TOYO TANSO CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥34.09B
• Operating Income: ¥5.42B
• Net Income: ¥7.19B
• EPS: ¥216.06

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

Verdict: FY2025 Q3 was a weaker quarter with meaningful profit compression amid a double‑digit revenue decline, though the balance sheet remains exceptionally strong. Revenue fell 12.7% YoY to 340.95, while operating income dropped 41.5% YoY to 54.20, indicating negative operating leverage. The operating margin settled at roughly 15.9% this quarter versus an estimated 23.7% a year ago, implying about 780 bps of margin compression. Net income declined 37.0% YoY to 45.31, with EPS of 216.06 JPY. Ordinary income of 60.14 was supported by net non‑operating income (about +4.7), and profit before tax spiked to 100.26, suggesting material one‑time or extraordinary gains in the period. The gross margin is indicated at 46.6% in the dataset; however, there is an internal inconsistency between reported gross profit and cost of sales—our margin comments follow the 46.6% figure that aligns with the reported gross profit. DuPont shows net margin 13.3%, asset turnover 0.304, and financial leverage 1.18x, yielding a low ROE of 4.8%. Capital efficiency is soft with ROIC at 4.5%, below the 5% warning threshold. Liquidity is very strong: current ratio 516%, quick ratio 396%, and net cash position implied by cash (129.76) exceeding long‑term loans (40.34). Interest coverage stands at 301x, evidencing minimal financial risk. Earnings quality is difficult to judge this quarter because operating cash flow was not disclosed; the gap between ordinary income and profit before tax indicates non‑recurring items likely influenced reported profit. The payout ratio is calculated at 67.2%, slightly above the 60% benchmark, and sustainability should be assessed against free cash flow once available. Looking ahead, the key swing factors are demand recovery in key end markets (e.g., semiconductor and industrial applications), price/cost dynamics for carbon materials, and normalization of one‑time items. With strong balance sheet resilience but compressed profitability and sub‑target ROIC, near‑term focus should be on restoring margins and asset turns.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.8% = Net Profit Margin 13.3% × Asset Turnover 0.304 × Financial Leverage 1.18x. The largest change driver YoY is the profit margin, as operating income fell 41.5% on a 12.7% revenue decline, compressing operating margin by an estimated ~780 bps (from ~23.7% to ~15.9%). Business drivers likely include price/mix pressure and/or lower capacity utilization that reduced gross profitability, compounded by negative operating leverage (SG&A at 19.5% of sales could not flex down as quickly as revenue). Non‑operating items provided a modest cushion to ordinary income (+4.7 net), but extraordinary gains inflated profit before tax and are not indicative of recurring profitability. Sustainability: the margin compression is partly cyclical (volume/utilization), but recovery depends on end‑market demand and price discipline; the extraordinary gains are one‑time. Concerning trend flags: revenue declined faster than SG&A reduction (SG&A growth unavailable but ratio elevated at 19.5% of revenue), implying deleverage; ROIC at 4.5% falls below the 5% warning threshold, signaling weaker capital efficiency.

Growth Assessment

Top line contracted 12.7% YoY to 340.95, reflecting weaker demand and/or pricing in core graphite/carbon applications. Operating income fell 41.5% YoY to 54.20, indicating outsized sensitivity to volume/mix and fixed‑cost absorption. Ordinary income decreased 38.2% YoY to 60.14 despite some non‑operating support; net income declined 37.0% to 45.31. The non‑operating income ratio of 12.8% suggests limited but positive contribution from financial income (dividends 0.44, interest 0.64) and other items. Profit before tax at 100.26 was significantly above ordinary income, implying material one‑off gains; this flatters headline growth and should be stripped for run‑rate assessment. Efficiency softened with asset turnover at 0.304, characteristic of a demand slowdown and higher working capital intensity. Near‑term growth outlook hinges on semiconductor/industrial order recovery, pricing stabilization, and improved utilization; without these, margin recovery may be gradual. Currency tailwinds (JPY weakness) can help exports but also raise imported raw material costs; net impact depends on hedging and pricing power. Given ROIC at 4.5%, management emphasis should be on selective growth with higher returns and disciplined capex.

Financial Health

Liquidity is exceptionally strong: current ratio 516.4% and quick ratio 395.8%, far above benchmarks and with no warning triggers. There is no maturity mismatch risk evident—current assets (595.53) comfortably exceed current liabilities (115.32), with cash (129.76) and receivables (146.63) together exceeding total current liabilities. Solvency is robust: debt‑to‑equity 0.18x and implied equity ratio ~84.7% (950.51/1,122.05); interest coverage is 301x. Long‑term loans total 40.34 against cash of 129.76, implying a net cash position. Accounts payable (15.65) are small relative to receivables (146.63) and inventory (139.08), indicating conservative supplier financing and potential working capital intensity. No off‑balance sheet obligations were reported in the dataset. No warnings for Current Ratio < 1.0 or D/E > 2.0.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income and free cash flow cannot be assessed this quarter. As such, we cannot compute OCF/NI < 0.8 screens or FCF coverage for dividends/capex—this is a key limitation. Earnings quality considerations: ordinary income (60.14) is close to operating income plus net non‑operating income, but profit before tax (100.26) indicates significant extraordinary gains that likely do not recur, creating a divergence between core earnings power and headline PBT. Working capital snapshot suggests potential cash tie‑up: receivables (146.63) and inventories (139.08) are large relative to revenue scale, which could suppress OCF in a downcycle if collections slow or inventory turns lengthen. No explicit signs of working capital manipulation are observable from the limited data provided.

Dividend Sustainability

The calculated payout ratio is 67.2%, modestly above the 60% benchmark for comfort, implying tighter headroom given lower earnings. DPS and total dividends paid were not disclosed; therefore, FCF coverage cannot be assessed. With ROE at 4.8% and ROIC at 4.5%, distribution policy should balance shareholder returns with reinvestment to lift capital efficiency. Given the strong net cash position, near‑term liquidity supports dividends, but sustainability depends on restoring operating cash flow and margins. Policy outlook: stable or cautious dividends are plausible, but we need OCF and capex visibility to judge coverage.

Risk Assessment

Business Risks:

• Demand cyclicality in semiconductor and industrial carbon applications leading to volume and utilization swings
• Pricing pressure in specialty graphite products affecting gross margins
• Raw material and energy cost volatility impacting spread management
• Operational leverage risk with SG&A and fixed costs deleveraging on lower revenue

Financial Risks:

• Capital efficiency risk with ROIC at 4.5% (<5% warning threshold)
• Working capital intensity (high receivables and inventories) potentially weighing on OCF in downturns
• Potential reliance on non‑recurring gains (extraordinary items) affecting reported profit quality

Key Concerns:

• Operating margin compression of ~780 bps YoY (23.7% to 15.9%)
• Subpar ROE (4.8%) despite very low leverage, indicating weak underlying returns
• Large gap between ordinary income (60.14) and profit before tax (100.26), implying one‑time factors
• Payout ratio at 67.2% with unknown FCF coverage

Investment Implications

Key Takeaways:

• Core profitability weakened materially; negative operating leverage evident
• ROIC at 4.5% underscores need for return‑focused capital allocation
• Balance sheet strength (net cash, 301x interest coverage) mitigates financial risk
• Headline PBT boosted by extraordinary gains—underlying run‑rate is lower
• Working capital heavy profile could constrain cash generation if demand remains soft

Metrics to Watch:

• Operating margin trajectory and gross spread recovery
• Order trends and capacity utilization in semiconductor/industrial segments
• OCF/Net Income and free cash flow once disclosed
• Inventory and receivable days (turnover improvements)
• ROIC versus 7–8% management target range
• Pricing versus raw material/energy cost pass‑through
• Extraordinary items and their recurrence

Relative Positioning: Within domestic carbon/graphite peers, Toyo Tanso typically operates with higher value‑add exposure and strong balance sheet discipline; however, the current quarter shows sharper operating margin compression and sub‑5% ROIC, leaving it trailing efficiency targets even as leverage remains far lower and liquidity stronger than many peers.

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