NIPPON PAINT HOLDINGS CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.32T
• Operating Income: ¥190.58B
• Net Income: ¥136.26B
• EPS: ¥57.19

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 Paint Holdings (IFRS, consolidated) delivered solid top-line growth and strong operating leverage in FY2025 Q3 year-to-date: revenue rose 7.8% YoY to 13,183.78 and operating income surged 36.4% YoY to 1,905.79. Gross profit of 4,907.20 implies a healthy gross margin of 37.2%, indicating improved price-cost dynamics and/or favorable mix. Operating margin expanded to roughly 14.5%, reflecting cost discipline and operating leverage as SG&A growth lagged gross profit growth. Net income increased 38.6% YoY to 1,343.36, with an effective tax rate of 19.6%. DuPont analysis points to a calculated ROE of 8.2% derived from a 10.2% net margin, 0.347x asset turnover, and 2.33x financial leverage. ROA by DuPont math is about 3.5%, consistent with a capital-intensive, globally diversified coatings business. EBITDA was 2,373.11 (18.0% margin), supporting the improvement in operating profitability. Profit before tax (1,825.52) is modestly below operating income, implying a net non-operating loss despite positive equity-method income of 20.41—likely FX or financing-related impacts. Total comprehensive income was materially lower at 604.14, suggesting significant negative OCI (e.g., currency translation or FV changes), a watchpoint for book value volatility. On the balance sheet, total assets were 37,941.53 with equity of 16,284.07 (equity ratio 42.4%), indicating a moderate leverage profile. Liquidity appears sound with cash and equivalents of 2,883.01, though current liability details are unreported, limiting precise liquidity ratio analysis. Operating cash flow of 662.26 equaled 0.49x net income, indicating earnings outpaced cash conversion, likely due to working capital investment; free cash flow defined as OCF plus investing CF was -150.21 given sizable investing outflows. Capex was 357.85 (about 2.7% of revenue), consistent with capacity and productivity investments. On dividends, the payout ratio is a conservative 26.5% on earnings, but FCF coverage is negative using the OCF+Investing definition; however, OCF still covered dividends paid of 351.56 comfortably. Data gaps exist for several line items (e.g., interest, current liabilities, DPS), but the available figures support a view of improving profitability, moderate leverage, and temporarily constrained free cash flow due to investment and working capital.

Profitability Analysis

ROE decomposition: Net profit margin 10.2% x asset turnover 0.347 x financial leverage 2.33x = ROE 8.2% (in line with the reported figure). Margin quality: gross margin at 37.2% and EBITDA margin at 18.0% indicate healthy price realization and input cost management; the spread between gross and operating margins (approx. 22.7ppt) reflects the SG&A intensity of a global coatings platform but shows operating efficiency given 36.4% YoY operating profit growth on 7.8% revenue growth. Operating leverage: revenue +7.8% vs operating income +36.4% demonstrates strong operating leverage in FY2025 Q3, likely from pricing, mix, and cost control. Tax burden and non-operating: effective tax rate was 19.6%. Profit before tax (1,825.52) below operating income (1,905.79) indicates net non-operating losses, partly offset by equity-method income of 20.41; interest expense was unreported, limiting coverage analysis. ROA (NPM x AT) approximates 3.5%, consistent with a scale coatings business with meaningful asset base. Overall, profitability trajectory is positive with notable margin expansion.

Growth Assessment

Revenue grew 7.8% YoY to 13,183.78, suggesting sustained demand and pricing discipline across regions and end-markets. Operating income growth of 36.4% outpaced sales, indicating improved mix and cost structures. Net income growth of 38.6% further confirms quality of earnings uplift, supported by a sub-20% effective tax rate. The gross margin at 37.2% and EBITDA margin at 18.0% are strong versus historical paint/coatings norms, implying price over raw materials and scale benefits. Equity-method gains (20.41) contributed but were not the primary driver. The sharp gap between net income and total comprehensive income (604.14) flags FX and OCI headwinds that can mute book value growth despite earnings delivery. Looking forward, sustaining price-cost spread and mix while normalizing working capital should underpin growth conversion to cash. However, unreported R&D and limited segment detail constrain assessment of innovation-driven growth and geographic sustainability. Overall outlook: mid-single-digit top-line growth with continued emphasis on profitability appears attainable, with sensitivity to FX, raw materials, and China demand.

Financial Health

Assets totaled 37,941.53 against equity of 16,284.07, for an equity ratio of 42.4%, indicating moderate leverage. Debt-to-equity ratio is reported at 0.90x, but interest-bearing debt amounts were unreported, so this ratio may reflect broader liabilities; solvency nevertheless appears comfortable given equity depth. Cash and equivalents were 2,883.01, providing liquidity support, but current liabilities are unreported, preventing calculation of current and quick ratios; the reported working capital figure equals current assets (10,552.08), suggesting the liabilities side is not disclosed. Accounts receivable of 3,769.76 and inventories of 2,024.84 imply sizable operating working capital consistent with scale. Accounts payable of 2,925.13 provides supplier financing. Financial leverage from DuPont at 2.33x is consistent with balance sheet metrics and acceptable for the business model. OCI-driven swings (comprehensive income 604.14 vs net income 1,343.36) can affect equity and leverage optics; this is a watchpoint in FX-volatile periods.

Cash Flow Quality

OCF was 662.26 vs net income of 1,343.36, an OCF/NI ratio of 0.49x, indicating weak cash conversion in the period—likely driven by working capital build (receivables/inventory) and timing effects; detailed components are not provided. Capex was 357.85 (about 2.7% of revenue), a manageable reinvestment level relative to EBITDA of 2,373.11. Free cash flow defined as OCF + investing CF was -150.21 due to broader investing outflows (-812.47) beyond PP&E, potentially including M&A, intangibles, or financial asset movements. On a maintenance view (OCF - capex), implied free cash flow would be approximately 304.41, highlighting that the negative FCF stems from discretionary/inorganic investment rather than core operations. The gap between operating profit growth and cash generation suggests temporary working capital drag; monitoring days sales outstanding, inventory days, and payables days is key. Interest coverage cannot be assessed due to unreported interest expense, but EBITDA coverage would likely be robust given margin expansion if debt costs are typical.

Dividend Sustainability

Payout ratio is 26.5%, implying dividends are conservative on an earnings basis and leave room for reinvestment. Dividends paid were 351.56, covered 1.88x by OCF of 662.26, indicating adequacy from an operating cash perspective. However, using FCF defined as OCF + investing CF (-150.21), FCF coverage is negative (-0.42x), reflecting elevated investment outflows in the period; coverage improves materially when using OCF - capex methodology. Annual DPS and quarterly DPS were unreported, so per-share dividend trajectory cannot be confirmed. Equity ratio of 42.4% and moderate leverage provide balance sheet flexibility to sustain dividends through investment cycles, but negative comprehensive income could constrain retained earnings growth if persistent. Policy outlook likely prioritizes stable to gradual dividend growth aligned with earnings growth, contingent on working capital normalization and the scale of discretionary investments.

Risk Assessment

Business Risks:

• Raw material price volatility (resins, solvents, titanium dioxide) impacting gross margins
• Demand cyclicality in architectural and industrial end-markets across Asia-Pacific and China
• Competitive pricing pressure from global and regional paint manufacturers
• FX fluctuations affecting reported revenue/margins and generating OCI volatility
• Execution risks in M&A or overseas expansions reflected in investing cash flows
• Supply chain disruptions affecting inventory and service levels

Financial Risks:

• Weak cash conversion (OCF/NI 0.49x) indicating working capital sensitivity
• Negative total comprehensive income (604.14 vs NI 1,343.36) affecting equity and leverage
• Potential interest rate and refinancing risk (interest and debt details unreported)
• Dividend coverage sensitivity to investment outflows when using FCF (OCF + investing CF)
• Currency translation risk impacting book value and equity ratio

Key Concerns:

• Sustaining margin gains while maintaining volume growth amid competitive markets
• Normalization of working capital to lift OCF in line with earnings
• Visibility on the composition of investing CF (capex vs M&A/financial assets)
• Lack of disclosure on interest expense and current liabilities limiting ratio analysis

Investment Implications

Key Takeaways:

• Strong operating leverage with operating income +36.4% on revenue +7.8%
• Healthy gross margin at 37.2% and EBITDA margin at 18.0% signal improved price-cost spread
• ROE of 8.2% driven by higher margin and moderate leverage (2.33x)
• OCF lagged earnings (0.49x NI), likely due to working capital; cash conversion is a focal point
• Negative FCF on a total investing basis (-150.21) reflects elevated investment activity
• Equity ratio 42.4% suggests balanced solvency despite OCI-driven equity volatility
• Dividend payout conservative on earnings (26.5%), but coverage sensitive to investing outflows

Metrics to Watch:

• Price-cost spread: gross margin and operating margin trajectory
• OCF/Net income ratio and working capital days (DSO, DIO, DPO)
• Investing CF breakdown (capex vs M&A/financial investments)
• FX impacts on OCI and equity, and translation effects on revenue
• ROE progression vs target, and asset turnover trends
• Debt composition and interest expense once disclosed; interest coverage
• Dividend policy updates and DPS trajectory

Relative Positioning: Within the global coatings peer set, Nippon Paint is exhibiting above-trend margin expansion and robust operating leverage, supported by scale in Asia; leverage is moderate and equity strong, but cash conversion trails profit growth this period. Maintaining price discipline and normalizing working capital should strengthen its position relative to domestic and international peers.

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
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