LION OFFICE PRODUCTS CORP. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥37.02B
• Operating Income: ¥1.19B
• Net Income: ¥848M
• EPS: ¥30.55

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

Lion Office Products (TSE: 423A0) delivered solid top-line growth in FY2025 with revenue of ¥37.0bn, up 6.1% YoY, supported by stable gross profitability. Gross profit reached ¥8.65bn, translating to a gross margin of 23.4%, indicating decent pricing discipline and/or product mix resilience amid input cost pressures. Operating income increased 9.1% YoY to ¥1.19bn, with the operating margin at 3.2%, suggesting slight operating leverage as revenue growth outpaced SG&A growth. Ordinary income of ¥1.28bn exceeded operating profit, helped by minimal interest burden, while net income rose 19.7% YoY to ¥0.91bn, reflecting both improved operations and a normalized tax charge. DuPont analysis points to a calculated ROE of 7.46% (net margin 2.46%, asset turnover 1.478x, leverage 2.05x), a modest but improved return profile YoY. Asset turnover is healthy for the industry, underscoring efficient asset utilization. Liquidity positions appear sound: current ratio is 175% and quick ratio 132%, indicating ample near-term coverage without relying on inventories. Leverage is moderate with total liabilities-to-equity at roughly 0.97x, and interest coverage is very strong at ~170x, implying limited refinancing risk. Cash flow is the weak point this period: operating CF was slightly negative (−¥6m) despite positive earnings, and free cash flow was −¥230m after ¥224m of investing outflows, suggesting working capital build or timing effects. The effective tax rate, inferred from the income tax charge (¥371m) and net income, is approximately 29%, despite the reported metric field showing 0.0% (the latter appears undisclosed rather than zero). Dividend data were not disclosed in the XBRL fields; thus payout information is unavailable for this analysis window. Overall, profitability improved modestly, balance sheet resilience remains good, and financing costs are negligible; however, the disconnect between earnings and operating cash flow warrants monitoring. Inventory stood at ¥4.08bn, and working capital was a healthy ¥7.04bn, but cash conversion timing likely weighed on OCF near fiscal year-end. With ordinary income exceeding operating income and interest expenses minimal, non-operating items were benign. Looking forward, sustaining revenue growth while converting earnings to cash will be key to improving ROE beyond the current mid‑single‑digit level. Data limitations exist for some items (equity ratio, cash balance, dividend fields), but the core P/L and B/S provide a sufficient basis for assessing fundamentals.

Profitability Analysis

roe_decomposition: ROE 7.46% = Net Profit Margin 2.46% × Asset Turnover 1.478× × Financial Leverage 2.05×. The ROE is driven primarily by healthy asset turnover; margin is modest and leverage is moderate. margin_quality: Gross margin 23.4% suggests reasonable pricing and cost management. Operating margin 3.2% and ordinary margin 3.4% indicate thin, but improving, operating leverage. Net margin at 2.46% improved with earnings growth outpacing revenue. operating_leverage: Operating income grew 9.1% vs. revenue +6.1%, implying positive operating leverage, likely from SG&A discipline. Depreciation is modest (¥340m), so fixed-cost intensity is moderate.

Growth Assessment

revenue_sustainability: Revenue rose 6.1% YoY to ¥37.0bn. With asset turnover at 1.478x, the firm appears to be utilizing assets efficiently to support growth, though sustainability will depend on demand in office-related categories and channel execution. profit_quality: Net income +19.7% YoY to ¥912m. Ordinary income exceeded operating income, and interest expense was only ¥7m, indicating core operations are the main profit driver. Tax expense of ¥371m implies an effective tax rate ~29%, consistent with normalizing tax burden. outlook: Maintaining growth will require holding gross margins near current levels and controlling SG&A. Mix upgrades and cost pass-throughs could modestly lift margins; however, competitive intensity and input costs are ongoing constraints.

Financial Health

liquidity: Current assets ¥16.43bn vs. current liabilities ¥9.38bn; current ratio 175% and quick ratio 132% provide a comfortable liquidity buffer. solvency: Total liabilities ¥11.85bn vs. equity ¥12.23bn; liabilities-to-equity ~0.97x indicates moderate leverage. Interest coverage ~170x (EBIT ¥1.189bn / interest ¥7m) shows negligible interest burden. capital_structure: Financial leverage (assets/equity) at 2.05x supports ROE without excessive balance sheet risk. Precise interest-bearing debt and cash balances were not disclosed, limiting granularity on net debt.

Cash Flow Quality

earnings_quality: OCF/Net Income at −0.01 indicates earnings did not convert to cash this period, likely due to working capital timing (e.g., receivables/inventory build). This contrasts with solid P/L results and strong interest coverage. fcf_analysis: Free cash flow was −¥230m (OCF −¥6m plus investing CF −¥224m). Investing outflows appear manageable relative to EBITDA (¥1.53bn). working_capital: Working capital of ¥7.04bn and inventories of ¥4.08bn suggest capacity to meet demand, but elevated inventories or slower collections can temporarily depress OCF. Monitoring inventory turnover and DSO is key.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed in the data. On an earnings basis, capacity exists given net income of ¥912m, but cash coverage is currently weak due to negative FCF. fcf_coverage: With FCF at −¥230m, cash coverage of dividends (if any) would be limited for the period. Sustainability hinges on normalization of OCF and prudent capex. policy_outlook: Without disclosed DPS/policy, we infer a conservative stance would be supported by strong liquidity and low interest burden once OCF normalizes. Confirmation from management guidance would be necessary.

Risk Assessment

Business Risks:

• Demand volatility in office supplies/furnishings amid hybrid work trends
• Pricing pressure from competition and channel consolidation
• Input cost inflation and supply chain disruptions affecting gross margin
• Product mix risk if lower-margin categories grow faster
• Dependence on key distributors or corporate procurement cycles

Financial Risks:

• Earnings–cash flow mismatch due to working capital swings
• Potential inventory obsolescence if demand slows
• Limited visibility on net debt and cash balances due to undisclosed items
• Tax rate variability affecting net margins
• Exposure to FX on imported materials (if applicable)

Key Concerns:

• Negative operating cash flow despite higher earnings
• Thin operating margin (3.2%) leaves less buffer for shocks
• Inventory levels require close monitoring to avoid cash drag

Investment Implications

Key Takeaways:

• Top-line growth of 6.1% YoY with modest operating leverage
• ROE at 7.46% driven by strong asset turnover and moderate leverage
• Liquidity is strong; interest burden is negligible (coverage ~170x)
• Cash conversion is weak this period (OCF/NI −0.01; FCF −¥230m)
• Gross margin stable at 23.4%; operating margin remains thin at 3.2%

Metrics to Watch:

• OCF/Net income and free cash flow normalization
• Inventory turnover and days sales outstanding
• Gross margin trajectory and SG&A ratio
• Asset turnover sustainability
• Interest-bearing debt and cash balances (when disclosed)

Relative Positioning: The company exhibits moderate profitability with solid asset efficiency and a sound liquidity profile, but trails higher-margin peers on operating margin; near-term focus is on improving cash conversion while maintaining growth.

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