RIKEN VITAMIN CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The current period resulted in higher revenue but lower operating income, as cost increases outpaced the benefits of price pass-through and sales growth, preventing top-line growth from translating into profit growth. Revenue increased to ¥251.3B (¥232.6B in the same period last year, +8.1%), while Operating Income declined to ¥22.5B (¥23.6B last year, -4.9%). Ordinary Income was ¥25.5B (+0.6%) and Net Income was ¥18.7B (+2.5%), supported by non-operating dividend income, foreign exchange gains, and extraordinary income. Gross margin declined to 32.2% (33.2% last year), while Operating Income margin fell to 8.9% (10.2% last year), with both metrics deteriorating.

Factors Affecting Performance

【Revenue】Revenue was ¥251.3B, representing a year-on-year increase of +8.1%. By segment, Overseas showed the highest growth at ¥60.3B (+18.3%), followed by Domestic Chemical Business and Others at ¥23.4B (+11.1%) and Domestic Food at ¥171.4B (+4.7%). Domestic Food accounted for 68.2% of the revenue mix, indicating that the Company remains highly dependent on this business. Although the growth rate of the Overseas Business exceeded that of the Company as a whole, its scale remains limited.

【Profit and Loss】Operating Income was ¥22.5B, down -4.9% year on year. In addition to Cost of Sales of ¥170.4B (gross margin of 32.2%, compared with 33.2% last year), Selling, General and Administrative Expenses increased to ¥58.4B (+9.0%), outpacing revenue growth (+8.1%), causing operating leverage to work in the opposite direction. Segment profit margins were 11.6% for Domestic Chemical Business and Others and 11.2% for Domestic Food, compared with 2.5% for Overseas, highlighting a structure in which profitability improvement in the Overseas Business will affect the Company-wide profit margin. Ordinary Income was supported by non-operating income, including dividend income of ¥2.1B and foreign exchange gains of ¥0.3B, and remained nearly flat year on year at +0.6%. Net Income increased by +2.5%, as extraordinary income of ¥1.7B, including a ¥1.0B gain on the sale of investment securities, was largely offset by extraordinary losses of ¥1.1B, including losses on the disposal of fixed assets. In summary, the Company achieved higher revenue but lower profit.

Segment Analysis

Domestic Food generated revenue of ¥171.4B (+4.7%) and Operating Income of ¥19.3B (-5.6%), with a profit margin of 11.2%, resulting in lower profit. Domestic Chemical Business and Others recorded revenue of ¥23.4B (+11.1%) and Operating Income of ¥2.7B (+0.4%), with a profit margin of 11.6%, achieving profit growth broadly in line with revenue growth. Overseas showed the highest growth at revenue of ¥60.3B (+18.3%), but profitability remained low, with Operating Income of ¥1.5B and a profit margin of 2.5%; the segment remains in the improvement phase from the nearly break-even level recorded in the same period last year. Domestic Food accounted for 68.2% of Company-wide revenue, and its profit decline was the primary cause of the decrease in Company-wide Operating Income.

Key Financial Metrics

【Profitability】Operating Income margin declined to 8.9% (10.2% last year) and Net Income margin fell to 7.4% (7.9% last year), while gross margin also narrowed to 32.2% (33.2% last year). 【Cash Flow Quality】Non-operating income of ¥3.5B represented approximately 1.4% of revenue. Although operating income from the core business remained the primary earnings driver, extraordinary income of ¥1.7B, including a ¥1.0B gain on the sale of investment securities, made a certain contribution to Net Income. 【Investment Efficiency】ROE was 2.2% and the Equity Ratio was 71.9% (71.6% last year), indicating that capital efficiency remains low, although the financial base is strong. 【Financial Soundness】Current assets of ¥652.9B versus current liabilities of ¥186.2B indicate a high current ratio. The Company held cash and deposits of ¥179.1B against long-term borrowings of ¥51.7B, indicating a high degree of funding stability.

Cash Flow Analysis

As the Cash Flow Statement has not been directly disclosed in the available data, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥179.1B, a decrease of -¥21.7B from ¥200.7B at the end of the previous fiscal year. This appears to have been affected by the accumulation of working capital resulting from increases in accounts receivable to ¥214.9B (+¥1.2B year on year) and inventories to ¥101.7B (+¥3.9B). Meanwhile, investment securities increased to ¥161.7B (+¥11.4B), suggesting that a portion of funds may have been allocated to investment assets. Seasonal payment factors, including a significant decrease in income taxes payable from the equivalent of ¥28.3B at the end of the previous fiscal year, also contributed to the decline in cash. Overall, the Company appears to be facing a situation in which the expansion of working capital accompanying business growth is putting pressure on cash on hand, with inventory and receivables turnover efficiency affecting cash generation capacity.

Earnings Quality

Current-period earnings were centered on Operating Income of ¥22.5B from the core business. Extraordinary income of ¥1.7B, including a ¥1.0B gain on the sale of investment securities, was largely offset by extraordinary losses of ¥1.1B, including a ¥0.4B loss on the disposal of fixed assets, resulting in a limited net impact on Net Income. Non-operating income of ¥3.5B represented approximately 1.4% of revenue, with dividend income of ¥2.1B and foreign exchange gains of ¥0.3B as its primary components, indicating a limited contribution from non-recurring factors. The difference between Ordinary Income of ¥25.5B and Net Income of ¥18.7B was primarily attributable to income taxes of ¥7.3B. The effective tax rate was approximately 28%, with no particularly abnormal figures observed. However, the upward trend in accounts receivable and inventories requires monitoring from an accruals perspective when evaluating earnings quality.

Earnings Forecast and Guidance

Progress toward the full-year forecasts of Revenue of ¥1000.0B, Operating Income of ¥71.0B, and Ordinary Income of ¥76.0B was 25.1% for Revenue, 31.7% for Operating Income, 33.5% for Ordinary Income, and 24.9% for Net Income in Q1. Revenue was progressing broadly in line with a standard pace, while Operating Income and Ordinary Income were ahead of plan. The Company has made no revisions to either its earnings forecast or dividend forecast. Trends in raw material and energy costs through the second half of the fiscal year, as well as profitability improvement in the Overseas Business, will be key to achieving the full-year plan.

Shareholder Returns

Under the Company’s plan, the annual dividend is ¥110 (when comparing with ¥55 in the previous year, the distinction between interim and year-end dividends should be noted). The Payout Ratio is calculated at approximately 42.6% based on forecast full-year EPS of ¥258.1. With an Equity Ratio of 71.9%, limited interest-bearing debt, and low financial leverage, the stability of dividend funding is high. No disclosure has been made regarding share repurchases, and shareholder returns are centered on dividends.

Risk Factors

1. Low profitability of the Overseas Business: Overseas has a high growth rate, with revenue of ¥60.3B (+18.3%), but its Operating Income margin of 2.5% is substantially below those of Domestic Food (11.2%) and Domestic Chemical Business and Others (11.6%), diluting the Company-wide margin.

2. Negative operating leverage: Selling, General and Administrative Expenses increased to ¥58.4B (+9.0%), outpacing revenue growth (+8.1%), and Operating Income margin declined to 8.9% (10.2% last year). If the situation in which cost increases outpace revenue growth continues, profitability may remain under downward pressure.

3. Accumulation of working capital: Accounts receivable of ¥214.9B and inventories of ¥101.7B are both trending upward, while cash and deposits decreased by -¥21.7B from the end of the previous fiscal year. Continued expansion of working capital could constrain cash generation capacity.

Industry Benchmark (For Reference; Based on Our Analysis)

Industry Benchmark (food_beverage)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceed the industry median, placing its profitability at a relatively high level within the industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, but does not reach the upper end of the industry IQR (10.3%), placing it at a level within the upper-tier group.

※Source: Based on our analysis

Key Points from the Results

1. The result of higher revenue but lower profit reflects the simultaneous progress of growth in the Overseas Business and cost pressure on the domestic businesses. Overseas revenue grew by +18.3%, but monetization remains only halfway complete, with a profit margin of 2.5%; the pace of future profitability improvement will determine the extent of recovery in the Company-wide margin.

2. The fact that Selling, General and Administrative Expenses growth (+9.0%) exceeded revenue growth (+8.1%) indicates that operating leverage worked in the opposite direction during the current period. Whether this trend continues in subsequent periods will be a key point when assessing the profit margin trend.

3. Progress against the earnings forecast was ahead of plan for Operating Income and Ordinary Income, and the Company has maintained its earnings forecast. Financial soundness remains high, with an Equity Ratio of 71.9% and a high current ratio, indicating that near-term funding risks are limited.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model 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: ¥2,794–¥2,955 at ±1% for the cost of equity, and ¥2,872–¥2,874 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets at the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

（Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / 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. The 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 with a professional as necessary.

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