Furubayashi Shiko Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥13.00B
• Operating Income: ¥318M
• Net Income: ¥169M
• EPS: ¥214.80

Income Statement

Balance Sheet

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

FY2025 Q3 (cumulative) shows a sharp earnings recovery despite slightly lower sales, with operating income up 908.5% YoY to 3.18 and net income up 78.0% YoY to 2.37. Revenue declined 1.3% YoY to 130.00, indicating a soft top line but improved profitability. Gross profit reached 18.54, with a gross margin of 14.3%, while SG&A was 18.22, implying a slim but positive operating margin. Operating margin improved to about 2.45% (3.18/130.00), reflecting better cost control and/or improved pricing versus a very low base last year. Ordinary income rose to 3.57 (+79.3% YoY), aided by non-operating income of 2.53, including dividends of 0.81 and investment securities gains of 1.04, highlighting meaningful non-core contributions. Net margin improved to 1.82% (2.37/130.00), and the effective tax rate was 30.7%. Interest burden remains light, with interest expense of 0.18 and interest coverage at a robust 17.67x. On the balance sheet, equity totals 104.22 against assets of 194.35, implying an equity ratio around 53.6% and a conservative capital structure. Liquidity is adequate with a current ratio of 122.7% and a quick ratio of 109.9%, supported by cash and deposits of 17.47 and accounts receivable of 46.02. Debt remains manageable with short-term loans of 9.80 and long-term loans of 13.64; the reported D/E of 0.86x (liabilities-to-equity basis) is moderate, while interest-bearing debt-to-equity is around 0.23x. ROE is 2.3% on a DuPont basis (NPM 1.8%, asset turnover 0.669x, leverage 1.86x), but ROIC is only 2.0%, signaling underwhelming capital efficiency. Earnings quality cannot be fully assessed due to unreported cash flow data (OCF, FCF), so the durability of the profit recovery remains uncertain. Profit composition shows a non-trivial reliance on non-operating items this quarter, which may not be fully recurring. The combination of soft sales, improved margins, and supportive non-operating gains suggests short-term stabilization, but sustained improvement will require stronger core operating profitability. Forward-looking, management likely needs to maintain cost discipline, reduce reliance on market-related gains, and lift ROIC toward 5–8% to align with investor expectations.

Profitability Analysis

ROE (2.3%) = Net Profit Margin (1.8%) × Asset Turnover (0.669x) × Financial Leverage (1.86x). The largest driver of YoY improvement appears to be the margin component, as operating income surged +908.5% YoY while revenue declined 1.3%. Operating margin expanded to roughly 2.45%, an increase of about 220 bps versus last year’s very low base, indicating meaningful operating leverage from cost control and/or better mix. Non-operating income of 2.53 (notably investment securities gains of 1.04 and dividends of 0.81) also bolstered ordinary income, lifting the overall net margin. Asset turnover at 0.669x reflects moderate utilization of the asset base; with revenue down modestly, turnover likely did not improve materially. Financial leverage at 1.86x is moderate and not the key ROE driver. Business-wise, improved spread between gross margin (14.3%) and SG&A ratio (~14.0%) created a narrow but positive operating margin; however, the reliance on market-related and dividend income points to a portion of profits being non-core. Sustainability is mixed: cost discipline can persist, but investment securities gains are inherently one-off and dividend income can fluctuate with portfolio performance. A watchpoint is that SG&A remains high relative to gross profit, leaving little room for error; any revenue softness could quickly compress margins. With revenue contracting and non-operating income meaningful, the current ROE level is vulnerable unless core operating profit expands further.

Growth Assessment

Top-line contracted 1.3% YoY to 130.00, indicating subdued demand or pricing pressure in core paper/packaging markets. Operating income, however, jumped to 3.18, evidencing strong operating leverage from a low base. Ordinary income of 3.57 and net income of 2.37 (+78.0% YoY) benefited from non-operating tailwinds (dividends 0.81, securities gains 1.04). Revenue sustainability remains a question given weak sales momentum; near-term growth likely hinges on end-market recovery (food/FMCG, consumer goods) and pricing discipline. Profit quality is mixed: core margins improved, but non-operating contributions were significant this period. Outlook depends on maintaining gross margin at or above mid-teens while reducing the SG&A burden to widen operating margin. With ROIC at 2.0%, incremental growth should prioritize higher-return projects and efficiency gains. Absent expansion in operating margin above 3–4%, earnings growth may stall if non-operating gains normalize.

Financial Health

Liquidity is adequate: current ratio 122.7% (>1.0) and quick ratio 109.9% (>1.0) indicate coverage of short-term obligations, though below the 1.5x comfort benchmark. Working capital stands at 15.43 with current assets of 83.30 vs current liabilities of 67.87; cash of 17.47 plus receivables of 46.02 provide a buffer over near-term payables of 37.97 and short-term loans of 9.80. Solvency is sound: total equity 104.22 vs total liabilities 90.13 implies an equity ratio of ~53.6%. Reported D/E (liabilities-to-equity) is 0.86x, while interest-bearing debt is 23.44 (short 9.80, long 13.64), roughly 0.23x of equity, indicating conservative leverage. Interest coverage at 17.67x is strong, reducing refinancing risk. No explicit off-balance sheet obligations were reported. Maturity mismatch risk appears manageable given the liquidity profile and modest short-term debt relative to cash and receivables. No warnings triggered for Current Ratio < 1.0 or D/E > 2.0.

Cash Flow Quality

Operating cash flow, free cash flow, and capex were unreported, so OCF/Net Income and FCF coverage cannot be assessed. In the absence of OCF data, earnings quality cannot be validated against cash conversion benchmarks (>1.0). Working capital signals are generally stable: receivables of 46.02 and inventories of 8.68 vs payables of 37.97 do not indicate obvious aggressive working capital tactics, though period-end balances alone are inconclusive. Given meaningful non-operating gains this period, cash realization may diverge from accounting profit (e.g., investment securities gains). Until OCF is disclosed, treat profit quality as uncertain and avoid assuming repeatability of non-operating contributions.

Dividend Sustainability

The calculated payout ratio is 37.5%, which is comfortably below the 60% benchmark and appears manageable against current earnings. DPS and total dividends paid were unreported, limiting precision. With interest-bearing leverage modest (~0.23x equity) and interest coverage strong, balance sheet capacity supports ordinary dividends. However, lack of FCF data prevents confirmation of cash coverage, and reliance on non-operating income this period reduces visibility on sustainable distributable profit. Near-term dividend stability looks acceptable given earnings and capitalization, but medium-term sustainability hinges on sustaining core operating cash flows and maintaining capex discipline.

Risk Assessment

Business Risks:

• Commodity input price volatility (pulp, paper, energy) impacting gross margin
• Weak demand/pricing in core packaging end-markets leading to top-line pressure
• Customer concentration risk typical in packaging value chains (not disclosed but possible)
• Operational leverage given thin spread between gross margin and SG&A

Financial Risks:

• Profit reliance on non-operating items (dividends, securities gains) that may not recur
• Limited visibility on cash generation due to unreported OCF/FCF
• Market valuation risk of investment securities (49.21) affecting equity and P/L
• Interest rate risk on loans (short-term 9.80, long-term 13.64), albeit modest in size
• FX exposure on imported raw materials if not fully hedged

Key Concerns:

• ROIC at 2.0% is below the 5% warning threshold, indicating inefficient capital deployment
• Operating margin remains low (~2.45%), leaving earnings sensitive to revenue dips
• Sales decline (-1.3% YoY) may reflect soft market conditions
• Data gaps (cash flows, depreciation, capex) limit assessment of sustainability

Investment Implications

Key Takeaways:

• Earnings recovery driven by margin improvement from a low base; net income +78% YoY on -1.3% revenue
• Non-operating gains (2.53) contributed materially, reducing predictability of profits
• Liquidity and solvency are solid (equity ratio ~53.6%, interest coverage 17.67x)
• Core profitability remains thin (operating margin ~2.45%), requiring continued cost control
• Capital efficiency is weak (ROIC 2.0%, ROE 2.3%), highlighting need for higher-return initiatives

Metrics to Watch:

• Operating margin progression and SG&A ratio vs gross margin
• OCF and FCF once disclosed; OCF/Net Income > 1.0 as a quality benchmark
• Revenue trajectory in key packaging end-markets and pricing actions
• Non-operating income mix (dividends vs investment gains) and volatility
• ROIC improvement toward 5–8% through mix and asset efficiency
• Working capital trends (AR and inventory turnover) and capex commitments

Relative Positioning: Within Japan’s paper/packaging peers, the company shows conservative leverage and adequate liquidity but lags on capital efficiency (ROIC 2.0%) and maintains relatively low operating margins, implying room for operational improvement to close the gap with more efficient 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
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