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

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

Taiyo Bussan Co., Ltd. (TSE: 9941, non-consolidated, JGAAP) delivered FY2025 Q4 results characterized by modest top-line growth but pressure on profitability and cash generation. Revenue increased 4.8% YoY to ¥19.66bn, consistent with a high-volume, low-margin trading model. Despite the higher sales base, operating income fell 7.1% YoY to ¥247m, indicating negative operating leverage as costs outpaced gross profit growth. Gross profit was ¥743m, implying a thin gross margin of 3.8%, typical for a trading-oriented business but leaving limited buffer for cost volatility. Net income declined 8.6% YoY to ¥148m, yielding a net margin of 0.75%, while EBITDA was ¥255m (1.3% margin), underscoring structurally low profitability. DuPont decomposition shows ROE at 14.9%, driven primarily by high financial leverage (8.42x) and strong asset turnover (2.35x) rather than margin strength. ROA is modest at roughly 1.8%, consistent with the trading profile and low margin base. Interest coverage is manageable at 3.9x on EBIT, but the cushion is not ample for shocks in funding costs or gross margin. The balance sheet shows total assets of ¥8.36bn and total equity of ¥0.99bn, with liabilities of ¥7.19bn; the debt-to-equity ratio is high at 7.24x. Liquidity is thin but positive with a current ratio of 104.8% and working capital of ¥337m, indicating a narrow buffer against short-term funding needs. Operating cash flow was negative at ¥-560m, driving free cash flow to ¥-565m, suggesting meaningful working capital absorption despite profitability. Financing cash inflow of ¥484m likely bridged the OCF shortfall, highlighting reliance on external funding to support operations. Dividend distribution was absent (DPS ¥0, payout 0%), which is consistent with the negative FCF profile and balance sheet conservatism needed amid leverage. Data gaps exist (e.g., inventories, cash and equivalents, equity ratio, share count not disclosed in XBRL fields), so certain inferences rely on available subtotal metrics rather than full disclosures. Overall, performance reflects a resilient revenue base but tight margins, negative operating leverage, and cash flow strain necessitating careful working capital and funding management.

Profitability Analysis

ROE_decomposition: DuPont: Net profit margin 0.75% × Asset turnover 2.351 × Financial leverage 8.42 = ROE 14.9%. ROA approximates 1.8% (¥148m / ¥8,363m), implying ROE uplift is predominately leverage-driven rather than margin expansion. margin_quality: Gross margin 3.8% (¥743m/¥19,662m) and operating margin ~1.26% (¥247m/¥19,662m) reflect a thin spread typical of trading. EBITDA margin 1.3% shows limited operating buffer. Net margin 0.75% is pressured by interest costs (¥63.7m) and limited scale benefits. operating_leverage: Revenue +4.8% YoY contrasted with operating income -7.1% indicates negative operating leverage, likely from gross margin compression and/or higher SG&A/logistics costs not offset by volume growth.

Growth Assessment

revenue_sustainability: Top-line growth to ¥19.66bn (+4.8% YoY) suggests steady demand and high turnover. Sustainability hinges on maintaining customer volumes and pass-through of input costs in a price-competitive environment. profit_quality: Declines in operating and net income despite higher revenue suggest mix/price pressure and higher operating costs. Interest expense meaningfully erodes earnings given the thin margin base. outlook: Absent evidence of structural margin improvement or cost relief, earnings growth will depend on disciplined pricing, procurement, and working capital efficiency. Any normalization of working capital could lift cash earnings, but sustained negative operating leverage is a risk.

Financial Health

liquidity: Current ratio 104.8% and working capital ¥336.7m indicate only a modest cushion. Quick ratio equals current ratio due to undisclosed inventories, so true liquidity could be weaker if inventory is material. solvency: Debt-to-equity 7.24x and leverage (assets/equity 8.42x) are high for a low-margin model. Interest coverage at 3.9x (EBIT/interest) is adequate but leaves limited headroom against rate increases or profit dips. capital_structure: Total assets ¥8.36bn funded primarily by liabilities (¥7.19bn) with equity ¥0.99bn. The reported equity ratio field is not populated; based on totals, equity/asset ratio is roughly 11.9%.

Cash Flow Quality

earnings_quality: OCF/Net income of -3.78 indicates weak cash conversion, likely from working capital build (receivables/payables timing and/or inventory, though inventory not disclosed). FCF_analysis: OCF ¥-560m and investing CF ¥-5m yield FCF ¥-565m, pointing to operating cash strain rather than capex intensity. working_capital: High asset turnover (2.35x) implies heavy use of short-term funding. Negative OCF suggests receivable growth or reduced payables; tight current ratio amplifies execution risk if collections lag.

Dividend Sustainability

payout_ratio_assessment: DPS ¥0 and payout 0% align with the need to preserve liquidity amid negative FCF and high leverage. FCF_coverage: FCF coverage 0.00x due to no dividends paid; however, the capacity to resume dividends depends on restoring positive OCF and strengthening the balance sheet. policy_outlook: Given leverage and working capital needs, a conservative policy is likely until cash generation stabilizes and interest coverage improves.

Risk Assessment

Business Risks:

• Thin gross margins increase sensitivity to procurement and logistics cost swings.
• Negative operating leverage in the period suggests earnings volatility if sales mix worsens.
• High reliance on volume and customer concentration risk typical for trading businesses.
• Competitive pricing pressure can compress margins further.

Financial Risks:

• High leverage (D/E 7.24x) with modest interest coverage (3.9x).
• Negative operating cash flow necessitating external financing (¥484m inflow).
• Tight liquidity (current ratio 104.8%) elevates refinancing and covenant risks if conditions tighten.
• Potential interest rate sensitivity due to debt reliance.

Key Concerns:

• Sustained negative OCF despite positive earnings.
• Operating income decline despite revenue growth (negative operating leverage).
• Limited equity buffer relative to liabilities.
• Data gaps on cash, inventories, and share metrics constrain full assessment.

Investment Implications

Key Takeaways:

• ROE of 14.9% is predominantly leverage-driven; underlying ROA is modest.
• Revenue growth (+4.8% YoY) did not translate to operating profit growth; margins remain thin.
• OCF and FCF were negative, funded by increased financing inflows.
• Liquidity is tight but positive; solvency ratios are stretched for a low-margin model.
• Dividend suspended/absent, appropriately conservative given cash dynamics.

Metrics to Watch:

• OCF and working capital days (receivables, payables, inventory once disclosed).
• Gross margin trend and SG&A ratio for signs of operating leverage improvement.
• Interest coverage and effective borrowing costs amid rate environment.
• Current ratio and short-term debt maturities/refinancing activity.
• Asset turnover stability as a driver of earnings resilience.

Relative Positioning: Compared to typical Japanese trading-oriented small caps, the company shows comparable asset turnover but higher financial leverage and weaker cash conversion this period; profitability is within low-margin norms, but the leverage-dependent ROE and negative OCF elevate risk relative to peers with stronger balance sheets.

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