J-OIL MILLS, INC. Q2 FY2026 earnings call

Overall Positioning

• The company reported year-over-year lower revenue and profit in the first half, driven primarily by unanticipated declines in meal value and time lags in passing through higher costs to product prices. Management is focused on executing near-term actions to restore profitability while advancing long-term structural transformation.
• The company maintained its full-year dividend at 70 yen per share, aligned with its stable dividend policy and confidence in future earnings recovery.

Short-Term Profit Restoration Actions

• Three rounds of price adjustments have been announced in 2025, with the third round rolled out recently; management is working to accelerate penetration of these changes to absorb higher costs.
• The company is optimizing its product portfolio to focus on higher-margin offerings, and improving operational efficiency via actions such as consolidating small-batch deliveries to reduce logistics and production costs.

High Value-Added Product Expansion

• Business-use Oils and Fats: Expanding the integrated "Fly Eco System" solution that combines long-life frying oil (using proprietary SUSTEC technology) with IT-enabled oil degradation monitoring, which cuts waste oil volume while delivering consistent frying quality for food service clients. The company is also expanding its JOYL PRO product line, including flavor-enhancing oils that help clients maintain product quality while reducing raw material costs.
• Consumer-use Oils and Fats: Expanding the product line-up for the popular Smart Green Pack olive oil series, which combines environmental benefits with user convenience to drive demand in a stabilizing raw material market. The company is also expanding the functional supplement oil category: offering 2 packaging sizes for MCT oil to match trial and repeat user needs, and scaling marketing for Japan's first skin-focused functional labeled flaxseed oil product to grow market share.

Mid- to Long-Term Strategic Initiatives

• Business Portfolio Optimization: Leveraging the company's core strength in "Oishisa Design" (flavor and texture solution design) that combines fats, functional starch, margarine and shortening to solve client product challenges. Management is deepening the scientific foundation of this capability to expand its application upstream (adding value to existing meal/feed primary industry products) and downstream (entering new untapped markets with new material combinations).
• Accelerated Global Expansion: In ASEAN, J-Oil Mills Thailand is expanding its sales team to launch combined oil and starch Oishisa Design solutions after growing starch sales. In North America, the company established a new partnership with Ajinomoto Health & Nutrition North America to expand distribution of existing products (soy sheet "Mamenorisan" and vitamin K2 "Menattto") and develop new product lines. Domestically, the company is splitting its single international business organization into two specialized units: one for M&A/capital alliance strategy, and one for growing existing overseas operations, to accelerate expansion.
• Management Foundation Strengthening: The company's digital transformation (dX) initiatives are on track, with cross-departmental work streamlining targeting 30,000 hours of annual work reduction, and the company earned Japan's Ministry of Economy, Trade and Industry DX Certified Operator status in November 2025. For human capital management, the company established the Human Resources Committee in April 2025, with the top priority of developing talent to lead growth areas, including next-generation leadership, young managers, specialized experts, and global/business development talent.

1. Oils and Fats Segment (2025 First Half): The segment reported a year-over-year decrease in both revenue and operating profit. Operating profit declined 3.38 billion yen year-over-year, driven by larger-than-expected meal price drops and slow penetration of price adjustments. For full-year 2025, management forecasts segment revenue of 206.5 billion yen, and operating profit of 4.1 billion yen (revised down from the initial forecast of 8.3 billion yen). 2. Specialty Food Segment (2025 First Half): The segment saw a year-over-year revenue decrease but an operating profit increase. Total operating profit grew 450 million yen year-over-year: 320 million yen from restructuring effects in dairy-based PBF and price pass-through in powdered fats/oils, plus 120 million yen from focus on high-margin functional starch in the texture design business. For full-year 2025, management forecasts segment revenue of 18.7 billion yen, and operating profit of 800 million yen (revised up from the initial forecast of 600 million yen). Total consolidated first half 2025 revenue was 112.25 billion yen, operating profit 2.52 billion yen, recurring profit 2.78 billion yen, and net income 1.75 billion yen, all down year-over-year.

• The company revised its full-year 2025 (fiscal year ending March 2026) consolidated guidance downward from its May 2025 forecast, to reflect larger-than-expected declines in meal prices and slower-than-anticipated penetration of price adjustments.
• New full-year guidance targets: consolidated revenue of 226 billion yen, operating profit of 5 billion yen, operating margin of 2.2%, net income of 4.1 billion yen, and ROE of 3.9%.
• Segment guidance changes: Oils and Fats operating profit revised down from 8.3 billion yen to 4.1 billion yen; Specialty Food operating profit revised up from 600 million yen to 800 million yen.
• Management expects price adjustment effects to gradually appear in the second half of the fiscal year, driving profit improvement and cash flow normalization as higher costs are absorbed.
• The full-year annual dividend per share is maintained at 70 yen, unchanged from prior guidance.

• Sustained higher biofuel demand driven by the U.S. EPA's biofuel blending mandate increase has pushed up oil values while significantly reducing meal values, a dynamic that is expected to continue as long as the current policy framework remains in place, keeping cost pressure high for the oils and fats business.
• Rising infrastructure costs, including raw material logistics costs and personnel costs, are expected to continue increasing in the medium term, adding further margin pressure.
• Passing through higher input costs to product prices via price adjustments experiences inherent time lags, which delayed full absorption of cost increases in the first half and created larger-than-expected profit pressure that led to the full-year guidance downgrade.
• Weak consumer purchasing power amid broad price hikes has reduced demand for consumer-use oils and fats, creating continued challenging market conditions for the domestic retail segment.
• The company's profitability remains highly exposed to fluctuations in global commodity prices and foreign exchange rates, as core raw materials for the oils business are imported.

The full Q&A content is hosted on an external linked document, and no transcribed Q&A content is included in the provided source transcript.