Berg Earth Co. Reports Revenue Growth Amid Persistent Losses in Q1 2026
Berg Earth Co., Ltd. (TSE:1383) reported a 3.3% year-over-year increase in revenue for the first quarter of its 2026 fiscal year, reaching JPY 788M. However, the company continued to face significant challenges, with operating profit, ordinary income, and net profit all remaining in the red.
Key Numbers
- Revenue: JPY 788M (+3.3% YoY)
- Operating Profit: △¥330M (N/A YoY)
- Ordinary Income: △¥332M (N/A YoY)
- Net Profit: △¥231M (N/A YoY)
- Operating Margin: -41.9%
- Equity Ratio: 31.7% (previous: 34.9%)
Analysis
Despite a challenging market environment, Berg Earth Co. managed to achieve a modest revenue increase, driven in part by a shift in demand for watermelon seedlings from in-house cultivation to purchased seedlings, which has been well-received for its consistent quality. Additionally, the company noted strong performance in non-vegetable seedling segments, such as home gardening and flower seedlings, during the quarter.
However, the company’s operating margin of -41.9% remains far below the industry average of 6.0%, highlighting ongoing struggles with profitability. This is attributed to rising input costs, including seed price increases, as well as higher production costs due to increased labor, depreciation, and fuel expenses. These factors have been exacerbated by declining demand for vegetable seedlings and intense competition in the market.
Notably, the company has seen a reduction in the magnitude of its losses, with operating profit improving by JPY 44M (11.8%), ordinary income by JPY 41M (11.0%), and net profit by JPY 45M (16.3%) compared to the same period last year. These improvements are largely attributed to cost-cutting measures, including reduced outsourcing costs and optimized transportation logistics.
What to Watch
Berg Earth Co. is currently implementing a mid-term management plan covering the period from 2024 to 2028, with a focus on expanding its seedling business, enhancing profitability, and developing new products and technologies. The company has also made progress in strengthening its production infrastructure, including the recent launch of operations at its subsidiary, Berg Fukushima Co., Ltd.’s Hatozawa Farm.
Looking ahead, investors should closely monitor the impact of these initiatives on long-term profitability, as well as the performance of non-vegetable seedling segments such as home gardening and flower seedlings. Additionally, the expansion of production at Hatozawa Farm may have short-term cost implications, including increased labor and depreciation expenses, which could affect near-term results.
Japan-Specific Context
It is important to note that Japanese companies often report quarterly results, and the Q1 period (November to January) typically sees lower sales and higher costs due to seasonal factors. Additionally, while the reduction in losses may appear positive, it does not necessarily reflect improved profitability, as it is primarily driven by cost reductions rather than increased revenue. Lastly, the expansion of consolidated subsidiaries, such as Berg Fukushima, may lead to short-term increases in expenses, which could affect immediate financial performance.
Source: Original filing (TDnet) | 日本語版
This article is for informational purposes only and does not constitute investment advice. Financial figures are AI-extracted and may contain errors — always verify against the original filing.