Nippon Yusen Kabushiki Kaisha (9101) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 ended March 2026, revenue and earnings declined, primarily due to the softening of liner shipping market conditions and a significant decrease in equity-method investment income. Revenue was ¥18,120.7B (-8.3% YoY), Operating Income was ¥1,001.2B (-43.8%), Ordinary Income was ¥1,650.8B (-62.2%), and Net Income was ¥1,497.9B (-62.6%). The Operating Income margin declined to 5.5% from 9.0% in the same period of the previous year. In addition, equity-method gains and losses contracted significantly to ¥724.0B from ¥2,631.8B in the previous year, widening the decline in Ordinary Income.

Factors Affecting Earnings

【Revenue】Revenue declined 8.3% YoY to ¥18,120.7B. The largest factor was a 71.1% decline in revenue from the air transportation business due to its exclusion from consolidation following the share exchange involving NCA. The liner shipping business also reported a 1.1% decline in revenue as market conditions softened due to increased vessel capacity following new vessel deliveries. Meanwhile, the energy business was the only clearly growing segment, with revenue increasing 26.6% on higher VLCC and VLGC market rates.

【Profit and Loss】Operating Income declined 43.8% to ¥1,001.2B, while Ordinary Income declined 62.2% to ¥1,650.8B. The 72.5% decrease in equity-method gains and losses was the primary driver of the decline in Ordinary Income, resulting in a larger decrease than that of Operating Income alone. Extraordinary gains of ¥354.4B, including gains on the sale of fixed assets and investment securities, were temporary factors. After deducting extraordinary losses of ¥116.2B, the net amount of ¥238.2B boosted Profit Before Tax. In conclusion, the company experienced declining revenue and earnings.

Segment Analysis

Total segment profit, on an Ordinary Income basis, was ¥1,650.8B, with the automotive business accounting for ¥778.1B, or approximately 47% of the total, making it the core business. Although the automotive business maintained its transportation volume, profit declined 15.1% due to the stronger yen and higher cargo-handling costs. The energy business generated ¥422.2B, or approximately 26% of the total, and was the only segment to report profit growth, up 30.4% due to higher VLCC and VLGC market rates and FPSO operations. The liner shipping business generated ¥385.0B, with profit declining sharply by 84.6%; deterioration in market conditions due to increased new vessel supply was the primary factor affecting earnings. Dry bulk (¥22.8B, -89.6%), air transportation (¥21.6B, -88.7%), and logistics (¥97.8B, -52.8%) also reported lower profit. Profit margins differed significantly among segments, at 19.7% for automotive and 24.8% for energy, compared with 0.6% for dry bulk.

Key Financial Indicators

Profitability: ROE was 5.1% (down from the previous year), and the Operating Income margin was 5.5% (down from 9.0% in the previous year).
Cash quality: Cash and deposits were ¥2,211.9B, an increase from the previous year.
Financial soundness: The Equity Ratio was 57.9%, and the current ratio was 94.8% (current assets of ¥8,831.0B / current liabilities of ¥9,311.4B).
Basic EPS was ¥347.33 (-60.5% from ¥878.46 in the previous year).

Cash Flow Analysis

This report does not explicitly disclose Operating CF, Investing CF, or Financing CF. Based on changes in cash and deposits, cash at period-end was ¥2,211.9B, an increase of ¥651.8B from the same period of the previous year. Meanwhile, short-term borrowings increased 397.5% YoY to ¥2,707.0B, warranting attention to the shortening of the funding structure. In terms of capital expenditures, construction in progress increased by ¥674.6B, indicating continued investment in vessels and other assets.

Earnings Quality

Against Ordinary Income of ¥1,650.8B, Net Income was ¥1,497.9B, with the difference attributable to tax expenses and extraordinary gains and losses. Non-operating income of ¥892.2B represented 4.9% of revenue and included ¥84.5B in dividends received. Extraordinary gains of ¥354.4B, including ¥129.1B in gains on the sale of fixed assets and ¥72.8B in gains on the sale of investment securities, should be distinguished as temporary factors. Excluding these items, the profit-generating ability of the core business remains at an Operating Income margin of 5.5%. The substantial decline in Ordinary Income was primarily due to a 72.5% decrease in equity-method investment income, indicating high sensitivity to fluctuations in the performance of investee businesses.

Earnings Forecast and Guidance

Progress against the full-year forecast was 75.8% for revenue, 83.4% for Operating Income, and 84.7% for Ordinary Income, all exceeding the standard progress rate of 75%. Compared with the previous forecast, the full-year forecast was revised upward by ¥400B for revenue and ¥50B for Ordinary Income, while the Net Income forecast remained unchanged at ¥2,100B. Although progress toward the Operating Income and Ordinary Income forecasts is high, progress toward the Net Income forecast is relatively low at approximately 71%, reflecting the impact of fluctuations in extraordinary gains and losses and tax expenses in Q4.

Shareholder Returns

The full-year dividend forecast is ¥225 per share (an interim dividend of ¥115 and a year-end dividend of ¥110, comprising an ordinary dividend of ¥85 and a commemorative dividend of ¥25 for the company’s 140th anniversary). Based on the full-year Net Income forecast of ¥2,100B, the Payout Ratio is approximately 45.3%. In addition, the company is conducting a share repurchase program with a maximum limit of ¥1,500B, and had repurchased approximately ¥1,203B as of the end of January 2026. The Total Return Ratio, combining dividends and share repurchases, is above the Payout Ratio, indicating an active shareholder return policy.

Catalysts

【Short term】Trends in short-term liner shipping freight rates in Q4, the continuation of voyages via the Cape of Good Hope, and progress on the share repurchase program (maximum limit of ¥1,500B). 【Long term】Progress in integrating the healthcare logistics business and its contribution to earnings following the acquisition of Movianto International B.V., and the finalization of purchase price allocation for goodwill (an increase of approximately ¥2,000B).

Industry Benchmarks (For Reference; Compiled by the Company)

Industry Benchmarks (transport)

Profitability and Returns

Both the Operating Income margin and Net Income margin were below the industry median, placing the company in the relatively lower range within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate was significantly below the industry median, with the company standing out for its revenue decline within the industry.

※Source: Compiled by the Company

Risk Factors

1. Shipping market volatility risk: Segment profit in the liner shipping business declined 84.6% YoY, while dry bulk profit declined 89.6%, indicating high earnings sensitivity to market fluctuations. The continuation of voyages via the Cape of Good Hope affects short-term freight rates.

2. Goodwill and acquisition integration risk: Goodwill increased 837.5% YoY to ¥2,546.9B following the acquisition of Movianto International B.V. Purchase price allocation remains provisional, and integration progress and earnings contributions have not yet been determined.

3. Liquidity and funding structure risk: The current ratio was 94.8%, below 1.0x, and working capital was negative, with current assets of ¥8,831.0B against current liabilities of ¥9,311.4B. Short-term borrowings increased 397.5% YoY, indicating a continued shortening of the funding structure.

Key Earnings Highlights

1. The decline in Ordinary Income (-62.2%) exceeded the decline in Operating Income (-43.8%), indicating that the 72.5% decrease in equity-method investment income, an operating-external factor, amplified the fluctuation in earnings.

2. By segment, the automotive and energy businesses maintained their roles as earnings pillars, while the liner shipping, dry bulk, air transportation, and logistics businesses all reported lower profit simultaneously. The diversification benefits of the overall business portfolio were therefore limited during the current period.

3. Although the full-year forecasts for Operating Income and Ordinary Income were revised upward, the Net Income forecast remained unchanged. This confirms a structure in which the upside factors in the first half are balanced against uncertainty in the second half, including market conditions and extraordinary gains and losses in Q4.

Theoretical Share Price (Reference Value)

Sensitivity: ¥6,349–¥6,719 at ±1% for the Cost of Equity, and ¥6,507–¥6,544 at ±0.1 for ω.

Notes:

• Normalized EPS calculated from Ordinary Income and other figures is used to exclude the impact of temporary gains and losses (the company’s forecast EPS is ¥499.6).
• Since forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q3 earnings were materially weaker year on year as lower freight-market profitability and a sharp reduction in equity-method income outweighed still-positive operating and segment earnings. Revenue for the nine-month cumulative period declined 8.3% YoY to ¥1,812.1bn. Operating income fell 43.8% to ¥100.1bn. The operating margin compressed by 330bp to 5.5% from 9.0% in the prior-year period. Gross profit decreased 15.0% to ¥313.0bn, and the gross margin declined by 130bp to 17.3% from 18.6%. SG&A expenses rose 12.1% to ¥212.9bn despite the revenue contraction, increasing the SG&A-to-sales ratio by approximately 210bp to 11.7%. Ordinary income declined 62.2% to ¥165.1bn, a steeper fall than operating income because equity-method earnings of affiliates fell 72.5% to ¥72.4bn. Profit attributable to owners of parent declined 62.8% to ¥147.0bn, equivalent to basic EPS of ¥347.33. Net margin contracted by 120bp to 8.1% from 9.3%. Ordinary income remained above operating income because non-operating income of ¥89.2bn substantially exceeded non-operating expenses of ¥24.3bn, with equity-method income the dominant disclosed contributor. Pretax income was supported by ¥35.4bn of extraordinary income, including ¥12.9bn of gains on asset sales and ¥7.3bn of gains on investment-security sales. These gains exceeded extraordinary losses of ¥11.6bn, creating a net extraordinary gain of ¥23.8bn and supporting reported net income, although this component is not recurring operating profit. The tax burden was normal, with an effective tax rate of 20.7% and a tax-burden factor of 0.778. Comprehensive income of ¥219.2bn exceeded net income, reflecting positive valuation and foreign-currency translation movements. The balance sheet expanded following the acquisition of Movianto International B.V.'s healthcare-logistics business, which added approximately ¥200bn of provisional goodwill and materially increased logistics assets. The strategic effect is a larger logistics platform with a potentially more defensive healthcare revenue mix, but near-term returns depend on successful integration and the acquired business meeting assumptions embedded in provisional purchase-price allocation. Management forecasts FY2026 revenue of ¥2,390bn, operating income of ¥120bn, ordinary income of ¥195bn, and profit attributable to owners of ¥210bn, implying that the final quarter must restore profitability relative to the nine-month run rate. The earnings outlook remains sensitive to freight rates, bunker fuel prices, USD/JPY movements, affiliate earnings, and M&A integration outcomes.

Profitability Analysis

The reported annualized DuPont ROE is 6.6%, comprising an 8.1% net profit margin, 0.485x asset turnover, and 1.69x financial leverage. This ROE is below the 8% level generally associated with adequate capital efficiency and is also consistent with the 3.0% ROIC quality alert. The principal year-on-year deterioration was profitability rather than leverage: operating margin fell 330bp and net margin fell 120bp. Asset turnover is modest for an asset-intensive shipping group with vessels, logistics assets and substantial investment securities, while the Movianto acquisition has further enlarged the asset base. Financial leverage is moderate rather than aggressive, with D/E of 0.69x and debt/capital of 21.8%, so balance-sheet leverage is not the primary source of the reduced return profile. Gross margin of 17.3% is below the 20% quality benchmark, reflecting a weaker revenue-to-direct-cost spread; this is a material concern in an industry exposed to freight-rate and bunker-cost volatility. Operating leverage was unfavorable because SG&A rose 12.1% while revenue declined 8.3%. Segment income is stated on an ordinary-income basis and shows that the Liner & Logistics business remains the core business by contribution, although its segment income declined sharply to ¥385.0bn from ¥2,502.5bn. Logistics generated revenue of ¥5,923.6bn, down 3.3% YoY, and segment income of ¥97.8bn, down 52.8% YoY. Liner shipping generated revenue of ¥1,311.6bn, down 1.1%, while segment income fell 84.6% to ¥21.6bn, demonstrating the sensitivity of profitability to container-market conditions. Automobile transport revenue fell 71.1% to ¥396.2bn and segment income fell 52.8% to ¥21.6bn; the decline coincided with the August 2025 share exchange involving Nippon Cargo Airlines and should be assessed in the context of the resulting segment-asset change. Dry bulk revenue decreased 2.9% to ¥3,949.2bn and segment income declined 15.1% to ¥778.1bn, making it the largest current segment income contributor after the core Liner & Logistics grouping. Energy revenue declined 13.4% to ¥4,081.1bn and segment income fell 89.6% to ¥22.8bn. Other businesses increased revenue 26.3% to ¥1,704.3bn and segment income 30.4% to ¥422.2bn, partly offsetting weakness in shipping-related operations. The sustainability of group margins therefore depends chiefly on a recovery in liner and energy profitability, stabilization of equity-method earnings, and discipline over post-acquisition overhead.

Growth Assessment

Revenue contraction was broad across the principal transport businesses, with growth in other businesses insufficient to offset declines in energy, dry bulk, logistics, liner shipping and automobile transport. The low 2/10 consistency score indicates that the recent earnings pattern has been highly variable, which is characteristic of exposure to cyclical shipping markets but limits visibility on normalized earnings. The segment mix has shifted toward logistics through the Movianto acquisition, adding a European healthcare-logistics platform that may improve revenue resilience over time. However, the acquired goodwill is provisional because purchase-price allocation has not been completed, making the eventual acquired-asset and amortization profile important to monitor. Equity-method earnings fell to ¥72.4bn from ¥263.2bn and explain a substantial portion of the sharper decline in ordinary income relative to operating income. This makes earnings recovery dependent not only on consolidated operations but also on affiliate performance. Against full-year guidance, nine-month revenue progress is 75.8%, broadly in line with the standard 75% pace. Operating-income progress is 83.4%, 8.4 percentage points above the standard pace, indicating that the ¥120.0bn full-year operating-income target requires only ¥19.9bn in Q4. Ordinary-income progress is 84.7%, 9.7 percentage points above the standard pace. Profit attributable to owners progress is 70.0%, 5.0 percentage points below the standard pace, implying a Q4 contribution of ¥63.0bn to meet the ¥210.0bn forecast. The difference between the comfortable operating and ordinary-income progress rates and the lower net-income progress rate indicates that below-ordinary items and tax outcomes will be important to the final-quarter result. Management's forecast assumptions include Q4 USD/JPY at ¥155.00 and fuel oil at US$475.08 per metric ton, versus full-year assumptions of ¥150.14 and US$534.35 respectively. A weaker yen can support USD-denominated freight revenue but may also raise yen costs where fuel, chartering, debt service or procurement are dollar-linked; the net effect depends on hedging and currency matching. Lower assumed Q4 fuel costs provide a potential margin tailwind, but freight-rate movements remain the more consequential operating variable.

Financial Health

Liquidity is the principal balance-sheet constraint. The current ratio is 0.95x and the quick ratio is 0.88x, both below 1.0x; current assets of ¥883.1bn are below current liabilities of ¥931.1bn, producing negative working capital of ¥48.0bn. This creates a maturity-mismatch risk because short-term loans of ¥270.7bn, the current portion of bonds of ¥20.0bn, and other current obligations must be serviced from current assets, operating cash generation, refinancing capacity and committed facilities. Cash and deposits increased 41.8% YoY to ¥221.2bn, improving immediate liquidity, but cash covers only 0.82x of short-term loans. The low-liquidity alert is therefore material: although the working-capital deficit is not large relative to group scale, it reduces flexibility during a freight-market downturn or if acquisition-related integration requires additional funding. Solvency remains sound, with interest-bearing debt of ¥824.1bn, D/E of 0.69x, debt/capital of 21.8%, and total liabilities representing 40.7% of total assets. Long-term loans of ¥553.4bn and bonds of ¥122.0bn provide a meaningful longer-dated funding base, which moderates refinancing risk. Interest coverage of 6.53x remains above the 5x strong-credit benchmark, although it should be monitored because operating income declined 43.8% while interest expense was only modestly lower at ¥15.3bn. Total assets increased by ¥660.3bn YoY to ¥4,980.5bn, while total equity was broadly stable at ¥2,954.4bn. The capital adequacy ratio declined to 57.9% from 67.6%, chiefly reflecting acquisition-related asset and liability growth rather than an aggressive debt-to-equity structure. Goodwill rose by ¥2,275.2bn, or 837.5%, to ¥2,546.9bn, and intangible assets rose by ¥2,398.6bn, or 411.5%, to ¥2,981.5bn. These increases principally reflect the Movianto acquisition and have changed the balance-sheet risk profile from primarily vessel and investment exposure toward greater acquired-intangible exposure. Goodwill/equity is still moderate at 8.6% and goodwill/assets is 5.1%, well below warning thresholds, limiting immediate balance-sheet dependence on goodwill value retention. Lease obligations total ¥261.5bn, comprising ¥37.4bn current and ¥224.1bn non-current, and should be considered alongside interest-bearing debt when assessing fixed financing commitments. Investment securities of ¥1,930.5bn account for 38.8% of assets, underscoring the importance of market valuation, dividend receipts and affiliate performance to capital and earnings.

Notable B/S Changes

Goodwill: +¥2,275.2bn (+837.5%) to ¥2,546.9bn - primarily reflects the Movianto healthcare-logistics acquisition; provisional purchase-price allocation and post-acquisition earnings delivery should be monitored for amortization and impairment risk. Intangible assets: +¥2,398.6bn (+411.5%) to ¥2,981.5bn - acquisition-related expansion increases the importance of return realization from acquired logistics operations. Short-term loans: +¥216.3bn (+397.5%) to ¥270.7bn - materially increases short-term funding reliance and contributes to the 0.95x current ratio and negative working capital. Cash and deposits: +¥65.2bn (+41.8%) to ¥221.2bn - improves liquidity buffer, but remains below short-term loans and covers 0.82x of that balance. Property, plant and equipment: +¥270.1bn (+20.9%) to ¥1,565.7bn - reflects continued capital intensity, including vessels of ¥878.2bn and construction in progress of ¥242.1bn. Total assets: +¥660.3bn (+15.3%) to ¥4,980.5bn - asset growth materially exceeded equity growth and reduced the capital adequacy ratio to 57.9% from 67.6%.

Cash Flow Quality

Reported earnings quality is mixed on the basis of profit composition. Operating income of ¥100.1bn was supplemented by ¥72.4bn of equity-method earnings within non-operating income, while pretax income also benefited from a net extraordinary gain of ¥23.8bn. Equity-method income can be recurring for a diversified shipping group, but its 72.5% YoY decline demonstrates meaningful volatility in this earnings source. Gains on asset and investment-security sales supported pretax income but should not be treated as recurring cash earnings or as a substitute for operating-margin recovery. The 43.8% decline in operating income, combined with acquisition-related balance-sheet expansion, makes preservation of operating cash conversion a key monitoring item. Working capital was negative by ¥48.0bn, and current liabilities exceeded current assets, so cash generation and refinancing discipline are particularly important for maintaining liquidity. The increase in cash and deposits to ¥221.2bn provides some near-term buffer, but cash is below short-term loans of ¥270.7bn. The balance-sheet expansion associated with Movianto also raises the importance of integration-related expenditure control and post-acquisition cash returns.

Dividend Sustainability

The company paid an interim dividend of ¥115 per share and forecasts a FY2026 dividend of ¥225 per share, consisting of an ¥85 ordinary year-end dividend and a ¥25 commemorative year-end dividend. The forecast year-end payment is therefore ¥110 per share. Based on forecast EPS of ¥499.64, the forecast dividend payout ratio is approximately 45.0%, below the 60% sustainability benchmark. The interim dividend represented a calculated 34.0% payout ratio against nine-month net income. The forecast payout level appears supportable by forecast earnings, but the commemorative component means the ordinary recurring dividend run rate is lower than the headline FY2026 DPS. Retained earnings of ¥2,177.8bn and owners' equity of ¥2,885.2bn provide substantial accounting capital support. Dividend capacity should nevertheless be evaluated against the group's liquidity position, acquisition integration requirements, vessel and logistics investment needs, and cyclical shipping earnings exposure. A sustained recovery in core operating margins and affiliate income would improve resilience of the ordinary dividend component.

Risk Assessment

Business risks include Freight-rate cyclicality is the highest operating risk, particularly in liner shipping where segment income fell 84.6% YoY to ¥21.6bn despite only a 1.1% revenue decline., Bunker-fuel price volatility can materially affect shipping margins; management's Q4 fuel assumption is US$475.08/MT, and a rise above this level could erode the expected final-quarter margin., USD/JPY volatility affects dollar-denominated freight revenue, fuel costs, charter costs and financing exposures; the forecast assumes ¥155.00/US$ in Q4., Affiliate-performance volatility is material because equity-method earnings declined 72.5% YoY to ¥72.4bn, contributing to the 62.2% fall in ordinary income., Movianto healthcare-logistics integration risk includes execution, customer retention, European operating performance and realization of the assumptions used in the provisional purchase-price allocation., The shipping sector remains exposed to global trade volumes, geopolitical disruptions, port congestion, carbon regulation including EU ETS-related costs, and higher ship-financing costs..

Financial risks include Current ratio of 0.95x and quick ratio of 0.88x indicate a short-term liquidity shortfall, with negative working capital of ¥48.0bn., Cash of ¥221.2bn covers only 0.82x of short-term loans of ¥270.7bn, requiring dependable operating cash flow and refinancing access., Interest coverage remains sound at 6.53x, but weakening operating profit could reduce debt-service headroom if the downturn persists., Goodwill increased ¥2,275.2bn YoY to ¥2,546.9bn after the Movianto acquisition; while goodwill/equity of 8.6% is manageable, future underperformance could lead to JGAAP goodwill amortization pressure and impairment risk., Investment securities represent 38.8% of total assets, exposing equity and comprehensive income to valuation movements and earnings to changes in investee dividends and affiliate profitability..

Key concerns include Capital efficiency is weak: annualized ROE is 6.6% and ROIC is 3.0%, below the 5% warning threshold., Gross margin of 17.3% is below the 20% benchmark, while SG&A increased 12.1% during an 8.3% revenue decline., Reported net income includes a net extraordinary gain of ¥23.8bn, reducing comparability with underlying recurring profitability., FY2026 profit attributable to owners requires ¥63.0bn in Q4 to reach guidance, despite nine-month progress of 70.0% versus the standard 75% pace., The acquisition has expanded intangible assets and logistics exposure substantially; return realization and integration milestones are central to the medium-term earnings thesis..

Investment Implications

Key takeaways include Nine-month revenue, operating income and profit attributable to owners declined 8.3%, 43.8% and 62.8% YoY, respectively., Margin compression and the collapse in equity-method earnings, rather than excessive financial leverage, drove the decline in returns., The balance sheet retains moderate leverage and strong interest coverage, but sub-1.0x current and quick ratios require close liquidity monitoring., The Movianto acquisition provides strategic expansion in healthcare logistics but introduces provisional-goodwill, integration and return-on-capital execution risk., Full-year operating and ordinary-income guidance appears attainable from nine-month progress, while net-income guidance requires a stronger Q4 contribution..

Metrics to watch include Liner shipping segment income and freight-rate indicators, including container freight rates, Equity-method earnings of affiliates, Operating margin and SG&A-to-sales ratio, Bunker fuel prices relative to the US$475.08/MT Q4 assumption, USD/JPY relative to the ¥155.00/US$ Q4 assumption, Current ratio, cash-to-short-term-debt coverage and interest coverage, Movianto integration milestones, purchase-price allocation finalization, goodwill amortization and any impairment indicators, ROIC and annualized ROE recovery.

Regarding relative positioning, NYK combines a moderate-leverage balance sheet and diversified shipping/logistics portfolio with currently weak profitability and capital efficiency. The growing logistics platform may improve medium-term resilience relative to a pure-play shipping model, but near-term relative performance remains highly dependent on freight-market normalization, affiliate earnings and disciplined integration of the healthcare-logistics acquisition.