KOBE BUSSAN CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥551.70B
• Operating Income: ¥39.88B
• Net Income: ¥27.73B
• EPS: ¥143.98

Income Statement

Balance Sheet

Cash Flow Statement

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

Kobe Bussan (3038) delivered solid FY2025 Q4 (full-year) consolidated results under JGAAP, with revenue of 5,517.01 (100M JPY), up 8.6% YoY, indicating resilient traffic and ticket growth in its core wholesale/retail food channels. Gross profit rose to 664.66 (100M JPY), yielding a gross margin of 12.0%, demonstrating stable procurement and pricing discipline amid cost fluctuations. Operating income increased 16.1% YoY to 398.78 (100M JPY), and the operating margin improved to 7.2%, evidencing positive operating leverage as SG&A growth (265.87) lagged gross profit expansion. Ordinary income jumped 52.3% YoY to 480.81 (100M JPY), helped by higher non-operating income of 87.69, including 8.60 of interest income, while non-operating expenses remained modest at 5.66. Net income advanced 48.7% YoY to 318.78 (100M JPY), with an effective tax rate of 31.6%, highlighting both stronger operations and a benign below-the-line contribution. DuPont analysis shows a net margin of 5.8%, asset turnover of 2.120x, and financial leverage of 1.61x, yielding an ROE of 19.8%, which is attractive versus typical domestic food retail/wholesale benchmarks. EBITDA reached 464.29 (100M JPY), an 8.4% margin, supported by depreciation and amortization of 65.51. Liquidity is robust: cash and deposits of 1,309.94 (100M JPY) comprise ~50% of total assets (2,601.93), and current/quick ratios are 311%/282%, respectively. The balance sheet is conservative with total liabilities of 987.92 and owners’ equity of 1,573.73, implying a debt-to-equity ratio of 0.61x and net cash when comparing cash to reported loans (short-term 31.15, long-term 270.19). Cash flow quality is strong: operating cash flow (OCF) of 421.13 exceeds net income (OCF/NI = 1.32x), and free cash flow (FCF) of 331.95 comfortably covers estimated cash returns. Capital intensity remained low, with capex of 90.79 (~1.6% of revenue), supporting the asset-light, franchise-anchored model. Working capital management appears disciplined with accounts receivable of 302.27, inventories of 176.30, and payables of 380.21, underpinning solid cash conversion. Dividend sustainability looks favorable, with a calculated payout ratio of 19.7% and FCF coverage of ~5.3x, though detailed dividend disclosures were not provided in XBRL. Reported XBRL operating and ROA metrics appear understated versus calculated results, likely due to tagging/definition differences rather than operational weakness. Overall, Kobe Bussan’s FY2025 profile reflects durable top-line growth, expanding operating profitability, high ROE with low financial risk, and strong cash generation, albeit with some reliance on non-operating income and with limited disclosure granularity in selected line items.

Profitability Analysis

ROE decomposition (DuPont): Net margin 5.8% × asset turnover 2.120 × financial leverage 1.61x = ~19.8% ROE (matches reported). Operating margin is ~7.2% (398.78/5,517.01), outpacing revenue growth (+8.6%) with operating income +16.1% YoY, indicating positive operating leverage from scale and SG&A control. Gross margin of 12.0% is stable, suggesting procurement and price pass-through effectiveness despite input cost volatility. Ordinary margin at ~8.7% (480.81/5,517.01) benefitted from non-operating income (87.69), including 8.60 of interest income on a large cash balance; this tailwind may not be structural at the same magnitude. EBITDA margin of 8.4% and D&A of 65.51 indicate a relatively low asset intensity supporting returns. Interest expense is de minimis (0.23), driving an interest coverage ratio >1,700x. Calculated ROA (NI/ending assets) approximates 12.3%, though the true ROA would differ based on average assets; still, returns on assets appear strong versus sector norms. Margin quality looks solid with limited evidence of one-off charges; however, the gap between operating and ordinary income underscores some reliance on financial income. Overall profitability is healthy with expanding core margins and high capital efficiency.

Growth Assessment

Revenue grew 8.6% YoY to 5,517.01, consistent with steady store expansion and resilient consumer demand in core banners. Operating income climbed 16.1% YoY to 398.78, outpacing sales, implying operating leverage from scale, mix improvements, or efficiency gains. Net income advanced 48.7% to 318.78, amplified by higher non-operating income and low interest expense, with an effective tax rate of 31.6%. Gross margin at 12.0% suggests manageable input cost pressures; sustainability will hinge on FX, commodity costs, and pricing discipline. EBITDA of 464.29 (+8.4% margin) and OCF of 421.13 (1.32x NI) indicate high-quality earnings conversion. Capex remained modest at 90.79 (~1.6% of sales), supporting continued expansion without straining cash flows. Looking ahead, growth should be supported by store network development, private-brand penetration, and procurement scale, while risks include commodity/FX volatility and competitive pricing intensity. Non-operating income (notably interest income of 8.60) may normalize with rate changes; core operating growth remains the key driver. Overall outlook: moderate mid-single to high-single-digit revenue growth with potential for incremental margin gains, contingent on cost control and mix.

Financial Health

Liquidity is strong: current assets 1,849.06 vs current liabilities 593.70 yields a current ratio of 311%; quick ratio is 282% after excluding inventories (176.30). Cash and deposits of 1,309.94 cover all reported loans (short-term 31.15 and long-term 270.19), implying a substantial net cash position of roughly 1,008.6 (100M JPY). Working capital stands at 1,255.36, offering ample operating flexibility. Total liabilities of 987.92 vs owners’ equity of 1,573.73 result in a debt-to-equity ratio of 0.61x and financial leverage (assets/equity) of ~1.61x. Interest coverage is exceptionally high at ~1,734x, reflecting minimal interest burden. Asset base is conservative with low goodwill (4.83) and modest intangibles (17.31), reducing impairment risk. Solvency risk is low given net cash and strong internal cash generation. No material concentration risks appear on the balance sheet; however, detailed lease liabilities are not disclosed here and could be relevant for retail operations.

Cash Flow Quality

Earnings quality is high: OCF of 421.13 exceeds net income of 318.78 (OCF/NI = 1.32x), indicating cash-backed profits and favorable accruals (NI − OCF = −102.35). OCF/EBITDA is ~0.91, consistent with normal working capital seasonality. Free cash flow of 331.95 after capex of 90.79 confirms strong cash generation capacity, with capex at ~1.6% of revenue implying low capital intensity. Working capital appears well managed: accounts receivable (302.27) and inventories (176.30) are more than offset by accounts payable (380.21), limiting cash tied up in operations. Non-operating cash inflows (e.g., interest income) contribute but are not the primary driver of cash generation. Investing CF of -89.18 and financing CF of -111.00 reflect disciplined reinvestment and net cash returns to stakeholders. Overall, cash conversion supports both growth investment and shareholder returns without external financing.

Dividend Sustainability

The calculated payout ratio is 19.7% based on EPS of 143.98 JPY and net income of 318.78 (100M JPY), indicating conservative distributions relative to earnings. FCF coverage of dividends is strong at ~5.28x, implying dividends of about 62.9 (100M JPY) inferred from payout metrics. With OCF of 421.13 and substantial net cash, dividend capacity is well supported even under moderate stress scenarios. While DOE is reported at 0.0% (likely a tagging/definition artifact) and detailed DPS data are unreported, the implied policy orientation appears to prioritize sustainable, earnings-linked payouts. Near-term sustainability is high given cash generation, low leverage, and modest capex requirements; upward flexibility depends on growth investments and potential changes in non-operating income.

Risk Assessment

Business Risks:

• Input cost and commodity price volatility affecting gross margins
• Foreign exchange fluctuations on imported food procurement
• Competitive pricing pressure in food retail/wholesale
• Food safety and quality control risks impacting brand trust
• Franchise/partner execution risk and store network management
• Labor cost inflation and staffing constraints
• Energy and utility cost volatility impacting store economics
• Supply chain disruptions (logistics, imports) affecting availability and costs

Financial Risks:

• Normalization of non-operating income (e.g., lower interest income) reducing ordinary income
• Working capital swings impacting near-term cash flows
• Potential increase in interest rates impacting financing costs/valuation (despite net cash)
• FX hedging effectiveness and transaction exposure
• Limited visibility on lease liabilities and off-balance commitments

Key Concerns:

• Reliance on non-operating income to bridge ordinary income above operating income
• Sensitivity of gross margin to FX and commodity trends
• Data granularity gaps (SG&A breakdown, detailed dividend data) limiting diagnostic depth

Investment Implications

Key Takeaways:

• High-quality growth: revenue +8.6% with operating income +16.1% indicates operating leverage
• Strong profitability: 7.2% OPM, 8.4% EBITDA margin, ROE ~19.8%
• Robust balance sheet: net cash >1,000 (100M JPY) equivalent and low leverage (0.61x D/E)
• Excellent cash conversion: OCF/NI 1.32x and FCF 331.95 supporting reinvestment and dividends
• Conservative payout: ~20% payout ratio with ~5.3x FCF coverage enhances dividend durability
• Non-operating income contribution notable; monitor sustainability amid rate/market shifts

Metrics to Watch:

• Same-store sales growth and traffic/ticket trends
• Gross margin and SG&A ratio (bps changes) to gauge operating leverage
• OCF/NI ratio and working capital days (AR, inventory, AP)
• Capex vs. store openings and unit economics
• Ordinary income composition (interest and other non-operating items)
• FX rates and key commodity price indices
• Net cash balance and interest income trajectory

Relative Positioning: Within Japan’s food retail/wholesale space, Kobe Bussan exhibits above-average ROE, superior cash generation, and a net cash balance sheet, supported by an asset-light, scale-driven model; margins are healthy for the category, though part of the ordinary income uplift currently benefits from non-operating income.

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