Kobayashi Pharmaceutical (4967): FY2025 Results Summary — Flat Sales, Operating Income Down 40.0% on Ad Restart and Plant Impairments

This article is based on publicly available IR materials and is not a recommendation to buy or sell any specific securities.

Kobayashi Pharmaceutical Co., Ltd. reported net sales of 165.7 billion yen for the fiscal year ended December 31, 2025, up 0.1 billion yen year on year, while operating income fell 9.9 billion yen to 14.9 billion yen. Net sales came in 5.3 billion yen short of the initial plan, but operating income exceeded the plan by 0.9 billion yen thanks to rigorous cost management. As announced on February 3, 2026, the company recorded extraordinary losses totaling 14.6 billion yen from impairment losses at the new Sendai plant and the Thai Plant, and net income fell 63.7% to 3.6 billion yen. For the year ending December 31, 2026, the company forecasts net sales of 173.0 billion yen (up 4.4%) and operating income of 12.5 billion yen (down 16.2%).

Consolidated Results (Full-Year Actual)

Net sales increased but operating income decreased on a full-year basis. The International Business performed steadily, mainly in the U.S. and Southeast Asia. Operating income declined due to such factors as the impact of the full-scale resumption of domestic TV advertising from July and increased fixed costs associated with securing personnel at plants to improve quality. In the fourth quarter, an additional extraordinary loss of approximately 300 million yen (3.6 billion for the full year) related to red yeast rice-related products was recorded on a non-consolidated basis.

Item (billion yen)	FY 25 Full year	FY 24 Full year	Year-on-year change	Percentage of net sales (FY 25)
Net sales	165.7	165.6	+0.1%	–
Gross profit	84.7	87.6	-3.3%	51.1%
Operating income	14.9	24.8	-40.0%	9.0%
Ordinary income	16.9	26.8	-36.7%	10.3%
Net income	3.6	10.0	-63.7%	2.2%
EBITDA (Operating income + Depreciation + Amortization of goodwill)	23.6	32.8	-28.0%	14.3%

Versus the initial plan, consolidated net sales fell short by 5.3 billion yen (Domestic Business down 1.9 billion yen, International Business down 3.5 billion yen), reflecting delays in resuming domestic advertising and sluggish sales in mainland China. Operating income nonetheless exceeded the plan by 0.9 billion yen, driven mainly by the Domestic Business.

Business (billion yen)	Net sales FY 25	Net sales YoY change	Net sales vs. initial plan	Operating income FY 25	Operating income YoY change	Operating income vs. initial plan
Consolidated	165.7	+0.1 billion yen (+0.1%)	-5.3 billion yen	14.9	-9.9 billion yen (-40.0%)	+0.9 billion yen
Domestic Business	118.0	-1.8 billion yen (-1.5%)	-1.9 billion yen	13.9	-9.3 billion yen (-39.9%)	+0.2 billion yen
International Business	46.9	+1.8 billion yen (+4.0%)	-3.5 billion yen	0.8	-0.5 billion yen (-36.3%)	+0.6 billion yen

Segment Results

In the Domestic Business, both net sales and operating income decreased on a full-year basis, mainly due to the continued impact of the previous year’s downward trend in the Direct Marketing Business, while operating income decreased on an increase in advertising expenses following the resumption of advertising. Contributions from new products (+2.9 billion yen) and an increase in inbound tourist demand (+1.2 billion yen) were offset by a decrease in sales of existing products due to the impact of the advertising suspension until Q2 (-4.3 billion yen) and a fall in Direct Marketing Business sales due to cancellation of regular subscriptions (-1.8 billion yen).

Domestic Business (billion yen)	FY 25 Full year	FY 24 Full year	Year-on-year change
Healthcare products	58.3	59.1	-1.5%
Household products	50.8	50.1	+1.3%
Body warmers	6.1	6.0	+2.6%
Direct Marketing Business	2.7	4.5	-39.3%
Total net sales	118.0	119.9	-1.5%
Total operating income	13.9	23.2	-39.9%
Operating margin	11.8%	19.4%	–

In the International Business, net sales increased but operating income decreased on a full-year basis. Despite the significant impact of a decline in demand for body warmers and Netsusama Sheet in mainland China due to seasonal factors, international sales as a whole increased, driven by strong performance in the U.S. and Southeast Asia. The effect of foreign currency translation was -0.15 billion yen for net sales and +0.2 billion yen for operating income.

International Business net sales (billion yen)	FY 25 Full year	FY 24 Full year	YoY change (incl. FX translation)	YoY change (excl. FX translation)
U.S.	23.8	21.2	+12.1%	+13.5%
Mainland China	6.8	8.2	-16.6%	-15.9%
Hong Kong	2.7	2.8	-3.5%	-2.3%
Southeast Asia	9.2	8.5	+8.4%	+5.8%
Other	4.2	4.2	-0.3%	-0.4%
Total International Business	46.9	45.1	+4.0%	+4.4%
Total operating income	0.8	1.2	-36.3%	-52.2%
Operating margin	1.7%	2.8%	–	–

Extraordinary Losses

As described in the February 3, 2026 release, the company recorded impairment losses at two plants, for extraordinary losses of 14.6 billion yen in total. For the new Sendai plant, an extraordinary loss of 13.4 billion yen was recorded: verification preparations required to comply with pharmaceutical manufacturing guidelines established by various countries, together with the strengthening of the quality management system, are now expected to require more time and cost than initially anticipated, and the full-scale market launch of pharmaceuticals in mainland China is expected to take longer than initially anticipated, leading to a revised sales plan and an anticipated decline in future profitability. For the Thai Plant, an extraordinary loss of 1.2 billion yen was recorded, as establishing quality control and stable production systems is now expected to take longer than initially anticipated.

FY2026 Forecast

For the year ending December 31, 2026, net sales are forecast to increase to 173.0 billion yen, up 4.4% year on year, due to the effects of resuming domestic advertising throughout the year and the continued growth of overseas sales. Operating income is forecast to decrease to 12.5 billion yen, down 16.2%, as investment for future growth such as advertising and capital expenditures takes precedence. The forecast assumes exchange rates of US$ 1 = 148 yen and Chinese yuan 1 = 21.0 yen.

Item (billion yen unless noted)	FY2025 results	FY2026 forecast	Year-on-year change	Percentage of net sales (forecast)
Net sales	165.7	173.0	+4.4%	–
Operating income	14.9	12.5	-16.2%	7.2%
Ordinary income	16.9	13.0	-23.5%	7.5%
Net income	3.6	10.0	+173.5%	5.8%
EBITDA	23.6	22.0	-6.9%	12.7%
EPS (yen)	4.919	13.452	+173.5%	–
ROE	1.7%	4.8%	–	–
Net sales of Domestic Business	118.0	123.0	+4.2%	–
Net sales of International Business	46.9	49.4	+5.1%	–

Assumptions cited for the forecast include, in Japan, a decline in sales due to the termination of the company’s own direct marketing platform, inbound tourism remaining at the same level as in 2025, the impact of resuming advertising year-round (sales increase, profit decrease), and an increase in expenses associated with the operation of the new Sendai plant and the Saito R&D and Manufacturing Lab. Overseas, steady overall performance is expected in the U.S. despite a high hurdle from strong body warmer sales in 2025; in China the decline in demand for Netsusama Sheet is expected to bottom out with ANMERUTSU shipments returning to normal; and in Asia both pharmaceuticals and Netsusama Sheet are expected to perform well. No contribution from new M&A deals is expected in either the domestic or international business.

Shareholder Returns

The dividend for FY2025, initially set at 104 yen (44 yen for interim, 60 yen for year-end), will be paid as planned at 104 yen (44 yen for interim, 60 yen for year-end). For FY2026 the company presents a dividend of 106 yen (45 yen for interim, 61 yen for year-end).

Item	FY2025 results	FY2026 forecast
Dividend per share	104 yen (44 yen for interim, 60 yen for year-end)	106 yen (45 yen for interim, 61 yen for year-end)
ROE	1.7%	4.8%

Response to the Red Yeast Rice Incident

The company reiterated its apologies over the 2024 red yeast rice-related product incident and stated that, under its new management structure, it continues to give priority above all to apologizing to and compensating customers who have suffered health damage and suppliers who have suffered losses. The measures outlined in the “Measures to Prevent Recurrence” released in September 2024 have been largely implemented, and with implementation completed, thorough operation and continuous improvement are being promoted. On compensation for health damage (for hospitalization and hospital visits), as of January 31, 2026, of the 510 people found eligible for compensation, payment for 260 people had been completed; 1,340 people had contacted the compensation desk and 890 had submitted compensation application documents. The materials note that, regarding death-related inquiries, the company’s survey has identified no cases where death was clearly caused by consumption of the product at this point.

On governance, the company will propose a transition to a company with an audit and supervisory committee at the Annual General Meeting of Shareholders scheduled for March 27, 2026, in order to strengthen the management supervisory function and accelerate decision-making through delegation of authority. The Board of Directors opposes all of the shareholder proposals submitted for that meeting.

Cash Flow and Capital Investment

Cash flow from operating activities was 25.5 billion yen in FY25 against 11.2 billion yen in FY24, and free cash flow was 25.4 billion yen against -7.2 billion yen. Capital investment (including goodwill) was 20.7 billion yen versus 24.8 billion yen in FY24, with 6.5 billion yen forecast for FY26. Depreciation and amortization (including goodwill amortization) was 8.7 billion yen versus 8.0 billion yen, with 9.5 billion yen forecast for FY26.

This article is an analysis based on publicly available information and is not a recommendation to buy or sell any specific securities. Investment decisions are your own responsibility.