NIPRO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥317.38B
• Operating Income: ¥15.34B
• Net Income: ¥6.63B
• EPS: ¥36.21

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: A mixed quarter—solid operating improvement and strong cash conversion, but weak bottom line optics due to heavy non-operating drag and OCI losses amid high leverage. Revenue rose 1.7% YoY to 3,173.82, with operating income up 14.0% to 153.37, signaling cost discipline and improved operating efficiency. Gross profit was 1,001.18, implying a 31.5% gross margin, while operating margin reached an estimated 4.83%. Ordinary income surged 83.3% YoY to 82.34, but non-operating balance remained a drag (non-op income 25.19 vs non-op expenses 96.22), suppressing recurring profitability. Profit before tax was 124.48, aided by extraordinary items, yet the effective tax rate was high at 46.7%, limiting bottom-line flow-through. Net income printed at 59.05, with a stated YoY change of -98.7%, which appears distorted by prior-year one-time factors and makes net margin comparability unreliable. Total comprehensive income was -112.52, indicating large OCI losses (likely FX translation or valuation), which reduced equity despite positive net income. Cash generation was a bright spot: operating cash flow of 168.69 exceeded net income 2.86x, underscoring strong earnings quality this quarter. Leverage remains elevated with D/E at 2.87x and Debt/EBITDA near 10.0x, keeping interest coverage moderate at 3.43x and heightening refinancing risk. Liquidity is adequate (current ratio 149.7%, quick ratio 104.1%), but the sizeable short-term loans of 1,552.57 warrant monitoring against available liquidity. ROE is low at 2.0% and ROIC at 1.3%, highlighting capital efficiency challenges and the need for improved asset turnover or margin lift. Non-operating volatility and OCI swings are the key headwinds to translating operating gains into shareholder returns. Given the payout ratio estimate of 72.6%, distribution capacity hinges on sustaining strong OCF amid unknown capex needs. Forward-looking, incremental operating improvements and working-capital discipline can support cash flow, but deleveraging and mitigating non-operating losses are essential to stabilize the bottom line. Absent disclosure on capex/dividend cash usage, FCF coverage of dividends cannot be confirmed. Overall, operational execution improved, but financial structure and non-operating/OCI volatility temper the quality of reported earnings.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.0% = Net Profit Margin (1.9%) × Asset Turnover (0.275x) × Financial Leverage (3.87x). The most notable change vs revenue growth was the operating layer: operating income grew 14.0% vs revenue +1.7%, implying operating margin expansion (estimated +52 bps YoY from ~4.31% to ~4.83%). Business driver: better cost control and/or product mix improvements lifted operating profit more than sales, consistent with SG&A leverage despite limited top-line growth (SG&A level reported at 847.81; detailed line items not disclosed). Non-operating results were a headwind: net non-operating loss (~71) driven by interest expense (44.73) and other items reduced ordinary income relative to operating income. The bottom line was further pressured by a high effective tax rate (46.7%) and large negative OCI, disconnecting comprehensive earnings from operating progress. Sustainability: operating margin gains appear repeatable if mix/pricing discipline persists; however, non-operating volatility (interest/FX/valuation) and elevated leverage are ongoing drags. Concerning trend: leverage-driven interest burden suppresses recurring earnings; also, the reported YoY net income collapse is likely one-off distorted, so focusing on operating and cash metrics is more informative.

Growth Assessment

Top-line grew modestly at +1.7%, suggesting steady demand but limited volume/price uplift. Operating profit grew +14.0%, indicating positive operating leverage from cost controls and mix. Ordinary income rose sharply (+83.3%), but this masks an adverse non-operating balance and likely extraordinary factors. Net income optics (-98.7% YoY) are not economically comparable, likely reflecting prior-year non-recurring gains; current net margin is 1.9%. With EBITDA at 454.87 and depreciation/amortization at 301.50, underlying cash earnings capacity is materially higher than accounting net income. Outlook: incremental growth hinges on mix/pricing in medical devices/consumables and normalization of non-operating items; FX and interest costs remain key swing factors. Absent segment disclosures and capex plans, visibility on medium-term growth acceleration is limited.

Financial Health

Liquidity is adequate: current ratio 149.7% (~1.50x) and quick ratio 104.1%, above warning thresholds; no explicit red flag for current ratio <1.0. Solvency is stretched: D/E 2.87x (>2.0 warning) and Debt/EBITDA about 10.0x indicate high leverage. Interest coverage is moderate at 3.43x (OI/interest), leaving limited cushion against rate or earnings shocks. Maturity profile risk: short-term loans of 1,552.57 are sizable; however, current assets of 5,804.81 and cash of 1,099.69 provide coverage alongside receivables 1,526.70 and inventories 1,769.47. No off-balance sheet obligations were disclosed in the data provided. Equity stands at 2,977.44 with owners' equity 2,389.39; total comprehensive loss this period erodes capital despite positive NI, highlighting sensitivity to OCI swings.

Cash Flow Quality

Earnings quality is strong this quarter: OCF/Net Income at 2.86x (>1.0) indicates robust cash conversion and low accrual risk. Working capital appears supportive of OCF; inventories (1,769.47) and receivables (1,526.70) levels are high in absolute terms but not evidently bloating cash outflows this quarter. Free cash flow could not be computed due to unreported investing cash flow/capex; hence, sustainability of dividends plus capex is not verifiable. No direct signs of working capital manipulation are evident from the limited data, though monitoring inventory turns and receivable days is advised.

Dividend Sustainability

Dividend details are largely undisclosed; DPS and total dividends paid are unreported. The calculated payout ratio is 72.6%, above the <60% benchmark, implying limited buffer if earnings weaken; however, strong OCF this quarter mitigates near-term risk. FCF coverage cannot be assessed without capex/investing CF disclosure. Policy outlook is unclear; with ROE at 2.0% and ROIC at 1.3%, reinvestment returns appear subdued, but deleveraging may take precedence over higher payouts given leverage metrics.

Risk Assessment

Business Risks:

• Modest top-line growth (+1.7%) limits operating leverage potential if cost tailwinds reverse
• Product mix and pricing risk in core medical devices/consumables could pressure gross margin (31.5%)
• Execution risk around SG&A efficiency given limited YoY disclosure granularity
• Supply chain and inventory management risk with inventories at 1,769.47

Financial Risks:

• High leverage: D/E 2.87x and Debt/EBITDA ~10.0x increase refinancing and interest-rate risk
• Interest burden (44.73) keeps interest coverage at 3.43x, constraining flexibility
• Non-operating volatility (FX, valuation) producing recurring drag and OCI losses (TCI -112.52)
• High effective tax rate (46.7%) reduces net income sensitivity to operating improvements

Key Concerns:

• Disconnect between operating income growth and weak bottom-line optics due to non-operating losses
• Large negative OCI eroding equity despite positive NI
• Unreported capex/investing CF obscures FCF and dividend coverage assessment
• Low capital efficiency: ROE 2.0%, ROIC 1.3% far below 7–8% targets

Investment Implications

Key Takeaways:

• Operational improvement evident: operating income +14% vs revenue +1.7% with estimated ~+52 bps margin expansion
• Cash conversion strong: OCF/NI 2.86x supports near-term flexibility
• Leverage is the primary constraint: D/E 2.87x and moderate interest coverage 3.43x
• Bottom line clouded by non-operating losses and high taxes; comprehensive loss highlights OCI volatility
• Capital efficiency remains weak with ROE 2.0% and ROIC 1.3%

Metrics to Watch:

• Operating margin trajectory (current ~4.83%) and gross margin stability (31.5%)
• Interest coverage and average funding cost amid rate environment
• Working capital efficiency (inventory and receivable turns) and OCF sustainability
• Capex and investing cash flows to assess FCF and dividend capacity
• OCI components (FX translation, securities valuation) and equity sensitivity

Relative Positioning: Within Japanese medtech/manufacturing peers, Nipro shows improving operating execution but lags on leverage and capital efficiency; earnings quality (cash conversion) is comparatively strong, yet financial risk and non-operating/OCI volatility weigh on the quality of reported profits.

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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