KUMIAI CHEMICAL INDUSTRY CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥170.46B
• Operating Income: ¥10.57B
• Net Income: ¥4.22B
• EPS: ¥36.38

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

Kumiai Chemical Industry (4996) delivered FY2025 Q4 consolidated results showing topline resilience but significant profit compression and elevated below-the-line drag. Revenue rose 5.8% YoY to 1,704.62, supported by stable agrochemical demand and likely pricing/mix, but gross profit of 343.66 implies a gross margin of 20.2%, suggesting continued input cost pressure and possibly adverse product mix. Operating income declined 6.9% YoY to 105.67, putting the operating margin at 6.2% despite higher sales, indicating negative operating leverage in the period. Non-operating income was sizable at 41.14, with equity-method and related income (equity method earnings 32.47, dividends 2.30, interest 1.34) cushioning core weakness; after non-operating expenses of 13.18, ordinary income came to 133.63 (-27.0% YoY). Profit before tax fell further to 90.87, implying notable extraordinary losses (approximately -42.8), and the effective tax rate was elevated at 53.6%, culminating in a sharp Net Income decline of 67.8% to 43.81. DuPont analysis yields a ROE of 2.9% (net margin 2.6%, asset turnover 0.687x, leverage 1.64x), well below a typical cost of equity for the sector, driven chiefly by low margins and sub-1x asset turnover. EBITDA was 162.60 (margin 9.5%), and interest coverage was strong at 17.0x, indicating manageable financing costs despite higher short-term borrowings. Liquidity is robust with a current ratio of 208% and quick ratio of 127%, backed by 219.82 cash and sizeable inventories of 597.69. The balance sheet is sound with total equity of 1,511.07 and total liabilities of 970.98 (debt-to-equity 0.64x), though short-term loans are elevated at 367.82. Cash generation was a bright spot: operating cash flow of 338.03 (7.72x net income) and FCF of 248.74 provide flexibility to absorb cyclical swings and fund investment. Equity-method contributions are material to ordinary income, highlighting some reliance on affiliates for profitability. Reported ratios from XBRL (e.g., reported operating margin 0.1%) appear inconsistent with computed margins under JGAAP presentation; we therefore rely on the calculable figures provided. Dividend data are partially unreported; the calculated payout ratio of 103.4% contrasts with a reported 0.3%, indicating disclosure inconsistencies and necessitating caution in interpreting payout. Overall, the quarter reflects healthy sales, pressure on core margins, heavy extraordinary items and taxes, but strong cash conversion and ample liquidity. Key watchpoints include normalization of the tax rate, resolution of extraordinary losses, inventory management, and the sustainability of non-operating earnings.

Profitability Analysis

ROE is 2.9%, decomposed as net margin 2.6% × asset turnover 0.687 × financial leverage 1.64x. Operating margin is 6.2% (105.67/1,704.62), down YoY given operating income fell 6.9% while revenue grew 5.8%; this indicates negative operating leverage and/or cost inflation not fully offset by pricing. Gross margin of 20.2% suggests limited pricing power in the period and/or higher raw material, logistics, or mix effects in agrochemicals. EBITDA margin is 9.5%, a ~330 bp spread over operating margin consistent with D&A of 56.93; capital intensity remains moderate. Ordinary income margin is 7.8% (133.63/1,704.62), lifted by non-operating gains (notably equity-method income of 32.47). PBT margin drops to 5.3% due to extraordinary losses, and the net margin compresses sharply to 2.6% on a high 53.6% effective tax rate. Interest expense is modest at 6.21 with 17.0x coverage, indicating financial costs are not the main earnings headwind. The dependence on non-operating income to hold up ordinary income highlights weaker core profitability quality this term. Overall margin quality is mixed: core margins were pressured, while affiliate income and other non-operating items were important supports.

Growth Assessment

Revenue grew 5.8% YoY to 1,704.62, indicating resilient demand in key markets and/or price/mix improvement. However, operating income declined 6.9%, implying that growth was not accretive to margins due to cost pressures or higher SG&A (237.99) relative to gross profit. Ordinary income fell 27.0%, as non-operating gains were insufficient to offset weaker core profitability and higher non-operating expenses. Net income declined 67.8%, driven by extraordinary losses and a high tax burden. The quality of profit growth is weak this period given the gap between revenue and earnings trajectories and the reliance on non-operating income. Equity-method earnings (32.47) are material and may be cyclical; sustainability depends on affiliates' performance. Outlook hinges on normalizing extraordinary items, potential tax rate reversion toward historical levels, and inventory normalization supporting gross margins. With FCF strong, the company has room to invest in product pipeline and efficiency; margin recapture via pricing and cost control will be key to restoring earnings leverage.

Financial Health

Total assets are 2,482.05 with equity of 1,511.07, yielding a solid capitalization base. Liquidity is strong: current assets 1,541.76 vs current liabilities 740.17 produce a current ratio of 208% and quick ratio of 127%. Working capital is 801.59, supported by cash of 219.82 and inventories of 597.69. Interest-bearing debt totals at least 511.06 (short-term loans 367.82, long-term 143.24); net debt approximates 291.24 versus strong equity, implying moderate leverage. Debt-to-equity is 0.64x on a total liabilities basis, within prudent bounds. Interest coverage of 17.0x reflects low interest burden relative to EBITDA. The maturity profile tilts short-term (ST loans 367.82), creating some refinancing risk, but ample liquidity and cash generation mitigate it. Investment securities of 386.40 provide additional financial flexibility if needed.

Cash Flow Quality

Operating cash flow of 338.03 is robust at 7.72x net income, indicating strong cash conversion aided by non-cash charges (D&A 56.93) and likely working-capital release; receivables are unreported, but inventory changes are an important swing factor to monitor. Free cash flow was 248.74 after capex of 82.77, demonstrating capacity to fund investments and support balance sheet needs. Earnings quality is mixed: statutory net income is depressed by extraordinary items and high taxes, while cash generation is healthy; sustainability depends on whether tax/extraordinary effects normalize. Non-operating inflows (e.g., dividends from affiliates) may be included in OCF under JGAAP; this can inflate OCF vs core operating earnings, so recurring core cash should be monitored. Working capital intensity remains high given inventories of 597.69; inventory turnover discipline will be key to sustaining OCF.

Dividend Sustainability

Dividend disclosures are limited; DPS and total dividends paid are unreported, and reported payout ratios appear inconsistent (calculated 103.4% vs reported 0.3%). Given net income of 43.81 and strong FCF of 248.74 (FCF coverage 5.49x), cash capacity to support dividends appears ample despite weak earnings. Retained earnings of 1,103.94 and strong liquidity provide additional buffer. However, with net income depressed and payout metrics unclear, we treat sustainability assessment cautiously and emphasize FCF coverage and balance sheet strength over earnings-based payout in this period. Policy direction cannot be inferred with confidence from the provided data; management’s stance on maintaining or adjusting dividends relative to earnings volatility remains a key watchpoint.

Risk Assessment

Business Risks:

• Raw material and logistics cost volatility impacting gross margins
• Agrochemical demand cyclicality across key regions and crops
• Regulatory changes and product registration risks in domestic and overseas markets
• Product mix shifts and pricing pressure from competitors
• Dependence on affiliates for a material portion of ordinary income
• Foreign exchange fluctuations affecting export competitiveness and translation

Financial Risks:

• Elevated short-term borrowings (367.82) presenting refinancing and rate reset risk
• High effective tax rate (53.6%) compressing net profitability and cash tax uncertainty
• Extraordinary losses reducing PBT by roughly 42.8, with potential recurrence risk
• Working capital intensity (inventories 597.69) potentially tying up cash in downturns
• Potential volatility in investment securities and equity-method income streams

Key Concerns:

• Sustained margin compression despite revenue growth (operating margin 6.2%)
• Reliance on non-operating income to support ordinary income
• Visibility on tax normalization and drivers of extraordinary losses
• Inventory management and receivables (unreported) influencing cash conversion
• Dividend policy clarity given conflicting payout indicators

Investment Implications

Key Takeaways:

• Topline grew 5.8% YoY, but operating income declined 6.9%, indicating margin pressure
• Non-operating gains (net +27.96) and equity-method income (32.47) were important supports
• Extraordinary losses (~42.8) and a 53.6% effective tax rate drove a 67.8% net income decline
• ROE at 2.9% reflects low margins and sub-1x asset turnover despite moderate leverage
• Liquidity is strong (current ratio 208%, quick 127%) with manageable leverage (0.64x D/E)
• OCF 338.03 and FCF 248.74 underscore strong cash generation versus reported earnings
• Short-term loans are high (367.82), but interest coverage is strong at 17.0x
• Dividend sustainability appears supported by FCF and equity, but disclosures are incomplete

Metrics to Watch:

• Gross and operating margin trajectory (cost pass-through, mix)
• Tax rate normalization and drivers of one-off items
• Inventory levels and turnover; receivables once disclosed
• Equity-method income stability and affiliate performance
• Short-term debt levels and average interest cost
• Capex discipline versus growth pipeline and R&D disclosure
• FX sensitivity and hedging effectiveness

Relative Positioning: Within domestic agrochemical peers, Kumiai exhibits solid liquidity and cash generation but currently weaker bottom-line quality due to extraordinary items and elevated taxes; reliance on affiliate income is higher than some peers, and operating leverage is negative this term despite revenue growth.

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