Fuji Nihon Corporation Q4 FY2025 earnings call

• Corporate Rebranding and Strategic Transformation

  • In October 2024, the company changed its corporate name from Fuji Nihon Seito Corporation to Fuji Nihon Co., Ltd., removing "Seito (refined sugar)" from the name to reflect its strategic shift from a sugar refining manufacturer to a food science company, aligned with its corporate purpose "Science for Food, Power the World!"
  • The first mid-term management plan "CHANGE 2028" was launched as the initial step toward achieving the long-term vision "NEXT VISION 2040". The quantitative targets for ordinary profit and ROE were achieved in the first year of the plan, though management notes the profit base still needs further strengthening.

• Strategic Investments and Partnerships

  • Took an equity stake in digzyme Inc., a firm developing enzymes via bioinformatics, to launch joint development of enzymes for inulin production and new raw material development from carbohydrate sources, to add value to existing products and accelerate new product development.
  • Formed a capital and business alliance with Saikinson Co., Ltd., which operates gut microbiome testing services, to combine Saikinson's gut flora testing technology and expertise with Fuji Nihon's material advantages and know-how to expand gut health services.
  • Acquired a 49% stake in Thai Wah Fuji Nihon Co., Ltd. in a joint venture with Thailand's Thai Wah Public Company Ltd., launching a new tapioca starch and related food product manufacturing and sales business in Thailand to expand into Southeast Asian markets and develop high value-added products incorporating the company's inulin.

• Governance, Sustainability, and Shareholder Returns

  • Earned a "B" score in CDP's 2024 climate change assessment, the highest possible score for SME participants, representing international recognition of the company's climate change management practices.
  • Expanded the shareholder benefit program: holders of 500 to 999 shares now receive 5,000 yen worth of company products, and holders of 1,000+ shares receive 10,000 yen worth of company products, to thank shareholders and deepen understanding of the company's products.
  • The base dividend policy maintains a stable continuous dividend targeting 3.5% or higher return on equity, balancing internal reserve needs for mid to long-term capital expenditure and R&D. For FY2025, the annual dividend is set at 34 yen per share (19 yen year-end dividend), matching the company's performance.

All four product segments achieved year-over-year revenue and profit growth for the full fiscal year:

1. Refined Sugar Business (now renamed Sugar Business): Contributed 48.9% of total consolidated sales. Inbound tourism demand drove strong performance for souvenirs, confectionery, and food service products; sales volume decreased year-over-year due to poor weather and raw material price hikes, but successful implementation of appropriate selling prices and stable raw material sourcing with cost reduction efforts delivered net revenue and profit growth. The newly added tapioca starch business will be expanded going forward.
2. Functional Ingredients Business: Contributed 47.8% of total consolidated sales. Increased adoption of high value-added products in the domestic market and strong sales volume growth for inulin in Southeast Asia drove growth. Consolidated subsidiary Unitec Foods also delivered revenue and profit growth from strong sales of natural additive ingredients driven by rising gummy demand. This segment now makes up nearly half of total revenue, pushing non-sugar businesses to over 50% of total company sales.
3. Real Estate Business: Stable operation of Toyoko Inn Kayabacho Station (built on the former head office site) drove revenue and profit growth. Three properties located in Tokyo, Kanagawa, and Nagano were sold as part of a capital efficiency improvement initiative.
4. Other: This segment holds cut flower activators and other food products, which were transferred from other segments following an organizational restructuring in April 2024. No separate financials were disclosed.

Overseas business operating profit reached 296 million yen, an increase of 115 million yen year-over-year, and rose to 8.1% of total company operating profit (up 1 percentage point from the prior year).

• For the FY2026 (ending March 2026) consolidated performance forecast, the company projects 29.1 billion yen in total revenue (a 3.1% year-over-year increase), 3.1 billion yen in operating profit (a 4.1% year-over-year decrease), 3.3 billion yen in ordinary profit (a 9.6% year-over-year decrease), and 2.3 billion yen in net profit attributable to parent company shareholders (a 19.2% year-over-year decrease), resulting in a forecast of higher revenue but lower profit.
• Despite the forecast lower profit, management is maintaining the annual dividend at 34 yen per share (15 yen interim dividend, 19 yen year-end dividend), matching the prior fiscal year's payout.
• Strategic segment priorities for FY2026:
  • Sugar Business: Strengthen the sales organization, maintain strict quality control and stable product supply to boost customer satisfaction, while pursuing additional cost reduction via stable raw material sourcing, to offset long-term industry headwinds of declining sugar consumption from population aging and competition from alternative sweeteners, while capitalizing on growing inbound demand.
  • Functional Ingredients Business: Expand inulin domestic sales volume by deepening relationships with existing customers and acquiring new customers by highlighting new functional benefits including skin health, and launch new products including liquid inulin; expand sales territory and improve quality in Southeast Asia; Unitec Foods will focus on expanding sales of thickening polysaccharides and growing ODM business leveraging its technical expertise to add new value.
  • Real Estate Business: Continue efforts to maintain stable profit generation.
  • Tapioca Starch Business: Collaborate with Thai Wah partner to develop and sell value-added products to increase corporate value.
• Management will accelerate expansion of existing overseas business revenue and new business development to meet the CHANGE 2028 mid-term plan target of reaching 20% of total profit from overseas operations.

• Industry-wide headwinds for the sugar business include long-term declining sugar consumption driven by aging population and falling birth rates, as well as growing competition from sweetener alternatives and added sugar modified products.
• Raw material supply volatility: the sugar business faces ongoing risks of poor weather impacting crop yields and sustained raw material price increases, which can pressure sales volume and margins.
• Persistent broader economic risks: ongoing consumer price inflation has created concerns about consumer pullback in spending and a worsening cost environment across the company's operations.
• The company has not yet met its mid-term target of 20% of total operating profit from overseas business, requiring accelerated investment and expansion to reach this strategic goal, and the profit base needed to hit mid-term plan targets remains unestablished.

No question and answer section was included in the provided transcript.