the nisshin oillio group, ltd....financial results presentation for fiscal 2010 first-half (the six...
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Financial Results Presentation for Fiscal 2010 First-Half(the Six Months Ended September 30, 2010)
November 9, 2010The Nisshin OilliO Group, Ltd.
2
Medium-term Business Plan GROWTH 10 Phase IProgress Report and Future Direction
Kazuo OgomePresident
3
Fiscal 2010 First-Half Consolidated Financial Results
(Millions of yen) 1H FY10 1H FY09 Change (%)
Net Sales 149,313 148,493 0.6%Operating Income 3,973 5,891 -32.5%Ordinary Income 3,537 5,651 -37.4%
Net Income 1,600 2,994 -46.6%
(Reference: Non-consolidated Financial Results)
(Millions of yen) 1H FY10 1H FY09 Change (%)
Net Sales 88,231 92,857 -5.0%Operating Income 2,530 4,686 -46.0%Ordinary Income 3,037 4,979 -39.0%
Net Income 1,920 2,909 -34.0%
4
Fiscal 2010 Forecasts
(Millions of yen) FY10 FY09 Change (%)
Net Sales 311,000 301,299 3.2%Operating Income 10,500 10,435 0.6%Ordinary Income 9,800 10,302 -4.9%
Net Income 5,200 5,104 1.9%
(Reference: Non-consolidated Financial Forecasts)
(Millions of yen) FY10 FY09 Change (%)
Net Sales 181,000 185,071 -2.2%Operating Income 6,200 6,650 -6.8%Ordinary Income 6,500 7,138 -8.9%
Net Income 3,900 3,591 8.6%
5
GROWTH 10 PhaseⅠ Results and Issues
Target Position at Completion of PhaseⅠ
As the foundation for transforming ourselves into an international corporate group, become a foods corporate group that possesses a stable earnings structure and original technologies.
¥311.0 billion¥300.0 billionNet sales¥9.8 billion¥15.0 billionOrdinary income
ForecastInitial target
Consolidated sales and income targets
6
PhaseⅠ Results and Issues
◇ Domestic oils and meal business
◇ Processed oils and fats business
・ Stabilize the market by selling at appropriate pricesEstablish sales prices in line with globally high grain pricesExpand sales of Healthy Resetta and Healthy Choleste healthy oils, olive oil and sesame oil for the home-use market
・ Production and sale of high-value-added products, entry into highly-processed fields
Investment in Malaysia-based palm-oil processing equipment and oils and fats for chocolateEntry into the chocolate business through capital participation in Daito Cacao Co., Ltd.
◇ Oils and fats business in China・ Stable operations in Dalian Nisshin Oil Mills and launch of Chinese version of Healthy Resetta “日清減肥油”
Operations of Dalian Nisshin Oil Mills stable; recorded profitsGMP certification obtained for Chinese version of Healthy Resetta “日清減肥油;” market launch
7
PhaseⅠResults and Issues
◇ Healthy foods business
◇ Soy protein business
・ Developing the food lifestyle field and the health linkage field through pursuit of health and good taste
Joint product development with PIETRO Co, Ltd. and merger of mail-order sales businessEntry into the South Korean nursing care foods marketEarnings enhanced through cost reductions and stronger sales
・ Earnings enhanced through cost reductions and stronger salesEnhanced technical support and proposal-based salesCosts reduced through revision of production and purchasing systems
◇ Fine chemicals business
・ Progress in overseas sales of raw materials for cosmeticsIncreased overseas sales through sales bases in Europe and ChinaDeveloped products in the environment-related field using medium-chain triglycerides
8
Status of Cost Reduction Efforts
Production ・ Build a production control system¥0.7 billion
Area Target
Investment
General purchasing and administrative
expenses
Logistics
Other
¥0.5 billion ・ Bolster expense management and promote cost awareness
・ Reduce depreciation and amortization through tight investment profit management
・ Reduce inventory and raise efficiency of logistics network
¥0.4 billion
¥0.2 billion
¥0.2 billion
Major initiatives
◇ ¥2 billion reduction in FY2010 compared with FY2008
¥2 billionTotal
¥0.8 billion
Forecast
¥0.4 billion
¥0.6 billion
¥0.2 billion
¥2 billion
9
Management Environment Going Forward
・ Rising global demand and flow of speculative funds into the market have kept grain prices high
・ Growth in oils, fats, and meal markets in emerging nations (strong expansion in volume and quality)
・ Reduced consumption of oils and fats in Japan due to population aging and decline
・ Rise in imported oils and meal due to reduced or scrapped import duties and the yen’s appreciation
Recognize Future Decline in Demand for Oils, Fats and Meal Due to Globally High Raw Materials Prices and Declining Population and Birthrate in Japan as a Structural Issue
10
Direction Going Forward
Secure stable earnings
・ Reform business operating system for greater efficiency
・ Change to profit-driven activities
◇ Oils and meal business
Realize a stable earning structure and secure growth
We will secure stable earnings in the domestic market going forward despite the structural challenge of declining consumption of oils, fats and meal due to an aging and declining population with a low birthrate.
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Direction Going Forward
Grow business into a second earnings pillar
・ Make full use of the business base established in Phase 1
・ Aggressively develop overseas markets for oils and fats for chocolate
◇ Processed oils and fats business
Concentrate management resources here to grow and expand the business scale to match that of the oils and meal business
12
Direction Going Forward
Lay the foundations for growth
・ Expand business in China, healthy foods business, fine chemicalsbusiness, and soy protein business
・ Expand domestic and overseas business through pursuit of flavor, health, and beauty
◇ Growth business
Nurture businesses with potential to become earnings pillars alongside the oils and meal business and processed fats and oils business
13
Direction Going Forward
◇ Strengthen operation base
Focus on technology
① Develop products and technologies
Differentiate Nisshin OilliO from competitors through further cultivation of elemental and applied technologies; strengthen earnings capabilities
・ Further cultivate enzyme, separation, and analysis and evaluation technologies
・ Strengthen application technologies
・ Invest in human resources to strengthen product and technology development capabilities
14
Direction Going Forward
・ Realign production and logistics bases to fit product demand and business structure
②Promote cost structure reforms
Reform cost structure based on the assumption that high raw materials costs and shrinking domestic consumption are structural challenges
・ Review operation cost structure and re-allocate management resources
・ Cut costs in purchasing, procurement and logistics. Eliminate unprofitable operations and items
◇ Strengthen operation base
Reform cost structure
15
Takeshi Ootara
Officer General Manager
Financial Department
Outline of Financial Results for Fiscal 2010 First-Half(the Six Months Ended September 30, 2010)
16
Raw Materials Prices & ForeignExchange Rate 1H FY10 Results 1H FY09 Results Change Change (%)
Soy bean Unit Price (USD/t) 449 447 +2 +0%Rapeseed Unit Price (USD/t) 469 440 +29 +7%
Foreign Exchange Rate (JPY/USD) 90 95 -5 -5%
Net Income
1H FY09 Results 1H FY10 ResultsOrdinary Income
1H FY09 Results 1H FY10 Results
Ne t Sale s
1H FY09 Results 1H FY10 Results
Operati ng Income
1H FY09 Results 1H FY10 Results
Outline of Consolidated Financial Results for Fiscal 2010 First-Half
148,493 149,313+819 (+0.6%)
3,9735,891-1,917 (-32.5%) 5,651 3,537
-2,113 (-37.4%)
2,994 1,600-1,394 (-46.6%)
* Figures for raw materials prices and foreign exchange rates are based on Nisshin OilliO estimates.
Millions of yen
17
500
700
900
1,100
1,300
1,500
1,700
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
US¢/Bu
Soybean Market Prices (Chicago)
Source: Bloomberg
Sep. 27 1,144.00
April – September 2009April – September 2010
Jun. 29 926.00
Jun. 11 1, 291.25
Sep. 15 901.50
Average price (closing price): 1,088
Average price (closing price): 996Percentage decline: 8%
18
300
400
500
600
700
800
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
CAD/t
Rapeseed Market Prices (Winnipeg)
Source: Bloomberg
Sep. 27 487.30
April – September 2009 April – September 2010
May 12 360.00
May 20 484.10
Sep. 24 376.10
Average price (closing price): 436 Average price (closing price): 424
Percentage decline: 3%
19
1,200
1,600
2,000
2,400
2,800
3,200
3,600
4,000
4,400
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
MYR/t
Palm Oil Market Prices (Malaysia)
Mar. 11 2,730
January – June 2009
January – June 2010
Jan. 14 2,200
May 13 2,905
Jan. 2 1,720
Average price (closing price): 2,262
Percentage increase: 13%
Average price (closing price): 2,551
Source: Bloomberg
20
80
85
90
95
100
105
110
115
120
125
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
JPY/USD
Foreign Exchange Rate
April – September 2010
April – September 2009
Apr. 6 101.44
Sep. 28 88.24
Average price (closing price): 89
Percentage decline: 7%
Average price (closing price): 95
May 4 94.99
Sep. 15 82.88
Source: Bloomberg
21
Freight Charges per Ton for Panamax Size Vessels, U.S. to Japan
Source: Based on TDS Maritime Intelligence data
5/20 78.004
7/24 67.442
15
35
55
75
95
115
135
155
175
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
USD/LT
April – September 2009
April – September 2010
Average price: 63
Percentage increase: 18%Average price: 53
Jul. 9 46.270
Apr. 7 34.152
Jul. 24 67.442
May 20 78.004
22
50.00
55.00
60.00
65.00
70.00
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
%
Changes in Value of Meal
April – September 2010
April – September 2009
Sep. 24 62
Jul. 1 70
Apr. 9 57
Jul. 1 61
Average price: 60
Average price: 65
A fall of 5 points
23
Market Prices: Oils
3,0002,900
4,800
3,300
3,600
155
4,300
3,600
4,2004,100
3,200
179
4,600
219
2,8002,860
3,050
2,950
165.5
166.3167.5
158
145
160157
178
140
203
148
162.5
165.5
160.5153152
153
173
224
219
249
229
209
145
141
166
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
JPY/can
130
150
170
190
210
230
250
270
290
JPY/kg
Soybean oil (can) Soybean oil (bulk) Rapeseed oil (bulk)
24
Market Prices: Meals
Source: The Daily Oils & Fats Special
43,50045,000
50,000
55,000
60,00062,000
45,000
30,00031,500
34,000
32,000
37,000
67,000
31,000
38,000
28,500
32,000
47,500
36,00042,000
57.1
67.9
43,000 40,000
69.2
52,000
59.7
70,000
50,500
61.5
69.0
68.0
70.0
66.1
68.9
58.2
69.4
77.9
75.2
20,000
30,000
40,000
50,000
60,000
70,000
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
JPY/t
50.0
55.0
60.0
65.0
70.0
75.0
%
Soybean meal Rapeseed meal Rapeseed meal ratio
31,500 31,500 31,500
25
Consolidated Results by Business and Geographic SegmentsMillions of yen
Consolidated 149,313 3,973 148,493 5,891 +0.6% -32.5%
Oils and Meal 136,920 2,969 136,502 5,501 +0.3% -46.0%
Healthy Foods & Soy Protein 5,007 (98) 4,936 (388) +1.4% -
Fine Chemicals 2,945 212 2,801 9 +5.1% +2,119.9%
Other 12,701 887 12,417 780 +2.3% +13.7%
Eliminations/Corporate (8,261) 3 (8,164) (11)
Japan 110,241 2,843 114,506 4,818 -3.7% -41.0%
Asia 42,562 1,122 36,115 1,071 +17.9% +4.8%
Eliminations/Corporate (3,491) 7 (2,128) 1
Percentage of overseas sales
1H FY10 1H FY09 Change
25.7% 21.8% +3.9
1H FY10 1H FY09 Change (%)
Net SalesOperatingIncome(Loss)
Net SalesOperatingIncome(Loss)
Net SalesOperatingIncome(Loss)
26
•Based on data for The Nisshin OilliO Group, Ltd., Settsu Oil Mills Co., Ltd., Daito Cacao Co., Ltd, Daito Cacao Co., Ltd., Dalian Nisshin Oil Mills, Ltd.*, Shanghai Nisshin Oil & Fats, Ltd. * and Intercontinental Specialty Fats Sdn. Bhd. * T.&C. Manufacturing Company Pte. Ltd.*
* Data for January 1 – June 30, 2010
•Figures in parentheses indicate year-on-year percentage point changes.
Breakdown of Sales of Oils & Fats, Meal and Grains(April – September 2010)
Net Sales Sales Volume
Meal: 22% (-1)
Home use: 21% (±0 )
For processed foodmanufacturers: 10% (-2)
Commercial use: 15% (-1)
Grains: 1% (±0)
Processed oils & fats:31% (+4)
Home use: 6% ( ±0)
Commercial use: 9% ( ±0)
Processed oils & fats: 27% (+1)
For processed foodmanufacturers: 8% (-1)
Meal: 49% ( ±0)
Grains: 1% (±0)
Net SalesSales
Volume Net SalesSales
VolumeDomestic 68% 64% 73% 64%
International 32% 36% 27% 36%
1H FY10 1H FY09
27
Changes in Major Raw Material Prices
25,000
35,000
45,000
55,000
65,000
75,000
85,000
Apr. – Sep.
2006
Oct. 2006 –
Mar. 2007
Apr. – Sep.
2007
Oct. 2007 –
Mar. 2008
Apr. – Sep.
2008
Oct. 2008 –
Mar. 2009
Apr. – Sep.
2009
Oct. 2009 –
Mar. 2010
Apr. – Sep.
2010
Oct. 2010 –
Mar. 2011
(forecast)
JPY/t
200.00
300.00
400.00
500.00
600.00
700.00
800.00
USD/t
Soybeans (JPY/t) Rapeseed (JPY/t) Soybeans (USD/t) Rapeseed (USD/t)
28
Change in Unit Sales Prices
Taking Apr. – Sep. 2006 as baseline of 1.0
0.800
1.000
1.200
1.400
1.600
Apr. – Sep.
2006
Oct. 2006 –
Mar. 2007
Apr. – Sep.
2007
Oct. 2007 –
Mar. 2008
Apr. – Sep.
2008
Oct. 2008 –
Mar. 2009
Apr. – Sep.
2009
Oct. 2009 –
Mar. 2010
Apr. – Sep.
2010
(actual result)
Oct. 2010 –
Mar. 2011
(forecast)
Unit price of major oil & fat products (JPY/kg)
29
Major Factors Affecting Operating Income (Year on Year)
Fiscal 2009 First-Half Operating Income: ¥5.9 billion
Down ¥1.9 billion
(Billions of yen)
Fiscal 2010 First-Half Operating Income: ¥4.0 billion
Overseas Operations +0.10
+0.50
+0.60
Healthy Foods & Soy ProteinBusiness/Fine Chemicals Business
Total
Subsidiaries +0.05Others SG&A +1.25
ManufacturingCosts, Other (0.40)
Sub-total +0.85
Total +0.90
Soybeans (0.10)Rapeseed (1.10)Foreign Exchange Rate +2.10
Sub-total +0.90
(2.15)
(2.15)
Total (3.40)
Raw Material Costs
Sales of MealSales of Oils and fats
SG&A Sales Promotion Costs +0.55Advertising Costs +0.20Logistics Expenses +0.10Depreciation +0.10Other +0.30
Sub-total +1.25
Materials andRaw MaterialsCosts ( 0.30)
Energy Costs ( 0.30)
Other +0.20Sub-total ( 0.40)
ManufacturingCosts, Other
30
Consolidated Balance Sheet: ChangesFrom End of Previous Fiscal Year
Millions of yen Millions of yen
Total assets Total liabilities and net assets
Current assets Total liabilitiesCash and deposits Notes and accounts payable-tradeNotes and accounts receivable-trade Interest-bearing debtShort-term investment securities OtherInventoriesshort-term loans receivableOther
Total net assetsNoncurrent assets Retained earnings
Property, plant and equipment Minority interestsIntangible assets OtherInvestments and other assets
+3,950
(1,193)
114,696 (119)
+738
+3,093
+335
(1,648)
+5,276
112,937 +5,395
(1,443)
227,633
+189
+81
(169)
(188)
227,633
129,690
97,943
+7,077
+5,276
(1,801)
+8,504
+5,855
(7,488)
(65)
31
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
FY05 FY06 FY07 FY08 FY09 1H FY10
Nisshin OilliO Group Domestic Subsidiaries Overseas Subsidiaries
Consolidated Interest-Bearing Debt(Millions of yen)
1,206
54,108
25,189 25,082
43,943
51,553
18,000
5,98333,000
15,029
6,080
18,000
34,500
36,000
952
400
6,129
9,043
8,868
6,685
51,014
33,000
4,566
13,499
32
Consolidated Cash Flows
Millions of yen
Net cash provided by operating activitiesIncome before income taxes and minority interestsDepreciation and amortizationDecrease in notes and accounts receivable-trade, inventories, and notes and accounts payable-tradeIncome taxes paidOther
Net cash used in investing activitiesPurchase of property, plant and equipmentPurchase of stocks of subsidiaries and affiliatesOther
Net cash provided by financing activitiesNet increase in short-term loans payable and commercial propertiesRedemption of bondsCash dividends paidOther
+3,834
+1,884
(172)
+285
+1,329
(10)
(861)
+3,070(147)
(1,743)+769
(3,090)
(2,898)
(226)
+33
33
Consolidated Financial Forecasts for Fiscal 2010
* Figures for raw materials prices and foreign exchange rates are based on Nisshin OilliO estimates.
Raw Materials Prices & Foreign
Exchange Rate FY10 FY09
Foreign Exchange Rate (JPY/USD) 88 93
Soybean Unit Price (USD/t) 460 462Rapeseed Unit Price (USD/t) 484 452
-6%
Change
(2)+32(5)
Change
-0%+7%
Millions of yen
ROE = Net Income / Shareholders’ equity
+1.9%
Net Sales
OperatingIncomeOrdinaryIncome
Net Income 1,600
+9,700
+64
+95
311,000
10,500
1H
301,299 148,493149,313
3,973 10,435 5,891
Major Indicators FY09
9,800
5,200
3,537
5,104 2,994
10,302 5,651
Year-on-year
+3.2%
+0.6%
(503) -4.9%
FY10 FY091H
ROA (ordinary income base; %)
ROE (net income base; %) Ratio of Interest-Bearing Debt to Operating
Cash Flow s (times)
FY104.3%
4.7%
4.8
4.6%
4.7%
4.5
34
Consolidated Sales Forecasts by Business and Geographic Segments
Millions of yen
Millions of yen
148,493 +9,701 +3.2%Consolidated 311,000 149,313 301,299
+2,289 +2.9%
Eliminations/Corporate ( 5,000) ( 3,491) ( 5,036) ( 2,128) +36
FY10 FY091H
-418
Consolidated 311,000 149,313 301,299 148,493 +9,701 +3.2%
( 17,000)
Year-on-year1H
Japan 235,500 110,241 228,124 114,506 +7,376 +3.2%
Asia 80,500 42,562 78,211 36,115
FY10 FY09 Year-on-year
+3.1%
+2.4%
+207 +3.6%5,793 2,801
Eliminations/Corporate
6,000
26,000
2,945
25,017
( 8,261) ( 16,582) ( 8,164)
1H
286,000
10,000
1H
277,308 136,502136,920
5,007 9,762 4,936
+3.9%
Oils and Meal
Healthy Foods & SoyProtein
Fine Chemicals
Other 12,701
+8,692
+238
+98312,417
35
Forecasts for Major Factors Affecting Operating Income (FY10 Year on Year)
Fiscal 2009 Operating Income: ¥10.4 billion
Up ¥0.1 billion
(Billions of yen)
Fiscal 2010 Operating Income: ¥10.5 billion
Overseas Operations +0.05
+0.80
Total +0.85
Healthy Foods & Soy ProteinBusiness/Fine Chemicals Business
+0.30SG&A +1.50ManufacturingCosts, Other +0.15
Sub-total +1.65
+1.95
SubsidiariesOthers
Total
SG&ASales Promotion Costs +0.75
Advertising Expenses +0.60
Other +0.15
Sub-total +1.50
Raw Material Costs Soybeans +0.20Rapeseed (2.40)ForeignExchangeRate +4.50
Sub-total +2.30Sales of Meal (6.25)Sales of Oils and fats +1.25
Total (2.70)
Materials andRaw MaterialsCosts (0.30)
Energy Costs (0.55)
Other +1.00
Sub-total +1.50
Materials andRaw MaterialsCosts
36
Capital Expenditures, Research and Development Costs, and Depreciation and Amortization
Capital Expenditures(Millions of yen)
1H FY10 Result FY10 Forecast2,532 7,000
Research and Development Costs(Millions of yen)
1H FY10 Result FY10 Forecast1,152 2,400
Depreciation and Amortization(Millions of yen)
1H FY10 Result FY10 Forecast3,070 6,500