Sanyo Trading Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥132.70B
• Operating Income: ¥6.43B
• Net Income: ¥4.39B
• EPS: ¥160.23

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

FY2025 Q4 results show a mixed picture for Sanyo Trading: top-line resilience but margin pressure, leading to lower profits despite strong cash generation and solid balance sheet strength. Revenue grew 2.7% YoY to 1,327.0, supported by stable demand across core trading lines. Gross profit reached 225.6 with a gross margin of 17.0%, broadly stable. Operating income declined 9.1% YoY to 64.3, taking the operating margin to 4.85%. Based on last year’s implied base, operating margin compressed by about 63 bps (from ~5.48% to 4.85%). Net income fell 11.4% YoY to 46.2, putting the net margin at 3.48% and implying a ~56 bps compression from ~4.04% a year ago. Ordinary income decreased 13.0% YoY to 68.8, indicating additional pressure below the operating line. Non-operating income of 10.95 (including dividends of 1.40 and interest income of 0.54) partially cushioned operating softness; non-operating income equates to about 24% of operating income, a meaningful but not excessive contribution. Earnings quality was strong: operating cash flow of 71.6 exceeded net income by 1.55x, and free cash flow of 74.3 benefited from modest capex and a net inflow in investing activities. The balance sheet remains defensive with a current ratio of 249% and low leverage (D/E 0.59x; interest coverage 78x). ROE is 9.0% on a DuPont basis (NPM 3.5%, asset turnover 1.63x, leverage 1.59x), broadly in line with a reasonable cost of equity for a trading company of this size. ROIC of 9.4% exceeds the 7–8% sector target, indicating healthy capital efficiency despite the margin compression. The effective tax rate of 37.7% weighed on bottom-line conversion. Inventory levels (259.9) remain sizable but are supported by strong liquidity and positive OCF, reducing near-term risk. With equity-method income not disclosed and non-operating income modest, earnings appear predominantly driven by core operations plus routine financial income. Looking ahead, restoring operating margin through pricing discipline and SG&A efficiency will be key to sustaining ROE at or above 9%, while balance sheet strength and FCF provide ample capacity to fund dividends and selective growth investments.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.0% = Net Profit Margin 3.5% × Asset Turnover 1.628 × Financial Leverage 1.59x. The largest change driver YoY is margin compression, inferred from operating income (-9.1% YoY) versus revenue (+2.7% YoY), which implies operating margin fell ~63 bps (from ~5.48% to 4.85%); net margin fell ~56 bps (from ~4.04% to 3.48%). Business reasons likely include mix shifts toward lower-margin lines and/or competitive pricing and a higher effective tax rate (37.7%) dampening net conversion. Non-operating income contributed meaningfully (10.95; ~24% of operating income), cushioning ROE but not altering the margin pressure narrative at the operating level. Sustainability: asset turnover at 1.63x remains a structural strength; leverage is modest at 1.59x and unlikely to be the lever for higher ROE. Margin headwinds could ease if pricing normalizes or SG&A efficiency improves, but absent that, the current ROE run-rate hinges on maintaining turnover and stable non-operating items. We cannot confirm SG&A growth versus revenue due to lack of YoY SG&A detail; however, the decline in operating income despite higher sales flags operating deleverage risk.

Growth Assessment

Top-line growth was modest at +2.7% YoY to 1,327.0, indicating steady demand but limited pricing power. Operating profit declined 9.1% YoY to 64.3, reflecting margin compression and operating deleverage. Ordinary income fell 13.0% YoY to 68.8, suggesting incremental pressure from non-operating items or FX compared to the prior year. Net income decreased 11.4% YoY to 46.2, with a higher effective tax rate (37.7%) further constraining profit growth. EBITDA of 69.1 implies an EBITDA margin of 5.2%, consistent with a low-double-digit operating leverage business; any incremental gross margin pressure directly impacts earnings. The profit mix shows core operating income as the primary driver with non-operating income providing a secondary, recurring cushion (dividends, interest). With ROIC at 9.4% (above the 7–8% benchmark), reinvestment returns remain healthy; near-term growth depends on stabilizing margins and disciplined working capital. Outlook: steady revenue with focus on margin recovery, inventory discipline, and maintaining ROIC >8%.

Financial Health

Liquidity is strong: current ratio 248.8% and quick ratio 156.3% comfortably exceed benchmarks; no warning flags (CR is not <1.0). Working capital of 418.1 provides a large buffer. Short-term loans (29.1) are modest relative to current assets (699.2), indicating low maturity mismatch risk; cash (119.0), receivables (236.8), and inventories (259.9) together exceed current liabilities (281.1) by a wide margin. Solvency: D/E at 0.59x is conservative; interest coverage of 78.2x indicates negligible refinancing risk. Long-term loans are minimal (1.0), reducing duration risk. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF of 71.63 exceeds net income of 46.15 (OCF/NI = 1.55x), indicating high-quality earnings with cash conversion above benchmark. Free cash flow of 74.30 was strong, aided by modest capex (-6.07) and a positive net investing cash flow (+2.67), which likely includes asset disposals or investment redemptions; this inflow may not be recurring. FCF comfortably covers typical shareholder returns and organic needs. No clear signs of working capital stress are evident given positive OCF alongside high inventories; however, inventory remains elevated versus payables (259.9 vs 125.5), so continued monitoring is warranted. No manipulation indicators are apparent in the disclosed figures.

Dividend Sustainability

Using the calculated payout ratio of 34.6% (based on EPS and net income), the dividend appears well-covered by both earnings and free cash flow (FCF coverage 4.66x). With strong liquidity, low leverage, and robust interest coverage, the company has ample capacity to sustain and incrementally grow dividends, subject to profit stability. While reported DOE is shown as 0.0% and DPS items are unreported, available cash flow metrics support dividend sustainability under current operating conditions.

Risk Assessment

Business Risks:

• Margin compression amid modest top-line growth (operating margin down ~63 bps YoY).
• Inventory valuation and turnover risk given sizable inventory balances (259.9).
• Dependence on non-operating income (~24% of operating income) for cushioning profits.
• Potential pricing pressure or mix shifts toward lower-margin products.

Financial Risks:

• Potential one-time nature of positive investing cash flow inflows that boosted FCF.
• Tax rate volatility (effective tax rate 37.7%) impacting net profit.
• FX exposure typical for trading companies, which can affect both operating and non-operating lines.

Key Concerns:

• Operating deleverage as SG&A detail is unavailable; profits fell despite revenue growth.
• Sustained margin recovery is needed to maintain ROE at ~9% without increasing leverage.
• Equity-method income not disclosed; any affiliate volatility could be underappreciated.

Investment Implications

Key Takeaways:

• Revenue resilient (+2.7% YoY) but profitability compressed; operating margin down ~63 bps.
• ROE at 9.0% with ROIC 9.4% demonstrates solid capital efficiency despite softer margins.
• Earnings quality strong (OCF/NI 1.55x) and FCF robust (74.3), supporting shareholder returns.
• Balance sheet conservative (D/E 0.59x; current ratio 249%; interest coverage 78x).
• Non-operating income plays a meaningful supporting role; reliance remains moderate.

Metrics to Watch:

• Operating and net margin trajectory (pricing and mix).
• Inventory turnover and working capital movements.
• Non-operating income composition (FX, dividends, other gains).
• Effective tax rate normalization.
• ROIC relative to the >8% benchmark and stability of asset turnover.

Relative Positioning: Within Japan’s specialized trading peer set, Sanyo Trading exhibits above-target ROIC, conservative leverage, and superior cash conversion, offset by near-term operating margin compression and moderate reliance on 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