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

For FY2025 Q3 (consolidated, JGAAP), Kobayashi Shiko (39440) delivered resilient earnings despite a slight top-line contraction. Revenue declined 1.3% year on year to ¥13.0 billion, but operating income surged 908.5% to ¥318 million, indicating substantial cost discipline and/or improved pricing and mix. Gross profit of ¥1.854 billion implies a 14.3% gross margin, a level that supports the strong recovery in operating income even as sales softened. Operating margin reached 2.45%, with ordinary income of ¥357 million (ordinary margin 2.75%) benefiting modestly from net non-operating gains relative to operating profit. Net income was ¥237 million, equating to a 1.82% net margin, and the DuPont-bridged ROE came in at 2.27% (margin 1.82% × asset turnover 0.669 × leverage 1.86), confirming internal consistency of the profitability profile. The asset base totals ¥19.435 billion with equity of ¥10.422 billion and liabilities of ¥10.410 billion, implying a debt-to-equity ratio near 1.00x and moderate balance sheet leverage. Liquidity appears adequate with a current ratio of 116.5% and a quick ratio of 107.5%, supported by positive working capital of ¥1.327 billion. Interest coverage is strong at 17.7x, reflecting low interest burden versus operating income. Revenue softness alongside margin expansion suggests effective cost pass-through and/or operational improvements, a key pivot after prior-year weakness. Cash flow statements are unreported in this dataset (zeros indicate non-disclosure), limiting assessment of operating cash conversion and capex intensity; therefore, free cash flow and coverage metrics cannot be validated. Depreciation and amortization are also undisclosed, which obscures EBITDA and underlying capital intensity. Dividend per share is reported as zero, implying the company is not distributing cash currently; this is consistent with a conservative capital allocation stance given low-single-digit ROE. With operating leverage evident in the sharp profit rebound, sustainability will hinge on maintaining gross margin gains and stable volume in a potentially price-competitive paper/packaging environment. The balance sheet is stable, but thin operating margins leave limited cushion against input cost volatility. Overall, profitability is improving from a low base, liquidity is sound, leverage is moderate, and the principal analytical limitation is the absence of cash flow disclosure.

Profitability Analysis

ROE is 2.27%, decomposed as net margin 1.82% × asset turnover 0.669 × financial leverage 1.86, reflecting a margin-driven recovery on modestly utilized assets and moderate leverage. Gross margin is 14.3% (¥1,854m/¥13,000m), supporting an operating margin of 2.45% (¥318m/¥13,000m). The spread between gross and operating margin (~11.8pp) captures selling, general, and administrative intensity; the substantial YoY operating income increase (+908.5%) indicates improved operating efficiency and/or better pricing. Ordinary income of ¥357m exceeds operating income by ¥39m, implying net non-operating gains (after ¥18m interest expense), which modestly enhanced profitability. Net margin of 1.82% underscores thin bottom-line economics typical for converters, but the step-up signals better cost control. Operating leverage appears positive: a 1.3% revenue decline coincided with a sharp profit rebound, suggesting fixed cost absorption improvements or structural cost reductions. Interest coverage at 17.7x (¥318m/¥18m) indicates ample capacity to service debt at current earnings levels. EBITDA is undisclosed due to absent D&A; therefore, margin analysis relies on operating income. Effective tax rate shown as 0.0% in the calculated metrics is not indicative, as income tax expense of ¥75m is disclosed; bottom-line outcomes already reflect tax effects. Overall margin quality has improved, but durability will depend on sustained gross margin and SG&A discipline.

Growth Assessment

Revenue declined 1.3% YoY to ¥13.0bn, suggesting stable-to-soft demand conditions. Despite lower sales, operating income rose 908.5% YoY to ¥318m, indicating robust improvement in cost structure and/or pricing power. Ordinary income at ¥357m and net income at ¥237m (+78.0% YoY) confirm that the improvement is not confined to operating level alone. Revenue sustainability likely hinges on packaging end-market trends and customer retention; current data imply volume headwinds but stable core demand. The quality of profit growth appears driven by margin expansion rather than volume, a potentially sustainable path if input costs remain manageable and pricing discipline holds. Non-operating items contributed modestly (+¥39m vs operating income), not the primary driver of growth. The absence of cash flow data limits visibility into whether profit growth is backed by operating cash receipts (collection efficiency, inventory turns). Outlook is cautiously constructive: maintaining the now-higher operating margin will be critical if revenue remains flat-to-declining. Monitoring gross margin trajectory and SG&A ratio will indicate whether the turnaround is structural. Given sector exposure to pulp/energy cost swings, margin resilience through pass-through mechanisms will influence forward growth quality.

Financial Health

Total assets are ¥19.435bn, liabilities ¥10.410bn, and equity ¥10.422bn, yielding a debt-to-equity ratio near 1.00x and financial leverage of ~1.86x. Liquidity is adequate with current assets of ¥9.352bn and current liabilities of ¥8.025bn, translating to a current ratio of 116.5% and a quick ratio of 107.5%. Working capital is positive at ¥1.327bn, indicating short-term funding headroom. Interest expense of ¥18m is small relative to operating income, producing a robust interest coverage of 17.7x. Asset turnover of 0.669 suggests moderate utilization of the asset base typical for manufacturing/converting operations. Equity ratio is shown as 0.0% in the dataset, but this appears undisclosed rather than literal; balance sheet figures imply an equity ratio around 53.6% (¥10.422bn/¥19.435bn) based on available numbers. Solvency appears comfortable with liabilities roughly matched to equity and no signs of over-leverage. Absent details on debt maturities and cash holdings (cash is unreported), near-term refinancing risk cannot be precisely assessed. Inventory of ¥729m is relatively small versus current assets, implying a higher share of receivables and/or cash equivalents, though cash is not disclosed. Overall, the capital structure is balanced and liquidity adequate, with manageable financial risk at current earnings levels.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in this dataset (zeros indicate unreported), so cash conversion cannot be quantified. Accordingly, OCF/Net Income, free cash flow, and capex intensity cannot be validated, and EBITDA is unavailable due to undisclosed D&A. Earnings quality must be inferred from the income statement: the large YoY rebound in operating income, coupled with modest interest expense, suggests improved core profitability. Working capital is positive at ¥1.327bn; however, without period-to-period changes, its impact on cash generation is unknown. Inventories stand at ¥729m; limited visibility into turnover precludes assessment of potential cash release/absorption. The modest positive spread between ordinary and operating income implies non-operating items did not artificially inflate cash earnings materially. In summary, while reported profits look cleaner and operationally derived, the absence of OCF and capex data is a key limitation to assessing free cash flow quality and coverage.

Dividend Sustainability

Annual DPS is reported as ¥0.00, with a payout ratio of 0.0%, indicating no dividend distribution for the period. Given net income of ¥237m and moderate leverage, the company appears capable of maintaining a no-dividend stance without financial strain. Free cash flow is undisclosed, so cash coverage cannot be evaluated; however, with zero payout, sustainability is effectively assured from a cash perspective. With ROE at 2.27%, retaining earnings to strengthen the balance sheet or fund efficiency investments is consistent with conservative capital allocation. Future dividend capacity will depend on sustained operating margin, stable revenue, and demonstrable operating cash generation once disclosed. Policy outlook appears cautious: absent explicit guidance, continuation of retention seems likely until profitability and cash flows trend higher and more stable.

Risk Assessment

Business Risks:

• Input cost volatility (paper, pulp, packaging materials, energy) impacting margins
• Pricing pressure and pass-through lag with key customers
• Demand cyclicality in end markets for packaging and paper-based products
• Customer concentration risk typical of converters
• Operational disruption risk (machinery downtime, supply chain bottlenecks)
• Environmental and recycling regulatory changes affecting product mix and costs
• Labor availability and wage inflation in manufacturing
• Natural disaster risk in Japan affecting facilities and logistics

Financial Risks:

• Thin operating margin (2.45%) leaves limited buffer against shocks
• Limited visibility on operating cash flow and capex due to undisclosed cash flow statements
• Interest rate risk on floating-rate borrowings despite current low interest expense
• Potential working capital swings affecting liquidity
• Refinancing and covenant risk cannot be assessed fully without debt detail

Key Concerns:

• Sustainability of margin improvement amid declining revenue
• Absence of cash flow disclosure obscures free cash flow and dividend capacity assessment
• Low ROE (2.27%) versus typical cost of equity, implying limited value creation at present

Investment Implications

Key Takeaways:

• Revenue fell 1.3% YoY to ¥13.0bn, but operating income rebounded sharply (+908.5%) to ¥318m
• Margins improved: gross margin 14.3%, operating margin 2.45%, net margin 1.82%
• ROE is low at 2.27%, supported by moderate asset turnover (0.669) and leverage (1.86x)
• Liquidity is adequate with current ratio 116.5% and quick ratio 107.5%; working capital ¥1.327bn
• Interest coverage is strong at 17.7x, indicating manageable debt service
• Cash flows (OCF/FCF) and D&A are undisclosed, limiting earnings quality validation
• Dividend is suspended (DPS ¥0), aligning with a conservative stance amid low ROE

Metrics to Watch:

• Gross margin trajectory and price/cost spread versus pulp and energy indices
• Operating margin and SG&A ratio to confirm structural efficiency gains
• Asset turnover and working capital days (AR, inventory, AP) for cash conversion
• Operating cash flow and capex once disclosed to assess FCF generation
• Debt levels, interest rates, and coverage metrics amid rate environment changes
• Ordinary vs operating income gap to monitor non-operating influence
• Customer concentration and order trends as indicators of demand stability

Relative Positioning: Within Japan’s paper and packaging converters, profitability remains on the low side (OP margin 2.45%) but is improving sharply from the prior-year trough; leverage is moderate (~1.0x D/E) and liquidity is adequate, positioning the company as a conservative, recovering operator relative to small/mid-cap 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
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