Berg Earth co.,ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥7.30B
• Operating Income: ¥-32M
• Net Income: ¥5M
• EPS: ¥30.22

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Mixed quarter—modest top-line growth but operating loss; bottom line stayed positive due to non-operating/extraordinary items and strong operating cash flow. Revenue increased 2.9% YoY to 73.03, while operating income fell to -0.32 (operating margin -0.4%), indicating core profit pressure. Gross profit was 17.17 with a gross margin of 23.5%, but SG&A of 17.50 exceeded gross profit, driving the operating loss. Non-operating income of 0.37 roughly offset non-operating expenses of 0.33, yet ordinary income remained slightly negative at -0.28. Profit before tax printed at 1.52 and net income at 0.48 (+21.0% YoY), implying material below-OP items supported earnings. EPS (basic) was 30.22 JPY, and calculated ROE was 2.2% on owners’ equity of 21.15. EBITDA was 2.60 (margin 3.6%), insufficient to cover SG&A growth and interest costs; interest coverage stood at -1.95x (warning). Operating margin compressed versus last year (exact bps not available due to lack of prior-period margin disclosure), while gross margin held at 23.5%. Earnings quality from a cash perspective was solid, with OCF of 3.29 equating to 6.85x net income, but FCF was negative at -2.44 due to capital expenditures of 5.66. Liquidity is adequate with a current ratio of 139.9% and quick ratio of 136.0%, but leverage is elevated at D/E 1.79x. Tax expense of 0.98 implies a high effective tax rate of 64.9%, likely reflecting non-deductible items or one-off tax effects. Dividend data were largely unreported; the calculated payout ratio is 33.6%, but FCF coverage was -15.12x, suggesting limited near-term flexibility if capex remains heavy. The balance sheet shows 6.50 in short-term loans and 14.07 in long-term loans; cash of 8.78 and receivables of 10.65 support near-term obligations. Forward-looking, capex intensity points to capacity or efficiency investments that could lift mid-term earnings, but near-term operating leverage and interest coverage are key watch points. The company needs to restore operating profitability and improve cost absorption to reduce reliance on non-operating/extraordinary items for net profit.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (0.7%) × Asset Turnover (1.206x) × Financial Leverage (2.79x) = ROE 2.2%. The net margin is the principal constraint on ROE given operating loss at -0.4% operating margin despite a positive net margin. Asset turnover of 1.206x is reasonable for the asset base, implying operations are generating sales but not converting to operating profit. Leverage at 2.79x is boosting the modest net return on equity, but with negative interest coverage this leverage increases fragility. The largest change vs prior year is likely net margin deterioration (operating income negative despite higher sales), driven by SG&A outpacing gross profit and possibly higher input/energy costs squeezing gross-to-operating conversion. This looks partly cyclical/seasonal and partly cost-structure related; sustainability is questionable unless pricing and cost control improve. Concerning trends include SG&A (17.50) exceeding gross profit (17.17), signaling poor operating leverage; and EBITDA (2.60) being thin relative to interest expense (0.16), contributing to negative interest coverage.

Growth Assessment

Revenue grew 2.9% YoY to 73.03, indicating stable demand. However, profit growth quality is weak: operating income swung to a loss (-0.32), while net income rose to 0.48 largely due to items below operating income (profit before tax 1.52 vs ordinary income -0.28). This suggests revenue is not yet translating into sustainable earnings. Gross margin at 23.5% is decent, but SG&A absorption is the constraint. Near-term outlook depends on cost normalization (labor, utilities, logistics) and pricing execution; capex of 5.66 suggests capacity/efficiency investments that could underpin medium-term growth. Without margin recovery, incremental sales may not improve profits. Monitor seasonality and product mix, as this sector can face weather and crop-cycle variability.

Financial Health

Liquidity: Current ratio 139.9% and quick ratio 136.0% indicate adequate short-term liquidity (above 1.0 but slightly below the 1.5 benchmark). Solvency: D/E at 1.79x is elevated versus a conservative 1.5x, though below the 2.0x explicit warning threshold; financial risk is present given weak earnings coverage. Total liabilities are 38.84 vs total equity 21.74; interest-bearing debt approximates 20.57 (short-term 6.50, long-term 14.07). Maturity mismatch: Short-term loans (6.50) are covered by cash (8.78) and receivables (10.65), mitigating near-term refinancing risk. However, negative EBIT and thin EBITDA leave limited buffer against rate increases or covenant pressure. No off-balance sheet obligations were reported in the data provided.

Cash Flow Quality

OCF of 3.29 vs net income of 0.48 yields an OCF/NI ratio of 6.85x, indicating high cash realization and limited accrual reliance this period. FCF was -2.44 due to capex of 5.66; while negative FCF is acceptable during investment cycles, recurring negative FCF would strain balance sheet capacity given leverage. Working capital: cash (8.78) and receivables (10.65) are robust relative to payables (5.32); inventories are low at 0.78, which may reflect product characteristics/seasonality rather than aggressive working-capital management. No overt signs of working-capital manipulation; the strong OCF suggests timely collections and disciplined payables. Sustainability: If capex normalizes, FCF could turn positive; if capex persists at current pace, financing will be required to support investments and any dividends.

Dividend Sustainability

Dividend data are largely unreported; the calculated payout ratio is 33.6% against ROE of 2.2%, implying dividends (if paid) are modest relative to earnings. However, FCF coverage is -15.12x this period due to heavy capex, indicating dividends would not be covered by free cash flow. Cash on hand (8.78) and access to financing (1.96 financing CF inflow) can temporarily support distributions, but with negative operating profit and negative interest coverage, prudence would argue for prioritizing balance sheet resilience. Policy outlook: absent disclosed DPS, assume a conservative stance until operating margins recover and FCF turns positive on a sustained basis.

Risk Assessment

Business Risks:

• Margin compression from input cost inflation (energy, materials, logistics) and limited pricing power.
• Seasonality and weather-related volatility affecting agricultural production and demand.
• Product mix shifts and potential disease/pest outbreaks impacting yields and sales.
• Execution risk on recent capex (5.66) not translating into expected efficiency or capacity gains.

Financial Risks:

• Elevated leverage (D/E 1.79x) with negative interest coverage (-1.95x).
• Dependence on non-operating/extraordinary items to achieve net profit (ordinary income -0.28 vs PBT 1.52).
• Refinancing and interest rate risk on 6.50 short-term loans and 14.07 long-term loans.
• High effective tax rate (64.9%), implying earnings sensitivity to non-deductible items or one-offs.

Key Concerns:

• Operating loss despite revenue growth; SG&A (17.50) exceeding gross profit (17.17).
• Negative FCF (-2.44) amid capex cycle, pressuring internal funding of dividends and debt service.
• Data gaps in SG&A breakdown and extraordinary items, limiting visibility on cost drivers and one-offs.

Investment Implications

Key Takeaways:

• Top-line grew 2.9% but operating margin fell to -0.4%, leading to an operating loss.
• Net income of 0.48 was supported by items below operating profit (PBT 1.52 vs ordinary income -0.28).
• OCF was strong at 3.29 (6.85x NI), but FCF negative due to 5.66 capex.
• Leverage is elevated (D/E 1.79x) and interest coverage is below warning threshold (-1.95x).
• Liquidity adequate (current ratio 139.9%), near-term funding risk moderate.
• ROE modest at 2.2%, primarily constrained by low net margin.

Metrics to Watch:

• Operating margin recovery and SG&A trend relative to sales.
• Gross margin resilience versus energy and input costs.
• Interest coverage (EBIT/interest) and debt maturities/refinancing terms.
• Capex intensity and returns (OCF uplift, EBITDA/Capex).
• Working capital turns (receivables collection, inventory levels) and OCF sustainability.
• Nature and recurrence of below-OP gains/charges affecting PBT and tax rate.

Relative Positioning: Within its segment, the company shows stable sales but weaker operating profitability and thinner coverage ratios than conservative benchmarks; near-term performance hinges on cost control and successful monetization of recent capex to restore positive operating margins.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis