S&P Global Ratings maintained Nippon Steel's (TYO:5401) BBB long-term issuer credit rating, according to a recent release.

The rating agency expects the company's key financial metrics to improve more gradually than previous estimates given a weak Japanese steel segment and further capital expenditure.

The company took measures to raise profitability and lessen fixed costs, but it still faces a dampened domestic steel market and stagnation in Asian markets where it primarily exports, the rating agency said.

Heavy investments will also result in a free operating cash flow deficit of between 200 billion yen and 300 billion yen as well as only a slight recovery in the debt-to-EBITDA ratio to about 3.9x in fiscal 2026, according to S&P.

The metrics could recover in the next year or so, but S&P sees volatile business conditions as a risk.

The negative outlook considers S&P's belief that the rebound in the major financial ratios may not happen as expected if the debt burden becomes a main pressure point.

Notable developments impacting the company's debt-to-EBITDA ratio could prompt future rating actions, the rating agency said.