KITOKU SHINRYO CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥130.90B
• Operating Income: ¥7.96B
• Net Income: ¥1.29B
• EPS: ¥668.61

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Kitochu Shokuryo (27000) delivered a significant earnings inflection in FY2025 Q3 (cumulative), with revenue of ¥130.9bn (+50.4% YoY) and operating income of ¥8.0bn (+377.1% YoY), driving net income to ¥5.46bn (+342.2% YoY). The operating margin expanded to roughly 6.1%, a notable performance for a food/grain trading and processing model typically characterized by thin margins. DuPont decomposition indicates a robust ROE of 26.44%, supported by a 4.17% net margin, strong asset turnover of 3.35x, and moderate financial leverage of 1.89x. Liquidity appears solid with a current ratio of 137% and a quick ratio of 121%, while solvency is reasonable with debt-to-equity at 1.19x. Interest coverage is very strong at 175x based on operating income versus reported interest expense, suggesting ample buffer against rate or credit spread volatility. Total assets are ¥39.0bn and total equity is ¥20.7bn, implying an equity ratio around 53% (despite the reported 0.0% equity ratio field, which appears undisclosed rather than actually zero). Inventory stands at ¥3.54bn, and working capital is ¥8.24bn, indicating manageable operational funding needs. Ordinary income of ¥8.01bn marginally exceeds operating income, indicating supportive non-operating items or limited financial drag; the reported income tax of ¥0.48bn implies a low effective tax rate on an ordinary-income basis, though tax reconciliation details are limited. The DuPont and profitability metrics align with a year of strong operating leverage and potentially favorable procurement and pricing conditions in core rice and food product businesses. Cash flow statement items are not disclosed in this dataset (zeros indicate unreported), so operating cash conversion and free cash flow cannot be evaluated from this snapshot. Dividend-related fields are also undisclosed, so payout policy and FCF coverage cannot be assessed. There is a numerical inconsistency between the displayed cost of sales and gross profit; given the provided gross margin (4.9%) and operating margin dynamics, we treat line-item disparities as classification/presentation differences rather than analytical errors. Overall, the Q3 cumulative result portrays a company leveraging volume growth and margin capture to deliver high ROE with balanced leverage and strong interest coverage. Sustainability will hinge on commodity price trends, procurement discipline, and the ability to maintain improved margins into FY-end and beyond.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.17%
• asset_turnover: 3.353
• financial_leverage: 1.89
• calculated_ROE: 26.44%
• comments: High ROE is driven primarily by strong asset turnover and a cyclical uplift in margins; leverage is supportive but not excessive. margin_quality:
• revenue: 130903000000
• operating_income: 7964000000
• net_income: 5463000000
• operating_margin: 6.08%
• net_margin: 4.17%
• gross_margin: 4.9%
• notes: Operating margin exceeds the disclosed gross margin due to classification effects and/or other operating income; we rely on provided margins but note the line-item discrepancy. operating_leverage:
• revenue_growth_yoy: 50.4%
• operating_income_growth_yoy: 377.1%
• comment: Large positive operating leverage; fixed-cost absorption and/or pricing tailwinds likely drove outsized operating profit growth relative to sales.

Growth Assessment

revenue_sustainability: The 50.4% YoY revenue growth suggests strong volume and/or price increases. Given the industry’s exposure to commodity rice and foodstuffs pricing, sustainability will depend on procurement conditions, market demand, and competitive pricing. profit_quality: Net margin at 4.17% and operating margin at ~6.1% denote a cyclical peak versus typical levels for a grain/food distributor. Ordinary income slightly above operating income implies limited non-operating drag; interest burden is minimal. However, without cash flow data, the earnings-to-cash conversion cannot be verified. outlook: If input costs remain stable and the company maintains pricing discipline, margins could remain above historical averages near term. Medium-term growth will hinge on product mix upgrades, value-added processing, and supply chain efficiencies to defend margins as commodity conditions normalize.

Financial Health

liquidity:

• current_ratio: 137.4%
• quick_ratio: 121.3%
• working_capital: 8235960000
• comment: Healthy liquidity with sufficient buffer to support inventory and receivables cycles. solvency_capital_structure:
• total_assets: 39044000000
• total_liabilities: 24609791000
• total_equity: 20664000000
• equity_ratio_estimate: ≈52.9%
• debt_to_equity: 1.19x
• interest_coverage: 175.1x
• comment: Moderate leverage and very strong coverage suggest low near-term solvency risk. Equity base is solid relative to assets.

Cash Flow Quality

earnings_quality: Earnings quality cannot be triangulated against operating cash flow due to undisclosed cash flow data. The high operating income and low interest burden are positives, but cash conversion remains unverified. free_cash_flow_analysis: Free cash flow cannot be computed without OCF and capex disclosure. With inventories of ¥3.54bn and strong sales growth, working capital needs could be material; directionality is unknown in this dataset. working_capital_dynamics: Working capital stands at ¥8.24bn, indicating headroom to support operations. Monitoring inventory turnover and receivables days will be key to validating cash realization from the earnings uplift.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are undisclosed here. EPS is ¥668.61, but absent DPS and cash flow data, payout capacity cannot be quantified. FCF_coverage: Undeterminable due to unreported OCF and capex. policy_outlook: Given elevated profitability and moderate leverage, the balance sheet appears capable of supporting dividends; however, any assessment requires management policy disclosure and actual cash generation data.

Risk Assessment

Business Risks:

• Commodity price volatility in rice and related grains affecting procurement costs and pricing.
• Supply chain and harvest risk (weather, geopolitics) impacting availability and quality.
• Competitive pressure in low-margin food distribution potentially compressing spreads.
• Customer concentration and channel risk in domestic wholesale/retail networks.
• FX volatility if imports are material (USD/JPY, other currencies).
• Regulatory and food safety compliance risks.

Financial Risks:

• Margin mean reversion from current elevated operating margin.
• Working capital swings due to rapid sales growth and inventory restocking.
• Interest rate normalization raising funding costs (though current coverage is strong).
• Potential mismatch between accounting earnings and cash flows (cash flow data undisclosed).

Key Concerns:

• Sustainability of recent margin expansion given commodity cyclicality.
• Limited visibility on cash flow generation and capex due to undisclosed cash flow statement.
• Line-item presentation discrepancies between cost of sales and gross profit complicate margin interpretation.

Investment Implications

Key Takeaways:

• ROE of 26.4% driven by strong asset turnover and improved margins.
• Operating margin around 6.1% marks a significant uplift versus typical industry levels.
• Balance sheet is sound with ~53% equity ratio (estimated) and 1.19x D/E.
• Interest coverage of 175x limits near-term financial stress risk.
• Cash flow visibility is limited; need confirmation of earnings-to-cash conversion.

Metrics to Watch:

• Gross and operating margin trajectory versus rice/commodity price trends.
• Operating cash flow and OCF/NI once disclosed.
• Inventory turnover and receivables days to assess working capital intensity.
• Ordinary income to operating income gap (non-operating items and FX impacts).
• Leverage (D/E) and interest coverage as rates evolve.
• Dividend announcements and payout policy updates.

Relative Positioning: Within Japan’s grain and food trading/processing peers, the company currently exhibits superior profitability momentum and strong asset turnover, supported by a prudent capital structure; durability versus cyclicality remains the key differentiator to watch.

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