Fuji Oil : “Towards a Further Leap 2020” The Fuji Oil Group midterm management plan

This is a notification about 'Towards a Further Leap 2020,' the midterm management plan we recently formulated for the four-year period of fiscal 2017 - 2020.
While we are still in the middle of Renaissance Fuji 2018, the midterm management plan formulated by the Fuji Oil Group last year, we decided to revise the plan now rolling and make the change to a fixed midterm management plan in order to achieve further growth amid the changes on a global scale that are even being likened to a fourth industrial revolution.

Placing top priority on conditioning our management system, management infrastructure, and financial system for competitiveness worldwide while improving our productivity, we are committed to sure execution of reform with clear targets for fiscal 2020.

Description of the plan

1. Background to formulation of 'Towards a Further Leap 2020'

Renaissance Fuji 2016 set forth 'how we want to be' in 2030 and 'how we should be' in 2020. It called for progression to a management disposition geared for withstanding fluctuation in the market and continuously generating profit, technical innovation to ensure a business scale and profit rates that underpin our presence on the global stage, and realization of the medium- and long-term vision of a corporate group 'contributing to healthier and happier living with delicious foods.' We are going to continue striving to realize this vision, practicing and accelerating sustainable, global, and technical management as our basic policy, and deploying a growth strategy for developing business in both markets that are growing and markets where we can fully exercise our strengths.
The Fuji Oil Group has worked to bolster its marketing in response to the greatly changing market. Amid the changes in lifestyles and distribution systems driven by artificial intelligence (AI) and the Internet of Things (IoT), we see a need to place precedence on change in various aspects if we are to remain an enterprise that is attuned to these trends in the market environment and is competitive around the world. These aspects include swift improvement of the management foundation, renovation of facilities, and promotion of restructuring.
To this end, we formulated the midterm management plan 'Towards a Further Leap 2020' in line with our ideals of 'contributing to customers and society with 'delicious and healthy' foods,' 'Kachizukuri (promoting a shift from product-out to solution approaches in creating value),' and 'promotion of self-reform for sustainable growth.' The plan is aimed at making us a global enterprise supporting healthy and happy living for consumers through delicious foods.

2. Basic principles of 'Towards a Further Leap 2020'

In the rapidly changing market environment, we will fall far short of reaching the goal of 'how we want to be' in 2030 if we proceed on a line that is merely an extension of our existing business. With a keen awareness of this fact, we are going to prepare the foundation needed for closing this gap by 2020.
For this midterm plan, we shall deploy a growth strategy centered around 'reinforcement of core competence,' 'growth of soy business,' and 'development of function enhanced, high value-added business.' In addition, we shall bolster marketing, adopt strategies drafted from the perspective of consumers, and set our sights on stable growth of earnings. Furthermore, to attain sustainable growth, we shall resolutely reduce costs and pursue unification with global standards.

・Reinforcement of core competence

We shall strive for expanded earnings and stable growth by expanding and developing our business in hard butters for chocolate, chocolate, and confectionery and bakery ingredients.

・Growth of soy business

We shall pursue the health of the earth and humankind through our business in vegetable protein. We shall provide products adapted to the times along with the maturation of food culture (and the rise of flexitarians) reflecting concern for the environment and health.

・Development of business in function enhanced, high value-added products

We shall develop business in polysaccharides and stabilized DHA/EPA products we announced last year. We shall enter the fields of nutrition and health with a view to stabilizing the Group earnings.

・Cost reduction and unification with global standards

For the next generation, we shall organize a unit whose purpose is to heighten production efficiency at all Fuji Oil Group companies, and endeavor to increase their competitiveness. At the same time, we shall unify trunk systems and accounting terms on a global level.

3. Basic strategy

(1) Growth and area strategy

Toward the goal of reinforcing our core competence, we shall make sure to expand the markets and product groups in which we can exercise our strength. For this purpose, we shall actively work to renovate facilities and heighten production efficiency in preparation for the next generation. We shall deploy strategy that is centered on the Japanese market and incorporates market growth in priority areas (China, North America, and Brazil).
We shall construct supply chain management (SCM) systems and make efforts to assure our supply of traceable materials. At the same time, we shall strive to optimize the procurement of materials within the Group and link this to higher levels of competitiveness.
As the last stage of the structural reform we have been pursuing to spur the growth of our soy business, we shall execute reform including a review of production sites. In addition, we shall provide for the growth of our soy business by augmenting our assortment of the new soy ingredients made with our ultra soy separation (USS) manufacturing method (soy milk cream and low-fat soy milk) and products using these ingredients.
To develop business in function enhanced, high value-added products, we shall embark on business in nutritional items and health foods in addition to developing business in soy beans and other polysaccharides and stabilized DHA/EPA products.

In deploying this strategy, we shall establish new sites as well as search for and implement M&A projects and alliances, in parallel with activities to reinforce the capacity of existing facilities.

(2) Profit structure reform

To heighten production efficiency and improve competitiveness at all Group companies, we shall organize a new unit coordinated with the Engineering Development Department and Production Control Division, appoint a new chief operations officer (COO), and establish a group for promotion of productivity. Through activities led by this new unit, we shall also raise levels of safety, quality, and environmental friendliness in each area, and heighten the Group credibility.

(3) Reinforcement of the management foundation

・Strengthening of Group governance

By promoting the diffusion of the Fuji Oil Group Management Philosophy throughout the Group, we shall foster a sense of Group solidarity and further strengthen Group governance.

・Promotion of diversity

To manage companies and operate businesses from diverse perspectives, we shall promote diversity by steps such as increasing the number of women managers and employees who are foreign nationals, and proactively giving assignments and appointments to younger employees.

・Promotion of health management

On January 1, 2017, the Fuji Oil Group announced the 'Fuji Oil Group Health Management Declaration.' In our belief that we will be able to contribute to society with delicious and healthy foods as our Group vision only if all of our employees are healthy, we shall make efforts for health maintenance and management for all the employees in the Group.

・Unification with global standards

Positioning the period covered by this midterm plan as one for priority reinforcement of our management foundation, we shall promote the unification of trunk systems, accounting terms, and accounting standards in all areas. With the approach of our 70 anniversary in 2020, we shall rebuild our corporate identity and corporate brand at all Group companies.

(4) Financial strategy

Through reform, we shall instill the Group with a resilient financial disposition on a global scale by creating cash flow through sustained profit growth, improving capital efficiency, and tightening financial governance.
For a further increase in management efficiency (management target: ROE of 10%), we shall attach importance to cash flow, carefully select investment subjects based on Group investment standards with consideration of Group synergy in allocation of management resources to new businesses and M&A projects, and work to optimize the makeup of the business portfolio of the Group as a whole. In addition, we shall work to improve the cash conversion cycle (CCC) by measures such as compressing inventories based on value chain analysis, assure the visibility and liquidity of Group funds through global fund management, and increase the total asset turnover ratio by consolidating production sites and slimming assets. In the aspect of financial leverage as well, we shall optimize arrangements with an awareness of capital costs.
As for shareholder return, we shall adopt the range of 30 - 40% as the guideline for our dividend payout ratio and endeavor to pay dividends that are both stable and continuous. We shall also agilely consider the option of acquiring treasury stock.

4. Management targets (FY2020)

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