MARUKA FURUSATO Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥117.22B
• Operating Income: ¥2.02B
• Net Income: ¥4.04B
• EPS: ¥58.19

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

Furusato Maruka Holdings (TSE: 7128) reported FY2025 Q3 consolidated results under JGAAP showing a modest top-line decline but a pronounced compression in profitability. Revenue was ¥117.2bn, down 2.3% YoY, indicating softer demand and/or normalization of pricing in core industrial distribution and machinery businesses. Gross profit of ¥19.21bn implies a gross margin of 16.4%, which is reasonable for an industrial trading group but suggests limited pricing power amid cost pass-through dynamics. Operating income fell to ¥2.02bn (-25.9% YoY), compressing the operating margin to 1.7%, reflecting weaker operating leverage and likely higher SG&A relative to sales. Ordinary income of ¥2.53bn exceeded operating income, indicating a positive non-operating balance (e.g., financial income or equity-method gains) that partially cushioned operating weakness. Net income declined sharply to ¥1.39bn (-64.7% YoY), dragging the net margin down to 1.19%; the sharp drop versus operating profit suggests an elevated tax burden and/or the absence of prior-year one-off gains. DuPont metrics point to low ROE at 1.95%, driven primarily by thin net margins despite decent asset turnover (~1.00x) and moderate leverage (~1.65x assets/equity). Liquidity is strong: current ratio is 1.91x and quick ratio is 1.67x, with working capital of ¥41.25bn, providing resilience against cyclical swings. The balance sheet is conservative: using reported totals, equity of ¥71.27bn against assets of ¥117.66bn implies an equity ratio of about 60.6% and a liabilities-to-equity (D/E) of 0.67x. Interest expense remains minimal at ¥21m, and interest coverage is robust at ~96x on Q3 YTD operating income, highlighting very low financial risk. Inventory of ¥10.83bn appears manageable relative to current assets, implying receivables are a larger working capital component typical of trading operations. Cash flow statement items are not disclosed in this dataset, so operating and free cash flow assessments cannot be derived from the provided figures. Depreciation is also undisclosed, so EBITDA-based views are not available and the reported zero EBITDA should be treated as unreported, not actual. Dividend data (DPS and payout) are not disclosed in this feed; therefore, we cannot comment on current distributions or implied yield. Overall, the quarter reflects resilient top-line scale and balance sheet strength but notable margin pressure and subdued returns, with the steep net profit decline likely reflecting tax/one-off effects and weaker operating leverage.

Profitability Analysis

ROE_decomposition: Reported DuPont shows net profit margin 1.19% x asset turnover 0.996 x financial leverage 1.65 = ROE 1.95%. This low ROE is primarily margin-driven; turnover is healthy for a trading-oriented group, and leverage is moderate. margin_quality: Gross margin is 16.4% on ¥19.21bn gross profit, consistent with distribution/trading mix. Operating margin compressed to 1.72% (¥2.015bn/¥117.219bn), down YoY given operating income decline of 25.9% vs revenue -2.3%, signaling unfavorable operating leverage and likely higher SG&A. Ordinary margin improved vs operating margin due to non-operating gains (ordinary income ¥2.534bn > operating income), but sustainability of non-operating support is uncertain. Net margin at 1.19% is thin and well below ordinary margin, suggesting elevated tax expense and/or absence of prior-year extraordinary benefits. operating_leverage: Revenue -2.3% YoY vs operating income -25.9% YoY indicates significant negative operating leverage in the period. Cost base rigidity (fixed SG&A) likely magnified the profit decline. With gross margin steady, the deleveraging mainly stems from overhead absorption rather than gross margin compression.

Growth Assessment

revenue_sustainability: Revenue of ¥117.2bn declined modestly (-2.3% YoY), consistent with a cyclical pause in capex-sensitive segments (machine tools/industrial equipment) and potential normalization after prior price increases. No evidence of structural decline, but momentum is soft. profit_quality: Ordinary income exceeding operating income points to reliance on non-operating gains to sustain profits. The large gap between ordinary and net income indicates a heavier tax burden or one-off items below ordinary income, which weakens profit quality at the bottom line. outlook: Absent disclosed order backlog or segment detail, near-term profit recovery hinges on stabilizing demand and tighter SG&A control. If tax rates normalize and non-operating support persists, ordinary income could remain resilient; however, recovering operating margin will be key to durable earnings growth.

Financial Health

liquidity: Current ratio 1.91x and quick ratio 1.67x on current assets ¥86.60bn vs current liabilities ¥45.35bn indicate strong short-term liquidity. Working capital is ¥41.25bn, providing ample buffer. solvency: Total liabilities ¥47.45bn versus equity ¥71.27bn implies D/E of 0.67x and an equity ratio around 60.6% (computed from non-zero items), reflecting a conservative capital structure. capital_structure: Interest expense is just ¥21m with ~96x coverage on operating income, evidencing minimal reliance on debt financing. Balance sheet capacity appears sufficient to weather cyclical downturns or fund moderate growth.

Cash Flow Quality

earnings_quality: Cash flow data are not disclosed in this dataset (zeros indicate unreported), so OCF-to-net income conversion cannot be assessed. Earnings quality must be inferred from margins and working capital context. FCF_analysis: Free cash flow is not reported; no assessment can be made without OCF and capex detail. Depreciation is also undisclosed, preventing EBITDA-based cross-checks. working_capital: Inventories of ¥10.83bn are modest relative to current assets, implying receivables and other current assets are the dominant components. Given the trading model, tight receivable collection and inventory turns are key to cash conversion, but actual turns and DSO are not available here.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in the provided data (zeros treated as unreported). With net income at ¥1.39bn and strong balance sheet metrics, capacity exists, but payout discipline cannot be evaluated without policy guidance. FCF_coverage: FCF is not disclosed; therefore, coverage of dividends by free cash flow cannot be assessed. policy_outlook: No dividend policy information is available in this dataset. For a trading/industrial group with conservative leverage, a stable or progressive dividend is typical, but confirmation requires management guidance and historical DPS trends.

Risk Assessment

Business Risks:

• Cyclical exposure to capital investment in manufacturing and machine tools demand
• Price competition and pass-through risks in steel/building materials and industrial distribution
• Supplier concentration and availability risks for imported machinery and components
• Customer credit risk in SME-heavy end markets
• Project timing risk affecting quarterly revenue recognition
• Potential integration and execution risks given the combined Furusato and Maruka platforms

Financial Risks:

• Operating leverage leading to outsized earnings swings on modest revenue changes
• Working capital intensity (receivables/inventory) impacting cash conversion in downturns
• Tax expense volatility affecting net income predictability
• Foreign exchange exposure on imported equipment and components (if applicable) impacting margins

Key Concerns:

• Sharp YoY decline in net income (-64.7%) versus more modest revenue decline
• Thin operating margin (1.7%) and dependence on non-operating income to lift ordinary profit
• Insufficient disclosure of cash flow and depreciation in this dataset, limiting earnings quality analysis

Investment Implications

Key Takeaways:

• Top line resilience with only a -2.3% YoY decline, but operating leverage magnified profit contraction
• Net margin compressed to 1.19% and ROE to 1.95%, well below typical cost of equity
• Balance sheet is strong with an estimated ~60.6% equity ratio and low interest burden
• Ordinary income outpaced operating income, highlighting non-operating support of earnings
• Liquidity is ample (current ratio 1.91x; quick ratio 1.67x), providing flexibility

Metrics to Watch:

• Operating margin trajectory and SG&A control
• Ordinary-to-operating income gap (sustainability of non-operating gains)
• Effective tax rate normalization and drivers of net income volatility
• Working capital turns (DSO/DIO) and OCF conversion once disclosed
• Order intake/backlog and capex trends in key end markets

Relative Positioning: Within Japan’s specialized trading and industrial distribution peers, the company exhibits stronger-than-average balance sheet conservatism and liquidity but currently weaker profitability and ROE, making operational margin recovery the key determinant of relative performance.

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