Lion Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥304.94B
• Operating Income: ¥27.83B
• Net Income: ¥23.21B
• EPS: ¥75.25

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 Co., Ltd. (TSE:4912) delivered a solid FY2025 Q3 (9M cumulative) result marked by modest top-line growth and sharp profit expansion under IFRS. Revenue rose 1.3% YoY to 3,049.45, while operating income surged 62.7% to 278.29, indicating strong operating leverage. Net income increased 64.3% to 208.13, with EPS of 75.25 yen. Profitability improved materially: gross margin printed at 45.1% and operating margin at 9.1%, supported by disciplined SG&A management (SG&A ratio ~39.0%). EBITDA reached 434.67 (14.3% margin), suggesting improved cost absorption and likely benefits from pricing/mix and easing input cost pressures. The DuPont-based ROE was 6.3%, composed of a 6.8% net margin, 0.635x asset turnover, and 1.46x leverage, pointing to profitability gains more than asset intensity or leverage changes. Comprehensive income of 224.37 exceeded net income (208.13), implying positive other comprehensive income (e.g., FX translation or securities valuation). Cash flow conversion was softer: operating cash flow (OCF) was 157.01, 0.75x of net income, reflecting working capital drag. Free cash flow, defined here as OCF plus total investing cash flow, was 93.51 despite capital expenditures of 147.54 (OCF minus CapEx would be 9.47), highlighting the importance of definition when assessing coverage. The balance sheet remains conservative with total equity of 3,289.69, an equity ratio of 63.7%, and liabilities-to-equity of 0.55x. Current assets were 2,514.24, including accounts receivable of 761.97 and inventories of 532.52; accounts payable was sizable at 1,171.29, consistent with the consumer products supply chain profile. Financing cash outflows totaled -204.78, reflecting shareholder returns via dividends (-72.98) and share repurchases (-100.01), alongside other financing outflows. Dividend sustainability appears reasonable with a calculated payout ratio of 36.3% and FCF coverage of about 1.24x on the reported FCF basis. Equity-method income was 21.92, representing roughly 7% of pretax profit, an ancillary but notable contributor. Overall, the quarter evidences margin repair and operating leverage on subdued sales growth, tempered by weaker cash conversion and higher shareholder distributions. Data gaps (e.g., non-operating detail, current liabilities, debt composition, DPS) limit precision in some ratios, but available metrics support a view of improved profitability and a strong balance sheet with manageable cash flow risk.

Profitability Analysis

ROE_decomposition: DuPont ROE is 6.3% = Net Profit Margin 6.8% x Asset Turnover 0.635 x Financial Leverage 1.46x. The uplift vs prior period is driven mainly by margin expansion; leverage remains modest and asset turnover is moderate for the category. margin_quality: Gross margin is 45.1% (gross profit 1,376.26 on revenue 3,049.45). SG&A ratio is ~39.0% (1,190.02/3,049.45), yielding an operating margin of ~9.1% (278.29/3,049.45). EBITDA margin is 14.3%. Effective tax rate is 16.8%, supportive of net margin. The spread between gross and operating margins indicates improved cost discipline within SG&A and likely pricing/mix benefits. operating_leverage: Revenue grew 1.3% YoY while operating income rose 62.7% YoY, evidencing strong operating leverage from margin recovery. D&A of 156.38 against EBITDA of 434.67 indicates a meaningful non-cash component supporting EBIT growth. Equity-method income (21.92) contributed to PBT (297.97) by ~7.4%, providing an additional profit tailwind but not the primary driver.

Growth Assessment

revenue_sustainability: Top-line growth of 1.3% YoY is modest; sustainability likely hinges on pricing retention and mix improvements amid competitive HBC markets. No segment detail is provided, so growth breadth is unclear. profit_quality: The large YoY increase in operating and net income appears driven by margin normalization rather than volume-driven growth. Comprehensive income exceeding net income suggests some tailwind from OCI items. Equity-method gains modestly support earnings. outlook: With gross and operating margins improved and leverage low, profit resilience should be underpinned by continued cost control and stable pricing. However, the OCF/NI ratio at 0.75x hints at working capital sensitivity, which may constrain incremental margin-to-cash conversion absent inventory and receivables normalization.

Financial Health

liquidity: Current assets are 2,514.24, including receivables of 761.97 and inventories of 532.52. Cash and deposits are unreported, but cash and equivalents at period end were 1,022.40. Current liabilities are unreported, so current and quick ratios cannot be calculated from the provided data. solvency: Total liabilities are 1,814.73 against equity of 3,289.69, yielding liabilities-to-equity of ~0.55x and an equity ratio of 63.7%, indicating a strong capital base. Interest-bearing debt details and interest expense are unreported, so interest coverage cannot be assessed, but overall solvency appears robust given low leverage. capital_structure: Leverage is modest (financial leverage 1.46x per DuPont). Shareholder returns (dividends 72.98, buybacks 100.01) were funded despite only moderate FCF, drawing on the strong cash balance (1,022.40) and low balance-sheet risk.

Cash Flow Quality

earnings_quality: OCF of 157.01 is 0.75x net income of 208.13, below the preferred ~1.0x+ threshold, implying earnings uplift not fully translating into cash due to working capital movements or timing effects. FCF_analysis: Investing CF was -63.50 and CapEx -147.54. Reported FCF (defined here as OCF + Investing CF) was 93.51, while OCF minus CapEx would be 9.47; the difference indicates non-CapEx investing inflows (or lower outflows) offsetting CapEx. Clarifying the company’s FCF definition is important for comparability. working_capital: Receivables (761.97) and inventories (532.52) are significant; payables are high at 1,171.29, typical for the category. The OCF shortfall vs net income suggests either inventory build or receivables growth, or a reduction in payables; without prior-period balances and current liabilities, directionality cannot be confirmed.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 36.3% based on earnings, indicating headroom versus typical consumer staples payout norms. DPS is unreported. FCF_coverage: With reported FCF of 93.51 and dividends paid of 72.98, dividend coverage is approximately 1.24–1.28x on the provided FCF basis. On an OCF-minus-CapEx basis, coverage would be tight (~0.13x), highlighting sensitivity to FCF definition. policy_outlook: Given strong equity (63.7% ratio) and ample cash (1,022.40), the balance sheet can support stable dividends. However, sustainability of elevated buybacks (100.01) should be calibrated to cash generation normalization and working capital trends.

Risk Assessment

Business Risks:

• Input cost volatility (surfactants, packaging, logistics) affecting gross margins
• Competitive pricing pressure and private-label encroachment in home and personal care categories
• Demand elasticity to further price increases amid modest volume growth
• Regulatory and ESG-related changes affecting product formulations and labeling
• Channel mix shifts (e-commerce, drugstores) impacting trade terms and promotional intensity
• Execution risk in overseas markets and equity-method affiliates

Financial Risks:

• Working capital swings depressing OCF (OCF/NI at 0.75x)
• Limited visibility on interest-bearing debt and interest expense; potential interest rate exposure unknown
• FX translation impacts on OCI and earnings (comprehensive income sensitivity)
• Sustained high shareholder returns (dividends/buybacks) potentially exceeding internally generated cash
• CapEx intensity (147.54) relative to OCF if maintained at elevated levels

Key Concerns:

• Cash conversion below earnings despite strong profit growth
• Dependence on margin normalization rather than strong revenue growth
• Data gaps (non-operating detail, current liabilities, DPS, debt breakdown) limiting ratio precision

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +62.7% on revenue +1.3%
• Material margin improvement: 45.1% gross margin and ~9.1% operating margin
• ROE at 6.3% driven primarily by margin; leverage remains conservative at 1.46x
• Cash conversion soft (OCF/NI 0.75x), indicating working capital drag
• Robust balance sheet: equity ratio 63.7%, liabilities-to-equity ~0.55x
• Shareholder returns increased (dividends 72.98, buybacks 100.01) funded amid moderate FCF
• Positive comprehensive income (224.37) above net income (208.13)

Metrics to Watch:

• OCF/Net income ratio and working capital trends (AR and inventory levels relative to AP)
• Gross margin trajectory and SG&A ratio sustainability
• EBITDA margin and operating margin versus price/cost environment
• CapEx-to-sales and the definition/consistency of reported FCF
• Equity-method income contribution and volatility
• Dividend payout ratio and buyback pace relative to FCF

Relative Positioning: Within domestic consumer staples/home and personal care peers, Lion currently exhibits mid-teens EBITDA margin, moderate ROE, and a stronger-than-average equity ratio, implying a conservative financial profile with improving profitability but below-peak cash conversion.

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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