BRIDGESTONE CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥3.23T
• Operating Income: ¥291.72B
• Net Income: ¥257.80B
• EPS: ¥302.75

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

Bridgestone’s FY2025 Q3 (IFRS, consolidated) shows modest topline pressure but a pronounced squeeze on profitability, partly offset by solid cash generation. Revenue was 32,349.26 (100M JPY), down 1.1% YoY, while operating income fell 22.6% YoY to 2,917.23, indicating negative operating leverage and/or adverse mix and cost dynamics. Gross profit of 12,887.82 implies a robust gross margin of 39.8%, but SG&A of 9,411.29 (29.1% of revenue) absorbed much of the gross value-add, yielding an estimated operating margin of about 9.0%. Net income declined 19.5% YoY to 2,035.36, with an effective tax rate of 28.2%. Notably, profit before tax (3,586.37) exceeded operating income by 669.14, implying positive net non-operating/financial contributions during the period. DuPont metrics point to a mid-single-digit ROE of 5.8%, driven by a 6.3% net margin, asset turnover of 0.589x, and financial leverage of 1.55x. EBITDA was 5,529.61, translating to a 17.1% margin, and D&A (2,612.38) exceeded capex (2,137.93), suggesting relatively low reinvestment in the period versus depreciation. Cash generation was strong: operating cash flow reached 3,204.85 and free cash flow 1,458.88, with OCF/NI of 1.57x underscoring earnings quality. The balance sheet remains conservative, with total liabilities of 19,370.29 and equity of 35,383.91, for an equity ratio of 63.5% and liabilities-to-equity of 0.55x. Liquidity ratios cannot be directly computed due to unreported current liabilities, but cash and equivalents were 7,067.32 at period-end. Total comprehensive income of 1,041.63 lagged net income, reflecting negative other comprehensive items (likely FX or fair value effects), which partially dampened equity accretion. Working capital is sizable, with accounts receivable at 10,373.45, inventories at 9,452.85, and accounts payable at 6,107.04; implied CCC appears long, typical for the industry but worth monitoring given the revenue softness. Dividend capacity appears broadly maintained: the implied payout ratio is 73.6% and FCF coverage is 0.97x, indicating nearly full coverage from free cash generation in the period. Financing cash outflows (-3,105.78) reflect distributions to shareholders and possibly debt management, while buybacks were minimal (-0.08). Overall, the company preserved cash flow discipline and balance sheet strength despite margin pressure, but ROE remains subdued at 5.8%, and the decline in comprehensive income flags external headwinds. Data gaps (e.g., non-operating breakdown, current liabilities, interest expense, DPS) limit precision in some metrics; the analysis focuses on disclosed figures and consistent derived ratios.

Profitability Analysis

ROE_decomposition: ROE 5.8% = Net margin 6.3% x Asset turnover 0.589 x Financial leverage 1.55x. Net income 2,035.36 on revenue 32,349.26 yields the 6.3% margin; asset turnover derived from revenue/total assets; leverage from assets/equity (54,884.77 / 35,383.91). margin_quality: - Gross margin: 39.8% (12,887.82 / 32,349.26). - SG&A ratio: 29.1% (9,411.29 / 32,349.26). - Operating margin (derived): ~9.0% (2,917.23 / 32,349.26). - EBITDA margin: 17.1% (5,529.61 / 32,349.26). The widening gap between gross and operating margins suggests elevated overhead burden and/or higher selling expenses, offsetting otherwise strong gross profitability. operating_leverage: Revenue declined 1.1% YoY, but operating income fell 22.6% YoY, indicating negative operating leverage. This implies either weaker pricing/mix, higher input costs, increased SG&A, or a combination thereof. Given EBITDA margin remains decent, the compression likely reflects price-cost timing and higher overhead intensity in the quarter.

Growth Assessment

revenue_sustainability: Topline decreased 1.1% YoY to 32,349.26, signaling mild demand softness or adverse mix/FX. The sector is cyclical; sustainability depends on replacement tire demand, OE build rates, and pricing discipline. profit_quality: Net income fell 19.5% YoY to 2,035.36, outpacing the revenue decline, a sign of pressure on cost absorption and pricing. Profit before tax exceeded operating income by 669.14, indicating supportive non-operating items (e.g., FX gains or financial income). Effective tax rate at 28.2% is within a normal range, and OCF/NI at 1.57x supports earnings quality. outlook: With EBITDA margin at 17.1% and strong gross margin, recovery potential exists if cost inflation abates and price/mix holds. However, the decline in total comprehensive income vs. net income highlights exogenous risks (FX, market value changes). Monitoring price-cost spread, volumes (replacement vs OE), and regional FX will be key to near-term growth stabilization.

Financial Health

liquidity: Current ratio and quick ratio are not calculable due to unreported current liabilities and cash details. Cash and equivalents were 7,067.32, and operating cash flow was robust at 3,204.85, providing liquidity support. Working capital is significant given AR 10,373.45 and inventories 9,452.85. solvency: Equity ratio 63.5% and liabilities/equity of 0.55x indicate a conservative capital structure. Interest-bearing debt is unreported, and interest coverage cannot be calculated, but profit before tax materially exceeds operating income, suggesting no evident financing strain within the disclosed period. capital_structure: Total assets 54,884.77 vs equity 35,383.91 (financial leverage 1.55x). The balance sheet provides capacity to navigate cyclicality, though comprehensive income volatility may impact equity via OCI.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.57x indicates healthy cash conversion. The positive gap suggests limited earnings accrual risk in the period. FCF_analysis: Free cash flow was 1,458.88 after capex of 2,137.93. Capex intensity is ~6.6% of revenue, and D&A (2,612.38) > capex, implying net depreciation outpaced reinvestment in the period (potentially timing-related). working_capital: AR 10,373.45 and inventories 9,452.85 vs AP 6,107.04 imply a sizable cash conversion cycle. Roughly estimated days: AR ~117 days, inventory ~174 days, AP ~113 days, for a CCC ~179 days (caution: end-period balances vs YTD revenue/CoS and seasonality effects). Despite this, OCF remained strong.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 73.6% of net income (implying dividends of ~1,500 vs NI 2,035.36). This is elevated but within a range that can be supported by current earnings. FCF_coverage: FCF coverage is 0.97x, indicating dividends were nearly covered by free cash flow in the period; minor shortfall could be bridged by existing cash balances (7,067.32) if needed. policy_outlook: Given the conservative balance sheet and stable OCF, sustaining the dividend appears manageable, but further margin compression or adverse OCI/FX could pressure coverage. Buybacks were de minimis (-0.08), suggesting emphasis on dividends within total shareholder return for now.

Risk Assessment

Business Risks:

• Raw material cost volatility (natural/synthetic rubber, petrochemicals) impacting gross margin.
• Demand cyclicality tied to global auto production and replacement tire markets.
• Pricing pressure and competition across regions and segments.
• FX fluctuations affecting revenue, margins, and OCI (translation effects).
• Product mix shifts (e.g., toward EV/high-spec tires) requiring ongoing capex and R&D.
• Geopolitical and trade risks affecting supply chains and regional demand.
• Regulatory and environmental compliance costs (sustainability, emissions, recycling).

Financial Risks:

• Limited visibility on interest-bearing debt and interest expense; interest coverage unreported.
• Large working capital base and long CCC expose cash flows to demand swings.
• OCI volatility (evidenced by comprehensive income below net income) affecting equity.
• Potential pension or long-term liabilities not broken out in the provided data.
• FX-related balance sheet exposures and translation risk.

Key Concerns:

• Operating income down 22.6% YoY despite only a 1.1% revenue decline, indicating negative operating leverage.
• ROE at 5.8% is subdued relative to typical return targets.
• High payout ratio (73.6%) with FCF coverage ~1.0x leaves limited buffer if cash generation weakens.

Investment Implications

Key Takeaways:

• Solid gross and EBITDA margins but notable compression at the operating line.
• Cash generation remains resilient with OCF/NI at 1.57x and positive FCF.
• Balance sheet strength (equity ratio 63.5%) provides flexibility.
• OCI drag reduced total comprehensive income, tempering equity accretion.
• Dividend is largely covered by FCF but with a slim cushion.

Metrics to Watch:

• Price-cost spread (tire ASPs vs raw material indices).
• Regional and segment mix and volume trends (replacement vs OE).
• SG&A ratio and operating margin progression.
• Working capital efficiency (AR, inventory, AP days; CCC).
• OCF/NI and FCF trends; capex vs D&A trajectory.
• FX impacts on both P&L and OCI.
• ROE and asset turnover improvements.

Relative Positioning: Within the global tire sector context, Bridgestone maintains healthy gross profitability and a conservative balance sheet, but current ROE is mid-single digit and below potential; restoring operating leverage and improving working capital efficiency are key levers for relative improvement.

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