Zojirushi Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥91.15B
• Operating Income: ¥7.44B
• Net Income: ¥4.45B
• EPS: ¥92.30

Income Statement

Balance Sheet

Cash Flow Statement

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: A solid top-line and operating profit beat, but bottom-line declined due to higher tax and non-operating effects; overall quality of earnings remains strong with robust cash flows and a fortress balance sheet. Revenue grew 4.5% YoY to 911.5, with operating income up 24.9% YoY to 74.4, driving operating margin to 8.2%. Ordinary income rose 12.1% YoY to 83.0, and profit before tax was 85.7. However, net income fell 7.5% YoY to 59.8, implying net margin of 6.6%. Operating margin expanded by roughly 133 bps versus last year’s 6.8% (59.6/872.2), while ordinary income margin expanded by about 62 bps (9.11% vs ~8.49%). Conversely, net margin compressed by about 81 bps (6.6% vs ~7.4%) largely due to a higher effective tax burden (28.8%) and a smaller non-operating tailwind relative to the prior period. Earnings quality is high: OCF of 99.3 was 1.66x net income, accruals ratio was -3.3%, and cash conversion (OCF/EBITDA) was 1.02x. Free cash flow of 77.9 amply covered shareholder returns (DPS 40 yen; payout ~48.6%) and coexisted with buybacks of 34.0. The balance sheet is exceptionally strong with a current ratio of 396.8% and substantial cash and deposits (331.8), and interest coverage of 185.9x reflects a net-cash profile. ROE of 6.7% is below an 8% threshold and well under double-digit best-in-class, highlighting a return gap despite operational improvements. Inventory remains elevated at 260.9, suggesting longer cash conversion cycles typical of small home appliance seasonality; this was nonetheless well-managed given the OCF strength. A key concern is underinvestment: CapEx/Depreciation is 0.60, signaling potential future competitiveness risk if sustained. Forward-looking, margin discipline and pricing/mix improvements are encouraging, but to lift ROE structurally, the company likely needs a combination of modest leverage to invest, sustained product innovation, and improved asset turns. Guidance is not provided here, but maintaining FCF strength while lifting CapEx toward at least maintenance levels (>1.0x Depreciation) will be important to support growth and defend share against domestic and Chinese competitors. Near-term, the company appears well-positioned to sustain dividends and selective buybacks given cash generation. Mid-term, improving ROIC via inventory efficiency, product mix upgrades, and targeted CapEx are the levers to watch. Overall, fundamentals are resilient, cash flow quality is high, but underinvestment and sub-8% ROE cap upside until addressed.

Profitability Analysis

ROE (6.7%) = Net Profit Margin (6.6%) × Asset Turnover (0.770x) × Financial Leverage (1.32x). The biggest YoY driver appears to be margin dynamics: operating margin expanded to 8.2% (+133 bps), but net margin fell to 6.6% (~-81 bps) due to a higher effective tax rate (28.8%) and smaller net non-operating boost. Business reason: improved gross-to-operating conversion (SG&A discipline and pricing/mix) lifted EBIT, while tax normalization and a less favorable below-the-line environment offset at the net level; net interest income helped (interest burden >1.0) but not enough to overcome taxes. Sustainability: operating leverage gains from pricing/mix and cost control can be partially sustainable, but the tax rate normalization is likely enduring, keeping net margin capped unless incremental operating efficiencies are realized. Asset turnover at 0.770x suggests moderate capital efficiency; elevated inventories (260.9) likely weigh on turns. Financial leverage remains low, limiting ROE amplification—appropriate given the net-cash stance, but also a headwind to headline ROE. Watch for any SG&A growth outpacing revenue—current data shows operating income up 24.9% on revenue up 4.5%, implying favorable operating leverage this period rather than SG&A pressure.

Growth Assessment

Top-line grew 4.5% YoY to 911.5, driven likely by steady domestic demand and stable exports in small home appliances; exact segment/geography mix is unreported. Operating income rose 24.9% to 74.4 on improved margin execution. Ordinary income increased 12.1% to 83.0, indicating a positive but smaller contribution from non-operating items compared with prior-year dynamics. Net income declined 7.5% to 59.8 due to higher taxes and less below-the-line support. Revenue sustainability appears reasonable given brand strength and product breadth, but competition in domestic and China markets may cap pricing power. Profit quality is supported by negative accruals (-3.3%) and strong cash conversion (OCF/EBITDA 1.02x). Outlook: maintaining mid-to-high single-digit operating margins is plausible; further expansion will depend on product mix upgrades, cost control, and FX/raw material tailwinds. Near-term catalysts include product refresh cycles, premiumization, and supply chain normalization; risks include demand softness in China and channel inventory rebalancing.

Financial Health

Liquidity is very strong: current ratio 396.8% and quick ratio 275.5%, with cash and deposits (331.8) exceeding current liabilities (215.2). No warning on current ratio <1.0 or D/E >2.0; D/E is a conservative 0.32x. Maturity mismatch risk is low given ample current assets versus current liabilities and net cash. Total liabilities are 287.4 against total equity 895.9, reinforcing solvency strength. Interest coverage is extremely robust (EBITDA coverage 242x; EBIT-based 185.9x). Off-balance sheet obligations are not disclosed in the provided data; none can be assessed here.

Cash Flow Quality

OCF of 99.3 vs net income of 59.8 yields OCF/NI = 1.66x, indicating high earnings quality. Free cash flow of 77.9 comfortably supports dividends and buybacks; FCF sustainability appears good given modest CapEx (-13.5) and disciplined working capital, though inventory levels warrant ongoing monitoring. No signs of working-capital-driven earnings inflation: cash conversion is strong (OCF/EBITDA 1.02x), and accruals ratio (-3.3%) is healthy. The main structural question is whether current CapEx is sufficient to maintain and grow the asset base given depreciation (CapEx/Dep 0.60).

Dividend Sustainability

Calculated payout ratio is ~48.6% (DPS 40 yen on outstanding shares 72.6m vs NI ~59.8 billion yen), within a sustainable range (<60%). FCF coverage is 2.68x, indicating comfortable coverage of dividends from free cash flow. The company also executed share repurchases of 34.0, and financing cash outflows (-90.9) were still supported by strong OCF and net cash. Policy outlook: with robust liquidity and cash generation, maintaining or modestly increasing dividends is feasible, but sustained underinvestment could pressure medium-term competitiveness and earnings capacity if not addressed.

Risk Assessment

Business Risks:

• Intense competition in small home appliances (domestic peers and Chinese entrants) potentially pressuring pricing and share
• Demand softness and channel inventory risk in China and select export markets
• Raw material and component cost volatility impacting gross margin
• Product lifecycle and innovation cadence risk given underinvestment flag (CapEx/Dep 0.60)
• Quality/recall risks inherent to consumer electronics/home appliances

Financial Risks:

• ROE at 6.7% below 8% threshold may limit valuation support absent improvement
• High inventory (260.9) contributes to long cash conversion cycle and potential obsolescence risk
• Currency exposure (USD/CNY vs JPY) affecting revenue and input costs
• Potential future CapEx catch-up could temporarily depress FCF if investment increases meaningfully

Key Concerns:

• Underinvestment (CapEx/Dep 0.60) may erode product competitiveness and manufacturing efficiency over time
• Net margin compression despite stronger operating margin, driven by higher tax burden
• Sustained sub-10% ROE with low leverage despite strong balance sheet

Investment Implications

Key Takeaways:

• Operationally strong quarter: operating margin expanded to 8.2% (+133 bps) and ordinary income up 12.1% YoY
• Net income declined 7.5% on higher taxes; net margin 6.6% (~-81 bps YoY)
• Cash flow quality is high (OCF/NI 1.66x; FCF 77.9) with ample liquidity (cash 331.8)
• ROE 6.7% remains below target ranges; asset turns and investment intensity are key improvement levers
• Quality alert: underinvestment (CapEx/Dep 0.60) is a medium-term strategic risk
• Dividend is well covered (payout ~48.6%; FCF coverage 2.68x) with incremental buybacks executed

Metrics to Watch:

• CapEx/Depreciation trend toward ≥1.0
• Inventory days and overall cash conversion cycle
• Operating margin sustainability and gross margin mix effects
• OCF/Net income and accruals ratio
• AR and AP turnover (working capital discipline)
• Effective tax rate normalization and any one-off items
• DPS and buyback cadence versus FCF

Relative Positioning: Within Japanese small home appliance peers, Zojirushi combines strong brand equity and a fortress balance sheet with mid-single-digit to low-double-digit margins; however, ROE lags best-in-class operators (e.g., peers with double-digit ROE). The company’s superior liquidity and net cash are positives, but inventory intensity and low CapEx/Dep point to a need for targeted reinvestment to defend share and improve capital efficiency.

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