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

Suntory Beverage & Food (2587) reported FY2025 Q3 IFRS consolidated results with revenue of 12,780.8 and operating income of 1,265.7, translating to an operating margin of about 9.9%. Top line was essentially flat year over year (+0.0%), while operating income declined 9.2% and net income fell 9.5% to 753.65, indicating margin compression and negative operating leverage. Gross profit of 4,924.97 implies a gross margin of 38.5%, while SG&A expenses of 3,510.24 equate to 27.5% of revenue and 71.3% of gross profit, underscoring elevated brand investment and cost pressure. EBITDA was 1,821.82 (14.3% margin), giving a healthy cash earnings base despite profit contraction. The DuPont framework shows a net margin of 5.9%, asset turnover of 0.601x, and financial leverage of 1.56x, resulting in a reported ROE of 5.5%, which is modest for a consumer beverages company. Operating cash flow was solid at 1,399.64, 1.86x net income, supporting strong earnings quality. Free cash flow was 684.14 after investing outflows of 715.50, providing ample coverage for dividends (dividends paid: 293.54; FCF coverage ~1.85x). The balance sheet remains conservative with total assets of 21,257.90, total equity of 13,612.92 (equity ratio 58.9%), and a debt-to-equity ratio of 0.55x. Cash and equivalents were 1,604.93, reinforcing liquidity, although current liabilities were unreported and thus short-term ratios cannot be calculated. Profit before tax was 1,249.52 with an effective tax rate of 30.2%, broadly in line with expectations. Comprehensive income of 944.79 exceeded net income, suggesting favorable OCI items (likely FX translation gains), helpful given the company’s international footprint. EPS (basic) was 243.90 JPY on an average share count of ~309 million, consistent with the reported net income scale. Inventory stood at 1,184.12 (~9.3% of revenue), reasonable for the category, though changes and turnover cannot be evaluated without additional disclosures. While the earnings trajectory shows pressure from cost inflation and/or increased marketing spend, cash generation and balance sheet strength provide resilience and flexibility. Data limitations exist for several line items (e.g., interest expense, current liabilities, R&D, DPS), but available figures allow for a robust assessment of profitability, cash flow, and capital structure.

Profitability Analysis

ROE decomposition: net profit margin 5.9% x asset turnover 0.601x x financial leverage 1.56x = ~5.5% ROE (matches reported 5.5%). Operating margin is approximately 9.9% (operating income 1,265.70 / revenue 12,780.80), indicating solid but pressured profitability given the YoY decline in operating income against flat sales. Gross margin of 38.5% suggests continued pricing power and mix, but cost of sales remains a headwind; SG&A intensity at 27.5% of revenue (71.3% of gross profit) indicates elevated brand and commercial spend and/or logistics inflation. EBITDA margin of 14.3% shows decent cash profitability, with D&A of 556.12 representing ~4.4% of revenue, consistent with asset-heavy manufacturing and distribution. Negative operating leverage is evident: with revenue flat and operating income down 9.2%, fixed and semi-fixed costs likely rose faster than sales (e.g., input costs, labor, marketing, freight). The effective tax rate of 30.2% is within a normal range, not a major swing factor in the YoY change. Equity method income is minor (1.82), not materially affecting margins. Overall, profitability remains sound in absolute terms but under pressure versus the prior year, with cost control and pricing/mix execution key to stabilizing margins.

Growth Assessment

Revenue was flat YoY at 12,780.80, implying that volume/mix/price collectively delivered no net growth in the period, potentially due to macro softness in certain regions, FX translation effects, or tough comps. Operating income decreased 9.2% YoY and net income fell 9.5%, showing deterioration in operating leverage and/or higher below-EBIT items. Given an EBITDA margin of 14.3% and gross margin of 38.5%, the growth headwind appears cost- and SG&A-driven rather than demand collapse. With comprehensive income (944.79) exceeding net income, FX/OCI may have been favorable this period, but underlying operating momentum seems muted. The sustainability of revenue will depend on pricing hold, product mix improvement (premiumization, low/no sugar), and regional performance, none of which can be dissected further due to limited segment disclosures. Profit quality is supported by OCF/NI of 1.86x, indicating that earnings are cash-backed despite lower margins. Outlook-wise, stabilizing input costs (e.g., PET, sweeteners, coffee beans) and disciplined A&P could help margin recovery; conversely, sustained inflation or competitive pricing pressure would prolong compression. Capex levels are not disclosed, but investing CF of -715.50 suggests ongoing reinvestment to support medium-term growth (capacity, packaging, logistics, digital). In the near term, growth reacceleration likely hinges on pricing elasticity, promotional cadence normalization, and innovation pipeline execution. The company’s strong balance sheet offers optionality for bolt-on M&A or targeted investments if organic growth remains subdued.

Financial Health

Liquidity is strong given cash and equivalents of 1,604.93 and robust OCF; however, the current ratio and quick ratio are not calculable due to unreported current liabilities and other current asset details. Working capital is shown as 6,605.41 (current assets), but without current liabilities we cannot assess short-term coverage, though inventory levels (1,184.12) appear manageable relative to sales. Solvency is solid: total equity of 13,612.92 yields an equity ratio of 58.9%, and the debt-to-equity ratio is a moderate 0.55x, suggesting ample headroom. Financial leverage of 1.56x (assets/equity) indicates a conservative capital structure. Interest coverage cannot be computed due to unreported interest expense, but EBITDA of 1,821.82 provides a sizable cushion for any interest obligations. Noncurrent assets are 13,974.90, consistent with a capital-intensive footprint; goodwill and intangible details are unreported, limiting our view on impairment risk. Overall, the company appears well-capitalized with sufficient liquidity and low-to-moderate leverage, supporting resilience against near-term earnings volatility.

Cash Flow Quality

Earnings quality is strong, with OCF/Net Income of 1.86x indicating healthy conversion of accounting profit into cash. Free cash flow of 684.14 (OCF 1,399.64 less investing CF 715.50) is solid, even after what appears to be ongoing reinvestment. The absence of explicit capex disclosure limits precision, but investing cash outflows likely include maintenance and growth capex; we assume limited non-recurring asset sales given the positive comprehensive income and steady EBITDA. Working capital dynamics cannot be fully assessed due to limited disclosure, though inventories at 1,184.12 are roughly 9.3% of revenue, a reasonable level for beverages; changes in receivables/payables are unreported. Financing CF outflow of -972.25 includes dividends of -293.54 and likely net debt reduction; this indicates a balanced approach between shareholder returns and deleveraging. Cash and equivalents of 1,604.93 provide additional buffer, and the strong OCF suggests the company can continue to fund operations and investments without stressing the balance sheet. Overall cash flow quality appears robust given the high cash conversion and positive FCF.

Dividend Sustainability

The calculated payout ratio is 49.2%, implying a moderate distribution relative to earnings. FCF coverage of dividends is about 1.85x, which is healthy and suggests the dividend is well-supported by cash generation even amid margin pressure. Dividends paid in cash were 293.54 during the period; DPS and full-year guidance are unreported, limiting precision on forward distributions. Given the strong equity ratio (58.9%) and solid OCF/NI conversion (1.86x), the company has capacity to maintain a stable dividend policy under current conditions. However, sustainability depends on stabilizing profits; further margin erosion without offsetting cost relief could compress coverage. No share repurchases were reported, indicating a preference for dividends and/or debt reduction over buybacks in this period. Policy outlook appears geared toward maintaining consistent dividends funded by internally generated cash, barring significant adverse shifts in input costs or FX.

Risk Assessment

Business Risks:

• Commodity and packaging cost inflation (PET resin, aluminum, sugar, coffee beans)
• Competitive pricing pressure in key markets and channels
• Weather-driven volume volatility, especially in peak seasons
• Regulatory changes including sugar taxes and labeling requirements
• FX translation and transaction exposure due to international operations
• Channel mix shifts (convenience, vending, e-commerce) impacting margin structure
• Consumer demand softness in certain regions or categories

Financial Risks:

• Potential interest rate exposure despite moderate leverage (interest expense unreported)
• FX-related earnings and equity volatility affecting OCI and reported results
• Working capital swings due to inventory and receivables seasonality
• Intangible asset impairment risk (goodwill/intangibles details unreported)
• Refinancing risk on unreported debt maturities if credit conditions tighten

Key Concerns:

• Flat revenue (+0.0% YoY) alongside a 9.2% decline in operating income indicates negative operating leverage
• SG&A at 27.5% of revenue (71.3% of gross profit) suggests elevated spend that must translate into future growth
• ROE at 5.5% is modest relative to typical beverage peers, requiring margin or asset efficiency improvements
• Limited disclosure on current liabilities and interest expense constrains precise liquidity and coverage analysis

Investment Implications

Key Takeaways:

• Top line was flat while profits contracted, highlighting margin pressure and negative operating leverage
• Gross margin at 38.5% and EBITDA margin at 14.3% remain solid but below prior-year profitability
• ROE of 5.5% reflects modest returns given conservative leverage (1.56x)
• OCF/NI of 1.86x indicates strong earnings quality and cash conversion
• Free cash flow of 684.14 comfortably funded dividends (coverage ~1.85x)
• Balance sheet is strong with 58.9% equity ratio and debt-to-equity of 0.55x
• Effective tax rate of 30.2% is stable and not a major headwind
• Comprehensive income exceeded net income, suggesting favorable FX/OCI effects in the period

Metrics to Watch:

• Pricing/mix realization versus input cost inflation (COGS rate and gross margin trend)
• SG&A efficiency and A&P ROI (SG&A as % of revenue)
• Operating margin trajectory and EBITDA margin recovery
• OCF/Net income and working capital movements (inventory, receivables, payables turnover)
• ROE progression via margin improvement and asset turnover
• FX impacts on revenue and comprehensive income
• Capex levels and composition (maintenance vs. growth) inferred from investing cash flows

Relative Positioning: Within the Japanese and global non-alcoholic beverage peer set, Suntory Beverage & Food exhibits a strong balance sheet and robust cash generation but currently delivers mid-pack profitability with ROE below many peers; margin recovery and operational efficiency will be important to close the gap.

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