Ezaki Glico Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥264.74B
• Operating Income: ¥9.02B
• Net Income: ¥8.26B
• EPS: ¥114.18

Income Statement

Balance Sheet

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 Q3 results show solid top-line growth but significant margin compression, with profits relying more on non-operating items and ROIC below threshold. Revenue rose 9.8% YoY to 2,647.36, while operating income fell 28.8% to 90.20 and ordinary income declined 29.1% to 108.69. Net income decreased 11.5% to 72.68, supported by positive non-operating income (38.12) that partially offset weaker operations. Gross margin printed at 35.9%, while operating margin was 3.4% and net margin 2.7%. Based on the reported YoY changes, operating margin compressed by approximately 184 bps (from ~5.25% to 3.41%). Ordinary margin compressed by roughly 225 bps (from ~6.36% to 4.11%), and net margin by about 66 bps (from ~3.41% to 2.75%). Non-operating income is sizable relative to operating income (38.12 vs 90.20), indicating higher dependence on below-the-line items for profit stability. Earnings quality cannot be validated via cash flows as OCF is unreported, limiting assessment of accrual intensity and working capital behavior. Liquidity remains strong with current ratio at 196% and quick ratio at 167%; leverage is conservative with D/E at 0.37x and interest coverage at 155.5x. Asset efficiency and capital productivity are weak: ROE is 2.7% and ROIC is 3.0%, both well below typical consumer staples hurdles. The effective tax rate is 27.9%, consistent with a normalized burden. Balance sheet resilience provides near-term flexibility, but low ROIC and compressed operating margin point to structural profitability challenges. With payout ratio at 84.8% (above the 60% comfort level) and FCF unreported, dividend sustainability appears tight without improvement in cash generation. Forward-looking, the key swing factors are input cost trends (e.g., cocoa, dairy, sugar), pricing power and mix, and SG&A discipline to restore operating leverage. Overall, the quarter underscores the need for sustained margin recovery and better asset turns to lift capital efficiency and protect shareholder returns.

Profitability Analysis

DuPont decomposition (ROE 2.7%) = Net Profit Margin (2.8%) × Asset Turnover (0.709x) × Financial Leverage (1.37x). The biggest drag versus prior year appears to be Net Profit Margin, given revenue growth (+9.8%) alongside a 28.8% drop in operating income and a 29.1% drop in ordinary income. Business drivers likely include input cost inflation (cocoa/dairy/sugar), currency effects on imported materials, and increased SG&A (advertising, logistics, personnel) that lifted the SG&A-to-sales ratio to 31.2%. The margin pressure looks partly cyclical (commodity costs, FX) but also points to executional challenges in passing through costs and controlling overheads; sustainability depends on pricing/mix realization and cost normalization. Asset turnover at 0.709x is modest for a branded food company, reflecting a relatively asset-heavy footprint (intangible assets 265.26, investment securities 544.90, cash 551.68) and possibly slower turnover in receivables/inventory; improving turns could support ROE. Leverage at 1.37x is low, providing safety but limiting ROE magnification. Flags: revenue grew 9.8% while operating income fell 28.8%, implying negative operating leverage; SG&A growth likely outpaced sales (inferred from margin compression), though detailed YoY SG&A data is unreported.

Growth Assessment

Revenue growth of 9.8% is healthy, suggesting pricing/mix and/or volume expansion, but profit growth is negative with OP -28.8% and NI -11.5%, indicating growth quality issues. Operating margin fell to 3.41% from an estimated ~5.25% a year ago, demonstrating insufficient cost pass-through. Non-operating income (38.12) contributed meaningfully to ordinary income (108.69), cushioning the bottom line but raising questions about recurring earnings quality. With gross margin at 35.9%, there is room for recovery if input costs ease and pricing sticks; however, the near-term outlook depends on commodity and FX trajectories. Absent cash flow disclosure, we cannot confirm whether growth is cash-generative; working-capital ratios (AR ~45 days; inventory ~44 days, estimated) look reasonable. Outlook hinges on: 1) additional price/mix actions, 2) procurement and reformulation to mitigate cocoa/dairy inflation, 3) SG&A optimization to restore operating leverage, and 4) stabilization of non-operating items (e.g., dividends, interest income). Near-term growth is likely skewed to top line, with profitability recovery contingent on cost trends and execution.

Financial Health

Liquidity is strong: Current Ratio 196.2% and Quick Ratio 167.0% (both well above benchmarks). No warning on Current Ratio (<1.0) or D/E (>2.0); D/E stands at a conservative 0.37x. Maturity profile is favorable: Current Assets 1,609.96 vs Current Liabilities 820.55; Cash and Deposits 551.68 comfortably exceed Short-Term Loans 28.02. Long-term loans are minimal at 1.55, reducing refinancing risk. Accounts payable of 361.54 are well covered by current assets, indicating low maturity mismatch risk. Off-balance sheet obligations are not disclosed in the provided data; hence, no assessment can be made. Overall solvency is strong with Total Equity 2,725.81 and Assets/Equity of 1.37x.

Cash Flow Quality

OCF is unreported; therefore, OCF/Net Income and FCF cannot be assessed. As such, we cannot evaluate cash conversion, accrual intensity, or whether working capital supported or detracted from OCF this period. Preliminary working capital diagnostics from the balance sheet are neutral: receivables (~45 days) and inventories (~44 days) appear reasonable against 9M revenue/COGS run-rates. Given the notable contribution of non-operating income and compressed operating margins, we flag potential risk to cash flow quality if price/mix or cost normalization does not materialize. Dividend and capex coverage by FCF cannot be determined due to missing OCF and capex data.

Dividend Sustainability

Reported payout ratio (calculated) is 84.8%, materially above the <60% comfort benchmark, suggesting limited buffer if earnings weaken. With FCF and OCF unreported, coverage cannot be verified; reliance on balance sheet cash is possible near term given cash of 551.68 and low debt, but not a substitute for recurring FCF. Sustainability therefore hinges on restoring operating margin and improving cash conversion. Policy outlook is uncertain in the absence of disclosed DPS guidance; a stable dividend would require profit and FCF recovery or continued draw on cash reserves.

Risk Assessment

Business Risks:

• Commodity input inflation (cocoa, dairy, sugar) pressuring gross margin
• Pricing power and elasticity risk affecting ability to pass through costs
• Operational cost inflation (logistics, energy, labor) lifting SG&A ratio
• Product and brand execution risk in domestic confectionery market
• FX exposure on imported raw materials (yen depreciation risk)

Financial Risks:

• High payout ratio (84.8%) vs subdued earnings and low ROIC (3.0%)
• Profit sensitivity to non-operating income (38.12 vs OP 90.20)
• Potential working capital swings impacting cash conversion (OCF unreported)
• Capital efficiency weakness (ROE 2.7%, asset turnover 0.709x)

Key Concerns:

• Margin compression: OP margin ~3.41% vs ~5.25% prior (≈184 bps compression)
• ROIC at 3.0% below 5% warning threshold
• Lack of cash flow disclosure hampers validation of earnings quality
• Dividend sustainability risk if profitability recovery lags

Investment Implications

Key Takeaways:

• Top-line growth strong (+9.8%) but margins compressed sharply; OP -28.8%
• Non-operating income materially supporting ordinary profit
• Balance sheet strength (current ratio 196%, D/E 0.37x) mitigates near-term risk
• Capital efficiency weak (ROE 2.7%, ROIC 3.0%); improvement needed
• Dividend payout ratio elevated at 84.8%; sustainability contingent on cash generation

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Gross margin vs input cost basket (cocoa, dairy, sugar) and FX (USD/JPY, EUR/JPY)
• OCF/Net income and FCF once disclosed
• Price/mix realization and volume trends by category/region
• Inventory and receivables turns (DIO/DSO) for early signs of demand or execution issues

Relative Positioning: Within Japanese consumer staples, Ezaki Glico exhibits solid liquidity and low leverage but lags peers on profitability and capital efficiency this quarter; reliance on non-operating income and an elevated payout ratio increase sensitivity to execution on margin recovery.

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