Management Information

Message from the President

I wish to thank our shareholders for your consistent and exceptional support.

The environment surrounding our company is facing a major transitional period. There are global concerns such as trade friction and the depreciation of currencies in emerging countries, and while corporate performance is strong in Japan, the future of its economy remains uncertain due to issues including declining exports and slowing personal consumption. Meanwhile, the Corporate Governance Code has been updated, urging companies to further improve transparency. The food industry is also facing challenges such as how to respond to the rising awareness for safe and reliable foods and the growing trend of healthier living. Our policy is to steadily tackle such issues.

During this interim period we are aiming to enhance our production efficiency and further improve our product quality. To achieve this we established the “Production Division” and the “Products and Merchandise Division” as of April 1, 2018. We are also installing new facilities at our subsidiary confectionery plant in Ibaraki Prefecture and renovating its facilities. Going forward, we will gradually promote capital investments with a long-term perspective. Through these initiatives, we will further our vision – which is to “enhance our integrated functions, covering ingredient procurement, processing and manufacturing, and sales and distribution.”

Enjoying high demand from food manufacturers in the confectionery, baking and other industries, our sales grew by 2.9% during this interim period; overseas dairy products in particular saw significant rises. As for profit, both operating profit and ordinary profit decreased, due to rise in cost of sales ratio, caused by increase in expenses of supplies and repairing due to installment of new production lines at a confectionery plant, and increased selling and administrative expenses mainly owing to the rise in distribution costs.

Meanwhile, interim (current) profit attributable to owners of parent increased due to the effect of tax cut from the change in US taxation policy. Our basic policy of profit distribution is to maintain stable dividends. For the current term, we plan to pay an interim dividend of 23 yen and a year-end dividend of 23 yen, totaling to an annual dividend of 46 yen (6 yen increase year on year) per common share.

I thank you and appreciate your continued guidance and support.

President and Representative Director Ichiro Honda

Management Policy & Management Strategy

We see the following five management environments as the areas that we need to focus on from a mid- to long-term perspective. Corresponding to such environments, we have stipulated five basic management strategies.

Management Policy Management Strategy

1.Expand our domestic sales base

Expand our domestic client base We will expand our customer base by offering new and improved products.
Strengthen our sales proposals and improve our market share We will sharpen our sensitivity to consumer trends and regional characteristics, and make appropriate proposals to growing products and industries. In particular, we will propose high value-added products utilizing our production subsidiaries.
Product development We will develop products that respond to diversifying market needs and changing consumption habits.
Discover new product sources and products We will expand our capacity to source products from around the world to further improve our stable procurement capability.
2.Enhance our production function
Reform our production divisions We will create concrete plans to enhance our production features and further improve our strength as a specialized food trading company with production functions.
Capital investments with a long-term perspective We will make capital investments with a long-term perspective to deal with aging plants and the lack of production capacity.
Improve production efficiency We will promote interactions between plants and develop human resources in the production management section.
3.Improve our product quality and efficiency
Improve the quality warranty system We will introduce testing equipment, double-check manufacturing lines, and improve facilities to further strengthen our system of supplying safer and more secure food. We will also take further steps to acquire external certifications for a more comprehensive quality warranty system.
Promote CSR management We will actively pursue measures to conserve the earth’s environment and reduce our environmental impact. To achieve a low-carbon society and reduce energy consumption and food waste, we will improve production processes and introduce energy-saving facilities.
Further pursue efficient management We plan to reevaluate our logistics, improve the accuracy of our inventory control, and further advance use of information systems and IT.
Pursue group management We will organize a system that will further allow efficient co-working within the group.
4.Enhance our global businesses
Penetrate further into existing markets We will further explore the US market and sales of value-added products in China.
Expand into new markets We are considering business developments in areas where we currently do not have local subsidiaries, including Europe and Southeast Asia.
5.Enhance our management base
Enhance corporate governance We will reinforce our compliance with corporate governance codes to further enhance our corporate governance system, including strengthening the internal control system. In addition, we aim to increase the effectiveness of our board of directors, by strengthening communications with independent external directors.
Enhance risk management and compliance We will evaluate and analyze company-level/multidimensional risks more professionally, with measures such as using risk-management programs. We will enhance compliance including continued elimination of businesses with anti-social forces and prevention of insider trading.
Develop and improve human resources We will develop diverse human resources and promote work-style reform, including a review of overtime work.

Business Risks

Risks with the potential to negatively affect the Group’s financial status and management results are as follows, and we see them as factors that may significantly impact investor decisions. Though the items below include future items, they were interpreted as of January 30, 2018, the day we submitted our securities report.

(1)Stable procurement of food ingredients and their rising prices

As the Group sources food ingredients and products in and outside Japan, we face risks such as poor harvests due to natural disasters and unfavorable weather, which makes it difficult to secure consistent quality and quantity. We also face the possibility of our purchase and production costs being greatly affected by substantial fluctuations of agricultural products and currency rates, etc., consequently impacting the Group’s financial status and management results.

(2)Food safety

The Group sources products and ingredients from Japanese and overseas manufacturers and producers, and has production subsidiaries in Japan, the US, and China. Unpredictable safety issues and accidents in the manufacturing or processing lines could cause large-scale product recalls or large product-liability costs that would affect the Group’s financial status and management results.

(3)Inventory risks

The Group handles a wide variety of food ingredients and products. We carefully take into account harvest periods for agricultural products, production schedules at each plant, shipping schedules to our clients, and food expiry dates to ensure we carry no excess inventory or expired products. However, stock disposal due to disparity between sales forecasts and actual results, as well as substantial price fluctuations, could affect the Group’s financial status and management results.

(4)Legal regulations to be enforced on the industry

Our business activities are regulated in Japan by laws such as the Food Safety Basic Act and Food Sanitation Act and in other countries where we conduct businesses by similar legal regulations. Although we have laid out appropriate measures to comply with these regulations, changes in these regulations or receiving a violation warning could limit the Group’s business activities and adversely affect our financial status and management results.

(5)Trade credit risks

The Group has experienced credit risks owing to accounts receivable of trade partners. We work to prevent credit risks by setting credit limits for each partner based on credit analyses and reviewing the partner based on the approval authority reflecting the credit limit. However, uncollected debts arising from unpredictable circumstances such as bankruptcy of our trade partners could affect the Group’s financial status and management results.

(6)Impact of business globalization

The Group both sources part of food ingredients and products from overseas and operates production bases and sales businesses overseas. Wars, terrorism, political or social unrest, disadvantageous taxation and regulations, their amendments and abolition, and other unpredictable circumstances may affect the Group’s financial status and management results.

(7)Natural disasters

Unpredictable natural disasters such as large earthquakes and extensive fires could cause loss or damage to the Group’s facilities and plants. In addition, large-scale epidemics of communicable diseases could damage our product supply and production activities, affecting the Group’s financial status and management results.

Corporate Governance

Our Corporate Governance

Our basic approach to corporate governance The Group’s corporate philosophy is to "create a new food culture and contribute to society by consistently providing our customers with safe and reliable food products carefully sourced from domestic and overseas suppliers." To achieve this philosophy, it is important that we continue to exist as a company trusted by our shareholders and all stakeholders of the society, by ensuring healthy management with high transparency. Aiming for sustainable growth and improving our mid- to long-term corporate value, we will work to improve our corporate governance and build and operate a system to monitor and control our business activities.

Organization Chart of Corporate Governance

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