Japan’s Meiji Holdings has revised its profit forecasts due to challenges in its China business. Despite raising sales outlook for the year ended on 31 March, the company expects lower-than-expected results for ordinary profit and shareholder dividends. Meiji disclosed that it will incur an “extraordinary income” charge of Y22.5bn ($148.2m) in the final quarter of the year related to the sale of investment securities. Additionally, an impairment loss of around Y14.3bn on non-current assets in China’s drinking milk and yogurt business is expected.
The company attributes the challenges in China to an intensified price competition and declining profitability in the market. As a result, the outlook for shareholder profits has been reduced to Y48bn from Y51bn, with ordinary profit anticipated to be Y76bn compared to Y78bn previously. The difficulties are specifically linked to Meiji’s AustAsia dairy farm business unit in China, where rising feed prices and falling raw milk prices have impacted profitability, leading to an expected fourth-quarter impairment loss of Y6.2bn.
On a positive note, Meiji has raised its forecasts for sales and operating profit. Sales are expected to reach Y1.11tn by 31 March, up from the previous forecast of Y1.09tn. Operating profit is also anticipated to be Y84.5bn, higher than the previous estimate of Y80bn. The company’s diverse product portfolio includes branded dairy products, cheese, ice cream, chocolate, and gummy confectionery. Meiji also operates in the pharmaceutical sector, with sales forecast improvements attributed to antibacterial drugs.
“The food segment of Meiji benefitted from price increases across various categories, coupled with lower than expected expenses,” the company explained. Overall, Meiji remains optimistic about its business despite the challenges faced in China, emphasizing its commitment to delivering quality products in the food and beverage industry.
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