We remain fully committed to the five key focus areas outlined in our MTP, leveraging strategic initiatives to drive sustained profitability. Our approach is built on a robust project pipeline, disciplined pricing management, accelerated productivity enhancements, maximized globalization benefits, and refined business portfolio optimization, which are all aimed at delivering stronger financial performance and long-term shareholder value creation.
Financial Strategy
Execution in line with our Medium-term management plan（MTP）; “NS Vision 2026”
Our approach to capital and human resource allocation remains focused on long-term strategic growth. Investment decisions are made globally, understanding the importance of ensuring that project returns exceed the cost of capital. Human resources are allocated and deployed dynamically across the business to support expansion, strategic initiatives, and emerging opportunities.
For 11 consecutive years, we have steadily increased our dividend, achieving an approximate 14% CAGR over the past decade. Our commitment to shareholder returns remains strong as we aim for continued dividend growth over time, targeting a dividend net income ratio of 20–30%. As we reduce debt and strengthen our adjusted D/E ratio, the payout ratio is expected to trend higher.
Business results
Prioritizing Margin Expansion and Profit Quality
Despite the challenges expected in FYE2026, both at the micro and macro levels, NSHD remains committed to disciplined financial execution. Excluding currency impacts, revenues are projected to grow 1.6% year-over-year, while Core Operating Income, also excluding currency effects, is expected to rise 4.3%. Our strategic priority is to ensure profit growth outpaces sales growth, reinforcing our commitment to margin expansion and long-term financial resilience.
Financial position
Systematic Repayment of Debt to Strengthen Financial Stability
Our commitment to financial soundness remains firm as we continue systematic debt repayments. For FYE2026, the adjusted net D/E ratio is projected at 0.77 times, as announced in our Full Term FYE2025 Earnings Presentation on May 23, 2025. While this falls short of our MTP NS Vision 2026 target of below 0.7, it reflects strategic investments made to drive long-term growth.
Our forecast incorporates two opportunistic acquisitions announced in December 2024, which were not included in our original MTP. If approved by regulatory bodies, these acquisitions will temporarily impact D/E ratios. However, excluding acquisition-related effects and currency fluctuations, our D/E ratio remains on a favorable downward trajectory, reinforcing our disciplined approach to financial management.
Cash flow
Appropriate allocation of operating cash flows generated by the business
In NS Vision 2026, our goal is to generate ¥730B in accumulated operating cash flows over four years. We anticipate reinvesting 60% of these funds into the business through strategic capital investments and acquisitions, while the remaining 40% will be allocated toward debt reduction and dividend payments.
Through disciplined execution, productivity enhancements, and effective working capital management, our operating cash flow has exceeded initial projections leading up to FYE2025. This strong financial position has enabled us to capitalize on growth opportunities, including M&A activities and the early refinancing of hybrid debt, while maintaining a steady increase in dividends to shareholders.
Capital efficiency
Steady progress toward the goals set forth in the MTP "NS Vision 2026”
Our ROCE after Tax has continued to improve, reaching 7.2% in FYE2025 —an increase of 50 basis points over FYE2024. Having already surpassed our MTP target of greater than 6% for FYE2026, we remain focused on further strengthening returns through ongoing strategic initiatives. Key actions in progress to drive ROCE improvement include maintaining a solid project pipeline with strong financial and economic returns, opportunistic acquisitions, optimizing pricing management, expanding productivity programs, and advancing globalization efforts.
Investment decisions are carefully evaluated to ensure each project exceeds the established hurdle rate, which is set higher than our cost of capital, for its respective country or region, with periodic reviews to maintain financial discipline. We prioritize high-profitability opportunities while continuously refining underperforming businesses by either restructuring them to enhance profitability or exiting operations that no longer align strategically with the NSHD Group.
Shareholder return
11 Years of Consecutive Dividend Growth at 14% CAGR
The dividend increased by ¥7 from the previous fiscal year, reaching ¥51 for FYE2025 with a payout ratio of 22.3%. Over the past decade, we achieved a compounded annual growth rate of approximately 14%, reinforcing our commitment to long-term shareholder value. We remain focused on enhancing shareholder returns and plan to continue steady dividend increases, targeting a payout ratio in the 20 to 30% range, while maintaining financial stability, reducing debt, investing in growth, and ensuring balanced capital allocation.
Alan David Draper
Senior Executive Officer and CFO