NICCA CHEMICAL (4463) H1 FY2026 Earnings Deep Dive: Record-High Interim Profits Driven by High-Value-Added EHD Products, Leading to Significant Full-Year Guidance Upward Revision

Nicca Chemical Co., Ltd.'s H1 FY2026 (interim) financial results represent an exceptionally strong performance, with the company achieving record-high sales and profits for an interim period , driven by robust growth in the chemical business and the expansion of high-value-added products. Consequently, the company has announced an upward revision to its full-year consolidated earnings forecast .

This report breaks down the key topics from the earnings supplementary materials into 10 perspectives, providing a comprehensive analysis of the performance structure, business segment status, and mid-to-long-term growth strategies.

---

1. H1 Consolidated Earnings Highlights: Achieving Record-High Interim Performance

Consolidated results for the interim period showed significant year-on-year growth across all profit lines.

• Net Sales : 31,008 million yen (up 14.1% YoY)
• Operating Profit : 2,653 million yen (up 37.1% YoY, Operating Margin 8.6% )
• Ordinary Profit : 2,708 million yen (up 54.6% YoY)
• Net Income Attributable to Owners of Parent : 1,946 million yen (up 95.2% YoY)

Background and Significance of Slide 4

Slide 4 presents the most critical financial data, comparing the overall consolidated performance of the current period with the same period last year. While net sales grew by 14.1% , operating profit surged by 37.1% , and net income jumped by 95.2% , indicating a substantial expansion in profit margins. This is the result of a combination of increased volume, an improved product mix (higher proportion of high-value-added products) , and positive foreign exchange impacts (stronger USD and CNY) , demonstrating that the company's earnings structure is shifting toward a higher-profit model.

---

2. Improvement in Key Management Indicators and Capital Efficiency: ROE Exceeds 10%

In line with increased profitability, various management and capital efficiency indicators have shown marked improvement.

• ROE (Return on Equity) : 10.7% (up 4.7pt YoY)
• ROA (Return on Assets) : 6.9% (up 0.8pt YoY)
• ROIC (Return on Invested Capital) : 6.4% (up 0.4pt YoY)
• PBR (Price-to-Book Ratio) : 0.74x (up 0.13pt YoY)
• EBITDA : 3,689 million yen (up 709 million yen YoY)

Profit growth is directly contributing to the efficient utilization of net assets and invested capital, showing steady progress toward PBR improvement alongside a rising stock price level.

---

3. Analysis of Factors Affecting Net Sales and Ordinary Profit

A breakdown of the 3,827 million yen (+14.1%) year-on-year increase in consolidated net sales reveals clear disparities across business segments and regions.

• Chemical Business : Contributed +2,970 million yen to sales growth. Overseas bases drove significant growth , with increases in Japan (+160 million yen), China (+1,620 million yen), South Korea (+620 million yen), and others (+1,170 million yen).
• Cosmetics Business : A negative factor of -657 million yen , impacted by inventory adjustments at domestic distributors (-610 million yen) and a sluggish South Korean market (-30 million yen).
• FX Impact : Provided a tailwind of +1,303 million yen for chemicals and +27 million yen for cosmetics (average exchange rate: 158.31 JPY/USD vs. 149.00 JPY/USD in the previous year).

In terms of ordinary profit, the segment profit increase in chemicals (+934 million yen) significantly absorbed the decline in the cosmetics business (-316 million yen), and with the improvement in foreign exchange gains/losses (+114 million yen), the company achieved a year-on-year increase of 955 million yen (+54.6%) .

---

4. Chemical Business: Driven by Overseas Market Growth and High-Value-Added Shift

The chemical business, the company's core pillar, showed exceptionally high growth.

• Net Sales : 23,876 million yen (up 21.8% YoY)
• Segment Profit : 3,191 million yen (up 51.5% YoY)

By sector, the core textile chemicals field benefited from strong operations at major textile processing plants in China and recovery/growth in South and Southeast Asia, including India and Bangladesh. Additionally, the recovery of coolant agents for semiconductor processing in the electronic materials field , the acquisition of new global business, and growth in rubber processing aids and medical device cleaning agents in the functional chemicals field have bolstered overall performance.

---

5. Core Growth Engine: Trends in EHD (High-Value-Added Product) Ratio

The company has positioned the expansion of EHD products (high-value-added products for Environment, Health/Hygiene, and Digital/Advanced Materials) as the pillar of its corporate growth strategy.

Background and Significance of Slide 12

Slide 12 shows the trend in the sales ratio of EHD-related products within the chemical business. Having grown steadily from 41.7% in Q2 2023, it reached 48.1% in Q2 2026 (up 2.9pt YoY) , amounting to 23.8 billion yen in sales. It is important to note that the profit margin of EHD products is 14% higher than that of conventional products . In other words, as the EHD ratio increases, the marginal profit ratio of the entire chemical business structurally improves. The company has set targets of 48% for 2026 and 55% for 2030 , confirming that the shift toward high-value-added products is proceeding as planned.

---

6. Overseas Strategy & M&A: Acquisition of The Chemours Company's Non-Fluorinated Water Repellent "Zelan™" Business

In March 2026, the company announced the acquisition of the "Zelan™" non-fluorinated water repellent business from the U.S.-based global chemical manufacturer, The Chemours Company (transfer scheduled for completion in August 2026).

• Background and Objectives : Driven by tightening global regulations on fluorine (PFAS regulations), the need for environmentally friendly non-fluorinated water repellent technology is expanding rapidly.
• Acquired Assets : Manufacturing and sales rights for "Zelan™" products, patent and technology licenses, and trademark usage licenses such as "Teflon EcoElite™."
• Significance : "Zelan™" provides high durability and water repellency using plant-based raw materials and has a proven track record with global outdoor and sports brands. This acquisition significantly strengthens Nicca Chemical's existing water repellent lineup and is expected to expand its market share globally.

---

7. Cosmetics Business: Temporary Decline and Launch of New Initiatives

The cosmetics business is in a transitional phase, resulting in a decline in both sales and profit.

• Net Sales : 6,706 million yen (down 8.6% YoY)
• Segment Profit : 506 million yen (down 38.1% YoY)

Background of Profit Decline

Inventory adjustments by distributors for the core salon brand "DEMI COSMETICS," a decrease in repeat orders for new projects from the previous year in the OEM/ODM business at Yamada Pharmaceutical, and sluggish growth at Demi Korea due to the stagnation of the South Korean economy all had an impact. However, actual sales from distributors to domestic salons remain solid.

Positive Factors and New Products

Initial orders for the "TOIROCTION" bleach-less line (32 items) of the hair color brand launched in June have been extremely strong, exceeding the plan by more than three times . Furthermore, the launch of "FeTeE," a new oil brand co-developed by Japan and South Korea, is scheduled for September.

---

8. Future Production Base: Construction of the "Fukui Smart Factory" for Cosmetics

To achieve a future leap in the cosmetics business, the company is steadily proceeding with the construction of the "Fukui Smart Factory," a large-scale project with a total investment of approximately 19.5 billion yen .

• Operational Timing : Scheduled for completion and full-scale operation in May 2027
• Production Capacity : 3x manufacturing capacity compared to the current head office factory
• Productivity : 1.5x labor productivity through automation and DX promotion
• Funding Plan : Secured via subsidies (up to 5 billion yen, 1/3 subsidy rate) and a 14 billion yen syndicated loan.

Construction of the exterior walls and rooftop equipment is complete, with a progress rate of 94% (aiming to secure 6 months of product inventory by the end of August 2026). Strategic inventory accumulation is also underway to eliminate supply concerns during the transition of factory functions.

---

9. Upward Revision of Full-Year Consolidated Earnings Forecast: Significant Profit Growth Plan

Based on the strong H1 performance, the steady growth of EHD products, the reflection of the Chemours business acquisition, and the revision of the exchange rate assumption (from 150 JPY/USD at the start of the period to 158 JPY/USD), the company has significantly revised its full-year earnings forecast for FY2026 upward .

Background and Significance of Slide 23

Slide 23 lists the earnings forecast changes from the initial to the revised outlook.

• Full-Year Net Sales : 64,000 million yen (up 5,500 million yen / +9.4% vs. initial, up 14.9% YoY)
• Full-Year Operating Profit : 5,400 million yen (up 1,200 million yen / +28.6% vs. initial, up 40.4% YoY)
• Full-Year Ordinary Profit : 5,400 million yen (up 1,350 million yen / +33.3% vs. initial, up 40.3% YoY)
• Net Income : 3,800 million yen (up 1,000 million yen / +35.7% vs. initial, up 59.4% YoY)

The upward revision of the chemical business segment profit forecast from 4,150 million yen to 5,800 million yen (+39.8%) is the primary driver. While partially accounting for the risk of rising raw material costs due to heightened tensions in the Middle East, strong demand trends, price revisions, and the shift to high-value-added products are providing a powerful tailwind for full-year performance.

---

10. Shareholder Return Policy: 6th Consecutive Dividend Increase and Achievement of 3.0% DOE

Along with earnings growth, the company continues to actively enhance shareholder returns.

• FY2026 Annual Dividend Forecast : 70 yen per share (35 yen interim, 35 yen year-end, +10 yen increase YoY)
• DOE (Dividend on Equity) : 3.0% (up 0.2pt YoY)
• Consecutive Dividend Increase Record : Expected to achieve 6 consecutive years of dividend increases

The company maintains a dividend policy of "progressive dividends + targeting a DOE of 3.0%," demonstrating a highly transparent return stance linked to profit growth.

---

Summary and Overview

Nicca Chemical's H1 FY2026 earnings were exceptionally strong, with the company achieving record-high operating and net profits at the corporate level, driven by expanding demand for overseas textile chemicals and EHD products . The overwhelming growth in the chemical business has covered the temporary adjustment phase in the cosmetics business, demonstrating the strengths of the company's portfolio management.

Furthermore, with the improvement of its competitive edge in the global water repellent market through the "Zelan™" acquisition and the tripling of production capacity via the "Fukui Smart Factory" scheduled for 2027, preparations for mid-to-long-term growth are proceeding steadily . The upward revision of the full-year forecast and the plan for a 6th consecutive dividend increase symbolize that the company's business foundation has entered a robust expansion phase.