FEED ONE CO.,LTD. Q3 FY2026 earnings call

• Company Overview

  • FEED ONE was formed via the 2014 merger of two listed feed companies, with Mitsui & Co. as the largest shareholder holding 25% stake and the company classified as an equity-method affiliate of Mitsui.
  • The group covers the full supply chain from upstream raw material procurement to downstream processed livestock product distribution, with 16 consolidated subsidiaries and 11 affiliated companies across Japan, Vietnam and India, and a stated corporate purpose of "Creating the future of food through feed, supporting life, and delivering smiles."

• Core Competitive Advantages

  • Livestock Feed: 13 production facilities across Japan, a specialized sales team of over 150 people, over 50 research staff with species-specific R&D facilities, and 30,000 annual product quality tests. The company holds technical partnerships with Cargill subsidiary Provimi and Kansas State University to access global leading technology.
  • Fisheries Feed: The company is an industry leader in low-fishmeal and fishmeal-free feed development, with a fishmeal inclusion rate 3% lower than the industry average. It has already launched commercially successful fishmeal-free products including Madai DP Sustaina ZERO for red seabream and Masu EP Succeed ZERO for trout.
  • Food Business: Leverages feed-sector synergy to source livestock raised on FEED ONE feed, and holds 20-40% share in major Japanese mass retail channels for pork and egg products.

• Sustainability and Social Issue Solutions

  • Addresses climate-related challenges: Developed heat stress-adapted feed for livestock that saw strong sales growth during 2024's record heat; developed methane reduction feed for cattle that maintains production efficiency and is nearing commercial launch, after becoming the first domestic company to import specialized methane measurement equipment to establish testing capabilities.
  • Advances circular economy: Utilizes food by-products and processing waste as feed ingredients, forming a core part of Japan's food recycling loop.
  • Next-generation aquaculture development: Prioritizes four key goals: reduced fishmeal use, development of alternative functional ingredients (e.g. insect protein), feed tailored for land/offshore aquaculture, and new feeding technologies such as compensatory growth.

• Human Capital and Governance

  • Delivered a cumulative ~20% wage increase over 3 years, with training expenditure exceeding the listed company average. Improved female employee representation via targeted new graduate hiring, and holds a 97% 3-year retention rate for new hires and a 2.4% overall employee turnover rate. The company has been certified as part of the "White 500" top healthy workplaces for large corporations in Japan.

1. Livestock Feed Business: This is the company's core business, accounting for approximately 80% of total revenue. Both sales volume and segment profit have grown steadily over the past 10 years. The company is the 2nd largest player in the overall Japanese livestock feed market (1st among private companies), and holds the No.1 market share in pig feed in Japan.
2. Fisheries Feed Business: This segment has seen growing segment profit in recent years, and is on track to hit a new record high profit this fiscal year. The company holds the No.1 market share in red seabream feed and is the 2nd largest player in the overall Japanese fisheries feed market.
3. Food Business: This segment processes and distributes pork and eggs, benefited from rising commodity prices for pork and eggs in recent years driven by heatwaves and livestock disease outbreaks. The segment's core consumer product Magic Pearl (shelf-stable seasoned boiled eggs) sold 40 million units in 2024, with production capacity expanded after a new factory completion in March 2025.

• Short-term fiscal guidance: For the current fiscal year, management has set a target of 7 billion yen in ordinary profit and 5.2 billion yen in net income, and the full company is working to achieve a new all-time record high profit for both metrics.
• 10-year long-term vision (Phase 2, 2024-2033): The company targets achieving a 20%+ industry sales volume share and over 16 billion yen in EBITDA by 2033, to become the true leading company in Japan's compound feed industry.
• Fisheries Feed Business 10-year target: After the completion of the new 13 billion yen Toyokawa, Aichi facility, the segment targets 1.4x higher sales volume and 2x higher EBITDA 10 years after factory completion.
• Shareholder return guidance: The company updated its shareholder return policy last year, shifting from a 25%+ payout ratio target to a progressive dividend policy targeting 3% return on equity. Management commits to steadily increasing dividends going forward under this new framework.

• External industry risks: The overall compound feed industry faces widespread aging infrastructure, sharply rising construction costs that make new large factories uneconomical for most players, increasing business volatility from abnormal heat stress harming livestock/fish growth, and growing spread of infectious diseases such as avian influenza and African swine fever.
• Commodity and supply chain risks: Rising global fishmeal prices driven by growing aquaculture production, and supply disruption risks for imported raw materials (including corn) driven by population growth, geopolitical conflict, and yen depreciation.
• Internal operational risks: After strong sales volume growth in the first 10 years post-merger, FEED ONE is currently facing constrained production capacity that limits further growth.

Q: People usually associate investment with secondary and tertiary industries. Is primary industry a viable investment opportunity for investors? / A: FEED ONE holds a mission to support Japan's protein supply, and is investing in replacing outdated production facilities as many industry peers retreat due to aging infrastructure. While rising construction costs and extended construction timelines are challenges, as Japan's leading private feed manufacturer, the company will continue investing within its cash flow capacity to maintain financial health. Improved production efficiency from investment will lower feed costs and support stable supply of livestock and seafood products. This creates sustainable long-term value for investors supporting Japan's critical primary industry supply chain.

Q: What is the current on-the-ground state of Japan's livestock and aquaculture industry, and does it have room for growth? / A: The number of independent producers is declining rapidly, but total production volume is flat or growing, as the industry undergoes rapid consolidation into larger-scale operations. Large-scale consolidation is most advanced in poultry farming, followed by pig farming, and is progressing slowest in dairy farming, which is still facing high producer exit rates. Even with fewer producers, growing consumption of livestock products means total supply volume continues to increase, creating ongoing demand for high-quality feed.

Q: What is FEED ONE's plan for growing the fisheries feed business, and will the food business expand into seafood products in the future? Would the company consider entering aquaculture operations directly? / A: The fisheries feed business has strong growth potential driven by the rise of new large-scale land and offshore aquaculture operations. The company already handles a small volume of seafood products, and will explore expanding downstream processing and distribution via partnerships with companies that already have strengths in the seafood market. While the company already operates a small number of livestock farms, entering large-scale primary aquaculture requires significant capital and deep industry expertise. Based on past experience, the company will be very cautious about entering full-scale aquaculture operations directly to avoid missteps.

Q: Will FEED ONE introduce a shareholder dividend program like peer company Chubu Feed? / A: Management does not rule out introducing a shareholder benefit program in the future as one potential measure to support share price growth. However, the company recently updated its shareholder return policy to a progressive dividend framework targeting 3% DOE starting this fiscal year, and will prioritize executing on this progressive dividend commitment first before considering additional shareholder return initiatives.