Kobayashi Pharmaceutical (4967) Q2 2024 earnings summary

Executive summary

• Significant health issues from red yeast rice products led to major recalls, compensation, and business withdrawal, causing a sharp profit drop and management overhaul.

• Company prioritized quality, safety, and trust rebuilding, launching comprehensive compensation for affected customers.

• International business, especially in the US and Southeast Asia, grew strongly, while domestic sales suffered from the recall and ad suspension.

Financial highlights

• Consolidated sales for 1H 2024: ¥73,136 million, down 0.7% year-over-year; operating income ¥9,471 million, down 9.0%; net income ¥1,436 million, down 81.7%.

• Extraordinary loss of ¥7,726 million recorded due to product recall-related losses.

• Domestic sales fell 5.2% to ¥54,739 million; international sales rose 16.7% to ¥18,140 million.

• EBITDA for 1H 2024: ¥13.3 billion, up 1.0% year-over-year.

• Cash and cash equivalents at June 2024: ¥47,172 million, down ¥12,518 million from previous year-end.

Outlook and guidance

• Full-year 2024 sales forecast revised to ¥169,000 million; operating income to ¥24,000 million (–6.9% YoY); net income forecast at ¥12,100 million (–40.5% YoY), with further costs possible.

• EPS forecast for FY2024: ¥162.77; dividend forecast: ¥102–103/share (unchanged YoY).

• No domestic advertising resumption expected within the year; inbound demand and FX assumptions unchanged.