Fulltech Co.Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥9.91B
• Operating Income: ¥360M
• Net Income: ¥422M
• EPS: ¥50.86

Income Statement

Balance Sheet

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

Furutech Co., Ltd. (TSE: 6546) reported FY2025 Q3 consolidated results under JGAAP showing modest top-line resilience but pronounced earnings compression. Revenue was ¥9,913 million, down 0.9% year over year, indicating relatively stable demand conditions. Gross profit was ¥3,419 million, translating to a gross margin of 34.5%, which is healthy for an engineering/services-oriented business model. Operating income declined sharply to ¥360 million (-39.4% YoY), pulling the operating margin down to 3.6% as SG&A intensity rose. Ordinary income of ¥420 million exceeded operating income, suggesting positive non-operating contributions more than offset small interest expenses. Net income was ¥272 million (-35.3% YoY), implying a net margin of 2.74% and highlighting compressed profitability. DuPont decomposition indicates ROE of 3.97%, driven by a 2.74% net margin, asset turnover of 0.914x, and financial leverage of 1.58x—signaling low-to-moderate leverage and subdued profitability as the primary constraints on ROE. Liquidity appears sound with a current ratio of 157.1% and working capital of ¥2,724.9 million, supporting near-term obligations. Solvency is conservative: total liabilities are ¥5,546.6 million against equity of ¥6,848.0 million, implying liabilities-to-equity of 0.81x and an implied equity ratio of roughly 63.2% (equity/total assets), despite the disclosed equity ratio field showing 0.0% (unreported). Interest expense is minimal at ¥4.9 million, and the interest coverage ratio is a robust 73.6x, underlining low financial risk. The tax expense reported at ¥229.96 million versus net income implies an estimated effective tax rate around the mid-40% range based on a reconstructed pre-tax income, though mapping differences between ordinary and pre-tax income may exist. Operating leverage was unfavorable this quarter: a small revenue decline coincided with disproportionately large operating profit contraction, pointing to elevated fixed cost absorption or higher SG&A. Cash flow statements are unreported in this dataset, constraining assessment of earnings quality and free cash flow conversion. Dividend data are also unreported; EPS for the period is ¥50.86, but payout metrics cannot be confirmed. Overall, the company maintains a strong balance sheet and liquidity but faces near-term margin pressure that weighs on ROE and earnings quality. Data limitations include unreported cash flows, inventories, DPS, share counts, and certain ratios, which should be considered when interpreting these results.

Profitability Analysis

ROE is 3.97%, decomposed into a net margin of 2.74%, asset turnover of 0.914x, and financial leverage of 1.58x. Operating margin is 3.6% (¥360 million operating income on ¥9,913 million revenue), down sharply YoY in contrast to a modest 0.9% revenue decline, indicating negative operating leverage. Gross margin of 34.5% (¥3,418.6 million gross profit) remains solid, but SG&A was approximately ¥3,058.6 million (gross profit minus operating income), equating to about 30.9% of revenue—an elevated level that compressed operating margin. Ordinary margin of roughly 4.2% (¥420 million/¥9,913 million) benefited from non-operating income exceeding interest expense; interest burden is minimal (¥4.9 million), with interest coverage at 73.6x. The net margin at 2.74% reflects both operating compression and a relatively high effective tax burden estimated in the mid-40% range. Overall, margin quality is mixed: healthy gross profitability but high overhead and cost absorption reduce operating profitability. With leverage modest (assets/equity ≈ 1.58x), ROE is primarily limited by low net margin rather than capital structure. Sustained improvement likely depends on SG&A discipline, utilization, and project mix supporting gross margin stability.

Growth Assessment

Revenue declined 0.9% YoY to ¥9,913 million, suggesting broadly stable demand but no growth momentum. Profitability deteriorated much more than revenue, with operating income down 39.4% YoY and net income down 35.3% YoY, driven by higher operating costs or less favorable mix. Gross margin at 34.5% indicates underlying project/service economics remain acceptable, but overhead intensity increased. The ordinary income uplift versus operating income indicates stable non-operating support, but core operating performance weakened. With limited disclosure on backlog, orders, or segment mix, revenue sustainability beyond Q3 cannot be firmly assessed. If revenue stabilizes but SG&A remains elevated, earnings recovery may lag; conversely, any normalization in cost run-rate could provide operating leverage on a flat-to-modestly growing top line. Outlook hinges on execution in cost control, pricing, and utilization, as well as macro conditions in construction, building equipment, and maintenance cycles relevant to the company’s end markets. Absent cash flow data, the quality of earnings growth (or decline) cannot be cross-validated via OCF.

Financial Health

Total assets are ¥10,844 million and total equity is ¥6,848 million, implying an equity ratio near 63.2% and financial leverage of 1.58x—indicative of a conservative capital structure. Total liabilities are ¥5,546.6 million (liabilities-to-equity 0.81x), and current liabilities are ¥4,773.4 million against current assets of ¥7,498.3 million, yielding a current ratio of 157.1% and working capital of ¥2,724.9 million. The quick ratio is shown equal to the current ratio due to unreported inventories; actual quick liquidity may be lower if inventories exist under different account names. Interest expense is very low at ¥4.9 million, and the 73.6x interest coverage underscores low refinancing risk. No cash and equivalents are reported in the dataset, which reflects non-disclosure rather than a true zero balance; therefore, point-in-time liquidity from cash cannot be assessed here. Overall, solvency and near-term liquidity appear strong based on available balance sheet items.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported in this dataset (shown as zero), so direct evaluation of earnings-to-cash conversion is not possible. The OCF/Net Income ratio and FCF figures appearing as zero reflect non-disclosure rather than actual values and should not be interpreted as cash deficits. Without OCF and capex, we cannot validate working capital movements, cash conversion cycle, or the sustainability of earnings via cash generation. Given the observed margin compression, it would be important to monitor whether receivables and unbilled work increased and whether payables support temporarily masked cash outflows. In the absence of cash flow data, a cautious stance on earnings quality is warranted until OCF trends and free cash flow conversion are disclosed.

Dividend Sustainability

Dividend per share (DPS), payout ratio, and free cash flow coverage are unreported in this dataset and thus cannot be assessed quantitatively. EPS for the period is ¥50.86, but without DPS and OCF/capex data, payout affordability and coverage cannot be determined. Balance sheet strength (equity ratio ~63% and low interest burden) suggests capacity to sustain ordinary dividends under normal conditions, but the sharp YoY decline in operating and net income introduces caution. Policy outlook cannot be inferred from the provided data; confirmation requires management guidance or historical dividend records. Until cash flows and declared dividends are disclosed, dividend sustainability assessment remains limited.

Risk Assessment

Business Risks:

• Operating leverage: small revenue declines drove outsized operating profit contraction (-39.4% YoY), implying high fixed cost absorption.
• Margin pressure: elevated SG&A at ~30.9% of sales reduces operating margin resilience.
• Project mix and pricing risk: gross margin sustainability depends on mix and execution in installation/maintenance projects.
• Demand cyclicality in construction/building equipment end-markets, which can affect order intake and utilization.
• Execution risk on cost control and staffing in a tight labor environment.

Financial Risks:

• Limited visibility on cash flows (OCF/FCF unreported), constraining assessment of liquidity from cash generation.
• Potential working capital swings (receivables, unbilled, advances) typical of project businesses could impact near-term cash.
• Tax burden variability; estimated effective tax rate appears relatively high based on reconstructed figures.
• Inventory and cash balances unreported in this dataset, limiting precise liquidity analysis.

Key Concerns:

• Disproportionate decline in operating income despite flat revenue underscores earnings sensitivity to costs.
• Insufficient disclosure of cash flows and dividends prevents full evaluation of earnings quality and payout sustainability.
• Reliance on non-operating items to bridge operating shortfalls (ordinary income > operating income) may not be durable.

Investment Implications

Key Takeaways:

• Revenue essentially flat (-0.9% YoY) but operating income down 39.4% highlights negative operating leverage.
• Gross margin remains solid at 34.5%, but SG&A at ~30.9% of sales compressed operating margin to 3.6%.
• ROE of 3.97% is constrained by low net margin rather than leverage (assets/equity ~1.58x).
• Balance sheet is conservative with an implied equity ratio ~63% and liabilities-to-equity of 0.81x.
• Interest burden is negligible (interest expense ¥4.9 million; coverage 73.6x).
• Cash flow, DPS, and share data are unreported; conclusions on FCF and payout cannot be drawn.

Metrics to Watch:

• Order intake and backlog trends to gauge near-term revenue visibility.
• Gross margin trajectory by project/service mix.
• SG&A run-rate and productivity metrics (utilization, headcount efficiency).
• Operating cash flow and working capital movements (receivables, unbilled, payables).
• Capex levels and resulting free cash flow.
• Tax rate normalization and any extraordinary/non-operating items.
• Inventory and cash balances once disclosed.

Relative Positioning: Within Japanese building equipment and engineering services peers, Furutech exhibits a conservative balance sheet and low financing risk but currently weaker operating profitability due to elevated SG&A and unfavorable operating leverage; margin recovery and cash conversion disclosure will be key to closing the gap with more efficient 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