Toyo Tire Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥435.29B
• Operating Income: ¥72.07B
• Net Income: ¥55.20B
• EPS: ¥344.55

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

TOYO TIRE (5105) reported FY2025 Q3 year‑to‑date consolidated results under JGAAP showing steady top-line growth with some margin compression. Revenue reached ¥435.3bn, up 3.5% YoY, indicating resilient demand across core tire categories despite a slowing global macro backdrop. Gross profit was ¥177.9bn, translating to a robust gross margin of 40.9%, which remains strong for the sector and suggests maintained pricing discipline and mix benefits. Operating income declined 5.5% YoY to ¥72.1bn, implying operating margin of 16.6%, a sequential normalization from prior elevated levels. Net income was ¥53.1bn, down 3.9% YoY, with a net margin of 12.2%, still healthy versus global tire peers. DuPont shows ROE at 10.75% driven by solid net margin (12.19%), modest asset turnover (0.611x), and conservative leverage (financial leverage 1.44x), indicating returns are largely operationally generated rather than leverage‑dependent. Liquidity is strong: current ratio 2.48x and quick ratio 1.90x, backed by working capital of ¥222.9bn and inventories of ¥86.7bn. The balance sheet is conservatively geared with total liabilities of ¥250.1bn versus equity of ¥493.8bn, implying a debt-to-equity of 0.51x. Interest coverage is very high at 71.4x (OI/interest expense), underscoring ample headroom to absorb rate or spread volatility. Using income tax expense of ¥23.5bn and net income of ¥53.1bn, the implied effective tax rate approximates 30–31%, consistent with Japan-based corporates with overseas earnings. Cash flow statement items are unreported in this dataset, so operating cash flow and free cash flow can’t be assessed; consequently, OCF/NI and FCF metrics shown as zero should be treated as not disclosed. Depreciation and amortization is also unreported, so EBITDA and EBITDA margin are not meaningful here. Dividend information is not disclosed in this feed; EPS was ¥344.55 but DPS and payout ratio are not available. Overall, the company demonstrates healthy profitability, conservative financial policy, and strong liquidity, though operating leverage softened modestly versus last year. Near-term growth appears driven by pricing/mix and potentially stable volumes, with YoY margin pressure suggesting costs (materials, logistics) and/or FX normalization. Absent cash flow disclosures, our assessment focuses on income statement strength and balance sheet resilience.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.75% = Net margin 12.19% × Asset turnover 0.611 × Financial leverage 1.44. The primary driver is margin strength, with operating margin at 16.6% (¥72.1bn OI on ¥435.3bn revenue) and net margin at 12.2% (¥53.1bn NI). Gross margin of 40.9% remains elevated for the tire industry, implying sustained pricing power and/or product mix, albeit with some YoY compression given operating income was down 5.5% despite revenue growth. The decline in operating income relative to sales growth signals modest negative operating leverage in the period, likely from input cost normalization, sales mix, or SG&A reinvestment. Asset turnover of 0.611x indicates a capital‑intensive profile typical of tire manufacturing; improvements here would meaningfully lift ROE given the conservative leverage. Interest expense is low at ¥1.01bn, yielding interest coverage of 71.4x, confirming that profitability is not dependent on financial leverage. The implied tax rate of roughly 30–31% (¥23.5bn tax vs. pre‑tax approximated by NI + tax) is within a normal range and not a drag on ROE volatility. With D&A not disclosed, EBITDA is not available; however, given the sector’s fixed asset base, underlying EBITDA would be materially above operating income, suggesting additional buffer at the cash earnings level. Overall, profitability remains solid, with slight margin pressure indicating reduced operating leverage YoY but still healthy returns on equity generated mostly by margins rather than leverage.

Growth Assessment

Revenue grew 3.5% YoY to ¥435.3bn, indicating stable demand and effective pricing/mix management. Operating income fell 5.5% YoY to ¥72.1bn, and net income declined 3.9% to ¥53.1bn, signaling some compression in operating leverage despite topline growth. The divergence between revenue and profit growth suggests cost headwinds, pricing normalization, product mix shifts, or increased SG&A investments. Gross margin at 40.9% remains strong, supporting the view that structural profitability is intact even as YoY comps normalize. Absent cash flow data, we cannot corroborate earnings growth with cash conversion, so the quality of growth assessment relies on the income statement and working capital snapshot. Inventories of ¥86.7bn within current assets of ¥373.8bn appear manageable, but inventory trends relative to sales are unknown; sustained revenue growth with flat inventories would be a positive signal (not observable here). Outlook-wise, continued pricing discipline, regional mix, and cost normalization will be key for sustaining margins. FX and raw material cost trajectories typically influence tire sector earnings; given net margin still at 12.2%, the company appears to have cushion to navigate moderate headwinds. With asset turnover at 0.611x, growth through utilization and footprint optimization could enhance returns. In short, revenue growth is sustainable if pricing/mix holds and volume remains steady, but margin recovery will depend on cost inputs and operating efficiency.

Financial Health

Liquidity is strong: current assets ¥373.8bn versus current liabilities ¥150.9bn deliver a current ratio of 2.48x and quick ratio of 1.90x. Working capital of ¥222.9bn provides a significant buffer for operations and seasonal swings. Solvency is solid with total liabilities of ¥250.1bn against equity of ¥493.8bn; debt-to-equity stands at 0.51x, indicating conservative leverage. Financial leverage in DuPont at 1.44x (assets/equity) underscores a strong equity base supporting the balance sheet. Interest burden is light (¥1.01bn), with interest coverage of 71.4x, implying minimal refinancing risk from the income statement perspective. Total assets are ¥712.0bn, highlighting a capital‑intensive business that may require ongoing capex; however, cash and debt composition details are not disclosed here. The reported equity ratio field shows 0.0% in the dataset; using provided assets and equity implies a substantial equity cushion, but we base solvency comments on the actual asset/equity values disclosed. Overall, financial flexibility appears ample given low leverage and strong liquidity, though visibility is limited without cash and debt breakdowns.

Cash Flow Quality

Cash flow metrics are not disclosed in this dataset (OCF, investing CF, financing CF, and cash are shown as zero placeholders). As a result, OCF/Net Income and FCF figures are not interpretable here. Earnings quality must therefore be inferred from margins and balance sheet signals: gross margin at 40.9% and net margin at 12.2% suggest that earnings are not purely accounting‑driven. Inventories of ¥86.7bn within current assets of ¥373.8bn appear proportionate, but without prior-period comparisons, we cannot assess inventory build/consumption or the cash conversion cycle. Depreciation & amortization is unreported, preventing EBITDA and FCF bridging analysis. Given the capital-intensive nature of tire manufacturing, maintenance capex is typically significant; without capex/OCF data, free cash flow coverage of earnings cannot be validated. In sum, the absence of CF disclosures constrains our assessment of cash conversion and working capital efficiency; we rely on income statement robustness and the strong liquidity buffer as indirect indicators.

Dividend Sustainability

Dividend data is not disclosed in this dataset (DPS and payout ratio fields show zero placeholders), so we cannot compute payout or FCF coverage. EPS is ¥344.55 for the period, suggesting distributable capacity exists at the earnings level, but sustainability depends on OCF and capex, which are unreported. The balance sheet’s conservative leverage (D/E 0.51x) and high interest coverage (71.4x) are supportive of dividend resilience in general. However, without OCF and FCF, we cannot assess coverage or policy adherence. We therefore view dividend sustainability as indeterminable from this dataset alone and would need actual DPS guidance, historical policy, and cash flow disclosures to form a view.

Risk Assessment

Business Risks:

• Raw material cost volatility (natural rubber, synthetic rubber, carbon black, energy) affecting margins
• Foreign exchange fluctuations impacting export competitiveness and translation effects
• Demand cyclicality across automotive OE and replacement markets
• Product mix shifts toward lower‑margin segments or regions
• Logistics and freight cost variability
• Competitive pricing pressure from global tire manufacturers
• Regulatory and safety compliance requirements across jurisdictions

Financial Risks:

• Potential capex intensity impacting free cash flow in the absence of reported OCF/FCF
• Working capital swings (inventory and receivables) affecting cash conversion
• Interest rate and credit spread changes (though current coverage is ample)
• FX-related balance sheet translation effects

Key Concerns:

• Operating income down 5.5% YoY despite revenue growth (+3.5%), indicating margin pressure
• Lack of cash flow disclosure prevents validation of earnings quality and FCF generation
• D&A unreported, limiting visibility into EBITDA and maintenance vs. growth capex needs
• Dividend data not disclosed, obscuring capital return profile

Investment Implications

Key Takeaways:

• Revenue growth of 3.5% YoY with strong gross margin (40.9%) underscores resilient demand and pricing
• Operating margin at 16.6% and net margin at 12.2% remain solid, though YoY margin pressure is evident
• ROE of 10.75% is driven mainly by profitability rather than leverage (financial leverage 1.44x)
• Balance sheet is conservative (D/E 0.51x) with strong liquidity (current ratio 2.48x, quick ratio 1.90x)
• Interest coverage of 71.4x indicates negligible near-term financial strain
• Cash flow, D&A, and dividend data are not disclosed, limiting assessment of cash conversion and payout sustainability

Metrics to Watch:

• Sequential and YoY operating margin progression versus raw material and logistics cost indices
• Inventory levels relative to sales and days inventory outstanding (DIO) to gauge cash conversion
• OCF and FCF once disclosed, including capex intensity and OCF/NI ratio
• FX impacts on revenue and margins, particularly USD/JPY and EUR/JPY sensitivities
• Volume versus price/mix decomposition to assess sustainability of revenue growth
• Any updates on dividend policy and payout targets

Relative Positioning: Within the tire sector, TOYO TIRE’s current profile suggests above-average margins, conservative leverage, and strong liquidity, positioning it defensively versus more leveraged peers; visibility on cash generation and capital returns is the main gap in this dataset.

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