Art Green Co., Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.51B
• Operating Income: ¥14M
• Net Income: ¥3M
• EPS: ¥2.90

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

ArtGreen Co., Ltd. (34190) reported FY2025 Q4 (consolidated, JGAAP) results with essentially flat revenue at 25.13 (100M JPY), down 0.1% YoY, but a sharp deterioration in profitability near the operating line. Operating income fell 61.5% YoY to 0.14, driving ordinary income down 66.1% to 0.12 and net income down 75.9% to 0.03. Gross profit was 10.43, implying a healthy gross margin of 41.5%, yet SG&A of 10.28 absorbed nearly all gross profit, leaving an operating margin of about 0.6%. The ordinary margin was approximately 0.5%, and the net margin shrank to about 0.1%, underscoring fragile bottom-line profitability. The DuPont decomposition shows ROE of 0.6%, driven by very low net margin (~0.1%), reasonable asset turnover (1.77x), and moderate leverage (2.70x). Despite weak profits, liquidity remains strong with a current ratio of 262% and quick ratio of 255%, supported by cash and deposits of 6.74. The capital structure shows total liabilities of 8.93 vs equity of 5.25 (D/E 1.70x), with long-term loans of 4.22; interest coverage is modest at 2.12x. Cash flow quality is a concern: operating cash flow was -0.32, investing CF -0.48, and free cash flow -0.80, funded by financing inflows of 0.53. The OCF/Net income ratio at -10.67x indicates poor earnings-to-cash conversion, likely due to working capital outflows and/or timing effects near a breakeven earnings level. The effective tax rate was an elevated 72.7%, magnifying the compression from pre-tax to net profit given the small profit base. Working capital appears cash-intensive: accounts receivable of 3.35 and inventories of 0.35 against revenue of 25.13 imply an estimated cash conversion cycle in the mid-20 days, though exact days depend on sales mix and timing. The company retains balance sheet flexibility via cash holdings, but the negative FCF and thin margins highlight execution risk if operating conditions soften. Dividend information is unreported, so payout assessment is constrained; with EPS at 2.90 yen and negative FCF, any dividend would likely rely on balance sheet capacity rather than internally generated cash in this period. Data limitations include several unreported line items (e.g., DPS, some SG&A details, short-term loans, interest-bearing debt total), so conclusions rely only on disclosed non-zero data. Overall, FY2025 shows resilient top line but significant operating leverage and pressure on earnings quality, making cash conversion and cost control key monitoring points.

Profitability Analysis

ROE_decomposition: ROE 0.6% = Net margin ~0.1% x Asset turnover 1.771 x Financial leverage 2.70x. Net margin is the primary drag; asset utilization is relatively efficient for the scale, and leverage is moderate. margin_quality: Gross margin 41.5% (10.43/25.13) suggests decent value-add. SG&A ratio ~40.9% (10.28/25.13) consumed nearly all gross profit, leaving operating margin ~0.6% (0.14/25.13). Ordinary margin ~0.5% (0.12/25.13) after net non-operating expense (~0.02). Net margin ~0.1% (0.03/25.13) pressured further by a high 72.7% effective tax rate on a small profit base. operating_leverage: Revenue declined only 0.1% YoY while operating income fell 61.5% YoY, evidencing high operating leverage near breakeven. Small revenue or cost variances materially impact operating profit due to a largely fixed SG&A base.

Growth Assessment

revenue_sustainability: Revenue was stable at 25.13 (-0.1% YoY). The stability implies no major demand shock, but growth momentum is absent. Receivables of 3.35 (~49 days of sales) suggest normal collection cycles, supporting sustainability. profit_quality: EBITDA of 0.30 (margin 1.2%) and operating margin ~0.6% indicate thin operating economics. Ordinary income of 0.12 and net income of 0.03 point to sensitivity to costs and non-operating items. Elevated tax burden exacerbated the drop from pre-tax to net. outlook: Near-term earnings trajectory hinges on SG&A control and gross margin defense. With high operating leverage, even low single-digit revenue changes or cost inflation could swing profitability. Absent disclosed growth initiatives (R&D unreported; SG&A breakdown unreported), a cautious, range-bound outlook on profit improvements is reasonable until cash conversion improves.

Financial Health

liquidity: Current assets 11.97 vs current liabilities 4.56 yield a current ratio of 262.3% and quick ratio of 254.6%, indicating ample short-term liquidity supported by cash of 6.74 and receivables of 3.35. solvency: Total liabilities 8.93 vs equity 5.25 imply D/E of 1.70x; leverage is moderate for the scale. Long-term loans are 4.22 within noncurrent liabilities of 4.37, evidencing term debt reliance. capital_structure: Equity 5.25 (capital stock 1.43, capital surplus 0.95, retained earnings 2.86) supports a leverage multiple of 2.70x (assets/equity). Interest coverage is 2.12x, leaving limited buffer if earnings slip. Net cash position cannot be precisely determined as short-term loans and total interest-bearing debt are unreported; using disclosed long-term loans vs cash suggests balance sheet cushion, but this is data-limited.

Cash Flow Quality

earnings_quality: OCF/Net income at -10.67x flags weak conversion of accounting profit into cash, likely driven by working capital outflows and timing at low profitability levels. FCF_analysis: OCF -0.32 and investing CF -0.48 result in FCF of -0.80 (using OCF + investing CF). Capex was modest at -0.04, implying most investing outflow was other investments (e.g., intangibles 0.64, investment securities 0.18) or M&A; details are unreported. working_capital: AR 3.35 (~49 days), inventory 0.35 (~5 days on revenue proxy), and AP 1.10 (~27 days on cost of sales) suggest an estimated cash conversion cycle in the mid-20 days. Negative OCF despite stable revenue indicates a net working capital build or slower collections versus payables timing.

Dividend Sustainability

payout_ratio_assessment: DPS and total dividends are unreported; payout ratio is not calculable. EPS was 2.90 yen, leaving a narrow earnings base to fund distributions if any. FCF_coverage: FCF was -0.80, implying any dividend (if paid) would not be covered by free cash in the period and would rely on cash on hand or financing. policy_outlook: With unreported dividend data and negative FCF, the prudent stance would be to prioritize balance sheet resilience until OCF normalizes. Absent explicit policy disclosure, dividend visibility is low.

Risk Assessment

Business Risks:

• High operating leverage near breakeven: small revenue or cost changes can swing profit materially
• Margin pressure from SG&A intensity (SG&A ~41% of sales) despite healthy gross margin
• Potential cost inflation (labor, logistics, rent) not fully passed through to prices
• Tax rate volatility affecting net income at low profit levels
• Execution risk in improving working capital and cash conversion

Financial Risks:

• Negative operating cash flow and FCF requiring financing inflows (Financing CF +0.53)
• Modest interest coverage (2.12x) exposing earnings to rate or profit shocks
• Leverage at D/E 1.70x; refinancing risk if credit conditions tighten
• Data limitations on short-term borrowings and total interest-bearing debt obscure true net leverage

Key Concerns:

• Sustained thin operating margin (~0.6%)
• Weak OCF/NI (-10.67x) indicating low earnings quality
• High effective tax rate (72.7%) depressing net profit
• Reliance on financing to fund negative FCF
• Lack of disclosed dividend policy amid constrained profitability

Investment Implications

Key Takeaways:

• Top line stable but profitability highly sensitive; operating income down 61.5% on -0.1% revenue
• Gross margin solid (41.5%), yet SG&A intensity erodes operating profit
• ROE low at 0.6% from very thin net margins despite acceptable asset turnover
• Liquidity strong (current ratio 262%, cash 6.74), providing near-term cushion
• Cash flow quality weak (OCF -0.32, FCF -0.80), financed by 0.53 of net inflows
• Leverage moderate (D/E 1.70x), interest coverage 2.12x leaves limited headroom

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio
• OCF and OCF/NI conversion ratio
• Working capital days (AR, inventory, AP) and cash conversion cycle
• Gross margin resilience
• Interest coverage and effective tax rate normalization
• Debt maturity profile and any changes in short-term borrowings (currently unreported)

Relative Positioning: Within small-cap Japanese names, ArtGreen exhibits adequate liquidity and moderate leverage but weaker earnings quality and profitability near breakeven. The company’s ability to stabilize margins and convert earnings to cash will determine whether it can close the gap versus peers with stronger FCF profiles.

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