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

Hasegawa Co., Ltd. (4958) delivered modest topline growth in FY2025, with revenue up 2.6% YoY to ¥73.5bn, but profitability softened as operating income declined 9.1% to ¥8.5bn. Gross profit margin remained strong at 40.3%, yet operating margin compressed to roughly 11.6%, indicating higher SG&A burden or mix effects despite solid gross margin. Ordinary income reached ¥9.29bn, implying robust non-operating contributions, and net income declined 3.9% to ¥6.92bn, reflecting some resilience below the operating line. DuPont analysis shows an ROE of 5.61% driven by a 9.42% net margin, low asset turnover (0.499x), and conservative leverage (1.19x), highlighting a balance-sheet-strong but not highly leveraged return profile. Using the provided balance sheet, the equity ratio (equity/asset) is approximately 83.8%, far above typical peers, underscoring very low financial risk. Cash generation was robust: operating cash flow of ¥11.25bn equates to 1.63x net income, and free cash flow of ¥4.33bn (c. 5.9% FCF margin) demonstrates healthy earnings quality. Liquidity is ample, with a current ratio of 4.89x and quick ratio of 4.35x, supported by significant working capital of ¥57.47bn. Interest expense is minimal (¥24m) and interest coverage is extremely high at ~355x, further de-risking the capital structure. The effective tax rate reported as 0.0% is clearly a non-disclosure artifact; using reported taxes (¥2.97bn) and net income suggests a pre-tax income of ~¥9.89bn and an effective tax rate around 30%. Operating leverage was negative this year as modest revenue growth did not translate into profit growth, suggesting SG&A inflation, adverse mix, or price/cost timing. Investment cash outflows of ¥6.91bn appear consistent with ongoing capacity, maintenance, and development needs in flavors & fragrances; capex discipline still allowed positive FCF. Dividend data were not disclosed (DPS and payout ratio show as zero placeholders), so distribution policy cannot be assessed from these fields; financing cash outflow (¥5.49bn) may reflect dividends and/or buybacks or debt repayments. Asset turnover remains relatively low for the industry, which, alongside low leverage, caps ROE; improving utilization and mix could lift returns. FX, raw material input costs (aroma chemicals, naturals), and customer demand in consumer staples end-markets will remain key external drivers. Overall, the company exhibits high balance sheet strength and solid cash conversion, with near-term margin pressure weighing on returns; execution on pricing, mix, and cost control will determine the trajectory of ROE and profit growth.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 9.42%
• asset_turnover: 0.499x
• financial_leverage: 1.19x
• calculated_ROE: 5.61%
• interpretation: ROE is primarily constrained by low asset turnover and deliberately conservative leverage; margin remains solid for the category. margin_quality:
• gross_margin: 40.3% (stable/strong for F&F)
• operating_margin: 11.6% (8,515 / 73,495)
• ordinary_margin: 12.6% (9,288 / 73,495)
• net_margin: 9.42%
• drivers: Operating margin compression despite strong gross margin suggests higher SG&A (¥21.13bn, ~28.7% of sales), mix shifts, and/or timing lag in price-cost pass-through. operating_leverage: Negative in FY2025: revenue +2.6% YoY vs operating income -9.1% YoY indicates cost growth outpaced sales or adverse mix, dampening incremental margins.

Growth Assessment

revenue_sustainability: Topline grew 2.6% YoY, consistent with steady demand in core flavors/fragrances; sustainability depends on pricing power, innovation pipeline, and regional demand (incl. FX). profit_quality: Net income declined 3.9% YoY, less than the operating income decline, aided by non-operating items; tax rate implied ~30% is normalizing. outlook: To re-accelerate earnings, management likely needs to improve SG&A efficiency, optimize product mix toward higher value-added applications, and maintain disciplined pricing to offset input cost volatility.

Financial Health

liquidity:

• current_ratio: 489.1% (4.89x)
• quick_ratio: 434.6% (4.35x)
• working_capital: ¥57.47bn
• commentary: Very strong short-term liquidity; inventory (¥8.05bn) is modest relative to current assets, implying high-quality quick assets. solvency:
• equity_ratio: Approx. 83.8% (computed: 123,324 / 147,151)
• debt_to_equity: 0.20x (reported)
• interest_coverage: 354.8x
• commentary: Ultra-low leverage and minimal interest burden materially reduce solvency risk. capital_structure: Assets ¥147.2bn funded predominantly by equity (¥123.3bn) with total liabilities ¥24.8bn; conservative structure limits ROE but enhances resilience.

Cash Flow Quality

earnings_quality: OCF/Net Income = 1.63 indicates strong cash conversion; low interest burden and normalizing taxes support clean earnings. FCF_analysis:

• operating_CF: ¥11.25bn
• investing_CF: ¥-6.91bn (likely capex-heavy)
• free_cash_flow: ¥4.33bn (~5.9% FCF margin)
• interpretation: Capex was significant but well covered by OCF, enabling positive FCF while sustaining capacity and innovation. working_capital: High working capital base supports operations; specific turnover metrics not disclosed, but inventory appears well-managed relative to sales and COGS.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are not disclosed (zeros are placeholders). Based on profitability and strong cash generation, capacity for distributions exists, but policy cannot be inferred from provided fields. FCF_coverage: With FCF of ¥4.33bn, modest dividends would likely be well covered; exact coverage cannot be calculated without DPS. policy_outlook: Given conservative balance sheet and stable cash flows, the firm has flexibility to balance reinvestment with shareholder returns; actual policy remains undisclosed in this dataset.

Risk Assessment

Business Risks:

• Raw material price volatility for aroma chemicals and natural extracts
• FX fluctuations (JPY vs USD/EUR/Asian currencies) impacting both input costs and overseas sales
• Customer concentration and pricing pressure from large FMCG clients
• Regulatory and compliance risks in food safety, cosmetics, and fragrance standards across regions
• Demand cyclicality in discretionary fragrance categories and regional macro slowdowns
• R&D execution risk affecting pipeline of value-added flavors and fragrances
• Supply chain disruptions affecting key ingredients availability

Financial Risks:

• ROE dilution from persistently low asset turnover and conservative leverage
• Potential capex cycles increasing cash needs if growth projects accelerate
• FX translation impacts on equity and earnings
• Working capital swings affecting OCF timing

Key Concerns:

• Operating margin compression despite strong gross margin indicates cost pressure or mix headwinds
• Low asset turnover constrains ROE versus peers
• Limited disclosure on dividends and cash balance complicates assessment of shareholder return policy

Investment Implications

Key Takeaways:

• Topline growth positive (+2.6% YoY) but operating income declined (-9.1%), signaling margin pressure
• Strong gross margin (40.3%) and cash conversion (OCF/NI 1.63) underpin earnings quality
• Balance sheet is exceptionally strong (equity ratio ~83.8%), solvency risk is low
• ROE (5.61%) limited by low asset turnover (0.499x) and conservative leverage (1.19x)
• Positive FCF (¥4.33bn) after notable investing outlays indicates capacity to fund both reinvestment and potential returns

Metrics to Watch:

• Operating margin and SG&A-to-sales (currently ~28.7%)
• Pricing and mix to defend gross margin (40.3%)
• Asset turnover improvement and capex efficiency
• OCF/Net income and FCF margin sustainability
• Raw material cost indices and FX rates (JPY)
• Effective tax rate normalization (~30% implied)

Relative Positioning: Within the flavors & fragrances space, the company stands out for balance sheet strength and cash conversion but trails on ROE due to low asset turnover and conservative leverage; improving utilization and margin discipline would narrow 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
• 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