OAT Agrio Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥23.61B
• Operating Income: ¥3.04B
• Net Income: ¥1.80B
• EPS: ¥192.14

Income Statement

Balance Sheet

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

Verdict: Solid Q3 FY2025 performance with healthy top-line growth and clear operating margin expansion, translating into double-digit profit growth. Revenue rose 6.4% YoY to 236.05, while operating income increased 13.4% YoY to 30.39, outpacing sales and indicating better pricing/mix and/or cost discipline. We estimate operating margin expanded approximately 81 bps YoY to 12.9% from about 12.1% a year ago, based on reported revenue and operating income growth rates. Gross margin stands high at 45.9%, supporting the improvement despite SG&A absorption; the SG&A ratio is 34.6% of sales. Ordinary income increased 15.3% YoY to 30.08, and net income rose 14.5% YoY to 19.42, yielding a net margin of 8.2%. Non-operating items were a small net drag (income 0.80 vs expenses 1.51), but the impact on overall profitability was limited. Interest coverage is strong at 22.7x, reflecting manageable financing costs versus earnings power. Balance sheet liquidity is healthy (current ratio 150.7%, quick ratio 128.8%), and leverage is moderate (D/E 0.95x, financial leverage 1.95x). DuPont ROE is 10.5%, driven primarily by an improved net profit margin and steady asset turnover of 0.656. ROIC is 9.3%, comfortably above an 8% ‘excellent’ benchmark, suggesting value creation over the cost of capital. Earnings quality cannot be fully assessed due to unreported operating cash flow; this is a key data gap to monitor. Working capital remains material given the business model (AR 72.64, inventories 31.15), but near-term refinancing risk appears contained with ample liquid assets versus short-term loans. The effective tax rate is 30.4%, consistent with a normalized burden. With payout ratio calculated at 31.4%, dividends appear conservative against earnings, though cash flow coverage is unverified. Forward-looking, sustained margin management and disciplined working capital will be critical to defend ROE/ROIC amid input cost and FX volatility typical in agrochemicals.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (8.2%) × Asset Turnover (0.656) × Financial Leverage (1.95x) = ~10.5% ROE (matches reported). The largest change appears to be the margin component, as operating income growth (+13.4% YoY) outpaced revenue growth (+6.4% YoY), implying roughly +81 bps operating margin expansion; asset turnover and leverage look broadly stable from context. Likely drivers include favorable product mix (higher-margin formulations), pricing actions, and cost control outweighing SG&A growth. This margin improvement seems partially sustainable if pricing and mix tailwinds persist and input costs remain benign; however, it could moderate with raw material or currency swings. Watch for SG&A growth versus revenue: current SG&A ratio is 34.6%; any acceleration in SG&A ahead of sales would pressure the operating leverage that aided this quarter.

Growth Assessment

Top-line grew 6.4% YoY to 236.05, a steady pace likely reflecting price/mix improvements and stable demand in core agrochemical markets. Operating income increased 13.4% to 30.39, with ordinary income +15.3% and net income +14.5%, signaling positive operating leverage. Gross margin at 45.9% underpins earnings resilience, while the slight non-operating net expense did not derail growth. Revenue sustainability hinges on maintaining competitive product efficacy, registrations, and distribution footprint; seasonality typical of agrochemicals should also be considered into Q4. Profit quality appears more margin-driven than volume-driven this quarter; absent OCF disclosure, sustainability should be confirmed with cash conversion in the full-year. Outlook: If current pricing/mix and cost control hold, full-year profitability targets look attainable, but sensitivity to raw material prices and FX should be factored into H2/H1 seasonality and procurement cycles.

Financial Health

Liquidity is solid: current ratio 150.7% and quick ratio 128.8% exceed healthy benchmarks; no warning triggers (CR < 1.0) observed. Solvency is comfortable with D/E 0.95x and strong interest coverage (22.7x). Short-term loans (85.37) are sizable but balanced by cash (59.16), receivables (72.64), and inventories (31.15), mitigating maturity mismatch risk. Long-term loans are modest at 16.32, keeping overall refinancing exposure manageable. Intangible assets (85.60) including goodwill (53.33) are significant within noncurrent assets, implying some impairment risk under a downturn. No off-balance sheet obligations are reported in the provided data.

Cash Flow Quality

Operating cash flow is unreported; thus OCF/Net Income and FCF cannot be calculated, and earnings quality cannot be validated quantitatively. Given the working capital intensity (AR 72.64; inventories 31.15), cash conversion will be a key determinant of quality; elevated AR could lengthen DSO around peak sales periods. No signs of working capital manipulation can be inferred from the limited dataset, but we will reassess upon cash flow disclosure. Capex and dividends are unreported; FCF coverage of shareholder returns cannot be assessed at this time.

Dividend Sustainability

The calculated payout ratio is 31.4%, which is conservative versus typical sustainability thresholds (<60%). With strong interest coverage and moderate leverage, earnings capacity supports dividends. However, absent OCF/FCF data and DPS details, we cannot confirm cash coverage of dividends. Policy outlook appears maintainable if current profitability and ROIC (9.3%) are preserved and working capital remains under control.

Risk Assessment

Business Risks:

• Input cost volatility (raw materials/solvents/intermediates) impacting gross margin
• Regulatory and registration risk for crop protection products across markets
• Seasonality in agrochemical demand affecting quarterly revenue and cash conversion
• Product mix risk if lower-margin lines or regions outgrow core high-margin products
• FX exposure on imports/exports influencing both COGS and pricing

Financial Risks:

• Reliance on short-term loans (85.37) necessitating continued access to working capital lines
• High intangibles and goodwill (85.60 and 53.33) creating potential impairment risk in downturns
• Earnings-to-cash conversion uncertainty due to unreported OCF
• Potential tax rate variability around the 30.4% effective rate

Key Concerns:

• Lack of cash flow disclosure prevents validation of earnings quality and dividend cash coverage
• Non-operating net expense (0.71) could widen with rate or FX shifts
• AR concentration and collection timing may elevate DSO in seasonal peaks

Investment Implications

Key Takeaways:

• Healthy growth: revenue +6.4% YoY; operating income +13.4% YoY
• Operating margin expansion of ~81 bps YoY to ~12.9%
• ROE at 10.5% and ROIC at 9.3% indicate value creation
• Liquidity strong (CR 150.7%, QR 128.8%) and leverage moderate (D/E 0.95x)
• Interest coverage robust at 22.7x; financing risk manageable
• Cash flow disclosure absent—critical for confirming quality and dividend coverage

Metrics to Watch:

• Operating cash flow and OCF/NI once disclosed
• Working capital turns: AR days and inventory days
• Gross and operating margin trajectory versus input cost and FX
• Capex and FCF to assess capacity for growth investments and dividends
• Goodwill/intangible impairment indicators
• Short-term debt rollover and borrowing costs

Relative Positioning: Within agrochemical peers, OAT Agrio demonstrates above-benchmark profitability (ROIC ~9% and double-digit ROE) with solid liquidity and moderate leverage; the primary gap versus best-in-class is visibility on cash conversion given the current lack of OCF/FCF disclosure.

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