The government’s Cabinet approved an outline to reduce the consumption tax on food from 8% to 1% for 2 years from April 2027. As a vertically integrated meat company that sources, processes and sells beef, pork and poultry in Japan and overseas, エスフーズ is assessing the impact of the tax cut and its exit strategy.
In September, the government’s Cabinet approved a policy to reduce the consumption tax on food from 8% to 1% for 2 years from April 2027. エスフーズ is positioned as a vertically integrated, comprehensive meat company that sources and processes beef, pork and poultry in Japan and overseas, then supplies supermarkets, food-service businesses and its group’s butcher shops. It could benefit from an increase in household demand resulting from the tax cut.
The company’s strength lies in its end-to-end supply chain from production through food service and its business model of diversifying sales outlets by cut and selling through its entire product mix. If the tax cut shifts demand from food service to households, the key question will be how effectively the group’s internal businesses can absorb that demand.
At the same time, factors other than the tax cut are also affecting earnings. In the United States, cattle numbers remain low, while エスフーズ continues to invest several tens of billions of yen in new plants. In Japan, calf prices continue to surge, and these factors could affect earnings.
Among the stock’s valuation indicators, its apparent discount to net assets and dividend yield of around 4% tend to attract attention. However, it will be necessary to determine which will have the greater impact: the tailwind from the tax cut or the headwind from the overseas cattle shortage. The article organizes the direction of the indicators that should be monitored at each earnings release.