BALMUDA Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥6.77B
• Operating Income: ¥-842M
• Net Income: ¥-231M
• EPS: ¥-100.68

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

Verdict: Weak quarter with sharp revenue decline and deep operating losses, albeit supported by ample liquidity. Revenue was 67.66 (100M JPY), down 22.3% YoY, indicating demand softness and/or channel adjustment. Gross profit was 26.89 with a gross margin of 39.7%, but SG&A of 29.28 exceeded gross profit, driving operating loss of -8.42. Operating margin was approximately -12.4%, and ordinary income was -8.53, highlighting persistent operating pressure. Net income was -8.55, implying a net margin of -12.6% and annualized ROE of -24.1%. Asset turnover was 1.335 and financial leverage 1.43x, indicating the loss is primarily margin-driven rather than balance-sheet driven. Interest coverage was -93.6x, signaling limited earnings capacity to service debt despite low absolute borrowings. Liquidity remains strong with current ratio 319% and quick ratio 207%, and cash and deposits of 9.75 provide a buffer against near-term obligations. Inventory stood at 15.17, a material component of current assets, suggesting execution risk if sell-through remains weak. The P/L line items suggest the presence of unreported extraordinary items (profit before tax -2.29 vs operating/ordinary losses) that complicate comparability. Margins likely compressed YoY, but precise basis point changes are not calculable due to lack of prior-period margin disclosures. Cash flow quality cannot be assessed as operating cash flow data is unreported; this is a key monitoring gap. With ROIC at -29.6%, capital efficiency is well below management targets and indicates value dilution if sustained. Forward-looking, recovery hinges on stabilizing sales, disciplined SG&A control, and inventory normalization; absent these, losses could persist despite a solid balance sheet.

Profitability Analysis

Step 1 (ROE decomposition): ROE (-24.1%) = Net Profit Margin (-12.6%) × Asset Turnover (1.335) × Financial Leverage (1.43x). Step 2: The most adverse driver is Net Profit Margin, which is deeply negative due to operating losses. Step 3: Business reason: GP of 26.89 could not cover SG&A of 29.28, producing an operating loss (-8.42); limited non-operating income (0.19) and interest expense (0.09) offered no relief. This points to revenue shortfall and fixed-cost burden in a seasonally important period. Step 4: Sustainability: Margin pressure is partly cyclical (demand/channel destocking) but also structural if product mix/pricing and fixed cost base are misaligned; without cost rationalization or sales recovery, negative margins could persist. Step 5: Concerning trends: Revenue fell 22.3% YoY while SG&A remains high relative to gross profit, suggesting unfavorable operating leverage. Interest coverage is negative, underscoring weak earnings capacity despite modest leverage.

Growth Assessment

Revenue declined 22.3% YoY to 67.66, indicating a challenging demand environment and/or channel inventory corrections. No segment or geographic detail is available to isolate drivers, but the consumer durable profile suggests sensitivity to discretionary demand and competitive pricing. Gross margin at 39.7% remains respectable, implying product-level contribution is intact, but scale deleverage (fixed SG&A) turned operating margin to -12.4%. Profit quality is weak due to reliance on cost absorption; ordinary and net losses mirror operating losses. Outlook depends on: (1) sell-through improvement and normalized orders, (2) tighter SG&A controls, and (3) inventory management to prevent discounting. With ROIC at -29.6% and ROE at -24.1%, a return to value-creating growth requires material operating improvement. Given limited disclosure on order backlog or product pipeline, revenue sustainability is uncertain near term.

Financial Health

Liquidity: Strong. Current ratio 319% and quick ratio 207% indicate ample short-term coverage; working capital is 29.66. Cash and deposits 9.75 vs current liabilities 13.52 mitigate liquidity stress, supported by receivables 7.20 and inventories 15.17. Solvency: Conservative. Debt-to-equity 0.43x (based on total liabilities/equity) and modest interest-bearing loans (short-term 1.00, long-term 1.69). No warnings on Current Ratio (<1.0) or D/E (>2.0). Maturity mismatch: Low—current assets (43.18) comfortably exceed current liabilities (13.52). Off-balance sheet: Not disclosed; no information on guarantees or leases beyond what may be embedded in SG&A.

Cash Flow Quality

OCF/Net Income cannot be assessed (OCF unreported). Free cash flow is unreported, so dividend and capex coverage are not analyzable. Earnings quality flags: (1) Operating loss is primary driver of negative NI; with no OCF data, we cannot confirm cash conversion. (2) Inventory of 15.17 is sizable versus YTD sales (inventory is ~22% of revenue), implying potential working capital drag if sell-through remains soft. (3) Limited non-operating items (0.19 income, 0.09 expense) suggest losses are operational in nature rather than one-offs disclosed in non-operating lines.

Dividend Sustainability

Dividend data is unreported; payout and FCF coverage are not calculable. Given negative net income (-8.55) and unreported OCF/FCF, near-term dividend capacity would typically be constrained absent excess cash or policy commitments. Equity remains solid at 35.46 (BVPS ~416 JPY), but sustaining distributions during losses would risk depleting capital unless profitability normalizes.

Risk Assessment

Business Risks:

• Demand volatility in discretionary home appliances leading to revenue swings (-22.3% YoY).
• High fixed SG&A relative to current scale, amplifying operating losses when sales decline.
• Inventory risk (15.17) if sell-through lags, potentially forcing discounting and margin erosion.
• Product cycle and innovation risk affecting pricing power and mix.
• Supply chain and procurement cost variability impacting gross margins.

Financial Risks:

• Negative interest coverage (-93.56x) indicating weak debt service capacity from earnings.
• ROIC of -29.6% implying capital inefficiency and potential value erosion if prolonged.
• Possible extraordinary P/L adjustments (PBT -2.29 vs operating/ordinary losses) not detailed, creating forecasting uncertainty.
• Currency exposure on sourcing/manufacturing if FX moves against procurement costs (not quantified).

Key Concerns:

• Sustained operating losses (-8.42) with no visibility on cost-down or restructuring.
• Lack of operating cash flow disclosure impedes assessment of cash burn.
• Scale deleverage as revenue contracts faster than cost base can adjust.
• Execution risk in inventory normalization ahead of key sales periods.

Investment Implications

Key Takeaways:

• Top-line down 22.3% YoY; operating margin -12.4% with SG&A exceeding gross profit.
• ROE -24.1% driven primarily by negative margins; leverage is not the culprit.
• Liquidity is strong (current ratio 319%, quick 207%) despite earnings weakness.
• Interest coverage negative, highlighting fragile earnings capacity.
• ROIC -29.6% flags urgent need for operational turnaround.

Metrics to Watch:

• Quarterly revenue trajectory and order intake to gauge demand recovery.
• Gross margin stability versus discounting and input costs.
• SG&A run-rate and any restructuring savings.
• Inventory days and inventory/revenue ratio for sell-through health.
• Operating cash flow and free cash flow once disclosed.
• Extraordinary gains/losses detail to reconcile PBT and NI.

Relative Positioning: Within Japan-listed consumer electronics/small appliance peers, the company currently underperforms on profitability (negative operating and net margins) and capital efficiency (ROIC -29.6%), but maintains a relatively conservative balance sheet and strong liquidity. Turnaround hinges on restoring scale and cost discipline; absent that, peers with positive margins and cash generation appear better positioned.

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