Miroku Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥12.52B
• Operating Income: ¥-24M
• Net Income: ¥-2.53B
• EPS: ¥-856.06

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: FY2025 Q4 was operationally soft with a slight operating loss and a large net loss driven by non-operating/extraordinary items, despite double-digit top-line growth and positive operating cash flow. Revenue rose 14.7% YoY to 125.18 (100M JPY), but gross profit was 12.35 and SG&A was 12.60, yielding operating income of -0.24. Non-operating income of 2.92, including 0.59 of dividend income and 1.30 of equity-method gains, lifted ordinary income to 2.11, down 71.6% YoY. Profit before tax was -23.02 and net income -25.25, implying sizable extraordinary losses or valuation charges not detailed in the XBRL. EBITDA was 6.95 (margin 5.6%), highlighting some cash earnings capacity despite the reported operating loss. Gross margin was 9.9% and operating margin about -0.2%, underscoring cost pressure and limited pricing power. Ordinary margin compressed materially: by our calculation, to 1.7% from roughly 6.8% a year ago, a deterioration of about 512 bps. Interest expense was 0.54 and the interest coverage ratio (EBIT basis) was -0.45x, a warning sign for earnings-based debt service capacity. On liquidity, the current ratio was a comfortable 242.9%, but the quick ratio at 97.2% indicates dependence on inventories (62.71) to bridge near-term obligations. Balance sheet leverage (D/E) was 1.03x with long-term loans of 51.00 and short-term loans of 18.60 against equity of 107.47. Operating cash flow was solid at 12.36, but heavy capex of 23.42 drove negative free cash flow of -12.27; financing inflows of 15.90 covered the deficit. Earnings quality is mixed: OCF was positive but diverged sharply from net income (OCF/NI -0.49), reflecting non-cash losses and/or extraordinary charges. With dividends unreported and DOE at 0.0%, capital allocation appears tilted to maintaining liquidity and funding capex. Forward-looking, restoring operating margin and normalizing extraordinary items are key for ROE recovery (currently -23.5% via DuPont), while inventory intensity and financing reliance warrant monitoring.

Profitability Analysis

ROE decomposition (DuPont): ROE (-23.5%) = Net Profit Margin (-20.2%) × Asset Turnover (0.572) × Financial Leverage (2.03x). The dominant driver of the weak ROE is the collapse in net profit margin, given ordinary income fell 71.6% YoY and net income swung to a large loss despite higher sales. Asset turnover at 0.572 is modest for a manufacturer with significant fixed assets and inventories, but it is not the primary swing factor this quarter. Financial leverage at 2.03x (Assets/Equity) is moderate and relatively stable; leverage did not exacerbate ROE as much as margin compression did. Business drivers: COGS of 112.83 kept gross margin to 9.9%, and SG&A of 12.60 essentially exhausted gross profit, leading to an operating loss; ordinary income was supported by 2.92 in non-operating gains (including 1.30 equity-method income), but extraordinary losses (not disclosed) pushed PBT and NI deeply negative. Sustainability: Non-operating gains may not be reliable, and extraordinary losses could be one-time; absent detailed disclosure, we treat them as potentially non-recurring but note the operating margin near zero needs structural improvement to sustain ROE recovery. Concerning trends: cost growth outpaced contribution margin—SG&A consumed 102% of gross profit—and EBIT-based interest coverage turned negative, indicating operating leverage is working against profitability.

Growth Assessment

Revenue expanded 14.7% YoY to 125.18, indicating demand resilience and/or price/mix tailwinds. However, profit growth was not achieved: ordinary income fell 71.6% to 2.11 and net income turned to -25.25, signaling margin pressure and/or exceptional charges. Ordinary margin compressed to 1.7% from an estimated ~6.8% a year ago, implying significant deterioration in underlying profitability. EBITDA margin of 5.6% shows some cash earnings capacity, but conversion to operating profit was hampered by SG&A absorption. With equity-method income of 1.30 and dividend income of 0.59 contributing to ordinary income, reliance on non-operating sources increased. Outlook hinges on restoring gross margin and reducing overhead intensity; continued capex (23.42) may support future productivity, but near-term profitability visibility is limited without evidence of cost pass-through or mix improvement. We note potential industry cyclicality and FX sensitivity that could influence top-line sustainability.

Financial Health

Liquidity is mixed: current ratio is healthy at 242.9%, but the quick ratio at 97.2% is below the 1.0 benchmark, reflecting a heavy inventory position (62.71) relative to cash (16.64) and receivables (21.32). No explicit warning is triggered for current ratio (<1.0), and D/E at 1.03x is below the 2.0 threshold, so solvency is acceptable but should be watched given negative EBIT. Maturity profile: short-term loans of 18.60 are covered by liquid resources plus receivables, and current assets (104.57) comfortably exceed current liabilities (43.04), limiting near-term refinancing stress. Long-term loans of 51.00 underpin a leveraged but manageable capital structure relative to equity (107.47). Interest coverage (EBIT-based) is -0.45x, a clear weakness; cash-based coverage is better (OCF of 12.36 vs interest 0.54), but sustained negative EBIT would pressure covenants if any. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF was 12.36 against net income of -25.25, yielding OCF/NI of -0.49 (<0.8), which flags a quality concern driven by non-cash or extraordinary losses. Free cash flow was -12.27 after capex of 23.42, indicating internal cash generation did not cover investment needs; financing inflows of 15.90 bridged the gap. With inventories high and quick ratio below 1.0, working capital intensity is elevated; without period-over-period working capital details, we cannot isolate whether OCF benefited from temporary releases. No clear signs of deliberate working capital manipulation can be concluded from the limited disclosure, but the earnings-to-cash divergence suggests significant non-cash charges and/or extraordinary losses. Sustainably funding both capex and any shareholder returns would require either improved operating margins or reduced investment pacing.

Dividend Sustainability

Dividend data are unreported (DPS and total dividends N/A), and DOE is reported at 0.0%. Calculated payout ratio of -1.4% is not meaningful due to negative net income; effectively, there is no evidence of cash dividends in the period. With FCF at -12.27, recurring cash dividends would not be covered by organic cash generation and would require balance sheet or financing support. Given leverage at 1.03x D/E and negative EBIT, a conservative dividend stance appears prudent until operating profitability normalizes and FCF turns positive. Policy outlook cannot be inferred without management guidance; coverage by FCF should be the primary constraint.

Risk Assessment

Business Risks:

• Margin pressure: gross margin 9.9% and operating margin ~-0.2% indicate limited pricing power and high cost absorption.
• Execution risk on cost control: SG&A (12.60) exceeded gross profit (12.35), driving operating loss.
• Extraordinary loss uncertainty: large gap between ordinary income (2.11) and PBT (-23.02) implies material exceptional items.
• Inventory intensity: quick ratio 97.2% and inventories 62.71 create exposure to obsolescence and demand swings.
• Industry cyclicality: exposure to capital goods/industrial demand and export markets can amplify revenue volatility.
• FX sensitivity: non-operating and ordinary results may be influenced by yen fluctuations if exports/components are significant.

Financial Risks:

• Earnings-based debt service: interest coverage (EBIT) at -0.45x is below warning thresholds.
• Refinancing/rollover risk on 18.60 short-term loans amid weak EBIT.
• Capex funding risk: negative FCF (-12.27) necessitated 15.90 of financing inflows.
• Leverage: D/E at 1.03x with 51.00 of long-term loans limits flexibility if profitability remains weak.

Key Concerns:

• ROE -23.5% driven by net margin collapse; recovery depends on operating margin improvement.
• Ordinary margin compressed by ~512 bps YoY despite 14.7% revenue growth, indicating adverse operating leverage.
• OCF/Net Income at -0.49 signals significant non-cash losses; earnings quality questioned until items are clarified.
• Quick ratio below 1.0 suggests reliance on inventory conversion for liquidity.

Investment Implications

Key Takeaways:

• Top-line grew 14.7% YoY to 125.18, but profitability deteriorated sharply.
• Operating loss (-0.24) and ordinary income (2.11) were overshadowed by sizable extraordinary losses, leading to NI -25.25.
• Ordinary margin compressed from 6.8% to 1.7% (-512 bps).
• Positive OCF (12.36) but negative FCF (-12.27) due to heavy capex (23.42).
• Liquidity adequate by current ratio (242.9%), but quick ratio (97.2%) and negative EBIT weaken the quality of coverage.
• Leverage moderate (D/E 1.03x), yet interest coverage negative on an EBIT basis.
• ROE -23.5% mainly from net margin deterioration; asset turnover (0.572) and leverage (2.03x) are secondary factors.

Metrics to Watch:

• Gross and operating margin trajectories and cost pass-through effectiveness.
• Extraordinary items disclosure bridging ordinary income to PBT/NI.
• Inventory levels and quick ratio improvement.
• FCF progression versus capex plans and financing dependence.
• Interest coverage (EBIT and EBITDA-based) and debt maturity profile.
• Order intake/backlog (if disclosed) as a leading indicator of revenue sustainability.

Relative Positioning: Within industrial/manufacturing peers, the company shows stronger top-line momentum but weaker margin resilience and earnings-based debt service capacity this quarter; balance sheet leverage is moderate, yet inferior interest coverage and negative FCF place it behind more cash-generative peers until margins recover.

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