ROKKO BUTTER CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥31.00B
• Operating Income: ¥744M
• Net Income: ¥511M
• EPS: ¥26.24

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

Rokko Butter Co., Ltd. reported FY2025 Q3 (single-entity, JGAAP) results showing muted topline and significant margin compression. Revenue declined 1.0% YoY to ¥31.0bn, while operating income fell 48.6% YoY to ¥0.74bn, indicating strong negative operating leverage. Gross profit was ¥6.12bn, implying a gross margin of 19.8%, which, together with a 2.4% operating margin, points to elevated input costs and/or higher fixed SG&A absorption. Ordinary income was ¥0.64bn, slightly below operating income due to net non-operating expenses including ¥21.8m in interest. Net income declined 9.1% YoY to ¥0.51bn, with reported EPS of ¥26.24. Using net income and EPS implies roughly 19.5 million shares outstanding; share count and DPS were not disclosed in the feed. DuPont metrics yield an ROE of 1.63% (net margin 1.65% × asset turnover 0.607 × financial leverage 1.63), indicating subdued shareholder returns driven mainly by thin margins. Balance sheet strength remains solid with total assets of ¥51.03bn, equity of ¥31.30bn (implying an equity ratio of approximately 61.3% despite a reported 0.0% placeholder), and liabilities of ¥20.54bn (D/E ~0.66x based on liabilities/equity). Liquidity appears comfortable: current ratio 130.9% and quick ratio 119.9%, supported by working capital of ¥5.88bn and modest inventories of ¥2.10bn. Interest coverage is strong at 34.2x, reflecting low financial risk notwithstanding earnings pressure. The effective tax rate, recalculated from disclosed income tax (¥258m) and net income, is approximately 33.6%, despite a 0.0% placeholder in the metrics. Cash flow statements, depreciation, equity ratio, share counts, and dividend data were not disclosed (zeros are placeholders), limiting analysis of cash conversion, capex intensity, and dividend capacity. Overall, the quarter reflects resilient balance sheet and liquidity, but profitability is under pressure due to cost/mix dynamics and fixed-cost absorption. Near-term recovery hinges on gross margin normalization via pricing/mix, cost pass-through, and SG&A discipline. Given the data gaps, conclusions on cash flow quality and dividend policy must be treated as provisional. Key metrics to monitor include gross margin trajectory, ordinary margin, inventory levels, and any pricing actions to offset input cost inflation.

Profitability Analysis

ROE of 1.63% decomposes into net margin 1.65%, asset turnover 0.607x, and financial leverage 1.63x, indicating that subdued profitability, rather than leverage or asset efficiency, is the primary constraint on returns. Operating margin is 2.4% (¥744m/¥31.0bn) versus an implied prior-year operating margin near 4.6% (given -48.6% YoY OI vs. -1% sales), pointing to ~220 bps margin compression. Gross margin is 19.8%, suggesting elevated cost of goods (likely dairy/raw materials, packaging, and logistics) and/or mix shift toward lower-margin items. Ordinary margin is 2.1% (¥637m/¥31.0bn), slightly below operating due to net non-operating costs including ¥21.8m interest; non-operating items marginally detracted from profitability. The interest coverage ratio of 34.2x indicates financing costs are not a material drag on earnings. The tax burden appears normal for Japan: an effective tax rate around 33.6% (¥258m tax on ~¥769m pre-tax). Operating leverage was unfavorable this period: a modest 1% sales decline resulted in a 49% drop in operating profit, implying a high fixed-cost base and/or insufficient price pass-through. Overall margin quality is weak this quarter, with profitability closely tied to cost inputs and pricing power; restoring gross margin is crucial for normalizing ROE.

Growth Assessment

Top-line contracted 1.0% YoY to ¥31.0bn, indicating largely stable demand but some softness likely from volumes and/or price/mix dynamics. Profit growth lagged materially, with operating income down 48.6% YoY, showing that cost inflation and fixed-cost absorption overshadowed revenue stability. Ordinary and net income followed the same trend, although the net decline (-9.1% YoY) was milder due to tax effects and non-operating items. Revenue sustainability appears reasonable given slight decline, but profit quality is currently constrained by input costs; the small ordinary-income shortfall relative to operating income signals limited non-operating income to buffer results. Without cash flow data or segment disclosures, we cannot attribute growth by category; however, the structure suggests branded dairy/cheese exposure with sensitivity to imported raw materials and FX. Near-term outlook hinges on pricing power, additional cost pass-through, and mix upgrades; any easing in milk/cheese and packaging costs or yen stabilization would be supportive. Absent evidence of increased promotional intensity or structural share loss, revenue could remain broadly stable, but margin recovery is the key swing factor for earnings momentum.

Financial Health

Liquidity is sound with a current ratio of 130.9% and a quick ratio of 119.9%, supported by working capital of ¥5.88bn. Inventories are ¥2.10bn, a modest portion of current assets, reducing obsolescence risk and implying relatively lean stock. Solvency appears strong: equity of ¥31.30bn against total assets of ¥51.03bn implies an equity ratio around 61.3% (the 0.0% in the feed is a placeholder), and liabilities/equity of ~0.66x indicates conservative leverage. Interest expense is minimal at ¥21.8m with 34.2x coverage, pointing to low refinancing risk. Capital structure is robust for weathering temporary margin pressure. We note that detailed debt composition, maturities, and covenants are not disclosed in the feed, so conclusions rely on aggregate balance-sheet ratios.

Cash Flow Quality

Cash flow statement items (OCF, investing CF, financing CF) and depreciation/amortization are not disclosed in the provided feed (zeros are placeholders), preventing a direct assessment of earnings-to-cash conversion, capex intensity, and free cash flow. Consequently, the reported OCF/Net Income ratio of 0.00 and FCF of 0 are not interpretable. Given low interest expense and solid working capital position, structural cash burn seems unlikely, but we cannot verify without OCF and capex. Working capital at ¥5.88bn (about 19% of revenue) appears manageable; however, we lack receivables and payables data to evaluate cash conversion cycles and any inventory-driven cash absorption. Earnings quality cannot be cross-checked via accruals or non-cash items due to absence of D&A and CF data. We advise monitoring forthcoming disclosures for OCF, capex, and D&A to assess sustainable FCF generation.

Dividend Sustainability

Dividend data (DPS, payout ratio, FCF coverage) are not disclosed in the feed; zeros are placeholders. With EPS at ¥26.24 and strong balance sheet metrics, capacity for dividends likely exists, but we cannot judge policy or coverage without OCF/FCF and actual DPS. Historically, payout in the Japanese food sector tends to be stable, but company-specific policy is unknown from this dataset. Any payout assessment should consider recovery of operating margins, cash conversion, and near-term capex needs once disclosed.

Risk Assessment

Business Risks:

• Raw material and commodity price volatility (dairy/cheese inputs, packaging, logistics)
• FX exposure on imported inputs (yen weakness pressures COGS)
• Pricing power and timing of cost pass-through to retailers
• Competitive intensity from domestic peers and private-label products
• Product mix shifts toward lower-margin SKUs
• Demand elasticity amid consumer price sensitivity
• Food safety and quality control risks impacting brand trust
• Supply chain disruptions (import logistics, cold chain)

Financial Risks:

• Margin compression from sustained cost inflation reducing interest coverage headroom if earnings fall further
• Working-capital swings affecting OCF (receivables, inventory, payables) not visible in current data
• Potential need for increased promotional spending to support volumes, pressuring profitability
• Tax rate variability impacting net income (effective ~33.6% this period)
• Data limitations (no CF/D&A disclosed) obscure true cash earnings and capex burden

Key Concerns:

• Sharp YoY decline in operating income (-48.6%) on modest sales decline (-1.0%), indicating high negative operating leverage
• Low operating margin (2.4%) and thin net margin (1.65%) suppress ROE (1.63%)
• Absence of cash flow and D&A data prevents verification of earnings quality and FCF

Investment Implications

Key Takeaways:

• Top line broadly stable but profitability under significant pressure; margin recovery is the key driver
• Balance sheet and liquidity are strong, mitigating solvency risk amid weaker earnings
• ROE is depressed by thin margins rather than excessive leverage or asset inefficiency
• Non-operating items are a minor drag; core issue is gross margin and fixed-cost absorption

Metrics to Watch:

• Gross margin and operating margin progression by quarter
• Input cost indices (dairy/cheese, packaging) and FX (USD/JPY, EUR/JPY)
• Pricing actions and mix upgrades (premium vs. value SKUs)
• SG&A run-rate and operating leverage
• Working capital trends (inventory levels, receivables/payables) and OCF once disclosed
• Capex and D&A to gauge underlying FCF
• Ordinary income margin as a recurring profitability indicator

Relative Positioning: Within Japanese processed food/dairy peers, Rokko Butter exhibits a conservative balance sheet and adequate liquidity but currently lags on profitability and ROE due to cost pressures; near-term performance hinges on restoring gross margin through pricing and mix while maintaining volume.

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