Lacto Japan Co., Ltd.

Business Details

Lacto Japan Group operates as a single-segment food business company that integrates the import wholesale of dairy raw materials, cheese, meat & food materials, and functional food ingredients with cheese manufacturing and sales through its Asian subsidiaries. The company's main customers are domestic food manufacturers, and it stably supplies safe and reliable raw materials backed by a global supply network. Its strength lies in being an independent trading company not affiliated with a major corporate group, enabling omnidirectional trading. Consolidated net sales for the second quarter (interim period) of FY2026 (ending November 2026) were ¥97,866 million (up 2.7% year on year), but due to the drop-off of one-time gains, a decline in profit margins, and an increase in selling, general and administrative expenses, operating profit fell sharply to ¥2,781 million (down 22.1% year on year).

Recent Overview

Higher revenue but sharply lower profit in the interim period, mainly due to the drop-off of one-time gains and lower profit margins

In the interim period of FY2026 (ending November 2026) (December 2025 to May 2026), net sales increased to ¥97,866 million (up 2.7% year on year), driven by higher unit sales prices due to yen depreciation and strong performance in the Meat & Food Materials Division, the Life Science Business Division, and the Asia Cheese Manufacturing Division. On the other hand, due to the drop-off of the ¥650 million compensation received recorded in the previous period, a decline in profit margins from front-loaded expense recognition in the Dairy Raw Materials & Cheese Division, and increased selling, general and administrative expenses mainly due to head office relocation costs (¥3,420 million, up 17.3% year on year), operating profit fell sharply to ¥2,781 million (down 22.1% year on year), ordinary profit to ¥2,475 million (down 35.4% year on year), and interim net profit to ¥1,748 million (down 37.5% year on year). Note that due to delays in the launch of the new Singapore plant and the head office core system, the recognition of related expenses was pushed back, resulting in ordinary profit exceeding the initial forecast. The full-year earnings forecast remains unchanged at net sales of ¥193,000 million and ordinary profit of ¥4,800 million.

Key Products

Growth Drivers

• Rising sales unit prices for imported raw materials due to continued yen depreciation (a factor boosting net sales)
• Rapid increase in sales of high-protein raw materials in the Life Science Business Division, driven by expanding global protein demand (interim sales volume up 40.4% year on year, sales up 67.1% year on year)
• Expansion of the chicken processed products and spice business and new customer development in the Meat & Food Materials Division (interim sales volume up 3.3% year on year)
• Strong sales to Malaysia in the Asia Business Cheese Manufacturing & Sales Division (increased demand for processed foods due to the Malaysian government's cash handout policy) and an 11.2% year-on-year increase in sales volume
• Expansion of manufacturing capacity through the launch of the new Singapore plant (although the start of operations has been delayed, contribution is expected from the second half onward)
• Continued expansion of dairy product demand in Southeast Asia (strong sales to Japanese companies in Malaysia, Singapore, and Indonesia)

Risks

• Decline in profit margin in the Dairy Raw Materials & Cheese Division due to front-loaded expense recognition (which became apparent in the interim period)
• Structural year-on-year deterioration in ordinary profit due to the drop-off of the ¥650 million compensation received (a one-time gain) recorded in the previous period
• Increase in selling, general and administrative expenses (¥3,420 million in the interim period, up 17.3% year on year), mainly due to head office relocation costs, rising personnel expenses, and higher logistics costs
• Continued weak sales of imported dairy raw materials (skim milk powder, prepared powdered milk products, etc.) due to the sustained high level of domestic skim milk powder inventory
• Impact on the Meat & Food Materials Division from the suspension of pork and raw ham imports from Spain (partially covered by procurement from other countries)
• Risk of delayed start-up of the new Singapore plant and the head office core system (related expenses may be concentrated in the second half)
• Uncertainty in Asian business due to heightened geopolitical risk, China's economic slowdown, and intensifying price competition in Thailand and the Philippines
• Inventory risk and increased working capital due to a significant increase in inventory assets (¥50,772 million at the end of the interim period, up ¥6,493 million from the end of the previous fiscal year)
• Increased financial burden and decline in equity ratio (from 35.9% to 33.3%) due to an increase in interest-bearing debt (a ¥4,000 million increase in commercial paper and a net increase in long-term borrowings)