NICHIMO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥67.02B
• Operating Income: ¥1.59B
• Net Income: ¥1.08B
• EPS: ¥158.92

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

Nichimo Co., Ltd. (8091) reported solid topline and profit growth for FY2026 Q2 on a consolidated JGAAP basis, with revenue up 8.8% YoY to ¥67.0bn and operating income up 29.0% YoY to ¥1.59bn. Profitability improved, as operating margin expanded to approximately 2.37% versus roughly ~2.0% implied a year ago, demonstrating operating leverage despite low gross margins typical of trading-heavy models. Ordinary income of ¥1.80bn exceeded operating income by ¥0.22bn, indicating positive non-operating contributions that more than offset ¥0.20bn of interest expense. Net income rose 22.5% YoY to ¥1.33bn, translating to an inferred net margin of 1.98% and reported ROE of 4.14%, supported by high asset turnover (0.723x) and moderate-to-high financial leverage (2.89x). Gross profit of ¥5.69bn implies a gross margin of 8.5%, consistent with thin spread businesses but adequate when coupled with cost discipline. EBITDA was ¥2.09bn (3.1% margin), yielding healthy EBIT and EBITDA interest coverage of ~8.0x and ~10.5x, respectively. Balance sheet scale is ¥92.7bn of assets, funded by ¥32.1bn equity and ¥52.9bn liabilities; the implied equity ratio is about 34.6% (equity/assets) even though an equity ratio of 0.0% is shown in the inputs, suggesting this metric was not disclosed in XBRL under that label. Liquidity appears sound on a current ratio basis (176%) but the quick ratio at ~92% underscores reliance on inventories (¥27.0bn, ~48% of current assets). Operating cash flow was materially negative at -¥13.47bn, likely driven by working capital investment (notably inventory build), and was largely funded by ¥12.40bn of financing inflows, consistent with seasonal or cyclical funding patterns in trading businesses. Investing cash flows were not reported, and cash and equivalents were not disclosed under the provided labels, limiting full cash position assessment. Despite the negative OCF, profitability and interest coverage remain adequate, and working capital headroom (¥24.4bn) provides operational flexibility. Dividend data show DPS and payout ratio at 0.0%, which likely reflects non-disclosure for the period rather than policy change; without full cash flow and capex data, dividend capacity must be judged cautiously. Overall, the quarter reflects healthy revenue growth, margin improvement, and manageable leverage, but cash conversion is weak due to working capital, elevating near-term financial discipline requirements. Key watchpoints are inventory turnover, OCF normalization in H2, and financing dependence. Given several unreported items (cash balance, investing CF, DPS detail, equity ratio under the provided label), interpretations rely on inferred metrics and may be refined when full disclosures are available.

Profitability Analysis

ROE of 4.14% is consistent with DuPont: net margin 1.98% × asset turnover 0.723 × financial leverage 2.89. Operating margin improved to ~2.37% (¥1,586m/¥67,022m), outpacing revenue growth (+8.8% YoY vs. OP +29.0% YoY), indicating positive operating leverage and opex discipline. Gross margin of 8.5% remains thin but stable for a trading/food-related portfolio. Ordinary income margin is ~2.69% (¥1,803m/¥67,022m), reflecting non-operating gains offsetting ¥198m interest expense. EBITDA of ¥2,086m (3.1% margin) provides an additional buffer; EBITDA/interest ~10.5x and EBIT/interest ~8.0x suggest comfortable service capacity. The implied effective tax rate, based on disclosed tax expense (¥355m) and ordinary income, is roughly ~20% (355/1,803), though an “effective tax rate 0.0%” metric was provided in the inputs; we rely on the implied ~20% from the figures. Overall margin quality improved through SG&A control and better operating leverage, while net margin remains constrained by the inherently low spread nature of the business and financing costs.

Growth Assessment

Revenue grew 8.8% YoY to ¥67.0bn, consistent with steady demand and likely price/mix tailwinds in core categories. Operating income grew 29.0% YoY, implying incremental margins and improved operating efficiency. Ordinary income exceeded operating income, indicating supportive non-operating items (e.g., forex, equity-method gains, or other non-operating income) despite higher interest costs. Net income rose 22.5% YoY to ¥1.33bn, confirming that profit growth is not solely from non-operating sources. Sustainability hinges on maintaining gross spreads and turnover amid inventory-heavy operations; any normalization of working capital should support cash conversion. Given the trading profile, revenue growth is likely sensitive to commodity/seafood pricing and FX; pricing discipline and procurement efficiency will be key. The outlook depends on H2 seasonality: if inventory builds reverse, OCF should recover, reducing reliance on financing. Absent explicit segment detail, we assume growth is broad-based across trading and related operations; confirmation via segment disclosures would refine sustainability judgments.

Financial Health

Total assets ¥92.66bn vs. equity ¥32.05bn implies an equity ratio around 34.6% and D/E of 1.65x, a moderate leverage profile for a trading-oriented model. Current ratio 176% indicates ample short-term coverage; quick ratio 91.9% shows dependence on inventory monetization. Working capital stands at ¥24.42bn, providing a cushion but tying up cash in inventory (¥27.00bn, ~29% of total assets). Interest expense of ¥198m is well covered by EBIT (8.0x) and EBITDA (~10.5x). Financing CF of +¥12.40bn likely reflects short-term borrowings to fund working capital, acceptable if seasonal but a risk if structural. The reported equity ratio in inputs (0.0%) appears undisclosed under that specific tag; based on provided balance sheet totals, solvency is adequate. Overall financial health is stable, with liquidity contingent on inventory turnover and continued access to credit lines.

Cash Flow Quality

OCF of -¥13.47bn versus net income of ¥1.33bn (OCF/NI ≈ -10.15x) indicates very weak cash conversion this period, likely driven by working capital outflows, particularly inventory build. Depreciation is ¥0.50bn, suggesting a capital-light core, but investing CF was unreported, so capex cannot be assessed; true free cash flow cannot be calculated. With OCF negative and financing CF +¥12.40bn, operations were effectively debt-funded in the half, which is common seasonally but should unwind with sales collection and inventory normalization. Earnings quality from an accrual perspective appears reasonable—profit growth accompanied by improved operating margin—but cash realization is the key issue to monitor. Working capital intensity is high: inventories are ~48% of current assets, and the quick ratio below 100% highlights reliance on inventory conversion. We would track inventory days, receivables days, and payables days to confirm OCF normalization in H2.

Dividend Sustainability

Annual DPS and payout ratio are shown as 0.0%, which likely indicates non-disclosure at this stage rather than a definitive zero payout. With net income of ¥1.33bn, earnings capacity exists for dividends; however, OCF was negative and investing cash flows were not disclosed, making FCF coverage indeterminable for the period. Any dividend in the near term would need to be balanced against working capital needs and potential debt repayment as inventories convert. Historically, trading companies often target stable-to-progressive dividends, but without policy disclosure we cannot infer Nichimo’s stance for FY2026. Until OCF normalizes and capex visibility improves, near-term payout prudence would be rational from a coverage perspective. FCF coverage and payout ratios should be reassessed when full-year cash flows and DPS guidance are available.

Risk Assessment

Business Risks:

• Commodity and seafood price volatility impacting gross spreads
• Foreign exchange fluctuations affecting procurement costs and selling prices
• Inventory valuation and obsolescence risks given high stock levels
• Supply chain and logistics disruptions (shipping capacity, freight rates)
• Resource sustainability and regulatory constraints in fisheries-related categories
• Customer concentration or channel risk in key markets
• Competitive pressure compressing margins in trading segments

Financial Risks:

• Negative operating cash flow requiring increased short-term financing
• Interest rate risk on floating-rate borrowings
• Working capital cyclicality leading to cash flow volatility
• Potential covenant or liquidity pressure if inventory conversion slows
• Limited visibility on cash balances and capex due to unreported items
• FX translation and transaction impacts on earnings and equity

Key Concerns:

• OCF/NI at approximately -10x indicates heavy working capital drag
• Quick ratio below 100% underscores dependence on inventory monetization
• Leverage at 1.65x D/E requires continued earnings and cash flow support
• Non-operating income contribution to ordinary income may be less predictable
• Incomplete disclosures (cash, investing CF, DPS details) limit precision of analysis

Investment Implications

Key Takeaways:

• Healthy revenue growth (+8.8% YoY) with outsized operating income growth (+29% YoY) signals improving operating leverage
• Margins remain thin but improved (OP margin ~2.37%, gross margin 8.5%) and interest coverage is comfortable (~8x EBIT)
• Working capital investment drove OCF deeply negative; inventory conversion is critical to normalize cash flows
• Balance sheet solvency is adequate (implied equity ratio ~34.6%) though liquidity depends on inventory turnover and credit access
• Non-operating gains supported ordinary income; sustainability of these items should be monitored

Metrics to Watch:

• Inventory days and turnover; change in inventories and receivables vs. sales
• OCF/Net income and OCF margin progression into H2
• Net debt/EBITDA and interest coverage trends
• Gross and operating margin resilience amid pricing and FX changes
• Ordinary income composition (non-operating gains vs. interest costs)
• Equity ratio (as disclosed) and availability of committed credit lines
• Capex and investing cash flows once disclosed

Relative Positioning: Within Japan’s trading- and seafood-related peers, Nichimo shows typical thin margins with improving operating leverage, moderate leverage, and higher working capital intensity; near-term positioning hinges on cash conversion and inventory turnover while maintaining spread discipline.

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