FEED ONE CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, revenue and profit increased, driven by growth in the aquaculture feed business and improvements in the cost ratio. Revenue was ¥78.44B (+9.0% YoY), Operating Income was ¥2.14B (+45.0%), Ordinary Income was ¥2.36B (+26.7%), and Net Income for the period (consolidated, including non-controlling interests) was ¥1.78B (+8.2%). The Operating Income margin improved by +0.7pt YoY to 2.7%. In addition to the improvement in the gross profit margin (+0.1pt), operating leverage emerged as the increase in SG&A expenses (+1.6%) was kept below the increase in Revenue (+9.0%). Meanwhile, Net Income attributable to owners of the parent was limited to ¥1.76B (+7.6%), primarily because the tax burden normalized from the previous year’s low effective tax rate, causing growth to fall below that through the Ordinary Income level.

Factors Affecting Results

【Revenue】Revenue increased 9.0% YoY to ¥78.44B. By segment, the aquaculture feed business grew substantially to ¥7.85B (+49.6%), while the food business also contributed to revenue growth, increasing to ¥11.61B (+12.2%). The core livestock feed business grew moderately to ¥59.11B (+2.3%), but remains the center of earnings, accounting for 75.4% of the revenue mix.

【Profit and Loss】Operating Income increased substantially by 45.0% YoY to ¥2.14B. While the cost of sales ratio was nearly flat at 89.0% (89.1% in the same period of the previous year), the gross profit margin improved to 11.0% (+0.1pt), and operating leverage emerged as the increase in SG&A expenses was kept below the increase in Revenue. Ordinary Income increased 26.7% YoY to ¥2.36B. Although equity in earnings of affiliates declined from ¥0.29B in the previous year to ¥0.05B, dividend income increased from ¥0.13B to ¥0.17B and non-operating expenses decreased, allowing profit growth to be maintained at the Ordinary Income level. Profit Before Tax increased 34.9% YoY to ¥2.58B, boosted by ¥0.22B in extraordinary income, including a ¥0.22B gain on sales of investment securities. However, due to the normalization of the effective tax rate from 13.8% in the previous year to 30.9% in the current period, Net Income attributable to owners of the parent was limited to ¥1.76B (+7.6%). Revenue and profit increased.

Segment Analysis

Segment profit (total before adjustment: ¥3.06B) was led by the livestock feed business, which generated ¥2.70B (+16.6%) and accounted for 88.4% of total segment profit. Despite high Revenue growth of +49.6%, the aquaculture feed business posted a decline in segment profit to ¥0.21B (-30.5%), indicating that achieving both revenue growth and profitability remains a challenge. The food business turned profitable, posting segment profit of ¥0.11B (a loss of ¥0.01B in the same period of the previous year), contributing to diversification of the business portfolio.

Key Financial Indicators

【Profitability】The Operating Income margin improved by +0.7pt to 2.7% (2.1% in the same period of the previous year), while the Ordinary Income margin improved by +0.4pt to 3.0% (2.6%). In contrast, the Net Income margin attributable to owners of the parent was nearly flat at 2.2% (2.3%), with the normalization of the tax burden acting as a downward factor.【Cash Flow Quality】Trade receivables (notes and accounts receivable) increased 6.0% YoY to ¥42.88B, growing at a slower pace than Revenue (+9.0%); no sharp deterioration in working capital was identified.【Investment Efficiency】ROE was 2.8% (quarterly basis, not annualized), and the total asset turnover ratio was 0.58x. Despite the high Equity Ratio of 46.6%, capital efficiency remained low, reflecting the low-margin business structure.【Financial Soundness】Interest coverage was 31.9x, while interest-bearing debt (the total of short-term and long-term borrowings and lease obligations) was approximately ¥25.15B. The Debt/Capital ratio was approximately 28.4%, indicating that financial leverage remained at a conservative level.

Cash Flow Analysis

As the statement of cash flows is not included in the scope of disclosure, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased 6.6% from ¥11.14B in the same period of the previous year to ¥11.88B, indicating an accumulation of liquidity on hand. Trade receivables increased to ¥42.88B (+6.0%), while trade payables increased to ¥33.78B (+8.8%), with working capital expanding broadly in line with Revenue growth (+9.0%). Long-term borrowings were ¥23.15B, slightly down from ¥23.33B in the same period of the previous year, indicating that interest-bearing debt continued to trend downward from a financing perspective. The ¥0.22B gain on sales of investment securities recognized as extraordinary income represents a temporary cash inflow and should be evaluated separately from recurring cash-generation capacity.

Earnings Quality

In terms of earnings quality, the ¥2.14B increase in Operating Income was primarily attributable to recurring factors—an improved gross profit margin and restrained SG&A expenses—and is therefore assessed as high quality. On the other hand, non-recurring elements were mixed into the increases in Ordinary Income and Profit Before Tax. Equity in earnings of affiliates declined significantly from ¥0.29B in the same period of the previous year to ¥0.05B, exerting downward pressure on non-operating income, while dividend income increased to ¥0.17B (¥0.13B in the previous year), partially offsetting the decline. Extraordinary income of ¥0.22B was primarily attributable to gains on sales of investment securities, representing a temporary contribution equivalent to 8.4% of Profit Before Tax of ¥2.58B. The effective tax rate normalized from 13.8% in the same period of the previous year to 30.9%, and growth in Net Income attributable to owners of the parent was limited to +7.6%, compared with +34.9% growth in Profit Before Tax. Comprehensive income was ¥1.82B, down -6.6% from ¥1.95B in the same period of the previous year, moving in the opposite direction from the increase in Net Income. This divergence was primarily due to the increase in valuation differences on available-for-sale securities recorded in the same period of the previous year (+¥0.29B) turning to -¥0.02B in the current period. The difference between Net Income and comprehensive income resulted from changes in the fair value of marketable securities rather than accruals.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 24.8% for Revenue (¥78.44B/¥317.00B), 25.2% for Operating Income (¥2.14B/¥8.50B), 26.8% for Ordinary Income (¥2.36B/¥8.80B), and 27.1% for Net Income attributable to owners of the parent (¥1.76B/¥6.50B). All were either above or at approximately the 25% level that serves as a benchmark for quarterly progress. No revisions were made to the earnings forecast or dividend forecast in this earnings release. The full-year plan calls for Revenue growth of +9.1%, Operating Income growth of +5.1%, and Ordinary Income growth of +2.2%. The Q1 pace of profit growth (Operating Income +45.0%) is therefore proceeding above the growth rate assumed in the full-year plan.

Shareholder Returns

The annual dividend forecast is ¥26 per share, implying a Payout Ratio of approximately 15.3% based on the company’s forecast Net Income per share of ¥169.85. In the previous fiscal year (the fiscal year ended March 2026), the interim dividend totaled ¥21 per share, comprising an ordinary dividend of ¥16 and a commemorative dividend of ¥5. Given the conservative financial leverage (Debt/Capital ratio of approximately 28%) and liquidity on hand (cash and deposits of ¥11.88B), the current-year annual dividend forecast of ¥26 is assessed as sustainable as long as earnings remain at current levels. No disclosure regarding share repurchases was identified.

Risk Factors

1. Raw Material Market and Foreign Exchange Risk: The cost of sales ratio remained nearly flat at 89.0% (89.1% in the previous year), and fluctuations in the prices of key raw materials such as grains and fats and oils, as well as foreign exchange movements, could affect the gross profit margin (currently 11.0%) going forward.

2. Dependence on Temporary Earnings Factors: The ¥0.22B gain on sales of investment securities accounted for 8.4% of Profit Before Tax of ¥2.58B. Equity in earnings of affiliates declined substantially by -82.3% YoY (¥0.29B → ¥0.05B), warranting caution when assessing recurring earnings power excluding non-recurring items.

3. Segment Profitability Gap: Dependence on the livestock feed business is high, as it accounts for 75.4% of the revenue mix. In the aquaculture feed business, segment profit declined -30.5% YoY, indicating that revenue growth and profitability improvement have not necessarily coincided across segments.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Profitability is below the industry median, with both the Operating Income margin and Net Income margin ranking in the lower tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median, indicating that the pace of revenue growth is relatively high within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Release

1. The +45.0% increase in Operating Income was primarily driven by operating leverage resulting from the improved gross profit margin (+0.1pt) and restrained SG&A expenses. Full-year progress is also proceeding smoothly at above 25%.

2. Growth in Net Income attributable to owners of the parent (+7.6%) was substantially below growth in Profit Before Tax (+34.9%), primarily because the effective tax rate normalized from the low level of 13.8% in the same period of the previous year to 30.9% in the current period.

3. From a business structure perspective, growth in the aquaculture feed business (+49.6%) and the food business’s return to profitability (from a ¥0.01B loss to ¥0.11B in profit) were observed. However, segment profit in the aquaculture feed business declined, making the achievement of both revenue growth and profitability improvement an important focus going forward.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,661–¥1,761 at ±1% for the Cost of Equity, and ¥1,709–¥1,712 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because non-controlling interests are included in net assets, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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