KOZO Holdings Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥14.10B
• Operating Income: ¥-260M
• Net Income: ¥-352M
• EPS: ¥-1.12

Income Statement

Balance Sheet

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

KOZO Holdings reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥14.10bn, up 7.9% year on year, indicating top-line growth momentum. Gross profit was ¥4.87bn, translating to a healthy gross margin of 34.5%, which suggests reasonable pricing power and cost pass-through at the gross level. Despite this, operating income was a loss of ¥260m, flat YoY, implying that SG&A and other operating costs absorbed the gross profit expansion. Ordinary loss was ¥239m, slightly better than operating loss, indicating modest non-operating gains offsetting interest expense. Net loss came in at ¥292m (EPS: -¥1.12), equating to a net margin of -2.07%. DuPont analysis indicates a calculated ROE of -35.39%, driven by a negative net margin, high asset turnover of 2.73x, and material financial leverage of 6.27x. The leverage effect is amplifying the net loss at the equity level given the thin margin profile. Liquidity is tight with a current ratio of 87.6% and quick ratio of 73.4%, and working capital of -¥496m, pointing to short-term funding pressure. The balance sheet shows total assets of ¥5.18bn and total liabilities of ¥5.87bn, implying an equity base of ¥0.83bn and an implied equity ratio of roughly 15.9% (based on reported totals), though the disclosed equity ratio is 0.0% due to non-disclosure format. Interest expense was ¥24.6m, with interest coverage at -10.6x given negative operating income, underscoring constrained debt service capacity from operations. Inventories of ¥565m comprise a meaningful share of current assets, increasing the importance of inventory turnover and demand visibility. Cash flow statement items were not disclosed (shown as zero), limiting assessment of operating cash conversion and capex needs; hence, cash flow quality cannot be validated this period. Dividend per share is reported at ¥0, appropriate given negative earnings and limited visibility on free cash flow. Overall, the profile is characterized by decent gross profitability but insufficient scale/operating efficiency to cover fixed costs, leading to recurring operating losses. The uptick in revenue provides a base for potential earnings recovery if operating costs can be controlled, but leverage and liquidity metrics elevate financial risk. Given the data limitations (notably cash flow and depreciation), conclusions rely on the available income statement and balance sheet detail.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin -2.07% × Asset turnover 2.725 × Financial leverage 6.27 = ROE -35.39%. Gross margin is 34.5% (gross profit ¥4,869m on revenue ¥14,102m), indicating adequate unit-level economics. Operating margin is -1.84% (operating loss ¥260m), implying SG&A and other operating costs exceed gross profit headroom; operating loss remained flat YoY despite higher revenue, suggesting cost inflation or higher fixed cost base. Ordinary margin is -1.69% and benefited slightly from non-operating items, partly offsetting ¥24.6m interest expense. Net margin is -2.07%, with a small tax outflow despite losses, diluting bottom line. Operating leverage appears unfavorable this period: revenue grew 7.9% but operating income did not improve, indicating that either fixed costs stepped up or variable costs rose within SG&A. The negative interest coverage (-10.6x) reflects that current operating earnings are insufficient to service interest, adding pressure to improve operating efficiency or reduce leverage. Without depreciation disclosure, EBITDA cannot be assessed; however, the negative operating income suggests EBITDA was likely weak as well unless depreciation is sizable but unreported.

Growth Assessment

Revenue growth of 7.9% YoY to ¥14.10bn demonstrates demand resilience and/or improved execution in the core business. However, profit growth is lacking: operating loss remained at ¥260m YoY, indicating poor operating leverage and cost containment challenges. Gross profit of ¥4.87bn suggests room for profitability if SG&A efficiency improves; the key is converting gross margin into operating margin. Ordinary and net losses narrowed only slightly versus operating loss due to non-operating gains netting interest expense, but the structural earnings issue remains at the operating level. Sustainability of revenue growth will depend on backlog/order visibility and market conditions; while not disclosed, the inventory balance of ¥565m warrants monitoring for potential demand mismatches. Profit quality is currently weak given negative operating income; stabilization requires SG&A rationalization, mix improvement, or pricing actions. Outlook hinges on cost measures and potential scale benefits from revenue growth; if revenue momentum persists and cost base normalizes, losses could narrow. Absent disclosure on segment mix or one-off items, we assume core operations drove results rather than transitory factors. Overall, top-line trend is encouraging, but earnings conversion remains the critical bottleneck.

Financial Health

Liquidity is strained: current ratio 87.6% (current assets ¥3,492m vs current liabilities ¥3,989m), quick ratio 73.4%, and working capital of -¥496m signal short-term funding needs. Inventories are ¥565m; reliance on inventory conversion heightens cash management risk. Total liabilities are ¥5,871m against total assets of ¥5,175m and equity of ¥825m, implying high leverage with debt-to-equity of 7.12x. Implied equity ratio is roughly 15.9% (equity/assets), though the disclosed equity ratio is shown as 0.0% due to non-disclosure formatting. Interest expense of ¥24.6m versus operating loss leads to interest coverage of -10.6x, underscoring limited capacity to service debt from current operations. Capital structure is aggressive given the small equity base; any earnings volatility materially impacts solvency buffers. With cash and cash equivalents not disclosed, assessment of immediate liquidity headroom is limited; access to credit lines and working capital facilities would be important mitigants.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow were not disclosed this period (zeros denote non-reporting), preventing direct assessment of earnings-to-cash conversion or free cash flow. The OCF/Net Income ratio and FCF shown as zero are not informative under the disclosure caveat. Given negative operating income, baseline cash generation from operations is likely weak absent favorable working capital movements. Working capital appears tight, with negative working capital of -¥496m and inventories of ¥565m, implying reliance on payables and customer advances to fund operations. Without depreciation data, we cannot adjust to EBITDA to infer cash earnings. Key focus should be on receivables collection, inventory turnover, and payables terms to support OCF, as well as capex discipline to preserve FCF.

Dividend Sustainability

Annual DPS is ¥0 with a reported payout ratio of 0.0%, which aligns with negative earnings and uncertain cash flow visibility. Given the operating loss and elevated leverage, distributions would not be covered by earnings or free cash flow at present. Lack of OCF and capex disclosure limits precise FCF coverage analysis; however, the negative operating margin and interest coverage suggest limited capacity for near-term dividends. Policy-wise, preserving liquidity and deleveraging are likely priorities until consistent profitability and positive OCF are established.

Risk Assessment

Business Risks:

• Operating leverage risk: inability to translate gross margin into operating profit despite revenue growth
• Cost inflation or elevated fixed cost base pressuring margins
• Demand variability impacting inventory turnover and working capital
• Competitive pricing pressure that could erode gross margin

Financial Risks:

• Tight liquidity with current ratio 87.6% and quick ratio 73.4%
• High leverage: debt-to-equity 7.12x and implied equity ratio ~15.9%
• Negative interest coverage (-10.6x) indicating limited debt service capacity from operations
• Potential refinancing/rollover risk if access to credit tightens

Key Concerns:

• Persistent operating losses (-¥260m) despite 7.9% revenue growth
• Negative working capital of -¥496m increasing short-term funding dependence
• Non-disclosure of cash flows and depreciation limits visibility on cash generation and investment needs
• Small equity base (¥825m) magnifies earnings volatility impact on solvency

Investment Implications

Key Takeaways:

• Top-line growth (+7.9% YoY) but operating loss unchanged, indicating weak operating leverage
• Gross margin is solid at 34.5%, but SG&A efficiency must improve to restore profitability
• Leverage is high (7.12x liabilities/equity) and interest coverage is negative
• Liquidity is tight with sub-1.0x current and quick ratios and negative working capital
• Cash flow disclosure is lacking; monitoring OCF and capex is critical for FCF outlook

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of sales
• Interest coverage and net debt metrics (when cash is disclosed)
• Working capital turnover: receivables days, inventory days, payables days
• Gross margin stability amid cost and pricing dynamics
• Equity ratio and any capital measures (debt repayments, equity raise)

Relative Positioning: Compared to typical TSE small caps, KOZO Holdings shows above-average gross margin but below-average operating profitability and weaker liquidity, paired with higher financial leverage, placing it in a more vulnerable quadrant until cost structure and cash generation improve.

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