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March 28, 2017
2020
The Nisshin OilliO Group, Ltd. Fiscal 2017–Fiscal 2020 Four-Year Medium-term Management Plan
Takao Imamura
President and Representative Director
The Nisshin OilliO Group, Ltd.
Billion yen Consolidated operating income trends
Our basic policy is to build a solid earnings base for the future, mainly by improving earnings in the core oil and fat business. We expect to post our third consecutive fiscal year of profit growth, driven by structure reforms and the deployment of global strategies.
Segment Initial goal Result
Oil and Meal Business, and Processed Food Business
Domestic Oil and Fat Business
Stable profits
Made progress in structure reforms by deploying high value-added products, improving earnings in standard oils category, and reducing costs
Healthy Food and Other Businesses
Creation of new businesses and brands for MCT products
Expanded lineup of health-related products that use MCT, and develop market for elderly and nursing care
Processed Oil and Fat Business
Steadily expand earnings to develop into the second pillar after the Domestic Oil and Fat Business
Fortified global platform for growth, mainly at ISF, Daito Cacao Co., Ltd. and T.&C. Manufacturing Co., Pte. Ltd.
Fine Chemical Business Growth of business size worldwide
Expanded sales of raw materials for cosmetics in China
Issues
• Transformation of business structure to cope with market changes, including aging society, and active business development in growth markets
• Further expansion of overseas operations leveraging the global platform built so far and proprietary technological expertise
• Ongoing business structure reforms by boosting the ration of value-added products in the Domestic Oil and Fat Business
• Sustain and fortify oil milling competitiveness by pursuing efficiency improvements
2
5.6
7.5
9.0
Recognition of Current Trends & Review of FY2014–FY2016 Medium-term Management Plan
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
Fiscal 2014 results Fiscal 2015 results Fiscal 2016 forecast
Strategic Marketing
2020
Globalization Technological Innovation
□ The Nisshin OilliO Group looks to produce new value and create markets by utilizing the premium technologies it has forged over its 110-year history to address the needs of our customers and to find solutions for the issues they face
□ The Nisshin OilliO Group maximizes corporate values through contributions to good dietary environment and good health.
□ Carry on business structure reforms while shifting focus to growth trajectory
Basic policies
Increase investment to accelerate globalization and strengthen cooperation between sites
Strengthen our marketing capability to create new additional value
Deploy strategies that rally the group’s comprehensive competencies in the edible oils for commercial-use and edible oils for food processing domains
Strengthen the OilliO brand and create a new market in the household-use domain
Structure reforms for oil milling and fortification of production platforms
ESG management
Globally expand the Health Science Business, which contribute to society through "the power of health and energy"
Growth strategies
*Health Science Business: This business contributes to society by providing consumers with "the power of health and energy" that are essential at each stage of life through wellness recommendations developed using proprietary technologies
Corporate Vision & Basic Policy
Reinforcement
3 OilliO 2020
Operating income
ROE
(Plan)
: ¥9.0 billion : 5.0%
2017
2018
2019
2020
Crossing over from structure reforms to growth trajectory
KPIs for growth strategy
● Expand Health Science Business: sales growth rate
● Acceleration of globalization: overseas sales growth rate
● Accelerate growth in the edible oils for commercial-use and edible oils for food processing
domains: Gross profit growth in the edible oils for commercial-use and edible oils for food
processing domains
● Enhance profit margins on the household-use products: profit growth rate in household-use
● Improve value of MCT: Recognition rate of MCT
●Create new value for Oil and Fat Business and
expand business domain
●Enhance presence as a global company
ESG management
Structure reforms for oil milling and fortification of production platforms
Acquire new business domains that produce synergies with the Oil and Fat Business
2016
Vision for the future
ROE: 10%-plus 2020
Aiming for future growth, we target operating income of ¥13.0 billion-plus and an ROE of 7%-plus in fiscal 2020
Operating income
ROE
EPS growth
Operating cash flow
: ¥13.0 billion-plus
: 7%-plus
: 8% (annual average)
: ¥50.0 billion (cumulative)
4 Targets OilliO 2020
* In fiscal 2017, for accounting purposes, our reporting segments are “Oil and Meal and Processed Food,” “Processed Oil and Fat,” and “Fine Chemical.”
¥9.0 billion
Fine Chemical
Processed Oil and Fat
Oil and Meal and Processed Food
11
32
47
¥13.0 billion
Fiscal 2020 (forecast)
Fine Chemical
Processed Oil and Fat
Oil and Meal and Processed Food
20
49
61
Oil and Meal, Others
Health Science
+900 million
+500 million
Domestic
Overseas
+600 million
+300 million
Domestic +300 million
Fiscal 2016 (forecast)
Overseas +1,400 million
* In the Oil and Meal and Processed Food Business, we aim to achieve profit growth by continuing to implement structure reforms and growth strategies, despite the harsh business environment—population decline in Japan and negative impact from TPP agreements and FTAs.
5 Segment Operating Income
Globally expand the Health Science Business, which contribute to society through "the power of health and energy"
Item KPI Fiscal 2020 goal
Expand Health Science Business Sales growth rate for Health Science Business Annual average growth of 20% (+ 205% versus fiscal 2016)
● Speedy expansion by using resources outside the group, including global collaborations that pivot around distinctive
technological development and technologies
Segments Products (example)
Oil and Meal, and Processed Food
[Oil and fat products]
• Healthy oils (Healthy Resetta, etc.)
• Coconut oil
[Wellness foods]
• Enepurin, Memorion,
• MCT oil and MCT powder, etc.
Processed Oil and Fat
• MCT oil
• Crystallized powder fat
Fine Chemical • MCT oil
* Expansion utilizing the existing organizations and channels of the Nisshin OilliO Group in Japan and abroad
Health Science Business
This business will be at the core of group synergies aiming to contributes to society by empowering customers with
"the power of health and energy" throughout the diverse life stages of their lives. This business added new value
in various businesses based on proprietary oil and fat technologies nurtured thus far. These technologies employ
medium-chain triglyceride (MCT) and technologies that make oils delicious and easy to eat.
Infancy School age-youth Prime of life to middle- and upper middle age Active seniors Lively elderly
Development of a new born
Growing child Obesity in middle/ upper-middle age (countermeasure for
lifestyle diseases)
Forgetfulness as a senior
Poor nutrition among elderly
Easily converted into energy to build
muscular strength and improve reflexes
To help prevent the adherence of fat in the body
Alternative energy for the brain
(ketone bodies)
Easily converted into energy for activities for daily living (ADL)
and vitality
6 Major Strategies based on Basic Policies
Marvels of breast milk
(currently conducting research)
Increase investment to accelerate globalization and strengthen cooperation between sites
Item KPI Fiscal 2020 goal
Acceleration of globalization Overseas sales growth rate Annual average growth of 7% (+132% versus fiscal 2016)
●In the Processed Oil and Fat Business, we plan to expand overseas platforms, mainly comprising of development in Southeast Asia, and create in-depth collaborations between sites
●In the raw materials for cosmetics business, we aim to cultivate markets in East Asia and develop new markets in Europe and the Americas
Build a global supply chain originating from site in Malaysia to cater to chocolate and confectionery markets
The Nisshin OilliO (Shanghai) International Trading Co., Ltd.
Industrial Química Lasem (IQL), S.A.U. (Spain)
●Actively considering the use of outside resources, including M&A and partnerships to accelerate globalization and to expand the Health Science Business
In the raw materials for cosmetics business, which utilizes sites in China and Europe, strengthen communication with users, including major cosmetics manufacturers, and reinforce proposal skills
Signing chocolate business merger with the Salim Group
Intercontinental Specialty Fats Sdn. Bhd. (ISF; Malaysia)
Open R&D center equipped with state-of-the-art facilities
Presentation for users in China
Oil and fat for high-end cosmetics
PT. Indoagri
Daitocacao
(Indonesia)
7 Major Strategies based on Basic Policies
Deploy strategies that rally the group’s comprehensive competencies in the edible oils for commercial-use and edible oils for food processing domains
Item KPI Fiscal 2020 goal
Accelerate growth in the edible oils for commercial-use and edible oils for food processing domains
Gross profit* growth in the edible oils for commercial-use and edible oils for food processing domains
Annual average growth of 2% (+110% versus fiscal 2016)
* Gross profit: Sales minus cost of sales and selling expenses
●In the ready-to-eat foods and restaurant domains, cultivate and expand sales by a sales method that focuses on cooperation to unearth user needs
●Improve proposals in the edible oils for commercial-use and edible oils for food processing domains, and secure new customers by strengthening and instilling user support functions
Jointly unearth customer needs and recommend appropriate solutions in the ready-to-eat foods and restaurant domains
Long use as resists oxidation
Recommend packing materials that are easy to use and produce little waste
Sales method that focuses on cooperation to unearth user
needs Pillow packaging
Prevent oil absorption
Bag-in-box (BIB)
Packaging making it easy-to-use even for women and seniors to work in restaurant kitchens
8 Major Strategies based on Basic Policies
Strengthen the OilliO brand and create a new market in the household-use domain
Item KPI Fiscal 2020 goal
Enhance profit margins on the household-use products
Gross profit growth rate in the household-use domain
Annual average growth of 3% (+114% versus fiscal 2016)
●Enhance brand power by shifting product lineup to high-margin items and further pursuing a leading position in the market
●Create a market by recommending new uses for oils, and processed foods that make it simple to deliciously consume oils
“Fresh-keep oil” (that come in fresh-keep bottles)
Build up lineup of processed foods, including high value oils that can easily be enjoyed with raw foods
Dressings with the texture of a smoothie that contain extra virgin olive oil and vegetables
“Oil for topping” series Nisshin olive-kaoru smoothie dressings BOSCO CAFE
9 Major Strategies based on Basic Policies
Strengthen our marketing capability to create new additional value
Item KPI Fiscal 2020 goal
Improve value of MCT Recognition rate of MCT 50% (+24% versus fiscal 2016)
●Leverage development of products and applications by promoting sales method that focuses on cooperation to unearth user needs and speedy product deployment capabilities
●Strategic branding of high value-added products, whose key element is MCT
Medium-Chain Triglyceride
MCT
MCT being included in meals at rehabilitation centers
Recommending MCT to improve muscular
strength and stamina of athletes
Nutritional support using Healthy Resetta for the Yokohama F Marinos
youth teams
Collaborations between industry, academia, and
the government in Suzuka City to extend healthy life expectancy
using MCT
MCT is a super energy that support the health of many people at each stage of
life, from infancy to senior years
MCT being used in rehabilitation programs that use Cyberdyne’s
robot suit
10 Major Strategies based on Basic Policies
Strengthen platforms and infrastructure
Item KPI Fiscal 2020 goal
Business structure reforms Cost reduction owing to process innovations
¥2.0 billion-plus
●ESG management
● Full-fledged cost reduction by strengthening production technologies, including the use of AI and IoT, and rebuild production platform to adequately adapt to changes in market and business structure
● Fortify oil and fat sales infrastructure by attaining competitiveness in oil milling and by cultivating technologies used in the processing of oils and fats
●Structure reforms for oil milling and fortification of production platforms
Offices at main site are now free address offices and have gone paperless. Now we are aiming to further improve productivity
● Implement environmental management and transparent management
● Actively undertake health management, which positions “the promotion of employee health” as a key theme in management
● Improve productivity through workstyle reforms
Workstyle reforms
11 Major Strategies based on Basic Policies
Use in hospitals and to treat diseases (as a dietary therapy) • Nutritional supplement post-surgery or for
premature infants
• Alleviate epileptic seizures
1960s
Use to treat lifestyle-related diseases (as normal food) • To help prevent the adherence of fat in
the body (Healthy Resetta)
• Energy supplement for seniors
1990s
New growth • Dietary therapy for Alzheimer-type dementia and cancer
• Improve muscular strength and stamina of athletes
2000s
Given the growing prospects for MCT, we plan to commercialize MCT as a food product that is easy to consume and recommend various other uses by leveraging our technological expertise which is backed by more than 40-years of research results.
Specific use for post surgery, etc.
Easy to use as a cooking oil
MCT can efficiency produce ketone bodies
Deliver MCT in product groups designed to suit each of our customers’ many life stages
Supply MCT in household cooking oils
Medium-Chain Triglyceride
MCT
12 Expand Health Science Business with Technologies that Center on MCT
Example of technology for processing fat to make it easy to consume
Our proprietary technologies enable us to process oils with completely different properties than conventional powdered fat under certain conditions (Patent pending)
Various uses including preventing water separation by coating the surface of food or a paste made from emulsified water or juice and oil
Improve QOL for patients with Alzheimer-type dementia
MCT is energy for the brain Effectively produce ketone bodies
Medium-Chain Triglyceride
MCT
Crystallized powder fat
• Improve memory and cognitive skills • Better behavior, conversation skills, and
speech and conduct • Recoup lost vitality, etc.
Crystallized powder fat expands the use of oils and fats and increases the volume of intake so there are many different potential applications for food
13 Expand Health Science Business with Technologies that Center on MCT
* The graph depicts responses of persons with dementias or other cognitive disorders to coconut oil or oils containing medium chain triglycerides as reported by their caregivers (n=184, September 2012). Source: Modified based on “KETONES & MEDIUM CHAIN TGs: ALTERNATIVE FUELS FOR ALZHEIMER’S AND OTHER DISORDERS” presentation by Mary T. Newport M.D., at the MCT Symposium
Improvements and benefits patients with dementia or other cognitive disorders gained from taking MCT
Pursue enhancement of corporate value while maintaining optimal balance between capital efficiency that emphasizes ROE and financial soundness
Our policy is to achieve a payout ratio of roughly 30% to adequately return the benefits of profit growth to our shareholders
Operating & investment cash flow
Operating cash flow
+¥50.0 billion (cumulative)
–¥50.0 billion (cumulative)
Capital expenditure &
business investment
For capital expenditures, we will identify the profit margin on and necessity of each investment. These investments will primarily be to boost production capacity in the Processed Oil and Fat Business and the Fine Chemical Business, secure competitiveness of domestic plants, and hone the efficiency of investments of domestic plants. We plan to actively carry our business investments, including M&A, taking into account synergistic benefits. We plan roughly ¥50 billion in capital expenditures and business investments.
Our policy is to maintain a payout ratio of roughly 30% to provide stable returns. Focusing on the total return ratio and improvement to capital efficiency, we plan to flexibly buy back our own shares taking into account market factors, including stock price.
Our policy is to keep capital expenditures and business investments, including M&A, within the scope of operating cash flow. However, in the event of a major business investment, including large-scale M&A, we will use our cash on hand and newly procure capital to fund this
Dividends
Investm
ent Re
turn
14 Financial Strategies
Targets
KPIs
Item Target Fiscal 2020 goal
Profit margins Operating income ¥13.0 billion
Management efficiency ROE 7%
Growth EPS (annual average growth) 8%
Secure cash flow Cumulative operating cash flow for four-year period Cumulative ¥50.0 billion
Item KPI Fiscal 2020 goal
Expand Health Science Business Sales growth rate for Health Science Business
Annual average 20% (+205% versus fiscal 2016)
Acceleration of globalization Overseas sales growth (forex neutral) Annual average 7% (+132% versus fiscal 2016)
Accelerate growth in the edible oils for commercial-use and edible oils for food processing domains
Gross profit growth in the edible oils for commercial-use and edible oils for food processing domains
Annual average 2% (+110% versus fiscal 2016)
Enhance profit margins on the household-use products
Gross profit growth in the household-use domain
Annual average 3% (+114% versus fiscal 2016)
Improve value of MCT Recognition rate of MCT 50% (24% versus fiscal 2016)
Business structure reforms Cost reduction owing to process innovations
¥2.0 billion-plus
15 Targets & KPIs
These materials including forward-look statements. The assumptions, forecasts, and estimates are based on
information currently available at the time these materials were prepared. Actual measures, policies, strategies,
and earnings results may differ due to various factors that could arise going forward.