Lacto Japan Co., Ltd. · TSE:3139
Lacto Japan — FY2023 Earnings Presentation
44 slides from Lacto Japan's earnings presentation, Jan 18, 2024
Slide 1: FY11/2023 Financial Results Briefing
FY11/2023 Financial Results Briefing Lacto Japan Co., Ltd. January 18, 2024
Slide 2: Index
Consolidated Financial Results for FY11/2023 and Forecasts for 01 FY11/2024 02 Aiming for Operations That Consider the Cost of Capital and Share Price 03 Overview of Operations for FY11/2023 Index 04 Business Environment (Mainly the Dairy Products Sales Business) 05 Initiatives for Each Division for
Slide 3: Consolidated Financial Results for FY11/2023 and Forecasts for FY11/2024
01 Consolidated Financial Results for FY11/2023 and Forecasts for FY11/2024 © Lacto Japan Co., Ltd. 3
Slide 4: Overview of Consolidated Financial Results for FY11/2023
Overview of Consolidated Financial Results for FY11/2023 ⚫ Sales volume fell in the Dairy Ingredients and Cheese Business Division and the Asian Dairy Ingredients Sales Division due to sluggish demand caused by escalating inflation. ⚫ The previous year’s rise in international market prices for dairy
Slide 5: FY11/2023 Net Sales and Sales Volume by Business Division
FY11/2023 Net Sales and Sales Volume by Business Division (YoY changes) ⚫ Sales volume did not increase in the Dairy Ingredients Sales Division in Japan or overseas. ⚫ Functional food ingredient sales, which are included in “Others,” grew in both net sales and sales volume. Dairy Ingredients and Che
Slide 6: Factors Contributing to YoY Changes in Net Sales and Ordinary Income
Factors Contributing to YoY Changes in Net Sales and Ordinary Income ⚫ Net sales increased due to higher unit sales prices reflecting higher market prices of ingredients and a weaker yen, which offset a decline in sales volume ⚫ The decrease in ordinary income was due to a decline in gross margins c
Slide 7: Consolidated Balance Sheets
Consolidated Balance Sheets End-November End-November (Unit: ¥mn) Change 2022 2023 Total current assets 70,067 67,068 -2,998 Main points regarding Cash and deposits 6,379 7,779 1,399 YoY changes POINT Notes and accounts receivable 21,065 18,700 -2,365 ❶ Decrease in notes and accounts ❷ receivable/in
Slide 8: Consolidated Statements of Cash Flow
Consolidated Statements of Cash Flow ⚫ Operating cash flow, which had been negative for two consecutive periods, turned positive FY11/2023 (Unit: ¥mn) Main points regarding YoY changes POINT Cash flows from operating activities 3,222 ❶ Operating CF ❶ Increase in cash flow due to a POINT Cash flows f
Slide 9: FY11/2024 Consolidated Earnings Forecasts
FY11/2024 Consolidated Earnings Forecasts ⚫ It is estimated that growth in domestic food consumption may be sluggish and that business may be impacted by the slowdown in the Chinese economy for 1H, but the business environment may fully recover in imports and sales of dairy ingredients and cheese in
Slide 10: Net Sales by Division
Net Sales by Division FY11/2022 FY11/2023 FY11/2024 (Unit: ¥mn) Full-year 1Q 2Q 3Q 4Q FY-end 1Q 2Q 3Q 4Q FY-end forecast Dairy Ingredients and Cheese 22,024 25,178 25,153 26,465 98,821 27,594 29,196 26,367 28,687 111,845 105,200 YoY 28.9% 26.8% 39.4% 23.2% 29.2% 25.3% 16.0% 4.8% 8.4% 13.2% -5.9% Mea
Slide 11: Sales Volume by Division
Sales Volume by Division FY11/2022 FY11/2023 FY11/2024 (Unit: tons) Full-year 1Q 2Q 3Q 4Q FY-end 1Q 2Q 3Q 4Q FY-end forecast Dairy Ingredients and 46,731 49,722 44,625 41,877 182,957 40,578 44,757 39,464 42,622 167,421 172,900 Cheese YoY 8.3% 1.8% 3.7% -15.1% -0.8% -13.2% -10.0% -11.6% 1.8% -8.5% 3.
Slide 12: Aiming for Operations That Consider the Cost of Capital and Share Price
02 Aiming for Operations That Consider the Cost of Capital and Share Price © Lacto Japan Co., Ltd. 12
Slide 13: Stance on Share Price
Stance on Share Price ⚫ We target a P/B ratio of 1x or more by improving the profitability of our business divisions and strengthening shareholder returns to bring ROE back to the 10% level, focusing on growth businesses and strengthening IR initiatives FY11/2019 FY11/2020 FY11/2021 FY11/2022 FY11/2
Slide 14: Toward a Recovery of the P/B Ratio to 1x
Toward a Recovery of the P/B Ratio to 1x ⚫ Steadily implement measures to improve ROE and P/E ratio Factors Measures ⚫ Implementation of sales strategy with an emphasis on profit margins Introduction of ROIC as a management ⚫ Sales strategy emphasizing an expansion of indicator for business division
Slide 15: Overview of Operations for FY11/2023
03 Overview of Operations for FY11/2023 © Lacto Japan Co., Ltd. 15
Slide 16: Overview of Each Division: Dairy Ingredients and Cheese Business Div.
Overview of Each Division Dairy Ingredients and Cheese Business Div. Business overview (Unit: ¥mn) ◼ This division saw a YoY decline in sales volume because final demand was Net sales sluggish due to food price hikes and because the recovery in demand for 111,845 dairy ingredients was weaker than ex
Slide 17: Dairy Ingredients and Cheese: Sales Volume of Major Products
Overview of Each Division Dairy Ingredients and Cheese Business Div. ⚫ In FY11/2023, the business was impacted by a decline in the sales volume of imported powdered milk mixtures, but there were signs of bottoming out in 4Q (Unit: tons) Changes in the sales volume of major products in the Dairy Ingr
Slide 18: Japan's major dairy imports
Overview of Each Division Dairy Ingredients and Cheese Business Div. ⚫ Japan’s major dairy imports (Unit: tons) Skim milk powder (Unit: tons) Butter 60,000 * Figure for 25,000 * Figure for FY2023 is total FY2023 is total 50,000 for 7 months for 7 months 20,000 between Apr-Oct between Apr-Oct 40,000
Slide 19: Overview of Each Division: Meat and Ingredients Div.
Overview of Each Division Meat and Ingredients Div. Business overview (Unit: ¥mn) ◼ In pork sales, demand for North American pork increased amid rising market Net sales prices for European pork. We saw strong sales of pork from North America, 18,268 where we have a procurement advantage. 15,135 ◼ Sa
Slide 20: Asian Business (Dairy Ingredients Sales Division)
Overview of Each Division Asian Business (Dairy Ingredients Sales Division) Business overview Net sales (Unit: ¥mn) ◼ Weak demand for powdered milk mixtures in Japan led to a decline in the sales volume of related ingredients. 26,672 ◼ The inventory of skim milk powder in Japan declined. This led t
Slide 21: Asian Business (Cheese Manufacturing & Sales Division)
Overview of Each Division Asian Business (Cheese Manufacturing & Sales Division) Business environment (Unit: ¥mn) ◼ Sales of processed natural cheese products increased for use in restaurants, Net sales especially those in Singapore and Malaysia. 4,828 ◼ The sales volume of processed cheese was slug
Slide 22: Business Environment (Mainly the Dairy Products Sales Business)
04 Business Environment (Mainly the Dairy Products Sales Business) © Lacto Japan Co., Ltd. 22
Slide 23: Business Environment for the Domestic Dairy Industry
Business Environment for the Domestic Dairy Industry ⚫ Progress has been made in adjusting the inventory of skim milk powder due to successful countermeasures and a reduction in raw milk production Raw milk production YoY comparison (nationwide) (Unit: tons) Estimated end-of-period inventory of skim
Slide 24: Business Environment for the Domestic Dairy Industry
Business Environment for the Domestic Dairy Industry ⚫ The number of cattle breeders (dairy farming households) and cows are both on a downward trend due to increased production costs in the dairy farming industry (Unit: households) Number of cattle breeders (milk cows) (Unit: k heads) Number of cat
Slide 25: International Market Prices for Dairy Products
International Market Prices for Dairy Products ⚫ International market prices for dairy products have been stable since 2023 (EUR/ton) International market prices for major dairy products Jun 2022 8,000 7,270 7,000 Oct 2022 Sep 2023 6,000 5,350 4,427 Dec 2023 Jul 2023 4,390 5,507 5,000 Jul 2021 3,750
Slide 26: Supply and Demand Trends for Dairy Products in China
Supply and Demand Trends for Dairy Products in China ⚫ Trends in China’s imports of raw milk, dairy products, etc. Supply-demand trends and outlook for raw milk and dairy products (China) (Unit: 10,000 tons) 7,000 6,098 5,972 5,867 6,000 5,354 4,949 5,000 4,264 4,109 3,966 3,932 4,000 3,683 3,440 Ra
Slide 27: Trends in Domestic Dairy Products
Trends in Domestic Dairy Products ⚫ Price increases for major dairy products for large users and for milk for processing (yen/kilo) Prices for major dairy products for large users 2023 1,700 • April +¥10.0 (Price of milk for processing use) • +¥1.5 in April 2014 • +¥1.0 1,512 • August in April 2017
Slide 28: Initiatives for Each Division for FY11/2024
05 Initiatives for Each Division for FY11/2024 © Lacto Japan Co., Ltd. 28
Slide 29: Initiatives: Dairy Ingredients and Cheese Business Div.
Initiatives for Each Division for FY11/2024 Assumptions for the business environment, etc. Initiatives for this period ⚫ Steadfast response to a recovery in ⚫ Recovery in demand to accelerate for demand for imported ingredients both dairy ingredients and cheese in 2H and beyond ⚫ Strengthen sales ef
Slide 30: Initiatives: Meat and Ingredients Div.
Initiatives for Each Division for FY11/2024 Assumptions for the business environment, etc. Initiatives for this period ⚫ Aim to recover pork sales profit ⚫ Recovery in U.S. suppliers’ margin by improving the product mix production systems Meat and Ingredients Div. ⚫ Strengthen sales of processed foo
Slide 31: Initiatives: Asian Business
Initiatives for Each Division for FY11/2024 Assumptions for the business environment, etc. Initiatives for this period Asian Business ⚫ Expected recovery in demand for ⚫ Strengthen the local sales force for (Dairy Ingredients Sales prepared mixtures in Japan in 2H and dairy ingredients Division) be
Slide 32: Initiatives: Others (Functional Food Ingredients)
Initiatives for Each Division for FY11/2024 Assumptions for the business environment, etc. Initiatives for this period ⚫ Actively propose new protein products using distinctive ingredients Others ⚫ Increasing need for differentiation of ⚫ Make proposals combining multiple (Sales of protein products
Slide 33: Progress of the Corporate Business Plan “NEXT-LJ 2025”
06 Progress of the Corporate Business Plan “NEXT-LJ 2025” © Lacto Japan Co., Ltd. 33
Slide 34: Basic Policy
Basic Policy ⚫ Focus on strengthening the foundation for growth during the three-year period from FY11/2023 to FY11/2025 as the first step toward achieving the long-term vision Base Growth Challenge Build next-generation Existing business “evolution" Expansion of Asian business businesses Stable sup
Slide 35: Progress of Business Growth Measures
Progress of Business Growth Measures ⚫ Implement each measure in accordance with our basic policies Base Growth Challenge Existing business “evolution" Expansion of the Asian Business Build next-generation businesses Best matching Expansion of the Cheese Manufacturing & New products Sales Business
Slide 36: Progress in Business Performance
Progress in Business Performance ⚫ It is estimated that the forecast for FY11/2024, the second year of the Corporate Business Plan, may miss the initial target, but the forecast for the final year has been left unchanged Corporate Business Plan “NEXT-LJ 2025” FY11/2023 FY11/2024 (Results) (Forecast)
Slide 37: Financial Targets
Financial Targets ⚫ The dividend payout ratio and the equity ratio are on track to meet the final-year target of the Corporate Business Plan ⚫ We will maintain our efforts to improve profitability so that ROE will recover to the 10% level FY11/2022 (results) FY11/2023 (results) FY11/2025 (target) RO
Slide 38: Dividend Policy
Dividend Policy ⚫ The basic policy on shareholder returns is to increase dividends as we continue to improve the dividend payout ratio. Changes in dividends and the dividend payout ratio (Unit: yen) 70 30% Policy on shareholder returns 25.7% 60 ◼ Our basic policy for rewarding shareholders is to inc
Slide 39: (Reference) Dialogue with Shareholders and Investors
07 (Reference) Dialogue with Shareholders and Investors © Lacto Japan Co., Ltd. 39
Slide 40: Dialogue with Shareholders and Investors
Dialogue with Shareholders and Investors ⚫ Currently, regular dialogue is held mainly with domestic investors Main events * FY11/2023 results Activities Event details Representative Financial results briefing (full year and 2nd quarter) Twice President, Director in charge of IR Individual meetings (
Slide 41: Dialogue with Shareholders and Investors: Key Dialogue
Dialogue with Shareholders and Investors ⚫ Details of dialogue with shareholders, investors, etc. (Examples of key dialogue) Questions and comments Summary of our responses from shareholders and investors Please improve the dividend payout ratio We will increase the dividend payout ratio while balan
Slide 42: Dialogue with Shareholders and Investors: Disclosure Feedback
Dialogue with Shareholders and Investors ⚫ We have expanded information disclosure in response to the feedback received during our dialogue with shareholders and investors. We also improved our disclosure format and information dissemination tools. ⚫ We plan to expand English-language disclosure and
Slide 43: This report
This report contains projections of performance and other projections based on information currently available and certain assumptions judged to be reasonable. Actual performance may differ materially from these projections as a result of projections as a result of changes in the business environmen
Slide 44: Lacto Japan
hed) Lacto Japan