Namura Shipbuilding Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥72.61B
• Operating Income: ¥10.77B
• Net Income: ¥14.40B
• EPS: ¥118.05

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

Namura Shipbuilding Co., Ltd. (7014) reported FY2026 Q2 consolidated results under JGAAP showing resilience in cash generation despite margin compression and lower revenue. Revenue declined 7.2% YoY to ¥72.6bn, reflecting likely delivery timing and mix effects inherent to shipbuilding. Operating income fell 28.6% YoY to ¥10.8bn, with operating margin at 14.8%, indicating cost pressure and/or less favorable vessel mix relative to the prior year. Net income decreased 42.6% YoY to ¥8.19bn, magnifying the operating decline, possibly due to a lower contribution from non-operating items and a normalization of taxes from previously low bases. Gross margin remained healthy at 25.1%, but the gap between gross and operating profit (approximately ¥7.44bn) suggests higher period SG&A and/or project-related costs. Ordinary income exceeded operating income by roughly ¥0.61bn, indicating net positive non-operating contributions, while interest expense remained minimal at ¥0.10bn. DuPont analysis shows ROE at 6.91%, driven by an 11.28% net margin, 0.311x asset turnover (first-half basis), and moderate financial leverage of 1.97x, implying an equity ratio of roughly 50.8%. Liquidity is strong with a current ratio of 180% and sizeable working capital of approximately ¥62.9bn, which is important for a milestone-billing business with project work-in-progress. Operating cash flow was robust at ¥18.7bn, yielding an OCF-to-net income ratio of 2.28x, indicating strong cash conversion of earnings in the period. Interest coverage is very high at 109.9x, consistent with limited financial leverage and low funding costs. The reported effective tax rate metric shows 0.0%, but the income tax charge of ¥0.19bn versus pre-tax profit implies a very low but non-zero effective rate, potentially reflecting loss carryforwards or preferential regimes. Several data points such as Investing CF, cash and equivalents, equity ratio, and share data are unreported in this dataset and should not be interpreted as zeros; conclusions are based on the available non-zero items. The inventory line appears unusually small relative to project scale, likely reflecting classification under construction in progress or contract assets not captured in the “Inventories” tag. Dividend remains suspended with DPS at ¥0, and payout ratio at 0%, as the company appears to be prioritizing balance sheet strength and project execution. Overall, the company demonstrates healthy operating fundamentals, improving balance sheet quality, and strong cash generation, though earnings volatility remains tied to the timing of vessel deliveries, input cost dynamics, and FX.

Profitability Analysis

ROE is 6.91%, decomposed as Net Margin 11.28% x Asset Turnover 0.311x x Financial Leverage 1.97x. The net margin of 11.28% is solid for a shipbuilder, though net income declined 42.6% YoY, suggesting margin normalization from a strong prior year base. Gross margin of 25.1% indicates good project pricing and/or cost pass-through, but operating margin at 14.8% (¥10.77bn OI on ¥72.61bn revenue) points to higher SG&A or project execution costs in the period. EBITDA margin is 17.1% with EBITDA of ¥12.41bn; D&A at ¥1.64bn is modest, implying limited recent heavy capex or conservative depreciation schedules. Operating leverage worked against the company: a 7.2% revenue decline translated into a 28.6% drop in operating income, implying negative operating leverage due to fixed cost absorption and delivery mix. Ordinary income outpaced operating income by ¥0.61bn, evidencing supportive non-operating items (e.g., foreign exchange gains, equity method, or other income). Interest burden is minimal with interest expense of ¥0.098bn and 109.9x coverage, so financing costs are not a drag on profitability. The low reported effective tax metric (0.0%) contrasts with a recorded tax expense of ¥0.187bn; the effective rate is very low relative to ordinary income and may reflect loss carryforwards or tax credits, which supported net margin. Overall margin quality is decent, but YoY compression underscores sensitivity to delivery mix and fixed-cost absorption typical in shipbuilding.

Growth Assessment

Revenue fell 7.2% YoY to ¥72.61bn, likely reflecting delivery timing rather than a structural decline, given the project-based nature of the business. Operating income decreased 28.6% YoY to ¥10.77bn, indicating margin pressure from cost inflation, mix, or execution variance. Net income declined 42.6% YoY to ¥8.19bn, suggesting fewer non-operating tailwinds and a slight normalization in tax. Sustainability of revenue hinges on order backlog, book-to-bill, and vessel mix (bulk carriers, tankers, specialized vessels), which are not disclosed here; without backlog data, visibility is constrained. Profit quality is supported by high cash conversion: OCF of ¥18.71bn versus net income of ¥8.19bn (OCF/NI 2.28x) suggests strong milestone collections and working capital inflows. EBITDA of ¥12.41bn provides an adequate buffer for ongoing operations. The outlook depends on cost pass-through mechanisms in contracts, steel and component price trends, labor availability, and FX (USD/JPY) on USD-denominated contracts. If book-to-bill remains above 1.0 and input costs stabilize, margins could improve in subsequent periods with better yard utilization. However, the pronounced YoY decline indicates that FY2026 profitability will be sensitive to second-half deliveries and execution. Non-operating contributions remain a swing factor given the gap between ordinary and operating income.

Financial Health

Total assets are ¥233.23bn and total equity is ¥118.55bn, implying an equity ratio of roughly 50.8% (despite the reported 0.0% metric being unreported). Total liabilities are ¥103.90bn, reflecting a moderate balance sheet. The current ratio is 180.2% with current assets of ¥141.31bn and current liabilities of ¥78.41bn, signaling strong near-term liquidity. Quick ratio of 180.1% is consistent with an immaterial inventory figure in this dataset; inventory appears understated due to classification differences in shipbuilding WIP/contract assets. Working capital is sizeable at ¥62.9bn, providing cushion for project execution and progress payments. Debt-to-equity is 0.88x per provided metric, suggesting moderate leverage; given low interest expense, the proportion of interest-bearing debt within total liabilities appears manageable. Interest coverage at 109.9x underscores low financial risk from servicing obligations. Capital structure is balanced, with leverage contributing moderately to ROE without creating undue solvency risk. Based on assets/equity, financial leverage is 1.97x, aligning with a healthy equity buffer for a cyclical industry.

Cash Flow Quality

Operating cash flow of ¥18.71bn exceeds net income of ¥8.19bn, producing an OCF/NI ratio of 2.28x, which indicates strong earnings quality and cash conversion in the period. This strength likely reflects milestone billing and favorable working capital movements (advances received and collection of receivables) typical in shipbuilding cycles. EBITDA of ¥12.41bn and modest D&A of ¥1.64bn suggest solid underlying cash profitability. Investing cash flow is unreported in this dataset, so Free Cash Flow cannot be reliably computed; the reported FCF of 0 should be treated as missing. Financing cash flow is -¥1.63bn, implying net debt repayment or dividend/other financing outflows; given DPS is zero, this likely reflects debt reduction or lease payments. Working capital management appears a positive contributor in the half, but the sustainability of OCF depends on the timing of deliveries and progress billings, which can reverse in subsequent periods. Without cash and cash equivalents disclosure, liquidity buffers cannot be quantified from cash alone, but the strong current ratio provides comfort.

Dividend Sustainability

Annual DPS is ¥0.00 with a payout ratio of 0.0%, indicating retention of earnings for balance sheet reinforcement and project funding. Given investing cash flow is unreported, FCF coverage of dividends cannot be assessed; the listed 0.00x should be viewed as not available. From a capacity standpoint, OCF of ¥18.71bn and limited interest burden suggest flexibility to consider distributions once earnings stabilize and cash needs for backlog are clear. Policy-wise, shipbuilders often prioritize capital for working capital swings and potential capex over dividends during recovery or ramp phases. Sustainability of future dividends will hinge on backlog visibility, margin stability, and the maintenance of positive OCF through the delivery cycle. At present, cash retention aligns with near-term execution priorities and risk management.

Risk Assessment

Business Risks:

• Cyclical shipbuilding demand and order timing affecting revenue recognition
• Fixed-price contract exposure and risk of cost overruns (steel, components, labor)
• FX volatility (USD/JPY) impacting contract profitability and translation
• Delivery mix and yard utilization driving margin variability
• Supply chain constraints for key components (engines, equipment) causing delays
• Labor availability and skilled workforce constraints in domestic yards
• Customer credit risk and concentration in certain vessel types or geographies
• Environmental regulations affecting vessel specifications and cost structures

Financial Risks:

• Working capital swings tied to progress billings and advances
• Potential reversal of favorable OCF if billing milestones shift
• Low but non-zero tax charge volatility due to loss carryforwards/credits expiring
• Exposure to interest rate changes on floating-rate debt despite low leverage
• Asset impairment risk if market conditions deteriorate (yards, equipment)

Key Concerns:

• Material YoY decline in operating and net income despite modest revenue drop
• Margin sensitivity to delivery timing and input cost inflation
• Limited disclosure on investing cash flows and cash balance in this dataset
• Unusual inventory line likely reflecting classification differences, complicating analysis

Investment Implications

Key Takeaways:

• Margins compressed YoY: operating income -28.6% on revenue -7.2%, highlighting negative operating leverage
• ROE at 6.91% with moderate leverage (1.97x) and solid net margin (11.28%)
• Strong cash conversion: OCF/NI of 2.28x and EBITDA margin of 17.1%
• Healthy liquidity: current ratio 180% and working capital ~¥62.9bn
• Interest burden minimal with 109.9x coverage, reducing financial risk
• Dividend suspended; earnings retained to support operations and balance sheet

Metrics to Watch:

• Order intake, backlog, and book-to-bill ratio
• Operating margin trajectory and cost pass-through effectiveness
• Working capital movements (advances, contract assets/liabilities) and OCF sustainability
• FX rate (USD/JPY) and hedging effectiveness
• Input cost trends (steel, key components) and delivery schedule adherence
• Capex plans and any disclosed investing cash flows impacting future FCF

Relative Positioning: Within the Japanese shipbuilding landscape, Namura appears to maintain a moderate leverage profile, strong liquidity, and solid cash conversion relative to typical sector characteristics, though profitability remains sensitive to delivery mix and project timing compared to larger integrated peers.

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