Meiji Holdings Co., Ltd. · TSE:2269

Meiji — FY2018 Earnings Presentation

54 slides from Meiji's earnings presentation, May 17, 2018

  1. Slide 1: Financial Results for FYE March 2018 and New Medium-term Business Plan

    Financial Results for FYE March 2018 and New Medium-term Business Plan May 17, 2018

  2. Slide 2: Agenda

    Agenda 1. Overview of STEP UP 17, the Medium-term Business Plan ended March 2018 2. The Meiji Group 2026 Vision 3. The New Medium-term Business Plan (FYE March 2019-2021) 4. Outlook for the FYE March 2019  Business forecasts and other forward-looking statements are based on information available at

  3. Slide 3: 1. Overview of STEP UP 17

    1. Overview of STEP UP 17 3 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserved.

  4. Slide 4: Highlights – FYE March 2018

    Highlights – FYE March 2018 (JPY bn) FYE March 2017 FYE March 2018 FYE March 2018 Results Plan Results YoY Change vs. Plan -0.1% -1.7% Net sales 1,242.4 1,262.3 1,240.8 -1.6 -2.1 +7.1% -1.9% Operating income 88.3 96.5 94.6 +6.2 -1.8 Op. income margin 7.1% 7.6% 7.6% +0.5pt -0.0pt Net income attributa

  5. Slide 5: Pursued Improving Profitability through 3 years of STEP UP 17

    Pursued Improving Profitability through 3 years of STEP UP 17 94.6 88.3 STEP UP 17 77.7 Initial plan 64.0 51.5 36.4 Consolidated operating income FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 FY3/18 (JPY bn) Op. income margin 3.2% 4.4% 6.4% 7.1% 7.6% 5% ROE 6.0% 8.9% 16.1% 14.2% 13.1% > 8% Overseas sales 43.7

  6. Slide 6: Summary – STEP UP 17

    Summary – STEP UP 17 Achievements  Grew core business; functional yogurt and chocolate  Expanded core domain by launching new drugs  Increased efficiency and reduced costs through structural reforms  Recorded profit in food overseas business and agricultural chemicals and veterinary drug busines

  7. Slide 7: 2. The Meiji Group 2026 Vision

    2. The Meiji Group 2026 Vision 7 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserved.

  8. Slide 8: 2026 Vision – Key Strategies

    2026 Vision – Realizing Sustainable Growth and Enhancing Corporate Value Our promise and commitment for the 2026 Vision We will combine the strengths, the Meiji Group has cultivated over the past 100 years, with the latest technology and new findings. Thus we create innovative ways to meet our custo

  9. Slide 9: 2026 Vision – Key strategies

    2026 Vision – Realizing Sustainable Growth and Enhancing Corporate Value Key strategies 1. Secure an overwhelming To promote; advantage in core businesses • Use external resources 2. Establish growth foundation in • Increase productivity significantly overseas markets Business 3. New challenges in t

  10. Slide 10: Business Vision: Food

    Business Vision: Food Establish Overwhelming Position in Japan and Distinctive Position Overseas Op. income CAGR FY3/27 Overseas sales ratio 6% range >10% Japan Set 3 domains and enhance business portfolio Yogurt Cheese Drinking milk Core Growth Reform Processed foods Frozen Prepared Prepared foods

  11. Slide 11: Business Vision: Pharma

    Business Vision: Pharma Promote Selection and Concentration through Securing and Strengthening Competitive Advantage Op. income CAGR FY3/27 Overseas sales ratio 9% range >30% Agricultural chemicals and Ethical pharmaceuticals veterinary drugs  Become leading company in Asia for infectious diseases

  12. Slide 12: Provide Unique Value in the Health and Preventive Medicine Domains

    Business Vision: Provide Unique Value in the Health and Preventive Medicine Domains Use group strengths and open innovation effectively  Nutrition science expertise  Milk, lactobacillus, cocoa research Food  Nutrition engineering technology ： Open  Pharmacological expertise Innovation  Syntheti

  13. Slide 13: Management Vision: Enhance our Management System

    Management Vision: Enhance our Management System 1 Establish functional, strategic management system to grow sustainably in Japan and globally  Systemize and apply succession plan, created based on our leadership value  Establish business management system, secure and develop quality human resourc

  14. Slide 14: 3. The New Medium-term Business Plan

    Beyond meiji – the 1st stage 3. The New Medium-term Business Plan (FYE March 2019-2021) 14 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserved.

  15. Slide 15: Key Strategies

    Key Strategies Basic concept Address strategic issues continuously and challenge for the further growth 1 Expand share and achieve high revenues in core businesses Expand aggressively in overseas markets and establish growth 2 platform 3 Propose new value in health care domain Continue structural re

  16. Slide 16: Expanding Yogurt, Chocolate, and Nutritional Products

    1. Expand share and achieve high revenues in core businesses Food Expanding Yogurt, Chocolate, and Nutritional Products Net Sales in Japan (JPY bn) Market Share in Japan ■Meiji ■Other ■Nutritionals ■Largest peer ■Chocolate ■Functional and plain yogurt 60% 53.9% 1,030.1 1,038.2 1,070.0 50% 43.5% 44.0

  17. Slide 17: Cultivate Future Growth Drivers

    1. Expand share and achieve high revenues in core businesses Food Cultivate Future Growth Drivers Market Share in Japan Net Sales of Growth Domain in Japan ■Meiji ■Cheese (JPY bn) ■Largest peer ■Frozen dessert ■Foods for professional use 30% 25% 59.8 20% 58.6 58.1 15% 11.1% 52.1 9.6% 43.0 44.9 10% 7

  18. Slide 18: Maximize Product Value in Core Domains and Enhance Presence

    1. Expand share and achieve high revenues in core businesses Pharma Maximize Product Value in Core Domains and Enhance Presence ■Other Net Sales in Japan (JPY bn) Market share target in FY3/21 ■Generic drugs ■REFLEX + SYCREST + BILANOA #1, 20% (FY3/18: #1, 16.4%) - Systemic antibacterial drugs: - An

  19. Slide 19: Expand Sales of Generic Drugs and Accelerate Biosimilar Development

    1. Expand share and achieve high revenues in core businesses Expand Sales of Generic Drugs and Accelerate Biosimilar Pharma Development to Drive Growth  Specialty generic drugs Target sales of generic drugs in FY3/21 (Antibacterial, respiratory disease, CNS disorders) JPY 65bn (up 39.0% from FY3/18

  20. Slide 20: Launch High Value-added Products, Invest Intensely in Overseas Business

    2. Expand aggressively in overseas markets and establish growth platform Food Launch High Value-added Products, Invest Intensely in Overseas Business Net Overseas Sales and Profits (JPY bn) Sales Breakdown by Area 100 5 Net sales Op. income 90.0 (JPY bn) Results Target (FY3/18) (FY3/21) Change 80 4

  21. Slide 21: Expand CMO/CDMO Business at Medreich

    1. Expand share and achieve high revenues in core businesses / 2. Expand aggressively in overseas markets and establish growth platform Pharma Expand CMO/CDMO* Business at Medreich Net Overseas Sales and Profits (JPY bn) Strengths of Medreich  Global sales network ( ) 10  Obtained regulatory appro

  22. Slide 22: Continue Structural Reforms to Improve Productivity

    4. Continue structural reforms and resolve specific business issues in each business Food Continue Structural Reforms to Improve Productivity Strategy KPIs  Create production structure optimal to business strategy Production  Promote labor-saving  Per capita net sales in production division  Sol

  23. Slide 23: Improve Profitability in Milk Business

    4. Continue structural reforms and resolve specific business issues in each business Food Improve Profitability in Milk Business Drinking Milk Sales* in Japan (JPY bn) Sales of Oishii Gyunyu Breakdown by Volume Move into the black Home in FY3/21 ■Oishii Gyunyu (Premium Milk) delivery 2% 107.1 106.0

  24. Slide 24: Structural Reform and Platform Development in Agricultural Chemicals and Veterinary Drugs

    4. Continue structural reforms and resolve specific business issues in each business Pharma Structural Reform and Platform Development to Grow Income from Overseas Agricultural Chemicals and Veterinary Drug Business  Promote research of agricultural chemicals aiming for Increase JPY bn 2.6 global d

  25. Slide 25: KPIs – The New Medium-term Business Plan

    KPIs – The New Medium-term Business Plan  Net sales JPY 1.35 trillion Growth &  Op. income (margin) JPY 125 billion (9.3%) profitability  Overseas sales JPY 142 billion  Overseas profits JPY 9.5 billion Food 13-14% Efficiency  ROA 11-12% → Pharma 6-7% & stability  Debt/equity ratio < 0.5 Share

  26. Slide 26: KPIs – The New Medium-term Business Plan

    KPIs – The New Medium-term Business Plan (JPY bn) [Food] Consolidated Net Sales [Pharma] Consolidated Net Sales ■Japan ■Overseas ■Japan ■Overseas 190.0 1,160.0 168.4 171.6 1,073.6 1,090.0 90.0 52.0 43.4 51.8 39.4 41.9 1,038.2 1,070.0 1,030.1 138.0 129.0 129.7 FY3/18 FY3/19E ・・・ FY3/21E FY3/18 FY3/19

  27. Slide 27: Use of Cash Flows

    Use of Cash Flows Operating cash Capital FY3/19-FY3/21 flows expenditures Approx. JPY330bn Generate stable cash Invest in new growth drivers and improvement of flow by increasing income productivity to achieve 2026 Vision FY3/19-FY3/21 Breakdown Increase production capacity and improve quality 50% A

  28. Slide 28: 4. Outlook for the FYE March 2019

    4. Outlook for the FYE March 2019 28 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserved.

  29. Slide 29: Outlook for the FYE March 2019

    Outlook for the FYE March 2019 (JPY bn) FYE March 2018 FYE March 2019 Results Plan YoY Change +1.5% Net sales 1,240.8 1,260.0 +19.1 +5.1% Operating income 94.6 99.5 +4.8 Op. income margin 7.6% 7.9% +0.3pt Net income attributable to +2.8% shareholders of parent company 61.2 63.0 +1.7 EPS (JPY) 422.15

  30. Slide 30: Appendix: Financial data

    Appendix: Financial data 30 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserved.

  31. Slide 31: Results - FYE March 2018

    Results - FYE March 2018 (JPY bn) FYE March 2018 （単位：億円） Results YoY Change Main Factors for Change -0.1% Net sales 1,240.8 -1.6 ― (See P32-34 for details by segment) +7.1% Operating income 94.6 +6.2 ― (See P32-34 for details by segment) +7.7% - Change in equity in losses of affiliates (-0.4, yoy) N

  32. Slide 32: Analysis of Consolidated Operating Income

    Results - FYE March 2018: Analysis of Consolidated Operating Income (JPY bn) Consolidated Results Food Pharma Other Results -- FYE March 2017 88.3 82.9 5.7 -0.3 Due to increased/decreased sales -2.2 -2.3 +0.1 ― Changes in costs of goods sold -3.2 (*1) -3.2 0.0 ― Changes in other SG&A expenses +13.0

  33. Slide 33: Food Results - FYE March 2018

    Food Results - FYE March 2018 (JPY bn) FYE March 2017 FYE March 2018 FYE March 2018 Results Plan Results YoY Change vs. Plan -0.8% -1.5% Net sales 1,082.1 1,090.2 1,073.6 -8.4 -16.6 +1.5% -2.2% Operating income 82.9 86.1 84.1 +1.2 -1.9 [YoY Change] ( FY3/17) (FY3/18) (JPY bn) Analysis of Operating I

  34. Slide 34: Pharma Results - FYE March 2018

    Pharma Results - FYE March 2018 (JPY bn) FYE March 2017 FYE March 2018 FYE March 2018 Results Plan Results YoY Change vs. Plan +4.2% -2.7% Net sales 161.6 173.2 168.4 +6.8 -4.8 +90.7% +0.2% Operating income 5.7 11.0 11.0 +5.2 +0.0 (JPY bn) Analysis of Operating Income Results -- FYE March 2017 5.7 :

  35. Slide 35: Financial Position as of March 2018

    Financial Position as of March 2018 (JPY bn) Results as of Mar. 2018 YoY Change Main Factors for Change +4.0% -Increase in notes and accounts receivable (+11.9) Current assets 392.6 +14.9 -Increase in raw materials and supplies (+4.5) +5.7% -Increase in buildings and structures, net (+17.2) Fixed as

  36. Slide 36: Cash Flows and Shareholders' Return

    Results - FYE March 2018: Cash Flows and Shareholders’ Return (JPY bn) FYE March 2018 Results YoY Change Main Factors for Change - Decrease in income taxes paid (+10.6) Net cash flow from - Increase in inventories (+7.3) 108.7 +26.8 operating activities - Increase in trade payables (+3.9) - Increase

  37. Slide 37: Plan - FYE March 2019

    Plan - FYE March 2019 (JPY bn) Second First Half Full Year YoY Change Half YoY change YoY Change +0.3% +2.7% +1.5% Net sales 613.4 +1.9 646.5 +17.1 1,260.0 +19.1 Meiji Holdings -4.3% +13.6% +5.1% Operating income 43.2 -1.9 56.3 +6.7 99.5 +4.8 -4.8% +11.5% +3.8% Op. income margin 43.9 -2.1 55.5 +5.7

  38. Slide 38: Plan by Business in Food Segment - FYE March 2019

    Plan by Business in Food Segment - FYE March 2019 (JPY bn) Second First Half Full Year YoY Change Half YoY change YoY Change Fermented Dairy +0.1% +1.6% +0.8% Net sales 170.6 170.6 341.3 Fresh and +0.0 +2.7 +2.8 -0.9% -2.6% -1.8% Operating income 24.4 -0.2 26.7 -0.7 51.1 -0.9 +0.7% +0.2% +0.5% Net s

  39. Slide 39: Plan by Business in Food Segment - FYE March 2019

    Plan by Business in Food Segment - FYE March 2019 (JPY bn) Second First Half Full Year YoY Change Half YoY change YoY Change +19.1% +19.2% +19.2% Net sales 24.4 27.3 51.8 Overseas +3.9 +4.4 +8.3 -84.9% +109.2% +14.8% Operating income 0.0 -0.2 0.7 +0.3 0.8 +0.1 Other Domestic +0.1% +0.9% +0.5% Subsid

  40. Slide 40: Plan - FYE March 2019: Analysis of Consolidated Operating Income

    Plan - FYE March 2019: Analysis of Consolidated Operating Income (JPY bn) Consolidated Results Food Pharma Other Results -- FYE March 2018 94.6 84.1 11.0 -0.5 Due to increased/decreased sales +17.9 +11.2 +6.7 ― Impact of NHI drug price revision -12.6 ― -12.6 ― Changes in costs of goods +2.7 (*1) -3.

  41. Slide 41: Plan - FYE March 2019: Cash Flows and Shareholders' Return

    Plan - FYE March 2019: Cash Flows and Shareholders’ Return (JPY bn) FYE March 2019 Plan YoY Change Main Factors for Change Net cash flow from - Increase in inventories 96.9 -11.8 - Increase in taxes paid operating activities Net cash flow from - Increase in capital expenditures -104.2 -39.9 [Amounts

  42. Slide 42: Plan by Business - FYE March 2021

    Plan by Business - FYE March 2021 [Food Segment] FYE March 2021 FYE March 2021 (JPY bn) vs. FYE March vs. FYE March Plan Plan 2018 2018 Fermented Dairy Other Domestic +3.8% -12.3% Net sales 351.2 Net sales 261.0 Subsidiaries Fresh and +12.7 -36.7 +17.7% Operating income 61.2 +9.2 Operating income 5.

  43. Slide 43: Key Currencies and Our Average Exchange Rates

    Key Currencies and Our Average Exchange Rates Key Currencies and Our Average Exchange Rates Foreign exchange target USD EUR RMB (JPY) For FYE March 2019 140.00 128.94 130.45 133.09 132.96 Food: JPY 115 123.03 120.81 123.14 USD 117.70 Pharma: JPY 110 120.00 114.59 116.95 Food: JPY 135 113.76 111.61 1

  44. Slide 44: Appendix: Topics

    Appendix: Topics 44 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserved.

  45. Slide 45: Market Trends in Imported Raw Materials Prices

    Market Trends in Imported Raw Materials Prices (USD/MT) Nonfat Dry Milk (USD/MT) Cheese 2,500 4,500 4,000 2,000 3,500 1,500 3,000 1,000 2,500 (GBP/MT) Cacao beans (Cent/Bushel) Sugar 2,500 25 2,000 20 1,500 15 1,000 10 500 5 45 ｜ May 17, 2018 ｜ Copyright © Meiji Holdings Co., Ltd. All rights reserve

  46. Slide 46: Yogurt and Chocolate Market Trends in Japan

    Yogurt and Chocolate Market Trends in Japan YoY Change (JPY bn) 10.0% 386.3 400.5 385.0 5.0% 346.9 348.4 Yogurt 330.8 0.0% -5.0% -10.0% FY3/17 FY3/18 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/13 FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 YoY Change 10.0% 397.0 5.0% Chocolate 364.0 380.0 351.0 321.0 326.0 0.0% -5.0% -10.0

  47. Slide 47: Sales by Region

    Sales by Region (JPY bn) <Net sales of Food segment> [Sales of domestic business] [Sales of overseas business] 1,061.3 1,082.1 1,073.6 Ratio to net sales: 4% 1,021.8 992.3 1,023.0 1,043.9 1,030.1 43.4 38.3 38.1 29.4 FY3/15 FY3/16 FY3/17 FY3/18 FY3/15 FY3/16 FY3/17 FY3/18 FY3/15 FY3/16 FY3/17 FY3/18

  48. Slide 48: General Image of NHI Pricing Reform in 2018

    General Image of NHI Pricing Reform in 2018 Launch of 5 years Approve generic drugs after launch of generic drugs 10 years 16 years Brand-name drugs New drugs under patent, undergoing Long-term listed products (brand-name products with generic versions) re-examination (avg. 14.4 years) NHI pricing r

  49. Slide 49: Vaccine Business

    Vaccine Business  Global Vaccine Market USD 27.5 billion in 2016 → USD 35.2 billion in 2022 (Estimate) • Market is expected to grow in both advanced and emerging countries because importance of preventive medicine is increasing • 4 major companies have 80% share of global vaccine market → High entr

  50. Slide 50: R&D Pipeline

    R&D Pipeline R&D Pipeline (◆: compounds discovered in-house) FY3/19 FY3/20 FY3/21 ME1111 [Antionychomycosis] ◆ Phase II Infectious diseases ME1100 Arbekacin inhalation [HABP/VABP] ◆ P Ib (Overseas) OP0595 [β-lactamase inhibitor] ◆ * PI Depromel (SME3110 Fluvoxamine) [SSRI, Pediatric OCD] Expanded in

  51. Slide 51: R&D Pipeline

    R&D Pipeline R&D Pipeline (◆: compounds discovered in-house) FY3/19 FY3/20 FY3/21 Agricultural chemicals ME5382 [Insecticide] ◆ Applied Approve ME5343 [Insecticide] Licensing agreement with BASF ◆* Applied Approve (Overseas) (Overseas) ANM-138 [Insecticide] Joint development with Nippon Kayaku ◆ App

  52. Slide 52: CSR 2026 Vision

    CSR 2026 Vision Our promise and commitment for CSR 2026 Vision As Food and Health professionals, we contribute to addressing social issues through our business activities, and to realizing a sustainable society for people to live healthy, peaceful lives. Areas of Activity Domains 52 ｜ May 17, 2018 ｜

  53. Slide 53: CSR Materiality and KPIs for FYE March 2021

    CSR Materiality and KPIs for FYE March 2021 Areas of Activity Core Policies KPIs (1) Develop products that contribute to healthy diets and a super- - Contribute to healthy aged society Health and diets 1 (2) Enroll a total of 500,000 people into nutrition and healthy diet Nutrition - Respond to a su

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Meiji Holdings — FY2018 Earnings Presentation on 6ix