Management Information
Message from the President
I would like to express our sincere gratitude to our shareholders and investors for their exceptional support.
In terms of the general business environment surrounding us, the economic outlook remains uncertain as prices continue to rise, partly due to higher local prices related to imported products and the yen's depreciation, and partly due to consumers' thrifty spending habits. In the food industry, the number of items subject to price hikes decreased compared to the past, but the trend of price hikes in response to rising costs continue. Under these circumstances, our group held a product exhibition in April of this year to commemorate the 120th anniversary of our founding and made specific proposals for value-added products.
As a result of these efforts, consolidated net sales for the first half of the fiscal year 2024/10 (77th period) increased 7.0% year-on-year to 59,692 million yen. Profits improved in Japan due to improved export profitability of seeds from China and increased domestic sales in China and Hong Kong, as well as calming energy costs and progress in commodity price revisions. As a result, operating income increased 47.4% to 3,092 million yen, ordinary income increased 52.6% to 3,178 million yen, and net income attributable to owners of the parent increased 44.4% to 1,949 million yen.
Regarding the second half of fiscal year ending October 31, 2024 (77th period), while Europe and the U.S. are exploring the timing of interest rate cuts, there is a possibility of a change in monetary policy in Japan in the direction of higher interest rates amid moderate economic recovery and rising prices, and there is also uncertainty regarding trends in the foreign exchange market. In addition, volatility in overseas commodity markets is expected to continue because of climate change and other factors, and geopolitical risks are also expected to increase, including the U.S. presidential election and China's response to it, in addition to the situation in Russia, Ukraine, and the Middle East. In Japan, as labor supply and demand become tighter, it will become more important for companies to secure human resources, and awareness of human capital management and sustainability is expected to increase further. Although corporate earnings are on an improving trend and capital investment is on the rise, the economic environment surrounding our group is expected to remain uncertain in the future, as consumer confidence is expected to remain restrained, as wage increases are not keeping pace with the rise in various prices.
In this environment, our group intends to conduct proposal activities aimed at increasing sales of the products proposed at the exhibition held in April, in order to improve factory utilization rates, and at the same time, to ensure the stable procurement of safe and secure food materials.
We look forward to your further support and guidance.
Management Environment & Management Strategy
We see the following five management environments that need to be addressed from a medium- to long-term perspective in particular, and have established basic management strategies to address these environments.
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1. Growth strategy as a Trading Company Specializing in Food Products |
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Pursuit of Supply Chain Sustainability for Major Products |
･Promotion of diversifying suppliers through diversification and decentralization of production areas for new development and purchasing products |
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Proposal for Diversity of Food for Healthy and Rich Diet |
･Sales activities that respond to new demand such as health-conscious, vegan, and fully nutritious foods. |
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Strengthening Global Deployment |
･Stabilize the surplus of the Chinese business and strengthen the US business. ･Promotion of export business in line with the growth of emerging markets and development of products specialized for local demand. |
| 2. Growth strategy as a food-processing manufacturer | |
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Increase of production system and sales of our own processed products that are value-added products |
･Selection of value-added products that meet market needs and establishment of production increase system by capital investment of the corresponding processed products. ･Expansion of the sales area of our own processed products and development of new sales channels. |
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Efforts to reduce the environmental burden |
･Efforts to reduce environmental impact such as consideration of the use of renewable energy, reduction of food loss and waste, reduction of waste by improving yield, introduction of recycled products, etc. |
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Maintaining a sustainable logistics network |
･Efforts to address logistics issues, reviewed the existing logistics network, verified and took measures against the "2024 logistics problem. |
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Providing safe and secure food |
･Strengthening the quality control and assurance system at our own factories, strengthening the quality audit system at our partner factories and suppliers, and maintain a system to provide safe and secure foods. |
| 3. Promotion of Sustainability Management | |
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Promotion of environmental and human rights responses |
･To achieve carbon neutrality, we set targets based on accumulated data on CO2 emissions. |
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Cooperation with stakeholders |
･Promotion of CSR (Corporate Social Responsibility) such as consideration for the environment, social contribution, fair and transparent corporate management. ･Continue to promote contributions to the local community by improving the comfortable working environment, improving working conditions, and enhancing welfare. ･Strengthening IR activities to enhance corporate value. |
| Strengthening Corporate Governance Structure | ･Ensuring corporate transparency and accountability through enhanced information disclosure. ･Further enhancement of the corporate governance system by utilizing the Governance Committee and improving the effectiveness of the Board of Directors. ･Thorough risk management and compliance. |
| Strengthening the management base | ･Improving business efficiency by promoting DX, and improving the DX level of our employees. ･Maximize the use of human capital by rebuilding the personnel system, pursuing diversity, and building development programs. ･Build human resources strategies that match the realization of management strategies. |
Management Objectives & Shareholder Return Policy
◆As for net sales, changes in local prices reflecting changes in crop yields and demand, and fluctuations in foreign exchange rates cause changes in the unit purchase prices of imported food materials, which in turn cause changes in selling prices. Therefore, as a management indicator, our main goal is to increase gross profit and operating income rather than net sales.
◆In addition, our policy is to aim for an ROE (return on equity) of 8% over the medium to long term in order to sustainably increase corporate value. Although it is currently below 8% due to aggressive capital investment such as new plant construction and the recording of depreciation and amortization expenses, we aim to achieve 8% over the medium to long term.
◆In terms of profit distribution,we regard the return of profits to shareholders as an important management issue and makes it a basic policy to maintain stable dividends and to pay dividends from surplus twice a year, once as an interim dividend and once as a year-end dividend, based on a comprehensive assessment of business investments to achieve medium- to long-term growth and the level of retained earnings. Our basic policy is to pay dividends twice a year, an interim dividend and a year-end dividend.
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, 2024, the day we submitted our securities report.
(1)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. We endeavor to enhance quality management and secure food safety by measures such as holding regular meetings with participants from the Quality Assurance Department and plants both in Japan and overseas. However, unpredictable 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.
(2)Inventory
The Group handles a wide variety of food ingredients and products. In particular, we maintain a certain amount of inventory centering on imported ingredients and products. We focus on inventory management to ensure we carry no excess inventory or expired product, by carefully taking into account harvest timing for agricultural products, production schedules at each plant, shipping schedules to our clients, and food expiry dates, as well as by assigning a person-in-charge for each product, who conducts frequent information exchanges with sales representatives. 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.
(3)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 climate change, 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 fluctuations in the overseas market prices of agricultural products due to changes in demand, or by exchange rate fluctuations. To counteract the above, we assign a procurement person-in-charge for each product, and strive to secure a consistent supply by conducting frequent information exchanges with each supplier and verifying the conditions of crops. However, if fluctuations occur on an unpredictable scale, the quality of ingredients and products may be compromised, or shortages may occur, which could impact the Group’s financial status and management results.
(4)Epidemics of communicable diseases or natural disasters
On top of sales offices, the Group also promotes its business through production plants and such. While the Group strives to control risks by such efforts as regularly reviewing the business continuity plan (BCP) and utilizing insurance, 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 which rely on ordering and shipping activities, and our production activities which rely on plants, thus affecting the Group’s financial status and management results.
(5)Impact of business globalization
The Group sources a portion of food ingredients and products from overseas, and operates production bases and sales businesses overseas. While the Group aims to manage related risks by designating departments dedicated to overseas procurements and a department to the management of overseas Group companies, wars, terrorism, political or social unrest, disadvantageous taxation and regulations, their amendments and abolition, and other unpredictable circumstances, or a defect in the governance of an overseas Group company, may affect the Group’s financial status and management results.
(6)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.
(7)Compliance with legal regulations, etc.
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.
(8)Information and systems
On the back of the advancement of digitalization, besides order, purchase and accounting processing being conducted via information communications and data processing, communication with business partners, information exchanges within the Company, etc. also utilize electronic exchange methods. Therefore, the Group strives to reduce related risks by designating a department dedicated to information systems. However, if an information leakage, data loss, or virus attack occurs, the Group’s corporate activities may be hindered, which may affect the Group’s financial status and management results.
(9)Risks Related to Domestic and International Transportation
In response to labor shortages in the logistics industry, the Group is promoting a modal shift from trucking to rail freight and other modes of transportation, as well as unloading imported cargo at ports close to consumption centers. However, if problems arise, such as delays in product delivery due to a shortage of delivery drivers or a significant increase in logistics costs due to soaring labor and fuel costs, our group's business results may be affected. In addition, the increasing instability in global marine transportation may cause delays in the procurement of products and increases in logistics costs, which may affect the financial position and business performance of the Group.
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
