SAPPORO HOLDINGS LIMITED FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥382.59B
• Operating Income: ¥19.58B
• Net Income: ¥10.87B
• EPS: ¥139.72

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

Sapporo Holdings (IFRS, consolidated) delivered resilient profitability in FY2025 Q3 despite a slight top-line contraction, with revenue of 3,825.89 and operating income up 10.8% YoY to 195.78. The operating margin improved to roughly 5.1%, supported by disciplined SG&A control (SG&A ratio about 27.7%) and maintained gross margin at 31.4%. Net income was 108.92, down 5.3% YoY, reflecting a higher effective tax rate of 32.5% and/or below-operating items, as profit before tax of 167.67 grew less than operating profit. EBITDA was 364.34 (9.5% margin), implying meaningful non-cash charges (D&A 168.56), consistent with a capital-intensive profile across breweries and real estate. DuPont analysis shows a net margin of 2.9%, asset turnover of 0.601x, and financial leverage of 3.05x, yielding an ROE of 5.2%, which is modest but stable. Cash generation was robust: operating cash flow reached 294.81, translating to an OCF/Net Income ratio of 2.71x, and free cash flow (defined as OCF + investing CF) stood at 207.37. Capex of 150.27 was lower than OCF, supporting positive FCF even while investing to sustain/upgrade assets. The balance sheet shows total assets of 6,364.31 and equity of 2,083.57 (equity ratio 32.6%), with total liabilities of 4,678.05 implying a debt-to-equity ratio of 2.25x; interest-bearing debt data are unreported, limiting coverage analysis. Liquidity disclosure is partial; current liabilities are unreported, so current/quick ratios are not computable, but current assets are 1,939.18 with sizable receivables and inventories. Comprehensive income of 152.41 exceeded net income, indicating positive OCI effects (e.g., FX/valuation gains) that bolstered equity. Dividend cash outflow was 36.64, and the calculated payout ratio is 37.6%, with FCF coverage cited at 5.06x, suggesting headroom for the current dividend level. Revenue declined 0.8% YoY, but mix/pricing and cost discipline drove operating profit growth, signaling positive operating leverage. The margin expansion at stable to slightly lower sales indicates progress on efficiency and/or price realization in core segments. However, net margin remains thin at 2.9%, leaving earnings sensitive to cost inflation, FX, and tax effects. Overall, Sapporo exhibits improved operating performance, solid cash flow quality, and manageable (though elevated) leverage, with selective reinvestment and dividend capacity supported by FCF.

Profitability Analysis

ROE_decomposition: ROE 5.2% = Net margin 2.9% x Asset turnover 0.601x x Equity multiplier 3.05x. Gross margin is 31.4%, SG&A ratio ~27.7%, producing an operating margin near 5.1%. EBITDA margin is 9.5%, and D&A of 168.56 indicates substantial capital intensity within the asset base. margin_quality: Operating profit grew 10.8% YoY against a 0.8% revenue decline, implying favorable price/mix and/or cost control. Net profit margin of ~2.9% remains modest; the gap between operating income (195.78) and net income (108.92) reflects tax (32.5% ETR) and below-operating items (interest/other) not fully disclosed. operating_leverage: Positive operating leverage evidenced by operating income +10.8% YoY on slightly lower sales. SG&A containment and gross margin stability underpin incremental margin. EBITDA-to-operating income spread (EBITDA 364.34 vs. OI 195.78) provides cushion for fixed-cost absorption.

Growth Assessment

revenue_sustainability: Revenue decreased 0.8% YoY to 3,825.89, indicating soft volumes and/or portfolio shifts. Receivables at 994.58 and inventories at 581.48 are consistent with scale but do not indicate overstocking risk from the provided data. profit_quality: Profit before tax of 167.67 and net income of 108.92 include a 32.5% effective tax burden; operating profit growth versus softer net income underscores sensitivity to non-operating factors. EBITDA growth and OCF/NI of 2.71x corroborate underlying earnings quality. outlook: Given improving operating efficiency and pricing actions in a flat-to-declining top-line environment, near-term growth likely hinges on cost pass-through, mix upgrades, and disciplined SG&A. Headwinds include commodity/input costs, FX exposure in overseas operations, and domestic beer market demographics; tailwinds include premiumization and real estate contributions. Disclosure gaps (R&D, interest expense, segment details) limit specificity.

Financial Health

liquidity: Current assets are 1,939.18, with cash and current liabilities unreported, so current and quick ratios are not computable. Receivables of 994.58 and inventories of 581.48 dominate near-term assets; working capital cannot be precisely assessed given missing current liabilities. solvency: Total liabilities are 4,678.05 versus equity of 2,083.57 (debt-to-equity 2.25x; equity ratio 32.6%). Interest-bearing debt is unreported, precluding interest coverage and net leverage calculations. The asset base of 6,364.31 is substantial relative to equity, consistent with a 3.05x equity multiplier. capital_structure: Leverage is elevated but manageable given strong OCF and positive FCF. OCI contributed to equity (total comprehensive income 152.41 > net income 108.92), supporting capital buffers. Absent detail on the maturity ladder and rate mix, refinancing and rate sensitivity cannot be fully appraised.

Cash Flow Quality

earnings_quality: OCF of 294.81 versus net income of 108.92 implies strong cash conversion (2.71x), suggesting disciplined working capital and accrual quality. EBITDA of 364.34 well exceeds net income, with non-cash D&A of 168.56 appropriately reconciling earnings to cash. FCF_analysis: Free cash flow (defined here as OCF + investing CF) is 207.37, reflecting OCF 294.81 and investing CF -87.44; alternatively, OCF less capex equals ~144.54, both positive. Capex of 150.27 indicates ongoing reinvestment while preserving cash generation. working_capital: Receivables (994.58) and inventories (581.48) are sizable; without current liabilities disclosure, changes and cycle ratios cannot be computed. The strong OCF suggests working-capital management was a positive contributor or at least not a drag in the period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 37.6%, consistent with a conservative policy relative to earnings capacity. EPS is 139.72 JPY; DPS is unreported, limiting cross-checks. FCF_coverage: FCF coverage of dividends is cited at 5.06x, indicating ample headroom this period. Cash dividends paid were 36.64, comfortably covered by both OCF and FCF. policy_outlook: With positive FCF and mid-30s payout ratio, the current dividend level appears supportable. Upside to distributions would likely depend on sustained margin gains and clearer leverage metrics; conversely, cost/FX shocks or elevated capex could constrain flexibility.

Risk Assessment

Business Risks:

• Domestic beer and RTD volume pressures amid demographic decline and changing consumption patterns in Japan
• Input cost volatility (malt, aluminum, energy) potentially compressing margins
• FX exposure in overseas businesses (e.g., North America) affecting revenues and costs
• Competitive pricing dynamics versus major peers (Asahi, Kirin, Suntory)
• Execution risk in portfolio premiumization and channel mix shifts
• Real estate market and project risk affecting non-beer earnings stability

Financial Risks:

• Elevated leverage (debt-to-equity 2.25x) with incomplete visibility on interest-bearing debt and maturities
• Interest rate risk on floating-rate borrowings (not disclosed) potentially impacting net interest
• Thin net margin (2.9%) increasing sensitivity to shocks in costs, FX, or taxation
• Partial liquidity disclosure (current liabilities, cash) limiting assessment of short-term coverage
• OCI volatility influencing equity and leverage ratios

Key Concerns:

• Net income decline (-5.3% YoY) despite improved operating profit
• Limited disclosure on interest expense and current liabilities constrains credit and liquidity analysis
• Sustaining margin gains if commodity costs or FX move unfavorably

Investment Implications

Key Takeaways:

• Operating margin expanded to ~5.1% with operating income +10.8% YoY on -0.8% revenue, indicating effective cost/mix management
• Cash flow quality is strong (OCF/NI 2.71x) and FCF positive after capex
• Leverage is meaningful (equity ratio 32.6%, D/E 2.25x) but supported by cash generation
• Net margin remains low at 2.9%, keeping earnings sensitive to below-operating items and taxes
• Dividend appears well covered this period (payout ~37.6%, FCF coverage ~5.06x)

Metrics to Watch:

• Price/mix vs. volume trends in core beverage segments
• Gross margin trajectory vs. input cost inflation (malt, aluminum, energy)
• Interest expense and interest coverage once disclosed
• Capex plans and investing cash flows, particularly for real estate and production assets
• OCF/NI ratio and working-capital movements (receivables and inventories)
• Equity ratio and leverage (including any disclosure of interest-bearing debt)
• Effective tax rate normalization and below-operating income/expense trends

Relative Positioning: Within the Japan beverages peer set, Sapporo shows improving operating leverage and solid cash conversion but operates with a thinner net margin and higher leverage than some peers; sustained pricing/mix gains and cost discipline are key to closing the profitability gap while maintaining balance sheet resilience.

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