briefing on results for the 1st half of the term ending mar....
TRANSCRIPT
November 18, 2013
Briefing on Results forthe 1st Half of the Term
Ending Mar. 2014
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved2
Today’s Topics
About the Fire at Hiratsuka Factory
I. Overview of the Financial Results for the1st Half of the Term Ending Mar. 2014
II. Earnings Forecast for the Term EndingMar. 2014Ritaro Igaki, President and Chief Executive Officer
III. Building of a Safety Management System and Restoration of Production CapacityHiroyuki Matsumoto, Senior Vice President, Chief of Corporate Planning Division
IV. Overseas Bases and Overseas StrategiesHironori Kasamatsu, Senior Vice President, Chief of Corporate Administration Division
* In this presentation material, “second quarter” is called “first half.”
About the Fire at Hiratsuka Factory
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved3 Copyright ⓒ 2013 Takasago International Corporation All Right Reserved
Outline of the fire accident
Date and time of occurrence: April 10, 2013 (Wednesday), 11:04 a.m. Site: Hiratsuka factory, flavor production building Damage: No injuries, three-story reinforced concrete building
(total floor area 6316 m2) destroyed. Outline of the accident: A fire broke out during the work of segmenting ethyl acetate
into smaller sized stainless containers from a drum. The fire spread across the floor, and inflammable materialssuch as stored raw materials went up in flames.
The Accident Prevention Committee was established.With the assistance of an independent organization, the Committee investigated the cause while obtaining confirmation from outside experts based on their specialist knowledge, formulated a draft emergency plan, and proposed permanent preventive measures. The Committee also published an accident report in August 2013.
Preventive measures in response to the fire and the rebuilding of the safety management system will be discussed later.
I. Overview of Financial Results for the 1st Half of the Term Ending Mar. 2014
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved4
Fiscal 2014/3 1st Half Results
2013/31st halfresult
2014/31st halfresult
Year-on-year change
2014/3 Estimate
Announced on Aug. 12
Comparison with estimate
Amount % Amount %
Net sales 60,152 66,234 6,081 10.1 66,000 234 0.4
Gross profit 18,667 20,953 2,286 12.2 ‒ ‒ ‒
Gross margin 31.0% 31.6% ‒ ‒ ‒ ‒ ‒
SG&A expenses 14,856 16,564 1,708 11.5 ‒ ‒ ‒
Operating income 3,810 4,388 577 15.2 4,300 88 2.0
Ordinary income 3,837 4,604 766 20.0 4,300 304 7.1
Extraordinary income/losses 104 -1,351 -1,456 ‒ ‒ ‒ ‒
Net income 2,641 2,178 -463 -17.5 2,000 178 8.9
[Unit: million yen]
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved5
Exchange rates USD:EUR:
80 yen103 yen
96 yen126 yen
96 yen126 yen
2013/31st halfresult
2014/31st halfresult
Year-on-year change
Amount %
Net sales 60,152 66,234 6,081 10.1
Gross profit 18,667 20,953 2,286 12.2
Gross margin 31.0% 31.6% ‒ ‒
Operating income 3,810 4,388 577 15.2
Ordinary income 3,837 4,604 766 20.0
Net income 2,641 2,178 -463 -17.5
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved6
[Unit: million yen]• Net sales increased in all regions
but Japan, where the fire had an impact.
• The overseas sales ratio rose to 46%.
• The positive impact of foreign exchange rates was approximately 5.0 billion yen.
• Operating income increased 15% due to the effect of higher sales in many regions and lower raw material costs.
• Net income declined due to the positing of an extraordinary loss of 1.3 billion yen for the fire at Hiratsuka Factory.
Overview
Fiscal 2014/3 1st Half Results
Exchange rates USD:EUR:
80 yen103 yen
96 yen126 yen
Sales in Each Region—Japan, Americas, Europe, Asia
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved7
Fiscal 2014/3 1st Half Results -- Sales in Each Region --
(1) Sales in each region Japan
FlavorsSales of carbonated and sports drinks and ices increased due to the effect of extreme heat.
The impact of the fire accident was offset by the contribution of new products, etc.
FragrancesThe market has been re-vitalizing in the area of fabric softeners with substantive and long-lasting fragrances.
New products such as fabric softeners and liquid detergents and renewed products drove sales (sales of fragrances have remained steady since fiscal 2010).
Aroma chemicals
The overseas market as a whole was recovery. Firm demand for synthetic mentholcontinued.
Demand for the Company’s mainstay menthol increased. Exports were steady, partly backed by the weaker yen.
Fine chemicalsA stronger tendency to use generic drugs had a significant impact on manufacturers of pharmaceutical intermediates.
Sales of major existing intermediates (those for antibiotic drugs, etc.) declined, although some new products contributed to sales.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved8
Market overview Company’s situation
-1.0%
Japan 35.4 billion yen 54% Americas 13.1 billion yen 20% Europe 8.6 billion yen 13% Asia 8.9 billion yen 13%
Japan
Sales66.2 billion
yen
35.9 35.8 35.4
1st half of term endedMarch 2012
1st half of term endedMarch 2013
1st half of term endingMarch 2014
9.7 9.8
13.1
1st half of term endedMarch 2012
1st half of term endedMarch 2013
1st half of term endingMarch 2014
(2) Sales in each region Americas
FlavorsIn North America, sales increased in the mint business for large customers. Sales also showed double-digit growth at the business base in Brazil (South American business).
Fragrances Although sales increased in South and Central Americas, sales were weak in North America for both multinational companies and local customers.
Fine chemicals Sales declined given a growing tendency to use generic drugs
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Company’s situation
* Comparison in local currency terms
+33.4%
Americas
Sales66.2 billion
yen
Japan 35.4 billion yen 54% Americas 13.1 billion yen 20% Europe 8.6 billion yen 13% Asia 8.9 billion yen 13%
Fiscal 2014/3 1st Half Results -- Sales in Each Region --
7.46.7
8.6
1st half of term endedMarch 2012
1st half of term endedMarch 2013
1st half of term endingMarch 2014
(3) Sales in each region Europe
Flavors Sales to large customers with whom relations were strengthened increased steadily, and sales of flavors for dairy products and confectioneries remained strong.
FragrancesSales of fine fragrances were on par with the year-ago level. In other areas, sales increased slightly as sales to large customers increased and decreased, depending on customer.
Aroma chemicals Both sales to the Group companies and those to customers outside the Group increased, partly thanks to the recovery in the overall flavor and fragrance market.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved10
Company’s situation
+28.6%
Japan 35.4 billion yen 54% Americas 13.1 billion yen 20% Europe 8.6 billion yen 13% Asia 8.9 billion yen 13%
Sales66.2 billion
yen
Europe
Fiscal 2014/3 1st Half Results -- Sales in Each Region --
* Comparison in local currency terms
6.77.7
8.9
1st half of term endedMarch 2012
1st half of term endedMarch 2013
1st half of term endingMarch 2014
(4) Sales in each region Asia
Flavors
In China, sales of flavors for confectioneries to large customers and sales to local customers were steady. Sale increased favorably in Southeast Asia, but foreign exchange had a large impact. At a new flavor factory in Singapore, transfer is scheduled to be completed by the end of the year. Sales in Dan Kaffe (Malaysia), which was eliminated from the scope of consolidation, were a factor to push down sales.
Fragrances Sales of fragrances for daily necessities to major customers and multinational companies increased significantly in both China and Southeast Asia.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved11
Company’s situation
+16.0%
Asia
Sales66.2 billion
yen
Japan 35.4 billion yen 54% Americas 13.1 billion yen 20% Europe 8.6 billion yen 13% Asia 8.9 billion yen 13%
Fiscal 2014/3 1st Half Results -- Sales in Each Region --
* Comparison in local currency terms
Operating Income Status
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2013/31st halfresult
2014/31st halfresult
Year-on-year change
Amount %
Net sales 60,152 66,234 6,081 10.1
Gross profit 18,667 20,953 2,286 12.2
Gross margin 31.0% 31.6% - -
SG&A expenses 14,856 16,564 1,708 11.5
Operating income 3,810 4,388 577 15.2
Ordinary income 3,837 4,604 766 20.0
Extraordinary income/losses 104 -1,351 -1,456 -
Net income 2,641 2,178 -463 -17.5
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved13
[Unit: million yen]
Operating income
Americas-1
Asia+2Europe
+2
38 44
Japan+2
[Japan]Profitability in exports improved due to the weaker yen.Fragrance business remained strong. [Americas]SG&A expenses increased in Central and South America.[Europe]Operations returned to profitability, mainly thanks to lower raw material prices and an earnings recovery at subsidiaries in Spain.[Asia]Profits increased significantly due to lower raw material prices and the weaker yen (currency translation), in addition to strong sales.
Foreign exchanges
+2
Exchange rates USD:EUR:
80 yen103 yen
96 yen126 yen
Fiscal 2014/3 1st Half Results -- Operating Income --
Consolidated elimination
-2
2013/31st halfresult
2014/31st halfresult
Year-on-year change
Amount %
Net sales 60,152 66,234 6,081 10.1
Gross profit 18,667 20,953 2,286 12.2
Gross margin 31.0% 31.6% - -
SG&A expenses 14,856 16,564 1,708 11.5
Operating income 3,810 4,388 577 15.2
Ordinary income 3,837 4,604 766 20.0
Extraordinary income/losses 104 -1,351 -1,456 -
Net income 2,641 2,178 -463 -17.5
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved14
[Unit: million yen]
Extraordinary income/losses
Impact of the fire at Hiratsuka Factory
Insurance income (1st half) 0
Loss due to fire
Abandonment of noncurrent assets
0.6 billion yen
Abandonment of inventories
0.2 billion yen
Other expenses 0.4 billion yen
Total 1.3 billion yen
Exchange rates USD:EUR:
80 yen103 yen
96 yen126 yen
Fiscal 2014/3 1st Half Results -- Extraordinary Income/Loss --
II. Earnings Forecast for the Term Ending Mar. 2014
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2013/31st halfresult
2014/31st halfresult
Year-on-year change
Amount %
Net sales 118,973 121,000 2,026 1.7
Gross profit 36,295 - - -
SG&A expenses 30,009 - - -
Operating income 6,285 5,000 -1,285 -20.5
Ordinary income 7,475 5,000 -2,475 -33.1
Net income 4,673 3,000 -1,673 -35.8
Fiscal 2014/3 Full-Year Earnings Forecast
[Unit: million yen]
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Sales forecast by region
Overseas sales ratio 42%
Impact of 1 yen change in exchange rates on salesDollar/yen 300 million yenEuro/yen 150 million yen
Exchange rates USD:EUR:
80 yen103 yen
96 yen126 yen
Japan Americas Europe Asia
2012/3result
2013/3result
2014/3estimate
Operating cash flows 6,890 5,724 6,000
(Depreciation and amortization) (4,895) (4,619) (4,800)
Investingcash flows -3,955 -5,363 -10,000
Financing cash flows -3,743 1,372 3,400Net increase
(decrease) in cash and cash equivalents
-931 2,131 -600Cash and cash equivalents at
beginning of period12,136 11,205 13,336
Cash and cash equivalents atend of period
11,205 13,336 12,736
Fiscal 2014/3 Forecast for Consolidated Cash Flows
[Unit: million yen]
- Increase in overseas investment inSingapore, Germany, USA, etc.
- A capital investment of approx. 3.0 billion yen to restore production capacity
- Excluding the investment in a new factory in western Japan(Final investment amount and time of payment yet to be determined)
- Increase in loans payable for investment
Investing cash flows
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved17
Financing cash flows
III. Building of a SafetyManagement System and Restoration of Production Capacity
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved18
Fire at Hiratsuka Factory and Preventive Measures
Date and time of occurrence: April 10, 2013 (Wed.), 11:04 a.m. Site: Second floor of flavor production building inside Hiratsuka Factory Damage: No injuries, three-story reinforced concrete building (total floor area 6316 m2) destroyed. Overview of accident: During the blending of flavors for toothpaste, static electricity caused a fire during the work
of segmenting ethyl acetate into smaller stainless containers from a drum spread to inflammable materials such as raw materials. The building was almost completely destroyed.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved19
Preventive measures
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Accident Prevention Committee: With the assistance of an independent organization, the Committee investigated the cause of the accident, drafted an emergency plan, and proposed permanent preventive measures.
Preventive measures: 1. Measures to avoid causing fire
Full implementation of measures based on strict rules to avoid generating naked flames in work areas
2. Measures to contain fire Full implementation of measures based on strict rules to identify and contain risk factors3. Measures requiring an immediate response
Drilling in emergency countermeasures by the entire Takasago Group after the accident4. Permanent measures Educate personnel and create an organization focused on safety measures5. Development of preventive measures
Sessions at all factories of the Takasago Group to check responses and share information
Outline of the accident
Rebuilding of the Safety Management System
20
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved
20
Scope
Give strong assurance that “safety comes before anything else” and rebuild the safety system with strong determination.
To foster safety awareness and develop a safety culture
OrganizationEHS HEAD QUARTERS (new)
TOP
Workplaces
Business places
Headquarters
C
A D
PPolicyBudget
Guidelines
Objective
Approaches
Activity results
Implement PDCA with greater awareness on a Company-wide basis.
• Strong cooperation with relevant divisions
• Budget and authority for safety measures
• President & Chief of Headquarters
20
Environmentalconservationhealth
Securityand
disasterprevention
Occupationalsafety
Establishment of BCP System
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved21 Copyright ⓒ 2013 Takasago International Corporation All Right Reserved21
Measures for early restoration
Improvement of the effectiveness of alternate
productionSecuring of inventory
• Establish Takasago West Japan Co., Ltd. in western Japan• Enhance existing facilities
For early resumption of important operations –Activities to fulfill our supply responsibility
Each business division:Identify the most urgent
items.
Production division:Examine complementary
production between factories.
R&D and each division:Standardize raw materials
and revamp flavor and fragrance formulations.
Make a Group-wide effort and provide practical training.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved
Flavor Production System(1) Restoration of production capacity
Construction work to repair and improve facilities that included safety measures using the lessons from the fire was undertaken mainly at Hiratsuka Factory and Kashima Factory.
Production capacity that had been destroyed was restored in October 2013
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved22
Operation commencing time: October 2013Improvements: Production facilities of flavors, etc. and storage warehouse, etc.Investment: Hiratsuka Factory Approx. 1.1 billion yen, Kashima Factory
Approx. 1.3 billion yen, etc.Total amount of repairs and improvements: Approx. 3.0 billion yen
* Changes in flavor production capacity in Japan
Occurrence of fire
Apr. 2013
Restoration of production capacity
Oct. 2013
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved23
(2) Establishment of Takasago International Western Japan Factory Co., Ltd.
Promote BCP and improvements in production efficiency throughout the Takasago Group.
Aim to increase customer satisfaction.• Improve efficiency from production to logistics in western Japan.• Increase productivity with the latest facilities• Achieve high-level safety, health and environmental responsiveness.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved23
Operation commencing: First half of 2015 (planned)Facilities: Production facilities of flavors, etc. and logistics facilities, etc. Production capacity: Approx. 3,000 tons (estimate at the operation commencing time)Location: Hiroshima
Flavor Production System
* Changes in flavor production capacity in Japan
Occurrence of fire
Apr. 2013
After the construction
of a new factory2015
Restoration of production capacity
Oct. 2013
IV. Overseas Bases and Overseas Strategies
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Brazil
Australia
Mexico
U.S.A.
VenezuelaGuatemala
U.S.A.
South Africa
China
United Kingdom
France
Indonesia
PhilippinesMalaysiaVietnamThailand
Singapore
GermanyItaly
Russia
India
Spain
Taiwan
JapanKorea
Madagascar
Morocco
Turkey
Overseas Bases (27 Countries and Regions in the World)
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved25
Production/Sales
Sales
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Investment: Approx. $45 millionSite area: 14,000 m2
Production capacity:Approx. 20,000 tons
27 Countries and Regions in the World -- Overseas Strategies --
(1) New factory in Singapore – Operations started
Enable an increase in production capacity, enhancement of the R&D function, and comprehensive
business development in Asia.
Respond to increasing demand in Asia
8%Beverage
2012-2017 market forecast
Changes in sales of Takasago in Asia 1H FY2014/3
Confectioneries8%
Fragrances, etc.
8%Cosmetics, etc.
8% 7%Soap/detergent
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved27
Joint venture with Ramanandraibe Export Co.Collector of vanilla beansLeading company in Madagascar
Local division of rolesRamanandraibe
Export Co.Collection and ripening
of vanilla beans
TAKASAGO MADAGASCAR S.A.
Purchase of ripened beans and extraction of
vanilla essence
Stable procurement of raw materials is possible by establishing a production base in a growth area.
27 Countries and Regions in the World -- Overseas Strategies --
(2) Vanilla project – Takasago brand LA VANILLE T has started up
TAKASAGO MADAGASCAR S.A.
Secures the largest vanilla beans collection capacity.Extracts essence from vanilla beans.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved28
Acquisition of SOCIETE CANANGA S.A.R.L.Natural product extraction and processing company in Morocco Takasago Morocco, a processing facility, was established based on CANANGA S.A.R.L.
TAKASAGO MOROCCO
Secondary processing of raw vanilla essence
Rapid supply to Europe, the world’s largest vanilla market, is possible.
27 Countries and Regions in the World -- Overseas Strategies --
(2) Vanilla project – Takasago brand LA VANILLE T has started up
TAKASAGO MADAGASCAR S.A.
Exports vanilla essence (Takasago’s technology) to each processing facility.
TAKASAGO MOROCCO
Secures the largest vanilla beans collection capacity.Extracts essence from vanilla beans.
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved29
(2) Vanilla project – Takasago brand LA VANILLE T has started up
TAKASAGO MADAGASCAR S.A.
Exports vanilla essence (Takasago’s technology) to each processing facility.
TAKASAGO MOROCCO
• Global production volume of vanilla beans: 7,508 mtMadagascar-grown vanilla beans: Approx. 1,587 mt
(Source: Data of FAOSTAT 2011)• Use of vanilla flavor:
Confectionery, frozen deserts, dairy products, etc.
Encompasses commercial distribution from upstream to downstream (procurement of vanilla beans for delivery
to customers)
Realize a stable supply of vanilla flavor.
Secures the largest vanilla beans collection capacity.Extracts essence from vanilla beans.
Takasago facilities
Supply vanilla flavors to customer preferences.
27 Countries and Regions in the World -- Overseas Strategies --
Copyright ⓒ 2013 Takasago International Corporation All Right Reserved30
NotesThis reference material has been produced with the purpose of providing information regarding the business contents, strategies, and performance of our corporate group as of November 18, 2013, not promoting the investment in the securities issued by our company.The opinions and forecasts, etc. written in this reference material are based on the judgment of our company as of the time of its production. We do not guarantee or assure the accuracy or completeness of the information. In addition, the information may be revised without notice.
Thank you for your kind attention.
For inquiries: Hironori Kasamatsu, Director /Chief of Corporate Administration Division
TEL: 03-5744-0523 FAX:03-5744-0512http://www.takasago.comE-mail:[email protected]