Resonac Holdings Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥986.26B
• Operating Income: ¥21.47B
• Net Income: ¥7.09B
• EPS: ¥33.37

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Resonac Holdings (40040) reported FY2025 Q3 (cumulative) results showing top-line resilience but sharp profit compression. Revenue was 9,862.63 (100M JPY), down 4.2% YoY, reflecting a soft demand environment, likely in cyclical materials and semiconductor-related businesses. Gross profit was 2,433.10, implying a gross margin of 24.7%, which is reasonable but insufficient to offset relatively fixed costs when volumes soften. SG&A was 1,758.42, or 17.8% of revenue, highlighting limited cost flexibility and high operating leverage. Operating income fell to 214.70 (-74.9% YoY), compressing operating margin to 2.2% and evidencing significant negative operating leverage. Profit before tax was 202.05, implying modest net non-operating losses overall despite 51.70 of equity-method income; this suggests other financial and/or miscellaneous costs offset equity-method gains. The effective tax rate was elevated at 61.0%, amplifying the drop from PBT to net income. Net income was 60.36 (-90.7% YoY), translating to a slim net margin of 0.6% and EPS of 33.37 JPY. Total comprehensive income was negative at -78.86, indicating OCI losses (e.g., FX translation or fair value changes) that reduced equity despite positive net income. DuPont analysis shows ROE of 0.9%, driven by very low net margin (0.6%), moderate asset turnover (0.477x), and a relatively high equity multiplier (3.08x). The equity ratio stands at 31.2%, and debt-to-equity at 2.20x, reflecting a leveraged balance sheet typical of capital-intensive materials businesses. Current assets were 8,865.48 with inventories of 2,208.12 (about 25% of current assets), and cash & equivalents of 2,946.56 (about 14% of total assets), providing some liquidity buffer. Cash flow statements and many line items (e.g., interest expense, depreciation, capex) were unreported, limiting cash-based quality assessments. The reported payout ratio of 199.1% is high relative to depressed earnings, raising near-term dividend sustainability questions absent a profit recovery or reliance on balance sheet liquidity. Overall, the quarter underscores cyclical pressure, high operating sensitivity to volumes and pricing, and elevated tax/OCI headwinds that diluted return metrics. A recovery in end-markets (especially semiconductors) and normalization of the effective tax rate are key to improving earnings quality and ROE. Data gaps (e.g., OCF, capex, interest) constrain a full assessment of cash flow resilience and leverage serviceability, and should be monitored in subsequent disclosures.

Profitability Analysis

ROE_decomposition: ROE 0.9% = Net margin 0.6% × Asset turnover 0.477 × Equity multiplier 3.08. Extremely thin net margin is the primary drag; modest turnover and high leverage provide limited offset. margin_quality: Gross margin 24.7% suggests some pricing power/portfolio mix, but SG&A at 17.8% of revenue leaves a narrow buffer for operating profit, yielding an operating margin of 2.2%. The high effective tax rate (61.0%) further compresses net margin to 0.6%. Negative total comprehensive income points to OCI losses that erode economic profitability beyond the income statement. operating_leverage: Revenue declined 4.2% YoY while operating income fell 74.9% YoY, demonstrating pronounced negative operating leverage. The cost base appears rigid; small volume/mix/pricing downticks translate into outsized earnings swings.

Growth Assessment

revenue_sustainability: Top-line decline of 4.2% YoY indicates a soft demand phase, likely linked to cyclical segments (e.g., semiconductor materials, electronics, and industrials). Inventories at 2,208.12 suggest cautious throughput; inventory levels should be watched for normalization. profit_quality: Operating margin fell to 2.2% and net margin to 0.6%, with a 61.0% tax rate and OCI losses (-78.86 total comprehensive income) undermining quality. Equity-method income of 51.70 was a meaningful contributor (~26% of PBT), implying underlying operating profit was even weaker on a standalone basis. outlook: Earnings recovery hinges on end-market improvement (notably semiconductors), cost discipline, and tax rate normalization. With leverage elevated, management’s ability to pass through input costs and improve utilization will be critical to lift margins back toward cycle-average levels.

Financial Health

liquidity: Current assets were 8,865.48 with cash & equivalents at 2,946.56 (~14% of total assets). Current liabilities were unreported, so current and quick ratios are not calculable; the reported 'working capital' figure reflects current assets only, not net working capital. solvency: Total assets 20,696.86 and total liabilities 14,806.20 yield an equity ratio of 31.2% (company-reported). Debt-to-equity is 2.20x, indicative of a leveraged structure for a materials company. Interest-bearing debt was unreported, and interest coverage cannot be assessed. capital_structure: Equity of 6,714.98 (retained earnings 3,186.43; capital surplus 1,088.63) supports an equity multiplier of 3.08x. Negative total comprehensive income suggests potential volatility in equity from OCI, affecting capital buffers in downcycles.

Cash Flow Quality

earnings_quality: Cash flow data (OCF, capex) were not disclosed, preventing reconciliation of accrual earnings to cash. Elevated tax expense versus PBT and reliance on equity-method income point to fragile bottom-line cash conversion in the period. FCF_analysis: Free cash flow could not be calculated due to unreported OCF and capex. Cash & equivalents of 2,946.56 provide a buffer, but sustainability depends on OCF recovery as earnings normalize. working_capital: Inventories are 2,208.12 (~24.9% of current assets). Without AR/AP disclosure, working capital intensity and cash conversion cycle cannot be quantified; inventory trends versus revenue should be monitored for alignment.

Dividend Sustainability

payout_ratio_assessment: The calculated payout ratio is 199.1% against EPS of 33.37 JPY, implying dividends exceed current earnings capacity in this weak-profit phase. DPS figures were unreported, so the exact cash outlay is unknown. FCF_coverage: Not assessable due to missing OCF and capex data. In the absence of FCF information, coverage likely relies on cash on hand and/or balance sheet flexibility near term. policy_outlook: Given cyclical earnings and elevated leverage, a stable dividend likely requires margin recovery and normalized taxation. Management may prioritize balance sheet resilience if end-market recovery lags; conversely, a semiconductor upturn could quickly restore dividend coverage.

Risk Assessment

Business Risks:

• Cyclical demand in semiconductor and electronics materials impacting volumes and pricing
• Raw material and energy cost volatility affecting gross margins
• Customer concentration in advanced materials and potential program timing risk
• Technological obsolescence risk in high-spec materials requiring sustained R&D/capex
• Global supply chain disruptions and capacity utilization swings
• FX volatility (USD/EUR/CNY) impacting both operations and OCI
• Competitive pricing pressure in commoditized product lines

Financial Risks:

• High operating leverage leading to outsized EBIT volatility on small revenue changes
• Leverage (D/E 2.20x) and a low equity ratio (31.2%) heighten downside risk in downturns
• Elevated effective tax rate (61.0%) depressing net income and cash generation
• Negative total comprehensive income reducing equity and potentially covenant headroom
• Unreported interest expense and OCF limit visibility on interest coverage and liquidity runway

Key Concerns:

• Sustainability of dividends given a 199.1% payout ratio amid depressed earnings
• Reliance on equity-method income to support PBT while core operations are weak
• Inventory normalization and pricing power recovery to rebuild margins

Investment Implications

Key Takeaways:

• Revenue declined 4.2% YoY; operating income fell 74.9% YoY, evidencing strong negative operating leverage
• Operating margin compressed to 2.2% and net margin to 0.6%; ROE is just 0.9%
• Effective tax rate is unusually high at 61.0%, materially depressing net earnings
• Total comprehensive income was negative (-78.86), eroding equity despite positive net income
• Equity-method income (51.70) was a notable share of PBT, highlighting weak underlying operations
• Leverage is elevated (D/E 2.20x; equity ratio 31.2%), typical for the sector but a constraint in downturns
• Liquidity buffer exists (cash & equivalents 2,946.56), but OCF/FCF unreported limits visibility
• Calculated payout ratio of 199.1% raises near-term dividend sustainability questions

Metrics to Watch:

• Operating margin recovery and EBIT per unit of sales
• Effective tax rate normalization trajectory
• Inventory levels versus sales and any write-downs
• OCF and FCF once disclosed; capex intensity and timing
• Interest expense and coverage metrics when available
• OCI components (FX, securities, pensions) and impact on equity
• Semiconductor end-market indicators (utilization rates, ASPs) relevant to materials demand

Relative Positioning: Within Japanese chemical/materials peers, Resonac currently shows below-cycle profitability with higher earnings volatility due to operating leverage, a moderate-to-high leverage profile, and meaningful exposure to semiconductor cycles; margin and ROE are suppressed versus likely mid-cycle peer levels, with recovery contingent on demand normalization and cost pass-through.

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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