Shiseido Company,Limited FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥693.82B
• Operating Income: ¥-33.35B
• Net Income: ¥1.43B
• EPS: ¥-110.10

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

Shiseido (4911) reported FY2025 Q3 consolidated IFRS results showing top-line softness and pronounced operating deleverage. Revenue was 6,938.17, down 4.0% YoY, indicating a modest contraction in demand or adverse mix/FX effects, though segment/FX details are unreported. Gross profit was 5,541.89 with a gross margin of 79.9%, which is high for the category and suggests strong pricing/mix and/or lower cost of goods, but also implies that most cost pressure resides in SG&A. SG&A expenses were 5,549.06, essentially consuming the entire gross profit and leading to an operating loss of -333.50 (down 91.5% YoY). EBITDA remained positive at 233.52, supported by 567.02 of D&A, but the EBITDA margin was thin at 3.4%, highlighting weak operating efficiency at current volumes. Profit before tax was -325.18, net income was -439.83, and total comprehensive income was -561.11, reflecting additional non-P&L negative movements (e.g., FX/OCI), though details are not disclosed. The DuPont breakdown shows net margin of -6.3%, asset turnover of 0.574, and financial leverage of 2.07x, resulting in a calculated ROE of -7.5%. This indicates that losses are driven by margins rather than balance sheet inefficiencies or leverage. Operating cash flow was positive at 429.90 despite the net loss, creating an OCF/Net Income ratio of -0.98x, which points to cash earnings exceeding accounting losses this period. However, free cash flow was negative at -286.66, as investing outflows (including capex of -170.12 and other investments) outweighed OCF. The balance sheet shows total assets of 12,088.81 and equity of 5,854.07 (equity ratio 46.8%), indicating a moderate leverage profile; the reported debt-to-equity ratio is 1.16x, though interest-bearing debt specifics are unreported. Liquidity assessment is constrained by missing current liability data; current assets are 4,778.00, but current and quick ratios are not calculable. Dividends paid were -237.59 despite negative FCF and losses, making near-term dividend coverage tight based on the reported metrics. The effective tax rate is -17.6% due to tax expense against a pre-tax loss, suggesting non-recurring or jurisdictional effects. Overall, the quarter exhibits negative operating leverage on a modest revenue decline, solid gross margin resilience, positive OCF despite losses, but weak FCF and earnings pressure, with adequate solvency yet constrained visibility due to several unreported line items.

Profitability Analysis

ROE_decomposition: Net profit margin -6.3% × Asset turnover 0.574 × Financial leverage 2.07x = ROE -7.5%. Margin deterioration is the dominant driver of negative ROE; asset utilization is moderate and leverage is not excessive. margin_quality: Gross margin is high at 79.9%, suggesting strong brand pricing/mix and effective COGS control. However, SG&A of 5,549.06 slightly exceeds gross profit (5,541.89), producing an operating margin of approximately -4.8% and indicating cost rigidity, reinvestment, or elevated marketing/overheads. EBITDA margin at 3.4% shows minimal buffer after SG&A, with D&A (567.02) pushing EBIT into loss. operating_leverage: Revenue fell 4.0% YoY while operating income fell 91.5% YoY, evidencing high negative operating leverage and SG&A inflexibility. Small revenue changes are translating into outsized EBIT swings, implying a high fixed-cost base and sensitivity to volume/mix.

Growth Assessment

revenue_sustainability: Top-line declined 4.0% YoY to 6,938.17. Without segment/geographic disclosure, it is unclear whether declines stem from specific regions or channels; the magnitude suggests cyclical or market-specific headwinds rather than structural collapse. profit_quality: Despite a net loss of -439.83, OCF was positive at 429.90, implying favorable working capital movements or non-cash charges (notably D&A of 567.02). The OCF/Net Income ratio of -0.98x indicates cash generation is better than accounting earnings, but sustainability is uncertain without working capital detail. outlook: Earnings recovery hinges on restoring top-line growth and/or reducing SG&A intensity. With high gross margins, incremental revenue should carry attractive incremental contribution if SG&A can be contained. However, absent clarity on regional demand and cost actions, near-term margin visibility remains limited.

Financial Health

liquidity: Current assets total 4,778.00, but current liabilities are unreported; thus current and quick ratios are not calculable. Cash and equivalents are 984.79, providing a liquidity cushion, though short-term debt data are unreported. solvency: Equity ratio is 46.8% (equity 5,854.07 vs assets 12,088.81), reflecting a solid capital base. Financial leverage (assets/equity) is 2.07x, consistent with DuPont. Debt-to-equity is reported at 1.16x, but the composition and maturity profile of interest-bearing debt are unreported, limiting interest coverage analysis. capital_structure: Total liabilities are 6,772.05. Accounts payable are 1,521.99, accounts receivable 1,543.05, and inventories 1,605.07, suggesting a sizeable operating working capital footprint typical of the category. Lack of disclosure on short- and long-term loans constrains assessment of refinancing risk.

Cash Flow Quality

earnings_quality: OCF of 429.90 against net income of -439.83 implies losses are partly driven by non-cash items and/or temporary working capital effects. D&A of 567.02 corroborates significant non-cash charges. Effective tax rate of -17.6% points to tax expense recognized despite losses, which may normalize. FCF_analysis: Reported free cash flow is -286.66, indicating that investing outflows exceeded OCF despite modest capex of -170.12; other investing uses likely include intangibles or strategic investments (details unreported). Financing CF was +74.22, and dividends of -237.59 were paid, resulting in cash outflow reliance on the balance sheet to fund both investment and shareholder returns. working_capital: Receivables of 1,543.05, inventories of 1,605.07, and payables of 1,521.99 indicate material working capital. The positive OCF suggests working capital release or stable collections, but lack of period change details limits deeper analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio of -36.4% is not economically meaningful due to negative earnings; it indicates dividends paid despite losses. With ROE at -7.5% and net losses, earnings-based coverage is weak. FCF_coverage: FCF coverage is -1.79x, reflecting dividends paid against negative free cash flow. This raises questions about the near-term sustainability of the current dividend level unless OCF improves or investment outflows moderate. policy_outlook: Given negative earnings and FCF, sustaining dividends likely depends on management’s commitment to shareholder returns versus reinvestment priorities and balance sheet tolerance. Absent guidance, a cautious stance on payout growth is warranted from a coverage perspective.

Risk Assessment

Business Risks:

• High operating leverage leading to outsized profit swings on small revenue changes
• Potential demand volatility in key beauty markets (regional/segment details not disclosed)
• Brand investment and marketing spend requirements keeping SG&A elevated
• Product mix and innovation cycle risks affecting gross margin and growth
• Supply chain and input cost fluctuations impacting profitability

Financial Risks:

• Negative free cash flow despite positive OCF due to substantial investing outflows
• Dividend payments despite losses and negative FCF reducing financial flexibility
• Limited visibility on interest-bearing debt and maturities (interest coverage not calculable)
• Potential OCI volatility (total comprehensive income -561.11) impacting equity

Key Concerns:

• Sustainability of SG&A levels relative to current sales
• Ability to restore positive operating margin and stabilize ROE
• Coverage of dividends in the absence of positive FCF
• Working capital management durability if revenue remains soft

Investment Implications

Key Takeaways:

• Revenue down 4.0% YoY with significant negative operating leverage (OP down 91.5% YoY)
• Gross margin strong at 79.9%, but SG&A exceeds gross profit, driving EBIT loss
• EBITDA positive (233.52) but thin margin at 3.4%
• Net loss of -439.83 and ROE at -7.5% reflect margin pressure rather than leverage issues
• OCF positive at 429.90 but FCF negative at -286.66 due to investing outflows
• Equity ratio 46.8% suggests adequate solvency; liquidity ratios not computable due to missing data
• Dividends paid (-237.59) despite negative FCF; coverage is weak on reported figures

Metrics to Watch:

• Revenue growth trajectory and mix to gauge operating leverage relief
• SG&A-to-sales ratio and marketing efficiency
• Operating margin and EBITDA margin progression
• Working capital turns: AR, inventory, and AP efficiency
• Free cash flow and capex/intangible investment levels
• Any disclosure on interest-bearing debt, interest expense, and coverage
• OCI movements impacting equity and comprehensive income

Relative Positioning: Within the global beauty and skincare peer set, Shiseido shows premium-like gross margins but currently lags in operating margin and cash flow conversion due to elevated SG&A and negative operating leverage; balance sheet strength is adequate relative to many peers, but near-term payout coverage is weaker.

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