NIPPON SHOKUBAI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥200.20B
• Operating Income: ¥9.01B
• Net Income: ¥7.97B
• EPS: ¥50.43

Income Statement

Balance Sheet

Cash Flow Statement

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

Nippon Shokubai (4114) reported FY2026 Q2 consolidated results under IFRS showing resilient cash generation amid soft topline and margin pressure. Revenue declined 3.2% YoY to 2,001.97, reflecting cyclical demand normalization and likely pricing/mix headwinds across chemicals. Gross profit was 363.07 with an 18.1% gross margin, while operating income declined 13.8% YoY to 90.11 as operating margin compressed to roughly 4.5%, indicating negative operating leverage. Net income fell 14.7% YoY to 76.12, with net margin at 3.8%; the effective tax rate was 27.7%. Despite lower earnings, operating cash flow was strong at 229.79 (OCF/NI 3.02x), underpinned by solid working-capital inflows and non-cash charges (D&A 158.33). EBITDA totaled 248.44 (12.4% margin), evidencing adequate cash earnings capacity to fund investment and shareholder returns. Balance sheet strength remains a key buffer: total equity is 3,900.30 with an equity ratio of 71.0%, and liabilities are modest at 1,511.26. The company appears to be in a net cash position using disclosed cash & equivalents of 545.65 versus at least 413.91 of reported loans (short + long), though full interest-bearing debt is not fully disclosed. Profit before tax was 107.95, supported by 17.37 of equity-method earnings, while non-operating items were otherwise not disclosed. Total comprehensive income of 123.92 exceeded net income, suggesting positive OCI (e.g., FX translation or valuation gains), which boosted equity. Free cash flow was healthy: 153.78 using OCF + investing CF, and 108.59 on an OCF – capex basis, comfortably funding dividends (34.75) and most of buybacks (41.08). Financing cash outflows of 143.42 indicate active capital returns and likely debt service. DuPont analysis shows low asset turnover (0.374) and modest leverage (1.37x assets/equity), yielding a reported ROE of 1.9%, weighed down by slim net margins. Inventory stood at 843.15, and current assets were 2,554.51, but current liabilities were unreported, limiting liquidity ratio analysis. Overall, the quarter reflects solid cash discipline and a conservative balance sheet, offsetting cyclical earnings pressure; however, sustained profit recovery will depend on pricing spread, demand normalization, and cost pass-through. Data limitations (notably non-operating details, current liabilities, specific cash balances by category, and DPS) constrain deeper diagnostics, but the available figures support a view of strong financial resilience with near-term profitability headwinds.

Profitability Analysis

ROE_decomposition: ROE 1.9% = Net margin 3.8% × Asset turnover 0.374 × Financial leverage 1.37x. The main drag is the low net margin and low turnover; leverage is conservative and contributes little to ROE uplift. margin_quality: Gross margin 18.1% reflects decent spread retention but is down versus the operating margin of ~4.5%, indicating a heavy SG&A/overhead burden or weaker pricing power. EBITDA margin is 12.4%, implying D&A intensity of ~7.9% of sales. Effective tax rate is 27.7%, in a normal range. Equity-method income (17.37) provides a non-operating uplift to PBT. operating_leverage: With revenue down 3.2% YoY and operating income down 13.8% YoY, incremental margins were negative, evidencing unfavorable operating leverage amid a largely fixed-cost base. Absent price/mix improvement or volume recovery, operating margins may remain constrained.

Growth Assessment

revenue_sustainability: Revenue contracted 3.2% YoY to 2,001.97, consistent with cyclical softness in chemicals and potential price normalization. Inventory at 843.15 suggests normalizing working capital, but receivables detail is unreported, limiting demand read-through. profit_quality: Net income of 76.12 and PBT of 107.95 are supported by strong cash conversion (OCF/NI 3.02x) and non-cash D&A (158.33). Equity-method income contributed 17.37 to PBT, partially mitigating weaker operating profit. outlook: Near-term earnings hinge on spread recovery (feedstock and energy costs vs. product pricing), volume normalization in key end-markets, and FX. Cost control and mix upgrades can stabilize margins, but absent demand acceleration, growth is likely gradual. Positive OCI this period supports equity but is not a recurring earnings driver.

Financial Health

liquidity: Current assets are 2,554.51; current liabilities are unreported, so current and quick ratios are not calculable. Cash & equivalents are 545.65, providing a substantial liquidity buffer. Working capital is reported as 2,554.51, but this equals current assets due to missing current liabilities, so interpret cautiously. solvency: Total liabilities are 1,511.26 vs. equity of 3,900.30, yielding an equity ratio of 71.0% and liabilities-to-equity of ~0.39x (reported as Debt-to-Equity 0.39x, which here reflects total liabilities/equity, not interest-bearing debt). capital_structure: Reported short-term loans are 231.26 and long-term loans 182.65 (at least 413.91 total loans). With cash & equivalents at 545.65, the company appears to be in net cash of roughly 131.74, though full interest-bearing debt is not fully disclosed. Leverage is modest (financial leverage 1.37x).

Cash Flow Quality

earnings_quality: OCF/Net income at 3.02x signals strong cash realization of earnings, aided by D&A (158.33) and working capital movements. Net income of 76.12 compares to OCF of 229.79, supporting quality. FCF_analysis: OCF + Investing CF = 153.78 (reported FCF). On a maintenance lens, OCF – capex = 108.59, still solidly positive. This supports shareholder returns and deleveraging while preserving liquidity. working_capital: Inventories are 843.15; receivables/payables are unreported, limiting granular analysis of cycle time and cash conversion. The strong OCF suggests favorable working-capital management this period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is reported at 233.6%, which likely reflects an annualized DPS versus the period EPS of 50.43 JPY and/or uses a different time basis; DPS itself is unreported. Cash dividends paid were 34.75 in the period, equivalent to ~23 JPY per share using average shares, but timing effects mean this may not align with the payout ratio metric. FCF_coverage: Using reported FCF (OCF + investing CF) of 153.78, cash dividends of 34.75 are covered ~4.4x; including buybacks of 41.08, shareholder returns of 75.83 are covered ~2.0x. The dataset also shows an aggregate FCF coverage ratio of 0.86x, which likely uses an alternative definition or rolling period; interpret with caution. policy_outlook: With strong balance sheet capacity (equity ratio 71%) and positive FCF, baseline dividend capacity appears supported; however, sustainability at a high payout ratio depends on earnings recovery. Absent DPS disclosure, policy cadence (interim/final) and potential variability with profits remain key monitoring points.

Risk Assessment

Business Risks:

• Cyclical demand and pricing in core chemical products leading to margin volatility
• Raw material and energy price fluctuations impacting spreads
• Foreign exchange movements affecting export competitiveness and translation
• Customer inventory adjustments in downstream end-markets
• Regulatory and environmental compliance costs, including decarbonization investments
• Competition and substitution risk in commoditized chemical segments

Financial Risks:

• Potential working-capital swings despite current strength
• OCI-driven equity volatility (securities valuation and FX translation)
• Interest rate risk on variable-rate borrowings (interest expense not disclosed)
• Execution risk on capex timing and returns (capex 121.20 this period)

Key Concerns:

• Negative operating leverage as revenue declines outpace cost reductions
• Low asset turnover (0.374) constraining ROE despite conservative leverage
• Limited disclosure on current liabilities and non-operating items, hindering full liquidity and coverage analysis

Investment Implications

Key Takeaways:

• Revenue down 3.2% YoY with operating income down 13.8% evidences margin pressure and negative operating leverage
• Cash generation is robust (OCF/NI 3.02x; FCF 153.78) supporting balance sheet strength and returns
• Equity ratio 71% and apparent net cash position provide resilience
• ROE at 1.9% is constrained by low margins and low asset turnover rather than leverage
• Positive OCI boosted comprehensive income and equity this period
• Shareholder returns (dividends and buybacks) were largely covered by FCF, though payout ratio signals sensitivity to earnings base

Metrics to Watch:

• Product spread indicators (selling prices vs. feedstock and energy costs)
• Operating margin trajectory and incremental margins
• Working-capital trends (inventories, receivables, payables turnover) as disclosures allow
• Capex intensity vs. EBITDA and resulting returns on invested capital
• FX rates vs. revenue mix exposure
• DPS disclosure and payout framework vs. profit normalization

Relative Positioning: Within Japanese chemicals, the company exhibits below-average near-term profitability but above-average balance sheet strength and cash conversion, positioning it defensively in a cyclical phase.

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
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