Unicharm's Earnings Call: Mixed Performance Amid Asian Struggles

byjoko •Rabu, Agustus 13, 2025

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Unicharm Corporation ((JP:8113)) has conducted its Q2 earnings call. Continue reading for the key takeaways from the call.

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Unicharm Corporation's latest earnings call presented a varied outlook, highlighting both progress and obstacles. Although the company achieved strong results in Japan, North America, and the Middle East, it encountered substantial difficulties in the Asian region, especially in China. This contrasting situation resulted in a cautious attitude, with hopeful indicators for future improvement being offset by current challenges, including a second reduction in the projected outlook.

Japanese Business Achievements

Unicharm's activities in Japan achieved unprecedented levels, with a 4.1% growth in net sales and a 2.9% increase in core operating income, representing the best performance ever documented. This achievement was due to strategic value transformation efforts, the introduction of new products, and a substantial increase in the sales proportion of wellness care and pet care items.

Growth in North America and the Middle East

The firm announced a 2.3% growth in net sales and a 12.7% surge in core operating income across North America and the Middle East. The core operating margin rose to 14.6%, fueled by strong results in the pet care industry in North America and increased demand for baby and feminine care items in the Middle East.

Record Dividend Increase

Unicharm revealed a strategy to raise its yearly dividend by JPY3.3 per share, reaching JPY18 per share, which signifies the 24th straight year of increased dividends. This move highlights the company's dedication to providing returns to its investors.

Insurance Income and Tax Advantages

Interim earnings belonging to the parent company increased because of a JPY5.3 billion insurance income received in India and the effective application of tax loss carryforwards associated with this revenue, offering financial support during other difficulties.

Investment Strategies to Drive Long-Term Expansion

The organization is undertaking bold investments in targeted marketing and sales initiatives, with a strong emphasis on the digital marketplace. These actions are anticipated to produce favorable outcomes starting from the third quarter, showcasing a forward-thinking strategy for upcoming expansion.

Sales and Primary Operating Revenue Drop

Unicharm's total sales fell to ¥464.2 billion, representing a 4.8% drop, while its main operating income decreased by 22% to JPY57 billion. This reduction was primarily because of a strong base from the prior fiscal year, which recorded exceptionally high profits.

Difficulties in the Asian Market

The Asian market presented major difficulties, as net sales dropped by 14.5% and core operating income fell by 69.4%. The main problems were in China, Indonesia, and Thailand, worsened by damage to the company's reputation and intense competition from local firms.

Reputational Damage in China

Sales and profits in China were heavily affected by harmful rumors regarding feminine care products, resulting in a significant drop in sales and profit margins, which underscores the fragility of brand reputation.

Rising Costs and Expenses

Higher SG&A expenses, such as those related to logistics, sales marketing, and personnel costs, rose by 1.9 percentage points relative to sales, greatly affecting core operating income and highlighting the importance of managing expenses.

Second Downward Forecast Revision

Unicharm has lowered its profit projection for the fiscal year concluding on December 31, 2025, because of a delayed recovery in Asia and short-term effects in China. However, the company still holds a positive outlook for its operations in Japan, North America, and the Middle East.

Forward-Looking Guidance

Although there are obstacles, Unicharm continues to focus on its strategic investments and intends to raise its annual dividend while buying back more treasury stock. The company strives for a total return ratio of 50% or higher, showing faith in its long-term growth approach.

In summary, the earnings call of Unicharm Corporation showcased a multifaceted scenario of successes and obstacles. Although the company has achieved notable progress in Japan, North America, and the Middle East, the Asian market continues to pose persistent challenges. The general outlook remains one of cautious hope, with strategic investments and an emphasis on returning value to shareholders providing a way ahead.

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