J.E.T.Co.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥11.02B
• Operating Income: ¥-1.70B
• Net Income: ¥403M
• Earnings per Unit (EPU): ¥-193.60

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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 weak quarter marked by a sharp revenue decline, a swing to operating loss, and a deeply negative bottom line despite adequate liquidity. Revenue fell 22.9% YoY to 110.21, indicating a substantial demand slowdown and/or delivery timing slippage. Gross profit is reported at 29.77, implying a gross margin of 27.0%, but the listed cost of sales (113.14) is inconsistent with the reported gross profit—suggesting classification or data extraction issues; we anchor on the provided gross profit margin for analysis. Operating income deteriorated to -17.04 (down 63.4% YoY), translating to an operating margin of approximately -15.5%. Ordinary income was -17.81, with non-operating items netting to an expense of 0.67 (0.30 income vs 0.97 expense), including interest expense of 0.47 and interest income of 0.11. Profit before tax is reported at +6.88 despite negative ordinary income, implying material below-the-line effects (extraordinary gains/losses or reclassifications) not detailed in the disclosure. Net income came in at -25.41 (down 68.2% YoY), a difference of -32.29 versus profit before tax after taxes (2.84) that suggests significant non-controlling interests or undisclosed extraordinary/one-off charges; details are not available in XBRL. ROE calculated by DuPont is -25.9%, driven primarily by a negative net margin (-23.1%), modest asset turnover (0.55x), and leverage of 2.04x. Gross margin at 27.0% points to some resilience in pricing/mix/service content, but SG&A of 22.21 overwhelmed gross profit, resulting in negative operating leverage. Operating margin compressed significantly on our reading; precise bps comparison vs last year is not available, but the shift to -15.5% implies severe contraction. Earnings quality cannot be confirmed because OCF/NI is unreported; however, the large net loss coupled with negative interest coverage (-36.3x) raises concerns about cash earnings until volumes recover. Liquidity is solid with a current ratio of 319% and quick ratio of 258%, supported by 24.19 in cash and low short-term borrowings (2.50). Leverage is moderate with D/E at 1.04x and long-term loans of 40.63 forming the bulk of interest-bearing debt. Inventories are elevated at 36.50 relative to revenue run-rate, implying working capital tie-up amid demand softness. Forward-looking, recovery depends on order intake normalization, inventory unwinding, and cost control; near term, negative ROIC (-8.5%) indicates value erosion unless utilization and margins rebound. We highlight data gaps (cash flows, extraordinary items) that limit visibility into earnings quality and the sustainability of any P/L inflection.

Profitability Analysis

ROE decomposition: ROE (-25.9%) = Net Profit Margin (-23.1%) × Asset Turnover (0.55x) × Financial Leverage (2.04x). The dominant negative driver is the net margin, which turned deeply negative due to operating loss (operating margin about -15.5%) and additional below-the-line charges. Asset turnover at 0.55x is subdued, consistent with lower shipments and elevated assets (notably inventories at 36.50), reducing efficiency. Financial leverage at 2.04x modestly amplifies losses but is not the primary culprit. Business drivers: revenue fell 22.9% YoY while SG&A of 22.21 did not flex down sufficiently, creating negative operating leverage; non-operating expenses (interest) further weighed on ordinary income, and undisclosed extraordinary or minority-interest effects drove net profit far below profit before tax. Sustainability: the margin pressure appears cyclically driven by volume decline and mix, potentially reversible with order recovery; however, any extraordinary charges would be one-time, while interest expense will persist until deleveraging. Watch for SG&A growth exceeding revenue—here, despite revenue contraction, SG&A remained high relative to gross profit, a concerning trend if volumes remain muted.

Growth Assessment

Top-line contracted 22.9% YoY to 110.21, indicating significant demand weakness and/or delivery delays. Gross margin at 27.0% suggests some pricing/mix support, but not enough to offset volume decline. Operating income dropped to -17.04, evidencing negative operating leverage. Ordinary income at -17.81 and net income at -25.41 confirm broad-based profit deterioration. There is no segment or product mix disclosure, limiting attribution of the decline to specific end markets. With inventories at 36.50 and receivables at 5.53, revenue visibility hinges on converting WIP/finished goods into shipments; otherwise, further write-down risks may emerge. Outlook requires stabilization of order intake and utilization; absent that, profitability likely remains negative in the near term. Any recovery path will need SG&A right-sizing and improved capacity utilization to restore operating margins.

Financial Health

Liquidity: strong. Current ratio 319.4% and quick ratio 258.0% indicate ample short-term coverage; cash of 24.19 exceeds short-term loans of 2.50. Solvency: Debt-to-equity at 1.04x is moderate; long-term loans (40.63) dominate the capital structure, reducing immediate refinancing pressure. Interest coverage is deeply negative at -36.26x due to operating losses, triggering a debt service warning despite adequate liquidity. Maturity mismatch risk appears limited near term (current assets 189.78 vs current liabilities 59.42), but sustained losses could erode equity (currently 98.10) and challenge covenants if any exist (not disclosed). No off-balance sheet obligations are reported in the data provided.

Cash Flow Quality

OCF is unreported, so OCF/Net Income and FCF cannot be assessed. Given the large net loss and negative operating income, cash earnings quality is likely weak absent working capital release. Inventories at 36.50 are high relative to receivables (5.53) and quarterly revenue, which could either support a positive OCF if unwound or consume cash if builds continue or write-downs occur. With capex unreported, we cannot gauge maintenance vs growth investments; financing cash flows are also unavailable. We see no explicit signs of working capital manipulation from the limited dataset, but the inventory level is a focal point for future OCF.

Dividend Sustainability

Dividend data are unreported; the calculated payout ratio (-3.2%) is not meaningful with negative earnings. Without OCF and FCF disclosure, coverage cannot be assessed. Given negative net income and interest coverage below threshold, maintaining or increasing dividends would be challenging unless backed by balance sheet cash and near-term earnings normalization. Policy outlook depends on management stance and covenant headroom; conservatism would be prudent until profitability recovers.

Risk Assessment

Business Risks:

• Demand volatility leading to 22.9% YoY revenue decline
• Negative operating leverage from fixed cost base (SG&A 22.21 vs gross profit 29.77)
• Potential inventory obsolescence/write-down risk with inventories at 36.50
• Execution risk in converting backlog/inventory to revenue

Financial Risks:

• Debt service risk: interest coverage -36.26x
• Sustained losses eroding equity (ROE -25.9%, ROIC -8.5%)
• Refinancing exposure to long-term debt (40.63) if performance does not recover
• Possible undisclosed extraordinary losses or minority interest swings affecting bottom line

Key Concerns:

• Inconsistency between cost of sales (113.14) and gross profit (29.77) figures suggests classification/data extraction issues
• Profit before tax (+6.88) versus net income (-25.41) implies substantial below-the-line impacts not detailed
• Cash flow data (OCF/FCF) are missing, limiting earnings quality assessment
• Margin compression and negative ordinary income indicate core earnings weakness

Investment Implications

Key Takeaways:

• Severe earnings deterioration: operating margin about -15.5%, net margin -23.1%
• Negative ROE (-25.9%) and ROIC (-8.5%) signal value destruction absent a turnaround
• Liquidity is a mitigating factor (current ratio 319%, quick ratio 258%), but debt service capacity is weak
• Working capital, especially inventories, is the swing factor for near-term OCF
• Data gaps (cash flow, extraordinary items) constrain visibility into normalized earnings

Metrics to Watch:

• Order intake and backlog conversion to stabilize revenue
• Inventory levels and turnover; any write-downs
• Operating margin trajectory and SG&A control
• OCF/NI and FCF once disclosed
• Interest coverage improvement and debt trajectory
• Any disclosure on extraordinary items or non-controlling interests explaining PBT-to-NI gap

Relative Positioning: Versus domestic capital goods peers, the company currently sits in the weaker cohort on profitability and capital efficiency (negative ROE/ROIC), while liquidity is above average; balance sheet leverage is moderate, but earnings-based coverage metrics are materially below peer norms until volume and margins recover.

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