TOKAI CARBON CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥237.34B
• Operating Income: ¥21.30B
• Net Income: ¥8.44B
• EPS: ¥76.61

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

Tokai Carbon (5301) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥237.3bn, down 8.2% YoY, yet operating income increased 40.0% YoY to ¥21.3bn, highlighting strong margin improvement despite top-line pressure. Gross profit was ¥61.1bn, implying a gross margin of 25.7%, and operating margin expanded to roughly 9.0%, signaling improved cost discipline and/or better pricing/mix. Ordinary income was ¥21.1bn, slightly below operating income due to ¥1.30bn in interest expense, indicating limited non-operating drag. Net income surged to ¥16.35bn (+192.9% YoY), with EPS at ¥76.61, suggesting a substantial recovery in bottom-line performance. DuPont metrics show ROE of 5.08%, driven by a net profit margin of 6.89%, asset turnover of 0.377x, and financial leverage of 1.96x, indicating moderate profitability on a relatively conservative balance sheet. Total assets were ¥629.3bn and total equity ¥321.8bn, implying an equity ratio of about 51.1% (the reported 0.0% equity ratio is an unreported placeholder), which supports balance sheet resilience. Liquidity appears robust with a current ratio of 183% and quick ratio of 163%, underpinned by ¥122.6bn in working capital; inventories are ¥30.1bn, indicating lean stock relative to current assets. Interest coverage is healthy at approximately 16.3x (operating income to interest expense), reducing near-term refinancing risk. The calculated effective tax rate shown as 0.0% is not representative; using disclosed figures, tax expense of ¥7.72bn on pre-tax income (proxied by ordinary income of ¥21.06bn) implies an effective tax rate near 36–37%. Cash flow statements are unreported in this dataset (zeros indicate non-disclosure), so OCF/NI and FCF metrics cannot be interpreted from the provided figures. Depreciation and amortization is also unreported, limiting EBITDA analysis (the 0 EBITDA/0% margin are placeholders). Dividend per share is shown as ¥0.00 with a 0% payout ratio due to lack of disclosure in this extract; dividend policy assessment requires external confirmation. The operating profit increase despite lower sales indicates meaningful operating leverage and likely improved pricing relative to raw material costs, though sustainability depends on end-demand in steel and other downstream markets. Overall, profitability has rebounded with controlled financial risk, but visibility on cash conversion, capex needs, and shareholder returns is constrained by missing cash flow and dividend disclosures. Key watchpoints include electrode ASPs vs needle coke and energy costs, inventory normalization, and FX impacts. Given the cyclical nature of graphite electrodes and specialty carbon materials, maintaining margin gains through cycle-sensitive demand will be crucial.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.89% (NI ¥16.35bn / Revenue ¥237.34bn)
• asset_turnover: 0.377x (Revenue ¥237.34bn / Assets ¥629.26bn)
• financial_leverage: 1.96x (Assets ¥629.26bn / Equity ¥321.79bn)
• calculated_ROE: 5.08% (matches reported DuPont ROE 5.08%) margin_quality: Gross margin at 25.7% (¥61.11bn gross profit) suggests favorable price-cost dynamics relative to prior troughs; operating margin at ~9.0% (¥21.30bn/¥237.34bn) is solid for a cyclical materials business. Ordinary income is close to operating income, indicating limited non-operating volatility aside from interest expense. Net margin at 6.89% benefits from improved operating performance; tax expense of ¥7.72bn implies an effective tax rate of ~36.7% (not 0%) based on ordinary income, which is within a normal range. SG&A is estimated at ~¥39.81bn (gross profit minus operating income), or ~16.8% of sales, suggesting disciplined overhead. operating_leverage: Operating income grew +40.0% YoY on an -8.2% YoY revenue decline, demonstrating strong operating leverage from cost rationalization and/or mix/pricing gains. This indicates a lower breakeven and improved absorption; sustainability will depend on volume recovery and maintaining price/cost spreads for graphite electrodes and specialty carbon products.

Growth Assessment

revenue_sustainability: Top line declined 8.2% YoY to ¥237.3bn, consistent with softer steel production and cyclical demand in electrodes and carbon materials. The extent to which price increases offset volume declines is unclear from the data; however, gross margin strength suggests at least partial pricing resilience. profit_quality: Earnings growth is driven by margin expansion rather than revenue growth. With interest expense at ¥1.30bn and ordinary income close to operating income, the uplift appears operational. The effective tax burden (≈36–37%) is consistent with normal operations, enhancing the quality of net profit. Lack of D&A disclosure limits assessment of non-cash earnings and EBITDA. outlook: If electrode ASPs hold and raw material (needle coke) and energy costs remain stable, operating margin could remain resilient. A recovery in steel production would support volumes and utilization. Risks include price fatigue, inventory corrections downstream, and FX volatility impacting export competitiveness and input costs.

Financial Health

liquidity: Current ratio 183% and quick ratio 163% demonstrate strong short-term liquidity, supported by ¥122.6bn of working capital. Inventories at ¥30.1bn appear moderate relative to current assets. solvency: Total liabilities of ¥315.6bn versus equity of ¥321.8bn imply a liabilities-to-equity ratio of ~0.98x; equity ratio is about 51.1% (computed), indicating a solid capital base. Interest coverage of ~16.3x suggests comfortable debt service capacity. capital_structure: Leverage (assets/equity) stands at ~1.96x. The debt-to-equity ratio provided (0.98x) corresponds to total liabilities/equity rather than interest-bearing debt; detailed net debt is not available due to missing cash and debt breakdown in this extract.

Cash Flow Quality

earnings_quality: With OCF, capex, and D&A unreported (zeros are placeholders), conversion of accounting profit to cash cannot be evaluated from this dataset. Nonetheless, the presence of meaningful taxable income and interest expense indicates operating reality rather than purely non-cash profits. FCF_analysis: Free cash flow cannot be computed without OCF and capex. Historically for cyclical materials, FCF sensitivity to working capital is high; current strong working capital position suggests potential cash release if inventories and receivables normalize in a downcycle. working_capital: Working capital is ¥122.6bn (CA ¥270.4bn minus CL ¥147.7bn). Inventories are ¥30.1bn; days inventory and receivables turnover cannot be derived without COGS cadence and AR disclosure. Monitoring WC movements will be key to assessing cash conversion.

Dividend Sustainability

payout_ratio_assessment: The dataset shows DPS at ¥0.00 and payout ratio 0%, but this likely reflects missing disclosure rather than a confirmed suspension. Without confirmed dividend and cash flow figures, payout ratio analysis is inconclusive. FCF_coverage: FCF coverage of dividends cannot be assessed given unreported OCF and capex figures. Net income of ¥16.35bn suggests capacity for distributions if cash generation is supportive, but evidence is insufficient here. policy_outlook: Given cyclicality, management typically balances dividends with balance sheet strength. With an estimated equity ratio ~51% and improved profitability, a stable-to-prudent policy is plausible, but explicit guidance is not available in the provided data.

Risk Assessment

Business Risks:

• Cyclicality tied to global steel production affecting graphite electrode demand
• Pricing volatility for electrodes and specialty carbon products
• Raw material cost fluctuations, especially needle coke and energy
• Competitive dynamics and potential ASP pressure as capacity normalizes
• Customer inventory adjustments and order timing risk
• FX fluctuations (USD/JPY, EUR/JPY) impacting export economics and material costs
• Environmental and regulatory compliance costs (emissions, energy intensity)
• Operational risks: capacity utilization, maintenance downtime, and yield

Financial Risks:

• Working capital swings impacting operating cash flow
• Interest rate risk on floating-rate debt and refinancing terms
• Potential impairment risk in downturns (not assessable here due to missing details)
• Tax rate variability across jurisdictions (~36–37% effective tax indicated)

Key Concerns:

• Lack of disclosed cash flow data limits assessment of cash conversion and FCF
• Unreported depreciation and capex obscure sustainability of operating margins and maintenance needs
• Equity ratio and tax rate shown as 0% in calculated metrics are placeholders; reliance on computed figures is necessary
• Sustainability of margin gains amid revenue decline requires confirmation in subsequent quarters

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +40% YoY despite -8.2% revenue decline, lifting operating margin to ~9.0%
• ROE at 5.08% is moderate; improvement hinges on margin durability and asset turnover recovery
• Balance sheet appears solid with ~51% equity ratio (computed) and interest coverage ~16x
• Cash flow visibility is limited due to unreported OCF/FCF and D&A
• Tax burden (~36–37%) and non-operating items are within normal ranges, supporting earnings quality

Metrics to Watch:

• Electrode ASPs versus needle coke and energy cost spreads
• Order trends and utilization rates tied to global steel output
• Working capital movements (inventories, receivables) and OCF conversion
• Capex commitments and maintenance versus growth spending
• FX rates (USD/JPY) and their impact on margins
• Interest expense trajectory and debt maturity profile
• Segment mix between graphite electrodes and specialty carbon

Relative Positioning: Within cyclical carbon materials peers, Tokai Carbon demonstrates improving margins and a comparatively strong balance sheet, but has lower reported visibility on cash conversion in this dataset; sustaining price-cost spreads and stabilizing volumes will influence its standing versus domestic and global competitors.

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