FUJICCO CO.,LTD. Q4 FY2025 earnings call

Previous Mid-Term Management Plan Review

• The prior mid-term plan hit its total sales target of 57 billion yen, but missed all profit targets badly: actual operating profit was 1.131 billion yen vs the 4.25 billion yen target, operating margin hit 2.0% vs 7.5% target; net income was 951 million yen vs 3.15 billion yen target; ROE hit 1.4% vs 5.0% target.
• Completed 4 strategic priorities: 1) Brand value strengthening: cut ~40% of SKUs, implemented multiple price hikes, launched two new kelp brands to address raw material depletion, restored bean demand via the "Everyday Beans" campaign, and saw rapid growth for Marugoto SOY Caspian Sea Yogurt; 2) Factory operations reform: scrapped the high-cost two-tier factory consolidation plan, instead pursued productivity gains via labor-saving production lines with innovative technology; 3) DX promotion: completed selection and implementation of 8 required new core systems, and is currently focused on cultivating internal DX talent to improve company-wide digital literacy; 4) Corporate governance strengthening: purchased 1.5 million treasury shares, clarified tenure limits for independent outside directors, and expanded sustainability discussions at the board level.

New 2025-2027 Mid-Term Management Plan: Strategic Focus

• Positioning: This 3-year period is a critical phase to build a sustainable growth foundation for the company's 2030 Vision, which targets 700+ billion yen in sales, 7.5% operating margin, 5.0%+ ROE, and PBR of 1.0x or higher by 2030.
• Basic policy: Focus on expanding and deepening the core kelp and bean businesses, while building the yogurt business as the company's third core growth pillar.
  • Kelp business: Maintain high profitability and sustainable growth; partner with production regions to preserve kelp resources amid ongoing depletion, innovate raw material storage technology to improve quality, and secure appropriate profit through value-based pricing.
  • Bean business: Restore profitability and achieve V-shaped growth after years of declines; expand product development across segments, target customer segment-specific product development, improve factory utilization, and conduct consumer education on soy protein's role in frailty prevention.
  • Yogurt business: Accelerate growth as the third core pillar; launch new large-format creamy Caspian Sea Yogurt (Richmo) in fall 2005, expand global rollout: single-serve SOY yogurt launched at all 7-Eleven Taiwan locations in April 2025 via licensed local production, and plans to expand yogurt sales in Indonesia via existing partner retail networks.
• Operational efficiency: Closed the 57-year-old Hamasaki factory in 2025 due to persistent unprofitability, severe aging, and no viable return on reinvestment; all 124 affected employees will be reassigned to other facilities, headquarters, or sales offices. The closure supports portfolio restructuring and factory efficiency improvements.
• Development strategy: Pursue three-pronged development across existing, adjacent, and new areas; target increasing new product revenue contribution from 4.7% (2025) to 7.7% (2028) via leveraging core technology for adjacent products, refreshing existing core products, and developing new adjacent areas.
• Management base strengthening: 1) Continue DX expansion to speed product development and improve product line profitability management; 2) Human capital management: pursue DE&I, improved psychological safety, and shifted from work style reform to "meaningful work reform" to improve employee engagement, with a target to increase the employee engagement index from 6.7 to 7.5 by 2030; 3) Sustainability: target 30% CO2 emission reduction by 2030, balance plastic reduction, clean energy adoption, and profit growth; 4) Capital allocation: maintain balance between shareholder returns, balance sheet strengthening, and growth investment.

For the 2025 March fiscal year, total consolidated net sales reached 57.077 billion yen, a 2.4% increase year-over-year. All product segments grew year-over-year:

• Bean products: Total sales were +534 million yen year-over-year, reaching 105.4% of prior year sales, the largest contributor to total sales growth. Key items: single-serve Mame Kobachi boiled beans grew 120% year-over-year; new premium azuki and black bean products drove significant growth; new "Morning Protein Omamesan" launched in March 2025.
• Yogurt products: Total sales were +287 million yen year-over-year, reaching 104.5% of prior year sales. Marugoto SOY Caspian Sea Yogurt grew 150% year-over-year after a 2023 reformulation; legacy Caspian Sea Yogurt achieved double-digit year-over-year growth on targeted promotions to younger consumers.
• Kelp products: Kelp products maintained steady sales growth; kelp tsukudani achieved growth after two targeted TV CM campaigns for younger consumers and families with children this fiscal year.
• Side dish products: Missed initial year-to-date sales targets due to slower demand growth after price increases, resulting in a negative sales deviation from plan.
• Direct-to-consumer sales and ingredients business: Experienced significant year-over-year sales declines due to the strong negative impact of the 2024 red yeast rice issue on supplement and health ingredient sales.

• 2025-2027 mid-term plan target: For the 2028 March fiscal year (end of the plan period), target total sales of 62.7 billion yen, operating margin of 5.0%+, and operating profit of 3.0 billion yen or higher; also targets reaching PBR ≥ 1.0x and ROE ≥ 3.0% by the end of the plan period.
• Cumulative 3-year cash flow target: 16.0 billion yen in operating cash flow, 11.0 billion yen in investment outflows, 4.0 billion yen in total shareholder returns, leaving 1.0 billion yen in positive free cash flow.
• 2026 March fiscal year full-year guidance: Target total sales of 58.5 billion yen, +2.5% year-over-year; target operating profit of 1.65 billion yen, +518 million yen year-over-year; target net income of 1.35 billion yen, +398 million yen year-over-year; the annual dividend per share is maintained at 46 yen.
• For 2026, management expects planned spring and June 2025 price hikes to add 1.8 billion yen in marginal profit, with 400 million yen in internal cost reduction offsetting expected increases in material, labor, and logistics costs. Bean and yogurt products are planned to grow to 106.8% and 107.6% of 2025 sales respectively, to drive overall growth.
• Depreciation expense is expected to be ~3.5 billion yen in 2026, matching 2025 levels with capital expenditure also staying at comparable levels; the new large-format yogurt product launch is included in the 2026 capital expenditure budget.

• Ongoing kelp raw material depletion, driven by environmental changes, creates supply and cost risks for the core kelp business; the company has launched new raw material development and resource conservation initiatives, but these have not yet fully mitigated long-term supply risks.
• Multiple price hikes implemented over the past several years have led to sales volume declines, which prevented the company from absorbing higher raw material, labor, energy, and logistics costs, resulting in operating profit coming in far below prior plan targets.
• The prior mid-term plan's factory consolidation initiative was scrapped due to excessively high implementation costs, leading to delayed productivity improvement gains.
• The red yeast rice issue in 2024 caused significantly larger-than-expected sales declines in the direct-to-consumer and ingredients business segments, leading to full-year results missing initial sales and profit targets by a wide margin.
• Persistent low profitability has led to PBR trading below 1.0x and low ROE, which creates pressure on the company's market valuation and cost of capital.

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