HOSHIZAKI CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥365.43B
• Operating Income: ¥46.29B
• Net Income: ¥30.68B
• EPS: ¥238.02

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

Hoshizaki (6465) delivered a solid FY2025 Q3 performance, with top-line growth outpacing profits but overall earnings remaining resilient. Revenue rose 10.3% YoY to 3,654.3, supported by healthy demand, while operating income increased 8.7% YoY to 462.9, indicating robust but slightly moderated operating leverage. Ordinary income grew 4.1% YoY to 491.3, suggesting a less favorable non-operating contribution versus last year despite net positive financial income this period. Net income advanced 10.8% YoY to 336.6, translating to a 9.2% net margin and ROE of 8.7% per DuPont. Gross margin stands at 34.8%, and operating margin is 12.7%, implying solid pricing/scale benefits amid cost inflation. Operating margin compressed by about 19 bps YoY (from ~12.9% to ~12.7%), as revenue growth outpaced operating profit growth. The ordinary income margin also faces pressure relative to operating profit growth, likely due to lower YoY non-operating tailwinds compared to the prior year. Interest income (37.3) exceeded interest expense (11.5), supporting ordinary income and reflecting the company’s sizable net cash position (cash 1,675.4 vs short-term loans 53.5). Earnings quality cannot be fully assessed because operating cash flow and capex were not reported; this is a data gap rather than a concern. Liquidity remains very strong with a current ratio of 235% and quick ratio of 211%, while leverage is conservative (D/E ~0.44x) and interest coverage is a robust 40.4x. Asset efficiency (asset turnover 0.654) and moderate leverage (1.44x) underpin the 8.7% ROE. The 45.2% payout ratio appears prudent given earnings growth and balance sheet strength, though FCF coverage cannot be verified due to unreported cash flows. Intangibles and goodwill are elevated (goodwill 748.5; intangibles 988.2), implying some acquisition-driven growth and potential future impairment sensitivity. With ROIC disclosed at 14.0%, returns on invested capital are comfortably above typical cost of capital, indicating value-accretive operations. Forward-looking, margin discipline and working capital management will be key to sustain ROE near or above current levels. Given the global footprint, FX and input cost volatility remain watch points, but the balance sheet affords resilience.

Profitability Analysis

ROE (8.7%) = Net Profit Margin (9.2%) × Asset Turnover (0.654) × Financial Leverage (1.44x). The most notable change driver QoQ/YoY appears to be margin dynamics, as revenue growth (+10.3%) outpaced operating income growth (+8.7%), implying a modest decline in operating margin. Specifically, operating margin declined by ~19 bps YoY to ~12.7% (462.9/3,654.3) from ~12.9% inferred from prior period (426.0/3,313.1). Business-wise, this likely reflects a mix of higher SG&A (SG&A ratio ~23.2%) and cost inflation partially offset by pricing and scale benefits. Non-operating items were supportive (net +46.2), but ordinary income growth (+4.1%) lagged operating income growth, indicating less favorable non-operating contributions versus last year (e.g., lower FX or investment gains YoY). Asset turnover at 0.654 is steady for a durables/industrial equipment maker; leverage of 1.44x remains conservative, limiting ROE expansion from gearing. The margin compression looks modest and likely cyclical rather than structural, assuming pricing discipline and easing input costs continue; however, sustainability depends on demand in foodservice equipment and supply chain stability. No red flags on operating discipline, but note that SG&A growth direction is unknown from disclosures; the current SG&A-to-sales of ~23.2% warrants monitoring to ensure it does not rise faster than revenue.

Growth Assessment

Top-line growth of 10.3% indicates healthy demand and/or pricing effects across regions and product lines. Operating income growth of 8.7% trails revenue growth, implying slightly lower operating leverage in the period. Ordinary income growth of 4.1% suggests reduced non-operating tailwinds YoY despite a positive net financial income this quarter (interest income > interest expense). Net income growth of 10.8% outpaced operating income growth, supported by stable below-the-line items and manageable taxes (effective tax rate 31.4%). Gross margin of 34.8% and operating margin of 12.7% remain strong for the category, implying continued product differentiation and service mix. ROIC at 14.0% signals returns comfortably above cost of capital, supportive of reinvestment and selective M&A. With goodwill (748.5) and intangibles (988.2) sizable, the company likely benefits from acquired capabilities and brands, but must maintain earnings to avoid impairment risk. Near-term growth sustainability hinges on replacement demand in foodservice, channel inventory normalization, and pass-through of input costs (e.g., stainless steel). Currency movements can influence overseas profit translation; interest income may stay supportive if rates remain elevated. Outlook: modest margin pressure could persist if SG&A or costs grow faster than sales, but balance sheet strength allows continued investment in growth and service infrastructure.

Financial Health

Liquidity is very strong: current ratio 234.6% and quick ratio 211.1%, far above benchmarks; no warning triggers (both >1.0). Solvency is conservative with D/E ~0.44x and interest coverage 40.4x, indicating ample capacity to service debt. Cash and deposits (1,675.4) vastly exceed short-term loans (53.5), implying a net cash position and low refinancing risk. Maturity mismatch risk is low given abundant current assets (3,330.7) relative to current liabilities (1,419.9). While long-term loans and total interest-bearing debt are unreported, total liabilities are modest (1,702.6) versus equity (3,886.4). Elevated goodwill (748.5) and intangibles (988.2) introduce potential impairment sensitivity in downturns. No explicit off-balance sheet obligations were reported in the data provided. Overall financial health is robust, providing resilience against cyclical swings.

Cash Flow Quality

Operating cash flow was not reported, so OCF/Net Income cannot be calculated; this is a disclosure gap rather than an indication of poor quality. Free cash flow and capex are also unreported, preventing verification of cash conversion and investment intensity. Working capital appears healthy with high cash, moderate receivables (829.6), and inventories (333.7) relative to payables (393.5); no obvious signs of aggressive working capital manipulation are evident from the point-in-time data. Interest income exceeding interest expense suggests net cash generating financial income, but cash flow sustainability still depends on operating cash generation. Absent OCF/FCF data, we cannot confirm whether earnings are cash-backed; monitoring future OCF/NI (>1.0 desired) will be important.

Dividend Sustainability

The calculated payout ratio is 45.2%, within the <60% benchmark, implying room for continued distributions alongside reinvestment. With strong liquidity (net cash) and low leverage, balance sheet capacity supports dividends even without precise FCF data. However, FCF coverage cannot be assessed due to unreported OCF and capex. If ROIC remains around 14% and margins hold near current levels, the payout appears sustainable; downside risks would stem from margin compression or elevated capex cycles. No specific DPS figures were disclosed for the period; policy consistency should be confirmed in the next guidance update.

Risk Assessment

Business Risks:

• Demand cyclicality in commercial foodservice equipment impacting replacement and new installations
• Input cost volatility (e.g., stainless steel, components) affecting gross margin
• Execution risk on pricing and mix to offset inflation and FX
• Goodwill/intangible impairment risk if acquired units underperform
• Supply chain and logistics disruptions affecting deliveries and working capital

Financial Risks:

• FX translation risk from overseas operations impacting revenue and profit
• Interest rate shifts affecting interest income on large cash holdings
• Potential rise in SG&A intensity pressuring operating leverage
• Data gaps on cash flows and debt maturities limiting visibility on cash conversion and refinancing profile

Key Concerns:

• Slight operating margin compression (~19 bps YoY) as revenue outpaced operating profit
• Reduced YoY support from non-operating items despite current net positive financial income
• High level of goodwill and intangibles (total ~1,736.7) increasing impairment sensitivity in downturns

Investment Implications

Key Takeaways:

• Revenue +10.3% YoY with operating income +8.7% shows robust demand but modest operating margin compression
• ROE 8.7% underpinned by 9.2% net margin, 0.654x asset turnover, and conservative leverage (1.44x)
• Liquidity exceptionally strong (current ratio ~235%, net cash), supporting resilience and dividends
• ROIC at 14.0% indicates value-accretive operations despite elevated intangibles
• Ordinary income growth lagging OI suggests fewer non-operating tailwinds versus prior year

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (>1.0 target) once disclosed
• SG&A-to-sales ratio and operating margin trajectory
• Gross margin versus input costs (steel, components) and pricing actions
• Inventory turns and receivables collection (DSO/DIO) when disclosed
• FX impact on overseas profitability and interest income trends
• Capex intensity and FCF coverage of dividends

Relative Positioning: Within Japanese industrial equipment peers, Hoshizaki demonstrates above-average balance sheet strength (net cash), solid margins, and strong ROIC, positioning it favorably for disciplined growth and shareholder returns, with the main watch points being modest margin pressure and the absence of current cash flow disclosures.

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