Presentation October 29, 2009 Reexamining Strategies and Strengthening Our Earnings Base to Weather the Turbulent Business Climate —Business Strategies for the Second Half of the Fiscal Year Ending March 31, 2010— (Stock code: 2871) Nichirei Corporation Tel: (+81-3) 3248-2235 E-mail: abemsh@nichirei.co.jp http://www.nichirei.co.jp/english/ir/index.html
Table of Contents [Overview] [Business Strategy: Logistics] Segment Operating Income Targets Revised Downward to Business Conditions Becoming More Difficult, but Shortfalls in 1 8 Reflect Slump in Processed Foods Alone Europe Covered by Japan Regional Storage Operations on a Par with Previous Fiscal Year [Business Strategy: Processed Foods] 9 despite Downturn in Business Environment Commercial Use Earnings Declines Significantly Due to Impact from Price Declines for Transfer Center Transit Cargo 2 10 Measures to Counter Switch to Lower Priced Items Covered by Improved Efficiency for Better Profitability Household Use Profitability Improves on Upturn in Business European Business Results Bottoming Out, but Costs from New 3 11 Climate and Decline in Prices of Raw Materials Facility in Poland Remains a Burden during Second Half Priority Measures to Recover Sales as Commercial Use 4 Market Shift to Lower Priced Items Bolstering the Supply Structure to Support Aggressive 5 [Reference Materials] Expansion in Processed Chicken Products Expanding Sales Channels through Functionality and 6 Segment Data 12 Accumulated Expertise for Acerora [Business Strategy: Marine Products] Profitability Up Year on Year Amid Business Climate of 7 Falling Prices Notes: 1. Figures shown in the graphs and charts in this presentation, unless otherwise specified, have been rounded off to the unit indicated. Certain figures have also been rounded up or down. 2. “E” indicates estimates. 3. “Previous E” indicates FY10/3 estimates announced on July 28, 2009 with first quarter results; “Initial E” indicates FY10/3 estimates announced on May 12, 2009 with results for the previous fiscal year (FY09/3). 4. “Q” indicates a fiscal quarter, e.g. 2Q is the second quarter.
Segment Operating Income Targets Revised Downward to Reflect Slump in Processed Foods Alone (Amounts less than 100 09/3 10/3 (Previous E) 10/3 E 10/3 (Previous E) 09/3 million yen are omitted) (Comparison) (Comparison) 4,745 4,581 4,485 -96 -5% Net Sales 151 166 151 -15 -0% Operating Income 141 145 136 -9 -4% Recurring Income 60 77 78 1 30% Net Income EPS 19 yen 25 yen 25 yen ROE 5% 7% 7% Note: 10/3 (Previous E) items are forecast announced on July 28. 1. FY10/3 forecasts revised downward, net sales ¥9.6 billion and operating income ¥1.5 billion. (i) In net sales, Processed Foods revised downward ¥3.8 billion, Meat and Poultry ¥5.6 billion, and Logistics ¥2.5 billion to incorporate slump in commercial use products and sale of the acerola-based drink business. (ii)In operating income, Processed Foods revised downward ¥2.4 billion and Marine Products ¥0.3 billion as a result of the slump in commercial use products and delays in the improvement of profitability for processed chicken products. 2. Extraordinary items to improve ¥2.1 billion as a result of the lack of the loss on change to new lease accounting standards recorded in the previous fiscal year, and a gain on the sale of the acerola-based drink business. Net income is forecast to increase ¥1.8 billion. Net Sales by Segment Operating Income by Segment 100 million yen 100 million yen Intercompany 5,500 4,745 4,581 4,636 4,694 225 elimination 4,577 66 4,485 87 63 5,000 69 181 70 Other 74 68 Intercompany 174 100 75 200 70 79 70 elimination 166 160 4,500 1 Other 1 2 Real estate 151 151 1 1,271 1,423 175 2 1,387 0 4,000 1,341 1,420 0 1,395 45 Real estate 43 4 5 Logistics 150 3,500 61 36 2 1 846 Logistics 36 3,000 125 40 809 925 Meat and poultry 839 865 809 Meat and poultry 2,500 72 100 811 Marine products 747 85 78 747 761 690 58 690 2,000 Marine products 75 78 Processed foods 6 82 1,500 Processed foods 3 50 7 6 1,000 4 Consolidated 1,848 1,773 1,750 1,740 1,686 1,724 Consolidated net 60 7 55 25 0 operating income sales 7 500 41 41 3 20 17 FY 0 0 -5 -4 -269 -242 -225 -244 -233 -257 -17 -1 FY 06/3 07/3 08/3 09/3 10/3 E 10/3 -500 -25 06/3 07/3 08/3 09/3 10/3 E 10/3 (Previous E) 1 (Previous E)
Business Strategy: Processed Foods
[ Business Strategy: Processed Foods ] Commercial Use Earnings Declines Significantly Due to Measures to Counter Switch to Lower Priced Items 1. For household use products, Nichirei forecasts a slight increase in earnings during the second half, as a reduction in the number of items handled equivalent to 8% of sales is absorbed by an increase in sales of mainstay products. The impact from the tainted gyoza incident in January 2007 has faded, the market is steadily recovering, and the fierce price competition seen previously has not reappeared. Profitability has been boosted by improvement in the product mix, and lower prices for raw materials. 2. For commercial use products, Nichirei forecasts a 4% decline in sales from the previous fiscal year, as efforts to counter the slump in sales for prepared foods and restaurants by introducing lower priced items with a sense of value will result in a decline in the unit price. In terms of earnings, this will result in a ¥1.2 billion decline for the combined first and second half periods. Also, the improved profitability from the decline in the price of the raw material for processed chicken products has not happened as expected. While this has resulted in a difficult circumstance, we expect the situation to improve during the second half. The supply structure will also be strengthened to support expanded sales of processed chicken products. 3. In the acerola business, first half earnings rose ¥0.4 billion in cuts in advertising and sales promotion expenditures, but second half earnings are expected to decline ¥0.3 billion due to a change during the period in the way sales are recorded. Factors Affected Operating Income in Processed Foods in FY10/3 (Compared with FY09/3) Net Sales and Operating Margin of Processed Foods 100 million yen A FY09/3 20 c e r Acerola 4 2,000 5.0% o 1,848 Pre-cooked frozen foods l Subsidiary earnings rise 2 1,773 a 1,750 FY09/3 1H (Actual) 1,740 1,724 1,686 4 Decreasing operating expenses 1 366 Raw material 1 344 4.0% 326 310 317 Greater profitability from improved 309 1,500 u c product mix 1 s c 128 e e o 122 Improvement in logistics costs 1 100 n d R 119 3.4% 102 m 83 Revenue decline centered on t e e m p Increase in sales e c v - r e r l e commercial use product -9 9 o r 3.0% 3.0% e i n d c promotion expenses -2 d n u u i e e c a Wellness -2 2.4% o t l 1,000 n s 798 2.3% Bad debt, etc. -2 803 834 869 831 839 2.0% Raw material 10 Pre-cooked frozen foods Greater profitability from improved i I n m product mix 3 c p l o r 1.1% o Improvement in logistics costs 1 s o g Revenue decline centered on 500 t v FY10/3 2H (Expected) i s e s m commercial use product -3 1.0% 1.0% t 1 e i n Increase in sales promotion c 556 t 504 466 461 463 471 s expenses -1 Acerola -3 F Increasing operating expenses -4 0 0.0% Y 1 Other -1 0 / 06/3 07/3 08/3 09/3 10/3 E 10/3 FY 3 FY10/3 (E) 17 (Previous E) ( E 10 20 30 ) Pre-coocked frozen foods for househould use Pre-coocked frozen foods for commercial use 1 Health value Other 7 100 million yen Operating margin 2
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