Starzen Company Limited Q4 FY2025 earnings call

Overall Financial Results and KPI Performance

• Total revenue hit a company record, supported by successful pass-through of rising raw material costs and strong processed food sales. Net profit to parent shareholders rose 62.4% year-over-year to 12.1 billion yen, driven by a one-off 7.8 billion yen special gain from fixed asset sales, also hitting a record high.
• All core medium-term management plan KPIs exceeded target: EBITDA at 12.3 billion yen, ROE at 14.6%, ROIC at 6.2%, equity ratio at 51.6%.

Medium-Term Strategy Progress

• Overseas Business Expansion: Overseas revenue is up 44% since 2021. Starzen's strategy has two core pillars: expanding exports of domestic Japanese products, and strengthening local production/sales overseas, with the goal of maximizing group profit via end-to-end supply chain integration. Key recent moves:
  • Acquired an Australian Wagyu production and feeding operation, building a direct production-to-commercialization stable supply base. Australia was selected for its long trading history with Starzen, geographic proximity to high-growth Asian/Chinese markets, strong disease biosecurity, existing halal certification for access to Middle Eastern and Muslim-majority markets, and zero-tariff access to multiple markets via economic partnership agreements that create a competitive advantage over US beef. The acquired operation currently holds ~4,000 head of cattle, with plans to expand the company's original Australian Wagyu brand Gyokuo Gyu and develop new differentiated products.
  • Expanded Japanese Wagyu exports under the AKUNE GOLD export brand, with growing sales in the EU following a world steak competition award, and continued investments in quality improvement and branding. Entered a capital and business alliance with leading domestic Japanese Wagyu producer Mizusawa Farm to secure a stable long-term supply base and adapt to changing domestic and global demand, with production expertise being shared with the Australian operation.
  • Built local sales capabilities via partnerships with experienced local firms, including a Singaporean affiliate that already sells Wagyu to local retail and food service customers. Cross-functional task forces are being deployed to Hong Kong and Thailand to develop locally adapted offerings, with plans to expand to North America and the Middle East with support from partner Mitsui & Co.
• Domestic Business Efficiency: A new large logistics center is under construction in Kawasaki, Kanagawa to restructure the national logistics network and reduce waiting times. The Itami Sales Center is moving to a new purpose-built facility, and the company will continue consolidating and reallocating sales centers across Japan to adapt to changing population and trade area dynamics.
• High Value-Added Product Expansion: Restructured product development to add consumer-focused brand and experience building. Cross-functional category branding teams develop products targeting specific consumer segments and use cases, with a recently reformulated national brand hamburger seeing strong post-launch volume growth. Leveraging the company's on-site slaughterhouse facilities to develop new high-value products from growingly popular by-products (offal), and building full eating experience offerings such as the Shuji-jikan (Drinking Time) line that collaborates with retailers to build in-store displays around the specific eating occasion, moving beyond simple product supply to become a lifestyle proposal company aligned with the corporate mission of creating exciting food experiences.
• DX, Operational Reform and Human Capital Investment: The company's Zeus DX project has launched two initial systems this period:
  • The LINK logistics management and delivery system, which streamlines end-to-end logistics operations from order taking to billing, reduces reliance on individual expert knowledge, stabilizes vehicle loading rates, prevents misdeliveries, and will use accumulated data to drive further loading efficiency improvements.
  • A new core system for the domestic chicken business will launch in June 2025, integrating sales planning, inventory, ordering and delivery with LINK to reduce human error and improve on-site efficiency. Digital investments are expected to deliver at least 500 million yen in annual cost savings by 2031.
  • Human capital investments include increased internal branding to embed the updated corporate mission, expanded training and reskilling opportunities, a 10% incentive match for the employee stock ownership plan, and a program that grants 100 thousand yen worth of restricted stock to participating employees for free, to align employee and shareholder interests.

Capital Return and Capital Efficiency Improvements

• Capital profitability is a core second pillar of management alongside growth, with three focus areas: improving profitability via the above strategic initiatives, improving asset efficiency by reallocating capital from underperforming assets to high-return growth projects (such as selling the Tokyo Minato Ward logistics facility to fund new logistics and sales center construction), and optimizing financial leverage via adjusted dividend policy targeting 3.0% DOE, completed share buybacks, and a 2025 stock split and refreshed shareholder benefit program with expanded product selection and added McDonald's gift cards. The company delivered ROE above 14% this period, but will continue improving capital profitability and IR activity to reduce cost of equity as PBR remains below 1x.

Starzen's total full year revenue for the 2025 March period hit 436.1 billion yen, a 6.2% increase year-over-year. Breakdown by product segment:

1. Domestic Meat: Total revenue increased 6.7 billion yen year-over-year, a 3.9% growth, contributing approximately 26.5% of total company revenue. Domestic beef saw a slight volume decline but grew revenue on strong high-end cut export growth; domestic pork saw lower shipment volumes due to African swine fever and extreme heat, but revenue grew on higher market prices.
2. Imported Meat: Total revenue increased 12.8 billion yen year-over-year, an 8.6% growth, contributing approximately 36.8% of total company revenue. Imported beef saw steady demand from food service, and overall revenue grew on higher selling prices driven by rising market and import costs, despite ongoing sales challenges for retail channels.
3. Processed Foods: Total revenue increased 6.7 billion yen year-over-year, a 9.3% growth, contributing approximately 16.4% of total company revenue. Growth was driven by strong sales of hamburgers, roast beef, and food service-oriented products.
4. Ham and Sausages: Total revenue decreased 0.4 billion yen year-over-year, resulting from lower handled volumes after price adjustments and product portfolio reviews, contributing approximately 20.3% of total company revenue.

• For the 2026 March period, management forecasts total revenue of 450.0 billion yen, operating profit of 9.4 billion yen, ordinary profit of 11.0 billion yen, and net profit to parent shareholders of 8.0 billion yen. The forecast lower net profit reflects the absence of the large one-off special gain from fixed asset sales recorded in the 2025 March period; operating and ordinary profit are projected to grow year-over-year even after accounting for planned cost increases including goodwill amortization for the newly acquired Australian farm, base wage hikes, and higher logistics costs.
• The full year dividend forecast is 43 yen per share (equivalent to 129 yen pre-stock split), for an expected DOE of 2.7%. Management maintains a long-term target of 3.0% DOE, and will continue pursuing stable, sustained shareholder returns balanced against growth investment needs and changing operating conditions.

• Volatile foreign exchange rates, persistently high feed costs, and rising overall operating costs have created a tough operating environment, with consumer demand shifting to lower-priced products and overall meat consumption remaining weak despite recovering inbound demand.
• Domestic pork production is facing reduced shipment volumes due to African swine fever outbreaks and extreme heat, putting downward pressure on segment profit.
• Imported meat faces higher import costs that have created retail sales challenges.
• Inventory values increased due to higher import meat market prices and unfavorable exchange rate movements, leading to a decline in operating cash flow this period, though management notes inventory remains within normal sales cycle levels and cash flow will recover in the next fiscal year.

The provided transcript cuts off before the full question and answer content, so only the topics of the scheduled exchanges are confirmed below: (1) Competitive advantages for Starzen's overseas expansion; (2) Inclusion of net asset sales gains in the net profit plan; (3) Japanese Wagyu strategy adjusted for tariff impacts; (4) Outlook for reducing holdings of policy-owned shares; (5) Domestic meat sales outlook and operating environment.