4004 · Resonac Holdings

Will it survive?

• Can it pay its interest? 2.7×
  Adequate
  Operating income ¥46.7B ÷ interest expense ¥17.0B
  What this means

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt, net of cash? ¥707.6B · 15.2× operating profit
  Heavy net debt
  Cash ¥262.0B − debt ¥969.5B
  What this means

  Netting ¥262.0B of cash and short-term investments against ¥969.5B of debt leaves ¥707.6B owed, about 15.2× a year's operating profit (20.8× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

Is it a good business?

• Return on invested capital 5%
  Below average through the cycle
  10-yr median, range -1%–22%; 3% latest = NOPAT ¥36.9B ÷ invested capital ¥1.41T
  Industry peers: median 16%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 3% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 4%
  Thin through the cycle
  10-yr median margin, range 1%–11%; latest ¥23.6B = operating cash ¥130.3B − maintenance capex ¥106.7B
  Industry peers: median 2%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 2% of revenue this year, a 4% median across 10 years.

• Are earnings backed by cash? 4.49×
  Cash-backed
  Cash from ops ¥130.3B ÷ net income ¥29.0B
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 50%
  Returns about half
  Dividends + buybacks ¥11.8B ÷ Owner Earnings ¥23.6B
  What this means

  Of ¥23.6B Owner Earnings, ¥11.8B (50%) went back to shareholders, ¥11.8B dividends, ¥7M buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 1.13×
  Maintaining
  Capex ¥106.7B ÷ depreciation ¥94.3B
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 7 of 10
  What this means

  Lost money in 3 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 2 of 10 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 11% → 3% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 11% early to 3% lately, median 6% — competition or costs are biting in.

• Reinvestment, incremental ROIC −6%
  What this means

  Reinvested capital came back at a negative incremental return over this window — the invested base grew while operating profit did not. The filings show where it went.

• Owner earnings growth +6%/yr
  What this means

  Owner earnings grew about 6% a year over the record.

• Worst year 2020 · −2.0% op. margin
  What this means

  Operations went underwater in 2020, understand why before trusting the good years.

• Share count +2.4%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.