5010.T

Company Overview

• Nippon Seiro is the only specialized wax manufacturer in Japan, founded in 1929 and approaching its 100th anniversary, operating a global specialty wax business focused on delivering new customer value.
• It sources raw materials from oil refiners, processes them into 450 types of wax products for approximately 1,400 global customers across a wide range of industries.

2025 December Fiscal Year Key Initiatives & Results

• Product Development: Developed new high value-added products (including wax suitable for water-repellent processing) and cost-reduced existing products to improve price competitiveness, all of which have been adopted by customers. Filed a patent for the company's proprietary rice wax technology and exhibited at the Sustainable Material Expo to promote product functionality.
• Capital Investment & Facility Improvement: Finalized a full renovation plan for the aging core Tokuyama Factory, and approved the demolition of a portion of existing equipment to make space for new product manufacturing facilities and equipment that will improve production efficiency and product quality. Completed preparations to extend the interval for mandatory full-factory periodic overhauls from once every 2 years to once every 4 years, enabling 4 consecutive years of uninterrupted factory operation going forward, and expects significant future reductions in periodic overhaul costs.
• Human Resources & Organizational Improvement: Implemented a review of the wage system including an increase in starting salaries. Introduced a scholarship repayment support program to attract young talent, and launched an ongoing employee engagement survey to improve workplace satisfaction. The company will continue these initiatives to become a more attractive employer.
• Balance Sheet Improvement: Focused the full year on inventory reduction to lower inventory assets, improve cash flow, and strengthen the balance sheet. Produced less volume than sales to reduce inventory, which increased fixed cost per unit as expected. Lowered inventory as planned, leading to a large reduction in inventory assets, an increase in cash and cash equivalents, and total liabilities fell more than 3 billion yen year-over-year after the early repayment of 1.5 billion yen of the 3 billion yen subordinated capital loan taken out in October 2023.

2026 December Fiscal Year Key Planned Initiatives

• Product Development & Sales Expansion: Expand the R&D organization and accelerate new product development through collaboration with external institutions to increase the share of new high value-added wax in total sales. Start sample work to commercialize plant-derived rice wax, and expand sales of water-based wax emulsions (which offer excellent processability and environmental performance) across multiple applications.
• Balance Sheet & Financial Health Improvement: Aim to fully repay the remaining 1.5 billion yen of the 3 billion yen October 2023 subordinated loan during the fiscal year to further strengthen the financial base.
• Core Facility Renovation: Launch the Tokuyama Factory renovation project during the fiscal year.
• Dividend & Shareholder Returns: The company was forced to continue a zero dividend in 2025 because it did not meet the statutory distributable profit requirement under Japanese company law. The company aims to achieve sufficient profit to implement a dividend in 2026, though the dividend amount is currently undecided. The company plans to release a new medium-term management plan by mid-2026 that will outline both medium- to long-term business strategy and a updated shareholder return policy.

Outcomes of Previous Medium-Term Structural Reforms

• Since 2023, the company has advanced the "raw material conversion" initiative outlined in its medium-term management plan. Prior to raw material conversion, the company mass produced low-margin general-purpose wax and large volumes of heavy fuel oil that could only be sold at a discount to raw material cost. After raw material conversion and production process review, the company reduced output of low-margin products and heavy fuel oil, increased the production share of high value-added wax, improving product mix and achieving stable profit levels. Despite rising raw material and logistics costs from inflation, profit and cash flow have improved significantly. The company also implemented wax price adjustments to pass through a portion of cost increases to customers, corrected pricing for unprofitable business lines, and reviewed customer relationships to lift overall profit levels.

• Total revenue for the 2026 December Fiscal Year is forecast to increase 6.7% year-over-year to 21.1 billion yen, driven by expanded export sales.
• Operating profit is forecast to increase 53.4% year-over-year to 1.8 billion yen. This improvement comes from: the completion of inventory reduction efforts allowing higher production volume which reduces fixed cost per unit and improves cost of goods sold; and the full-year impact of the 2025 price adjustment.
• Net profit is forecast to increase 14.7% year-over-year to 800 million yen. This slower growth than operating profit reflects a planned 400 million yen special loss for demolition and removal costs as part of the Tokuyama Factory renovation project.
• Domestic Sales Forecast: Domestic sales volume is expected to decline in some applications due to competition from low-cost overseas products, but the company will grow sales of high-quality, high value-added wax products. Average selling price will rise due to the 2025 price adjustment, and total domestic sales are expected to be flat year-over-year.
• Export Sales Forecast: Focused on the North American and Chinese markets, the company will actively expand sales of both high value-added products and cost-competitive products. Average selling price will decline, but sales volume will increase sharply year-over-year, leading to higher total export revenue.
• Heavy Fuel Oil Sales Forecast: Sales volume will increase year-over-year due to higher wax production, but the company will continue efforts to minimize heavy oil output through raw material selection and production process improvements.

Nippon Seiro operates a single core specialty wax business with sales split by end-use application as follows:

• Rubber (primarily tire) applications: 27% of total revenue
• Ink (primarily printer toner) applications: 20% of total revenue
• Candle applications: 6% of total revenue
• Adhesive applications: 6% of total revenue
• All other applications (waterproofing for cardboard, chewing gum texture adjustment, cosmetics, daily necessities, agricultural materials): 41% of total revenue

Heavy fuel oil is a by-product of wax production, sold after internal use for boiler fuel.

2025 December Fiscal Year actual full-year performance:

• Total consolidated revenue: 19.776 billion yen
• Operating profit: 1.173 billion yen
• Net profit: 697 million yen
• Operating cash flow: 3.686 billion yen, which exceeded initial forecast
• Free cash flow: 3.09 billion yen, which exceeded initial forecast

Full-year 2025 sales volume fell 9% year-over-year, driven by weak H1 sales, while average selling price increased 2% year-over-year due to price pass-through for higher logistics and input costs and a focus on high value-added products. The 2% selling price increase was not enough to offset the volume decline, leading to lower total revenue. Heavy fuel oil sales volume fell 36% year-over-year due to intentional wax production cuts for inventory reduction, and the company continues to minimize heavy oil production because it sells at a discount to raw material cost.

• Weak demand in H1 2025 driven by global economic uncertainty including Trump-era tariffs led to full-year revenue and profit falling below initial 2025 forecasts, with full-year sales volume 9% lower year-over-year.
• High price competition from low-cost overseas products negatively impacts domestic sales volume in some product lines.
• The 2025 zero dividend was required because the company did not meet the statutory distributable profit threshold under Japanese company law, and dividend implementation for 2026 is still conditional on achieving targeted profit levels and remains undecided as of the call.
• Sustained inflation has driven significant increases in raw material costs and logistics costs, which the company has partially offset through price adjustments and product mix improvement but remains a ongoing pressure on profitability.
• Heavy fuel oil production is inherently unprofitable as it sells at a discount to raw material cost, requiring ongoing process adjustments to minimize output.

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