Kagome Q2 FY2026: Operating Profit Drops 14.5%, Full-Year Outlook Cut

Kagome’s consolidated results for the first half of fiscal 2026 (January–June) showed a 3.7% increase in revenue to 143.79 billion yen, but a steep decline in profitability. Operating profit fell 14.5% to 9.09 billion yen, and net income attributable to owners of the parent tumbled 24.2% to 4.68 billion yen.

The main drags were a post-price-hike drop in domestic beverage volumes, higher promotional and advertising costs, and a slump in international tomato paste market prices. The January acquisition of UK-based Silbury Marketing Ltd boosted International segment revenue but could not offset the margin erosion.

Kagome lowered its full-year operating profit forecast to 19.5 billion yen, from the previous 23 billion yen a sharp cut, while leaving its revenue target unchanged at 310 billion yen. The downgrade reflects additional cost pressures, including an estimated 2.8 billion yen hit from packaging and energy costs due to worsening Middle East tensions, and a slower-than-expected recovery in domestic beverage volumes. Despite the profit warning, the company plans to hike its annual dividend by 10 yen to 58 yen per share, signaling confidence in cash generation.

Domestic Processed Food Business: Revenue 73.08 billion yen (down 0.2% YoY), business profit 5.02 billion yen (down 8.8%).

• Beverages (38.90 billion yen, 1.5% decline): Tomato juice grew on health claims, but the flagship “Yasai Seikatsu 100” series saw volume drop after a price revision. Business profit fell 10.7% to 2.77 billion yen due to higher ad spend.
• Mail Order (6.02 billion yen, 0.6% decline): Soups were solid but supplements were sluggish; business profit shrank 12.7% to 224 million yen.
• Other Foods (28.16 billion yen, 1.8% increase): Steady demand for household ketchup and bulk frozen vegetables, offset by gift products decline. Manufacturing cost inflation pushed business profit down 5.7% to 2.03 billion yen.

International Business: Revenue 68.58 billion yen (up 11.9%), boosted by M&A and the weaker yen, but business profit fell 10.2% to 5.19 billion yen.

• Primary Processing (tomato, etc.): 30.67 billion yen (up 5.5%). In local currencies, sales fell on soft tomato paste prices; yen depreciation added 2.55 billion yen. Business profit plunged 23.7% to 2.39 billion yen.
• Secondary Processing: 38.27 billion yen (up 18.4%). Strong food-service demand, the Silbury contribution, and yen effects (2.79 billion yen tailwind) drove growth. Business profit rose 10.4% to 2.78 billion yen.

Other (seeds, real estate, etc.): Revenue 11.85 billion yen (down 0.2%), business profit tumbled 82.6% to just 67 million yen.

Major segment summary:

Total assets at half-year end stood at 356.95 billion yen, down 18.87 billion yen from the prior fiscal year-end, mainly due to a 12.31 billion yen drop in cash (after the Silbury acquisition and loan repayments) and a 10.63 billion yen decrease in inventories. Liabilities declined by 21.59 billion yen, lifting the equity attributable to owners of the parent ratio to 54.1% (from 50.7%).

Cash flow: Operating activities generated 21.80 billion yen (lower than the same period last year). Investing cash outflows of 9.09 billion yen included 4.33 billion yen for the Silbury stake and 5.81 billion yen in capex. Financing outflows of 25.29 billion yen reflected loan repayments (12.63 billion yen) and dividends (4.36 billion yen). Cash balance fell to 14.53 billion yen.

On shareholder returns, Kagome plans a 10-yen increase in the full-year dividend to 58 yen per share (year-end lump sum). It also bought back 1.34 billion yen of its own shares during the half.

Key risks identified by Kagome:

• Elevated raw material costs: Ongoing increases in agricultural inputs, packaging materials, and energy, worsened by Middle East instability.
• Post-price-hike demand softness: Domestic beverage volumes are recovering more slowly than expected, posing downside risk for the full year.
• Foreign exchange: Yen weakness boosts International revenue but lifts import costs. Further yen depreciation could amplify cost pressures.
• International commodity prices: Tomato paste prices have fallen amid oversupply, squeezing Primary Processing margins.
• Geopolitical uncertainty: Conflicts in the Middle East and trade policy volatility may disrupt seed sales and supply chains.

Kagome kept its full-year revenue forecast at 310 billion yen (up 5.3% YoY) but slashed its business profit outlook to 19 billion yen (down 15.1%), operating profit to 19.5 billion yen (down 12.6%), and net income attributable to owners of the parent to 10.5 billion yen (down 29.1%). The revision stems from higher packaging/energy costs (approx. 2.8 billion yen business profit impact) and the lagging beverage volume recovery.

Revised forecast vs. previous:

In January 2026, Kagome acquired UK-based food distributor Silbury Marketing Ltd as a consolidated subsidiary. The purchase price was 5.52 billion yen (cash), with provisional goodwill of 2.72 billion yen. Silbury had been the exclusive UK distributor for Kagome’s Portuguese tomato processing subsidiary. Full integration creates an end-to-end model spanning marketing, development, production, and sales in Europe. The European market for processed tomato products continues to grow, especially in food service, and internalising the distributor function aims to sharpen competitive advantage. Silbury contributed 8.05 billion yen in revenue post-acquisition, though it posted a 130 million yen loss in its initial phase; management expects a positive medium- to long-term contribution.

Capital expenditure on tangible and intangible assets reached 5.81 billion yen during the half. Specific R&D spending was not disclosed, but the company continues to invest in new seed varieties and cultivation research under the ‘Other’ segment. Marketing investments to revive domestic beverage demand, along with capacity expansion in International operations, pushed selling, general and administrative expenses to 38.51 billion yen (up 8.8% YoY).