OSAKA YUKA INDUSTRY LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.18B
• Operating Income: ¥139M
• Net Income: ¥-32M
• EPS: ¥-30.77

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

Verdict: Solid top-line and operating recovery in FY2025 Q4 with sharply improved operating income, but bottom line swung to a net loss due to outsized tax expense, leaving headline ROE negative despite strong cash generation. Revenue rose 20.0% YoY to 11.84, with gross profit at 5.71, implying a healthy gross margin of 48.2%. Operating income surged to 1.39 (+642.1% YoY), lifting operating margin to 11.7%, indicating meaningful operating leverage on improved volumes/mix and cost control. Ordinary income was 1.38 (+615.4% YoY), essentially in line with operating income as non-operating items netted to zero. Profit before tax was just 0.16 as below-the-line items and adjustments compressed pretax margin to 1.4%. An outsized income tax expense of 0.48 (effective tax rate ~301%) drove net income to -0.32 and EPS to -30.77 JPY. Cash flow quality was strong: operating cash flow of 2.06 exceeded accounting earnings (OCF/NI -6.44x, reflecting positive cash vs negative NI), and free cash flow was positive at 1.47 even after 0.58 of capex. The balance sheet remains highly conservative with equity of 16.47 against total assets of 18.62 (equity ratio ~88.4% by calculation) and ample liquidity (current ratio 533%, cash 8.73). Asset efficiency is modest (asset turnover 0.636), but ROIC at 9.0% exceeds the 7–8% benchmark, indicating value-accretive investment discipline despite the headline net loss. Margin trajectory is constructive at the operating level; exact bps expansion YoY cannot be quantified from the data provided, but the swing in operating income suggests notable improvement. Earnings quality concerns center on the large tax charge and valuation allowance effects rather than core operations. With positive FCF and net cash, dividend capacity appears supported operationally, though reported payout ratios are not meaningful given the net loss and unreported DPS. Forward-looking, sustaining the improved operating margin while normalizing the tax rate should restore positive ROE. Key watchpoints include tax normalization, demand durability underlying the 20% revenue growth, and maintaining gross margin resilience. Overall, fundamentals point to a business operationally recovering with strong liquidity, temporarily obscured by tax-related bottom-line volatility.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (-2.7%) × Asset Turnover (0.636) × Financial Leverage (1.13x) = ROE approximately -1.9% (matches reported). The component changing the outcome most is Net Profit Margin, which is negative despite solid operating margin due to an extraordinary-high effective tax rate (~301%) reducing net profit below zero. Business reason: core operations improved (operating margin 11.7%), non-operating items largely neutral, but below-the-line tax effects (likely valuation allowance changes, prior-period tax adjustments, or non-deductible items) suppressed net income. Sustainability: the operating margin improvement appears more durable given the broad-based revenue growth (+20% YoY) and controlled SG&A (4.32 vs gross profit 5.71), whereas the extreme tax rate is likely one-off or transitory and should normalize toward statutory rates. Asset turnover at 0.636 reflects a capital-intensive/specialty processing profile; improvements may be gradual via higher utilization. Financial leverage is low (1.13x), limiting ROE amplification; this is conservative but constrains equity returns. Concerning trends: none evident in cost inflation at the operating line this quarter; however, the gap between operating and pretax income (11.7% vs 1.4% margins) flags below-the-line drag that needs monitoring. SG&A detail is unreported, limiting deeper productivity diagnostics.

Growth Assessment

Revenue grew 20.0% YoY to 11.84, a strong rebound for a small-cap chemical processor, suggesting improved demand or successful mix/price actions. Operating income increased 642.1% YoY to 1.39, indicating significant operating leverage as fixed costs were absorbed on higher volumes. Gross margin at 48.2% supports the notion of favorable mix or pricing. Non-operating items were neutral (0.04 income offset by 0.04 expenses), so the operating recovery is the key driver of ordinary income. Pretax profit compressed to 0.16 due to below-the-line items and a very high tax expense of 0.48, resulting in a net loss of -0.32; this appears non-core in nature. EBITDA of 2.24 (18.9% margin) indicates healthy cash earnings relative to scale. ROIC at 9.0% is above the 7–8% benchmark, implying disciplined capital deployment and productive assets despite modest asset turnover. Sustainability: revenue momentum hinges on end-demand in specialty chemicals/processing and the company’s ability to sustain pricing; lack of segment detail limits visibility. Profit quality is supported by positive OCF and FCF; normalization of tax effects would likely translate operating gains into net profit growth. Outlook: with net cash and strong liquidity, the company is positioned to invest in capacity/efficiency; key is sustaining utilization and margin while avoiding cost creep.

Financial Health

Liquidity is very strong: current assets 11.11 vs current liabilities 2.08 yield a current ratio of 532.9% and a quick ratio of 518.5% (cash and deposits 8.73 dominate). No warning on Current Ratio (<1.0) or D/E (>2.0); D/E is a conservative 0.13x. Total liabilities are only 2.16 against equity of 16.47, implying an equity ratio of ~88.4% (calculated). Maturity mismatch risk appears low given current assets far exceed current liabilities and minimal payables (0.04). Interest-bearing debt is unreported; however, overall liabilities are small, and cash on hand suggests a net cash position. No off-balance sheet obligations are disclosed in the provided data. Working capital is ample at 9.02, supporting operations and investment needs without external funding.

Cash Flow Quality

Operating cash flow was 2.06 versus net income of -0.32, yielding an OCF/NI ratio of -6.44x; while this triggers a quantitative flag, the direction (positive cash, negative NI) indicates cash earnings outpaced accounting profit due to tax and below-the-line items. Free cash flow was positive at 1.47 after capex of 0.58, demonstrating internally funded investment capacity. Earnings-to-cash conversion is strong at the operating level, corroborated by EBITDA of 2.24. Working capital movements likely contributed positively (given modest receivables 1.04 and inventories 0.30 relative to revenue), but detailed drivers are unreported. No clear signs of working capital manipulation are evident from the limited data. With positive FCF and substantial cash, the company can support maintenance capex and potential shareholder returns while preserving balance sheet strength.

Dividend Sustainability

Dividend details (DPS and total dividends) are unreported; reported payout ratios are inconsistent due to the net loss (calculated payout -117.4%, reported 580.2%), making payout metrics not meaningful this period. From a cash perspective, FCF of 1.47 and net cash liquidity suggest capacity to sustain a modest dividend if policy prioritizes stability. Coverage: FCF coverage indicated at 3.91x implies ample headroom relative to recent dividend scale (exact yen amount not provided). Policy outlook: given conservative leverage and positive ROIC (9.0%), the company has room to maintain or gradually grow distributions contingent on net income normalization (notably tax effects). Key constraint is the current net loss; a return to positive NI would align accounting payout with cash capacity.

Risk Assessment

Business Risks:

• Demand volatility in specialty chemical processing affecting utilization and pricing power
• Input cost fluctuations (energy, raw materials) that can compress gross margins
• Customer concentration risk typical for niche processors (data not disclosed)
• Execution risk on capex and process yields impacting ROIC sustainability

Financial Risks:

• Tax rate volatility (valuation allowances or one-off adjustments) causing earnings swings
• Small scale with modest asset turnover (0.636) limiting operating flexibility in downturns
• Limited disclosure on interest-bearing debt and SG&A composition reduces transparency
• FX exposure if export-linked revenue/materials are significant (not disclosed)

Key Concerns:

• Effective tax rate of ~301% drove a net loss despite strong operating profit
• Gap between operating margin (11.7%) and pretax margin (1.4%) indicates material below-the-line drag
• Data limitations on segment mix, SG&A breakdown, and debt prevent deeper risk calibration
• Sustainability of 20% YoY revenue growth absent segment/end-market detail

Investment Implications

Key Takeaways:

• Operational recovery evident: operating income +642% YoY with 11.7% margin
• Net loss (-0.32) stems primarily from extraordinary tax expense, not core deterioration
• Strong cash generation (OCF 2.06; FCF 1.47) and net cash balance support flexibility
• ROIC at 9.0% exceeds benchmark, indicating value-accretive deployment despite small scale
• Balance sheet highly conservative (equity ~88% of assets; current ratio ~533%)

Metrics to Watch:

• Normalization of effective tax rate and reconciliation items driving PBT to NI
• Gross and operating margin trajectory vs energy/raw material cost trends
• Order backlog/utilization indicators underpinning revenue growth sustainability
• Working capital turns (receivables and inventory days) vs revenue growth
• Capex intensity vs EBITDA and its impact on future ROIC

Relative Positioning: Versus domestic small-cap specialty chemical peers, the company exhibits superior balance-sheet strength (net cash, very high liquidity) and an above-benchmark ROIC (9%), with improving operating profitability but lower asset turnover. Headline profitability (ROE -1.9%) lags due to tax-driven losses; absent such effects, operating metrics compare favorably. Disclosure depth is thinner than some peers (SG&A and debt details unreported), which modestly elevates perceived risk.

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