Price increases supported unit prices, but can they continue to offset lower volumes?

Consolidated revenue in the first quarter was ¥147,099 million, up 2.4% year on year, while operating profit was ¥9,977 million, up 12.9%. Compared with year-earlier revenue of ¥143,678 million and operating profit of ¥8,835 million, operating profit grew faster than revenue. The operating margin calculated from revenue and operating profit rose approximately 0.63 percentage points, from about 6.15% in the year-earlier quarter to about 6.78% in the current quarter, suggesting that price increases and an improved product mix lifted margins.

The company said that, in its domestic business, it had pursued price revisions and expanded higher-value-added products, but sales volumes of products such as milk and ice cream declined, while various costs, including raw material, energy, logistics, and personnel costs, continued to rise. Previous disclosures show that the company has repeatedly reached situations in which lower volumes and higher costs could not be fully absorbed even after price revisions and product-mix improvements. It is therefore too early to view the latest profit growth as simply the result of price increases.

The first-quarter financial summary does not disclose the specific rate of decline in sales volumes, the increase in revenue from price revisions, or the contribution of unit prices and volumes by category. The impacts of raw milk, raw materials and energy, logistics, and personnel expenses are also described only in aggregate. In the next first-half results, it will be necessary to check not only whether revenue of ¥293,330 million and operating profit of ¥20,805 million in the year-earlier period are exceeded, but also whether revenue growth comes from higher unit prices or is accompanied by a recovery in volumes, and whether an operating margin in the high-6% range can be maintained.