Tokyo, Japan-based Kyokuyo Co. – Japan’s fourth-largest seafood company in total sales – recently suffered a year-over-year dip in sales and profits, the company reported in its financial results for the period 1 April through 31 December 2023.
Net sales for Kyokuyo were down 5.5 percent year over year, totaling JPY 201.6 billion (USD 1.3 billion, EUR 1.2 billion), and operating profit dropped 14.5 percent, slipping to JPY 6.94 billion (USD 45.7 million, EUR 42.1 million).
Kyokuyo’s ordinary profit declined 16.1 percent to JPY 6.95 billion (USD 46 million, EUR 42.4 million), while the profit attributable to owners of the parent company fell by 16.4 percent to JPY 4.9 billion (USD 32.6 million, EUR 29.8 million). Its updated forecast for the full year ending 31 March 2024 in net sales is JPY 262 billion (USD 1.7 billion, EUR 1.6 billion), a 3.7 percent decline from the previous year.
In its previous half-year report – in which its year-over-year net sales and ordinary profit fell by 5.6 percent and 28.6 percent, respectively – Kyokuyo noted that sales and profits in its Marine Products Business were declining due to uncertain seafood market conditions.
Going forward, the company’s medium-term business plan focuses on a shift from exporting Japan-produced seafood to both producing and selling overseas. To accomplish this, it has been opening more overseas production facilities and developing products specifically for overseas markets.
To boost sales in Southeast Asia, Kyokuyo established Kyokuyo Vina Foods Co. as a Vietnamese subsidiary in July 2022 that focuses on primary processing of seafood and production of simmered and grilled fish. Processing in Vietnam will help it penetrate the local market and lessen its dependence on processing in China, where Covid-19 shutdowns caused major disruptions. Construction on Kyokuyo's Vietnam plant began in 2023, and it is expected to become operational some time in FY 2024.
Separately, in April 2023, the company established Ocean’s Kitchen Corp. in Kent, Washington, U.S.A. to manufacture and sell imitation crab meat in the United States. A plant is being remodeled there with a planned beginning of surimi manufacturing in FY 2024.
In January 2024, Kyokuyo’s European subsidiary – Kyokuyo Europe BV – acquired Turkish seafood processor Kocaman Su Ürünleri İhracat ve İthalat Ticaret. The company sells frozen seafood domestically but also exports other frozen food products to the E.U.
“The recent business environment in the seafood and food industry, to which our group belongs, has been particularly severe in the domestic market due to population decline and a decline in the consumption of fish,” the company said. “The continued decline in seafood consumption due to low demand and rising logistics and labor costs due to labor shortages are putting pressure on profits.”
Kyokuyo said it wants to increase overseas net sales to JPY 30 billion (USD 199.4 million, EUR 182.3 million) for full-year 2023. Japanese fiscal years are named for the starting date rather than the ending date, so FY 2023 is the current fiscal year. For reference, in FY 2022, overseas sales reached JPY 25.4 billion (USD 167.5 million, EUR 154.2 million).
Despite the recent challenges, the company said its prospects for overseas expansion are bright.
“In addition to improving living standards due to increased incomes – mainly in emerging countries in Asia – a global protein crisis has led to an increase in demand for seafood globally,” Kyokuyo said.
The company also recently announced in a press release that it would issue 1 million new shares with the goal of raising up to JPY 3.5 billion (USD 23.1 million, EUR 21.5 million). That includes a purchase of 150,000 shares by SMBC Nikko Securities for a third-party allotment that will pay Kyokuyo JPY 486 million (USD 3.2 million , EUR 3 million). The funds raised will be transferred to overseas subsidiaries of the group and used to repay loans that the company procured from financial institutions for capital investments.
