11 August 2008 - In the first quarter under review (April 1, 2008 to June 30, 2008), the Japanese economy showed signs of decelerating, with corporate profits decreasing and consumer spending remaining broadly flat.
In the Japanese food industry, the business environment remained severe, as a result of continued high prices of raw materials as well as concerns about food safety.
Internationally, the Asian economy continued its expansion, with growth in China and other countries, but the U.S. economy slowed down and economy recovery in Europe also eased off.
Within this environment, the Ajinomoto Group (“Ajinomoto” or “the Group”) focused its efforts on pursuing reforms on all levels throughout the entire Group, and extensively reducing costs and strengthening the business structure, aiming to be successful in the increasingly severe operating environment and to overcome competitive pressures. However, although consolidated sales for the first quarter increased 0.9% (¥2.5 billion) to ¥301.4 billion, operating income decreased 43.4% (¥6.1 billion) to ¥7.9 billion, and ordinary income decreased 31.1% (¥4.6 billion) to ¥10.2 billion, due to the impact of higher prices of crude oil and raw materials. Net income decreased 56.6% (¥4.8 billion) to ¥3.7 billion, due to a decrease in gains on sale of fixed assets and other factors.
Consolidated operating results by segment
Consolidated operating results by business segment are as follows:
Domestic food products
Domestic food product sales increased 4.5% (¥6.8 billion) to ¥158.5 billion, and operating income decreased 68.5% (¥1.5 billion) to ¥0.6 billion. The slight increase in sales was attributable to contributions by coffee and edible oils and Calpis Co., Ltd. becoming a wholly owned subsidiary on October 1, 2007. The substantial decrease in operating income was due to the higher cost of raw materials and other factors.
Seasonings and processed foods: In seasonings and processed foods for the retail market, sales of umami seasoning AJI-NO-MOTO were slightly higher than in the previous first quarter period. Sales of consommé and Chinese dashi products were maintained at the same level as the previous first quarter period, but sales of HON-DASHI decreased substantially. Sales of soups trended favorably, while sales of the Cook Do line increased slightly. Sales of mayonnaise and mayonnaise-type dressings grew steadily overall, despite lower sales of Pure Select Saralear. Sales of Kellogg’s products decreased slightly.
In seasonings and processed foods for the commercial market, sales were slightly lower than in the previous first quarter period, reflecting severe conditions in the restaurant market. Sales of ACTIVA, an enzyme (transglutaminase) that improves the texture and qualities of food, to food processing companies progressed favorably, driven by overseas sales growth, while sales of savory seasoning products were maintained at the same level as the previous first quarter period.
Sweeteners and nutritional foods: Sales of low-calorie sweeteners for home use and restaurant use increased compared to the previous first quarter, due to favorable sales of PAL SWEET and PAL SWEET Calorie Zero. Overall sales of amino acid supplement amino VITAL decreased previous first quarter period, due to lower sales of granulated products and other factors, despite higher sales of jelly drink type and liquid products.
Delicatessen and Bakery products: Sales of lunchboxes, prepared dish delicatessen products and bakery products each increased slightly from the previous first quarter period.
Frozen foods: Sales of products for the retail market decreased, due to core products such as Gyoza, Ebi Shumai, Ebi Pilaf and Fried rice with various ingredients being impacted by the market downturn caused by the Chinese-made frozen gyoza incident that occurred at the end of January 2008. Sales of products for restaurant and institutional use increased slightly, reflecting strong sales to major customers, which offset the impact of a decline in eating out due to continued rises in the price of food and foodstuffs and rising gasoline prices.
Beverages: Revenue from beverage sales increased significantly, due to Calpis Co., Ltd. becoming a wholly owned subsidiary on October 1, 2007.
Edible oils, Coffee, Dairy products: Sales of edible oils increased substantially from the previous first quarter period.
Revenue from coffee sales increased from the previous first quarter period, due to strong sales of instant coffee.
In chilled dairy products, sales of BIO and other yogurt products were favorable.
Overseas food products
Overseas food product sales increased 3.0% (¥1.1 billion) to ¥38.5 billion, due to a substantial increase in sales volumes of AJI-NO-MOTO and flavor seasonings for home use and restaurant use, which offset the negative impact of exchange rates of mainly Asian currencies. However, operating income decreased 16.4% (¥0.7 billion) to ¥3.8 billion, reflecting the global rise in prices of raw materials and fuels.
Seasonings: In Asia, sales of AJI-NO-MOTO for home use and restaurant use and sales of flavor seasonings for home use increased only slightly from the previous first quarter period. In America, sales of flavor seasonings for home use grew strongly in South America.
Processed foods: In Asia, sales of Birdy canned coffee were at the same level as the previous first quarter period.
Amino acids
Sales in the amino acids business decreased 4.4% (¥3.1 billion) to ¥68.7 billion, with revenue declining due to a business reorganization. However, operating income increased 56.9% (¥1.6 billion) to ¥4.5 billion. The steady growth in sales excluding the impact of the business reorganization and the substantial increase in operating income were attributable to higher revenue and income from feed-use amino acids and specialty chemicals, despite major decreases in income from umami seasonings for processed food manufacturers due to the global increase in prices of raw materials and fuels and a decline in income from pharmaceutical fine chemicals.
Umami seasonings for processed food manufacturers: Sales of AJI-NO-MOTO to the food processing industry grew strongly from the previous first quarter period, supported by higher sales volumes both in Japan and overseas. Sales of nucleotides decreased slightly, due to the impact of exchange rates and other factors, despite increased sales mainly to major overseas customers.
Feed-use amino acids: Sales of Lysine and Threonine trended favorably, supported by higher sales volumes and unit prices. Sales of Tryptophan decreased from the previous first quarter period.
Amino acids for pharmaceuticals and foods: Revenue increased in Japan, but overseas, sales decreased in North America and Europe, due partly to the impact of exchange rates.
Sweeteners: Sales increased substantially overall from the previous first quarter period, supported by higher sales volumes of sweeteners for the processed food industry. In South America, sales of powdered juice Refresco MID, which contains aspartame, decreased from the previous first quarter period.
Pharmaceutical fine chemicals: Sales decreased from the previous first quarter period.
Specialty chemicals: Sales of cosmetics ingredients trended favorably both in Japan and overseas. Sales of amino acid-based cosmetic Jino grew steadily. Sales of insulation film for build-up printed wiring board grew from the previous first quarter period.
