NOK CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥359.40B
• Operating Income: ¥15.71B
• Net Income: ¥15.40B
• EPS: ¥81.66

Income Statement

Balance Sheet

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: NOK’s FY2026 Q2 (cumulative) results show top-line contraction and weaker operating profitability, partially offset by stronger non-operating gains, resulting in modest ordinary income growth but slightly lower net income year on year. Revenue declined to 3,593.97 (−8.7% YoY), reflecting softer volumes and/or pricing in the core segments. Gross profit was 646.96, implying an 18.0% gross margin, which is thin for a precision components maker and suggests cost pressure or weaker utilization. Operating income fell to 157.13 (−17.7% YoY), with an operating margin of 4.37%, indicating operational deleverage as SG&A at 489.82 consumed 13.6% of sales. Ordinary income rose to 215.94 (+2.3% YoY) as non-operating income of 93.29 (notably dividend income of 18.15) more than offset non-operating expenses of 34.48; the 58.81 net non-operating contribution cushioned the decline in operating profit. Net income declined slightly to 133.32 (−2.0% YoY), yielding a 3.71% net margin. Interest coverage is a comfortable 12.35x, and the balance sheet is strong with current ratio 214% and quick ratio 156.5%, supported by cash and deposits of 1,338.10. Equity is robust at 6,389.05 (equity ratio approx. 68.3%), and net cash is likely positive given loans of 658.98 versus cash of 1,338.10. ROE is low at 2.1% (DuPont: NPM 3.7%, asset turnover 0.384x, leverage 1.47x), and ROIC of 1.9% signals under-earning relative to the 7–8% benchmark. Margin comparison vs prior year in basis points cannot be precisely quantified due to missing historical margins, but operating margin likely compressed given operating income fell more than revenue. Earnings quality is mixed: ordinary income resilience relies on non-operating items (dividends/other gains), while operating earnings weakened. Total comprehensive income of 311.79 far exceeded net income (133.32), implying sizable OCI gains (likely FV of securities/FX), adding volatility to equity but not cash. Cash flow data are unreported; thus, we cannot validate OCF support for earnings or dividend capacity. Forward-looking, stabilizing demand, cost pass-through, and mix improvement are needed to lift ROIC and ROE; dependency on non-operating income is a risk if market-driven gains normalize.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.1% = Net Profit Margin 3.7% × Asset Turnover 0.384 × Financial Leverage 1.47x. The weakest component is asset turnover at 0.384, indicating low capital efficiency, while leverage is modest and margin thin. The YoY pattern shows operating income down 17.7% on revenue down 8.7%, implying operating margin pressure; ordinary income increased due to non-operating gains, so the biggest change driver was non-operating items, not core operations. Business drivers likely include softer auto/electronics demand, unfavorable utilization, and cost inflation partly offset by non-operating dividends and other income. Sustainability: non-operating contributions (e.g., dividend income 18.15 and other gains) are inherently more volatile and less controllable; improvement in ROE will require core margin recovery and better asset utilization. Watch for SG&A discipline: SG&A is 13.6% of sales; without YoY SG&A detail, we cannot confirm if SG&A growth exceeded revenue decline, but the deleverage suggests a relative increase in SG&A ratio.

Growth Assessment

Top-line contracted 8.7% YoY to 3,593.97, evidencing cyclical softness in core end markets. Operating profit fell 17.7% to 157.13, indicating negative operating leverage and/or mix deterioration. Ordinary income rose 2.3% to 215.94 due to non-operating tailwinds, but this is not a durable growth engine. Net income slipped 2.0% to 133.32, with EPS at 81.66 yen. Current operating margin is 4.37% and net margin 3.71%; to reaccelerate earnings, NOK needs volume recovery, cost-downs, pricing/mix improvements, and better factory utilization. Given ROIC at 1.9%, incremental growth must be margin-accretive or capital-light to create value. Outlook hinges on auto production normalization, inventory correction in electronics (FPCs), and raw material/energy cost trends. Absence of OCF/CapEx data limits visibility on self-funded growth capacity.

Financial Health

Liquidity is strong: current ratio 214% and quick ratio 156.5%, with working capital of 2,331.54. No warning flags (current ratio >> 1.0). Solvency is conservative: D/E ratio 0.47x per provided metric; cash and deposits (1,338.10) exceed total loans (short-term 484.18 + long-term 174.80 = 658.98), implying net cash. Equity is 6,389.05 against assets 9,361.12 (equity ratio ~68.3%), providing ample buffer. Maturity profile risk is low: short-term loans 484.18 are well covered by liquid assets (cash 1,338.10 + receivables 1,528.87). Interest coverage at 12.35x is strong (>5x benchmark). No off-balance sheet obligations were disclosed in the dataset.

Cash Flow Quality

Operating cash flow, free cash flow, and capex were unreported; OCF/NI and FCF coverage cannot be calculated. As such, we cannot validate whether earnings are cash-supported. Potential quality flags: ordinary income uplift relies on non-operating items (net +58.81), and total comprehensive income far exceeds net income, indicating valuation/FX-driven OCI gains rather than operating cash. Working capital levels (AR 1,528.87; inventories 1,176.07) are sizable; without turnover/OCF data we cannot assess whether WC absorbed or released cash this period. Dividend coverage by FCF cannot be assessed due to missing data.

Dividend Sustainability

Dividend per share and total dividends paid are unreported; however, a calculated payout ratio of 136.4% is flagged. If accurate, this exceeds the <60% benchmark and would be unsustainable absent exceptional FCF or balance sheet usage. Given ROIC at 1.9% and softer operating earnings, sustaining a >100% payout would likely rely on cash reserves or asset gains, which is risky. Without OCF/FCF data, we cannot confirm coverage; policy outlook should prioritize aligning dividends with normalized FCF and core earnings rather than non-operating gains.

Risk Assessment

Business Risks:

• Demand cyclicality in automotive and electronics leading to revenue volatility (-8.7% YoY this period).
• Operating margin compression (OP -17.7% YoY) from utilization and cost pressures.
• Raw material and energy price fluctuations impacting COGS and gross margin (18.0%).
• Customer concentration risk with major OEMs/tiers typical in the sector.
• Foreign exchange volatility affecting both operating results and financial income/OCI.

Financial Risks:

• Earnings reliance on non-operating income (net +58.81), which is volatile.
• Potential dividend overreach (calculated payout 136.4%) absent supporting FCF.
• ROIC at 1.9% well below 5% warning threshold indicates value dilution risk if capital intensity persists.

Key Concerns:

• Low ROE (2.1%) and low asset turnover (0.384) highlight weak capital efficiency.
• Total comprehensive income (311.79) far above net income (133.32) suggests equity volatility from OCI.
• Lack of cash flow disclosure limits validation of earnings quality and dividend capacity.

Investment Implications

Key Takeaways:

• Core operations weakened: revenue -8.7% YoY and operating income -17.7% YoY; operating margin 4.37%.
• Ordinary income resilience (+2.3% YoY) was driven by non-operating gains (net +58.81), not by core recovery.
• Balance sheet is strong (equity ratio ~68%, net cash), mitigating financial risk.
• ROE 2.1% and ROIC 1.9% indicate under-earning; capital efficiency must improve.
• Earnings quality mixed due to reliance on non-operating items and missing OCF data.

Metrics to Watch:

• Operating cash flow and free cash flow (coverage of dividends and capex).
• Operating margin trajectory and SG&A ratio versus sales.
• Gross margin recovery and inventory turnover (utilization/working capital health).
• Non-operating income composition (dividends, FX, securities gains) and sustainability.
• ROIC improvement toward >5% and ultimately 7–8%.
• Order trends from key auto/electronics customers and pricing pass-through.

Relative Positioning: Financially conservative with strong liquidity and net cash, but currently underperforming on profitability metrics versus value-creation benchmarks; near-term earnings depend more on non-operating tailwinds than core margin strength.

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