strong action for lean management - kirin holdings
TRANSCRIPT
Strong action for lean management~ Ready for further Qualitative Expansion in Asia and Oceania ~
November, 2010
Kirin Holdings Company, Limited
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Contents
(Abbreviations)KH: Kirin Holdings, KB: Kirin Brewery, KBC: Kirin Beverage, ME: Mercian, KHK: Kyowa Hakko Kirin, KKF: Kirin Kyowa Foods, KHB: Kyowa Hakko Bio, KHC: Kyowa Hakko Chemical, KCI: Kirin (China) Investment, LNNF: Lion Nathan National Foods, LN: Lion Nathan, NFL: National Foods, SMB: San Miguel Brewery, SMI: San Miguel Brewing International, F&N: Fraser and Neave, KBE: Kirin Business Expert
Review of Results for the Third Quarter
From the Third Quarter to the End of the Year: Qualitative Information
2010 3Q Highlights and Measures Through the End of the Year(1) Domestic Alcohol Beverages, Soft Drinks and Foods(2) Australia, Pharmaceuticals, and others
Progress of Cross Company Teams
Kirin Group Business Infrastructure Conditions in the Asia-Oceania Region
Strong Brand Families Produced by Group Partner Companies
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Review of Results for the Third Quarter
Billion Yen Year to Date YoY Change YoY Change in percent
Forecast Results for Year
YoY Change in percent
Sales Including liquor taxes
1,602.8 (65.4) (3.9) 2,180.0 (4.3)
Operating Income
After amortization of goodwill
113.6 19.7 21.0 133.0 3.6
Ordinary Income 107.4 (2.6) (2.4) 125.0 (13.6)
Net income for the quarter 24.2 (17.4) (41.9) 35.0 (28.8)
Measures to address issues in the first year of the Implementation and Qualitative Expansion Medium-Term Business Plan are moving ahead as planned Business results are progressing strongly towards the targets revised in the first half, and we will
boost activities even further in the fourth quarter to achieve our targets for the yearIn July, we acquired 14.7% of Fraser and Neave, the largest beverage operator in Singpore and Malaysia,
further accelerating our international integrated beverages group strategy in the Asia-Oceania region
CCT activities and measures to cut costs by group companies as well as the strengthening brands, supplemented by hot weather in the domestic alcohol beverage and soft drink business, resulted in a substantial increase in operating income from the previous year (third quarter operating income reached a record high).
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Liquidated assets have amounted to 28 billion yen (the progress rate is 70%). Measures are being reinforced to achieve the planned targetThe process of making Mercian a wholly-owned subsidiary is proceeding according to planWe received an Independent Committee report and are reexamining governance of group subsidiariesKyowa Hakko Kirin decided to sell all shares of Kyowa Hakko Chemical (planned for the end of March 2011)
From the Third Quarter to the End of the Year: Qualitative Information
Other Groupwide Measures
Other Groupwide Measures
Developments in Individual
Segments and Overall Direction
Developments in Individual
Segments and Overall Direction
CCTCost Synergies
CCTCost Synergies
Progress towards achieving the group plan has been good
[Conditions through the Third Quarter]
In the domestic alcohol beverage, soft drink, and foods businesses, measures to launch new products with value and to raise profitability have been successful
In the pharmaceuticals business, sales of leading products have been brisk. The impact of the revisions to the pharmaceutical product pricing standards have been within expectations, and the business as a whole is performing well
In Oceania, conditions, especially for the soft drinks & foods business, remained very challenging with high input costs and a very price competitive retail environment. Lion Nathan National Foods continues to invest in its focused portfolio of core ‘power brands’.
⇒ The entire group is working to achieve the targets for the year that were revised in the first half
Measures in various areas to achieve the contribution target of 7.5 billion yen are proceeding ahead of schedule
Continued strengthening of measures in the fourth quarter Kirin Brewery and Kirin Beverage production plant optimization work is progressing smoothly, and
efforts to meet production and logistics field objectives are going as planned Measures are being implemented ahead of schedule to address outstanding issues in
procurement, IT, and other areas
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Progress of measures to strengthen brands: The sales target for the year for ”Kirin Gogo-no-Kocha”, the number one brand* in the black tea market, has been revised upwards
The results of profit structure reforms including cutting costs for materials and controlling sales promotion costs are starting to take effect
In the refrigerated beverage business, we are implementing structural reforms to build a solid foundation and enhance competitiveness
In China, we are strengthening marketing activities for the “Kirin Gogo-no-Kocha” brand and undertaking profit structure reforms
2010 3Q Highlights and Measures Through the End of the Year (1):Domestic Alcohol Beverages, Soft Drinks and Foods
Kirin BreweryKirin Brewery
Measures to bolster the Kirin brand and to propose new value have been successful “Kirin Nodogoshi Nama” and the new “Kirin Honkaku Karakuchi Mugi” have sold well
Sales also enjoyed effects from hot weather, and sales generally recovered in July to September
The sales department of Kirin Brewery Company, Ltd. and Kirin Merchandising Company, Ltd. will merge to form a new company. Integration of management will reinforce community-based sales structures
In the new genre market, which is expected to grow further and reach a peak season at year-end, we will reinforce three core products—“Kirin Nodogoshi Nama”, “Kirin Honkaku Karakuchi Mugi”, and “Kirin Koku no Jikan Zeitaku Mugi”—with a focus on the first to accelerate current sales even further
In the new genre market, which is expected to grow further and reach a peak season at year-end, we will reinforce three core products—“Kirin Nodogoshi Nama”, “Kirin Honkaku Karakuchi Mugi”, and “Kirin Koku no Jikan Zeitaku Mugi”—with a focus on the first to accelerate current sales even further
MercianMercian We are certain to achieve our sales target in November to December, the period with the greatest sales opportunities We will aim for a 5% increase in orders for Beaujolais Nouveau compared to the previous year, by introducing Beaujolais Nouveau Rose and other measures
We are certain to achieve our sales target in November to December, the period with the greatest sales opportunities We will aim for a 5% increase in orders for Beaujolais Nouveau compared to the previous year, by introducing Beaujolais Nouveau Rose and other measures
Kirin BeverageKirin Beverage
We will continue to concentrate on raising competitiveness centered on brand strength with a focus on core brands such as “Kirin Gogo-no-Kocha”We will continue to concentrate on raising competitiveness centered on brand strength with a focus on core brands such as “Kirin Gogo-no-Kocha”
Sales of domestic daily wines for household consumption are preferableWe are proposing new value to customers such as wine in environmentally-friendly PET bottles
FY10FY10
FY10FY10
FY10FY10
* Actual figures from 2009 Food Marketing Institute study
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2010 3Q Highlights and Measures Through the End of the Year (2): Australia, Pharmaceuticals, and others
Lion Nathan National Foods
Lion Nathan National Foods
Kyowa Hakko Kirin Group
Kyowa Hakko Kirin Group
Kyowa Hakko Kirin(1) Although there was some impact from the mandated lower drug prices in April, sales of leading products
remain strong(2) In addition to an increase in the one-off source of income through licensing, royalty income is also highKyowa Hakko Bio reported strong sales of amino acids for intravenous liquids and pharmaceutical materials for Asian markets. The company is creating systems for increased production of ornithine restorative amino acid*, a functional ingredient, responding to brisk sales of Kirin Plus-i
Kyowa Hakko Chemical reported a substantial improvement in results thanks to a resurgence in demand for products because of the economic recovery
Efforts continue to be focused on sales of leading products to achieve the annual targets in each businessEfforts continue to be focused on sales of leading products to achieve the annual targets in each business
<Alcohol beverages>
Continued to drive premiumisation and innovation, such as low-carb, and delivered a solid revenue performance despite of challenging conditions.
<Soft drinks & foods>
While conditions were more challenging with high input costs and consumers shift to lower priced items retailer discounting from July to September, LNNF continued to invest in its core assets to deliver sustainable growth over the long term.The integration and optimization of manufacturing is on track.
While conditions were more challenging with high input costs and consumers shift to lower priced items retailer discounting from July to September, LNNF continued to invest in its core assets to deliver sustainable growth over the long term.The integration and optimization of manufacturing is on track.
Though the conditions remained challenging from July to September, LNNF conducted planned initiatives to achieve the full year profit target.As part of LN’s innovation strategy, low-carb beer “XXXX Summer Bright Lager” was made available nationally
in September 2010 after a very successful launch in Queensland.
Though the conditions remained challenging from July to September, LNNF conducted planned initiatives to achieve the full year profit target.As part of LN’s innovation strategy, low-carb beer “XXXX Summer Bright Lager” was made available nationally
in September 2010 after a very successful launch in Queensland.
FY10FY10
FY10FY10
Conditions remained very challenging with relatively high input costs by historical standards and a very price competitive retail environment. LNNF continues to invest in its core brands and focus on innovation
to drive mix improvement. The integration and optimization of manufacturing is making strong progress to deliver synergies.
FY10FY10
*It regrows back to Ornithine after being consumed in the body and thus is called a restorative amino acid.
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(Billion yen)
Contribution target for FY2010
Year to date(Progress %) Major efforts
Production/Distribution 0.8 0.48
(58.3%)
Cost reduction through KB / KBC production site optimizationKB / KBC (Supply and demand) Cost reduction through overhaul of logistical function structure
Procurement 4.6 5.55
(120.8%)
Promoting implementation of group procurement between KB, KBC inraw materials, packaging materials and advertising
IT and others 2.1 3.13
(149.0%)
The ahead of schedule implementation of measures to cut information-infrastructure costs, planned from 2011 to 2012
Total 7.5 9.16
(122.1%)
Surpassing annual contribution targets owing to the ahead of schedule implementation of these measures in the third quarter
Progress of Cross Company Teams
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Asset Reduction (CCT)Asset Reduction (CCT)
Business portfolio selection and concentrationBusiness portfolio selection and concentration
Internal business restructuring (CCT)Internal business restructuring (CCT)
Have achieved approx.28 billion yen through Q3 out of our annual plan of 40 billion yen.Proceeding forward as planned, working mostly with fields such as real estate, investment securities, and held assets of group businesses.
End of March: Agribio business externalized.End of September: Externalized food production and sales business of Nagano Tomato.Plans to transfer of ownership of Koiwai Dairy Products (KIW) shares owned by KBC to KH and KH’s acquisition of new shares, as well as the split-off and later acquisition of KIW refrigerated drinks manufacturing operations in Tokyo by KBC by January 2011
On July 1, restructuring of ME and KHB raw alcohol businesses into ME’s subsidiary company was completed, while ME’s processing alcohol and fermentation seasoning businesses were unified into KKF as planned.
Promotion of health and functional food businessPromotion of health and functional food business
Project “ Kirin Plus –i” unveiled in January Breaking annual sales objective of 5 billion yen in around only four months.Commonly utilized “Ornithine” in all products achieved around fivefold sales in volume YOY at KHB, producing and selling its material.
Progress on Medium-Term Business Plan
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Kirin Group Business Infrastructure Conditions in the Asia-Oceania Region
Fraser and Neave has joined our group, accelerating international integrated beverages group strategy
Chinese Market Promote integrated
beverages group strategy through KCI while keeping an attentive eye on market changes
Chinese Market
Secure opportunities for beverage and food business infrastructure expansion in the rapidly growing market through acquisition of capital in F&N
Further strengthen beer business in the Philippines through coordination with SMB
Strengthen SMI business infrastructure and promote alcohol business across Southeast Asia
Southeast Asia Market
Japanese Market
Utilize KB/KBC/ME/Ei Sho Gen, etc. brands to accelerate integrated beverages group strategy
Japanese Market
[Oceania Market]
Accelerate integrated beverages group strategy positioning LNNF as foundation
Oceania Market
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San Miguel Brewery
Fraserand
Neave
Lion Nathan National Foods
Lion NathanNational Foods
Possessing both powerful alcohol and food/beverage brand families in each regionFurther strengthening of each brand through creation
of group synergies
Strong Brand Families Produced by Group Partner Companies
Dom
estic
Alc
ohol
B
usin
ess
Kirin Brewery
Kirin BeverageOverwhelming sales volume within the Philippines. Beer business operations extend to China and Southeast Asia as well
Largest beverage business in Malaysia and Singapore
Owner of many of Australia’s leading milk and juice beverage brands
Owner of many strong beer brands, including XXXX
Many strong brands in each category, such as Kirin Nodogoshi Nama, Kirin Chuhai Hyoketsu, Kirin FREE, etc.
Strong brands in each category, such as the No. 1* black tea beverage, Kirin Gogo-no-Kocha, as well as Kirin FIREand Kirin Nama-cha* Actual figures from 2009 Food Marketing Institute study
Sout
heas
t Asi
a A
lcoh
ol
Bus
ines
s
Sout
heas
t Asi
a B
ever
age
and
Food
Bus
ines
s
Oce
ania
B
ever
age
and
Food
Bus
ines
s Oce
ania
A
lcoh
ol
Bus
ines
s
Dom
estic
B
ever
age
Bus
ines
s
Mercian
Appendix
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Nurture close links with customers through products that provide the enjoyment of food and health Integrate our expertise in fermentation and biotechnology, manufacturing, and research and marketing to create
value and offer distinctive products of the highest quality Be a leading company in Asia and Oceania, with alcohol beverages, soft drinks and pharmaceuticals as our core
business
KV2015 Group Vision
1. Pursue an integrated beverages strategy
2. Internationalize business
3. Establish health food & functional food business pillar to follow alcohol beverages, soft drinks and pharmaceutical businesses
Strengthen foundations by achieving growth in domestic
alcohol business
Continuing Kirin’s leap in growth outlined in KV2015 long-term vision Moving to Stage II with the 2010—2012 Medium-term Business Plan
Unit: billion yen
Quantum growth trajectory
Current trajectory
0
500
1,000
1,500
2,000
2,500
3,000
1997 98 99 00 01 02 03 04 05 06 Est. 20150
50
100
150
200
250
300Sales (left axis)
Operating income (right axis)New growth trajectory
Historic growthline
Approx. 30%18%Sales excl. liquor
taxOverseas composition
OP margin
Sales (yen)
Approx. 30%
10% plus
2.5 trillion
3 trillion
2015
27%Operating income
9%Excl. liquor tax
1.27 trillionExcl. liquor tax
1.68 trillionIncl. Liquor tax
2006KV2015 targets
Kirin Group Vision 2015 (KV2015) (announced May 2006)
12MTBP = Three-year Medium-term Business Plan
Profitability
Business scale
2010-2012
Stage 1: 2007 MTBP(2007-2009)
Stage 1: 2007 MTBP(2007-2009)
Stage 1 Stage 2 Stage 3
Shifting to qualitative expansion
Stage 2: 2010 MTBP(2010-2012)
Stage 2: 2010 MTBPStage 2: 2010 MTBP(2010(2010--2012)2012)
Three years of implementation to Three years of implementation to increase profitabilityincrease profitability
Stage 3: 2013 MTBP(2013-2015)
Stage 3: 2013 MTBP(2013-2015)
Three years to kickThree years to kick--start start growthgrowth
Address key issues through implementation-focused plan to further advance shift from quantity to quality ⇒achieve long-term management vision (KV2015)
2010 MTBP—from quantity to quality
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1.Increase Group enterprise value by realizing growth and synergies at operating companies(1) Pursue an integrated beverages group strategy (2) Accelerate growth in pharmaceuticals business (3) Develop the health food and functional food business(4) Generate growth through Group synergies (5) Realize lean management by eliminating strain, waste and irregularity
2.Pursue financial strategy that supports higher enterprise value3.Engage in CSR activities that enhance Kirin’s coexisting with society
Group-wide effort to make new value propositions in line with customer needs Pursue profitability and efficiency: implement lean management, eliminating strain, waste
and irregularity
Improve profitability and asset efficiency
Generate Group synergies
Realize lean management
Strengthen technical capabilities & customer
relationships
Pursue integrated beverages group strategy
Improve profitability and asset efficiency
2010 Kirin Group Basic Policy
KB: strong lead in customer supportKBC: strong brand creationLNNF: start of new organization structure
Asset efficiencyTCR *activities coordinating
production, SCM and sales
Use CCT* to improve profitability, efficiencyAccelerate integration of production, sales
and development at Kyowa Hakko KirinNew Group-wide brand KIRIN Plus-i
Diagram:2010 MTBP=Specific action in 2010
*CCT stands for Cross Company Tesms (Refer to P10) *TCR stands for total cost reform
140.65
0.84
252.0
25%
2,180.0
229.5
205.0
650.0
1,095.5
2010 plan(mid-quarter revision)
8.3%
7.3%
9.5%
133.0
175.0
1,835.0
2010 plan(mid-quarter revision)
2,490.0(98.4)2,278.4Incl. Liquor taxTotal
1,167.0(2.1)1,097.6Alcohol beveragesSales by segment
815.0(85.0)735.0Soft drinks and foods
225.0(1.7)206.7Pharmaceuticals
283.0(9.4)238.9Other businesses
10% plus0.0% points8.3%Prior to goodwill amortizationCash ROE (%)
0.80 plus
0.5
341.0
29%
2012 target
8.8%
10.8%
188.0
231.0
2,130.0
2012 target
Excl. liquor tax
39.2212.8EBITDA(2%) points27%Overseas sales ratio
Change2009 actual
Guidelines
(0.07)0.91DER
(0.05)0.70Asset turnover ratio
17.3157.7Prior to amortization of goodwillOperating income
4.6128.4After amortization of goodwill
1.3% points8.2%Excl. liquor tax. Prior to amortization of goodwillOP ratio (%)
0.6% points6.7%Excl. liquor tax. After amortization of goodwill
(83.7)1,918.7Excluding liquor taxSales
Change2009 actual
Targets
Target substantial increase in pre-goodwill operating income, EBITDA and other cash-based earnings indices Improve profitability (reduce costs) across Group and enhance resilience to changes in business environment
¥2.00¥1.99PHP(San Miguel Brewery)
¥80¥70.04A$(Lion Nathan)
¥80¥74.57A$(National Foods)
2010e2009 actual
Assumed exchange rates
(Unit: billions of yen)
2010 Kirin Group quantitative targets
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Target growth compared to 20092010 operating income
growth2012 operating income
growthMain operating
companiesArea
Total
3. Growth in Australia, including merger benefits (incl. organic growth, integration effects, exchange rates, goodwill amortization expenses)
LNNFAustralia
1. Domestic growth from integrated beverages strategy, pharmaceuticals, etc.
KB, KBC: Cost structure reformKHK:Improvement of chemicals earnings
2. CCT cost synergies
KBKBCME
KHKKKF
Japan
22.2
19.1
18.3
59.6
*After amortization of goodwill(Unit: billion yen)
7.5
4.6
2.5
Australia growth 12.1
NFL nine months (3.9)
LN 100% goodiwil (13.6)
Centering activities on CCT to reform earning structure (lower costs) and increase resilience to changes in business environment
Targeting higher earnings in Australia (prior to amortization of LN 100% goodwill) with continued strong performance at LN and earnings recovery at NFL
Breakdown of target increase in operating income
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Capital structurePursue debt repayment, targeting a D/E ratio of 0.5x at the end of 2012 (allowing a temporary upper limit of approximately 1.0x)
Significantly increase cashflow by realizing Group synergies, adopting lean management, improving investment efficiency and reducing assets
◆◆ Operating cash flow approx. ¥210.0 bn (cf. approx. ¥189.9 bn in 2009) Realize synergies from integrated beverages group strategy and adopt rigorous lean management in
each operating company
◆◆ Investment cash flow outlay of approx ¥145.0 bn (cf. approx ¥321.6 bn in 2009) Hold capex to ¥100.0 bn (cf. ¥110.2 bn in 2009) Liquidate assets of approx. ¥40.0 bn, targeting total of ¥150.0 bn plus during MTBP
2010 operating CF approx. ¥210 bn
2010 capex aprox. ¥100 bn
Debt repayment
2010 assets to be liquidated more than approx. ¥40 bn
Shareholder returnsDividends:Consolidated payout ratios over 30% Aim to increase dividends inline with growth in real earnings, taking into consideration amortization of goodwill, etc. arising from investment for growthShare buybacks:To be considered in the context of progress on qualitative expansion, on the basis of maintaining medium- to long-term credit rating
Shareholder returns
Cash Flow
Increased operating CF
Improved investment efficiency Further asset
reductions
Investment for growthContinue to intensively allocate resources as appropriate, with no fixed investment framework
2010 financial strategy: Increase cash flow
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Investment Strategy
◆Actively direct cash towards attractive projects that are WORTH INVESTMENT, though we have not set a quota for strategic investment during this MTBP.
◆Worth Investment1. Projects that match our approach to becoming a leading food and health company
in Asia and Oceania
2. Accelerating the generation of group synergies
3. High project profitability and appropriate investment efficiency
Options for quantum leap in growth
Investment for growth
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Kirin is helping realize a sustainable society with CSR through business and CSR as a corporate citizen.
Becoming a low-carbon corporate group Preventing driving under the influence
Supporting Japan’s national soccer teamAs an official sponsor of the Japan National Team, Kirin helps foster the soccer culture in Japan, and through initiatives such as the Kirin Soccer Field Program, cultivates the next generation of soccer athletes.
1) Halve total value chain CO2 emissions by 2050 compared to 19902) Reduce CO2 emissions from manufacturing, distribution and office
activities by at least 1% per year through 20503) Reduce domestic CO2 emissions from manufacturing, distribution
and office activities by 35% by 2015 compared to 1990
Development
Procurement
ManufacturingDistribution
Consumption
Sales
Disposal/recycling
Quantitative targets:
Minimizing carbon use
Living simple but rich lives
Coexisting with nature
Kirin aims to become a low-carbon corporate group, based on a CSR theme of coexisting in harmony with nature.
Reduced use of energy
Environmentally friendly products
Reduced use of resources
Implementing Kirin Group environmental initiatives across the entire value chain
Toward a low-carbon society
With the 0.00% alcohol Kirin FREEbeer-taste beverage, Kirin is helping curb driving under the influence.
ⒸJ.LEAGUE PHOTOS
Engaging with society through CSR
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MOU Reached on Sale of KHC
Objective(KHK)To focus effectively its business resources to its pharmaceutical business(KHC)To implement actively the capital expenditure required to meet the diverse market demand,
independent of KHK
The other party of MOUJapan Industrial Partners, Inc.
Schedule Early January, 2011 (scheduled) Final agreement signedEnd of March, 2011 (scheduled) The shares to be transferred
KHK has signed Memorandum of Understanding to transfer all the shares of Kyowa Hakko Chemical, which is a consolidated subsidiary company of KHK.
KHK
KHC
100%
Japan Industrial Partners
(or the special purpose company to be established by other investors as well as the funds that Japan Industrial Partners administers and manages that will acquire KHC)
transfer all the shares of KHC
201 : KH holds 50.12% of the total Mercian shares (as of the end of June, 2010)
Share Exchange to Acquire 100% of Mercian
ObjectiveTo reinforce Mercian’s management base and corporate governance To create synergies and improve competitiveness by enhancing the group alliance in the domestic alcohol business
SchemeShare Exchange:0.14 shares of common stock of KH will be delivered by allotment for each one share of common stock of Mercian.
Mercian obtained the approval of the Share Exchange Agreement by a resolution at the extraordinary shareholders’ meeting of Mercian, on November 5, 2010.
ScheduleNovember26, 2010 Date of delisting (Mercian)December 1, 2010 Scheduled date of Share Exchange (Effective Date)
Because KH has already acquired Mercian as its consolidated subsidiary1, the impact of the Share Exchange on the business performance of both KH and Mercian is expected to be minor on both a consolidated and unconsolidated basis.
KH has reached an agreement with Mercian under which Mercian will become a wholly owned subsidiary of KH.
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Aim of the integration and New Company Aim of the integration and New Company
New Company’s OutlineNew Company’s Outline
Consistent management system of every sales activityConsistent management system of every sales activity
Restructuring of domestic alcohol beverage business against the continuous decrease of demand in the future
Improving sales division as well as production division such as restructuring of two product site (Tochigi and Hokuriku ), distribution division ( improving of site, structure or system )
New personnel system to pursue community-based way of working and recruitment of divers peopleNew personnel system to pursue community-based way of working and recruitment of divers people
Further strengtheningthe community-based sales structure
Further strengtheningthe community-based sales structure
Direction of the New companyDirection of the New company
The KB Sales Department will integrate with Kirin Merchandising to form a new company.
Location 6-26-1, Jingu-mae, Shibuya-ku, TokyoEstablishment January 1, 2012 (proposed)Principal shareholder 100% owned by Kirin BreweryMain Business Sales and sales promotion of alcoholic drinks and soft drinksSales 853.7billion yen (Actual result of KB in 2009)Employees Approx. 3,500 (proposed at present)
* Details such as corporate name, representatives, capital not decided at present.
Achieving more powerful sales activity and higher efficiency by speeding up of decision making and implementation
Achieving more powerful sales activity and higher efficiency by speeding up of decision making and implementation
Achieving further improvement of KIRIN Brand to every customer by higher Achieving further improvement of KIRIN Brand to every customer by higher
Reorganization of the KB Sales Department
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Newly established
KBE
Inherited corporate statusCorporate name change
KGO
New KBE Standard and special services
Service strategy planning; group corporate functions
KBE will be restructured to separate the indirect services shared by the group.
This will provide the group with more efficient operations at cost levels offering greater market competitiveness.
Reorganization OverviewReorganization Overview
The new KBE and KGO are scheduled to begin business from January 1, 2011.
Kirin Business Expert Co., Ltd. (New KBE) Kirin Group Office Co. (KGO)
Representatives: Undecided
Location: 2-10-1 Shinkawa, Chuo-ku, Tokyo
Proposed establishment: Dec. 2010 Will inherit corporate status from the current KBE when the company name changes
100% subsidiaries of KH
Employees: approx. 170 (proposed) Employees: approx. 230 (proposed)
Company Overview Company Overview
Organizational Changes to KBE
23
The 2010 annual sales target for Kirin FREE, launched in April 2009, was revised from 4.3 million cases upward to 5.1 million cases.
The launch of Kirin FREE enabled rapid growth and expansion of non-alcohol beer-taste beverage market in Japan. In 2010, this market volume is expected to grow up to 9.0 million cases, increase by 80% over last year.
Kirin FREE is our innovative product, realized potential demand of our customers for perfect non-alcohol (0.00%) beer-taste beverage.
We will continuously propose various scenes of drinking Kirin FREE to our customers, andintensify efforts to eliminate drunk driving.
Kirin FREE growing further in the second yearKirin FREE is driving non-alcohol beer-taste beverage market, as the NO.1 brand of this category.
Growth of non-alcohol beer-taste beverage market
0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2005 2006 2007 2008 2009 2010
(million cases)
(E)
KirinKirinFREEFREE
9.0
10.0
Yasumuhi-no Alc. 0.00%
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Kirin Plus-I : Health and Functional Foods Project
The first wave of products from four group companies under the crossover Kirin Plus-i brand went on sale in April.Sales have already exceeded the yearly objective of 5 billion yen in only four months.Ornithine, commonly utilized in all products, ranked in Nikkei MJ ranking of hit products and sales increased by 5 times
Yasumuhi-no Alc. 0.00% (KB)
Otona-no-Kirin Lemon (KBC)
Ukon Double (KBC)
Otona-no-Yoghurt (Koiwai Dairy Products)
Cayu~na (KKF)
A new non-alcoholic beer that endorses alcohol-free days. Includes ornithine, a restorative amino acid found in high concentrations in basket clams.
A new non-alcoholic beer that endorses alcohol-free days. Includes ornithine, a restorative amino acid found in high concentrations in basket clams.
A sugar-free, energy-boosting healthy carbonated beverage. Contains healthy ingredients that will delight adults: ornithine, citric acid, and vitamin B6. Contains 1% unripe lemon juice.
A sugar-free, energy-boosting healthy carbonated beverage. Contains healthy ingredients that will delight adults: ornithine, citric acid, and vitamin B6. Contains 1% unripe lemon juice.
Has the double power of both turmeric and ornithine, a restorative amino acid. A refreshing, citrus drink that tones down turmeric’s characteristic bitterness. Contains no fruit juice.
Has the double power of both turmeric and ornithine, a restorative amino acid. A refreshing, citrus drink that tones down turmeric’s characteristic bitterness. Contains no fruit juice.
Energy for tomorrow for busy people! Make yoghurt part of your new daily routine. Thoroughly fermented yoghurtcontaining ornithine, a restorative amino acid.
・Relaxing “Night vanilla”・Refreshing “Morning grapefruit”
Energy for tomorrow for busy people! Make yoghurt part of your new daily routine. Thoroughly fermented yoghurtcontaining ornithine, a restorative amino acid.
・Relaxing “Night vanilla”・Refreshing “Morning grapefruit”
Cayu~na offers a new approach to rice porridge (called ‘kayu’ in Japanese) and is designed to make rice porridge more accessible. It contains generous amounts of spinach and ornithine, a restorative amino acid. Cayu~na is freeze-dried, so just add hot water anywhere, anytime. A new way to incorporate “cayu” into your daily diet.
Cayu~na offers a new approach to rice porridge (called ‘kayu’ in Japanese) and is designed to make rice porridge more accessible. It contains generous amounts of spinach and ornithine, a restorative amino acid. Cayu~na is freeze-dried, so just add hot water anywhere, anytime. A new way to incorporate “cayu” into your daily diet.
The first wave of Kirin Health Project products all contain the ingredient ornithine, a restorative amino acid.The first wave of Kirin Health Project products all contain the ingredient ornithine, a restorative amino acid.
The ornithine used in project products is produced using Kyowa Hakko’s fermentation method. The ornithine used in project products is produced using Kyowa Hakko’s fermentation method.
Each product contains 400 mg of ornithine per serving (approx. 900x amount found in a basket clam).Each product contains 400 mg of ornithine per serving (approx. 900x amount found in a basket clam).
25
1898Incorporation
Beverages: 100PLUS (isotonic), F&N (carbonated), SEASONS (Asian)Dairies: Magnolia, Fruit Tree Fresh, Nutrisoy, NutriteaBeer: Tiger, Anchor, Baron’s, ABC
Major Brands
F&N is a Singapore Exchange-listed conglomerate involved in food and beverage, brewery and real estate businesses. F&N’s food and beverage business is focused on soft drinks and dairy products, and operates through an extensive network in the Southeast Asian market including Singapore and Malaysia.
Business
approx.18,000Employees
Revenue: SGD 5.3 billion (JPY 337.7 billion)1
PBIT: SGD 0.8 billion (JPY 51.3 billion)1
Net income: SGD 0.4 billion (JPY 28.0 billion)1Financials3
Shareholder's Equity: SGD 5.6 billion (JPY 353.7 billion)1
Total assets: SGD 13.9 billion (JPY 878.2 billion)1Assets2
Lee Hsien YangChairman
SingaporeHeadquarters
Fraser and Neave Limited.Company Name
Source: F&N 2009 annual report1 SGD 1 =JPY 63.33 (as of July 23, 2010)2 As of September 30, 20093 Fiscal year ending September 2009
Overview of F&N
26
11 243 Others
270 1,504 Development Property
186 340 Investment Property
17 193 Glass Containers1
(1)417 Printing & Publishing
207 1,352 Breweries
61 978 Dairies
60 542 Soft Drinks
811 5,333 Group
PBITTotal Revenue2Business Segment
Financial information regarding business segments(Fiscal year ending September 2009, SGD in millions)
10%
18%
24%7%
3%6%
28%
4%
Major subsidiary, joint venture and associated companies ( ): effective shareholding by F&N
Soft Drinks, Dairies: Fraser & Neave Holdings Bhd (57.4%)
Breweries: Asia Pacific Breweries Ltd (39.7%)
Printing & Publishing: Times Publishing Ltd (100.0%)
Property: Frasers Centrepoint Limited (100.0%), Frasers Centrepoint Trust (51.0%),Frasers Commercial Trust (22.5%)
Composition of total revenue by business segments3
(Fiscal year ending September 2009)
Soft Drinks
Dairies
BreweriesPrinting & Publishing
Glass Containers1
Investment Property
Development Property
Others
Source: F&N 2009 annual report1 Fraser & Neave Holdings Bhd, a subsidiary of F&N, completed its divestment of glass containers business in July 20102 Elimination not shown in the segment breakdown3 Excludes elimination
F&N Financials Overview by Segment
27
MagnoliaFruit Tree Fresh
NutrisoyNutritea
Dairies
TigerAnchorBaron’s
ABC
SEASONS
F&N
100PLUS
Asian
Beer(Asia Pacific Breweries)
Carbonated
Isotonic
Major Soft
Drinks, Dairies Brands
Beer Brands
Source: F&N 2009 annual report, etc.
F&N have a compelling brand portfolio in each isotonic, carbonated and dairies categoriesStrong position as a No.1 brand of isotonic and carbonates especially in Malaysia and Singapore
Strong Beverages Brand Portfolio of F&N
28
35%
51%
12%2%
Consolidated Revenue of FNH: MYR 3,737 million (Fiscal year ending September 2009)
2009 Revenue by Business Segment of FNH
Soft Drinks
Dairy Products
Glass Containers2
Property/Others
2009 Revenue by Geographic Segment of FNH
65%
19%
4%4%
2%6%
Malaysia
Thailand
Singapore
ChinaVietnam
Others
1 Excluding breweries business2 FNH completed its divestment of glass containers business in July 2010
F&N operates its Food & Beverage business1 primarily through Fraser & Neave Holdings Bhd (Malaysia listed company; “FNH”) based in Malaysia
F&N Food & Beverage Business1 OverviewF&N Food & Beverage Business1 Overview
29
Lion Nathan National FoodsLion Nathan National Foods
Soft Drinks & Foods (OP difference) *2
+2.6FY2010 (E)
+1.92010 3Q16.8305.92009 3Q *1
24.3385.0FY2010 (E)
13.9265.42010 3Q
OperatingIncome *2
Sales Revenue
Alcohol Beverages(OP difference) *2
(3.0)FY2010 (E)
(1.8)2010 3Q
Alcohol BeveragesAlcohol
Beverages
Soft drinks & Foods
Soft drinks & Foods
•Solid performance from LNA’s core ‘power brands’ in Q3. Premiumisation across the market combined with successful innovation delivered growth.•Boag’s portfolio is performing strongly.
•Dairy and juice categories remain challenging.•Further progressing on integration and strengthening brands.•Continuing effort to optimize business structure.
Integration Progress
Integration Progress
・‘Best practice’ has been leveraged across the group. ・Manufacturing optimization has seen significant progress.
*1 : Combination of FY2009 results of LN and NFL*2 : After amortization of goodwill
(¥Billions)
Lion Nathan National Foods
30
Beer - New Zealand1Beer – Australia1
Market shareMarket share
Source:1 AC Nielsen MAT September 20092 AC Nielsen Only white milk (exclude flavoured milk)3 AC Nielsen
Chilled Juice – Australia3Milk – Australia2
【Oceania / Market 】 LNNF Position in Primary Categories
LNNF has strong market positions in a range of key beverage categories
43% 51%
63% 54%
31
2,571 2,701 2,850 2,873 2,958 3,071 3,148 3,232 3,347 3,4683,676
3,8924,122
4,356
2,000
2,500
3,000
3,500
4,000
4,500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(A$ in mm)
3.4% CAGR
5.4% CAGR
Growth in the Australia Milk Market by Value
1,145 1,140 1,154 1,162 1,197 1,229 1,267 1,291 1,3161,365
1,4191,475
1,5371,599
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(A$ in mm)
1.7% CAGR
4.0% CAGR
Growth in the Australia Juice Market by Value
All Dairy Products Market growing steadily and more rapid growth expected especially in
Milk and Juice Market from 2006.
378 424 477 526 566 628 684 729 783 850 935 1,024 1,118 1,213
0
250
500
750
1,000
1,250
1,500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(A$ in mm)
9.5% CAGR
9.1% CAGR
Growth in the Australia Yogurt Market by Value
898 955 1,006 1,097 1,180 1,244 1,297 1,335 1,378 1,434 1,515 1,596 1,681 1,764
0
500
1,000
1,500
2,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(A$ in mm)
5.5% CAGR5.1% CAGR
Growth in the Australia Cheese Market by Value
【Australia / Market 】 Market growth by dairy products
32
(Mi l l i onpesos)
0
10 ,000
20 ,000
30 ,000
40 ,000
50 ,000
60 ,000
2005 2006 2007 2008 2009
Sales
0
2 ,000
4 ,000
6 ,000
8 ,000
10 ,000
12 ,000
14 ,000
16 ,000
18 ,000
Income
OperatingIncome NetIncome Sales
Billion yen SMB SMC
2009 Q3 0.2 (0.6)
2010 Q3 4.5
FY2010 4.4*
*SMB is a spin off of SMC (since October 2007). Figures for 2005-2007 are extracted from the official financial results for the beer business announced at the time of IPO (Proforma Financial Statement). Figures for subsequent years were disclosed by SMB.
KH Consolidated Net IncomeKH Consolidated Net Income Local SalesLocal Sales
Major ProductsMajor Products
SMBSMB
SMISMI
In 2010, backed by the steady growth of the Philippine economy, sales remained strong in comparison with planned annual targets and the previous year’s results.
Although SMI is struggling in terms of sales, sales volumes, and operating income, its profitability is improvingcompared with the previous year as a result of price increases in Indonesia and Hong Kong and an improved brand mix in the export sector.
*FY2010 forecast based on actual result in pesos from Oct..08 – Sep.09
San Miguel Brewery
33
西寧
成都
昆明
南寧
海口
貴陽
長沙 南昌福州
台北
武漢杭州
合肥南京鄭州
蘭州
呉忠
西安
太原
青島
沈陽
長春
ハルビン
包頭
張家口
青海省
四川省
雲南省
広西省
広東省
貴州省湖南省
江西省
福建省
台湾
湖北省 安徽省
上海
江蘇省河南省
甘粛省
寧夏省
陝西省
山東省
遼寧省
吉林省
黒龍江省
内モンゴル
天津
北京
河北省山西省
浙江省重慶
広州広州
••
••
Kirin Brewery (Zhuhai)
•
Dalian Daxue BreweryProduction Capacity: 280.000KL
Hangzhou Qiandaohu BreweryProduction Capacity: 160.000KL
Kirin (China) Investment
Building business platform in three areas in China
Northeast China :Dalian Daxue BreweryYangtze River Delta: Hangzhou Qiandaohu Brewery
Kirin (China) Investment Pearl River Delta:Kirin Brewery (Zhuhai)
Production Capacity: 200.000KL
*Production Capacity as of end of December 2009
【Overseas Alcohol】 Focus areas in China
34
Shanghais②上海錦江麒麟飲料食品有限公司(Shanghai JinJiang Kirin Beverage & Food Co., Ltd.)・Established in 1996・Acquired remaining 35.38% of the share in Dec,2009
Kirin has become 93.04% owner of the company
③麒麟飲料(上海)有限公司(Kirin Beverage(Shanghai)Co.,Ltd.)・Established in 2006
④上海麒麟食品有限公司(Shanghai Kirin Beverage & Food Co.,Ltd.)・Established in 2007
Shanghais②上海錦江麒麟飲料食品有限公司(Shanghai JinJiang Kirin Beverage & Food Co., Ltd.)・Established in 1996・Acquired remaining 35.38% of the share in Dec,2009
Kirin has become 93.04% owner of the company
③麒麟飲料(上海)有限公司(Kirin Beverage(Shanghai)Co.,Ltd.)・Established in 2006
④上海麒麟食品有限公司(Shanghai Kirin Beverage & Food Co.,Ltd.)・Established in 2007
Beijin①北京飛騰麒麟飲料有限公司(Beijing Flying Kirin Beverage Co.,Ltd.)・Established in 2009
Beijin①北京飛騰麒麟飲料有限公司(Beijing Flying Kirin Beverage Co.,Ltd.)・Established in 2009
South East Asia⑤サイアム キリン ビバレッジ(Siam Kirin Beverage Co.,Ltd.)・Established in 2005
⑥キリン・エースコック(ベトナム)飲料有限責任会社(Viet Nam Kirin Acecook Beverage Co.,Ltd.)・Established in 2008
South East Asia⑤サイアム キリン ビバレッジ(Siam Kirin Beverage Co.,Ltd.)・Established in 2005
⑥キリン・エースコック(ベトナム)飲料有限責任会社(Viet Nam Kirin Acecook Beverage Co.,Ltd.)・Established in 2008
【Overseas Beverage】 Focus areas in Asia
35
: POTELLIGENT® Technology: KM-Mouse Technology
Antibody pharmaceutical pipeline (as of October 2010)
36
(Billion yen) 2009 actual
2010 forecast(mid-quarter
revision)
Remarks
Operating CF 189.9 210.0 Effects will be generated by creating group synergies and implementing lean management. Cash flows in 2010 are planned to exceed ¥200 billion.
Investment CF
(321.6) (145.0) Capital investment in 2010 will be limited to ¥100 billion and asset liquidation will be ¥40 billion.
FCF (131.7) 65.0
FinancingCF
174.2 (95.0) Financial standing will improve in conjunction with repayment of interest-bearing liabilities.
2010 Cash FlowsControls on capital investment and asset liquidation has resulted in repayment of interest-bearing liabilities, setting the stage for a quantum leap in growth and a restoration of financial health.
37
Goodwill Amortization List for FY2010
38
Accounting period of Kirin Holdings Consolidated subsidiary Affiliated company
●FY2008
FY2007 FY2008Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Kirin HD
Kirin Pharma
Kyowa Hakko
Kyowa Hakko Kirin
Lion Nathan
National Foods
San Miguel
●FY2009
FY2008 FY2009Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Kirin HD
Kyowa Hakko
Lion Nathan
National Foods
San Miguel Brewary
San Miguel
●FY2010
FY2009 FY2010Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Kirin HD
Kyowa Hakko Kirin
Lion Nathan Natinal Foods *1
Lion Nathan Natinal Foods *2
San Miguel Breary
*1 former Lion Nathan*2 former National Foods
Change in accounting periods
39
3.02.7Operating income
44.042.6Sales
2010Forecast
2010 3QActual
Foreign exchange chartForeign exchange chart
Impact of changes in foreign exchange (AU$) on operating results (compared to previous fiscal year)Impact of changes in foreign exchange (AU$) on operating results (compared to previous fiscal year)
Reference: Increase of 1yen in the AU$ exchange rate equates:FY2010(E) a loss in sales of ¥5.0billion , a loss in operating income of ¥0.3billion
*After consideration on impact from reporting period change for NFL
(Billion Yen)
(Yen)
Lion Nathan National Foods
72.15
67.14
2009 3QActual
80.0080.7774.57Soft drink and food business
80.0081.1270.04Alcohol beverage business
2010Forecast
2010 3QActual
2009Actual
Average rate for the period used for the income statement:
Forex Sensitivity (Australian dollar)
40
This material is intended for informational purposes only and is not a solicitation or offer to buy or sell securities or related financial instruments.