TADANO LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥240.55B
• Operating Income: ¥11.01B
• Net Income: ¥8.77B
• EPS: ¥103.55

Income Statement

Balance Sheet

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 Q3 was a mixed quarter for Tadano—solid top-line growth but sharp operating profit compression, with headline net profit flattered by non-recurring gains. Revenue grew 13.1% YoY to 2,405.47, demonstrating demand resilience across cranes and related solutions. Gross profit reached 629.56, implying a 26.2% gross margin. Operating income fell 43.3% YoY to 110.08, pushing the operating margin down to 4.6% despite higher sales. Ordinary income dropped 54.1% YoY to 78.57, reflecting higher non-operating expenses (29.19) outpacing non-operating income (6.46) and increased interest costs (15.11). Net income rose 49.1% YoY to 130.88, driven by material extraordinary gains implied by the gap between profit before tax (164.92) and ordinary income (78.57). We estimate net extraordinary gains around 86.35, which boosted bottom-line performance despite weak operations. Operating margin compressed by roughly 454 bps YoY (from ~9.1% to ~4.6%), and ordinary margin compressed by about 478 bps (from ~8.1% to ~3.3%). In contrast, net margin expanded by ~131 bps (to 5.4%) solely due to one-offs, masking core profitability pressure. Interest coverage remains adequate at 7.29x, and liquidity is strong with a current ratio of 221.9% and quick ratio of 171.2%. Balance sheet shows moderate leverage (D/E 1.31x) and ample cash (874.34) relative to short-term loans (582.99). ROE stands at 6.7%, supported by 2.31x financial leverage but held back by a low net profit margin on a core basis; ROIC is weak at 2.6% versus a 7–8% benchmark. Cash flow data are unreported, limiting earnings quality validation; however, the divergence between net income and operating performance is a caution flag. Forward-looking, margin recovery depends on price realization, mix improvement, and cost normalization; sustaining FY profit growth without recurring extraordinary gains will be challenging. We remain focused on operating leverage, inventory discipline, and funding costs into FY2025 Q4 and FY2026 guidance.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.7% = Net Profit Margin 5.4% × Asset Turnover 0.529 × Financial Leverage 2.31x. The largest YoY swing is in Net Profit Margin at the operating/ordinary level—operating margin compressed from ~9.1% to ~4.6%, while ordinary margin fell from ~8.1% to ~3.3%. Business drivers likely include cost inflation (materials, logistics), unfavorable mix, pricing lag, and higher SG&A intensity versus revenue. The apparent expansion in headline net margin is non-core, underpinned by estimated extraordinary gains (~86.35), and not sustainable. Asset turnover at 0.529 suggests a capital-intensive model with meaningful working capital (inventories 739.92), limiting efficiency; small improvements may come from faster order-to-cash and inventory turns. Financial leverage at 2.31x supports ROE but raises sensitivity to earnings volatility and rates; interest expense of 15.11 and coverage at 7.29x remain manageable. Concerning trends: operating and ordinary income declines against rising revenue indicate negative operating leverage; SG&A details are unreported, but given the margin compression, SG&A and/or cost of sales likely grew faster than revenue. Overall, core profitability deterioration is the key headwind, with ROIC at 2.6% well below cost of capital, signaling value dilution if not corrected.

Growth Assessment

Revenue growth of 13.1% YoY to 2,405.47 indicates demand recovery and/or pricing initiatives, but profit quality is weak as operating income fell 43.3% and ordinary income fell 54.1%. Headline net income grew 49.1% YoY due to non-recurring gains, not underlying operations. Growth sustainability hinges on: (1) price-cost balance (steel and logistics normalization), (2) product mix (higher-margin rough terrain/all-terrain cranes and aftermarket), and (3) overseas FX tailwinds and backlog conversion. Without recurring extraordinary gains, net profit growth is unlikely to persist unless operating margin rebounds toward the prior ~9% level. Watch backlog, book-to-bill, and regional mix for visibility on FY2026. Given asset intensity and inventory levels, revenue growth without margin recovery may strain ROIC.

Financial Health

Liquidity is solid: current ratio 221.9% and quick ratio 171.2% (well above benchmarks). No warning on current ratio (<1.0) or D/E (>2.0); D/E is 1.31x, within a conservative threshold but not low. Maturity profile appears manageable: short-term loans 582.99 are covered by cash 874.34 plus receivables 487.42; current assets 3,236.29 exceed current liabilities 1,458.27. Solvency: total liabilities 2,576.41 vs equity 1,967.09, indicating moderate leverage; interest coverage at 7.29x is above the 5x comfort level. Intangibles (goodwill 181.40; intangible assets 274.61) are sizable, implying some impairment risk if earnings underperform. No explicit off-balance sheet obligations are reported in the data provided.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and free cash flow cannot be calculated; this limits earnings quality validation. Nonetheless, the divergence between operating/ordinary income declines and net income growth, coupled with estimated extraordinary gains, suggests lower-quality earnings this quarter. Inventory is large at 739.92 relative to sales, indicating working capital intensity; without OCF detail, we cannot confirm whether working capital was a source or use of cash. Dividend and capex coverage by FCF cannot be assessed due to missing cash flow data. No clear signs of working capital manipulation can be identified from available static balances alone.

Dividend Sustainability

The calculated payout ratio is 22.8%, indicating headroom relative to typical <60% benchmarks. However, FCF coverage is not assessable given unreported OCF and capex. Balance sheet liquidity and leverage suggest capacity to maintain dividends in the near term, but sustainability should be judged on recurring operating earnings, not the current quarter's extraordinary gains. Policy visibility is limited due to missing DPS and dividend cash out data; monitor full-year guidance, payout policy, and cash generation in FY2025 Q4.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation (steel, components) and logistics costs
• Demand cyclicality in construction, infrastructure, and energy end-markets affecting crane orders
• FX volatility impacting export competitiveness and translation effects
• Aftermarket and parts mix sensitivity to fleet utilization
• Execution risk in backlog conversion and delivery schedules

Financial Risks:

• Moderate leverage (D/E 1.31x) and exposure to interest rate increases; interest expense 15.11
• Earnings quality risk due to reliance on extraordinary gains in the quarter
• Impairment risk from goodwill (181.40) and intangible assets (274.61) if profitability weakens
• Working capital intensity (inventories 739.92) can absorb cash in downcycles

Key Concerns:

• Core operating margin contraction of ~454 bps YoY despite 13.1% revenue growth
• ROIC at 2.6% materially below 7–8% target range, indicating suboptimal capital efficiency
• Ordinary income down 54.1% YoY, signaling weak recurring profitability
• Limited cash flow disclosure this quarter restricts validation of earnings quality and FCF

Investment Implications

Key Takeaways:

• Top-line growth strong, but core profitability weakened materially
• Headline net income strength is non-recurring; underlying earnings power is lower
• Liquidity is ample and leverage moderate, providing financial flexibility to execute recovery
• ROE of 6.7% aided by leverage; ROIC of 2.6% remains the primary structural challenge

Metrics to Watch:

• Operating margin trajectory and gross margin recovery
• Backlog, book-to-bill, and order intake by region/product
• Inventory days and working capital intensity
• Interest expense trend and debt mix (short- vs long-term)
• FX impacts (USD/JPY, EUR/JPY) on revenue and margins
• Occurrence/size of extraordinary gains or losses (to assess earnings quality)
• ROIC progression toward >5% near term and 7–8% medium term

Relative Positioning: Within Japanese machinery peers, Tadano maintains strong brand recognition and a global installed base, but current profitability and ROIC lag best-in-class levels. Liquidity and balance sheet strength are supportive, yet margin recovery and capital efficiency improvement are needed to close the gap with higher-ROIC peers.

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