Ito En Shares Surge Over 8% After Q1 Operating Profit Beats Estimates

Shares of Japanese beverage maker Ito En surged more than 8% Wednesday, following its fiscal first-quarter results, bucking a broader drop in the country's stocks.

The maker of Oi Ocha green tea on Tuesday reported operating profit of 10.2 billion yen ($63.7 million) for the three months from May through July, up 22% from a year earlier. Revenue rose 3.3% to 135.18 billion yen over the same period.

Operating profit came in well above Citi's forecast of 7.7 billion yen. The bank had expected profit to decline on the back of higher raw material and tea leaf costs, as well as expenses related to the company's vending machine business.

More than half of the 2.5 billion yen profit beat was powered by the company's vending machine business, which posted a 4% operating profit margin compared to the bank's expectations for a loss. The company said it integrated its vending machine-related businesses in May to improve profitability and business efficiency.

Citi called the first-quarter results "positive" for the shares, adding that the May-to-July period is the peak demand season for soft drinks. The bank said that the vending machine business' profitability was "impressive," given it had been loss-making until last year.

The company reported that tea leaves and beverages segment's operating profit rose 23.5% to 8.99 billion yen, while sales rose 2.7%. It attributed the improved profitability to lower promotional expenses and reduced depreciation, which helped offset rising costs.

Ito En, whose Oi Ocha brand is marketed globally with baseball star Shohei Ohtani, said it aims to expand its overseas business to more than 60 countries and regions by the fiscal year ending April 2029, from 52 currently. It said sales volumes of beverages and tea bags were increasing in markets where it already operates.