■ The performance trends of Delica Foods Holdings ＜3392＞

1. Overview of the 2025 Fiscal Year First Half Results

For the interim consolidated results for the fiscal year ending March 2025, revenue increased by 10.7% year-on-year to 28,056 million yen, with an operating loss of 111 million yen (compared to a profit of 329 million yen in the same period last year), a recurring loss of 73 million yen (compared to a profit of 379 million yen), and a net loss attributable to the parent company’s shareholders of 66 million yen (compared to a profit of 320 million yen).

In the market environment, the increase in human flow, including inbound tourism, has invigorated the dining industry, leading to sustained demand that has kept the demand for agricultural products steady. Revenue surpassed the initial plan (27,000 million yen) and set a new record. On the other hand, the profit aspect saw a significant decline due to the soaring prices of agricultural products caused by abnormal weather and inconsistent conditions, worsening procurement rates, increases in labor and logistics costs, and increased depreciation expenses associated with the commencement of operations at the Osaka FS Center.

Looking closely at the factors affecting profit increases and decreases, the quantity increase contributed 659 million yen to profit, while the worsening procurement rate (a 0.9% decrease year-on-year) resulted in a decrease of 252 million yen, and expenses rising contributed a decrease of 857 million yen. Factors for the procurement rate deterioration include the soaring vegetable prices due to adverse weather, declines in yield rates due to poor raw material quality, and booking losses incurred from compensating raw material shortages by procuring from distribution markets. The main items contributing to the increase in expenses were labor costs at 331 million yen, logistics costs at 210 million yen, and depreciation expenses at 89 million yen. The increase in labor costs was due to approximately a 6% rise year-on-year in the number of employees, including regular and temporary workers as of September 2024, as well as a base increase for regular employees implemented in June 2023 and a review of temporary employee treatment starting in July 2024. The logistics cost ratio rose to 7.4%, an increase of 0.1 percentage points year-on-year.

The reason for the operating profit falling short of the plan by 373 million yen was primarily due to a 210 million yen increase in procurement costs, 80 million yen from higher labor costs, an additional 30 million yen due to one-time costs associated with the opening of the Osaka FS Center, and 50 million yen from the decreased operation rates of business locations in the surrounding areas (Osaka, Nara, Hyogo). Regarding the Osaka FS Center, difficulties in hiring temporary employees increased recruitment costs, and the use of staffing agencies contributed to higher costs. Additionally, the labor shortage seemingly extended the test operation period for the new production line until the summer.

(1) Sales trends by segment and industry

Looking at sales by segment, cut vegetables increased by 1.9% year-on-year to 11,919 million yen, whole vegetables by 15.9% to 11,197 million yen, and others (including meal kits) by 24.1% to 4,938 million yen, with all segments showing an increase in sales, setting a new record. The growth of cut vegetables temporarily slowed, while whole vegetables expanded, but the mid-term trend continues to indicate that the demand for cut vegetables remains stronger. Additionally, regarding the BtoC business included in others, despite a decrease in sales from major OEM partners for meal kits, developments in new menu creation and market expansion under the 'Rakusaï' brand progressed, maintaining sales levels above the same period last year. The number of retailers and mass merchandise stores handling meal kits also expanded smoothly, increasing from 43 at the end of the previous period to 68, aiming for sales in 100 stores by the end of the period.

Regarding sales trends by industry, the food service industry expanded smoothly, mainly among existing clients, while the school meal industry also saw increased revenue due to the acquisition of new customers. On the other hand, the retail and mass merchandising industry seems to have remained flat due to stagnant growth among major clients.

(2) Performance by Business Segment

Although the revenue in the fruit and vegetable business reached a record high of 27,655 million yen, a 10.5% increase year-on-year, factors such as worsened purchase rates, increased labor and Logistics costs, and the burden of establishing the Osaka FS Center led to a segment loss (operating loss) of 112 million yen (compared to a profit of 343 million yen in the same period last year).

The revenue from the Logistics business increased by 17.2% year-on-year to 2,370 million yen, and the segment profit increased by 178.8% to 64 million yen, resulting in increased revenue and profit. The revenue was driven by expanded inter-company transactions as well as progress in acquiring external customers. Revenue from external customers increased by 28.0% year-on-year to 364 million yen, and the proportion of external customer revenue relative to the business rose from 14.1% in the same period last year to 15.4%. Along with expanding transactions with existing customers, new customers such as food supermarkets were developed. The company evaluated its strategy to absorb investment costs such as vehicle and labor costs through the expansion of contracted Logistics services in response to the rising risk of transportation costs due to labor shortages in the Logistics industry as functioning effectively. Furthermore, it seems that the logistics collaborative system with Air Water <4088> announced in 2023 for the structural transformation of the fruit and vegetable supply chain and Vegitech Co., Ltd. is proceeding smoothly, with revenue of 34 million yen for Air Water, an increase of 26 million yen year-on-year, and 11 million yen for Vegitech, an increase of 10 million yen.

* A major player in the processing and wholesale of fruits and vegetables, with consolidated sales of 67.2 billion yen for the fiscal year ending March 2024.

The revenue from the research and development and analysis business decreased by 13.4% year-on-year to 42 million yen, with segment profit at 3 million yen (compared to a loss of 1 million yen in the same period last year). Although revenue declined due to a decrease in contracted analysis projects, profits turned positive due to efforts to control labor costs. Order reception seems to be strong at present, and an increase in revenue and profit is expected for the full year.

(Written by FISCO guest analyst, Jo Sato)