Euglena Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥37.09B
• Operating Income: ¥2.62B
• Net Income: ¥-788M
• EPS: ¥-2.79

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

Euglena Co., Ltd. (TSE: 2931) reported FY2025 Q3 consolidated results under JGAAP showing steady top-line growth and a sharp rebound at the operating level, but a bottom-line net loss due to below-operating items. Revenue was ¥37.1bn, up 5.1% YoY, with gross profit of ¥24.7bn and an elevated gross margin of 66.5%, indicating a favorable product mix and/or pricing discipline. Operating income surged to ¥2.62bn (+963.6% YoY), translating to a 7.1% operating margin, implying significant operating leverage through SG&A efficiency or improved utilization. Ordinary income was ¥2.14bn, reflecting net non-operating expense headwinds (notably interest expense of ¥341m), but still positive. Despite positive operating/ordinary profit, net income was a loss of ¥380m (EPS -¥2.79), implying sizable extraordinary losses and/or non-controlling interest effects between ordinary and net lines. The DuPont-based ROE was -1.17%, driven by a -1.02% net margin and modest asset turnover of 0.532, partially offset by financial leverage of 2.14x. Liquidity appears strong: the current ratio stands at 240.9% and the quick ratio at 226.5%, supported by working capital of ¥18.1bn. The capital structure shows total liabilities of ¥41.1bn and total equity of ¥32.5bn (implying an estimated equity ratio near 46.7% despite the reported 0.0% field being undisclosed). Interest coverage is 7.7x (operating income to interest expense), indicating adequate capacity to service debt from operating profit. Inventory is a modest ¥1.85bn, consistent with a predominantly consumer/functional food and related businesses footprint rather than heavy processing inventory intensity. Cash flow statement items were not disclosed in this dataset; therefore, OCF/FCF metrics reported as zero should be treated as unavailable rather than truly zero. Dividend remains nil (DPS ¥0), aligning with the current loss and growth investment posture. The sharp improvement in operating profit on modest revenue growth highlights margin recovery, but the persistence of net loss raises questions about one-off items, impairment or strategic project costs (e.g., biofuels), and their recurrence. Overall, the quarter reflects improved core profitability, resilient liquidity, and manageable leverage, but bottom-line volatility and disclosure gaps (cash flows, D&A) constrain assessment of earnings quality and sustainability. We focus on the durability of the operating margin gains, the drivers of extraordinary losses, and normalization of below-the-line items through year-end.

Profitability Analysis

roe_decomposition: ROE -1.17% = Net margin (-1.02%) × Asset turnover (0.532) × Financial leverage (2.14). The negative net margin is the principal drag; asset turnover is modest, and leverage is moderate, providing limited offset. margin_quality: Gross margin of 66.5% is high, suggesting favorable mix/pricing and possibly growth in higher-margin segments. Operating margin of ~7.1% (¥2.618bn/¥37.086bn) represents significant YoY recovery, indicating SG&A efficiency and operating leverage. Ordinary margin is ~5.8%, reflecting net non-operating expenses, notably ¥341m interest expense. The swing from positive ordinary income to net loss implies material extraordinary losses or minority interests; tax burden is minimal (¥20m), suggesting losses and/or tax credits. operating_leverage: Operating income +963.6% YoY on +5.1% revenue growth implies strong operating leverage, likely from fixed cost absorption and SG&A control. Sustainability depends on maintaining current gross margins and cost discipline as volumes scale.

Growth Assessment

revenue_sustainability: Revenue grew 5.1% YoY to ¥37.1bn. With asset turnover at 0.532, growth appears not capex-led within the quarter; sustainability will depend on consumer demand in healthcare/functional foods and progress in new businesses (e.g., biofuels). profit_quality: Core profit quality improved at the operating level (7.1% margin), but the net loss points to below-OP volatility. Without D&A disclosure, EBITDA cannot be assessed from provided data, and cash conversion remains unclear. outlook: If high gross margins persist and SG&A remains controlled, operating profitability should remain positive. Key swing factors are extraordinary items normalization, interest burden management, and execution in growth initiatives; these will drive whether net profit turns positive in subsequent quarters.

Financial Health

liquidity: Current ratio 240.9% and quick ratio 226.5% indicate strong short-term liquidity. Working capital is ¥18.054bn, providing a solid buffer. solvency: Debt-to-equity ratio is 1.27x, indicating moderate leverage; interest coverage of 7.7x suggests adequate debt-servicing capacity from operations. Taxes are minimal (effective tax rate near 0% on a net loss). capital_structure: Total assets ¥69.712bn, liabilities ¥41.142bn, equity ¥32.518bn. Although the reported equity ratio field is undisclosed (0.0%), an estimate based on provided BS figures is roughly 46.7% (equity/assets), indicating a balanced structure. Net debt cannot be assessed due to undisclosed cash & equivalents.

Cash Flow Quality

earnings_quality: Cash flow data (OCF/Investing/Financing) were not disclosed in this dataset; reported zeros should be treated as unavailable. As such, we cannot corroborate earnings with cash conversion or working capital cash dynamics. fcf_analysis: Free cash flow cannot be computed due to missing OCF and capex (D&A also undisclosed). While operating profit is positive, the net loss and interest expense highlight the importance of verifying OCF sufficiency when data becomes available. working_capital: Inventories are ¥1.845bn; with strong current and quick ratios, liquidity appears ample. However, absent CF data, we cannot assess collection cycles or payables-driven funding of operations.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is shown as 0% (no dividend), which aligns with a net loss and investment needs. fcf_coverage: FCF coverage cannot be evaluated because OCF and capex are undisclosed in this dataset. As a result, cash returns policy assessment relies on profitability trajectory and balance sheet flexibility rather than cash generation evidence. policy_outlook: Given the current net loss and growth investments, continuation of a conservative dividend stance appears consistent until net profitability and cash generation stabilize.

Risk Assessment

Business Risks:

• Execution risk in scaling biofuel and new technology initiatives with uncertain near-term returns
• Competitive pressure in functional foods, supplements, and related consumer health categories
• Input cost volatility and supply chain risks affecting gross margin
• Regulatory and subsidy dependence for sustainable fuels and ESG-linked projects
• Product mix shifts that could erode current high gross margins
• FX exposure if raw materials or overseas sales are material

Financial Risks:

• Moderate leverage (D/E 1.27x) and ongoing interest expense burden (¥341m) despite improved OP
• Bottom-line loss driven by extraordinary items, implying potential for further impairments or one-offs
• Limited visibility on operating cash flow due to undisclosed CF data in this period
• Refinancing and interest rate risk if a sizable portion of debt is floating or near maturity
• Potential covenant headroom constraints if profitability weakens

Key Concerns:

• Persistence and nature of extraordinary losses leading to net loss despite positive operating income
• Sustainability of the 7.1% operating margin given modest revenue growth
• Absence of cash flow disclosure, constraining assessment of earnings quality and funding capacity

Investment Implications

Key Takeaways:

• Top-line growth of 5.1% with a strong gross margin of 66.5%
• Operating income rebounded sharply to ¥2.62bn, margin ~7.1%
• Ordinary income positive at ¥2.14bn but net income still a loss of ¥380m
• Interest coverage 7.7x suggests manageable debt service
• Liquidity is robust (current ratio 241%, quick 227%, working capital ¥18.1bn)
• ROE -1.17% driven by negative net margin and modest asset turnover
• Capital structure balanced with an estimated equity ratio ~46.7%
• Cash flow metrics undisclosed, limiting FCF and cash conversion analysis

Metrics to Watch:

• Extraordinary gains/losses and their recurrence
• Operating cash flow and free cash flow once disclosed
• Gross margin sustainability and SG&A ratio
• Interest expense trajectory and coverage
• Debt maturity profile and refinancing terms
• Progress and unit economics in biofuel/new businesses
• Asset turnover improvement and inventory turns

Relative Positioning: Versus domestic functional food/health peers, Euglena exhibits higher gross margins but lower asset turnover and continued bottom-line volatility; versus renewable fuel developers, it shows healthier near-term operating profitability but shares similar execution and policy dependence risks.

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