THE PACK CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥71.60B
• Operating Income: ¥4.28B
• Net Income: ¥3.98B
• EPS: ¥61.13

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

The Pack Co., Ltd. (TSE:3950) reported FY2025 Q3 consolidated results under JGAAP with modest top-line growth and margin compression at the operating and net levels. Revenue increased 2.2% year over year to ¥71.6bn, indicating resilient demand despite a challenging cost environment. Gross profit was ¥17.6bn, implying a gross margin of 24.6%, which is reasonable for packaging but we lack YoY gross margin to confirm trend. Operating income declined 13.5% YoY to ¥4.28bn, signaling negative operating leverage as higher SG&A and/or input costs offset revenue growth. Ordinary income of ¥4.52bn exceeded operating income, suggesting a positive non-operating contribution (e.g., financial income), while interest expense was de minimis at ¥2m. Net income fell 13.5% YoY to ¥3.45bn, aligning with the operating line pressure. Net margin stands at 4.81%, and operating margin at roughly 5.98%, both pointing to compressed profitability versus the prior year. DuPont analysis yields ROE of 4.57%, driven by a 4.81% net margin, 0.73x asset turnover, and modest leverage of 1.30x (Assets/Equity), indicating returns are more margin/turnover than leverage-driven. The balance sheet is strong: total assets are ¥98.1bn and total equity ¥75.4bn, implying an equity ratio near 76.9% (despite the reported 0.0% figure being undisclosed), and liabilities are modest at ¥28.8bn. Liquidity appears ample with a current ratio of 216% and quick ratio of 191%, underpinned by ¥32.3bn of working capital. Interest coverage is extremely high (>2,000x), reflecting minimal borrowing costs. Cash flow statements and depreciation are not disclosed in this dataset, limiting assessment of earnings quality and capex intensity; EBITDA is therefore not available. Dividend data are also not disclosed here, so payout and FCF coverage cannot be evaluated from this extract. Overall, the company exhibits solid financial health and conservative capital structure, but near-term profitability softness and lack of cash flow disclosure constrain visibility on cash conversion and dividend capacity. Key monitoring items include gross-to-operating margin progression, input cost pass-through, working capital discipline, and any updates on capital allocation and dividends. Data limitations are noted where items are shown as zero due to non-disclosure.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.57% = Net margin 4.81% × Asset turnover 0.73x × Financial leverage 1.30x. The primary drag on ROE this quarter is margin compression: operating income declined 13.5% YoY despite 2.2% revenue growth, compressing operating margin to ~5.98%. Gross margin is 24.6%; the spread between gross and operating margins (~18.6pp) implies elevated SG&A and/or other operating costs. Ordinary income (¥4.52bn) above operating income (¥4.28bn) indicates supportive non-operating items, mitigating some operating softness. Interest expense (¥2m) is negligible, so interest burden does not impair profitability. Effective tax rate is not disclosed in this dataset; given net income of ¥3.45bn and income tax of ¥1.86bn, tax burden appears material, but precise rate cannot be determined without pre-tax income disclosure. Operating leverage was negative in the period: +2.2% sales with −13.5% operating income suggests cost inflation and/or mix effects outpaced pricing/productivity benefits. Overall profitability remains positive but under pressure, with returns generated mainly by core operations rather than leverage.

Growth Assessment

Revenue grew 2.2% YoY to ¥71.6bn, indicating steady demand across end-markets, albeit without strong acceleration. Profit growth lagged, with operating and net income both down 13.5% YoY, implying pressures from input costs (e.g., paper, logistics) or higher SG&A (wages, utilities) and potential adverse mix. The ordinary income outperformance vs operating income suggests some cushion from non-operating factors, but sustainability of such contributions is uncertain. Without cash flow and depreciation data, we cannot determine whether current earnings benefit from lower depreciation or working capital releases; no such evidence is available here. Outlook considerations hinge on the company’s ability to pass through costs, optimize product mix, and control SG&A to restore operating leverage. With asset turnover at 0.73x, efficiency is adequate; incremental revenue growth should contribute to ROE if margins stabilize. Near-term growth quality would improve with clearer evidence of gross margin resilience and controlled overheads. Data gaps (cash flows, segment detail) limit visibility into revenue sustainability by product/customer segment.

Financial Health

Liquidity is strong: current assets ¥60.0bn vs current liabilities ¥27.8bn yield a current ratio of 216% and quick ratio of 191%, supported by inventories of ¥7.12bn and working capital of ¥32.3bn. Solvency is robust with total liabilities of ¥28.8bn and total equity of ¥75.4bn; this implies debt-to-equity of ~0.38x (using total liabilities as a proxy) and an equity ratio of approximately 76.9% (equity/total assets), despite the reported equity ratio being undisclosed. Interest expense is negligible (¥2m), resulting in interest coverage of ~2,139x, underscoring minimal financial risk from borrowing. Capital structure is conservative, relying primarily on equity, which provides resilience in downturns but caps leverage-driven ROE. Absence of detailed debt maturity and cash balances in this extract limits granular assessment of near-term refinancing risks and liquidity buffers.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in this dataset, so OCF/Net Income and free cash flow cannot be reliably assessed. Earnings quality cannot be triangulated via cash conversion, accruals, or capex intensity since depreciation/amortization is also not disclosed here. Working capital appears ample (¥32.3bn), and quick ratio of 191% suggests liquid current assets, but we cannot determine whether working capital absorbed or released cash in the period. Without CF data, we cannot assess FCF coverage of dividends or debt service; conclusions on cash flow quality remain tentative. Monitoring future disclosures for OCF trends, capex levels, and changes in inventories/receivables will be important for evaluating sustainability of earnings.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset for FY2025 Q3. With EPS of ¥61.13 and a strong equity base, capacity for distributions could be supported by balance sheet strength, but sustainability depends on actual OCF and capex, which are not available here. FCF coverage cannot be computed due to undisclosed cash flows. Policy outlook cannot be inferred from this dataset; future guidance or historical policy is not provided in the extract. Until cash flow data and dividend declarations are available, assessment of payout safety and trajectory remains indeterminate.

Risk Assessment

Business Risks:

• Input cost volatility (paper, resin, energy, logistics) potentially compressing gross margins if pass-through lags
• Negative operating leverage if SG&A growth outpaces revenue
• Customer mix and pricing pressure in domestic packaging markets
• Demand cyclicality tied to consumer goods and retail activity
• Potential FX exposure on raw materials or imported components (not detailed here)

Financial Risks:

• Limited visibility on cash generation due to undisclosed OCF/FCF
• Potential working capital swings affecting cash conversion
• Tax burden variability; precise effective tax rate not derivable from available data
• Concentration of equity financing limits ROE expansion absent margin improvement

Key Concerns:

• Operating income down 13.5% YoY despite revenue growth (+2.2%), indicating margin pressure
• Lack of cash flow disclosure prevents assessment of earnings quality and dividend coverage
• Need for price/mix improvements or cost controls to restore operating leverage

Investment Implications

Key Takeaways:

• Top-line growth of 2.2% YoY but profitability under pressure with operating and net income down 13.5% YoY
• ROE at 4.57% reflects modest margins and low leverage; improvement hinges on margin recovery
• Balance sheet strength is a clear positive: equity ratio ~77% and interest coverage >2,000x
• Liquidity robust with current ratio 216% and quick ratio 191%
• Cash flow and dividend data not disclosed; visibility on cash conversion and payout is limited

Metrics to Watch:

• Gross and operating margin trends (cost pass-through, SG&A control)
• Ordinary vs operating income gap (sustainability of non-operating gains)
• Working capital turns (inventories and receivables) and OCF once disclosed
• Capex and depreciation trends to gauge maintenance vs growth spending
• Updates on dividend policy and payout once announced

Relative Positioning: Financially conservative with strong liquidity and low leverage compared to typical mid-cap packaging peers, but near-term profitability appears softer with negative operating leverage; improved cost pass-through and operating efficiency would be key to strengthening its relative earnings profile.

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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