Management Information

Message from the President

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

While the Japanese economy remains on a moderate growth path, the food industry has been facing competition in new product development and product line reviews due to trends such as changes in consumer needs and reorganization of the distribution industry. We have been striving to develop products that respond to such changes in food manufacturers’ needs while at the same time reinforcing our quality control.

In addition, we have been actively making capital investments as well, aiming to enhance the function of the production divisions. As a result of the above, net sales for the fiscal year ended October 2018 increased 3.1% year on year to 106,594 million yen, due to factors including growth of overseas dairy products in Japan.

Meanwhile, as for profit, as a result of factors including costs to launch a new plant in Chikusei City, Ibaraki Prefecture and a decrease in the transaction volume of nuts due to impacts of irregular weather on crop yields, operating profit decreased 12.9% year on year to 4,713 million yen, ordinary profit decreased 10.5% year on year to 4,885 million yen, and profit attributable to owners of parent decreased 8.2% year on year to 3,373 million yen.

With regard to the economic environment surrounding us, causes for concerns are increasing as foreign demand that remained robust has been showing signs of weakness due to factors such as a slowdown in the Chinese economy, in addition to a sense of caution over trade friction between the U.S. and China. Under these external environments, during the the fiscal year ending October 2019, we will continue to work on issues to be addressed at each division, including enhancement of production function and further improvement of product quality, through specific initiatives. As for business performance, our company forecasts that net sales will increase 1.3% year on year to 108.0 billion yen, operating profit will decrease 2.4% year on year to 4.6 billion yen, ordinary profit will decrease 2.7% year on year to 4,750 million yen, and profit attributable to owners of parent will decrease 2.1% year on year to 3.3 billion yen.

We are looking forward to your further support and guidance.

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.
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.Strengthen product development capability and improve product quality
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.
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.
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.
Promote CSR management We will promote activities to satisfy CSR (Corporate Social Responsibility) requirements such as consideration for the environment, contribution to society, and fair and transparent corporate operation.
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.

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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