Meiji Q1 FY2027: Operating Profit Jumps 28% on Drug Business Growth

For the April-June 2026 quarter, revenue rose 5.8% year-on-year to ¥289.4 billion, operating profit surged 27.7% to ¥22.6 billion, and net income attributable to owners of the parent jumped 51.3% to ¥15.2 billion. Ordinary profit climbed 37.8% to ¥24.8 billion. Gross margin improved to 30.7% from 29.2%, while operating margin expanded to 7.8% from 6.5%.

The pharmaceutical segment was the standout driver, with sales up 13.6% to ¥55.6 billion and operating profit soaring 76.3% to ¥8.4 billion. The food segment recorded a 4.1% revenue increase to ¥233.9 billion and a 10.9% rise in operating profit to ¥15.1 billion, though high cocoa prices remained a drag. Company-wide profitability improved, led by pharmaceuticals.

First-quarter operating profit reached 50.4% of the full-year forecast of ¥100 billion, already exceeding half of the first-half plan of ¥45 billion.

Food Segment

Overall food sales came to ¥233.9 billion (+4.1% y/y), with operating profit of ¥15.1 billion (+10.9% y/y).

• Dairy: Revenue ¥67.5 billion (+0.8%), operating profit ¥6.4 billion (+6.2%). Domestic products such as “Meiji Hemoglobin A1c Care Yogurt” and “Meiji Probio Yogurt R-1” performed well, though “Meiji Probio Yogurt LG21” saw a decline.
• Cocoa: Revenue ¥43.6 billion (+12.7%), but operating profit fell 34.2% to ¥2.0 billion as high-cost raw materials procured during price spikes eroded margins in domestic chocolate.
• Nutrition: Revenue ¥30.9 billion (+6.3%), operating profit ¥3.7 billion (+20.9%), driven by expanding sports protein sales and structural reform benefits.
• Food Solutions: Revenue ¥49.9 billion (+2.6%), operating profit ¥2.0 billion (+15.4%), supported by B2B, commercial cream, and frozen dessert demand.

Pharmaceutical Segment

Pharmaceutical sales rose 13.6% to ¥55.6 billion, while operating profit soared 76.3% to ¥8.4 billion.

• Domestic: Revenue ¥31.7 billion (+15.3%), operating profit ¥6.0 billion (+38.3%). Injectable antibiotic market recovery, drug price support, and expanded prescriptions for the selective ROCK2 inhibitor “Rezurock Tablets” contributed.
• Overseas: Revenue ¥17.0 billion (+11.7%), operating profit ¥2.8 billion (+26.6%), helped by revenue growth at the Indian subsidiary and cost reductions.
• Vaccines & Animal Health: Revenue ¥6.8 billion (+10.6%), operating loss narrowed to ¥0.4 billion, with gains in Japanese encephalitis and pentavalent vaccines.

The pharmaceutical segment’s operating profit nearly doubled, offsetting slower profit growth in food.

At the end of Q1 FY2027, total assets stood at ¥1,285.7 billion (+1.9% from end-FY2026), while net assets were virtually flat at ¥817.5 billion (0.0%). The equity ratio remained high at 60.1%, down slightly from 61.2%. Interest-bearing debt rose 22.8% to ¥138.2 billion due to increases in short-term borrowings and commercial paper, but overall financial health remains sound.

Operating cash flow improved sharply to an inflow of ¥14.7 billion (vs. a ¥5.1 billion outflow a year earlier), helped by a smaller increase in inventories and higher pre-tax profit. Investing cash flow was an outflow of ¥3.7 billion (vs. ¥14.4 billion outflow), reflecting larger subsidy receipts. Free cash flow turned positive at ¥10.9 billion.

Meiji plans an annual dividend of ¥110 per share for FY2027 (interim ¥55, year-end ¥55), a ¥5 increase from the previous year, marking two consecutive years of dividend hikes. No share buyback was announced, but steady profit growth and improved cash flow underpin the shareholder return.

Full-year guidance for FY2027 remains unchanged from the May 2026 announcement. The company projects revenue of ¥1,212.0 billion (+3.3% y/y), operating profit of ¥1,000.0 billion (+7.2% y/y), ordinary profit of ¥1,010.0 billion (+4.6%), and net income attributable to parent of ¥62.5 billion (+78.2% y/y).

Q1 operating profit already reached 50.4% of the full-year target and exceeded half of the first-half plan of ¥45 billion, marking a strong start. Continued momentum in pharmaceuticals could drive upside, while the food segment faces the risk of prolonged high cocoa costs, testing its ability to absorb expenses in the second half.

On July 21, 2026, Meiji resolved to transfer its China dairy, yogurt, and B2B operations to Shanghai Aoya Food Co., Ltd. The transaction is valued at RMB 320 million (about ¥5.0 billion), with completion targeted for December 31, 2026. The deal covers the relevant operations of Meiji (China) Investment Co., Ltd. and two manufacturing subsidiaries (Tianjin, Suzhou); the Guangzhou cocoa facility is excluded.

Intensifying competition and a deteriorating market environment had made the China business a drag on overseas food profits. The divestiture allows Meiji to exit the China market and redirect resources to more profitable areas. The cleanup of unprofitable China operations is expected to improve earnings quality. The financial impact is still under review, but the move is viewed as a positive structural reform step.

Key risks and challenges identified from the financial statements and supplementary materials include:

• Foreign exchange risk: A higher overseas sales ratio means yen appreciation could erode profits.
• Raw material cost pressure: Cocoa bean prices remain near record highs, potentially continuing to squeeze food segment margins.
• China restructuring risk: The earnings impact of the divestiture and the competitive environment for the remaining cocoa business require monitoring.
• Mature domestic market: Domestic food sales growth is modest, making price revisions and product innovation ongoing priorities.
• Pharmaceutical patent cliffs and generic competition: Greater generic penetration for key antibiotics could affect revenue.
• Geopolitical risk: Uncertainty in the Middle East and trade policies could disrupt raw material procurement and overseas operations.