TOMOE ENGINEERING CO.,LTD.(TOMOE KOGYO CO.,LTD.) FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥59.37B
• Operating Income: ¥5.35B
• Net Income: ¥3.49B
• EPS: ¥128.66

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

Tomoe Kogyo (巴工業, 63090) delivered solid topline and operating performance in FY2025 Q4 (full-year), with revenue of 593.65 and operating income of 53.52, both rising by roughly 14% YoY. Gross profit was 134.92, implying a gross margin of 22.7%, and the operating margin held near 9.0%, evidencing disciplined cost control despite growth. Ordinary income increased to 54.01, supported by modest non-operating income (0.98), mainly dividends (0.51) and interest (0.15), while non-operating expenses were minimal (0.26). Net income came in at 38.51 (+6.5% YoY), implying a net margin of 6.5% and an effective tax rate of 22.5%. DuPont shows an ROE of 9.0% built from a 6.5% net margin, 1.053x asset turnover, and 1.32x financial leverage, indicating returns are primarily driven by operating profitability and decent asset efficiency rather than leverage. The balance sheet is conservative with total equity of 427.37 (equity ratio by calculation ~75.8%) and low reported interest-bearing obligations (short-term loans 0.77; long-term loans unreported), underpinning solvency. Liquidity is robust: current ratio 319% and quick ratio 275%, aided by substantial cash and deposits of 149.33 and relatively modest current liabilities of 132.48. Operating cash flow was 23.76, trailing net income (OCF/NI = 0.62x), while investing cash outflows of 24.74 (including capex of 5.08 and likely financial investments) resulted in slightly negative free cash flow as defined by OCF + total investing CF (-0.98). EBITDA totaled 57.09 (margin 9.6%), with low D&A (3.57), which supports the quality of operating income. Working capital expanded (working capital 289.92), and inventory days are estimated around the low-50s, consistent with a project- and equipment-driven business; accounts receivable were unreported, limiting deeper cash conversion analysis. Comprehensive income (49.32) exceeded net income, suggesting positive OCI (likely valuation gains on securities or FX), which boosted equity. EPS was 128.66 JPY on an average share count of ~29.93 million; book value per share is 1,427.68 JPY, implying an ROE consistent with the 9% figure. Reported XBRL operating margin and ROA values (0.1%) are clearly placeholders and not reflective of the underlying performance; the calculated margins should be used. Dividend details were not disclosed; a calculated payout ratio of 112.8% and FCF coverage of -0.02x are provided but should be treated cautiously given missing DPS and parent/consensus differences. Overall, results reflect steady growth with maintained margins, strong balance sheet resilience, but weaker cash conversion due to investment and working capital needs. Data limitations include several unreported line items (AR, long-term debt, DPS) which constrain precision in cash flow and dividend sustainability assessments.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 6.5% (Net income 38.51 / Revenue 593.65)
• asset_turnover: 1.053x (Revenue 593.65 / Total assets 563.85)
• financial_leverage: 1.32x (Assets 563.85 / Equity 427.37)
• calculated_ROE: 9.0% (matches provided)
• commentary: ROE is primarily margin- and turnover-driven; leverage is modest, limiting risk while keeping ROE near 9%. margin_quality:
• gross_margin: 22.7% (134.92/593.65)
• operating_margin: 9.0% (53.52/593.65)
• EBITDA_margin: 9.6% (57.09/593.65)
• ordinary_income_margin: 9.1% (54.01/593.65)
• net_margin: 6.5% (38.51/593.65)
• insight: Margins were stable YoY given revenue and operating income both grew ~14%. Low D&A (3.57) indicates operating profit is not flattered by heavy capitalization. operating_leverage: Revenue grew 13.9% while operating income rose 13.8%, implying neutral operating leverage in FY2025. SG&A ratio was approximately 14.8% (87.89/593.65), showing scale benefits balanced by cost investments. other_notes: Non-operating income was minor (0.98), so core profitability largely explains earnings. Effective tax rate at 22.5% is in a normal range.

Growth Assessment

revenue_sustainability: Topline growth of 13.9% is strong for an industrial/machinery-centric portfolio, likely reflecting healthy demand and backlog execution. With asset turnover at 1.05x and inventory days around 54, growth appears supported operationally. profit_quality: Operating margin at ~9% alongside modest D&A supports quality. However, OCF/NI of 0.62x signals weaker cash realization from profits, likely due to working capital usage and investment in projects. outlook: Absent segment disclosures, baseline outlook is for steady demand in core equipment and related businesses, with potential variability tied to order timing and capital investment cycles. If order momentum holds and working capital normalizes, earnings growth could translate better into cash. FX and input costs remain swing factors.

Financial Health

liquidity: Current ratio 318.8% and quick ratio 275.4% indicate ample short-term coverage. Cash and deposits of 149.33 exceed reported short-term loans (0.77), evidencing net cash on reported figures. solvency: Total liabilities of 138.38 vs equity of 427.37 yield a liabilities-to-equity of ~0.32x. Financial leverage at 1.32x and enormous interest coverage (16,417x, reflecting negligible interest expense) underscore low financial risk. capital_structure: Equity constitutes roughly 75.8% of assets (427.37/563.85). Long-term loans and broader interest-bearing debt were unreported; based on available items, the company operates with very low gearing. working_capital: Working capital is 289.92. Estimated days inventory outstanding ~54 (57.50 / 386.28 × 365). Accounts receivable were unreported; therefore, full cash conversion cycle cannot be determined.

Cash Flow Quality

earnings_to_cash_conversion: OCF/NI at 0.62x (23.76/38.51) indicates below-par conversion for the year, likely driven by working capital build and increased investment in operations. FCF_analysis: Free cash flow (defined here as OCF + total investing CF) was -0.98 due to sizable investing outflows of -24.74. If using capex-only FCF, OCF - capex equals +18.68, implying that financial investments, not maintenance capex, were the primary drain. working_capital_dynamics: Inventory rose or remained elevated (57.50), and payables of 49.78 imply roughly 47 days payables; receivables data is missing, adding uncertainty. The negative gap between NI and OCF likely reflects timing of collections and inventory/project buildup.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio of 112.8% conflicts with unreported DPS and a reported DOE of 0.1% that appears placeholder. Without DPS or total dividends paid, reliability is low. FCF_coverage: FCF coverage at -0.02x (based on OCF + total investing CF) suggests dividends would not be covered if they were paid at that level; however, capex-only FCF was positive, indicating ordinary dividends could be covered by operating cash barring large financial investments. policy_outlook: Given strong balance sheet and net cash, capacity for stable dividends exists. Absent disclosed DPS and payout policy details, assume a conservative stance pending clarity on cash allocation between investments and shareholder returns.

Risk Assessment

Business Risks:

• Order timing and backlog volatility in industrial equipment can create earnings lumpiness.
• Input cost and FX fluctuations affecting margins on long-lead projects.
• Customer capex cycles in end markets (e.g., manufacturing, environmental/industrial) driving demand swings.
• Execution risk on large projects leading to working capital strain and cash conversion variability.

Financial Risks:

• Weaker cash conversion (OCF/NI 0.62x) if receivables collection or inventory normalization lags.
• Investment cash outflows (-24.74) competing with dividends and buybacks for cash usage.
• Data gaps on long-term debt and interest-bearing debt prevent a full leverage assessment.

Key Concerns:

• Sustained negative free cash flow if investment outlays continue at current pace.
• Potential increase in working capital requirements as revenue grows.
• Limited transparency on dividend policy and payout trajectory due to unreported DPS.

Investment Implications

Key Takeaways:

• Solid growth with stable operating margin (~9%) and ROE around 9%.
• Very strong liquidity and low leverage support resilience.
• Cash conversion lagged earnings (OCF/NI 0.62x); investing outflows turned headline FCF slightly negative.
• Comprehensive income exceeded net income, bolstering equity.
• Data omissions (AR, long-term debt, DPS) limit precision on cash conversion and payout sustainability.

Metrics to Watch:

• Order intake and backlog/book-to-bill to gauge revenue visibility.
• OCF/NI and working capital movements (receivables days, inventory levels) for cash conversion.
• Capex and investment CF to distinguish growth investments from maintenance.
• Margin trajectory (gross and operating) amid input cost and FX changes.
• Dividend disclosures (DPS, payout policy) and any shift in capital allocation.

Relative Positioning: Within Japanese small- to mid-cap industrial machinery peers, the company shows above-average balance sheet strength, mid-to-high single-digit operating margins, and a balanced ROE achieved with low leverage; cash conversion is the main relative weak spot this year.

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