Nippon Sheet Glass Company,Limited FY2027 Q1 Earnings Report

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Executive Summary

The most important point in these results is that, despite higher revenue and operating income, interest and tax burdens significantly weighed on net income. Revenue increased to ¥246.34B (+17.2% YoY), while operating income rose to ¥8.83B (+28.5% YoY), securing growth in both revenue and operating income. Meanwhile, profit before tax was limited to ¥1.87B (-31.5% YoY), and profit for the quarter attributable to owners of the parent was ¥0.19B, recovering from a ¥0.15B loss in the same period of the previous year. Financial expenses of ¥8.67B significantly exceeded financial income of ¥1.07B, offsetting most of EBIT and creating a divergence between operating income growth and net income. Cash flow from operating activities was -¥13.86B, indicating a significant gap between reported earnings and cash generation.

Factors Affecting Performance

【Revenue】Revenue increased 17.2% YoY to ¥246.34B. Automotive glass was the largest growth driver, accounting for 53.9% of the total, with revenue of ¥132.69B (+20.9%). Building glass, accounting for 40.9% of the total, generated revenue of ¥100.84B (+13.0%), while high-performance glass, accounting for 5.1%, generated revenue of ¥12.58B (+13.9%), with both contributing to revenue growth. By region, Europe generated ¥97.797B and the Americas ¥90.993B, both expanding from the previous year and indicating broad-based demand growth across regions.

【Profit and Loss】Operating income was ¥8.83B (+28.5% YoY), driven by building glass, which generated ¥8.66B (+30.0%, profit margin 8.6%), and high-performance glass, which generated ¥2.18B (+71.1%, profit margin 17.3%). In contrast, operating income from automotive glass declined to ¥1.19B (-49.9%), with its profit margin falling to 0.9%, indicating deteriorating profitability behind the revenue increase. Profit before tax decreased to ¥1.87B due to higher financial expenses of ¥8.67B, compared with ¥8.03B in the previous year. After corporate income taxes and other taxes of ¥1.76B were recorded, the effective tax rate rose to approximately 94%, leaving net income at ¥0.11B. Although revenue and operating income increased, the heavy interest and tax burden remains a bottleneck at the net income level.

Segment Analysis

The structure is clear: building glass and high-performance glass drove higher revenue and operating income, while deteriorating profitability in automotive glass diluted the overall operating margin. Building glass generated revenue of ¥100.84B (+13.0%) and operating income of ¥8.66B (+30.0%, profit margin 8.6%), making it the largest source of profit and accounting for 98% of total operating income. High-performance glass generated revenue of ¥12.58B (+13.9%) and operating income of ¥2.18B (+71.1%, profit margin 17.3%), achieving the highest profit margin. By contrast, automotive glass had the largest revenue scale at ¥132.69B (+20.9%), but operating income fell to ¥1.19B (-49.9%) and its profit margin plunged to 0.9%, raising questions about the quality of its revenue growth. The Other segment recorded an operating loss of ¥3.20B, reflecting corporate expenses, amortization of goodwill, and other items.

Key Financial Indicators

【Profitability】The operating margin improved to 3.6% from 3.3% in the previous year, but the net profit margin remained extremely low at 0.1%, as financial expenses of ¥8.67B weighed on profit before tax. The effective tax rate was approximately 94%, calculated as corporate income taxes and other taxes of ¥1.76B divided by profit before tax of ¥1.87B, significantly depressing the net profit margin.【Cash Flow Quality】Cash flow from operating activities was -¥13.86B, substantially below net income of ¥0.11B, while free cash flow was negative at -¥28.16B. Inventories increased to ¥194.36B, tying up working capital and contributing to the deterioration in operating cash flow.【Investment Efficiency】ROE was 0.1%, remaining at a level that directly reflects the low net income. Equity-method investment income of ¥1.26B accounted for approximately 67% of profit before tax of ¥1.87B, indicating a high degree of dependence on equity-method investments relative to the earnings power of the core business alone.【Financial Soundness】The equity ratio was 13.4%, maintaining approximately the same level as the previous year’s 13.5%. Interest-bearing debt totaled ¥569.49B, comprising current debt of ¥273.37B and non-current debt of ¥296.12B, while the difference from cash and cash equivalents of ¥44.27B remains substantial. The increase in long-term borrowings from ¥239.37B in the previous year to ¥296.12B appears to reflect the extension of part of short-term debt into long-term financing.

Cash Flow Analysis

Operating cash flow was -¥13.86B, a slight improvement from -¥14.97B in the previous year, but remained substantially negative. The subtotal of operating cash flow before changes in working capital was -¥4.85B, with inventory accumulation and other factors delaying cash conversion. Investing cash flow was -¥14.30B, primarily due to capital expenditures of ¥13.36B, resulting in negative free cash flow of -¥28.16B when combined with operating cash flow. Financing cash flow was +¥12.39B, as proceeds from the issuance of bonds and borrowings of ¥67.49B exceeded bond redemptions and repayments of borrowings of ¥55.03B, indicating that the funding shortfall was covered through external financing. Consequently, cash and cash equivalents declined from ¥57.56B at the beginning of the period to ¥44.27B, indicating that internally generated funds were insufficient to fully cover investment and repayment requirements.

Earnings Quality

Against net income of ¥0.11B, the process by which this income was generated shows dependence on temporary factors and income outside the core business. Individually disclosed items consisted of income of ¥0.09B and expenses of ¥0.70B, resulting in a net expense of -¥0.61B. Although the absolute scale was small, the impact relative to net income was significant. Financial expenses of ¥8.67B were nearly equivalent to operating income of ¥8.83B, creating a structure in which non-operating interest expenses effectively offset the earning power of the core business. Equity-method investment income of ¥1.26B accounted for approximately 67% of profit before tax of ¥1.87B, suggesting the limited earnings power of the core business alone. Comprehensive income was -¥2.36B, substantially diverging from net income of ¥0.11B. Foreign currency translation adjustments for foreign operations of +¥3.53B made a positive contribution, while cash flow hedges of -¥3.67B and changes in the fair value of other financial assets of -¥2.18B had negative effects. The fact that operating cash flow was substantially below net income also indicates weak cash backing for the reported earnings.

Earnings Forecast and Guidance

Full-year progress was generally on track for revenue and operating income, while net income was significantly behind schedule. Revenue progress was 28.0%, calculated as ¥246.34B ÷ ¥880.00B, and operating income progress was 24.5%, calculated as ¥8.83B ÷ ¥36.00B. Both were generally in line with the simple progress benchmark of 25%. In contrast, net income progress was only 2.8%, calculated as ¥0.11B ÷ ¥4.00B, or 6.2% on a basis attributable to owners of the parent, calculated as ¥0.19B ÷ ¥3.00B. This indicates that reducing financial expenses and the tax burden will be necessary to achieve the full-year forecast. Full-year operating income is expected to increase 24.9% YoY, while net income is expected to decline 32.1% YoY, indicating that the company has incorporated downward pressure from taxes and interest expenses into its forecast assumptions.

Shareholder Returns

The dividend forecast for the current period is ¥0 per share, and the payout ratio cannot be calculated. In the same period of the previous year, dividends of ¥1.95B were paid to shareholders of the parent, but both operating cash flow and free cash flow are negative in the current period, limiting the scope for stable dividends funded by internal resources. Share repurchases amounted to ¥0.00B, indicating a restrained approach to shareholder returns at present.

Risk Factors

1. Gap between profitability and cash generation: Against an operating margin of 3.6%, operating cash flow was negative at -¥13.86B, creating a significant divergence between net income of ¥0.11B and operating cash flow. The accumulation of inventories of ¥194.36B has tied up working capital, making inventory optimization a key issue.

2. Heavy interest and tax burden: Financial expenses of ¥8.67B were nearly equivalent to operating income of ¥8.83B, while the effective tax rate was high at approximately 94%. Interest-bearing debt totaled ¥569.49B, meaning that changes in the interest-rate environment could have a substantial impact on net income.

3. Deteriorating profitability in automotive glass: The operating margin of automotive glass, which accounts for 53.9% of the revenue mix, declined to 0.9%, diluting the overall profit margin. If profitability improvements in this business do not progress, the structure in which revenue growth does not directly translate into profit growth may continue.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin are below the industry median, indicating relatively low profitability within the industry.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, placing the company’s top-line expansion pace in a favorable position within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Top-line revenue increased by double digits YoY across all segments—automotive glass, building glass, and high-performance glass—with expansion also confirmed in Europe and the Americas by region. At the operating income level, building glass and high-performance glass were the main drivers, while the decline in automotive glass profitability to 0.9% diluted the overall margin. This is an important point when assessing the quality of the revenue growth indicated by the earnings data.

2. Against profit before tax of ¥1.87B, financial expenses of ¥8.67B and corporate income taxes and other taxes of ¥1.76B were recorded, compressing net income to ¥0.11B. Equity-method investment income of ¥1.26B accounted for approximately 67% of profit before tax, which should be considered when evaluating the relationship between the earnings power of the core business alone and net income.

3. Operating cash flow was -¥13.86B, substantially below net income, and free cash flow was also negative at -¥28.16B. The funding shortfall was covered through external financing via financing cash flow of +¥12.39B. Inventory levels and changes in the funding structure should therefore be monitored continuously in future earnings data.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson type, with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥819–¥867 at ±1% for the cost of equity, and ¥835–¥847 at ±0.1 for ω.

Notes:

• Net income is substantially compressed relative to operating income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (net income ÷ operating income 8%). This value reflects that compression at face value; if the factors are temporary, normalized earnings power may be higher.
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Goodwill represents a high proportion of net assets, and the assumptions would change substantially if impairment occurs.
• Net assets as of the quarter-end are used, resulting in a timing difference from the full-year forecast.

(Calculation model: Residual income model / Interest-rate reference month: 2026-07 / This value is not intended to forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary 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 discretion and responsibility, after consulting with a professional as necessary.

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