Strengthening of Operating Base and Challenge New Developments

Transcription

1 Financial Meeting for the Second Quarter of Fiscal 2010 Strengthening of Operating Base and Challenge New Developments 1st Stage Interim Report July 1, 2010 Kewpie Corporation (

2 Contents 1) Fiscal 2010 Interim Results 2) Fiscal 2010 Plans 3) Fiscal 2010 Plans by Segment 4) Reference Materials Note: Figures less than units indicated have been rounded off Note: The above content comprises statements that constitute forward-looking statements. These include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and the financial condition of the Company. Such forward-looking statements are not guarantees of future performance but involve risks and uncertainties, and actual results may differ from those in the forward-looking statements due to various factors. -1-

3 Fiscal 2010 Interim Results -2-

4 Fiscal 2010 Interim Results Net Sales Increase by 5 Billion Yen; Operating Income Increase by 4.3 Billion Yen (both Year-on-Year) ( bn) 5/09 5/10 Result Increase/ Decrease Year-on-Year Plan Comparison* Net Sales % -7.1 Foodstuffs % - Distribution % - Operating Income % 2.8 Foodstuffs % - Distribution % ー Elimination/ Corporate % ー Ordinary Income % 3.1 Net Income % 1.5 *Plan comparison indicates difference for figures announced on January,

5 Fiscal 2010 Interim Summary of Sales Core Products Grow Solidly, Despite Decrease in Sales of Foodstuffs ( bn) 5/09 5/10 Result Increase /Decrease Year-on-Year Sales % Condiments and Processed Foods % Health Function Products % Egg Products % -2.7% Salad and Prepared Foods % Common Business Operations % Distribution Systems % Sales By Segment Condiments and Processed Foods Health Function Products Egg Products Salad and Prepared Foods Distribution Systems Increase /Decrease (Year Earlier) Sales of Processed Foods decreased, but condiments for salads expanded sales quantity and market share Focus on selected items in healthcare products had negative impact, but hyaluronic acid products showed good results Good sales of material products with added value to confectionery and bakery industries, etc. Shift of business categories and other factors caused sales to decrease, but cut vegetables and other core products expanded solidly Despite the impact of deceases in sales volume by manufacturers and other customers, sales rose due to the increase in number of consolidated companies -4-

6 Fiscal 2010 Interim Summary of Operating Income Operating Income Increases due to Stabilized Raw Material and Energy Costs as well as Cost Reductions ( bn) 5/09 5/10 Result Increase /Decrease Year-on-Year Operating Income % Condiments and Processed Foods % Health Function Products % Egg Products % 45.5% Salad and Prepared Foods % Common Business Operations % Distribution Systems % Elimination/Corporate % Sales By Segment Condiments and Processed Foods Health Function Products Egg Products Salad and Prepared Foods Distribution Systems Increase/Decrease (Year Earlier) Condiments for salads performed solidly, and stabilized raw materials costs and cost reductions contributed to profits Profitability in the healthcare section improved Cost reductions as well as positive effect of increased sales of core products, etc. contributed to profits Profits increased as reinforcement of business constitution progressed through shifts of business categories and other measures Heightened efficiency of storage and transportation functions and other factors contributed to profits -5-

7 Fiscal 2010 Interim Factors Causing Increase and Decrease in Net Sales and Operating Income Factors Causing Increase and Decrease in Net Sales ( bn) 5/09 5/10 Result Increase Net Sales Factors Causing Increase and Decrease in Operating Income ( bn) 5/09 5/10 Result Increase Operating income Cultivation of the domestic market Cultivation of the domestic market Business development in overseas market (Expansion in East Asia + the U.S.) Business development in overseas market (Expansion in East Asia + the U.S.) Concentration on core products (Including quasi-core products) Other existing products, etc. Concentration on core products (Including quasi-core products) Other existing products, etc. Distribution systems business Total negative impact: Total positive impact: +4.4 Distribution systems business Impact of Costs and Price Revisions *Major factors included in the operating income indicated above -0.1 Marketing expenses Impact of price revisions -0.1 Retirement benefits expenses, etc. Total negative impact: Total positive impact: Improvement of cost structure of the group Material and energy costs -6-

8 Fiscal 2010 interim Key Points of Non-Operating and Extraordinary Income/Expenses ( bn) 5/09 5/10 Increase Operating Income Non-Operating Income/Expenses Ordinary Income Increase in equity in earning of affiliates Decrease in interest expenses Increase in foreign exchange losses Extraordinary Income/Expenses Income before Income Taxes Increase in allowance for doubtful accounts 0.06 Decrease in losses on disposal of fixed assets 0.08 Income Taxes Minority Interests Increase in income taxes Increase in minority interests Net Income

9 Fiscal 2010 Interim Key Points of Balanced Sheet ( bn) 200 5/09 11/09 5/ Current Assets Fixed Assets Liabilities Net Assets Current Assets Fixed Assets Liabilities Net Assets Comparison with FY2009 Increase in Current Assets 7.6 bn Increase in cash and deposit 2.1 bn Increase in receivable in trade 3.7 bn Increase in inventories 0.9 bn Increase in Tangible and Intangible Fixed Assets 0.7 bn Increase in purchase 6.6 bn Decrease in depreciation Increase accompanying new consolidation on subsidiaries bn 0.7 bn Decrease in Investments and Other Assets 0.7 bn Decrease in investments in securities bn Increase in guarantee deposits 0.4 bn Increase in Liabilities 0.7 bn Increase in payables in trade 1.7 bn Decrease in loans payable bn Increase in Net Asset 7.0 bn Increase in earned surplus 5.0 bn Increase in minority interests 1.8 bn -8-

10 Fiscal 2010 interim Key Points of Cash flow ( bn) /08 5/09 5/ Cash Flow from Cash Flow from Cash Flow from Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities Operating Activities Investing Activities Financing Activities Comparison with FY2009 Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities Increase in net income 4.6 bn Decrease in purchase of investment securities 2.2 bn Increase in cash dividends paid bn Increase in inventories Increase in income taxes paid bn bn Decrease in purchase of tangible fixed assets Increase in loans receivable 0.4 bn bn Increase in loans payable 0.1 bn -9-

11 Fiscal 2010 Plans -10-

12 Fiscal 2010 Plans Increases in Sales and Profits Planned: Sales to Increase by 20.4 Billion Yen and Operating Income to Increase by 3.8 Billion Yen 11/09 11/10 Plan Increase/Decrease Year-on-Year Net Sales % Foodstuffs % Distribution % Operating Income % Foodstuffs % Distribution % Elimination/Corporate % Ordinary Income % Net Income % ROA 6.5% % %000 ( bn) -11-

13 Fiscal 2010 Plans by Segment Plans to Increase Sales by 0.1 Billion Yen and Operating Income by 3.5 Billion Yen in Foodstuffs Sales by Segment ( bn) Operating Income by Segment ( bn) 11/09 11/10 Plan Increase/ Decrease 11/09 11/10 Plan Increase/ Decrease Total Condiments and Processed Foods Health Function Products Egg Products Salad and Prepared Foods Common Business Operations Foodstuffs Business Total Distribution Systems Elimination/Corporate

14 Fiscal 2010 Factors Causing Increase and Decrease in Net Sales and Operating Income Factors Causing Increase and Decrease in Net Sales ( bn) 11/09 11/10 Plan Increase Net Sales Factors Causing Increase and Decrease in Operating Income ( bn) 11/09 11/10 Plan Increase Operating Income Cultivation of the domestic market 3.9 (+0.8 ; +3.1) Cultivation of the domestic market Business development in overseas market (Expansion in East Asia + the U.S.) 0.5 (+0.2 ;+0.3) 0 (-0.1 ; +0.1) Business development in overseas market (Expansion in East Asia + the U.S.) Concentration on core products (Including quasi-core products) (±0 ; +1.1) (+1.0 ; +5.5) Concentration on core products (Including quasi-core products) Other existing products, etc. Distribution systems business (+3.2 ; -0.7) (+0.4 ; -0.3) (+0.6 ; +0.2) (-6.6 ; -4.8) Other existing products, etc. Total negative impact: Total positive impact: +3.8 Distribution systems business 20.2 (+9.7 ; +10.5) Impact of Cost and Price Revisions *Major factors included in the operating income indicated above Total negative impact: Total positive impact:+31.7 Figures in parenthesis indicate (year-on-year variation for the first half, year-on-year variation for the second half) -13- (-0.1 ; -0.7) -0.8 (-1.3 ; ±0) -1.3 Retirement benefits expenses, etc. Improvement of cost structure of the group Material and energy costs Marketing expenses Impact of price revisions 0.2 (-0.1 ; +0.3) 1.7 (+1.1 ; +0.6) 2.5 (+3.6 ; -1.1)

15 Major Subjects for Fiscal 2010 Based and Fundamental Policy and Strategy Challenge to New Developments Cultivation of the Domestic Market Deploy the new sauce world Make group-wide endeavors to effectively utilize the product route flow of foods to mass-merchandise stores Concentration on Core Products Expand health-conscious types of mayonnaise and dressings Expand use areas of hyaluronic acid products and reduce costs Expand focused egg products Enhance competitiveness by area of salads and cut vegetables Full-Fledged Execution of Food Service Strategy Expansion in East Asia Launch offensive on food service markets in China and Thiland Enter to Malaysian market Strengthening of Operating Base Improvement of Cost Structure of the Group Endeavor to improve cost structure across business units Reorganize production bases in the Kanto area to improve productivity Promote Development of Human Resources and Improvement of Group Quality -14-

16 Operation Status of Major Subjects : 1 Strengthening of Operating Base Figures in parenthesis indicate year-on-year variation for the entire strategic items Concentration on Core Products Results in the first half Condiments for salads performed solidly, achieving increases in volume and market share Hyaluronic acid products expanded favorably Liquid eggs and other egg material products perform well in confectionery and bakery industries Salads and cut vegetables achieved growth (First half: sales +1.0 billion yen, operating income +3.2 billion yen) Endeavors in the second half Expand condiments for salads by promoting proposals of "salads as main dishes" Promote proposals of hyaluronic acid products for foodstuff and cosmetic industries in Japan and abroad Pursue affordability and added value of eggs Reinforce product strengths of salads and cut vegetables (Full-year plan: sales +6.5 billion yen, operating income +2.5 billion yen) Improvement of Cost Structure of the Group Implement the "Mudadori" (work improvement activities by employees to heighten efficiency and productivity) across the board throughout the group Secure progress in reorganization of production bases and continue reinforcing business constitution (Cost reduction: first half 1.1 billion yen, full-year plan 1.7 billion yen) -15-

17 Operation Status of Major Subjects : 2 Challenge to New Developments Results in the first half Figures in parenthesis indicate year-on-year variation for the entire strategic items Endeavors in the second half Cultivation of the Domestic Market Expansion in East Asia Deployment of the new "sauce world progressed, led by "Gu-no-Sauce" (ingredient-based sauces), a new product line Effective utilization of the product route flow of perishables to prepared foods to mass-merchandise stores expanded, primarily for main business partners (First half: sales +0.8 billion yen, operating income +0.2 billion yen) Sales expanded in China for the food service market, which is expanding thanks to such factors as Expo 2010 Shanghai Established an operation base in Malaysia Set up a liaison office in Vietnam and started market research (First half: sales +0.7 billion yen, operating income ±0 billion yen) Expand the new "sauce world" by enriching product offerings, proposing new recipes and showing how the products could be utilized Reinforce endeavors for expanded and normalized utilization of the product route flow of perishables to prepared foods (First half: sales +3.9 billion yen, operating income +0.5 billion yen) Accelerate sales in the inland areas and to the food service market, taking advantage of our strongly recognized brand Start production in Malaysia and begin to sell Halal-certified products Reinforce menu-proposals for the food service market in Thailand (First half: sales +1.4 billion yen, operating income ±0 billion yen) -16-

18 Deployment of the New "Sauce World" as Exemplified by the "Gu-no-Sauce (ingredient-based sauces) Deploy the New Sauce World Sales in the first half: 2.5 billion yen (+0.6 billion yen year-on-year) Full-year plan: 5.0 billion yen (+1.2 billion yen year-on-year) For home use "Gu-no-Sauce" (ingredient-based sauces) (Typical example) Full of large ingredients! "Makes a sound when you take a bite" Small package type For professional use Like an original sauce with an added touch! The product "turns side dishes into superb delights" Want to try and use the with a variety of dishes! Expansion of the new "sauce world" -17-

19 The New "Sauce World" Expands Along the Product Route Flow of Perishables to Prepared Foods at Mass-merchandise Stores Prepared foods Daily food For professional use Attach to packages of prepared foods, meat and fish Small package type Use as backyard to prepared foods, etc. Meat Sell related products at different sales areas For home use Fresh fish Vegetables and fruits -18-

20 Business Approach in China Planned sales for 2010: 4.0 billion yen Target sales for 2015: 10.0 billion yen Create demand Expand areas of use through menu-proposals Focus on areas in which Kewpie excels Expand the market Extend operations in the food service market and inland areas Ability to make elaborate proposals Strength by quality Proliferate our brand -19-

21 "Create Demand" in China Create demand Menus that match local tastes Japanese-style menu Fruit salad Potato salad Menus to meet the trend of Westernized eating habits Breads and sandwiches Western-style salad Expand areas of use through menu-proposals Established Beijing Kewpie in 1993 Established Hangzhou Kewpie in Changes in menu proposals in China -20-

22 "Expand the Market" in China Expand the market Business bases in China Expand into the food service market Reinforce proposals to the expanding market that is increasingly Westernized, triggered by Expo 2010 Shanghai Subdivided subsidiaries (Beijing, Tianjing, Shanghai and Guangzhou) Other business bases Beijing Tianjing Expand into inland areas Operate 20 business bases in China, with the four subdivided subsidiaries at the core Guangzhou Sales in the first half Year-on-Year For the food service market For the inland areas Shanghai About 25% increased About 20% Increased -21-

23 "Proliferate Our Brand" in China Proliferate our brand Secure product delivery to major supermarkets and promote in-shop sales activities Granted certification of a "Far Famed Trademark," recognized by the Chinese government as a famous trademark, for the first time among Japanese food companies (January 2010) Brand proliferation as home-use products has favorable impact on expanding into the food service market Many restaurants and food shops within the Shanghai Expo venue used Kewpie products -22-

24 Operation Status of Major Subjects : 3 Implement Full-fledged Execution of Food Service Strategy Results in the First Half Exercise the group's comprehensive capabilities in a variety of scenes (Typical cases of our endeavors) Coordination within areas Mutually learn about products of other business categories within the area and improve comprehensive proposal capabilities Use of sales channels Marketing forces of eggs sell products of other business categories to the bakery industry Development of use Apply the use expansion of Espuma Base, a new product, to other areas Solution Find and solve latent needs by entering the restaurant kitchens Endeavors in the Second Half Develop the market by enhancing capabilities to propose solutions Create new demand by utilizing the customer solution centers Reinforce proposals for food manufacturers by establishing specialized departments -23-

25 Fiscal 2010 Plans by Segment -24-

26 Condiments and Processed Foods Business Create Unique Occasions for Eating by Promotion of Products and Marketing Activities that Integrate the Group s Strengths ( bn) 11/09 <Plans> 11/10 Plan Increase (Decrease) Net Sales Operating Income Operating Income Ratio 7.9% 9.3% +1.4% < Factors Causing Increase and Decrease in Net Sales > Cultivation of the domestic market Business development in overseas market Concentration on core products ( First half +0.3 Second half +1.5 ) (First half+0.1 Second half+0.7) (First half -0.4 Second half +0.5) Other existing products, etc. (First half -2.7, Second half -1.1) <Endeavors in the second half> Challenge to New Developments Deploy with the new sauce world Create new domains and implement "food solutions" Proliferate new products into the market and expand use of existing products Accelerate expansion into food service market Expand such value-added products as functional mayonnaise Expand condiments in East Asia (See page 17-18) (See page 16) Strengthening of Operating Base Expand sales volume of condiments for salads and improve their profitability Promote "salads as main dishes" and expand the entire business of condiments for salads Pursue efficient production systems for core products Reinforce product strengths of processed foods Reinforce processed fruits and expand pasta sauces -25-

27 Health Function Products Business Provide Our Proprietary Products and Services with the Value of Health Functions to Contribute to Society ( bn) 11/09 11/10 Plan Increase Net Sales Operating Income Operating Income Ratio 3.5% 6.3% +2.8% < Factors Causing Increase and Decrease in Net Sales > -0.7 Cultivation of the domestic market Business development in overseas market Concentration on core products (First half+0.3, Second half+0.3) -0.7 <Plans> (First half±0, Second half+0.1) (First half ±0, Second half+0.2) Other existing products, etc. (First half-0.4, Second half -0.3) Challenge to New Developments Expand hyalurolic acid products in East Asia Expand hyaluronic acid products for medical and food use in South Korea Newly develop the cosmetics market in China by offering high-functional hyaluronic acid products Reinforce activities for the market for professional nursing care foods Expand product offerings that utilize original materials and technologies for professional use Implement the food service strategy at hospitals and nursing care facilities Strengthening of Operating Base Expand hyaluronic acid products in the food and cosmetics markets Propose high-functional hyaluronic acid products for cosmetic use Publicize and expand food-use hyaluronic acid products with merits for knee joints Promote expansion of demand for our unique supplementary foods to liquid foods Combine our supplementary foods to liquid foods that prevent diarrhea and emesis with liquid foods offered by other companies Develop the market for home nursing care foods Renew Kewpie Yasashii Kondate (gentle menu) and realize affordability Expand stores that sell the products and reinforce mail-order services -26- <Endeavors in the second half>

28 Home-use Nursing Care Food Kewpie Yasashii Kondate (Full-scale Renewal) Always provide the joy of eating Tastiness that encourages eating the products again Menus with variety Reasonably priced that allows many people to use the products Affordability Create taste Original production technologies (smoothness, consistency and sense of ingredients) Reinforce sales channels *Sales for the current fiscal year: *Increased 50% in comparison with previous fiscal year -27-

29 Egg Products Business Enhance Competitiveness in the Existing Area and Establish an Egg World by Expanding New Areas <Plans> < Endeavors in the second half > ( bn) 11/09 11/10 Plan Increase Challenge to New Developments Net Sales Operating Income Operating Income Ratio 4.5% 4.5% ±0% * Net sales include billion yen positive impact of egg market Expand into a new egg area Introduce and foster unique products backed by technologies Accelerate the marketing of chilled egg products Expand chilled egg products for prepared foods and daily foods in respective areas Promote adding value to egg whites <Factors Causing Increase and Decrease in Net Sales> Cultivation of the domestic market 1.4 (First half+0.5, Second half+0.9) Strengthening of Operating Base Concentration on core products Business development in overseas market Other existing products, etc (First half-0.1, Second half+0.3) (First half+0.5, Second half+2.3) (First half-0.1 Second half+0.7) Concentration on core products Expand sales by pursuing affordability and adding value Cultivate demand for liquid eggs, thick rolled omelet and egg spread, and expand their market shares Improvement of cost structure of the group Promote re-deployment of production in the Kanto area Reduce manufacturing cost and operating cost -28-

30 Salad and Prepared Foods Business Promote the Development of New Markets by Utilizing Our Nationwide Network <Plans> < Endeavors in the second half > ( bn) 11/09 11/10 Plan Increase/ Decrease Challenge to New Developments Net Sales Operating Income Operating Income Ratio 1.6% 2.1% +0.5% <Factors Causing Increase and Decrease in Net Sales> 商品群の精鋭化による影響 Cultivation of the domestic market Concentration on core products (First half+0.6, Second half+2.4) (First half+0.1 Second half+0.5) Other existing products, etc. (First half-1.7, Second half-0.7) Impact of shift in business types (enhancement of business foundations) (First half -2,.0, Second half-2.8) Endeavor to expand deployment areas and development sales channels Lightly marinated pickles, rice balls, condiments for vegetable and fruit markets, etc. Reinforce development of products in new categories Sweets, prepared foods to be heated in microwave ovens, etc. Continue developing sales channels for hospitals and home delivery services Strengthening of Operating Base Enrich product offerings of salads and cut vegetables Expand product offerings that meet consumers' orientation for simple and convenient Reinforce proposals for special and commemorative days Continue cost reduction activities in respective areas Focus on improving yields of major raw materials Strengthen competitiveness of core products based on the positive effects from shifts in business categories -29-

31 Distribution Systems Business Promote Improvement of Quality and Strengthening of Functions of Physical Distribution <Plans> < Endeavors in the second half > ( bn) 11/09 11/10 Plan Increase Challenge to New Developments Net Sales Operating Income Operating Income Ratio 2.4% 2.7% 0.3% Reinforce the capability to meet customer needs to outsource physical distribution Establish marketing systems and strengthen the capability to dedicated distribution services Develop new customers by offering import cargo handling services <Factors Causing Increase and Decrease in Net Sales> Expand the scope of consolidation (First half+11.4 Second half+11.9) Win new deals Decrease in transactions with existing customers and other factors (First half -2.6, Second half-2.5) (First half+0.9 Second half+1.1) Strengthening of Operating Base Improve profitability by establishing standardization of operations Prepare and enhance service standards and fee systems Enhance profitability management for individual customers Restructure distribution functions Strengthen transportation capacities via trunk lines and reduce costs in handling small lot products Enlarge storage bases in big cities and concentrate local bases Promoting marketing that is in close contact with respective areas -30-

32 Reference Materials -31-

33 Reference: Performance Trends 11/06 11/07 11/08 11/09 11/10 Plan 11/12 Mid Term Business Plan New Business Segments Condiment and Processed Foods Health Function Products Egg Products Salad and Prepared Foods Common Business Operations Distribution Systems Elimination/Corporate Total Former Business Segments Condiment and Processed Foods Health Function Products Egg Products Salad and Prepared Foods Distribution Systems Elimination/Corporate Total Note: Figures in the upper column are sales, and those in the lower column are operating income ( bn)

34 Reference: Major Expenses, etc. (consolidated) 5/06 5/07 5/08 5/09 5/10 11/09 ( bn) 11/10 Plan Sales promotion expenses Advertising expenses Distribution expenses Labor expenses R&D expenses Capital investments Depreciation expenses Non-Operating Income/Expenses Extraordinary Income/Expenses 11/09 11/10 Plan Breakdown of Increase/Decrease (comparison between fiscal 2009 and plans for fiscal 2010) Increase in exchange losses -0.1 Increase in other expenses -0.1 Decrease in other sales -0.2 Decrease in impairment losses +1.0 Increase in loss on disposal of fixed assets

35 Reference: Condiments for Salads and Sales Results by Sector (Non-Consolidated) 5/05 5/06 5/07 5/08 5/09 5/10 Year-on-Year Home-use Commercial-use Total Volume (1,000t) % Amount (\bn) % Volume (1,000t) % Amount (\bn) % Volume (1,000t) % Amount (\bn) % *Results for 5/10 have been modified in accordance with the arrangement of product categories conducted in 5/09. ( /kg) Home-Use Price (per kg) ( /kg) Commercial-Use Price (per kg) -34-

36 Reference: Movement in Egg and Cooking Oil Prices ( ) 5/01 5/02 5/03 5/04 5/05 5/06 5/07 5/08 5/09 5/10 Medium-sized egg, Tokyo market average price (per kg) Average price of institutional use (tank truck base) for processed oil and fats (per kg) (Monthly average from December to May for each year ) ( ) Egg Prices ( ) Cooking Oil Prices /01 5/02 5/03 5/04 5/05 5/06 5/07 5/08 5/09 5/10 5/01 5/02 5/03 5/04 5/05 5/06 5/07 5/08 5/09 5/10-35-

37 Changes in Business Segments Purpose of the Change Earlier, a common-purpose company served each segment for cross-sectional work, but this company has been made into a separate common business operations segment to make profits and losses of each segment clearer. Former Business Segments (Through Fiscal 2009) New Business Segments (Starting in Fiscal 2010) Condiments and Processed Foods Condiments and Processed Foods Health Function Products Health Function Products Egg Products Egg Products Salad and Prepared Foods Salad and Prepared Foods Distribution Systems Common Business Operations Distribution Systems The common-purpose company has been reclassified as the common business segment to clarify the scope of operating companies. Some products in the Salad and Prepared Foods segment have been transferred to the Condiments and Processed Foods segment. -36-