Earth Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥142.95B
• Operating Income: ¥13.27B
• Net Income: ¥7.59B
• EPS: ¥413.67

Income Statement

Balance Sheet

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

Earth Corporation (TSE:4985) delivered solid FY2025 Q3 YTD results with revenue of ¥142.95bn (+6.0% YoY) and operating income of ¥13.27bn (+24.2% YoY), indicating healthy topline growth coupled with improved operating efficiency. Gross profit reached ¥55.74bn, translating to a robust gross margin of 39.0%, which suggests improved product mix and/or disciplined pricing despite cost inflation in raw materials and logistics earlier in the cycle. Operating margin expanded to 9.3%, outpacing revenue growth and demonstrating operating leverage, likely from better utilization, SG&A discipline, and normalization of promotional intensity. Net income rose 24.7% YoY to ¥9.03bn, with a net margin of 6.31%, consistent with margin expansion across the P&L. DuPont analysis shows ROE of 11.1%, driven by a 6.31% net margin, asset turnover of 0.978x, and moderate financial leverage of ~1.80x (assets/equity). Balance sheet strength is solid: total assets are ¥146.20bn and total equity ¥81.40bn, implying an equity ratio of approximately 55.7% (calculated), despite the reported equity ratio field showing 0.0% (unreported). Liquidity appears comfortable with a current ratio of 129.7% and a quick ratio of 90.0%, supported by inventories of ¥22.97bn and working capital of ¥17.20bn. Interest coverage is very strong at ~415x (operating income/interest expense), highlighting low financial risk from interest-bearing liabilities. The effective tax rate field is unreported (0.0%), but a simple approximation based on disclosed taxes and net income implies a tax rate around 27–28%, consistent with Japan’s statutory range. Cash flow statement items (OCF/ICF/FCF) and D&A are unreported in this dataset, which limits assessment of earnings-to-cash conversion; however, the earnings trajectory and margins indicate improving fundamentals. Dividend information is also unreported (DPS and payout shown as 0.00), so dividend sustainability cannot be assessed from this extract; historical policy and guidance would be required. Overall, the company is exhibiting improved profitability, good cost control, and resilient demand across its product portfolio into Q3 YTD, with conservative leverage and ample liquidity. Inventory levels are meaningful, suggesting the need to monitor sell-through and seasonal demand normalization to avoid working capital drag. With operating leverage working positively in FY2025 Q3 YTD, attention should turn to the durability of price/mix benefits and cost tailwinds into FY2026. Risks include raw material cost volatility, FX on sourcing, competitive pricing pressures in household insecticide and daily necessities, and overseas expansion execution. Data limitations, particularly the absence of cash flow and D&A, constrain a full cash conversion analysis; conclusions herein focus on the available non-zero items.

Profitability Analysis

ROE is 11.09%, decomposed into net margin of 6.31%, asset turnover of 0.978x, and financial leverage of ~1.80x. Operating margin is 9.28% (¥13.27bn/¥142.95bn), reflecting strong operating leverage as operating income grew +24.2% vs revenue +6.0%. Gross margin stands at 39.0%, indicating healthy product mix and pricing power, possibly aided by input cost normalization and disciplined promotions. Ordinary income margin is 9.52%, close to operating margin, implying limited non-operating distortions; interest expense is minimal at ¥32mn. The spread between gross and operating margins (approx. 29.7pp) encapsulates SG&A intensity; the YoY operating income outperformance suggests improved SG&A efficiency or scale benefits. Effective tax rate is not reported in the metrics; an inferred rate using taxes vs pre-tax proxy (taxes ¥3.45bn/(taxes + net income ≈ ¥12.48bn)) is ~27.7%. EBITDA cannot be computed due to unreported D&A (shown as 0), but the high interest coverage indicates robust underlying earnings quality. Overall profitability is improving with both margin expansion and stable asset efficiency; leverage is moderate and not the main driver of ROE.

Growth Assessment

Revenue growth of +6.0% YoY to ¥142.95bn reflects steady demand in core categories and/or contribution from pricing/mix. Operating income growth of +24.2% YoY demonstrates positive operating leverage and likely benefits from cost normalization (materials, logistics) and SG&A control. Net income growth of +24.7% aligns with operating trends and limited non-operating drag. Margin expansion across gross and operating levels suggests revenue quality is supported by pricing power rather than volume-only growth. Sustainability will depend on maintaining price/mix in competitive channels and managing promotional activity as peers respond. Given meaningful inventories (¥22.97bn), sell-through into seasonal peaks (spring/summer for insecticides) will be important to avoid margin dilution from markdowns. Overseas and new category contributions (if any) are not disclosed here; growth outlook thus focuses on core Japan demand and channel execution. With leverage not a growth lever, earnings trajectory remains most sensitive to gross margin and SG&A efficiency. Near-term outlook appears constructive based on YTD performance, but normalization of cost tailwinds and potential consumer trade-down are watch points.

Financial Health

Total assets are ¥146.20bn and total equity ¥81.40bn, implying a calculated equity ratio of ~55.7% (vs the reported 0.0% field which is unreported). Total liabilities are ¥60.98bn; debt-to-equity of 0.75x here reflects total liabilities/equity (true net debt is not provided). Current ratio is 129.7% (¥75.07bn/¥57.88bn) and quick ratio 90.0%, indicating adequate short-term liquidity even after removing inventories. Working capital is ¥17.20bn, offering buffer for seasonal inventory builds. Interest expense is low at ¥32mn and interest coverage is ~415x, suggesting minimal financial risk from borrowing costs. No cash and cash equivalents are disclosed in this dataset (0 indicates unreported), so absolute liquidity cannot be precisely gauged. Overall solvency appears strong with ample equity capital and moderate leverage.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported in this dataset (shown as 0), so OCF/NI and FCF cannot be evaluated from the provided figures. Accordingly, the OCF/NI ratio and FCF shown as 0 should not be interpreted as actual zeros. Earnings quality must be inferred from income statement discipline: low interest burden, improved operating margin, and a reasonable inferred tax rate (~27–28%) suggest limited reliance on non-operating items. However, inventories of ¥22.97bn and a quick ratio of 0.90 indicate working capital management is a key area to watch, especially around seasonal sell-through. Without D&A, we cannot reconcile EBITDA or assess non-cash charges; historically, consumer products firms exhibit modest D&A relative to sales, but this cannot be assumed here. Conclusion: earnings appear healthier YoY, but cash conversion assessment is constrained by absent cash flow disclosures.

Dividend Sustainability

Dividend data (DPS and payout ratio) are unreported in this dataset (displayed as 0.00). With net income of ¥9.03bn and strong interest coverage, capacity for distributions appears supported by earnings, but lack of OCF/FCF and cash balance data prevents analysis of cash coverage. Historically, payout policies in the sector blend stable base DPS with opportunistic buybacks, but we cannot confirm the company’s stance or FY2025 guidance from this extract. Until cash flow and dividend guidance are available, we cannot assess FCF coverage or policy sustainability; monitoring full-year results and official policy statements is necessary.

Risk Assessment

Business Risks:

• Raw material and packaging cost volatility affecting gross margin
• FX fluctuations on imported inputs and overseas operations
• Competitive pricing and promotion intensity in domestic retail channels
• Seasonality risk in insecticide demand and weather-related sell-through
• Channel inventory normalization risk leading to discounting
• Regulatory and product safety/compliance in household chemicals
• Brand and product innovation cadence versus peers

Financial Risks:

• Working capital build tied to inventory levels impacting OCF
• Potential logistics cost re-acceleration
• Limited disclosure on cash/cash equivalents and debt composition
• Interest rate risk minimal but present if leverage increases
• FX-related translation and transaction impacts

Key Concerns:

• Absence of cash flow and D&A data limits earnings-to-cash assessment
• Inventory magnitude requires close monitoring of sell-through and obsolescence risk
• Margin sustainability if input cost tailwinds fade or promotions increase

Investment Implications

Key Takeaways:

• Strong FY2025 Q3 YTD margin expansion with operating income +24.2% on revenue +6.0%
• ROE at 11.1% driven by improved margins and steady asset efficiency
• Solid balance sheet with calculated equity ratio ~55.7% and high interest coverage
• Liquidity adequate (current 130%, quick 90%), though cash balance unreported
• Cash flow conversion and dividend details not assessable from provided data

Metrics to Watch:

• Gross and operating margin trajectory into Q4 and FY2026
• Inventory days and sell-through during peak season
• OCF, FCF, and OCF/NI ratio once full cash flow statements are available
• Price/mix vs volume contribution to revenue growth
• Any changes in dividend policy, DPS, or share buyback announcements

Relative Positioning: Within Japan household products/insecticide peers, Earth appears to be in an improving profitability phase with solid operating leverage and conservative leverage; balance sheet quality is a relative strength, while transparency on cash flows in this extract is a relative weakness.

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