Price revisions, higher domestic volumes and a Vietnam M&A contribution drove 9M operating income up 57.1%. With progress at 84.4%, the focus is on upside to the full-year plan.

Key Positives From The 3Q Results

9M operating income reached JPY 3,546M (+57.1% YoY). Price revisions, higher domestic volumes, productivity gains and M&A contributions combined to lift OPM to 6.4% (+1.7pt YoY). Domestic volumes rose 5.3%, outpacing industry production growth of 0.3%, so the company gained share while still pushing through price increases. Its earnings structure is increasingly able to absorb rising labor and materials costs.

• Gross Margin Expansion
  : Gross profit margin improved to 22.5% (+1.7pt YoY). SG&A rose 16.4%, roughly in line with revenue growth, keeping the SG&A ratio at 16.1%.
• Quarterly Momentum
  : 3Q standalone operating income was JPY 1,523M (+81.3% YoY), with OPM of 8.0% (both our estimates). Profit levels have stepped up each quarter.
• Domestic Volume Growth
  : Domestic volumes rose 5.3%, led by fresh produce. The contribution from Marunaka Shiko (acquired November 2025) further supported higher revenue and profit.
• Overseas Pricing Agility
  : Overseas sales were strong, and the company quickly raised prices to offset Middle East-driven raw material inflation. Together with the contribution from Hoang Hai (acquired August 2025), this delivered profit growth.
• Stronger Balance Sheet
  : The equity ratio rose to 58.3% (+3.2pt vs. prior fiscal year-end). Repayment of short-term borrowings cut interest-bearing debt to JPY 6,831M.

Key Concerns From The 3Q Results

Net income attributable to owners of parent rose 22.6%, lagging operating income growth. The main drag was the absence of the prior year's JPY 915M gain on sale of investment securities. The full-year net income plan also calls for growth of only 6.9%. Higher goodwill amortization and interest expense from M&A, along with inventory build driven by raw material inflation, warrant scrutiny of earnings and cash flow quality.

• Lower Securities Gains
  : Gain on sale of investment securities shrank to JPY 69M (-92.4% YoY). Core business growth is not fully flowing through to the bottom line.
• Rising M&A-Related Fixed Costs
  : Goodwill amortization rose to JPY 412M (+154.1%) and interest expense to JPY 199M (+45.6%).
• Inventory Build
  : Inventories reached JPY 5,593M (+23.7% vs. prior fiscal year-end). With raw material prices rising, inventory valuation and working capital needs bear watching.
• Soft Domestic End Markets
  : Domestic volumes in food products and electrical machinery dipped slightly YoY. Labor and materials costs also continue to rise.
• Securities Exposure
  : Investment securities stand at JPY 21,178M, or 24.4% of total assets (our estimate). Equity market swings remain a source of volatility in net assets and extraordinary gains/losses.

Focus Areas / Items To Monitor Going Forward

• Implied 4Q Shortfall
  : The full-year plan implies 4Q operating income of JPY 654M (our estimate), below the 3Q standalone figure of JPY 1,523M. The key question is whether this reflects conservative assumptions or genuine cost pressures in 4Q.
• Sustainability of Pricing
  : Can the company keep revising prices at home and abroad as Middle East tensions push up raw material costs? We want to confirm that margins can be sustained.
• Medium-Term Plan Delivery
  : This is the final year of the Medium-Term Management Plan (FY2024–FY2026). We will look at how far targets are met and how M&A and overseas expansion fit into the next growth strategy.

Key Financial Highlights

• Operating vs. Net Income Gap
  : The gap in growth rates mainly reflects the absence of the prior year's JPY 915M gain on sale of investment securities.
• Comprehensive Income Surge
  : The increase was driven by a JPY 1,269M rise in valuation difference on available-for-sale securities and a JPY 344M foreign currency translation adjustment. Both were negative in the prior year.
• EPS Outpacing Net Income
  : EPS grew faster than net income because the average share count fell to 9,768,916 shares (-1.9% YoY).
• Non-Controlling Interests
  : Net income attributable to non-controlling interests was JPY 60M (prior year: JPY 7M), reflecting the 80% acquisition of Hoang Hai.
• Retrospective Restatement
  : FY12/2025 figures have been restated to reflect finalization of the provisional accounting for the Hoang Hai business combination.

Performance By Business Segment

The Packaging Materials business drove most of the profit growth. Domestically, higher volumes and price revisions lifted earnings; overseas, cost pass-through and M&A contributions did the same. Real Estate Leasing remained a stable source of earnings.

Segment Performance Table

Note: Segment revenue includes inter-segment transactions. Margins are our estimates.

Progress Rate Versus Full-Year Guidance

Operating income progress stands at 84.4%, ahead of the 78.3% achieved at the same point last year against full-year actuals (our estimate). Meeting the plan requires 4Q operating income of only JPY 654M, roughly in line with the prior-year 4Q actual of JPY 624M. Given the JPY 1,523M posted in 3Q alone, the plan looks highly achievable.

Note: Prior-year progress at the same point against full-year actuals (our estimates) was 71.3% for revenue, 78.3% for operating income, 75.6% for recurring profit and 71.9% for net income.

Changes To Guidance

Full-year guidance announced on August 7, 2026 was maintained: revenue of JPY 75,000M, operating income of JPY 4,200M and net income of JPY 3,400M. The company cites several sources of uncertainty. These include the impact of Middle East tensions on resource prices and supply, the effect of inflation on consumer spending, and labor constraints from staffing shortages.

Commentary On Shareholder Returns

The year-end dividend forecast was maintained at JPY 90 per share, a JPY 10 increase from JPY 80 in the prior year. This implies a payout ratio of 25.8%, based on full-year forecast EPS of JPY 348.69 (our estimate). No new share buyback was disclosed.

Financial Position

The equity ratio rose to 58.3%, and net interest-bearing debt is modest at JPY 1,176M (our estimate). The company repaid short-term borrowings and took on JPY 3,000M of new long-term borrowings, extending its debt maturity profile. It also booked JPY 17M in syndicated loan fees.

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Toshiaki Suzuki: 7.8%→8.8% (2026/03/16) - Joined the business partners' shareholding association to strengthen ties with the issuer (amended report)