5019 · Idemitsu Kosan

Will it survive?

• Can it pay its interest? 11.7×
  Comfortable
  Operating income ¥212.2B ÷ interest expense ¥18.1B
  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? ¥1.21T · 5.7× operating profit
  Heavy net debt
  Cash ¥157.1B − debt ¥1.36T
  What this means

  Netting ¥157.1B of cash and short-term investments against ¥1.36T of debt leaves ¥1.21T owed, about 5.7× a year's operating profit (6.4× 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? 64d
  Long (60+ days)
  DSO 38 + DIO 68 − DPO 42 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital 7%
  Below average through the cycle
  10-yr median, range -0%–13%; 6% latest = NOPAT ¥167.6B ÷ invested capital ¥2.83T
  Industry peers: median 6%
  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 6% 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, recently turned positive
  latest ¥296.5B = operating cash ¥392.4B − maintenance capex ¥96.0B; positive each of the last 3 years, after an earlier loss stretch (10-yr median 1%)
  Industry peers: median 6%
  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 4% of revenue this year, a 1% median across 10 years.

• Are earnings backed by cash? 2.28×
  Cash-backed
  Cash from ops ¥392.4B ÷ net income ¥171.9B
  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? 16%
  Reinvests most of it
  Dividends + buybacks ¥46.5B ÷ Owner Earnings ¥296.5B
  What this means

  Of ¥296.5B Owner Earnings, ¥46.5B (16%) went back to shareholders, ¥44.2B dividends, ¥2.3B 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? 1.61×
  Expanding
  Capex ¥154.9B ÷ depreciation ¥96.0B
  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, 2017–2026

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

• Profitable years 9 of 10
  What this means

  Lost money in 1 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 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 5% → 3% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 5% early to 3% lately, median 3% — competition or costs are biting in.

• Reinvestment, incremental ROIC 5%
  What this means

  Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.

• Owner earnings growth +25%/yr
  What this means

  Owner earnings grew about 25% a year over the record.

• Worst year 2020 · −0.1% op. margin
  What this means

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

• Dividend record rising
  What this means

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