TSUCHIYA HOLDINGS CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥31.46B
• Operating Income: ¥-122M
• Net Income: ¥178M
• EPS: ¥-3.66

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: FY2025 Q4 shows weak operating performance with a small operating loss but solid operating cash inflow, highlighting mixed quality and the need for tighter cost control. Revenue declined 5.5% YoY to 314.56, while gross profit was 81.27 and SG&A totaled 82.50, resulting in operating income of -1.22. Non-operating income of 1.06 (notably 0.39 from dividends and 0.08 from interest) partially offset non-operating expenses of 0.79, yielding ordinary income of -0.95. Profit before tax was 0.50, but after an unusually high tax charge of 1.43, net income came in at -0.93 (net margin -0.3%). Gross margin printed at 25.8%, operating margin at -0.39% (ordinary margin -0.30%), and EBITDA margin was 0.7%, indicating very tight operating leverage. Basis point comparisons vs prior year margins are not calculable due to lack of disclosed prior-year margin levels, but the shift to a negative operating margin implies compression. Operating cash flow was strong at 12.50 despite the net loss, producing an OCF/NI ratio of -13.44x, which is mechanically distorted by the negative NI but still signals cash generation via add-backs and working capital release. Free cash flow was -8.50, with capex of 21.22 outpacing OCF. Liquidity remains sound with a current ratio of 153.7% and quick ratio of 153.7%, supported by cash and deposits of 53.31. Leverage is moderate (D/E 1.07x; financial leverage 2.07x), but interest coverage is weak at -1.82x, indicating operating earnings are insufficient to comfortably service interest. Equity stands at 130.41 (book value per share approximately 506 JPY), and ROE is -0.7% per DuPont (driven by the negative net margin). The elevated effective tax rate (286.1%) despite a loss suggests non-recurring tax items or timing differences. Forward-looking, the key to restoring profitability will be gross margin defense and SG&A discipline to lift operating margin back into positive territory, while moderating capex to align with cash generation. If operating cash inflow can be sustained and capex normalizes, FCF could improve; otherwise dividend capacity (if any) may remain constrained. Overall, the quarter underscores cost pressure and weak operating leverage, partially cushioned by healthy liquidity and non-operating income.

Profitability Analysis

DuPont: ROE (-0.7%) = Net Profit Margin (-0.3%) × Asset Turnover (1.166x) × Financial Leverage (2.07x). The dominant driver of the negative ROE is the net profit margin, as both asset turnover and leverage are within typical ranges for a builder/developer, while margins slipped into negative territory. Business reason: gross margin at 25.8% could not cover SG&A of 82.50, resulting in an operating loss of -1.22; this indicates either weaker pricing/mix, lower volumes (revenue -5.5% YoY), or elevated overheads. Non-operating income (1.06) helped but was insufficient to offset interest expense (0.67) and other costs, leaving ordinary income negative. Sustainability: the net margin weakness is likely cyclical/operational rather than structural if management can recalibrate SG&A and restore volume/mix; however, interest burden and materials/labor cost inflation may keep margins tight near term. Operating leverage is negative at present: EBITDA of 2.34 on 314.56 revenue (0.7% margin) means small demand shocks can swing earnings. Concerning trends: SG&A (82.50) exceeded gross profit (81.27), a clear red flag, and interest coverage at -1.82x indicates profits are not covering financing costs. Without prior-year detailed margins, bp-level attribution is not available, but the YoY revenue decline alongside a deeper operating loss implies margin compression rather than expansion.

Growth Assessment

Top-line contracted 5.5% YoY to 314.56, suggesting softer demand or project timing. Profitability deteriorated: operating income was -1.22 and ordinary income -0.95 despite 1.06 in non-operating income, pointing to core weakness. EBITDA of 2.34 indicates minimal operating buffer; any additional cost inflation would quickly erode profits. The net loss of -0.93 versus a high tax charge (1.43) distorts bottom-line comparability; normalized taxes would lift NI but still likely leave earnings thin. Revenue sustainability hinges on order intake, project backlog conversion, and housing demand—data not disclosed here. Given asset turnover at 1.166x, the asset base is being utilized, but margins must improve to translate into earnings. Outlook: focus on cost discipline (SG&A reduction), selective pricing, and project execution to lift operating margin above 1–2% as a first step; leverage the 53.31 cash to manage through volatility while curbing discretionary capex to stabilize FCF.

Financial Health

Liquidity: Current ratio 153.7% and quick ratio 153.7% indicate a healthy buffer; working capital stands at 49.39. No warning on current ratio (<1.0) is needed. Solvency: Debt-to-equity at 1.07x is within conservative thresholds (<1.5), and financial leverage is 2.07x; however, interest coverage at -1.82x is a material weakness and triggers a warning (<2x). Maturity profile: Current assets of 141.39 comfortably exceed current liabilities of 92.00, mitigating near-term refinancing risk; noncurrent liabilities are 47.48, including long-term loans of 30.00. With cash and deposits at 53.31, short-term liquidity appears sufficient, though ongoing operating losses would pressure coverage. No off-balance sheet obligations are mentioned in the data provided.

Cash Flow Quality

OCF was 12.50 versus net income of -0.93, producing an OCF/NI ratio of -13.44x (flagged). The positive OCF despite a net loss reflects non-cash add-backs (D&A 3.56) and likely working capital release; this is supportive near term but may not repeat if working capital normalizes. Free cash flow was -8.50 as capex of 21.22 exceeded OCF; this implies investment outflows are the primary drag on cash this period. Sustainability: Without growth in OCF or a reduction in capex, sustaining negative FCF would require drawdown of cash or incremental financing. No clear signs of working capital manipulation are evident from the limited disclosures, but the mismatch between thin EBITDA (2.34) and interest expense (0.67) indicates constrained coverage from core operations.

Dividend Sustainability

Dividend data (DPS and total dividends) were not disclosed. The reported payout ratio is 0.3% while the calculated payout ratio is -277.2% due to negative net income; both figures are not decision-useful. FCF coverage is -3.30x, indicating any dividend (if paid) would not be covered by internally generated free cash. Given negative operating margin and EBITDA margin of 0.7%, maintaining or increasing dividends would likely depend on cash reserves (53.31) rather than recurring cash generation. Policy outlook cannot be inferred without management guidance; prudence would point to conserving cash until operating margins normalize.

Risk Assessment

Business Risks:

• Demand cyclicality in housing/construction leading to revenue volatility (-5.5% YoY this period).
• Cost inflation for materials and labor compressing margins (SG&A exceeding gross profit).
• Execution risk on projects with thin EBITDA margin (0.7%) amplifying downside from delays or rework.
• Dependence on non-operating income (dividends, interest) to offset operating weakness.

Financial Risks:

• Weak interest coverage (-1.82x) indicating insufficient operating earnings to service debt.
• Negative FCF (-8.50) due to capex outlays exceeding OCF, pressuring cash if sustained.
• High effective tax rate (286.1%) despite net loss, suggesting potential non-recurring tax charges or timing effects.
• Potential refinancing risk if operating losses persist, though mitigated by current liquidity (cash 53.31).

Key Concerns:

• Operating margin in negative territory (-0.39%), with SG&A (82.50) above gross profit (81.27).
• Reliance on working capital release and D&A to generate OCF while profitability is weak.
• Data limitations on revenue mix, order backlog, and detailed SG&A components hamper root-cause analysis.

Investment Implications

Key Takeaways:

• Core profitability is under pressure: operating loss (-1.22) despite positive gross profit and modest EBITDA (2.34).
• Liquidity is adequate (current ratio 153.7%, cash 53.31), providing a cushion for near-term operations.
• Leverage is moderate (D/E 1.07x), but earnings-based coverage is weak (ICR -1.82x).
• OCF was positive (12.50), but capex drove negative FCF (-8.50); capex discipline is crucial.
• ROE is negative (-0.7%) driven by a small negative net margin (-0.3%) rather than excessive leverage.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio (targeting SG&A below gross profit).
• Order intake and backlog conversion to stabilize revenue after the -5.5% YoY decline.
• Gross margin trends amid input cost and pricing dynamics.
• Interest coverage and EBITDA growth relative to interest expense (0.67).
• OCF versus NI trajectory and capex commitments to restore positive FCF.
• Debt maturity schedule and any changes in long-term loans (currently 30.00).

Relative Positioning: Within domestic construction/housing peers, Tsuchiya Holdings exhibits weaker operating leverage and earnings coverage but comparatively solid liquidity and moderate balance sheet leverage; restoring a positive operating margin is the key differentiator needed to close the gap with healthier-margin peers.

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