KITOKU SHINRYO CO.,LTD. Q2 FY2025 earnings call

Core Business and Market Context

• The large revenue and profit growth is driven by the sharp surge in Japanese rice prices, referred to as the "Reiwa Rice Crisis". Tight supply-demand dynamics that began with the 2023 harvest intensified in the 2024 harvest, leading to high-cost procurement competition, increased consumer stockpiling demand after the Nankai Trough earthquake emergency warning, and sustained elevated rice prices far above historical levels.
• Kitoku Shinryo is not a generic rice wholesaler, but a specialized polished rice wholesaler that operates its own milling facilities, provides direct sales to end users, and performs end-to-end quality control, sorting, contaminant removal, custom packaging, and stable distribution. This role as a bridge between producers and consumers is considered critical for Japan's food security infrastructure, given rice is harvested only once per year and requires careful supply balancing.

Government Reserve Rice Distribution Response

• Management prioritized fulfilling social responsibility for the smooth distribution of government reserve rice released starting in late March 2025. The company quickly adapted to both competitive auction and negotiated contract release systems.
• For auctioned reserve rice, Kitoku Shinryo achieved the fastest nationwide distribution to markets. For the negotiated contract system (which allows retailers to purchase brown rice directly from the government), the company provided outsourced milling and packaging services for retailers that lack these capabilities, delivering on both speed and food safety requirements.
• The company emphasized that this response demonstrated its core capability as a rice wholesaler: reliably delivering rice where and when it is needed, and it will continue building systems to respond quickly to future social demand. The company's core Okegawa milling facility in Saitama operates 24/7/365 with over 8,000 tons per month of production capacity, supporting stable nationwide supply as the core of the company's operations. This on-the-ground operational capability enables the company to meet unexpected demand surges.

Non-Rice Growth Initiatives

• Feed business: Expanding sales of food byproduct-based raw materials for the growing pet food market, in addition to traditional livestock and aquaculture customers. This circular business that repurposes food production waste and byproducts is positioned as a strategically important sustainable growth area amid a shrinking domestic food market from population decline.
• Egg business: Developing new value-added products using meat from spent laying hens, which has unique dense texture and rich flavor. The company is focusing on menu development and sales expansion to position this product as a deli ingredient.

Capital and Shareholder Strategy

• Implemented a 1-for-5 stock split on July 1, 2025 to lower the per-share price, improve trading liquidity, and support stable, fair price formation.
• The company prioritizes shareholder returns, will maintain a stable dividend policy with appropriate returns based on earnings and retained earnings positions, and will continue the existing shareholder benefit program that provides rice products twice annually, including enhanced benefits for long-term holders, which has been well received by investors.

Only full aggregated results and performance for the core Rice Grains segment are disclosed in the call transcript:

• Overall company first half 2025 results: Total revenue of 84.015 billion yen, up 41.9% year-over-year (YoY); operating profit of 5.257 billion yen, up 496.4% YoY; recurring profit of 5.355 billion yen; net income attributable to parent company shareholders of 3.703 billion yen, up 445.6% YoY, with all profit figures hitting new all-time record highs.
• Rice Grains segment (core business): Total sales volume reached 214,000 tons, an increase of 16,000 tons YoY. The volume increase was primarily driven by higher Minimum Access import rice volumes, while domestic sales volume saw a moderate increase (led by household-focused demand), though brown rice sales declined sharply due to raw material shortages. Average domestic rice transaction prices rose to approximately 1.6x YoY levels. The segment drove the entire group's large profit growth, as management was able to pass rising purchase prices through to selling prices relatively quickly amid tight market conditions. No separate financial performance or revenue contribution percentages are disclosed for the Feed and Egg segments in this call.

• Management previously published an upward revision to full-year 2025 (December term) guidance in August 2025, after first half results significantly outperformed initial expectations driven by government reserve rice distribution and strong household demand.
• Kitoku Shinryo expects the core Rice Grains segment to continue solid full-year performance supported by government reserve rice operations. The company is currently preparing a new three-year mid-term management plan that will succeed the current plan ending this fiscal year. The new plan will focus on driving individual growth across the Rice Grains, Feed, Egg, and Overseas segments, capturing synergies and complementary relationships between business units, expanding into adjacent business areas, and making proactive investments in equipment, human resources, and new product development to strengthen the group's overall profit structure and lay the groundwork for the next stage of growth.

• Raw material supply and price risk: Tight domestic rice supply-demand conditions from the 2023-2024 rice harvest cycle continue to impact the market. The 2025 harvest outcome, including potential yield declines and quality degradation from extreme heat and drought, remains a key uncertainty. High starting producer price estimates are expected to keep procurement prices elevated, and sustained high rice prices may impact consumer demand over time.
• Market uncertainty: Full-year performance has significant residual volatility, as the impact of extended government reserve rice sales and 2025 new rice crop conditions on market distribution after fall 2025 remain unclear. The company notes it is currently operating in a high-risk, high-volatility market environment.

No formal question and answer session is included in the provided transcript.