RYOBI LIMITED FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥227.79B
• Operating Income: ¥8.04B
• Net Income: ¥5.67B
• EPS: ¥178.72

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

Verdict: FY2025 Q3 was a solid profitability recovery quarter for Ryobi, with stronger operating execution driving margin expansion despite thin overall returns. Revenue grew 5.8% YoY to 2,277.9, while operating income rose 32.8% YoY to 80.44, clearly outpacing top-line growth. Gross profit was 239.89, yielding a gross margin of 10.5%, and SG&A was held to 179.34, or 7.9% of sales, enabling operating leverage. Operating margin improved to 3.53%, and based on implied prior-year levels, we estimate YoY expansion of roughly 72 bps (from ~2.81% to ~3.53%). Ordinary income increased 13.9% YoY to 82.60 with an ordinary margin of 3.63%, an estimated 26 bps expansion YoY. Net income rose 5.0% YoY to 57.84, with a net margin of 2.54%, showing slight YoY compression of about 2 bps due to higher non-operating drag below ordinary income and a normalized tax rate. Earnings quality was strong: operating cash flow of 159.38 was 2.76x net income, and free cash flow (OCF minus capex) was positive at roughly 52.31, covering growth investments and leaving room for shareholder returns. The effective tax rate was 25.8%, broadly in line with statutory levels. Net non-operating contribution (income minus expenses) was +11.97, supporting ordinary profit, but profit before tax (76.46) indicates ~6.1 in net extraordinary losses. Balance sheet health remains sound with a current ratio of 160% and interest coverage at 7.6x, though ROE at 3.3% and ROIC at 2.8% remain below cost of capital, signaling capital efficiency issues. Debt-to-equity at 0.86x and Debt/EBITDA at 2.85x are acceptable for a cyclical manufacturer. Total comprehensive income of 36.67 trailed net income, implying negative OCI (likely FX translation and/or valuation losses on securities), which dampens equity growth. Cash and deposits of 280.24 plus strong receivables collections underpin liquidity, while short-term loans of 316.01 are manageable against current assets of 1,584.98. Dividend payout ratio is calculated at 48%, which appears consistent with cash generation this period given positive FCF. Forward-looking, the quarter suggests improved cost pass-through and operating discipline, but structurally low margins and ROIC highlight the need for mix improvement and asset turn enhancement to sustain value creation.

Profitability Analysis

ROE (3.3%) = Net Profit Margin (2.5%) × Asset Turnover (0.688) × Financial Leverage (1.86x). The principal constraint on ROE is the low net margin, despite moderate leverage and reasonable asset turnover for a capital-intensive die-casting/tools business. Versus last year, operating momentum improved (operating income +32.8% vs revenue +5.8%) indicating margin expansion at the operating level (72 bps YoY), but net margin was essentially flat to slightly lower (-2 bps), implying non-operating effects and extraordinary losses offset some operating gains. Business drivers for the improvement likely include pricing actions, cost pass-through (materials/energy), and SG&A discipline (SG&A at 7.9% of sales), aided by 148.68 of D&A supporting EBITDA margin of 10.1%. Sustainability: part of the margin gain appears recurring (cost discipline and price/mix), while the small negative swing between ordinary income and pretax (approx. -6.1) looks one-off; however, thin structural margins mean sensitivity to demand and input costs remains high. Watch for SG&A growth relative to revenue—this quarter SG&A rose slower than operating income, a positive sign of operating leverage; if SG&A re-accelerates faster than sales, it would pressure margins.

Growth Assessment

Top-line growth of 5.8% YoY to 2,277.9 was modest but broad enough to support operating leverage. Operating income expanded 32.8% YoY to 80.44, signaling improved conversion of sales to profit. Ordinary income was up 13.9% YoY (82.60), though profit before tax (76.46) indicates some one-time extraordinary losses. Net income increased 5.0% YoY to 57.84, roughly in line with sales growth due to below-the-line headwinds. Revenue sustainability depends on auto/industrial demand and FX; no segment breakdown was provided, limiting visibility into mix. Profit quality is backed by solid EBITDA (229.12) and cash conversion (OCF/NI 2.76x). Outlook: with cost pass-through mostly realized and a normalized tax rate (25.8%), incremental upside will rely on volume recovery, continued pricing discipline, and mix towards higher-margin products; risks include input cost volatility and cyclical softness.

Financial Health

Liquidity is healthy: current ratio 160.4% and quick ratio 137.3% comfortably exceed benchmarks. Working capital is positive at 596.53, and cash and deposits (280.24) plus receivables (613.07) and inventories (228.15) cover short-term loans (316.01) and accounts payable (356.64), indicating low near-term maturity mismatch risk. Solvency is acceptable: debt-to-equity at 0.86x and Debt/EBITDA at 2.85x are within conservative thresholds for the sector; interest coverage (EBIT/interest) is 7.64x. Total liabilities are 1,535.09 versus total equity of 1,775.45, reflecting a solid equity cushion. No off-balance sheet obligations were reported in the provided data. There are no explicit warnings (Current Ratio < 1.0 or D/E > 2.0) based on disclosed figures.

Cash Flow Quality

Earnings quality is strong this quarter: OCF of 159.38 is 2.76x net income (57.84), well above the 0.8 threshold. Free cash flow, approximated as OCF minus capex, was about 52.31, positive even after 107.07 of capital expenditures. This supports both investment needs and distributions. Working capital dynamics are not fully disclosed, but given high OCF versus NI, cash generation likely benefited from receivable collections and/or inventory normalization rather than aggressive deferrals—no overt signs of working-capital manipulation are evident from the limited data. Financing CF was -125.99, suggesting net debt reduction and/or dividends/shareholder returns were funded by internal cash generation.

Dividend Sustainability

The calculated payout ratio is 48.0%, implying moderate distributions aligned with policy norms (<60%). With estimated free cash flow of ~52.31 and net income of 57.84, implied dividends at ~27.8 (48% of NI) would be covered ~1.9x by FCF this period. Actual dividend cash outflow was not disclosed, but based on cash generation and leverage metrics, current payout appears sustainable near term. Continuity depends on maintaining OCF strength and capex discipline; any step-up in growth capex or a demand downturn could tighten coverage.

Risk Assessment

Business Risks:

• Cyclical demand in automotive die-casting and power tools exposes volumes and pricing to macro slowdowns.
• Input cost volatility (aluminum, energy) could pressure margins if cost pass-through weakens.
• FX fluctuations (JPY versus USD/EUR/CNY) can impact both translation and transaction margins.
• Customer concentration with major OEMs increases negotiating pressure and volume risk.
• Execution risk on productivity improvements needed to sustain margin gains.

Financial Risks:

• Thin net margin (2.5%) leaves limited buffer against cost/inflation shocks.
• ROIC at 2.8% is below the 5% warning threshold, indicating capital efficiency challenges.
• Negative OCI this period (comprehensive income 36.67 vs NI 57.84) introduces equity volatility via securities valuation/FX.
• Exposure to variable-rate debt could raise interest expense if rates remain elevated.
• Extraordinary losses (~6.1) below ordinary income highlight potential one-off charges.

Key Concerns:

• Sustained low ROE (3.3%) and ROIC (2.8%) imply returns below cost of capital.
• Reliance on non-operating items: net non-operating contribution of +11.97 accounts for ~15.7% of pretax profit.
• Structural margin thinness despite recent operating leverage; durability through cycles is unproven.
• Data gaps (segment mix, full investing cash flows, dividend cash amounts) limit granularity of risk assessment.

Investment Implications

Key Takeaways:

• Operating recovery is real: operating income +32.8% YoY vs revenue +5.8% YoY, with ~72 bps operating margin expansion.
• Cash conversion is strong (OCF/NI 2.76x) and FCF positive after 107.07 of capex.
• Balance sheet is solid (current ratio 160%, D/E 0.86x, interest coverage 7.6x).
• Capital efficiency remains the key overhang: ROE 3.3%, ROIC 2.8%.
• Net margin remains thin at 2.5%, and comprehensive income was pressured by negative OCI.

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of sales.
• ROIC improvement toward 5–8% range (mix, pricing, asset turns).
• Working capital turns (receivables and inventory days) and their impact on OCF.
• Capex discipline versus growth plans and resulting FCF.
• Non-operating/extraordinary items’ net impact and OCI volatility.

Relative Positioning: Within Japanese auto/industrial component peers, Ryobi shows improving operating execution and healthy liquidity but lags on structural profitability and capital efficiency; sustained gains will require mix upgrades and better asset utilization.

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