FEED ONE CO.,LTD. Q2 FY2026 earnings call

• Interim Financial Overview: • Consolidated net sales: 142.344 billion yen, recurring profit: 3.714 billion yen, net profit: 2.873 billion yen, all slightly down year-over-year. Progress against full-year forecasts: 53.1% for recurring profit and 55.3% for net profit, meeting targets on track. • Total assets increased by 1.263 billion yen to 125.4 billion yen. Equity ratio improved 2pp to 46%, D/E ratio improved 0.04pp to 0.46x. Operating cash flow was +8.2 billion yen, covering a 6.6 billion yen negative investment cash flow, resulting in +1.6 billion yen free cash flow.

1. Livestock Feed Business: Contributes ~80% of total company revenue and profit. Sales volume decreased ~2% year-over-year, driven by summer extreme heat, reduced livestock inventory, and responses to constrained manufacturing capacity. Segment profit also decreased year-over-year. 2. Fisheries Feed Business: Contributes ~10% of total company revenue and profit. Sales volume decreased ~15% year-over-year due to rising seawater temperatures and reduced farmed fish populations. Segment profit increased year-over-year, supported by strong demand recovery for high value-added eel feed, lower raw material prices, and strict profitability management. 3. Food Business: The egg segment saw lower profit due to persistently high market prices and depreciation expenses from subsidiary Magic Pearl Co., Ltd.'s new factory. The meat segment saw improved profitability year-over-year driven by sales condition reviews and strict sales management, despite pork carcass prices hitting all-time highs. Overall segment profit increased sharply year-over-year.

• Full-year 2026 March term forecasts are maintained at the initial levels: 311 billion yen net sales, 7 billion yen recurring profit, 5.2 billion yen net profit. • Livestock Feed Business: Full-year profit target is expected to be met, driven by sales volume recovery from cooler temperatures in the second half and strong new product sales outlook. • Fisheries Feed Business: Achieving the full-year sales volume target is challenging despite expected volume recovery, but the full-year profit target is still expected to be met. • Food Business: While persistently high egg market prices from four reported avian influenza cases this term is a source of uncertainty, improved profitability from lower pork carcass prices in the meat segment is expected to offset this, so the full-year profit target for the overall segment is expected to be met. • 10-year (Phase 2) long-term targets: 20%+ market share, 16 billion yen+ EBITDA, 10%+ ROE, 8%+ ROIC, with 800 billion yen total planned growth investment.

• Industry and market risks: Population aging and decline create downside pressure for domestic livestock and aquatic product demand; climate change (rising temperatures/sea temperatures) reduces sales volumes in the near term and shifts aquaculture suitable areas; disease outbreaks (avian influenza, African swine fever) reduce livestock inventory and feed demand. • Supply chain risks: Geopolitical risks, production restriction policies in major exporting countries, and import restrictions from livestock disease increase uncertainty for stable imports of feed raw materials; sharp fluctuations in grain prices, ocean freight rates, and exchange rates create input cost volatility; aging manufacturing capacity at existing facilities constrains output.
  • **Operational risks: Rapid raw material price fluctuations may not be fully passed through to selling prices in all scenarios, creating near-term margin pressure.

Q: What synergies exist between Feed One and Mitsui in the fisheries feed business? / A: Feed One sources fishmeal raw material from Mitsui for fisheries feed. Mitsui also supports collaboration including supplying feed to a salmon land-based aquaculture company that Mitsui has invested in, co-developing new technologies, and providing proposals for fisheries feed export. This extends the existing win-win raw material procurement collaboration from the livestock feed segment to the fisheries feed business.

Q: How does Feed One differ from JA Zennoh, the market leader in livestock feed, and what is your outlook for gaining market share? / A: JA Zennoh has a much larger organization and much broader distribution channel scale to farmers, but this also comes with much higher operating costs that are less efficient. Feed One differentiates by actively sourcing new technologies from domestic and international markets, has stronger sales focused on farm performance and profitability, and operates a leaner organizational structure. Feed One has been gradually gaining share from JA Zennoh, particularly with larger and more technology-focused producers switching from JA Zennoh to Feed One, a trend that management expects to continue.

Q: How has the falling market price of soybean meal and rapeseed meal impacted Feed One's results? / A: Soybean meal and rapeseed meal are the second largest feed raw material input after corn, but falling prices have not created a large material impact on results so far. From Feed One's perspective, looser supply and lower prices for these major raw materials is a favorable development, particularly as the company shifts fisheries feed raw materials away from fishmeal to plant-based inputs. Livestock feed prices are revised quarterly, so price changes are partially reflected in selling prices, so overall the impact is broadly neutral to positive.

Q: How sensitive is Feed One's profitability to yen depreciation? / A: For livestock feed, quarterly price revisions allow cost increases from yen depreciation to be incorporated into selling prices, so profitability is not highly sensitive outside of extremely rapid yen depreciation, and any impact fades over subsequent quarters. For fisheries feed, there are no quarterly price revisions, so yen depreciation does impact profitability. The company's ongoing push to expand fishmeal-free feed eliminates exposure to imported fishmeal price changes from yen depreciation, which reduces profit volatility.