MEIJI HOLDINGS CO LTD Revisions to Consolidated Financial Forecasts for FYE March 2024 (FY2023) and Recording of Impairment Loss
Explanatory Material
April 9, 2024
0 © Meiji Holdings Co., Ltd. All rights reserved.
AGENDA
- Revisions to FY2023 Consolidated Financial Forecasts and Recording of Impairment Loss
- Current State of China Business and Future Initiatives
1 © Meiji Holdings Co., Ltd. All rights reserved.
1. Revisions to FY2023 Consolidated Financial Forecasts and Recording of Impairment Loss
2 © Meiji Holdings Co., Ltd. All rights reserved.
Revisions to FY2023 Consolidated Financial Forecasts
(JPY bn) | FY2022 | FY2023 | FY2023 | |||
Plan | vs. Plan | |||||
Results | Revised plan | YoY Change | ||||
(as of Nov.) | as of Nov. | |||||
Net sales | 1,062.1 | 1,098.5 | 1,113.0 | +4.8% | +1.3% | |
+50.8 | +14.5 | |||||
Food segment | 865.6 | 891.1 | 905.5 | +4.6% | +1.6% | |
+39.8 | +14.3 | |||||
Pharmaceutical segment | 197.2 | 208.1 | 208.1 | +5.5% | ― | |
+10.8 | ||||||
Operating profit | 75.4 | 80.0 | 84.5 | +12.0% | +5.6% | |
+9.0 | +4.5 | |||||
Food segment | 55.8 | 61.0 | 64.0 | +14.7% | +5.0% | |
+8.1 | +3.0 | |||||
Pharmaceutical segment | 21.7 | 22.0 | 23.5 | +8.2% | +6.8% | |
+1.7 | +1.5 | |||||
Ordinary profit | 74.1 | 78.0 | 76.0 | +2.5% | -2.6% | |
+1.8 | -2.0 | |||||
Profit attributable to owners of | 69.4 | 51.0 | 48.0 | -30.9% | -5.9% | |
parent | -21.4 | -3.0 | ||||
- Net Sales: upward revision for Food, no change for Pharma
- Operating profit: upward revisions both for Food and Pharma
- Ordinary profit and profit attributable to owners of parent: downward revisions
- Share of loss of entities accounted for using equity method expected to be recorded as non-operating expenses
- Extraordinary income due to sales of investment securities and impairment loss related to China expected to be recorded
3 © Meiji Holdings Co., Ltd. All rights reserved.
Recording of Impairment Loss Related to Drinking Milk and Yogurt Business in China
Impairment loss related to AustAsia Group Ltd. (equity | JPY | |
6.2 bn | Decline in profitability due to soaring feed prices | |
method affiliate*) [Share of loss of entities accounted | ||
and drop in raw milk prices in China | ||
for using equity method in Non-operating expenses] | ||
Impairment loss related to the drinking milk and yogurt | 14.3 bn | Decline in profitability due to intensifying price |
competition facing the BtoC drinking milk and | ||
business in China [Extraordinary losses] | ||
yogurt business | ||
*Acquired stock in the company, which operates farms in China in July 2020, to promote the stable procurement of raw milk. Our current stock equity is 22.19%.
- Impact on balance sheets: Decrease in shares of subsidiaries and associates and non-current assets at the end of March 2024
- Impact on cash flows: No impact caused by the abovementioned losses
- Year-enddividend: No change from previous forecast announced in May 2023
4 © Meiji Holdings Co., Ltd. All rights reserved.
2. Current State of China Business and Future Initiatives
5 © Meiji Holdings Co., Ltd. All rights reserved.
Overview of China Business
(JPY bn) | FY2022 | FY2023 | ||
Plan | ||||
Results | YoY Change | |||
(as of Nov.) | ||||
Net Sales | 21.4 | 24.3 | +13.5% | |
+2.8 | ||||
Operating profit | -0.4 | -4.0 | ー | |
-3.5 | ||||
Start operation in Jan. 2023
Tianjin ■ ■
Start operation in Mar. 2024
Shanghai ■
Start operation in Jan. 2024
Guangzhou ■ ■ ■
Sales by business* (RMB million)
BtoC Drinking Milk and Yogurt | ||
BtoB Drinking Milk and Cream | ||
Confectionery | ||
Ice Cream | 7.0 | |
Other | 3.1 | |
3.7 | 454.0 | |
399.6 | 456.4 | |
531.9 | ||
419.0 | 444.0 | |
181.2 | 225.4 | 319.7 |
306.5 | 284.6 | 294.7 |
FY2021 | FY2022 | FY2023E |
*Not calculated as net sales after applying revenue recognition accounting standards
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Drinking Milk Business: Changes in External Environment
Market trend of drinking milk
(RMB million)
Number of café of the three
major franchises
LL
Around
Chilled
40,000
29,184
92,546 97,509 103,827
111,083 114,211 119,793
x3
6,066
8,912
16,218
27,294 | 30,450 | 33,035 | 40,086 | 39,134 | 39,222 |
2018 | 2019 | 2020 | 2021 | 2022 | 2023E |
*Euromonitor International
- BtoC market
- Largely unchanged after rapid growth driven by getting recognition of milk as healthy
- Severer price competition due to increase in engaged companies in the market and the eased supply and demand of raw milk
- BtoB market
- Increase in handling in the dining industry
- Rapid increase in the number of cafés
7 © Meiji Holdings Co., Ltd. All rights reserved.
4,789
4,1236,900
201920232025
*Meiji's research
- Intensified competition in the chilled milk market
- Profitability declined on drop in retail prices
- Increased demand for our BtoB milk business
Existing Initiatives and Issues
- Expand product lineups
- Introduce new products with enhanced nutritional function and products aligned with local needs
- Launched functional yogurt and strengthen promotion of its unique functions
- Aggressively expand BtoB milk and cream business
- Business transactions grew on reputation for high quality and stable supply
- Focus on major café franchises, which are driving market growth
- Strengthen structure ahead of launch of operations at new plants
- Sales: Increase sales staff and contracted dealers in North China and South China regions
- Logistics: Build a core logistics system for delivering products to North China, East China, and South China
- Development: Establish a product development center and integrate the development functions
Such products did not take hold so well in the market and are still on the way to a growth trajectory
Steadily growing
Strengthened structure but management issues remain
Issues requiring action: Establish differentiating superiority for BtoC products
- Further increase presence on BtoB market
- Implement structural reforms
8 © Meiji Holdings Co., Ltd. All rights reserved.
Financial Forecasts for China Business
(JPY bn)
FY2023 | FY2026 | |
Op. profit | Improvement for 3 years | Op. profit |
+0.5 | to | +1.0 | Aim to | ||
break even | |||||
-4.0 | +1.0 to +1.5 | Growth outside of | |||
drinking milk and |
Contribution
yogurt business*
margin increase
Approx. |
-1.0/year |
Decrease due to |
impairment |
+2.0 to +2.5
Initiative 2
Decrease inReview business and product portfolio
fixed costs
Increase in depreciation | ||
Initiative 1 | ||
cost of drinking milk | ||
and yogurt business | Structural reforms |
9 | © Meiji Holdings Co., Ltd. All rights reserved. | *Including increase in depreciation cost of businesses other than drinking milk and yogurt business |
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Meiji Holdings Co. Ltd. published this content on 09 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 April 2024 07:11:01 UTC.
