Ultrafabrics Holdings Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥15.41B
• Operating Income: ¥1.19B
• Net Income: ¥559M
• EPS: ¥30.05

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

Ultrafabrics Holdings (IFRS, consolidated) delivered marginal topline growth in FY2025 Q3 year-to-date, with revenue at 154.13 (100M JPY), up 0.3% YoY, but experienced a sharp compression in earnings as operating income fell 45.1% YoY to 11.94 and net income declined 55.9% YoY to 5.59. The gross margin remains structurally high at 52.8%, reflecting the premium synthetic materials mix and pricing, yet operating margin contracted to 7.7% as SG&A intensity increased to 38.7% of sales. EBITDA of 23.98 implies a 15.6% margin, cushioning EBIT via depreciation add-backs (D&A 12.04), but the step-down from gross profit to EBIT indicates elevated overhead and/or mix and volume deleverage. The effective tax rate surged to 60.2% (tax 5.05 on PBT 8.39), a key drag on bottom-line conversion and likely influenced by geographic profit mix and discrete items; this also contributed to total comprehensive income turning slightly negative at -0.27, suggesting unfavorable OCI (e.g., FX translation). DuPont shows ROE at 3.3%, built from a 3.6% net margin, 0.407x asset turnover, and 2.25x financial leverage—profitability rather than leverage or turnover is the main constraint on returns. Despite weak earnings, cash generation was strong: operating cash flow reached 30.96 (OCF/NI 5.54x), and free cash flow was 13.47, implying robust cash conversion aided by non-cash charges and likely working capital release. The balance sheet is stable with an equity ratio of 44.5% (equity 168.54 on assets 379.09) and liabilities of 215.70; however, interest-bearing debt is unreported, leaving debt service capacity to be inferred from cash flow rather than coverage ratios. Current asset composition shows significant inventories at 43.92 and receivables at 32.19, which, alongside soft revenue growth, warrants monitoring for potential inventory carry and credit risk, though OCF performance suggests some working capital normalization during the period. Financing cash outflows of -23.20 reflect dividends (-7.15) and likely debt reduction or other financing items, while capex of -16.90 keeps reinvestment disciplined relative to OCF. The calculated payout ratio is 118.4%, exceeding earnings; however, FCF coverage of dividends is healthy at 2.04x YTD, indicating current distributions are being funded by cash generation rather than balance sheet draw. Book value per share is calculated at 1,062.65 JPY; with ROE depressed, capital efficiency is currently below management’s likely mid-term aspirations. Given revenue stability but margin pressure and a high tax burden, near-term earnings recovery depends on SG&A control, mix/pricing reinforcement, and normalization of the tax rate. Data limitations include unreported ordinary income, interest expense, current liabilities, and debt, which constrain precise solvency and interest coverage assessments; conclusions are based on reported non-zero data.

Profitability Analysis

ROE_decomposition: ROE 3.3% = Net margin 3.6% x Asset turnover 0.407 x Financial leverage 2.25x. The weak net margin is the dominant drag; turnover is modest for a specialty materials business and leverage is moderate. margin_quality: Gross margin 52.8% is strong and consistent with a premium product mix, but SG&A ratio at 38.7% compressed operating margin to 7.7%. EBITDA margin is 15.6%, indicating meaningful fixed-cost absorption but insufficient to offset overhead scaling. The effective tax rate of 60.2% materially undermines NPAT conversion from PBT, likely including one-offs/geographic mix. Total comprehensive income turned negative (-0.27), pointing to OCI losses (likely FX translation) that further pressure equity returns. operating_leverage: With revenue up only 0.3% YoY and operating income down 45.1%, the period exhibits negative operating leverage—incremental volumes did not cover fixed SG&A, and/or mix shifts and inflationary costs outweighed pricing. D&A 12.04 vs EBIT 11.94 implies significant operating leverage sensitivity at the EBIT level.

Growth Assessment

revenue_sustainability: Topline was broadly flat (+0.3% YoY), suggesting stable demand but limited growth momentum. The inventory level (43.92) relative to flat sales warrants caution on overstock risk if end-market demand softens. profit_quality: EBITDA (23.98) and OCF (30.96) demonstrate solid cash earnings despite weak EBIT and NI, supported by non-cash charges and likely working capital tailwinds. However, the elevated tax rate and OCI losses reduce reported earnings and equity accretion. outlook: A recovery depends on SG&A normalization, sustained pricing/mix in premium segments, and tax rate normalization. FX remains a swing factor for reported OCI and potentially margins. Execution on cost controls and disciplined capex (16.90 YTD) supports medium-term margin repair if volumes improve.

Financial Health

liquidity: Cash and equivalents are 27.24; current ratio/quick ratio are unreported and not calculable. Working capital is listed at 108.92, aided by current assets of 108.92; without current liabilities disclosure, precise liquidity assessment is limited. solvency: Equity ratio is 44.5% (equity 168.54 vs assets 379.09), indicating a balanced capital structure. Debt-to-equity is reported at 1.28x, but interest-bearing debt is unreported, limiting visibility on leverage composition and serviceability. capital_structure: Total liabilities are 215.70, including accounts payable of 21.51. Financing CF of -23.20 suggests active balance sheet management (dividends and likely debt repayments), while maintaining positive FCF. Absent ordinary income and interest data, we infer solvency comfort from positive OCF and equity buffer.

Cash Flow Quality

earnings_quality: OCF/NI of 5.54x underscores strong cash conversion relative to accounting profits, supported by D&A (12.04) and presumed working capital release. The gap between EBIT and NI is exacerbated by a high tax rate rather than cash operating weakness. FCF_analysis: Free cash flow is 13.47 (8.7% FCF margin on revenue), after capex of 16.90. Investment spending appears disciplined versus OCF (30.96), leaving room for shareholder returns and potential deleveraging. working_capital: Receivables are 32.19 and inventories 43.92; OCF strength suggests either collections improvement or inventory normalization during the period. Continued monitoring is needed to ensure inventories do not build against flat demand.

Dividend Sustainability

payout_ratio_assessment: The calculated payout ratio of 118.4% exceeds earnings, indicating overdistribution on an earnings basis. This is driven by depressed NI rather than outsized dividends. FCF_coverage: FCF coverage of dividends is a comfortable 2.04x, implying distributions are currently supported by cash generation despite low earnings. policy_outlook: Given strong OCF but weak reported NI and high tax rate, maintaining the current dividend likely hinges on sustaining FCF and avoiding further profit erosion. Without DPS disclosure, we assume a stable policy bias but acknowledge elevated sensitivity if earnings weakness persists.

Risk Assessment

Business Risks:

• End-market softness in premium automotive, aviation, and furniture segments affecting volumes and mix.
• Pricing pressure or slower pass-through of input cost inflation in synthetic materials.
• FX volatility impacting reported revenue, margins, and OCI (translation effects).
• Customer concentration risk typical in premium OEM programs.
• Product substitution and technology/material innovation by competitors.

Financial Risks:

• Elevated effective tax rate depressing net income and ROE.
• Potential inventory build relative to flat sales, risking cash conversion if demand slows.
• Limited disclosure on interest-bearing debt and interest expense, creating uncertainty around coverage.
• Dividend payout above earnings increasing sensitivity to earnings volatility.

Key Concerns:

• Sharp YoY decline in operating and net income despite stable revenue indicates negative operating leverage.
• High tax rate (60.2%) materially compresses NPAT; sustainability of this rate is unclear.
• Negative total comprehensive income suggests OCI headwinds (likely FX).

Investment Implications

Key Takeaways:

• Revenue stable (+0.3% YoY) but earnings compressed (OP -45.1%, NI -55.9%).
• Gross margin robust at 52.8%, but SG&A ratio elevated at 38.7%, yielding 7.7% operating margin.
• ROE low at 3.3%, constrained by net margin and high tax rate rather than leverage.
• Cash generation solid: OCF 30.96, FCF 13.47; OCF/NI 5.54x indicates strong cash conversion.
• Equity ratio 44.5% provides balance sheet resilience amid earnings softness.
• Dividend funding currently supported by FCF (2.04x coverage) despite 118.4% payout on earnings.
• OCI and FX effects turned total comprehensive income negative; monitor currency impacts.
• Capex (16.90) remains disciplined relative to OCF, supporting investment capacity.

Metrics to Watch:

• SG&A as a percentage of sales and trajectory of operating margin.
• Effective tax rate normalization and drivers of tax expense.
• Order trends and backlog in key end-markets (auto/aviation/furniture) to gauge volume recovery.
• Inventory levels and turns vs sales to assess working capital risk.
• FX rates (USD/JPY) and OCI impacts on equity.
• Gross margin sustainability and pricing/mix realization.
• Free cash flow and dividend coverage over the next quarters.

Relative Positioning: Within specialty materials/textiles peers on the TSE, Ultrafabrics exhibits superior gross margins and healthy cash generation but currently lags on earnings growth and ROE due to negative operating leverage and an unusually high tax rate; balance sheet solidity is a relative strength while visibility on debt and ordinary income is below average due to disclosure gaps.

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