Sodick Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥56.35B
• Operating Income: ¥3.02B
• Net Income: ¥395M
• EPS: ¥42.89

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

Sodick (TSE: 6143) delivered a clear profit rebound in FY2025 Q3 with revenue of ¥56.3bn (+10.5% YoY) and operating income of ¥3.0bn (+260% YoY), indicating meaningful operating leverage as costs normalized and sales recovered. Gross profit of ¥16.6bn implies a 29.5% gross margin, while operating margin improved to roughly 5.4%, translating to ordinary income of ¥2.9bn and net income of ¥2.17bn (+439.5% YoY). Reported DuPont metrics point to a low but improving ROE of 2.58%, driven primarily by a modest 3.85% net margin and an asset turnover of 0.385, with financial leverage (assets/equity) of 1.74. Balance sheet strength is a key support: equity is ¥84.2bn versus total assets of ¥146.2bn, implying an equity ratio around 57–58% by calculation (despite a reported 0.0% equity ratio that appears to be a disclosure gap). Liquidity is robust with a current ratio of 2.95x, quick ratio of 2.63x, and working capital of ¥67.1bn, underscoring ample short-term flexibility. Solvency looks conservative with total liabilities of ¥60.6bn and a debt-to-equity ratio of 0.72x. Interest expense of ¥298m is well covered (about 10.1x), consistent with the improved operating earnings profile. The effective tax rate calculated from disclosed tax expense (¥705m) and net income implies approximately 24–25%, aligning with a normalized tax environment despite a reported “0.0% effective tax rate” metric that appears formula-driven by missing cash flow data. Cash flow statements (OCF/FCF/financing) are not disclosed in this dataset and show as zeros, so any cash conversion or FCF conclusions cannot be drawn from this release. Dividend data are also not disclosed (DPS and payout show as zero placeholders), so dividend sustainability must be inferred from earnings capacity and balance sheet only. Operatingly, the company benefited from revenue growth and margin recovery, but ROE remains modest, suggesting further improvement requires either higher margins, faster asset turnover, or a more efficient balance sheet. Inventory stands at ¥11.1bn, which appears manageable relative to current assets (¥101.5bn) and should support delivery without undue working capital drag if demand stabilizes. Overall, Sodick’s FY2025 Q3 shows a solid profit recovery with healthy liquidity and manageable leverage, but limited disclosure on cash flows and dividends constrains a full quality-of-earnings and payout assessment. Data inconsistencies (gross profit vs. cost of sales arithmetic and equity ratio) likely reflect classification or disclosure differences rather than fundamental issues, and we analyze based on the internally consistent ratios provided. The outlook hinges on sustaining top-line momentum and defending gross margins amid end-market volatility typical of capital goods. Given the cyclical nature of precision machinery, continued order intake and backlog visibility will be critical to validate the improving earnings trajectory.

Profitability Analysis

ROE decomposition indicates 2.58% ROE = 3.85% net margin × 0.385 asset turnover × 1.74 leverage. Net margin of 3.85% reflects a meaningful rebound in profitability versus last year (net income +439.5% YoY), but remains modest for the sector, implying room for further operating margin expansion. Gross margin is 29.5%; operating margin is approximately 5.4% (¥3.018bn/¥56.346bn), and ordinary margin about 5.2%, indicating relatively contained non-operating items with interest expense of ¥298m. The strong YoY lift in operating income (+260%) versus revenue growth (+10.5%) evidences positive operating leverage, likely from better mix, utilization, and fixed-cost absorption. Interest coverage at roughly 10.1x suggests limited drag from financing costs; ordinary income closely tracks operating income, signaling low non-operating volatility in the quarter-to-date. The discrepancy between reported cost of sales and gross profit arithmetic suggests classification differences; we rely on the internally consistent gross margin (29.5%). Overall margin quality appears improved but still sensitive to volume and mix; sustaining gross margin near 30% will be key to compounding ROE given moderate asset turnover.

Growth Assessment

Revenue of ¥56.3bn grew 10.5% YoY, implying demand recovery across key end markets for machine tools and precision equipment. Profit growth outpaced sales (operating income +260% YoY; net income +439.5% YoY), indicating mix improvement and better cost discipline. The conversion from gross to operating profit (≈5.4% OPM) shows regained operating efficiency; continuation depends on volume stability and pricing discipline. Asset turnover at 0.385 remains modest; further growth without proportional asset expansion would enhance ROE. Given the capital goods cycle, sustainability hinges on order backlog, capex intentions of customers (auto/EV, electronics, medical), and global macro/FX conditions; these datapoints are not disclosed here. Tax normalization (~24–25% effective rate inferred) supports cleaner YoY comparisons. Outlook: cautiously favorable if order momentum persists and if the company can maintain near-30% gross margins, but exposed to cyclical slowdowns and FX swings.

Financial Health

Total assets ¥146.2bn, equity ¥84.2bn, liabilities ¥60.6bn; calculated equity ratio ~57.6% (versus a reported 0.0% placeholder), indicating a solid capital base. Current assets ¥101.5bn and current liabilities ¥34.4bn yield a current ratio of 2.95x and quick ratio of 2.63x, demonstrating strong liquidity. Working capital is sizeable at ¥67.1bn, providing operational flexibility and buffer against demand variability. Debt-to-equity at 0.72x (total liabilities/equity) is moderate, consistent with the 1.74x financial leverage used in DuPont. Interest expense of ¥298m with interest coverage ~10.1x suggests low refinancing stress. Inventory of ¥11.1bn appears manageable within current assets; monitoring inventory turns is important given the cyclical nature of demand. Overall solvency and liquidity profiles are strong and should support operations through cycles.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed in this dataset (zeros indicate unreported values), so OCF/NI and FCF metrics cannot be interpreted. As such, we cannot validate earnings-to-cash conversion or working capital cash effects for the period. Given the improved profitability, cash generation would typically improve unless offset by inventory build or receivable growth; however, without cash flow statements or AR/AP disclosures, this remains an assumption. The reported OCF/Net Income ratio of 0.00 and FCF of 0 are placeholders and should not be treated as analytical conclusions. Key to assess earnings quality will be subsequent disclosure of OCF, capex, and changes in working capital (especially receivables and inventories).

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (zeros are placeholders). Without DPS and cash flow data, we cannot assess FCF coverage. Based on earnings alone, net income of ¥2.17bn suggests capacity for distribution subject to capex and working capital needs, but the company’s capital intensity and cyclicality argue for a balanced payout policy. The strong balance sheet (equity ~¥84bn; liquidity ratios >2.6x) provides flexibility, yet sustainable dividends ultimately depend on normalized OCF and investment requirements. Until cash flow and stated policy are available, payout sustainability analysis remains limited.

Risk Assessment

Business Risks:

• Cyclical demand in machine tools and precision equipment leading to revenue volatility
• End-market exposure to autos/EV, electronics, and medical devices with capex sensitivity
• FX fluctuations (e.g., USD/JPY, EUR/JPY) impacting export competitiveness and margins
• Supply chain constraints for precision components and semiconductors
• Pricing pressure from global competitors and potential mix deterioration
• Technology obsolescence risk in EDM and CNC solutions if R&D lags

Financial Risks:

• Operating leverage to volumes could compress margins in a downturn
• Working capital swings (receivables/inventory) could weigh on OCF in weaker quarters
• Interest rate and refinancing risk, albeit mitigated by current coverage (~10.1x)
• Potential FX translation and transaction impacts on earnings and equity

Key Concerns:

• Limited cash flow disclosure prevents validation of earnings quality and FCF
• Data inconsistencies (equity ratio, COGS vs. gross profit) complicate margin diagnostics
• Low ROE (2.58%) despite recovery suggests need for sustained margin and turnover gains

Investment Implications

Key Takeaways:

• Top-line grew 10.5% YoY to ¥56.3bn; profit rebound with operating income +260% YoY
• Margins improved: gross 29.5%, operating ~5.4%, net 3.85%
• ROE 2.58% driven by modest net margin and low asset turnover; leverage 1.74x
• Balance sheet robust: equity ¥84.2bn; current ratio 2.95x; D/E 0.72x
• Interest coverage around 10.1x indicates manageable financing burden
• Cash flow and dividend data not disclosed; FCF assessment pending

Metrics to Watch:

• Order intake and backlog trends to gauge sustainability of revenue growth
• Gross margin trajectory versus cost inflation and pricing
• Operating margin progression and fixed-cost absorption
• Asset turnover (0.385) and inventory turns (inventory ¥11.1bn)
• OCF and FCF once disclosed; capex requirements and working capital changes
• FX rates and hedging impacts on ordinary income

Relative Positioning: Sodick shows a healthy balance sheet and a visible margin recovery versus the prior year, but profitability and ROE remain below best-in-class peers in the precision machinery space; continued execution on gross margin and asset efficiency is 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
• 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