HOKUTO CORPORATION Q2 FY2026 earnings call

Overall Financial Results

• Consolidated sales grew 2.081 billion yen year-over-year to 38.08 billion yen
• Gross profit increased 10.4% year-over-year to 8.364 billion yen, driven by selling price increases
• Operating profit grew 340 million yen year-over-year, marking the first consolidated operating profit since the COVID-19 pandemic
• Net income increased 1.9 billion yen year-over-year to 1.401 billion yen, with all core profit metrics turning positive

Production Strategy

• Overall consolidated mushroom production was slightly below plan, as the company intentionally reduced output (led by maitake) to prevent price erosion from oversupply. This deliberate production adjustment successfully maintained selling prices and drove stronger-than-planned profit.

New Product and Marketing Initiatives

• The "Shimofuri Hiratake" product received the 2025 Technology Award from the Japanese Society of Mycology for its development, and gained significant consumer awareness from a collaboration with popular cooking creator Ryuji's viral recipe, stabilizing its selling price and increasing demand.
• Launched a limited-quantity direct-to-consumer e-commerce subscription service delivering carefully selected Hokuto-grown mushrooms from Nagano Prefecture, which has received very positive customer feedback to date.
• Launched test sales of new quick-frozen pre-cut mushroom product "Toretate Ichiban♪" in selected stores in Nagano and the Tokyo metropolitan area; the product retains fresh mushroom texture, offers long storage and high convenience, and the company will monitor market reception to determine next steps.
• Completed the first breed improvement of eringi in 26 years, launching a new variety with improved texture and appearance; the company is running national promotions and working to refine the product launch after initial launch-phase challenges.
• Collaborated with external partners including Hoshino Resorts and Urban Research on joint marketing and business initiatives.

1. Domestic Mushroom Business: Achieved revenue and profit growth driven by solid selling prices across all mushroom varieties. Sales were nearly in line with original plan, while profit improved significantly against plan. The premium product "Shimofuri Hiratake" saw increased demand from improved consumer awareness, leading to higher production volume year-over-year, while maitake production was intentionally reduced to maintain price stability. This segment is the largest contributor to overall company revenue and profit.
2. Overseas Mushroom Business: The US delivered solid performance, with local currency sales growing 790 thousand USD year-over-year to 13.87 million USD, though operating profit saw a slight decline. Performance was below plan overall, driven by weakness in Taiwan and Malaysia: Taiwan faced poor operating conditions in Q1 and could not fully recover lost ground in Q2 despite recovery efforts; Malaysia prioritized price increases to improve margins, but legacy low prices from past contracts limited sales volume, resulting in lower revenue and profit year-over-year, with poor balance between volume and pricing. Only the US delivered positive operating profit against plan.
3. Processed Products Business: Overall revenue missed plan, as Q1 performance was very weak and subsidiary Arden Co. could not fully recover despite improved order volume from July onward. However, strong sales of high-margin items drove overall profit growth for the segment.
4. Chemical Products Business: Both revenue and profit increased year-over-year, driven by securing a large equipment project in the agricultural materials segment. Revenue came in 100 million yen above original plan, with operating profit 45 million yen above plan.

• The company upwardly revised full-year 2026 March fiscal year guidance: consolidated sales are now projected at 84.7 billion yen, an increase of 1.1 billion yen from the prior forecast; operating profit is projected at 5.83 billion yen, an increase of 1.55 billion yen; ordinary profit is projected at 6.28 billion yen, an increase of 1.63 billion yen.
• Individual (non-consolidated) full-year guidance was also upwardly revised, with sales up 1.1 billion yen to 4.34 billion yen net income, and operating and ordinary profit both increased against prior forecasts.
• October 2025 performance remained strong, and Q3 is the company's peak profit season. The company notes it may further revise guidance again after releasing Q3 results, depending on market conditions.
• The company plans a 2 yen increase in full-year dividends, with an interim dividend of 10 yen per share and a planned year-end dividend of 42 yen per share, though the final dividend may be adjusted based on final performance.

• Malaysia's overseas mushroom operations are facing prolonged underperformance, as misaligned pricing strategy led to lower-than-expected sales volume, with the company still working to resolve the balance between pricing and volume.
• Taiwan's operations could not fully recover from Q1 underperformance, leaving full-year results at risk of missing targets.
• The company's performance is heavily dependent on domestic mushroom sales, so unexpected changes in Q3 consumer demand or pricing could impact full-year results and require further guidance adjustments.
• While the Ueda factory has fully recovered from last year's fire, there is some uncertainty around pricing for buna shimeji after the recovery of full supply, requiring close monitoring of sales trends.

Q: The analyst notes that while cumulative H1 domestic mushroom profit is positive, Q2 itself was in deficit, covered by Q1 surplus. The analyst asks if the current profit level from successful production cuts and price management is sustainable and has become entrenched, or if it remains fragile. / A: Management confirms that unusually hot summer weather impacted the market, but notes supermarkets have shifted away from aggressive discounting, which has supported overall price increases. The intentional maitake production cut was implemented after frontline input to avoid price drops, and this strategy delivered strong results. Management says it wants to observe results for another year, but notes the market is unlikely to return to the poor pricing conditions of 2-3 years ago, and the company feels encouraged by current progress.

Q: The analyst asks for an update on the aggressive North America expansion strategy laid out in the new mid-term plan, including progress on investment, demand building, and customer acquisition, as well as timing for the planned second factory. / A: Management says the company is currently steadily acquiring new customers to prepare for the new factory, and has started work with several new accounts, but is not yet ready to rush into full second factory construction. The company is deliberately selecting customers that will support appropriate price levels rather than pursuing volume through discounting. No timeline for land acquisition or permitting has been set, and the company is still finalizing cost projections for the project.

Q: The analyst asks for an outlook for mushroom pricing during the upcoming peak demand season of November-December, given the observed reduction in industry discounting. / A: Management confirms the Ueda factory has fully recovered from last year's fire, with supply back to normal levels. Pricing has remained solid through November, and the recent sharp drop in temperatures has increased demand for hot pot, supporting prices. While there is some uncertainty around buna shimeji pricing after supply normalization, management does not expect significant price erosion, and notes current pricing is already running above plan.

Q: The analyst asks for early outcomes from the partnership with Advantedge Partners. / A: Management confirms that the partnership has supported successful collaborative PR for "Shimofuri Hiratake", including YouTube campaigns with creator Ryuji that have steadily increased consumer awareness. Sales have been solid, and a recent full package redesign has also contributed to strong performance.