YAKULT HONSHA CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, the Company reported higher revenue but lower operating income, while securing final-period profit growth due to non-recurring factors such as extraordinary gains and foreign exchange gains. Revenue was ¥1,204.6B (+3.3% year on year), Operating Income was ¥100.9B (-7.5%), and Ordinary Income was ¥156.5B (-9.0%). Meanwhile, Net Income attributable to owners of the parent increased to ¥135.9B (+17.2%), boosted by ¥66.4B in extraordinary gains, including a ¥52.9B gain on the sale of investment securities. The primary reason for the decline in Operating Income was that, although the gross margin improved to 59.5% (58.9% in the previous year), the SG&A ratio rose to 51.1% (49.5% in the previous year), with cost increases exceeding the benefit of higher revenue.

Factors Affecting Business Performance

【Revenue】Revenue increased 3.3% year on year to ¥1,204.6B. By region, the Americas at ¥257.5B (+18.7%), Asia and Oceania at ¥336.9B (+14.4%), and Europe at ¥36.6B (+14.2%) led growth, with the combined total for the three overseas regions increasing by approximately +16% year on year. Japan, meanwhile, recorded lower revenue of ¥553.7B (-7.2%), and its share of total Company revenue declined from approximately 51% in the previous year to approximately 46%, indicating an expansion in the overseas revenue ratio.

【Profit and Loss】Operating Income declined 7.5% year on year to ¥100.9B. The primary factor was that SG&A expenses increased 6.7% to ¥615.9B, outpacing the revenue growth rate, causing the SG&A ratio to rise by +1.6pt. Although non-operating income of ¥67.5B, comprising a ¥23.2B foreign exchange gain, ¥17.7B in interest income, and ¥14.6B in dividend income, provided support, Ordinary Income declined 9.0% to ¥156.5B. Extraordinary gains of ¥66.4B, including a ¥52.9B gain on the sale of investment securities and a ¥12.4B gain on the sale of fixed assets, were recorded as temporary factors, bringing Profit Before Tax to ¥214.3B. After deducting income taxes of ¥64.7B and Net Income attributable to non-controlling interests of ¥13.7B, Net Income attributable to owners of the parent amounted to ¥135.9B (+17.2%). Thus, the Company recorded higher revenue but lower profit through the Ordinary Income stage, while final profit turned to growth due to the contribution of extraordinary gains.

Segment Analysis

By segment Operating Income, the Americas posted ¥69.2B (+9.0% year on year; profit margin of 26.9%), demonstrating the highest profitability company-wide and serving as the main earnings driver. Asia and Oceania recorded a substantial increase in Operating Income to ¥31.4B (+145.8%) against revenue of ¥336.9B (+14.4%), with the profit margin also improving to 9.3%. Japan recorded lower revenue of ¥553.7B (-7.2%) and lower Operating Income of ¥56.6B (-35.6%), with its profit margin declining to 10.2%. Europe posted an Operating Loss of ¥1.8B against revenue of ¥36.6B (+14.2%), resulting in a loss-making profit margin of -5.0%. The structure is one in which the high profitability of overseas operations, particularly the Americas, offsets declining profits in Japan and losses in Europe. The disparity in profit margins among segments (26.9%–▲5.0%) is the primary cause of variation in the Company-wide margin.

Key Financial Indicators

【Profitability】The Operating Income margin was 8.4%, down 0.99pt from 9.4% in the previous year, as the improvement in the gross margin to 59.5% (58.9% in the previous year) was offset by the increase in the SG&A ratio to 51.1% (49.5% in the previous year). The Net Income margin based on Net Income attributable to owners of the parent was 11.3%; owing to the contribution of non-recurring gains, it did not decline to the same extent as the Operating Income margin.【Cash Quality】Cash and deposits totaled ¥2,170.5B, representing 23.6% of total assets. Together with investment securities of ¥744.5B, the Company maintains a substantial level of liquid assets.【Investment Efficiency】ROE was 2.3%, calculated based on Net Income attributable to owners of the parent after deducting income taxes and the portion attributable to non-controlling interests from Profit Before Tax. Total asset turnover remains low, constraining the level of ROE through asset efficiency.【Financial Soundness】The Equity Ratio was 70.9%, slightly down from 71.7% in the previous year. The Current Ratio of 208.3% and Quick Ratio of 201.8% indicate strong short-term payment capacity. Against total interest-bearing debt of approximately ¥1,130B, cash and deposits stood at ¥2,170.5B, indicating a financial structure close to a net cash position.

Cash Flow Analysis

As the Company did not disclose items from the Statement of Cash Flows, cash trends are analyzed based on changes in the Balance Sheet. Cash and deposits totaled ¥2,170.5B, down ¥140.2B (-6.1%) from ¥2,314.6B in the same period of the previous year. Meanwhile, property, plant and equipment increased 5.9% to ¥3,664.8B, of which construction in progress expanded to ¥1,162.1B (¥964.3B in the previous year, +20.5%), accumulating to 31.7% of total property, plant and equipment. Progress in capital expenditures appears to have been one factor behind the decline in cash and deposits. Short-term borrowings increased to ¥602.3B (¥492.3B in the previous year, +22.3%), suggesting that part of the investment funding may have been financed through short-term borrowing. Investment securities declined to ¥744.5B (¥803.9B in the previous year, -7.4%), consistent with the recognition of a ¥52.9B gain on the sale of investment securities. Overall, the structure suggests that investment activities were the main source of funding needs, supplemented by the use of cash and deposits and an increase in short-term borrowings.

Quality of Earnings

Against Ordinary Income of ¥156.5B, net extraordinary gains of ¥57.8B, comprising extraordinary gains of ¥66.4B (a ¥52.9B gain on the sale of investment securities and a ¥12.4B gain on the sale of fixed assets) less extraordinary losses of ¥8.6B, brought Profit Before Tax to ¥214.3B. After deducting income taxes of ¥64.7B (effective tax rate of 30.2%) and Net Income attributable to non-controlling interests of ¥13.7B, Net Income attributable to owners of the parent was ¥135.9B, representing a -13.1% divergence from Ordinary Income. This reflects the impact of extraordinary income and expenses in addition to the tax burden and deductions for non-controlling interests. Non-operating income of ¥67.5B represented 5.6% of revenue, primarily comprising a ¥23.2B foreign exchange gain, ¥17.7B in interest income, and ¥14.6B in dividend income, all of which were income sources outside the core business. Comprehensive income was ¥212.6B, of which ¥187.9B was attributable to owners of the parent, exceeding Net Income of ¥135.9B by ¥52B. The primary factor was the positive contribution from foreign currency translation adjustments on an owners-of-the-parent basis. The earnings structure is highly dependent on non-recurring and non-operating factors such as extraordinary gains and foreign exchange gains, warranting attention to potential reversals and volatility from the next period onward.

Earnings Forecast and Guidance

Progress in Q1 against the full-year forecast was 22.9% for Revenue (¥1,204.6B/¥5,270.0B), 22.9% for Operating Income (¥100.9B/¥440.0B), 27.2% for Ordinary Income (¥156.5B/¥575.0B), and 29.2% for Net Income attributable to owners of the parent (¥135.9B/¥465.0B). Compared with simple quarterly progress on an equal-quarter basis, with 25% as a guide, Revenue and Operating Income were slightly below the benchmark, while Ordinary Income and Net Income were slightly above it; none, however, represented a substantial deviation. The early progress at the Ordinary Income and Net Income stages was largely attributable to extraordinary gains and non-operating income recorded in Q1, and it cannot be determined from the current financial results whether non-recurring factors at a similar level will continue throughout the full year. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The Company forecasts an annual dividend of ¥72 per share. Based on forecast EPS of ¥174.21, the Payout Ratio is 41.3% (¥72/¥174.21). Cash and deposits of ¥2,170.5B exceed total interest-bearing debt of approximately ¥1,130B, indicating a financial structure close to a net cash position. Together with the strong financial foundation reflected in an Equity Ratio of 70.9%, the Company has secured financial support for its dividend.

Risk Factors

1. Short-term debt dependence and refinancing risk: Short-term borrowings increased to ¥602.3B (¥492.3B in the previous year, +22.3%). With long-term borrowings largely flat at ¥509.6B, the short-term proportion of interest-bearing debt has increased. Cash and deposits of ¥2,170.5B exceed total interest-bearing debt and provide a buffer, but trends in refinancing costs will be a monitoring point when the interest-rate environment changes.

2. Risk of delays in the operation of large-scale capital investments: Construction in progress expanded to ¥1,162.1B (¥964.3B in the previous year, +20.5%), representing 31.7% of property, plant and equipment. While no earnings contribution will arise until operations commence, depreciation expenses will increase after commencement, making the impact on asset efficiency and profit margins a key focus going forward.

3. Variability in profitability by region: The Japan segment recorded Operating Income of ¥56.6B (-35.6%), with its profit margin declining to 10.2%, while the Europe segment remained loss-making, with an Operating Loss of ¥1.8B (profit margin of -5.0%). The Americas’ high margin of 26.9% supports total Company profit, while the disparity in profitability among regions is widening.

Industry Benchmarks (For Reference; Compiled by the Company)

Profitability and Return

Both the Operating Income margin and Net Income margin are substantially above the industry median, placing the Company’s profitability among the highest in the industry.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, indicating that the pace of revenue growth is relatively moderate despite the Company’s high profitability.

Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Income margin was 8.4%, down from 9.4% in the previous year, while the increase in the SG&A ratio (+1.6pt) exerted pressure on costs. Meanwhile, final-period profit growth was supported by non-recurring and non-operating factors such as extraordinary gains of ¥66.4B and foreign exchange gains. A key characteristic is the high contribution of temporary factors to the composition of profit growth.

2. Full-year progress was 22.9% for Revenue, 22.9% for Operating Income, 27.2% for Ordinary Income, and 29.2% for Net Income, with Ordinary Income and Net Income slightly ahead of schedule. This lead was largely attributable to extraordinary gains recorded in Q1, and it cannot be determined from the current financial results alone whether factors at a similar level will continue throughout the full year.

3. While overseas operations—the Americas and Asia and Oceania—are driving higher revenue and profit, Japan continues to record lower revenue and profit, and Europe remains loss-making. Changes in the regional earnings structure are therefore a key structural focus that will determine the Company-wide profit margin going forward.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥2,072–¥2,192 at ±1% for the cost of equity, and ¥2,126–¥2,134 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference from the full-year forecast.
• As net assets include non-controlling interests, 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 through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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