Message from the President
I wish to thank our shareholders and investors for their consistent and exceptional support.
Regarding the business environment surrounding us, the need for processed foods has remained stable as people are shifting from foods prepared at home to foods prepared outside the home associated with changes in lifestyles. There are many issues, such as rising labor costs due to labor shortages, rising costs due to rising logistics costs, and fluctuations in food prices due to the expansion of climate change, and we are working together as a whole to address these issues. Specifically, we are working to achieve a stable supply of products by expanding the number of overseas suppliers, broaden our customer base, and increase added value through aggressive capital investment.
As for our business performance in the fiscal year ended October 31, 2019, domestic sales of butter and other imported dairy products, confectioneries, confectionery ingredients, and other products were favorable, but total sales fell slightly year on year due to lower prices of walnuts and other nuts and a decline in overseas sales in yen terms due a stronger yen compared to the previous fiscal year. As for profit, although there were some profit-boosting factors such as strong performance in the confectionary business, profit declined as a result of a decline in local prices of agricultural products due to the negative impact of crops, an increase in selling costs such as labor costs and transportation costs, and other factors.
As for the 73rd Term, in Japan, gradual economic expansion is expected as private consumption is expected to remain firm, partly due to the hosting of the Tokyo Olympics, and as capital investment for labor saving is also expected to continue. Meanwhile, overseas, in addition to trade friction between the United States and China and the U.S. presidential election, there are other uncertainties such as a slowdown in the Chinese economy. Under these circumstances, we will strive to continue to provide high value-added products by continuing investment in its production divisions.
As for our business results, we forecast an increase in net sales and profit, with net sales of 108.0 billion yen (up 2.0% year on year), operating profit of 4.4 billion yen (up 7.6% year on year), ordinary profit of 4.3 billion yen (up 6.9% year on year), and profit attributable to owners of parent of 2,850 million yen (up 7.4% year on year).
We look forward to your further support and guidance.
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.
1.Expand domestic sales base and enhance sales proposals
|Expand domestic customer base||We will expand our customer base by offering new and improved products.|
|Strengthen sales proposals and improve our market share||We will make appropriate proposals for growing products and industries such as proposals of food materials suitable for customers’ product development needs. In particular, we will propose high value-added products utilizing our production subsidiaries.|
|2.Enhance 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 importing and exporting company with production functions.|
|Capital investments with a long-term perspective||We will make capital investments with a long-term perspective in the areas of labor saving facilities, products quality improvement and others to deal with aging plants and the lack of production capacity.|
|Improve production efficiency||We will promote interactions between plants and improve accuracy of production plans in order to improve yield rates and production efficiency.|
|3.Improve product quality and procurement management|
|Improve quality management and warranty systems||We will further strengthen our system of stable supplying safer and more secure foods by introducing testing equipment and thorough quality controls at plants, and improving sorting ability. We will also take further steps to acquire external certifications for a more comprehensive quality warranty system.|
|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. We will also deal with new trade framework.|
|Improve procurement management||We will manage inventory risks and lower cost rates by timely procurement in response to changes in market prices and foreign exchange rates.|
|4.Enhance our global business|
|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 Asian markets.|
|5.Enhance management base|
|Enhance corporate governance||We will reinforce our compliance with corporate governance codes to further enhance our corporate governance 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. We will also improve production processes and introduce energy saving equipment in order to reduce energy consumption and food wastes.|
|Further pursue efficient operation||We plan to promote advance use of information systems and IT. We will also reevaluate our logistics, improve the accuracy of our inventory control, and enhance management of foreign exchange rate fluctuation 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 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 substantial fluctuations of agricultural products and currency rates, etc., consequently impacting the Group’s financial status and management results.
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.
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.
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.
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