Dynapac Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥47.83B
• Operating Income: ¥2.26B
• Net Income: ¥2.31B
• EPS: ¥229.47

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

Verdict: FY2025 Q3 shows a solid operating recovery with notable margin expansion at the operating level, but bottom-line quality is mixed due to heavy non-operating and extraordinary contributions and weak comprehensive income. Revenue rose 6.3% YoY to 478.29, supported by improved demand/pricing in core packaging. Operating income surged 77% YoY to 22.57, taking operating margin to about 4.7%. Using back-calculated comparatives, operating margin expanded by roughly 189 bps (from ~2.8% to ~4.7%), evidencing meaningful operating leverage from cost control and/or input price normalization. Ordinary income increased 42.7% YoY to 26.90, aided by 7.33 in non-operating income, including 3.05 of dividend income and 0.24 of interest income. Profit before tax reached 34.82, implying sizable extraordinary items (~7.9) on top of non-operating gains. Despite stronger operating and ordinary profits, net income was flat-to-down (-0.3% YoY) at 22.84 as tax burden (effective tax rate 33.7%) and the mix of non-core items offset operating gains. Net profit margin stands at 4.8%, slightly below the implied prior-year ~5.1%, indicating a 32 bps compression at the bottom line. Total comprehensive income was only 9.77, far below net income, pointing to negative other comprehensive income—likely valuation losses on investment securities (210.74 on the balance sheet). ROE is 4.8% via DuPont (NPM 4.8% × Asset Turnover 0.583 × Leverage 1.74x), and ROIC is low at 3.0%, signaling capital efficiency below the industry hurdle. Liquidity is tight with a current ratio of 100.7% and quick ratio of 95.7%, while interest coverage is strong at 21.9x, and leverage (reported D/E 0.74x) is moderate. Cash flow statements are unreported, limiting earnings quality validation (OCF/NI not calculable). The quarter’s forward-looking implication is positive for core operations if input costs remain benign and price discipline holds, but bottom-line volatility from securities valuations and extraordinary items remains a risk. The sizeable investment securities portfolio and goodwill/intangibles raise valuation and impairment sensitivity. Dividend payout looks moderate at 31.6%, but sustainability cannot be confirmed without FCF. Overall, operational momentum has improved, yet quality of earnings and liquidity warrant caution.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.8% = Net Profit Margin 4.8% × Asset Turnover 0.583 × Financial Leverage 1.74x. The largest positive change this quarter appears at the operating margin level: operating income +77% vs revenue +6.3% implies operating margin expanded ~189 bps YoY (back-calculated prior operating margin ~2.8% vs current ~4.7%). Business drivers likely include raw material cost normalization (paper/linerboard), pricing/mix improvements, and SG&A discipline (SG&A at 70.59, ~14.8% of sales) enabling operating leverage. However, net margin compressed ~32 bps YoY (from ~5.1% to 4.8%) as taxes normalized higher and profit mix included non-core items and extraordinary gains that did not translate into comprehensive income. Asset turnover at 0.583 suggests modest efficiency for a packaging manufacturer; no clear evidence of YoY improvement given limited historical asset data. Financial leverage at 1.74x is moderate and stable. Sustainability: operating margin gains could be partly sustainable if cost pass-through holds and input prices remain stable; extraordinary items and non-operating dividend income are less predictable. Watch for any sign of SG&A growth outpacing revenue—current data do not show that, but the lack of YoY SG&A detail is a limitation.

Growth Assessment

Top-line growth of 6.3% YoY to 478.29 indicates steady demand/pricing recovery. Operating profit growth of 77% YoY signals strong operating leverage, likely driven by raw material cost relief and price/mix improvements. Ordinary income growth of 42.7% was additionally supported by non-operating income (dividends/interest), highlighting some dependence on financial income. Net income declined slightly (-0.3% YoY) due to higher tax and profit mix effects, despite stronger operations. Given the non-operating income ratio of 32.1%, a portion of profit growth is non-recurring/less controllable. Total comprehensive income (9.77) trails net income materially, implying negative OCI from securities valuation—this is a headwind if market conditions remain weak. Outlook: If input costs stay benign and price discipline is maintained, operating margins can remain above last year's level; however, bottom-line volatility from securities/OCI and absence of CF data cap confidence in the durability of growth.

Financial Health

Liquidity: Current ratio 100.7% (just above 1.0) and quick ratio 95.7% (below 1.0) indicate tight near-term liquidity—explicit caution warranted when combined with short-term loans of 70.65. Solvency: Reported D/E 0.74x is moderate; interest coverage is strong at 21.92x, suggesting low immediate interest burden risk. Maturity mismatch: Current assets 280.09 barely exceed current liabilities 278.19; reliance on short-term borrowings and payables (accounts payable 124.61) raises refinancing and working capital management importance. Balance sheet composition: Investment securities 210.74 and goodwill/intangibles totaling ~102 (goodwill 45.97, intangibles 55.94) introduce valuation and impairment risks. No off-balance sheet obligations disclosed in the provided data.

Cash Flow Quality

OCF, investing CF, and financing CF are unreported, so OCF/Net Income and FCF cannot be assessed. This prevents validation of earnings conversion to cash and detection of working capital swings. Given tight liquidity, robust OCF would be crucial to cover short-term loans and sustain dividends/capex; absence of data is a key limitation. No explicit signs of working capital manipulation are identifiable from limited balance sheet snapshots; inventories (13.93) appear lean relative to receivables (178.46), but trend data are not available.

Dividend Sustainability

Calculated payout ratio is 31.6%, which is moderate and generally consistent with sustainable levels for packaging companies; however, the actual DPS is unreported and FCF coverage cannot be evaluated due to missing CF and capex data. With ROIC at 3.0% (<5% warning) and liquidity tight (quick ratio <1.0), sustained dividends likely hinge on maintaining improved operating margins and stable OCF. Policy outlook cannot be inferred without management guidance; near-term stability appears plausible given earnings, but sensitivity to OCI/market valuations should be noted.

Risk Assessment

Business Risks:

• Input cost volatility (paper, pulp, energy) affecting gross margins
• Demand sensitivity to end-markets (e-commerce, consumer goods, auto/industrial packaging)
• Pricing power and pass-through effectiveness against customer consolidation
• Impairment risk tied to goodwill (45.97) and intangibles (55.94)

Financial Risks:

• Tight liquidity: current ratio ~1.01 and quick ratio ~0.96 with short-term loans 70.65
• Market valuation risk on investment securities (210.74) evidenced by low comprehensive income vs net income
• Earnings volatility from non-operating and extraordinary items (non-operating income 7.33; implied extraordinary ~7.9)
• Refinancing risk if credit conditions tighten given reliance on short-term borrowings

Key Concerns:

• Low capital efficiency: ROIC 3.0% (<5% threshold)
• Net margin compression (~32 bps YoY) despite strong operating margin expansion
• Absence of cash flow disclosure limits verification of earnings quality and dividend cover
• Potential tax rate normalization at ~34% could cap net profit growth

Investment Implications

Key Takeaways:

• Core operations improved materially with operating margin expansion (~+189 bps YoY).
• Bottom-line quality mixed: high contribution from non-operating and extraordinary items; comprehensive income weak.
• Liquidity is tight; watch working capital and refinancing of short-term loans.
• Capital efficiency remains below hurdle (ROIC 3.0%), tempering valuation support.
• Exposure to marketable securities introduces OCI-driven volatility.

Metrics to Watch:

• Operating cash flow and free cash flow (when disclosed)
• Operating margin and SG&A-to-sales ratio progression
• OCI movements and valuation changes in investment securities
• Inventory and receivables turns; days working capital
• Short-term debt rollover and interest costs; interest coverage trend
• Tax rate and any extraordinary gains/losses disclosure

Relative Positioning: Versus domestic paper/packaging peers, Dynapac shows improved operating momentum and strong interest coverage but weaker liquidity (quick ratio <1.0) and subpar capital efficiency (ROIC 3.0%). High exposure to investment securities adds earnings/comprehensive income volatility compared to more operationally focused 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