Kirin Holdings Company,Limited FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.76T
• Operating Income: ¥123.26B
• Net Income: ¥118.06B
• EPS: ¥126.95

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

Verdict: A solid FY2025 Q3 with resilient topline growth and clear bottom-line improvement, supported by strong cash conversion but offset by negative free cash flow due to elevated investing outlays. Revenue grew 3.3% year over year to 17,561.2, while net income rose 29.7% to 1,028.3, demonstrating strong operating execution and/or improved below-OP line contributions. Gross profit reached 7,786.6, implying a gross margin of 44.3%, consistent with effective pricing and mix management in a cost-inflationary environment. Operating income came in at 1,232.6, translating to a roughly 7.0% operating margin. Net margin printed at 5.9%, and EBITDA was 1,921.3 with a 10.9% margin. On an inferred basis, net margin expanded by about 120 bps year over year (from ~4.7% to 5.9%), given revenue +3.3% and net income +29.7%, though operating and gross margin YoY changes are not disclosed. Equity-method income of 291.4 contributed meaningfully, representing about 17.4% of pre-tax profit and roughly 28% of net income—material but not dominant. ROE was 7.1% (DuPont: 5.9% net margin × 0.531x asset turnover × 2.27x leverage), showing acceptable returns though not yet top-tier for global beverage peers. Cash flow quality was strong, with operating cash flow of 1,786.0 at 1.74x net income, indicating robust earnings conversion. However, free cash flow was negative (-809.1) due to heavy investing cash outflows (-2,595.1), which exceeded capex (-971.1), implying M&A or strategic investments. Balance sheet remains sound with equity ratio 35.3% and D/E 1.27x; liquidity ratios are not disclosed, but current assets of 9,835.1 comfortably exceed accounts payable of 3,285.3. Intangible intensity is high (goodwill 4,951 and intangibles 6,576), elevating long-term impairment risk if acquired businesses underperform. The payout ratio is 63.1%, modestly above a conservative 60% benchmark, while FCF coverage is -1.25x this period, suggesting dividends rely on operating cash and financing in the near term. Effective tax rate was 30.6%, within a normal range. Looking ahead, sustained price/mix discipline, cost normalization, and stable equity-method contributions are key to maintain margin gains and support returns toward or above the company’s cost of capital. Overall, quality of earnings is high this quarter, but investment cash needs and below-target ROIC (5.9%) temper the medium-term return profile.

Profitability Analysis

ROE decomposition (DuPont): ROE 7.1% = Net Profit Margin 5.9% × Asset Turnover 0.531 × Financial Leverage 2.27x. The most impactful inferred change YoY is the net profit margin, given net income +29.7% versus revenue +3.3%, implying roughly 120 bps margin expansion (prior ~4.7% to 5.9%). Business drivers likely include price/mix improvements in beverages and normalization of input cost inflation, plus a higher equity-method contribution (291.4) supporting pre-tax profit. Operating leverage also likely aided results as topline grew with SG&A contained (absolute SG&A 6,166.2; YoY detail not disclosed). Sustainability: price discipline and easing COGS inflation can persist, but equity-method income can be volatile and commodity/FX cycles could reverse some gains; therefore, part of the margin lift appears cyclical. Watch for SG&A growth exceeding revenue growth in coming quarters—a risk we cannot verify this quarter due to lack of YoY SG&A disclosure. Asset turnover at 0.531 reflects a capital-intensive, brand-driven consumer staples profile; improvement would depend on tighter working capital and asset pruning. Leverage at 2.27x is moderate and not the main ROE driver; incremental ROE gains should come from margins and turnover rather than higher gearing.

Growth Assessment

Revenue growth of 3.3% indicates steady demand and pricing traction across core beverage categories. Profit growth was substantially stronger (net income +29.7%), implying operational improvement and non-operating tailwinds. Operating and gross margin YoY changes are not disclosed; however, the inferred net margin expansion (~120 bps) suggests healthy price/mix, cost control, and supportive equity-method income. EBITDA of 1,921.3 and a 10.9% margin offer additional cushion, though capex and investment intensity are elevated near term. Sustainability hinges on continued pricing power, brand strength, and input cost normalization (barley, aluminum, energy), with FX also influencing overseas businesses. Equity-method income of 291.4 is material; stability of affiliates will influence growth quality. ROIC at 5.9% trails typical target ranges (7–8%), indicating room to improve returns through portfolio optimization and disciplined capital allocation. Outlook: modest topline growth with continued focus on margin defense appears achievable; major upside requires further cost efficiencies, mix upgrades, and improved returns on invested capital.

Financial Health

Liquidity: Current ratio not disclosed; however, current assets (9,835.1) exceed accounts payable (3,285.3), suggesting coverage of key short-term obligations, though full current liabilities are unreported. No explicit warning for Current Ratio < 1.0 due to missing data. Solvency: Equity ratio 35.3% and D/E 1.27x indicate a moderate balance sheet within conservative thresholds (<1.5x). Interest-bearing debt is not disclosed; interest coverage cannot be calculated, but EBITDA of 1,921.3 provides a buffer; monitor when interest expense is available. Maturity mismatch risk: Without total current liabilities and short-term loans, precise assessment is limited; available data do not indicate immediate stress. Intangible assets (goodwill 4,950.7; intangibles 6,576.0) total ~34.6% of assets, elevating impairment risk under adverse scenarios. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF of 1,786.0 is 1.74x net income, indicating high-quality earnings with strong cash conversion. Free cash flow was -809.1 as investing outflows (-2,595.1) exceeded both OCF and capex (-971.1), implying M&A or strategic investments beyond maintenance capex. Dividend and capex commitments are not covered by FCF this period; financing inflows (1,000.7) and existing cash (1,317.2) bridged the gap. OCF/NI well above 1.0 reduces concern about accrual-driven profits. Working capital signals (AR 4,284.3; inventories 3,610.9; AP 3,285.3) appear balanced, but changes are unavailable; we see no concrete signs of working-capital-driven earnings management in the reported snapshot.

Dividend Sustainability

Calculated payout ratio is 63.1%, slightly above the conservative <60% benchmark but not excessive for a mature beverage company. FCF coverage is -1.25x this period, indicating dividends are not covered by free cash flow due to elevated investment spending; reliance on operating cash and financing is implied near term. With OCF strong and balance sheet moderate (D/E 1.27x), the current dividend appears serviceable, but its sustainability improves if investing cash outflows normalize or if OCF continues to exceed net income consistently. Policy details and DPS are unreported; monitor guidance and capital allocation priorities for FY-end.

Risk Assessment

Business Risks:

• Commodity/input cost volatility (barley, aluminum, energy) affecting gross margin
• FX fluctuations impacting overseas earnings translation and input costs
• Competitive pressure in domestic and overseas beverage markets limiting pricing power
• Execution and integration risk from M&A or strategic investments (implied by high investing CF)
• Equity-method income volatility (291.4 contributes ~17% of PBT)

Financial Risks:

• Negative free cash flow in the period necessitating financing to fund dividends and investments
• Intangible-heavy balance sheet (~34.6% of assets) raising impairment risk
• Interest coverage unobservable due to unreported interest expense; potential interest rate risk
• Moderate leverage (D/E 1.27x) limits headroom if earnings weaken

Key Concerns:

• ROIC at 5.9% below typical 7–8% target range, indicating limited value creation headroom
• Lack of detailed current liability data obscures liquidity assessment
• Unreported non-operating income/expense details make earnings durability harder to gauge

Investment Implications

Key Takeaways:

• Topline resilience (+3.3% YoY) with strong profit growth (+29.7%) points to margin improvements and supportive below-OP items
• High-quality earnings conversion (OCF/NI 1.74x) offsets near-term negative FCF from investment activity
• Equity-method income is material but not dominant (17.4% of PBT; ~28% of NI)
• Balance sheet is moderate (equity ratio 35.3%, D/E 1.27x), providing flexibility
• ROE 7.1% and ROIC 5.9% suggest scope for return enhancement via mix, efficiencies, and portfolio actions

Metrics to Watch:

• Price/mix vs volume by region and category
• Input cost indices (barley, aluminum, energy) and hedging outcomes
• Equity-method income volatility and affiliate performance
• Capex/M&A cadence and resulting FCF trajectory
• Impairment indicators for goodwill/intangibles
• OCF/NI conversion and working capital turns
• Operating margin progression and SG&A discipline

Relative Positioning: Within the Japan beverage peer set, the company shows solid cash conversion and margin recovery, but returns (ROIC 5.9%) trail best-in-class peers; investment intensity and intangible load warrant closer scrutiny versus competitors emphasizing higher ROIC and steadier FCF.

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