HOKKAIDO COCA-COLA BOTTLING CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥44.70B
• Operating Income: ¥2.23B
• Net Income: ¥1.52B
• EPS: ¥105.66

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

Verdict: A steady but mixed quarter—revenue and operating profit grew modestly, while net profit declined due to a higher effective tax burden and limited non-operating tailwinds. Revenue rose to 446.99, up 3.4% YoY, supported by a gross profit of 140.18 and an operating income of 22.27 (+5.1% YoY). Operating margin printed at roughly 5.0%, and net income came in at 14.37, down 5.4% YoY with a net margin of 3.2%. Using back-calculated comparables, the operating margin expanded by approximately 7 bps YoY (from ~4.91% to ~4.98%). Conversely, the net margin compressed by about 31 bps YoY (from ~3.52% to ~3.21%), reflecting a higher effective tax rate of 33.4% and limited non-operating contributions. Gross margin stood at 31.4%, indicating decent price/mix or cost pass-through, though YoY change is not calculable from disclosed data. Ordinary income grew 3.8% YoY to 22.23, but non-operating income (1.11) was not a major swing factor and interest expense remained de minimis (0.01). Balance sheet strength is a clear positive: current ratio 240%, quick ratio 188%, and debt-to-equity 0.28x underscore ample liquidity and conservative leverage. Interest coverage is extraordinarily high at 2,227x, reflecting negligible financial risk. ROE was 3.3% on DuPont math (NPM 3.2%, asset turnover 0.813x, leverage 1.28x), pointing to structurally low capital efficiency for now. ROIC at 4.4% is below the 5% warning threshold, highlighting the need for continued margin and asset efficiency improvements. Earnings quality cannot be fully assessed due to unreported cash flow, leaving OCF/NI and FCF coverage unknown. The payout ratio is a modest 28.4%, implying dividends are affordable against earnings, although FCF coverage awaits disclosure. Near-term outlook hinges on sustaining gross margin, controlling SG&A intensity, and maintaining pricing/mix tailwinds amid input cost and energy volatility. With a strong balance sheet and low financial risk, the company has flexibility, but improving capital efficiency and cash conversion is key to raising returns.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin (3.2%) × Asset Turnover (0.813x) × Financial Leverage (1.28x) = 3.3%. The weakest link is the low net margin, followed by modest asset turnover; leverage is conservative and not a major driver. Compared with last year’s directional changes, operating profit grew faster than revenue (+5.1% vs +3.4%), implying slight operating leverage and a small operating margin expansion (+7 bps). However, net income fell (-5.4% YoY), indicating that the net margin deteriorated (~-31 bps) due mainly to a higher effective tax rate (33.4%) and limited upside from non-operating items. Business drivers: beverage bottling typically experiences input cost pressures (sugar, PET resin, aluminum, energy), logistics and wage inflation; the solid gross margin (31.4%) suggests some pricing/mix benefits or cost control, partially offset downstream (SG&A intensity still high at 26.6% of sales). Sustainability: small operating margin gains are likely sustainable if price/mix and cost discipline persist, but net margin recovery will depend on tax normalization and continued cost tailwinds. Flags: SG&A grew roughly in line with revenue given the stable opex ratio (~26.6%); no evidence yet of SG&A deleveraging, which caps operating leverage.

Growth Assessment

Top-line growth of 3.4% YoY to 446.99 is solid for a regional bottler and likely driven by pricing/mix and gradual volume normalization; precise drivers are not disclosed. Operating income rose 5.1% YoY to 22.27, outpacing revenue and indicating modest operating leverage. Ordinary income growth (+3.8% YoY) was similar to top-line expansion, suggesting non-operating items were not a major growth lever. Net income declined 5.4% YoY to 14.37, primarily due to a higher effective tax rate and lack of incremental non-operating gains. Gross margin at 31.4% indicates reasonable cost pass-through; however, the absence of YoY gross profit detail limits a precise margin bridge. With ROIC at 4.4% (below 5%), growth quality and capital efficiency remain improvement areas. Near-term, sustaining revenue growth will hinge on pricing resilience, channel mix (notably vending), and weather-driven demand in Hokkaido. Profit sustainability depends on managing input cost volatility (commodities, energy) and gaining SG&A efficiency without sacrificing market support. Outlook: modest growth with incremental margin improvement is feasible, but net profit recovery requires stable tax and disciplined costs.

Financial Health

Liquidity is strong: current ratio 240.3% and quick ratio 188.2% indicate ample near-term coverage. Solvency is conservative: debt-to-equity is 0.28x, and interest coverage is 2,227x. No warnings: Current Ratio well above 1.0 and D/E far below 2.0. Maturity mismatch risk appears low given current assets (255.34) comfortably exceed current liabilities (106.24); AR (74.12) and inventories (55.42) together exceed AP (39.59), supporting liquidity. Total liabilities are modest at 118.98 against total equity of 430.91, yielding a sturdy capital structure. Off-balance sheet obligations are not disclosed; no guarantees or lease commitments are provided in the dataset, so additional obligations cannot be assessed. Overall financial flexibility is high, allowing continued investment and dividend payments without stressing the balance sheet.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed and earnings quality remains uncertain from a cash conversion perspective. Free cash flow and capex are also unreported, preventing analysis of maintenance vs growth spending and dividend coverage by FCF. Working capital snapshot is healthy (AR + inventory comfortably above AP), and no signs of aggressive short-term liability financing are visible; however, without period cash flow movements, potential working capital release/absorption cannot be evaluated. Given low leverage and large cash and deposits (91.88), short-term funding risk is minimal. Key watchpoint: confirm OCF/NI > 1.0 and stable inventory turns when cash flow data is disclosed.

Dividend Sustainability

The calculated payout ratio is 28.4%, which is comfortably below the 60% benchmark and suggests dividends are affordable against earnings. FCF coverage is not calculable due to missing OCF and capex, so ultimate sustainability should be rechecked upon disclosure. Balance sheet support is strong: retained earnings of 349.28 and low leverage provide cushion for stable dividends. Policy outlook: with conservative leverage and modest earnings growth potential, management can likely prioritize stable-to-gradual dividend progression, subject to cash flow confirmation and capex needs for coolers, logistics, and IT.

Risk Assessment

Business Risks:

• Commodity input cost volatility (PET resin, sugar, aluminum) impacting COGS and gross margin
• Energy and logistics cost inflation pressuring distribution-heavy operations
• Weather seasonality in Hokkaido driving volume variability, especially for cold beverages
• Channel mix risk (vending vs retail) affecting price realization and opex intensity
• Demographic headwinds in Hokkaido potentially limiting long-term volume growth
• Competition from national beverage brands and private labels

Financial Risks:

• Low ROIC at 4.4% below 5% warning threshold, indicating capital efficiency challenges
• Earnings-to-cash conversion unknown due to missing OCF and capex disclosure
• Potential tax rate volatility (current effective tax rate 33.4%) affecting net margin

Key Concerns:

• Net margin compression YoY (~-31 bps) despite higher operating margin, driven by tax and limited non-operating support
• SG&A ratio remains elevated (~26.6% of sales), limiting operating leverage
• Data limitations on cash flows and capex obscure FCF visibility and dividend coverage

Investment Implications

Key Takeaways:

• Top-line and operating income growth were positive (+3.4% and +5.1% YoY), but net income declined (-5.4% YoY)
• Operating margin modestly expanded (+7 bps), while net margin compressed (-31 bps)
• Balance sheet is very strong (current ratio 240%, D/E 0.28x, interest coverage 2,227x)
• ROE is muted at 3.3% and ROIC is 4.4%, highlighting capital efficiency improvement needs
• Dividend affordability looks fine with a 28.4% payout ratio, pending FCF confirmation

Metrics to Watch:

• OCF/Net Income and FCF once cash flow data is disclosed
• Gross margin trend vs input cost indices (resin, sugar, aluminum) and energy
• SG&A-to-sales ratio and operating leverage progression
• Net margin recovery and effective tax rate trajectory
• Inventory days and AR collection to validate cash conversion
• ROIC uplift via margin improvement and asset utilization

Relative Positioning: Within Japan’s beverage bottlers, Hokkaido Coca-Cola Bottling exhibits conservative leverage and strong liquidity but lags on capital efficiency (ROIC 4.4%) and overall returns (ROE 3.3%). Compared to larger national peers, margin scale and operating leverage appear more constrained, leaving greater reliance on disciplined cost control and selective pricing/mix to improve returns.

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