TSUBAKI NAKASHIMA CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥52.76B
• Operating Income: ¥891M
• Net Income: ¥-1.13B
• EPS: ¥-29.07

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

Tsubaki Nakashima’s FY2025 Q3 (IFRS, consolidated) results show a challenging demand environment and significant pressure from non-operating items, resulting in a net loss despite positive operating profit. Revenue was 527.62 (100M JPY), down 9.5% YoY, reflecting softer volumes/pricing in core end-markets. Gross profit of 88.76 implies a gross margin of 16.8%, which, while still positive, is thin for an engineered components business and vulnerable to mix and utilization. SG&A was 62.27 (11.8% of sales), and the delta between gross profit less SG&A (26.49) and reported operating income (8.91) indicates notable other operating expenses under IFRS (e.g., restructuring/one-offs), compressing the operating margin to 1.7%. Operating income dropped 65.4% YoY, signaling pronounced operating deleverage as revenue contracted. Below the operating line, the company booked sizable non-operating or financial items: profit before tax was -8.07 despite positive operating income, pointing to material finance costs, FX losses, or other non-operating charges in the quarter-to-date period. The effective tax rate prints at -100.2% because tax expense (8.09) was recognized despite a pre-tax loss, deepening the net loss to -11.30. EBITDA was 33.89 (6.4% margin), evidencing some cash earnings capacity relative to operating profit, supported by D&A of 24.98. DuPont analysis yields a net margin of -2.1%, asset turnover of 0.308, and financial leverage of 2.92x, combining to ROE of -1.9%; leverage is amplifying losses given the negative margin. Cash flow quality was better than the headline loss suggests: operating cash flow was positive at 19.99, implying that non-cash charges and/or working-capital movements offset the accounting loss. However, capex of 26.28 led to negative free cash flow of -6.07, and financing outflows of -18.17 (including dividends of -5.66 and buybacks of -6.03) reduced cash to 230.60. The balance sheet shows total assets of 1,711.11 and total equity of 586.05 (equity ratio 34.2%), with liabilities of 1,132.13; the reported debt-to-equity ratio of 1.93x suggests a fairly levered profile. Inventories are sizable at 360.78 and receivables at 206.85, underscoring working capital intensity and sensitivity to demand swings. With revenue under pressure and non-operating losses present, near-term profitability depends on mix, utilization, and the normalization of finance/FX charges or other below-OP line items. Dividend sustainability is strained by negative FCF, although current cash provides a temporary buffer. Data gaps (non-operating breakdown, debt composition, current liabilities) limit precision, but available figures clearly indicate margin pressure, deleveraging, and the need for disciplined capex and working capital control. Overall, while the franchise retains cash-generating capability at the operating level, earnings quality is diluted by below-OP charges and an adverse tax burden under IFRS.

Profitability Analysis

ROE_decomposition: Net margin -2.1% × asset turnover 0.308 × financial leverage 2.92x = ROE -1.9% (matches reported). Negative profitability is the dominant driver; leverage modestly magnifies the loss. margin_quality: Gross margin 16.8% (GP 88.76 on revenue 527.62) is thin and suggests limited pricing power or underutilization. SG&A ratio is 11.8%, leaving 5.0% spread before other operating items; the step-down to operating margin of 1.7% indicates material other operating costs under IFRS (e.g., restructuring, impairment, or other operating expenses). EBITDA margin of 6.4% shows some cash earnings capacity, but conversion to operating income is weak due to these other operating items. operating_leverage: Operating income declined 65.4% on a 9.5% revenue drop, indicating high negative operating leverage. Fixed-cost absorption appears adverse, with inventory levels (360.78) suggesting capacity underutilization risks. The sensitivity of OP margin to volume implies that even modest top-line recovery could improve margins, but conversely further volume pressure could push OP into loss.

Growth Assessment

revenue_sustainability: Revenue contracted 9.5% YoY to 527.62, reflecting cyclical end-market softness. Working-capital intensity (inventories and receivables totaling 567.63) highlights exposure to demand fluctuations. Absent segment disclosures, we infer broad-based weakness across industrial and automotive applications. profit_quality: Despite positive operating income (8.91), profit before tax was -8.07 due to substantial non-operating/financial charges. The negative effective tax rate (-100.2%) exacerbated the net loss, reducing earnings quality and visibility. EBITDA of 33.89 provides a baseline of operating cash earnings, but the bridge to net income is impaired by below-OP and tax items. outlook: Short-term outlook hinges on demand stabilization, cost containment, and normalization of non-operating items (finance costs/FX). If volumes stabilize and inventory is right-sized, gross margin and operating leverage should improve. Conversely, continued macro softness or JPY volatility could sustain below-OP losses and keep ROE negative.

Financial Health

liquidity: Cash and equivalents stand at 230.60. Operating CF was positive at 19.99, but FCF was -6.07 due to capex of 26.28. Current ratio/quick ratio are not computable due to unreported current liabilities, so liquidity headroom cannot be precisely assessed. solvency: Total liabilities are 1,132.13 against equity of 586.05, implying an equity ratio of 34.2% and financial leverage of 2.92x. The reported debt-to-equity ratio is 1.93x, indicating a levered capital structure; interest coverage cannot be calculated due to unreported interest expense, but negative PBT flags pressure from finance costs or other non-operating items. capital_structure: Equity 586.05 with capital surplus 113.17 and retained earnings 154.86 indicates accumulated earnings capacity, but current period losses reduce retained earnings growth. Lack of detail on interest-bearing debt and maturity structure limits analysis of refinancing risk.

Cash Flow Quality

earnings_quality: OCF of 19.99 versus net income of -11.30 yields an OCF/NI ratio of -1.77x, indicating cash generation outpaced accounting earnings due to non-cash charges (D&A 24.98) and likely working-capital effects. The divergence between EBITDA (33.89) and operating income (8.91) reflects significant non-cash and other operating items. FCF_analysis: FCF was -6.07 (OCF 19.99 less capex 26.28). Investing CF of -26.06 closely tracks capex, suggesting limited M&A or disposals this period. Financing CF of -18.17 (dividends -5.66, buybacks -6.03, remainder likely net debt repayment or interest) further reduced cash. working_capital: Inventories (360.78) and receivables (206.85) are sizable; with current assets of 849.63 and no current liabilities disclosed, precise turns and days are not computable. High inventory levels amid declining sales increase risk of write-downs and suppress OCF if not normalized.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio of -92.0% is not economically meaningful due to negative earnings. With net loss and negative ROE, earnings-based coverage is weak. FCF_coverage: FCF coverage is -0.58x given negative FCF (-6.07) and dividends paid of -5.66; dividends were not covered by internally generated free cash this period and relied on cash reserves and/or balance sheet. policy_outlook: Given negative earnings and FCF in the period, sustaining dividends and buybacks at current levels would depend on cash on hand (230.60) and future OCF recovery. A more conservative stance (recalibrating payouts to FCF) would align with balance sheet preservation until profitability normalizes. No DPS data were disclosed, limiting visibility on forward policy.

Risk Assessment

Business Risks:

• Cyclical demand in automotive and industrial end-markets leading to volume and mix volatility
• Pricing power constraints evidenced by thin gross margin (16.8%)
• High operating leverage driving outsized profit swings on modest revenue changes
• Inventory risk amid softer sales, raising potential for write-downs
• Exposure to FX (JPY movements) affecting both translation and transaction results

Financial Risks:

• Leverage is elevated (D/E 1.93x; equity ratio 34.2%), reducing flexibility
• Negative profit before tax despite positive operating income indicates sizable non-operating/finance costs
• Interest coverage not observable due to unreported interest expense, creating uncertainty
• Negative FCF in the period with concurrent shareholder returns (dividends and buybacks) pressuring cash
• Tax expense despite loss (effective tax rate -100.2%) increases earnings volatility under IFRS

Key Concerns:

• Sustainability of margins and ability to offset fixed costs amid revenue declines
• Normalization path for non-operating losses (finance costs, FX, or other items) that flipped PBT negative
• Working capital normalization, particularly inventories at 360.78, to support cash generation
• Dividend and buyback capacity given negative FCF and levered balance sheet

Investment Implications

Key Takeaways:

• Top-line contracted 9.5% YoY to 527.62 amid cyclical softness
• Operating margin compressed to 1.7% and OP fell 65.4% YoY, reflecting negative operating leverage
• Below-operating losses turned PBT to -8.07 despite positive OP, impairing earnings quality
• EBITDA margin of 6.4% indicates some cash earnings, but conversion to net profit is weak
• OCF positive at 19.99, yet capex 26.28 drove FCF to -6.07
• Equity ratio 34.2% and D/E 1.93x point to a levered capital structure
• Dividend and buybacks (totaling 11.69) not covered by FCF in the period
• Inventory and receivables levels are high relative to sales, elevating working capital risk

Metrics to Watch:

• Order trends and utilization rates to gauge operating leverage trajectory
• Gross margin progression and pricing/mix improvements
• Non-operating items: finance costs, FX gains/losses, and other one-offs impacting PBT
• Cash conversion (OCF/EBITDA) and free cash flow coverage of shareholder returns
• Inventory days and receivables days to monitor working capital normalization
• Net debt and interest coverage once interest expense is disclosed
• Effective tax rate normalization under IFRS

Relative Positioning: Within Japan-listed precision components/engineered parts peers, the company currently exhibits below-average profitability (EBITDA margin 6.4%, operating margin 1.7%) and higher earnings volatility due to non-operating charges, alongside a moderately high leverage profile; near-term positioning appears weaker until volume and below-OP items normalize.

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
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