Management Analysis Of Financial Position, Operating Results, And Cash Flows

In 2025, the world continued to undergo rapid and drastic changes, significantly impacting the business environment surrounding the Group. In addition to subdued consumer sentiment globally, heightened health consciousness intensified regulatory measures to curtail alcohol and sugar consumption, further exacerbating business conditions. Advances in AI rapidly transformed people’s values and lifestyles, while climate change, regional conflicts, and economic instability stemming from change of government in the United States and other factors required management to accurately identify and respond to these environmental changes.

In these circumstances, the Group has consistently placed CSV at the core of its management, aiming for long-term and sustainable growth. At the same time, to respond swiftly and flexibly to environmental changes, we transitioned to a new management cycle to annually review our three-year plan in 2025.

Furthermore, alongside our alcoholic beverages, non-alcoholic beverages, and pharmaceuticals businesses, we have aimed to position our Health Science business, which views solving health issues as a business opportunity, as the Group's growth driver. In 2025, profitability improved following the completion of the acquisition of 100% ownership of FANCL Corporation and the sale of the amino acid business and so forth of Kyowa Hakko Bio Co., Ltd. This established a solid business foundation for the growth of our Health Science business. Our existing alcoholic beverages, non-alcoholic beverages, and pharmaceutical businesses also performed steadily, delivering results exceeding our plan. Consequently, consolidated normalized operating profit reached a record high for the third consecutive year.

Our ESG initiatives also received high recognition from external organizations. In the MSCI ESG Rating* , an ESG indicator, we achieved an “AA” rating for the fifth consecutive year, placing us alongside global leaders in CSV management.

Furthermore, in the 7th Nikkei SDGs Management Survey, the Company secured the highest position in the overall “SDGs Management” ranking for the seventh consecutive year, receiving the top “Grand Prize” awarded to only one company.

Lion Pty Ltd has been certified as a B Corp, joining the ranks of companies meeting high standards in social and environmental performance, accountability, and transparency. A North American company New Belgium Brewing Company, Inc. and an Australian company Blackmores Limited are also certified, demonstrating the high regard for the initiatives undertaken by the Group’s major overseas operating companies.

Consolidated revenue for fiscal year 2025 increased due to steady progress in each business and the full-year contribution of FANCL CORPORATION, reaching a record high. Consolidated normalized operating profit increased significantly and reached a record high, driven by steady progress in each business including the Alcoholic Beverages businesses in Japan and Australia, the full-year contribution of FANCL CORPORATION, and improved profitability of the Health Science business including the early realization of structural reforms at Kyowa Hakko Bio Co., Ltd. In addition, profit attributable to owners of the Company increased significantly by more than 2.5 times year on year due to an increase in normalized operating profit, and other factors.

Among the key performance indicators, ROIC was 7.6%, achieving the initial target due to an increase in profit. EPS increased significantly along with the increase in profit attributable to owners of the Company, and increased by 110 yen from the previous fiscal year to 182 yen.

Results by segment are as follows.

Total assets at the end of fiscal year 2025 were ¥3,494.0 billion, an increase of ¥139.9 billion from the end of the previous fiscal year. Property, plant and equipment, goodwill and intangible assets increased by ¥131.9 billion in total from the end of the previous fiscal year, mainly due to an increase in intangible assets associated with the in-licensing of development products at Kyowa Kirin Co., Ltd. and an increase in property, plant and equipment associated with the progress of plant construction.

Equity increased by ¥61.4 billion from the end of the previous fiscal year to ¥1,595.1 billion due to an increase in retained earnings of ¥70.2 billion, an increase in reserves of ¥44.4 billion, and a decrease in non-controlling interests of ¥44.0 billion. The increase in reserves was mainly attributable to an increase in foreign currency translation differences on foreign operations of ¥41.5 billion due to a weak yen. The decrease in non-controlling interests was mainly attributable to the impact of the additional acquisition of FANCL Corporation.

Liabilities increased by ¥78.5 billion from the end of the previous fiscal year to ¥1,898.9 billion. Bonds and borrowings increased by ¥65.9 billion mainly due to new issuances of bonds.

As a result, the equity ratio attributable to owners of the Company and the gross debt equity ratio stood at 36.8% and 0.72 times, respectively.

The balance of cash and cash equivalents (hereinafter, “net cash”) at the end of fiscal year 2025 was ¥125.3 billion, an increase of ¥17.4 billion (excluding a decrease of ¥10.7 billion due to changes in accounting policy) from the end of the previous fiscal year. Cash flows for each activity were as follows:

The Company will allocate resources to its businesses and distribute profits to its shareholders as set out below.

Regarding resource allocation to businesses, giving top priority to growth investment with a focus on the Health Science domain, the Company will make investments that contribute to enhancement of existing businesses and profitability improvement. The Company will also implement a stable and continuous allocation of resources to intangible value (such as brands, research and development, information and communication technology (ICT), and human resources) as well as new business creation that sustain the growth of future cash flows. The Company will take a disciplined approach to investments in terms of maintaining and improving the Kirin Group’s capital efficiency.

We view the distribution of profits to shareholders as a key management matter. Since our listing in 1949, we have continued to pay dividends without fail in every fiscal year. We paid dividends until FY2024 with a target payout ratio of 40% or more on a normalized EPS basis. From FY2025 onwards, in order to achieve more stable and sustainable dividends, we have changed our dividend policy to one that aims for a consolidated dividend on equity (DOE) of 5% or more. In principle, we will pay a progressive dividend per share. As part of management that is conscious of capital costs with the aim of increasing corporate value, we will strive to further enhance the return of profits to shareholders and improve capital efficiency. We will continue to consider whether or not to repurchase our own shares as an additional form of shareholder return, taking into account the optimal capital structure, the market environment, and our capital capacity after the investment.

With regard to financing, we will utilize sustainable finance to promote CSV management. Funds raised will be allocated to initiatives aimed at solving social issues in line with the CSV Purpose. In preparation for rapid changes in the economic environment and other factors, priority is given to debt financing while maintaining a high credit rating that is not affected by financial conditions. When raising funds through the issuance of shares for investments required to achieve medium- to long-term goals, we will fulfill our accountability to shareholders by carefully considering the impact on stakeholders and other factors, after verification and review by the Board.