Nippi (7932) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, revenue declined while Operating Income and Ordinary Income increased, resulting in a situation in which impairment losses associated with the withdrawal from unprofitable products in the Collagen and Casing Business weighed on bottom-line profit. Revenue was ¥356.7B (-4.8% YoY), Operating Income was ¥27.9B (+7.3%), Ordinary Income was ¥29.3B (+10.0%), and Net Income attributable to owners of the parent was ¥19.1B (+1.7%). Despite the decline in revenue, the Operating Margin improved to 7.8% from the previous year, indicating progress in reviewing the product mix and managing profitability. However, Profit Before Tax was ¥25.7B (-6.1%), held back by the impact of ¥4.3B in impairment losses.

Factors Affecting Performance

【Revenue】Revenue was ¥356.7B, a 4.8% YoY decline. By segment, the Cosmetics-Related Business increased revenue to ¥62.5B, representing 17.5% of the total, but the Gelatin-Related Business (¥93.2B, 26.2% of total revenue, -6.4% YoY), Collagen and Casing Business (¥67.8B, 19.0%, -4.0% YoY), and Leather-Related Business (¥44.6B, 12.5%, -21.2% YoY) reported lower revenue and were factors behind the company-wide decline.

【Profit and Loss】Operating Income increased to ¥27.9B (+7.3%), and the Operating Margin expanded to 7.8%. The main contributors to the increase were the Gelatin-Related Business, with profit of ¥17.6B (+58.2%), and the Cosmetics-Related Business, with profit of ¥7.8B (+29.2%), reflecting the contributions of cost management and an improved product mix. In contrast, the Leather-Related Business, with profit of ¥1.0B (-50.3%), and the Collagen and Casing Business, with profit of ¥4.6B (-48.5%), experienced substantial profit declines. Ordinary Income reached ¥29.3B (+10.0%), aided by non-operating income and expenses, including dividend income of ¥1.5B and foreign exchange gains of ¥0.8B. However, an impairment loss of ¥4.3B associated with the withdrawal from special-specification products in the Collagen and Casing Business was recognized as an extraordinary loss, leaving Profit Before Tax at ¥25.7B (-6.1%). Net Income was ¥19.1B (+1.7%), indicating that the company posted lower revenue but higher profit at the Operating Income and Ordinary Income levels, rather than lower revenue and lower profit.

Segment Analysis

The Gelatin-Related Business reported revenue of ¥93.2B, representing 26.2% of the total and a 6.4% YoY decline, while Operating Income was ¥17.6B (+58.2%). Its margin was 18.8%, the highest level among all segments, making it the largest profit contributor and accounting for approximately 41.6% of total segment profit before corporate adjustments. The Cosmetics-Related Business reported higher revenue and profit, with revenue of ¥62.5B (+11.9% YoY) and Operating Income of ¥7.8B (+29.2%), for a margin of 12.5%. The Rental and Real Estate Business is small in scale, with revenue of ¥8.0B, but has an exceptionally high margin of 78.1%. In contrast, the Collagen and Casing Business (revenue of ¥67.8B, profit of ¥4.6B, margin of 6.7%) and the Leather-Related Business (revenue of ¥44.6B, profit of ¥1.0B, margin of 2.2%) recorded substantial profit declines. In particular, the Collagen and Casing Business recognized an impairment loss of ¥4.3B associated with its withdrawal from special-specification products for overseas markets. Corporate expense adjustments increased from ¥12.9B in the previous year to ¥14.3B, creating a structure in which improvements in segment profit are not fully reflected in consolidated profit.

Key Financial Metrics

【Profitability】The Operating Margin was 7.8%, improving from approximately 6.9% in the same period of the previous year, while the Net Profit Margin was 5.4%. ROE was 4.7% (DuPont decomposition: Net Profit Margin of 5.4% × Total Asset Turnover of 0.499x × Financial Leverage of 1.74x). Financial leverage is restrained, and the constraints on ROE stem from the low profit margin and low asset turnover. Interest coverage was approximately 25x, indicating strong debt-servicing capacity.【Cash Flow Quality】Days sales outstanding were 68 days on an annualized basis, while inventory days were 84 days on an annualized basis. Both exceeded general warning thresholds (60 days and 60–90 days, respectively), confirming the accumulation of working capital, primarily product inventories of ¥77.3B.【Investment Efficiency】Total Asset Turnover was 0.499x, indicating room to improve asset efficiency.【Financial Soundness】The Equity Ratio was 57.3%, the Current Ratio was 184.1%, and the Quick Ratio was 134.6%, indicating sound short-term payment capacity. On the other hand, short-term borrowings of ¥51.2B constitute the core of current liabilities, and the short-term debt ratio is high at 45.8%, indicating relatively high sensitivity to the refinancing environment.

Cash Flow Analysis

As reported figures from the statement of cash flows are not included within the disclosed scope, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥93.8B, up from ¥89.3B in the same period of the previous year, indicating an improving liquidity trend. Meanwhile, accounts receivable were ¥88.7B (¥82.5B in the previous year), and product inventories were ¥77.3B (¥80.5B in the previous year, broadly at the same level). Accounts receivable increased despite declining revenue, indicating that working capital compression has not progressed. Short-term borrowings increased to ¥51.2B from ¥44.1B in the previous year, suggesting a somewhat higher reliance on short-term funding. Investment securities increased to ¥58.9B from ¥47.9B in the previous year, indicating that a portion of surplus funds may have been directed toward securities investments.

Quality of Earnings

Ordinary Income of ¥29.3B exceeded Operating Income of ¥27.9B, and the difference was supported by recurring non-operating income, such as dividend income of ¥1.5B and foreign exchange gains of ¥0.8B, indicating relatively good earnings quality. On the other hand, most of the extraordinary loss of ¥4.3B (¥4.3B) was an impairment loss associated with the withdrawal from unprofitable products in the Collagen and Casing Business. This temporary factor reduced Profit Before Tax by 6.1% and limited Net Income growth to 1.7%. The impairment loss was equivalent to approximately 22.6% of Net Income attributable to owners of the parent of ¥19.1B, indicating that current-period Net Income was strongly affected by a temporary factor. Comprehensive Income was ¥27.6B (¥23.1B in the previous year), exceeding Net Income of ¥19.8B. Since the primary factor was an ¥7.9B valuation difference on available-for-sale securities, it should be noted that fluctuations in the value of held assets, separate from the earnings power of the core business, boosted Comprehensive Income.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥490.0B (-0.3% YoY), Operating Income of ¥38.0B (+4.8%), Ordinary Income of ¥38.0B (+5.1%), and EPS of ¥904.11. Progress rates for the cumulative Q3 period were 72.8% for revenue, 73.3% for Operating Income, 77.0% for Ordinary Income, and 73.6% for Net Income. All were close to the standard quarterly progress level of approximately 75%, and no significant upside or downside relative to the full-year forecast was identified. Excluding the temporary impairment factor, progress is generally in line with the full-year profit growth forecast.

Shareholder Returns

The annual dividend forecast is ¥633, with the Q2 (interim) dividend at ¥0, indicating a dividend structure centered on the year-end dividend. The Payout Ratio calculated from the forecast dividend of ¥633 relative to forecast EPS of ¥904.11 is approximately 70.0%. Although this exceeds the generally sustainable level of approximately 60%, it remains below 100%. As no share repurchases have been confirmed, the 70.0% figure presented here represents the dividend-only Payout Ratio and is not the Total Return Ratio. Dividend sustainability will depend on the extent to which the full-year earnings forecast is achieved.

Risk Factors

1. Impairment risk associated with business portfolio restructuring: The Collagen and Casing Business withdrew from special-specification products for overseas markets and recognized an impairment loss of ¥4.3B. Revenue in the business declined 4.0% YoY, while profit declined 48.5%, indicating deteriorating profitability. Additional facility restructuring or impairment losses may occur.

2. Declining working capital efficiency: Days sales outstanding (68 days on an annualized basis) and inventory days (84 days on an annualized basis) both exceed general warning thresholds. Product inventories of ¥77.3B represent the primary factor, creating risks of inventory valuation losses and production adjustments in the event of demand fluctuations.

3. Reliance on short-term funding and refinancing: Short-term borrowings of ¥51.2B account for approximately 33% of current liabilities of ¥156.3B, and the short-term debt ratio is high at 45.8%. Changes in the interest rate environment or deterioration in refinancing terms could affect funding costs.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability is slightly below the industry median but remains within the IQR.

Growth and Capital Efficiency

The Revenue Growth Rate is significantly below both the industry median and the lower bound of the IQR, indicating a notable revenue decline compared with peer companies.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The improvement in the Operating Margin from the previous year despite a 4.8% decline in revenue resulted from higher profit in the Gelatin-Related Business and the Cosmetics-Related Business, which drove company-wide performance and suggest the effectiveness of product mix optimization and profitability management.

2. The impairment loss in the Collagen and Casing Business reflects both the rationalization of an unprofitable business and the weakness of the business’s earnings base. The degree of post-impairment profitability recovery in the business will be a key point to monitor going forward.

3. The lengthening of days sales outstanding and inventory days indicates an accumulation of working capital. Together with the degree to which the full-year profit growth forecast is achieved, whether actual cash-generation capacity is disclosed in future earnings results will be closely watched.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q3 was a mixed but operationally resilient result for Nippi: revenue declined, while operating and ordinary profit expanded through a material gross-margin improvement. Nine-month revenue fell 4.8% year on year to ¥35.67bn. Operating income nevertheless rose 7.3% to ¥2.79bn, and ordinary income increased 10.0% to ¥2.93bn. Gross profit increased 5.3% to ¥10.37bn despite the lower sales base. The gross margin expanded by 276bp to 29.1% from 26.4% in the prior-year period. The operating margin improved by 88bp to 7.8% from 6.9%, indicating that the gross-profit recovery more than absorbed a 4.1% increase in SG&A expenses to ¥7.59bn. Net income attributable to owners rose only 1.7% to ¥1.91bn, materially lagging operating profit growth. The main reason was a ¥432m impairment charge related to withdrawal from unprofitable overseas special-specification collagen-casing production, partly offset by ¥73m of extraordinary gains. This impairment equaled 22.7% of reported net income and reduced pre-tax profit by 6.1% year on year to ¥2.57bn. Non-operating income rose to ¥288m, supported by ¥148m of dividend income and ¥80m of foreign-exchange gains, while interest expense was contained at ¥112m. The balance sheet remains sound, with a 184.1% current ratio, a 134.6% quick ratio, net cash of ¥1.92bn after debt, and interest coverage of 24.9x. However, 45.8% of interest-bearing debt is short term, requiring regular refinancing even though cash covers short-term loans by 1.83x. Working-capital intensity is a key operational issue: receivable days of 68 and inventory days of 102 are above manufacturing benchmarks, and require attention amid declining revenue. Segment trends are polarized, with gelatin and cosmetics delivering strong profit expansion while collagen-casing and leather deteriorated sharply. Management's full-year operating-income forecast of ¥3.80bn implies a 73.3% Q3 progress rate versus the normal 75%, broadly consistent with achievement but leaving limited room for additional disruption. The full-year dividend forecast of ¥633 per share implies a high, but still sub-100%, payout ratio of approximately 70.0% against forecast EPS of ¥904.11. Overall, the investment debate centers on whether higher margins in gelatin and cosmetics can sustainably outweigh weak collagen-casing demand, elevated inventory days, and the evidence of impaired overseas production economics.

Profitability Analysis

Annualized DuPont ROE is 6.2%, comprising a 5.4% net profit margin, 0.665x asset turnover, and 1.74x financial leverage. The annualized ROE is below the 8% threshold generally associated with a satisfactory return profile, and the limiting factor is modest operating profitability and asset productivity rather than excessive leverage. The 5-factor bridge shows a 7.8% EBIT margin, a 0.921 interest burden, and a 0.746 tax burden. Interest burden remains healthy because EBIT covers interest expense 24.9x, so financing costs are not materially constraining returns. Gross margin was the principal positive earnings driver, increasing 276bp year on year to 29.1% as cost of sales fell 8.1% to ¥25.30bn, faster than the 4.8% decline in revenue. Operating margin expanded 88bp to 7.8%; the smaller improvement relative to gross margin reflects SG&A rising to ¥7.59bn from ¥7.29bn while revenue contracted. This unfavorable SG&A/revenue relationship is a point to monitor because it limits operating leverage if sales remain weak. Segment profit before corporate-cost allocation increased 8.6% to ¥4.22bn, while corporate expenses increased from ¥1.29bn to ¥1.43bn. Gelatin-related business was the largest segment by Q3 segment profit at ¥1.76bn and is the core earnings contributor, with a 18.8% segment margin. Cosmetics generated ¥783m of segment profit, a 12.5% margin, while rental and real estate generated ¥621m, a structurally high 78.1% margin on a small revenue base. Food and other earned ¥505m, a 6.3% margin. Collagen-casing profit fell 48.5% to ¥456m and its margin compressed 5.8 percentage points to 6.7%; the impairment of overseas special-specification production assets underscores that this decline is not merely a timing issue. Leather profit decreased 50.3% to ¥96m, with its margin falling 1.3 percentage points to 2.2%. Accordingly, margin sustainability depends on continued gelatin and cosmetics execution and stabilization in the collagen-casing portfolio after the production withdrawal.

Growth Assessment

Revenue declined across four of six reporting segments, demonstrating that the consolidated sales contraction is broad rather than isolated. Gelatin-related revenue fell 6.4% to ¥9.32bn, but segment profit rose 58.3% to ¥1.76bn, suggesting strong pricing, mix, or cost improvement. Cosmetics revenue increased 8.0% to ¥6.25bn and segment profit grew 29.2% to ¥783m, making it the strongest combined sales-and-profit growth business. Food and other revenue fell 1.7% to ¥8.08bn while profit increased 9.8% to ¥505m, reflecting modest margin resilience. Rental and real-estate revenue was essentially flat at ¥794m and profit declined 1.4% to ¥621m. Collagen-casing revenue decreased 3.9% to ¥6.78bn and leather revenue fell 21.2% to ¥4.46bn, with both businesses reporting substantially lower profits. The exit from unprofitable overseas special-specification collagen-casing output should remove a loss-making activity, but it also confirms execution and demand risks in that segment. Full-year revenue guidance is ¥49.00bn, implying 72.8% progress at Q3 versus a standard 75%; this is 2.2 percentage points behind a straight-line pace. Full-year operating and ordinary income forecasts are each ¥3.80bn, implying 73.3% and 77.0% progress, respectively. Operating-income progress is broadly in line with the Q3 seasonal benchmark, whereas ordinary-income progress is 2.0 percentage points ahead. The forecast therefore assumes a modest revenue recovery or seasonal fourth-quarter contribution, while preserving the Q3 margin improvement. The sales outlook should be assessed primarily through inventory clearance, collection discipline, and the ability of gelatin and cosmetics to maintain current profitability.

Financial Health

Liquidity is healthy: current assets of ¥28.78bn exceed current liabilities of ¥15.63bn, producing working capital of ¥13.15bn and a current ratio of 184.1%. The quick ratio of 134.6% confirms that liquidity does not rely solely on inventory monetization. Cash and deposits of ¥9.38bn exceed short-term loans of ¥5.12bn by ¥4.26bn, and cash covers short-term debt 1.83x. Interest-bearing debt totals ¥11.17bn, comprising ¥5.12bn of short-term loans, ¥6.05bn of long-term loans, and ¥0.10bn of bonds. After cash, net debt is negative ¥1.92bn, providing balance-sheet flexibility. Debt-to-equity is 0.74x and debt-to-capital is 21.4%, both consistent with a conservative solvency profile and materially below the levels that would imply aggressive financial risk. Interest coverage of 24.9x provides a substantial buffer against higher borrowing costs. The principal funding consideration is refinancing concentration: 45.8% of debt is short term, above the 40% alert threshold. This does not currently signal a liquidity shortfall because cash and liquid working capital are ample, but it increases exposure to banking conditions and short-term rate repricing. Accounts payable declined 27.5% year on year to ¥4.89bn, while electronically recorded operating obligations were ¥2.42bn; lower trade payables can reduce supplier financing and partly explain elevated working-capital funding needs. Treasury stock increased in absolute terms from ¥0.40bn to ¥6.30bn, indicating capital has been deployed toward repurchases; the amount remains modest at 0.9% of total assets. PPE represents 50.3% of total assets, including ¥28.52bn of land, which provides asset backing but also contributes to the relatively low annualized asset-turnover ratio. Investment securities increased ¥1.10bn year on year to ¥5.89bn, or 8.2% of assets, increasing exposure to market-value movements; ¥790m of positive securities valuation changes supported comprehensive income.

Notable B/S Changes

Accounts payable: -¥1.85bn (-27.5%) to ¥4.89bn - reduced supplier credit increases working-capital funding needs; electronically recorded operating obligations of ¥2.42bn should be considered alongside trade payables. Treasury stock: increased by ¥0.59bn in absolute value, from ¥0.40bn to ¥6.30bn - indicates additional capital returned through buybacks; treasury stock remains 0.9% of total assets. Investment securities: +¥1.10bn (+23.0%) to ¥5.89bn - a larger market-sensitive investment portfolio; ¥790m of positive securities valuation OCI contributed to comprehensive income. Short-term loans: +¥0.71bn (+16.0%) to ¥5.12bn - raises the short-term debt share to 45.8%, requiring refinancing monitoring despite ample cash coverage. Accounts receivable: +¥0.39bn (+4.6%) to ¥8.87bn while revenue declined 4.8% - consistent with the elevated 68-day collection period and a potential cash-conversion headwind. Property, plant and equipment: -¥0.92bn (-2.5%) to ¥35.99bn, including construction in progress falling from ¥0.36bn to ¥0.05bn - reflects a limited near-term construction pipeline; the period also included ¥0.43bn of collagen-casing asset impairment.

Cash Flow Quality

Reported cash-flow data are not available for the period, so cash conversion, operating-cash-flow-to-net-income, free-cash-flow coverage, and accruals measures are not assessed. Balance-sheet working-capital indicators nonetheless warrant caution. Annualized receivable days of 68 exceed the 60-day warning level, indicating slower collection or a customer/payment-term mix that ties up cash. Annualized inventory days are reported at 102 days, above the 90-day warning threshold; a separate industry alert reports 84 days versus a 60-day benchmark, and both measures point to elevated inventory intensity. Finished goods of ¥7.73bn represent the disclosed inventory balance, alongside raw materials of ¥1.07bn and work in process of ¥0.66bn. The high finished-goods balance is particularly important in a period of 4.8% revenue decline, as it raises risks of discounting, obsolescence, or future write-downs if demand does not recover. Accounts receivable increased 4.6% year on year to ¥8.87bn despite lower revenue, reinforcing the need to monitor collections. Reported net income includes a ¥432m impairment charge, while ¥71m gains on sales of investment securities and ¥80m foreign-exchange gains provided partial offsets; reported profit therefore does not represent a purely recurring earnings measure. The impairment is non-cash at recognition but reflects a real economic reset in the collagen-casing asset base. The combination of extended receivable and inventory days is the main potential working-capital drag on future cash generation.

Dividend Sustainability

The company forecasts a full-year dividend of ¥633 per share against forecast EPS of ¥904.11, implying a dividend payout ratio of approximately 70.0%. This exceeds the conventional sub-60% sustainability benchmark, but remains below 100% and is supported by the company's net-cash position and strong liquidity. Forecast dividends on 2.889 million issued shares imply aggregate distributions of approximately ¥1.83bn, compared with forecast profit attributable to owners of ¥2.60bn. The expected distribution would therefore retain roughly ¥0.77bn of forecast earnings before considering any buybacks. Treasury stock rose to ¥630m from ¥40m a year earlier, which indicates some repurchase activity; dividend payout should be distinguished from any broader shareholder-return calculation. The Q2 dividend was ¥0 per share, indicating that distributions are concentrated in the year-end payment under the disclosed information. Dividend capacity ultimately depends on converting earnings into cash, especially given elevated receivables and inventory. The high planned payout leaves less flexibility if collagen-casing restructuring costs recur or if the sales decline persists. Conversely, the healthy current ratio, negative net debt, and low debt-to-capital ratio provide a meaningful cushion for the forecast distribution.

Risk Assessment

Business risks include High priority: Collagen-casing profitability weakened sharply, with revenue down 3.9% and segment profit down 48.5% to ¥456m. The ¥432m impairment associated with withdrawal from overseas special-specification production demonstrates that some assets and product economics were not recoverable., High priority: Inventory intensity is elevated, with annualized DIO reported at 102 days and an additional industry measure at 84 days. Finished goods of ¥7.73bn amid declining sales elevate markdown, obsolescence, and inventory-write-down risk., Medium-high priority: Leather revenue fell 21.2% and segment profit declined 50.3%, leaving a thin 2.2% segment margin and limited buffer against further demand or input-cost pressure., Medium priority: Receivable days of 68 exceed the 60-day warning level, creating collection and customer-credit exposure and potentially delaying cash conversion., Medium priority: Manufacturing operations face raw-material, energy, foreign-exchange, quality-control, and export-market risks. Foreign-exchange gains of ¥80m contributed to non-operating income in Q3, illustrating some earnings sensitivity to currency movements., Medium priority: The group's substantial property base, including ¥28.52bn of land, supports asset value but can depress asset turnover and exposes returns to low utilization or property-market changes..

Financial risks include Medium priority: Short-term debt represents 45.8% of interest-bearing debt, above the 40% refinancing-risk alert threshold. Cash coverage of 1.83x and negative net debt mitigate immediate risk, but refinancing remains exposed to interest rates and lender conditions., Low-medium priority: Investment securities of ¥5.89bn equal 8.2% of assets. Securities valuation gains supported OCI during the period, so equity and comprehensive income remain sensitive to market-price movements., Low priority: Debt-to-equity of 0.74x, debt-to-capital of 21.4%, and interest coverage of 24.9x indicate that leverage and debt-service capacity are currently sound..

Key concerns include The 22.7% one-time-items alert is rooted in the ¥432m impairment charge relative to ¥1.91bn of net income. This lowers the comparability of reported earnings and signals a strategic or operational issue rather than a simple accounting adjustment., SG&A increased 4.1% while revenue declined 4.8%. Continued cost growth without a sales recovery could reverse the Q3 operating-margin improvement., Annualized ROE of 6.2% remains below the 8% benchmark despite better operating margins, reflecting low asset turnover and a sizable capital base., The full-year operating-income forecast requires only a modest Q4 contribution, but the revenue progress rate of 72.8% is slightly below the normal 75% Q3 pace, making execution in gelatin, cosmetics, and inventory management important..

Investment Implications

Key takeaways include The core earnings support comes from gelatin-related operations: ¥9.32bn of revenue and ¥1.76bn of segment profit, with a strong 18.8% segment margin., Cosmetics is the clearest growth engine, delivering 8.0% revenue growth and 29.2% segment-profit growth., Consolidated profitability improved despite lower sales, with gross margin up 276bp and operating margin up 88bp., Reported net-income growth understates operating progress because the collagen-casing impairment reduced earnings., Balance-sheet risk is contained by negative net debt, robust liquidity, conservative debt capitalization, and strong interest coverage., High receivable and inventory days remain the most important indicators of potential cash-conversion and demand risk..

Metrics to watch include Collagen-casing revenue, segment margin, and any further restructuring or impairment charges, Gelatin-related segment margin sustainability after the Q3 58.3% profit increase, Cosmetics revenue growth and segment-profit conversion, Finished-goods inventory balance, annualized DIO, and any inventory valuation losses, Annualized receivable days and receivables growth relative to sales, Short-term debt share, refinancing rates, and interest expense, Q4 delivery against ¥49.00bn revenue, ¥3.80bn operating income, and ¥2.60bn owner-attributable-profit forecasts, Cash generation relative to the approximately ¥1.83bn implied annual dividend commitment.

Regarding relative positioning, Nippi combines a conservatively financed, asset-backed balance sheet with diversified operations spanning gelatin, collagen casing, cosmetics, leather, food, and real estate. Its Q3 earnings profile is stronger in margin terms than the headline sales decline suggests, but annualized ROE of 6.2% and asset turnover of 0.665x indicate returns remain moderate. Relative earnings quality depends on whether the high-margin gelatin and cosmetics businesses can offset structurally weaker collagen-casing and leather operations while working-capital efficiency improves.