APPLE INTERNATIONAL CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥29.53B
• Operating Income: ¥526M
• Net Income: ¥1.08B
• EPS: ¥26.56

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

Apple International Co., Ltd. (TSE: 2788) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥29.53bn, down 11.9% YoY, highlighting a top-line contraction amid what appears to be a tougher trading environment. Operating income declined 57.1% YoY to ¥0.53bn, indicating significant margin compression and/or weaker operating leverage. Net income was ¥0.34bn, down 66.5% YoY, with EPS of ¥26.56, underscoring a sharper deterioration at the bottom line than at the operating level. Gross profit was ¥2.95bn, implying a gross margin of about 10.0%; however, the disclosed cost of sales figure (¥30.58bn) is inconsistent with the gross profit and revenue provided, so we rely on the stated gross profit and margin for analysis. DuPont decomposition shows a net margin of 1.15%, asset turnover of 1.452x, and financial leverage of 1.97x, yielding an ROE of 3.30%, well below typical cost of equity thresholds. The ordinary income of ¥0.52bn is close to operating income, suggesting limited non-operating headwinds; interest expense of ¥48.44m implies an interest coverage ratio of roughly 10.9x, a comfortable level. Liquidity is strong: current ratio 226% and quick ratio 126% reflect sizable working capital buffers, supported by ¥7.74bn of inventories and total current assets of ¥17.45bn. The balance sheet is moderate in leverage with total liabilities of ¥9.58bn versus equity of ¥10.35bn, a debt-to-equity ratio of 0.93x. The equity ratio is shown as 0.0% but that appears to be undisclosed rather than actually zero; based on totals, implied equity ratio is approximately 50.9%. Cash flow statements are not disclosed (all zeros), preventing assessment of operating cash flow conversion and free cash flow; conclusions on cash generation must therefore be tentative. Tax expense of ¥259m versus pre-tax profit of about ¥600m implies an effective tax rate around 43%, higher than the 0.0% metric shown (which is likely placeholder). The reported downturn in profits alongside a 10% gross margin profile suggests a trading/wholesale model with relatively thin structural margins, making earnings sensitive to volume and pricing. Inventory of ¥7.74bn relative to current liabilities of ¥7.71bn highlights the importance of inventory turnover and pricing discipline to protect margins and cash. Dividend per share is undisclosed at 0.00; with earnings positive but dividends not reported, the company is either retaining cash or has not disclosed a payout for the period. Overall, Apple International remains liquid and solvent but is contending with cyclical or competitive headwinds, causing compressed profitability and a subdued ROE. Near-term priorities likely include restoring gross margin, improving operating efficiency, and maintaining disciplined working capital to stabilize earnings quality.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.15% (¥341m / ¥29,527m)
• asset_turnover: 1.452x (Revenue ¥29.53bn / Assets ¥20.34bn, using period-end proxy)
• financial_leverage: 1.97x (Assets ¥20.34bn / Equity ¥10.35bn)
• calculated_ROE: 3.30% (matches reported) margin_quality: Gross profit of ¥2.95bn implies ~10.0% gross margin; however, the cost of sales figure provided (¥30.58bn) is inconsistent with the gross profit and revenue, so analysis relies on the stated gross profit/margin. Operating margin compressed to ~1.78% (¥526m / ¥29,527m), with net margin at 1.15%. The magnitude of YoY declines (operating income -57.1%, net income -66.5%) indicates significant deleveraging on lower sales and/or elevated cost pressure. operating_leverage: Revenue fell 11.9% YoY while operating income fell 57.1% YoY, demonstrating negative operating leverage. This suggests fixed cost absorption issues and/or mix deterioration. Interest expense is modest (¥48m), so most margin pressure is at the operating level rather than below the line.

Growth Assessment

revenue_sustainability: Top-line decline of 11.9% YoY points to weaker demand or pricing in core activities. With asset turnover at 1.45x, the business remains throughput-oriented, but near-term momentum is negative. profit_quality: Operating margin contraction to ~1.8% and net margin at 1.15% reflect thin profitability. Ordinary income (¥516m) closely tracks operating income (¥526m), implying minimal reliance on non-operating items. Higher apparent tax burden (~43% effective) weighs on net income. outlook: Recovery depends on restoring volume and/or pricing and improving gross margin. Given the inventory-heavy model, faster inventory turns and disciplined procurement should support margin normalization. However, absent disclosed cash flows, visibility on underlying cash earnings and reinvestment capacity is limited.

Financial Health

liquidity: Current ratio 226.2% and quick ratio 125.9% indicate strong liquidity. Working capital is ¥9.74bn, providing a cushion against short-term volatility. solvency: Debt-to-equity ratio is 0.93x (liabilities ¥9.58bn / equity ¥10.35bn). Implied equity ratio is ~50.9% (equity/total assets), despite a reported 0.0% placeholder. Interest coverage at ~10.9x (operating income/interest expense) is comfortable. capital_structure: Balance sheet shows moderate leverage primarily via liabilities within a capital-light, trading-like model. With asset turnover at 1.45x, maintaining prudent leverage is key given thin margins.

Cash Flow Quality

earnings_quality: Cash flow data are undisclosed (zeros), preventing calculation of OCF/NI or FCF. As such, cash conversion and accrual intensity cannot be evaluated this quarter. FCF_analysis: Free cash flow is not reported. Given inventory of ¥7.74bn, working capital swings could materially impact FCF in either direction. working_capital: Inventories represent ~44% of current assets and ~38% of total assets−equity buffer, making turnover and valuation critical. Quick ratio >100% suggests liquidity even excluding inventory, but cash position is undisclosed.

Dividend Sustainability

payout_ratio_assessment: DPS is undisclosed (0.00) and payout ratio shows 0.0% despite positive EPS of ¥26.56, implying either no interim distributions or lack of disclosure. With ROE at 3.30% and earnings under pressure, a conservative payout stance would be consistent with balance sheet preservation. FCF_coverage: Not assessable this period due to undisclosed OCF/FCF. Dividend coverage cannot be evaluated from cash flow. policy_outlook: Given declining profitability and absent CF disclosure, prioritizing reinvestment and balance sheet resiliency is plausible. Any resumption or increase in dividends would likely hinge on evidence of margin recovery and sustained cash generation.

Risk Assessment

Business Risks:

• Thin structural margins (~10% gross, ~1.8% operating) increase sensitivity to volume and price changes
• Inventory valuation and turnover risks in a trading-heavy model
• Demand cyclicality and potential competitive pricing pressure causing negative operating leverage
• Geographic and FX exposure risk if revenues are export-linked (not disclosed here)
• Supply chain and procurement cost variability affecting gross margin

Financial Risks:

• Lack of disclosed operating, investing, and financing cash flows obscures cash generation and liquidity runway
• Moderate leverage (D/E ~0.93x) could amplify earnings volatility if margins compress further
• Potentially high effective tax rate (~43%) reduces net income resilience
• Interest rate risk on borrowing costs, albeit currently manageable given 10.9x interest coverage

Key Concerns:

• Double-digit revenue decline with outsized drop in operating and net income
• Inconsistency between reported cost of sales and gross profit figures; reliance on stated gross profit for analysis
• Undisclosed cash flow statements, depreciation/amortization, and cash balance limit assessment of earnings quality and capital intensity

Investment Implications

Key Takeaways:

• ROE at 3.30% reflects compressed profitability despite reasonable asset turnover and moderate leverage
• Operating leverage turned negative: -11.9% revenue led to -57.1% operating income
• Liquidity is strong (current ratio 226%, quick ratio 126%), supporting near-term operations
• Interest coverage remains comfortable at ~10.9x, indicating manageable financial costs
• Cash flow and depreciation data are not disclosed, limiting visibility into cash earnings and maintenance needs

Metrics to Watch:

• Gross margin trend and reconciliation of cost of sales disclosure
• Inventory turnover days and stock valuation adjustments
• Operating expense ratio and break-even volume
• OCF/Net income conversion and FCF once disclosed
• Ordinary income vs. operating income spread (non-operating gains/losses)
• Effective tax rate normalization

Relative Positioning: Within inventory-intensive trading/automotive-related peers, Apple International exhibits strong liquidity and moderate leverage but currently weaker profitability and ROE due to margin compression and negative operating leverage.

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