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

Hosokawa Micron (TSE:6277) reported FY2025 Q4 (full-year) consolidated results under JGAAP with revenue of ¥77.99bn, down 8.7% YoY, indicating a cyclical soft patch or slower order conversion. Gross profit was ¥29.95bn, delivering a solid gross margin of 38.4%, but operating income fell 14.8% YoY to ¥7.05bn as operating leverage turned negative on the revenue decline. Net income decreased 18.9% YoY to ¥4.53bn, compressing the net margin to 5.8% despite negligible interest expense (¥23m) and robust ordinary income of ¥7.72bn. DuPont analysis yields ROE of 6.73%, decomposed into a 5.80% net margin, 0.759x asset turnover, and 1.53x financial leverage—an equity-efficient but growth-constrained profile this year. EBITDA was ¥9.35bn (12.0% margin), evidencing healthy underlying earnings capacity even as operating margin settled near 9.0%. Cash generation was a standout: operating cash flow of ¥9.50bn equated to 2.10x net income, and free cash flow of ¥5.82bn after ¥3.68bn net investing outflows demonstrates strong earnings quality. The balance sheet is conservative with total liabilities of ¥36.45bn versus equity of ¥67.22bn; a computed equity ratio is approximately 65.4% (despite a reported 0% placeholder), and the debt-to-equity ratio of 0.54x (liabilities basis) underscores low financial risk. Liquidity appears ample with a current ratio of 217.8% and working capital of ¥34.94bn, though inventories and cash balances are not disclosed in the dataset provided. Interest coverage stands at about 307x, reflecting minimal interest-bearing debt. The effective tax rate in calculated terms is approximately mid-30% based on the reported income tax charge, despite a 0% placeholder in the summary metrics. Dividends, DPS, and share count are not disclosed here; therefore, payout and per-share equity metrics cannot be validated, though EPS is reported at ¥306.09. Overall, the company protected gross margin well but experienced operating margin pressure from lower volumes and possibly higher fixed-cost absorption. With strong FCF and a robust balance sheet, the company retains strategic flexibility to navigate the cycle and invest. Near-term focus should be on order intake, backlog conversion, and margin discipline to stabilize ROE back toward historical norms. Data limitations (notably inventories, cash and equivalents, and dividend details) constrain full granularity, but the available figures point to resilient cash flow and low balance-sheet risk amid a softer top line.

Profitability Analysis

roe_decomposition: ROE 6.73% = Net margin 5.80% × Asset turnover 0.759 × Financial leverage 1.53. Margin compression and slower asset turns versus stronger years explain the subdued ROE despite low leverage risk. margin_quality: Gross margin of 38.4% indicates pricing power and mix resilience. Operating margin of ~9.0% (¥7.05bn/¥77.99bn) declined more than revenue (-14.8% OI vs -8.7% sales), highlighting negative operating leverage. EBITDA margin at 12.0% confirms healthy underlying profitability, with D&A of ¥2.30bn modest (≈3.0% of sales). Net margin at 5.8% is weighed by a normalized tax burden (see below), not by interest costs. operating_leverage: Operating income fell 14.8% on an 8.7% revenue decline, implying unfavorable cost absorption and/or higher SG&A ratio. Fixed-cost intensity is evident; incremental margin turned negative year over year, a typical dynamic for project/capital equipment downswings.

Growth Assessment

revenue_sustainability: Revenue declined 8.7% YoY to ¥77.99bn, suggesting slower demand or order timing. Without disclosure on backlog or segment/geographic mix, sustainability into FY2026 cannot be fully assessed; however, the company’s strong gross margin suggests core franchise strength. profit_quality: Despite the top-line contraction, gross margin held at 38.4% and EBITDA margin at 12.0%, pointing to defensible pricing and cost control below the gross line. Negative operating leverage pressured operating profit, but the margin structure remains sound for recovery if volumes normalize. outlook: Given strong OCF (2.10x net income) and low interest burden, the company is well positioned to invest and bridge the cycle. Key swing factors for the next year are order intake, backlog conversion speed, and cost discipline. Absent visibility on orders, a near-term stabilization case hinges on steady demand in core end markets and continued mix/pricing support.

Financial Health

liquidity: Current ratio 217.8% and working capital of ¥34.94bn indicate ample short-term headroom. Quick ratio equals current ratio in the dataset due to inventories being unreported; true quick liquidity may be lower depending on actual inventory levels. solvency: Total liabilities of ¥36.45bn vs equity of ¥67.22bn yields a debt-to-equity of 0.54x on a liabilities basis; interest expense of only ¥23m and interest coverage of ~306x imply very low interest-bearing debt. Computed equity ratio is ~65.4% (equity/total assets), despite the reported 0% placeholder. capital_structure: Low leverage with strong equity cushion supports resilience through cycles. Financing cash outflows of ¥3.34bn suggest repayments and/or distributions, but specific composition is not disclosed.

Cash Flow Quality

earnings_quality: OCF of ¥9.50bn vs net income of ¥4.53bn (OCF/NI = 2.10x) indicates strong cash conversion, likely aided by working capital inflows and disciplined receivables management. fcf_analysis: Free cash flow estimated at ¥5.82bn (OCF ¥9.50bn + Investing CF -¥3.68bn), providing significant internal funding capacity after investment. Capex/proceeds breakdown is not disclosed, but the level of investing outflow appears manageable relative to cash generation. working_capital: Working capital stands at ¥34.94bn; detailed components are not disclosed (inventories reported as 0 in this dataset). The strong OCF suggests net working capital release or efficient turnover during the year.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in the provided data (zeros indicate non-reporting). EPS is ¥306.09, which, combined with robust OCF, implies capacity to fund dividends if policy prioritizes distributions. fcf_coverage: With FCF of ¥5.82bn, potential dividend coverage appears ample in capacity terms; however, actual dividend outlay is unknown in this dataset, preventing a precise coverage calculation. policy_outlook: Absent explicit guidance or historical policy detail here, we cannot infer a payout target. Given the strong balance sheet and cash generation, the company has flexibility to balance dividends, buybacks, and reinvestment, subject to order visibility and capex needs.

Risk Assessment

Business Risks:

• Cyclical demand in capital goods/process equipment leading to order and revenue volatility
• Negative operating leverage during downturns due to fixed-cost base
• Project execution and delivery timing risk affecting revenue recognition and margins
• Raw material and component cost variability impacting gross margin
• Foreign exchange exposure on exports and overseas subsidiaries
• End-market concentration risk (e.g., chemicals, pharmaceuticals, battery/semiconductor) if applicable
• Competitive pricing pressure in global powder processing markets

Financial Risks:

• Working capital swings impacting cash flow timing
• Potential FX translation effects on earnings and equity
• Limited disclosure on interest-bearing debt composition despite low interest expense
• Pension or off-balance obligations not visible in the provided data

Key Concerns:

• Revenue decline of 8.7% YoY and operating income decline of 14.8% YoY
• Operating margin compression from 10%+ levels to ~9% (implied) due to negative operating leverage
• Limited visibility on backlog, order intake, inventories, and cash balances
• ROE at 6.73%, below double-digit thresholds typical of higher-performing machinery peers

Investment Implications

Key Takeaways:

• Top-line contracted 8.7% YoY, pressuring operating profit via negative operating leverage
• Gross margin remained robust at 38.4%, supporting medium-term earnings resilience
• ROE at 6.73% reflects subdued asset turns and compressed margins more than leverage constraints
• Cash generation is strong: OCF/NI 2.10x and FCF of ¥5.82bn
• Balance sheet is conservative with a computed equity ratio ~65% and minimal interest burden
• Liquidity is ample (current ratio ~2.18x; working capital ¥34.9bn)
• Dividend details are not disclosed; capacity to distribute exists but policy unknown

Metrics to Watch:

• Order intake, backlog levels, and book-to-bill ratio
• Gross margin and operating margin trajectory
• Operating cash flow to net income conversion and working capital days
• Capex and R&D intensity versus growth opportunities
• FX movements versus revenue/cost footprints
• Ordinary income versus operating income spread (non-operating contributions)
• Tax rate normalization relative to PBT

Relative Positioning: Within Japanese machinery/capital goods peers, Hosokawa Micron exhibits a strong balance sheet and above-average cash conversion, with margins in the mid-to-high single digits at the operating level and low double-digit at the EBITDA level. ROE at ~6.7% is below top-tier peers that deliver double-digit ROE, reflecting current cycle headwinds and modest asset turnover.

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