NIHON TRIM CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, revenue was ¥241.6B (YoY +¥17.0B, +7.5%), achieving top-line growth, while Operating Income was ¥29.4B (YoY -¥3.5B, -10.5%), Ordinary Income was ¥31.5B (YoY -¥3.9B, -11.0%), and Net income attributable to owners of parent was ¥20.3B (YoY -¥2.1B, -9.4%), resulting in a revenue-up/profit-down outcome. The core WaterHealthCare business performed steadily with revenue of ¥211.4B (+8.0%), but SG&A rose to ¥134.5B (YoY +¥13.0B), outpacing the increase in gross profit (+¥9.6B) and directly causing the decline in operating profit. Operating margin declined by 240bp to 12.2% (prior 14.6%), and net margin tightened by 160bp to 9.4% (prior 10.0%), indicating a notable deterioration in profitability.

Drivers of Performance Variation

【Revenue】 Revenue rose to ¥241.6B (YoY +7.5%). By segment, the core WaterHealthCare Business recorded ¥211.4B (sales mix 87.5%, YoY +8.0%), driven by higher water purifier unit sales and expansion of the after-sales market, which lifted corporate top-line. The MedicalRelated Business posted ¥30.2B (sales mix 12.5%, +4.4%) with modest growth. Gross margin fell 80bp to 67.9% (prior 68.7%), as cost of goods sold increased at a slightly faster pace than revenue, with COGS rising by ¥77.7B.

【Profitability】 Gross profit increased to ¥163.9B (YoY +¥9.6B, +6.2%) alongside revenue growth, but SG&A rose to ¥134.5B (YoY +¥13.0B, +10.7%), a double-digit increase that more than offset gross profit gains. As a result, Operating Income declined to ¥29.4B (-10.5%), and Operating margin fell 240bp to 12.2% (prior 14.6%). SG&A ratio worsened to 55.7% (prior 54.1%), with advertising, personnel, and upfront R&D costs pressuring profits. By segment, WaterHealthCare’s operating margin fell 200bp to 12.8% (prior 14.8%), and MedicalRelated plunged 590bp to 7.6% (prior 13.5%), with the latter’s profitability deterioration particularly dragging on corporate margins. Non-operating income, including interest income of ¥1.1B, provided limited support, leaving Ordinary Income at ¥31.5B (-11.0%). Extraordinary gains included securities disposal gains of ¥1.5B and property disposal gains of ¥0.4B, which partially contributed to Net income of ¥20.3B (-9.4%), although these are of limited sustainability. After corporate taxes of ¥8.7B and non-controlling interests of ¥2.4B, Net income attributable to owners of parent was ¥20.3B (prior ¥22.4B), concluding the year with revenue up and profits down.

Segment Analysis

The WaterHealthCare Business recorded revenue of ¥211.4B (YoY +8.0%), Operating Income of ¥27.1B (YoY -6.4%), and an operating margin of 12.8% (prior 14.8%), showing revenue growth but profit contraction. Increased unit sales of water purifiers and aftermarket expansion supported top-line growth, while higher promotion expenses and personnel costs compressed margins. The MedicalRelated Business reported revenue of ¥30.2B (+4.4%), Operating Income of ¥2.3B (-41.3%), and an operating margin of 7.6% (prior 13.5%), a substantial profit decline driven by upfront investments and increased R&D associated with expansion in medical and preventive healthcare areas, significantly worsening profitability and contributing to the company-wide margin decline. Both segments maintained resilient revenues, but cost increases uniformly pressured margins, making margin recovery a key issue going forward.

Key Financial Metrics

【Profitability】Operating margin was 12.2% (prior 14.6%), down 240bp, and net margin was 9.4% (prior 10.0%), down 160bp, with acute SG&A growth and segment margin deterioration driving a material retreat in profitability. ROE was 8.9%, decomposed as Net margin 8.4% × Asset turnover 0.67 × Financial leverage 1.42, with the decline driven mainly by lower profitability. Gross margin remained high at 67.9% (prior 68.7%) but decreased by 80bp, affected by price competition and changes in cost mix. 【Cash Quality】Operating Cash Flow / Net Income was 1.40x (benchmark >1.0), indicating good cash backing of earnings, and the accrual ratio stood at -2.3%, within a healthy range. Conversely, Operating CF / EBITDA was 0.83x, below 0.9x, as accounts receivable collection delays (-¥7.8B) and increased inventories constrained cash conversion. DSO was 108 days and CCC was 160 days, revealing deterioration in working capital efficiency. 【Investment Efficiency】Capital expenditures were ¥5.2B, 1.02x depreciation of ¥5.1B, maintaining replacement investment. Marketable securities increased markedly to ¥28.6B (YoY +¥15.5B, +118.9%), raising exposure to market price volatility. 【Financial Soundness】Equity Ratio was 70.6%, very high, with current ratio 302% and quick ratio 302%, indicating minimal short-term liquidity risk. Debt/EBITDA was 0.29x and interest coverage >500x, reflecting conservative leverage and very high financial resilience.

Cash Flow Analysis

Operating Cash Flow was ¥28.5B (YoY +6.6%), remaining solid, and the ratio of Operating CF to Net income before tax (taxable income) of ¥31.5B was 1.40x, indicating good cash backing of profits. Subtotal (before working capital changes) was ¥37.0B, adding non-cash charges such as depreciation ¥5.1B and goodwill amortization ¥0.4B. On working capital, increases in accounts receivable absorbed cash of -¥7.8B and inventories -¥0.1B, while increases in advance receipts contributed +¥3.7B. After corporate tax payments of ¥9.5B, Operating CF totaled ¥28.5B. Investing CF was -¥20.7B, mainly comprising capital expenditures -¥5.2B, acquisition of marketable securities -¥12.0B, and acquisition of subsidiary shares -¥3.7B, partially offset by securities redemptions +¥10.0B and sale proceeds +¥2.0B. Free Cash Flow was ¥7.8B (Operating CF + Investing CF), yielding an FCF coverage ratio of 0.69x against total returns (dividends ¥10.8B and capital expenditures ¥5.2B), indicating insufficiency and leading to the use of abundant cash deposits of ¥142.1B to fund returns and investments. Financing CF was -¥24.1B, primarily for share buybacks -¥11.6B, dividend payments -¥10.8B, and debt repayments -¥1.2B. Cash and cash equivalents at year-end were ¥137.1B (beginning ¥153.9B), slightly down but still maintaining strong liquidity.

Quality of Earnings

Recurring earnings are centered on Operating Income of ¥29.4B from core operations; non-operating income totaled ¥2.6B including interest income of ¥1.1B, about 1.1% of sales, indicating that income sources primarily rely on business activities. Extraordinary items included disposal gains on securities ¥1.5B and property disposal gains ¥0.4B (total special gains ~¥0.96B) and special losses such as asset retirement losses ¥0.18B, with the net impact of special items on Net income of ¥20.3B being approximately 4%, thus limited. Equity-in-affiliates income was ¥0B, indicating almost no contribution from affiliates. On a consolidated basis, Operating CF ¥28.5B versus Net income ¥22.7B yields an Operating CF / Net income ratio of 1.26x and an accrual ratio of -2.3%, indicating accounting profits are backed by cash flow and the quality of earnings is good. The gap between Ordinary Income ¥31.5B and Net income ¥20.3B is mainly due to corporate taxes ¥8.7B and non-controlling interests ¥2.4B; distortions from temporary accounting adjustments or valuation gains/losses are small, supporting the characterization of a highly recurring earnings structure.

Forecasts & Guidance

Full-year guidance forecasts Revenue ¥270.0B (YoY +11.8%), Operating Income ¥33.0B (YoY +12.2%), Ordinary Income ¥35.0B (YoY +11.2%), and Net Income ¥22.0B (YoY +8.5%). The company plans double-digit revenue growth and Operating Income increase of ¥3.6B year-over-year, aiming for a reversal from this year’s margin adjustments. The plan assumes maintaining Operating margin around 12.2% (current-year result), contingent on controlling SG&A and improving segment-level profitability. Recovery of MedicalRelated profitability and sustaining WaterHealthCare margins are key to achieving the plan. If the pace of increase in advance receipts (current-year +¥3.7B) continues, it would signal robust order prospects as a leading indicator; however, unless working capital efficiency (DSO, CCC) simultaneously improves, upside to cash generation will be limited. Achieving the plan requires SG&A control, price/mix improvements, and realizing scale economies through customer-base expansion.

Shareholder Returns

Year-end dividend is ¥130 per share, with a payout ratio of 44.5% (based on Net income), a mid-level ratio. Total dividends were ¥10.8B, with good coverage relative to Operating CF of ¥28.5B. Share buybacks of ¥11.6B were executed, making total shareholder returns approximately ¥22.4B, and Total Return Ratio is about 110% [(Dividends ¥10.8B + Buybacks ¥11.6B) ÷ Net income ¥20.3B], a high level. With Total Return Ratio above the 80% benchmark, and abundant cash deposits of ¥142.1B and low leverage (Debt/EBITDA 0.29x), this is sustainable in the short term, but mid-term reassessment of the balance between FCF improvement and the pace of returns is desirable. If next-year profit growth is realized and working capital efficiency improves, sustaining return capacity will be feasible.

Risk Factors

1. Segment concentration risk: The WaterHealthCare Business accounts for 87.5% of revenue, indicating high single-business dependency, leaving the company vulnerable to demand-supply shifts in the water purifier market, regulatory changes, and intensified competition. With MedicalRelated profitability having deteriorated sharply (operating margin 7.6%, prior 13.5%), insufficient portfolio diversification means a slowdown in the core business would directly impact consolidated performance.

2. Deterioration in working capital efficiency: DSO 108 days and CCC 160 days reflect delays in receivables collection and inventory turnover, and Operating CF / EBITDA of 0.83x remains low. Accounts receivable increased, creating a cash outflow of -¥7.8B and constraining FCF generation. Without strengthened credit controls and faster collection processes, cash generation will remain constrained, limiting investment capacity and return distribution.

3. Margin pressure and rising SG&A: SG&A grew 10.7% YoY, outpacing revenue growth (+7.5%), and Operating margin fell to 12.2% (prior 14.6%), a 240bp decline. MedicalRelated’s operating margin dropped sharply to 7.6% (prior 13.5%), with promotional spending, personnel, and R&D upfront investments pressuring profitability. Delays in cost optimization or revising pricing strategy could entrench margin deterioration and erode ROE and shareholder return capacity.

Industry Benchmarks (Reference — Company Estimates)

Profitability & Returns

The company’s Operating margin of 12.2% and Net margin of 9.4% exceed manufacturing sector medians (7.8%, 5.2%), placing it in the upper tier within the industry. However, Operating margin declined from 14.6% last year to 12.2% this year, somewhat reducing relative advantage within peers.

Growth & Capital Efficiency

Revenue growth of 7.5% surpasses the manufacturing median of 3.7%, maintaining performance above industry average on top-line expansion.

※Source: Company aggregation

Earnings Highlights to Watch

1. Feasibility of margin recovery: This year, rapid SG&A growth and deterioration in MedicalRelated profitability drove Operating margin down 240bp to 12.2% (prior 14.6%). Next-year guidance assumes Operating Income ¥33.0B (+12.2%), predicated on margin recovery; achieving this will require SG&A control, segment-level profitability improvement, and price/mix adjustments. Monitor quarterly segment margin trends and changes in cost structure to assess plan feasibility.

2. Working capital efficiency and cash generation: With DSO 108 days and CCC 160 days, working capital efficiency has worsened and Operating CF / EBITDA 0.83x indicates room for improvement in cash conversion. Correcting receivables collection and optimizing inventory management could generate FCF upside and support sustainability of the 110% Total Return Ratio. Going forward, the pace of CCC normalization and Operating CF growth will be key indicators for the sustainability of dividends and buybacks.

3. Marketable securities and market risk: Marketable securities were increased to ¥28.6B (YoY +118.9%), raising exposure to market price volatility. Fair value adjustments are slightly negative at -¥0.2B, but market movements could widen the divergence between comprehensive income and Net income. Assess the rationale for securities holdings (interest/dividend income expansion, efficient use of surplus cash) and monitor the adequacy of risk management policies.

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This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional adviser as appropriate.