DyDo Group Holdings got back to first-quarter operating profit, but the cleaner read on the quarter is that the business recovered faster than the reported earnings line suggests. Sales rose 4.3 percent to ¥55.239 billion and operating profit reached ¥1.556 billion, versus a ¥1.445 billion operating loss a year earlier. Ordinary profit, though, was only ¥459 million and net profit ¥110 million because Turkey-related IAS 29 hyperinflation accounting continued to reshape the reported numbers.
Where the rebound came from
The operating recovery was split between a less painful domestic drinks business and a strong overseas beverage business. Domestic beverage sales slipped 2.0 percent to ¥31.731 billion as vending machine volumes fell, but the segment loss narrowed sharply to ¥185 million from ¥2.386 billion. DyDo said that reflected lower depreciation after last year's impairment charges and profit-improvement measures. Overseas beverages did the heavier lifting: sales jumped 28.0 percent to ¥16.505 billion and segment profit rose 135.6 percent to ¥2.291 billion, led by Turkey and supported by Poland.
Management's presentation adds a few near-term watchpoints. In Japan, DyDo says its push to pull unprofitable vending machines and optimize the product mix is progressing, even if sales commission reform remains a challenge. In Poland, a new water production line started operating in April as planned. The company also said the current impact of Middle East tensions on each segment is limited.
Then IAS 29 enters the room
The reason the quarter still looks thin below operating profit is Turkey. DyDo has been applying IAS 29 to its Turkey subsidiary since the second quarter of the year to January 2023, after cumulative three-year inflation there exceeded 100 percent. In the latest quarter, the adjustment added ¥378 million to sales, but cut operating profit by ¥246 million, ordinary profit by ¥1.413 billion and net profit by ¥1.376 billion versus the pre-adjustment figures the company also disclosed.
DyDo also separately disclosed a ¥1.157 billion non-operating loss on net monetary position. The company said strong performance at the Turkey subsidiary increased cash, deposits and receivables so that monetary assets rose well above monetary liabilities, producing the loss under IAS 29. The notice says that amount was already reflected in the same day's quarterly results.
What it means for the year
DyDo left full-year guidance unchanged. The company says the outlook already assumes continued IAS 29 adjustments in Turkey, including a ¥600 million boost to sales but reductions of ¥1.4 billion to operating profit, ¥2.8 billion to ordinary profit and ¥2.7 billion to net profit. So the operating comeback is visible, but Turkey's accounting fog is not clearing yet.