Ajinomoto H1 FY2025 presentation: Functional Materials drives growth amid food challenges

Introduction & Market Context

Ajinomoto Co Inc (TSE:2802) presented its first half fiscal year 2025 results on November 6, 2025, showing stable performance with sales of ¥738.8 billion (99.3% of FY2024) and business profit of ¥86.7 billion (99.8% of FY2024). Despite the relatively flat H1 performance, the company maintained its ambitious full-year forecast, projecting sales of ¥1,618.0 billion (105.7% YoY) and business profit of ¥180.0 billion (113.0% YoY).

CEO Shigeo Nakamura emphasized that while progress toward the full-year plan is slightly behind schedule, the company is "quickly addressing issues faced in Q2-FY2025" and aims to "steadily achieve our forecast for FY2025." The company's stock has shown remarkable movement, with prices rising 88.07% from the last close.

As shown in the following comprehensive overview of financial performance:

Quarterly Performance Highlights

The first half of FY2025 saw Ajinomoto maintain stable business profit despite various challenges. The company achieved a slight increase in profit attributable to owners of the parent company, which rose to ¥51.2 billion (102.0% YoY).

A detailed breakdown reveals that while gross profit improved due to better margins (+¥10.0 billion), this was offset by increased SGA expenses (-¥8.7 billion) as the company invested in future growth. Currency translation had a minimal impact of approximately -¥0.7 billion on business profit.

The following waterfall chart illustrates these factors affecting H1 business profit:

Performance varied significantly across business segments. The Healthcare and Others segment, which includes the high-performing Functional Materials business, contributed an additional ¥4.2 billion to H1 business profit. However, this was partially offset by declines in the Frozen Foods segment (-¥2.7 billion) and Seasonings and Foods segment (-¥0.7 billion).

For the full year FY2025, Ajinomoto forecasts significant improvement across all segments, with particularly strong growth expected in Healthcare and Others (+37.3% YoY). The company's detailed forecast by segment shows progress toward these targets:

Segment Performance Analysis

The Functional Materials business, part of the Healthcare and Others segment, emerged as the standout performer with 120% YoY growth in both sales and business profit during H1-FY2025. This performance is driven by increased sales of ABFTM for PCs and general-purpose servers. Management indicated no change in semiconductor market trends for H2, suggesting continued strong performance.

"The segment will drive company-wide performance," the presentation noted, with full-year sales forecast to exceed 111% YoY.

In contrast, the Frozen Foods segment faced challenges, particularly in Japan where the company lost market share in gyoza products. However, management reported that after revising its price strategy in September, "sales exceeded the previous-year and we regained the top market share." For North America, the segment saw decreased sales and profit due to tariff impacts and the rescheduling of large-scale distribution sales promotions to H2.

The Bio-Pharma Services business showed promising growth following the Forge acquisition, with sales increasing 4x compared to FY2023, customer numbers up 1.5x, and approved IND applications nearly 10x higher. The company's proprietary AJICAP® technology for creating revolutionary Antibody-Drug Conjugates (ADCs) is also gaining traction with steady expansion of customers.

Strategic Initiatives

Ajinomoto outlined its long-term strategic goals through its 2030 ASV (Ajinomoto Shared Value) Indicators. These targets include ambitious financial metrics as well as social value indicators related to environmental impact and nutrition commitments.

The following chart details these comprehensive long-term targets:

To support these goals, the company forecasts operating cash flow of ¥220 billion or more in FY2025. This will fund significant investments in future growth, with capital investments planned at over ¥110 billion for FY2025 alone. The longer-term investment plan includes approximately ¥750 billion in capital investment for FY2023-2030 and around ¥300 billion earmarked for M&A during the same period.

Management has also adopted a new financial discipline indicator: maintaining a "net interest-bearing debt/EBITDA ratio of less than 2x."

Shareholder Returns

Ajinomoto announced substantial shareholder returns, including an annual dividend of ¥48 per share for FY2025 and an aggressive share buyback program. The company has already executed a buyback of up to 50 million shares (¥100 billion) in May and plans an additional buyback of up to 30 million shares (¥80 billion) in November.

The following chart illustrates the company's approach to balancing shareholder returns with investments for growth:

Forward-Looking Statements

Looking beyond 2030, CEO Nakamura emphasized the importance of innovation and maintaining a "sense of healthy urgency" in operations. The company is strengthening its corporate brand, global management structure, and data-driven management to maximize resources.

Ajinomoto faces several challenges, including increased competition from Chinese manufacturers in the MSG (umami seasonings) segment and the need to better assess customer needs in its Japanese Frozen Foods business. To address these issues, the company has established an MSG Business Collaboration Promotion Department (April 2025) and is working to maintain competitive advantages through proprietary technologies.

The company's growth path shows varying trajectories across segments, with Healthcare and Others expected to lead with 11.2% organic growth in FY2025, compared to 6.7% for Seasonings and Foods and 6.3% for Frozen Foods. This segment-specific approach is illustrated in the following reference chart:

Ajinomoto continues to focus on high-value-added products and strategic pricing to maintain market share while expanding in emerging markets. The company's efforts to innovate and adapt to changing market conditions will be crucial in navigating the challenges ahead while pursuing its ambitious growth targets for FY2025 and beyond.

Full presentation:

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