OSAKA YUKA INDUSTRY LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.18B
• Operating Income: ¥139M
• Net Income: ¥62,000
• 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

Osaka Yuka Kogyo (TSE:41240) delivered a sharp operational rebound in FY2025 Q4 under JGAAP (consolidated), with revenue up 20.0% year on year to ¥1.184bn and operating income surging 642.1% to ¥139m. Gross profit reached ¥406m, implying a gross margin of 34.3%, and operating margin rose to 11.7%, evidencing strong operating leverage as fixed costs were absorbed over higher volumes and/or improved pricing. Ordinary income of ¥138m was broadly in line with operating income, indicating limited non-operating drag. Despite improved operations, the company recorded a net loss of ¥32m (EPS -¥30.77), implying a sizeable extraordinary loss under JGAAP (estimated at roughly ¥150m post-tax) that overshadowed solid core profitability. Cash generation was robust: operating cash flow (OCF) of ¥206m exceeded accounting operating profit, supported by non-cash charges (depreciation ¥90m) and likely working capital inflows. Free cash flow (FCF) was a healthy ¥147m after ¥59m of investing cash outflow, suggesting internally funded reinvestment capacity. The balance sheet is very strong, with total assets of ¥1.862bn and equity of ¥1.647bn; this implies an equity ratio of about 88% (our calculation), despite the equity ratio field being undisclosed in XBRL. Liquidity is ample: current assets of ¥1.127bn vs. current liabilities of ¥206m yield a current ratio of 546% and working capital of ¥920m. Leverage remains low with a debt-to-equity ratio of 0.13x, and interest expense is undisclosed (reported as 0), implying minimal financial burden. DuPont analysis shows a negative ROE of -1.94% driven solely by the net loss margin (-2.70%), while asset turnover (0.636x) and leverage (1.13x) are stable and conservative. EBITDA was ¥229m (19.4% margin), providing a better indicator of recurring earnings power than net income this period due to extraordinary items. The disconnect between positive OCF and negative net income indicates earnings quality was stronger than the bottom line suggests, as cash profit and working capital discipline more than offset non-cash/one-time losses. Dividend per share is undisclosed (reported as 0.00), and no payout occurred, which is prudent given the net loss but strong FCF affords future flexibility. Key data limitations include undisclosed cash and equivalents, equity ratio, interest expense, and share count, which constrain per-share and net cash metrics. Overall, underlying operations and cash flow quality improved markedly, but extraordinary losses and data gaps cloud the headline net result.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin -2.70% x asset turnover 0.636x x financial leverage 1.13x = ROE -1.94%. The negative net margin stems from extraordinary items; core profitability at the operating level was healthy with an 11.7% operating margin and 19.4% EBITDA margin. Gross margin at 34.3% supports the margin stack, implying improved mix/pricing or scale benefits. Operating leverage was significant: with revenue +20% YoY and operating income +642% YoY, prior-year operating margin was roughly ~1.9%, demonstrating substantial fixed-cost absorption this year. Ordinary income tracked operating income closely, indicating limited non-operating headwinds (interest is undisclosed and appears minimal). The gap from positive ordinary income to a net loss suggests extraordinary losses (e.g., impairment, special charges) typical under JGAAP classifications. Depreciation of ¥90m (≈7.6% of sales) underpins EBITDA-to-OP bridge and signals a moderate capital intensity. Effective tax rate metrics are not meaningful this period due to a net loss; taxes paid (¥19m) likely reflect taxable income components prior to extraordinary items. Overall, underlying return metrics are improving, but reported ROE is constrained by one-off losses rather than core operating performance.

Growth Assessment

Revenue rose 20.0% YoY to ¥1.184bn, signaling solid demand recovery for the company’s specialty chemical processing/services. The magnitude of operating income growth (+642.1% YoY) implies both topline expansion and sizable operating leverage, likely from better capacity utilization and cost discipline. Ordinary income aligned with operating income, reinforcing that growth is fundamentally operational rather than driven by financial items. The net loss points to non-recurring factors rather than deterioration in the run-rate earnings power. EBITDA margin of 19.4% indicates improved profit quality versus prior year and provides a better proxy for normalized earnings. Sustainability hinges on maintaining volume, mix, and pricing while avoiding repeat extraordinary expenses; absent these, normalized net margins should trend closer to operating margins less tax. With OCF of ¥206m outrunning accounting profits, growth appears supported by cash conversion and working capital management. Revenue durability will depend on customer demand in key end-markets (likely electronics/materials/industrial) and feedstock spread stability. Given the small base (¥1.184bn sales), growth rates can be volatile, but the balance sheet provides capacity to invest for expansion. Near-term outlook is constructive for operations, though headline profits will remain sensitive to one-time items until such charges abate.

Financial Health

Liquidity is very strong: current assets ¥1,126.7m vs current liabilities ¥206.4m yield a current ratio of 546% and quick ratio of 534%, with modest inventories of ¥25.3m. Working capital stands at ¥920.3m, offering a sizable buffer for operations. Solvency is robust: total liabilities ¥213.4m against equity ¥1,647.0m imply low leverage (D/E 0.13x). While the disclosed equity ratio is 0.0% (undisclosed), our calculation indicates ~88.4% equity-to-assets (¥1,647m/¥1,862m), consistent with a conservatively financed structure. Interest expense is undisclosed and appears immaterial, and ordinary income was not hindered by financing costs. Cash and equivalents are undisclosed, limiting net cash analysis; however, the low liabilities and strong OCF suggest ample headroom. The company appears well-positioned to absorb shocks and fund capex internally without meaningful external financing.

Cash Flow Quality

Earnings quality is strong this period: OCF of ¥206m versus net income of -¥32m results in an OCF/Net Income ratio of -6.44 (distorted by the loss), reflecting that cash generation exceeded accounting losses due to non-cash items (¥90m depreciation) and likely favorable working capital movements. Free cash flow of ¥147m (OCF ¥206m plus investing CF -¥59m) indicates solid internal funding capacity after reinvestment. Investing cash outflow likely represents maintenance and/or selective growth capex; the scale (≈5.0% of sales) looks manageable. Working capital quality appears sound: inventories are modest (¥25m) relative to current assets, and the liquidity metrics suggest timely collections; detailed receivable/payable turns are not disclosed. Ordinary-to-OCF conversion looks healthy, reinforcing that the net loss was driven by non-cash/one-off charges rather than poor cash economics. Overall, cash flow quality supports the sustainability of operations and future capex.

Dividend Sustainability

No dividend was paid (DPS reported as 0.00; payout ratio 0%), which aligns with a net loss and the potential presence of extraordinary charges. From a capacity standpoint, FCF of ¥147m would have comfortably covered a modest cash dividend, but management appears to prioritize balance sheet strength and reinvestment amid earnings volatility. With an equity ratio we estimate at ~88% and low leverage, the balance sheet can support future distributions once profitability normalizes. Coverage metrics based on FCF are strong ex-dividend; however, absent disclosed share count and cash balance, per-share sustainability cannot be assessed. Dividend policy outlook likely hinges on normalization of net income (elimination of extraordinary losses) and visibility on growth investments.

Risk Assessment

Business Risks:

• Demand volatility in end-markets for specialty chemicals and contract processing
• Raw material and energy price fluctuations impacting spreads
• Customer concentration risk typical of niche processing businesses
• Capacity utilization sensitivity driving operating leverage in downturns
• Regulatory and environmental compliance costs in chemical processing
• Supply chain disruptions and logistics constraints
• Execution risk on capex and technology upgrades

Financial Risks:

• Earnings volatility from extraordinary items under JGAAP (impairments, special losses)
• Limited disclosure on cash and interest-bearing debt complicates net cash assessment
• Small scale (¥1.184bn revenue) heightening fixed-cost absorption risk if volumes soften
• Tax cash outflows despite accounting losses (timing differences) impacting cash earnings

Key Concerns:

• Net loss despite strong operating performance implies material one-off charges
• Sustainability of 11–12% operating margin if demand or pricing normalizes
• Data gaps (cash, share count, interest) limit precision of per-share and coverage analyses

Investment Implications

Key Takeaways:

• Core operations improved markedly: revenue +20% YoY and operating margin 11.7%
• Net loss (-¥32m) likely reflects extraordinary losses rather than deteriorating core earnings
• Strong cash generation (OCF ¥206m; FCF ¥147m) underscores healthy cash economics
• Balance sheet is conservatively financed with an estimated ~88% equity ratio and D/E 0.13x
• Working capital and liquidity are ample (current ratio 546%) supporting self-funded growth

Metrics to Watch:

• Extraordinary gains/losses and disclosure around their nature and recurrence
• Operating margin and EBITDA margin sustainability versus raw material/energy spreads
• Order trends, capacity utilization, and pricing/mix indicators
• OCF/EBITDA conversion and working capital turns (DSO, DIO, DPO) when disclosed
• Capex plans versus OCF and impact on future depreciation
• Effective tax rate normalization and cash tax outflows

Relative Positioning: Within Japan specialty chemicals/processing peers, the company appears conservatively capitalized with strong liquidity and improving operational metrics, but smaller scale and exposure to extraordinary items yield higher headline earnings volatility.

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