NIHON SHOKUHIN KAKO CO., LTD.

Business Details

Nippon Food Chemical is a single-segment company that manufactures and sells products across four divisions—Starch Products, Saccharified Products, Fine Chemical Products, and By-products—using corn and other raw materials. Its primary customer is Mitsubishi Corporation (parent company), and it supplies materials to a wide range of industries including food service, beverages, paper manufacturing, and food processing. While the domestic market is its primary base, the company is also pursuing overseas expansion through its Thai affiliate AMSCO. Under its medium-term management plan "Chuki 2027," the company has set targets of consolidated ordinary income of ¥17-23 million (¥20 million ±3 million) and ROE of 5-6%.

Recent Overview

Net sales and operating income showed slight increases, but ordinary income and net income declined significantly due to lower equity in earnings of affiliates

In FY2026 (ending March 2026), net sales were ¥62,993 million (up 0.5% year on year) and operating income was ¥1,251 million (up 4.2% year on year), showing improvement in the core business. However, equity in earnings of affiliates declined sharply from ¥698 million to ¥374 million, causing ordinary income to fall to ¥1,568 million (down 18.1% year on year) and net income to decline to ¥1,168 million (down 23.5% year on year). By division, Starch Products, Fine Chemical Products, and By-products saw increased revenue, while only Saccharified Products saw a decline. The company retired 1,457,132 shares of treasury stock, improving the equity ratio to 59.6%. The annual dividend was significantly increased to ¥145 (from ¥95 in the prior period), resulting in a payout ratio of 60.8%. For FY2027 (ending March 2027), the company forecasts net sales of ¥65,500 million and ordinary income of ¥2,000 million.

Key Products

Growth Drivers

• Recovery in demand from the food service industry: increased demand for commercial-use saccharified products and food-grade starch driven by rising inbound tourism and human mobility
• Expansion of overseas sales of Fine Chemical Products: growth in overseas expansion through Thailand's AMSCO and increased direct exports
• Market development of the new product "Megalolink" (slowly digestible saccharide): capturing new demand in the functional saccharide field
• Market formation for the decarbonization material "Starcross 70PPi": expansion into food and cosmetics container/packaging and automotive interior fields
• Improved profitability through manufacturing cost reductions: promotion of revenue structure review and equipment optimization under Chuki 2027
• Recovery of equity in earnings of affiliates through cost improvements at overseas affiliate AMSCO: reflected in the forecast for FY2027 (ending March 2027)
• Strengthened incentives for medium- to long-term enhancement of corporate value through introduction of a performance-linked stock compensation plan (BIP trust)

Risks

• Risk of fluctuations in the Chicago corn market for raw material corn: full-year average of around 431 cents/bushel for FY2026 (ending March 2026), with upward pressure from rising fertilizer prices due to worsening conditions in the Middle East
• Foreign exchange risk: continued yen depreciation with the yen at around ¥159/dollar at period-end and a full-year average of around ¥150/dollar, raising costs of imported raw materials
• Crude oil and energy price risk: WTI surged to around $101 at period-end due to worsening Middle East conditions (concerns over closure of the Strait of Hormuz), affecting manufacturing and delivery costs
• Continued consumer frugality: risk of declining sales volumes of saccharified products and starch products amid rising prices
• Structural decline in demand for paper-related starch: continued decline in demand due to ongoing digitalization of newspapers and magazines
• Long-term decline in total saccharide demand due to gradual decrease in domestic population: recognized as a key issue in the medium-term management plan
• Risk of fluctuation in equity in earnings of affiliates: declined by ¥324 million year on year due to weak performance at overseas affiliate AMSCO, significantly pressuring ordinary income
• Isomerized sugar adjustment fund system risk: ongoing cost burden arising from the revised operation of the system since April 2024, with potential impact on earnings if difficult to pass on to selling prices
• Rising logistics cost risk: increased transportation costs due to response to the "2024 Logistics Problem," and mandatory compliance with the revised Logistics Efficiency Act starting FY2026
• Concentration risk in the Tokai region (Fuji City, Shizuoka Prefecture): risk of production suspension due to large-scale earthquakes or other natural disasters affecting the main production site