HOSOKAWA MICRON CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥77.99B
• Operating Income: ¥7.05B
• Net Income: ¥3.69B
• EPS: ¥306.09

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 Q4 (full-year) shows a resilient but decelerating finish—top line and profit contracted YoY, yet margins remained healthy and cash generation was strong. Revenue declined 8.7% YoY to 779.94, with operating income down 14.8% to 70.51 and net income down 18.9% to 45.27. Gross profit was 273.55, implying a 35.1% gross margin, while operating margin calculated at 9.0% remained solid despite cyclical softness. Ordinary income fell 16.5% to 77.15 as non-operating income of 9.09 (notably 5.83 interest income) only partially offset operating pressure. Net margin was 5.8%, with an effective tax rate of 33.9%. Based on YoY changes, operating margin compressed by roughly 65 bps (from about 9.7% to 9.0%), and net margin by about 73 bps (from about 6.5% to 5.8%). Earnings quality was strong: operating cash flow of 94.99 was 2.10x net income, and free cash flow of 58.19 comfortably covered buybacks (10.00) and likely dividends (amount unreported). Balance sheet strength is a highlight: cash and deposits of 319.42 cover current liabilities of 289.20, current ratio is 232%, and interest coverage is 141x. ROE stood at 6.7% (DuPont: 5.8% margin × 0.759 turnover × 1.53x leverage), while ROIC of 12.8% indicates value creation versus typical WACC benchmarks. Non-operating income, mainly interest on large cash balances, supported ordinary income; this tailwind may normalize if rates change. Equity-method income (0.78) was immaterial to the profit mix, underscoring operating core reliance. With revenue and profit down, the key watchpoint is whether demand normalizes and operating leverage turns favorable in FY2026. Cash flow and liquidity provide ample flexibility for capex, R&D, and shareholder returns, suggesting the company can navigate the downcycle without balance sheet stress. Overall, cyclical softness compressed margins modestly, but solid cost discipline and robust cash conversion underpin a stable outlook.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 5.8% × Asset Turnover 0.759 × Financial Leverage 1.53x = ROE 6.7%. The biggest drag YoY was the margin component: operating income fell 14.8% vs revenue -8.7%, compressing operating margin by ~65 bps to ~9.0% and net margin by ~73 bps to ~5.8%. Business drivers: weaker topline likely reduced operating leverage (fixed SG&A and depreciation of 23.37 weighed on margins), while the company preserved gross margin at 35.1% but saw SG&A intensity at ~26.0% of sales. Non-operating tailwinds (interest income 5.83) partially cushioned ordinary profit (-16.5% YoY). Sustainability: the margin compression appears cyclical rather than structural; with ROIC at 12.8% and no evidence of pricing erosion in the data, margins should normalize with volume recovery. Watchpoints: if SG&A growth were to outpace revenue persistently (data not provided for SG&A YoY), it would erode operating leverage; for now, the delta seems driven by deleveraging on lower sales rather than cost blowouts.

Growth Assessment

Revenue contracted 8.7% YoY to 779.94, consistent with late-cycle softening in capital goods demand. Profit declines were steeper than revenue (operating -14.8%, ordinary -16.5%, net -18.9%), indicating negative operating leverage. Non-operating income (9.09), mainly interest (5.83) and small equity-method income (0.78), supported ordinary profit but is not a core growth driver. EBITDA of 93.88 (12.0% margin) demonstrates still-solid earnings capacity. Outlook hinges on order intake and backlog in powder processing end-markets (not disclosed); absent these, we assume stabilization before recovery, with potential for margin recapture as volumes normalize. ROIC at 12.8% signals efficient capital deployment, supporting reinvestment-led growth. However, the YoY compression in operating and net margins suggests near-term growth visibility is modest without a demand inflection.

Financial Health

Liquidity is strong: current assets 670.13 vs current liabilities 289.20 (current ratio 231.7%; quick ratio also 231.7% given inventory unreported). Cash and deposits of 319.42 alone cover current liabilities (~110% coverage), minimizing near-term refinancing needs. Solvency is conservative: total liabilities 355.14 vs equity 672.19 (D/E 0.53x). Long-term loans are 11.27; total interest-bearing debt is unreported but likely low given interest expense of 0.50 and very high interest coverage (141x). No warning flags: current ratio well above 1.0 and D/E far below 2.0. Maturity mismatch risk appears low given cash-rich position and modest payables (71.68). Off-balance sheet obligations are not disclosed in the provided data.

Cash Flow Quality

Earnings quality is high: OCF/Net Income = 2.10x, indicating strong cash conversion. Free cash flow of 58.19 (after capex of 33.92) comfortably covers shareholder returns (buybacks of 10.00 and likely dividends; amount unreported). The positive spread between EBITDA (93.88) and capex (33.92) suggests maintenance and growth capex are well within cash generation capacity. Working capital details (inventories, changes in AR/AP) are not provided, so we cannot isolate the drivers of high OCF; however, there are no apparent red flags (e.g., OCF below NI). No signs of aggressive working capital manipulation can be inferred from the limited disclosures.

Dividend Sustainability

Payout ratio (calculated) of 41.7% appears comfortably within the <60% benchmark, and FCF coverage of 3.08x indicates ample headroom to sustain dividends alongside capex. Total dividends paid and DPS are unreported, so conclusions rest on calculated metrics and EPS (306.09 JPY). Given strong liquidity, low leverage, and robust OCF, ongoing dividends look sustainable under current conditions. The company also executed share repurchases of 10.00, which were covered by FCF, suggesting capacity for balanced shareholder returns. Policy stance is not provided; sustainability remains sensitive to cyclical earnings but is supported by cash strength.

Risk Assessment

Business Risks:

• Cyclical demand in capital goods leading to negative operating leverage (evidenced by revenue -8.7% vs operating profit -14.8%).
• End-market exposure in powder processing equipment (semiconductor/advanced materials/chemicals) susceptible to capex cycles.
• Potential pricing pressure if macro weakness persists, which could further compress margins.
• Execution risk on backlog and project timing (order intake/backlog not disclosed).

Financial Risks:

• Non-operating income partly supported by interest on cash (5.83); normalization of rates could reduce ordinary profit.
• Currency fluctuations impacting export margins and translated profits (FX sensitivity not disclosed).
• Limited visibility on total interest-bearing debt due to unreported short-term loans (though leverage appears low).

Key Concerns:

• Margin compression of ~65–75 bps across operating and net levels YoY.
• Visibility: lack of disclosed inventories and SG&A breakdown reduces ability to assess cost stickiness and working capital risk.
• High effective tax rate (33.9%) continues to weigh on net margin.
• Demand recovery timing uncertain; growth outlook hinges on order trends not provided.

Investment Implications

Key Takeaways:

• Core profitability remains solid with a 9.0% operating margin despite cyclical headwinds.
• Cash generation is a standout: OCF 94.99 and FCF 58.19 support both capex and shareholder returns.
• ROIC of 12.8% signals value creation and strategic flexibility.
• ROE at 6.7% is moderate; improvement depends on margin recovery and asset turnover.
• Non-operating interest income elevated due to large cash balance; potential headwind if rates decline.

Metrics to Watch:

• Order intake, backlog, and book-to-bill (not disclosed) to gauge FY2026 recovery potential.
• Gross margin stability and SG&A ratio to sales for operating leverage inflection.
• OCF/NI and working capital components (inventory and receivables turnover).
• Capex pipeline and its alignment with ROIC > WACC.
• FX rates and pricing trends in export markets.

Relative Positioning: Within Japanese machinery/capital goods peers, Hosokawa Micron shows above-average liquidity and cash conversion, conservative leverage, and competitive ROIC, but near-term growth visibility is limited and ROE trails peers that are further along in recovery cycles.

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