McDonald's Holdings Company(Japan),Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥312.32B
• Operating Income: ¥42.90B
• Net Income: ¥24.25B
• EPS: ¥203.01

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

For FY2025 Q3, 日本マクドナルドホールディングス (2702) delivered resilient topline growth with revenue of ¥312.3bn, up 2.9% YoY, while expanding profitability markedly. Gross profit reached ¥61.7bn, translating to a gross margin of 19.8%, and operating income increased 15.5% YoY to ¥42.9bn as operating margin rose to approximately 13.7%. Net income came in at ¥27.0bn, up 11.3% YoY, producing an EPS of ¥203.01 and a net margin of 8.6%. DuPont analysis indicates ROE of 9.87%, driven by an 8.64% net margin, asset turnover of 0.924x, and modest financial leverage of 1.24x. The spread between revenue growth (+2.9%) and operating income growth (+15.5%) points to positive operating leverage, suggesting disciplined cost control and mix improvements. Ordinary income (¥42.4bn) tracked operating income closely, reflecting immaterial non-operating items and a very low interest burden (¥7m). Liquidity appears strong with a current ratio of 146.8% and working capital of ¥35.6bn, while solvency is conservative with total liabilities of ¥84.1bn and debt-to-equity of 0.31x. The balance sheet shows total assets of ¥338.0bn and equity of ¥273.5bn, implying an implied equity ratio of roughly 81% despite the reported equity ratio field showing 0.0% (undisclosed). Cash flow statement items, depreciation/amortization, inventories, and dividends are undisclosed in this dataset (zeros represent unreported, not actual zero), limiting direct assessment of cash conversion, asset intensity, and payout capacity. Even so, the sizable operating profit and minimal interest burden imply ample interest coverage (over 6,100x). The effective tax rate is shown as 0% due to unreported tax expense; normalized taxation would likely be higher. Margin expansion alongside modest revenue growth suggests successful pricing, product mix, or cost savings, cushioning input cost pressures. Asset turnover at 0.924x is healthy for a largely franchise-driven QSR model and supports ROE despite conservative leverage. With a robust equity base and light financial obligations, the company has capacity to withstand cost volatility and invest in growth. Key areas to monitor include same-store sales trends, cost inflation in food and labor, and any updates on capital allocation or dividends once disclosed. Overall, the quarter underscores resilient demand and disciplined execution, though lack of cash flow and dividend disclosures constrains a full sustainability assessment.

Profitability Analysis

ROE of 9.87% is explained by net margin of 8.64%, asset turnover of 0.924x, and financial leverage of 1.24x, indicating returns are predominantly margin- and efficiency-driven rather than leverage-driven. Operating margin of approximately 13.7% (¥42.9bn OI on ¥312.3bn revenue) expanded meaningfully versus revenue growth, evidencing operating leverage. Gross margin stands at 19.8%, implying effective procurement, pricing, and mix management despite a cost-sensitive environment. The gap between gross and operating margins suggests SG&A discipline; given operating income grew +15.5% YoY on +2.9% sales, fixed-cost absorption and efficiency improved. Ordinary income aligns with operating income, and interest expense is negligible (¥7m), so financial costs did not dilute profitability. Effective tax rate is shown as 0% due to non-disclosure; reported net income still increased 11.3% YoY, signaling robust underlying earnings. EBITDA is undisclosed (0 indicates not reported), so we infer operating cash profitability from operating income trajectory rather than EBITDA metrics. Overall profitability quality appears high given the strong operating leverage and minimal financial drag, but full margin quality assessment is constrained by missing D&A and tax detail.

Growth Assessment

Revenue grew 2.9% YoY to ¥312.3bn, suggesting stable demand and pricing resilience in a mature QSR market. Operating income rose 15.5% YoY to ¥42.9bn, outpacing sales and confirming healthy operating leverage from cost controls and/or mix. Net income increased 11.3% to ¥27.0bn, slightly lagging operating income growth, likely due to normalization below the operating line or rounding effects (tax not disclosed). Asset turnover of 0.924x indicates efficient use of the asset base to support growth, consistent with a franchise-oriented model. The expansion in operating margin to roughly 13.7% is notable and underpins near-term earnings momentum. Sustainability hinges on maintaining same-store sales growth through ticket and traffic, as well as ongoing cost discipline amid food and labor inflation. The modest topline growth rate implies the bulk of FY growth is efficiency-driven; incremental sales acceleration would further enhance operating leverage but is not yet evident. With limited disclosure on store openings/closures and capex, we cannot parse unit-driven versus price/mix growth. Absent cash flow data, we cannot validate earnings-to-cash conversion supporting growth investments. Outlook depends on managing commodity costs, FX on imported inputs, and wage trends; current profitability suggests good resilience if demand holds.

Financial Health

Balance sheet strength is evident with total assets of ¥338.0bn and total equity of ¥273.5bn, implying low leverage (assets/equity ≈ 1.24x). Total liabilities are ¥84.1bn, yielding a debt-to-equity proxy of 0.31x and strong solvency. Liquidity is comfortable: current assets of ¥111.7bn versus current liabilities of ¥76.1bn produce a current ratio of 146.8% and working capital of ¥35.6bn. Quick ratio equals the current ratio in this dataset due to undisclosed inventories; actual liquidity may be slightly lower if inventories are present. Interest expense is minimal (¥7m), and interest coverage is extremely high (>6,100x based on operating income), indicating minimal refinancing risk. The reported equity ratio field shows 0.0% but is undisclosed; the implied equity ratio is approximately 81% (equity/total assets), underscoring balance sheet conservatism. Lease obligations, if any, are not visible here and could alter leverage and liquidity assessments under JGAAP disclosure differences. Overall, the company exhibits strong capacity to absorb shocks and fund operations without reliance on external debt.

Cash Flow Quality

Operating cash flow, investing cash flow, financing cash flow, and depreciation/amortization are undisclosed in this dataset, preventing direct evaluation of cash conversion, maintenance capex, or leverage-free cash generation. With net income of ¥27.0bn and strong operating profit of ¥42.9bn, earnings capacity appears robust, but OCF/NI is shown as 0.00 due to non-disclosure rather than weak conversion. Free cash flow is likewise undisclosed (0 reported), so FCF coverage and reinvestment intensity cannot be assessed. Working capital appears well managed at a high level (working capital ¥35.6bn), but the absence of inventory and receivables/payables breakdown limits granularity on cash tied in operations. Interest burden is negligible (¥7m), which would ordinarily support strong OCF retention to equity if cash conversion is healthy. In summary, earnings quality looks solid from an accrual standpoint, but cash flow quality cannot be verified with the provided data.

Dividend Sustainability

Dividend data are undisclosed in this dataset (Annual DPS 0.00 and payout ratio 0.0% reflect non-disclosure). Without OCF and FCF, we cannot compute dividend coverage from cash. Based on reported net income of ¥27.0bn and low financial leverage, capacity for distributions appears supported by earnings, but cash verification is not possible. Policy signals, historical payout tendencies, and medium-term guidance are not provided here, so outlook on dividends remains unassessed within this dataset. Once disclosed, key tests will include payout ratio versus normalized earnings, FCF coverage after maintenance capex, and headroom within net cash/liquidity.

Risk Assessment

Business Risks:

• Cost inflation in key commodities (beef, chicken, potatoes, packaging) pressuring gross margin
• Foreign exchange volatility (USD/JPY) impacting imported ingredient costs
• Wage inflation and staffing constraints affecting store-level profitability
• Competitive intensity in the domestic QSR market potentially pressuring price and traffic
• Demand sensitivity to consumer sentiment and weather/seasonality
• Supply chain disruptions affecting product availability and logistics costs
• Brand/reputation risks from food safety or quality issues
• Execution risk in pricing/mix strategies that supported recent margin expansion

Financial Risks:

• Potential off-balance sheet or lease-related obligations not visible in the provided data
• Tax normalization risk (effective tax rate appears as 0% due to non-disclosure)
• Limited visibility on cash generation and capex due to undisclosed cash flow statements
• FX exposure not hedged sufficiently could widen cost volatility
• Concentration risk if royalty/brand fees adjust with FX or sales performance

Key Concerns:

• Absence of cash flow and D&A data limits assessment of cash conversion and maintenance capex needs
• Equity ratio field is undisclosed despite a strong implied equity base, indicating data gaps
• Sustainability of margin gains if cost pressures reaccelerate or pricing power wanes

Investment Implications

Key Takeaways:

• Topline growth of 2.9% YoY paired with 15.5% YoY operating income growth indicates strong operating leverage
• Operating margin improved to roughly 13.7%, with net margin at 8.6%
• ROE of 9.87% is achieved with modest leverage (assets/equity ≈ 1.24x), highlighting quality of earnings
• Balance sheet is conservative with debt-to-equity around 0.31x and current ratio at 1.47x
• Interest burden is negligible (¥7m), supporting resilience
• Cash flow and dividend data are not disclosed, constraining payout and FCF assessments
• Monitoring cost inflation and FX is critical to margin sustainability

Metrics to Watch:

• Same-store sales growth (traffic vs. average ticket)
• Gross margin and SG&A ratio to gauge cost control and pricing power
• Operating margin progression and store-level profitability
• USD/JPY and key commodity cost indices
• Capex and store openings/closures once disclosed
• Operating cash flow and free cash flow conversion when available
• Dividend policy updates and payout ratios upon disclosure

Relative Positioning: Within Japan’s listed QSR peers, the company exhibits strong profitability with conservative leverage and robust interest coverage, suggesting a defensible position supported by brand strength and operational scale; however, limited disclosure on cash flows and dividends currently tempers visibility relative to peers with fuller reporting.

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