MINEBEA MITSUMI Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥778.31B
• Operating Income: ¥44.39B
• Net Income: ¥28.70B
• EPS: ¥71.18

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A mixed FY2026 Q2—top line flat and operating profit slightly down, but net income up on below-the-line/tax effects, with weaker cash conversion and sub-target ROIC. Revenue was 7,783.14, essentially flat YoY (+0.0%), while operating income fell 5.1% YoY to 443.87. Gross profit was 1,357.01, implying a gross margin of 17.4%. SG&A was 927.78, and EBITDA reached 787.04, giving an EBITDA margin of 10.1%. Operating margin printed at 5.7%, and profit before tax was 403.70 with an effective tax rate of 28.9%. Net income rose 14.0% YoY to 285.85, lifting net margin to 3.7%. With revenue flat and operating income down 5.1%, operating margin compressed by roughly 30 bps YoY (about 6.0% to 5.7%). Conversely, net margin expanded by roughly 45 bps YoY (about 3.2% to 3.7%), indicating positive non-operating/tax mix despite lower operating earnings. Cash conversion was soft: operating cash flow was 223.42 versus net income of 285.85, an OCF/NI ratio of 0.78x, triggering an earnings quality flag. Free cash flow was negative at -148.74, reflecting capex of 360.36, while financing inflows of 183.92 supported dividends of 100.40. The balance sheet remains solid with total equity of 7,952.67 (equity ratio 46.3%) and a reported D/E of 1.13x. Asset turnover was 0.459 and financial leverage 2.13x, yielding a calculated ROE of 3.6%—consistent with the reported figure. ROIC was 4.0%, below the 5% warning threshold, implying value-creation headwinds absent improvement in margins or capital efficiency. Inventory (4,021.25) and receivables (3,108.40) remain sizable, anchoring working capital needs; accounts payable stand at 2,334.29. Forward-looking, the quarter suggests a need to restore operating leverage and improve cash conversion to fund capex and dividends internally. Without an acceleration in revenue growth or disciplined capex/working capital, maintaining both investment for growth and current payout levels may depend on external financing.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (NPM) 3.7% × Asset Turnover (AT) 0.459 × Financial Leverage (FL) 2.13x ≈ ROE 3.6% (matches reported). The largest QoQ/YoY change driver appears to be NPM: despite lower operating income, net income rose, implying favorable below-the-line/tax effects widened NPM. AT remained modest at 0.459, consistent with flat sales and a large asset base; FL of 2.13x is stable and not the primary driver. Business rationale: operating margin pressure (5.7% vs ~6.0% a year ago) suggests mix/pricing or cost headwinds, while a lower non-operating drag and/or tax rate dynamics supported net profit. Sustainability: the operating margin compression is structural unless pricing, mix, or cost efficiencies improve; the NPM benefit from below-the-line items is less reliable and could normalize. Watch for SG&A discipline—SG&A (927.78) against flat sales indicates limited operating leverage; if SG&A grows faster than revenue, margin compression risk persists.

Growth Assessment

Growth was stagnant at the top line (0.0% YoY), with operating profit down 5.1% YoY and net profit up 14.0% YoY. Revenue sustainability hinges on end-market demand (auto/industrial/electronics) and pricing; flat sales suggest volume/mix or pricing offsets. Profit quality is mixed: operating margin contracted ~30 bps while net margin expanded ~45 bps due to non-operating/tax factors. EBITDA margin at 10.1% provides cushion but is not expanding. Outlook requires either a demand rebound, improved mix toward higher-margin components, or tighter cost control to re-accelerate operating profit. ROIC at 4.0% is below cost-of-capital proxies; improving asset turns and margin is necessary for value creation. Capex intensity (360.36) amid flat revenue implies a lag before returns materialize; execution risk on ramp and yield is non-trivial.

Financial Health

Liquidity: Current ratio is not calculable due to unreported current liabilities; no explicit warning triggered. Solvency: D/E is 1.13x (within conservative range <1.5x), and equity ratio is a solid 46.3%, indicating balance sheet resilience. Maturity mismatch risk cannot be fully assessed; short-term borrowings are unreported, but current assets are sizable at 9,874.47 with inventories 4,021.25 and receivables 3,108.40. Accounts payable of 2,334.29 provide supplier financing, but the net working capital burden remains high. Off-balance sheet obligations are not disclosed in the provided data. Interest coverage is not calculable (interest expense unreported). Overall, capital structure is sound, but liquidity visibility is limited by missing current liability detail.

Cash Flow Quality

OCF/Net Income is 0.78x (<0.8), flagging weaker earnings quality this period. The shortfall likely reflects working capital absorption (notably inventory and/or receivables), given D&A of 343.17 exceeds the OCF shortfall versus NI. Free cash flow was -148.74 after capex of 360.36, indicating internal cash did not cover investment. Dividend cash outflow of 100.40 exceeded FCF, requiring financing inflows (183.92). Sustainability: without improvement in cash conversion and/or capex moderation, reliance on financing for both growth capex and dividends may continue. No clear signs of aggressive working capital manipulation are evident from disclosures, but the OCF/NI gap and large inventory balance warrant monitoring.

Dividend Sustainability

Calculated payout ratio is 67.2%, slightly above the <60% benchmark for comfort. FCF coverage of dividends is -0.77x, indicating dividends were not covered by free cash flow this period and were effectively funded by financing inflows. With ROIC at 4.0% and operating margin under pressure, headroom to raise payouts appears limited near term without profit growth or capex normalization. Policy outlook likely prioritizes stable dividends, but sustainability improves only if OCF recovers and FCF turns positive; absent that, the payout risks crowding out growth investment or increasing leverage.

Risk Assessment

Business Risks:

• End-market demand volatility in automotive, industrial, and consumer electronics weighing on volumes and mix
• Pricing pressure and input cost inflation compressing gross and operating margins
• Execution risk on capex projects (ramp/yield) with ROIC currently at 4.0%
• Inventory obsolescence risk given sizable inventories (4,021.25)
• Potential goodwill impairment risk (goodwill 611.82) if acquired units underperform

Financial Risks:

• Earnings quality risk: OCF/NI at 0.78x indicates weaker cash conversion
• FCF negative (-148.74), increasing reliance on external financing for dividends and capex
• Liquidity visibility limited due to unreported current liabilities; maturity mismatch cannot be assessed
• Interest coverage not calculable (interest expense unreported), obscuring debt-service cushion
• Currency fluctuation risk affecting both revenue and costs

Key Concerns:

• Operating margin compression (~30 bps YoY) despite flat sales
• ROIC at 4.0% below the 5% warning threshold
• Dividend coverage reliant on financing (FCF coverage -0.77x)
• Working capital intensity (AR 3,108.40 and inventories 4,021.25 vs AP 2,334.29) burdening cash flow
• Dependence on below-the-line/tax effects for net income growth

Investment Implications

Key Takeaways:

• Top line flat; operating profit declined 5.1% YoY while net profit rose 14.0% on non-operating/tax factors
• Operating margin compressed to 5.7% (~30 bps YoY), while net margin expanded to 3.7% (~45 bps)
• OCF/NI at 0.78x and FCF of -148.74 signal weak cash conversion and investment cash drain
• Balance sheet remains solid (equity ratio 46.3%, D/E 1.13x), providing flexibility
• ROIC at 4.0% underscores need for better asset turns/margins to create value
• Dividend payout (67.2%) not covered by FCF this period; financed by positive financing CF

Metrics to Watch:

• Operating margin trajectory and SG&A discipline vs revenue
• OCF/Net income and inventory/receivable trends (cash conversion cycle)
• ROIC vs 7–8% management-style targets; capex-to-sales and realized returns
• Free cash flow coverage of dividends
• Effective tax rate and non-operating items that influenced NI
• FX sensitivity and pricing power in key product lines

Relative Positioning: Relative to Japanese precision component peers, profitability this quarter appears middle-of-the-pack on EBITDA margin but below on ROIC, with a comparatively healthy equity base; improvement in cash conversion and operating leverage is needed to close the value-creation gap.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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