NIHON TRIM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.41B
• Operating Income: ¥1.56B
• Net Income: ¥1.45B
• EPS: ¥145.46

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Nihon Trim (TSE: 6788) delivered FY2026 Q2 consolidated results under JGAAP showing solid top-line growth but margin pressure at the operating level. Revenue rose 9.2% year over year to ¥12,406 million, evidencing healthy demand recovery or effective sales initiatives. Gross profit reached ¥7,978 million, translating to a very high gross margin of 64.3%, indicative of a premium product mix and/or disciplined pricing. Despite the strong gross margin, operating income declined 15.8% YoY to ¥1,563 million, signaling SG&A inflation or stepped-up growth investments that outpaced revenue growth. Ordinary income of ¥1,676 million exceeded operating income, pointing to positive non-operating contributions and minimal financing costs. Net income came in at ¥1,106 million, down 15.2% YoY, with EPS of ¥145.46 for the period. The DuPont framework shows an ROE of 4.47%, driven by an 8.92% net margin, asset turnover of 0.355x, and financial leverage of 1.41x, highlighting that relatively low asset turnover and modest leverage are constraining ROE more than margins. EBITDA was ¥1,788 million (14.4% margin), underscoring reasonable operating cash earnings but with a noticeable gap to gross margin due to overhead intensity. Cash flow quality looks sound: operating cash flow of ¥1,176 million covers net income by 1.06x, implying earnings are largely cash-backed for the period. Liquidity appears strong with a current ratio of 345.9% and working capital of ¥17,595 million, supporting resilience against near-term shocks. Solvency metrics are conservative: debt-to-equity is 0.40x and interest coverage is a very high 1,986x given negligible interest expense of ¥0.8 million. Financing cash flow was negative at ¥703 million, indicating shareholder returns and/or debt reduction; dividend details are not disclosed in this dataset. Several data points are unreported in XBRL (e.g., cash and equivalents, inventories, investing cash flow, equity ratio display, shares outstanding), which constrains granularity in some analyses. Nonetheless, the pattern suggests a cash-generative, lightly levered business with elevated gross margins but near-term operating deleverage. Key focus areas ahead are SG&A discipline, capex/working capital intensity (once disclosed), and the sustainability of non-operating income that supported ordinary profit. Overall, growth is present, profit quality is acceptable, and the balance sheet remains a differentiator among small-cap consumer/medical device peers, albeit with below-target ROE.

Profitability Analysis

ROE stands at 4.47% based on DuPont: Net Profit Margin 8.92% × Asset Turnover 0.355 × Financial Leverage 1.41. The relatively low asset turnover is the main bottleneck to ROE despite a healthy margin profile and modest leverage. Gross margin is high at 64.3%, reflecting premium pricing, product mix, and/or strong manufacturing economics. However, EBITDA margin of 14.4% and operating margin of 12.6% (¥1,563m/¥12,406m) show significant SG&A absorption; this SG&A intensity likely drove the 15.8% YoY operating profit decline despite 9.2% revenue growth. The spread between gross margin and EBITDA/operating margins implies operating leverage worked negatively this half as overhead grew faster than sales. Ordinary income (¥1,676m) exceeds operating income by ¥113m, suggesting net non-operating gains or income (e.g., financial income, subsidies) and interest expense is de minimis at ¥0.8m. Tax expense of ¥648m versus profit levels suggests a normalized effective tax burden; the reported effective tax rate metric of 0.0% should be treated as a data artifact. Bottom-line margin compression (net profit down 15.2% YoY) reflects operating deleverage more than financial or tax effects. Interest coverage is extremely high at 1,986x, indicating financing costs are not a constraint on profitability. Overall, margin quality at the gross level is strong, but cost discipline and efficiency improvements are needed to translate it into higher operating returns.

Growth Assessment

Revenue grew 9.2% YoY to ¥12,406 million, a solid performance given the company’s niche market exposure. The sustainability of this growth will hinge on channel productivity, new product contributions, and geographic/customer diversification; no backlog or segment data are provided in this dataset. Operating income fell 15.8% YoY to ¥1,563 million despite higher sales, indicating that incremental costs, promotions, or investments diluted margins in the period. Net income declined 15.2% to ¥1,106 million, broadly in line with operating profit trends, highlighting that the primary pressure point is at the operating level rather than below the line. Ordinary income of ¥1,676 million includes non-operating positives; reliance on such gains for profit growth may not be structurally repeatable. EBITDA of ¥1,788 million (14.4% margin) suggests room to expand profits if SG&A can be normalized relative to revenue. Cash generation remains resilient with OCF of ¥1,176 million (OCF/NI = 1.06x), supporting growth investments where required. Near-term outlook depends on the trajectory of expense normalization, sales mix, and potential pricing power retention; without segment disclosure, we assume core domestic water-related products remain the growth engine. In the absence of disclosed inventories, we cannot assess sell-in versus sell-through dynamics or potential channel stocking effects. If revenue momentum persists and SG&A growth moderates, operating leverage can turn positive in subsequent quarters. Conversely, if growth requires sustained promotional intensity, margin expansion could be delayed. Overall, growth quality is acceptable, but operating leverage will determine earnings trajectory.

Financial Health

Total assets are ¥34,926 million and total equity is ¥24,720 million, implying substantial capitalization by equity. The reported equity ratio is shown as 0.0% in the dataset but should be treated as undisclosed formatting; based on totals, the equity ratio approximates 70.8% (¥24,720m/¥34,926m). Total liabilities are ¥9,808 million, with current liabilities of ¥7,155 million, yielding a current ratio of 345.9% and working capital of ¥17,595 million—very strong liquidity. The quick ratio is also reported as 345.9%, but inventories are unreported; hence, the true quick ratio cannot be precisely verified. Debt-to-equity is 0.40x, indicating moderate leverage; however, interest expense is only ¥0.8 million, suggesting limited interest-bearing debt or very low rates. Interest coverage is robust at 1,986x, minimizing refinancing or interest-rate risk near term. No cash and equivalents figure is disclosed; thus, cash runway and net cash/(net debt) cannot be determined from this dataset. Absent investing cash flows, we cannot evaluate capex intensity or acquisition activity. Overall, solvency is strong, liquidity appears ample, and the capital structure is conservative.

Cash Flow Quality

Operating cash flow of ¥1,175,508,000 covers net income of ¥1,106,000,000 by 1.06x, indicating earnings are backed by cash conversion this period. With depreciation and amortization at ¥224,828,000, cash earnings (EBITDA) are supported by non-cash charges consistent with the P&L. Working capital dynamics cannot be fully assessed due to undisclosed inventories and receivables/payables details; however, positive OCF suggests no acute working capital drain in the half. Investing cash flow is undisclosed (shown as 0), so we cannot compute true free cash flow (FCF). The displayed FCF of 0 should be treated as not determinable rather than a zero outcome. Financing cash outflow of ¥702,630,000 indicates shareholder distributions and/or debt repayment during the period, consistent with the strong balance sheet. Interest paid is minimal, supporting cash flow resilience. Overall, cash flow quality is good at the operating level, but the absence of investing cash flow data limits conclusions on sustainable FCF after maintenance capex.

Dividend Sustainability

Dividend per share (DPS) and payout ratio are shown as 0.00 in this dataset, which should be interpreted as undisclosed rather than an actual zero. Financing cash outflows of ¥703 million could include dividends and/or buybacks, but the split is not provided. With net income of ¥1,106 million and OCF of ¥1,176 million, the company appears to have capacity to fund ordinary dividends if pursued, given modest leverage (D/E 0.40x) and strong liquidity. Free cash flow cannot be computed without investing cash flow, so FCF coverage of dividends is not assessable here. Historically informed policy commentary is not possible from the provided data; thus, dividend outlook remains undetermined pending disclosure. In the near term, balance sheet strength suggests flexibility in capital allocation, but sustainability assessments require visibility into capex needs and policy guidance.

Risk Assessment

Business Risks:

• Operating deleverage: SG&A growth outpacing revenue, compressing operating margin despite high gross margin.
• Product concentration: exposure to electrolyzed water-related devices and health products may concentrate demand risk.
• Regulatory and medical claims scrutiny in healthcare-adjacent products, potentially affecting marketing and sales.
• Channel risk: reliance on specific sales channels (e.g., direct sales, distributors) can amplify volatility if productivity weakens.
• Geographic concentration in Japan with limited disclosure on overseas mix, exposing the firm to domestic demand cycles.
• Non-operating income reliance to bridge ordinary profit above operating profit may not be structurally repeatable.

Financial Risks:

• Limited visibility on cash and equivalents and investing cash flows constrains assessment of net cash and capex commitments.
• Potential working capital swings (inventories/receivables) are not observable due to undisclosed details.
• Tax rate variability: tax expense appears material; changes in effective tax rate could affect net income.
• Exposure to input cost inflation or FX on components could pressure gross margins, albeit currently strong.

Key Concerns:

• Decline in operating income (-15.8% YoY) despite revenue growth (+9.2% YoY) indicates cost pressure.
• Low ROE at 4.47% driven by low asset turnover (0.355x) and modest leverage, limiting capital efficiency.
• Inadequate disclosure of investing cash flows and cash balances prevents robust FCF and liquidity analysis.

Investment Implications

Key Takeaways:

• Top-line growth of 9.2% YoY with very strong 64.3% gross margin underscores pricing power/mix strength.
• Operating income decline (-15.8% YoY) highlights negative operating leverage and SG&A pressure.
• ROE of 4.47% is constrained by low asset turnover and modest leverage despite acceptable net margins.
• OCF/NI of 1.06x indicates cash-backed earnings; financing outflow (¥703m) suggests ongoing capital returns and/or debt reduction.
• Balance sheet appears conservative with an implied equity ratio near 71% and D/E of 0.40x.
• Data gaps (cash, inventories, investing CF, dividend details) limit precision on FCF and capital allocation.

Metrics to Watch:

• SG&A-to-sales ratio and trajectory to gauge operating leverage recovery
• Asset turnover and capital intensity (capex) once investing CF is disclosed
• OCF/Net income ratio and working capital days (inventory/receivables/payables) when available
• Ordinary vs. operating income gap to monitor reliance on non-operating gains
• Gross margin stability amid input costs and pricing dynamics
• Dividend/buyback disclosures and payout policy guidance

Relative Positioning: Versus domestic small-cap consumer/medical device peers, Nihon Trim exhibits higher gross margins and a stronger, lowly levered balance sheet, but currently lags on ROE due to low asset turnover and near-term operating margin compression.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis