2750.T

• Company Overview & Core Philosophy

  • Founded in 1906 (120th anniversary in 2026), capital of 623.2 million yen, listed on the Tokyo Stock Exchange Standard Market, is a specialized food trading company focused on importing food products to Japan and exporting traditional Japanese food to global markets.
  • Core management philosophy: "Think together, work together, prosper together"; mission: "Contribute to happiness of food worldwide". New corporate slogan "Together, let's be passionate!" introduced after current CEO Masaomi Arakawa took office in April last year, with the goal of becoming a 200-year company balancing economic and social value.
  • Core competitive advantages: 120 years of history building a network of trading partners, suppliers and customers across 40 countries, focused on long-term collaborative relationships rather than spot trading; product-specialized employees that engage directly with customers to solve needs, selling products alongside their background stories and alignment with social goals to drive mutual long-term growth; a global group of subsidiary and affiliate companies with local market expertise across the UK, China, Thailand, India, and Japan supporting diversified operations.

• Mid-term Management Plan SHINE2027 Core Strategy

  • SHINE2027 is the second of three consecutive 3-year mid-term plans to reach the 2030 vision, following completed SHINE2024 (the "hop" step) with SHINE2027 as the "step" phase focused on driving change and execution. The SHINE acronym stands for Sustainable, Happiness (contribute to global food happiness), INnovative, Engagement (improve employee engagement), and draws on the "light" character from Ishimitsu's name, aiming for the company and all employees to shine in the food and coffee industry.
  • Key business model transformation initiatives:
    • Shift to higher margin products to preserve operating profit and net income, and improve the company's PBR.
    • Drive DX to improve sales efficiency and increase customer touchpoints.
    • Strengthen product development aligned with GHG emission reduction goals.
    • Expand social issue-solving products, targeting 40% of total net sales from this category by the end of the plan.
  • Defined social issue-solving products include products addressing GHG reduction, food loss reduction/waste effective utilization, plastic reduction, community contribution, human rights consideration, biodiversity conservation, and other environmental initiatives. Examples include low-GHG coffee raw materials from Brazil and Colombia, upcycled fish offcut products, and the Green Road Project, which allocates a portion of onion sales to fund afforestation in the Gansu Province desert in China in partnership with local NGOs and suppliers to secure long-term, stable supply sources.
  • Target to increase overseas revenue share from 17% (2025 March period) to 25% by the 2028 March period. Strategies to achieve this include leveraging existing overseas subsidiaries, expanding trilateral trade using global supply sources, and exporting the company's green roasting know-how to global markets.
  • Green roasting initiative to address long-term coffee supply risks: The company is developing a circular economy model that recycles spent coffee grounds after brewing, dries and pelletizes them for use as fuel for coffee roasting, then collects new spent grounds from customers to repeat the cycle. This reduces spent coffee waste and cuts fossil fuel use for roasting, lowering overall GHG emissions. A new green roasting factory is planned to open in Ono City, Hyogo Prefecture in March 2027 to scale this initiative, replacing the company's aging existing roasting facility to support growing roasting volume and meet customer demand for low-GHG coffee products (particularly addressing scope 3 emissions challenges for beverage manufacturers, creating new business opportunities).

• For the current fiscal year 2026 March period: Management expects consolidated net sales of 68.8 billion yen and operating profit of 1.7 billion yen. The planned full-year dividend is 38 yen per share, up from 30 yen per share in the 2025 March period. Moving forward, the company targets a consolidated payout ratio of 30% or higher, balancing growth investment needs with stable dividend payments to shareholders.
• For SHINE2027, targeting the 2028 March period closing: The company set the following consolidated performance targets: net sales of 74.0 billion yen, gross profit of 10.1 billion yen, gross profit margin of 13.7%, operating profit of 2.25 billion yen, operating profit margin of 3.04%, parent net income attributable to shareholders of 1.27 billion yen, ROE of 8% to 9%, ROIC of 4% to 5%, and PBR of 1x or higher.
• Shareholder return policy: The company maintains a shareholder benefit program that distributes company-handled food products: 2,000 yen equivalent for shareholders holding 500 to 999 shares, 4,000 yen equivalent for shareholders holding 1,000 shares or more. A new long-term holding benefit was added, granting an extra 2,000 yen equivalent of products to shareholders holding 500+ shares for 3+ consecutive years.

Ishimitsu Shoji operates 4 business segments, with overall consolidated results as follows: Fiscal year 2017 March period reported net sales of 38.0 billion yen and operating profit of 0.5 billion yen; the prior fiscal year 2025 March period reported net sales of 64.9 billion yen and operating profit of 1.5 billion yen; the current fiscal year 2026 March period expects net sales of 68.8 billion yen and operating profit of 1.7 billion yen. 1. Coffee & Tea Segment: Accounts for nearly 40% of consolidated net sales. This segment imports green coffee beans (unroasted raw material) from global suppliers and sells to domestic and overseas roasters, beverage manufacturers, coffee chains, and food service operators; it also handles tea and other beverage raw materials. Through affiliate Allied Coffee Roasters, it produces roasted coffee, private brand products for mass retailers and cafe chains, and sells instant coffee. Allied Coffee Roasters is the 4th largest coffee roaster by volume in Japan. Profit contribution is roughly proportional to its revenue share, though results vary year-over-year based on commodity market conditions, purchasing timing, and price pass-through success. 2. Food Segment: Consists of three sub-segments: processed foods, seafood, and prepared frozen foods. Processed foods imports Italian ingredients (olive oil, pasta), canned goods, and other items, selling to food service operators and supermarkets. Seafood is centered on shrimp, also includes squid and octopus imported from Vietnam and Thailand, sold to conveyor belt sushi chains, supermarkets, and mass retailers. Prepared frozen foods imports primarily chicken-based livestock products from Thailand (e.g., pre-fried fried chicken), sold as deli items to mass retailers and restaurant operators. 3. Agricultural Produce Segment: Imports fresh and processed vegetables (mainly bamboo shoots, burdock, onions) for sale domestically, with restaurant chains and delicatessen operators as core customers. 4. Overseas Business Segment: Exports traditional Japanese food products to global markets, with 85% of segment revenue coming from Asian markets, and the remainder from Europe, Oceania, and North America. It develops private brand products (soy sauce, miso, wasabi) in partnership with Japanese manufacturers, and has capitalized on the global Japanese food boom to expand into niche products like bonito tataki and mentaiko. As of the 2025 March period, overseas revenue accounts for 17% of total consolidated net sales.

• Climate change related risk to coffee supply: Coffee accounts for nearly 40% of Ishimitsu Shoji's consolidated revenue. Industry research warns that climate change driven by GHG emissions could cut global suitable coffee cultivation area in half by 2050 (called the 2050 coffee problem), threatening long-term stable supply.
• Commodity price volatility: Coffee prices are impacted by global commodity futures markets and exchange rate fluctuations, making long-term price forecasting difficult. While near-to-medium term projections can be reasonably made, extreme long-term price and supply uncertainty remains.
• Price pass-through challenges: When input costs rise, passing price increases to customers is not immediate, there is typically a 3 to 6 month gap between cost increases and completed price pass-through, which can create near-term margin pressure. Price pass-through is also more difficult in a competitive market environment.
• Inventory valuation impact: Rising commodity prices have increased the monetary value of inventory even with stable physical volume, which drove a large increase in inventory assets and negative operating cash flow in the 2025 fiscal year.
• Current green initiative investment costs: While environmental initiatives align with future customer demand, currently clear widespread customer demand for low-GHG products has not yet emerged, so most green initiative activity is early-stage investment rather than revenue-generating business.

Q: What positive business impact will the expansion of the green roasting initiative and new factory construction have on financial performance?

A: The primary near-term driver for the new factory is replacing the company's existing aging roasting facility; roasting volume has grown steadily, so updating equipment is required to maintain stable supply for customers. Green roasting was incorporated to address social challenges while continuing to supply high quality coffee, and it aligns with growing customer demand (particularly from large beverage makers that face significant scope 3 GHG emission reduction challenges) for people and planet-friendly coffee, so we expect this to create new long-term business opportunities.

Q: Sales have nearly doubled over the past 5 years, what are the key drivers of this growth, and why is coffee performing particularly strongly?

A: First, all segments have benefited from passing through higher raw material costs driven by exchange rate shifts and commodity price increases, which has restored sales and gross margin. Second, the company's Chinese subsidiary Ishimitsu Trading (Shanghai), which focuses on coffee, has been able to capture the very strong growth in coffee consumption in China over the past 5-10 years, which is a second major driver of overall growth.

Q: Is it correct that coffee consumption volume does not decline much even when prices increase?

A: Yes, that matches our experience. Retail coffee prices have roughly doubled over the past 3-4 years, but coffee has shifted from a luxury good to a daily necessity that consumers cannot go without, so we have not seen a large drop in consumption volume.

Q: Is it correct that growth in China's coffee consumption is being driven by the expansion of the middle-income class, bringing new coffee drinkers to the market?

A: That is exactly correct. This trend is not limited to China: Brazil, the world's largest coffee producer, recently overtook the US to become the world's largest coffee consumer. Growth in the middle-income class is driving increases in the number of people drinking specialty coffee, which is driving explosive overall market growth globally.

Q: Recent coffee prices have risen sharply, and there are concerns about stable production long-term due to limited growing areas. Are these price increases and supply concerns incorporated into the SHINE2027 mid-term plan?

A: Yes, these factors are incorporated into the plan, though price is difficult to forecast accurately due to futures market volatility. We budget based on projected coffee futures prices and exchange rates when building the plan, and we focus on protecting profit and continuing growth even with price volatility, rather than just focusing on top-line sales. Our supplier partners in producing countries are already working to adapt by changing cultivation varieties and improving productivity to avoid output declines. We have clear visibility for the next 2-3 years that aligns with our plan, and for longer-term risks we are proactively addressing the underlying issues through our green initiatives.

Q: Is most of the recent sales growth driven by inflation-driven price increases rather than portfolio expansion?

A: Inflation/price increases (driven by exchange rate shifts and coffee commodity market increases) have had a large impact on coffee sales across all of our coffee operations (consolidated Ishimitsu, Allied Coffee Roasters, Thai Ishimitsu). Growth in performance from our Chinese subsidiary Ishimitsu Trading (Shanghai) has had an equally large impact on overall sales growth.

Q: When input prices rise, is it difficult to pass price increases through to customers? Has it gotten harder over time?

A: Yes, price pass-through is definitely challenging, which is common across the food industry. We have always focused on building long-term relationships with customers, and we emphasize total product value beyond just price — including alignment with social goals, packaging improvements, collaboration on logistics and other value-added services — to create an environment where customers are willing to accept price increases. There is typically a 3 to 6 month gap between cost increases and full price pass-through, which creates near-term margin pressure, but after 1 to 2 years the higher prices are fully reflected in our results, which is visible in our current performance numbers.

Q: Coffee accounts for roughly 50% of sales, what share of operating profit and gross profit comes from the coffee business?

A: Profit share is roughly the same as sales share, so there is not a large difference between revenue contribution and profit contribution. That said, coffee results are more exposed to commodity market fluctuations, so profit share does vary year-over-year based on purchasing timing and how successful price pass-through has been in any given year.

Q: In 2025, operating cash flow was significantly negative and inventory increased a lot, what caused this?

A: The increase in inventory is driven primarily by higher unit prices for coffee and other products, rather than an increase in physical inventory volume. Higher commodity prices have pushed up the nominal value of the same physical volume of inventory, which leads to the increase in reported inventory assets and the corresponding negative impact on operating cash flow.

Q: You have adopted ROIC-focused management. Does focusing heavily on environmental initiatives increase costs, while ROIC management can lower borrowing costs and WACC — which effect will be larger long-term?

A: We have only recently started implementing ROIC-focused management, and we are still in the process of training each business unit on how to think about ROIC and how their work contributes to overall ROIC performance. To be honest, clear widespread customer demand for low-GHG products has not yet emerged in the market today. But we are certain that demand for these products from large listed corporate customers will grow in the future, so current investments in environmental initiatives are necessary upfront costs to drive future growth, even if they are not immediately accretive to profit today.