OHARA INC. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥28.89B
• Operating Income: ¥1.79B
• Net Income: ¥1.22B
• EPS: ¥71.04

Income Statement

Balance Sheet

Cash Flow Statement

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

Ohara (5218) delivered FY2025 Q4 consolidated results with modest top-line growth but margin compression at the operating level. Revenue rose 3.5% YoY to 288.95, while operating income declined 17.6% YoY to 17.94, compressing the operating margin to 6.2%. Gross profit was 87.84, implying a gross margin of 30.4%, but SG&A of 66.06 (22.9% of sales) limited operating leverage. Ordinary income decreased 11.5% YoY to 22.89, supported by net non-operating gains (notably interest income of 1.60, dividend income of 1.24, and equity-method income of 1.38 within the non-operating line). Net income nonetheless rose 10.4% YoY to 17.30, aided by non-operating items and a positive gap between ordinary income and profit before tax. DuPont analysis indicates a reported/calculated ROE of 3.3%, driven by a 6.0% net margin, 0.432x asset turnover, and modest financial leverage of 1.28x. EBITDA was 32.85, yielding an 11.4% EBITDA margin, underscoring modest profitability for a specialty materials company. Cash generation was softer: operating cash flow of 10.49 equated to 0.61x net income, and FCF defined as OCF plus investing CF was 1.95, reflecting working-capital intensity and capex needs. The balance sheet remains a key strength with total assets of 668.84 and equity of 523.47, implying an equity ratio of roughly 78% and net cash of about 100 (cash 151.61 vs loans 51.69). Liquidity is robust (current ratio 401%, quick ratio 371%), and interest coverage is ample at about 42x, indicating very low financial risk. The effective tax rate was 36.1%. Dividend payout appears to be about 33.8% of net income, but FCF coverage was only 0.33x in this period, suggesting near-term reliance on the strong cash position rather than cash generation to fund dividends. Inventory and receivables levels imply a long cash conversion cycle, typical of precision materials, which can pressure OCF during growth phases. While several XBRL sub-items are unreported (e.g., some SG&A components, R&D, DPS), the disclosed data allow a solid assessment of profitability, cash flow quality, and balance sheet resilience. Overall, the company exhibits conservative leverage and liquidity strength, with profitability pressured by cost structure and operating leverage in FY2025. Outlook hinges on demand normalization in end-markets (optics/semiconductors), pricing power to defend gross margins, and working-capital discipline to restore OCF alignment with earnings.

Profitability Analysis

ROE_decomposition: ROE 3.3% = Net margin 6.0% x Asset turnover 0.432x x Financial leverage 1.28x. Net margin is supported by non-operating income; asset turnover is modest for a materials company; leverage is conservative, limiting ROE amplification. margin_quality: Gross margin 30.4% (GP 87.84 on sales 288.95) remains healthy but not translating fully to operating profit due to SG&A at 22.9% of sales. Operating margin is 6.2% (OP 17.94), down YoY. Ordinary income margin is 7.9% (22.89/288.95), lifted by non-operating gains (interest/dividends/equity-method). Net margin is 6.0% (17.30/288.95) despite a relatively high effective tax rate of 36.1%. EBITDA margin is 11.4%, indicating a moderate fixed-cost burden. operating_leverage: Revenue +3.5% YoY versus operating income -17.6% YoY indicates negative operating leverage this year, suggesting fixed costs and/or mix/pricing headwinds. D&A of 14.91 (5.2% of sales) highlights capital intensity, contributing to EBITDA-OP spread.

Growth Assessment

revenue_sustainability: Top-line growth of 3.5% YoY suggests resilient demand in core segments (optical/specialty glass), but not robust. Given the industry’s exposure to semiconductor and precision optics cycles, sustainability depends on backlog and end-market normalization. profit_quality: Net income growth (+10.4% YoY) diverged from operating income decline (-17.6% YoY), indicating reliance on non-operating items (interest/dividends/equity-method) and potentially one-off factors between ordinary income and PBT. Underlying operating profit quality weakened as SG&A and cost-of-sales pressures compressed OP margin. outlook: Recovery in operating margin will depend on gross margin defense (pricing and mix), cost control in SG&A, and stabilization of input/energy costs. Non-operating contributions are positive but less predictable; sustained earnings growth requires OP improvement and better working-capital efficiency to convert earnings into cash.

Financial Health

liquidity: Current assets 390.55 vs current liabilities 97.39 imply a current ratio of 401% and quick ratio of 371%. Cash and deposits of 151.61 provide strong liquidity coverage. solvency: Equity 523.47 vs assets 668.84 implies an equity ratio of ~78% (calculated from disclosed balances). Total liabilities/equity ~0.27x. Interest coverage is robust at ~42x (EBIT/interest expense 17.94/0.43). capital_structure: Debt consists of short-term loans 40.12 and long-term loans 11.57 (total 51.69), well covered by cash (net cash ~100). Conservative leverage (financial leverage 1.28x) provides ample balance sheet flexibility.

Cash Flow Quality

earnings_quality: OCF/Net income = 0.61x (10.49/17.30) indicates weaker cash conversion this period, likely due to working-capital build and timing effects typical for project/precision materials businesses. FCF_analysis: Free cash flow (defined as OCF + investing CF) was 1.95, as OCF 10.49 offset investing CF of -8.54. Capex was 15.88, indicating ongoing investment; on a capex-only basis, OCF - capex was -5.39, underscoring cash strain from capital spending. working_capital: End-period AR 71.63 (~90 days sales using ending balances), inventory 28.88 (~55 days of COGS), and AP 13.86 (~26 days of COGS) suggest a cash conversion cycle of roughly 120 days (indicative, uses ending balances), implying OCF sensitivity to growth and mix.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio 33.8% implies dividends of ~5.85 against net income of 17.30. Reported payout ratio figures in XBRL show 0.4%/DOE 0.0% due to unreported items and should not be treated as actual zeros. FCF_coverage: FCF coverage is 0.33x (FCF 1.95 vs implied dividends ~5.85), indicating dividends were not covered by period FCF. However, strong net cash (~100) and high liquidity mitigate near-term risk. policy_outlook: Assuming a stable payout policy in the 30–35% range, sustainability hinges on restoring OCF alignment with earnings and maintaining capex discipline. Given variable non-operating income, prioritizing OP and cash conversion will be key to medium-term dividend resilience.

Risk Assessment

Business Risks:

• Cyclical demand in semiconductor and precision optics end-markets impacting volumes and mix
• Pricing pressure and product mix shifts affecting gross margin
• Input cost volatility (energy, specialty raw materials, rare earths) compressing margins
• FX fluctuations (JPY vs USD/EUR/CNY) affecting export competitiveness and translation
• Customer concentration and qualification risks in high-spec materials
• Technology/quality risks in advanced glass products and potential yield issues
• Geopolitical and trade restrictions impacting supply chain and export approvals

Financial Risks:

• Working-capital build leading to weaker OCF relative to earnings
• Dependence on non-operating income (interest/dividends/equity-method) to support bottom line
• Investment securities and equity-method income volatility
• Capex intensity pressuring FCF in downcycles
• Tax rate volatility (effective rate 36.1% this period) affecting net profitability

Key Concerns:

• Negative operating leverage: OP -17.6% YoY despite sales +3.5% YoY
• OCF/NI at 0.61x and FCF shortfall relative to dividends
• Potentially extended cash conversion cycle (~120 days) increasing cash flow volatility

Investment Implications

Key Takeaways:

• Modest topline growth with operating margin compression; EBITDA margin at 11.4%
• ROE at 3.3% constrained by low asset turnover and conservative leverage
• Strong balance sheet: equity ratio ~78%, net cash ~100, interest coverage ~42x
• Cash conversion weak this year (OCF/NI 0.61x); FCF positive on OCF+ICF basis but not covering dividends
• Non-operating income is a meaningful earnings contributor; underlying OP needs improvement

Metrics to Watch:

• Gross margin trend and SG&A ratio
• Operating margin and EBITDA margin recovery
• OCF/Net income and FCF sustainability
• DSO, DIO, DPO and overall cash conversion cycle
• Capex versus growth pipeline and returns
• Equity-method income and other non-operating contributions
• Effective tax rate and FX sensitivity

Relative Positioning: Within TSE-listed glass/specialty materials peers, Ohara exhibits superior balance sheet strength (net cash, high equity ratio) but middling profitability (EBITDA ~11%, OP ~6%) relative to higher-margin specialty peers; earnings resilience currently relies more on non-operating contributions than core operating leverage.

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