Toray Industries Inc
TSE:3402
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
635.2
962.2
|
| Price Target |
|
We'll email you a reminder when the closing price reaches JPY.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Toray Industries Inc
Earnings Call Analysis
Q1-2025 Analysis
Toray Industries Inc
The Toray Group recently held an earnings call to discuss their first-quarter results for the period ending June 30, 2024. Masahiko Okamoto, an executive of the company, provided an in-depth analysis of the quarterly performance, major segment results, financial condition, and forward-looking guidance.
Toray's consolidated revenue for the first quarter increased by a solid 10.3% to JPY 637.7 billion compared to the same period a year earlier. The company's core operating income saw a remarkable surge of 67.8% to JPY 36.8 billion. Profit also rose significantly by 92.6% to JPY 26.9 billion. These robust figures reflect the company's successful efforts in capturing recovery demand, implementing structural reforms, and adopting strategic pricing adjustments.
Several key business segments contributed to Toray's encouraging results: - Fibers & Textiles: Revenue in this segment increased by 9.4% to JPY 244.8 billion, with core operating income rising 35.7% to JPY 14.8 billion. The growth was driven by strong apparel applications and a robust performance by overseas trading subsidiaries. - Performance Chemicals: This segment recorded a 12.5% increase in revenue to JPY 241.7 billion and an impressive 147.5% rise in core operating income to JPY 18.3 billion. The profitability boost came from improved demand in the films business and better utilization rates. - Carbon Fiber Composite Materials: With revenue climbing 13% to JPY 77.7 billion, this segment achieved a core operating profit of JPY 5.1 billion, up 87.5%. The rise was due to steady recovery in the aircraft applications and lower utility costs in Europe.
At the end of June 2024, Toray's financial situation showed positive developments. Total assets increased to JPY 3,596 billion, up by JPY 129.5 billion, driven by higher inventories and tangible fixed assets. Total liabilities went up by JPY 30.3 billion to JPY 1,650.4 billion, mainly due to increased borrowings. Total equity rose to JPY 1,945.6 billion, a growth of JPY 99.2 billion from the previous fiscal year. Additionally, the company achieved a positive free cash flow of JPY 20.6 billion.
Toray reported a significant increase in capital expenditures for the first quarter, up by JPY 12.5 billion to JPY 36 billion. Depreciation and amortization also saw a rise, reaching JPY 33.4 billion, an increase of JPY 1.5 billion. Moreover, R&D expenditures for the quarter went up by JPY 2 billion to JPY 17.5 billion, underlining the company's commitment to innovation and long-term growth.
Looking ahead, Toray revised its consolidated business forecast for the six months ending September 30, 2024. The company now expects consolidated revenue of JPY 1,310 billion, core operating income of JPY 70 billion, and profit attributable to owners of parent to be JPY 46 billion. These adjustments take into account the strong performance in the first quarter and the anticipated global and Japanese economic recoveries. Despite potential risks such as changes in fiscal and trade policies in the U.S., prolonged real estate recession in China, and foreign exchange fluctuations, Toray remains optimistic about its forward momentum.
Toray's first-quarter results display a robust start to the fiscal year, powered by strong performances across various operational segments and strategic financial maneuvers. As the company anticipates gradual economic recovery both globally and within Japan, it remains vigilant of potential market and policy risks while staying committed to growth through innovation and structural reforms. Investors should note the substantial increases in revenue, core operating income, and profit, alongside the company's updated positive guidance for the coming months.
You don't have any saved screeners yet
Thank you very much for joining us today despite your busy schedule. On behalf of Toray Group, I'd like to take this opportunity to extend my gratitude towards your continued understanding and your interest in our management and business activities. Now, I'd like to post Toray's business results for the first quarter ended June 30, 2024.
Now I'd like to follow the table of contents shown on Page 1. This is a summary of the business performance and forecast. The core operating income for the first quarter significantly increased compared with the same period a year earlier as a result of capturing the recovery demand in addition to the promotion of the structural reform and strategic pricing. Given the business performance over the first quarter, total revised upwards, the consolidated business forecast for the 6 months of the fiscal year ending March 2025, which was announced on May 13, 2024. The full year consolidated business forecast will be reviewed as necessary as the announcement of the second quarter business results.
Now I'll explain the details of the business results starting from the next page. I would like to begin with an overview of business results for the first quarter ended June 30, 2024. Please turn to Page 4. Consolidated revenue for the first quarter increased 10.3% to JPY 637.7 billion, compared with the same period a year earlier. Core operating income increased 67.8% to JPY 36.8 billion, and profit increased 92.6% to JPY 26.9 million. Special items for the first quarter was positive JPY 1.3 billion, an improvement of JPY 2.4 billion on a year-to-year comparison.
Page 5 is about assets, liabilities, equity and free cash flow. As for financial condition at the end of June 2024, both assets and liabilities were affected by the increase in translated yen amount of overseas subsidiaries because of the depreciation of the yen. Total assets stood at JPY 3,596 billion, up JPY 129.5 billion from the end of the previous fiscal year due to an increase in inventories and tangible fixed assets. Total liabilities increased JPY 30.3 billion from the end of the previous fiscal year to JPY 1,650.4 billion, owing mainly to increases in borrowings.
Total equity rose by JPY 99.2 billion compared with the end of the previous fiscal year to JPY 1945.6 billion. Owner's equity was JPY 1831.6 billion. Interest-bearing liabilities was JPY 970.8 billion, and D/E ratio was 0.53. Free cash flow was positive at JPY 20.6 billion.
Page 6 explains about capital expenditures, depreciation and amortization and R&D expenditures. Capital expenditures for the first quarter increased by JPY 12.5 billion to JPY 36 billion on a year-to-year comparison. Meanwhile, depreciation and amortization increased by JPY 1.5 billion to JPY 33.4 billion. R&D expenditures increased by JPY 2 billion to JPY 17.5 billion compared with the same period of the previous fiscal year.
The table on Page 7 describes revenue and operating income by segment. In addition, the graph on this page shows the factor analysis of JPY 14.9 billion increase in core operating income for the first quarter on a year-to-year comparison. In the Performance Chemicals and Carbon Fiber Composite Materials segments, both production and sales expanded, capturing recovery of the electronic part market and the demand for aircraft. In addition to capturing the recovery demand by promoting structural reform on strategic pricing, core operating income increased 67.8% and core operating margin rose 2 points on a year-to-year comparison, respectively.
Using Page 8 and after, I would like to explain the results of each segment. First, Fibers & Textiles. Revenue of the Fibers & Textiles segment increased 9.4% to JPY 244.8 billion compared with the same period of year earlier, and the core operating income increased 35.7% to JPY 14.8 billion. The apparel applications were strong overall as movement of spring and summer clothing in Japan and [indiscernible] of overseas trading subsidiaries were robust. In the industrial applications, airbag textiles in the automobile applications was strong, [indiscernible] growth in demand.
Page 9 is the Performance Chemicals segment. Revenue increased 12.5% to JPY 241.7 billion compared with the same period of year earlier. Core operating income increased 147.5% to JPY 18.3 billion as demand recovery in the films business and the improvement of the utilization rate contributed to the significant improvement of profitability.
I would like to explain the overview of each business performance on the next page. While the Resins business was affected by the production declining, Japanese automobile industry, demand recovered in non-automobile applications for China and ASEAN. The Chemicals business remained strong. In the Film business, profitability improved as demand increased due to the rebound from inventory adjustments in supply chain in addition to improvement of the utilization rate. The Electronic & Information Material business saw demand recovery in the OLED-related materials and circuit materials.
Page 11 is the Carbon Fiber Composite Materials segment. Revenue increased 13% to JPY 77.7 billion compared with the same period of the year earlier, and this segment posted core operating profit of JPY 5.1 billion, 87.5% increase from the same period a year earlier. The cooperating income increased owing to a recovery in quantity in the aircraft applications as well as declining utility prices, such as electricity and natural gas prices in Europe.
I'd like to explain the status of each application on the next page. In the Aerospace applications, demand from major customers recovered steadily. In the Sports applications, inventory adjustments in general-purpose products for outdoor leisure continued, but sales of high-end products was strong. In Industrial applications, the wind turbine blade applications saw a gradual recovery.
Page 13 is the Environment & Engineering segment. Revenue increased 2.7% to JPY 57.5 billion compared with the same period a year earlier, and the core operating income decreased 17.7% to JPY 5.1 billion. In the Water Treatment business, demand in the U.S. and China, the 2 major markets for reverse osmosis membranes, was strong. Also, a large-scale project in the Middle East contributed to the strong business performance. As for Subsidiaries in Japan, a construction subsidiary was affected by a decline in sales of highly profitable properties.
Page 14 is a Life Science segment. Revenue increased 7.5% to JPY 12.1 billion compared with the same period of the year earlier and core operating income decreased by JPY 0.4 billion to negative JPY 0.8 billion. The Pharmaceutical business was affected by the impact of the penetration of the generic versions of the drug, the NHI drug price revision, and by the stagnant overseas sales volume. In the Medical Devices business, shipment of dialyzers for hemodiafiltration was strong, but affected by the soaring prices of raw materials and fuels.
Page 15 shows the business results of major subsidiaries and regions. At Toray International, sales of resins, films and electronic and information materials was strong. At our subsidiaries in Southeast Asia, in the Fibers & Textiles business, apparel applications and automotive applications in industrial applications were robust. In the Performance Chemicals business, demand for ABS resins was on the recovery trend in China and ASEAN.
At our subsidiaries in China, in the Fibers & Textiles business, apparel applications and automotive applications in industrial applications were strong. In the Performance Chemicals business, sales of resin products was strong.
As for our subsidiaries in the Republic of Korea, the Fibers & Textiles business was affected by the worsened supply-demand balance of non-woven fabric. In the Performance Chemicals business, sales of films and electronic and information materials was strong.
Next, I would like to explain the consolidated business forecast for the first 6 months ending September 30, 2024.
Please turn to Page 17. The global economy is likely to gradually recover along with the decline in inflation rate and monetary easing. The Japanese economy is also expecting a gradual recovery. However, potential changes in fiscal and trade policies in the U.S., which is in preparation of the presidential election, prolonged real estate recession in China, slowdown in consumption in the U.S. and Europe owing to the delay in the start of interest rate cuts, as well as changes in the Bank of Japan's monetary policy and foreign exchange fluctuations, are among the downward risks for the economy in Japan and overseas.
For the first 6 months of the fiscal year ending March 31, 2025, Toray revised its consolidated forecast, taking into consideration its business performance and business environment in the first quarter of the fiscal year. It now expects consolidated revenue of JPY 1,310 billion, core operating income of JPY 70 billion and profit attributable to owners of parent of JPY 46 billion.
The company will review as necessary its forecast for the entire fiscal year as the announcement of the business results for the second quarter of the fiscal year given changes in the external environment and other factors. The forecast from July to September is based on an assumed foreign currency exchange rate of JPY 150 to the U.S. dollar.
Page 18 shows the consolidated business forecast for the first 6 months of the fiscal year ending March 2025 by segment. Considering the business performance trend over the first quarter, et cetera, Toray revised the business forecast mainly for the Performance Chemicals segment as well as the Fibers & Textiles, Carbon Fiber Composite Materials and the Environment & Engineering segments.
This concludes my presentation. Thank you very much.