Medium-term plan targets raised across the board; first disclosure of new growth drivers including UK license manufacturing and moromi vinegar business

Summary

In FY2026/3, despite disruptions from an Asahi Group Holdings system outage, Orion posted record-high revenue of JPY 29.7B (+2.9%) and operating income of JPY 4.3B (+24.0%). Adjusted net income also came in strong at JPY 3.0B (+18.6%), with the annual dividend raised by JPY 4 vs. plan to JPY 44. For the current fiscal year (FY2027/3), the company plans to sustain top-line and operating income growth through beer mix shift and geographic expansion outside Okinawa and overseas, while absorbing JPY 440M in EBITDA headwinds from the liquor tax revision and expiration of the special measures act. The new medium-term plan (FY26–29) raises all targets above IPO-era levels (revenue CAGR 5.9%, EBITDA margin 25.1%, ROE 16.0%), with the UK license manufacturing model and moromi vinegar health beverage business explicitly positioned as new growth drivers.

Key Points (Earnings Highlights and Growth Actions)

• Management Strategy and Market Assessment
  • The October 2026 liquor tax revision and expiration of the special measures act are identified as the single largest external variable; beer mix is being repositioned from 61% to 81%
  • Management has clarified its concentration of resources in northern Okinawa, completing portfolio restructuring following the Naha hotel divestiture
  • Management recognizes structural growth in Okinawa tourism demand and the JUNGLIA effect as upside factors, but has incorporated them conservatively into the plan
• Recent Business Progress and Drivers
  • Alcoholic & Soft Beverages: COGS ratio improved by 7.8pt vs. FY2022/3, driven by high-concentration brewing and energy-efficient equipment upgrades
  • Tourism & Hotel: Absorbed JPY 616M revenue loss from the Naha hotel disposal while improving EBITDA margin to 25.3% (+3.5pt), led by RevPAR of JPY 31,936
  • License business surged +160% YoY to JPY 377M (13-month reporting; JPY 348M on a 12-month basis), with licensee count expanding from 37 to 64
  • Okinawa domestic sales were 5.7% below plan due to pre-price-hike demand pullback and the Asahi system outage, while overseas sales grew +21.7% led by Australia and the Americas
• Strategic Initiatives and Inflection Points
  • Invested GBP 1M in UK-based Sunrise; draft sales performing well across ~50 London-area pubs, with canned/bottled rollout to Scandinavia in preparation
  • Executed capex for non-alcoholic beer (Clear Free) manufacturing, transitioning from contract manufacturing to in-house production
  • Nurturing the moromi vinegar business as a next-generation earnings driver, with plans to enter the health beverage market leveraging awamori-derived ingredients
  • Completed JPY 550M in share buybacks and raised the DOE target from 7.5% to 8.0%

Outlook and Strategy

• FY2027/3 guidance calls for revenue of JPY 31.1B (+4.7%), operating income of JPY 4.35B (+0.9%), and EBITDA of JPY 5.95B (+1.2%). The JPY 440M impact from the special measures act expiration will be absorbed through beer mix shift and cost optimization
• Total shareholder returns of JPY 2.02B (+10.4% YoY) are planned, comprising a JPY 34 dividend plus JPY 550M in share buybacks
• Of JPY 21.4B in operating cash flow over the four-year mid-term plan period, JPY 10.0B is allocated to growth investment (JPY 7.0B growth capex + JPY 3.0B strategic investment) and JPY 7.0B to shareholder returns
• Revenue CAGR (FY25–29) for the Alcoholic & Soft Beverages segment: Okinawa domestic 4.0%, mainland Japan 8.6%, overseas 13.8%, licensing 7.3%. The company targets 6.8% overall growth driven by mainland, overseas, and new businesses
• The Hotel segment plans Motobu RevPAR of JPY 32,747 (+2.5%), with the annex building addition and new lodging facilities on company-owned land incorporated into the long-term plan
• President Murano has signaled strong commitment to building a tourism ecosystem in northern Okinawa, with Happy Park direct management and trial shuttle bus services from the hotel to dining outlets already underway

Positive Factors

• Beer manufacturing COGS ratio declined 7.8pt vs. FY2022/3, with efficient production at the Nago plant now firmly established. Further unit cost improvement is expected from can line upgrades
• An overwhelming brand foundation—78.1% draft server penetration in Okinawa restaurants and 96.9% tourist brand awareness—will support share defense post-liquor tax revision
• The UK license manufacturing model is asset-light with high profitability and capital efficiency, with significant room for lateral expansion into North America and Latin America
• Shima Chu 4 SKUs (including sugar-free) are performing well, with the company targeting RTD category expansion to capture users migrating away from happoshu after the tax revision
• Proprietary e-commerce subscription members reached 6,000 (FY29 target: 7,800), and active collaboration product launches are advancing the lifestyle brand strategy
• Designation as a JUNGLIA official hotel and affiliation with the Kintetsu Miyako Hotel chain are strengthening the Motobu hotel's customer acquisition platform

Concerns and Risks

• The annualized EBITDA impact from the special measures act expiration is approximately JPY 930M (cumulative over the mid-term plan). The beer mix shift is planned to offset this, but downside risk exists depending on consumer price sensitivity
• Recovery from the Asahi Group Holdings system outage is factored into the current fiscal year, but uncertainty remains around the timing of normalization for Asahi-sourced product sales both within and outside Okinawa
• Materials costs (cans, corrugated board) driven by Middle East tensions are locked in under annual contracts, but further upside risk at contract renewal warrants attention
• Hotel RevPAR upside is heavily dependent on inbound tourism demand and remains exposed to external factors (FX, geopolitical shifts)
• The per-share dividend appears to decline from JPY 44 to JPY 34 on the surface, but this is primarily due to the absence of prior-year extraordinary gains. Ensuring investor understanding of the stable dividend policy anchored to 8.0% DOE remains a challenge
• New businesses (health beverages, new lodging facilities) are in the upfront investment phase, with limited earnings contribution during the mid-term plan period. Payback is not expected until FY2030/3 onward

Performance Highlights

FY2026/3 delivered revenue of JPY 29,713M (+2.9% YoY), operating income of JPY 4,314M (+24.0%), and EBITDA of JPY 5,876M (+12.5%), marking four consecutive years of top-line and profit growth. EBITDA margin (ex-liquor tax) improved by 1.8pt from 22.4% to 24.2%. Adjusted net income hit a record high of JPY 3,030M (+18.6%), with the annual dividend raised by JPY 4 vs. plan to JPY 44.

Segment Performance

• EBITDA Margin (Ex-Liquor Tax): 24.2% (+1.8pt YoY)
• Adjusted EPS: JPY 74 (+57.3% YoY)
• EBITDA: JPY 5,876M (+12.5% YoY)
• Alcoholic & Soft Beverages EBITDA: JPY 4,409M (+13.4% YoY)
• Tourism & Hotel EBITDA Margin: 25.3% (+3.5pt YoY)
• Orion Hotel Motobu RevPAR: JPY 31,936 (+12.2% YoY)
• Licensee Count: 64 (vs. 37 in prior year)
• Net Debt/EBITDA: 1.00x (vs. 0.74x in prior year)
• Equity Ratio: 41.9% (+4.6pt YoY)