Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato伪伪Increasing sales in all products and markets,
establishing new record highs on a half-yearly basis
KENKO Mayonnaise Co., Ltd. <2915> (hereafter “KENKO Mayo” or “the Company”) is engaged in
the production and sale of salads and delicatessen products, mayonnaise and dressings, as well asprocessed egg and other products. It has a leading position in the commercial-use market, and theleading market share in the “long-life salads” category at 37.4%. In the mayonnaise and dressings
market, it is second behind the market leader Kewpie <2809> with a 14.7% share.
The Company continues to deliver sound results. In 1H FY3/16 consolidated results sales were up
10.5% y-o-y to ¥33,244mn, recurring profit was up 41.2% y-o-y to ¥1,793mn, both ahead of the planat the beginning of the year, and establishing new record highs on a half-yearly basis. Sales wereincreased across all products and markets, including processed egg products, salads, mayonnaise
and dressings, with a key feature of these results being this expansion on all fronts. In addition toprocessed egg products and small packaged long-life salads for convenience stores (herein CVS),
tackling the need for “wanting to create delicious meals that are easy to prepare” for restaurants also,
due to staffing shortages, led to sales expansion. From a profit perspective, rises in raw material andfixed costs were absorbed by the impact of higher sales and the increased capacity at the Shizuoka
Fujisan Factory, leading to double-digit growth.
The plan from the beginning of the year was left unchanged, aiming for full-year FY3/16 sales of¥63,200mn (up 4.8% y-o-y), and recurring profit up 8.0% y-o-y to ¥3,000mn. However, it appears
that sales from October also continue to be sound, and we feel that, in the absence of any significant
change in the market environment, the likelihood of an upward revision is high. In particular,
processed egg products produced at the Shizuoka Fujisan Factory are also well received bycustomers, providing momentum to achieve full production capacity a year ahead of the initial plan.
As a result, the Company is considering increasing production capacity, not only at the Shizuoka
Fujisan Factory, but at all factories.
We may cite the meticulous, coordinated response by the sales, product and menu development
team to customer needs, and having been able to tackle value-added proposal activities as forming
the background to these sound results. In the “KENKO Five Code 2015-2017” three-year mid-term
management plan that started from this period, sales of ¥75,000mn and a consolidated recurring
profit margin of 5% are cited as targets for the plan’s final year, FY3/18. If the current pace continues,
the Company is on track to comfortably achieve these targets.
The Company’s shareholder returns policy aims for stable dividend growth, with a payout ratio of
20% as a benchmark. In FY3/16 the Company again plans to increase dividends by ¥2 per shareyear-on-year to ¥25 (representing a payout ratio of 20.1%). Also, as a further shareholder incentive,
the Company awards shareholders of record at the end of March each year with (¥1,000 or ¥2,500
worth of) its own products in line with the number of shares held.

伪伪Check Point• Indonesian joint venture company established, and Halal certification obtained• 1H FY3/16 results show increased sales and earnings, setting new record highs on a halfyearly basis• Expecting that FY3/16 recurring profit will for the first time in six periods set a record highWe encourage readers to review our complete legal statement on “Disclaimer” page.
1

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KENKO Mayonnaise
Co., Ltd.

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2915 Tokyo Stock ExchangeFirst Section㻞㻘㻜㻜㻜㻟㻜㻘㻜㻜㻜
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22-Jan.-16㻡㻝㻘㻤㻣㻤

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㻡㻜㻜㻜㻲㼅㻟㻛㻝㻝FISCO Ltd. Analyst
Yuzuru Sato㻝㻘㻡㻜㻜㻞㻜㻘㻜㻜㻜

㻜

Important disclosuresand disclaimers appear
at the end of this document.

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伪伪Company Overview
Production capacity expansion proceeding as the Shizuoka
Fujisan Factory commences operations(1) Scope of Business
KENKO Mayo is a manufacturer of foodstuffs, mainly engaged in the production and sale of salads
and delicatessen items, mayonnaise and dressings, as well as processed egg products and otherproducts for commercial use, undertaking operations such as the production and sale of daily grocerydelicatessen products, and retail store operations through subsidiaries.
Looking at the consolidated sales contribution by product in 1H FY3/16, salads and delicatessen
items were the highest with 44.8%, followed by processed egg products with 27.4% and mayonnaise
and dressings with 25.9%. Looking at trends in recent years, while all sales are growing, in terms of
the proportion of sales, processed egg products are rising, with 1H FY3/16 being the first time thatthe contribution by processed egg products has overtaken mayonnaise and dressings. We may cite
as the reason for this that, due to expansion in the home meal replacement market (HMR), demandis expanding for processed egg products for lunch boxes, bakery products, and sandwiches aimed
at CVS. Also, from a production perspective, the commencement of operations from FY3/15 at the
Shizuoka Fujisan Factory, and promotion of increased production capacity were significant.

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Company Overview

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KENKO Mayonnaise
Co., Ltd.

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2915 Tokyo Stock ExchangeFirst Section

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22-Jan.-16

㻜㻚㻜㻑Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Looking at the consolidated sales composition by business category (customer industry type), we
see that three industry segments represent more than 70% of the total, with the restaurant industry
being 26.1%, CVS 25.9% and mass-retailers 19.5%. Looking at the trends for the past few years we
see that contributions by CVS and mass-retailers are in an uptrend. Expansion in the HMR is thought
to be the cause, against a background where, amongst other things, there are changes in consumer
lifestyles and greater participation by women in society.

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Looking at market shares within these industries, in recent years mayonnaise and dressings
have performed stably at around 15%, maintaining the Company’s number two position in theindustry. Given that it is virtually specialized in commercial-use, while its familiarity is limited withgeneral consumers, in the commercial-use field the Company plays sparring partner to the leading
manufacturer, Kewpie, with a supply track record to most of the major restaurants and hotel chains.
Meanwhile, the Company, the pioneer of “long-life salads,” has established an industry-leading
market share of over 37% in long-life salads.

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Company Overview

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KENKO Mayonnaise
Co., Ltd.

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2915 Tokyo Stock ExchangeFirst Section㻡㻡㻚㻥㻑㻭㼖㼕㼚㼛㼙㼛㼠㼛㻻㼠㼔㼑㼞㼟

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.

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Yuzuru Sato
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The Company’s strength are: 1) its nationwide production system that supplies high-quality products
on a stable basis, and 2) its collective strength of integrated production, development and sales,
namely product development capabilities that meet customer needs as well as its meticulous sales
response capabilities.
High quality means not only good taste; safety and security are also important elements. Further,
for the Company, which is focused on commercial-use sales, the question of how it can offer added
value to customers holds an important key to expanding business growth. The Company has taken
steps to offer added value through its meticulous response to customers, involving the segmentationof industry fields by business format, with the sales and product development and menu development
teams acting in concert. The number of product items that the Company develops annually exceeds
1,800, meaning it develops five new items every day. As the graph below shows, since 2011, theCompany’s sales growth rates has continued to grow at a rate exceeding the restaurant and HMR
markets thanks to the fruits of these efforts.

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■■Company Overview

Broad Product Lineup

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Source: Company briefing materials㻳㼞㼛㼣㼠㼔㻌㼞㼍㼠㼑㻌㼛㼒㻌㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㻛㻴㻹㻾㻌㻹㼍㼞㼗㼑㼠㻌㼍㼚㼐㻌㻯㼛㼙㼜㼍㼚㼥㻌㼟㼍㼘㼑㼟㻌㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㻛㻴㻹㻾㻌㻔㼏㼍㼘㼑㼚㼐㼍㼞㻌㼥㼑㼍㼞㻕
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Currently, the Company’s nationwide production system comprises 7 factories operated by the parent
company and 9 factories operated by 7 consolidated subsidiaries. Subsidiary production bases areclosely linked to their operating areas because they are the production bases for delicatessenrelated products for daily delivery to supermarkets, CVS, and other outlets. Above all, just-in-time(JIT) response capability is essential for CVS that operate 24/7. Some of the factories therefore
operate 365 days-a-year, with flexible production systems that can quickly respond to changes inorder volumes.
Also, the Company’s subsidiary Salad Cafe Co., Ltd. operates specialty salad restaurants. As of
end-September 2015 there were 17 shops, mainly opened in department stores and supermarkets.

We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■■Company Overview

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

In terms of overseas operations, the Company established a joint venture (49% equity stake) in
Indonesia with a local food producer in 2012 that began production (annual capacity of about
4,000 tons) of mayonnaise, dressings, and sauces in Autumn 2013. This factory has obtained
Halal certification, and apart from home and commercial-use sales of these products locally, it isengaged in the sale of liquid eggs. Demand, in particular from Japanese-affiliated companies is
so high that it has to proceed with expansion of its production capacity. From February 2015 theCompany has commenced exports to Japan of its “Omayo” brand mayonnaise, which has received
Halal certification, while domestically it is in the process of expanding its sales channels on a numberof fronts, such as hotels and restaurants.
Because its overseas businesses operate as equity-method affiliates, their sales are not reflected in
the Company’s consolidated sales, but are recorded in non-operating income and expenses as equity
in net income (losses) of affiliates. They are included under Other Businesses in the consolidated
business segments.

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Affiliates (% Capital Contribution & Scope of Operations)
Consolidated subsidiaries
DIETCOOK SHIRAOI Co., Ltd.
Lilac FOODS Co., Ltd.
KANTOH DIETCOOK Co., Ltd.
KANTOH DIET EGG Co., Ltd.
KANSAI DIETCOOK Co., Ltd.
DIETCOOK SUPPLY Co., Ltd.
KYUSHU DIETCOOK Co., Ltd.
Hello Delica Co., Ltd.
Salad Cafe Co., Ltd.
Equity-method affiliates

Ownership (%)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

PT. Intan Kenkomayo Indonesia

49.0

Main business
Delicatessen-related production and sales
Delicatessen-related production and sales
Delicatessen-related production and sales
Delicatessen-related production and sales
Delicatessen-related production and sales
Delicatessen-related production and sales
Delicatessen-related production and sales
Delicatessen-related sales
Operation of shops specializing in salads

Mayonnaise, dressings and sauces production andsales* Shows group investment ratio including indirect investment from wholly-owned subsidiaries.

伪伪Results Trends
1H FY3/16 results show increased sales and earnings, setting
new record highs on a half-yearly basis(1) 1H FY3/16 Financial Highlights
Consolidated 1H FY3/16 results, which were announced on November 9, showed solid performancewith sales up 10.5% y-o-y at ¥33,244mn, operating profit up 31.0% y-o-y at ¥1,826mn, recurring
profit up 41.2% y-o-y at ¥1,793mn and net profit up 106.7% y-o-y at ¥1,522mn, establishing a record
high on a half-yearly basis.
Consolidated 1H FY3/16 Results

Sales
Gross profit
SG&A expenses
Operating profit
Recurring profit
Net profit

1H FY3/15
Actual% Sales
30,091
7,728
25.7%
6,334
21.0%
1,394
4.6%
1,270
4.2%
736
2.4%

Initial plan
31,900
1,790
1,730
1,020

Actual33,244
8,596
6,770
1,826
1,793
1,522

1H FY3/16% Sales
25.9%
20.4%
5.5%
5.4%
4.6%

(¥mn)
y-o-y
10.5%
11.2%
6.9%
31.0%
41.2%
106.7%vs Plan
4.2%
2.0%
3.7%
49.2%

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■■Results Trends

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

Looking at restaurant, CVS and supermarket industry trends, which form the Company’s major target
markets, there is a gradual recovery trend for the industry overall. Despite Izakaya (Japanese-Style
restaurant-bar)’s continuing to struggle, family restaurants, fast food and other outlets, due also to
the impact of inbound demand, performed well. Further, in respect of sales of daily items for CVS
also, on an existing store basis, sales are performing soundly up 2-4% year-on-year. This is due tothe proliferation of solitary dining as a result of lifestyle changes and greater participation by womenin society, against a backdrop of expanding demand for lunch- boxes, sandwiches, salads and otheritems. Given that the statistics only announce existing store data, we feel on a total store basis therise would be 5% or more. For the same reasons, this suggests that the pace of delicatessen items
sales at supermarkets also continue to exceed 6% year-on-year, and underlying expansion in the
HMR market continues.

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㻝㻜㻚㻜㻑

㻤㻚㻟㻑

㻯㼂㻿㻌㻔㼐㼍㼕㼘㼥㻌㼕㼠㼑㼙㻌㼟㼍㼘㼑㼟㻕㻤㻚㻥㻑㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㼟㻌㻔㼐㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻕㻤㻚㻜㻑

Important disclosuresand disclaimers appear
at the end of this document.

㻢㻚㻞㻑

㻡㻚㻜㻑

㻠㻚㻞㻑
㻟㻚㻞㻑

㻠㻚㻜㻑

FISCO Ltd. Analyst
Yuzuru Sato

㻣㻚㻝㻑
㻢㻚㻟㻑

㻡㻚㻠㻑

㻢㻚㻜㻑

㻞㻚㻜㻑

㻢㻚㻣㻑

㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠

㻝㻚㻢㻑

㻞㻚㻟㻑

㻠㻚㻠㻑

㻟㻚㻝㻑

㻞㻚㻞㻑
㻟㻚㻞㻑
㻝㻚㻥㻑

㻜㻚㻜㻑

㻝㻚㻢㻑

㻜㻚㻤㻑

㻙㻞㻚㻜㻑
㻙㻠㻚㻜㻑

㻙㻞㻚㻣㻑
㻭㼜㼞㻙㻝㻡

㻙㻞㻚㻟㻑
㻹㼍㼥

㻶㼡㼚

㻶㼡㼘

㻭㼡㼓

㻿㼑㼜

㻻㼏㼠

㻿㼛㼡㼞㼏㼑㻦㻌㼞㼑㼟㼠㼍㼡㼞㼍㼚㼠㼟㻌㻔㻶㼍㼜㼍㼚㻌㻲㼛㼛㼐㻌㻿㼑㼞㼢㼕㼏㼑㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚㻕㻘㻌㼟㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㼟㻌㻔㻶㼍㼜㼍㼚㻌㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚㻕㻘㻌㻯㼂㻿㻌㻔㻶㼍㼜㼍㼚㻌㻲㼞㼍㼚㼏㼔㼕㼟㼑㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚㻕㻌㻯㼂㻿㻌㼐㼍㼠㼍㻌㼟㼔㼛㼣㼟㻌㼕㼚㻌㼑㼤㼕㼟㼠㼕㼚㼓㻌㼟㼠㼛㼞㼑㻌㼎㼍㼟㼑

While the fact that the industry environment itself is also sound forms a backdrop to the Company’ssolid results, the Company’s sales growth rate exceeds that of the industry overall and we may
cite, as major reasons for this solid performance, new customer acquisition and the promotion of
expansion in the share of business it enjoys with existing customers as a result of engaging in new
product proposals that meet customer needs.
Looking at the Company’s sales by business category, apart from CVS, which at about 30% up
year-on-year, grew the most, all business category had higher revenues including restaurants,
mass-retailers, and bread makers. In the restaurant industry in particular, amidst a worsening in staff
shortages, the need for “wanting to provide delicious meals that are easy to prepare” is rising, withthe ability to make product proposals that match this need leading to increased sales. In the Izakaya
industry also, that continues to struggle, the Company is expanding its share of business, focusing
on salads, and with increased sales year-on-year is arguably performing well.
Looking at factors behind fluctuations in recurring profit, ¥380mn from increased sales, and ¥441mn
from efficiency enhancements, underpinned by higher utilization rates at the Shizuoka Fujisan
Factory, were factors tending to increase earnings, while on the other hand, ¥202mn in raw material
cost fluctuations, mainly due to the impact of soaring egg prices, and ¥96mn in higher fixed costs
due to reductions in entrenched overheads and other costs, including IT investment, were factors
tending to lower earnings.
Moreover, as a result of the Company selling all of its shares in two affiliates in China in 1Q, andrecording ¥190mn of gains on sales in extraordinary profits, the quarterly net profit grow rate rose.

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Results Trends㻲㼍㼏㼠㼛㼞㼟㻌㼒㼛㼞㻌㻲㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟㻌㼕㼚㻌㻾㼑㼏㼡㼞㼞㼕㼚㼓㻌㻼㼞㼛㼒㼕㼠
(¥mn)
㻞㻘㻡㻜㻜
▲㻞㻜㻞
㻞㻘㻜㻜㻜

KENKO Mayonnaise
Co., Ltd.

㻝㻘㻡㻜㻜

2915 Tokyo Stock ExchangeFirst Section

㻟㻤㻜

㻝㻘㻜㻜㻜
㻡㻜㻜

▲㻥㻢

㻠㻠㻝

㻝㻘㻞㻣㻜

㻵㼚㼏㼞㼑㼍㼟㼑㼐㼟㼍㼘㼑㼟㻼㼞㼛㼐㼡㼏㼠㼕㼢㼕㼠㼥㼑㼚㼔㼍㼚㼏㼑㼙㼑㼚㼠㻾㼍㼣㻌㼙㼍㼠㼑㼞㼕㼍㼘㼏㼛㼟㼠㻌㻌
㼒㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟㻲㼕㼤㼑㼐㻌㼏㼛㼟㼠㻌㻌㻌㼕㼚㼏㼞㼑㼍㼟㼑㼟㻝㻘㻣㻥㻟

22-Jan.-16㻜㻝㻴㻌㻲㼅㻟㻛㻝㻡

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻝㻴㻌㻲㼅㻟㻛㻝㻢

Delicatessen-related business increased significantly, with thepromotion of new take-ups of basic products by mass-retailers(2) Trends by Business Segment○ Seasoning/Processed Food Business
Sales in the seasoning and processed food business rose 9.7% y-o-y to ¥27,419mn, with segment
profit rising 22.7% y-o-y to ¥1,527mn.
Looking at sales trends by item, salads and delicatessen items rose 10.7% y-o-y to ¥9,211mn (sales
volumes rose 7.9%), mayonnaise and dressings rose 3.1% y-o-y to ¥8,614mn (sales volumes rose6.4%), processed egg products rose 15.3% y-o-y to ¥8,982mn (sales volumes rose 13.1%), with all
performing soundly. Looking at pricing per unit volume, only mayonnaise and dressings declined dueto the impact of increased weighting in bulk size commercial-use mayonnaise sales.
In processed egg products, the flavor and quality of the Souzaitei® series, produced at the Shizuoka
Fujisan Factory is rated highly, and a major factor for sound sales. By industry, apart from items
such as egg salads for sandwiches and delicatessen bakery products, Atsuyaki (thick omelet) for
lunchboxes, and Kinshi-tamago for noodles performing well, with Atsuyaki and Dashimaki (Japaneserolled omelet with broth) tamago for conveyor-belt sushi chains driving new customer acquisition,
there was significant growth in revenues. At the Shizuoka Fujisan Factory, orders continue to besound and with, amongst other things, some production lines approaching full 24 hour capacity, there
is momentum to achieve full operational capacity a year ahead of the initial plan, which sought toachieve this in three years from commencing operations in March 2015.
In salads and delicatessen items, small packaged long-life salads grew significantly by approximately
five times year-on-year. Given that the use by date is long at 45-60 days and with one meal per
package they are easy to purchase, apart from private label sales expanding significantly at CVS,
sales under the Company’s proprietary brand are also performing well. Further, items utilizing
ingredients in basic products such as potato salad and tuna salad, have had new take-up for mainly
restaurants, CVS and bread makers, which is also a factor behind increased revenues.
In mayonnaise and dressings, apart from promoting new take-up of mayonnaise for bread makers,
sales of mayonnaise for commercial-use in the 1kg format increased. Further, in sauces, withamongst other things the addition of two new products to the “World Sauces” series, there wassteady 13% year-on-year expansion, mainly in the restaurant industry.

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■■Results Trends㻿㼑㼍㼟㼛㼚㼕㼚㼓㻌㻒㻌㼜㼞㼛㼏㼑㼟㼟㼑㼐㻌㻲㼛㼛㼐㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟㻿㼍㼘㼍㼐㻌㻒㻌㼐㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻌㻒㻌㼐㼞㼑㼟㼟㼕㼚㼓㼟㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻼㼞㼛㼏㼑㼟㼟㼑㼐㻌㼑㼓㼓㻌㼜㼞㼛㼐㼡㼏㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻻㼠㼔㼑㼞㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕(¥mn)
㻟㻜㻘㻜㻜㻜

(¥mn)
㻝㻘㻤㻜㻜
㻢㻝㻞

㻞㻡㻘㻜㻜㻜

KENKO Mayonnaise
Co., Ltd.

㻞㻜㻘㻜㻜㻜

2915 Tokyo Stock ExchangeFirst Section

㻠㻤㻡

㻡㻞㻣
㻝㻘㻟㻢㻜

㻝㻘㻡㻞㻣

㻤㻘㻥㻤㻞

㻝㻘㻞㻠㻠

㻝㻘㻜㻜㻜

㻝㻡㻘㻜㻜㻜

㻤㻘㻢㻝㻠

㻤㻘㻟㻡㻠

㻤㻘㻣㻡㻜
㻝㻜㻘㻜㻜㻜

22-Jan.-16

㻡㻘㻜㻜㻜

FISCO Ltd. Analyst
Yuzuru Sato

㻤㻜㻜
㻢㻜㻜
㻠㻜㻜

㻤㻘㻜㻞㻞

㻤㻘㻟㻝㻣

㻥㻘㻞㻝㻝

㻝㻴㻌㻲㼅㻟㻛㻝㻠㻝㻴㻌㻲㼅㻟㻛㻝㻡㻝㻴㻌㻲㼅㻟㻛㻝㻢㻜

Important disclosuresand disclaimers appear
at the end of this document.

㻝㻘㻠㻜㻜
㻝㻘㻞㻜㻜

㻣㻘㻣㻤㻣

㻢㻘㻥㻡㻞

㻝㻘㻢㻜㻜

㻞㻜㻜
㻜





○ Delicatessen-Related Business
Delicatessen-related business sales rose 14.8% y-o-y to ¥5,213mn, with segment profits up 125.6%
y-o-y to ¥337mn. Apart from promotion of new take-up for basic products for mass-retailers, such as
potato salad, macaroni salad and spaghetti salad, as a result of cut vegetables, which are limited to
the Hokkaido region, also performing well, there was double-digit growth in sales. Considering thatdelicatessen sales in the supermarket industry grew more than 6%, this suggests that the Company’smarket share is expanding steadily. It is perceived that having optimal potatoes for its potato salad,grown in cooperation with, and supplied by contracted farmers, allows it to differentiate itself in termsof flavor and quality, leading to expansion in market share. From a profit perspective, there had beena decline due to vegetable prices soaring year-on-year, however, in this quarter, as a result of thepromotion of productivity enhancement at each location and the impact of higher revenues, profits
are recovering.

㻰㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻙㻾㼑㼘㼍㼠㼑㼐㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟(¥mn)

㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕(¥mn)

㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕

㻣㻘㻜㻜㻜

㻟㻟㻣

㻟㻟㻝

㻟㻡㻜

㻢㻘㻜㻜㻜

㻟㻜㻜

㻡㻘㻜㻜㻜

㻞㻡㻜

㻠㻘㻜㻜㻜

㻞㻜㻜
㻝㻠㻥

㻟㻘㻜㻜㻜
㻞㻘㻜㻜㻜

㻠㻘㻡㻠㻜

㻠㻘㻝㻡㻠

㻡㻘㻞㻝㻟

㻝㻡㻜
㻝㻜㻜

㻝㻘㻜㻜㻜

㻡㻜

㻜

㻜
㻝㻴㻌㻲㼅㻟㻛㻝㻠㻝㻴㻌㻲㼅㻟㻛㻝㻡㻝㻴㻌㻲㼅㻟㻛㻝㻢

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

■■Results Trends○ Other Businesses
Other business, in addition to revenue from the Company’s specialty salad shops, Salad Café,
operated by its subsidiary, Salad Café, Inc., includes in profits equity in net income (losses) ofaffiliates from overseas operations. Sales rose 8.3% y-o-y to ¥611mn, with a segment loss of ¥66mn(compared to a segment loss of ¥134mn for the same period a year earlier).

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

Although at 17 Salad Café store numbers were the same as those in this period a year earlier, sales
performed soundly with heightened health consciousness. From a profit perspective, it maintains
a modest profit. On the other hand, in respect of overseas business, as a result of the disposalof Chinese affiliates in 1Q, equity in net losses in affiliates declined from ¥138mn a year earlier
to ¥68mn. In respect of Indonesian operations, local sales of mayonnaise and liquid eggs are
expanding, and while it is now profitable on a standalone monthly basis, it will not be in the black on
a cumulative 1H basis.

22-Jan.-16㻻㼠㼔㼑㼞㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟
(¥mn)
㻤㻜㻜

Important disclosuresand disclaimers appear
at the end of this document.

㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻻㼢㼑㼞㼟㼑㼍㼟㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕㻣㻟㻰㼛㼙㼑㼟㼠㼕㼏㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕
㻞

㻞㻜

㻣㻜㻜

㻜

㻢㻜㻜

㻙㻞㻜

㻡㻜㻜

FISCO Ltd. Analyst
Yuzuru Sato

(¥mn)

㻙㻠㻜
㻙㻢㻤

㻠㻜㻜

㻟㻜㻜

㻡㻤㻣

㻡㻢㻠

㻢㻝㻝

㻞㻜㻜

㻙㻢㻜

㻙㻤㻜
㻙㻝㻜㻜

㻙㻝㻞㻠
㻝㻜㻜

㻙㻝㻞㻜

㻙㻝㻟㻤

㻜

㻙㻝㻠㻜
㻝㻴㻌㻲㼅㻟㻛㻝㻠㻝㻴㻌㻲㼅㻟㻛㻝㻡㻝㻴㻌㻲㼅㻟㻛㻝㻢

Improvement in the Company’s financial status continues,
with the interest-bearing debt ratio in a downtrend(3) Financial Condition
Looking at the financial condition at the end of September 2015, total assets rose ¥837mn since theend of the previous fiscal period to ¥40,286mn. Within current assets, cash and deposits grew by¥1,636mn and notes and accounts receivable by ¥1,040mn, while other current assets declined by¥931mn. Further, within fixed assets, apart from tangible fixed assets declining ¥298mn, investments
and other assets declined ¥578mn due to the disposal of shares in affiliates.
Total liabilities declined ¥274mn from the end of the previous period to ¥21,206mn. Notes andaccounts payables rose ¥1,197mn, however, a steady reduction in interest bearing liabilities
proceeded, as they declined by ¥1,026mn. Further, net assets rose ¥1,112mn from the end of theprevious period to ¥19,080mn, as a result of increases in retained earnings.
Looking at management indicators, the shareholders’ equity ratio rose 1.9% from the end of theprevious period to 47.4%, steadily approaching the mid-term management plan target of 50%. Theinterest-bearing debt ratio is also in a downtrend, so arguably the financial condition has further
improved.

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■■Results Trends

Consolidated Balance Sheet

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

Current assets(cash and deposits)
Fixed assets
Total assets
Current liabilities
Fixed liabilities(interest-bearing debt)
Total Liabilities
Total Net Assets(Safety)
Current ratio
Equity ratio
Interest-bearing debt ratio

FY3/13
18,403
5,919
15,59533,99814,2494,948
5,526
19,197
14,801

FY3/1418,095
3,884
21,59039,686
14,8609,015
9,943
23,876
15,810FY3/1518,704
4,778
20,74439,44814,422
7,058
8,584
21,481
17,967

1H FY3/16
20,4496,414
19,83640,28615,1386,067
7,558
21,206
19,080129.2%
43.5%
37.3%

121.8%
39.8%
62.9%

129.7%
45.5%
47.8%

135.1%
47.4%
39.6%

(¥mn)
Change
1,744
1,636
-907
837
716
-991
-1,026-274
1,112

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato伪伪Future Outlook
Expecting that FY3/16 recurring profit will for the first time insix periods set a record high(1) Results Outlook for FY3/16
FY3/16 full-year targets remain unchanged from the plan at the beginning of the period, with sales up
4.8% y-o-y to ¥63,200mn, operating profit up 1.6% y-o-y to ¥3,050mn, recurring profit up 8.0% y-o-yto ¥3,000mn, and net profit up 7.8% y-o-y to ¥1,770mn. The factors behind fluctuations in recurring
profit include ¥572mn from the impact of greater revenues, ¥563mn from enhanced production
efficiency, and ¥30mn in reduced logistics costs as factors boosting earnings, and ¥537mn inincreased raw material costs, and ¥404mn in increased fixed costs (staff costs, IT investment etc.)
as factors reducing earnings. However, apart from the rate of progress through to 1H for sales andrecurring profit, at 52.6% and 59.8%, exceeding the plan from the beginning of the period, given nochange in sound underlying sales from October onwards, we feel that the likelihood of an upwardrevision sooner or later is high, with recurring profit expected to set a record high for the first time insix periods (after recording ¥2,853mn in FY3/10).
Results Outlook for FY3/16
FY3/15

Actualresults
60,327
3,001

Sales
Operating profit(equity in net income (losses)of affiliates)
Recurring profit
Net profit(¥mn)

FY3/16% Sales
5.0%

vs Plan% Sales

63,200
3,050

y-o-y

4.8%

vs 1H plan

4.8%
1.6%

52.6%
59.9%

-246

-0.4%

-

-

-

-

2,776
1,642

4.6%
2.7%

3,000
1,770

4.7%
2.8%

8.0%
7.8%

59.8%
86.0%

We encourage readers to review our complete legal statement on “Disclaimer” page.
11

■■Future Outlook㻲㼍㼏㼠㼛㼞㼟㻌㼒㼛㼞㻌㻲㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟㻌㼕㼚㻌㻾㼑㼏㼡㼞㼞㼕㼚㼓㻌㻼㼞㼛㼒㼕㼠
(¥mn)
㻟㻜

㻠㻘㻜㻜㻜
㻡㻢㻟

㻟㻘㻡㻜㻜

KENKO Mayonnaise
Co., Ltd.

㻞㻘㻡㻜㻜㻵㼚㼏㼞㼑㼍㼟㼑㼐
㼟㼍㼘㼑㼟

㻞㻘㻜㻜㻜
㻝㻘㻡㻜㻜

▲㻠㻜㻠
㻸㼛㼣㼑㼞㻌㼘㼛㼓㼕㼟㼠㼕㼏㼟㻌
㼏㼛㼟㼠㼟

㻡㻣㻞

㻟㻘㻜㻜㻜

2915 Tokyo Stock ExchangeFirst Section▲㻡㻟㻣㻼㼞㼛㼐㼡㼏㼠㼕㼢㼕㼠㼥㼑㼚㼔㼍㼚㼏㼑㼙㼑㼚㼠㻾㼍㼣㻌㼙㼍㼠㼑㼞㼕㼍㼘㻌 㻲㼕㼤㼑㼐㻌㼏㼛㼟㼠㻌㼕㼚㼏㼞㼑㼍㼟㼑㼟㼏㼛㼟㼠㻌㼒㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟

㻞㻘㻣㻣㻢

㻟㻘㻜㻜㻜

㻝㻘㻜㻜㻜

22-Jan.-16㻡㻜㻜㻜㻲㼅㻟㻛㻝㻡

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻲㼅㻟㻛㻝㻢



Within this framework, how the Company will proceed with strengthening production capacity forprocessed egg products, salads, delicatessen and other items for which sales are currently sound,is a key point of interest. The Company is currently at the stage of considering strengthening
capacity in respect of the Shizuoka Fujisan Factory and other domestic production bases, and weunderstand that within this fiscal period the plan for strengthening capacity from next period onwards
will crystallize to some extent. Further, at some of the other production bases, certain production
equipment is becoming obsolete, and the Company is considering introducing new lines withhigh productivity as well as refurbishing the buildings. For this reason, the possibility of a one-off
expensing against this obsolete equipment by the Company in FY3/16 is also conceivable. Eitherway, underlying conditions continue to be sound, and we may expect a continuation in core results
expansion as the Company promotes new customer acquisition and also expansion in the share ofbusiness with existing customers going forward.
Plan to Strengthen Production Bases Towards Fiscal 2017
Mayonnaise & dressings business
Enhancing flavor & quality, extending use by dates,changing packaging, and flexible format responses(multi-refill)

Salad & delicatessen businessLong-life salad line small package response
Multi-product production responses

Potato business
Potato salad production line response to caterfor all packaging sizes

Egg business
Strengthening baked egg production lines
at the Shizuoka Fujisan FactoryStrengthening freezer facilities and scrambled egg lines

Source: Company results briefing materials

The outlook for full-year sales by reported segment calls for 4.2% y-o-y growth in seasonings andprocessed foods, 7.7% in delicatessen-related businesses, and 4.3% in other businesses, however,from the rate of progress as of 1H it is likely that all segments will exceed plan. “Engaging in thestrengthening of initiatives by industry and business” and “Augmenting the product line-up” may becited as the two key initiatives for 2H.
Sales by Segment

Seasonings & Processed foods
Salads & Delicatessen
Mayonnaise & Dressings
Processed Egg products
OthersSide-Dish-Related Business
Other Business
Total

FY3/1345,89416,081
16,82011,986
1,007
7,526
1,113
54,533

FY3/1447,541
15,866
17,093
13,567
1,015
8,586
1,173
57,301

FY3/1549,733
16,758
16,771
15,115
1,089
9,419
1,175
60,327

FY3/16 E
51,82917,061
16,783
16,878
1,107
10,145
1,225
63,200(¥mn)
Growth rate
4.2%
1.8%
0.1%
11.7%
1.7%
7.7%
4.3%
4.8%

We encourage readers to review our complete legal statement on “Disclaimer” page.
12

■■Future Outlook

In engaging in the strengthening of initiatives by industry and business type, the Company will
promote expansion of sales channels and product formats that meet market needs. For processed
egg products, the policy will be to acquire customers not only for CVS, but also for the restaurant
industry. Further, for small, packaged long-life salads, that continue to perform well, the Company isplanning to introduce new products for mass-retailers and CVS, and expects a further rise in sales
from 2H.

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru SatoIn respect of augmenting the product line-up, apart from promoting the strengthening of productseries, such as the World Salad, World Sauce and WASAI BANSAI ® series, there are plans for a“World Traveler Dressings ™ series. Sales of the first product entry, “Sylter style ™ Dressing" havecommenced. This product is a dressing made to envisage the German resort area of Sylt island,
and reproduces a dressing which is popular in Germany. Additionally, the Company is promoting
expansion of functional foods. From 2H apart from commencing sales of a sausage-shaped potato
salad that can be readily eaten with one hand, “Vegeso ™ Smoked Potato”, it is also promoting thedevelopment of products in response to demand for softer foods.

Mid-term management plan targets of ¥75bn in sales and ROE
of 8% or above maintained(2) Three-Year Mid-Term Management Plan
The Company has started a new three-year Mid-term Management Plan, “KENKO Five Code 20152017” from fiscal 2015. In terms of specific management indicators it aims for consolidated sales of¥75bn, a consolidated RP margin of 5%, a shareholders’ equity ratio of 50% and to maintain an ROE
of 8% or above in FY3/18.
KENKO Five Code 2015-2017
FY3/1560,327
4.6%
45.5%
9.6%

Consolidated sales
Consolidated RP margin
Shareholders’ equity ratio
ROE

FY3/1875,0005%50%
8% or above

The market environment, amidst a shift in the style of meals at home in the direction of individuality
and simplicity, due to the rise of single member households, evolution in the nuclear family andgreater participation by women in society, anticipates going forward also expanded growth in the
HMR market, which is one of the Company’s major markets. Further, with recent rises in healthconsciousness and the arrival of Japanese cuisine booms domestically and overseas, and also
increases in the number of foreign tourists as we head towards the hosting of 2020 Tokyo Olympics
and Paralympics, it is expected that for the time being the Company’s operating environment willremain favorable, and arguably its operating target figures are at comfortably achievable levels. Under
the mid-term management plan, initially an increased sales contribution from MA was expected,
however, judging by the current momentum, even in the absence of M&A, the Company is on track
to be able to achieve ¥75bn in net sales. That said, the Company continues to consider M&A, withtarget companies being those which may be expected to offer synergies with existing operations
domestically. Further, within business strategies aimed at achieving the mid-term management plan,
the Company is tackling the following three major initiatives.
○ Establishing our position as the Leading Company in Salads
In order to establish its position as the Leading Company in Salads the Company’s policy is to expand
the scope of sales in its various existing businesses. For its FY3/18 sales target, the Company plansfor 19% growth in its mayonnaise and dressings business, 14% growth in its salads and delicatessen
business, 19% growth in its potato business and 23% growth in its egg business over FY3/15 actual
results.

We encourage readers to review our complete legal statement on “Disclaimer” page.
13

■■Future Outlook

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

22-Jan.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru SatoIn its egg business, which is expected to have the highest rate of growth, as noted above, giventhat performance is sound to the extent that production lines are already fully utilized, we feel the
Company will progress expansion of the Shizuoka Fujisan Factory. In respect of its mayonnaise anddressings business, apart from promoting the development of product series, such as the World
Sauces series, the Company will expand sales by developing functional products, expanding export
products and other initiatives. In its salads and delicatessen business the Company will promote
the strengthening of the World Salad series and the WASAI BANSAI® series, and promote productdevelopment including also softer foods for the elderly. In its potato business apart from strengthening
products that meet market needs (such as potatoes that are pre-prepared for commercial usage),the strategy is to expand sales by implementing menu proposals where potato salad forms the main
dish, while spurring an invigoration of the potato salad market.
○ Further evolving of “Salad Cuisine”
Toward further evolution of Salad Cuisine the Company is strengthening KENKO Mayonnaise
Group structures. The Group will continue to broadcast Salad Cuisine utilizing the media at KENKO
Mayonnaise parent. In addition, at subsidiaries that manufacture and sell daily items, the Groupwill expand its sales market share to local mass-retailers, strengthening product development andits menu proposal capabilities. Furthermore, the Group will increase the number of its Salad Cafe
shops, and will undertake expansion of salad cuisine tutorials.
○ Strengthening the management platform to proactively promote expansion into global markets
As part of its global expansion the Company has newly established a research office in Vancouver,
Canada in July 2015. Given that Vancouver is a region with racial diversity and strong healthconsciousness, and where there is also an abundance of relevant foodstuffs, the Company entered
this market as the optimal place to gather information on food trends. In the future, the Company
aims to provide new food culture information and undertake product development as a market player,
based on information collected at this office location.
Further, the Company will also promote strengthening of Halal certified products. Along with themayonnaise type “Omayo” from the Indonesian factory, the Company commenced imports of frozen
fish patties and frozen fried fish produced by its joint venture partner from November 2015.
In respect of exports, while ¥350mn worth of exports are expected in FY3/16, the Company targets¥1,000mn in FY3/18. Currently, as of September 2015 the Company is selling mayonnaise anddressings in 33 countries and regions, and plans to expand exports of processed egg products andlong-life salads in the future. Overseas, as there is also a Japanese cuisine boom, there is also
increased activity among Japanese-affiliated restaurants in penetrating these markets, so arguably
the Company’s room for growth is substantial.

伪伪Shareholders Return Policy
Expecting further dividend increases if the payout ratio falls
below 20%
The Company’s shareholder returns are cash dividend payments and special gifts exclusive toshareholders. On the basis of a dividend payout ratio of 20% on a consolidated basis, and taking into
consideration the continuity of dividends, its policy is to stably raise dividends in line with increased
earnings. In FY3/16 the Company plans to pay a dividend of ¥25, a ¥2 increase year-on-year(representing a dividend payout ratio of 20.1%). However, if the dividend payout ratio falls below
20% as a result of net profit exceeding forecasts, we may expect a further increase in dividends.

We encourage readers to review our complete legal statement on “Disclaimer” page.
14

■■Shareholders Return Policy

At the same time, as a special gift to shareholders, KENKO Mayo presents the Company’s products
as gifts to shareholders of register as of March 31. A present with a value of ¥1,000 is given to
shareholders with 100 to 999 shares, while a present with a value of ¥2,500 is given to shareholders
of 1,000 or more shares. The investment return per unit of shares including the shareholder special
gift was at about 1.5% mark based on conversion at a share price of ¥2,267 as of December 22.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼑㼞㻌㻿㼔㼍㼞㼑㻌㼍㼚㼐㻌㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section(¥)

㻰㼕㼢㼕㼐㼑㼚㼐㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕

㻟㻜㻚㻜㻜

㻞㻣㻚㻢㻌

（㻑）

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㻝㻥㻚㻥㻌

㻝㻥㻚㻟㻌

㻞㻜㻚㻝㻌

㻞㻜㻚㻜㻜

22-Jan.-16

㻞㻜㻚㻜

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Important disclosuresand disclaimers appear
at the end of this document.

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㻜㻚㻜
㻲㼅㻟㻛㻝㻝FISCO Ltd. Analyst
Yuzuru Sato㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢㻱

Consolidated Income Statement

Sales(y-o-y)Cost of goods sold(% Sales)
SG&A expenses(% Sales)Operating profit(y-o-y)(% Sales)Non-operating profit
Non-operating expenses(Equity in net income (losses) ofaffiliates)
Recurring profit(y-o-y)(% Sales)Extraordinary profit
Extraordinary losses
Income before income taxes(y-o-y)(% Sales)Corporate income tax(effective tax rate)
Net profit(y-o-y)(% Sales)[Key indicators]
Number of shares outstanding(thousands)
Net profit per share (¥)
Dividend per share (¥)
Net assets per share (¥)
Dividend payout ratio (%)

FY3/12
51,8782.5
38,253
73.7
11,480
22.1
2,144
-22.7
4.1
80
151

FY3/1354,533
5.1
39,62872.7
12,126
22.2
2,778
29.6
5.1
100
303

FY3/1457,301
5.1
42,53074.2
12,342
21.5
2,428
-12.6
4.2
148
318

FY3/1560,327
5.3
44,60873.9
12,717
21.1
3,001
23.6
5.0
154
378

(¥mn; %)
FY3/16 E
63,200
4.8

3,050
1.6
4.8

-20

-216

-229

-246

2,073
-22.7
4.0
83
1,990
-18.5
3.8
960
48.2
1,029
-22.0
2.0

2,574
24.1
4.7
2
188
2,388
20.0
4.4
979
41.0
1,409
36.8
2.6

2,258
-12.3
3.9
1
45
2,215
-7.3
3.9
949
42.8
1,265
-10.2
2.2

2,776
22.9
4.6
97
80
2,793
26.1
4.6
1,151
41.2
1,642
29.8
2.7

3,000
8.0
4.7

14,211

14,211

14,211

14,211

14,211

72.46
20.00
949.44
27.6

99.16
21.00
1041.54
21.2

89.08
21.00
1,112.55
23.6

115.5723.00
1,264.38
19.9

124.55
25.00
20.1

1,230
41.0
1,770
7.8
2.8

We encourage readers to review our complete legal statement on “Disclaimer” page.
15

Disclaimer
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