SUMCO CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥304.44B
• Operating Income: ¥5.87B
• Net Income: ¥18.65B
• EPS: ¥-2.85

Income Statement

Balance Sheet

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

SUMCO’s FY2025 Q3 consolidated results under JGAAP show modest top-line growth but a sharp deterioration in profitability, consistent with a cyclical trough in semiconductor wafer demand and pricing. Revenue rose 2.6% YoY to ¥304.4bn, but operating income collapsed 80.4% YoY to ¥5.9bn, implying significant negative operating leverage. Gross margin was 18.5%, indicating cost absorption pressure and/or ASP headwinds despite stable volumes. Operating margin compressed to roughly 1.9%, and ordinary income fell to ¥2.2bn, reflecting non-operating costs including ¥1.9bn in interest expense. Net income turned to a ¥1.0bn loss, with tax expense of ¥7.4bn exceeding ordinary income, suggesting one-off or deferred tax-related effects that depressed bottom line. DuPont shows a net margin of -0.33%, asset turnover of 0.266x, and financial leverage of 1.76x, yielding a calculated ROE of -0.15%. Liquidity appears solid: current assets of ¥435.1bn and current liabilities of ¥163.6bn translate to a current ratio of 2.66x and a quick ratio of 2.50x, providing operational flexibility. The balance sheet also looks conservatively structured, with total liabilities of ¥515.4bn against total equity of ¥649.4bn (liabilities-to-equity 0.79x). While the reported equity ratio field is not disclosed, the implied equity-to-asset ratio from the balance sheet is approximately 56.8%, indicating a strong capital base. Working capital is ample at ¥271.5bn, supporting inventory and receivable needs through the cycle. Cash flow statements are not disclosed in the provided data, limiting assessment of earnings-to-cash conversion and capex intensity within the period. Dividend per share is shown as zero for the period, consistent with profit pressure and a prudent cash stance during an investment-heavy phase; however, full policy context is not provided here. Interest coverage on an operating basis is about 3.1x, still adequate but down meaningfully, highlighting sensitivity to further earnings pressure. Overall, the profile reflects a company navigating a cyclical bottom with resilient liquidity and balance sheet strength, but with compressed margins and unusual tax charges depressing net income. Near-term earnings recovery hinges on utilization improvements, ASP stabilization, and normalization of tax effects.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin -0.33% × asset turnover 0.266 × financial leverage 1.76 = ROE -0.15%, aligned with the reported figure. The negative net margin is primarily driven by severe margin compression and a sizable tax charge that exceeds ordinary income. Gross margin of 18.5% suggests notable underutilization and/or unfavorable pricing/mix; cost of sales at ¥240.3bn consumed the majority of revenue. Operating margin is ~1.9% (¥5.9bn/¥304.4bn), down sharply YoY, indicating high fixed-cost absorption and negative operating leverage. Ordinary margin is ~0.7%, pressured by ¥1.9bn interest expense and other non-operating items. The tax line (¥7.4bn) turned a slim pre-tax profit into a net loss, pointing to non-recurring tax adjustments or deferred tax asset valuation changes rather than core business weakness. EBITDA metrics are not assessable from the provided data (depreciation not disclosed), so EBITDA margin shown as 0.0% should be treated as not available rather than zero. Overall, profitability deterioration is cyclically driven with additive effects from non-operating/tax items; operating leverage remains a key swing factor into recovery.

Growth Assessment

Revenue increased 2.6% YoY to ¥304.4bn, indicating some resilience in shipments or pricing relative to the prior year despite industry softness. However, the steep drop in operating income (-80.4% YoY) signals that growth quality is weak, with incremental revenue not translating into profit due to price/mix headwinds and fixed-cost absorption. The ordinary income of ¥2.2bn suggests non-operating drags (interest and others) also weighed on growth in comprehensive earnings. Net loss of ¥1.0bn was exacerbated by a large tax expense, likely non-recurring, which clouds the underlying trend. Sustainability of revenue depends on semiconductor cycle normalization, with utilization ramp-up and potential ASP stabilization needed to convert sales into earnings. Profit quality should improve if the cost base flexes with higher volumes and tax effects normalize. Outlook near term is cautious: small top-line gains could recur, but margin recovery is needed for meaningful earnings improvement; focus on contract pricing resets and capacity ramp economics will be pivotal.

Financial Health

Liquidity is robust with current assets of ¥435.1bn versus current liabilities of ¥163.6bn, yielding a current ratio of 2.66x and quick ratio of 2.50x. Working capital stands at ¥271.5bn, providing a buffer to manage inventory and receivable cycles. Solvency appears sound: total liabilities are ¥515.4bn against equity of ¥649.4bn, implying liabilities-to-equity of 0.79x. The implied equity ratio from the balance sheet is about 56.8% (equity/total assets), despite the equity ratio field not being disclosed in the dataset. Financial leverage at 1.76x (assets/equity) is moderate, consistent with a capital-intensive but prudently financed profile. Interest coverage is approximately 3.1x on operating income, adequate but thinner than typical mid-cycle levels. Overall capital structure supports ongoing operations and potential capex; however, prolonged margin pressure could compress coverage further.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in the provided dataset, so earnings-to-cash conversion and free cash flow (FCF) cannot be evaluated from this data. The reported OCF/Net Income ratio of 0.00 and FCF of 0 should be interpreted as not available rather than actual zeros. Given the negative net income and capital-intensive nature of the business, underlying FCF likely depends on working capital movements and capex timing, which are not provided. Working capital is sizable at ¥271.5bn; if inventories or receivables increased to support future demand, this could temporarily depress OCF despite cyclical positioning. Without cash flow disclosures, we cannot assess the quality of earnings or the degree of non-cash items (e.g., depreciation, deferred taxes) embedded in results.

Dividend Sustainability

Annual DPS is shown as 0.00 in the dataset, but comprehensive dividend policy details and cash flow coverage are not provided. With net income slightly negative and profitability compressed, a cautious dividend stance is consistent with preserving balance sheet flexibility during a cyclical trough. Payout and FCF coverage figures shown as 0.0 should be treated as not available rather than actual zeros due to undisclosed cash flows. Sustainability will hinge on the speed of operating margin recovery and capex requirements tied to capacity and technology upgrades. In the absence of OCF/FCF data, we cannot quantify coverage; however, the balance sheet strength (implied equity ratio ~57%) supports optionality once earnings normalize.

Risk Assessment

Business Risks:

• Cyclical semiconductor demand and pricing volatility impacting wafer ASPs and utilization
• High operating leverage leading to large profit swings on small volume/price changes
• Customer concentration risk with large IDM/ foundry clients and potential contract repricing
• Technology and yield risks tied to advanced node wafer specifications and defect density
• Energy and raw material cost fluctuations affecting gross margin
• Geopolitical and export control risks influencing end-demand and customer capex
• Supply chain disruptions for specialty gases, polysilicon, and equipment

Financial Risks:

• Compressed interest coverage (~3.1x) amid profit pressure
• Potential for elevated capex and depreciation increasing fixed-cost burden
• Tax volatility (large tax expense vs. modest pre-tax profit) influencing net income
• FX exposure affecting revenues and costs given global customer base
• Working capital swings impacting operating cash flow in downcycles

Key Concerns:

• Operating margin erosion to ~1.9% despite revenue growth
• Net loss driven by significant tax expense, obscuring underlying profitability
• Lack of disclosed cash flow data limiting assessment of earnings quality and FCF

Investment Implications

Key Takeaways:

• Top-line grew 2.6% YoY to ¥304.4bn, but profitability deteriorated sharply
• Gross margin at 18.5% and operating margin at ~1.9% reflect negative operating leverage
• Ordinary income of ¥2.2bn and interest expense of ¥1.9bn leave thin coverage (~3.1x)
• Net loss of ¥1.0bn largely tied to outsized tax expense relative to pre-tax profit
• Balance sheet appears strong with liabilities/equity at 0.79x and implied equity ratio ~57%
• Liquidity is ample (current ratio 2.66x; quick ratio 2.50x), supporting cyclical flexibility
• Cash flow data not disclosed; FCF and payout coverage cannot be assessed from this dataset
• Dividend shown as zero; policy normalization likely contingent on earnings recovery

Metrics to Watch:

• Utilization rates and wafer ASP trends (especially 300mm vs. 200mm mix)
• Operating margin progression and cost absorption as volumes recover
• Interest coverage and non-operating items impacting ordinary income
• Tax rate normalization and any deferred tax asset valuation changes
• Working capital turns (inventory and receivable days) once disclosed
• Capex intensity and depreciation trajectory affecting fixed-cost leverage

Relative Positioning: Within global silicon wafer peers, SUMCO exhibits strong balance sheet flexibility but currently lags on profitability due to cyclical margin compression; recovery potential hinges on industry demand normalization and pricing stabilization relative to integrated competitors.

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