4151 · Kyowa Kirin

Will it survive?

• Can it pay its interest? 120.1×
  Comfortable
  Operating income ¥60.0B ÷ interest expense ¥500M
  What this means

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.

• How heavy is the debt, net of cash? —
  Debt under-captured — leverage unknown, not low
  What this means

  This company pays far more interest than its tagged debt implies (the rest sits under segment dimensions the data source strips), so its net cash or net debt cannot be read honestly: the gap is unknown, not zero, and 'net cash' here would be exactly the fiction the figure is meant to prevent. Judge it on the record and owner earnings instead.

• How long is cash tied up? -119d
  Negative, funded by others
  DSO 133 + DIO 104 − DPO 357 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money.

Is it a good business?

• Return on invested capital —
  Debt under-captured
  Industry peers: median 18%
  What this means

  This company's interest bill implies far more debt than its filings tag at the consolidated level (the rest sits under segment dimensions the data source strips), so invested capital, and the return on it, cannot be read honestly. Judge this one on Owner Earnings and the record instead.

• Owner-earnings margin 14%
  Solid through the cycle
  8-yr median margin, range 8%–23%; latest ¥70.5B = operating cash ¥96.6B − maintenance capex ¥26.1B
  Industry peers: median 11%
  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 14% of revenue this year, a 14% median across 8 years. It chose to put ¥11.6B more into growth, so free cash flow this year was ¥58.9B — the gap is investment, not weakness.

• Are earnings backed by cash? 1.44×
  Cash-backed
  Cash from ops ¥96.6B ÷ net income ¥67.0B
  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? 44%
  Returns about half
  Dividends + buybacks ¥30.9B ÷ Owner Earnings ¥70.5B
  What this means

  Of ¥70.5B Owner Earnings, ¥30.9B (44%) went back to shareholders, ¥30.9B dividends, ¥9M 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? 1.44×
  Expanding
  Capex ¥37.7B ÷ depreciation ¥26.1B
  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 10 of 10
  What this means

  Never lost money over the record, the earnings stability Graham insisted on.

• Operating margin 12% → 8% (3-yr avg ends)
  What this means

  The recent-years average (8%) sits below the early years (12%), but the latest year (12%) is back near the early level: a cyclical trough dragging the window down, not a one-way slide. The through-cycle median is 11% — read it across the cycle, not on the dip.

• Owner earnings growth +2%/yr
  What this means

  Owner earnings grew about 2% a year over the record.

• Worst year 2024 · −0.9% op. margin
  What this means

  Operations went underwater in 2024, understand why before trusting the good years.

• Share count −1.0%/yr
  What this means

  The share count is shrinking, buybacks are quietly growing your slice of the business.

• Dividend record rising
  What this means

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