The Nisshin OilliO Group, Ltd.

Transcription

1 The Nisshin OilliO Group, Ltd. Fiscal 2017 Fiscal 2020 Four-Year Medium-term Management Plan 2020 March 28, 2017 The Nisshin OilliO Group, Ltd. Takao Imamura President and Representative Director

2 Recognition of Current Trends & Review of FY2014 FY2016 Medium-term Management Plan 2 Our basic policy is to build a solid earnings base for the future, mainly by improving earnings in the core oil and fat business. We expect to post our third consecutive fiscal year of profit growth, driven by structure reforms and the deployment of global strategies. Billion yen Consolidated operating income trends Segment Initial goal Result Oil and Meal Business, and Processed Food Business Domestic Oil and Fat Business Healthy Food and Other Businesses Stable profits Creation of new businesses and brands for MCT products Made progress in structure reforms by deploying high value-added products, improving earnings in standard oils category, and reducing costs Expanded lineup of healthrelated products that use MCT, and develop market for elderly and nursing care Processed Oil and Fat Business Steadily expand earnings to develop into the second pillar after the Domestic Oil and Fat Business Fortified global platform for growth, mainly at ISF, Daito Cacao Co., Ltd. and T.&C. Manufacturing Co., Pte. Ltd. 1.0 Fiscal 2014 results Fiscal 2015 results Fiscal 2016 forecast Fine Chemical Business Growth of business size worldwide Expanded sales of raw materials for cosmetics in China Issues Transformation of business structure to cope with market changes, including aging society, and active business development in growth markets Further expansion of overseas operations leveraging the global platform built so far and proprietary technological expertise Ongoing business structure reforms by boosting the ration of value-added products in the Domestic Oil and Fat Business Sustain and fortify oil milling competitiveness by pursuing efficiency improvements

3 OilliO 2020 Corporate Vision & Basic Policy Globalization Technological Innovation Strategic Marketing The Nisshin OilliO Group looks to produce new value and create markets by utilizing the premium technologies it has forged over its 110-year history to address the needs of our customers and to find solutions for the issues they face The Nisshin OilliO Group maximizes corporate values through contributions to good dietary environment and good health. Basic policies Carry on business structure reforms while shifting focus to growth trajectory Growth strategies Globally expand the Health Science Business, which contribute to society through "the power of health and energy" Increase investment to accelerate globalization and strengthen cooperation between sites Deploy strategies that rally the group s comprehensive competencies in the edible oils for commercial-use and edible oils for food processing domains Strengthen the OilliO brand and create a new market in the household-use domain Strengthen our marketing capability to create new additional value Reinforcement Structure reforms for oil milling and fortification of production platforms ESG management *Health Science Business: This business contributes to society by providing consumers with "the power of health and energy" that are essential at each stage of life through wellness recommendations developed using proprietary technologies

4 OilliO 2020 Targets 4 Aiming for future growth, we target operating income of 13.0 billion-plus and an ROE of 7%-plus in fiscal 2020 Operating income ROE EPS growth Operating cash flow 2020 : 13.0 billion-plus : 7%-plus : 8% (annual average) : 50.0 billion (cumulative) 2020 Vision for the future ROE: 10%-plus Create new value for Oil and Fat Business and expand business domain Enhance presence as a global company Operating : 9.0 billion income ROE : 5.0% (Plan) Crossing over from structure reforms to growth trajectory KPIs for growth strategy Expand Health Science Business: sales growth rate Acceleration of globalization: overseas sales growth rate Accelerate growth in the edible oils for commercial-use and edible oils for food processing domains: Gross profit growth in the edible oils for commercial-use and edible oils for food processing domains Enhance profit margins on the household-use products: profit growth rate in household-use Improve value of MCT: Recognition rate of MCT Acquire new business domains that produce synergies with the Oil and Fat Business Structure reforms for oil milling and fortification of production platforms ESG management

5 Segment Operating Income 5 Fiscal 2020 (forecast) 13.0 billion Domestic +600 million Fiscal 2016 (forecast) 9.0 billion Fine Chemical 20 Overseas +300 million Fine Chemical 11 Processed Oil and Fat 49 Domestic +300 million Processed Oil and Fat Oil and Meal and Processed Food Oil and Meal and Processed Food 61 Overseas Oil and Meal, Others Health Science +1,400 million +900 million +500 million * In the Oil and Meal and Processed Food Business, we aim to achieve profit growth by continuing to implement structure reforms and growth strategies, despite the harsh business environment population decline in Japan and negative impact from TPP agreements and FTAs. * In fiscal 2017, for accounting purposes, our reporting segments are Oil and Meal and Processed Food, Processed Oil and Fat, and Fine Chemical.

6 Major Strategies based on Basic Policies 6 Globally expand the Health Science Business, which contribute to society through "the power of health and energy" Item KPI Fiscal 2020 goal Expand Health Science Business Sales growth rate for Health Science Business Annual average growth of 20% (+ 205% versus fiscal 2016) Speedy expansion by using resources outside the group, including global collaborations that pivot around distinctive technological development and technologies Health Science Business This business will be at the core of group synergies aiming to contributes to society by empowering customers with "the power of health and energy" throughout the diverse life stages of their lives. This business added new value in various businesses based on proprietary oil and fat technologies nurtured thus far. These technologies employ medium-chain triglyceride (MCT) and technologies that make oils delicious and easy to eat. Development of a new born Marvels of breast milk (currently conducting research) Growing child Easily converted into energy to build muscular strength and improve reflexes Obesity in middle/ upper-middle age (countermeasure for lifestyle diseases) To help prevent the adherence of fat in the body Forgetfulness as a senior Alternative energy for the brain (ketone bodies) Poor nutrition among elderly Easily converted into energy for activities for daily living (ADL) and vitality Segments Oil and Meal, and Processed Food Processed Oil and Fat Products (example) [Oil and fat products] Healthy oils (Healthy Resetta, etc.) Coconut oil [Wellness foods] Enepurin, Memorion, MCT oil and MCT powder, etc. MCT oil Crystallized powder fat Fine Chemical MCT oil Infancy School age-youth Prime of life to middle- and upper middle age Active seniors Lively elderly * Expansion utilizing the existing organizations and channels of the Nisshin OilliO Group in Japan and abroad

7 Major Strategies based on Basic Policies 7 Increase investment to accelerate globalization and strengthen cooperation between sites Item KPI Fiscal 2020 goal Acceleration of globalization Overseas sales growth rate Annual average growth of 7% (+132% versus fiscal 2016) In the Processed Oil and Fat Business, we plan to expand overseas platforms, mainly comprising of development in Southeast Asia, and create in-depth collaborations between sites In the raw materials for cosmetics business, we aim to cultivate markets in East Asia and develop new markets in Europe and the Americas Intercontinental Specialty Fats Sdn. Bhd. (ISF; Malaysia) Build a global supply chain originating from site in Malaysia to cater to chocolate and confectionery markets The Nisshin OilliO (Shanghai) International Trading Co., Ltd. Industrial Química Lasem (IQL), S.A.U. (Spain) Open R&D center equipped with state-of-the-art facilities In the raw materials for cosmetics business, which utilizes sites in China and Europe, strengthen communication with users, including major cosmetics manufacturers, and reinforce proposal skills PT. Indoagri Daitocacao (Indonesia) Signing chocolate business merger with the Salim Group Presentation for users in China Oil and fat for high-end cosmetics Actively considering the use of outside resources, including M&A and partnerships to accelerate globalization and to expand the Health Science Business

8 Major Strategies based on Basic Policies 8 Deploy strategies that rally the group s comprehensive competencies in the edible oils for commercial-use and edible oils for food processing domains Item KPI Fiscal 2020 goal Accelerate growth in the edible oils for commercial-use and edible oils for food processing domains Gross profit* growth in the edible oils for commercial-use and edible oils for food processing domains Annual average growth of 2% (+110% versus fiscal 2016) In the ready-to-eat foods and restaurant domains, cultivate and expand sales by a sales method that focuses on cooperation to unearth user needs Improve proposals in the edible oils for commercial-use and edible oils for food processing domains, and secure new customers by strengthening and instilling user support functions * Gross profit: Sales minus cost of sales and selling expenses Sales method that focuses on cooperation to unearth user needs Bag-in-box (BIB) Pillow packaging Prevent oil absorption Long use as resists oxidation Jointly unearth customer needs and recommend appropriate solutions in the ready-to-eat foods and restaurant domains Packaging making it easy-to-use even for women and seniors to work in restaurant kitchens Recommend packing materials that are easy to use and produce little waste

9 Major Strategies based on Basic Policies 9 Strengthen the OilliO brand and create a new market in the household-use domain Item KPI Fiscal 2020 goal Enhance profit margins on the householduse products Gross profit growth rate in the householduse domain Annual average growth of 3% (+114% versus fiscal 2016) Enhance brand power by shifting product lineup to high-margin items and further pursuing a leading position in the market Create a market by recommending new uses for oils, and processed foods that make it simple to deliciously consume oils Oil for topping series Nisshin olive-kaoru smoothie dressings BOSCO CAFE Dressings with the texture of a smoothie that contain extra virgin olive oil and vegetables Fresh-keep oil (that come in fresh-keep bottles) Build up lineup of processed foods, including high value oils that can easily be enjoyed with raw foods

10 Major Strategies based on Basic Policies 10 Strengthen our marketing capability to create new additional value Item KPI Fiscal 2020 goal Improve value of MCT Recognition rate of MCT 50% (+24% versus fiscal 2016) Leverage development of products and applications by promoting sales method that focuses on cooperation to unearth user needs and speedy product deployment capabilities Strategic branding of high value-added products, whose key element is MCT Medium-Chain Triglyceride MCT MCT is a super energy that support the health of many people at each stage of life, from infancy to senior years Collaborations between industry, academia, and the government in Suzuka City to extend healthy life expectancy using MCT MCT being included in meals at rehabilitation centers MCT being used in rehabilitation programs that use Cyberdyne s robot suit Recommending MCT to improve muscular strength and stamina of athletes Nutritional support using Healthy Resetta for the Yokohama F Marinos youth teams

11 Major Strategies based on Basic Policies 11 Strengthen platforms and infrastructure Item KPI Fiscal 2020 goal Business structure reforms Cost reduction owing to process innovations 2.0 billion-plus Structure reforms for oil milling and fortification of production platforms Full-fledged cost reduction by strengthening production technologies, including the use of AI and IoT, and rebuild production platform to adequately adapt to changes in market and business structure Fortify oil and fat sales infrastructure by attaining competitiveness in oil milling and by cultivating technologies used in the processing of oils and fats ESG management Implement environmental management and transparent management Actively undertake health management, which positions the promotion of employee health as a key theme in management Improve productivity through workstyle reforms Workstyle reforms Offices at main site are now free address offices and have gone paperless. Now we are aiming to further improve productivity

12 Expand Health Science Business with Technologies that Center on MCT 12 Medium-Chain Triglyceride MCT Given the growing prospects for MCT, we plan to commercialize MCT as a food product that is easy to consume and recommend various other uses by leveraging our technological expertise which is backed by more than 40-years of research results. MCT can efficiency produce ketone bodies Easy to use as a cooking oil New growth Dietary therapy for Alzheimer-type dementia and cancer Improve muscular strength and stamina of athletes Specific use for post surgery, etc. Use to treat lifestyle-related diseases (as normal food) To help prevent the adherence of fat in the body (Healthy Resetta) Energy supplement for seniors Use in hospitals and to treat diseases (as a dietary therapy) Nutritional supplement post-surgery or for premature infants Alleviate epileptic seizures 1960s 1990s 2000s Supply MCT in household cooking oils Deliver MCT in product groups designed to suit each of our customers many life stages

13 Expand Health Science Business with Technologies that Center on MCT 13 Medium-Chain Triglyceride MCT Improvements and benefits patients with dementia or other cognitive disorders gained from taking MCT Improve QOL for patients with Alzheimer-type dementia Improve memory and cognitive skills Better behavior, conversation skills, and speech and conduct Recoup lost vitality, etc. * The graph depicts responses of persons with dementias or other cognitive disorders to coconut oil or oils containing medium chain triglycerides as reported by their caregivers (n=184, September 2012). Source: Modified based on KETONES & MEDIUM CHAIN TGs: ALTERNATIVE FUELS FOR ALZHEIMER S AND OTHER DISORDERS presentation by Mary T. Newport M.D., at the MCT Symposium MCT is energy for the brain Effectively produce ketone bodies Crystallized powder fat Example of technology for processing fat to make it easy to consume Our proprietary technologies enable us to process oils with completely different properties than conventional powdered fat under certain conditions (Patent pending) Various uses including preventing water separation by coating the surface of food or a paste made from emulsified water or juice and oil Crystallized powder fat expands the use of oils and fats and increases the volume of intake so there are many different potential applications for food

14 Return Financial Strategies 14 Pursue enhancement of corporate value while maintaining optimal balance between capital efficiency that emphasizes ROE and financial soundness Our policy is to achieve a payout ratio of roughly 30% to adequately return the benefits of profit growth to our shareholders Operating & investment cash flow Operating cash flow billion (cumulative) Capital expenditure & business investment 50.0 billion (cumulative) Investment For capital expenditures, we will identify the profit margin on and necessity of each investment. These investments will primarily be to boost production capacity in the Processed Oil and Fat Business and the Fine Chemical Business, secure competitiveness of domestic plants, and hone the efficiency of investments of domestic plants. We plan to actively carry our business investments, including M&A, taking into account synergistic benefits. We plan roughly 50 billion in capital expenditures and business investments. Our policy is to keep capital expenditures and business investments, including M&A, within the scope of operating cash flow. However, in the event of a major business investment, including large-scale M&A, we will use our cash on hand and newly procure capital to fund this Dividends Our policy is to maintain a payout ratio of roughly 30% to provide stable returns. Focusing on the total return ratio and improvement to capital efficiency, we plan to flexibly buy back our own shares taking into account market factors, including stock price.

15 Targets & KPIs 15 Targets Item Target Fiscal 2020 goal Profit margins Operating income 13.0 billion Management efficiency ROE 7% Growth EPS (annual average growth) 8% Secure cash flow Cumulative operating cash flow for four-year period Cumulative 50.0 billion KPIs Item KPI Fiscal 2020 goal Expand Health Science Business Sales growth rate for Health Science Business Annual average 20% (+205% versus fiscal 2016) Acceleration of globalization Overseas sales growth (forex neutral) Annual average 7% (+132% versus fiscal 2016) Accelerate growth in the edible oils for commercial-use and edible oils for food processing domains Enhance profit margins on the household-use products Gross profit growth in the edible oils for commercial-use and edible oils for food processing domains Gross profit growth in the household-use domain Annual average 2% (+110% versus fiscal 2016) Annual average 3% (+114% versus fiscal 2016) Improve value of MCT Recognition rate of MCT 50% (24% versus fiscal 2016) Business structure reforms Cost reduction owing to process innovations 2.0 billion-plus

16 These materials including forward-look statements. The assumptions, forecasts, and estimates are based on information currently available at the time these materials were prepared. Actual measures, policies, strategies, and earnings results may differ due to various factors that could arise going forward.