NH Foods (2282) FY2027 Q1 Earnings Report

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Executive Summary

The quarter recorded higher revenue but lower profit, as the increase in revenue was insufficient to absorb rising costs. Revenue was ¥384.95B (+8.7% YoY), while Profit Before Tax was ¥18.52B (+0.6% YoY), remaining broadly flat. Net Income was ¥12.21B (-2.7% YoY), and quarterly profit attributable to owners of the parent was ¥10.77B (-5.6% YoY). The primary factors were higher revenue and profit in the Meat Business, offset by a decline in the Processed Foods Business margin and increased tax expenses and profit attributable to non-controlling interests, which pressured bottom-line profit.

Factors Affecting Performance

【Revenue】Revenue was ¥384.95B, representing an 8.7% YoY increase. The mainstay Meat Business Division grew to ¥263.98B (+11.5% YoY), driving the increase in revenue. The Processed Foods Business Division recorded ¥109.67B (+3.1% YoY), while the Sports and Entertainment Business Division recorded ¥11.85B (+14.1% YoY), with all segments posting higher revenue.

【Profit and Loss】Cost of sales was ¥319.11B, increasing faster than revenue and resulting in a higher cost-of-sales ratio than in the same period of the previous year. SG&A expenses were controlled at ¥48.60B (+2.3% YoY), improving the SG&A ratio to 12.6%; however, this was insufficient to absorb the increase in costs. Segment profit in the Processed Foods Business Division declined to ¥0.75B (-13.9% YoY), with the margin falling to 0.7%, representing a constraint on the company-wide margin. Meanwhile, the Meat Business Division posted profit of ¥15.26B (+20.4% YoY), and the Sports and Entertainment Business Division posted profit of ¥4.91B (+29.2% YoY; margin of 41.4%). Profit Before Tax was ¥18.52B (+0.6% YoY), broadly flat; however, profit attributable to owners of the parent declined to ¥10.77B (-5.6% YoY) due to corporate income taxes of ¥6.31B (+7.7% YoY) and an increase in profit attributable to non-controlling interests. In conclusion, the results reflect higher revenue but lower profit.

Segment Analysis

The Meat Business Division recorded revenue of ¥263.98B (68.6% of total), Operating Income of ¥15.26B (+20.4% YoY), and a margin of 5.8%. It was the Group’s core business in terms of both higher revenue and higher profit, as well as absolute profit contribution. The Sports and Entertainment Business Division is small in scale, with revenue of ¥11.85B (3.1% of total), but highly profitable, recording Operating Income of ¥4.91B (+29.2% YoY) and a margin of 41.4%. Following the organizational restructuring in April 2026, which placed the ballpark business under this division, it was clarified as a reportable segment. The Processed Foods Business Division posted higher revenue of ¥109.67B (28.5% of total), but Operating Income declined to ¥0.75B (-13.9% YoY), with the margin falling to 0.7%, confirming its structure’s susceptibility to raw material and packaging material costs.

Key Financial Indicators

【Profitability】The cost-of-sales ratio to revenue rose to 82.9% from the same period of the previous year, compressing the gross margin. The SG&A ratio improved to 12.6% from 13.4% in the same period of the previous year, indicating progress in fixed-cost efficiency. However, the increase in costs could not be absorbed, and the profit attributable to owners of the parent margin contracted to 2.8% from 3.2% in the same period of the previous year. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.96B, a significant decline from ¥2.18B in the same period of the previous year, representing only 0.18x profit attributable to owners of the parent of ¥10.77B. The primary factors were a ¥20.64B increase in inventories and payment of ¥9.998B in corporate income taxes and other taxes. 【Investment Efficiency】Annualized ROE was 8.9%. 【Financial Soundness】The Equity Ratio declined slightly to 52.4% from 53.8% in the same period of the previous year, but remained at a high level. Current assets of ¥462.33B compared with current liabilities of ¥270.96B resulted in a current ratio of approximately 170.6%, indicating sound short-term liquidity.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥1.96B, a significant decline from ¥2.18B in the same period of the previous year, widening the gap with Net Income. The primary factor was a ¥20.64B increase in inventories, while payment of ¥9.998B in corporate income taxes and other taxes further pressured cash flow. Although an ¥8.22B increase in trade payables partially offset these factors, investing cash flow represented an outflow of ¥10.59B, mainly comprising ¥10.51B for the acquisition of fixed assets, resulting in negative free cash flow of ¥8.63B. Financing cash flow was an outflow of ¥2.77B. Cash dividends of ¥15.17B and ¥10.00B in share repurchases were funded through a net increase of ¥25.89B in short-term borrowings. Consequently, cash and cash equivalents declined from ¥68.68B at the beginning of the period to ¥58.32B, confirming that shareholder returns could not be covered solely by internally generated funds during the quarter.

Earnings Quality

Profit Before Tax of ¥18.52B was broadly flat at +0.6% YoY. However, profit attributable to owners of the parent declined to ¥10.77B (-5.6% YoY) due to an increase in corporate income taxes and other taxes of ¥6.31B and an increase in profit attributable to non-controlling interests. Other income of ¥4.08B and other expenses of ¥1.95B represented 1.1% and 0.5% of revenue, respectively, indicating limited reliance on non-operating and non-recurring items. At the same time, the fact that OCF was substantially below Net Income is an important observation in assessing earnings quality; the buildup of inventories and payment of corporate income taxes and other taxes temporarily weakened cash conversion. Total comprehensive income of ¥14.65B exceeded profit attributable to owners of the parent of ¥10.77B, with other comprehensive income, including foreign currency translation adjustments for foreign operations of ¥2.53B, serving as a contributing factor.

Earnings Forecasts and Guidance

Progress against the full-year earnings forecast was 25.7% for revenue, calculated as ¥384.95B ÷ ¥1,500.00B, and 28.3% for profit attributable to owners of the parent, calculated as ¥10.77B ÷ ¥38.00B based on EPS of ¥403.68 assuming the forecast amount of ¥38.0B. Both exceeded the simple progress benchmark of 25%, indicating generally steady progress as of Q1. However, no revisions have been made to the earnings forecast, and the decline in the Processed Foods Business margin and weak cash conversion resulting from the increase in inventories will require close monitoring in assessing the achievement of the full-year outlook.

Shareholder Returns

The full-year dividend forecast is ¥180 per share, implying a Payout Ratio of 44.6% based on forecast EPS of ¥403.68. Dividend payments during the quarter were ¥15.17B, and total shareholder returns, including ¥10.00B in share repurchases, amounted to ¥25.17B. The quarterly Total Return Ratio was high at 233.7% relative to profit attributable to owners of the parent of ¥10.77B, with returns exceeding free cash flow of negative ¥8.63B and being funded through an increase in short-term borrowings. During the period, the company also retired ¥29.99B of treasury shares, reducing the book balance of treasury shares to ¥1.73B. This was a transfer within equity and does not indicate an improvement in cash-generating capacity. No revision has been made to the dividend forecast.

Risk Factors

1. Raw Material and Livestock Costs and Pass-Through Risk: The cost-of-sales ratio rose to 82.9%, and the gross margin declined from the same period of the previous year. If fluctuations in feed, livestock products, packaging materials, and foreign exchange rates continue, margins—particularly in the Processed Foods Business—may remain under pressure.

2. Weak Cash Conversion: OCF was ¥1.96B, representing only 0.18x profit attributable to owners of the parent of ¥10.77B. The primary factors were a ¥20.64B increase in inventories and payment of ¥9.998B in corporate income taxes and other taxes. Whether inventories are converted into sales and profit will be a key focus going forward.

3. Increasing Dependence on Short-Term Funding: Short-term borrowings increased by ¥25.89B on a net basis, and current interest-bearing liabilities rose to ¥72.71B. Dividends and share repurchases were conducted despite negative free cash flow of ¥8.63B, with returns funded through short-term borrowings. If this structure continues, sensitivity to changes in interest rates and refinancing conditions will increase.

Industry Benchmark (For Reference; Based on Our Research)

Profitability and Returns

The Net Profit Margin was slightly below the industry median, placing the company at a mid-range level in terms of cost absorption capacity.

Growth and Capital Efficiency

The Revenue Growth Rate exceeded the industry median, representing high growth positioned in the upper range of the IQR.

※Source: Based on our research

Key Points from the Earnings Results

1. The Meat Business Division continued to achieve double-digit growth in both revenue and profit, driving performance as the Group’s core business and accounting for more than 70% of segment profit. Meanwhile, the Processed Foods Business Division’s low margin of 0.7% remains a structural constraint on company-wide margin improvement.

2. The OCF-to-Net Income ratio was low at 0.18x, confirming temporary cash outflows resulting from the increase in inventories and payment of corporate income taxes and other taxes. Whether the inventory increase and weak cash flow continue over multiple quarters will be an important point in assessing earnings quality.

3. Full-year progress was 25.7% for revenue and 28.3% for profit attributable to owners of the parent, both exceeding the standard 25% pace. However, total shareholder returns during the quarter substantially exceeded free cash flow, making the balance between cash-generating capacity and the funding source for returns an area to monitor going forward.

Theoretical Share Price (For Reference)

Sensitivity: ¥5,252–¥5,556 for ±1% in the Cost of Equity, and ¥5,391–¥5,407 for ±0.1 in ω.

Notes:

• Because 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; therefore, there is a timing gap relative to the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type; explicit five-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these figures do not forecast or guarantee future share prices and do not constitute predictions of market prices or recommendations of any specific investment action.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by our company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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