Financial Results Presentation
for the Year
Ended March 31, 2014

May 16, 2014
Financial Results Presentation for the Year Ended March 31, 2014

1Contents

1. Business Overview
2. Results for Year Ended March 31, 2014
3. Outlook for Year Ending March 31, 2015
4. Medium-Term Management Plan Progress<Disclaimer>
The opinions, outlooks, forecasts and other forward looking statements contained herein are
based on Nitta Gelatin Inc.’s judgments as of when this presentation was compiled.
Accuracy of information contained in this presentation is by no means guaranteed. Please beaware that the Company’s earnings going forward may vary materially from the content of thispresentation depending on various variables including the market environment.
Financial Results Presentation for the Year Ended March 31, 20142

1. Business Overview

Financial Results Presentation for the Year Ended March 31, 20143

1 Company Overview
Company Overview
Name

Nitta Gelatin Inc.

Representative

Norimichi Soga, Representative Director and President

Head Office

4-4-26, Sakuragawa, Naniwa-ku, Osaka (P.C.556-0022), Japan

Establishment

January 1918

Stock ListingFirst Section of the Tokyo Stock Exchange (Stock code: 4977)

CapitalConsolidated
Net SalesConsolidatedEmployees¥3,144 million¥32.8 billion (Year ended March 31, 2014)
635 (As of March 31, 2014)

Financial Results Presentation for the Year Ended March 31, 20144

1 Company Overview
Business Segments, Divisions and Main Products
BusinessSegment

Division

Gummy candy, marshmallow and otherconfectionery, food products, convenience store
delicatessen items, frozen foods, etc.

For capsules

Hard and soft capsules, mini-capsules, etc.

For photography

Color film, X-ray film, photographic paper, etc.

PeptideCollagen peptide

Dietary food supplements, health supplements,functional nutrient foods, etc.

CasingCollagen casing

Sausages, frankfurters, snack sausages, salamis, etc.

Life Science Collagen, gelatin
Food
Materials

FormulaSolution

Application

For foodGelatin

CollagenMaterialProduct

Adhesives

Testing reagents for laboratory research, synthetic
tissue, synthetic bones, DDS, cell transplants, etc.

Gelling agents, Stabilizers
and quality enhancers

Dessert jellies, delicatessen items, meat products,etc.

Sealants (High-performancegaskets)

Smartphones, mobile phones, tablets, digital
cameras, etc.

Hot-melt adhesives

Packaging, bookbinding, construction material,
hygiene products, etc.

Animal glues

Bookbinding, paper packs, paper crafts, etc.

Financial Results Presentation for the Year Ended March 31, 20145

2. Results for Year Ended
March 31, 2014

Financial Results Presentation for the Year Ended March 31, 20146

2 Results for Year Ended March 31, 2014
Business Performance (1) : Net Sales
Net Sales : ¥32,814 million

Change :% Change:(¥ million)
34,000Initialforecast¥32,700¥4,041 million+14.0 %

 Increased sales due to larger sales
volume and price revisions
 Increased sales due to exchange
rate impacts
Exchange Rate :¥83.22/$ → ¥99.97/$

32,81432,00030,00028,77228,00026,0002013/3Financial Results Presentation for the Year Ended March 31, 20142014/37

2 Results for Year Ended March 31, 2014
Business Performance (2) : Operating Income
Operating Income : ¥955 million
Change :¥△640 million% Change :△40.1 %(¥ million)
2,000

1,500

Initialforecast
1,700
1,595

 Increased purchase price resulting
from the weak yen
 Rise in raw material prices

1,000955

 Delay in price revisions in Japan500

 Casing quality problems
 Delay in the adoption of newsealants by customers0

2013/3Financial Results Presentation for the Year Ended March 31, 20142014/38

2 Results for Year Ended March 31, 2014
Causes for Profits Decrease
1. Delay in Price Revisions in Japan
Rise in Raw Material Cost

 Increased demand from other users
 No increase in slaughter quantity

Rise in Production Cost

Overseas : Price revisions
have been conductedWeak Yen

Japan : Delay in the progressof price revisions

Decrease in Profits
Financial Results Presentation for the Year Ended March 31, 20149

2 Results for Year Ended March 31, 2014
Causes for Profits Decrease
2. Gelatin Market Situations
 Gelatin prices remained high due to short supply in the global market
 Increasing demand for gelatin in Asian countries such as China andIndia

Gelatin Unit Sales Price Index
160

Overseas
140

134
120

Japan
100

80

2011/032012/03

Financial Results Presentation for the Year Ended March 31, 20142013/03

2014/0310

2 Results for Year Ended March 31, 2014
Causes for Profits Decrease
3. Casing Quality Problems
Increased production
resulted inincreased defectives
Returned products
Decrease in profits
Financial Results Presentation for the Year Ended March 31, 2014112 Results for Year Ended March 31, 2014
Causes for Increase & Decrease inConsolidated Operating Income

955

Year ended
March 31, 2014

Downturn ofCasing business△270

Increasein SG & A*
△450

△920

(Weak Yen)

(Unit : ¥ million)
ImportRise inraw material cost
△110+180

Cost Reduction& Others+310

Price Increases+620(Weak Yen)

1,595

Year ended
March 31, 2013

Export(compared with the previous year)

SG & A : selling, general and administrative expenses
Financial Results Presentation for the Year Ended March 31, 2014122 Results for Year Ended March 31, 2014
Business Performance (3) : Ordinary Income
Ordinary Income : ¥1,115 million

Change :¥△863 million% Change :△43.6 %(¥ million)
2,000
1,978

Initialforecast
1,890

1,500

 Decrease in operating profit
1,115

1,000

 Decrease in equity inearnings of affiliates
50002013/3Financial Results Presentation for the Year Ended March 31, 20142014/313

2 Results for Year Ended March 31, 2014
Business Performance (4) : Net Income
Net Income : ¥665 million

Change :¥△859 million(¥ million)

1,500% Change : △56.4 % Extraordinary income : Compensation
received due to equipment failure of a
subsidiary in USA
 Extraordinary loss : Net assets
decreased by equity interests change ofaffiliates in India

1,525

Initialforecast
1,380

1,000665500

0

2013/3Financial Results Presentation for the Year Ended March 31, 20142014/314

2 Results for Year Ended March 31, 2014
Loss on Change in Equity
Amendment ofIndian Shareholding Regulations

Public Shareholders Ratio
More than 25%

As of March 31, 2013

As of March 31, 2014

Number ofShares

Ratio(thousand shares)

Nitta Gelatin

3,900

46.4%

KSIDC*2,862

34.1%

Public Shareholders

1,637

19.5%Total

8,400

100.0%

Increase in Number ofShares
the Number(thousand shares)of Shares
Held by
3,900
PublicShareholders
2,860+679

thousand shares

Reduction in the Company’s shareholdingin Nitta Gelatin IndiaRatio

Change43.0% △3.4p
31.5% △2.6p

2,316

25.5%

+6.0p

9,079

100.0%－△ ¥104 million(Extraordinary loss)

KSIDC : Kerala State Industrial Development Corporation
Financial Results Presentation for the Year Ended March 31, 201415

2 Results for Year Ended March 31, 2014
Collagen Material Business Sales rose, income fell from theyear before(¥ million)(¥ million)
25,0002,000
Sales (Left)
Segment Profit (Right)

 Highlights
 Gelatin Business：
・Strong performance in gelatin forfood and capsules
・Rise in purchase price by weak yen
・Rise in raw material prices
・Increasing energy cost(Overseas) ・Robust demand in gelatin forfood and capsules
・Strong sales due to price revisions

22,500(Japan)

 Peptide Business：
・Strong sales in Asia and Japan・Rise in raw material prices

22,436
1,794

20,000

1,750

1,500

18,674
1,420
17,5001,250

15,0001,000

 Collagen Casing Business：・Sluggish sales due to quality problems
resulted in a loss
Financial Results Presentation for the Year Ended March 31, 20142013/3

2014/316

2 Results for Year Ended March 31, 2014
Formula Solution Business Sales rose, income fell from theyear before

12,000

1,500
Sales (Left)
Segment Profit (Right)

10,377

 Highlights
 Food Materials Business :・ Sluggish growth as a whole
・ Rise in raw material prices(¥ million)(¥ million)

10,097
10,000

1,200

1,152

 Adhesives Business :・ Strong performance in hot-melt type8,000
adhesive
・ Delay in the adoption of new sealants
by customers
・ Rise in raw material prices

9009206,000600

2013/3Financial Results Presentation for the Year Ended March 31, 20142014/317

2 Results for Year Ended March 31, 2014
Overseas Sales Ratio

Overseas

Fiscal year
ended March34%

2013
Japan

Fiscal year
ended March¥28.7 billion

Japan

60%

Overseas

40%

2014

¥32.8 billion

66%

Financial Results Presentation for the Year Ended March 31, 201418

2 Results for Year Ended March 31, 2014
Balance Sheets (B/S)
 Assets increased due to increases in Notes and accounts
receivable, Property, plant and equipment
 Shareholders' equity increased by public offering(¥ million)

2013/3 2014/3+2

Minority interests+314

Total net assets
Total liabilities and netassets

25,190ChangeInvestments and otherassets

18,685
8,164
7,642
2,878
12,704
8,804
50
3,849

Total assets

25,19031,389 +6,199

Notes and accounts
receivable-trade
Inventory
Other

Noncurrent assets
Property, plant andequipment

Intangible assets

Financial Results Presentation for the Year Ended March 31, 20142013/3 2014/3
9,637
3,736
5,900
5,828
3,142
2,686
15,465
11,170△1,592
147
9,724

15,319
5,839
6,831
2,648
9,870
6,287
48
3,534

Current assets(¥ million)+3,365+2,324+810+229+2,833+2,516

Current liabilities
Notes and accounts
payable-trade
Other

Noncurrent liabilities
Long-term loans payable
Other

Total liabilities
Shareholders' equity
Accumulated othercomprehensive income

Change10,080
4,255
5,824
7,528
4,415
3,112
17,60814,734△1,097
144
13,781

31,389 +6,199

+443
+518
△75+1,699+1,273+425+2,142+3,564+494△3+4,056

19

2 Results for Year Ended March 31, 2014
Capital Investment(¥ million)

ForecastResults

Capital expenditure

3,400

2,949

Depreciation andamortization

900914

Shirring facilities (China)

 Nitta Casings Inc. (USA)

Productivity improvement demonstration facility
completed in May 2014
 Beijing Nitta Collagen Casing Co., Ltd. (China)
Shirring facilities began operating in July 2013
 Construction of Peptide Plant in USA
Completed in May 2014
 Nitta Gelatin Vietnam Co., Ltd. (Vietnam)
Gelling agent manufacturing plant to becompleted in the end of May 2014

Peptide Plant in USA

Vietnam plant completion drawing
Financial Results Presentation for the Year Ended March 31, 201420

2 Results for Year Ended March 31, 2014
Overseas Ratio inProperty, Plant and Equipment

Japan34%
Japan

47%

Year ended

Year ended
March 2014

March 2013

Overseas¥6.2 billion

53%¥8.8 billion

Overseas

66%

Financial Results Presentation for the Year Ended March 31, 201421

2 Results for Year Ended March 31, 2014
Topics Acquisition of FSSC 22000
FSSC : Food Safety Management System certification• Nitta Gelatin Inc. Osaka Plant (Gelatin) Mar. 2014
Aug. 2012• Nitta Gelatin Canada, Inc. (Gelatin)
Oct. 2012• Nitta Gelatin USA, Inc. (Gelatin)
Certificate of registration(Osaka Plant)
June 2014 scheduled• Nitta Gelatin India Ltd. (Gelatin)• Guangdong Baiwei Bio Material Co., Ltd (Peptide) Apr. 2013

 Collagenaid® Receives Monde Selection’sGrand Gold Quality Award for
the Third Straight Year

2012
Financial Results Presentation for the Year Ended March 31, 2014

2013

2014
22

2 Results for Year Ended March 31, 2014
TopicsPromotion of Brand Strategy
 Participation in 43rd INTERNEPCON JAPAN Exhibition (Tokyo)

 Participation in 18th Food Ingredients China Exhibition (China)
 Healthy Long Life and Anti-Aging Seminar (Osaka)

INTERNEPCON JAPAN Exhibition 2014Food Ingredients China Exhibition 2014

Financial Results Presentation for the Year Ended March 31, 2014

Healthy Long Life and Anti-Aging Seminar23

2 Results for Year Ended March 31, 2014
Topics PR Activities
Gelatin recipe book publication“Syokuiku”(Food Education) Aug. 2013
［Professionals magazine of school lunch］

INSPIRATION“Sozai no Chikara” No.13 (spring of 2014 issue)［Free magazine for restaurant chefs］
Financial Results Presentation for the Year Ended March 31, 201424

2 Results for Year Ended March 31, 2014
Consolidated Statements of Cash Flows (C/F)
 Operating CF : Proceeds from assignment of accounts receivable decreased
 Investing CF : Net cash used in plant investments increased Financing CF : Proceeds from public offering and bank loans increased(¥ million)

Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Increase in cash and cash equivalents
End balance of cash and cash equivalents

Financial Results Presentation for the Year Ended March 31, 20142013/32,050△1,557
△376
180
2,258

2014/3△692△3,105
3,875147
2,406
25

2 Results for Year Ended March 31, 2014
Fund Procurement byPublic Subscription and Third-Party Offering

Number of new shares : 2,603,900 shares
Procurement funds : ¥3.1 billion

Number of issued shares : 18,373,974 shares
Financial Results Presentation for the Year Ended March 31, 201426

2 Results for Year Ended March 31, 2014
Share Distribution
Number of Shares Issued
15,770thousand shares

18,373

Number of Shareholders
3,014

thousand shares

5,781+2,603thousand shares

Individuals

34.7%+2,767

Individuals

32.8%

Domestic
companies

Domestic
companies

Individuals

97.0%

33.3%

37.6%
Individuals
Foreigninvestors

2.0%
Securitiescompanies

1.7%

Financial
institutions

25.9%

2013/3Financial
institutions

29.8%

Foreigninvestors

95.5%

1.7%
Securities
companies

2014/3Financial Results Presentation for the Year Ended March 31, 2014

0.5%

2013/3

2014/327

3. Outlook for Year Ending
March 31, 2015

Financial Results Presentation for the Year Ended March 31, 201428

3 Outlook for Year Ending March 31, 2015
External Business Environment in Year Ending March 31, 2015
 International gelatin prices are projected to remain high based onincreased demand and tight raw material supplies
 Demand for casing, gelatin and peptide is growing in Asian countries Weak yen continues
 Outbreak of porcine epidemic diarrhea (PED) in North America（US$/kg） 10

International Price of Gelatin

987
654

07/03

08/03

09/03

10/03

11/03

12/03

13/03

14/03

Source: IMR INTERNATIONAL
Financial Results Presentation for the Year Ended March 31, 201429

3 Outlook for Year Ending March 31, 2015
Forecasts for Year Ending March 31, 2015(¥ million)

2014/3

2015/3

2015/3(Mid-term)(Forecast)vs. 2014/3

vs. Mid-term

Net Sales

32,81438,60036,500+11.2%△5.4%

OperatingIncome955

2,700

1,800+88.4%△33.3%

2.9%

7.0%

4.9%

－－

1,115

2,600

1,900+70.4%△26.9%

3.4%

6.7%

5.2%

－－665

1,500

1,200+80.3%△20.0%

2.0%

3.9%

3.3%

－－Ordinary
IncomeMarginMarginNet Income
MarginFinancial Results Presentation for the Year Ended March 31, 201430

3 Outlook for Year Ending March 31, 2015
Prerequisites for Outlook
1. Price revisions completed in the Japanese market
2. Thorough reduction of manufacturing cost
3. SG & A reduction in the whole Group
4. Business expansion and stable supply of gelatin, casingand peptide.

5. Profit expansion of Sealing Materials Business6. Conversion of Indian affiliate to consolidated subsidiarycompleted in the year ending March 31, 2016
SG & A : selling, general and administrative expenses
Financial Results Presentation for the Year Ended March 31, 201431

3 Outlook for Year Ending March 31, 2015
Sales Forecasts by Segment
Segment profit

Net sales(¥ million)

2014/3 2015/3 Change 2014/3 2015/3 Change(Result)(Forecast)(Result)

Collagen Material business

22,43626,000 +15.9%

1,420

Formula Solution business

10,377

10,500

+1.2%

920

990

+7.6%

－－－

△1,384△1,460－36,500 +11.2%

955( Elimination orcorporate expenses)
Total

32,814

Financial Results Presentation for the Year Ended March 31, 2014

(Forecast)

2,270 +59.9%

1,800 +88.5%

32

3 Outlook for Year Ending March 31, 2015
Investment Plan(¥ million)

Capital investment
Depreciation

2013/3

2014/3

2015/3(Result)(Result)(Forecast)

1,193

2,949

3,000825914

1,315

2015/3 Outline of Main Capital Investments(¥ million)
New buildings, production facilities in
Osaka Plant
Upgrade collagen casing production
facilities in North America
Upgrade gelatin manufacturing
facilities in Osaka Plant
OthersFinancial Results Presentation for the Year Ended March 31, 2014

Investment
amountInvestment benefit (goal)

800

Sealing business expansion

600

Improve productivity and quality

500

Improve productivity and quality

1,100

Energy-saving and productivity enhancing
equipment, production facilities ofcollagen for medical use, etc.
33

3 Outlook for Year Ending March 31, 2015
Shareholder Returns<Dividend Forecast>Year ended March 31, 2014 :¥6 per share year-end dividendYear ending March 31, 2015 : ¥12 per share annual dividend( ¥6 interim dividend )( ¥6 year-end dividend )<Shareholder Benefit Program>
Plans call for continuing the program
Benefit details
 100 to less than 500 shares :¥1,000 shopping certificate for Nitta Gelatin products
 500 or more shares : Nitta Gelatin products worth ¥3,000, such as health foods
Financial Results Presentation for the Year Ended March 31, 201434

4. Medium-Term
Management Plan Progress

Financial Results Presentation for the Year Ended March 31, 201435

4 Medium-Term Management Plan Progress
Medium-Term Management Plan(¥ billion)(¥ billion)

Net sales (left scale)Operating income (right scale)40

4.2Initial
forecast

billion38.6
billionbillion36.5
billion32.8

30billion

28.7

4△2.1

41.0
billion

3Initial
forecast

2.7

billion△0.9

billionbillion2021.8

1.6

billionbillion1010.9billion00

2013/3

2014/3Financial Results Presentation for the Year Ended March 31, 20142015/3

2016/336

4 Medium-Term Management Plan Progress
Business Strategies
Division

Gelatin

PeptideCasingFood materials
Adhesives

Strategy• Hone competitiveness by achieving globally competitive costs• Convert Group companies in India into subsidiaries• Increase supply capabilities: Boost production in North Americaand India, and strengthen new supply bases• Expand sales: Develop differentiated products and new
applications, and create new markets• Strengthen supply capabilities and expand sales• Expand business in China• Popularize the global brand Wellnex• Enhance North American plant productivity and expand sales• Promote efforts to build a production and sales framework inChina• Expand sales by strengthening application lab functions• Expand business in Vietnam• Enlarge business by expanding sealing materials globallyFinancial Results Presentation for the Year Ended March 31, 201437

4 Medium-Term Management Plan Progress
Capital Investment

Planned Investment: ¥11.0 billion(April 2013 to March 2016)

 Deploy new facilities in the casing business• Improve North American plant productivity• Develop a production and sales framework in China

 Construct U.S. peptide plant (completed) Deploy facilities to boost efficiency at the Osaka Plant
 Deploy facilities to ramp up gelatin production
Financial Results Presentation for the Year Ended March 31, 201438

4 Medium-Term Management Plan Progress

Financial Results Presentation for the Year Ended March 31, 201439

Thank you for your attention.

Financial Results Presentation for the Year Ended March 31, 201440