KURIYAMA HOLDINGS CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥66.05B
• Operating Income: ¥3.68B
• Net Income: ¥2.76B
• EPS: ¥183.87

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

Verdict: Solid top-line growth with modest margin compression; earnings supported by strong operating cash flow and non-operating gains, delivering healthy EPS growth. Revenue rose 12.2% YoY to 660.47, while operating income declined 4.5% YoY to 36.80, indicating some operating margin pressure. Gross profit reached 185.74, implying a gross margin of 28.1%. Operating margin stands at 5.6% (36.80/660.47), while ordinary income increased 1.3% YoY to 43.03, lifting the ordinary margin to 6.5%. Net income surged 30.9% YoY to 36.12, pushing net margin to 5.5%, aided by non-operating income and a manageable tax rate (26.0%). Based on revenue growth vs operating income decline, we estimate operating margin compressed by roughly 98 bps YoY (from ~6.6% to ~5.6%). Non-operating income of 8.35 (interest income 1.48, dividends 0.41) offset non-operating expenses of 4.37, contributing to ordinary income resilience. Cash generation was a highlight: operating cash flow of 55.58 exceeded net income by 1.54x, pointing to high earnings quality. Balance sheet strength is evident with current ratio 245%, quick ratio 155%, and net cash position (cash 119.41 vs total loans 116.68), alongside an estimated equity ratio of ~53.8%. ROE is 7.7% per DuPont (net margin 5.5%, asset turnover 0.760, leverage 1.86x), a decent level but below best-in-class industrials. ROIC of 5.9% is below the 7–8% benchmark, implying scope to improve capital efficiency. EBITDA of 47.84 implies an EBITDA margin of 7.2% and robust interest coverage of 29.1x, reducing financial risk. Capital allocation appears prudent: capex of 10.50 is covered comfortably by OCF, implying positive FCF. The 34% payout ratio looks sustainable; estimated FCF coverage of dividends is strong. Forward-looking, the key watchpoints are margin recovery (cost pass-through, SG&A discipline) and sustaining cash conversion; with balance sheet flexibility, the company is positioned to invest and maintain dividends.

Profitability Analysis

ROE (7.7%) = Net Profit Margin (5.5%) × Asset Turnover (0.760) × Financial Leverage (1.86x). The most notable change vs last year is likely net margin compression at the operating level, inferred from revenue +12.2% YoY and operating income −4.5% YoY, implying ~98 bps operating margin contraction. This likely reflects higher cost of sales and/or SG&A inflation outpacing pricing and mix, despite gross margin of 28.1% remaining reasonable. The margin pressure seems partly cyclical (input cost and wage inflation) and partly execution-related (cost pass-through and overhead absorption), suggesting partial recovery is feasible but not guaranteed within 1–2 quarters. Financial leverage at 1.86x is moderate, and with interest coverage at 29x, leverage is not the driver of ROE changes. Asset turnover at 0.760 indicates reasonable asset efficiency; given strong revenue growth with stable asset base, turnover is a supportive factor. Watch for SG&A ratio discipline (currently ~22.3% of sales) and whether SG&A growth is normalized below revenue growth to restore operating leverage.

Growth Assessment

Revenue growth of 12.2% YoY is solid, suggesting healthy end-demand across key product lines. Profit growth is mixed: ordinary income +1.3% YoY and net income +30.9% YoY reflect a lift from non-operating items and taxes, while operating income −4.5% YoY indicates underlying margin pressure. The revenue expansion appears sustainable near term if pricing and volumes hold, but profit sustainability hinges on cost pass-through and SG&A control. Non-operating income (8.35) contributed meaningfully (non-operating income ratio 23.1%), which may not be consistently repeatable. EBITDA margin at 7.2% provides headroom, but operating margin at 5.6% is below the implied prior-year level (~6.6%), highlighting the need for efficiency gains. Outlook: focus on price-cost dynamics (raw materials, logistics), mix upgrades, and inventory normalization to stabilize gross margin; SG&A efficiency to restore operating leverage. With ROIC at 5.9%, management likely prioritizes margin and capital turns to reach a 7–8% target range.

Financial Health

Liquidity is strong: current ratio 245.1% and quick ratio 155.2% well above benchmarks; no warning (both >1.0). Solvency is solid: estimated equity ratio ~53.8% (equity 467.60 / assets 868.77). Debt-to-equity at 0.86x (reported) and interest coverage 29.13x indicate conservative risk; cash (119.41) broadly matches total loans (116.68), implying near-net-cash. Maturity mismatch risk is low: current assets 507.67 vs current liabilities 207.10, with cash and receivables (231.83) covering short-term debt (30.39) and accounts payable (78.35) by a wide margin. Long-term loans 86.29 are manageable given cash flow generation. No off-balance sheet obligations were reported in the provided data. Working capital is ample (300.56), reducing refinancing risk.

Cash Flow Quality

OCF of 55.58 exceeds net income of 36.12 (OCF/NI 1.54x), indicating high-quality earnings with strong cash conversion. Using capex as a proxy for investing outflows, FCF ≈ 45.08 (OCF 55.58 − capex 10.50), comfortably positive. This FCF level supports both maintenance capex and dividends, with additional capacity for selective growth investments or debt reduction. No signs of aggressive working capital management are evident from the snapshot; inventories are sizable at 186.22, but OCF strength suggests inventory and receivable collections were supportive during the period. Financing CF is −30.13, consistent with disciplined capital returns and/or debt service. Overall, cash flow quality is robust this quarter.

Dividend Sustainability

With a calculated payout ratio of 34.0%, dividends appear conservative relative to earnings. While total dividends paid are unreported, an estimate using payout × NI implies ~12.3, versus FCF of ~45.1, suggesting ~3.7x coverage. The balance sheet’s near-net-cash position and strong liquidity further underpin sustainability. Absent a structural drop in operating margin or a spike in capex, the current dividend level appears well covered by cash generation. Policy outlook likely remains focused on stable to progressive dividends supported by FCF and a prudent capital allocation stance.

Risk Assessment

Business Risks:

• Input cost volatility (rubber, petrochemicals) potentially pressuring gross margins if price pass-through lags.
• Demand cyclicality in end-markets (automotive, construction, industrial) affecting volumes and mix.
• Inventory obsolescence or markdown risk given inventories of 186.22 amid changing demand.
• Dependence on non-operating income to support ordinary income in periods of margin pressure.

Financial Risks:

• Potential FX exposure on imported materials impacting costs and earnings volatility.
• Refinancing and interest rate risk limited but present on total loans of 116.68 (long-term 86.29).
• ROIC at 5.9% below the 7–8% benchmark implies sensitivity to margin and turnover shortfalls.

Key Concerns:

• Operating margin contraction (~98 bps YoY) despite double-digit revenue growth.
• Non-operating income (8.35) contribution is material (23.1%); sustainability is uncertain.
• ROE of 7.7% is adequate but may stall without margin recovery or improved asset turns.

Investment Implications

Key Takeaways:

• Strong top-line (+12.2% YoY) with operating margin compression to 5.6%.
• Net income +30.9% YoY supported by non-operating gains and favorable tax; quality of earnings underpinned by OCF/NI of 1.54x.
• Balance sheet strength: current ratio 245%, estimated equity ratio ~54%, near-net-cash position.
• ROIC 5.9% below target; improving cost pass-through and SG&A efficiency are pivotal for value creation.
• FCF ~45 supports dividend sustainability (estimated ~3.7x coverage at 34% payout).

Metrics to Watch:

• Operating margin trajectory and SG&A ratio vs revenue.
• Gross margin vs raw material and logistics cost indicators.
• Inventory levels and days on hand to gauge working capital normalization.
• Non-operating income sustainability (interest/dividend trends).
• ROIC progression toward 7–8% target range.
• Cash conversion (OCF/NI) and capex intensity.

Relative Positioning: Within Japanese industrial components and materials peers, the company exhibits above-average liquidity and cash conversion, moderate profitability (ROE ~7.7%), and sub-target ROIC. Near-term performance is competitive on growth but lags leaders on margin efficiency; balance sheet resilience is a differentiator.

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