Prima Ham Q2 FY2027: Sales rise 5.1%, operating profit falls 12.2%

Prima Ham posted higher revenue in the first half of FY2027, but operating and ordinary profit declined. Net income attributable to owners of the parent also fell, as sales growth failed to translate into stronger earnings.

Revenue increased on higher sales volumes of ham and sausages, processed foods and meat. But the rise in selling, general and administrative expenses exceeded the increase in gross profit, leaving higher sales unable to lift operating profit. The operating margin fell to about 1.7% from about 2.1% a year earlier, making a recovery in profitability alongside volume growth a key priority.

Processed Foods recorded a roughly 2.6% year-on-year increase in sales to external customers, while operating profit fell about 0.3%. Higher sales volumes lifted revenue, but profit remained broadly flat.

Meat sales to external customers rose about 9.9% year on year, but operating profit declined about 26.1%. Turning the expansion in meat sales into earnings remains a challenge. The earnings release did not separately explain the reasons for the decline in profit by segment.

Other includes meat sales through the e-commerce business and the scientific equipment business. Operating profit rose about 17.8% year on year. From FY2027, meat sales through the e-commerce business were moved from the Meat segment to Other, so the year-on-year comparison reflects this change in classification.

Total assets increased from the end of the previous fiscal year, while the equity ratio declined. Operating cash flow was higher than a year earlier, and outflows from investing activities narrowed.

The improvement in investing cash flow included the collection of receivables for securities sold at the end of the previous consolidated fiscal year. Prima Ham plans an interim dividend of ¥40 and a year-end dividend of ¥40, for an annual total of ¥80, unchanged from the previous fiscal year. The earnings release did not announce a new share buyback policy, and the company plans to maintain stable dividends for now.

Prima Ham left its consolidated forecast for FY2027 unchanged. It expects revenue to rise 5.1% from the previous fiscal year, operating profit to increase 20.5% and net income attributable to owners of the parent to grow 63.5%.

There were no revisions to the previous forecast. The earnings release did not provide full-year amounts for the prior fiscal year, so the table shows whether the company revised its forecast and the year-on-year rates it disclosed. Operating profit fell in the first half, while the full-year plan calls for growth, putting the focus on how much profit Prima Ham can generate in the second half.

The earnings release noted that actual results may differ from the forecast, but did not list specific risk factors. The results put the focus on whether the company can turn higher sales volumes into better profitability.

• Margin recovery: Revenue rose year on year, but operating profit declined. If the company cannot absorb higher selling, general and administrative expenses, earnings may remain sluggish even as sales continue to grow.
• Meat segment profitability: The Meat segment increased revenue but operating profit fell about 26.1% year on year. Its ability to pair sales growth with earnings will influence a companywide recovery.
• Forecast uncertainty: Prima Ham says its forecast is based on information currently available and assumptions it considers reasonable. Actual results could differ materially due to a range of factors.