OHISHI SANGYO CO.,LTD. Q2 FY2026 earnings call

• Company Overview & Milestones
  • Oishi Sangyo is a comprehensive packaging material manufacturer headquartered in Kitakyushu, Japan, that celebrated its 100th anniversary in April 2025. It has never posted an annual loss in its operating history despite profit volatility from raw material and energy price fluctuations.
  • The company operates domestic locations from Hokkaido to Kumamoto, with an additional overseas base in Malaysia. It holds the number one domestic market share for its core pulp molded products, and top domestic share for polystyrene film for food trays.
• Consolidated Interim Financial Performance
  • Consolidated revenue for the 2nd quarter interim period totaled 11.538 billion yen, an increase of 980 million yen year-over-year. Operating income was 403 million yen, up 160 million yen year-over-year, and ordinary income was 515 million yen, up 450 million yen year-over-year.
  • Growth drivers included higher sales volume of pulp molded products, domestic heavy-duty packaging bags, and corrugated cardboard products, combined with the positive impact of sales price reviews, which offset lower sales volume of overseas heavy-duty packaging and film products.
  • Net income attributable to parent company shareholders was 292 million yen, down 152 million yen year-over-year. This decline is entirely due to the absence of a 166 million yen non-recurring special gain from received damage insurance that was recorded in the prior year period.
  • Operating income increased 160 million yen year-over-year, supported by positive factors of higher average selling prices and lower manufacturing variable costs (which offset higher manufacturing labor costs and depreciation). The only offsetting negative factor was increased selling, general and administrative expenses (SG&A) including higher personnel and advertising costs.
• Capital Investment & Sustainability
  • The company is executing phased growth capital investment and facility updates aligned with its medium-term management plan, having invested approximately 1 billion yen in the first half of the current fiscal year.
  • The company pursues sustainability initiatives aligned with its basic policy, identifying material issues from an ESG perspective. Recent activities included exhibiting its mobile pulp mold recycling facility "Aru-Eco" at a children's work experience event in Kitakyushu to educate on recycling and environmental stewardship.

1. Cushioning Functional Materials Segment: Revenue contribution accounts for 47% of total consolidated revenue. The segment achieved year-over-year growth in both revenue and profit, driven by increased sales volume and sales price adjustments across its pulp mold and corrugated cardboard divisions. Pulp mold sales grew from recovering demand for egg trays, steady demand for takeaway drink trays, and higher sales volume of fruit/vegetable trays (led by tomatoes and apples). Corrugated cardboard sales increased in both industrial and agricultural end markets, also supported by price adjustments. 2. Packaging Functional Materials Segment: Revenue contribution accounts for 51% of total consolidated revenue. The segment reported year-over-year declines in both revenue and profit. Total revenue fell due to large sales volume drops in the film division and the overseas heavy-duty packaging bag division, alongside lower selling prices from falling raw material market prices. Profit declined further from increased depreciation expenses. Within the segment, domestic heavy-duty packaging bags grew revenue on higher sales volume (led by synthetic resin applications) and price adjustments, while overseas heavy-duty packaging bags saw reduced revenue from lower demand for synthetic resin and chemical packaging, offsetting partial growth in food-focused sales. For the film division, reduced sales volume stemmed from cost-cutting consumer behavior cutting demand for polystyrene film for food containers, and lower sales of cast film for automotive applications, alongside falling selling prices from declining raw material markets.

• The company maintains its full-year FY2026 March Term guidance unchanged from its initial opening forecast, with no upward or downward revisions. Interim progress is in line with plan, with revenue reaching 47.6% of the full-year target and ordinary income reaching 45.4% of target.
• Full-year consolidated revenue is forecast at 24.232 billion yen, representing a 3.2% (746 million yen) year-over-year increase. Growth is expected from price adjustments across business units and new product development focused on the growing pulp mold and film business segments, which will offset lower sales in the overseas business.
• Full-year operating income is forecast at 901 million yen, a 0.4% (3 million yen) year-over-year decrease, and ordinary income is forecast at 1.134 billion yen, a 0.3% (3 million yen) year-over-year increase. Profit is expected to remain roughly flat year-over-year: revenue growth will be offset by higher depreciation from proactive capital investment for future growth, and increased human capital investment from staff expansion, talent development, and compensation improvements.
• The company maintains its planned shareholder return: an interim dividend of 26 yen per share has been implemented as planned, and a year-end dividend of 26 yen per share is still planned, for a full-year annual dividend of 52 yen per share, aligned with the target DOE of 2.0% or higher.

• External cost pressures: Repeated increases in logistics costs and announced price hikes for base paper used in corrugated cardboard and heavy-duty packaging bags continue to create a challenging operating environment.
• Market demand uncertainty: External factors complicate sales forecasting, with consumer cost-cutting sentiment reducing demand for food-related packaging products, and weak demand for industrial end products like automotive components reducing demand for related packaging materials.
• Commodity price volatility: Falling raw material market prices have pulled down selling prices in the film segment, while upward pressure on raw material and logistics costs requires ongoing sales price adjustments to maintain margins.
• External geopolitical and industry risks: Trumps tariffs may create indirect impacts on customer demand and supply chain operations that require close monitoring. Industry-specific risks include volatility in egg demand from avian influenza, egg price fluctuations, changing consumer behavior, and seasonal factors that impact demand for egg packaging trays. Extreme weather like recent heatwaves creates uneven impacts on fruit and vegetable yields and packaging demand, though this is partially offset by the company's diversified end market exposure.

Q: The 34.2% year-over-year drop in interim net income is large. Is this decline from one-off factors or structural factors like higher SG&A and depreciation? / A: The entire decline comes from the absence of a 166 million yen one-off special insurance gain recorded in the prior year period, so it is purely temporary. Operating and ordinary income have both increased year-over-year, showing core business profitability is improving. Higher SG&A and depreciation are strategic investments in human capital and development to support medium- to long-term growth, not structural headwinds.

Q: Is the improved profit margin for the cushioning functional materials segment from structural improvements or temporary factors, and can this level be sustained? / A: The improvement is structural, driven by higher sales volume and completed price adjustments. While the segment will still face impacts from raw material price swings and end-market demand changes, the company will target stable profit generation through ongoing cost reduction, incremental price adjustments as needed, and development of high value-added products.

Q: What is driving the decline in revenue and profit for the packaging functional materials segment? / A: The decline stems from lower sales volume for overseas heavy-duty packaging, lower sales volume and selling prices for film (from falling raw material markets and weak consumer demand), and higher depreciation. Demand for food-related film is down due to cost of living pressures. The company is targeting a return to growth via expanding food-focused sales for overseas heavy-duty packaging and expanding sales to the electronics industry for film.

Q: How is the company viewing external volatility and sales uncertainty for the second half of the year? / A: The operating environment remains challenging, with announced base price hikes for raw paper and continuing logistics cost increases. The company will continue adjusting selling prices to offset higher input costs. While forecasting is difficult due to overlapping factors, domestic sales volume is progressing steadily, so the full-year earnings guidance remains unchanged.