Sapporo : 1Q (Online Meeting) Q&A(1.1MB)

Sapporo Holdings Limited

Q1 Financial Results Briefing for the Fiscal Year Ending December 2023

May 12, 2023

Event Summary

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Presentation

Moderator: Hello, investors. Thank you for attending today's briefing on the financial results for the first quarter of fiscal year 2023 of Sapporo Holdings Limited. The time has arrived, and we will now begin.

Present today is Yoshitada Matsude, Managing Director, and Takayuki Sato, General Manager of Accounting Department, Sapporo Holdings.

Please have at hand the Financial Results, Supplementary Materials to the Financial Results, and Financial Results Presentation PowerPoint. First, Matsude and Sato will provide an overview of Q1 financial results for approximately 20 minutes based on the financial results presentation materials and PowerPoint presentation, followed by a question-and-answer session. The entire meeting will last approximately one hour.

Let us begin with a summary from Matsude, followed by a detailed explanation from Sato. Best regards.

Matsude: My name is Matsude from Sapporo Holdings. I will now give an overview of the financial results for Q1 of this fiscal year.

First, points. Revenues were up from the previous year, while core operating loss and operating loss also improved. As in the previous year, there was an impact of about JPY3.5 billion in this fiscal year due to the cost increase, but we were able to respond to this impact with price revisions.

In addition to the recovery of the commercial-use market, the domestic alcoholic beverages business saw the strengthening of beer and the growth of RTD, while the overseas alcoholic beverages business saw the growth of the Sapporo brand, mainly in North America, while the effects of structural reforms in the restaurants business and the food and soft drinks business contributed to the business situation.

In comparison with the Company's plan, both sales revenue and profit are progressing as expected.

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I would like to continue with an explanation of the external environment affecting our business results. Let me begin with the graph on the left.

Regarding the impact of the COVID-19, the graph in the upper row shows the change in sales volume of beer bottles and kegs for so-called commercial use in the domestic alcoholic beverages business compared to 2019. The bottom row shows the change in Sapporo Lion's existing store sales in the restaurants business compared to 2019.

As you can see, the January-March period of last year was rather severely affected, but since April, the economy has been on a recovery track. We believe that this trend has remained unchanged since January of this year.

In terms of Q1 YoY comparisons, the volume of domestic alcoholic beverages sales to the commercial use increased by 72% year on year. Although total demand has also grown significantly, the figure is also about 6 points higher than total demand. Restaurants operator Sapporo Lion's existing store sales in January to March were also up 100% from the previous year, meaning that the Company doubled its sales.

Next, I would like to explain the cost increases on the right side, such as raw material. We expect a cost increase of JPY13.5 billion in raw materials and other costs for the current fiscal year. This is an increase of about JPY1 billion from the figure we announced at the beginning of the year.

Also, as I mentioned earlier, the cost for this Q1 was JPY3.5 billion higher than the same period of the previous year. Please refer to the documents for the distinction between domestic and overseas.

These cost increases will continue to be addressed through various price revisions, as in Q1.

We will now explain the situation by segment. Mr. Sato, General Manager of the Accounting Department, will explain these matters.

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Sato: I am Sato from the Accounting Department of Sapporo Holdings. I will explain the details of the financial results for Q1 of 2023, as well as the progress of the action plan of the mid-term management plan and the overview of our business.

First, please look at the left side, revenue summary. Consolidated total sales JPY108.8 billion, up by JPY15.5 billion or 16.6% from the same period last year.

By segment, domestic alcoholic beverages, where beer sales grew due to a turnaround in the commercial-use market in particular, and overseas alcoholic beverages, where the strong performance of the Sapporo brand combined with the revenue growth effect of the new consolidation of Stone, made a significant contribution to the consolidated total.

In the domestic food and soft drinks business, the sale of the café business last year and the liquidation of a vending machine operator company, as part of structural reforms have had a significant impact on sales but have contributed positively to profits.

Next is the right side, core operating profit. The consolidated total was minus JPY2.9 billion, an improvement of JPY3.5 billion in profit over the same period last year. Many of our businesses, including domestic alcoholic beverages, have resulted in improved profits.

The overseas alcoholic beverages segment saw a decrease in profit during the period due to the new consolidation of Stone and integration costs, and we expect the effect of synergies to be realized from Q2 onward.

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