Meiji cuts profit forecasts due to impairments from challenges in China dairy business

JAPAN – Meiji Holdings, a prominent dairy company based in Japan, has revised its profit forecasts downwards, citing impairment charges related to difficulties in its China business.

Despite an increase in sales projections for the fiscal year ending on March 31, Meiji anticipates lower-than-expected profits for ordinary profit and shareholder returns.

In a filing with the Tokyo Stock Exchange on April 9, Meiji disclosed plans to incur a significant “extraordinary income” charge of ¥22.5 billion (US$148.2 million) in the final quarter of the fiscal year, linked to the sale of investment securities.

Additionally, the company expects to register around ¥14.3 billion in impairment losses on non-current assets associated with its drinking milk and yogurt business in China.

Explaining the rationale behind the impairment losses, Meiji highlighted the challenging sales environment in China, characterized by intensified price competition and declining profitability.

These factors have notably impacted the performance of Meiji’s AustAsia dairy farm business unit, attributed to rising feed prices and falling raw milk prices.

“The sales environment for the drinking milk and yogurt business in China has been significantly changed. The price competition in the market intensified, leading to a decline in our profitability.”

The revised outlook forecasts a reduction in shareholder profits from ¥51 billion to ¥48 billion, while ordinary profit is expected to decrease from ¥78 billion to ¥76 billion.

Despite these setbacks, Meiji has raised its forecasts for sales and operating profit, with sales projected at ¥1.11 trillion and operating profit at ¥84.5 billion.

Meiji’s diverse product portfolio spans beyond dairy to include cheese, ice cream, chocolate, and gummy confectionery, in addition to pharmaceutical operations.

“The food segment saw the benefits of price hikes implemented across a wide range of categories. Additionally, various expenses trended below initial assumptions,” Meiji explained.

The company attributed the sales forecast increase to factors such as price hikes across various categories within the food segment and lower-than-anticipated expenses.

Despite the challenges in its China dairy business, Meiji remains focused on navigating market complexities and optimizing its operations to drive sustainable growth and profitability.

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