Japan’s Meiji Holdings has revised its earnings forecasts downwards due to impairment costs arising from challenges in its operations in China.
Based in Tokyo, Meiji has uplifted its sales forecast for the fiscal year concluding on 31 March, largely owing to price increments. However, the company anticipates recording results for ordinary profits and shareholder dividends that are below initial expectations.
In a statement to the Tokyo Stock Exchange today (9 April), Meiji disclosed it will face a Y22.5bn ($148.2m) charge as “extraordinary income” in the fiscal fourth quarter, stemming from the divestment of “investment securities.”
Regarding profits allocated to shareholders, the firm noted, “as extraordinary losses we expect around Y14.3bn impairment loss on non-current assets related to the drinking milk and yogurt business operated by subsidiaries in China.”
Meiji elaborated on this, stating, “The sales environment for the drinking milk and yogurt business in China has been significantly changed. The price competition in the market intensified, leading to a decline in our profitability.”
The projection for shareholder profits has been adjusted to Y48bn from Y51bn. The expected ordinary profit has been revised to Y76bn from the previous forecast of Y78bn.
Focusing on the food segment, Meiji attributed the challenges to its AustAsia dairy farm operation in China, which “saw a decline in profitability attributable to soaring feed prices and a drop in raw milk prices.”
An impairment loss of Y6.2bn is foreseen for this sector in the fourth quarter, affecting the ordinary profit figure.
Conversely, Meiji has increased its sales and operating profit forecasts.
Projected sales now stand at Y1.11tn up to 31 March, from the earlier prediction of Y1.09tn.
The company expects its operating profit to reach Y84.5bn, compared to the former estimate of Y80bn.
Meiji’s product range extends beyond milk and yogurt, including cheese and ice cream. Its portfolio also encompasses chocolate and gummy sweets.
Beyond the food sector, Meiji is involved in pharmaceuticals, with this division contributing to the raised sales forecast, particularly in antibacterial medications.
“The food segment saw the benefits of price hikes implemented across a wide range of categories. Additionally, various expenses trended below initial assumptions,” Meiji clarified.
