7012 · Kawasaki Heavy Industries

Will it survive?

• Can it pay its interest? 2.9×
  Adequate
  Operating income ¥60.8B ÷ interest expense ¥21.3B
  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? ¥343.9B · 5.7× operating profit
  Heavy net debt
  Cash ¥115.4B − debt ¥459.3B
  What this means

  Netting ¥115.4B of cash and short-term investments against ¥459.3B of debt leaves ¥343.9B owed, about 5.7× a year's operating profit (7.6× 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 4%
  Below average through the cycle
  10-yr median, range -3%–6%; 4% latest = NOPAT ¥48.1B ÷ invested capital ¥1.22T
  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 4% 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 2%
  Positive this year, negative across the cycle
  latest ¥44.1B = operating cash ¥140.1B − maintenance capex ¥96.0B (positive this year), after an earlier loss stretch (10-yr median -0%)
  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 -0% median across 10 years.

• Are earnings backed by cash? 1.30×
  Cash-backed
  Cash from ops ¥140.1B ÷ net income ¥108.2B
  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? 59%
  Returns about half
  Dividends + buybacks ¥26.0B ÷ Owner Earnings ¥44.1B
  What this means

  Of ¥44.1B Owner Earnings, ¥26.0B (59%) went back to shareholders, ¥26.0B dividends, ¥30M 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? 0.92×
  Maintaining
  Capex ¥96.0B ÷ depreciation ¥103.8B
  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 4% → 1% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 4% early to 1% lately, median 2% — competition or costs are biting in.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +9%/yr
  What this means

  Owner earnings grew about 9% a year over the record.

• Worst year 2024 · −2.1% op. margin
  What this means

  Operations went underwater in 2024, 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.