2936.T

Overall Financial Performance

• Total consolidated net sales increased 19.77 billion yen YoY to 211.814 billion yen, with all profit metrics reaching all-time records: operating profit rose 2.302 billion yen YoY to 6.584 billion yen, ordinary income rose 2.353 billion yen YoY to 7.168 billion yen, and net income rose 2.048 billion yen YoY to 5.551 billion yen.
• Total assets increased 7.3 billion yen YoY to 108.9 billion yen, while net assets increased 5.3 billion yen YoY to 72.8 billion yen. The current ratio remains above 200%, the debt-to-equity ratio is 0.13x, and the equity ratio increased 0.4pp to 66.8%.

Mid-Term Management Plan (Medium-Term Plan 2024, 3-year plan starting FY2025 March Term) Progress

• Core strategic pillars: 1) Improve profitability and expand scale of the feed segment; 2) Accelerate business growth of the other segment; 3) Advance sustainability management to support the expanded revenue base. The plan targets to build a stronger revenue base and achieve sustained growth, with a focus on improving PBR through capital cost-conscious management.
• Overall progress: All key metrics (operating profit, ROE, ROIC) significantly exceeded plan targets in the second year of the plan. PBR improved to 0.77x as of the end of FY2026 March Term from the prior year end, but remains below 1x.
• Feed segment progress: Initiatives for environmentally friendly feed, cost reduction, productivity improvement, and ROIC tree utilization have progressed steadily for livestock feed. Remaining challenges include integrated manufacturing-sales-R&D collaboration, expanding sales and research staffing, and expanding differentiated feed sales, with sales volume missing plan targets. For aquafeed, new product development and stable supply exceeded plans, with sales volume beating targets and progress on high value-added product sales. Challenges include expanding low-fishmeal/no-fishmeal feed sales, expanding staffing, improving production productivity and quality, and expanding ROIC tree utilization.
• Other segment progress: Total segment profit exceeded plan targets. For egg sales, stable supply and specialty egg sales progressed, with challenges remaining in specialty egg product development and organizational strength building. For fertilizer, organic blended fertilizer sales exceeded plan volume, with challenges in new product development, expanding production at the Kanto manufacturing base, and new customer acquisition. For subsidiary livestock equipment, sales exceeded plan targets via strengthened customer trust, with challenges in margin improvement and advancing the new sewage sludge treatment equipment business. For subsidiary insurance agency, livestock insurance sales progressed steadily via strengthened sales structures, with challenges in advanced livestock insurance sales and expanding life insurance sales.
• Sustainability management progress: Greenhouse gas emissions fell 11.1% in FY2024 compared to FY2020, on track for a 30% reduction target by 2030, but the reduction plan will need revision to hit the target. Further improvements to the effectiveness of the Board of Directors and risk management are needed. Human capital initiatives including compensation improvement and employee engagement will continue, with additional progress required for talent development and flexible work arrangements.

Shareholder Returns

• For FY2026 March Term: A full-year dividend of 65 yen per share (30 yen interim, 35 yen increased final dividend) is planned, resulting in a DOE of 2.7% in line with plan. A 1.5 billion yen share buyback was completed.
• For FY2027 March Term: A full-year dividend of 76 yen per share (38 yen interim, 38 yen final) is planned, targeting a DOE of 3.0% in line with the shareholder return policy. A share buyback has not yet been determined.

• For FY2027 March Term, the forecast incorporates expected cost increases from tightening Middle East tensions pushing up energy and overall prices. Management forecasts net sales of 221 billion yen (an increase YoY driven by higher feed sales volume and average selling prices), operating profit of 5.9 billion yen (a decrease YoY), ordinary income of 6.2 billion yen, and net income of 6.9 billion yen (an increase YoY due to planned gains from fixed asset transfers). All headline forecasts exceed the original Medium-Term Plan 2024 targets for the third year.
• ROE is forecast to rise YoY, while ROIC is expected to fall YoY due to higher invested capital and lower operating profit. DOE is planned in line with the Medium-Term Plan, and depreciation expense is expected to exceed the prior year level. Fund contribution unit costs will remain at a high level with a slight projected increase.
• For the feed segment: Management projects a small profit increase from further raw material position improvement and higher livestock feed sales volume, offset by higher variable and fixed costs driven by Middle East tension impacts, leading to a net YoY profit decrease. Prioritized initiatives include securing stable raw material supply and feed delivery as the top priority, expanding feed sales volume via new product development and existing product improvements using newly invested research facilities, strengthening internal information sharing and rapid proposal capabilities, expanding sales and research staffing, and improving profitability via product line refresh and ROIC tree-based problem solving. Targets include higher livestock feed sales volume and differentiated feed revenue share (against an expected overall market volume decline), and higher aquafeed sales volume and environmentally friendly feed sales (against an expected flat overall market).
• For the other segment: Total segment profit is forecast to decline YoY due to lower margins from higher raw material and supply costs, but will still exceed the original Medium-Term Plan third year target. Management will continue initiatives to expand sales volume and improve margins via new product development, sales structure strengthening, and stable supply system building, alongside cost reduction and productivity improvement to mitigate Middle East tension impacts.
• For sustainability management: Management will implement the revised greenhouse gas emission reduction plan, strengthen the activities of the sustainability and risk management committees, and prioritize investment in employee engagement and talent development.

1. Feed Segment:
   • Livestock feed: Total sales volume reached 3.08 million tons, an increase year-over-year (YoY), but missed planned volume due to impacts from avian influenza, African swine fever, and farm fire incidents. Profit increased by 330 million yen YoY due to higher sales volume, offset by a 90 million yen profit decrease from a 1.4pp drop in the differentiated feed revenue share. Environmentally friendly feed sales volume increased significantly following the renewal of nitrogen emission-reducing feed for laying hens.
   • Aquafeed: Total sales volume reached 38,000 tons, exceeding both prior year and planned volume, driven by successful expansion of new eel feed products and an integrated manufacturing-sales supply system for yellowtail feed. Profit increased by 300 million yen YoY, supported by improved margins from reformulated products that maintained quality while cutting costs, and lower prices for fishmeal and soybean meal. Environmentally friendly low-fishmeal feed sales exceeded prior year levels but missed planned volume.
   • Overall feed segment: Raw material position (the spread between adjusted feed prices and raw material costs) improved significantly YoY, particularly in Q4, driven by falling grain prices after price revisions, yen appreciation, optimized formulation, and improved manufacturing yield, adding 2.82 billion yen in profit YoY. Variable costs increased 180 million yen YoY (fund contribution costs rose 1.6 billion yen YoY to 5.4 billion yen), while fixed costs increased 470 million yen YoY due to higher personnel costs from human capital investment and increased repair costs for planned plant aging countermeasures.
2. Other Segment (comprising egg sales, livestock equipment, fertilizer, and insurance agency businesses):
   • Total segment profit reached 1.21 billion yen, which missed YoY levels but exceeded planned targets. Egg sales saw growth in volume and profit from strong performance of premium specialty eggs. Fertilizer also grew volume and profit driven by organic blended fertilizer sales and cost reduction efforts. Insurance agency profit grew YoY from steady livestock insurance sales. Livestock equipment sales volume exceeded YoY levels but profit fell due to higher steel prices.

• Around 90% of compound feed raw materials are imported, so the business is heavily exposed to exchange rate fluctuations. Corn accounts for ~50% and soybean meal accounts for ~15% of raw materials, so the business faces significant commodity price volatility risk for these two grains.
• Livestock feed sales volume is exposed to downside risk from outbreaks of avian influenza and African swine fever, which reduce livestock inventory and total feed demand. The FY2026 March Term sales volume missed plan targets due to residual impacts from prior disease outbreaks and farm fire incidents.
• Geopolitical risk from tightening Middle East tensions is expected to push up energy costs (electricity and fuel) and other operating costs in FY2027 March Term, which is the main driver of the projected YoY operating profit decline.
• The company's PBR remains below 1x, failing to meet the Medium-Term Plan target of improving PBR above 1x, creating pressure to further improve performance and capital allocation.
• The current pace of greenhouse gas emission reduction is not sufficient to hit the 2030 30% reduction target, requiring plan revisions and additional mitigation efforts to avoid missing sustainability targets.
• Multiple business units across both segments have unaddressed strategic gaps: most notably insufficient staffing for sales and R&D in the feed segment, delayed progress on new product development and new market expansion across other segment businesses, and remaining needs to improve governance effectiveness and human capital practices.

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