SAKATA INX CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥192.04B
• Operating Income: ¥11.90B
• Net Income: ¥9.33B
• EPS: ¥197.92

Income Statement

Balance Sheet

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 Q3 with modest top-line growth and better margin execution, delivering double-digit net profit growth and an ROE of 8.2%. Revenue rose 5.3% YoY to 1,920.5, supported by operating income up 8.8% to 119.0 and ordinary income up 13.7% to 131.1. Net income increased 17.1% to 97.8, aided by a lower effective tax rate of 22.4% and positive net non-operating income. Operating margin improved to 6.2%, expanding by roughly 20 bps versus the implied prior-year Q3 run-rate. Net margin advanced to 5.1%, an improvement of approximately 51 bps YoY. Gross margin stands at 23.0%, indicating price/mix and cost actions have held despite cost inflation earlier in the year. Ordinary income benefited from net non-operating gains (non-op income 15.25 vs non-op expenses 9.34), with interest income (2.30) and dividends (0.93) partly offsetting interest expense (5.13). Earnings quality cannot be fully verified as operating cash flow was unreported, though interest coverage is strong at 23.2x, implying good debt-servicing capacity. The balance sheet is healthy: current ratio 198%, quick ratio 167%, and D/E 0.82x with an equity ratio around 55% (calculated), pointing to conservative leverage. Working capital looks manageable with receivables at 615.0 and inventories at 191.3 relative to sales and cost base. DuPont analysis shows ROE of 8.2% driven by improved net margin, moderate asset turnover (0.89x), and prudent leverage (1.82x). ROIC is estimated at 7.1%, in-line with typical chemical/ink sector targets and supportive of value retention. Dividend burden appears reasonable with a calculated payout ratio of 38.8%, though lack of FCF data tempers confidence in coverage assessment. Forward-looking, easing input costs and steady packaging demand should underpin margins, while FX and overseas demand are key swing factors. Overall, Q3 indicates resilient execution with moderate operating leverage and a sound financial base, albeit with limited visibility on cash conversion.

Profitability Analysis

ROE decomposition (DuPont): ROE 8.2% = Net Profit Margin 5.1% × Asset Turnover 0.890 × Financial Leverage 1.82x. The notable driver this quarter is the improvement in net margin to 5.1% (approx. +51 bps YoY), outpacing revenue growth and contributing most to ROE gains. Operating margin rose to 6.2% (approx. +20 bps YoY), suggesting pricing discipline and/or easing raw material pressures. Asset turnover at 0.89x reflects a moderately asset-intensive model typical for ink/chemicals; no explicit evidence of material change vs. prior year is available. Leverage at 1.82x is conservative and stable, indicating ROE is not being boosted by aggressive balance sheet leverage. Business drivers: likely tailwinds from price carryover and cost normalization offsetting earlier inflation in resins/solvents/pigments, and a lower effective tax rate supporting bottom line. Sustainability: margin gains look reasonably sustainable if raw material costs remain benign and pricing holds; tax-rate benefits may be less predictable. Red flags: None apparent in operating expense intensity this quarter, but SG&A detail and YoY SG&A growth are unreported, preventing a check for cost creep exceeding revenue growth.

Growth Assessment

Revenue growth of 5.3% YoY indicates steady demand, likely supported by price/mix retention in packaging and functional inks; geographic/segment details are not disclosed. Operating income grew 8.8% YoY, implying positive operating leverage as gross-to-operating conversion improved modestly. Net income growth of 17.1% outpaced operating growth, aided by lower tax rate and positive net non-operating items. Ordinary income growth (+13.7%) outpaced operating income, reflecting the contribution of non-operating income (interest and dividends) over non-operating expenses. Non-operating contribution is meaningful (non-operating income ratio 15.6%), but largely recurring interest/dividends rather than one-off gains per available data. ROIC at 7.1% is around the sector target zone, suggesting returns approximately meet the cost of capital. Outlook hinges on input cost trends, FX, and end-market momentum in packaging and industrial applications; absent cash flow and segment data, visibility on sustainability of growth is moderate. Near term, stable to modestly improving margins appear achievable if cost normalization persists and pricing discipline is maintained.

Financial Health

Liquidity is strong with current ratio 198.2% and quick ratio 166.5%; no warning triggers (Current Ratio < 1.0) are present. Working capital is ample: current assets 1,195.7 exceed current liabilities 603.2 by 592.5. Cash and deposits (166.9) plus receivables (615.0) comfortably cover short-term loans (90.6) and accounts payable (249.7), limiting maturity mismatch risk. Solvency is solid: D/E 0.82x and an estimated equity ratio near 55% (1,187.5/2,158.0), indicating conservative capitalization. Long-term loans of 196.2 vs. noncurrent assets of 962.3 suggest appropriate terming of debt. Interest coverage at 23.2x denotes ample buffer against rate shocks. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

Operating cash flow was unreported, so OCF/Net Income and FCF cannot be assessed; therefore, earnings quality cannot be validated via cash conversion metrics. Positive indicators include strong interest coverage (23.2x) and conservative leverage, which indirectly support financial flexibility. Working capital levels appear reasonable given the scale of operations (A/R 615.0 and inventories 191.3), with no explicit signs of end-period working capital compression; however, without cash flow statements, potential timing effects cannot be ruled out. Dividend and capex coverage by FCF are not calculable; caution is warranted until OCF and capex data are available.

Dividend Sustainability

Calculated payout ratio is 38.8%, comfortably below the 60% threshold typically viewed as sustainable. Balance sheet strength (D/E 0.82x, equity ratio ~55%) and robust interest coverage provide additional cushion for distributions. However, FCF coverage is unreported; thus, sustainability cannot be confirmed from cash generation. Policy continuity appears likely given earnings growth and conservative leverage, but confirmation awaits disclosure of OCF and capex trajectories.

Risk Assessment

Business Risks:

• Raw material price volatility (resins, solvents, pigments) affecting gross margin
• Demand fluctuations in packaging and industrial print end-markets
• Geographic exposure and FX translation impacts on overseas revenue and costs
• Competitive pricing pressure from domestic and regional ink producers
• Potential normalization of currently favorable tax rate

Financial Risks:

• Interest rate risk on 286.8 of loans (short-term 90.6, long-term 196.2)
• Working capital intensity and receivables collection risk (A/R 615.0)
• Reliance on non-operating items (net +5.9) to bolster ordinary income
• Limited visibility due to unreported cash flow data (OCF/FCF unknown)

Key Concerns:

• Earnings quality cannot be verified without OCF; potential divergence risk
• Margin gains partly aided by lower tax rate; may not be repeatable
• Non-operating contributions, while modest, add volatility if interest/dividend income shifts with rates/markets

Investment Implications

Key Takeaways:

• Steady top-line growth (+5.3% YoY) with better margin conversion (+20 bps operating, +51 bps net)
• ROE at 8.2% and ROIC at 7.1% indicate acceptable returns with conservative leverage (1.82x)
• Strong liquidity (CR 198%, QR 167%) and high interest coverage (23.2x) underpin resilience
• Ordinary income benefited from positive non-operating balance; core operations remain the main driver
• Cash flow disclosure is missing; confirm OCF and capex to validate dividend and investment capacity

Metrics to Watch:

• OCF/Net Income and FCF once disclosed
• Gross and operating margin progression versus raw material indices
• Receivables and inventory turns (working capital discipline)
• Effective tax rate normalization risk
• FX impacts on overseas revenue and non-operating income/expenses

Relative Positioning: Within Japanese printing ink peers, Sakata INX exhibits a solid balance sheet, mid-single-digit operating margin, and ROE around sector averages. Its leverage is conservative and liquidity strong, positioning it defensively versus peers with higher debt or more volatile raw material exposure.

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
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