Kobayashi Q2 FY2026: Net Profit Drops 64% on Beni-Koji Woes; Full-Year Forecast Up 173%
Revenue
¥70.7B
+2.5%
Full-year forecast
¥173.0B
Operating Profit
¥2.2B
-67.5%
Full-year forecast
¥12.5B
Net Income
¥1.1B
-64.1%
Full-year forecast
¥10.0B
Operating Margin
3.1%
Kobayashi's H1 FY2026 revenue rose 2.5% to ¥70,749 million, but operating profit fell 67.5% to ¥2,162 million amid beni-koji fallout and ad spending. Full-year net profit is seen surging 173.5% to ¥10,000 million on a share sale gain.
Earnings Highlights
Kobayashi's consolidated revenue for the first half of FY2026 reached ¥70,749 million, up 2.5% year on year. Operating profit plummeted 67.5% to ¥2,162 million, ordinary profit fell 58.5% to ¥3,006 million, and net profit attributable to owners of the parent declined 64.1% to ¥1,136 million.
The year-earlier period had booked a strong operating profit of ¥6,600 million before the beni-koji issue surfaced, making for tough comparisons. This half, increased advertising expenses as TV commercials resumed and one-time costs from the integration of research labs (the Saito Monozukuri Lab completion) squeezed profits.
For the full year, net profit is forecast to jump 173.5% to ¥10,000 million, driven by a ¥3,282 million gain on the sale of Paltac shares booked in Q3 and a shrinking of beni-koji-related extraordinary losses. Operating profit, however, is forecast to decline 16.2% to ¥12,500 million, indicating that a core earnings recovery remains a pressing challenge.
Segment Performance
Domestic Business: Revenue increased 1.8% to ¥54,617 million, while segment profit dropped 47.6% to ¥4,291 million. New products like 'Salacia 100 Premium' and 'Breath Care Carbonated Tablets' contributed to sales growth, and healthcare external customer sales rose 2.0% to ¥29,218 million after TV ads resumed in July 2025. Daily goods slipped 0.4% to ¥22,049 million, and heating pads sales tumbled 23.7% to ¥731 million due to a warm winter. Profit was pressured by higher promotional expenses as advertising resumed and costs tied to the Saito lab integration.
International Business: Revenue climbed 8.1% to ¥19,195 million, but the segment loss widened to ¥2,175 million from ¥1,496 million a year earlier. China sales surged 34.0% to ¥4,954 million, led by 'Netsusama Sheet' and 'Anmerz', while Southeast Asia grew 12.4% to ¥3,999 million. The U.S. fell 8.5% to ¥7,217 million due to healthcare supply issues. Aggressive advertising investments across regions kept operating losses elevated, reflecting a long-term market share strategy.
Others: Revenue from transportation, container manufacturing, and real estate management rose 9.5% to ¥3,402 million, with segment profit up 92.2% to ¥133 million.
| Segment | Revenue | Share | Op. Profit | Op. Margin |
|---|---|---|---|---|
| Domestic Business | ¥54.6B | 71% | ¥4.3B | 7.9% |
| International Business | ¥19.2B | 25% | ¥-2.2B | -11.3% |
| Others | ¥3.4B | 4% | ¥133M | 3.9% |
Financial Position and Capital Policy
Total assets at the interim end decreased by ¥23,437 million from the prior fiscal year-end to ¥251,891 million. Liabilities were reduced as accounts receivable and accounts payable decreased, lifting the equity ratio to 82.9% from 76.3%, maintaining a very high level of financial safety.
Operating cash flow shrank to ¥460 million from ¥14,206 million a year earlier, weighed by beni-koji compensation payments, an increase in inventories, and a decrease in trade payables. Capital expenditure rose to ¥10,137 million for tangible fixed assets, mainly for the construction of the Saito Monozukuri Lab and production equipment upgrades, laying foundations for future growth.
Kobayashi raised the interim dividend by ¥1 to ¥45 and plans a year-end dividend of ¥61, bringing the full-year payout to ¥106, up ¥2 year on year. No share buyback was announced.
Risks and Challenges
The most significant risk is the prolonged beni-koji issue. The company booked a ¥661 million product recall-related loss as an extraordinary item this half, with provision balance at ¥1,351 million. Compensation for health victims and recall costs for corporate clients continue, and additional burdens from litigation could emerge. The company states that 'reasonable estimates are difficult at this point,' meaning beni-koji risk is not fully resolved.
Geopolitical risks, including tensions in the Middle East, could disrupt international logistics, push up energy and raw material costs, and cause currency fluctuations. While the impact is currently deemed minor, sudden changes remain possible. Changes in China's pharmaceutical system and tighter regulations also pose risks; the decision to sell the equity in Jiangsu Kobayashi Pharmaceutical partially addresses this exposure.
- Beni-koji compensation and litigation risks (potential additional burdens beyond provisions)
- Geopolitical risks (Middle East tensions, logistics disruptions, energy costs)
- Currency fluctuation risks (overseas sales ratio approx. 26%)
- China market regulatory changes and intensifying competition
- Climate-related risks for seasonal products like heating pads
Full-Year Outlook
Kobayashi left its full-year FY2026 consolidated forecasts unchanged: revenue ¥173,000 million (up 4.4%), operating profit ¥12,500 million (down 16.2%), ordinary profit ¥13,000 million (down 23.5%), and net profit attributable to owners of the parent ¥10,000 million (up 173.5%). The sharp rebound in net profit from the interim loss is driven by the ¥3,282 million gain on the sale of Paltac shares to be booked in Q3, along with shrinking beni-koji special losses. The operating profit decline, however, underscores the need for a core earnings recovery.
Analyst take
The scars of the beni-koji scandal remain deep, with operating profit falling to less than a third of prior-year levels. But double-digit overseas sales growth, led by China, offers a medium-to-long-term positive. The stepped-up ad spending widening the international loss can be read as an upfront investment for future earnings.
The decision to sell Jiangsu Kobayashi Pharmaceutical is noteworthy: it pivots to an asset-light model amid a shifting Chinese OTC regulatory landscape, though supply chain and quality control become new challenges.
The near-fourfold jump in full-year net profit is almost entirely due to the share sale gain, so the real recovery still needs to be proven. The operating profit forecast of ¥12,500 million is far from past peaks above ¥20,000 million; the next earnings statement must show a path back to profitability.