UNICHARM CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥694.23B
• Operating Income: ¥120.00B
• Net Income: ¥68.96B
• EPS: ¥34.68

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

Unicharm (TSE:8113) reported FY2025 Q3 consolidated IFRS results showing resilient bottom-line performance despite softer topline and operating profit. Revenue declined 3.9% YoY to 6,942.25, reflecting demand normalization and/or FX/portfolio effects. Gross profit was 2,846.42 with a gross margin of 41.0%, indicating firm pricing and/or input cost relief relative to sales contraction. Operating income fell 13.3% YoY to 1,200.00, implying operating margin contraction to roughly 17.3% and signaling negative operating leverage in the quarter. Profit before tax was 934.88, which is below operating income, suggesting net non-operating losses or adverse financial/other items. Net income nevertheless grew 2.0% YoY to 607.16, supported by below-the-line dynamics and despite a relatively high effective tax rate of 33.4%. Total comprehensive income was 490.34, below net income, pointing to negative OCI—likely currency translation losses given Unicharm’s overseas exposure. Cash generation remained robust with operating cash flow of 1,071.43 (OCF/NI 1.76x), underscoring solid earnings quality. Free cash flow was positive at 355.75 after 715.68 of investing outflows, supporting continued reinvestment and shareholder returns. The balance sheet is strong: equity ratio at 65.1% and total liabilities/equity (D/E) at 0.42x, with modest interest-bearing debt (short-term 209.94; long-term 58.57). ROE is 7.0% via DuPont: net margin 8.8%, asset turnover 0.589, and financial leverage 1.37x. EBITDA of 1,545.26 implies a 22.3% margin, cushioning cyclical swings versus EBIT. Working capital is ample given current assets of 6,710.40, though current liabilities were unreported, limiting traditional liquidity ratio analysis. Shareholder returns included 190.00 of buybacks; dividend metrics in XBRL are largely unreported, and the calculated payout ratio of 135% and FCF coverage of 0.43x should be treated cautiously. Overall, Unicharm exhibits sound financial health and cash flow, but softer revenue and operating profit trends, negative operating leverage, and adverse OCI/FX effects temper the near-term profile. Data limitations (notably non-operating items, dividend details, and current liabilities) constrain full comparability and precision.

Profitability Analysis

ROE_decomposition: ROE 7.0% = Net margin 8.8% x Asset turnover 0.589 x Equity multiplier 1.37x. The primary constraint on ROE is moderate asset turnover and only modest leverage, with net margin in a healthy high single-digit range. margin_quality: Gross margin at 41.0% indicates solid pricing and cost control. Operating margin is approximately 17.3% (1,200.00 / 6,942.25), down YoY in line with the -13.3% operating income vs -3.9% revenue contraction, implying mix/price/cost pressures and negative operating leverage. EBITDA margin of 22.3% provides a buffer, indicating that non-cash D&A (345.26) is meaningful but not excessive. operating_leverage: Revenue declined 3.9% YoY while operating income declined 13.3% YoY, evidencing negative operating leverage this period. This suggests fixed-cost absorption and/or increased SG&A intensity (SG&A 1,810.53) weighed on EBIT. Monitoring cost pass-through, mix, and efficiency initiatives is key for margin recovery.

Growth Assessment

revenue_sustainability: Revenue of 6,942.25 fell 3.9% YoY. Given Unicharm’s exposure to Asia and consumer staples categories, FX translation and normalization post-pandemic could be factors. Without segment/FX disclosure, sustainability assessment is constrained; stable gross margin suggests pricing resilience even as volumes/mix may be soft. profit_quality: Despite EBIT decline, net income rose 2.0% YoY to 607.16, indicating supportive below-the-line factors. However, PBT of 934.88 is below operating income, implying non-operating headwinds that were offset elsewhere (e.g., prior-year comps, tax dynamics). OCI was negative (comprehensive income 490.34 < net income), hinting at FX headwinds affecting equity. outlook: With gross margin intact but operating margin lower, near-term growth hinges on restoring operating leverage via cost control and mix optimization. Currency volatility remains a swing factor for translation and OCI. Absent disclosed guidance, a cautious stance on near-term growth is warranted until revenue re-accelerates and cost ratios normalize.

Financial Health

liquidity: Current assets total 6,710.40; current liabilities are unreported, preventing current/quick ratio calculation. Cash and deposits are unreported, but cash and equivalents at period-end were 2,610.54, indicating ample liquidity. Working capital equals reported current assets due to missing current liabilities data, so true liquidity buffer is likely smaller than 6,710.40. solvency: Equity ratio is 65.1% and total liabilities/equity is 0.42x, reflecting a conservative balance sheet. Interest-bearing debt is modest at 268.51 (short-term 209.94, long-term 58.57), implying low financial risk and strong capacity to absorb shocks. capital_structure: Total equity is 8,621.51 with retained earnings of 7,663.42 and capital surplus of 114.05, evidencing cumulative profitability. Leverage is deliberately modest (equity multiplier 1.37x), supporting resilience but limiting ROE expansion absent margin or turnover gains.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.76x indicates strong cash conversion and low accrual risk. The gap between EBIT (1,200.00) and OCF (1,071.43) is reasonable given working capital needs and tax payments. FCF_analysis: Free cash flow was 355.75 (OCF 1,071.43 minus total investing cash outflows 715.68). Investing CF likely includes capex and potentially strategic investments; capex was not disclosed, limiting assessment of maintenance vs growth spend. working_capital: Inventories are 1,211.33; receivables/payables are unreported. Without full working capital detail, we infer inventory management is significant for cash conversion. The strong OCF suggests stable collection and inventory control despite the sales decline, but confirmation requires receivables/payables data.

Dividend Sustainability

payout_ratio_assessment: Reported dividend figures are unreported, yet a calculated payout ratio is provided at 135.0%. If accurate, this exceeds 100% and is not sustainable over the long term from earnings alone. However, because DPS and total dividends are unreported, this ratio may rely on assumptions; treat with caution. FCF_coverage: FCF coverage is shown as 0.43x, implying dividends (as estimated) exceeded free cash flow in the period. Financing CF of -679.32 includes share repurchases of -190.00, suggesting combined shareholder returns likely outpaced FCF. policy_outlook: Unicharm historically emphasizes stable shareholder returns balanced with growth investment. Given strong balance sheet and cash generation, near-term dividend capacity is supported, but if the 135% payout is reflective, normalization toward earnings/FCF alignment would be prudent. Lack of DPS disclosure limits precision.

Risk Assessment

Business Risks:

• FX volatility impacting translation, OCI, and local profitability across overseas markets
• Input cost fluctuations (pulp, petrochemical derivatives) affecting gross margin
• Competitive pricing pressure in baby care, femcare, and adult incontinence categories
• Demand normalization post-pandemic and potential volume softness in mature markets
• Regulatory and ESG-related packaging and waste requirements raising costs

Financial Risks:

• Negative non-operating items driving PBT below operating income
• Potential mismatch between dividends/shareholder returns and sustainable FCF
• Limited disclosure of current liabilities and interest expense complicates liquidity and coverage analysis
• FX-related OCI losses reducing equity and book value per share volatility

Key Concerns:

• Negative operating leverage with EBIT down faster than sales
• Adverse OCI pointing to currency headwinds
• Dividend sustainability uncertainty given calculated payout above 100% and FCF coverage below 1.0x
• Data gaps (non-operating breakdown, DPS, current liabilities) restricting full risk quantification

Investment Implications

Key Takeaways:

• Topline declined 3.9% YoY; operating income declined 13.3% YoY, indicating margin pressure and negative operating leverage
• Net income grew 2.0% YoY despite non-operating headwinds, aided by below-the-line factors
• Gross margin remains robust at 41.0%; EBITDA margin 22.3% provides buffer
• Cash generation is strong (OCF/NI 1.76x), yielding positive FCF of 355.75
• Balance sheet is conservative (equity ratio 65.1%, liabilities/equity 0.42x) with low debt
• Comprehensive income below net income flags FX/OCI pressure on equity
• Shareholder returns included 190.00 of buybacks; dividend data is incomplete and calculated payout appears elevated

Metrics to Watch:

• Revenue trajectory by region/category and FX-adjusted growth
• Operating margin recovery and SG&A efficiency
• Non-operating items and interest expense to reconcile OI to PBT
• Working capital movements (receivables, payables, inventory turns)
• Capex level within investing CF to gauge growth vs maintenance spend
• DPS and total dividends for true payout and FCF coverage
• OCI components and currency translation impacts on equity

Relative Positioning: Within Japanese consumer staples, Unicharm maintains above-average margins and a stronger-than-average balance sheet with lower leverage, but current-period operating leverage is negative and FX headwinds weigh on comprehensive income versus peers focused more domestically.

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