Tokyo Stock Exchange, Prime Market, Securities code: 2004

Financial Results Briefing for FY2023(Ended March 31, 2023)

Showa Sangyo Co., Ltd.
President and CEO
Hideyuki Tsukagoshi
May 19, 2023

Agenda1

Overview of financial results for FY2023

2

Earnings forecast for FY2024

3

Medium-Term Management Plan 2023-2025

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

2

Overview of Consolidated Financial Results for FY2023
FY2022

Change(Year-onYear)FY2023(0.1 billions of yen)

Net sales

Percentage
of change(Year-onYear)

2,876

3,350

474

16.5%

Operating profit

55

41

▲13

▲24.8%

Ordinary profit

65

65

▲0.5

▲0.8%

Profit

40

77

37

94.1%

Net sales by segment(0.1 billions of yen)
3,350
50
2,876
2,384*
594
48
528
48
632
421
513
336
1199
1004
850
727

781

873

2021.32022.32023.3Operating profit by segment75
10Starches andsweeteners

16

55
4
5
10

41
3
10

35

38

31

Vegetable oils andhousehold foods
Flour milling(+) Implementation of price revision in all segments due tocontinuous historically high market price of grain raw material,
and rising import costs and energy costs from the yen’s
increasing depreciation against the U.S. dollar(-) Decrease in sales volume due to giving priority to sales at fair
prices■ Operating profit(-)

Decrease in profit from not being able to fully offset thedecreased portion of sales volume and the increased portionof selling, general and administrative expenses with pricerevision; yet being able to fully offset manufacturing costs
Significant decrease in profit for the starches and sweeteners
business from not being able to offset rapid increase in energy
costs in particular■ Profit

17-102021.3■ Net sales

(-)

Other
Animal feed

Key points of FY2023

2022.3* An approximation after applying the accounting standard for revenue recognition

2023.3(+) Gain on sale of non-current assets, approx. 5.2 billion yen,recorded to extraordinary income
Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

3

Factors for changes in operating profit for FY2023
By factor

By segment(0.1 billions of yen)(0.1 billions of yen)
Major breakdown of costs(Reference)498

Raw materials▲350

Exchange rate

▲90

Energy cost

▲40

55

2
0
▲15

55

▲7

▲7

▲1

41

Selling,
general andadministrative
expenses

Other2023.3▲496
2022.3

Sales volume

Sales unit
price

Costs

2022.3

Flour milling

Vegetable oils Starches andand household sweeteners
foods

▲1

Animal feed

412023.3Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

4

By Segment: Flour Milling Business
Key points
Main Business■ Performance(1) Increase in net sales due to implementation of revision in wheat flour price in line with therevision of wheat price(2) Increase in sales volume of commercial wheat flour through securing of new customers
via enhancement of proposal-based sales by target business type

Wheat flour, premixes, bread,bran

2022.3

Percentage ofchange(Year-on-Year)

2023.3(0.1 billions of yen)
Net sales

781

873

11.8%

Operating profit

35

38

8.0%

(0.1 billions of yen)

40

20

Operating profit
35■ Initiatives(1) Securing of multiple new customers through proposals utilizing market analysis
capabilities(2) Concentration of production and improvement in processes through operation system
integrated among Group’s five companies and seven plants, improvement in profitability
mainly through cost reduction by reviewing of logistic system and streamlining of brands(3) Continuous implementation of structural reform of earnings in baked bread business
Factors for changes in operating profit(0.1 billions of yen)

105

38

17
38

35
0

▲100

▲1

Costs

Selling, general andadministrative
expenses▲102021.32022.32023.32022.3

Sales volume

Sales unit priceOther2023.3Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

5

By Segment: Vegetable Oils and Household Foods Business
Key points
Main Business■ Performance(1) Increase in net sales due to implementation of price revision with rising raw material
costs and energy costs(2) Increase in sales volume of commercial food materials for food services (premixes andpasta); yet decrease in sales volume of commercial vegetable oils and householdproducts due to impact of price revision

Edible oil, soybean protein,premixes, pasta, household
foods, frozen foods

2022.3

Percentage ofchange(Year-on-Year)

2023.3(0.1 billions of yen)
Net sales
Operating profit(0.1 billions of yen)

1,004

1,199

19.4%

10

10

4.4%

Operating profit■ Initiatives(1) Strengthening of efforts to improve profitability through implementation of price revision
seven times since 2021
(2) Strengthening of providing small-package products through operation of Funabashi
Premix No. 2 Plant(3) Cost reduction through synergy with Boso Oil and Fat Group (cross selling and joint
procurement of products and sales channels, etc.)(4) Strengthening of adaptability to needs for plant-based foods
Factors for changes in operating profit

40(0.1 billions of yen)

228

31

20

10

10

10

0

2021.32022.32023.32022.3▲5
Sales volume

Sales unit price

▲221
Costs

0
Selling, general andadministrative
expenses

▲1
Other

10
2023.3Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

6

By Segment: Starches and Sweeteners Business
Key points

Main Business
Saccharified products,
cornstarch, processed starch

2022.32023.3(0.1 billions of yen)
Net sales

Percentage ofchange(Year-on-Year)

513

632

23.2%

Operating profit

5

▲10

-

(0.1 billions of yen)

Operating profit

20■ Performance(1) Increase in net sales due to implementation of price revision with rising grain raw material price andmanufacturing costs(2) Decrease in profit from not being able to fully offset the increased portion of costs with price revision,
besides the rising energy costs(3) Increase in sales volume of saccharified products for beverages due to easing of behavioral restrictions andimpact of heat wave; yet decrease in sales volume of cornstarch and processed starch due to decrease indemand for products for industrial use■ Initiatives(1) Promotion of project demonstrating synergy with San-ei Sucrochemical (cost reduction of raw material
procurement, integration of sales and R&D)
(2) Securing of profit through increased sales of high-value-added products such as Kona Ame (powdered cornsyrup), the Company’s original product lineup(3) Improvement in productivity under Group’s three-plant system (Showa Sangyo, San-ei Sucrochemical,
Shikishima Starch MFG)

Factors for changes in operating profit

115

16

10

5

▲10

2022.32023.3(0.1 billions of yen)

▲132

0

-10
-20

2021.3502022.3

Sales volume0
Sales unit price

0

▲10

Other
Costs

Selling, general andadministrative
expenses

2023.3Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

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By Segment: Animal Feed Business
Key points

Main Business
Mixed animal feed, eggs andprocessed egg products

2022.3

Percentage ofchange(Year-on-Year)

2023.3(0.1 billions of yen)
Net sales

528

594

12.5%

Operating profit

43▲21.1％(0.1 billions of yen)

Operating profit■ Performance(1) Increase in net sales due to implementation of price revision with rising grain raw
material price and manufacturing costs(2) Decrease in profit from increase in burden of compound feed price stabilization fund(3) Decrease in sales volume of mixed animal feed partly due to impact of bird flu(4) Increase in sales volume of eggs through cooperation with Showa Keiran■ Initiatives(1) Strengthening of adaptability to needs for heated animal feed (Kyushu Showa
Sangyo)(2) Expansion of sales of high-value-added products, namely synthetic milk andoligosaccharide mixed animal feed

Factors for changes in operating profit

15

10(0.1 billions of yen)

62

10

4

5

3

0
2021.32022.32023.342022.3▲5▲2▲56
Sales volume

Sales unit price

Costs

Selling, general andadministrative
expenses

1

3

Other

2023.3Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

8

Overview of Consolidated Balance Sheet
Consolidated Balance Sheet(0.1 billions of yen)

FY2022Current assets

FY2023

Change

1,092

1,234

142

Cash and deposits

91

62

▲ 29

Trade receivables

495

553

58

Inventories

467

587

120

Other

38

32

▲6

1,220

1,242

22

895

874

▲ 20

325

367

42

2,313

2,477

164

Non-current assets/DeferredassetsProperty, plant andequipment/Intangible assets
Investments and other assets
Total assets

FY2022
Liabilities

FY2023

Change in inventories(0.1 billions of yen)

467
274
2019

277
2020

359
2021

Change in interest-bearing debt

Change

1,222

1,314

91

Trade payables

335

324

▲ 11

Interest-bearing debt

518

603

85

Provision

18

18

0

Other

350

367

17

Net assets

1,090

1,163

72

Shareholders’ equity

978

1,037

59

Comprehensive income and
other

78

92

13

Non-controlling interests

33

33

0

47.4

Total liabilities and net assets

2,313

2,477

164

2019

587

2022

2023

(0.1 billions of yen)

441

518

603

2021

2022

2023

49.2

46.7

45.7

45.6

2020

2021

2022

2023

303

293

2019

2020

Change in equity-to-asset ratio

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

9

Cash Flows(0.1 billions of yen)
FY2022

FY2023

ChangeProfit before income taxes

58

109

Depreciation <Non-cash item>

100

99

50
▲0

2

4

1

Change in working capital (trade receivables, inventories, trade payables)

▲118

▲189

▲71

Income taxes paid/refund

▲32

▲11

3

▲41

21
▲43

13

▲29

▲42

▲111

▲98

12

Purchase of investment securities

0
▲0

61
▲12

61
▲12

Other

▲5

▲11

▲7

Cash flows from investing activities

▲117

▲61

55

Free cash flow

▲103

▲90

13

85

▲35

Redemption of convertible-bond-type bonds with share acquisition rights

120
▲11

11

Dividends paid

▲21

‐
▲20

Other

▲3

▲3

1
▲0

Cash flows from financing activities

84

61

▲22

Cash and cash equivalents at end of period

91

62

▲29

Impairment losses <Non-cash item>

Other
Cash flows from operating activities
Purchase of property, plant and equipment
Sale of property, plant and equipment

Short-term borrowings, commercial papers, long-term borrowings

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

10Change in Capital Investment and Depreciation(0.1 billions of yen)

Consolidated basis
140

125

123

120

80

99 101

97

100

85

85

81

2020.3

74 73

73

75

76 79

78

2015.32016.32017.32018.32019.3

87

94

100

60
40
20
0

Capital Investment

2021.32022.32023.3

Depreciation[Capital Investment]
Construction of Funabashi Premix No. 2 Plant, renewal of Kashima Plant facilities, renewal of
Headquarters core system, etc.

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

11

Change in R&D Expenditures
Consolidated basis(0.1 billions of yen)

35

30

26

24

25

22
20

27

21

22

22

2019.32020.3

19

15

10

5

0

2016.32017.32018.32021.32022.32023.3Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

12

Agenda1

Overview of financial results for FY2023

2

Earnings forecast for FY2024

3

Medium-Term Management Plan 2023-2025

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

13

Assumptions Underlying Earnings Forecasts for FY2024■ Cost environment [Raw materials, exchange rates, energy]
FY2023
April–Juneresults

July–September
results

October–
Decemberresults

January–March
results

FY2024
Assumption

Wheat yen/t*1

61,82072,53072,53072,53076,453

Soybean ¢/Bu*2

1,653

1,641

1,474

1,475

1,502

Rapeseed C$/MT*3

1,108

1,022

842

856

842

Corn ¢/Bu*4

730

738

665

663

660

Sea freight US$/t*5

74.5

77.5

62

54.6

65

Exchange rate*6120.02133.27141.63136.04133.00LNG yen/kg*7

94.0

110.6

152.7

132.5

111.8

*1:
*2:
*3:
*4:
*5:
*6:
*7:

Average price of five brands three months prior to the relevant period
Average Chicago market price two months prior to the relevant period
Average ICE market price two months prior to the relevant period
Average Chicago market price two months prior to the relevant period
Panamax vessel of U.S. Gulf-Japan (Based on corn)
Average TTM two months prior to the relevant period
Average unit price calculated from value and quantity of imported goods in the country of origin based on the actual monthly preliminary figures of Trade Statistics of Japan disclosed
two months prior to the relevant period

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

14

Earnings Forecast for FY2024
Change of segmentsWith the launch of the Medium-Term Management Plan 2023–2025, we will transform our sales departments from “product-out” models of business management andsales activities to “one-stop” models by business type and customer, and shift to “market-in” models of organizations and business management
In line with this change in business management, the Flour Milling Business, the Vegetable Oils and Household Foods Business and the Starches and Sweeteners
Business, which have previously been reportable segments, will be integrated into the “Food Business”

FY2023

Percentage ofchange(Year-on-Year)

Change(Year-on-Year)FY2024 forecast(0.1 billions of yen)

3,350

3,600

249

2,705

2,940

234

Animal feed

594

610

15

Other

50

50

▲0.7

Operating profit

41

75

33

Food

38

75

36

Animal feed

3

5

2

Other

15

10

▲4

Company-wide
expenses, etc.

▲15

▲16

▲0.6

Ordinary profit

65

86

21

31.8%

Profit

77

55

▲22

▲29.3％Net sales
Food

7.4%

79.2%

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15

Earnings Forecast for FY2024 (by Segment)
Change in net sales

Change in operating profit(0.1 billions of yen)(0.1 billions of yen)

234

15

36

3,600

2
▲4

▲0

3,350

75

41

FY
2023

Food

Animal feed

Other

Food and Animal feed
(+)
(+)
(+)
(+)

FY
2023

FY2024(forecast)

Building of efficient sales divisions through reorganization
Recovery of sales volume and implementation of sales at fair
prices
Focus on developing new products and entering new markets
Strengthening sales of functional products

Food

Animal feed

Other

FY2024(forecast)

Food and Animal feed
(+)
(+)
(+)
(+)

Building of efficient sales divisions through reorganization
Recovery of sales volume and implementation of sales at fair
prices
Focus on developing new products and entering new markets
Strengthening sales of functional products

Other
(-)

Decrease in profit from decrease in rental income from realestateCopyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

16

By Segment: Food Business (Flour Milling/Vegetable Oils/Starches
and Sweeteners)
Earnings forecast

Net sales

2024.3(Forecast)

Change

2,705

2,940

234

38

75

36

2023.3Operating profit

Change by main business

Operating profit
30
13

▲4

75

▲2
FY2023

Flour milling

Vegetable oils

Starches andConsolidated
sweeteners adjustments forcompany-wide
expenses* FY2023 results are aligned with the new segments

Flour
Milling
Business

・ Wheat flour
・ Premixes
・ Baked bread・ BranVegetable
Oils andHouseholdFoods
Business

・ Edible oil
・ Soybean protein
・ Premixes
・ Pasta・ Household foods*
・ Frozen foods

・ Saccharified
Starches
products
andSweeteners ・ CornstarchBusiness ・ Processed starch

38

FY2024(forecast)

New segment

Old segment

Flour
milling

Food business(0.1 billions of yen)

Change of main business

Vegetableoils

・ Wheat flour
・ Premixes
・ Pasta・ Baked bread・ Bran・ Edible oil
・ Soybean protein
・ Frozen foods

Starches ・ Saccharified products
・ Cornstarchandsweeteners ・ Processed starch* Household foods are divided into “Flour milling” and “Vegetable oils” depending on categories
Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

17

FY2024 Key Measures (Flour Milling)
Wheat flour▶ Revision of commercial wheat flour price (from the delivery on June 20, 2023)▶ Development of new products and cultivation of new customers and markets▶ Strengthening of cooperation among five companies and seven plants including group companies  Optimization from raw material procurement to productionof products at bases

Premixes and pasta▶ Strengthening of premix production through cooperation among Funabashi Premix No. 2 Plant andgroup companies▶ Expansion of sales to food services and ready-made meal business types

Baked bread

Strengthening of premix production
Kobe Plant(35,000 t/year)▶ Improvement of earnings through operation integrated among Group’s four companies** Grandsolu Bakery, Tower Bakery, Swing Bakery, Garden Bakery(1) Improvement of productivity  Improvement of loss rate(2) Reduction in labor costs and overheads  Initiatives to save energy and manpower Optimizationof operation in management back-office divisions

Household products

Okumoto Flour Milling(28,000 t/year)

Itako Plant(37,000 t/year)

Funabashi Food Plant(35,000 t/year)

Funabashi Premix No. 2 Plant(28,000 t/year)
Nearly double thatof previous facility

Secured163,000 t/year production capacity Group-wide▶ Expansion of sales of bound spaghetti imported from Turkey, whose sales began in December 2022
▶ Expansion of sales through export channels  Expansion of sales of household products, mainly Tempura
Batter Mixes EX, which is an export-only product▶ Expansion of sales through EC channels

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18

FY2024 Key Measures (Vegetable Oils)
Edible oil▶ Recovery of sales volume and profitability of soybean oil and rapeseed oil▶ Improvement of competitiveness and expansion of sales of rice bran oil and corn oil  Strengthening of cooperation with Boso Oil
and Fat and Tsuji Oil Mills▶ Development and expansion of sales of functional vegetable oils  Promotion of site-based and proposal-based sales

Soybean protein▶ Strengthening of proposals to new customers in ready-made meal and food service businesses against the
backdrop of surging meat prices▶ Establishment of production system to further increase production in preparation for sales expansion▶ Expansion of fields through development and sales of new soybean processed products and new soybean proteinmaterials
 Efforts for Mamefuru Bran, which is soybean skin powder as a functional soybean processed product, Daizu
Hi! Ga, which is a soybean germ product, and development of new products

Frozen foods[New product] “Mamefuru Bran”
Launched in February 2023

▶ Improvement of market competitiveness  Enhancement of takoyaki lines at Showa Frozen Foods, and strengthening of sales of commercial and householdproducts using Group’s sales channels▶ Expansion of business scaleHousehold products▶ Acquisition of new customers through strengthening of brand communication▶ Ensuring proposals for expansion of sales to customers
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FY2024 Key Measures (Starches and Sweeteners)
Overall▶ Expansion of sales to target users, stabilization of earnings through revision of customer portfolios,
and recovery of sales to pre-COVID-19 levels▶ Appropriate price revisions through appropriate dissemination of information to customers▶ Promotion of further diversification of raw material procurement channels▶ Optimization of production sites integrated among three group companies (Showa Sangyo,
Shikishima Starch MFG and San-ei Sucrochemical)
 Improvement of earnings by working to improve productivity and reduce distribution costs

Showa

Starchesandsweeteners

Saccharified products▶ Strengthening of efforts on recovering industries such as products for alcoholic drinks,
beverages, and sweets

Shikishima
Shikishima
Starch MFG

San-eiCornstarch▶ Expansion of sales through securing new users

Other▶ Implementation of differentiation strategies for powdered starch syrup and crystalline glucose, which are the Group’s strengths, and Sanei Sucrochemical’s unique acidic oligosaccharide Promotion of expansion of sales through proposal-based sales using BtoB marketing functions
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20

By Segment: Animal Feed Business
Mixed animal feed

Main Business▶ Sales at fair prices (price pass-through) commensurate with costs▶ Expansion of sales through proposals of solutions for various issues of farms(customers)

Mixed animal feed, eggs andprocessed egg products(0.1 billions of yen)

Net sales

Eggs and others

2024.3(Forecast)

2023.3

Change

594

610

15

Operating profit

3

5

2

(0.1 billions of yen)

Operating profit

10

5▶ Expansion of profit scale and pursuit of stabilization through development oflayered business strategy integrated between Showa Sangyo and Showa Keiran▶ Expansion of sales of high-value-added products, namely synthetic milk andoligosaccharide mixed animal feed
▶ Creation of new value through pursuit of technology to make feed from unused
raw materials
Initiatives for unused raw materials■ Social issues (ESG) ■■ Value creation (corporate profits) ■Initiatives to contribute to the realization ofa recycling-oriented and sustainable
society by utilizing materials that areconventionally discarded

Economic profits from converting nonvaluable items (items whose disposal
requires costs) into valuable items, andimprovement of customer value throughefforts with customers of other businesses

5302023.32024.3(Forecast)<Contribution from the perspective of
ESG><Contribution in economic value>

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21

Return to Shareholders (Dividends)
Change of dividends per share and dividend payout ratio
Dividends

Dividends (yen)Dividend payout ratio(%)

Dividend payout ratio

70

70.0

60

60.0

49.7

50
40

50.0

36.5

32.3
26.1

30

30.0

30.9*1

27.9

40.0
30.0

20

20.0

10

10.0

0

50

60

65

65

60

65

60

2018.32019.32020.32021.32022.32023.3

FY2024(forecast)

Dividend
payout ratio

Approx. 30%

0.0*1: Dividend payout ratio for FY2021 does not include effect of gain on bargain purchase.
If included, the ratio will be 20.3%

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Agenda1

Overview of financial results for FY2023

2

Earnings forecast for FY2024

3

Medium-Term Management Plan 2023-2025

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

23

Business Environment－Changes in the external environment andbusiness opportunities for our group－

Global Trends

Domestic Trends

・ Soaring prices of raw material grains

・ Declining population and acceleration of aging

・ Increasing energy prices

・ Growing interest in environmental conservation/
sustainability

・ Increasing geopolitical risks

・ Growing consciousness of health,safety and security

・ Mounting environmental problems(climate change, water resources, food loss)

・ Diversification of food preferences/eating styles

・ Acceleration of initiative for SDGs/
Recycling-oriented society

・ Increasing entries in food businessfrom other industries

・Advancement of digital technology

・ Improving operational efficiency throughautomation/labor saving

Lifestyle and consumption behaviors changed dramatically due to COVID-19 pandemic
in addition to the changes in the global environment and social structures.

Facing a changing business environment, we will “SHIN-KA” to grow.

Our Group will continue to grow as a “Grain Solution Company” to support food infrastructure
toward fiscal 2025, the 90th anniversary of our founding, and beyond. We will further pursue
our strength of “expertise in grains”, develop “high-functional products”, expand “businessfields”, and reduce “burden on the environment”.
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24

Principles
SHOWA's declaration: “SHIN-KA"

Toward the 90th Anniversary, and beyond

SUSTAINABLE

GRAINS
We will materialize
the “evolution" of
our Grain Solution

We will challenge
to “deepen" oursustainability
management

HEALTHWe will pursue“intrinsic value" ofingredients andcontribute topeople's health

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25

Financial KPIs
We will introduce (1) ROIC and (2) CCC as new business management indicators,
and manage the progress as financial KPIs.
(1) ＲＯＩＣ

Improve business portfolio management by establishing businessevaluation methods and rules for allocating management resources.

(2) ＣＣＣ

Promote cash flow management by identifying factors to be improved
and manage them on a monthly basis.
FY2021

FY2022

FY2025Difference

ResultResultTarget（vs. FY2022）

Ordinary profit（¥billion）

6.5

6.5

13

200%

ＲＯＥ

（％）

3.9

7.1＊1

7.0 or more

-

ROIC

（％）

2.6

1.8

4.0 or more

2.2 point increase

CCC

（day）

78

91

75

16 days shorter

0.4

0.5

0.6 or less

NET D/E ratio* 1：Gain on sale of non-current assets, approx. 5.2 billion yen, recorded to extraordinary income

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26

Five Key Strategies
1

Strengthening Our Core Businesses

1. Evolution of the “Grain Solution”.
-Enforce product sales by transforming into “one-stop” sales models1. Strengthening cooperation among group companies
3. Optimization of product composition
4. Expansion of value-added products sales by differentiation
strategy
5. Strengthening stable procurement

3

Reducing Burden on
the Environment

1. Continuous efforts to achieve ourenvironmental goals
2. Reduction of packaging plastic
3. Advanced utilization of biomass
4. Develop a roadmap to achievecarbon-neutrality

4

2

Expansion of Our Business Fields

1. Expanding overseas businesses by strengthening existing
businesses in the ASEAN region and developing new
businesses
2. Strengthening export businesses
3. Expansion of frozen food businesses
4. Challenge to new businesses－Plant-based food－Fine chemicals, oleochemical

Rebuilding Our Platform

1. Establishment of organizationalfoundation by reorganization
2. Advancing business portfolio
management by introducing ROIC
3. Strive for operational sophistication bydigitalization and build a promotionalorganization for DX

5

Enforcing Stakeholder
Engagement

1. Drastic promotion of D＆I
2. Strategic investment in humancapital
3. Strengthen external posting
and raise awareness of theGroup via SNS

Deepen sustainability management to support sustainable growth of our Group

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

27

Effects of Priority Measures on Ordinary Profit
We will generate ordinary profit of +6.5 billion yen by steadily executing the following measures.
① Strengthen Our Core Businesses
1. Evolution of the ”Grain Solution”+0.4

2. Strengthening cooperation amonggroup companies+0.9② Expansion of Our Business
FieldsRecovery of business environment
Responding to business environmental
changes

1. Expansion of overseas
businesses+0.5

1. Recovery of sales volume

2. Expansion of frozen foodbusinesses+0.3

2. Revision to optimal prices +2.4＋¥0.8billion＋¥3billion

3. Optimization of product composition +0.4
4. Expansion of value-added products
sales by differentiation strategy

+0.6

+1

＋¥2.7billion
ordinary
profit(¥billion)

65
65＋¥6.5billion

FY2019FY2020

FY2021

FY2022

Strengthening
基盤事業の
Our
強化CoreBusinesses

Recovery of
Expansionof Our 事業環境の回復・
事業領域のbusiness
Business
Fields拡大
環境変化への対応
environment etc.

FY2025
TargetCopyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

28

Capital Allocation - Fiscal 2023–2025
Cash inCash out
Shareholder return (60)Cash inOperatingcash flow

Harvest the fruits from implementation of strategies
during 1st & 2nd Medium-Term Management Planand generate operating cash flow of 56 billion yen

Reduction ofassetsReduction of cross-shareholdings (equities) and noncore real estate

Borrowing

Control ALM and manage fundings properly

Reference) Results from April 2020 to March 2023

3-year Cumulative Cash Flows
Cash in555

Cash out
555

Growth investment

Shareholder return
Operating cash flow

(61)

Operating cash flow

(121)

(330)
Cash out(560)
Shareholder
returnBorrowing Straight
bonds
(180)

Continue stable dividends over the long term witha target payout ratio of around 30%

Growthinvestment

Digitalization

(320)

4%
5%

Environmental
measures

Capital investment,
maintenance, renewal

Borrowing etc.
(175)

・ Renewal
・ Measures for productsafety and quality

11%

New business
(35)

46%

M&A
(150)

(230)

Capital investment
Sale of non-current
assets, etc.

Total: 33 billion yen

Growthinvestment

Streamlining ofproduction

Reduction of assets (30–40)

34%

(174)

(79)

(¥0.1 billion)

Borrowing (90–100)

Redemption of SB (70)

690

690

Working
capitalShorten CCC by optimizing inventories to keep

working capital increase to zero

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

29

Topics (1):Reorganization since our foundation(from April 1,2023)■ Sales departments organized for each customer respond to a wide range of requests as grain professionals (B to B).
In this way, we propose deliciousness through “Grain Solutions” to consumers as a One-stop Contact (B to B to C).
■ We will create ordinary profit of +400 million yen through company-wide reorganization.
【previous】 Sales Division【new】 Sales Division－ Experts in each business －－Grain professionals －Flour Milling Dept.

Ingredients
Sales Dept.

Oils & Fats Dept.

Food Process
Sales Dept.

Starch &Sweetener Dept.

Sales Channel（B）

Group Ⅰ

Confectionery,
Bread, Noodle

Group Ⅱ

Food
BeverageGroup Ⅰ

Processed food,
Ready-to-eat processing

Group Ⅱ

Restaurant

Effects ofReorganization

Food trends,
deterioration of quality, antiaging

Side dish,
DelicatessenGroup Ⅱ

Household foods

Food trend,
pursuit of freshness,convenience

Overseas Business
Development & Sales Dept.

Export,Overseas BusinessJapanese food trends,
safety and security

Principal AccountSales Dept.

Principal AccountSales Dept.

Convenience Store

Food trends, deterioration of quality,
proposal of sales floor operations

Solution Sales Dept.

Solution Sales Dept.

Restaurants(cross regions)

Scientific menu development,
food trends

All channels

All local food needs

Household Foods
Dept.

Branch（Osaka・Nagoya・Sendai・Sapporo・
Fukuoka・Hiroshima・Kanto-Shinetsu）

Branch（Osaka・Nagoya・Sendai・Sapporo・
Fukuoka・Hiroshima・Kanto-Shinetsu）（C）

Improvement of texture, taste
and flavor, production
process,
dining style

Group Ⅰ

Retailer
Sales Dept.

Consumers

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

30

Topics (2): Expanding Overseas Business
Promote new business development in addition to strengthening and expanding existing businesses
China
Dachan Showa Foods
Tianjin Co., Ltd.

Wheat flour

Premixes

Animal feed, eggsDachan LiangYou
Foods Co., Ltd.

Strengthen development and sales systems
Streamlining sales activities by promoting localization

TaiwanZ. Y. Food Company Limited

Improve productivity for self-employed farms by enhancing
efficiency and implementing measures against epidemics
Reduce costs by boosting egg incubation and managing
operation rates
Stabilize earnings by passing on raw material costs andexpanding sales

KOUCHAN MILL Co., Ltd.


Increase in sales volume by expanding plant production
capacity

VietnamInternational Mix Joint-Venture Company
Sales and technical support for sugar-free premix

Showa Sangyo International Vietnam Co., Ltd.


Production and sales of premix and sugar preparation(Start of operation scheduled for spring 2025)

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

31

Topics (3):Non-financial KPIs
Environmental
Targets
Reduction of
CO2 Emissions

FY2025 Target

FY2030 Target▲30% or more

▲46% or more

Human CapitalManagement
Drastic

Compared to FY2013

promotion of D＆I
Reduction offood Loss
Reduction ofwater usage(basic unit)▲30% or more(basic unit)

Digital Strategies

Proportion of women in management
positions:
Above 10% in fiscal 2025

▲30% or more

Compared to FY2018▲12% or more

9

▲ % or more

Strategic
investment in
human capital

Investment in Reskilling:
More than double in fiscal
2025 (vs. 2021)

Compared to FY2019

Improvement ofReduction ofplastic usage

FY2025 Target▲7% or more

▲ 25% or more

Compared to FY2013

employeeengagement

Engagement Score:
Target score to be announced in
the next couple of years

FY2025 Target

RD＆E Strategy

Digitalization
promotion

・Digitalization promotion costs of¥4.5 billion over 3 years（¥1.2 billion for growth investment）

Expansion of ourbusiness fields

・Strengthen R&D in frozen foodbusinesses and new business fields
・Improve production technology
of overseas production bases

Introduction ofmultifaceted
analytical DB and
Dashboard・Sales transformation through effective
use of customer information
・Cost reduction： ¥60 million per year

Utilization of IT/AI
technology

・Promotion of smart factories
utilizing digital technologies

Development of HR
to promote DX

・HR to promote DX： 100 staff
・Cost reduction by deploying“No-code development tools”：¥70 million per year

Cost reduction

・Cost reduction throughproductivity improvement actions
Total reduction:¥1 billion over the next three years

FY2025 Target

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

32

Reference Materials

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

33

Change in Quarterly Net Sales and Operating Profit
2Q

1Q

3Q

4Q

2022.32023.3

Amountof change

2022.32023.3

Amountof change

2022.32023.3

Amountof change

2022.32023.3

Amount ofchangeFlour milling

20,15021,362

1,212

18,742

21,582

2,839

19,92023,052

3,132

19,33921,376

2,036

Vegetable oils andhousehold foods

23,841

29,176

5,334

24,39728,476

4,078

26,84833,404

6,556

25,33828,8693,530

Starches andsweeteners

11,76315,157

3,393

12,931

15,876

2,945

13,50416,082

2,577

13,14916,137

2,987

Animal feed

11,88013,781

1,901

13,713

15,447

1,733

13,984

15,962

1,977

13,241

14,235

994

Other

1,239

1,210

▲29

1,252

1,339

87

1,082

1,233

150

1,311

1,289

▲21

Total

68,87580,688

11,812

71,03882,722

11,68475,34089,735

14,394

72,38081,907

9,527

762

1,028

265

805

1,143

337

859

1,310

451

1,127

357

▲769

▲176

1,059

1,236

▲8

▲549

▲541

845

992

147

360

▲437

▲798

Starches andsweeteners

224

▲136

▲361

301

▲375

▲677

299

▲242

▲542

▲275

▲257

17

OperatingAnimal feed
profit

219

▲111

▲330

252

254

2

53

180

126

▲40

58

99

403

336

▲67

397

421

24

372

418

46

369

323

▲45

Company-wide
expenses and others

▲391

▲360

30

▲385

▲392

▲7

▲419

▲415

3

▲393

▲422

▲28

Total

1,042

1,815

772

1,363

502

▲861

2,010

2,244

233

1,147

▲377

▲1,525(millions of yen)

Net sales

Flour milling
Vegetable oils andhousehold foods

Other

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

34

Cautionary notes regarding forward-looking statements
The figures included in this material are formulated based on information currently available and certain assumptions judged to be reasonable. As this material
contains potential risks and uncertainties, we do not guarantee its achievement or future performance.
Furthermore, as actual results, etc. may also significantly differ from the forward-looking statements included in this material, you should refrain from making
investment decisions based solely on this material.
Showa Sangyo Group will not necessarily review the Medium-Term Management Plan nor assume any obligation to do so, regardless of future information, events
or consequences caused by them.

Copyrightⓒ2023 SHOWA SANGYO Co., Ltd All Rights Reserved.

35