OHMORIYA Co.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥16.51B
• Operating Income: ¥-66M
• Net Income: ¥-75M
• EPS: ¥-14.76

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

Verdict: FY2025 Q4 results were weak on profitability and cash generation despite strong topline growth. Revenue rose 26.3% YoY to 165.11, but gross profit was only 19.33 with an 11.7% gross margin, and operating income remained in the red at -0.66, yielding an operating margin of roughly -0.4%. Ordinary income came in at -0.98 and net income at -0.73 (EPS -14.76 JPY), keeping full-year profitability negative. Non-operating income of 0.21 (mainly dividends 0.14) was more than offset by non-operating expenses of 0.53, including interest expense of 0.51, highlighting financing cost pressure. Gross margin at 11.7% looks thin for a food staple/nori processor, indicating incomplete cost pass-through amid input inflation and/or adverse product mix. Operating margin likely compressed YoY by several tens of basis points given revenue expansion alongside deeper operating loss; precise bp change is not calculable due to missing prior-period margin disclosure. Ordinary margin also stayed negative, implying limited help from non-operating items. Cash flow was the most concerning: operating cash flow was a large outflow of -50.11 versus net loss of -0.73, driven likely by working capital build (inventories at 125.93). Free cash flow was -68.78 after capex of -18.49, necessitating heavy financing inflows of 71.66 and lifting short-term loans to 67.00. Liquidity optics are mixed with a current ratio of 180% but a low quick ratio of 52.2%, reflecting inventory-heavy working capital and potential liquidity strain if sales slow or inventory turns extend. Leverage is moderate on a balance sheet basis (D/E 1.04x), but coverage is weak (interest coverage -1.30x) and ROIC was negative at -0.4%. DuPont ROE was -0.6%, driven primarily by a negative net margin (-0.4%) with asset turnover of 0.701 and leverage at 2.04x. Forward-looking, sustaining revenue growth will require improved gross margin and lower SG&A intensity, faster inventory turnover, and refinancing discipline to manage interest costs. Without a turnaround in operating cash generation and margin, dividend capacity (unreported) looks constrained by negative FCF. Overall, the quarter underscores execution risks in pricing, procurement, and inventory management in a higher-rate, inflationary backdrop.

Profitability Analysis

ROE decomposition: Net Profit Margin (-0.4%) × Asset Turnover (0.701x) × Financial Leverage (2.04x) = ROE (-0.6%). The biggest drag is the negative net profit margin, as operating loss (-0.66) and interest burden (0.51) offset revenue growth. Asset turnover at 0.701 indicates modest efficiency for a food processor with heavy inventories; leverage at 2.04x is not extreme but amplifies the negative margin. Business drivers: thin gross margin (11.7%) suggests rising input costs (raw seaweed, packaging, energy) and/or limited pricing power, while SG&A (20.00) exceeded gross profit (19.33), leaving core operations loss-making. Interest expense of 0.51 compressed ordinary income further, consistent with higher short-term borrowings (67.00). Sustainability: the negative margin appears cyclical and operational rather than one-off; recovery depends on price pass-through, cost control, and inventory normalization. Operating leverage is currently unfavorable: revenue +26.3% YoY did not translate into operating profit expansion, indicating SG&A growth and cost inflation outpaced gross profit gains. Concerning trends include SG&A outstripping gross profit and interest costs absorbing limited operating earnings, which together depress margin quality and keep ROE negative.

Growth Assessment

Revenue grew 26.3% YoY to 165.11, indicating strong sales momentum, likely from price revisions and/or volume recovery. However, growth quality is poor as gross margin is only 11.7% and operating income remains negative, implying limited pass-through and/or adverse mix. EBITDA was 1.72 (1.0% margin), signaling low earnings buffer against cost volatility. Non-operating support is minimal (net non-operating -0.32), leaving little cushion below operating line. The step-up in inventories to 125.93 hints at either front-loaded procurement or slower sell-through; either way, it depresses cash conversion and raises risk if demand normalizes. Near-term outlook hinges on gross margin improvement from procurement normalization and price/mix management, and on SG&A discipline; without these, revenue growth is unlikely to translate to profit growth. With interest expense of 0.51 and negative operating income, ordinary income will remain sensitive to financing costs, making deleveraging or refinancing terms important catalysts.

Financial Health

Liquidity: Current ratio is healthy at 180.4%, but quick ratio is weak at 52.2% due to heavy inventories, indicating reliance on inventory monetization to meet short-term obligations. No explicit warning for current ratio (<1.0) is needed, but quick liquidity risk is elevated. Solvency: D/E is 1.04x (moderate), total loans are 85.03 (short-term 67.00, long-term 18.03). Interest coverage is -1.30x, flagging near-term debt service risk if operating performance does not improve. Maturity mismatch: short-term loans of 67.00 materially exceed cash (13.80) and accounts receivable (30.72), implying refinancing risk and dependence on inventory turns for liquidity. Off-balance sheet: not disclosed; no information on guarantees or leases beyond the reported data. Equity base is 115.28 (BVPS ~2,315 JPY), providing some buffer, but negative ROE and ROIC indicate capital inefficiency.

Cash Flow Quality

OCF was -50.11 against net income of -0.73; the OCF/NI ratio (68.64x) is not meaningful with negative NI and masks a serious cash shortfall. The sizable operating outflow likely reflects working capital deterioration, particularly inventory build, and possibly higher payables reduction; the balance sheet shows inventories at 125.93 versus payables at 7.29, indicating funding via debt. Free cash flow was deeply negative at -68.78 after capex of -18.49, requiring financing inflows of 71.66 to bridge the gap. Earnings quality is weak: accounting loss is modest, but cash burn is large, signalling that reported losses understate cash stress. Sustainability: Without improvement in inventory turns and margin, FCF is unlikely to cover dividends and debt service. No clear signs of deliberate working-capital window dressing appear, but the magnitude of inventory relative to sales elevates the risk of later write-downs or margin pressure during clearance.

Dividend Sustainability

Dividend data (DPS, total dividends) are unreported; reported payout metrics are inconsistent (-104.8% calculated, 0.4% reported) and not reliable. With FCF at -68.78 and interest coverage negative, internal coverage of dividends is not present this period. Even a modest dividend would be funded by incremental borrowing or balance sheet draw, which is unsustainable if cash generation does not improve. Policy outlook likely turns conservative until operating cash flow normalizes and capex is internally funded. Monitoring points: confirm actual DPS from company release, track quarterly OCF normalization and inventory reduction before assessing coverage.

Risk Assessment

Business Risks:

• Input cost inflation (raw seaweed, energy, packaging) compressing gross margin
• Pricing power limitations leading to delayed pass-through and negative operating leverage
• Inventory build and potential obsolescence/quality degradation impacting margins
• Demand elasticity and mix shift toward lower-margin channels (e.g., private label)
• Supply variability in seaweed harvests affecting costs and availability

Financial Risks:

• Refinancing risk with short-term loans of 67.00 versus cash 13.80 and negative OCF
• Interest rate risk: interest expense already 0.51 with negative EBIT, coverage -1.30x
• Working capital funding strain due to high inventories relative to receivables and payables
• Potential covenant pressure if lenders require minimum profitability/coverage

Key Concerns:

• Large OCF outflow (-50.11) vs relatively small accounting loss (-0.73) indicating cash stress
• SG&A (20.00) exceeding gross profit (19.33), keeping core operations loss-making
• Negative ROIC (-0.4%) and ROE (-0.6%) signaling capital inefficiency
• Sensitivity to FX if raw materials are imported (not disclosed but typical for category)

Investment Implications

Key Takeaways:

• Strong revenue growth (+26.3%) did not translate to profits; operating margin ~-0.4%
• Gross margin thin at 11.7% with SG&A above gross profit, implying structural margin pressure
• Cash burn significant (OCF -50.11, FCF -68.78), financed by higher short-term debt
• Leverage moderate on balance sheet (D/E 1.04x) but serviceability weak (interest coverage -1.30x)
• Inventory intensity elevated (inventories 125.93), weighing on liquidity and future margins

Metrics to Watch:

• Gross margin and ASP/pass-through cadence by quarter
• Inventory turnover days and size of inventory relative to sales
• Operating cash flow and changes in receivables/payables
• Short-term debt level and average interest rate; interest coverage
• SG&A efficiency versus revenue growth
• ROIC recovery toward 5%+ as a minimum hurdle

Relative Positioning: Within Japan's packaged foods/seasonings segment, the company exhibits weaker profitability and cash conversion than typical peers, with higher inventory reliance and lower margin resilience; balance sheet leverage is moderate but serviceability is strained absent a near-term margin and working-capital turnaround.

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
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