Japan’s Meiji Holdings has lowered its full-year profit outlook after announcing another impairment linked to its food operations in China.
The Tokyo-based group said it expects to record an extraordinary loss of Y19.4bn ($122m) in the fourth quarter, relating to its Chinese subsidiary businesses. The charge covers its dairy and B2B operations, as well as its ice cream and chocolate segments.
According to the company, the impairment on non-current assets is split across the divisions, with Y2.7bn attributed to dairy and B2B, Y7.9bn to ice cream, and Y8.8bn to chocolate.
As a result, profit attributable to shareholders for the year ending 31 March (fiscal 2025) is now forecast to fall to Y36.5bn, down from a previous estimate of Y54bn. However, Meiji maintained its guidance for group sales at Y1.18trn and operating profit at Y91bn.
Despite holding its top-line outlook, the company acknowledged that “net sales growth continues to underperform our plans”.
At the same time, Meiji increased its ordinary profit forecast to Y93bn, up from Y87.5bn
Ongoing challenges in China
The latest impairment follows a Y14.3bn charge recorded in fiscal 2023, which was also linked to Meiji’s dairy and yogurt operations in China.
In a separate presentation, the company said that while it has implemented cost reduction measures and worked to improve margins, sales performance has remained below expectations.
Profitability within the ice cream division has come under particular pressure. Meiji said this reflects a significant shift in market conditions compared with earlier assumptions, alongside higher indirect manufacturing costs following the launch of its Shanghai facility in March 2024.
Similarly, the chocolate business has been impacted by rising costs. Meiji pointed to increased indirect manufacturing expenses tied to the start-up of its Guangzhou plant in January 2024, as well as higher raw material procurement costs.
Strategic response
In response, Meiji is implementing a series of corrective measures across its Chinese operations.
For its dairy and B2B activities, the company plans to strengthen cost controls, improve sales performance, expand distribution networks and review lower-margin product lines.
Within ice cream, Meiji intends to temporarily suspend production at its Shanghai facility while increasing capacity at its Guangzhou plant.
In chocolate, the focus will be on driving volume growth in high-performing product lines, alongside expanding distribution and boosting export activity.
Portfolio adjustments
When announcing the earlier impairment in April 2024, Meiji attributed the challenges in part to its AustAsia dairy farming business, which faced declining profitability due to rising feed costs and falling raw milk prices.
The company has now removed AustAsia from its equity-method accounting scope, following a reduction in its ownership stake.
“As a result, we project an improvement in equity method investment gains/losses and expect to record foreign-exchange gains,” Meiji said.
