Nippon Yusen Kabushiki Kaisha (9101) FY2026 FY Earnings Report

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Executive Summary

FY2026 posted lower revenue and earnings due to the normalization of market conditions and a sharp decline in equity-method investment gains. Revenue was ¥2,423.69B (-6.4% YoY), Operating Income was ¥138.60B (-34.3%), Ordinary Income was ¥211.13B (-57.0%), and Net Income attributable to owners of the parent was ¥215.67B (-55.7%). In addition to equity-method investment gains declining 71.0% YoY, SG&A expenses increased 12.5% despite the decline in revenue, resulting in negative operating leverage and amplifying the decline in earnings. Meanwhile, extraordinary income, including gains on the sale of investment securities and fixed assets, supported final profit.

Factors Affecting Business Performance

【Revenue】Revenue was ¥2,423.69B, down -6.4% YoY. The Energy Business performed strongly, with revenue increasing +32.7%, but the Air Transportation Business recorded a substantial -77.9% decline due in part to changes in the scope of consolidation associated with the share exchange involving Nippon Cargo Airlines. The Dry Bulk Business also reported lower revenue of -9.7% amid the normalization of market conditions. The Automotive Business, which accounted for 21.7% of the revenue mix, remained almost flat at -1.1% and continues to provide a stable earnings base.

【Profit and Loss】Operating Income declined substantially to ¥138.60B (-34.3%), while Ordinary Income fell to ¥211.13B (-57.0%). In particular, segment profit in the Liner Business plunged 81.9% YoY to ¥49.8B, while equity-method investment gains declined to ¥85.0B (-71.0% YoY), driving the decline in Ordinary Income. Although the Logistics Business and Dry Bulk Business continued to generate low margins of 1.3% and 1.8%, respectively, the Automotive Business, Energy Business, and Liner Business maintained high margins of 18.6%, 23.0%, and 28.5%, respectively. Extraordinary income of ¥82.3B, including a ¥37.8B gain on the sale of investment securities and a ¥25.5B gain on the sale of fixed assets, lifted profit before tax and narrowed the gap between Ordinary Income and Net Income. Overall, the results were characterized by lower revenue and earnings, with declining core earnings power partially offset by temporary extraordinary income.

Segment Analysis

Segment profit, based on Ordinary Income, was highest in the Automotive Business at ¥97.94B, accounting for 43.7% of the total. While margins remained high in the Liner Business at 28.5%, the Energy Business at 23.0%, and the Automotive Business at 18.6%, profitability was low in the Logistics Business at 1.3% and the Dry Bulk Business at 1.8%, highlighting substantial variation in profitability across businesses. Although revenue in the Liner Business was almost flat (+0.1%), segment profit fell sharply by -81.9% YoY, confirming a structure in which fluctuations in market conditions and equity-method earnings have a significant impact on profit. The Energy Business was the only growth driver, with both revenue and profit increasing by double digits. The Air Transportation Business experienced a change in the scope of consolidation due to the share exchange involving Nippon Cargo Airlines, implemented in August 2025; therefore, caution is required when interpreting year-on-year comparisons.

Key Financial Indicators

【Profitability】The Operating Income margin was 5.7%, down 2.4pt from 8.1% in the previous year, while the gross margin also declined to 17.7% from 18.1%. The Net Income margin was 8.9%, indicating an overall contraction in profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥473.36B, approximately 2.2 times Net Income, indicating strong cash conversion. Capital expenditures for tangible and intangible fixed assets of ¥304.5B exceeded depreciation and amortization of ¥175.18B, indicating an investment phase.【Investment Efficiency】ROE was 6.9%, and total assets increased 20.2% YoY while Net Income declined, highlighting the challenge of generating returns from the expansion of the asset base.【Financial Soundness】The Equity Ratio remained high at 60.4%. Current assets of ¥865.46B compared with current liabilities of ¥873.85B resulted in a current ratio of approximately 99%, slightly below 100%; short-term funding management remains an area requiring continued monitoring.

Cash Flow Analysis

OCF was ¥473.36B, down -7.3% YoY, but approximately 2.2 times Net Income of ¥215.67B, maintaining a strong level of cash conversion. Investing Cash Flow was -¥371.24B, reflecting active investment activity, including the acquisition of tangible and intangible fixed assets and the acquisition of shares in subsidiaries. Financing Cash Flow was -¥33.39B, with shareholder return activities centered on share buybacks of ¥144.06B being the primary cause of cash outflow. Free Cash Flow (OCF + Investing Cash Flow) remained positive at ¥102.12B, indicating that internally generated cash was generally sufficient to fund investment and shareholder returns even during an investment phase. In terms of working capital, increases in trade receivables and inventories partially weighed on OCF, but this was offset by an increase in trade payables, with no signs of significant working-capital management.

Earnings Quality

Profit before tax of ¥276.76B for the period included extraordinary income of ¥82.29B, comprising a ¥37.81B gain on the sale of investment securities and a ¥25.54B gain on the sale of fixed assets, as well as extraordinary losses of ¥16.66B. Accordingly, there was a temporary net uplift of approximately ¥65.6B. The relationship between Ordinary Income of ¥211.13B and Net Income of ¥215.67B shows that Net Income exceeded Ordinary Income due to the contribution from extraordinary gains and losses. Among non-operating income, equity-method investment gains of ¥85.02B accounted for approximately 40% of Ordinary Income, indicating a high degree of dependence on market conditions and the performance of affiliated companies. OCF exceeded Net Income, and earnings quality can be assessed as good from the perspective of accruals, or accounting-estimate components. However, given the dependence on extraordinary income, improvement in core earnings power will remain an area to monitor.

Earnings Forecast and Guidance

Against the company’s full-year forecast, Revenue of ¥2,605B, Operating Income of ¥145B, and Ordinary Income of ¥185B are indicated. Compared with the previous year’s actual results, the company expects higher revenue and Operating Income, with Revenue increasing +7.5% and Operating Income increasing +4.6%, while Ordinary Income is forecast to decline -12.4%. This appears to reflect the assumption that the level of extraordinary income and equity-method investment gains recorded in the current period will normalize in the next fiscal year. The forecast assumptions are an exchange rate of ¥155.00/US$and a fuel price of US$741.08/MT for the full year; deviations from these assumptions could become factors affecting performance.

Shareholder Returns

The annual dividend is ¥230 per share (¥115 interim and ¥115 year-end), with the year-end dividend comprising an ordinary dividend of ¥90 and a commemorative dividend of ¥25. The Payout Ratio, based on Net Income, was 45.6%, below the 60% level generally considered a benchmark for sustainability. In addition, the company conducted share buybacks of ¥144.06B, resulting in a high Total Return Ratio relative to Net Income when combined with total dividends. Total shareholder returns exceeded Free Cash Flow of ¥102.12B; if share buybacks continue at a similar scale, dependence on OCF and cash on hand may increase. The dividend forecast for the next period is ¥200 per share, expected to decline from ¥230 in the previous year partly due to the absence of the commemorative dividend.

Risk Factors

1. Market Conditions and Equity-Method Earnings Volatility Risk: Segment profit in the Liner Business fell 81.9% YoY to ¥49.8B, while equity-method investment gains were ¥85.02B (-71.0% YoY), accounting for approximately 40% of Ordinary Income. This structure means that fluctuations in market conditions and the performance of affiliated companies can have a significant impact on consolidated earnings.

2. Short-Term Liquidity Risk: Current assets of ¥865.46B compared with current liabilities of ¥873.85B resulted in a current ratio of approximately 99%, slightly below 100%. Short-term borrowings also increased substantially from the previous year, making short-term funding management and refinancing ongoing areas to monitor.

3. Investment Payback Risk: Goodwill and intangible fixed assets increased substantially due to active investment, including ¥304.5B in purchases of tangible and intangible fixed assets and the acquisition of shares in subsidiaries. The integration results and monetization speed of the goodwill balance, particularly in the Logistics Business, will be key areas of focus going forward.

Industry Benchmark (For Reference; Prepared by the Company)

Key Takeaways from the Financial Results

1. OCF was ¥473.36B in FY2026, approximately 2.2 times Net Income, demonstrating that cash-generation capacity was maintained even during a period of declining profit. The Automotive Business maintained a margin of 18.6% and provided a stable earnings base at the core of total segment profit.

2. The sharp decline in profit from the Liner Business and in equity-method investment gains drove the decline in Ordinary Income, leaving consolidated earnings highly sensitive to shipping market conditions and the performance of affiliated companies.

3. The company is simultaneously pursuing active investment, including a substantial increase in goodwill and intangible fixed assets and the acquisition of shares in subsidiaries, while returning capital to shareholders through share buybacks. Going forward, the monetization of acquired assets and the balance between the scale of shareholder returns and cash flow will be key points of focus in the financial results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥6,917–¥7,321 at a cost of equity of ±1%, and ¥7,098–¥7,125 at ω of ±0.1.

Note:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest-rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL financial summary data. It does not recommend investment in any specific issue. The industry benchmark is reference information compiled by the company based on publicly disclosed financial results. Investment decisions should be made at your own discretion and responsibility, with consultation with a professional adviser as necessary.

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