2904.T

Overall Second Quarter Financial Performance

• Consolidated net sales hit 19.6 billion yen, operating profit hit 0.9 billion yen, and net profit hit 0.6 billion yen, resulting in revenue growth but profit decline. ROE decreased 2.4 percentage points from 6.4% in the prior year to 4.0%.
• Revenue growth was driven by the effect of price adjustments implemented from March 1, 2025, and strong sales growth of core products including crab stick group, Koban Tenpura, and hanpen (fish cake).
• Profit decline was caused by rising raw material prices (surimi, chicken egg), increasing personnel and logistics costs. A 840 million yen raw material cost increase offset 530 million yen revenue growth benefit, 30 million yen energy cost improvement, and 160 million yen rationalization and cost reduction gains.
• Current assets increased 0.8 billion yen year-over-year to 13.7 billion yen, driven by higher raw material inventory due to surimi price increases. Interest-bearing debt increased 0.9 billion yen to 12.5 billion yen, D/E ratio worsened slightly to 0.82x, equity ratio declined 0.8 percentage points to 43.6%. Operating cash flow posted a 0.9 billion yen outflow, investment cash flow posted a 0.9 billion yen outflow, and financing cash flow raised approximately 2.2 billion yen mainly via increased short-term borrowing.

Osechi Sales Campaign Achievements

• Implemented three key strategies: 1) Inherited osechi culture to younger generations, hosted the "Osechi Hack Presentation Event" to share osechi culture and recipe ideas, and launched Chiikawa character branded cut kamaboko to successfully attract younger consumers and hit the target sales. 2) Implemented an early launch strategy aligned with shifting consumer purchasing patterns, bringing forward osechi displays to around December 20 to match consumers' trend of avoiding end-of-year crowded shopping, which reduced opportunity loss for distributors and performed well. 3) Expanded sales of the premium Jun Series (100% domestic raw materials) and value Roku Series (domestic sweet sea bream), both of which outperformed prior year in volume and value.
• Overall osechi sales exceeded the prior year, but growth was slower than planned due to a shift to lower unit price small size and set products driven by consumer thrift, leading to a lower average selling price than expected.

Marine Surimi Products and Prepared Food Business Strategies

• For the second half of fiscal 2026 and beyond, the business will focus on product development aligned with three core trends: heatwave preparedness, consumer thrift, and demographic change (population decline/aging society).
• Will strengthen sales of heatwave-appropriate products: Crab Kamaboko Bars (easy protein intake), 10th anniversary Unajiro (eel imitation product rich in vitamin B1), long-life frozen Koban Tenpura, and the popular Oden Eaten in a Bowl launched in summer 2025. Will launch a new sister product, Chilled Oden Eaten in a Bowl, for summer 2026, and strengthen sales of ready-to-eat products such as hanpen and fresh chikuwa that require no cooking.
• Core product Koban Tenpura has seen sales volume hit 145% of the prior year, driven by affordable pricing and high versatility. Capital investment for additional production capacity is underway, with new capacity scheduled to launch in May 2026 to expand national supply and drive further sales growth.

Mushroom Business Strategies

• Launched new high value-added organic maitake mushroom with Organic JAS certification, aligned with the company's safety-focused operating philosophy, and plans to expand sales.
• Will pursue expanded distribution and new customer acquisition, strengthen seasonal menu proposals and sales promotion tied to retailer events to increase maitake consumption occasions. Will develop custom product specifications for out-of-home dining chains to promote the taste and health benefits of maitake and increase product value.
• On the production side, will strengthen air conditioning facilities to maintain stable cultivation amid rising temperatures, continue automation and rationalization initiatives, horizontally expand successful packaging automation investments, and pursue automation of the inoculation process after successful R&D.
• Will conduct R&D to identify optimal cultivation conditions for maitake varieties adapted to climate change to stabilize cultivation output.

Overseas Business Initiatives

• Overseas expansion is a core goal of the ICHIMASA30 Vision 2045, which aims to become a global company contributing to global food culture with Japanese food.
• Entered into a business partnership with Smile Heart Foods in Thailand in February 2026 to build a foundation for expansion in Southeast Asia, a high-growth market with growing population and diversifying food demand. The partnership will combine Ichimasa's product strengths with the partner's local network to explore OEM development and build an overseas supply system.
• Established the Global Trade Office within the overseas business department in March 2026 to strengthen cross-border alliances and expand trade of third-party food products, going beyond the existing focus on exporting Ichimasa and Indonesian joint venture products.

Holding Company Structure Transition Evaluation

• Initiated evaluation of a transition to a holding company structure to enable more effective allocation of management resources, faster decision-making, and support business diversification amid changing consumer demand and market conditions.
• The evaluation aims to optimize group governance including strategic investment (including M&A), increase autonomy of individual business units, and accelerate growth. The transition is expected to strengthen management functions, enable rebalancing of the business portfolio, support increased investment in new businesses, and drive long-term enterprise value growth. Existing publicly traded shares will remain listed, so shareholder value will not be harmed. Timing and specific methods will be announced after further evaluation.

• Full year 2026 June fiscal year guidance is maintained at the original planned level: full year net sales of 36.2 billion yen, and operating profit of 1.1 billion yen. The company expects to secure full year earnings via further sales and profit growth in the marine surimi and prepared food business, and sales and profit recovery from stable cultivation in the mushroom business.
• Surimi prices are expected to continue rising in 2026, driven by strong fillet demand in Europe and the U.S., higher production costs, and yen depreciation. The company will continue to forecast price trends, adjust procurement and inventory levels to absorb cost increases.
• Chicken egg prices are expected to face further upside risk due to ongoing avian influenza outbreaks, reduced flock size, higher feed and production costs, and summer heat impacts. The company will maintain stable procurement and monitor market trends to protect profitability.
• The company will continue to pursue medium-term management plan target achievement, supported by expanded sales of affordable, high-demand core products, labor saving in production, improved factory utilization, and controlled selling, general and administrative expenses to offset ongoing broad-based cost increases.

1. Marine Surimi Products and Prepared Food Segment: Net sales reached 17.3 billion yen, operating profit reached 0.8 billion yen, with revenue growth but profit decline compared to the prior year period. This segment accounts for approximately 88.3% of total company net sales in the second quarter. 2. Mushroom Segment: Net sales reached 2.1 billion yen, with an operating loss of approximately 30 million yen. The segment achieved revenue and profit improvement compared to the prior year period, but remained unprofitable, accounting for approximately 10.7% of total company net sales in the second quarter. The 2025 December osechi (New Year traditional food) sales campaign, which falls under the Marine Surimi Products and Prepared Food Segment, outperformed the prior year result even as the overall national osechi market declined 0.9% in value and 5.4% in volume year-over-year.

• Raw material cost risk: Surimi prices have risen for four consecutive seasons, and further increases are expected in 2026. Chicken egg prices are already at high levels, with further upside risk. Broad-based raw material cost increases have outpaced the benefits of price adjustments and internal cost reduction, pressuring profitability.
• Energy price risk: Crude oil and LNG prices have stabilized recently, but escalating tensions in Iran have caused sharp crude price increases, and prolonged instability could lead to further energy cost increases that hurt profitability.
• Changing consumer behavior risk: Rising prices have strengthened consumer thrift, shifting purchasing from "selective splurging on special occasions" to "selective purchasing of only needed value products even for special events" such as osechi, which increases pressure on product portfolio planning and average selling prices. Consumers have also shifted to lower-priced mushroom alternatives, pressuring maitake sales volume.
• Mushroom business performance risk: The mushroom segment has remained in operating loss for multiple periods, and the high-cost environment combined with slower-than-expected sales volume recovery has delayed profitability improvement.
• Geopolitical and trade risk: Growing global conflicts and trade policy uncertainty (such as U.S. tariffs) increase instability for overseas expansion plans.

Q: Can the revised medium-term management plan target still be achieved, and what initiatives are in place to hit the target?

A: The operating environment has become more challenging as prolonged price increases have raised consumer thrift and made purchasing behavior more cautious. In the current environment, the marine surimi and prepared food business has successfully grown sales volume and secured revenue by expanding sales of affordable core products such as Salad Stick and Sandwich Hanpen, and expanding convenient storable products such as Koban Tenpura even amid consumer restraint on spending. On the profit side, while broad-based cost increases for raw materials, logistics, and personnel are expected, we will target final year target achievement via labor saving in production processes, improved factory utilization, and controlled SG&A expenses.

Q: What are the future plans for overseas business expansion?

A: We view overseas market development as mandatory amid a shrinking domestic market, and becoming a global enterprise is a core goal of our 2045 ICHIMASA30 Vision. We completed the first stage of building an overseas business foundation by 2025, and will continue to strengthen expansion in the second stage starting from July 2026. We converted our Indonesian joint venture KIF established in 2016 into a consolidated subsidiary in December 2024, and positioned it as the core of our overseas network. In February 2026 we signed a business partnership memorandum with leading Thai surimi producer Smile Heart Foods, and we will explore cooperation opportunities including knowledge sharing, product information exchange, and OEM product development. We note that growing global conflicts and trade policy uncertainty such as U.S. tariffs have increased global instability, so we will analyze global conditions and pursue appropriate risk diversification for overseas operations.

Q: Given the large cost increases you are facing, are you planning another price increase in the near term?

A: We currently have no plan to implement price adjustments during this fiscal year. However, further cost increases for raw materials, personnel, and logistics are expected going forward. We will continue to maximize internal efforts on cost reduction and productivity improvement, and will monitor market conditions closely and consider appropriate price strategy as needed going forward.

Q: Can you share progress on new business initiatives?

A: We cannot disclose specific details of M&A deals, but we are evaluating specific potential opportunities both domestically and internationally. The holding company structure evaluation and the Thailand business partnership are both projects led by our new business development department. We will continue to collect information broadly and evaluate opportunities based on synergies with existing businesses going forward.