Suntory Beverage & Food Limited FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.28T
• Operating Income: ¥126.57B
• Net Income: ¥91.73B
• EPS: ¥243.90

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 resilient but margin-pressured quarter—revenue was flat while operating and net profits declined, mitigated by strong cash generation and a solid balance sheet. Revenue was 12,780.8 (100M JPY), essentially unchanged YoY, indicating limited top-line momentum. Operating income fell 9.2% YoY to 1,265.7, and net income declined 9.5% YoY to 753.7. Gross profit was 4,925.0 with a gross margin of 38.5%. The operating margin printed at about 9.9% (1,265.7/12,780.8), implying a contraction versus last year given flat revenue. Based on the 9.2% drop in operating income with flat sales, operating margin likely compressed by roughly 100 bps YoY. Similarly, the net profit margin was 5.9%, which, against flat revenue and a 9.5% NI decline, implies net margin contraction of roughly 60–65 bps YoY. EBITDA was 1,821.8, implying a 14.3% EBITDA margin, supporting adequate operating cash generation. Cash flow quality was strong: operating cash flow (1,399.6) exceeded net income (753.7) by 1.86x, and free cash flow was a healthy 684.1 after 775.7 of capex. The balance sheet remains conservative with an equity ratio of 58.9% and D/E of 0.56x. ROE came in at 5.5% (NPM 5.9% × asset turnover 0.601 × leverage 1.56x), modest for a beverages peer set. ROIC was 6.5%, below the 7–8% target zone many consumer staples aim for but not alarming. Dividends look sustainable with a payout ratio of 49.2% and FCF coverage at 1.85x. Earnings quality is solid, but profitability softness suggests input cost or mix pressures and higher SG&A intensity. Forward-looking, pricing discipline, mix upgrades, and cost normalization will be key to re-expand margins and lift ROIC toward targets.

Profitability Analysis

Step 1 (ROE decomposition): ROE 5.5% = Net profit margin 5.9% × Asset turnover 0.601 × Financial leverage 1.56x. Step 2 (biggest change): With revenue flat and net income down 9.5%, the primary driver is net margin contraction; asset turnover and leverage appear relatively stable this quarter. Step 3 (business reason): Likely cost pressures (commodities such as sugar, PET resin, aluminum; logistics) and/or higher SG&A (brand investment, promotion) compressed operating margin to ~9.9%, flowing through to NI given a normal 30.2% tax rate. Step 4 (sustainability): Margin pressure could ease if pricing/mix catches up to costs and input inflation moderates; however, competitive intensity may cap near-term operating leverage—thus partially reversible but not instant. Step 5 (flags): SG&A ratio is ~27.5% of sales; without revenue growth, any SG&A growth above sales will weigh on margins. Operating margin contracted by roughly ~100 bps YoY and net margin by ~60–65 bps, warranting close monitoring.

Growth Assessment

Top line was flat at 12,780.8, indicating muted volume/mix growth amid likely pricing offsets. Operating income down 9.2% and net income down 9.5% suggest margin compression rather than demand deterioration. Gross margin at 38.5% and EBITDA margin at 14.3% are consistent with a branded beverages mix but below the prior-year profitability implied by the declines. Equity-method income (1.82) is immaterial to profit composition, so the story is core operations rather than affiliates. With ROIC at 6.5%, incremental growth needs to be margin-accretive to reach a 7–8% target zone. Outlook hinges on cost normalization, further price/mix improvement, and disciplined SG&A; absent revenue acceleration, margin recovery is the main earnings lever. Near-term growth visibility is moderate due to cost and FX sensitivities.

Financial Health

Liquidity: Current ratio not disclosed; we cannot opine definitively, but cash & equivalents of 1,413.35 and strong OCF provide cushion. No explicit warning triggered (Current Ratio <1.0 cannot be assessed). Solvency: D/E at 0.56x and equity ratio 58.9% indicate a conservative capital structure. Maturity mismatch: Current liabilities are unreported, so short-term refinancing needs vs current assets cannot be assessed; this is a data limitation. Off-balance sheet: None disclosed in the dataset. Overall: Balance sheet is robust, though limited short-term liquidity visibility persists due to missing current liability detail.

Cash Flow Quality

OCF/NI is 1.86x, indicating high-quality earnings with strong cash conversion. Free cash flow of 684.1 after 775.7 of capex is solid and comfortably funds dividends. With OCF at 1,399.6, internal funding covers capex and shareholder returns without stressing the balance sheet. Working capital details are not disclosed, but the OCF strength versus NI suggests either healthy underlying profitability or a net working capital release; absent line-item detail, no manipulation signs are evident. Interest expense is unreported, but low leverage reduces solvency risk. Overall cash generation quality is strong.

Dividend Sustainability

The calculated payout ratio is 49.2%, within a sustainable range (<60%). FCF coverage of dividends is 1.85x, indicating dividends are funded by organic cash flow even after capex. Dividends paid were 293.5, leaving ample residual FCF for balance sheet strength or selective growth investments. Given stable cash conversion and modest leverage, the current dividend level appears sustainable under baseline conditions. Any step-up would likely require visible margin recovery or higher top-line momentum.

Risk Assessment

Business Risks:

• Input cost volatility (sugar, PET resin, aluminum, energy, logistics) pressuring gross margin.
• Competitive intensity and promotional spend requirements elevating SG&A ratio.
• FX fluctuations affecting overseas businesses and translation effects.
• Weather-driven demand variability impacting ready-to-drink categories.
• Brand/mix execution risk needed for price realization and premiumization.

Financial Risks:

• Partial visibility on short-term liquidity due to unreported current liabilities.
• Goodwill (2,905.1) and intangibles (5,346.3) heighten impairment sensitivity if earnings weaken.
• ROIC at 6.5% below 7–8% target, limiting value creation if sustained.

Key Concerns:

• Operating and net margin contractions (~100 bps and ~60–65 bps YoY implied).
• Flat revenue signals limited volume/mix momentum.
• Dependence on cost normalization and pricing discipline for earnings recovery.

Investment Implications

Key Takeaways:

• Stable revenue but notable margin compression drove the profit decline.
• Cash conversion is strong (OCF/NI 1.86x) and FCF is positive despite capex.
• Balance sheet conservative (D/E 0.56x; equity ratio 58.9%).
• ROE 5.5% and ROIC 6.5% indicate room for improvement via margin recovery.
• Dividend appears sustainable with ~49% payout and 1.85x FCF coverage.

Metrics to Watch:

• Operating margin trajectory vs commodity cost trends.
• SG&A ratio and effectiveness of brand/promo spend.
• Pricing and mix (premiumization) progress by region/brand.
• ROIC uplift toward 7–8% target range.
• Working capital movements (inventory and receivables) once disclosed.
• FX sensitivity and hedging effectiveness.

Relative Positioning: Within beverages peers, the company exhibits strong cash generation and conservative leverage but currently lags on margin momentum and ROIC; successful pricing/mix management and cost normalization would improve its relative standing.

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