Consolidated Financial Results for the Nine Months Ended December 31, 2020
(Prepared pursuant to Japanese GAAP)
February 9, 2021
Company name: | MEGMILK SNOW BRAND Co., Ltd. |
Stock exchange listing: | Tokyo Stock Exchange (First Section), Sapporo Securities Exchange |
Stock code: | 2270 |
URL: | https://www.meg-snow.com/english |
Representative: | Keiji Nishio, Representative Director and President |
Contact: | Kentaro Watanabe, General Manager, Public Relations & Investor |
Relations Department | |
Phone: | +81 3-3226-2124 |
(Amounts rounded down to the nearest million yen)
1. Consolidated Results for the First Nine Months of the Fiscal Year Ending March 31, 2021
(April 1, 2020 - December 31, 2020)
(1) Consolidated Operating Results
(Percentages indicate year-on-year changes)
Net sales | Operating profit | Ordinary profit | Profit attributable to owners of parent | |||||
Nine months ended December 31, 2020 Nine months ended December 31, 2019 | millions of yen 470,619 469,118 | % 0.3 2.1 | millions of yen 16,955 14,788 | % 14.7 5.8 | millions of yen 18,445 16,400 | % 12.5 7.8 | millions of yen 11,541 10,235 | % 12.8 7.3 |
Nine months Ended December 31, 2020 : 15,290 million yen (21.4%)
Note:Comprehensive income:
Nine months Ended December 31, 2019 : 12,594 million yen (49.5%)
Profit per share - basic | Profit per share - diluted | |
Nine months ended December 31, 2020 Nine months ended | yen 170.69 151.19 | yen － － |
December 31, 2019 |
(2) Consolidated Financial Position
Total assets | Net assets | Equity ratio | Net asset per share | |
December 31, 2020 March 31, 2020 | millions of yen 394,547 370,434 | millions of yen 190,283 178,094 | % 47.5 47.3 | yen 2,773.03 2,586.86 |
For reference:
Equity: December 31, 2020 : 187,272 million yen
March 31, 2020 : 175,112 million yen
2. Dividends
Cash dividends per share | |||||
Record date or period | End-Q1 | End-Q2 | End-Q3 | Year-end | Total |
yen | yen | yen | yen | yen | |
Year ended March 31,2020 | － | － | － | 40.00 | 40.00 |
Year ending March 31,2021 | － | － | － | ||
Year ending March 31,2021 (forecast) | 40.00 | 40.00 |
Note: Revisions from the latest release of dividend forecasts: None
3. Forecast of Consolidated Results for the Fiscal Year Ending March 31, 2021
(April 1, 2020 - March 31, 2021)
(Percentages indicate year-on-year changes)
Net sales | Operating profit | Ordinary profit | Profit attributable to owners of parent | Profit per share | |||||
Full Year | millions of yen 620,000 | % 1.1 | millions of yen 19,000 | % 5.6 | millions of yen 20,500 | % 4.2 | millions of yen 13,000 | % 6.9 | yen 192.50 |
Note: Revisions from the latest release of earnings forecasts: None
Notes
(1) Material reclassifications of subsidiaries during the period: None
(2) Accounting methods specific to quarterly consolidated financial statements: None
(3) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accordance with amendments to accounting standards, etc.: None
2) Changes other than noted in 1) above: None
3) Changes in accounting estimates: None
4) Retrospective restatement: None
(4) Common stock issued
1) Issued shares as of period-end (including treasury stock)
December 31, 2020
70,751,855 shares
March 31, 2020
70,751,855 shares
2) Treasury stock as of period-end
December 31, 2020
3,218,227 shares
March 31, 2020
3,058,747 shares
3) Average number of shares (during the respective period)
Nine months ended December 31, 2020 | 67,613,544 shares |
Nine months ended December 31, 2019 | 67,698,746 shares |
*This summary of financial statements is not subject to audit by certified public accountant and auditing firm.
*Appropriate Use of Earnings Forecasts and Other Important Information (Earnings Forecasts)
Business forecasts contained in this report are based on the assumptions of management in the light of information available as of the release of this report. MEGMILK SNOW BRAND makes no assurances as to the actual results, which may differ from forecasts due to various factors such as changes in the business environment.
(Supplementary materials and presentation handouts)
Supplementary materials are attached to this report.
Table of Contents for Attachments
1. Operating Results …………………………………………………………………………………………………… 4
(1) Overview of Operating Results …………………………………………………………………………………… 4
(2) Analysis of Financial Condition …………………………………………………………………………………… 6
(3) Explanation of Forward-Looking Statements, including the Forecast of Consolidated Results …………… 6
2. Quarterly Consolidated Financial Statements and Key Notes …………………………………………………… 7
(1) Quarterly Consolidated Balance Sheets ………………………………………………………………………… 7
(2) Quarterly Consolidated Statements of Income and Consolidated Statements of Comprehensive
Income ……………………………………………………………………………………………………………… 9
Quarterly Consolidated Statements of Income ………………………………………………………………… 9
Quarterly Consolidated Statements of Comprehensive Income ……………………………………………… 10
(3) Quarterly Consolidated Statements of Cash flows …………………………………………………………… 11
(4) Notes to the Quarterly Consolidated Financial Statements …………………………………………………… 13
(Notes on the Assumption of a Going Concern) ………………………………………………………………… 13
(Notes Concerning Significant Changes in Shareholders' Equity (if any)) …………………………………… 13
(Segment and Other information) ………………………………………………………………………………… 14
(Supplementary Information)
Supplementary Information for the Nine Months Ended December 31, 2020
1. Operating Results
(1) Overview of Operating Results
During the nine months ended December 31, 2020, the Japanese economy continued to fac conditions due to the impact of the novel coronavirus (COVID-19). Amid efforts to balance social and economic activity with prevention of further spread of infection, however, there were some signs of recovery. Meanwhile, with regard to the outlook, the situation does not allow for optimism, and both economic trends and trends relating to the spread of infection in Japan and abroad will require close monitoring.
Although consumer spending rapidly declined as consumer sentiment worsened due to the impact of COVID-19, the incremental resumption of social and economic activity brought with it signs of a gradual recovery in spending. However, recovery has stalled with the recent resurgence of case numbers, and the consumption environment is once again severe.
COVID-19 has had a substantial impact on the food industry. At-home consumption of food increased, because consumers stayed home to prevent the spread of infection, while demand slumped in the restaurant industry, which suffered from various COVID 19-related restrictions. Despite economic stimulus measures implemented by the government contributing to a temporary earnings recovery in the restaurant industry, there is now renewed risk of earnings falling short of expectations.
In this business environment, the MEGMILK SNOW BRAND Group is pursuing initiatives to "Establish earnings bases in four business sectors (Dairy Products; Beverage & Dessert; Nutrition; and Feedstuffs & Seed)" in accordance with the Group Medium-term Management Plan 2022. Through the first three quarters, the Group undertook the following initiatives: (1) further product mix improvement through strategic expansion of functional yogurt and cheese, and other mainstay products,
(2) simultaneous pursuit of scale expansion and profit generation through continued marketing investment in the nutrition business field, (3) strategic expansion and development of an earnings base in the seed products business, and (4) bolstering the Group's overall strengths by making full use of Group managerial resources and the value chain.
The Group also took steps to prevent the spread of COVID-19 among Group employees and strived to provide a stable supply of safe and reliable products to customers. In addition, at a time of sharply decreased demand for milk and other products accompanying suspension of school meals and declining demand for eating out because of the pandemic, the Group engaged in raw milk processing aimed at preventing the need for disposal of raw milk. When demand subsequently dropped again, the Group worked to fulfill its role in adjusting supply and demand.
As a result of these developments, in the nine months ended December 31, 2020, consolidated net sales were ¥470,619 million (up 0.3% YoY), operating profit was ¥16,955 million (up 14.7%), ordinary profit was ¥18,445 million (up 12.5%), and profit attributable to owners of parent was ¥11,541 million (up 12.8%).
Operating results by business segment for the nine months ended December 31, 2020 were as follows. Net sales by segment are sales to outside customers.
1) Dairy Products
This segment comprises the manufacture and sale of dairy products (cheese, butter, powdered milk), margarine, nutrition business products (functional foods and infant formula),
and other products.
Net sales were ¥199,210 million (up 5.7% year on year), and operating profit was ¥11,247 million (up 28.8%).
The impact of COVID-19 on sales varied between sales channels. For instance, demand for home-cooked meals increased, while demand for eating out declined. In these circumstances, sales of butter were flat year-on-year amid continued efforts to ensure a stable supply. Sales of margarine increased slightly, due in part to expansion of the household-use market and the effect of promotional activities such as provision of new serving suggestions. Sales of cheese increased thanks to the effect of TV commercials and other promotional activities and growth of the household-use cheese products market due to increased demand for home-cooked meals. Sales of functional food products rose due to continued marketing investment in Mainichi Hone Care MBP, a food for specified health use. As a result of these developments, overall segment sales increased.
Operating profit increased due to factors including a decrease in fixed costs and higher sales volumes of household-use products.
2) Beverage & Dessert
This segment comprises the manufacture and sale of drinking milk, fruit juice beverages, yogurt, dessert, and other products.
Net sales were ¥211,539 million (down 3.3% YoY), and operating profit was ¥3,747 million (down 13.7%).
Sales of beverages (both milk-based and other beverages) declined due to factors including suspension of school meals accompanying temporary school closures to prevent the spread of COVID-19 and the fragmentation of consumption due to diversification of consumption behavior and consumer taste. Sales of yogurt also declined despite efforts to expand sales through activities to promote the benefits of lactobacillus gasseri SP and lactobacillus helveticus yogurt (which are products with function claims) because of the increasing diversification of products with function claims on the market. Dessert sales were strong, reflecting the launch of new products and other efforts to increase product appeal and market growth accompanying an increase in stay-at-home consumption.
As a result of these developments, overall segment sales decreased.
Operating profit declined, reflecting higher operation costs, a decrease in sales volumes due to the impact of changes in consumption trends attributable to COVID-19, and other factors, despite the positive effect of efficient use of promotional costs.
3) Feedstuffs and Seed
This segment comprises the manufacture and sale of cattle feed, pasture forage/crop and vegetable seeds, landscaping, and other products.
Net sales were ¥32,911 million (down 2.4% YoY), and operating profit was ¥1,125 million (up 2.7%). Overall segment sales decreased year on year, mainly because of a decline in sales volumes of pasture forage and crop seed and feedstuffs.
Operating profit, on the other hand, rose mainly due to a decrease in fixed expenses.
4) Other
This segment comprises joint distribution center services, real estate rental, and other businesses. Net sales were ¥26,958 million (down 4.7% YoY), while operating profit was ¥1,082 million (up 69.3%).
(2) Analysis of Financial Condition
1) Assets, liabilities, and net assets Assets
Total assets as of December 31, 2020 increased by ¥24,113 million from the previous fiscal year-end. The change is mainly attributable to increases in notes and accounts receivable-trade, construction in progress (included in "Other" under property, plant and equipment), and investment securities.
Liabilities
Total liabilities as of December 31, 2020 increased by ¥11,925 million from the previous fiscal year-end. The change is mainly attributable to increases in short-term loans payable and notes and accounts payable-trade, which offset decreases in long-term loans payable and provision for bonuses.
Net assets
Total net assets as of December 31, 2020 increased by ¥12,188 million from the previous fiscal year-end. The change is mainly attributable to increases in retained earnings and valuation difference on available-for-sale securities.
2) Cash flows
Cash and cash equivalents on a consolidated basis as of December 31, 2020 totaled ¥14,641 million. The following is a summary of consolidated cash flows and factors affecting cash flows for the nine months ended December 31, 2020.
Cash flows from operating activities
Operating activities provided net cash of ¥16,246 million, compared to ¥17,293 million provided in the same period the previous fiscal year. The year-on-year decrease in cash provided of ¥1,047 million is mainly attributable to increases in notes and accounts receivable-trade and income taxes paid, which offset an increase in profit before income taxes.
Cash flows from investing activities
Investing activities used net cash of ¥24,404 million, compared to ¥14,145 million used in the used in the same period the previous fiscal year. The year-on-year increase in cash used of ¥10,258 million is mainly attributable to an increase in purchase of property, plant and equipment and intangible assets.
Cash flows from financing activities
Financing activities provided net cash of ¥7,284 million, compared to ¥6,289 million used in the same period the previous fiscal year. The year-on-year increase in cash provided of ¥13,573 million is mainly attributable to an increase in proceeds from long-term loans payable.
(3) Explanation of Forward-Looking Statements, including the Forecast of Consolidated Results
There is no revision to the forecast of consolidated results disclosed in the Summary of Financial Results of May 13, 2020.
2. Quarterly Consolidated Financial Statements and Key Notes (1) Quarterly Consolidated Balance Sheets
(Millions of yen)As of March 31, 2020
As of December 31, 2020
Assets Current assets
Cash and deposits | 15,536 | 14,656 |
Notes and accounts receivable-trade | 71,880 | 83,012 |
Merchandise and finished goods | 42,998 | 42,525 |
Work in process | 1,044 | 670 |
Raw materials and supplies | 14,954 | 15,336 |
Other | 5,183 | 6,139 |
Allowance for doubtful accounts | (410) | (407) |
Total current assets | 151,187 | 161,934 |
Non-current assets | ||
Property, plant and equipment | ||
Buildings and structures, net | 46,497 | 47,996 |
Machinery, equipment and vehicles, net | 54,136 | 53,613 |
Land | 49,910 | 49,681 |
Other, net | 20,487 | 27,249 |
Total property, plant and equipment | 171,031 | 178,541 |
Intangible assets | ||
Goodwill | 719 | 641 |
Other | 3,007 | 2,823 |
Total intangible assets | 3,727 | 3,464 |
Investments and other assets | ||
Investment securities | 34,807 | 40,245 |
Deferred tax assets | 3,006 | 2,970 |
Other | 6,928 | 7,634 |
Allowance for doubtful accounts | (255) | (243) |
Total investments and other assets | 44,487 | 50,607 |
Total non-current assets | 219,246 | 232,613 |
Total assets | 370,434 | 394,547 |
(Millions of yen)As of March 31, 2020
As of December 31, 2020
Notes and accounts payable-trade | 55,354 | 58,539 |
Electronically recorded obligations-operating | 5,436 | 5,068 |
Short-term loans payable | 18,140 | 32,144 |
Income taxes payable | 3,740 | 2,173 |
Provision for bonuses | 5,212 | 2,804 |
Other | 32,435 | 32,509 |
Total current liabilities | 120,319 | 133,240 |
Non-current liabilities | ||
Bonds payable | 10,000 | 10,000 |
Long-term loans payable | 35,129 | 32,197 |
Deferred tax liabilities | 858 | 3,000 |
Deferred tax liabilities for land revaluation | 3,959 | 3,898 |
Provision for director's retirement benefits | 20 | 20 |
Provision for gift token exchange | 79 | 70 |
Net defined benefit liabilities | 10,017 | 10,398 |
Asset retirement obligations | 1,298 | 1,332 |
Other | 10,656 | 10,106 |
Total non-current liabilities | 72,019 | 71,024 |
Total liabilities | 192,339 | 204,264 |
Net assets | ||
Shareholders' equity | ||
Capital stock | 20,000 | 20,000 |
Capital surplus | 17,606 | 17,607 |
Retained earnings | 125,489 | 134,461 |
Treasury stock | (4,961) | (5,353) |
Total shareholders' equity | 158,134 | 166,714 |
Accumulated other comprehensive income | ||
Valuation difference on available-for-sale securities | 10,747 | 14,048 |
Deferred gains or losses on hedges | (88) | (81) |
Revaluation reserve for land | 8,815 | 8,677 |
Foreign currency translation adjustment | (142) | (212) |
Remeasurements of defined benefit plans | (2,354) | (1,874) |
Total accumulated other comprehensive income | 16,977 | 20,557 |
Non-controlling interests | 2,982 | 3,010 |
Total net assets | 178,094 | 190,283 |
Total liabilities and net assets | 370,434 | 394,547 |
(2) Quarterly Consolidated Statements of Income and Consolidated Statements of Comprehensive
Income
Quarterly Consolidated Statements of Income
(Millions of yen)
Nine months ended | Nine months ended | |
December 31, 2019 | December 31, 2020 | |
Net sales | 469,118 | 470,619 |
Cost of sales | 358,651 | 360,764 |
Gross profit | 110,466 | 109,855 |
Selling, general and administrative expenses | 95,678 | 92,900 |
Operating profit | 14,788 | 16,955 |
Non-operating income | ||
Interest income | 7 | 4 |
Dividend income | 696 | 684 |
Equity in earnings of affiliates | 901 | 964 |
Other | 771 | 635 |
Total non-operating income | 2,377 | 2,288 |
Non-operating expenses | ||
Interest expenses | 247 | 305 |
Other | 517 | 493 |
Total non-operating expenses | 764 | 799 |
Ordinary profit | 16,400 | 18,445 |
Extraordinary income | ||
Gain on sales of non-current assets | 10 | 27 |
Gain on sales of investment securities | 2 | 15 |
Other | 0 | 0 |
Total extraordinary income | 12 | 43 |
Extraordinary loss | ||
Loss on sales of non-current assets | 2 | 9 |
Loss on retirement of non-current assets | 883 | 985 |
Impairment loss | 421 | 672 |
Loss on fire damage | 566 | － |
Other | 57 | 162 |
Total extraordinary loss | 1,931 | 1,829 |
Profit before income taxes | 14,481 | 16,658 |
Income taxes | 4,090 | 5,061 |
Profit | 10,390 | 11,597 |
Profit attributable to non-controlling interests | 155 | 56 |
Profit attributable to owners of parent | 10,235 | 11,541 |
Quarterly Consolidated Statements of Comprehensive Income
Nine months ended December 31, 2019
Nine months ended December 31, 2020
Profit
10,390
11,597
Other comprehensive income
Valuation difference on available-for-sale securities Deferred gains or losses on hedges
Foreign currency translation adjustment Remeasurements of defined benefit plans Share of other comprehensive income of entities accounted for using the equity method
2,038
3,118
57
7
(167)
(98)
230
475
43
190
2,203
3,692
12,594
15,290
Total other comprehensive income Comprehensive income
Comprehensive income attributable to owners of parent
12,449
15,259
Comprehensive income attributable to non-controlling interests
144
30
(3) Quarterly Consolidated Statements of Cash flows
Nine months ended December 31, 2019
Nine months ended December 31, 2020
Cash flows from operating activities
Profit before income taxes Depreciation and amortization Impairment loss
14,481 11,999 421
16,658 11,866 672
(901) (964)
Equity in (earnings) losses of affiliates Amortization of goodwill
69 66
Increase (decrease) in allowance for doubtful accounts
(140) (14)
Increase (decrease) in provision for bonuses Decrease (increase) in net defined benefit asset Increase (decrease) in net defined benefit liability Increase (decrease) in provision for gift token exchange
(1,166) (2,408)
(160) (437)
202 900
(6) (8)
Loss (gain) on sales and retirement of non-current assets
875 967
(703) (689)
Interest and dividend income received Interest expenses
247 305
Decrease (increase) in notes and accounts receivable-trade
(10,821)
(11,483)
Decrease (increase) in inventories Increase (decrease) in notes and accounts payable-trade
91 421
3,776 3,601
Other
1,851 1,997
Sub total
20,115
21,452
Interest and dividend income Interest expenses paid Income taxes paid
761
788
(286)
(297)
(3,297)
(5,697)
Net cash provided by (used in) operating activities
17,293
16,246
(Millions of yen)Nine months ended December 31, 2019
Nine months ended December 31, 2020
Cash flows from investing activities
Payments into time deposits Payments of loans receivable Collection of loans receivable
－ (2)
(62) (244)
27 94
Purchase of property, plant and equipment and intangible assets
(14,148)
(24,263)
(104) (14)
Proceeds from sales of property, plant and equipment and intangible assets Purchase of investment securities
97 60
Proceeds from sales of investment securities Other
24 55
19 (89)
Net cash provided by (used in) investing activities Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable Repayment of long-term loans payable Purchase of treasury stock
Cash dividends paid
(14,145)
(24,404)
(55)
70
－
12,540
(2,553)
(1,538)
(13) (2,707)
(392)
(2,704)
(2) (2)
Cash dividends paid to non-controlling interests Other
(957) (687)
Net cash provided by (used in) financing activities
(6,289)
7,284
Effect of exchange rate on cash and cash equivalents
(46) (8)
Net increase (decrease) in cash and cash equivalents
(3,188) (882)
Cash and cash equivalents at beginning of period Increase in cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of period
14,303 168 11,283
15,524 － 14,641
(4) Notes to the Quarterly Consolidated Financial Statements
(Notes on the Assumption of a Going Concern)
Not applicable.
(Notes Concerning Significant Changes in Shareholders' Equity (if any))
Not applicable.
(Segment and Other information) 【Segment information】
Ⅰ Nine months ended December 31, 2019 (April 1 to December 31, 2019) 1. Net sales and income/loss by reportable segment
(Millions of yen)
Reportable segment | Other (note 1) | Total | Adjustments (note 2) | Amount recorded on consolidated statements of income (note 3) | ||||
Dairy Products | Beverage and Dessert | Feedstuffs and Seed | Total | |||||
Net sales Sales to outside customers | 188,409 | 218,681 | 33,733 | 440,823 | 28,295 | 469,118 | － | 469,118 |
Inter-segment sales and transfers | 9,426 | 78 | 696 | 10,202 | 9,408 | 19,611 | (19,611) | － |
Total | 197,835 | 218,759 | 34,430 | 451,025 | 37,704 | 488,729 | (19,611) | 469,118 |
Segment profit | 8,733 | 4,341 | 1,095 | 14,170 | 639 | 14,809 | (21) | 14,788 |
Note: 1. "Other" comprises businesses, such as joint distribution center services and real estate rental that are not included in reportable segments.
2. The -21 million yen adjustment for segment profit is for elimination of intersegment transactions.
3. Segment profit adjustments are based on operating profit reported on the quarterly consolidated statements of income for the corresponding period.
2. Impairment loss on non-current assets or goodwill by reportable segment.
Not applicable.
Ⅱ Nine months ended December 31, 2020 (April 1 to December 31, 2020) 1. Net sales and income/loss by reportable segment
(Millions of yen)
Reportable segment | Other (note 1) | Total | Adjustments (note 2) | Amount recorded on consolidated statements of income (note 3) | ||||
Dairy Products | Beverage and Dessert | Feedstuffs and Seed | Total | |||||
Net sales Sales to outside customers | 199,210 | 211,539 | 32,911 | 443,661 | 26,958 | 470,619 | － | 470,619 |
Inter-segment sales and transfers | 9,323 | 85 | 587 | 9,997 | 11,034 | 21,031 | (21,031) | － |
Total | 208,533 | 211,625 | 33,499 | 453,658 | 37,992 | 491,651 | (21,031) | 470,619 |
Segment profit | 11,247 | 3,747 | 1,125 | 16,119 | 1,082 | 17,202 | (246) | 16,955 |
Note: 1. "Other" comprises businesses, such as joint distribution center services and real estate rental that are not included in reportable segments.
2. The -246 million yen adjustment for segment profit is for elimination of intersegment transactions.
3. Segment profit adjustments are based on operating profit reported on the quarterly consolidated statements of income for the corresponding period.
2. Impairment loss on non-current assets or goodwill by reportable segment
Not applicable.