Sapporo : 2Q Financial Results - Consolidated (Based on IFRS)(284.4KB)

Financial Results

for the Six months ended June 30, 2023 - Consolidated (Based on IFRS)

August 10, 2023

1. Consolidated Financial Results for the six months ended June 30, 2023 (January 1 - June 30, 2023)

(Amounts in million yen rounded to the nearest million yen)

(1) Operating Results

*Core operating profit is a proprietary profit indicator that measures the performance consistency of our business. Core operating profit is calculated as Revenue - Cost of sales - SG&A expenses.

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4. Other

1. Changes to scope of consolidation: None
2. Changes in accounting policy, changes in accounting estimates, and retrospective restatement
3. 1. Changes in accounting policies required by IFRS: None
   2. Changes other than 1) above: None
   3. Changes in accounting estimates: None
4. Number of shares issued and outstanding (common stock)
5. 1. Number of shares issued at end of period (treasury stock included):

June 30, 2023: 78,794,298 shares

December 31, 2022: 78,794,298 shares

1. Number of shares held in treasury at end of period: June 30, 2023: 894,512 shares
   December 31, 2022: 896,678 shares
2. Average number of outstanding shares during the period: Six months ended June 30, 2023: 77,898,687 shares Six months ended June 30, 2022: 77,897,619 shares

Audit Status

The quarterly financial results are outside the scope of audit procedures based on the Financial Instruments and Exchange Act.

Appropriate Use of Earnings Forecasts and Other Important Information

This document contains projections and other forward-looking statements based on information available to the Company as of the date of this document. Actual results may differ from those expressed or implied by forward-looking statements due to various factors. For the assumptions underlying the forecasts herein and other information on the use of earnings forecasts, refer to "1. Analysis of Operating Results and Financial Condition (4) Consolidated Earnings Forecast" on page 8.

Seasonal factors

The Group's operating results are affected by substantial seasonal variation in demand in the Alcoholic Beverages and Food & Soft Drinks businesses. Revenues consequently tend to be lower in the first quarter than in the other three quarters.

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1. Analysis of Operating Results and Financial Condition

(1) Operating Results

In this second quarter consolidated accounting period (January 1 - June 30, 2023), lifestyle patterns of living with COVID-19 penetrated society and economic activity continued to normalize as the impact of COVID-19 lessened. On the other hand, the uncertain outlook continues, with concerns over rising prices due to factors such as the situation in Ukraine, the depreciation of the yen, and inflation from surging prices of raw materials and energy will lead to consumers becoming more cautious with their spending.

Under these circumstances, the Sapporo Group will decisively implement structural reforms, aiming to realize our growth strategy in the first year of our "Medium-Term Management Plan (2023-2026)."

Consolidated revenue overall increased compared to the previous first half. This was because of the recovery of on- trade beer sales and dining out demand for beer halls in Alcoholic Beverages, along with the inclusion of STONE BREWING CO., LLC (Stone) as a consolidated subsidiary at the end of August 2022, which both counteracted decreased revenue following the transfer of the cafe business in April 2022 and the liquidation of a vending machine operator subsidiary in November 2022 intended to shift management resources of Food & Soft Drinks to growth areas.

Consolidated core operating profit increased year-on-year amid the effects of increased revenue in the Japan Alcoholic Beverages business and structural reforms in the Restaurants business and Japan Food & Soft Drinks business.

Summary in key figures

Millions of yen, except percentages

*Core operating profit is the Sapporo Group's unique profit benchmark for measuring the performance of its regular business and is calculated by deducting cost of sales, and selling, general and administrative expenses, from revenue.

Results by segment are outlined below.

Alcoholic Beverages

Revenue increased year-on-year thanks to a steady recovery in the commercial-use products market, price revisions, strong sales in North America, and the addition of Stone Brewing Co., LLC to the Group at the end of August 2022.

Core operating profit increased year-on-year, despite increased variable costs due to factors such as increased raw material prices. This was thanks to the effects of increased revenue from the recovery in the on-trade market as well as the effects of structural reforms of the Restaurants business.

Despite the year-on-year increase in core operating profit, operating profit decreased year-on-year due to impairment losses associated with the resolution to dissolve an overseas subsidiary, which had been under consideration as a part of our business portfolio review.

■ Revenue: ¥172.5 billion (up ¥26.3 billion, or 18.0% year on year)

■ Core operating profit: ¥5.0 billion (compared with a loss of ¥0.5 billion a year earlier)

■ Operating profit: ¥(1.2) billion (compared with a profit of ¥1.2 billion a year earlier)

Details of Alcoholic Beverages (Japan and Overseas) and Restaurants in the Alcoholic Beverages business were as follows.

Japan

While the on-trade products market is in a recovery trend as economic activity continues to normalize as a result of lessened impact from COVID-19, the off-trade products market remained weak. As a result, total domestic demand for beer and beer-type beverages was estimated to have been about 99% year-on-year.

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In this fiscal year, we are focusing more on strengthening beer and RTD (*) in anticipation of the liquor tax revision in October 2023.

In this context, the Group's total domestic sales volumes of beer and beer-type beverages was 101% of the previous year's level thanks to an increase of on-trade products. On the other hand, while impacted by the recovery in the on-trade products market, strong sales continued for household use products, with the sales quantity of Black Label cans at 100% year-on-year, and sales quantity for RTD canned beverages at 104% year-on-year.

Overseas

In Canada, COVID-19 countermeasures have spurred an economic restart, and on-trade products market is in a year-on-year recovery trend, with total demand Beer-type beverages up year-on-year. On the other hand, in the United States there was a year-on-year decrease due to the impact of inflation and other factors.

In this context, sales volume of overseas beer brands exceeded that of the previous year thanks to a recovery of the on-trade market in Canada and after including the sales of Stone in the United States. Additionally, sales volume of Sapporo brand beer in the focus market of North America was strong at 104% of the previous first half's level.

Also, a resolution to liquidate ANCHOR BREWING COMPANY, LLC ("Anchor") was made in July 2023. Anchor was positioned as subject to liquidation in the Medium-Term Management Plan due to its continued sluggish business performance. In the United States, which will become a growth driver, we are shifting resources by enacting decisive structural reforms, and aim to achieve further growth centered on Sapporo brand beer by creating synergies with Stone.

Restaurants

The recovery trend for the restaurant market is continuing as economic activity continues to normalize as a result of lessened impact from COVID-19.

Amid this, due to price revisions and a recovery in the number of customers, the Sapporo Group's Restaurants business recorded existing store sales at 103% of 2019 levels, recovering to roughly the same level as before the outbreak of the COVID-19 pandemic.

*: RTD, or ready-to-drink beverages, are pre-mixed,low-alcoholcocktail-like beverages that can be consumed as is immediately after opening.

Food & Soft Drinks

Revenue declined year-on-year due to the impacts of reduced units in operations following the liquidation of a vending machine operator subsidiary and divestment of the cafe business in April 2022. This was despite price revisions.

Core operating profit and operating profit both increased compared to the same period of the previous fiscal year, despite increased raw material costs. The effect of price revisions and structural reforms contributed to this year-on-year improvement.

■ Revenue: ¥55.4 billion (down ¥2.1 billion, or 3.6% year on year)

■ Core operating profit: ¥0.5 billion (compared with a loss of ¥0.8 billion a year earlier)

■ Operating profit: ¥0.4 billion (compared with a loss of ¥0.3 billion a year earlier)

Food & Soft Drinks (Japan)

Although demand in the on-trade market and vending machines has been impacted by the "life of coping with COVID-19" becoming more prevalent, overall domestic beverage demand is estimated to be around 98% that of the previous year because of the recovery following the easing of pandemic restrictions.

Meanwhile, while sales value for Kireto Lemon, the main brand in our priority Lemon business, was 108% year-on- year, and 102% year-on-year for no-sugar-added tea made with selected domestic ingredients, due in part to the impact of price revisions, it was 93% year-on-year for soft drinks overall due to factors such as the reduction in operating units after the liquidation of a vending machine operator subsidiary.

Overseas Beverage

Domestic sales value in Singapore was 104% year-on-year amid robust sales primarily in the off-trade channel.

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