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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Toyo Tanso (5310) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥34.095bn, down 12.7% year on year, reflecting a cyclical slowdown and/or softer demand in key end-markets. Operating income declined 41.5% YoY to ¥5.42bn, indicating significant operating leverage and margin compression as volumes softened. Net income was ¥4.531bn, down 37.0% YoY, with a reported net margin of 13.29%, still solid in absolute terms but lower YoY. Gross profit is presented at ¥15.905bn with a calculated gross margin of 46.6%; however, the disclosed cost of sales figure (¥23.156bn) is arithmetically inconsistent with the gross profit, so we rely on the gross margin provided in the calculated metrics while noting the discrepancy. Operating margin stands at roughly 15.9% (operating income/revenue), down substantially from the prior period given the 41.5% decline in operating income versus a 12.7% decline in revenue. Ordinary income of ¥6.014bn implies healthy non-operating contributions and limited interest burden, consistent with the minimal interest expense (¥18m) and high coverage (301x). DuPont shows ROE at 4.77%, decomposed into net margin 13.29%, asset turnover 0.304x, and financial leverage 1.18x, indicating low leverage and modest asset efficiency. The balance sheet is strong: total assets of ¥112.205bn against total liabilities of ¥18.985bn and equity of ¥95.051bn, implying an equity ratio of about 84.7% (computed) despite the reported 0.0% (likely unreported). Liquidity is ample with a current ratio of 369% and quick ratio of 302%, supported by ¥64.112bn in current assets versus ¥17.359bn in current liabilities. Working capital is sizeable at ¥46.753bn, providing buffer through the cycle. Cash flow statements are not disclosed (zeros indicate unreported), so operating cash flow, free cash flow, and EBITDA cannot be assessed from the provided data; the reported EBITDA of zero is not meaningful given depreciation is unreported. The effective tax rate shown as 0.0% is not reliable; using net and ordinary income suggests a more typical tax/adjustment impact. Overall profitability remains positive but has softened due to negative operating leverage, while solvency and liquidity are exceptionally strong. The near-term outlook likely hinges on the recovery path in core demand areas and inventory normalization. Data limitations (cash flows, depreciation, shares outstanding, dividends) constrain precision in cash flow and dividend sustainability assessments, so conclusions focus on the robust balance sheet, decent margins, and compressed ROE.

From Earnings Presentation: This document is a correction material released on November 7, 2025, which rectifies errors in revenue recognition categories found in the Q2 FY2025 (December term) financial results presentation material released on August 21. An error in revenue recognition categories between Isotropic Graphite Products and Composites & Other Products was discovered at Shanghai Toyo Tanso Co., Ltd. for Q1-Q2, resulting in significant changes to product-specific figures, although overall consolidated revenue remained unchanged. Isotropic Graphite Products FY2025/H1 revenue was revised upward from 9,310 million yen to 10,203 million yen (+893 million yen), while Composites & Other Products was revised downward from 8,803 million yen to 7,910 million yen (▲893 million yen). Consequently, the year-over-year change for Isotropic Graphite Products improved from ▲23.6% to ▲16.3%, while Composites & Other Products deteriorated from +3.3% to ▲7.2%, with corresponding adjustments to initial forecast comparisons. Within Isotropic Graphite, the Electronics segment was revised from 3,297 to 3,908 million yen, and the General Industries segment from 4,824 to 5,106 million yen. Full-year forecasts for product-specific revenues and year-over-year/initial forecast comparisons were also recalculated, with Isotropic Graphite revised from 21,871 to 22,764 million yen, and Composites & Other from 16,245 to 15,352 million yen.

Financial Analysis

Profitability

ROE_decomposition:

• net_profit_margin: 13.29% (provided)
• asset_turnover: 0.304x (Revenue/Total Assets = 34.095/112.205)
• financial_leverage: 1.18x (Assets/Equity = 112.205/95.051)
• calculated_ROE: 4.77% (matches provided) margin_quality: Gross margin is cited at 46.6%, indicating strong value-add and pricing power, but the disclosed cost of sales does not reconcile with the gross profit; we prioritize the provided gross margin metric while noting inconsistency. Operating margin is ~15.9% (5.42/34.095), evidencing compression relative to revenue decline, likely due to fixed-cost absorption and mix. Net margin at 13.29% remains healthy, aided by negligible interest costs and some non-operating income. operating_leverage: Revenue fell 12.7% YoY while operating income dropped 41.5% YoY, pointing to high operating leverage and negative mix/price effects in the period. This indicates earnings are sensitive to volume recovery; conversely, further volume pressure would disproportionately impact profits.

Growth

revenue_sustainability: Revenue decline of 12.7% suggests cyclical weakness and/or customer inventory adjustments. Asset turnover of 0.304x is subdued, hinting at underutilized assets in the downturn. profit_quality: Despite the decline, margins remain positive: gross margin 46.6% and operating margin ~15.9%, indicating the underlying business retains pricing and cost discipline. Ordinary income outpaced operating income, aided by non-operating items, and minimal interest burden supports bottom-line resilience. outlook: With high operating leverage, earnings will be sensitive to topline recovery. A normalization in end-market demand and improved utilization could lift operating margin and ROE. Conversely, prolonged softness would keep ROE near mid-single digits. Given missing cash flow and segment data, we refrain from quantifying growth trajectories.

Financial Health

liquidity: Current ratio 369.3% and quick ratio 302.3% reflect ample liquidity; working capital is ¥46.753bn. Inventories are ¥11.642bn within ¥64.112bn current assets, implying a strong quick asset base. solvency: Total liabilities of ¥18.985bn vs equity of ¥95.051bn yields a debt-to-equity ratio of 0.20x (using total liabilities as a proxy), and an implied equity ratio of ~84.7% (computed), indicating very low leverage. capital_structure: Interest expense is only ¥18m with coverage at 301x, demonstrating considerable headroom. The low financial leverage (1.18x) supports balance-sheet resilience through cycles.

Cash Flow

earnings_quality: Cash flow data are unreported; OCF/Net Income and FCF figures shown as zero are not meaningful. As such, we cannot validate accrual quality or cash conversion. FCF_analysis: Free cash flow cannot be assessed due to missing operating and investing cash flows as well as depreciation/capex details. working_capital: Working capital is robust at ¥46.753bn; however, without cash flow statements we cannot gauge inventory turns, receivable collections, or the period’s working-capital drag/benefit.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as zero, which we treat as undisclosed. EPS is ¥216.06, implying room for dividends in principle, but no declared payout is visible from provided data. FCF_coverage: Not assessable; FCF is unreported. Therefore, we cannot evaluate dividend coverage by FCF. policy_outlook: With strong net cash/low leverage and stable margins, capacity to sustain dividends appears supported by the balance sheet, but policy and actual distributions cannot be inferred from the data provided.

Business Outlook

The revised full-year forecast shows Isotropic Graphite Products at 22,764 million yen (year-over-year ▲5.1%, vs. initial forecast ▲3.0%) and Composites & Other at 15,352 million yen (year-over-year ▲15.6%, vs. initial forecast ▲12.8%), with product mix relative to consolidated revenue of 38,116 million yen (approximately 89.4% progress rate based on GPT analysis Q3 cumulative 34,095 million yen) being revised. For Isotropic Graphite, the Electronics segment at full-year 9,105 million yen (year-over-year ▲12.4%) suggests resilience in semiconductor capex cycles, while the General Industries segment at 11,354 million yen (year-over-year +1.4%) indicates signs of bottoming out. Conversely, the Major 3 products within Composites & Other are forecast at 12,774 million yen (year-over-year ▲19.6%, vs. initial forecast ▲16.9%), indicating significant deceleration with a recognition of prolonged market adjustment in SiC coating monocrystalline silicon applications. The correction makes more evident the operating leverage reversal, inventory concerns, and utilization rate decline highlighted in the GPT analysis, confirming that the revenue decline in high-margin products (Major 3 Composites products) is the primary cause of operating margin pressure.

Management Guidance

This correction document does not contain qualitative commentary or guidance from management. It only states that "an error in revenue recognition categories was discovered at Shanghai Toyo Tanso Co., Ltd. for Q1 and Q2 of FY2025 (December term)", noting that consolidated revenue remains unchanged and only product-specific breakdowns were revised. Therefore, management's views on business environment, cost measures, investment plans, or shareholder return policies cannot be directly inferred from this document. However, the magnitude of downward revisions versus initial forecasts (Isotropic Graphite ▲3.0%, Composites ▲12.8%) numerically suggests that management recognizes particularly severe market deterioration in Composites & Other and has shifted to a more conservative outlook.

Strategic Initiatives

• Expanding Isotropic Graphite Products ratio: The correction confirms that FY2025/H1 revenue composition of 10,203/18,113 ≈ 56.3% exceeds Composites & Other's 43.7%, numerically supporting strategic focus on Isotropic Graphite with superior heat resistance and electrical conductivity
• Deepening Electronics segment presence: Electronics revenue of 3,908 million yen (38.3% of Isotropic Graphite) is primarily for monocrystalline silicon manufacturing (wafer susceptors and crucibles) and SiC wafers, expected to be a growth driver in semiconductor and solar cell recovery phases
• Securing General Industries resilience: General Industries at 5,106 million yen (year-over-year ▲5.4%) includes SiC continuous growth furnace materials and aerospace tooling, showing better resistance compared to the ▲12.4% decline in Major 3 Composites products, as non-semiconductor demand diversification progresses
• Structural adjustment of Major 3 Composites products: Revised Major 3 products at 6,596 million yen (year-over-year ▲12.4%, vs. initial forecast ▲3.9%) include SiC coating monocrystalline silicon, C/C composites, and vacuum sheets, facing challenges requiring restructuring and efficiency improvements amid customer inventory adjustments and EV/renewable energy investment cycle headwinds
• Strengthening inventory management: With inventory at 11,642 million yen (approximately 34% of revenue) as noted in GPT analysis, accurate product-specific breakdowns make reassessment of appropriate inventory levels and improvement of turnover rates a future focus

Risk Assessment

Business Risks:

• Cyclical demand in core end-markets (e.g., electronics/semiconductor-related applications) driving volume and mix volatility
• Negative operating leverage during downturns leading to outsized profit swings
• Pricing pressure and competitive dynamics in specialty carbon/graphite materials
• Raw material cost fluctuations and energy cost inflation impacting margins
• Potential FX volatility affecting export competitiveness and translation

Financial Risks:

• Earnings sensitivity to utilization rates given fixed-cost base
• Working capital swings during cyclical turns impacting cash conversion (unassessable this period due to missing CF)
• Potential capex requirements for capacity/technology upgrades not visible without capex disclosure

Key Concerns:

• Revenue down 12.7% YoY while operating income down 41.5% YoY, indicating high operating leverage
• Inconsistency between reported cost of sales and gross profit; reliance on provided gross margin metric
• Lack of cash flow and depreciation data, limiting assessment of earnings quality and FCF

Risk Factors from Presentation:

• Internal control and revenue recognition process deficiencies at consolidated subsidiary (Shanghai Toyo Tanso): This category error stems from human error or system inadequacies, requiring recurrence prevention measures and governance strengthening
• Market environment deterioration for Composites & Other Products: Correction reveals a shift from year-over-year +3.3% to ▲7.2%, with demand deceleration exceeding initial assumptions, particularly prolonged adjustment risk in the SiC coating monocrystalline silicon market
• Price and demand volatility in Electronics segment: Despite correction, year-over-year decline of ▲30.7% remains significant, with limited resilience in semiconductor capex cycles; price competition and substitution risks continue
• Margin impact from product mix shift: While the revenue decline in high-margin Major 3 Composites products (▲935 million yen) is offset by Isotropic Graphite revenue increase (+893 million yen), downward pressure on operating margin persists
• Uncertainty in achieving full-year forecast: Post-correction revisions versus initial forecasts (Isotropic Graphite ▲3.0%, Composites ▲12.8%) raise questions about feasibility of second-half recovery

Investment Implications

Key Takeaways:

• Margins remain positive (gross 46.6%, operating ~15.9%) despite cyclical downturn
• ROE at 4.77% reflects low leverage and soft asset turnover; improvement depends on topline recovery
• Balance sheet is very strong with implied ~85% equity ratio and minimal interest burden
• High operating leverage will amplify any demand recovery (or further weakness)
• Data gaps (cash flows, depreciation, DPS) constrain visibility on cash conversion and shareholder returns

Metrics to Watch:

• Order trends, backlog, and book-to-bill in core end-markets
• Utilization rates and capacity deployment
• Gross and operating margin trajectory (price/mix vs. cost inflation)
• Inventory levels and turnover; receivables DSO and payables DPO
• Capex and depreciation once disclosed; OCF and FCF conversion
• FX movements and energy/raw material cost trends

Relative Positioning: Versus domestic specialty carbon peers, Toyo Tanso appears conservatively capitalized with low leverage and strong liquidity, but currently exhibits depressed asset turnover and compressed profitability due to cyclical softness; near-term relative performance will hinge on the speed of demand normalization and margin recovery.

Supplementary Insights (Key Highlights)

• Correction due to revenue recognition category error at Shanghai Toyo Tanso resulted in Isotropic Graphite Products increasing approximately +9.6% (+893 million yen) and Composites & Other decreasing approximately ▲10.1% (▲893 million yen)
• Isotropic Graphite Products FY2025/H1 year-over-year performance improved from ▲23.6% to ▲16.3% (7.3 percentage point improvement), while Composites & Other deteriorated from +3.3% to ▲7.2% (10.5 percentage point decline), significantly changing performance perception
• Electronics segment revenue was revised upward by +18.5% from 3,297 to 3,908 million yen, and General Industries segment by +5.8% from 4,824 to 5,106 million yen, shifting demand assessment within Isotropic Graphite upward
• Major 3 products within Composites & Other were revised downward by ▲12.4% from 7,531 to 6,596 million yen, with year-over-year change shifting from +0.0% to ▲12.4%, highlighting weakness in SiC coating and monocrystalline silicon applications
• Full-year forecast for Isotropic Graphite revised from 21,871 to 22,764 million yen (year-over-year from ▲8.8% to ▲5.1%), and Composites & Other from 16,245 to 15,352 million yen (year-over-year from ▲10.6% to ▲15.6%), suggesting structural changes in product mix

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