Coca-Cola Bottlers Japan Holdings Inc. Q3 FY2026 earnings call

Financial Performance:

• Business income increased by JPY 7.9 billion year-over-year, achieving an upward trend despite record-breaking adverse weather and Middle East cost pressures.
• Revenue declined by 1.4% year-over-year; Gross profit declined by only 0.8% due to positive impacts from price revisions on wholesale revenue per case.
• Operating income rose significantly by JPY 103.8 billion year-over-year, largely due to the absence of a JPY 88.4 billion impairment loss recorded in the previous year's vending business.
• Net income increased by JPY 68.4 billion year-over-year to JPY 19.6 billion.

Operational Highlights:

• Sales volume continued to outperform the market, with total channel value share increasing by 0.7 percentage points.
• Implemented September price revisions ahead of the industry, leading to improved wholesale revenue per case across nearly all channels.
• Marketing investments were agilely adjusted; marketing expenses decreased by JPY 1.7 billion as investments were scaled back when ROI declined due to bad weather.
• AI-powered assortment systems have been implemented in over 300,000 vending machines (approx. half the total), improving profitability and route productivity.
• Two Integrated Distribution Centers began operating in phases, and logistics networks are being reorganized to reduce transportation distances and touches.
• Launched new products including Georgia Cafe Water and label-less I LOHAS Tennensui for online channels.

Shareholder Returns:

• Completed the JPY 30 billion share buyback program.
• Decided to cancel 7 million treasury shares (equivalent to 4.1% of total shares issued).
• Announced a 20% year-over-year dividend increase and a new JPY 40 billion share buyback program.

Strategic Direction:

• Focused on building growth foundations for Vision 2030 through commercial growth, pricing strategies, and enterprise-wide transformations.
• Strengthened partnerships, recognized as the highest-rated partner for three consecutive years in customer satisfaction surveys.

Vending Business: Revenue decreased due to volume declines from adverse weather and price revisions, though wholesale revenue per case improved. Segment profit increased by JPY 6.5 billion year-over-year to JPY 14.8 billion, driven by reduced depreciation expenses following prior impairment losses and transformation benefits improving route productivity. OTC Business: Volume declined, but revenue remained flat year-over-year, supported by price revisions. Segment profit increased by 9.4% year-over-year, primarily due to flexible reductions in marketing expenses in response to adverse weather conditions. Food Service: Both volume and revenue grew year-over-year. Revenue increased by a robust 9.3%, driven by product lineup expansion and securing new business accounts.

• Aims to increase business income in the fourth quarter, building on the Q3 momentum.
• Maintains full-year business income target of JPY 35 billion.
• Expects cost increases related to the Middle East situation to remain within the projected range of JPY 2 billion to JPY 4 billion impact on full-year earnings, which will be absorbed through price revisions and cost savings.
• For the 2027 fiscal year, management indicated that given external circumstances, they likely target the lower end of the previously communicated Vision 2030 range of JPY 45 billion to JPY 50 billion for business income.
• Expects sales volume decline in October to be limited to a low single-digit percentage compared to the previous year, with wholesale revenue per case continuing to improve.

• Record-breaking adverse weather during peak demand season negatively impacted sales volumes and channel mix.
• Cost pressures from the situation in the Middle East affecting commodities and utilities, estimated at JPY 2 billion to JPY 4 billion impact for the full year.
• Fluctuations in foreign exchange rates and market conditions contributing to additional cost increases.
• Potential need for further capital allocation adjustments depending on market conditions and growth opportunities.

Q: Analysts asked about the nature of Q3 cost reductions and how they impact 2027 profitability targets. / A: CFO Bjorn Ulgenes explained that cost measures included optimized marketing investments due to weather, ongoing transformation efforts, and tactical company-wide savings. He confirmed that while costs were cut now, investment will resume in 2027 to drive growth, targeting the lower end of the JPY 45-50 billion BI range for 2027.