YOKOREI CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥125.56B
• Operating Income: ¥4.24B
• Net Income: ¥3.02B
• EPS: ¥33.56

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

Yokohama Reitou (Yokorei, TSE: 28740) reported FY2025 Q4 (full-year) consolidated results under JGAAP with modest top-line growth but notable margin compression and lower bottom-line profitability. Revenue was 1,255.63 (100M JPY), up 2.7% YoY, indicating resilient demand in its core cold storage/logistics and food trading businesses. Operating income fell 8.8% YoY to 42.38, implying a calculated operating margin of about 3.4%, down YoY as costs outpaced revenue growth. Ordinary income declined 23.9% YoY to 36.58, suggesting weaker non-operating contributions and/or higher non-operating costs versus the prior year. Net income decreased 49.7% YoY to 19.78, with a net margin of 1.6%, highlighting substantial pressure further down the P&L, potentially from taxes, minorities, or valuation effects not disclosed in detail. DuPont analysis shows ROE of 2.4% (net margin 1.6% × asset turnover 0.601 × financial leverage 2.54x), a low return level for the sector. Asset turnover of 0.601 is consistent with an asset-intensive cold storage/logistics footprint, while leverage of 2.54x implies an approximate equity ratio of 39.5% (824.17/2,090.34). Operating cash flow was strong at 110.87, 5.61x net income, signaling solid cash conversion despite weaker reported earnings. However, investing cash flow was -166.25, resulting in negative free cash flow of -55.38, consistent with an investment-heavy year (likely capacity expansion, automation, and infrastructure upgrades). Financing cash flow of +56.33 bridged the free cash shortfall, indicating reliance on external funding or balance sheet flexibility to support capex. Total equity stood at 824.17, translating to a calculated BVPS of roughly 1,397 JPY, broadly aligned with XBRL’s 1,368 JPY, suggesting stable capital accumulation over time. Comprehensive income was 37.21, well above net income, implying positive other comprehensive income (likely valuation gains on investment securities or FX translation), partially offsetting weak net profit. The payout ratio is shown as 71.9% on a calculated basis (implying DPS around mid-20s JPY against EPS 33.56), while the reported payout ratio is 0.4%; the discrepancy likely reflects reporting taxonomy or timing rather than an actual near-zero payout. With many line items unreported (e.g., gross profit, SG&A detail, interest, tax, debt levels), some diagnostic ratios (ROA reported, interest coverage, liquidity metrics) are not directly computable from XBRL and must be inferred cautiously. Overall, the year reflects a trade-off between strategic investment and current-period profitability, with adequate balance sheet strength but subdued ROE and pressured margins. Future earnings trajectory hinges on normalization of costs, utilization ramp of new capacity, and maintaining disciplined pricing in trading and logistics. Given the strong OCF and negative FCF driven by capex, dividend coverage from free cash was weak this year, though coverage from earnings appears moderate based on calculated payout.

Profitability Analysis

ROE is 2.4%, decomposed into a 1.6% net margin, 0.601x asset turnover, and 2.54x financial leverage. The operating margin, calculated from disclosed figures, is approximately 3.4% (42.38/1,255.63), down YoY given operating income fell 8.8% against 2.7% revenue growth, indicating margin compression. Ordinary margin declined to roughly 2.9% (36.58/1,255.63), suggesting lower non-operating tailwinds or higher non-operating costs. Net margin at 1.6% is notably below typical mid-single-digit targets for stable logistics/storage operations, reflecting either cost pressures (energy, labor, logistics) or tax/minority effects not disclosed. The step-down from operating to net income appears pronounced, highlighting potential increases in below-OP line items. Operating leverage was negative this year: modest revenue growth coincided with a larger decline in operating profit, implying cost inflation outpaced pricing or mix benefits. Without SG&A and gross profit disclosures, margin quality cannot be fully assessed, but the OCF/NI ratio of 5.61x suggests earnings quality was better than headline net income implies, potentially due to non-cash charges or working capital release. Financial leverage at 2.54x is moderate for an asset-heavy cold storage operator and helps support ROE despite low margins. Comprehensive income (37.21) exceeding net income (19.78) signals valuation gains in OCI categories, somewhat cushioning low reported profitability. Overall profitability remains subdued with pressure across operating and ordinary levels, and improvement requires either pricing power, cost efficiency (energy optimization, automation), or mix shift toward higher-margin services.

Growth Assessment

Revenue grew 2.7% YoY to 1,255.63, a steady pace consistent with stable demand in cold storage capacity and food distribution. However, operating income declined 8.8% YoY to 42.38, indicating growth was not margin accretive. Ordinary income fell 23.9% YoY and net income fell 49.7% YoY, underscoring deterioration below the operating line. The divergence between revenue and profit trajectories suggests cost pressures (e.g., electricity for refrigeration, labor and logistics costs) and/or weaker non-operating items. The strong OCF despite lower net income implies underlying cash generation remains intact, and that the earnings decline may include non-cash or timing elements. Negative FCF reflects heavy investment (-166.25) rather than operational stress, positioning the company for future capacity, efficiency, or service expansion. Sustainability of revenue growth will depend on utilization of new/expanded facilities and stability in food import/export flows and pricing. Profit quality will hinge on the company’s ability to pass through costs, optimize energy usage, and manage inventory/trading risk. With ROE at 2.4%, the current return profile is below cost-of-equity norms, pointing to a need for either margin recovery or improved asset turnover post-investment. Near-term outlook: cautious on margins until cost pressures abate; medium-term improvement possible if capex drives utilization gains and operating efficiencies.

Financial Health

Total assets were 2,090.34 and total equity 824.17, implying an approximate equity ratio of 39.5% and financial leverage of 2.54x. This indicates a reasonably solid capital base for an asset-intensive business. Detailed liquidity metrics (current ratio, quick ratio) are not available due to unreported current assets/liabilities. Interest-bearing debt levels and maturity profiles are unreported, preventing direct solvency ratio computation (net debt/EBITDA, interest coverage). Financing cash inflow of 56.33 alongside negative FCF suggests increased borrowings or similar financing to fund investment, which is typical during expansion phases. Owners’ equity at 807.18 and BVPS around 1,397 JPY demonstrate continued balance sheet depth. The gap between comprehensive income (37.21) and net income (19.78) indicates OCI gains, which do not immediately affect cash but support equity. Overall, the balance sheet appears sound, but visibility on liquidity buffers and debt service is limited by disclosures.

Cash Flow Quality

OCF of 110.87 is robust relative to net income of 19.78, yielding an OCF/NI ratio of 5.61x, indicative of strong cash conversion and conservative accruals in the period. Free cash flow was -55.38 due to heavy investing cash outflows of -166.25, consistent with capacity or efficiency investments. Working capital details are not disclosed, but strong OCF suggests either stable working capital or release; clarity is limited without AR/AP/inventory breakdown. Depreciation and amortization are unreported, limiting EBITDA-based assessments; however, strong OCF despite lower earnings hints at meaningful non-cash charges. Financing inflow of 56.33 covered most of the FCF shortfall, typical of a capex cycle. Overall earnings quality appears better than net income suggests, but sustainability depends on maintaining OCF while investments transition to returns.

Dividend Sustainability

EPS (basic) was 33.56 JPY. The calculated payout ratio is 71.9%, implying annual DPS around the mid-20 JPY range; the reported payout ratio of 0.4% likely reflects reporting taxonomy or timing differences rather than an actual de minimis payout. FCF coverage was -3.89x, meaning dividends were not covered by free cash in this investment-heavy year. Coverage from earnings appears moderate (payout <100%), but cash coverage is weak due to capex; financing likely supported both investment and shareholder returns in the period. DOE was reported as 0.0% (treated as unreported); thus, equity-based payout discipline cannot be validated from XBRL. Dividend outlook will depend on normalization of capex, OCF sustainability, and profit recovery; with stronger OCF, coverage could improve once investment moderates. Policy inference is constrained by missing DPS and dividend cash data.

Risk Assessment

Business Risks:

• Energy cost inflation impacting cold storage operating expenses (electricity-intensive).
• Logistics cost volatility (transportation, labor) pressuring margins.
• Commodity and seafood price swings affecting trading margins and inventory valuation.
• FX fluctuations (notably USD/JPY) influencing import/export pricing and margins.
• Utilization risk on newly added capacity if demand underperforms.
• Customer concentration or contract repricing risk in storage/logistics services.
• Execution risk on large capex projects (delays, cost overruns).
• Regulatory and food safety compliance costs.

Financial Risks:

• Negative free cash flow funded by financing increases leverage and refinancing needs.
• Limited visibility on interest-bearing debt and interest coverage due to unreported items.
• Potential mark-to-market volatility in investment securities affecting OCI and equity.
• Low ROE (2.4%) relative to cost of capital, raising risk of value dilution if returns do not improve.
• Working capital swings in trading operations could strain liquidity in adverse markets.

Key Concerns:

• Margin compression despite revenue growth (OP -8.8% YoY vs sales +2.7%).
• Large investing outflows driving negative FCF in the period.
• Weak net margin (1.6%) and low ROE (2.4%).
• Dependence on financing inflows (+56.33) to fund investments and potentially dividends.
• Data gaps (gross profit, SG&A, debt and interest) limiting full credit risk assessment.

Investment Implications

Key Takeaways:

• Sales grew 2.7% to 1,255.63, but operating profit fell 8.8% to 42.38, indicating cost pressure.
• ROE at 2.4% reflects thin net margin (1.6%) and asset-heavy model (asset turnover 0.601).
• OCF was strong at 110.87 (5.61x net income), but FCF was negative (-55.38) due to -166.25 investing CF.
• Balance sheet appears solid with an implied equity ratio around 39.5% and leverage of 2.54x.
• Comprehensive income (37.21) exceeded net income (19.78), aided by positive OCI.
• Dividend coverage from earnings is moderate (calculated payout ~72%), but FCF coverage was negative.

Metrics to Watch:

• Operating margin trend and cost pass-through (energy, logistics, labor).
• Capacity utilization and yield per cubic meter/pallet-day in storage.
• OCF/NI ratio and FCF as capex normalizes; timing of capex completion.
• Ordinary income drivers (non-operating gains/costs) and their stability.
• Asset turnover and ROE improvements post-investment.
• FX exposure and trading gross margin in food products.
• Net debt levels, interest expense, and interest coverage once disclosed.

Relative Positioning: Within Japan’s cold storage and food logistics/trading space, Yokorei exhibits stable top-line growth and a solid equity base but currently lags on profitability and ROE due to margin compression and an investment-intensive year. Strong operating cash generation is a positive differentiator, yet near-term free cash flow is pressured by capex until new assets contribute.

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