T.HASEGAWA CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥73.50B
• Operating Income: ¥8.52B
• Net Income: ¥8.45B
• EPS: ¥169.50

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

FY2025 Q4 (full-year) results show resilient top-line growth but profit compression, with solid cash generation offsetting margin pressure. Revenue rose 2.6% YoY to 734.95, while operating income declined 9.1% to 85.15 and ordinary income fell 4.5% to 92.88. Net income decreased 3.9% to 69.21, translating to an EPS of 169.50 JPY and a calculated ROE of 5.6%. Gross margin was 41.3% (gross profit 303.47), and operating margin settled at 11.6% (operating income 85.15). Based on last year’s implied figures, operating margin compressed by roughly 150 bps and net margin by about 60 bps YoY. The YoY profit softness appears driven by higher operating cost intensity (SG&A-to-sales at 29.7%), despite stable gross profitability. Non-operating income of 8.59 (notably 3.64 interest income and 2.49 dividends) provided a cushion, helping ordinary income outperform operating income on a YoY basis. Cash flow quality was strong: operating cash flow of 112.47 exceeded net income by 1.63x, and free cash flow was positive at 43.33 after 29.32 in capex. The balance sheet remains exceptionally conservative with equity of 1,233.24 (approx. 84% equity ratio by calculation) and cash and deposits of 348.54, underpinning flexibility for investment and shareholder returns. Leverage is low (D/E 0.19x) and liquidity is abundant (current ratio 513%). ROIC was 6.8%, near but just below common 7–8% targets, implying room to improve capital efficiency and operating returns. Interest coverage is extremely strong at 387x, reflecting minimal financial risk. While margins compressed, earnings quality and cash conversion mitigate concerns for sustainability. The payout ratio (calculated) is 43.2%, indicating headroom; however, combined distributions including buybacks (22.38) appear to exceed FCF, drawing on the ample cash buffer. Forward-looking, key to re-accelerating ROE will be margin recovery (SG&A discipline and input cost management) and incremental improvement in ROIC. Overall, the quarter suggests a stable core franchise with conservative finances, near-term margin pressure, and healthy cash generation positioning the company for balanced reinvestment and returns.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 9.4% × Asset Turnover 0.499 × Financial Leverage 1.19x = ROE 5.6%. The largest drag YoY appears to be Net Profit Margin, given revenue growth (+2.6%) alongside declines in operating (-9.1%) and net income (-3.9%), implying margin compression (~150 bps operating, ~60 bps net). Business drivers likely include higher SG&A intensity (SG&A-to-sales 29.7%) and potential cost inflation that was not fully passed through, despite a solid gross margin at 41.3%. Asset Turnover remains modest at ~0.50x, consistent with a cash-rich, asset-heavy profile (significant cash, intangibles of 235.17 and goodwill of 73.06). Financial leverage is deliberately low (1.19x), limiting ROE uplift from gearing but reducing risk. Sustainability: margin pressure could normalize if pricing/cost actions catch up; leverage is unlikely to change materially given the conservative balance sheet. Watch for SG&A growth vs revenue; with OP down and sales up, operating cost growth likely exceeded sales growth, a mild concern for operating leverage.

Growth Assessment

Top-line grew 2.6% to 734.95, indicating steady demand across end-markets. Operating income fell 9.1% to 85.15, and ordinary income decreased 4.5% to 92.88, showing that non-operating income (8.59) softened but did not reverse the operating weakness. Net income declined 3.9% to 69.21; effective tax rate was 29.3%, consistent with a normalized profile. EBITDA was 127.41 (margin 17.3%), pointing to healthy underlying cash earnings despite lower operating profit. The non-operating contribution is primarily recurring in nature (interest income 3.64, dividends 2.49) given the large cash and investment balance, but it should not be relied upon to drive structural growth. ROIC at 6.8% is slightly below the 7–8% target range; improvements would likely come from mix/pricing and tighter cost control rather than balance sheet leverage. Outlook hinges on cost pass-through to protect gross margins, SG&A efficiency to restore operating leverage, and ongoing product innovation in flavors/fragrances to support mid-single-digit revenue growth.

Financial Health

Liquidity is exceptionally strong: current ratio 513.3% and quick ratio 453.4%, with cash and deposits of 348.54 versus current liabilities of 146.11. No warning on current ratio (<1.0) or D/E (>2.0); D/E is a conservative 0.19x. Maturity mismatch risk is minimal given current assets (749.97) far exceed current liabilities (146.11). Interest coverage is 387.05x, indicating negligible debt-service risk. Total equity of 1,233.24 against total assets of 1,471.51 implies an equity ratio of roughly 83.8% (calculated), supporting solvency. Off-balance sheet obligations are not disclosed in the provided data; none can be assessed. Intangibles (235.17) and goodwill (73.06) represent a meaningful portion of assets, introducing potential impairment risk under adverse conditions, but do not pose liquidity stress.

Cash Flow Quality

OCF/Net Income is 1.63x, indicating high earnings quality with robust cash conversion. Free cash flow is 43.33 after 29.32 of capex, leaving capacity for distributions and selective reinvestment. Working capital appears well-managed: receivables (176.51) and inventories (87.50) are comfortably supported by cash (348.54) and do not suggest reliance on stretching payables (58.12). No signs of aggressive working capital maneuvers are evident from the available figures. The cash balance and strong OCF provide flexibility even as profit softened. Combined shareholder returns (buybacks 22.38 plus estimated dividends based on 43.2% payout) likely exceeded FCF this year, but the company has ample liquidity to bridge the gap without stress.

Dividend Sustainability

Calculated payout ratio is 43.2%, within a conservative and sustainable range (<60%). FCF coverage for dividends is indicated at 1.45x, suggesting underlying capacity to fund dividends from organic cash generation. However, when including share repurchases (22.38), total cash returns likely exceed the 43.33 FCF, implying partial use of cash on hand (348.54) to fund buybacks. Given the low leverage and strong liquidity, the current dividend level appears sustainable; incremental increases would likely depend on margin recovery and ROIC improvement. Company policy specifics are not provided; absent guidance, expect a stable-to-modestly progressive dividend framework aligned with cash generation.

Risk Assessment

Business Risks:

• Input cost inflation and pricing lag compressing operating margins
• Customer demand variability in food, beverage, and consumer products end-markets
• Product mix and innovation pipeline execution affecting pricing power
• Intangible and goodwill impairment risk (intangible assets 235.17, goodwill 73.06)

Financial Risks:

• Combined dividends and buybacks modestly exceeding FCF, relying on cash reserves
• FX exposure affecting procurement costs and translation (not quantified in data)
• Interest rate risk on large cash holdings impacting interest income

Key Concerns:

• Operating margin compression (~150 bps YoY) with SG&A intensity at 29.7%
• ROIC at 6.8% slightly below 7–8% target range
• Dependence on non-operating income (interest/dividends) to soften profit decline (non-operating income 8.59)

Investment Implications

Key Takeaways:

• Steady revenue growth (+2.6%) but margin compression led to OP -9.1% and NI -3.9%
• Strong cash generation (OCF 112.47; OCF/NI 1.63x) and positive FCF (43.33) underpin financial flexibility
• Very conservative balance sheet (equity ratio ~84%, D/E 0.19x, current ratio 513%) limits downside risk
• ROE at 5.6% and ROIC at 6.8% indicate scope for efficiency and margin improvement
• Shareholder returns (buybacks plus dividends) likely exceeded FCF, funded by ample cash

Metrics to Watch:

• Operating margin recovery and SG&A-to-sales ratio
• Gross margin stability amid raw material cost changes
• ROIC progression toward/exceeding 8%
• OCF/NI and working capital turns (AR and inventory levels)
• Non-operating income sensitivity to interest rates and investment income
• Effective tax rate stability around ~29–30%

Relative Positioning: Within Japan specialty chemicals/flavors peers, the company stands out for its fortress balance sheet and strong cash conversion, but trails best-in-class peers on ROIC and operating margin resilience this fiscal year. Execution on cost control and pricing will be key to closing the gap.

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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