■Lacto Japan ＜3139＞ Performance Trends

1. Summary of financial results for the 2nd quarter of the fiscal year ending 2024/11

As for consolidated results for the second quarter of the fiscal year ending 2024/11, sales increased 5.1% from the same period last year to 84,560 million yen, operating profit increased 42.6% to 2,432 million yen, ordinary profit increased 68.1% to 2,260 million yen, and quarterly net income attributable to parent company shareholders increased 79.3% to 1,654 million yen. It hit record high sales and profits for the second quarter. The initial forecast for the second quarter was revised upward in 2024/4, but both sales and profit exceeded the revised forecast. After the transition of the novel coronavirus infection to class 5 infectious diseases, domestic economic activity normalized, and the food/leisure industry boomed due to an increase in inbound consumption, etc., and sales volume in all domestic business divisions increased, centering on commercial demand. Additionally, the sales volume of the cheese manufacturing and sales division of the Asian business also increased. Inventory levels of domestically produced skimmed milk powder declined due to measures against excess inventory and suppression of raw milk production, and the fact that it remained at a stable level in the second quarter also led to a recovery in demand for imported preparations.

In terms of profit and loss, each profit greatly exceeded the same period last year. Demand for souvenirs, ice cream, chocolate, etc. increased in the dairy ingredients and cheese sector, and sales of preparations containing butter and milk fat with high profit margins increased. Also, in the dairy ingredients sales division of the Asian business, the ratio of products appealing prices declined and the product mix improved, and in the same cheese manufacturing and sales division, raw cheese prices declined and the cost ratio improved. Due to these factors, gross profit margin was 6.0%, 1.0 point above the same period last year, and gross profit increased 26.8% from the same period last year. Meanwhile, SG&A expenses increased 15.0% from the same period due to an increase in volume of goods, an increase in domestic logistics expenses affected by rising energy prices, an increase in labor costs due to wage increases, etc., and an increase in business-related expenses such as travel expenses due to normalization of sales activities. This was absorbed by an increase in gross profit, and ordinary profit increased by about 1.7 times the same period last year. Ordinary income was 2,285 million yen, up 61.3% from the same period after the adjustment for exchange effects that did not correspond to the cost of sales during the period.

2. Trends by business sector

(1) Dairy Ingredients and Cheese Division

Since the restaurant and leisure industry boomed due to an increase in inbound consumption, etc., demand for raw dairy products for commercial use recovered. Above all, sales of butter, whole milk powder, lactose, etc. used as raw materials for souvenirs, ice cream, chocolate, etc. were strong. The inventory level of domestically produced skimmed milk powder declined due to excessive inventory countermeasure operations involving the public and private sectors and suppression of raw milk production, and the fact that it remained in the 0.05 million ton range, and the fact that the international market price of dairy products remained at a steady level despite the depreciation of the yen and being able to maintain price competitiveness also led to a recovery in demand for imported preparations. Sales of cheese for commercial use were also strong, and sales volume for the entire division was 91,099 tons, up 6.8% from the same period last year. Sales increased 3.8% from the same period to 58,932 million yen as raw material prices settled down. In terms of profit and loss, sales of milk ingredients with high profit margins, such as butter and milk powder containing milk fat, were strong, so the product mix improved, and profit margins also improved.

(2) Meat Food Division

Demand for commercial use recovered due to the boom in the restaurant and leisure industry. As the market price of European pork rises due to the effects of African swine fever, etc., North American pork, which is the company's main product, has a price advantage, and in addition to a steady increase in sales volume, sales volume of processed foods, mainly chicken and processed chicken products, also increased. The overall sales volume of the division was 15,843 tons, an increase of 14.2% over the same period last year. Also, since the unit sales price of pork remained high due to the effects of high market prices and the depreciation of yen, division sales increased 17.1% from 10,538 million yen, but profit margins only improved slightly.

(3) Functional Food Ingredients Division

Sales of functional food ingredients, which aim to expand business as a pillar of new growth, continued to be strong. In particular, sales of whey protein, which is a raw material for protein products, are strong. In Japan, “high protein” is a development theme not only for sports nutrition, but also for foods in general, and the market is expanding to general consumers such as health-conscious women and the elderly. Sales were 1,608 million yen, up 1.4% from the same period last year, and sales volume was 1,267 tons, up 12.0% from the same period. Sales volume and sales volume increased steadily from the 1st quarter to the 2nd quarter, but during the 2nd quarter accounting period, temporary refraining from purchases occurred due to depreciation of yen and price increases associated with high raw materials, and both sales volume and sales volume fell below the same period last year.

(Written by FISCO Visiting Analyst Matsumoto Akihiro)