Mitsubishi Tanabe Pharma Corp. :MTZXF-US: Earnings Analysis: Q4, 2017 By the Numbers : July 27, 2017

Mitsubishi Tanabe Pharma Corp. reports financial results for the quarter ended March 31, 2017.


  • Summary numbers: Revenues of USD 877.27 million, Net Earnings of USD 97.45 million.
  • Gross margins widened from 58.09% to 62.01% compared to the same period last year, operating (EBITDA) margins now 17.66% from 8.62%.
  • Change in operating cash flow of 181.09% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 877.27 1097.98 963.52 977.56 788.21
Revenue Growth (%YOY) 11.3 -4.21 14.02 20.52 -1.49
Earnings (mil) 97.45 218.24 140.63 202.97 -31.74
Earnings Growth (%YOY) 407.07 -14.35 20.42 65.61 56.98
Net Margin (%) 11.11 19.88 14.6 20.76 -4.03
EPS 0.17 0.39 0.25 0.36 -0.06
Return on Equity (%) 1.28 2.78 1.72 2.65 -0.45
Return on Assets (%) 4.5 9.69 6.03 9.33 -1.55

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, MTZXF-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if MTZXF-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -20.10% and earnings by -55.35% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 58.09% to 62.01% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 8.62% to 17.66% compared to the same period last year. For comparison, gross margins were 59.26% and EBITDA margins were 28.92% in the last reporting period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MTZXF-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 533.64 days from 558.67 days for the same period last year.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MTZXF-US‘s year-on-year change in operating cash flow of 181.09% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 3.31% to 14.88% and (2) one-time items. The company’s pretax margins are now 14.61% compared to -4.87% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Mitsubishi Tanabe Pharma Corp. engages in the research, development, manufacture, and sale of pharmaceutical products. Its products include Remicade, Ceredist, Talion, Kremezin, Maintate, Simponi, Lexapro, Tenelia, Tetrabik, and Imusera. The company was founded by Gohei Tanabeya in 1678 and is headquartered in Osaka, Japan.

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