INTERTRADE Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.84B
• Operating Income: ¥-8M
• Net Income: ¥27M
• EPS: ¥-20.20

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: A weak quarter with near-breakeven operations but a sizable ordinary loss driven by equity-method losses and other non-operating charges, resulting in a net loss and negative cash generation. Revenue was 18.36 (100M JPY), down 0.7% YoY, with gross profit of 5.48 and a gross margin of 29.8%. Operating income was -0.08 (100M JPY), implying an operating margin of approximately -0.4%, while EBITDA was barely positive at 0.08 (0.5% margin). Ordinary income plunged to -2.13 (100M JPY), reflecting non-operating expenses of 2.06, which were dominated by equity-method losses of -2.03. Net income came in at -1.45 (100M JPY), translating to EPS of -20.2 JPY and ROE of -13.5%. Margin-wise, gross margin stood at 29.8% and operating margin at about -0.4%; precise YoY basis-point changes are not calculable from the disclosed dataset, but the 36.6% drop in operating income versus a 0.7% revenue decline indicates operating margin compression. The negative ordinary income shows performance was primarily derailed below the operating line rather than by core operations. Earnings quality is weak: operating cash flow was -0.12 versus net income of -1.45, yielding an OCF/NI ratio of 0.08x, which flags poor cash conversion. Free cash flow was -2.64 due to investment outflows of -2.52 (capex minimal at -0.03), suggesting capital allocation toward financial assets or affiliates rather than physical assets. Liquidity remains ample with cash and deposits of 7.12 and a current ratio of 350%, mitigating near-term funding risk despite losses. Leverage is modest (D/E ≈ 0.38x) with total liabilities at 4.06 versus equity of 10.76; however, interest coverage is negative (-2.64x), indicating earnings are currently insufficient to cover interest. Retained earnings remain deeply negative (-13.04), highlighting a thin buffer from accumulated profitability, even though paid-in capital is large. The quarter’s headline weakness originates from equity-method losses, raising questions about affiliate performance sustainability. Near-term focus should be on stabilizing affiliates and restoring ordinary income, while preserving liquidity. Looking forward, absent a rebound in equity-method contributions, the company must improve core margin and SG&A efficiency to return to profitability.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-7.9%) × 1.240 × 1.38 ≈ -13.5%. The dominant driver of the negative ROE is the deeply negative net profit margin, as asset turnover (1.240) and leverage (1.38x) are fairly moderate. The margin deterioration stems largely from non-operating losses, primarily equity-method losses of -2.03 that pulled ordinary income far below operating level despite near-breakeven operations. Business rationale: affiliate underperformance or write-downs likely impacted equity-method line, while interest expense was modest (0.03) and not the main factor. Sustainability: equity-method losses can be volatile; if tied to one-time events, margin could normalize, but if affiliates face structural challenges, the drag may persist. Operating leverage appears unfavorable this quarter: revenue declined slightly (-0.7% YoY) while operating income dropped 36.6% YoY, indicating SG&A rigidity; SG&A (5.56) slightly exceeded gross profit (5.48), compressing operating margin. Concerning trends: cost base inflexibility (SG&A > gross profit) and reliance on below-OP contributions which turned negative. Focus areas to restore ROE are cost discipline to lift operating margin above zero and remediation of affiliate losses to stabilize ordinary income.

Growth Assessment

Top-line contracted modestly (-0.7% YoY) to 18.36, suggesting flat demand or competitive pressure in core businesses. Gross profit was 5.48 with a 29.8% margin; given OI decline (-36.6% YoY) against slight revenue dip, operating efficiency deteriorated. Profit quality skewed weak: operating loss (-0.08) and a much larger ordinary loss (-2.13) show non-operating items dominated earnings trajectory. Equity-method losses (-2.03) were the pivotal swing factor for growth in profit terms; absent this, ordinary result would have been near breakeven. EBITDA margin of 0.5% indicates minimal operating cushion, leaving limited room for shocks. Outlook hinges on affiliate stabilization and SG&A containment; even modest revenue recovery could leverage into improved OI if costs are adjusted. With investing CF outflows and increased investment securities on the balance sheet (2.61), management may be allocating capital for future returns, but near-term earnings visibility is low. Net loss and negative OCF weigh on growth quality; a return to positive OCF will be a key milestone.

Financial Health

Liquidity is strong: current ratio 350% and quick ratio 346.6%, with cash and deposits of 7.12 comfortably exceeding short-term loans of 1.00 and total current liabilities of 3.03. No warning on classic thresholds (Current Ratio <1.0: No; D/E >2.0: No). Working capital is 7.58, and maturity mismatch risk is low given cash coverage of short-term obligations. Solvency is acceptable: total liabilities 4.06 vs equity 10.76 implies D/E ≈ 0.38x. Interest-bearing debt totals 1.87 (short-term 1.00, long-term 0.87), manageable relative to cash. Interest coverage is negative (-2.64x) due to operating weakness, not excessive interest costs. Retained earnings are negative (-13.04), which constrains distributable reserves and underscores historical losses, though paid-in capital provides equity cushion. No off-balance sheet obligations were disclosed; data limitations prevent assessment of lease liabilities or guarantees if any.

Cash Flow Quality

OCF/Net Income is 0.08x (-0.12 OCF vs -1.45 NI), signaling poor cash conversion and potential earnings quality issues. Free cash flow was -2.64, driven by investing CF of -2.52; capex was minimal (-0.03), indicating outflows were likely financial investments (e.g., securities or affiliates), consistent with the rise in investment securities (2.61). This FCF profile is not sufficient to cover dividends or share repurchases (dividends unreported; buybacks negligible). Working capital manipulation signs are not evident from limited disclosures, but the combination of flat revenue, near-breakeven OI, and negative OCF suggests either timing effects in receivables/payables or low cash profitability. Sustainability: without a rebound in OCF, continued investment outflows would further reduce cash, though current cash balance provides interim flexibility.

Dividend Sustainability

Dividend data were unreported; thus, payout ratios are not calculable. Given negative net income (-1.45) and negative FCF (-2.64), capacity to pay or increase dividends would be constrained if a dividend were in place. Equity remains positive but retained earnings are negative, which under JGAAP may limit distributable amounts depending on legal reserve status. Policy outlook likely cautious until profitability and OCF normalize; near-term priority should be restoring positive ordinary income and cash generation.

Risk Assessment

Business Risks:

• Affiliate performance risk: equity-method loss of -2.03 materially impacted ordinary income.
• Operating leverage risk: SG&A (5.56) slightly exceeds gross profit (5.48), leaving minimal cushion.
• Demand/competition risk given slight revenue decline (-0.7% YoY) and low EBITDA margin (0.5%).

Financial Risks:

• Earnings coverage risk: interest coverage -2.64x despite low absolute interest expense.
• Cash flow risk: OCF/NI at 0.08x and FCF at -2.64 indicate weak cash generation.
• Capital allocation risk: sizable investing outflows (-2.52) into financial assets amid operating weakness.

Key Concerns:

• Sustained equity-method losses could keep ordinary income negative.
• Negative retained earnings (-13.04) restrict flexibility for distributions.
• Potential volatility if market-related investments underperform (given investment securities balance).

Investment Implications

Key Takeaways:

• Core operations near breakeven; ordinary loss driven predominantly by equity-method losses.
• Liquidity strong (cash 7.12; current ratio 350%), mitigating short-term funding risk.
• ROE is negative (-13.5%) due to margin pressure; asset turnover and leverage are not the main issues.
• Earnings quality weak: OCF/NI 0.08x and FCF -2.64.
• Cost structure inflexibility evident as SG&A approximates/ exceeds gross profit.

Metrics to Watch:

• Equity-method income trajectory and affiliate disclosures.
• Operating margin and SG&A trend versus revenue.
• OCF recovery and working capital movements (AR 2.62, AP 0.81).
• Ordinary income versus operating income gap.
• Cash balance versus investing outflows and debt service.

Relative Positioning: Within small-cap software/fintech vendors, the company exhibits strong liquidity but weaker profitability and cash conversion, with an unusual reliance on and exposure to equity-method results relative to peers.

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