KURAMOTO CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.76B
• Operating Income: ¥-289M
• Net Income: ¥-375M
• EPS: ¥-7.81

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

Kuramoto Seisakusho (52160) posted FY2025 Q3 consolidated results under JGAAP with strong top-line growth but persistent operating losses. Revenue rose 40.4% YoY to ¥1,758m, indicating demand recovery or new project wins, yet operating income remained at a loss of ¥289m (flat YoY), highlighting limited operating leverage. Gross profit reached ¥556.9m, translating to a 31.7% gross margin, a respectable level, but SG&A and other operating costs of roughly ¥845.9m (about 48.1% of sales) drove the operating loss. Ordinary loss widened to ¥320m and net loss to ¥374m (EPS: ¥-7.81), with a reported income tax expense of ¥54.4m despite the loss, consistent with non-income-based taxes or valuation-related items under JGAAP. DuPont metrics show a negative net margin (-21.27%) as the primary driver of the calculated ROE of -10.87%, compounded by modest asset turnover (0.403x) and low financial leverage (1.27x). Balance sheet strength is a relative positive: total assets are ¥4,366m against total liabilities of ¥912m, implying low leverage and ample equity (¥3,442m). Liquidity appears sound with a current ratio of 198.9% and working capital of ¥675m, supported by very small inventories (¥15m), suggesting either a low-inventory business model or classification differences. Interest expense is modest at ¥10.1m, but interest coverage is negative because EBIT is negative, indicating that the core issue is profitability, not financing strain. The reported equity ratio field is 0.0%, but based on the provided balance sheet figures, the implied equity ratio would be approximately 78–79% (not officially disclosed), reinforcing solvency strength. Cash flow statements and depreciation are unreported in this dataset; thus, EBITDA, OCF, and FCF indicators showing zero should be treated as undisclosed rather than actual zeros. The company paid no dividends (DPS ¥0), appropriately conservative given recurring losses and unreported cash flows. The scale of SG&A relative to sales implies a high break-even threshold, and at current gross margin levels, sales would need to rise substantially to return to operating profitability. The 40% revenue growth without improvement in operating income suggests cost pressure, mix issues, or temporary inefficiencies offsetting scale benefits. Overall, the quarter demonstrates encouraging revenue momentum but underscores the need for cost discipline and margin enhancement to translate growth into profits. Data limitations (notably cash flows, depreciation, and share count) constrain the depth of cash flow and per-share analyses; conclusions focus on non-zero, disclosed items.

Profitability Analysis

ROE_decomposition: Calculated ROE of -10.87% is driven by a negative net profit margin (-21.27%), modest asset turnover (0.403x = ¥1,758m / ¥4,366m), and low financial leverage (1.27x = Assets/Equity ≈ ¥4,366m/¥3,442m). The dominant drag is the negative margin; leverage is too low to amplify returns and, in this case, limits downside from losses. margin_quality: Gross margin is 31.7%, indicating reasonable manufacturing/service economics, but operating margin is -16.4% (¥-289m/¥1,758m), and ordinary margin is -18.2%, reflecting high overhead and limited scalability in the quarter. A reported tax expense of ¥54.4m despite losses points to non-income taxes or valuation adjustments under JGAAP. Interest expense (¥10.1m) is not the main driver; core operating costs are. operating_leverage: With SG&A and other operating costs estimated at ~¥845.9m (~48.1% of sales), the implied break-even sales at the current 31.7% gross margin is ~¥2.67bn (¥845.9m / 31.7%), well above current revenue. The 40.4% sales growth did not improve operating income, suggesting negative/limited operating leverage due to cost inflation, mix, or underutilization effects.

Growth Assessment

revenue_sustainability: Revenue grew 40.4% YoY to ¥1,758m. Sustainability will depend on repeat orders, capacity utilization, and end-market conditions; minimal inventory suggests either make-to-order dynamics or different inventory classification. profit_quality: Despite higher sales, the company remained loss-making at operating, ordinary, and net levels. Gross margin is stable at 31.7%, but high opex dilutes profitability, indicating weak conversion of revenue to earnings. outlook: To pivot to profitability, the company needs either higher gross margin (pricing/mix, cost-down) or a reduction in SG&A intensity. Monitoring sequential gross margin and SG&A/sales will be key to confirming operating leverage as scale builds.

Financial Health

liquidity: Current assets ¥1,358.1m vs current liabilities ¥682.8m; current ratio 198.9%, quick ratio 196.7%. Working capital is ¥675.3m. Cash balance is not disclosed; liquidity assessment is based on the reported current asset base. solvency: Total liabilities ¥912.5m vs equity ¥3,442m indicates low leverage; debt-to-equity is 0.27x. Interest expense is low (¥10.1m), and implied equity ratio from the balance sheet would be approximately 78–79% (official equity ratio not disclosed in the dataset). capital_structure: Leverage is conservative with liabilities at ~21% of assets. Limited financial risk from indebtedness, but recurring losses could erode equity if unaddressed over time.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows are not disclosed in this dataset (zeros denote unreported). Therefore, we cannot reconcile earnings to cash flow or assess accrual intensity. FCF_analysis: Free cash flow is unreported. With depreciation also unreported, EBITDA-related measures are not meaningful here. working_capital: Working capital is positive at ¥675.3m; inventories are very low at ¥15.1m. Without OCF detail, we cannot assess working capital cash effects (AR/AP days, inventory turns).

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is listed as 0.0%; given net losses and unreported cash flows, a dividend pause is consistent with capital preservation. FCF_coverage: FCF is unreported; hence coverage cannot be evaluated. Negative earnings suggest insufficient coverage for distributions. policy_outlook: Continuation of a no-dividend stance appears prudent until operating profitability and positive OCF are established. Future resumption would depend on stable profits and visibility on cash generation.

Risk Assessment

Business Risks:

• Persistent operating losses despite strong revenue growth indicate execution and cost control risk
• Sensitivity to demand cycles in end-markets (e.g., industrial/electronics) leading to order volatility
• Potential margin pressure from input costs (materials, energy) and pricing competition
• Capacity utilization risk impacting fixed-cost absorption and operating leverage
• Product/mix and technology obsolescence risks if the company serves fast-evolving niches
• Supply chain and lead-time management given low inventories

Financial Risks:

• Earnings losses could erode equity over time despite currently low leverage
• Negative interest coverage due to operating losses
• Cash flow visibility is low due to undisclosed OCF/FCF; potential funding needs cannot be ruled out if losses persist
• Impairment risk on long-lived assets if utilization remains weak

Key Concerns:

• High SG&A intensity (~48% of sales) keeping the company below break-even
• Lack of improvement in operating loss despite 40% revenue growth
• Unreported cash flow and depreciation data limit assessment of cash burn and asset productivity

Investment Implications

Key Takeaways:

• Top-line rebounded 40.4% YoY to ¥1,758m, but profitability did not improve
• Gross margin of 31.7% is adequate, yet opex scale prevents break-even
• Balance sheet is conservatively financed with low leverage and strong working capital
• Interest expense is small; the core issue is operating efficiency and scale
• Cash flow metrics are undisclosed, constraining visibility on cash generation

Metrics to Watch:

• Quarterly revenue run-rate and order backlog
• Gross margin trend and cost-down progress
• SG&A-to-sales ratio and fixed-cost reductions
• Operating income trajectory and interest coverage
• Asset turnover (sales/assets) and utilization rates
• OCF and FCF once disclosed, plus AR/AP days and inventory turns

Relative Positioning: Versus TSE glass/ceramics and industrial component peers, the company shows stronger balance sheet conservatism (low leverage) but weaker profitability (negative operating and net margins) and smaller scale, with operating leverage yet to materialize despite strong sales 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