FUKUDA CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥119.73B
• Operating Income: ¥6.43B
• Net Income: ¥4.04B
• EPS: ¥537.78

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Fukuda Corporation (18990) reported FY2025 Q3 consolidated results under JGAAP showing steady topline growth and notable margin expansion. Revenue rose 2.7% YoY to ¥119.7bn, while operating income increased 12.1% YoY to ¥6.43bn, indicating positive operating leverage. Gross profit was ¥13.0bn, implying a gross margin of 10.8%, and operating margin improved to approximately 5.37%. Ordinary income reached ¥6.59bn, slightly above operating income due to net non-operating gains of roughly ¥0.16bn. Net income was ¥4.45bn, up 12.8% YoY, with EPS of ¥537.78. The DuPont-calculated ROE stood at 5.05%, derived from a 3.72% net margin, 0.81x asset turnover, and 1.68x financial leverage. Balance sheet quality remains strong: total assets were ¥147.8bn and total equity ¥88.2bn, implying an equity ratio of about 59.7% (despite a reported 0.0% placeholder). Liquidity is robust, with a current ratio of 2.11x and working capital of ¥55.4bn. Leverage is conservative, with total liabilities/equity of 0.65x and negligible interest expense of ¥19m, resulting in an interest coverage of 338x. The effective tax rate, inferred from disclosed figures, is approximately 29.6% (¥1.95bn tax on ~¥6.59bn pre-tax), notwithstanding a 0.0% placeholder in the calculated metrics. Cash flow data, depreciation/amortization, and inventory balances were not disclosed in the XBRL feed, limiting visibility on cash conversion and EBITDA. Dividend information is also not disclosed; DPS and payout are shown as zero placeholders. Overall, the company demonstrates improved profitability on modest revenue growth, backed by a solid capital structure and ample liquidity. However, the absence of cash flow disclosure and order/backlog data constrains assessment of revenue sustainability and earnings quality for a project-based contractor. Monitoring working capital dynamics and cash conversion will be important given sector seasonality and the typical billing profile of construction projects.

Profitability Analysis

ROE (5.05%) is explained by a 3.72% net margin, 0.81x asset turnover, and 1.68x financial leverage. Operating margin was ~5.37% (¥6.43bn / ¥119.73bn), up YoY given operating income grew 12.1% against 2.7% revenue growth, signaling positive operating leverage and SG&A efficiency. Gross margin was 10.8% (¥12.96bn / ¥119.73bn), indicating improved project mix or cost control versus prior year (exact prior-year gross margin not disclosed). Ordinary margin was 5.50% (¥6.59bn / ¥119.73bn), aided by net non-operating income (¥0.16bn). Interest burden is minimal with interest expense of ¥19m and coverage of 338x, suggesting financial expenses are not diluting margins. Tax burden approximates 29.6%, consistent with standard domestic rates. EBITDA and D&A were not disclosed; thus, EBITDA margin showing as 0.0% is a placeholder and cannot be interpreted. Overall profitability trends are favorable, with better drop-through of revenue to operating profit and a conservative leverage profile supporting ROE.

Growth Assessment

Revenue grew 2.7% YoY to ¥119.7bn, indicative of steady demand but not a surge; lack of order intake/backlog disclosure limits visibility into forward revenue sustainability. Profit growth outpaced revenue, with operating income +12.1% YoY and net income +12.8% YoY, reflecting margin expansion and disciplined cost control. Ordinary income exceeded operating income by ¥0.16bn, implying modest non-operating tailwinds (likely financial income), but core operations drove most of the growth. Without depreciation and cash flow data, assessing whether profit growth is supported by underlying cash generation is constrained. In construction, seasonality and project timing can cause uneven quarterly flows; the solid operating margin suggests favorable execution and mix in the period. Outlook qualitatively hinges on backlog quality, cost pass-through on materials and labor, and bid discipline; these datapoints were not disclosed, so growth durability cannot be fully validated. Near-term, maintaining gross margin around double digits and operating margin above 5% would underpin continued profit growth if volumes remain stable.

Financial Health

Liquidity is strong: current assets ¥105.43bn vs current liabilities ¥50.00bn produce a current ratio of 2.11x and working capital of ¥55.43bn. Quick ratio is indicated at 2.11x due to inventories not being disclosed (inventory balance shows as zero placeholder). Solvency is solid: total liabilities are ¥57.41bn versus equity of ¥88.21bn, yielding a liabilities-to-equity ratio of 0.65x. The equity ratio can be derived at ~59.7% (equity/assets = ¥88.21bn/¥147.77bn), despite a reported 0.0% placeholder. Interest expense is very low (¥19m), and interest coverage is extremely high (338x), indicating minimal financial risk from debt service. The capital structure is conservative, providing ample flexibility to weather project delays or working capital swings typical in the sector.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (shown as zeros, which are placeholders), preventing direct assessment of cash conversion or free cash flow. As such, OCF/Net Income and FCF coverage metrics cannot be interpreted for this period. Given the sizable working capital position (¥55.43bn), cash generation can be sensitive to billing milestones, receivable collection, and advance receipts, which are common swing factors for contractors; however, detailed working capital components (inventories, receivables, payables) were not provided. Earnings quality appears supported by operating margin gains and minimal reliance on non-operating items, but confirmation via OCF and DSO/DPO trends is not possible with the current disclosure set.

Dividend Sustainability

Dividend data were not disclosed for the period; annual DPS and payout ratio appear as zeros (placeholders). Without DPS and cash flow information, we cannot assess payout ratio, free cash flow coverage, or adherence to any stated shareholder return policy. EPS was ¥537.78, which would provide capacity for dividends if a policy exists, but confirmation requires actual DPS and OCF disclosure. Future sustainability will depend on maintaining operating margins, managing working capital to support positive OCF, and preserving the strong balance sheet.

Risk Assessment

Business Risks:

• Project execution and cost overrun risk on fixed-price contracts
• Input cost inflation for materials and subcontracting, and labor availability constraints
• Timing and mix risk from large projects affecting margins and revenue recognition
• Order backlog visibility not disclosed, limiting revenue sustainability assessment
• Change-order and claims recovery risk impacting gross margins
• Weather and disaster-related delays affecting construction schedules
• Competitive bidding pressure compressing margins in public and private tenders

Financial Risks:

• Working capital swings from receivables, unbilled revenue, and advance payments
• Potential cash conversion shortfalls not assessable due to missing OCF disclosure
• Concentration risk in counterparties if receivables are large (not disclosed)
• Limited interest rate risk currently given minimal interest expense, but refinancing terms unknown

Key Concerns:

• Absence of cash flow statement and D&A disclosure hampers earnings quality assessment
• No disclosure of order intake/backlog to gauge forward activity levels
• Inventory and detailed working capital components not reported, limiting liquidity granularity

Investment Implications

Key Takeaways:

• Modest topline growth (+2.7% YoY) with strong operating leverage (+12.1% YoY OI) indicates margin expansion
• ROE of 5.05% is driven primarily by improved margins and moderate asset turnover, not by leverage
• Balance sheet is conservative with an inferred equity ratio of ~59.7% and liabilities/equity of 0.65x
• Interest burden is negligible (¥19m; 338x coverage), reducing earnings volatility from financing
• Lack of cash flow disclosure is the main gap to confirm earnings-to-cash conversion

Metrics to Watch:

• Order backlog and order intake growth
• Gross margin and operating margin trajectory
• Operating cash flow and working capital (DSO, DPO, unbilled receivables, advances)
• SG&A ratio and labor productivity/utilization
• Capex and D&A once disclosed to gauge underlying EBITDA
• Effective tax rate stability (currently ~29.6%)

Relative Positioning: Within the Japan construction and general contracting peer set, Fukuda appears to operate with a conservative balance sheet, modest ROE, and improving margins; confirmation of superior cash conversion and backlog quality would strengthen its relative standing.

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