NORITZ CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥142.61B
• Operating Income: ¥809M
• Net Income: ¥2.52B
• EPS: ¥14.68

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

Noritz Co., Ltd. (TSE:5943) reported FY2025 Q3 consolidated results under JGAAP with modest topline growth but subdued bottom-line profitability. Revenue was ¥142.61bn, up 1.0% YoY, indicating stable demand in core water-heater and housing equipment categories despite a soft residential market backdrop. Gross profit of ¥44.16bn implies a gross margin of 31.0%, a respectable level for the sector and suggestive of some mix and pricing resilience. Operating income came in at ¥0.81bn, up 25.2% YoY, translating to a slim operating margin of roughly 0.6%, highlighting that SG&A absorption remains a challenge. Ordinary income of ¥1.77bn exceeded operating income by about ¥0.96bn, indicating meaningful non-operating gains (e.g., FX, equity method, or other income) partly offset by interest expense of ¥0.11bn. Net income was ¥0.67bn, down 71.4% YoY, implying that extraordinary losses and/or a heavy tax burden weighed on the quarter despite operating improvement. The interest coverage ratio is 7.4x (operating income/interest expense), adequate but not a large cushion given low operating margins. DuPont metrics remain weak: net margin 0.47%, asset turnover 0.663x, leverage 1.62x, yielding a calculated ROE of 0.51%, which is below typical cost of equity for Japanese industrials. Liquidity is solid with a current ratio of 184% and a quick ratio of 136.9%, supported by ¥57.65bn of working capital. Inventories stand at ¥32.32bn, an important watchpoint for normalization as supply chains stabilize and demand patterns evolve. The balance sheet indicates total assets of ¥214.95bn and total equity of ¥132.65bn; this implies an equity ratio of roughly 61.7% (despite the reported equity ratio field being undisclosed), suggesting a conservative capital structure. Debt-to-equity is shown at 0.65x, consistent with some leverage but within manageable bounds given liquidity and coverage. Cash flow metrics (OCF, FCF) are not disclosed in this dataset, limiting assessment of earnings-to-cash conversion this quarter; the reported OCF/Net Income of 0.00 and FCF of 0 should be treated as unavailable, not zero. Dividend data (DPS, payout, FCF coverage) are similarly undisclosed; policy inference therefore relies on historical tendencies rather than this period’s figures. Overall, the quarter shows cost discipline and some operating leverage on modest sales growth, but bottom-line pressure from taxes and/or one-offs kept ROE and net margin low. Outlook hinges on sustaining gross margin, further SG&A efficiency, and normalization of non-operating and tax items while maintaining prudent inventory management.

Profitability Analysis

ROE_decomposition: Net margin 0.47% × Asset turnover 0.663 × Financial leverage 1.62 = Calculated ROE 0.51% (matches reported 0.51%). The very low net margin is the primary drag; asset utilization is moderate for the business model; leverage is modest and not the driver. margin_quality: Gross margin at 31.0% indicates reasonable pricing/mix. Operating margin is ~0.6% (¥0.81bn/¥142.61bn), implying SG&A intensity remains high. Ordinary income (¥1.77bn) outpacing operating income suggests non-operating gains supported results; however, net income fell sharply due to taxes and/or special items, compressing net margin to 0.47%. operating_leverage: Revenue grew 1.0% while operating income rose 25.2% YoY, indicative of positive operating leverage from cost control and mix. Given the low operating base, small absolute improvements translate to large percentage gains; sustainability requires continued SG&A discipline and stable gross margin.

Growth Assessment

revenue_sustainability: Revenue of ¥142.61bn (+1.0% YoY) suggests stable core demand. Given the housing-related exposure, growth likely reflects resilient replacement demand offsetting softer new housing starts. profit_quality: Operating income improvement contrasts with a 71.4% YoY decline in net income to ¥0.67bn, implying one-off charges and/or a high effective tax burden. Ordinary income > operating income indicates reliance on non-operating tailwinds this quarter. outlook: Key to sustaining growth will be gross margin stability near 31%, inventory normalization, and SG&A productivity. If extraordinary/tax headwinds abate, ordinary profit run-rate (~¥1.8bn) could better translate to net profit; otherwise, net margin will remain constrained.

Financial Health

liquidity: Current ratio 184% and quick ratio 136.9% indicate strong short-term solvency. Working capital of ¥57.65bn provides ample buffer. solvency: Debt-to-equity is 0.65x, consistent with moderate leverage. Interest coverage of 7.4x is acceptable but sensitive to low operating margins. capital_structure: Total assets ¥214.95bn and total equity ¥132.65bn imply an equity ratio of ~61.7% (reported field undisclosed). The structure is conservative, supporting flexibility to manage cyclical swings.

Cash Flow Quality

earnings_quality: OCF is undisclosed this period; the reported OCF/Net Income ratio of 0.00 reflects non-disclosure, not cash burn. Earnings quality cannot be validated without OCF and working-capital flow details. FCF_analysis: Free cash flow is undisclosed (reported 0); capex and D&A are not available, limiting assessment of maintenance vs. growth investment coverage. working_capital: Inventories at ¥32.32bn are material; monitoring turnover and any destocking is crucial for future OCF normalization. Receivables/payables detail is not provided.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are undisclosed in this dataset (displayed as 0.00). With net income at ¥0.67bn and low ROE (0.51%), capacity for distributions depends on cash generation and balance-sheet strength. FCF_coverage: FCF coverage cannot be assessed due to unavailable OCF and capex. Historical policy and cash balances would typically guide assessment, but those are not disclosed here. policy_outlook: Given conservative leverage and liquidity, the balance sheet could support a stable policy, but near-term payout prudence would be consistent with low profitability unless cash flows are robust.

Risk Assessment

Business Risks:

• Domestic housing cycle and renovation demand volatility affecting water-heater and system kitchen volumes
• Raw material and component cost inflation (steel, resins, semiconductors) pressuring gross margins
• Competitive pricing pressure from domestic peers (e.g., Rinnai/Paloma) and overseas manufacturers
• Product quality/safety and recall risk inherent to gas appliances and hot-water equipment
• Energy transition dynamics (electrification/heat pumps) potentially impacting gas-appliance demand mix
• Foreign exchange fluctuations affecting overseas earnings and imported component costs
• Execution risk on SG&A efficiency and mix improvements needed to lift operating margins

Financial Risks:

• Low operating margin (~0.6%) leaves limited buffer for shocks
• Potential volatility in non-operating items and taxes that can materially swing net income
• Inventory management risk and working-capital absorption affecting OCF
• Interest rate risk on floating-rate debt given debt-to-equity of 0.65x
• Limited visibility due to undisclosed cash flow and capex data this period

Key Concerns:

• Net income decline of 71.4% YoY despite higher operating income indicates one-offs/tax headwinds
• ROE at 0.51% is well below sector norms, requiring sustained margin improvement
• Dependence on non-operating gains (ordinary income > operating income) raises quality-of-earnings questions

Investment Implications

Key Takeaways:

• Topline grew 1.0% YoY to ¥142.61bn; gross margin healthy at 31.0%
• Operating leverage evident (+25.2% YoY OI) but margins remain thin (~0.6%)
• Ordinary income supported by non-operating gains; net income pressured to ¥0.67bn
• Solid liquidity (CR 184%, QR 136.9%) and moderate leverage (D/E 0.65x)
• Low ROE (0.51%) underscores need for structural margin enhancement
• Cash flow and dividend data are undisclosed, limiting payout and FCF assessment

Metrics to Watch:

• Gross margin trajectory and SG&A ratio
• Operating margin and ordinary income sustainability vs. non-operating items
• OCF/Net income conversion and inventory turnover
• Effective tax rate and any extraordinary gains/losses
• Interest coverage and debt profile (fixed vs. floating)
• Backlog/orders and product mix (premium vs. mass) trends

Relative Positioning: Within Japan’s residential equipment/appliance peers, Noritz shows solid balance-sheet strength but lags leading competitors on profitability, with ROE and operating margins below sector averages; successful cost and mix initiatives are needed to close the gap.

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
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