NATOCO CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥22.27B
• Operating Income: ¥1.40B
• Net Income: ¥1.14B
• EPS: ¥150.62

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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: A solid quarter with top-line growth, margin improvement, and high-quality cash generation, underpinned by a very strong balance sheet. Revenue rose 7.3% YoY to 222.75, supported by operating income growth of 13.4% YoY to 13.98 and net income up 19.0% YoY to 11.37. Operating margin expanded to roughly 6.3%, up about 34 bps YoY based on reconstructed prior-period figures. Net margin improved to 5.1%, a c.50 bps expansion YoY, reflecting both better operating leverage and lower non-operating drag. Ordinary income grew 9.6% to 15.09, lifting the ordinary margin by about 14 bps YoY. Gross margin stands at 22.3% for the period, though YoY movement is not directly calculable from disclosures. Earnings quality is strong: Operating cash flow of 18.47 is 1.62x net income, and free cash flow of 16.36 comfortably covers likely shareholder returns and capex. The balance sheet is exceptionally liquid, with a current ratio of 365.8% and cash/deposits of 107.11 against current liabilities of 57.71, indicating low refinancing or liquidity risk. Leverage is modest (D/E 0.26x), interest expense is negligible (0.01), and interest coverage is exceptionally high at 1,583x. DuPont analysis shows ROE of 4.6% driven by a conservative 1.26x leverage and asset turnover of 0.718; while profitability improved, low leverage caps absolute ROE. Working capital is well managed with sizeable accounts receivable (54.23) and lower inventories (13.63), aiding cash conversion. Reported ratios in XBRL (e.g., operating margin at 0.1%) appear definitionally different from standard calculations; we rely on calculable ratios from the primary statements. Dividend sustainability looks sound with a calculated payout ratio of 36.5% and FCF coverage of 3.94x, although DPS amounts were not disclosed. The quarter’s performance implies improved pricing/volume mix or input cost relief, likely continuing to support margins if raw materials and FX remain benign. Forward-looking, the company has capacity to invest or return capital while maintaining resilience.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (5.1%) × Asset Turnover (0.718) × Financial Leverage (1.26x) = ROE 4.6%. The most notable change vs last year is the net margin, which we estimate expanded by about 50 bps as net income growth (+19%) outpaced revenue growth (+7.3%). Business drivers likely include a better gross spread from input cost normalization and operating leverage from SG&A discipline relative to sales. Sustainability looks reasonable if raw material prices and FX remain supportive; however, the improvement could partially reflect one-time tailwinds in procurement or mix. Asset turnover at 0.718 reflects a conservative balance sheet with significant cash; unless asset intensity declines or growth accelerates, turnover may remain stable. Financial leverage is low (1.26x), constraining ROE despite margin improvement; this is a structural choice tied to a strong net cash position. Operating margin is approximately 6.3%, up ~34 bps YoY; ordinary margin improved ~14 bps YoY, confirming operating leverage. SG&A was 35.72; without YoY SG&A detail, we cannot confirm whether SG&A growth exceeded revenue, but operating leverage indicates SG&A grew slower than sales. Effective tax rate is 27.8%, consistent with normalized levels, not a key driver of ROE volatility. Overall, margin gains (net and operating) are the main contributor to the ROE uplift this period, while leverage and turnover remain conservative and steady.

Growth Assessment

Revenue increased 7.3% YoY to 222.75, indicating steady demand or improved pricing in core coatings/chemicals lines. Operating income grew 13.4% to 13.98, outpacing sales and signaling positive operating leverage. Net income rose 19.0% to 11.37, aided by stable non-operating items (net +1.11) and a normalized tax rate (27.8%). EBITDA of 21.18 implies an EBITDA margin of 9.5%, consistent with improved cost absorption. Non-operating income (1.25) was modestly supportive, led by interest income (0.80), consistent with the large cash balance; non-operating expenses were minimal (0.14). Growth quality is reinforced by OCF of 18.47, which exceeds net income, and FCF of 16.36, providing internal funding. Near-term outlook: if raw material costs (resins/solvents) and FX remain benign, margin stability or further modest expansion is plausible; volume sensitivity remains to domestic industrial and housing cycles. Investments (capex 5.80) indicate ongoing capacity/maintenance spend without straining cash. Revenue sustainability appears moderate, backed by diversified end-markets, but cyclicality of customers (automotive, construction, electronics) remains a factor.

Financial Health

Liquidity is very strong: current ratio 365.8% and quick ratio 342.2% far exceed healthy thresholds. Cash and deposits of 107.11 comfortably cover current liabilities of 57.71, mitigating short-term refinancing risk. Solvency is conservative with D/E at 0.26x and negligible interest expense (0.01), supporting an interest coverage ratio of 1,583x. There is no warning on Current Ratio (<1.0) or D/E (>2.0); both are comfortably within healthy ranges. Maturity mismatch risk is low given the net cash position and substantial working capital (153.41). Reported interest-bearing debt amounts are unreported; however, the tiny interest expense suggests minimal borrowing. Off-balance sheet obligations are not disclosed in the provided data; none can be inferred. Equity remains robust at 245.84, with retained earnings of 183.01, underscoring capital strength.

Cash Flow Quality

OCF/Net Income is 1.62x, indicating high-quality earnings with strong cash conversion. Operating cash flow of 18.47, less capex of 5.80, implies ample coverage for maintenance and strategic investment needs; provided Free Cash Flow is 16.36, reinforcing surplus capacity. Financing cash outflow of -3.98 indicates net returns to shareholders or debt reduction; specific dividends or buybacks are unreported. Working capital appears well managed with significant receivables (54.23) and relatively lean inventories (13.63); no signs of aggressive working capital manipulation are evident from the data. With FCF coverage of expected shareholder returns at 3.94x, cash generation looks sustainable in the near term.

Dividend Sustainability

The calculated payout ratio is 36.5%, comfortably below the 60% benchmark, suggesting sustainability given current earnings. Although DPS and total dividends paid are unreported, FCF coverage is strong at 3.94x, indicating room for stable or modestly higher distributions without stressing liquidity. DOE is shown as 0.0% in XBRL, likely due to definitional or disclosure gaps rather than a true absence of dividends. The company’s net cash position and high interest coverage further support dividend capacity. Policy outlook: absent explicit guidance, the balance sheet and cash flow profile are consistent with maintaining a conservative, sustainable dividend policy.

Risk Assessment

Business Risks:

• Raw material price volatility (resins, solvents) impacting gross margins
• Demand cyclicality in end-markets (automotive, construction, electronics)
• Foreign exchange fluctuations affecting both input costs and export competitiveness
• Competitive pricing pressure in coatings/chemicals leading to margin compression
• Regulatory/environmental compliance costs

Financial Risks:

• Concentration in accounts receivable (54.23) exposes to customer credit risk in downturns
• Potential reinvestment risk: low leverage and high cash could depress ROE if growth opportunities are limited
• Interest income sensitivity as rates normalize, modestly affecting non-operating income

Key Concerns:

• ROE remains modest at 4.6% due to low leverage and moderate asset turnover
• Visibility on dividend policy is limited as DPS is unreported
• Some reported XBRL ratios use different definitions (e.g., operating margin 0.1%), complicating peer comparisons

Investment Implications

Key Takeaways:

• Healthy top-line growth (+7.3% YoY) with operating leverage (OP up +13.4% YoY)
• Margin expansion: operating margin up ~34 bps and net margin up ~50 bps YoY
• High-quality cash generation (OCF/NI 1.62x) and strong FCF (16.36)
• Exceptionally strong liquidity (current ratio 365.8%, cash 107.11 vs CL 57.71) and conservative leverage (D/E 0.26x)
• ROE at 4.6% is capped by low leverage; scope to enhance returns via growth or capital policy over time

Metrics to Watch:

• Gross and operating margin trends versus raw material indices
• Asset turnover progression and inventory turns
• OCF/NI and working capital days (AR/AP/inventory) for cash conversion quality
• Capex intensity versus growth opportunities
• Dividend disclosures (DPS, payout) and any changes to capital allocation

Relative Positioning: Relative to typical Japan small/mid-cap coatings/chemicals peers, the company exhibits stronger balance sheet liquidity, comparable or improving operating margins, superior interest coverage, and lower leverage, albeit with a correspondingly modest ROE profile.

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