Kagome has cut its full-year profit forecast, telling investors that Middle East-linked cost inflation and a sluggish demand recovery after February's price increases will together erase billions of yen from the outlook it gave in February.
For the six months to June, the tomato-products group posted revenue of ¥143.8bn, up 3.7% from a year earlier, but business profit fell 18.6% to ¥8.4bn and net profit attributable to shareholders dropped 24.2% to ¥4.7bn. Kagome now expects full-year business profit of ¥19.0bn, down from the ¥23.0bn it guided in February, and net profit of ¥10.5bn, down from ¥13.4bn. Full-year revenue guidance stays at ¥310.0bn, and per-share earnings guidance falls to ¥116.04 from ¥147.47.
| Metric | Previous forecast | Revised forecast | Change |
|---|---|---|---|
| Revenue | ¥310.0bn | ¥310.0bn | Unchanged |
| Business profit | ¥23.0bn | ¥19.0bn | -¥4.0bn (-17.4%) |
| Operating profit | ¥23.0bn | ¥19.5bn | -¥3.5bn (-15.2%) |
| Net profit (parent) | ¥13.4bn | ¥10.5bn | -¥2.9bn (-21.6%) |
| EPS | ¥147.47 | ¥116.04 | -¥31.43 |
Middle East costs, spread across three lines
Kagome pins ¥2.8bn of the profit hit on the Middle East, split as ¥1.3bn in its domestic processed-food business, ¥0.4bn internationally and ¥1.1bn in its "other" segment. Domestically the pain comes from rising film and bottle packaging costs and oil-linked raw-material inflation; internationally it is packaging and energy costs. The remaining ¥1.1bn sits with subsidiaries United Genetics Holdings, which is selling fewer seeds to Middle Eastern buyers, and KAF, which faces higher packaging and freight bills. Kagome's own filing notes that the estimate also folds in broader shifts in market conditions and sales activity across countries as farming-input costs rise elsewhere, and it does not disclose how the ¥1.1bn splits between those causes.
Price hikes have not moved the mass-market brands
The bigger domestic story is what happened after Kagome raised prices on household and commercial beverages in February to offset high vegetable costs. Tomato Juice, its functional-health flagship, kept growing: first-half value sales rose 21% and volume rose 14% from a year earlier. Its two mass-market lines fared worse. Both Yasai Ichinichi Kore Ippon and Yasai Seikatsu 100 finished the half at 88% of prior-year value, with volume at 86% and 84% respectively. Kagome is adding ¥500mn to its planned second-half advertising and promotion budget to rebuild the health credentials of those lines, on top of spending increases that already dented first-half profit. Group-wide selling and administrative costs also rose, with personnel expense up ¥1.055bn and freight and storage up ¥771mn from a year earlier, adding pressure on margins before the Middle East charges are even counted.
International growth, thinner margins
Overseas, revenue climbed 11.9% to ¥68.6bn, helped by the January acquisition of British distributor Silbury Marketing, but segment profit fell 10.2% to ¥5.2bn. Kagome said a global easing in the tomato-paste supply-and-demand balance led it to cut sale prices at its Ingomar plant in the US and at operations in Europe and Australia, which reduced local-currency revenue in first-stage tomato processing even as a weaker yen added ¥2.55bn to the yen-translated total. Second-stage processing, which turns paste into pizza sauces and ketchup for foodservice customers, grew faster on the Silbury addition and stronger US foodservice demand, picking up ¥2.79bn from currency alone.
Despite the profit cut, Kagome left its dividend forecast untouched at ¥58 per share for the year, up from ¥48 last year.