December 21, 2010

Strong yen boosts Japanese dairy producers

A more powerful yen is lifting Japan's dairy sector by lowering the cost of ingredients imported from markets such as Australia and Europe and paid for in US dollars and euros.

This is likely to lift Megmilk Snow Brand Co.'s operating profit nearly JPY2 billion (US$23.89 million) in the year ending in March and bolster Meiji Dairies Corp., a unit of Meiji Holdings Co., by more than JPY3 billion (US$35.84 million).

The merger that created Megmilk Snow Brand last year has led to more efficient procurement, which, coupled with the yen's strength, lowered operating costs by JPY1.1 billion (US$13.14 million) on the year in the April-September period. Costs are poised to fall by nearly JPY1 billion (US$11.95 million) in the second half.

The yen is trading higher than Meiji Dairies' assumed rate of 90 to the dollar for the current fiscal year, leading to cheaper imports of supplies. Full-year dairy materials costs are expected to ease by more than JPY3 billion (US$35.84 million).

Morinaga Milk Industry Co., meanwhile, is likely to see material procurement costs rise by only around JPY600 million (US$7.17 million)this fiscal year, instead of the JPY3.3 billion (US$39.42 million) it had initially forecast.

The company still has an inventory of cheese ingredients it imported when prices were higher. But other supplies have come down in price, due to the increased buying power of the yen.