strong action for lean management - kirin holdings

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Strong action for lean management ~ Ready for further Qualitative Expansion in Asia and Oceania ~ November, 2010 Kirin Holdings Company, Limited

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Page 1: Strong action for lean management - Kirin Holdings

Strong action for lean management~ Ready for further Qualitative Expansion in Asia and Oceania ~

November, 2010

Kirin Holdings Company, Limited

Page 2: Strong action for lean management - Kirin Holdings

1

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

Page 3: Strong action for lean management - Kirin Holdings

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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).

Page 4: Strong action for lean management - Kirin Holdings

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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

Page 5: Strong action for lean management - Kirin Holdings

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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

Page 6: Strong action for lean management - Kirin Holdings

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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.

Page 7: Strong action for lean management - Kirin Holdings

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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

Page 8: Strong action for lean management - Kirin Holdings

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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

Page 9: Strong action for lean management - Kirin Holdings

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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

Page 10: Strong action for lean management - Kirin Holdings

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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

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and

Food

Bus

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Oce

ania

B

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and

Food

Bus

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Bus

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Dom

estic

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Mercian

Page 11: Strong action for lean management - Kirin Holdings

Appendix

Page 12: Strong action for lean management - Kirin Holdings

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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)

Page 13: Strong action for lean management - Kirin Holdings

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

Page 14: Strong action for lean management - Kirin Holdings

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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

Page 15: Strong action for lean management - Kirin Holdings

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

Page 16: Strong action for lean management - Kirin Holdings

15

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

Page 17: Strong action for lean management - Kirin Holdings

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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

Page 18: Strong action for lean management - Kirin Holdings

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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

Page 19: Strong action for lean management - Kirin Holdings

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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

Page 20: Strong action for lean management - Kirin Holdings

1919

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

Page 21: Strong action for lean management - Kirin Holdings

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.

Page 22: Strong action for lean management - Kirin Holdings

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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

Page 23: Strong action for lean management - Kirin Holdings

22

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

Page 24: Strong action for lean management - Kirin Holdings

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%

Page 25: Strong action for lean management - Kirin Holdings

24

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).

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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

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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

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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

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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

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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

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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%

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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

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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

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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

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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

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: POTELLIGENT® Technology: KM-Mouse Technology

Antibody pharmaceutical pipeline (as of October 2010)

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(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.

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Goodwill Amortization List for FY2010

Page 39: Strong action for lean management - Kirin Holdings

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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

Page 40: Strong action for lean management - Kirin Holdings

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)

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This material is intended for informational purposes only and is not a solicitation or offer to buy or sell securities or related financial instruments.