Meiji Holdings cuts profit forecast after US$122B impairment on China food operations
Meiji revises profit outlook downward following fresh China impairments, citing weak sales, rising costs, and operational challenges across dairy, ice cream, and chocolate segments.
JAPAN – Japan’s Meiji Holdings has lowered its full-year profit forecast after announcing a fresh impairment related to its food operations in China.
The Tokyo-headquartered company said it expects to record a fourth-quarter extraordinary loss of ¥19.4bn ($122m) tied to its China subsidiary operations, covering its dairy and B2B business, ice cream, and chocolate segments.
According to the company, the impairment on non-current assets includes ¥2.7bn ($17 million) for dairy and B2B, ¥7.9bn ($50 million) for ice cream, and ¥8.8bn ($55 million) for chocolate.
As a result, profit attributable to shareholders for the fiscal year ending 31 March 2025 is now projected to fall to ¥36.5bn ($230 million), down from the earlier forecast of ¥54bn ($340 million). Despite the downgrade, Meiji maintained its group sales guidance at ¥1.18trn ($7.4 billion) and its operating profit forecast at ¥91bn ($570 million).
However, the company acknowledged ongoing challenges, stating that net sales growth continues to underperform our plans.
Meiji also revised its ordinary profit estimate upward to ¥93bn $585 million from ¥87.5bn ($550 million).
The latest impairment follows a previous ¥14.3bn ($90 million) charge recorded in fiscal 2023 related to its drinking milk and yogurt operations in China.
In a separate presentation, Meiji said, “we promoted contribution margin improvement and cost reforms but net sales fell below plans”.
Explaining the decline in its ice cream business, the company said: “Profitability for the ice-cream business is worsening due to significant changes in the sales environment compared to initial assumptions, and an increase in indirect manufacturing costs associated with the launch of operations at the Shanghai plant in March 2024.”
Similarly, the chocolate segment has been affected by rising costs. “The Chocolate business has seen a decline in profitability due to an increase in indirect manufacturing costs associated with the launch of operations at the Guangzhou plant in January 2024 and rising raw material procurement costs,” Meiji said.
To address the challenges, Meiji outlined several corrective measures. For its dairy and B2B business, the company plans to improve cost structures, expand distribution, and review low-profitability products.
In the ice cream segment, production at the Shanghai plant will be temporarily suspended, while capacity at the Guangzhou facility will be increased.
For chocolate, Meiji aims to focus on high-performing products, expand distribution channels, and boost exports.
The company also confirmed that its AustAsia dairy farm business has been removed from the scope of equity method accounting due to a reduced equity stake.
It added: “As a result, we project an improvement in equity method investment gains/losses and expect to record foreign-exchange gains.”
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