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

BALMUDA Co., Ltd. (TSE: 66120) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥6.766bn, down 22.3% YoY, reflecting a materially weaker top line. Despite the revenue decline, reported gross profit of ¥2.689bn implies a gross margin of 39.7%, which is relatively solid for a premium small-appliance brand and consistent with the calculated margin provided. However, the company recorded an operating loss of ¥842mn and an ordinary loss of ¥853mn, culminating in a net loss of ¥855mn (EPS: -¥100.68). The DuPont bridge indicates an ROE of -24.11%, driven by a negative net profit margin (-12.64%), decent asset turnover (1.335x), and moderate leverage (financial leverage 1.43x). The revenue contraction combined with continued operating losses suggests unfavorable operating leverage, where fixed costs (including SG&A) are not sufficiently flexed down with sales. Interest burden is low in absolute terms (interest expense ¥9mn) but coverage is negative given the operating loss (interest coverage -93.6x). Liquidity ratios appear strong on the face of it (current ratio 306.1%, quick ratio 245.7%), supported by sizeable working capital of ¥3.725bn; however, some balance sheet line items show classification inconsistencies (current assets exceed total assets), warranting caution in interpretation. Total assets are ¥5.067bn, total liabilities ¥1.832bn, and total equity ¥3.546bn, implying a conservative balance sheet and modest leverage (D/E 0.52x), though cash and cash flows were not disclosed in XBRL for the period. Inventory of ¥1.092bn is meaningful relative to sales, and inventory management will be key given the top-line pressure. The company’s equity base remains intact, but persistent losses are eroding ROE and could constrain strategic flexibility if sustained. The absence of reported operating, investing, and financing cash flows (zeros indicate non-disclosure) prevents a proper assessment of earnings-to-cash conversion and free cash flow sufficiency. Dividend per share is zero, which is prudent given losses and the need to preserve liquidity. Overall, the quarter shows resilient gross margin but insufficient scale to cover fixed costs, negative profitability metrics, and adequate balance sheet capacity to navigate near-term headwinds. Key watch items include sales recovery, SG&A control, inventory turnover, and any disclosure updates on cash and cash flows.

Profitability Analysis

ROE_decomposition: ROE (-24.11%) = Net Profit Margin (-12.64%) × Asset Turnover (1.335x) × Financial Leverage (1.43x). The negative margin is the primary driver of negative ROE, while asset turnover is reasonable for the category and leverage is moderate. margin_quality: Gross margin is 39.7% (GP ¥2.689bn on revenue ¥6.766bn), indicating pricing power/product mix resilience. Operating margin is -12.4% (OI -¥842mn), implying SG&A and fixed costs outweigh gross profit at the current revenue run-rate. Note: the provided cost of sales (¥6.016bn) conflicts with the reported gross profit and margin; analysis relies on gross profit and margin figures disclosed. operating_leverage: Revenue declined 22.3% YoY while operating loss persisted at -¥842mn, indicating unfavorable operating leverage. With interest expense minimal (¥9mn), the primary issue is insufficient gross profit to cover SG&A. Recovery in sales or structural SG&A reduction would be needed to restore operating profitability.

Growth Assessment

revenue_sustainability: Revenue of ¥6.766bn (-22.3% YoY) signals demand softness and/or channel destocking. Sustainability depends on product pipeline, seasonal demand, and export performance; current trajectory suggests pressure on scale efficiency. profit_quality: Ordinary loss (¥853mn) broadly tracks operating loss, indicating limited non-operating distortions. Effective tax rate appears near zero due to loss-making position. With cash flows unreported, earnings-to-cash conversion cannot be validated. outlook: Near-term outlook hinges on stabilizing sales, managing inventories (¥1.092bn), and tightening SG&A. If revenue stabilizes and margins hold near ~40%, operating breakeven requires notable cost discipline or volume recovery.

Financial Health

liquidity: Reported current ratio 306.1% and quick ratio 245.7% imply strong short-term liquidity on paper; working capital is ¥3.725bn. However, current assets (¥5.532bn) exceed total assets (¥5.067bn), suggesting classification inconsistencies; rely primarily on total assets/liabilities. solvency: Total liabilities ¥1.832bn vs equity ¥3.546bn; debt-to-equity 0.52x indicates modest leverage. Financial leverage (assets/equity) 1.43x is conservative, providing some balance sheet cushion. capital_structure: Low interest expense (¥9mn) suggests limited financial debt or low-cost financing. Equity base remains the primary capital buffer amid operating losses.

Cash Flow Quality

earnings_quality: OCF was not disclosed (reported as zero), so accruals/earnings quality analysis is not possible this period. Net income is -¥855mn; without OCF, we cannot assess cash conversion or working capital-driven volatility. FCF_analysis: Free cash flow not disclosed (reported as zero). Capex and investing flows unavailable, preventing FCF sufficiency assessment. working_capital: Inventories ¥1.092bn are significant relative to quarterly sales run-rate; inventory discipline and turnover are critical given revenue contraction. Receivables and payables not disclosed, limiting cycle insights.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio 0.0%, appropriate given net loss (-¥855mn). With no OCF/FCF disclosure, payout capacity cannot be assessed beyond income statement and balance sheet signals. FCF_coverage: FCF coverage ratio reported as 0.00x due to non-disclosure of FCF; not indicative of actual cash ability to fund dividends. policy_outlook: Given negative earnings and the need to preserve liquidity for working capital and product development, maintaining a conservative dividend stance is likely until operating profitability improves.

Risk Assessment

Business Risks:

• Demand softness and channel inventory adjustments driving a 22.3% YoY revenue decline
• High operating leverage with fixed SG&A leading to operating losses at current scale
• Product cycle and innovation risk in premium small appliances amid intensifying competition
• Inventory management risk (inventories ¥1.092bn) during a revenue downturn
• Brand and pricing power sensitivity in a weak consumer environment

Financial Risks:

• Negative profitability translating into negative ROE (-24.11%) and potential equity erosion if sustained
• Limited visibility on cash generation due to non-disclosed cash flows
• Potential working capital swings affecting liquidity despite headline ratios
• Interest coverage negative (-93.6x) though absolute interest burden is small

Key Concerns:

• Sustained operating losses (-¥842mn) with no OCF disclosure
• Revenue contraction (-22.3% YoY) pressuring scale efficiency
• Balance sheet classification inconsistencies (current assets > total assets) complicate ratio analysis

Investment Implications

Key Takeaways:

• Top-line fell 22.3% YoY to ¥6.766bn; operating loss sustained at -¥842mn
• Gross margin resilient at 39.7%, but SG&A/fixed costs too high for current scale
• ROE -24.11% driven by negative margin; asset turnover and leverage are otherwise reasonable
• Balance sheet leverage is modest (D/E 0.52x) with reported strong working capital
• Cash flow data not disclosed; valuation of earnings quality and FCF requires caution

Metrics to Watch:

• Quarterly revenue trajectory and channel sell-through
• SG&A ratio and cost actions to improve operating leverage
• Inventory turnover and any write-downs
• Updated cash, OCF, and FCF disclosures
• Gross margin stability and product mix
• Ordinary income trend as a cleaner proxy for core performance

Relative Positioning: Within Japanese consumer electronics/small appliance peers, BALMUDA shows brand-driven gross margins but weaker scale and operating leverage, resulting in losses despite moderate leverage; balance sheet is conservative relative to many peers, but near-term profitability lags.

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