■Future Outlook

1. Performance Outlook for the Fiscal Year Ending March 2025

The revised full-year financial estimates for the fiscal year ending March 2025, updated in November 2024, are projected revenue of 81,300 million yen (26.0% increase from the previous year), operating profit of 3,230 million yen (7.3% decrease), ordinary profit of 3,100 million yen (2.5% decrease), and net income attributable to the parent company's shareholders of 2,640 million yen (6.1% increase). While revenue is expected to grow, a decrease in operating profit and ordinary profit is anticipated. Increased revenue is mainly due to the full-year contribution from Shokukai, which joined the group in the fiscal year ending March 2024, along with the alleviation of supply issues in rice wholesale sales seen in the first half with the inflow of new rice. Sales of polished rice are expected to be robust, particularly in supermarkets, leading to an upward revision of revenue. Rice prices in the market remain high, creating a favorable situation for earnings, but the supply-demand relationship still leaves room for caution. Yamatahne Co., Ltd. seeks stable procurement based on the cooperative relationships established with producers. On the profit side, contributing factors to the decrease include the impact of contract cancellations by some shippers in the logistics division and increased investments for future infrastructure development in IT and human capital. In IT-related investments, in addition to the aforementioned security enhancement measures, there are plans to invest in the overhaul of the warehouse management system. Regarding human capital investment, in July 2024, shares with transfer restrictions were granted to employees, supporting employee motivation as incentives return to salaries and enhancing productivity. Net income is expected to be bolstered by special gains from the sale of some businesses, therefore the estimates remain unchanged. Despite some downward revisions to the performance forecasts, the company views that the main reason for this is forward-looking investments for future growth, thus not identifying any particular cause for concern.

2. Performance forecast by segment.

In the logistics business, the initial forecast projected revenue of 24,950 million yen (2.2% increase from the previous year) and segment profit of 2,250 million yen (2.3% decrease), which have been revised to revenue of 25,000 million yen (2.5% increase) and segment profit of 1,900 million yen (17.5% decrease). This revision is based on the continued strong contribution from new business contracts and international operations that were factors behind the revenue increase in the first half, along with expectations that operations at the Honmoku Terminal will significantly contribute to earnings. However, factors contributing to decreased profits include the impact of contract cancellations by some shippers, as well as increases in outsourcing costs, labor costs, and system investment costs. The company predicts that in the logistics industry, the amount of Consumer and Production-related cargo transport will remain sluggish due to sustained high resource prices and rising costs, with a decrease in Construction-related cargo transport, leading to a forecast that total transport volume will remain firm but below the previous year. The strategy is to steadily implement the delayed fee revisions in the second half to target revenue growth and secure profit margins to achieve plans.

In the food business, the initial plan of revenue of 45,100 million yen (32.1% increase from the previous year) and segment profit of 1,460 million yen (86.5% increase) has been revised to revenue of 49,800 million yen (45.9% increase) and segment profit of 1,250 million yen (59.6% increase). The contribution from Shokukai's performance remains fundamentally unchanged; additionally, further revenue growth is anticipated considering the pass-through of increased procurement prices in new rice sales. Shokukai's core school lunch business remains robust, while its deli business targeting retail and wholesale continues to show growth. As mentioned previously, the company is expanding sales channels by leveraging its established logistics and sales routes to wholesalers, with expected growth also in the second half. Stable procurement of polished rice will be the key to performance; the company's strong ties with existing producers are seen as a significant advantage for stabilizing procurement. While Shokukai's performance contribution is expected, the anticipated increase in procurement costs due to rice shortages has prompted a slight downward revision of the projected profit increase.

In the information business, the initial plan of revenue of 1,750 million yen (0.9% increase from the previous year) and segment profit of 60 million yen (45.0% decrease) has been revised to revenue of 1,800 million yen (3.7% increase) and segment profit of 70 million yen (35.8% decrease). The primary development and operation of the general-purpose machine platform is expected to remain steady in the second half, prompting slight upward revisions for both revenue and profits. In the IT industry, there is a strong trend towards transitioning from traditional large general-purpose systems to open systems and cloud solutions in response to the DX movement, leading to an unprecedented increase in demand for general-purpose system engineers required during the system transition. This strong demand is likely to maintain the company's steady performance due to its strengths in operating general-purpose machine platforms. On the profit side, it is expected that significant investments will be necessary for security measures in the fiscal year ending March 2025, but stability is anticipated thereafter.

In the real estate business, the initial forecast for revenue of 4,700 million yen (11.1% increase from the previous year) remains unchanged, but segment profit has been revised upward from 2,080 million yen (1.1% increase) to 2,150 million yen (4.5% increase). Similar to the first half, stable operations of existing Long Term Rentals and rental income from newly acquired properties are expected to contribute, though profit estimates have been slightly revised considering the results from the first half. In the Real Estate industry, a gradual recovery in demand for rental office buildings is anticipated. While significant supply of office buildings is predicted in major cities in Japan, rent is expected to remain firm due to demand from office relocation and expansion. Based on mid-to-long-term repair plans, efforts are being made to enhance property value and safety while utilizing renewable Energy to operate office buildings in an environmentally conscious manner, aiming to improve the quality and services of existing properties to maintain high occupancy rates. In June 2023, the company newly acquired Plaza Monzen-Nakacho, directly connected to the Tozai Line and Oedo Line Monzen-Nakacho Station. Although there will be an increase in depreciation expenses related to real estate, stable rental income and high occupancy rates are anticipated due to its favorable location, resulting in overall expected revenue and profit growth. Regarding the Echinjima development project, collaboration with external experts such as the Japan Research Institute is being promoted to formulate specific plans and schedules based on the Echinjima Development Promotion Office, with a plan to announce the 'Echinokajima Grand Vision' in May 2025. There are high expectations from Koto Ward, and discussions and dialogues are being held with the administration and local community to aim for attractive community development.

(Writer: FISCO analyst Tomoichi Murase)