NANSO Transport Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥1.17B
• Net Income: ¥785M
• EPS: ¥83.15

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

FY2026 Q2 results show resilient core profitability with slight declines at each line, and a sharper fall at the bottom line due to a higher effective tax burden. Operating income was 11.71 (100M JPY), down 1.5% YoY, indicating relatively stable operations despite cost and demand headwinds typical in logistics. Ordinary income was 11.91 (100M JPY), down 0.9% YoY, helped modestly by positive net non-operating items (+0.20 from 0.53 non-op income minus 0.33 non-op expenses). Net income declined 11.4% YoY to 7.84, with an effective tax rate of 34.1% that compressed the bottom line more than the operating trend would suggest. Interest coverage remains very strong at 36.07x, reflecting conservative financial risk and ample headroom against financing costs. Balance sheet quality is solid: current ratio is 149.0% and D/E (liabilities/equity) is 0.49x, with cash of 36.72 covering short-term loans of 7.97 comfortably. Total assets stand at 336.25 with equity of 225.90, implying low financial leverage of 1.49x. Non-operating support is modest (net +0.20), meaning earnings are primarily driven by operations rather than one-off financial gains. ROIC is reported at 3.0%, which is below a typical cost of capital and flags capital efficiency as a key improvement area. With revenue and gross metrics unreported, margin mix and operating leverage cannot be fully assessed, but the slight gap between operating and ordinary income suggests limited reliance on non-core income. Cash flow data were not disclosed; thus, earnings quality (OCF vs NI) cannot be verified this quarter. Dividend payout ratio is calculated at 63.8%, which edges above our <60% sustainability benchmark and could become tight if cash flows soften. Net debt is modest at approximately 29.46 (loans 66.18 minus cash 36.72), leaving flexibility for maintenance capex and working capital needs. Forward-looking, the sector faces driver shortage and wage inflation ("2024 problem"), making rate pass-through and utilization critical to protect margins. Overall, the quarter reflects stable operations with conservative leverage, but low ROIC and a higher tax drag reduced net profitability, and absent cash flow disclosure limits assessment of dividend durability.

Profitability Analysis

ROE decomposition (NPM × Asset Turnover × Financial Leverage) cannot be fully calculated because revenue and average equity/revenue are unreported; only financial leverage is observable at 1.49x (Assets/Equity = 336.25/225.90). The most evident driver of the YoY decline in net income appears to be a higher effective tax rate and the small negative delta between operating and net, rather than leverage or non-operating items (ordinary income was down only 0.9% YoY while net income fell 11.4%). Business explanation: core operations were broadly steady (OI -1.5% YoY), non-operating results added a small positive (net +0.20), but tax expense (4.07) at a 34.1% rate constrained after-tax earnings. This effect is likely not structural unless there were tax credit timing effects; absent details, we treat it as potentially transient but monitorable. Sustainability: the low financial leverage (1.49x) and strong interest coverage (36.07x) indicate minimal financial engineering—future ROE improvement must come from better margins and/or asset turnover. Warning flags: we cannot test operating leverage or SG&A growth versus revenue as revenue and SG&A are unreported; however, the decline in operating income suggests modest margin compression or mix headwinds. Net non-operating support (roughly 1.7% of ordinary income) is small, implying limited risk of reversal, but also limited upside from non-core gains.

Growth Assessment

Top-line trends are unassessable due to unreported revenue; however, operating income declined slightly (-1.5% YoY), indicating modest pressure on core profitability. Ordinary income (-0.9% YoY) outperformed operating income due to small net non-operating gains, suggesting stable financial/other income contributions. Net income fell more sharply (-11.4% YoY), primarily due to tax burden normalization/elevation (34.1% effective rate). Without gross profit or SG&A disclosure, we cannot isolate cost inflation, wage increases, or fuel cost pass-through impacts. The earnings mix remains operating-led with minimal reliance on financial gains. Outlook hinges on: (1) price pass-through to offset wage/fuel increases under the 2024 labor reforms; (2) fleet utilization and mix optimization; and (3) disciplined capex to lift ROIC above 5%. Given the reported ROIC of 3.0%, management likely needs incremental pricing, asset turnover improvements, or portfolio optimization to drive medium-term value creation. Near-term growth appears constrained but stable, with risks skewed to costs if rate increases lag.

Financial Health

Liquidity is sound with a current ratio of 149.0% and quick ratio effectively the same given unreported inventories/receivables; no warning triggered (CR is not <1.0). Cash and deposits of 36.72 exceed short-term loans of 7.97, minimizing near-term refinancing risk. Working capital stands at 20.78, indicating a positive cushion. Solvency is conservative with total liabilities/equity at 0.49x, and interest coverage at 36.07x is well above our >5x benchmark. Long-term loans of 58.21 dominate the debt stack versus short-term loans of 7.97, reducing maturity concentration risk; current assets (63.17) cover current liabilities (42.39), suggesting limited maturity mismatch. Net debt is approximately 29.46, implying low balance-sheet risk. No off-balance sheet obligations were disclosed in the provided data; absence of disclosure does not preclude their existence (e.g., operating leases). Overall, the capital structure is conservative and supports operational stability.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income and free cash flow cannot be assessed; we cannot test the >1.0 OCF/NI benchmark this quarter. Earnings quality inference must rely on accrual metrics, which are limited without working capital detail (AR/AP/inventory unreported). Interest expense is low relative to operating income, reducing the risk that earnings are financed by leverage. With no capex or dividend cash data, FCF coverage of the dividend cannot be verified. We see no explicit signs of working capital manipulation, but data gaps (receivables, inventories, OCF) prevent confirmation. Monitor the next quarter’s cash flow statement to validate conversion of earnings into cash and to gauge maintenance capex needs for fleet renewal.

Dividend Sustainability

The calculated payout ratio is 63.8%, slightly above our <60% comfort threshold, implying limited buffer if earnings or cash flow weaken. With OCF and capex unreported, FCF coverage cannot be evaluated; this is a key limitation to assessing dividend durability. Balance sheet strength (low leverage, ample liquidity) offers some flexibility, but sustained payout at ~64% could pressure reinvestment capacity if ROIC improvement requires capex. Assuming EPS of 83.15 JPY implies an indicative DPS around the mid-50 JPY range, but actual DPS was not disclosed. We would watch for management guidance on payout policy, earnings trajectory, and cash generation before concluding on sustainability. Any continued tax rate elevation or cost inflation without pricing pass-through could constrain headroom.

Risk Assessment

Business Risks:

• Cost inflation (driver wages, fuel) under the 2024 labor reforms eroding margins if not fully passed through
• Utilization and rate mix risk amid freight demand variability
• Capital efficiency risk: ROIC at 3.0% indicates value creation below a typical cost of capital
• Operational execution risk in fleet maintenance/renewal given unknown capex profile
• Customer concentration risk (not disclosed) typical in regional logistics

Financial Risks:

• Potential tax rate volatility impacting net income (34.1% this quarter)
• Refinancing exposure to interest rate moves on 58.21 long-term loans (though leverage is low)
• Dividend coverage risk given payout ~64% and absent OCF/FCF data
• Working capital swings (AR/AP/inventory unreported) that could impact OCF

Key Concerns:

• Low ROIC (3.0%) versus 7–8% target range for healthy value creation
• Data gaps: revenue, gross profit, SG&A, OCF, and capex unreported limit visibility on margin drivers and cash conversion
• Net income decline (-11.4% YoY) outpacing operating income decline (-1.5% YoY), driven by higher taxes

Investment Implications

Key Takeaways:

• Core operations stable but mildly weaker: OI -1.5% YoY; ordinary income -0.9% YoY
• Net income down 11.4% YoY due to a 34.1% effective tax rate
• Strong balance sheet: current ratio 149%, liabilities/equity 0.49x, interest coverage 36x
• ROIC at 3.0% underscores need to improve capital efficiency
• Dividend payout ratio ~64% leaves limited buffer without clear OCF/FCF support

Metrics to Watch:

• Revenue growth and gross margin (currently unreported) to gauge price pass-through
• Operating cash flow and capex to confirm FCF and dividend coverage
• Effective tax rate trajectory and drivers
• Utilization, yield (rate increases), and cost per km/ton-km (if disclosed)
• ROIC and asset turnover improvement initiatives

Relative Positioning: Within Japanese regional logistics peers, the company exhibits conservative leverage and strong interest coverage, but its reported ROIC of 3.0% lags efficiency-focused operators; absent revenue and cash flow disclosures this quarter, visibility on margin resilience and cash conversion is below peers with fuller reporting.

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