NISSAN MOTOR CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.58T
• Operating Income: ¥-27.65B
• Net Income: ¥-218.92B
• EPS: ¥-63.55

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

Verdict: Weak quarter with a swing to losses and deteriorating profitability; balance sheet liquidity remains adequate but leverage and interest burden are elevated. Revenue declined 6.8% YoY to 55,786.87 (100M JPY), while gross profit was 6,633.66, yielding an 11.9% gross margin. SG&A of 6,910.19 exceeded gross profit, driving operating income to -276.53 and an operating margin of -0.5%. Ordinary income deteriorated to -779.30, reflecting a net non-operating loss as non-operating expenses (1,091.17) outpaced non-operating income (588.40). Net income came in at -2,219.21 (100M JPY), a 93.5% YoY decline, with net margin at -4.0%. Interest expense was a heavy drag at 503.04, consistent with the reported interest coverage of -0.55x. Operating cash flow was positive but minimal at 106.33 relative to the loss, resulting in an OCF/NI ratio of -0.05x, signaling poor earnings quality. Liquidity ratios remain above benchmark (current ratio 160.4%, quick ratio 147.0%), supported by cash and deposits of 15,720.57. However, leverage is high with D/E at 2.70x and long-term loans of 25,300.51, elevating solvency risk if profitability does not normalize. Gross margin of 11.9% is thin for an automaker and, combined with SG&A pressure, suggests limited pricing power or adverse mix/volume, though detailed drivers were not disclosed. Operating margin stood at -0.5% and net margin at -4.0%; precise YoY basis point changes are not computable from disclosed data but directionally indicate material compression from a prior profit base. Non-operating items were mixed: interest income (375.63) helped, but interest expense (503.04) and other non-operating costs resulted in a net drag. ROE was -4.3% on the DuPont build (NPM -4.0%, asset turnover 0.292x, financial leverage 3.70x), with negative margin the key driver of the loss. ROIC of -0.4% is well below the 5% warning threshold, implying value-dilutive deployment in the period. Forward-looking, stabilization hinges on restoring positive operating margin via cost control, mix improvement, and normalization of non-operating expenses, alongside deleveraging to reduce the interest burden. Data limitations (capex, FCF, equity method income, segment detail) constrain deeper diagnostics, but current signals point to a challenging second half requirement for recovery.

Profitability Analysis

DuPont decomposition: ROE (-4.3%) = Net Profit Margin (-4.0%) × Asset Turnover (0.292x) × Financial Leverage (3.70x). The dominant change factor is the margin component, as negative net margin overwhelmed modest asset turnover and elevated leverage. Business drivers include SG&A exceeding gross profit (6,910.19 vs 6,633.66), resulting in an operating loss, and a net non-operating drag where interest expense (503.04) outweighed interest income (375.63) and other non-operating costs remained high. Asset turnover at 0.292x reflects subdued sales relative to a large asset base (revenue 55,786.87 vs assets 191,338.35), consistent with a cyclical slowdown in volumes or shipments; specific mix/volume data were not disclosed. Financial leverage of 3.70x amplified the negative margin into a negative ROE, reflecting a capital structure that heightens earnings volatility. Sustainability assessment: the SG&A overhang relative to gross profit is unlikely to be sustainable; management will need to address cost base or improve mix/pricing to restore operating leverage. Interest burden will persist without deleveraging, limiting margin recovery at the ordinary income level. Concerning trends include revenue contraction (-6.8% YoY) combined with implied SG&A rigidity (SG&A > gross profit), and non-operating expenses exceeding non-operating income despite sizable interest income. Without evidence of one-off items (e.g., large impairments/recalls) in the disclosed data, we treat the margin weakness as operational rather than purely exceptional.

Growth Assessment

Top-line declined 6.8% YoY to 55,786.87, indicating pressure from volume/mix and/or FX; no segment or geographic breakdown was disclosed. Gross margin at 11.9% is thin, with SG&A growth vs revenue not disclosed but implied fixed cost stickiness as SG&A exceeded gross profit. Operating income plunged to -276.53 and ordinary income to -779.30, suggesting negative operating leverage on a lower revenue base. Net income fell to -2,219.21 (-93.5% YoY), reflecting both operating underperformance and heavier non-operating drag (notably interest). With asset turnover at 0.292x and ROIC at -0.4%, invested capital is not generating adequate returns this period. Outlook hinges on cost realignment, stabilization of input costs and supply chain, and possible price/mix improvement; however, absent disclosure on order backlog, regional demand, or product pipeline, visibility is low. The lack of disclosed R&D and capex data limits assessment of medium-term competitiveness and refresh cycle pacing.

Financial Health

Liquidity: Current ratio 160.4% and quick ratio 147.0% indicate near-term liquidity is adequate. Cash and deposits (15,720.57) exceed short-term loans (8,307.85), mitigating immediate refinancing risk. Working capital is positive at 46,491.72, with current assets (123,454.85) comfortably above current liabilities (76,963.13). Solvency: Debt-to-equity is high at 2.70x (warning), with long-term loans of 25,300.51 and ongoing interest burden (503.04) driving negative interest coverage (-0.55x). No explicit interest-bearing debt total was disclosed, but the reported loans suggest material leverage across maturities. Maturity mismatch risk appears moderate near term given liquidity buffers, but sustained losses could erode flexibility. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF was 106.33 versus net income of -2,219.21, yielding OCF/NI of -0.05x, which is a quality red flag (threshold >0.8). The positive but small OCF relative to the scale of operations suggests working capital release or non-cash charges helped partially offset operating losses, but not enough to indicate robust cash earnings. Free cash flow cannot be assessed as capex was unreported; consequently, coverage of dividends and debt service from FCF is not calculable. Interest expense (503.04) exceeded operating income, underscoring weak cash interest coverage before working capital effects. No clear signs of working capital manipulation can be inferred without period-to-period changes; point-in-time balances show inventories (10,308.51), AR (5,036.62), and AP (18,484.09) at substantial levels, but trends are unavailable.

Dividend Sustainability

Dividend data (DPS, total dividends, payout) are unreported for the period. Given negative net income and thin OCF (106.33), organic coverage for cash distributions appears weak this quarter. Without capex and FCF disclosure, we cannot quantify FCF coverage. Leverage (D/E 2.70x) and negative interest coverage (-0.55x) argue for balance sheet caution. Policy outlook cannot be assessed from the provided data; any dividend continuity would likely rely on future earnings normalization and/or balance sheet resources rather than current-period cash generation.

Risk Assessment

Business Risks:

• Demand softness leading to revenue decline (-6.8% YoY) and negative operating leverage
• Cost structure rigidity with SG&A exceeding gross profit, compressing operating margin to -0.5%
• Product mix and pricing pressure implied by thin gross margin (11.9%)
• Operational execution risks (warranty/quality/recall costs) not disclosed but typical for the sector
• Supply chain and logistics volatility affecting volumes and costs (industry-specific)

Financial Risks:

• High leverage (D/E 2.70x) with long-term loans 25,300.51 and short-term loans 8,307.85
• Negative interest coverage (-0.55x) as interest expense (503.04) exceeds operating income
• Weak earnings quality (OCF/NI -0.05x) and limited cash flow buffer
• Potential FX exposure given global operations; net non-operating costs suggest sensitivity to financial items

Key Concerns:

• ROIC at -0.4% well below 5% warning threshold, signaling value dilution
• Net non-operating loss as non-operating expenses (1,091.17) exceed non-operating income (588.40)
• Net margin -4.0% and ROE -4.3% driven by margin compression
• Data gaps (capex, FCF, segment mix, equity-method income) constrain visibility on sustainability and recovery path

Investment Implications

Key Takeaways:

• Top-line contraction and SG&A rigidity pushed operating margin to -0.5% despite 11.9% gross margin
• Non-operating drag, especially interest expense (503.04), deepened losses to net margin -4.0%
• Liquidity is adequate (current ratio 160.4%), but leverage is high (D/E 2.70x) and interest coverage negative
• Cash generation is weak relative to losses (OCF/NI -0.05x), limiting funding flexibility absent improvement
• ROIC -0.4% underscores need for earnings recovery and capital discipline

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Gross margin drivers (pricing, mix, incentives) and any warranty/recall charges
• OCF and FCF (capex disclosure) versus debt service requirements
• Leverage trend (net debt, interest expense) and interest coverage
• Revenue growth/volume recovery by region and FX sensitivity
• ROIC progression back toward >5% and ROE normalization

Relative Positioning: Within global autos, the period reflects weaker profitability and cash generation versus peers with positive operating margins and stronger coverage; liquidity is acceptable, but elevated leverage and negative ROIC place the company in a higher-risk quadrant until operational recovery is evident.

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