NAGASE & CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥479.73B
• Operating Income: ¥21.06B
• Net Income: ¥16.36B
• EPS: ¥141.42

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

Nagase & Co., Ltd. (8012) reported FY2026 Q2 (cumulative) revenue of ¥479.7bn, down 0.3% YoY, demonstrating broadly stable top-line performance despite a soft demand backdrop in chemicals and electronics-related segments. Gross profit of ¥88.0bn implies an 18.3% gross margin, indicating solid value-added trading and solutions capabilities in specialty chemicals and related businesses. Operating income was ¥21.1bn, effectively flat YoY, signaling cost discipline and resilient operating efficiency even as revenue edged lower. Ordinary income of ¥20.7bn was slightly below operating income, with interest expense of ¥1.94bn well covered by operating profit. Net income was ¥15.1bn, down 5.6% YoY, reflecting some pressure below the operating line and a normalization of taxes versus the prior year. DuPont metrics show a net profit margin of 3.15%, asset turnover of 0.59x, and financial leverage of 2.02x, yielding a reported ROE of 3.75%, consistent with the calculated figure. Operating margin stands at approximately 4.39%, broadly stable given the flat YoY operating income. EBITDA was ¥28.7bn (6.0% margin), underscoring moderate operating leverage and a trading-oriented earnings mix with working-capital intensity. Cash generation from operations was ¥12.0bn, implying OCF/Net Income of 0.79x, which suggests weaker cash conversion in the period, likely driven by working capital movements typical for an interim period in a trading business. Liquidity appears strong with a current ratio of 207.8% and quick ratio of 153.3%, supported by ¥290.6bn of working capital. The balance sheet shows total liabilities of ¥401.7bn against equity of ¥402.0bn, indicating a balanced capital structure and moderate leverage (Debt-to-Equity 1.00x as provided). The interest coverage ratio of 10.9x indicates comfortable debt service capacity under current earnings. While the provided “effective tax rate” metric shows 0.0%, the reported income tax expense of ¥6.64bn and ordinary income of ¥20.7bn imply a more typical tax burden in the ~30% range for the period; therefore, tax impacts should be interpreted using the disclosed expense figures. Dividend data (DPS and payout) are shown as zero for the period, which likely reflects non-disclosure at this stage rather than an actual zero; hence dividend capacity assessment relies on earnings and OCF indicators. Several data items (e.g., investing cash flows, cash and equivalents, shares outstanding, equity ratio) are shown as zero, which indicates non-disclosure in this dataset rather than actual zero values; analysis is therefore focused on the available non-zero metrics. Overall, Nagase delivered steady operating performance with solid liquidity and adequate solvency, though cash conversion lagged earnings in the half, and ROE remains modest at 3.75%. The outlook hinges on demand normalization in chemicals/electronics supply chains, inventory discipline, and maintaining gross margin resilience.

Profitability Analysis

ROE_decomposition: ROE 3.75% = Net margin 3.15% × Asset turnover 0.590× × Financial leverage 2.02×. The main drag is modest net margin given the trading model; leverage is moderate and asset intensity (working capital) tempers asset turnover. margin_quality: Gross margin 18.3% suggests sustained value-add in specialty chemicals distribution/solutions. Operating margin ~4.39% reflects disciplined SG&A control despite flat revenue. Ordinary margin ~4.32% remains close to operating margin, indicating limited non-operating drag aside from interest. Net margin 3.15% is consistent with a trading-focused mix. operating_leverage: EBITDA margin 6.0% and flat YoY operating income on slightly lower revenue indicate limited operating leverage—costs flexed adequately. D&A of ¥7.62bn supports stable EBIT/EBITDA bridge. Interest coverage at 10.9x confirms manageable financial leverage impact on operations.

Growth Assessment

revenue_sustainability: Revenue declined 0.3% YoY to ¥479.7bn, essentially stable. This indicates resilient customer activity across key end markets, though macro softness likely weighed on volumes/pricing in select categories. profit_quality: Operating income was flat YoY at ¥21.1bn, showing cost control offsetting light revenue. Net income declined 5.6% YoY to ¥15.1bn due to factors below the operating line and normal tax expense, pointing to some pressure on bottom-line growth. outlook: Near-term growth depends on restocking cycles in electronics/semiconductor-related supply chains, stabilization in chemicals demand, and currency effects. Maintaining the 18%+ gross margin and tight SG&A control will be key to defending operating profit if volumes remain subdued.

Financial Health

liquidity: Current ratio 207.8% and quick ratio 153.3% indicate strong short-term liquidity. Working capital is ¥290.6bn, providing cushion to manage seasonality and customer credit terms. solvency: Total liabilities ¥401.7bn vs equity ¥402.0bn; Debt-to-Equity 1.00x (as provided) suggests moderate leverage. Interest coverage 10.9x demonstrates ample capacity to service debt under current earnings. capital_structure: Financial leverage of 2.02× (Assets/Equity) reflects a balanced structure typical of trading companies reliant on working capital funding. The reported equity ratio is shown as 0.0% in the dataset, which should be treated as undisclosed rather than zero.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.79x (¥12.0bn OCF vs ¥15.1bn NI), indicating weaker cash conversion in the period, likely tied to working capital usage. EBITDA of ¥28.7bn supports underlying cash generation capacity. FCF_analysis: Free cash flow cannot be reliably assessed because investing cash flows are shown as zero (undisclosed). The reported FCF figure of zero reflects missing data rather than actual FCF. working_capital: Inventories are ¥146.8bn; given the modest top-line decline, inventory discipline remains important to improve cash conversion in subsequent quarters. The strong liquidity ratios suggest receivables and payables management remain adequate, but working capital likely consumed cash in the half.

Dividend Sustainability

payout_ratio_assessment: The dataset shows DPS and payout ratio as 0.0%, which should be interpreted as not disclosed for the period rather than actual zero. With net income of ¥15.1bn and positive OCF, internal capacity exists, but the absence of DPS disclosure precludes a definitive payout assessment. FCF_coverage: FCF coverage cannot be calculated because investing cash flows are undisclosed (reported as zero). As such, dividend coverage analysis based on FCF is not available from this dataset. policy_outlook: Assuming a stable earnings base and liquidity profile, the company appears positioned to sustain typical payout practices; however, confirmation awaits disclosed DPS guidance and full cash flow details.

Risk Assessment

Business Risks:

• Cyclical demand in chemicals and electronics end-markets
• Inventory risk and obsolescence in specialty materials
• FX volatility impacting import/export margins
• Commodity and input price fluctuations affecting gross spread
• China and regional macro slowdown affecting volumes
• Customer concentration and credit risk in distribution
• Regulatory and environmental compliance costs in chemicals

Financial Risks:

• Working capital swings pressuring OCF and cash conversion
• Interest rate risk on short-term funding
• Counterparty credit risk on receivables
• Potential refinancing risk if credit markets tighten
• Tax rate variability impacting net margins

Key Concerns:

• OCF/NI at 0.79x indicates weaker cash conversion in the half
• ROE at 3.75% remains modest versus capital market expectations
• Limited operating leverage leaves earnings sensitive to top-line softness

Investment Implications

Key Takeaways:

• Stable revenue (-0.3% YoY) with flat operating income underscores resilient operations
• Gross margin at 18.3% and operating margin ~4.39% reflect disciplined cost control
• OCF of ¥12.0bn vs NI of ¥15.1bn signals near-term cash conversion shortfall
• Liquidity strong (current ratio 208%, quick ratio 153%) with ¥290.6bn working capital
• Moderate leverage (D/E ~1.00x provided; interest coverage 10.9x) supports solvency
• ROE 3.75% driven by modest net margin and working-capital-intensive model
• Dividend capacity cannot be assessed fully due to undisclosed investing CF and DPS

Metrics to Watch:

• Gross margin trajectory and SG&A ratio to sustain operating margin
• OCF/Net Income and working capital turns (inventory and receivables days)
• EBITDA margin and interest coverage amid rate environment
• Net debt and funding mix once cash and investing CF are disclosed
• Tax expense trend to gauge normalized effective tax rate
• Revenue growth in electronics/semiconductor-related segments

Relative Positioning: Positioned as a specialty chemicals and electronics materials trading/solutions player with resilient gross margins and strong liquidity, but with modest ROE and cash conversion variability typical of working-capital-intensive trading models.

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
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