TAIYO BUSSAN KAISHA,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥19.66B
• Operating Income: ¥247M
• Net Income: ¥148M
• EPS: ¥76.93

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 (full-year) results show resilient top-line growth but weaker profitability and strained cash flows, with leverage and short-term funding reliance remaining key pressure points. Revenue grew 4.8% YoY to 196.62, while operating income declined 7.1% to 2.47 and ordinary income fell 14.1% to 1.73, highlighting margin pressure and higher non-operating costs. Net income decreased 8.6% to 1.48, implying a net margin of 0.75% despite revenue expansion. Current operating margin is 1.26% (2.47/196.62), down an estimated 16 bps YoY (vs. ~1.42% last year based on disclosed growth rates). Net margin compressed by roughly 11 bps YoY (0.86% to 0.75%). Gross margin sits at 3.8%, underscoring the thin-margin nature of the business and sensitivity to cost pass-through. DuPont shows ROE of 14.9%, driven by very high financial leverage (8.42x) and strong asset turnover (2.35x), offsetting a very low net margin (~0.8%). Earnings quality is weak: operating cash flow was -5.60 versus positive net income of 1.48, yielding an OCF/NI of -3.78x and negative free cash flow of -5.65. Liquidity is tight with a current ratio of 1.05 and large short-term loans of 54.15, implying ongoing refinancing needs. Interest coverage at 3.9x is acceptable but below strong benchmarks, and high leverage (D/E 7.24x) elevates sensitivity to rate hikes. Equity method income was negative at -0.14, detracting from ordinary profit, though equity-method dependence appears limited versus large sogo shosha norms. ROIC is 3.3%, below the 5% warning threshold, indicating capital efficiency challenges. Investing cash outflows were minimal (capex -0.02), suggesting limited growth investment or a pause in capex. Forward-looking, maintaining margins and improving working capital discipline are critical to normalize OCF and reduce short-term funding reliance. Key watch items are receivables collection, funding costs, and the trajectory of non-operating expenses.

Profitability Analysis

DuPont ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 0.8% × 2.351 × 8.42 ≈ 14.9%. The biggest driver is financial leverage (8.42x) and robust asset turnover, while net margin remains very thin. Operating margin is 1.26%, down an estimated ~16 bps YoY (derived from -7.1% OI vs +4.8% revenue), indicating negative operating leverage as costs rose faster than gross profit expansion. The business reason likely includes higher financing costs (interest expense 0.64; ordinary income fell more than operating income) and pressure on gross spreads in a thin-margin trading business. Equity-method losses (-0.14) further dragged ordinary income. Sustainability: high leverage is sustaining ROE but increases risk; with ROIC at 3.3% below cost of capital benchmarks, current ROE is not quality-driven and could compress if leverage is reduced or funding costs rise. Concerning trends: SG&A at 4.77 rose relative to gross profit of 7.43, leaving a narrow operating buffer; revenue grew 4.8% while operating profit fell, signaling cost pressure and/or weaker pricing power.

Growth Assessment

Revenue growth of 4.8% indicates stable demand or successful volume/mix expansion. However, the decline in operating (-7.1%) and ordinary income (-14.1%) shows growth was not profit-accretive, likely due to tighter gross spreads and higher non-operating costs. Net income fell 8.6%, reflecting both margin pressure and equity-method/non-operating headwinds. EBITDA margin was 1.3%, highlighting limited operating leverage in the model. The revenue base appears sustainable near term, but profit quality is vulnerable to cost pass-through effectiveness, funding costs, and affiliate performance. Outlook hinges on normalizing working capital (to restore OCF), stabilizing non-operating items, and improving ROIC via tighter capital deployment. With capex minimal (-0.02), near-term growth investments appear constrained; organic improvement in margins and WC efficiency is the primary lever.

Financial Health

Liquidity: Current ratio 1.05 and quick ratio 1.05 indicate minimal cushion; not below 1.0 but tight. Large short-term loans (54.15) vs cash (3.47) and receivables (49.45) imply reliance on rolling short-term funding; maturity mismatch risk is present if receivable collections slow. Solvency: D/E 7.24x is very high, a key red flag; equity base is thin (equity 9.93 vs assets 83.63). Interest coverage 3.88x is adequate but sensitive to earnings volatility or rate increases. Off-balance sheet: Not disclosed; lack of data on guarantees or contingent liabilities could understate risk. Equity ratio not provided; based on totals, equity/assets ≈ 11.9%, which is low.

Cash Flow Quality

OCF/Net income is -3.78x, flagging poor earnings-to-cash conversion. Free cash flow was -5.65 despite low capex (-0.02), indicating working capital outflows (likely receivables build or reduced payables). Given AR 49.45 vs AP 11.95, cash conversion depends heavily on collection cycles; no explicit signs of manipulation, but the scale of WC swing is a risk given thin margins. Financing inflow of 4.84 offset OCF deficit, increasing reliance on debt rollover. Sustainability: Without improvement in OCF, funding dividends and any growth capex from internal cash will be challenging.

Dividend Sustainability

Dividend data is unreported. With net income of 1.48 but OCF negative (-5.60) and FCF negative (-5.65), internal funding for dividends appears weak this period. Payout ratio and FCF coverage cannot be calculated, but from cash generation, any dividend would have required financing or cash drawdown. Policy outlook cannot be inferred from disclosures; sustainability hinges on restoring positive OCF and moderating short-term debt.

Risk Assessment

Business Risks:

• Thin gross and operating margins (GPM 3.8%, OPM 1.26%) heighten sensitivity to input cost and pricing shifts
• Cost pass-through and spread compression risk in trading activities
• Equity-method loss (-0.14) and affiliate performance volatility
• Potential customer concentration and credit risk given large receivables (49.45)
• Industry exposure to commodity/food price volatility and FX (if imports/exports are material)

Financial Risks:

• High leverage: D/E 7.24x and low equity ratio (~12%)
• Short-term funding dependence: short-term loans 54.15 vs limited cash 3.47
• OCF deficit (-5.60) and negative FCF (-5.65) requiring external financing
• Interest rate/refinancing risk; interest coverage 3.88x could weaken if rates rise or earnings soften
• Maturity mismatch risk if receivable collections slow

Key Concerns:

• ROIC at 3.3% below 5% warning threshold, implying weak capital efficiency
• Margin compression despite revenue growth (OPM down ~16 bps YoY)
• Ordinary income down 14.1% amid higher non-operating expenses and equity-method loss
• Data gaps (dividends, inventories, investment securities) limit full assessment of liquidity buffers and payout policy

Investment Implications

Key Takeaways:

• Top-line grew 4.8% but profits declined; margins compressed
• ROE 14.9% is leverage-driven; underlying ROIC only 3.3%
• Cash conversion weak (OCF/NI -3.78x), FCF negative
• Balance sheet highly leveraged with heavy short-term borrowing
• Equity-method income was a drag this year, though not a core driver

Metrics to Watch:

• Operating cash flow and working capital swings (AR days, AP days)
• Operating and net margin trends (bps changes QoQ/YoY)
• Short-term loans outstanding and interest coverage
• ROIC improvement vs asset deployment
• Equity ratio and D/E trajectory
• Non-operating items (interest expense, equity-method income) and their volatility

Relative Positioning: Versus smaller trading peers, the company operates with thinner margins, higher leverage, and lower ROIC, making it more sensitive to funding costs and working capital shocks; improving cash conversion and deleveraging would be required to strengthen its competitive and financial profile.

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