4Cs HD Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.44B
• Operating Income: ¥-165M
• Net Income: ¥-197M
• EPS: ¥-23.64

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

Four Seeds HD reported FY2025 Q4 consolidated results under JGAAP with topline growth but continued bottom-line losses. Revenue rose 8.1% YoY to ¥2,441m, indicating resilient demand or expanded footprint, but operating income remained a loss at ¥165m (flat YoY), and net income was a loss of ¥243m. Gross profit was ¥1,493m, implying a high gross margin of 61.2%, but operating expenses more than absorbed gross profit gains, keeping EBITDA negative at ¥142m and the EBITDA margin at -5.8%. Ordinary income of -¥206m suggests additional non-operating drags beyond modest interest expense of ¥4.7m. DuPont metrics show ROE at -14.66%, driven by a negative net margin of -9.95%, asset turnover of 0.817x, and financial leverage of 1.80x. Cash flow was notably weak: operating cash flow was -¥713m, much more negative than net income, and free cash flow was -¥1,284m, indicating sizeable working capital outflows and/or restructuring/investment needs. Investing cash outflows of -¥571m suggest elevated capex or acquisitions, funded by ¥938m of financing inflows. The balance sheet shows total assets of ¥2,986m, liabilities of ¥1,120m, and equity of ¥1,658m; while the reported equity ratio is 0.0% (undisclosed), the implied equity ratio from the provided totals is approximately 55% at period-end. Liquidity appears adequate with a current ratio of 213.9% and quick ratio of 176.8%, and working capital of ¥1,038m, though the negative OCF indicates underlying pressure. Leverage (D/E 0.68x) is moderate, and interest burden is low, but interest coverage is negative given operating losses. No dividend was declared (DPS ¥0; payout 0%) in light of losses and negative FCF. Data limitations exist: several fields are shown as zero due to non-disclosure (e.g., cash and cash equivalents, equity ratio, shares), which constrains precision on per-share and liquidity buffers. Overall, the quarter reflects improving sales scale but insufficient operating leverage, ongoing cash burn, and reliance on external financing to support investment and operations.

Profitability Analysis

ROE_decomposition: ROE -14.66% = Net margin (-9.95%) × Asset turnover (0.817x) × Financial leverage (1.80x). The primary driver of negative ROE is the loss-making net margin, with moderate asset turnover and leverage unable to offset it. margin_quality: Gross margin was a high 61.2% (gross profit ¥1,493m on revenue ¥2,441m), indicating strong unit economics or mix, but SG&A and other operating costs drove operating margin to approximately -6.8%. Ordinary loss (-¥206m) suggests non-operating losses beyond small interest costs (¥4.7m). EBITDA margin of -5.8% highlights insufficient cost absorption despite healthy gross margins. operating_leverage: Revenue grew 8.1% YoY but operating loss remained flat, implying limited positive operating leverage; incremental sales did not translate into profit improvement. The cost base appears relatively fixed or rising (e.g., labor, rent, marketing), muting scale benefits.

Growth Assessment

revenue_sustainability: Top-line growth of 8.1% suggests stable to improving demand and/or store/brand expansion. Sustainability will depend on retention of higher-margin offerings implied by the 61%+ gross margin and the ability to maintain volumes amid potential price sensitivity. profit_quality: Profitability remains weak: operating and net losses persisted, and ordinary income deteriorated relative to operating income. The gap between gross and EBITDA margins points to elevated overheads. Negative OCF versus net loss indicates profit quality challenges tied to working capital and cash conversion. outlook: To pivot toward profitability, management likely needs to tighten SG&A, optimize store/brand performance, and slow cash-intensive investments until unit economics scale. If revenue momentum continues and cost discipline improves, losses could narrow; however, current cash burn suggests near-term pressure without further financing or cost actions.

Financial Health

liquidity: Current ratio 213.9% and quick ratio 176.8% reflect a sizable liquidity cushion, supported by current assets of ¥1,949m versus current liabilities of ¥911m. Cash and equivalents are shown as 0 due to non-disclosure; thus, immediate cash headroom cannot be precisely assessed. solvency: Total liabilities of ¥1,120m against equity of ¥1,658m imply an equity ratio near 55% (based on balances; reported equity ratio of 0.0% is undisclosed). Debt-to-equity is 0.68x, indicating moderate leverage. Interest expense is modest (¥4.7m), but negative EBIT results in an interest coverage ratio of -34.8x. capital_structure: Financing inflows of ¥938m funded negative FCF and investments, signaling reliance on external capital (debt and/or equity). Balance-sheet capacity exists given moderate leverage, but sustained losses could erode equity over time.

Cash Flow Quality

earnings_quality: Operating CF of -¥713m versus net income of -¥243m (OCF/NI ratio reported 2.93 despite negative values) indicates weaker cash earnings than accounting earnings, likely from working capital build or non-cash gains not present here. Effective tax appears reported as 0.0% despite a tax expense of ¥15.6m, suggesting timing or non-deductible items. FCF_analysis: Free cash flow was -¥1,284m (OCF -¥713m plus investing CF -¥571m), reflecting both operational cash burn and investment outlays. This was largely backstopped by ¥938m of financing inflows, partially offsetting the shortfall. working_capital: Inventories were ¥338m; the scale of negative OCF suggests broader working capital absorption beyond inventories (e.g., receivables growth or payables reductions). Detailed components were not disclosed, but managing inventory turns and payables discipline will be key to improving cash conversion.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0%, appropriate given net losses (EPS -¥23.64) and negative FCF. Resumption of dividends would require restored profitability and positive, sustainable FCF. FCF_coverage: FCF coverage is 0.00x, underscoring that current cash generation cannot support distributions. policy_outlook: Given continued operating losses and reliance on financing inflows, dividend policy will likely remain conservative until earnings and cash flows stabilize. Management priority appears to be funding operations and investment over distributions.

Risk Assessment

Business Risks:

• Execution risk in cost control and operating leverage realization despite revenue growth
• Demand volatility and potential price sensitivity affecting sales mix and margin
• Competitive pressures in consumer-facing segments leading to marketing and discounting needs
• Store/brand portfolio performance variability and potential restructuring costs
• Supply chain and input cost inflation impacting gross-to-operating margin conversion

Financial Risks:

• Negative operating cash flow and large negative FCF necessitating continued external financing
• Potential equity erosion if losses persist, weakening capital adequacy over time
• Refinancing risk if financing inflows moderate amid tighter credit conditions
• Working capital management risk given indications of cash absorption
• Accounting disclosure gaps (e.g., cash balance, equity ratio) limiting visibility for stakeholders

Key Concerns:

• Persistent operating and net losses despite higher revenue
• OCF of -¥713m and FCF of -¥1,284m funded by ¥938m financing inflows
• Interest coverage negative; profitability insufficient to service debt from operations
• High gross margin not translating into positive EBITDA due to elevated SG&A
• Data limitations on cash and equity ratio hinder precise liquidity assessment

Investment Implications

Key Takeaways:

• Top-line growth of 8.1% did not translate to profit improvement; operating loss unchanged YoY
• Gross margin strong at 61.2%, but SG&A intensity keeps EBITDA and EBIT negative
• ROE -14.66% driven by negative net margin; asset turnover and leverage neutral to slightly supportive
• Cash burn significant (OCF -¥713m; FCF -¥1,284m) and financed by ¥938m inflows
• Balance sheet appears moderately levered (D/E 0.68x) with ample working capital, but sustainability hinges on turning OCF positive

Metrics to Watch:

• Operating margin and EBITDA margin trajectory quarter-on-quarter
• OCF and FCF trends, including inventory turns and payable days
• SG&A to sales ratio and cost-saving initiatives
• Ordinary income components (non-operating gains/losses) and interest coverage
• Leverage metrics (net debt/EBITDA when disclosed) and reliance on new financing

Relative Positioning: Versus small-cap TSE consumer-oriented peers, Four Seeds HD shows healthy gross margins but weaker operating profitability and markedly weaker cash conversion, offset by a currently moderate leverage profile and adequate liquidity on reported balance-sheet metrics.

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
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