Ajinomoto Co Inc

Despite your busy schedule, thank you very much for your participation to the Ajinomoto Group's financial results for Q1 of FY 2020 for a conference call. This is Pac from IR Office. I am the moderator. In today's conference call, we have Mr. Kaji, Corporate Fellow, General Manager of IR Office with us. We scheduled 16 minutes for the conference. At the outset, based on the disclosed material, 20 minutes or so, Mr. Kaji is going to make the explanation, and then we will have Q&A. The material that is going to be used today is uploaded on the Aya Ajinomoto's website, and the content of today's conference will be recorded and will also be uploaded on our website. I would like to have your cooperation, so we would like to now start. So, Kaji-san, please.

Good afternoon, everyone. Once again, this is Kaji from the IR office of Ajinomoto. Now, without further ado, we would like to explain the first quarter results for fiscal 2023. If you can open page six. This is a summary of the first quarter. For the first quarter, we achieved an increase in both revenue and profit. Revenue, business profit, we achieved the record profit and sales for the first quarter. For business profit, If we exclude the impact of Forge acquisition, its business profit increased by 7% compared to the same period of 2023. In seasoning and food segment, salt and seasoning overseas remain very solid. In frozen food segment, we have continued brand investment in accordance with the plan from the start of the year, so this led to achieving growth in main products. In healthcare and other segment, revenue increased. and profit increased significantly. Functional materials, in particular, recorded a significant increase in both revenue and profit. While pharmaceutical services, CDMO services, including Forge, orders remained very strong. In the first quarter, shared company-wide expenses increased due to strategic investments made for the purpose of achieving the 2030 roadmap. For the full year, however, we will control these expenses to keep them within the level that we had forecast at the beginning of the year. Moving on to page three, this is the highlight of the numbers. Sales revenues came in at 365.5 billion yen, 107.7% of the same period of last fiscal year. If we exclude the impact of currency translation, it was 102.3% the level of last year. Business market came in at 43 billion yen, 100.5% level of last year. If you exclude the currency translation, it came in at 95% of the last year's level. If we exclude the impact of Forge acquisition, as I said earlier, on a Japanese yen basis, it was 107% year-on-year. And if we exclude the impact of both Forge and currency translation, it was 102% the level last fiscal year. So we achieved an increase in business profit in profit by all these calculations. Profit attributable to owners or parent remained at 88% of the last fiscal year because the transient increase in tax burden of withdrawing tax overseas associated with the profit returned from funds from overseas subsidiaries. However, this is only transient and the corporate tax credit is going to normalize towards the 27% level that we have anticipated in the forecast that we have given to you. for the full year. Page 4, this is the changes behind the business profits. The sales growth led to improvement of gross profits of $9.5 billion year-on-year gross profit margin. Although in the healthcare business, we recorded a positive increase. However, when it comes to umami seasoning for processing and other food businesses, we recorded a decline because of the unit price decline. So overall, it was comparable to last fiscal year. We are disclosing this at each earnings call. When it comes to south segmental sauce and seasonings and query nourishment, I would like to give you the breakdown of the numbers here. For domestic, seasoning and sauce and seasoning quick nourishment, unit price was 103%, volume was 96%. Overall, the sales was on par with the last fiscal year level. For overseas, unit price, 103%, and volume, 102%, the level of last fiscal year. Overall, 105% overall compared to last fiscal year for overseas. The domestic business was 98%, so slightly decreasing compared to last fiscal year, but we are continuing to increase the prices aggressively for coffee, and stick business was quite favorable, but the regular and instant coffee recorded a decline, so therefore, overall, there was a decline. However, when it comes to the sauce and seasoning subsegment in Japan, volume was increased by mid-single-digit percentage points. If you look at the gray portion, which is the SD&A, of course there was an impact of consolidation of forge, but in association with the 2030 roadmap strategy, we are continuing to expand the investment for in-time assets that is needed for sustainable growth in the future. Moving on to page five, here this is the difference from year on year of the business profit by segment in the first quarter of 2024. In the second half of the page, Just as a reference, we have given the analysis of the difference between the full-year forecast and last year's actuals. From page 6 onwards, I would like to give you the sales status of each different segment. First of all, if you can look at page 6 now, this is the sales of the three major segments. The first is the seasoning and food segment. Overall, one increased by 14.2 billion yen. If you look at the domestic sauce and seasoning, it was on par with last fiscal year overall. Coffee recorded a decline in volume. However, the seasoning increased because of the unit price increase and also the volume increase. For overseas, sauce and seasoning both achieved an increase in the unit price and volume, And on the local currency basis, it's achieved a high growth of upper single-digit percentage point, and this drove the overall growth of the field seasoning food segment. The second segment, frozen food. Overall, 6.3 billion yen increase in sales. Especially the overseas Gyoza and Asian core categories achieved a growth, which led to the overall growth of the revenue. And healthcare and other business. Overall, $5.9 billion sales increase. Functional materials achieved a significant sales increase because of the recovery of the semiconductor market and biopharma services and ingredients. Because there was an inventory adjustment impact last fiscal year, however, this has already subsided this fiscal year, has begun to subside this fiscal year. Moving on to page seven, this is a business profit for the three major subsegments. First, the seasoning and food segment. Overall, the segment achieved an increase of 1 billion yen in profit. For domestic business in Japan, the umami seasoning and mayonnaise and specific seasoning also achieved a revenue growth, but we were not able to absorb the negative impact from coffee. So overall, the domestic business achieved a slight decrease in profit. For coffee and menu-specific seasoning, as we have already announced, we are going to implement some price increases in the second half onwards in order to counter this trend. For the overseas markets, sauce and seasoning and quick nourishment achieved a growth in profit and covered offset the decline overall. So the overall segment of sauce and seasoning and food achieved a growth in profit. Growth in food, the second segment. Overall, a billion yen decrease in profit. Overseas, it was on par with last fiscal year. However, for the domestic Japanese business, because we have conducted proactive brand investment in the first quarter, we recorded a decrease in profit. Here, the unrealized profit of negative 0.5 billion yen is included here, but we believe we shall be able to achieve the planned numbers. for the full year. Healthcare and others, $1.7 billion in increase in business profit. Functional materials achieved a significant increase because of the mixed improvement in sales growth. And the amino acids for pharmaceuticals and food, because of the growth of the high value-added areas, we achieved an increase in profit. Biopharma services, CDL loan, because the orders are profitable, growing very steadily, but there was an increase, a decrease of, if you exclude the impact of 0.4 billion negative impact, we are steadily growing on par with the plan. For Europe and North America, the orders are growing steadily. However, so in the second quarter onwards, we are expecting a steady growth in this area. On the other hand, if you look at the very bottom there, This is the allocation of the shared company-wide expenses at the bottom here. We have increased the strategic investment in line with the 2030 roadmap, and we have increased this especially in the early part of the year. So if you compare with the first quarter of the fiscal year, the expenditures have been growing. On a four-year basis, however, we would like to control expenses in line with the projection that we have provided to you.

Moving on to page eight. From here. We would like to briefly talk about the topics for each segment. First is the domestic initiatives for seasonings and frozen foods. We discussed the evolution of our marketing efforts at the business briefing held on July 1st this year. As a second action of the oyster sauce communication strategy introduced on that day, we developed a real store of oyster sauce times soma noodle. As targeted, the product was exposed on TV and social media and achieved the expected advertising effect, which was quite high. In addition, the umami seasoning Ajinomoto, which is celebrating the 115th anniversary of its launch, we introduced a new package in collaboration with a popular cartoon, One Piece, and also a milk-type bottle of Garinomoto was launched. We are promoting to expand the users, centering on young generation. Also, the frozen home delivery meal, Ayete, which was introduced at the business briefing last December, has been launched with very favorable start. The number of meals sold is approaching 300,000 units, and key indicators are exceeding the plan. Furthermore, we launched a large volume package of gyoza, which we have regained the number one market share. We're aiming for a strong number one market share with cost-effective products. Moving on to page nine. These are overseas feelings and food and frozen foods initiatives. When you look at the top, we are pursuing... business strategies for overseas seasonings with an eye to the future. The mainstay umami seasonings and flavor seasonings are steadily increasing volume and unit price and supporting the foundation of our overseas seasonings business. We're expanding sales of high-value added categories like the menu-specific seasonings and liquid seasonings in each country. Also, the... Philippines, we launched a soup and canned coffee in Thailand that contributes to well-being with its sugar-free type. On the right bottom, you can see the frozen food. The new product, shumai dumpling, was launched in the Asian foods core category of frozen foods in North America with a basic recipe of the shumai in Japan. Moving on to page 10 is about functional materials. We achieved a significant increase in both sales and income as the semiconductor market recovered. As we have reported in May, PCs recovered due to replacement demand, and servers and networks are also showing signs of recovery. Although still a small percentage of the total, inquiries from generative AI are more robust than expected. On the right-hand side, business profit margins are also improving. in addition to mixed effect and higher factory utilization rates, a slight contribution from the yen's depreciation was also a factor in the higher profit margin. Moving on to page 11, CDMO. The market is in a gradual recovery trend and in all areas of our business environment for orders is improving. although sales of small molecules in Europe declined because we have transferred that to the nucleotide for some lines. The company expanded high-value-added areas and was able to keep profits decreased minimal due to the effect of an improved mix. Agiphase continued to grow steadily. Altea in North America We'll continue to implement structural reform projects. In the first quarter, we recorded a bit of a profit decline. The business portfolio will be narrowed down to fill and finish, and the active ingredients business will be integrated to forge. We aim to improve profitability as soon as possible by carrying out this project which will also involve a reduction in personnel. Also, FORGE in North America has expanded the number of new customers. We have now 48 new customers. Both the number of orders and order amount are increasing steadily. CDMO business as a whole we will achieve profit growth from the second quarter onward and realize steady profit growth for the full year as well. Finally, page 12, please. This is the progress of midterm ASV indicators by segment. So that was a summary of the financial results for FY24 first quarter. While steadily growing our existing businesses, We continue to make investments in advance with an eye toward 2030. We would continuously would like to take the changes and countermeasures, and we will do our best to achieve the goal. Thank you very much.