Briefing on the results for the term ended Mar. 2013pdf.irpocket.com/C4914/qnwX/u7vK/q0il.pdfflavor and fragrance had increased. New transactions in flavor sector are growing. Also

Copyright ⓒ 2013 Takasago International Corporation All Right Reserved

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May 20, 2013

Briefing on the results forthe term ended Mar. 2013

Takasago International Corporation


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About the fire at Hiratsuka Factory(As of May 20th, 2013)

1. Outline of the fire accident• Site: Hiratsuka Factory, Flavor production building

• Damage Situation: Human suffering - None

• Property Damage: Total loss of three story building approx. 6,300 sq.m.

2. Situation of the factoryAs for the supply of the products, we are in the process of farming out to ourother factories, to our corporate group company and to others.

We will try our best to recover our production capacity to the level before theaccident as soon as possible.

3. Cause of the accident and recurrence preventionCurrently with guidance from the relevant authorities, we are striving todetermine the cause of the accident. Also, we will establish a recurrenceprevention committee and put all our effort toward prevention.

We will keep you updated about our investigation.


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1. Overview of the financial results for the term

ended Mar. 2013

2. Earnings forecast for the term ending Mar.

2014

3. Future plans for flavor production systems

4. Progress report of business measures

Today’s topics


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1. Overview of the financial resultsfor the term ended Mar. 2013


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[Sales]

High rate of growth in Asia greatly

contributed to increase in revenue.

Flavors for the domestic beverages and

Menthol are growing. The sales had

increased also due to the addition of a

consolidated subsidiary.

Negative impact from the currency

exchange rate is 1 billion yen.

Unit: million yen 2012/3 2013/3

Ratio to previousterm's results

Amount %

Net sales 113,676 118,973 5,297 104.7%

Gross profit 33,386 36,295 2,909 108.7%

Gross margin (29.3%) (30.5%) (1.2%) -

SG&A expenses 29,415 30,009 594 102.0%

Operating income 3,971 6,285 2,314 158.3%

Ordinary income 4,297 7,475 3,178 174.0%

(Extraordinaryincome)

5 643 638 -

(Extraordinarylosses)

123 784 661 -

Net income 1,774 4,673 2,898 263.4%

[Gross profit/Operating income]

Increase in cost due to personnel

additions and global business

development. Conversely, the earning

rate in Asia grew greatly.

[Others]

Gain on sales of subsidiaries and

affiliates' stocks: 500 million yen.

Facilities impairment loss: 700 million yen.

(Affiliated company in Spain)

Exchange ratesPrevious term: USD: 79.8 yen EUR: 111.1 yen

Current term: USD: 79.8 yen EUR: 102.6 yen

Consolidated results (Ratio to previous term’s results)


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Unit: million yen

2013/3Estimate

2013/3Result

Ratio to estimate

Amount %

Net sales 114,000 118,973 4,973 104%

Operating income 5,200 6,285 1,085 121%

Ordinary income 5,200 7,475 2,275 144%

Net income 3,100 4,673 1,573 151%

[Sales]

Due to steady growth in Asia, thesales growth from Menthol and theaddition of a consolidatedsubsidiary, it went higher thanexpected.

[Profits]

Positive impact from the increasedsales and exchange profit due toweak yen.

2012/5/14

Consolidated results (Ratio to estimates)


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700 698 742

271

89 8990

260256

737488

141515

0

200

400

600

800

1000

1200

11/3期 12/3期 13/3期

1,148 1,136 1,189

[Flavor]: Ratio to previous term's sales: 106.3% (Exchange loss: 0.3 billionyen)Japan: Flavors for sodas and non-alcoholic beverages are selling well.

Others such as functional beverages are also selling fine.Overseas: overall sells look fine, for example beverages in Southeast

Asia, dairy products and cigarettes in Europe.

[Fragrance]: Ratio to previous term's sales: 104.1% (Exchange loss: 0.5

billion yen)

Japan: Blended fragrances for fabric softener are selling well. Also doing

well in Korean market. Due to the decrease in resale material, a fall in

sales in TTL sector.

Steady sales of fragrance for fine fragrance/ personal care products in

Europe.

[Aroma chemical]: Ratio to previous term's sales: 100.5%

Menthol: Selling well due to the price increase of natural products.

Other aroma chemicals in Japan: Fall in sales due to severe price

competition.

In bases in Europe a fall in sales due to price competition with

products from China and India, also affected by a slowed market

in Europe caused by the economic slump.

[Fine chemical]: Ratio to previous term's sales: 98.8%

Decreased sales in the intermediate of medicine sector due to the

domestic and overseas generics trend in medicine.

Due to the economic downturn in Europe and the flood in

Thailand, sales of functional materials are falling behind. On the

other hand, an increase in sales of catalyzer.

Flavor62%

Fragrance23%

Aromachemical

8%

Finechemical

6%

Others1%

Sales for 2013118.9 billion yen

Sales for each business[100 million yen]

Term endedMarch, 2011




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Sales for 2013118.9 billion yen

[Japan]：Ratio to previous term's sales 101.9%

Increase in flavors for beverages

The profits of the company which is newly consolidated due to the

additional stock acquisition is a plus factor.

Decrease sales of intermediate of medicine.

[Americas]：Ratio to previous term's sales 110.8%

Some of the commissioned business contributed to the increase in

sales.

New base in Brazil opened in 2012. Affected by high value of the

Real (factor of exchange rate is minus 200 million yen) but an

increase in sales.

[Europe]：Ratio to previous term's sales 98.0%

Overall, the economic slump is still affecting sales, however, except for

the factor of exchange rate, minus 1,200 million yen, the sales of both

flavor and fragrance had increased.

New transactions in flavor sector are growing. Also steady growth in

east Europe and middle east Africa.

Some fine fragrances are selling well.

[Asia]：Ratio to previous term's sales 117.5% (exchange gain: 0.1 billion

yen)

In southeast Asia, for beverages and household products, more than

double digit growth ratio continuously. Steady growth in products for

Indonesia, Thailand and Vietnam.

Market in China, affected by stalled economy, some sales for major

clients became sluggish but still kept a nearly 10 percent growing rate.

Japan59%

Americas18%

Asia12%

Europe11%

1,1891,1361,148

Sales in each region[100 million yen]





9

3339

51

8

-6 -3

4

-5-3

11

9

172

2

1

-10

0

10

20

30

40

50

60

70

8059

12/3期

14

11/3期

Consolidated adjustment(unrealized gain, etc.)

39

Japan

13/3期

EuropeAmericas

Asia

63

[Japan]: 1,200 million yen increase from the previous term (129.2%)

(Major factors in the increase in income)Slight increase in SG&A expenses but improvement on gross

margin ratio.Growth of our original added-value flavors for beverages has

contributed.An increased profit due to the sales growth from Menthol.

[Americas]: 300 million yen increase from the previous term

(Major factors in the increase in income)

The profit improvement due to the improved operation of the base in

Brazil contributed.

In North America, slight increase in profit due to the increase of

global expense.

[Europe]: 200 million yen increase from the previous term

Fragrance sector continues to be in a hostile earning

environment due to short demand and high cost of raw

materials.

Steep rise in raw materials and increase in investment for

personnel and systems going against the effect of increased

productivity.

[Asia]: 700 million yen increase from the previous term (182.6%)

[Southeast Asia]

An Increase in sales in general.

(Major factors in the decrease in income) Partial decrease of

earning rate in food material business due to the adjustment of

equipment.

[China]

An increase in sales in both flavors and fragrance sectors.

Slight increase in profit due to the personnel expense increase

and defraying global expense.

Operating income in each region[100 million yen]





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100 million yen12/3

Result13/3

Result

Ⅰ. Retained earnings 59 92

After-tax income 18 47

Distributed Income(appropriation)

(8) (9)

Depreciation 49 54

Ⅱ. Capital investment, etc. (40) (54)

Ⅲ. Increase (decrease) inworking capital, others

1 (41)

FCF (Ⅰ+Ⅱ+Ⅲ) 20 (2)

Ⅳ. financial cash flows (29) 23

Increase (decrease) ininterest-bearing debt

(25) 23

Purchase of treasurystock

(4) 0

Total cash flow (Ⅰ+Ⅱ+Ⅲ+Ⅳ) (9) 21

Ⅴ. Cash and cash equivalents atend of period

112 133

Cash flow status

【Supplemental memo for the result of 13/3】

※Impairment loss of 800 million yen is included indepreciation※Increase in capital investment, Extensiveinvestment in Southeast Asia

※Increase in interest-bearing debt due to theincrease of working capital and capitalinvestment

※Increase in inventory


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2. Earnings forecast for the termending Mar. 2014


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Unit: million yen2013/3Result

2014/3Estimate

Ratio to previous term'sresults

Amount %

Net sales 118,973 121,000 2,027 101.7％

Operating income 6,285 2,800 (3,485) 44.6％

Ordinary income 7,475 3,100 (4,375) 41.5％

Net income 4,673 1,800 (2,873) 38.5％

Consolidated earnings forecast for the term ending Mar. 2014

Unit: 100 million yenProspect of financial impact for the consolidated earnings of the whole financialyear ending Mar. 2014

Operating income (45)Decrease in sales and production, loss by procurementof substitutions, etc.

Extraordinaryincome/losses (15)

Abandonment loss of fixed asset and inventory, incomefrom insurance.

Total (60)

Conditions of earnings forecast■Forecasted the impact fromthe fire accident at Hiratsukafactory based on certainestimations and availableinformation.

■For overseas operations,anticipating steady growth inAsia.

■Positive impact from exchangein both Dollars and Euros.


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3. Future plans for domesticflavor production system


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■Effort towards recovery of production capacity

①Current condition

(short-term supply system)

②Recovery of production capacity

in the later half of the year

■Structure production system for next year andonward

Future plan for domestic flavor production system


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■Effort towards recovery of production capacity

①Current condition (short-term supply system)

Relegate the production to our Kashima factory, Iwata factory and also toTakasago Food Products Co.

Outsource manufacturing to other companies.

②Recovery of production capacity in the later half of the year

Proceeding with investment in the surrogate factories for the improvementof their production capacity and establishment of systems. Currentlyworking toward the recovery of pre-fire accident production capacity in thelater half of the year.



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■ Structure production system for next year and onward

◆ Endeavor to structure the BCP system while pursuing safety

and efficiency

Considering establishing a new factory in order to a

structure stable supply system as soon as possible.

Currently planning for initial operation early in 2015.



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4. Progress report of business measures


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Progress status of major overseas investments

Amount of theinvestment

2013 2014 After 2015

Enhancement of productionsystem in North America

Approx.2,700 mil. yen

Expansion investment inSoutheast Asia


New base establishment inIndia


Setting up temporary factoryin India

Approx.100 mil. yen

Takasago MoroccoTakasago Madagascar

Approx.170 mil. yen

Planed for 2013

In operation from 2013

Planed for 2015

Planed for 2014

Planed for 2013


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Natural trend

○ Effective use of natural materials (Flavors and Fragrances ）

– Citruses, Coffees, Teas, Mint, Vanilla

– In the future: Spices, Herbs, Dairy

– Expand the use of natural material to Fragrances

○ Implement fractionation technique and biochemistry (fermentation)

– Use fraction, distillation, fermentation, etc.

○ Understand preferences in each region

– Cooperate with CIMR (verify compatibility of natural trend and health)

– Global Study－Black tea, Citruses

○ Responses to the improvement and change of diets

– Cut down salt, sugar, fat→Use Flavors to improve the taste

Natural product demand is growing especially in Europe and becomingregular among consumers. Considering the possibility that this trend willspread to other areas, securing natural materials and development is akey strategy in the future.


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Citruses – Florida, USA

Coffee – Malaysia, Brazil, Japan

Tea – China, Japan

Fruits aroma - Germany

Vanilla - Madagascar

Fermentation materials- Japan

Natural extract – Indonesia, Morocco

Natural materials


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●

●

Establishing production base of Vanillas in Madagascar

◆Established “TAKASAGO MOROCCO (STE CANANGA S.A.R.L.) ”

in November 2012： Natural materials extraction and processing factory

◆Planning to establish “TAKASAGO MADAGASCAR S.A.” in May 2013:

※Joint venture with Ramanandraibe Export Co., (Takasago 55%)

Make our base in the world leading vanilla producing country-Madagascar and steadily supply our unique high-quality and pricecompetitive vanilla flavor.

【References】◆Amount of vanilla bean production

in the world :7,508MT (Madagascar: Approx. 1,587MT)

From FAOSTAT 2011

◆Uses of vanilla essence: Confectioneries,Frozen desserts, Dairy products, etc.

※Extract vanilla essence in Madagascar, process it in Morocco and export toevery base.

The New Bland “LA VANILLE T”


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Thank you for your kind attention.

※NotesThis reference material has been produced with the purpose of providing

information regarding the business contents, strategies, and performance ofour corporate group as of May 20, 2013, not promoting the investment in thesecurities issued by our company.

The opinions and forecasts, etc. written in this reference material are basedon the judgment of our company as of the time of its production. We do notguarantee or assure the accuracy or completeness of the information. Inaddition, the information may be revised without notice.

For inquiries: Hiroyuki Matsumoto, Director / Chief of Management,Planning and Development Section

TEL: 03-5744-0523 FAX: 03-3730-6678

http://www.takasago.com

E-mail: [email protected]

Documents

Briefing on the results for the term ended Mar. 2013pdf.irpocket.com/C4914/qnwX/u7vK/q0il.pdfflavor and fragrance had increased. New transactions in flavor sector are growing. Also