KUBOTA CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.20T
• Operating Income: ¥214.69B
• Net Income: ¥166.10B
• EPS: ¥124.10

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Kubota FY2025 Q3 (IFRS, consolidated) shows a cyclical slowdown with solid cash generation. Revenue declined 3.2% YoY to 22,042.82, while operating income fell 22.0% YoY to 2,146.90, indicating margin compression amid softer demand and/or adverse mix. Using disclosed revenue and cost of sales, we derive gross profit of 6,683.66, implying a gross margin of about 30.3%, and an operating margin of approximately 9.7%. Net income decreased 28.3% YoY to 1,419.62, with an effective tax rate of 27.9% and profit before tax of 2,278.23, suggesting modest positive net non-operating contributions (+131). EBITDA was 3,098.45 (14.1% margin), indicating some cushion from depreciation but not enough to offset operating pressure. DuPont analysis points to a 5.2% ROE, driven by a 6.4% net margin, 0.378x asset turnover, and 2.16x financial leverage; this ROE is subdued for the machinery sector. Total comprehensive income of 801.25 is notably below net income, implying negative other comprehensive income, likely from FX translation and/or securities valuation, weighing on equity. Cash flow quality remains a relative strength: operating cash flow was 2,107.24 (OCF/NI 1.48x), and free cash flow was positive at 1,011.66 after 1,144.22 of capex. The balance sheet is sound with an equity ratio of 42.3% and reported debt-to-equity of 1.16x, though precise interest-bearing debt and current liability breakdowns are not disclosed in this dataset. Inventory stands at 6,869.75 (roughly 31% of revenue), and turnover appears moderate given cost of sales, suggesting continued focus on channel and production alignment. Financing cash outflows include dividends of 571.78 and share repurchases of 200.02, both covered by free cash flow in the period. Despite lower earnings, dividend sustainability appears intact near term with a calculated payout ratio of 40.5% and FCF coverage of 1.76x. Revenue softness and margin compression likely reflect normalization in North American agriculture/construction equipment channels, higher fixed-cost absorption, and possibly pricing/mix headwinds. The outlook hinges on inventory normalization, end-market recovery, and cost control; FX can be a swing factor for both earnings and OCI. Data limitations include unreported gross profit in XBRL (derived here), lack of current liabilities and interest expense, and absence of R&D and detailed segment disclosures; conclusions are based on available non-zero items and reasonable derivations.

Profitability Analysis

ROE_decomposition: ROE 5.2% = Net margin 6.4% x Asset turnover 0.378 x Financial leverage 2.16x (provided). The subdued ROE is primarily a function of lower net margin and modest asset efficiency. margin_quality: Derived gross margin ~30.3% (gross profit 6,683.66 = revenue 22,042.82 - cost of sales 15,359.16). Operating margin ~9.7% (2,146.90 / 22,042.82). EBITDA margin 14.1%. The YoY 22% decline in operating income vs a 3.2% revenue decline indicates margin compression, likely from weaker mix, price-cost dynamics, and lower operating leverage. operating_leverage: Operating income fell disproportionately to revenue (22% vs 3.2%), evidencing negative operating leverage in the period. Depreciation of 951.55 (about 4.3% of revenue) suggests a sizable fixed-cost base; with volumes easing, fixed costs diluted margins.

Growth Assessment

revenue_sustainability: Revenue decreased 3.2% YoY to 22,042.82, signaling a cooling cycle across agriculture and construction equipment and possibly water infrastructure. Without segment and regional splits, sustainability is uncertain, but inventory levels suggest channels may still be normalizing. profit_quality: Net income contracted 28.3% YoY to 1,419.62; operating income decreased 22.0% YoY. Effective tax rate at 27.9% is normalizing; PBT exceeded operating income by ~131, implying small positive contributions from non-operating items and equity affiliates (equity method income 18.17). outlook: Recovery depends on destocking completion, demand stabilization in North America/Europe, cost pass-through, and FX. Margin restoration will require better utilization and mix; any improvement in dealer inventory and order intake would be key leading indicators.

Financial Health

liquidity: Cash and equivalents are 2,221.35 with strong OCF of 2,107.24. Current ratio and quick ratio are not calculable due to unreported current liabilities; thus short-term liquidity assessment relies on cash generation rather than point-in-time ratios. solvency: Total assets 58,317.45; total liabilities 31,302.53; total equity 27,014.92 (equity ratio 42.3%). Debt-to-equity reported at 1.16x (likely broad liabilities-to-equity proxy given interest-bearing debt is unreported). Leverage (assets/equity) is 2.16x per DuPont. capital_structure: Comprehensive income lagging net income (801.25 vs 1,419.62) suggests OCI headwinds impacting equity. Financing cash outflow (-1,670.63) reflects dividends and buybacks plus possible net debt repayment; absence of interest expense disclosure limits coverage analysis.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.48x indicates healthy conversion. The gap between net income (1,419.62) and OCF (2,107.24) suggests supportive working-capital inflows or non-cash charges (D&A 951.55). FCF_analysis: FCF of 1,011.66 after capex of 1,144.22 demonstrates the ability to self-fund investments. Capex is about 5.2% of revenue, consistent with ongoing capacity and product development needs. working_capital: Inventories at 6,869.75 are sizable (~31% of revenue). With cost of sales 15,359.16, implied inventory turnover is ~2.24x for the reported period; continued normalization would support OCF. Receivables and payables are unreported, constraining a full working-capital assessment.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 40.5%, which is moderate given current earnings pressure. DPS details are unreported in this dataset. FCF_coverage: Dividends paid of 571.78 and share repurchases of 200.02 together are covered by FCF of 1,011.66 (FCF coverage of dividends ~1.77x), indicating capacity to maintain shareholder returns near term. policy_outlook: While earnings are down, strong cash conversion and a balanced capital structure support continuity. However, sustained margin pressure or OCI-related equity erosion could constrain future increases; management may prioritize inventory normalization and selective capex.

Risk Assessment

Business Risks:

• Demand cyclicality in global agriculture and construction equipment markets
• Channel inventory/destocking risk impacting volumes and pricing
• Input cost volatility (steel, logistics) and pricing power constraints
• FX fluctuations (USD/EUR vs JPY) affecting revenue, margins, and OCI
• Competitive intensity against global peers across tractors, engines, and CE
• Regulatory and emissions standards impacting product costs and timing
• Supply chain disruptions affecting parts availability and lead times

Financial Risks:

• Limited transparency on interest-bearing debt and current liabilities in the dataset
• Negative OCI reducing comprehensive income and potentially equity
• Potential working-capital reinvestment needs if volumes re-accelerate
• Exposure to dealer financing and credit risk (receivables not disclosed here)

Key Concerns:

• Operating margin compression with negative operating leverage
• Elevated inventories relative to revenue
• ROE at 5.2%, below typical machinery peer benchmarks

Investment Implications

Key Takeaways:

• Revenue -3.2% YoY and operating income -22.0% YoY indicate a cyclical soft patch
• Derived gross margin ~30.3% and operating margin ~9.7%; EBITDA margin 14.1%
• OCF 2,107.24 exceeds NI (1.48x), supporting solid cash conversion
• FCF positive at 1,011.66 after 1,144.22 of capex; both dividends and buybacks covered
• Equity ratio 42.3% and leverage 2.16x indicate a balanced balance sheet
• Total comprehensive income (801.25) trails NI, highlighting OCI headwinds
• ROE 5.2% reflects compressed margins and moderate asset turnover
• Inventory is high at 6,869.75; normalization is key for future cash flow

Metrics to Watch:

• Order intake and dealer inventory levels by region
• Inventory turnover and working-capital days
• Price-cost spread and mix (premium vs mass-market equipment)
• Operating margin trajectory and utilization rates
• FX trends and OCI impacts on equity
• Capex discipline versus demand outlook
• Dividend and buyback cadence versus FCF

Relative Positioning: Versus Japanese machinery peers, Kubota has higher exposure to agriculture and water infrastructure and less to mining; current ROE (5.2%) and operating margin (~9.7%) are below top-tier peers in an upcycle (e.g., global construction leaders often deliver double-digit ROE), reflecting cyclical normalization and negative operating leverage in FY2025 Q3.

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