TRUSCO NAKAYAMA (9830) FY2025 FY Earnings Report

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Executive Summary

Although the Company achieved higher revenue and operating income, final profit declined slightly due to the reversal of extraordinary gains recorded in the previous period. Revenue was ¥3200.4B (+8.5% YoY), Operating Income was ¥228.2B (+14.2%), and Ordinary Income was ¥225.4B (+12.4%), with all three expanding at a faster pace than revenue growth. Meanwhile, Net Income was ¥158.8B (-1.3%), primarily due to the reversal of the ¥27.8B gain on the sale of non-current assets recorded in the previous period; Profit Before Tax was ¥226.3B, maintaining approximately the same level as the previous period. Core earnings power improved due to a decline in the SG&A ratio.

Factors Affecting Performance

【Revenue】Revenue of ¥3200.4B (+8.5% YoY) was supported by growth in the core Factory Route (revenue of ¥2112.2B, +7.2% YoY, accounting for 66.0% of total revenue) and the e-Business Route (¥769.6B, +12.9% YoY). The Home Center Route generated ¥284.0B (+5.9% YoY), while the Overseas Route generated ¥34.6B (+12.0% YoY), with both recording higher revenue. By product category, Environmental and Safety Supplies and Office and Housing Equipment Supplies recorded double-digit revenue growth, indicating broad-based growth.

【Profit and Loss】Operating Income of ¥228.2B (+14.2% YoY) and an Operating Margin of 7.1% improved from 6.8% in the previous period, with profit expanding at a faster pace than revenue growth (+8.5%). The gross margin was 20.9%, essentially unchanged from the previous period, while the SG&A ratio declined to 13.7% from approximately 14.1%, resulting in operating leverage. Ordinary Income was ¥225.4B (+12.4% YoY), indicating expansion on a core business basis, while Net Income was ¥158.8B (-1.3% YoY). The decline was attributable to the fact that net extraordinary gains and losses amounted to only ¥0.9B in the current period, compared with the ¥27.8B gain on the sale of non-current assets in the previous period. In conclusion, the Company achieved higher revenue and operating income, while final profit declined slightly due to temporary factors.

Segment Analysis

Segment profit is presented on an Ordinary Income basis. Combined profit for the four routes was ¥228.4B; the △¥3.0B difference from consolidated Ordinary Income of ¥225.4B represents adjustments not attributable to individual segments. The Factory Route generated revenue of ¥2112.2B (66.0% of total revenue), profit of ¥154.1B (+12.4% YoY), and a profit margin of 7.3%, unchanged from 7.3% in the previous period, making it the core business driving performance in both scale and profitability. The e-Business Route generated revenue of ¥769.6B (+12.9% YoY) and profit of ¥68.3B (+17.8% YoY), and continued to grow while maintaining the highest profitability among all routes, with a profit margin of 8.9%. The Home Center Route generated revenue of ¥284.0B (+5.9% YoY), but remained low-margin, with profit of ¥2.9B and a profit margin of 1.0%. The Overseas Route is small in scale but highly profitable, with a profit margin of 9.0%.

Key Financial Metrics

【Profitability】The Operating Margin was 7.1% (6.8% in the previous period), while the Net Profit Margin was 5.0% (5.5% in the previous period). Core business profitability improved, but the Net Profit Margin declined due to the reversal of extraordinary gains recorded in the previous period. ROE was 8.5%, down from 9.6% in the previous period. The primary reason for this decline was the decrease in the Net Profit Margin due to the normalization of extraordinary gains and losses, rather than deterioration in operating performance. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥81.8B, representing only approximately 0.52x Net Income of ¥158.8B, indicating weakness in the conversion of earnings into cash. The primary factors were a ¥127.8B increase in inventories and a ¥28.9B increase in accounts receivable, which were not fully offset by the ¥41.0B increase in accounts payable. 【Investment Efficiency】Capital expenditures of ¥184.9B were approximately 3.3x depreciation and amortization expense of ¥55.8B, indicating that the Company is in a phase of growth investment. Total asset turnover was 1.038x (Revenue of ¥3200.4B ÷ Total Assets of ¥3083.6B), leaving room for further improvement in asset efficiency. 【Financial Soundness】The Equity Ratio was 60.4%, and current assets of ¥1616.5B substantially exceeded current liabilities of ¥641.6B, indicating sound short-term liquidity. Long-term borrowings were ¥550.0B, up from ¥450.0B in the previous period, indicating financing undertaken to support the investment phase.

Cash Flow Analysis

Operating Cash Flow was ¥81.8B, down 37.2% YoY, and its ratio to Net Income of ¥158.8B was only approximately 0.52x. The primary factors were a ¥127.8B increase in inventories and a ¥28.9B increase in trade receivables, which could not be sufficiently absorbed by the ¥41.0B increase in trade payables. Investing Cash Flow was negative ¥215.7B, as investment continued, primarily in capital expenditures of ¥184.9B; OCF alone was insufficient to fund investments. As a result, Free Cash Flow (OCF + Investing Cash Flow) was negative ¥133.8B. Financing Cash Flow was positive ¥196.4B, with funds raised through long-term borrowings offsetting the investment funding shortfall. Cash and cash equivalents increased from the previous period, primarily due to financing through borrowings. Going forward, the realization of investment returns and improvement in working capital will be key areas of focus for restoring cash generation capacity.

Earnings Quality

Ordinary Income of ¥225.4B expanded 12.4% YoY on a core business basis, while Profit Before Tax of ¥226.3B also remained approximately at the previous period’s level. The primary reason for the divergence between Net Income of ¥158.8B (-1.3% YoY) and Profit Before Tax was the change in extraordinary gains and losses. In the current period, net extraordinary gains and losses amounted to only ¥0.9B, comprising a ¥2.0B gain on the sale of non-current assets and a ¥1.2B impairment loss, compared with the ¥27.8B gain on the sale of non-current assets recorded in the previous period. Excluding this temporary factor, core earnings power is trending upward. Net non-operating expenses amounted to ¥2.8B, as interest expense of ¥6.2B exceeded interest and dividend income of ¥1.0B. From a cash flow perspective, OCF remained below Net Income, with working capital factors—namely increases in inventories and trade receivables—delaying the conversion of earnings into cash. This fact should be noted when evaluating earnings quality.

Earnings Forecasts and Guidance

For the fiscal year ending December 2026, the Company forecasts continued revenue growth, with Revenue of ¥3410.0B (+6.5% YoY), while forecasting lower profit, with Operating Income of ¥217.2B (-4.8% YoY) and Ordinary Income of ¥212.2B (-5.9% YoY). This represents a reversal from the current-period results of Operating Income of ¥228.2B and Ordinary Income of ¥225.4B. The planned decline in profit despite higher revenue indicates that the burden of upfront investment and the ability to absorb costs will be key areas of focus in the next fiscal year. Forecast EPS is ¥220.50, expected to decline from the current-period actual result of ¥240.84.

Shareholder Returns

The annual dividend for the current period was ¥60.00 per share (¥30.50 for Q2 and ¥29.50 for the year-end dividend), with total dividends of approximately ¥39.6B and a Payout Ratio of 24.9% against Net Income of ¥158.8B. The Payout Ratio remains low, and there is little concern regarding dividend sustainability even when compared with retained earnings of ¥1751.4B. However, Free Cash Flow was negative ¥133.8B in the current period, and the Company does not have a structure enabling it to fund both dividends and capital expenditures solely through OCF. The forecast dividend for the fiscal year ending December 2026 is ¥55.50 per share, representing a planned 7.5% reduction from the previous period. However, the Company plans to add a separate “善択配当” dividend during the same period, which is not included in this forecast dividend amount.

Risk Factors

1. OCF below Net Income: OCF of ¥81.8B was only approximately 0.52x Net Income of ¥158.8B, primarily due to a ¥127.8B increase in inventories and a ¥28.9B increase in trade receivables. If working capital improvements are delayed, the Company’s internal funding capacity for investments and dividends may decline.

2. Inventory accumulation and supply-demand fluctuations: Inventories were ¥681.8B, a substantial increase from the previous period, and could pose risks of funds being tied up, inventory stagnation, and valuation losses when demand for industrial products fluctuates. A broad range of readily available inventory is a source of competitiveness, but inventory levels require monitoring.

3. Concentration in the Factory Route: This route is the core business, accounting for 66.0% of revenue and more than half of segment profit. As a result, fluctuations in demand related to manufacturing and construction have a significant impact on consolidated performance.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

The Company’s Net Profit Margin is below the industry median and is relatively low within the industry.

Growth and Capital Efficiency

While the industry as a whole is trending toward declining revenue, the Company secured revenue growth and holds a clearly superior position within the industry in terms of growth.

※Source: Company analysis

Key Points from the Financial Results

1. Operating Income increased 14.2% YoY, and the Operating Margin improved by approximately 36bp, confirming improved core business profitability through greater SG&A efficiency.

2. The decline in Net Income was primarily due to the reversal of the gain on the sale of non-current assets recorded in the previous period. The fact that Profit Before Tax remained approximately at the previous period’s level is a distinction that should be made when evaluating the Company’s underlying business strength based on the financial results.

3. The OCF/Net Income ratio was approximately 0.52x, while inventories increased substantially from the previous period. The fact that working capital, primarily inventory, is tying up funds behind the higher revenue and profit is an item to monitor when assessing future cash generation capacity.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,615–¥2,769 at Cost of Equity ±1%, and ¥2,686–¥2,693 at ω±0.1.

Note:

• As forecast ROE is below the Cost of Equity, the theoretical value will be below Book Value per Share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional advisor as necessary.

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