ORION BREWERIES,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1 of FY2027, revenue increased but earnings declined, highlighting a structure in which rising costs exerted pressure on profits despite growth in the core Alcoholic Beverages and Soft Drinks Business. Revenue was ¥7.19B (+2.0% YoY), Operating Income was ¥0.95B (down 11.4%), Ordinary Income was ¥0.97B (down 10.9%), and Net Income attributable to owners of the parent was ¥0.65B (down 56.1%). The significant decline in Net Income was primarily attributable to the inclusion of a one-time ¥0.84B gain on the sale of fixed assets in the same period of the previous year; the absence of this gain affected the current period.

Factors Affecting Earnings

【Revenue】Revenue was ¥7.19B, representing a 2.0% YoY increase. The Alcoholic Beverages and Soft Drinks Business generated ¥6.03B (up 5.0%) and accounted for 83.8% of consolidated revenue, driving growth. Meanwhile, the Tourism and Hotel Business declined 11.0% to ¥1.16B, reflecting fluctuations in travel demand.

【Profit and Loss】Operating Income was ¥0.95B (down 11.4%), and the Operating Margin was 13.3%, down 2.0pt from 15.3% in the same period of the previous year. The Gross Margin declined to 50.7% from 52.3%, a decrease of approximately 1.6pt, primarily because Cost of Sales increased 5.4% YoY, exceeding the growth rate of Revenue. SG&A expenses also increased 3.3%, raising the SG&A ratio to 37.5%. Ordinary Income was ¥0.97B (down 10.9%). Net Income was ¥0.65B (down 56.1%); however, Net Income in the same period of the previous year included a ¥0.84B gain on the sale of fixed assets. As this one-time factor was absent in the current period, the earnings composition was closer to that of the core business. Revenue increased, but earnings declined.

Segment Analysis

The Alcoholic Beverages and Soft Drinks Business reported Revenue of ¥6.03B (up 5.0% YoY), Operating Income of ¥0.92B (down 10.8%), and a Profit Margin of 15.3% (18.0% in the previous year). Despite higher revenue, the Profit Margin declined by approximately 2.7pt due to rising costs. This is the core business, accounting for 96.3% of total segment profit, and its profitability has a decisive impact on consolidated performance. The Tourism and Hotel Business reported Revenue of ¥1.16B (down 11.0%), Operating Income of ¥0.03B (down 24.4%), and a Profit Margin of 2.9% (3.4% in the previous year), reflecting declines in both revenue and earnings.

Key Financial Indicators

【Profitability】The Operating Margin was 13.3% and the Net Profit Margin was 9.1%, both down from the same period of the previous year (15.3% and 21.1%, respectively); the latter decline was primarily due to the absence of a one-time extraordinary gain. The Gross Margin was 50.7%, down approximately 1.6pt YoY.【Cash Quality】Extraordinary gains and losses were approximately neutral in the current period (¥0.0002B gain on sale and ¥0.0004B loss on disposal), and Net Income largely reflected recurring earnings. Dividend income of ¥0.008B accounted for the majority of Non-operating Income of ¥0.012B, limiting its impact on Ordinary Income.【Investment Efficiency】Annualized ROE was 14.7%, remaining at a favorable level. Although the Total Asset Turnover Ratio was relatively low, the high Net Profit Margin and financial leverage supported ROE.【Financial Soundness】The Equity Ratio was 41.1%, while Long-term Debt amounted to ¥15.62B, representing 36.2% of Total Assets. Interest coverage was high, with Operating Income of ¥0.95B compared with Interest Expense of ¥0.08B, indicating ample debt-servicing capacity.

Cash Flow Analysis

Although a standalone Cash Flow Statement was not disclosed, an analysis of cash movements based on changes in the Balance Sheet shows that Cash and Deposits decreased by ¥2.25B YoY to ¥8.26B. Inventories increased 19.9% YoY to ¥1.63B, while Accounts Receivable rose 16.5% to ¥2.90B, indicating an increase in working capital exceeding the 2.0% Revenue growth rate. Accounts Payable increased 10.4% to ¥1.22B, insufficient to fully offset the increase in working capital. Construction in Progress increased significantly by ¥0.85B YoY (+305.0%), suggesting that ongoing capital expenditures were one use of funds. Net Assets decreased by ¥0.76B YoY, with declines in Retained Earnings and the acquisition of Treasury Stock (△¥0.49B) identified as sources of cash outflow.

Earnings Quality

Current-period Net Income of ¥0.65B was close to the level of Ordinary Income of ¥0.97B after reflecting corporate income taxes, as extraordinary gains and losses were approximately neutral (¥0.0002B gain on sale and ¥0.0004B loss on disposal). Earnings quality can therefore be assessed as reflecting recurring core business performance. Meanwhile, Net Income of ¥1.49B in the same period of the previous year included the one-time ¥0.84B gain on the sale of fixed assets; accordingly, the year-on-year comparison should not be interpreted as a simple deterioration. Non-operating Income was ¥0.12B, primarily comprising dividend income of ¥0.08B, equivalent to 1.6% of Revenue and not large enough to materially distort an assessment of the core business. As increases in Inventories and Accounts Receivable exceeded Revenue growth, attention should be paid from an accruals perspective to the gap between earnings and cash-generation capacity.

Earnings Forecast and Guidance

The full-year company forecasts are Revenue of ¥31.12B (+4.7% YoY), Operating Income of ¥4.35B (up 0.9%), and Ordinary Income of ¥4.19B (up 1.6%). Q1 progress rates were 23.1% for Revenue, 21.9% for Operating Income, and 23.1% for Ordinary Income, all below the simple one-quarter benchmark of 25%. In particular, the Operating Income progress rate was 3.1pt below the benchmark, meaning that accelerating Revenue growth and improving the Gross Margin in the second half will be necessary to achieve the full-year plan. No revisions have been made to the earnings forecasts.

Shareholder Returns

The full-year dividend forecast is ¥34.0 per share, implying a Payout Ratio of approximately 50.9% based on the full-year EPS forecast of ¥66.83. This Payout Ratio represents dividends relative to Net Income only and differs from the Total Return Ratio, which includes share repurchases. The Company repurchased Treasury Stock in the same period of the previous year (Treasury Stock △¥0.49B), and capital policy developments will remain a focus in the current period. The 50.9% Payout Ratio is below the 60% threshold generally considered an indicator of sustainability, while the financial base—including Cash and Deposits of ¥8.26B and a Current Ratio of 207.8%—supports dividend stability. No revisions have been made to the dividend forecast.

Risk Factors

1. Risk of concentration of profits in the core business: As the Alcoholic Beverages and Soft Drinks Business accounts for 96.3% of segment profit, the consolidated results are highly sensitive to sales volumes, customer acceptance of price revisions, and cost trends in this business.

2. Risk of margin pressure from rising costs: Cost of Sales increased 5.4% YoY, exceeding the 2.0% Revenue growth rate, while the Gross Margin declined approximately 1.6pt YoY. The Company may not have been able to fully offset increases in raw materials, packaging materials, energy, and logistics costs through price pass-through.

3. Risk of demand fluctuations in the Tourism and Hotel Business: The business reported an 11.0% decline in Revenue and a 24.4% decline in Operating Income, and is exposed to earnings volatility stemming from travel demand, accommodation prices, and supply trends among competing facilities.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (food_beverage)

Profitability and Returns

The Company’s profitability is substantially above the industry median and ranks at a high level within the food and beverage industry.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, positioning the Company as growing more slowly than the industry average.

※Source: Company compilation

Key Points from the Earnings Results

1. The core Alcoholic Beverages and Soft Drinks Business maintained Revenue growth of +5.0%, but its segment Profit Margin declined approximately 2.7pt, highlighting the structural challenge of converting Revenue growth into earnings.

2. The 56.1% decline in Net Income was primarily due to the absence of the one-time ¥0.84B gain on the sale of fixed assets recognized in the same period of the previous year. Current-period earnings have limited dependence on one-time factors and are closer to recurring earnings performance.

3. Q1 progress rates against the full-year plan were 23.1% for Revenue and 21.9% for Operating Income, both below the standard progress benchmark of 25%. Trends in second-half Revenue acceleration and improvement in the Cost of Sales ratio will be key points in assessing earnings quality.

Theoretical Share Price (Reference Value)

Sensitivity: ¥491–¥519 at Cost of Equity ±1%, and ¥503–¥508 at ω±0.1.

Notes:

• Net Assets as of the quarter-end 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 (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated from publicly disclosed data only; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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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. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, with consultation with professionals as necessary.

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