SAKAI Holdings CO.,LTD FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥17.02B
• Operating Income: ¥1.47B
• Net Income: ¥1.35B
• EPS: ¥106.27

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

Sakai Holdings (94460) reported FY2025 Q4 consolidated results under JGAAP showing solid top-line expansion and resilient operating profitability, coupled with strong cash generation but a leveraged balance sheet and tight liquidity. Revenue rose 9.9% YoY to ¥17.0bn, while operating income increased 4.2% to ¥1.47bn, indicating positive operating leverage but some margin pressure. Gross profit of ¥5.64bn implies a gross margin of 33.1%, a healthy level consistent with value-added services or pricing power. Ordinary income (¥1.33bn) trailed operating income due to net non-operating costs, mainly interest expense of ¥149m. Net income declined 25.3% YoY to ¥987m despite higher operating profit, suggesting the decline was driven by non-operating factors and/or taxes rather than core operations. The DuPont ROE of 21.09% is supported by a 5.80% net margin, 0.834x asset turnover, and 4.36x financial leverage, highlighting leverage as a key ROE driver. EBITDA was ¥2.41bn (14.2% margin), underpinned by ¥948m of D&A, which supports earnings quality. Cash flow from operations was robust at ¥1.97bn (OCF/Net Income of 1.99x), and positive investing cash flow (+¥76m) lifted free cash flow to ¥2.05bn. Financing cash flow of -¥1.99bn indicates meaningful debt reduction and/or other outflows, consistent with deleveraging or distributions (no dividend is reported). Liquidity is tight with a current ratio of 79.7% and negative working capital of ¥1.39bn, though interest coverage remains comfortable at 9.9x. Balance sheet leverage is high with debt-to-equity at 3.50x; calculated equity-to-asset ratio is approximately 22.9% based on the provided equity and asset figures (the reported 0.0% appears undisclosed rather than truly zero). The drop in net income versus stable-to-growing operating profit points to higher non-operating expenses and/or tax impacts; based on income tax of ¥465m and implied pre-tax earnings, the effective tax rate appears materially positive despite the 0.0% metric shown. Dividend disclosures show DPS and payout ratio as 0.00, which likely indicates non-disclosure rather than an explicit zero payout; EPS is provided at ¥106.27. Overall, the company exhibits improving revenues and operating profits, healthy cash conversion, and solid ROE, but faces liquidity constraints and elevated leverage that warrant monitoring. Working capital management and debt service capacity are key areas to watch given negative net working capital. Sustainability of growth will depend on maintaining gross margins amid potential cost pressures and interest expense. The financial profile suggests a focus on deleveraging using internally generated cash flow while preserving operating momentum.

Profitability Analysis

ROE is 21.09% per DuPont, decomposed as Net Profit Margin 5.80% x Asset Turnover 0.834 x Financial Leverage 4.36, indicating leverage is a meaningful enhancer of equity returns. Operating income grew 4.2% YoY to ¥1,465m on 9.9% revenue growth, suggesting modest negative operating leverage at the operating profit level; however, absolute margin levels remain solid. Gross margin stands at 33.1%, implying a favorable product/service mix and pricing discipline; sustaining this level is key to offsetting cost inflation. EBITDA of ¥2,413m yields a 14.2% margin, evidencing healthy underlying cash earnings and capacity to absorb fixed costs. Ordinary income of ¥1,332m is below operating income due to non-operating burdens (interest expense of ¥149m), slightly diluting margins below the operating line. Net income margin at 5.80% is respectable but fell YoY (given net income -25.3% YoY), implying non-operating or tax headwinds overshadowed operating gains. Interest coverage is 9.9x (operating income/interest), comfortably above stress thresholds, indicating current earnings can service interest despite high leverage. The margin structure (gross > operating > ordinary > net) is consistent, with the main drags being interest and taxes. No segment breakdown is provided; thus, margin quality assessment is at the consolidated level only.

Growth Assessment

Revenue grew 9.9% YoY to ¥17.0bn, demonstrating healthy demand and potential market share stability or gains. Operating income rose 4.2% YoY, trailing sales growth, implying modest margin compression or higher operating costs; however, the growth remains positive and indicates resilience in core operations. Net income declined 25.3% YoY to ¥987m despite higher operating profit, pointing to adverse non-operating factors (higher interest expense, other losses, or taxation) and/or absence of prior-year one-offs. The gross margin of 33.1% supports the sustainability of revenue growth if the company can manage input costs and maintain pricing. EBITDA growth (implicit from higher operating profit plus D&A) and OCF/Net Income of 1.99x suggest profit quality is sound, with earnings translating into cash. Ordinary income below operating income highlights financial structure as a constraint on profit growth; deleveraging could support future ordinary profit expansion. With positive FCF of ¥2.05bn, the company has room to fund selective growth investments while reducing debt. Outlook hinges on maintaining double-digit top-line growth while stabilizing non-operating items; absent detailed guidance, base-case assumes steady demand and gradual improvement in bottom-line as financing costs normalize.

Financial Health

Total assets are ¥20.40bn and total equity is ¥4.68bn, implying an equity ratio of roughly 22.9% (calculated), despite the reported equity ratio field showing 0.0% (likely undisclosed). Total liabilities are ¥16.39bn, and the debt-to-equity ratio is 3.50x, indicating a leveraged capital structure. Current assets are ¥5.46bn versus current liabilities of ¥6.84bn, yielding a current ratio of 79.7% and negative working capital of ¥1.39bn, highlighting tight liquidity. Quick ratio equals the current ratio due to inventories being undisclosed, so short-term liquidity assessment relies on the reported current assets alone. Interest coverage is 9.9x, suggesting adequate ability to service interest from operating earnings. Financing cash outflows (-¥1.99bn) coupled with strong OCF signal active balance sheet management, likely debt repayment. Cash and equivalents are shown as zero (undisclosed), limiting precise liquidity evaluation; reliance on credit lines or rapid receivable turnover may be necessary given negative working capital. Overall solvency is acceptable but constrained by leverage; continued deleveraging would improve financial flexibility.

Cash Flow Quality

Operating cash flow of ¥1,969m is nearly 2.0x net income (OCF/NI 1.99), indicating high earnings quality and strong cash conversion. EBITDA of ¥2,413m aligns with robust cash generation, supported by D&A of ¥948m, which is non-cash and bolsters OCF relative to net income. Investing cash flow was +¥76m, likely reflecting asset disposals or low net capex in the period; as a result, free cash flow was ¥2,045m, comfortably positive. Working capital dynamics are not fully disclosed, but negative working capital on the balance sheet suggests OCF may benefit from payables financing; sustainability depends on maintaining supplier terms and collection efficiency. Financing cash flow of -¥1,985m indicates net repayments or other financing outflows, consistent with using FCF to deleverage. The combination of positive OCF, positive FCF, and adequate interest coverage supports the view that earnings are cash-backed. Limited disclosure on cash and equivalents and inventory means intra-period liquidity swings cannot be fully assessed.

Dividend Sustainability

Reported DPS is 0.00 and payout ratio 0.0%, which likely reflects non-disclosure in XBRL rather than an explicit zero dividend; therefore, dividend policy cannot be inferred from these placeholders. EPS is ¥106.27, and FCF is ¥2,045m, implying theoretical capacity for distributions if policy allows, but capital allocation appears focused on financing outflows (likely debt reduction) in the period. Without confirmed DPS and historical payout data, sustainability analysis focuses on capacity: OCF coverage of earnings is strong (1.99x), and FCF is positive, supporting potential dividends in principle. Given leverage at 3.50x debt-to-equity and negative working capital, prioritizing balance sheet strengthening may take precedence over cash returns. FCF coverage of dividends cannot be computed reliably due to undisclosed DPS; reported 0.00x is not informative.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation potentially compressing the 33.1% gross margin
• Reliance on non-reported working capital items; negative working capital model may strain supplier relationships
• Execution risk in sustaining near-10% revenue growth amid competitive dynamics
• Limited visibility into segment mix and customer concentration due to disclosure constraints
• Potential exposure to interest rate fluctuations affecting financing costs

Financial Risks:

• High leverage (debt-to-equity 3.50x) increases sensitivity to earnings volatility
• Tight liquidity (current ratio 79.7%, negative working capital of ¥1.39bn)
• Net income volatility driven by non-operating items and taxes (NI down 25.3% YoY despite higher OI)
• Dependence on payables/short-term funding to finance operations given negative working capital
• Disclosure gaps (cash balance, inventories, equity ratio) complicate risk monitoring

Key Concerns:

• Sustaining cash conversion while managing negative working capital
• Deleveraging pace versus growth investment needs
• Stability of non-operating items (interest, other gains/losses) and tax burden
• Liquidity buffer adequacy given undisclosed cash balance

Investment Implications

Key Takeaways:

• Top-line growth (+9.9% YoY) with resilient operating profit (+4.2% YoY) underscores healthy core demand
• ROE at 21.09% is attractive but leverage-driven (4.36x), making balance sheet management critical
• Cash generation is strong (OCF/NI 1.99x; FCF ¥2.05bn), enabling deleveraging
• Liquidity remains tight (current ratio 79.7%, negative working capital), a key watchpoint
• Net income decline (-25.3% YoY) stems from non-operating/tax impacts rather than operating weakness

Metrics to Watch:

• Gross and operating margins to gauge cost pass-through and operating leverage
• Ordinary income versus operating income to track non-operating drag
• Interest coverage and effective interest rate to assess financing burden
• Working capital turnover (receivables/payables days) and current ratio
• Free cash flow and financing cash flows to monitor deleveraging
• Actual equity ratio (equity/assets) and net debt levels as disclosed

Relative Positioning: The company exhibits stronger cash conversion and ROE than a typical leveraged peer, but stands weaker on liquidity with negative working capital and a higher debt load; operating margins are solid, placing it mid-to-upper tier on profitability within a leveraged cohort.

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