Kobayashi Pharmaceutical (4967) Q4 2024 earnings summary

Executive summary

• Net sales declined 4.5% year-over-year to ¥165,600 million, with operating income down 3.6% to ¥24,860 million and net income attributable to owners of the parent dropping 50.5% to ¥10,067 million.

• The sharp decline in net income was primarily due to extraordinary losses related to a voluntary recall of benikoji-related products, which also led to increased provisions and compensation costs.

• The company launched 32 new products domestically and saw inbound demand from foreign tourists, but healthcare and direct marketing sales were negatively impacted by the recall.

• International business grew sales by 6.1%, driven by the U.S. and Southeast Asia, but segment income fell 60.5% due to higher costs and the recall's impact in China.

Financial highlights

• Gross profit margin decreased as gross profit fell to ¥87,603 million from ¥96,375 million year-over-year.

• Extraordinary losses totaled ¥13,609 million, mainly from defective product-related costs.

• Net cash provided by operating activities was ¥11,246 million, down from ¥18,360 million the previous year.

• Cash and cash equivalents at year-end were ¥45,973 million, a decrease of ¥13,717 million.

Outlook and guidance

• For FY2025, net sales are forecast to rise 3.3% to ¥171,000 million, but operating income is expected to drop 43.7% to ¥14,000 million due to increased investments in quality assurance and restructuring.

• Net income is projected to recover slightly to ¥10,500 million (+4.3% year-over-year).

• The company withdrew its medium-term management plan due to the recall incident and is implementing structural reforms and a new growth policy.