Revenue growth, but a lower operating margin: the first half will test cost absorption

Revenue in the first quarter of FY2027/3 was ¥92,379 million, an increase of ¥7,732 million, or 9.1%, from ¥84,647 million in the same period of the previous year. Operating profit, meanwhile, was ¥3,479 million, down ¥55 million, or 1.5%, from ¥3,534 million. The operating margin fell by approximately 0.41 percentage points, from approximately 4.18% in the same period of the previous year to approximately 3.77% in the current period, indicating that revenue growth did not translate directly into higher operating profit.

The company’s full-year forecasts are ¥350,000 million in revenue, ¥12,000 million in operating profit, ¥14,000 million in ordinary profit and ¥9,500 million in net income attributable to owners of the parent. As of the end of the first quarter, the forecasts had not been revised. Progress against the full-year forecast was approximately 26.4% for revenue and 29.0% for operating profit, with operating profit running approximately 2.6 percentage points ahead of revenue. However, the available information does not indicate the effects of seasonality or the allocation of profit between the first and second halves. Accordingly, ¥175,000 million and ¥6,000 million should be treated not as company targets, but as comparison benchmarks calculated mechanically as 50% of the full-year forecasts.

The company cited product price revisions, sales at appropriate prices, expanded sales in the oil-processing and saccharide categories, higher feed sales volumes and prices, and a recovery in egg sales from avian influenza as factors behind revenue growth. Higher logistics costs, labour costs and material prices, as well as consumers’ cost-consciousness and lower cargo volumes, weighed on profit. The company has not disclosed a monetary bridge separating the first-quarter profit contribution from price revisions and sales volumes from the negative effects of logistics costs, labour costs and material costs.

By segment, the Food Business recorded revenue of ¥71,091 million, up 2.4% year on year, while segment profit fell 3.0% to ¥3,272 million. The Feed Business recorded revenue of ¥19,799 million, up 41.9%, and segment profit of ¥224 million, up 64.8%. Accordingly, even if consolidated operating profit reaches approximately ¥6,000 million in the first half, it will be necessary to determine whether profitability in the Food Business continues to deteriorate or whether growth in the Feed Business can offset it.

At the next results announcement, revenue progress should be reviewed together with operating-profit progress and the operating margin. In particular, the key issues for assessing the validity of the ¥12,000 million full-year operating-profit forecast will be whether the cumulative first-half operating margin exceeds the first-quarter level of 3.77%, whether sales volumes are maintained after the price revisions, and whether increases in logistics costs, labour costs and material costs have expanded from the first-quarter level.