KIBUN FOODS INC. Q2 FY2026 earnings call

• Overall Financial Results

  • The second quarter achieved higher revenue but lower profit overall: total revenue was 48.864 billion yen, up 2.3% YoY (+1.105 billion yen YoY). Operating loss was 0.413 billion yen, a 0.959 billion yen YoY decrease. Net loss attributable to parent company shareholders was 1.053 billion yen, a 0.997 billion yen YoY deeper loss.
  • Positive drivers of profit: higher revenue added 0.219 billion yen, September domestic product price adjustments added 0.111 billion yen, cost improvements from higher sales and rationalization added 0.086 billion yen, and other cost variances added 0.029 billion yen. These positive factors were offset by larger negative cost impacts.

• Balance Sheet Updates

  • Inventory increased by 2.437 billion yen, driven by forward production for the critical year-end holiday sales season using lower-cost raw material to lock in margins amid ongoing raw material price inflation.
  • Lease assets increased by 0.944 billion yen due to a change in accounting treatment for some Kibun Fresh System properties from rental agreements to capitalized lease assets.
  • Interest-bearing debt increased due to early borrowing of funds that would normally be raised in December to support the forward production schedule.

• Operational Segment Details

  • Domestic Food: Higher raw material costs, especially for core surimi inputs, outpaced revenue gains leading to an operating loss. Product category performance: surimi products +0.4%, prepared dishes +2.5%, Chinese prepared dishes +9.3%, while noodle-shaped products underperformed at -13.2% YoY.
  • Overseas Food: The segment, which previously drove overall company growth, turned to declining revenue and profit due to U.S. tariff policy changes. Tariffs on Thai imports to the U.S. rose temporarily from 10% to 36% and settled at 19%, causing sharp order declines, lower Thai factory utilization, higher unit costs, and reduced production efficiency. All regions except China saw year-over-year sales declines, with crab stick and other surimi products both down ~12% YoY.
  • Food Related (primarily logistics): Grew both revenue and profit, driven by new customer gains, price adjustments for existing customers, and increased shipment volumes from successful customer promotions. Higher sales offset increased fuel and labor costs, and delivery route optimization further supported profit growth.

1. Domestic Food Segment: Revenue of 32.974 billion yen, up 2.5% year-over-year (+0.804 billion yen YoY). Operating loss of 1.214 billion yen, a 0.925 billion yen YoY decrease in profit. Revenue contribution: 67.5% of total company revenue. Within this segment, B2C retail accounts for 70% of segment revenue (22.727 billion yen, +1.1% YoY) and B2B commercial accounts for 30% (10.246 billion yen, +5.7% YoY).
2. Overseas Food Segment: Revenue of 5.421 billion yen, down 6.1% year-over-year (-0.350 billion yen YoY). Operating profit of 0.164 billion yen, a 0.324 billion yen YoY decrease in profit. Revenue contribution: 11.1% of total company revenue. Crab stick products account for ~45% of segment revenue, other surimi products account for ~20%.
3. Food Related Segment: Revenue of 10.469 billion yen, up 6.6% year-over-year (+0.651 billion yen YoY). Operating profit of 0.562 billion yen, up 81.7% year-over-year (+0.252 billion yen YoY). Revenue contribution: 21.4% of total company revenue. 80% of segment revenue comes from outside the group, with mass retailers (65%) and convenience stores (15%) making up 80% of delivery destinations.

• Management emphasizes that the company's business structure generates most of its full-year profit in the second half, making second half performance critical to full-year results.
• For Domestic Food: Management will implement steady promotional activities for the fall, winter, and New Year sales season to maintain sales volume after September price adjustments implemented to offset raw material inflation.
• For Overseas Food: Management will pursue a dual strategy of passing higher tariff costs through to selling prices and meeting customer demand closely, while expanding product lines beyond crab sticks to recover sales and absorb the impact of higher tariffs.
• For Food Related: Management will continue the strategies that drove first half growth, including new customer development, price adjustments, and operational efficiency improvements, to maintain revenue and profit growth.
• Management will continue to monitor the ongoing upward trend in frozen surimi prices, adjusting production timing and inventory levels strategically to protect second half profitability. A separate later announcement notes that full-year earnings and dividend guidance have been revised downward, with a dividend cut.

• Rising raw material prices, particularly core frozen surimi, continue to put upward pressure on costs for the domestic food business, squeezing margins even after recent price adjustments.
• U.S. tariff policy changes on Thai imports have created significant headwinds for the overseas food business, causing sharp order declines, lower factory utilization, and higher unit costs that have severely hurt segment profitability. All non-China overseas markets have seen material sales declines.
• Foreign exchange volatility created additional downside in the quarter: prior year foreign exchange gains disappeared, and the quarter recorded a 0.066 billion yen foreign exchange loss, plus a 0.074 billion yen increase in interest expense, pushing ordinary income lower.
• Underperformance of noodle-shaped products in the domestic B2C segment creates drag on overall domestic segment growth.
• Higher labor costs, activity costs, and selling variable costs add additional margin pressure beyond raw material and tariff impacts.

No transcribed Q&A content is included in the provided excerpt; the full Q&A is linked to an external document that is not included in the source material.