LIFEDRINK COMPANY,INC. Q2 FY2026 earnings call

Core Financial and Operational Performance:

• Achieved higher production, revenue, and profit in the 2nd quarter cumulative period. Production increased 14% year-over-year driven by full production at Gotemba plant (operational at full capacity since September 2024), production contribution from two O Beverage plants acquired in June 2024 and January 2025, and full production at N Beverage.
• Revenue grew 19% year-over-year, enabled by securing sufficient sales channels to match the increased production volume.
• Operating profit grew 16% year-over-year: rising logistics, labor and personnel costs were offset by higher sales and cost reduction from in-house bottle production.
• Operating margin came in at 12.3%, 0.4 percentage points lower year-over-year. Progress vs full-year plan is 55% for revenue, 54% for operating profit, 53% for net income, which is slightly below plan but management expects to recover in the second half.

M&A and Integration Progress:

• Post-merger integration of the O Beverage Yamanakako plant (acquired January 2025) is progressing smoothly, and the plant has achieved single-month profitability alongside rising production volume.

Cost Improvement Initiatives:

• In-house bottle production construction was completed in October 2025, and management expects further profit improvement in the second half of the fiscal year.

Growth Capital Expenditure Projects (all four key projects from the new mid-term management plan are progressing on schedule):

• N Beverage new 3rd line is on track to start operation in April 2026, and warehouse construction on the same site has started.
• Building construction for the second line at Gotemba plant has started and progresses on schedule.
• Line renovation at Iwate plant has started, including demolition of the old building and ongoing construction/equipment delivery while the existing line remains operational.
• Preparation for the acquisition of the Pokka Sapporo Food & Beverage Gunma plant (scheduled for January 2026) and early full operation after acquisition is progressing.

Market and Competitive Position:

• The overall market for basic beverages (water, tea, carbonated drinks) maintains stable growth, with private label and low-price beverage segments expected to see stronger growth. The company will leverage its core competitive advantages of low price and stable supply to capture this growth, with steady expansion of production capacity as a core strategic priority.

For the cumulative 2nd quarter period of FY2026 March Term, Life Drink Company reported total revenue of 28.6 billion yen, with total operating profit of 3.53 billion yen, net income of 2.36 billion yen, and EBITDA of 4.60 billion yen. The legacy LDC and N Beverage segment delivered a 0.39 billion yen profit increase, contributed by higher sales volume from secured sales channels, improved gross margin from higher 500ml beverage product mix and in-house bottle production at N Beverage. This growth offset rising labor, logistics and general costs. The M&A segment including O Beverage delivered 0.08 billion yen of profit improvement. The two O Beverage plants acquired in the prior period have turned to monthly net profit, driven by in-house bottle production and full production at Hita plant, and full production at Yamanakako plant. Total production volume reached 43 million cases, 14% higher year-over-year, with 1.2 million cases from Gotemba plant, 3 million cases from O Beverage, and 0.8 million cases from N Beverage contributing the 5.2 million case year-over-year increase.

• Management maintains the full-year production volume target of 84 million cases, as the year-to-date production growth of 14% is in line with expectations, and full production ramp-up at Yamanakako and Hita plants starting July 2025 is progressing smoothly, making the full-year target fully achievable.
• No changes to mid-term management plan production volume targets; management continues to explore initiatives to exceed the original mid-term production growth targets.
• The slightly lower than planned first-half operating profit progress is expected to be recovered in the second half of the fiscal year.
• Management expects further profit improvement in the second half from the completed in-house bottle production project.
• The company’s core market outlook, competitive environment and competitive positioning remain unchanged from prior guidance.

• Since October 2025, the market price of tea leaves (particularly autumn-winter bancha, the key raw material for green tea beverages) has spiked sharply, reaching 4x to 8x year-over-year, with a monthly average of 6x the prior year price.
• While the company has already secured all required tea leaf volume for current green tea production, the sharply higher procurement cost will impact profitability, with the effect starting to appear from late Q3 or Q4 FY2026.
• Rising logistics costs and increased outsourcing of carbonated beverage production to third parties (due to demand outpacing in-house production capacity) have driven a year-over-year decline in operating margin, though this is expected to be a temporary effect.
• Net interest-bearing debt increased 3.2 billion yen year-to-date to 12.6 billion yen to fund growth capex, pushing the net debt-to-EBITDA ratio to 1.7x, 0.3 percentage points worse than the end of FY2025, and the equity ratio declined from 43% to 40% due to higher leverage.

Q: Can you confirm if July-September sales growth, which was nearly 20%, outperformed expectations, and what is the sales trend after October? / A: The July-September sales growth was largely in line with management expectations. Most of the growth came from new customers acquired in the April-June period, which grew steadily through the summer season. Sales after October have continued to perform steadily as expected.

Q: What caused the year-over-year decline in first-half operating profit margin? / A: The main factors are worsening logistics efficiency, and higher third-party outsourcing of carbonated beverage production in Q2, as demand outpaced in-house production capacity. However, margin improved quarter-over-quarter from Q1, as logistics efficiency recovered. This impact is expected to be temporary, as the acquired Gunma plant will cover additional carbonated beverage demand starting next fiscal year.

Q: How will the recent surge in tea leaf prices impact profitability, and have these price increases been factored into guidance? / A: Price increases for earlier tea leaf harvests were partially factored into guidance, but the 4x-8x year-over-year spike in autumn-winter bancha prices was unanticipated. The higher-cost tea leaves will be used starting from late Q3 or Q4, so the cost impact will hit profitability in that period. The company is moving quickly to implement countermeasures including price adjustments to limit the impact on full-year earnings.

Q: Is the full-year production target of 84 million cases still on track, and are there any changes to mid-term production targets? / A: First-half production growth of 14% is exactly in line with expectations. Full production at the Yamanakako and Hita plants started in July and is ramping up smoothly, so the full-year target is still fully achievable. There are no changes to mid-term production targets, and management is continuing to explore options to exceed the original mid-term growth targets.