CMC CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥18.26B
• Operating Income: ¥2.69B
• Net Income: ¥2.70B
• EPS: ¥164.12

Income Statement

Balance Sheet

Cash Flow Statement

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

CMIC Co., Ltd. (21850) reported FY2025 Q4 consolidated results under JGAAP with revenue of ¥18.256bn, declining 6.5% YoY, and operating income of ¥2.694bn, down 9.4% YoY, indicating modest negative operating leverage in the period. Despite weaker top-line and operating profit, net income increased 3.4% YoY to ¥2.149bn, supported by sizable non-operating income (ordinary income exceeded operating income by approximately ¥0.511bn) and a normalized tax burden. Gross profit remained solid at ¥7.275bn, translating to a strong gross margin of 39.9%, while operating margin of 14.8% reflects disciplined cost control but some deleveraging as revenue declined. The DuPont framework shows net margin at 11.77%, asset turnover at 0.673x, and financial leverage at 1.24x, yielding an ROE of 9.80% (consistent with the reported figure), driven primarily by profitability rather than leverage. Balance sheet strength is notable with total assets of ¥27.137bn and total equity of ¥21.919bn; the implied equity ratio is around 80.8% despite the equity ratio field showing 0.0% (unreported). Liquidity is very strong, with a current ratio of 495.7% and quick ratio of 471.5%, underpinned by low inventories (¥0.862bn). Leverage is conservative, with a debt-to-equity ratio of 0.25x and minimal interest expense of ¥2.78m; the interest coverage ratio of about 969x underscores limited financial risk. Operating cash flow of ¥2.309bn slightly exceeded net income (OCF/NI 1.07), indicating acceptable earnings quality; however, investing cash flow was a net inflow of ¥0.367bn, likely reflecting divestitures or asset sales, which temporarily boosts free cash flow (calculated here as ¥2.676bn). SG&A is inferred at approximately ¥4.581bn (about 25.1% of sales), suggesting cost discipline but also highlighting sensitivity of operating profit to revenue swings. The effective tax rate, based on net income and tax expense provided, is estimated at roughly 31%, even though the metrics section shows 0.0% (unreported). No dividends were paid (DPS ¥0, payout ratio 0%), despite ample capacity, indicating a conservative capital allocation stance or prioritization of reinvestment and balance sheet strength. Overall, the company demonstrates strong profitability, robust liquidity, and low leverage, with near-term earnings supported by non-operating gains and cash flows augmented by investing inflows. The main watchpoint is the sustainability of revenue and non-operating contributions amid a softer top-line trend. Data limitations include several zero entries that represent unreported items rather than actual zero balances (e.g., equity ratio, cash and equivalents, shares), which we normalize where possible using provided statements.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 11.77%
• asset_turnover: 0.673
• financial_leverage: 1.24
• calculated_ROE: 9.80%
• comments: ROE is primarily margin-driven; leverage is modest and asset turnover is moderate for the business model. margin_quality:
• gross_margin: 39.9%
• operating_margin: 14.8%
• ordinary_income_margin: 17.6%
• net_margin: 11.77%
• non_operating_items: Ordinary income exceeds operating income by ~¥0.511bn, indicating positive non-operating contributions (e.g., interest/dividend income, investment-related gains). operating_leverage:
• revenue_change_YoY: -6.5%
• operating_income_change_YoY: -9.4%
• implied_operating_leverage: ≈1.4x
• comment: Negative operating leverage observed; cost base remains largely fixed near term. SG&A is ~25.1% of sales (¥4.581bn), highlighting sensitivity of EBIT to revenue.

Growth Assessment

revenue_sustainability: Top-line contracted 6.5% YoY to ¥18.256bn, suggesting softer demand or project timing effects. Inventory remains low (¥0.862bn), consistent with an asset-light or service-heavy mix, but also limiting buffer for rapid volume recovery. profit_quality: Operating profit fell 9.4% YoY to ¥2.694bn; nevertheless, net income rose 3.4% YoY to ¥2.149bn aided by non-operating gains and a normalized tax rate. Core profitability (gross margin ~40%) remains robust, but earnings reliance on non-operating income is elevated this period. outlook: Near-term earnings trajectory hinges on stabilizing revenue and sustaining high gross margins. If non-operating gains normalize, maintaining current net margins may require improved volume or additional cost measures. Watch for order intake, pipeline visibility, and commentary on client activity to gauge recovery.

Financial Health

liquidity:

• current_ratio: 495.7%
• quick_ratio: 471.5%
• working_capital: ¥14.058bn
• comment: Very strong short-term liquidity; inventory levels are modest relative to current assets. solvency:
• debt_to_equity: 0.25x
• interest_coverage: 969.1x
• equity_ratio_implied: ≈80.8% (Equity ¥21.919bn / Assets ¥27.137bn)
• comment: Low leverage and ample equity cushion significantly mitigate refinancing and covenant risks. capital_structure: The balance sheet is equity-heavy with limited interest-bearing debt and minimal interest expense (¥2.78m), leaving capacity for future strategic investment if needed.

Cash Flow Quality

earnings_quality: OCF/NI of 1.07 indicates that reported earnings are largely supported by cash generation with modest accrual impact. free_cash_flow:

• ocf: ¥2.309bn
• investing_cf: ¥+0.367bn
• calculated_fcf: ¥2.676bn
• comment: Positive investing cash flow implies asset sales or investment income; FCF is elevated this period due to inflows rather than lower capex. working_capital: Working capital is high at ¥14.058bn, underpinning liquidity. Detailed movements are not provided, but OCF suggests no significant adverse swing in receivables/payables in aggregate.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is 0% (DPS ¥0) despite positive earnings (EPS ¥164.12) and strong OCF, indicating a conservative distribution policy. fcf_coverage: FCF of ¥2.676bn more than covers a hypothetical dividend; actual DPS was zero, so coverage is not a constraint. policy_outlook: With low leverage and robust cash generation, the company has capacity for distributions; however, absent explicit guidance, current policy appears to prioritize financial flexibility and/or reinvestment.

Risk Assessment

Business Risks:

• Revenue softness (-6.5% YoY) indicating demand volatility or project timing risk.
• Dependence on non-operating gains to sustain net income in the period.
• Potential pricing pressure that could compress gross margin (~40%) if demand weakens further.
• Execution risk around cost control given SG&A at ~25% of sales.
• Customer concentration or contract renewal risks (not disclosed but typical for project/service-heavy models).

Financial Risks:

• Possible normalization of investing cash flows (positive this year), which could reduce FCF.
• Interest rate and market valuation risk on financial assets if non-operating income stems from securities.
• Working capital management risk if receivables stretch in a softer demand environment.

Key Concerns:

• Sustainability of non-operating income (¥~0.5bn) that lifted ordinary income.
• Top-line contraction and negative operating leverage.
• Limited disclosure on cash and equivalents and share count (zeros indicate unreported), reducing transparency for per-share and liquidity granularity.

Investment Implications

Key Takeaways:

• Core profitability remains solid (operating margin ~14.8%, gross margin ~39.9%) despite revenue decline.
• ROE of 9.8% is healthy and predominantly margin-driven with low financial leverage (1.24x).
• Balance sheet is conservative with an implied equity ratio ~80.8% and minimal interest burden.
• OCF exceeds net income (1.07x), supporting acceptable earnings quality.
• Free cash flow is strong but boosted by one-off investing inflows; sustainability should be monitored.
• Dividend payments are currently absent despite capacity, suggesting conservative capital returns policy.
• Non-operating income meaningfully supported results; normalization could weigh on net profit.

Metrics to Watch:

• Order intake and backlog to gauge revenue recovery trajectory.
• Non-operating income drivers (securities gains, FX, interest/dividend income) and their sustainability.
• Capex trends and normalization of investing cash flows (asset sales versus reinvestment).
• Working capital efficiency (DSO, DPO, inventory turns) and its impact on OCF.
• Operating margin resilience and incremental margin on revenue changes.
• Any updates to dividend or shareholder return policy.

Relative Positioning: Relative to peers, the company appears more conservatively financed with stronger liquidity and lower interest burden, relying more on operating margins and less on leverage to drive ROE; near-term earnings are somewhat more exposed to fluctuations in non-operating income.

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