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

For FY2025 Q4, Sanyo Trading Co., Ltd. delivered modest top-line growth with revenue of ¥132.7bn (+2.7% YoY), but profitability softened as operating income declined 9.1% YoY to ¥6.43bn and net income fell 11.4% YoY to ¥4.62bn. The gross margin stood at 16.8%, and the operating margin was approximately 4.8%, indicating margin compression in the face of higher costs and/or elevated SG&A intensity. Ordinary income was ¥6.88bn, suggesting limited non-operating upside, while interest expense was only ¥71m, underscoring a light financial burden. Net profit margin was 3.48%, consistent with a trading-oriented model where asset turnover is a key driver of returns. DuPont analysis shows ROE at 8.99%, built on a 3.48% net margin, 1.628x asset turnover, and 1.59x financial leverage—an efficiency-led ROE rather than leverage-driven. Cash flow quality was solid: operating cash flow (OCF) reached ¥7.16bn, 1.55x net income, and free cash flow (FCF) was ¥7.43bn due to positive investing cash flows (likely asset disposals or lower capex). Liquidity remains strong with a current ratio of 246.5% and a quick ratio of 149.7%, supported by substantial working capital of ¥37.5bn. The balance sheet appears conservative, with an implied equity ratio of roughly 63% (equity ¥51.3bn vs. assets ¥81.5bn) despite the reported equity ratio field being unreported. Interest coverage is very high at 90.2x, indicating minimal near-term refinancing risk. Inventory of ¥24.8bn is significant, consistent with the company’s trading model; managing turnover will be important as revenue growth was positive but operating profit declined. The effective tax rate shown as 0.0% is a placeholder; given reported income tax of ¥2.69bn and net income, the implied tax rate is likely in the mid-30% range. Financing cash outflow of ¥3.21bn indicates distributions and/or debt reduction, consistent with the company’s strong cash generation. Dividend data are unreported (DPS and payout shown as zero placeholders), so dividend policy cannot be evaluated from this dataset despite ample capacity suggested by FCF. Overall, the company exhibits resilient cash generation, robust liquidity, and moderate ROE, though pressure on operating margins and inventory discipline merit close monitoring. Data limitations exist where zeros indicate unreported items; analysis focuses on disclosed non-zero values.

Profitability Analysis

ROE of 8.99% is driven by a 3.48% net margin, 1.628x asset turnover, and 1.59x financial leverage, highlighting efficiency over leverage as the primary return driver. Gross margin of 16.8% and operating margin of roughly 4.8% reflect a trading-oriented mix with modest value-add, and the 9.1% YoY decline in operating income despite revenue growth points to negative operating leverage (costs rising faster than gross profit). EBITDA of ¥6.74bn yields a 5.1% EBITDA margin; low D&A (¥312m) indicates limited fixed-asset intensity. Ordinary income (¥6.88bn) only modestly exceeds operating income, suggesting limited reliance on non-operating gains. Interest burden is negligible (interest expense ¥71m; coverage 90.2x), so financial costs are not diluting margins. Margin quality appears pressured at the operating level, likely from higher input costs or SG&A; maintaining pricing power and improving mix will be key to stabilizing OPM. Overall profitability remains adequate but sensitive to gross margin and overhead efficiency.

Growth Assessment

Revenue growth was +2.7% YoY to ¥132.7bn, demonstrating stable demand across core segments, but profit growth lagged as operating income fell 9.1% and net income declined 11.4%. The divergence between sales and profits suggests cost inflation or weaker mix outweighed topline gains. Asset turnover at 1.628x remains the principal contributor to ROE, consistent with a trading model; sustaining growth will require disciplined working capital and inventory turnover. Given the strong OCF and positive investing cash flows, growth investment appears manageable without stressing the balance sheet. Profit quality remains acceptable given OCF/NI of 1.55x, indicating earnings are well-backed by cash. Near-term outlook implies cautious growth with a focus on recovering operating margins; revenue sustainability appears reasonable, but profit recovery hinges on cost pass-through, product mix, and SG&A control. Without segment details, the durability of growth by vertical is not assessed; however, the aggregate profile points to steady but margin-sensitive operations.

Financial Health

Liquidity is strong: current ratio 246.5%, quick ratio 149.7%, and working capital of ¥37.5bn reflect ample short-term coverage. Solvency appears sound with an implied equity ratio around 63% (equity ¥51.3bn against assets ¥81.5bn), despite the reported equity ratio being unreported in the dataset. Debt-to-equity of 0.54x (based on total liabilities-to-equity) indicates moderate leverage, largely operating liabilities typical of trading companies. Interest coverage of 90.2x underscores minimal refinancing risk and comfortable debt service capacity. The capital structure is conservative, affording flexibility to absorb cyclical shocks. Inventory is sizable at ¥24.8bn; maintaining turnover is important to prevent working capital drag. Overall financial health is robust, supported by strong liquidity, moderate leverage, and substantial equity buffer.

Cash Flow Quality

Earnings quality is solid with OCF of ¥7.16bn at 1.55x net income, indicating limited accrual risk and strong cash conversion. Free cash flow of ¥7.43bn benefited from a ¥0.27bn positive investing cash flow, suggesting low capex intensity or asset disposals; for a trading model, this is consistent with a light investment footprint. Financing cash outflow of ¥3.21bn indicates capital returns and/or debt reduction funded by internally generated cash. Working capital management appears effective in aggregate given positive OCF alongside inventory of ¥24.8bn; however, without receivables/payables detail, the drivers within the cash conversion cycle cannot be decomposed. With low D&A and stable EBITDA, cash generation is primarily driven by operating efficiency and working capital discipline rather than non-cash charges. Overall, cash flow quality supports the reported earnings and provides capacity for investment or distributions.

Dividend Sustainability

Dividend figures (DPS and payout) are unreported in this dataset and appear as zero placeholders; therefore, dividend level and policy cannot be assessed directly. From a capacity perspective, EPS of ¥160.23 and FCF of ¥7.43bn suggest ample headroom to fund ordinary dividends while maintaining balance sheet strength. OCF coverage of earnings is robust (1.55x), providing a cushion for distributions even in a flat or mildly weaker earnings scenario. Financing cash outflows of ¥3.21bn imply some capital returns and/or debt servicing during the period, but the split is undisclosed. In the absence of disclosed DPS, payout ratio, and policy guidance, sustainability assessment is limited; however, the company’s liquidity, low interest burden, and strong FCF indicate capacity to maintain or consider distributions if policy permits.

Risk Assessment

Business Risks:

• Margin compression risk from input cost inflation and limited pass-through in a trading model
• Inventory obsolescence or holding risk given ¥24.8bn inventory base
• Demand cyclicality across industrial end-markets affecting volumes and mix
• FX volatility impacting import costs and gross margins, depending on hedging and pass-through
• Supplier and customer concentration risks typical of specialized trading businesses
• Competitive pressure limiting pricing power and gross margin resilience

Financial Risks:

• Working capital intensity potentially straining cash if growth accelerates without turnover improvement
• Exposure to credit risk from customers (receivables not disclosed here)
• Potential volatility in non-operating gains/losses that affect ordinary income
• Interest rate increases marginally raising financing costs, albeit from a low base

Key Concerns:

• Operating income down 9.1% YoY despite revenue growth, signaling negative operating leverage
• Dependence on asset turnover to drive ROE, with limited margin buffer
• Large inventory balance requires vigilant turnover management to sustain OCF

Investment Implications

Key Takeaways:

• Top-line growth of 2.7% YoY but operating profit down 9.1% indicates margin pressure
• ROE at 8.99% is efficiency-led (1.628x asset turnover) rather than leverage-driven
• Strong liquidity (current ratio 246.5%, quick ratio 149.7%) and moderate leverage (0.54x)
• Cash flow quality is strong: OCF/NI 1.55x and FCF ¥7.43bn
• Interest coverage at 90.2x minimizes refinancing risk
• Inventory-heavy model underscores the need for turnover discipline to support margins and cash

Metrics to Watch:

• Gross and operating margins (pricing power and SG&A efficiency)
• Inventory turnover and days on hand
• OCF/NI ratio and FCF sustainability
• Asset turnover (revenue-to-asset efficiency)
• Ordinary income vs. operating income gap (non-operating volatility)
• Effective tax rate normalization (based on disclosed tax expense)

Relative Positioning: Within Japan’s trading-oriented mid-cap universe, the company exhibits conservative balance sheet strength, high liquidity, and efficiency-driven returns with modest margins; profitability is more sensitive to cost control and turnover than to financial leverage.

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