NIPPON SHOKUBAI (4114) FY2027 Q1 Earnings Report

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Executive Summary

During the quarter, Nippon Shokubai achieved substantial profit growth in addition to higher revenue, driven by improved profitability centered on the Materials Business. Revenue was ¥1,213.2B (+19.8% YoY), while Operating Income was ¥121.4B (+182.7% YoY). Net Income attributable to owners of the parent was ¥103.8B (+134.0% YoY), with the gross margin improving significantly from 18.0% in the same period of the previous year to 22.3%, and the operating margin improving from 4.2% to 10.0%. The profit growth rate, substantially exceeding the revenue growth rate, indicates an improvement in the earnings structure against the backdrop of trends in pricing, capacity utilization, and raw material and fuel costs.

Factors Affecting Performance

【Revenue】Revenue increased 19.8% YoY to ¥1,213.2B. By segment, Materials recorded ¥878.9B (+25.9% YoY) and Solutions recorded ¥334.2B (+6.3% YoY), with growth in Materials driving company-wide expansion.

【Profit and Loss】Operating Income increased 182.7% YoY to ¥121.4B, substantially exceeding the revenue growth rate. The cost-of-sales ratio declined, improving the gross margin to 22.3% from 18.0% in the previous year. The SG&A ratio also declined to 12.4% from 14.0%, while the absorption of fixed costs accompanying higher revenue also contributed. By segment, Materials recorded segment profit of ¥87.6B (+185.9% YoY; margin 10.0%), while Solutions recorded ¥46.6B (+97.6% YoY; margin 13.9%), indicating improved profitability in both businesses. However, Materials was the primary contributor in terms of both the magnitude of profit improvement and contribution. Equity-method investment gains were ¥13.5B, compared with ¥12.4B in the previous year, supporting Profit Before Tax. Meanwhile, Materials’ equity-method investment gains declined from ¥7.3B to ¥3.5B, indicating that the direction of business earnings and investment earnings was not aligned. Net Income was ¥106.5B (+129.0% YoY), including ¥103.8B attributable to owners of the parent (+134.0% YoY), resulting in higher revenue and higher profits.

Segment Analysis

The Materials Business achieved substantial profitability improvement, recording Revenue of ¥878.9B (+25.9% YoY), Operating Income of ¥87.6B (+185.9% YoY), and an operating margin of 10.0% versus 3.3% in the previous year. It became the core business, accounting for approximately 69% of company-wide Operating Income. The Solutions Business recorded Revenue of ¥334.2B (+6.3% YoY), Operating Income of ¥46.6B (+97.6% YoY), and an operating margin of 13.9% versus 5.9% in the previous year. Although smaller in scale, it exceeded Materials in terms of profitability. Both businesses reported higher revenue and higher profits; however, the primary driver of company-wide profit growth was the improvement in market conditions, pricing, and capacity utilization in Materials, resulting in a structure in which the performance of this business is likely to have a significant effect on consolidated results going forward.

Key Financial Metrics

【Profitability】The operating margin was 10.0%, improving by 577bp from 4.2% in the same period of the previous year, while the gross margin also increased to 22.3% from 18.0%. The net margin, based on income attributable to owners of the parent, improved to 8.6% from 4.4%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥131.4B, equivalent to 1.27 times Net Income attributable to owners of the parent of ¥103.8B, indicating strong cash backing for accounting earnings. However, increases in working capital, including Trade Receivables of +¥122.9B and Inventories of +¥93.8B, pressured OCF, while Trade Payables of +¥141.4B partially offset these increases.【Investment Efficiency】ROE remained at 2.6% on a quarterly actual-results basis; however, this figure does not annualize quarterly profit. Annualizing the improvement in the quarterly profit margin would result in a higher level. Capital expenditures were ¥133.3B, equivalent to 11.0% of Revenue and a meaningful scale, indicating continued capacity expansion and replacement investment.【Financial Soundness】The Equity Ratio was 65.8%, compared with 68.4% in the previous year, while cash and cash equivalents were ¥501.6B. Short-term borrowings increased by +¥100.3B from the end of the previous fiscal year to ¥331.4B, raising the proportion of short-term borrowings within interest-bearing debt and indicating increased short-term funding needs associated with working capital expansion.

Cash Flow Analysis

Cash flow from operating activities was ¥131.4B, down from ¥147.6B in the same period of the previous year. Nevertheless, it remained above Net Income attributable to owners of the parent of ¥103.8B, maintaining strong cash backing for earnings. The primary reason for the decrease was an increase in working capital: Trade Receivables increased by ¥122.9B and Inventories by ¥93.8B, while Trade Payables increased by ¥141.4B and partially offset these increases. Cash flow from investing activities was an outflow of ¥128.2B, primarily reflecting Capital Expenditures of ¥133.3B, indicating continued capacity expansion investment. Cash flow from financing activities was an outflow of ¥23.7B, with dividend payments of ¥93.1B partially funded by an increase in short-term borrowings of ¥48.1B, among other items. As a result, Free Cash Flow was limited to ¥3.2B, indicating limited capacity to fund capital expenditures and dividends solely through operating activities. Reducing working capital will be key to improving future liquidity management.

Quality of Earnings

The improvement in earnings during the period was primarily attributable to enhanced recurring earning power in the Materials Business, driven by selling prices, capacity utilization, and cost trends. No temporary factors such as extraordinary gains or losses were identified. Non-operating income and expenses included financial income of ¥9.0B, financial expenses of ¥2.3B, and equity-method investment gains of ¥13.5B, which supported Profit Before Tax. Profit Before Tax of ¥141.6B exceeded Operating Income of ¥121.4B. Equity-method investment gains accounted for 9.5% of Profit Before Tax; however, equity-method investment gains from the Materials Business declined year on year, warranting attention because their direction differed from the improvement in core business earnings. OCF exceeded Net Income attributable to owners of the parent, indicating good earnings quality from an accrual perspective. At the same time, increases in Trade Receivables and Inventories should be monitored as potential future collection and valuation risks. Comprehensive Income was ¥145.8B, exceeding Net Income of ¥106.5B, primarily due to increases in other components of equity, including FVOCI valuation gains and foreign currency translation adjustments.

Earnings Forecast and Guidance

The full-year company plan calls for Revenue of ¥4,550B, Operating Income of ¥210.0B (+19.8% YoY), forecast EPS of ¥139.71, and forecast dividends of ¥140.00 per share. Both the earnings forecast and dividend forecast were revised during the period. Q1 progress rates were 26.7% for Revenue, 57.8% for Operating Income, and 50.6% for Net Income attributable to owners of the parent, with profit progress substantially exceeding revenue progress. The full-year plan assumes Operating Income growth of +19.8%, substantially below the Q1 actual result of +182.7%; therefore, the company plan appears to incorporate margin normalization from Q2 onward.

Shareholder Returns

Dividend payments during the quarter totaled ¥93.1B. The full-year forecast is a dividend of ¥140.00 per share and forecast EPS of ¥139.71, implying a forecast Payout Ratio of 100.2%. No share repurchases were conducted during the quarter, and returns consisted solely of dividends; accordingly, shareholder returns are evaluated based on the Payout Ratio. As the forecast Payout Ratio exceeds 100%, there is room to improve the sustainability of dividends funded solely by earnings. However, the financial foundation of cash and cash equivalents of ¥501.6B and an Equity Ratio of 65.8% supports near-term payment capacity.

Risk Factors

1. Working capital expansion: Trade Receivables increased by +¥127.97B from the end of the previous fiscal year, while Inventories increased by +¥98.49B. This asset expansion during a period of revenue growth requires monitoring for risks such as inventory valuation losses and delayed collections when demand fluctuates.

2. Dependence on short-term financing: Short-term borrowings were ¥331.4B, an increase of +¥100.3B from the end of the previous fiscal year, accounting for 49.5% of interest-bearing debt of ¥670.1B. Although the capital base is strong, with an Equity Ratio of 65.8%, rising short-term refinancing needs are an area requiring attention in liquidity management.

3. Concentration of profit in the Materials Business: The Materials Business accounts for approximately 69% of company-wide Operating Income, and its operating margin improved sharply to 9.6%. This creates a structure in which fluctuations in market conditions, raw material and fuel prices, and capacity utilization have a significant impact on company-wide performance.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability exceeds the industry median and is at a favorable level.

Growth and Capital Efficiency

The revenue growth rate substantially exceeds the industry median and represents a high growth rate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Significant operating leverage emerged, with Operating Income increasing +182.7% versus Revenue growth of +19.8%. Improved profitability in the Materials Business, with its margin increasing from 3.3% to 9.6%, was the primary driver of company-wide profit growth.

2. Although OCF exceeded Net Income attributable to owners of the parent and provided cash backing for earnings, Free Cash Flow was limited to ¥3.2B due to increases in Trade Receivables and Inventories, indicating limited capacity to fund capital expenditures and dividends through internal funds.

3. Q1 profit progress against the full-year plan was high, at 57.8% for Operating Income and 50.6% for Net Income. However, the profit growth assumption underlying the full-year plan (+19.8%) is substantially below the Q1 actual result, making the trend in profit margins toward the second half of the fiscal year a key focus going forward.

Theoretical Share Price (For Reference)

Sensitivity: ¥2,396–¥2,527 for ±1% in the cost of equity, and ¥2,452–¥2,465 for ±0.1 in ω.

Notes:

• Because Net Income progress against the full-year forecast (51%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a range of +10% (because companies running ahead of schedule tend to exceed forecasts; adjustments may be excessive for businesses with strong seasonality).
• Because 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).

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it 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 based on XBRL earnings release data. It does not recommend investment in any specific security. The 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

FY2027 Q1 was a very strong earnings start for Nippon Shokubai, with broad-based operating-profit recovery led by the Materials business. Revenue increased 19.8% year on year to ¥121.3bn. Operating income rose 182.7% to ¥12.1bn, materially outpacing sales growth. Net income attributable to owners of the parent increased 134.0% to ¥10.4bn, and basic EPS rose to ¥70.24 from ¥29.27. Gross profit expanded 48.3% to ¥27.0bn, reflecting a substantial improvement in gross margin. Gross margin increased to 22.3% from 18.0% in the prior-year quarter, a 430bp expansion. Operating margin increased to 10.0% from 4.2%, a 576bp improvement, indicating powerful operating leverage. SG&A rose only 6.4% year on year to ¥15.1bn, well below the revenue growth rate, further supporting margin expansion. Both reportable segments improved, with Materials delivering the larger absolute increase in operating profit and remaining the core business. Profit before tax rose 125.3% to ¥14.2bn, supported by ¥1.35bn of equity-method investment income and net finance income of ¥0.67bn. Net margin improved to 8.6% from 4.4%, a 417bp expansion, although it remains below the 10% level generally associated with top-tier profitability. Operating cash flow of ¥13.1bn exceeded total quarterly net income of ¥10.6bn, producing an OCF/net income ratio of 1.27x and supporting the cash realization of earnings. However, cash generation was assisted by a ¥14.1bn increase in trade payables, while receivables and inventories consumed a combined ¥21.7bn of cash. Capital expenditure of ¥13.3bn nearly absorbed operating cash flow, leaving quarterly free cash flow of only ¥0.3bn. The Q1 operating-income progress rate against the full-year forecast is 57.8%, compared with a standard 25% seasonal benchmark, while attributable-profit progress is 50.6% and sales progress is 26.7%. This creates substantial upside sensitivity if current trading conditions persist, but also indicates that the full-year forecast appears to embed a pronounced normalization in profitability after Q1. The revised full-year dividend forecast of ¥140 per share is slightly above forecast EPS of ¥139.71, implying a dividend payout ratio of approximately 100.2% and making cash-flow delivery and the durability of the earnings recovery central issues for capital allocation.

Profitability Analysis

The reported annualized DuPont ROE is 10.1%, composed of an 8.6% net profit margin, 0.795x annualized asset turnover, and 1.48x financial leverage. Profitability is primarily being driven by margin recovery rather than aggressive balance-sheet leverage, as leverage remains moderate and the equity ratio is 65.8%. The largest improvement versus the prior-year quarter was operating profitability: operating income grew 182.7%, compared with 19.8% sales growth. Gross-margin expansion of 430bp was the principal contributor, while SG&A growth of 6.4% remained far below sales growth, demonstrating favorable operating leverage. The Materials segment is the core business, generating ¥8.4bn of operating income, equivalent to approximately 69% of consolidated operating income before the ¥0.7bn corporate/adjustment gain. Materials revenue increased 25.9% year on year to ¥87.9bn and segment operating income increased 261.1% from ¥2.3bn to ¥8.4bn; its operating margin rose to 9.6% from 3.3%, a 628bp increase. Solutions revenue increased 6.3% to ¥33.4bn, while operating income increased 97.1% to ¥3.7bn; its operating margin improved to 10.9% from 5.9%, a 500bp increase. Solutions therefore has the higher segment margin, but Materials supplied the overwhelming majority of incremental earnings. The tax burden was 0.733, consistent with the 24.8% effective tax rate and not indicative of an unusually heavy tax drag. The interest burden was 1.166 because finance income exceeded finance costs, and finance costs were limited to ¥0.23bn. Equity-method income of ¥1.35bn represented 11.1% of operating income and remains a meaningful contributor to pre-tax earnings, although it declined within Materials from ¥0.73bn to ¥0.35bn. Margin sustainability depends on whether the Q1 gross-profit recovery reflects durable product spreads and mix rather than a temporary pricing, feedstock-cost, or foreign-exchange tailwind.

Growth Assessment

Revenue growth was led by Materials, where external sales increased ¥18.1bn year on year, versus a ¥2.0bn increase in Solutions. The mix therefore shifted toward the larger Materials segment, while Solutions retained superior segment profitability. Consolidated gross profit increased ¥8.8bn, substantially exceeding the ¥0.9bn increase in SG&A, which indicates that the earnings acceleration was mainly gross-profit driven rather than cost-cutting driven. The Q1 revenue run rate represents 26.7% of the ¥455.0bn full-year sales forecast, broadly consistent with normal seasonality. In contrast, Q1 operating income represents 57.8% of the ¥21.0bn full-year forecast, 32.8 percentage points above the 25% standard Q1 progress rate. Attributable net income represents 50.6% of the ¥20.5bn full-year target, 25.6 percentage points above the standard pace. Management's full-year forecast implies a significant deceleration in quarterly profitability relative to Q1, so subsequent pricing, volume, and input-cost trends will determine whether the current run rate can be sustained. Equity-method income increased modestly by 8.9% to ¥1.35bn, providing a recurring investment-income component, although the segment composition shifted toward Solutions. The full-year forecast calls for operating-income growth of 19.8% and attributable-income growth of 22.3%, materially below Q1 growth rates. This forecast profile suggests that investors should separate the strong Q1 execution from the degree of normalization embedded in management guidance.

Financial Health

Financial health remains sound, supported by ¥411.3bn of total equity, a 65.8% equity ratio, and debt-to-equity of 0.48x. Total interest-bearing debt was ¥67.0bn, equivalent to 14.0% of capital, which is conservative relative to the 40% investment-grade benchmark. The current ratio was 2.06x, calculated from ¥269.3bn of current assets and ¥130.5bn of current liabilities, and is comfortably above 1.0x. The quick ratio was approximately 1.26x using cash, trade receivables, and other current financial assets, indicating adequate near-term liquidity even before reliance on inventory liquidation. Cash and equivalents of ¥50.2bn covered short-term borrowings of ¥33.1bn by approximately 1.51x. The liquidity-stress alert stating cash/short-term debt of 0.00x is not supported by the reported balance-sheet amounts; based on disclosed cash and short-term borrowings, coverage is strong. Nevertheless, short-term borrowings increased ¥10.0bn, or 43.4%, from the fiscal year-end balance to ¥33.1bn. The short-term debt ratio of 49.5% exceeds the 40% alert threshold, meaning nearly half of interest-bearing debt is short-term and refinancing requirements should be monitored. This maturity structure is manageable given current assets of ¥269.3bn and cash of ¥50.2bn, but the increase in short-term funding coincided with working-capital expansion. Trade payables increased ¥14.4bn, or 27.9%, from the fiscal year-end balance to ¥66.1bn, partially funding the rise in operating assets. There is no balance-sheet indication of excessive acquisition-related leverage: goodwill is only ¥3.5bn, or 0.9% of equity and 0.6% of assets. Property, plant and equipment represents 37.4% of assets, consistent with a capital-intensive chemical manufacturing model. Defined-benefit obligations of ¥9.3bn and non-current provisions of ¥4.1bn should remain part of the assessment of long-duration obligations.

Notable B/S Changes

Short-term borrowings: +¥10.0bn (+43.4%) from fiscal year-end to ¥33.1bn - funding reliance increased during a period of working-capital expansion; monitor refinancing mix and cash conversion. Trade payables: +¥14.4bn (+27.9%) from fiscal year-end to ¥66.1bn - supplier credit materially supported Q1 operating cash flow; a reversal would reduce cash generation. Trade receivables: +¥12.8bn (+14.0%) from fiscal year-end to ¥104.1bn - significant absolute increase, consistent with the 78-day annualized DSO alert and higher collection risk. Inventories: +¥9.8bn (+11.5%) from fiscal year-end to ¥95.6bn - significant absolute increase, consistent with the 92-day annualized DIO alert and increasing demand, pricing, and valuation sensitivity. Property, plant and equipment: +¥5.0bn (+2.2%) from fiscal year-end to ¥228.1bn - continued capital investment reinforces the group's capital-intensive manufacturing profile.

Cash Flow Quality

Quarterly operating cash flow was ¥13.1bn, exceeding total net income of ¥10.6bn and producing a healthy OCF/net income ratio of 1.27x. The accruals ratio of -0.5% also indicates favorable cash conversion and limited evidence of earnings being supported by non-cash accruals. Operating cash flow was underpinned by ¥8.1bn of depreciation and amortization and a ¥14.1bn increase in trade payables. Offsetting this, trade receivables increased ¥12.3bn and inventories increased ¥9.4bn, producing a combined ¥21.7bn working-capital outflow. The receivables increase was consistent with balance-sheet receivables rising ¥12.8bn from fiscal year-end to ¥104.1bn. The inventory increase was also reflected in inventories rising ¥9.8bn from fiscal year-end to ¥95.6bn. The high-receivable-days alert, at an annualized DSO of 78 days, indicates collection efficiency is weaker than the 60-day warning level and raises sensitivity to customer-payment timing and credit conditions. The high-inventory-days alerts, at an annualized DIO of 92 days, place inventory just above the 90-day severe-warning threshold and well above the general manufacturing benchmark of 60 days. For a chemical producer, elevated inventory can reflect feedstock procurement, shipment timing, and product-cycle requirements, but it also increases exposure to price declines, demand shortfalls, and inventory valuation pressure. The concurrent build in receivables and inventories means the reported operating cash flow should not be viewed as fully recurring unless these operating assets stabilize. Capital expenditure was ¥13.3bn, almost equal to operating cash flow, resulting in only ¥0.3bn of free cash flow. The current level of capital investment indicates continued plant and capacity spending, but it leaves limited internally generated cash after investment during the quarter. The absence of M&A-related investing cash outflows in Q1 and low goodwill reduce acquisition-integration and goodwill-impairment risk.

Dividend Sustainability

The full-year dividend forecast is ¥140 per share, compared with forecast EPS of ¥139.71, implying a dividend payout ratio of approximately 100.2%. A payout ratio at or slightly above 100% leaves no forecast earnings retention after dividends and is above the benchmark generally viewed as sustainable through a cycle. Q1 dividends paid to parent shareholders were ¥9.3bn, compared with attributable earnings of ¥10.4bn, equivalent to approximately 89.7% of Q1 attributable profit. Quarterly free cash flow was only ¥0.3bn because ¥13.3bn of capital expenditure nearly consumed operating cash flow. Consequently, Q1 free cash flow did not cover the ¥9.3bn parent dividend payment. The company retains substantial financial capacity, including ¥50.2bn of cash, a 65.8% equity ratio, and a 0.48x debt-to-equity ratio, which can support distributions in the near term. However, using balance-sheet liquidity or incremental short-term borrowing to fund dividends would weaken long-term dividend quality if free cash flow remains constrained. The dividend revision makes the sustainability of current operating margins, working-capital discipline, and the pace of capital expenditure more important than reported earnings alone. No share buybacks were reported in the quarter, so the relevant distribution measure is the dividend payout ratio rather than a total return ratio.

Risk Assessment

Business risks include High priority: Chemicals profitability is exposed to changes in acrylic-acid, ethylene-derivative, superabsorbent polymer, and specialty-product pricing, volumes, feedstock costs, and global supply-demand balances. The Q1 operating-margin increase of 576bp creates material downside sensitivity if spreads normalize., High priority: Annualized DIO of 92 days indicates elevated inventory exposure. A demand slowdown, product-price decline, or adverse raw-material movement could pressure cash flow and require inventory valuation adjustments., Medium priority: Annualized DSO of 78 days indicates slower collection than the 60-day warning benchmark. Further receivable growth would increase cash-conversion risk and customer-credit exposure., Medium priority: Materials generated most of the incremental profit, with segment operating income rising ¥6.1bn year on year. This concentration increases group sensitivity to cyclicality in commodity-linked chemical markets., Medium priority: Equity-method income of ¥1.35bn is meaningful to pre-tax profit and may fluctuate with affiliate performance, particularly as Materials equity-method income declined year on year..

Financial risks include Medium priority: Short-term borrowings increased 43.4% from fiscal year-end to ¥33.1bn, and 49.5% of interest-bearing debt is short term. This exceeds the refinancing-risk alert threshold, although liquidity coverage is currently adequate., Medium priority: Trade payables increased ¥14.4bn from fiscal year-end and supported operating cash flow. A reversal of supplier financing would reduce cash generation if receivable and inventory balances remain elevated., Medium priority: Forecast dividends of ¥140 per share imply a 100.2% payout ratio against forecast EPS, while Q1 free cash flow was only ¥0.3bn. Sustained capex intensity could necessitate use of cash reserves or debt capacity., Low priority: Debt/capital of 14.0%, D/E of 0.48x, and a 2.06x current ratio indicate no immediate balance-sheet solvency concern..

Key concerns include The principal issue is whether Q1's 10.0% operating margin is repeatable, since Q1 operating-income progress already reached 57.8% of the full-year forecast., Working-capital efficiency requires close monitoring: receivables and inventories increased a combined ¥21.7bn in the quarter, despite operating cash flow exceeding earnings., The liquidity-stress alert based on a 0.00x cash/short-term-debt ratio conflicts with reported balances. Reported cash of ¥50.2bn and short-term borrowings of ¥33.1bn imply 1.51x coverage; the relevant risk is refinancing mix rather than an immediate cash shortfall., Environmental, regulatory, process-safety, and product-quality risks are inherent to chemical manufacturing and could lead to remediation costs, production disruption, or reputational damage..

Investment Implications

Key takeaways include Q1 demonstrated a substantial earnings recovery: revenue grew 19.8%, operating income grew 182.7%, and operating margin improved 576bp to 10.0%., Materials is the core earnings engine, contributing roughly 69% of consolidated operating income before corporate adjustments and most of the year-on-year profit increase., Cash conversion is currently sound on an earnings basis, with OCF/net income of 1.27x, but working-capital absorption and supplier-credit support complicate assessment of underlying cash generation., The balance sheet is conservatively capitalized, but short-term borrowing growth and a 49.5% short-term debt share warrant monitoring., The full-year forecast appears conservative relative to Q1 profit delivery, while the ¥140 dividend forecast leaves little earnings coverage..

Metrics to watch include Materials and Solutions segment operating margins, particularly the sustainability of the 22.3% consolidated gross margin, Progress versus the ¥21.0bn operating-income and ¥20.5bn attributable-profit full-year forecasts, Annualized DSO of 78 days and DIO of 92 days, alongside absolute receivable and inventory balances, Operating cash flow before and after changes in receivables, inventories, and trade payables, Capital expenditure relative to operating cash flow and free-cash-flow coverage of dividends, Short-term borrowings, the short-term debt ratio, and cash-to-short-term-debt coverage, Equity-method investment income and the performance of key affiliates.

Regarding relative positioning, Nippon Shokubai entered FY2027 with good profitability on an annualized 10.1% ROE, a 10.0% operating margin, conservative 0.48x D/E, and very low M&A-related intangible exposure. Relative to manufacturing benchmarks, liquidity and leverage are strong, but working-capital efficiency is weak on the reported annualized DSO and DIO measures, and dividend coverage is tight because capital expenditure has constrained free cash flow.