ICHIMASA KAMABOKO CO.,LTD. Q4 FY2025 earnings call

• Overall 2025 June Fiscal Year Performance

  • Total company revenue hit 34.6 billion yen, operating profit hit 0.89 billion yen, and net profit hit 0.7 billion yen, marking an increase in revenue but a decrease in profit year-over-year. ROE decreased from 6.8% to 5.1%.
  • Revenue growth was driven by strong sales of core products Salad Stick and Koban Tempura, while profit declines were caused by sustained high surimi prices, rising energy, labor and logistics costs, and limited impact from the March 2025 price increase.
  • Profit increases from 90 million yen from revenue growth and 280 million yen from rationalization and cost reduction were offset by 370 million yen in raw material cost increases, 140 million yen in higher energy costs, and 240 million yen in higher selling, general and administrative costs.
  • Financially, D/E ratio improved to 0.67x from 0.71x, and equity ratio improved 2.6 percentage points to 48.8%.

• Seafood Surimi and Prepared Foods Operational Updates

  • Salad Stick saw a temporary volume dip in January-February H2 due to vegetable price inflation limiting salad promotion, but recovered after vegetable prices stabilized, ending with revenue and volume above prior year. Additional capital investment increased the dedicated second factory capacity by 20% to support further expansion.
  • Koban Tempura, designed around consumer demand for shelf-stability, convenience and value, performed strongly, and the complementary single-use reduced-salt satsuma-age product delivered synergistic sales growth amid rising consumer thrift.

• Mushroom Segment Operational Updates

  • Two consecutive years of operating losses, driven by record summer heat that disrupted maitake mushroom growth during the critical pre-peak growing season, leading to insufficient production volume for the autumn peak demand period. Cost reduction efforts from packaging line automation could not offset raw material and labor cost increases.
  • Root cause analysis identified persistent rising average temperatures as the main driver of growth disruption. Management has implemented countermeasures including enhanced air conditioning infrastructure and adjusted growing spacing, which have already delivered stable cultivation despite 2025's hotter-than-last-year summer.

• Long-term Vision and Mid-term Plan Progress

  • The ICHIMASA30 Vision lays out a 3-decade path to the 2045 target, with the 2021-2025 Second Mid-term Management Plan as the latter half of the first 10-year growth track stage.
  • Original mid-term targets of 40.0 billion yen revenue and 2.6 billion yen operating profit are no longer achievable due to severe unanticipated external changes, so targets have been revised downward. Five key initiatives are being implemented to hit revised targets:
    1. Business structural reform: EC business will be scaled back, with supplement sales and third-party mall listings ending, due to poor profitability from large marketing costs and competitor entry.
    2. Rationalization capital investment: On track to cut 206 jobs with a lower-than-planned total investment of 1.9 billion yen (down from an original 2.3 billion yen).
    3. Overseas expansion: PT. KML ICHIMASA FOODS (KIF) has been converted from an equity-method affiliate to a consolidated subsidiary, with work ongoing to develop distribution and products aligned with the long-term goal of becoming a global food company.
    4. New business exploration: A new business development office was established in July 2023 to explore adjacent opportunities, including M&A and alliances.
    5. Organizational culture reform: Shifted to a business divisional headquarters system and established the IWS (Ichimasa Work Style) Promotion Committee to break down silos, increase cross-functional collaboration, empower on-site teams, and improve employee experience and growth.

• Capital Management and Shareholder Returns

  • Management focuses on ROE above the cost of equity and ROIC above the weighted average cost of capital, with targets of 5% ROE, 4% ROIC, PBR above 1.0x, and share price above 800 yen. Of 8.0 billion yen in operating cash flow, 5.0 billion yen will be allocated to growth investment, prioritizing rationalization and labor saving to improve profitability. D/E ratio will be capped below 1.0x, and equity ratio will be maintained above 50%.
  • A 2-yen special anniversary dividend brings the 2025 full-year dividend to 14 yen per share, which will be maintained from 2026 onwards, meeting the 1.5%+ DOE target consistently. The shareholder benefit program has been partially revised to adjust costs amid rising logistics expenses, while retaining the program in response to strong shareholder demand.

1. 水産練製品・惣菜事業 (Seafood Surimi and Prepared Foods Segment): Revenue of 30.5 billion yen, operating profit of 1.0 billion yen, resulting in increased revenue but decreased profit year-over-year. This segment accounts for approximately 88.15% of total company revenue. 2. きのこ事業 (Mushroom Segment): Revenue of 3.8 billion yen, operating loss of 0.3 billion yen, resulting in decreased revenue and profit year-over-year. This segment accounts for approximately 10.98% of total company revenue.

• For the 2026 June fiscal year, management guides total revenue of 36.2 billion yen and operating profit of 1.1 billion yen, expecting profit recovery from growth in the seafood segment and stabilized production and recovering performance in the mushroom segment.
  • Full-year benefit from the 2025 price increase is expected to add 1.14 billion yen to profit, volume growth from core product expansion and stronger year-end osechi sales is expected to add 470 million yen, and ongoing efficiency gains will further support profit. Offsetting these gains, 1.41 billion yen in raw material cost increases and a 100 million yen increase in general and administrative costs (driven by wage hikes) are expected.
  • For surimi, prices are expected to stop further accelerating but remain elevated, despite increased Russian production intensifying US-Russia supply competition. Management will continue proactive purchasing and inventory management to absorb costs.
  • For the seafood segment, management plans to expand Salad Stick distribution, add production capacity for fast-growing Koban Tempura to enable national expansion, roll out new consumer-aligned products (Pakutto Protein Crab Stick Bar targeting male consumers as a high-protein snack, and Oden to Eat in a Bowl launching in autumn 2025 for multiple age groups), and continue rationalization investment for labor saving and efficiency.
  • For the mushroom segment, management will increase the share of per-gram price point and pre-portioned loose products, pursue new customer growth including food service and restaurant chains after stabilizing cultivation, roll out automation of the inoculation process after successful packaging automation to further cut costs.

• Sustained high raw material costs: Surimi prices have remained elevated after 2024, and longer-term supply is expected to tighten as the processing mix shifts toward fillets over surimi. Chicken egg prices face upward pressure from avian influenza-related flock reductions, rising feed and labor costs, and summer heat stress. Daikon production is expected to fall due to drought from abnormal weather across major producing regions. All of these create sustained input cost pressure.
  • Geopolitical and macro uncertainty: Energy prices face unpredictable volatility from escalating Middle East tensions, and exchange rate direction is unclear, further complicating business planning.
  • Climate change risk: Persistent rising summer temperatures have created growing disruption to indoor maitake cultivation, which required delayed corrective action that resulted in two straight years of losses. Extreme weather also increases risk of disruption to raw agricultural commodity supply.
  • Consumer behavior shift: Ongoing price increases have led to increased thrift and polarization between value-focused and premium-focused purchasing, requiring continuous adjustment to product assortment and marketing.
  • Unsuccessful new business expansion: New product and new market initiatives carry risk of poor consumer adoption and low profitability, as seen in the shutdown of the supplement and third-party EC business.

Q: What is the outlook for crab stick exports to the US amid high US tariffs? / A: Currently, high tariffs have not created a material impact on business. Overseas sales represent a small share of total revenue, so the overall impact on group performance is limited. The US remains one of Ichimasa's key export markets, so management will continue to closely monitor developments in US trade policy and respond appropriately.

Q: What impact has the March 2025 price increase had on sales volume? / A: There was a temporary dip in sales volume immediately after the price increase, but the decline was within management's expectations. The company implemented strategic promotional activities to boost demand based on lessons learned from prior price increases, and core products Salad Stick and Koban Tempura have performed well post-price increase, showing consumers recognize the product value. Management continues to run targeted promotions such as extra-volume offers to offset consumer thrift trends, and the price increase has been broadly accepted by the market.

Q: What is the outlook for profit recovery in the mushroom segment? / A: The main driver of 2025's loss was missed sales opportunity from cultivation disruption during the peak demand period, caused by extreme summer heat. After implementing countermeasures including enhanced air conditioning and adjusted growing layouts, cultivation has been stable in 2025 despite another summer of record high temperatures, with no repeat of last year's growth disruption. Management expects to be able to fully support peak demand sales this year, enabling performance recovery.

Q: How is the new business initiative progressing, including M&A? / A: The new business development team continues to explore opportunities across multiple adjacent and peripheral areas, evaluating a range of options including M&A. Management cannot disclose specific details of active M&A discussions, but notes that concrete opportunities are being evaluated in both domestic and international markets. The team will continue to gather information and assess opportunities based on potential synergy with existing Ichimasa businesses.