Earnings Call: Q4 2026

May 11, 2026

Summary

FY2026 sales, operating income and EBITDA set records, while net income was flat. FY2027 guidance targets further records, with My/Mochi growth offset in part by acquisition costs and strategic investment.

Hello everyone. I am Shinya Mori, Representative Director, President, and COO of Morinaga & Co., Ltd. Thank you very much for taking the time to join us today despite your busy schedule. One year has passed since I assumed the position of president. Over the past year, we have received many comments, suggestions, and valuable advice from analysts and investors. I would like to take this opportunity to thank you again. We look forward to continuing to receive your candid feedback. I would now like to provide a summary of our results for the fiscal year ended March 31, 2026, and our outlook for the future. The flow of today's presentation will be as follows: results for the fiscal year ended March 31, 2026, forecast for the fiscal year ending March 31, 2027, and progress and prospects of the 2024 Medium-Term Business Plan. First, let me talk about the results for the fiscal year ended March 31, 2026. Here is an overall view of our performance. Net sales totaled JPY 236.6 billion, up JPY 7.7 billion or 103.4% from the previous year, marking a record high for the fifth consecutive year. The results are mostly in line with the forecasts announced in November 2025. Operating income stood at JPY 22.3 billion, an increase of JPY 1.1 billion on the previous year. This was also in line with our forecast and marked a new record high for the second consecutive year. EBITDA was JPY 32.5 billion, also a record high. On the other hand, net income was JPY 17.7 billion, the same as the previous year. Although financial measures such as the sale of policy shareholdings were implemented as planned, the company fell short of its earnings forecast by JPY 0.5 billion due to an increase in income taxes. The next factor is the increase or decrease in operating profit. Factors contributing to a decrease in income are shown in red, and factors contributing to an increase in income are shown in blue. Raw material related in the four domestic businesses had a negative impact of approximately JPY 2.9 billion from the previous year. For the full year, the increase in cacao-related raw material costs had a significant impact. In Q4, in addition to the stabilization of the cacao market, the effects of measures to improve profitability, such as cost reductions due to raw material substitutions, were steadily realized, and the profit turned in the direction of higher income. There was also an increase in costs associated with intangible asset investments for the future, such as increased logistics costs, human resource investments, and DX investments. As for the U.S. business, the aggressive investment in selling expenses in response to the severe competitive environment, in addition to the impact of tariffs, contributed to a significant decrease in profits. Although these factors resulted in a total decrease in profit of approximately JPY 9.1 billion, we were able to absorb this by increasing sales, mainly in the confectionery and foodstuffs business and the frozen desserts business, and by the effects of price revisions and cost-cutting efforts, resulting in an overall increase in profit of JPY 1.1 billion. This slide shows sales and operating income results for the business segment. In terms of sales, the confectionery and foodstuffs business, the frozen desserts business, and the overseas business, excluding the U.S., grew, driving overall sales. On the other hand, the in- Business, the U.S. business, and the direct marketing business were down from the previous fiscal year, resulting in softer results. Operating income in the confectionery and foodstuffs business achieved a significant increase, doubling from the previous year due to the effects of price revisions and cost reductions. The operating margin was also 9.2%, an improvement of 4.6 percentage points from the previous year. In the direct marketing business, despite the difficult business environment, profits increased as a result of controlling advertising expenses. On the other hand, the in business and the U.S. business were affected by changes in the environment, resulting in a decrease in profits. Morinaga Shoji Co., Ltd., a group company in the food wholesaling business, reported a significant decrease in profit in the fiscal year ended March 2026, due to rising costs and struggling sales volume. Partly as a reaction to a significant increase in profit in the fiscal year ended March 2025, due to the effect of price revisions. To exclude the effect of unification of fiscal periods of overseas subsidiaries, this slide shows comparisons with the previous year on a local currency basis for the U.S. business. Excluding the impact of the change in fiscal year-end, sales were 98.7%, which was lower than in the same month of the previous year. I would like to explain the details by business segment later. I will now explain our plans for the fiscal year ending March 2027. In this slide, we will explain the assumptions underlying our earnings forecast for the financial year ending March 2027. Regarding raw materials, we assume that the cacao market, which had a significant impact until the previous fiscal year, will remain calm based on the current market level. Compared to the previous year, we assumed a positive contribution to earnings. On the other hand, we have factored in a certain degree of higher packaging-related costs, energy costs, and logistics costs due to the situation in the Middle East in our earnings forecast, and we expect the total cost of raw materials to go in the direction of lower profits. We will continue to closely monitor the future impact, including foreign exchange trends. Regarding the domestic business, although the profitability improvement measures that we have been working on have shown some results, we recognize that we must continue to be cautious about the risk of rising costs. There is no change in our policy to continue to take flexible actions, including price, product planning, and cost optimization while considering consumption trends, and to promote management with an emphasis on profitability. The results of My/Mochi, acquired through M&A, will be included in the consolidated earnings forecast from April 2026. Although the company is expected to contribute to higher sales and profits on a revenue and EBITDA basis, the amortization of goodwill and acquisition, PMI-related expenses, are expected to have a negative impact on the operating income base in the short term. Here is the consolidated forecast for the fiscal year ending March 31, 2027. We plan to achieve revenue of ¥257 billion, an increase of ¥20.4 billion on the previous fiscal year, representing 108.6% of the previous figure, and to set a record high for the sixth consecutive fiscal year. The consolidation of My/Mochi is expected to contribute significantly to sales growth. Operating income is expected to reach ¥22.8 billion, an increase of ¥500 million on the previous year, and we anticipate this will also set a record high. We plan to secure an increase in profit while factoring in the impact of changes in the external environment, M&A-related expenses related to My/Mochi, amortization of goodwill, and other profit and loss expenses. EBITDA is expected to reach JPY 36.1 billion, an increase of JPY 3.6 billion on the previous period, and is forecast to remain at a record high. Next, I will explain the factors contributing to the increase or decrease in our operating income forecast for the current fiscal year. Regarding raw material-related costs, while we expect a positive impact from the stabilization of the cacao market, we have factored in higher packaging and energy costs due to the situation in the Middle East and expect a total cost increase of approximately JPY 1.6 billion. In addition, the total factor for the decrease in profit is expected to be approximately JPY 6.6 billion due to an increase in intangible investment for future growth, such as investment in human resources, DX investment, and R&D, as well as depreciation expenses associated with the operation of the second plant in the U.S. and the impact of amortization of goodwill of My/Mochi. The company plans to counteract these negative factors by implementing flexible price revisions and increasing sales to secure an increase in profits. Here is the summary by business segment for the fiscal year ending March 31, 2027. For all major domestic businesses, we expect an increase in both profit and revenue. On the other hand, we plan to increase sales and decrease profits in our overseas business as we continue to make strategic investments to accelerate future growth. Excluding the effect of consolidation of My/Mochi, we plan to achieve approximately 110% of net sales in the U.S. on a local currency basis compared to the previous year. I will now explain the progress and outlook for the 2024 Medium-Term Business Plan. This fiscal year marks the final year of the 2024 Medium-Term Business Plan, the second stage toward the realization of the 2030 Vision. Under the theme of establishing a trajectory for dramatic growth, the company has been pursuing initiatives with a view to medium to long-term growth. I will explain the progress made towards our revenue and operating income targets under the 2024 Medium-Term Business Plan. For reference, the figures on an organic basis, excluding My/Mochi, are also shown in the gray box. First, regarding the red highlighted section. The first two years of the 2024 Medium-Term Business Plan, we were able to make progress in sales, exceeding the CAGR toward the Medium-Term Business Plan target. On the other hand, operating income and operating income margin fell slightly short of the midterm targets. However, even in a severe external environment with higher than expected raw material costs, we were able to achieve both top-line growth and profit growth while continuing to make intangible investments, such as human resource and DX investments with a view to medium to long-term growth. Next, the blue highlighted section. The forecast for the current fiscal year, ending March 31, 2027, includes the results of My/Mochi, which will be consolidated from April. As you can see here, on an organic growth basis, gray box sections, both sales and operating income are expected to progress in line with the midterm targets. On the other hand, the figures including My/Mochi exceed the sales and growth rate, but operating income is expected to fall short of the mid-range targets. This is due to the short-term profit and loss impact of the M&A. However, from the perspective in establishing a growth trajectory toward 2030, at this very moment, just past the turnaround point to 2030, we believe that this investment is of great strategic significance, and we are taking advantage of the growth opportunities in a flexible manner. Here are the changes in KPIs during the 2024 MTBP period. As for the overseas sales ratio, growth is expected to be positive on the back of the consolidation effect of My/Mochi, which we have made a management decision for step change increase and is expected to exceed the 2024 MTBP target. On the other hand, the ratio of sales in the focus domain has not grown sufficiently, and we recognize this as an issue to be addressed. We believe it is necessary to update our tactics, such as selection and concentration of growth opportunities, considering the changing environment. Although ROE and ROIC are in line with targets on an organic basis, excluding the impact of My/Mochi, overall ROE and ROIC are expected to fall short of targets due to the impact of growth investments resulting from the My/Mochi M&A. This is the result of management decisions that prioritize strategic growth investments, and we will continue to manage from a medium-term perspective based on our financial strategy. In anticipation of the business portfolio transformation, we have set ROIC targets for each of our major businesses and disclose progress in achieving them. In the graph on the left, the vertical axis is growth potential, net sales CAGR, and the horizontal axis is return on capital, ROIC. The figures in the table on the right show actual results for FY 2025 and targets for FY 2026. The graph on the left shows the actual results for FY 2023, actual results for FY 2025, and projected results for FY 2026 for each business. The confectionery and foodstuffs business and the frozen desserts business have been cut out and are shown expanded within the dotted line box. Except for the frozen desserts business, we have not fully realized growth in our priority areas, and we recognize this as a challenge. While our basic policy and approach to medium to long-term growth remain unchanged, we are considering both a short-term review of tactics and a medium-term restructuring of strategies. We will then proceed to examine our ideal business portfolio, including a review of priority areas for the 2027 Medium-Term Business Plan and beyond. On the other hand, for the confectionery and foodstuffs business, we were able to achieve both sales growth and improved capital profitability through progressive phased asset-light, in addition to price revisions and cost reduction efforts. ROIC, which was recognized as a challenge, has progressed well beyond the 2024 MTBP target, which is an important achievement. On the other hand, we recognize that the tide is turning against price revisions, and we are continuing to examine ways to improve the permanent capital profitability of the confectionery and foodstuffs business, including fundamental structural reforms from a medium to long-term perspective for the 2027 Medium-Term Business Plan and beyond, without letting up at this point. Our confectionery and foodstuffs business has a high ratio of self-manufactured plants, which enables us to provide unique technological value that other companies cannot imitate. On the other hand, our business structure has a high ratio of fixed costs, which puts pressure on earnings when the top line is not growing. That is why, in considering structural reforms, we conduct management discussions from multiple perspectives, including quantitative evaluation of earning power from a long-term perspective for brands and production bases connected to those brands, as well as from the perspective of intangible asset values such as brands. In our discussions, the optimal combination of an aggressive growth strategy that does not lead to a contractionary equilibrium and the reorganization of brands and bases is a key issue, and the accompanying reallocation of management resources is also essential. We are considering targeting not only confectionery and foodstuffs business, but also the entire domestic business. We are still in the middle of discussions on how far to go or not to go in terms of maximum effect, and we would like to accelerate our internal discussions going forward. I will now explain the status of our major business and our approach for FY 2026. First, I will explain the confectionery and foodstuffs business in the basic domain. During the two years of the 2024 MTBP, we were able to make considerable progress in improving profitability, even in a challenging environment of rising costs and price revisions, with a sales CAGR of +6% and an operating profit margin improvement of approximately 4 percentage points. Going forward, we will further promote a shift to the candy category, which has both high profitability and growth potential. The biggest driver in the last quarter's growth was Ramune, thanks to the successful development of measures that allowed customers to eat in a variety of settings. We will further expand this learning and implement more well-developed marketing initiatives. While the HI-CHEW brand in particular faces challenges in terms of growth, our sub-brands such as HI-CHEW Mini, HI-CHEW Premium, and Suppa Hi-Chew each offer distinctive products. We therefore intend to expand the reach of the brand by implementing marketing campaigns and initiatives that clearly define the role of each sub-brand. Considering the cross-purchase phenomenon between soft candy and gummies, we will take a broader view of the overall candy market and update our strategy to a more detailed one by introducing new products that will expand the possibilities of candy to a larger scale. Since there has been significant growth for Ramune, we will further increase awareness of the value of glucose and promote the product in a variety of eating situations through new products and new functional appeals. In addition, we will take one step further to improve profitability, mainly in the chocolate category, taking into account changes in the business environment after the price revision, and we will build a well-prioritized strategy for the future while keeping a close eye on the structural reform discussion I mentioned earlier in order to make better use of the effects of these short-term measures. I will explain the status of in Jelly. The brand concept of in Jelly is the number one brand of food that supports health of mind and body centered on sports. The basic policy of the LTV strategy has been to accompany all people who are positively active and to expand the scenes of consumption. On the other hand, the results for the last two years have been grim, with a sales CAGR of -2%, and purchase rate and frontage also down 2.2 percentage points. We believe that the background is a combination of external environmental factors, such as a drop in sports demand in summer due to the extremely hot summer, and the expansion of the market share of low-price PB products, as well as internal factors, such as a structure highly dependent on sports applications and a lack of growth engines other than in Jelly Energy with glucose. Last fiscal year, we strengthened advertising and sales promotion to capture summer demand, including the launch of commercials promoting everyday summer life occasions, which we had not done before, and sponsorship of the Tokyo World Athletics Championships. But unfortunately, this did not lead to results. In other words, we recognize that we have not been able to utilize the brand power of in, which has an overwhelming number one market share to expand the usage scenarios and customer base under the external environmental changes of the extreme heat and the severe competitive environment. Considering this situation, we will work with the approach of pursuing a game change in the medium to long term while keeping the basic policy unchanged and reviewing tactics in a flexible manner. in Jelly's greatest weapon is its high brand recall and the resulting high customer eating experience. We believe that the fact that many of our customers have left in Jelly during a changing environment is, on the other hand, an opportunity. Brand strength is the very trust of customers, and we must leverage this trust to first reacquire customers who have currently left us. On top of that, as a natural mission of the market leader, we will aim to return to growth by inviting new customers into the jelly beverage market. Extreme heat, inflation, and other factors are key factors in changing customer behavior. This environmental change should cause customers to have many new problems. To capture this growth opportunity, under the new tagline, "in my life," in which the in brand accompanies various scenes of daily life, the company will strengthen the brand through aggressive promotions featuring Ryoma Takeuchi and Taishi Nakagawa to create various customer contact points that are close to people's lives. That said, regarding our products and sales initiatives as one approach, we recognize that the traditional four seasons, spring, summer, autumn, and winter, are evolving. With the summer season becoming longer and customers becoming more aware of heatstroke prevention, leading to changes in their behavior, we view the shift to a five-season system, dividing summer into early summer and peak summer, which are, in other words, intense heat and extreme heat, as an opportunity to expand our customer touchpoints. We will therefore proceed with the development of new products and sales initiatives while ensuring these are closely aligned with our promotional strategies. Rather than overly anticipating a short-term V-shaped recovery, we will return to the basics of strengthening our brand. As the number one brand and market leader in the jelly beverage market, we will steadily restore medium to long-term growth for both our company and the market, while uncovering latent needs outside of existing scenes. In the frozen desserts business, the strategy of concentrating on differentiated products utilizing confectionery technology has resulted in a sales CAGR of 9% over the 2 years of the 2024 MTBP, far exceeding the market growth rate of 3%. In addition to the stable growth of the mainstay Jumbo group products, growth has been driven by the expansion of dessert-appealing products such as Ita Choco Ice and The Crepe. Strong sales of premium products also contributed to improved profitability. Going forward, we will not rest on our laurels, but will continue to strengthen the competitiveness of each of our mainstay products and nurture products that will become the next pillar of our business. Choco Monaka Jumbo will work to further expand its frontage, while enhancing the appeal of the delicious trinity of monaka, chocolate and ice cream, and a continuous freshness marketing. Vanilla Monaka Jumbo aims to take the growth trajectory to the next level by promoting the new concept of vanilla combination. In addition, we will pursue challenging growth in dessert-appealing products such as Ita Choco Ice and The Crepe based on the response up to the last fiscal year, with a view to investing in additional growth. Biscuit Sandwich and Pari Pari Sandwich, dessert-appealing products that make use of confectionery technology and follow on from Ita Choco Ice, have also seen significant growth and will be developed into the next pillar products while carefully instilling their quality value. Next, I would like to explain the direct marketing business. In addition to the external environment of declining TV viewership and increasing thriftiness, the impact of the price revision implemented in April 2025 has resulted in a tricky situation for both new customer acquisition and retention rates. In response to this environment, from the middle of the last fiscal year, the company has been steering its strategy toward controlling advertising expenses and prioritizing profits. As a result, although sales fell below the previous year's level, the operating profit margin improved, resulting in an increase in profit. Although there are challenges to growth, we view these results because of the business foundation we have built up to date. In the future, we will further promote our brand awareness measures, such as further verifying the effectiveness of mass advertising to build brand awareness, which have proven to be effective to a certain extent, and develop various measures to increase the number of regular customers again while assessing the balance between investment and return and looking for the next growth opportunity. Next, I will explain the HI-CHEW in the U.S. We have continued to grow by leveraging the value we have fostered in Japan and working on our basic policy of improving our distribution rate, SKUs, and in-store turnover. However, in the last 2 years, the sales CAGR has been on a tough footing at -1% due to increased competition in the candy market. In particular, the company sees the impact of the external environment of high cacao prices as a major factor in the strengthening of candy by major competitors and the slump in the CVS channel, which was HI-CHEW's main battleground. The graph on the right shows the trend of the candy market by channel. While the mass and food channels continue to grow, the CVS channel has not emerged from its slump. With the new plant about to begin operations, we believe that a return to growth is urgently needed. Based on the changes in the environment and recognition of the issues, we aim to leverage the operation of the new plant as a lever for growth and to reverse the trend by linking production and sales. Until now, due to supply capacity limitations, it has been difficult to make large lot proposals to major chains in the mass and food channels. Nonetheless, with an eye on the increased supply capacity that will result from the operation of the new plant, we have already begun making seasonal proposals and other large lot business negotiations, and we feel that we are getting a good response. In addition, we will implement the optimal allocation of personnel and brokers as a sales platform for this purpose. At the same time, we will implement more efficient and effective marketing investments by utilizing the intelligence team that was established last year. After implementing such selection and concentration in sales strategy and improving productivity, we will continue to make strategic and aggressive marketing investments in areas where we should go on the offensive. In terms of product strategy, we will also strengthen our brand extension strategy by expanding seasonal SKUs, introducing new products that utilize soft candy technology, as well as Hi-Chew Pop! Popsicles. The current fiscal year is positioned as an investment phase, and while factoring in short-term cost increases, we intend to build a foundation for a return to growth over the medium to long term. We will surely rise again, and we hope you will look forward to it. Next, I will explain about My/Mochi, which joined the group through M&A. We completed the closing on April 1st and are now in the initial phase of PMI. While respecting the local management structure, our involvement is focused on mid- to long-term growth strategies and governance aspects. On April 3rd, I, Matsunaga, the director in charge, and Kawabe, the U.S. general representative, participated in the kickoff meeting of My/Mochi, the new departure as a group company. We talked about the Morinaga & Co., Ltd. and their expectations for My/Mochi, and had a lively exchange of opinions. In our dialogue, we have been able to deepen mutual understanding of the history, values, and strengths of both companies, and we recognize that we are off to a good start. They asked a variety of questions about our technology of mainstay products, which immediately raised expectations for technological synergies between the two companies. First, we will prioritize stable business operations on a standalone basis while promoting efforts to create synergies by setting target days for synergy generation. Here is My/Mochi's status and future outlook regarding PPAs. The July 2025 to March 2026 results are mostly in line with our expectations, with an increase in revenues and income on an EBITDA basis. Net sales were 104.5% year-on-year, and new installations and reintroductions to major clients were realized. My/Mochi's fiscal year ends in June, but the company's earnings forecast incorporates estimates for April 2026 through March 2027. Given the current strong sales situation, we assume that the company will be able to maintain its profitability on an EBITDA basis. To the right is the current estimate of the PPA. We plan to finalize the amount by the end of Q2. As of this moment, the estimated amount of goodwill plus intangible assets is $120 million U.S. Assumed amortization periods are 12 years for goodwill and five years for intangible assets, and the straight-line method is assumed as the amortization method. In the short term, amortization of goodwill and intangible assets will have a negative impact on profits. On an EBITDA basis, the company has stable cash generation capacity, and we intend to further increase this level through synergy creation. I will explain the investment and shareholder returns during the 2024 Medium-Term Business Plan period. Total investment is expected to slightly exceed the planned JPY 60 billion by JPY 65 billion. While domestic capital investment is on a downward trend, overseas investment as a growth strategy is increasing on a yen basis, including the impact of foreign exchange rates. Including DX investments to strengthen the foundation, these are strategic investments to achieve the 2030 Vision, and management will focus on the content aspect. Shareholder returns have progressed steadily, amounting to JPY 30 billion over the two-year period against a plan of more than JPY 36 billion. We intend to continue to pay stable dividends and flexibly repurchase shares. Here is the impact of M&A execution on financial indicators. Although interest-bearing debt will increase because of the My/Mochi acquisition, the equity ratio, net D/E ratio, and interest-bearing debt to EBITDA ratio multiple are all within the financial guidance provided by the company. Therefore, we have no concerns about our financial strength because of this M&A. I would like to explain our shareholder returns policy. The company plans to pay an annual dividend of JPY 65 per share for the fiscal year ended March 31st, 2026, an increase of JPY 5 per share, and JPY 70 per share for the fiscal year ending March 31st, 2027, an increase of JPY 5 per share. The company will consider share buybacks in a flexible manner as necessary. Incidentally, if the financial year 2025 dividend is approved at the June shareholders meeting, it will be the 11th consecutive year of dividend increases. In returning profits to shareholders, our basic policy is to raise the DOE level over the medium to long term while maintaining a sound balance sheet. On the other hand, for financial year 2026, net assets are expected to expand more than planned due to an increase in accumulated adjustments related to retirement benefits and foreign currency translation adjustments on the back of rising stock prices and changes in the interest rate environment. As a result, DOE is not expected to reach the target of 4.3%, and a certain amount of deviation is assumed to occur. The decline in DOE is not due to a decision to curb shareholder returns, such as dividend levels or share buybacks, but rather to increase in net assets, which is the denominator. We will steadily implement the policy and level of total shareholder returns that we have indicated. The company believes that it is important to raise the DOE level over the medium to long term through stable and continuous shareholder returns, rather than adjusting in response to short-term DOE fluctuations. We intend to continue our basic policy of balancing investment in growth and shareholder returns. Thank you for listening.