COMPANY RESEARCH AND ANALYSIS REPORTKENKO Mayonnaise Co., Ltd.
2915
Tokyo Stock Exchange First Section

31-Jul.-2017
FISCO Ltd. Analyst

Ikuo Shibata

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Continued to achieve record-high results in FY3/17. ...................................................................................

01

2. Forecasts are for the higher sales and profits to continue in FY3/18 also. ...................................................

01

3. Conducting large-scale investment from the concept for the Group’s production bases. ............................

01

4. Stably pays dividends with a dividend payout ratio of 20% as the benchmark,and also provides special gifts to shareholders. ..........................................................................................

02■Company overview ------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Scope of Business.......................................................................................................................................

03

2. The Company Strengths..............................................................................................................................

06

3. Production structures, consolidated subsidiaries.........................................................................................

07■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Overview of the FY3/17 results.............. ......................................................................................................

09

2. Trends by business segment. . ......................................................................................................................

11

3. Financial position and management indicators. ...........................................................................................

14■Future outlook--------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Outlook for the FY3/18. . ...............................................................................................................................

16

2. Sales outlook by segment. . .................... ......................................................................................................

17■Longer-term management strategy--------------------------------------------------------------------------------------------------------- 18
1. The concept for the Group’s production bases. ...........................................................................................

18

2. The progress made in the Mid-term Management Plan. ..............................................................................

20■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 22

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

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir██SummaryContinued to achieve record-high results, benefiting from the
expansion of the restaurant and HMR markets
KENKO Mayonnaise Co., Ltd. <2915> (hereafter, “KENKO Mayo” or “the Company”) is a manufacturer of foods forcommercial-use engaged in the production and sale of salads and delicatessen items, mayonnaise and dressings, aswell as processed egg and other products. It holds a leading position in the commercial-use market and the leading
market share in the “long-life salads” category at 42.3%. It has a 15.2% share of the mayonnaise and dressings
market, second behind the market leader, and omelet products at 9.5%, third place behind the market leader.
1. Continued to achieve record-high results in FY3/17
In the FY3/17 consolidated results, net sales increased 5.8% year-on-year (YoY) to ¥70,812mn and recurring profit
rose 17.2% to ¥4,017mn, for the sixth consecutive fiscal year of higher sales and the third consecutive fiscal yearof higher recurring profit. Moreover, the Company achieved record highs for net sales for the fifth consecutive
fiscal year and for recurring profit for the second consecutive fiscal year. As a result of focusing on menu-proposal
activities by field and by business format, and also on product development, sales increased for all of the productsof salads, mayonnaise and dressings, and egg products. In particular, there was significant growth in sales, mainly
for convenience stores (hereafter, CVS), of egg salads for delicatessen bakery products and of long-life salads fromthe strategy of miniaturization for commercial-use. In addition to the effects of the higher sales, the factors behind
the increase in profits were the improved productivity at the factories and the progress made in reducing the costsof logistics and the main raw materials, and the recurring profit margin rose 0.6 of a percentage point to 5.7%.
2. Forecasts are for the higher sales and profits to continue in FY3/18 also
The forecasts for the FY3/18 consolidated results are for the higher sales and profits to continue, with net sales toincrease 5.9% YoY to ¥75,000mn and recurring profit to rise 2.1% to ¥4,100mn.While profits are expected to decline
in 1H due to the impact of the soaring price of potatoes, the Company will continue to implement measures by field
and by business format, and it is it is aiming for net sales of ¥75,000mn and a consolidated recurring profit marginof 5%, which are the initial targets for this fiscal year as the final year of the current Mid-term Management Plan.
3. Conducting large-scale investment from the concept for the Group’s production bases
For its domestic bases, the Company plans to expand facilities at two factories and build two new factories towards
growth from FY3/19 onwards. In addition to expanding production facilities at its Shizuoka Fujisan Factory, whichis the production base from processed egg products, and at its Nishi-Nihon Factory, which is its production basefor long-life salads and dressings, it will build two new factories for its consolidated subsidiaries that produce fresh
delicatessen items. The total investment amount is expected to be more than ¥15,000mn and production capacity
will increase by the equivalent of sales of more than ¥10,000mn annually, with the construction at all the factories tobe completed by March 2019. Therefore, net sales are forecast to expand from FY3/20 onwards. Conversely, thedepreciation burden will also increase, but it is considered that the aim is to continuously expanding earnings fromfurther strengthening the development and sales of high value-added products, in addition to from the higher sales.

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

01 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Summary

4. Stably pays dividends with a dividend payout ratio of 20% as the benchmark, and also provides special
gifts to shareholders
The Company’s shareholder returns policy is based on stable dividends, with a payout ratio of 20% as the benchmark. It plans to raise dividends by ¥2 y-o-y to ¥37.0 in FY3/18, which represents a dividend payout ratio of
21.2%, about the same as the previous fiscal year. Also, as a further shareholder incentive, the Company awards
shareholders registered at the end of March of each fiscal year with (¥1,000 or ¥2,500 worth of) its own products
according to the number of shares held.
Key Points
Has the top market share in the industry for long-life salads and is increasing its share for omelet products
In FY3/18, the forecast is for a decline in profits in 1H due to the soaring prices of a raw material, but for arecovery in 2H• The four new and expanded factories will become operational in FY3/19 and the aim is to further expand
earnings through large-scale investment••㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻌㻔㼏㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻕㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻾㼑㼏㼡㼞㼞㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕㻝㻜㻜㻘㻜㻜㻜

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㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company's financial results

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

02 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir██Company overview
Has the top market share in the industry for long-life salads and isincreasing its share for omelet products
1. Scope of Business
KENKO Mayo is engaged in the production and sale of salads and delicatessen items, mayonnaise and dressings,
as well as processed egg products and other products for commercial-use. It also undertakes operations such as
the production and sale of fresh delicatessen items (daily grocery delicatessen products) and retail store operations
through its consolidated subsidiaries.
Looking at the percentages of total net sales (consolidated) by product in the last five fiscal periods, sales of salads
and delicatessen products, which provide more than 40% of total sales, have been steadily expanding, and in
addition the major growth in processed egg products is noteworthy. The main factors behind this are the startof operations in FY3/14 of the Shizuoka Fujisan Factory, which specializes in processed egg products, and thesubsequent expansion of its production capacity, and also the acquisition of a series of customers in the restaurant
industry, including conveyer belt sushi chains, and CVS, thanks to customers’ favorable assessments of the qualityof the processed egg products produced at this factory. The percentage of total net sales provided by processed
egg products rose from 22.1% in FY/13 to 28.7% in FY3/17. Conversely, sales of mayonnaise and dressings trended
basically the same way as the trends in their markets as a whole and have moved within a flat range in the last few
years.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼚㼑㼠㻌㼟㼍㼘㼑㼟㻌㼎㼥㻌㼜㼞㼛㼐㼡㼏㼠㻌㻔㼏㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻕㻿㼍㼘㼍㼐㼟㻌㼍㼚㼐㻌㼐㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻌㼕㼠㼑㼙㼟㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻌㼍㼚㼐㻌㼐㼞㼑㼟㼟㼕㼚㼓㼟㻔¥㼙㼚㻕㻟㻡㻘㻜㻜㻜

㻱㼓㼓㻌㼜㼞㼛㼐㼡㼏㼠㼟㻻㼠㼔㼑㼞㼟
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㻜

Source: Prepared by FISCO from the Company's results briefing materials

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

03 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir

Company overview

Looking at the percentages of total net sales (consolidated) by field (customer industry), they are 27.9% for CVS,
27.4% for restaurants and 20.0% for mass retailers, and these 3 fields provide more than 70% of total sales. In
particular, a point to pay attention to is that CVS has overtaken restaurants to provide the highest percentage of total
net sales. The background to this is the expansion of the home meal replacement (HMR) market in the context of
the increase in the number of CVS, the trend toward more “solitary meals” with the rise in single-person households
and the “simplification” of cooking at home due to changes such as the shift to nuclear families and the greater
participation of women in society, including more working women. As the products for CVS, in addition to egg salads
for sandwiches and atsuyaki (thick omelet) for lunch boxes, sales of products like small-package, long-life salads
are also growing significantly.

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼟㼍㼘㼑㼟㻌㼏㼛㼚㼠㼞㼕㼎㼡㼠㼕㼛㼚㼟㻌㼎㼥㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼏㼍㼠㼑㼓㼛㼞㼥㻯㼂㻿㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㼟㻹㼍㼟㼟㻙㼞㼑㼠㼍㼕㼘㼑㼞㼟㻮㼞㼑㼍㼐㼙㼍㼗㼑㼞㼟㻝㻜㻜㻚㻜㻑

㻥㻜㻚㻜㻑
㻤㻜㻚㻜㻑
㻣㻜㻚㻜㻑
㻢㻜㻚㻜㻑

㻝㻝㻚㻥㻑

㻝㻝㻚㻝㻑

㻝㻝㻚㻠㻑

㻡㻚㻡㻑

㻡㻚㻡㻑

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㻠㻜㻚㻜㻑
㻟㻜㻚㻜㻑

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㻞㻢㻚㻣㻑

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㻝㻤㻚㻠㻑

㻝㻤㻚㻥㻑

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻞㻣㻚㻠㻑

㻞㻜㻚㻜㻑
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㻞㻡㻚㻣㻑

㻞㻣㻚㻥㻑

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Source: Prepared by FISCO from the Company's results briefing materials

Looking at the market shares in the Company’s industries, its share for mayonnaise and dressings has trended
stably over the last few years at around 15% and it has maintained its second-ranking position in the industry.
As it virtually specializes in commercial-use, its products are not very familiar to general consumers, but in thecommercial-use field it competes for the top position with Kewpie, which is the leading manufacturer, and it has a
track record of supplying many major restaurants and hotel chains. Meanwhile, the Company, which is a pioneer oflong-life salads, has established an industry-leading market share of over 40% for this product. Recently, sales ofsmall-package, long-life salads for CVS have grown significantly, and it has also been expanding its market shareof this product. The Company ranks third in the industry for omelet products with a market share of around 9%.
Until the completion of the Shizuoka Fujisan Factory this was around 5%, but its share has expanded in the last few
years and it is expected to grow further in the future.

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

04 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Company overview

㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻌㼍㼚㼐㻌㼐㼞㼑㼟㼟㼕㼚㼓㼟㻌㼙㼍㼞㼗㼑㼠㻌㼟㼔㼍㼞㼑㼟㻌㻔㻞㻜㻝㻢㻕㻝㻠㻚㻠㻑㻷㼑㼣㼜㼕㼑

㻝㻟㻚㻤㻑㻷㻱㻺㻷㻻㻌㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻡㻢㻚㻢㻑㻭㼖㼕㼚㼛㼙㼛㼠㼛㻻㼠㼔㼑㼞㼟

㻝㻡㻚㻞㻑

Source: Prepared by FISCO from NIKKAN KEIZAI TSUSHINSHA, Inc.’s “The Beverage & Food Statistics Monthly”

㻸㼛㼚㼓㻙㼘㼕㼒㼑㻌㼟㼍㼘㼍㼐㼟㻌㼙㼍㼞㼗㼑㼠㻌㼟㼔㼍㼞㼑㼟㻌㻔㼑㼟㼠㼕㼙㼍㼠㼕㼛㼚㼟㻌㼒㼛㼞㻌㻞㻜㻝㻢㻕㻞㻢㻚㻠㻑㻷㻱㻺㻷㻻㻌㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻠㻞㻚㻟㻑㻷㼑㼣㼜㼕㼑
㼅㼍㼙㼍㼦㼍㼗㼕
㻝㻞㻚㻝㻑㻻㼠㼔㼑㼞㼟

㻝㻥㻚㻞㻑

Source: Prepared by FISCO from FUJI Keizai’s “Foodstuff Marketing Handbook”

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

05 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Company overview

㻻㼙㼑㼘㼑㼠㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㼙㼍㼞㼗㼑㼠㻌㼟㼔㼍㼞㼑㻌㻔㼑㼟㼠㼕㼙㼍㼠㼕㼛㼚㼟㻌㼒㼛㼞㻌㻞㻜㻝㻢㻕㻞㻢㻚㻣㻑㻷㼑㼣㼜㼕㼑
㻠㻠㻚㻠㻑㻭㻴㻶㻵㻷㻭㻺
㻷㻱㻺㻷㻻㻌㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻻㼠㼔㼑㼞㼟
㻝㻥㻚㻠㻑㻥㻚㻡㻑

Source: Prepared by FISCO from FUJI Keizai’s “Foodstuff Marketing Handbook”

2. The Company Strengths
The Company’s feature is its collective strength of integration between the production, development and sales
departments; namely, its nationwide production system that supplies high-quality products on a stable basis, andproduct development capabilities that meet customer needs as well as its meticulous sales response capabilities.
High quality means not only good taste, as 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 is an important
key in order for it to grow its business. Therefore, it is taking steps to offer added value through its meticulous
response to customers, involving the detailed segmentation of industry fields by business format, with the sales,
product development, production and menu development teams acting in concert. Seemingly as a result of these
efforts, since 2011 the Company’s sales growth rate has continued to outpace the growth rate of the restaurants
and HMR markets.

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

06 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Company overview

Broad product line-up

Source: The Company's results briefing materials㻳㼞㼛㼣㼠㼔㻌㼞㼍㼠㼑㻌㼛㼒㻌㼠㼔㼑㻌㼞㼑㼟㼠㼍㼡㼞㼍㼚㼠㼟㻌㼍㼚㼐㻌㻴㻹㻾㻌㼙㼍㼞㼗㼑㼠㼟㻌㼍㼚㼐㻌㼠㼔㼑㻌㼟㼍㼘㼑㼟㻌㼓㼞㼛㼣㼠㼔㻌㼞㼍㼠㼑㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㼟㻌㼍㼚㼐㻌㻴㻹㻾㻌㼙㼍㼞㼗㼑㼠㼟㻌㻔㼏㼍㼘㼑㼚㼐㼍㼞㻌㼥㼑㼍㼞㻕The Company’s consolidated net sales (fiscal year)
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㻞㻜㻝㻞

㻞㻜㻝㻢

Source: Prepared by FISCO from the Company’s financial results and data from the Foodservice Industry Research Institute

3. Production structures, consolidated subsidiaries
Currently, the Company’s nationwide production system comprises seven factories operated by the parent company
and nine factories operated by seven consolidated subsidiaries. Subsidiary production bases are closely linked totheir operating areas because they produce delicatessen-related products for daily deliveries to supermarkets.
Above all, a just-in-time (JIT) response capability is essential for CVS, which operate 24 hours a day, 7 days a week.
Some of the factories therefore operate 365 days-a-year, with flexible production systems that can quickly respondto changes in order volumes.

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

07 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Company overview

Also, the Company’s subsidiary Salad Cafe Co., Ltd. operates specialty salad shops. As of the end of March 2017,
there were 18 shops, an increase of 1 store YoY, mainly opened in department stores and shopping malls in themetropolitan Tokyo and Kansai areas.
In terms of overseas operations, the Company established a joint venture (49% equity stake) in Indonesia with alocal food producer in 2012, which began production of mayonnaise and sauces in the fall of 2013 (annual capacityof about 4,000 tons). This factory has obtained Halal certification, and apart from local home and commercial-use
sales of these products, it is engaged in the sale of liquid eggs. From February 2015, the joint venture 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 number of fronts, such as for hotels and restaurants.
As 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 profit and expenses as equity in net profit (loss) of affiliates.
They are included in Other Businesses in the consolidated business segments.
Affiliates (scope of operations, investment ratio)
Consolidated subsidiaries

Investment ratio(%)

Main business

DIETCOOK SHIRAOI Co., Ltd.

100.0

Delicatessen-related production and sales

Lilac FOODS Co., Ltd.

100.0

Delicatessen-related production and sales

KANTOH DIETCOOK Co., Ltd.

100.0

Delicatessen-related production and sales

KANTOH DIET EGG Co., Ltd.

100.0

Delicatessen-related production and sales

KANSAI DIETCOOK Co., Ltd.

100.0

Delicatessen-related production and sales

DIETCOOK SUPPLY Co., Ltd.

100.0

Delicatessen-related production and sales

KYUSHU DIETCOOK Co., Ltd.

100.0

Delicatessen-related production and sales

Hello Delica Co., Ltd.

100.0

Delicatessen-related sales

Salad Cafe Co., Ltd.

100.0

Operation of shops specializing in salads

49.0

Mayonnaise, dressings, and sauces production and sales(equity-method affiliates)
PT. Intan Kenkomayo Indonesia* Shows Group investment ratio, including indirect investments from wholly-owned subsidiaries
Source: Prepared by FISCO from the Company's securities report

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

08 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir██Results trends
Achieved record highs for net sales for the fifth consecutive fiscal
year and for recurring profit for the second consecutive fiscal year
1. Overview of the FY3/17 results
In the FY3/17 consolidated results announced on May 12, net sales increased 5.8% YoY to ¥70,812mn, operating
profit rose 16.0% to ¥3,987mn, recurring profit grew 17.2% to ¥4,017mn, and net profit attributable to parent shareholders increased 37.5% to ¥2,867mn, for higher sales and profits. Net sales increased for the sixth consecutive
fiscal year and achieved a record high for the fifth consecutive fiscal year, while recurring profit rose for the third
consecutive fiscal year and achieved a record high for the second consecutive fiscal year. In comparison to therevised Company forecasts announced in November 2016, operating profit and recurring profit were slightly below
forecast, but this was due to the effects of the soaring market price of potatoes due to a poor harvest and a risein procurements costs, and also due to factors including the deterioration of yield and an increase in the disposal
loss. The impact of the poor harvest of potatoes is thought to have been on a scale of several hundreds of millionsof yen, and it seems that without this impact, both operating profit and recurring profit would have exceeded theirrevised forecasts.
FY3/17 consolidated results(¥mn)
FY3/16
Results

FY3/17% ofsales

Initialforecast

Revisedforecast

Results

% of
sales

YoY

vs.
revisedforecast

Net sales

66,933-70,00070,80070,812

-

+5.8%

+0.0%

Cost of sales

49,689

74.2%

-

-

52,433

74.0%

+5.5%

-

SG&A expenses

13,807

20.6%

-

-

14,391

20.3%

+4.2%

-

Operating profit

3,436

5.1%

3,450

4,100

3,987

5.6%

+16.0%

-2.8%

-81

-

-

-

-32

-

-

-

Recurring profit

3,426

5.1%

3,500

4,200

4,017

5.7%

+17.2%-4.4%

Extraordinary income/losses

-660

-

-

-

4

-

-

-

Net profit attributable to parent shareholders

2,085

3.1%

2,130

2,680

2,867

4.0%

+37.5%+7.0%

Share of loss of entities accounted for using
equity method

Note: Revised forecast is as of November 2016.
Source: Prepared by FISCO from the Company's financial results

Looking at the trends in the restaurant, CVS, and supermarket industries, which are the Company’s main target
markets, in the restaurant industry, the fast food market has recovered, while sales to family restaurants continue tobe strong. The cafe business format is trending favorably and the number of these stores is increasing, and overall
it grew by around 3% YoY. Also, sales of daily items for CVS rose only slightly on an existing stores basis, but onan all-stores basis it is estimated they grew by around 3% due to the increase in the number of stores. Demandfor products such as lunch boxes, sandwiches, and salads continued to expand because of the proliferation of“solitary meals” and the “simplification of cooking” following the increase in single-person households and the greater
participation of women in society, including more working women. For the same reason, sales of delicatessen items
for supermarkets increased by approximately 4%, and the underlying expansion of the HMR market is continuingalongside that of the restaurant market.

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

09 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Results trends

Major markets’ monthly sales trends (YoY)㻯㼂㻿㻌㻔㼐㼍㼕㼘㼥㻌㼕㼠㼑㼙㻌㼟㼍㼘㼑㼟㻕㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㻌㼟㼍㼘㼑㼟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㻌㼕㼠㼑㼙㻌㼟㼍㼘㼑㼟㻕

㻣㻚㻜㻑

㻡㻚㻥㻑

㻢㻚㻜㻑
㻡㻚㻜㻑

㻠㻚㻠㻑

㻠㻚㻜㻑

㻟㻚㻜㻑

㻟㻚㻤㻑

㻝㻚㻠㻑
㻜㻚㻢㻑

㻟㻚㻟㻑

㻟㻚㻜㻑
㻞㻚㻜㻑

㻝㻚㻜㻑

㻡㻚㻜㻑

㻝㻚㻜㻑
㻜㻚㻣㻑

㻝㻚㻡㻑
㻜㻚㻞㻑

㻜㻚㻜㻑

㻝㻚㻣㻑

㻝㻚㻡㻑

㻠㻚㻣㻑

㻞㻚㻡㻑

㻟㻚㻥㻑

㻝㻚㻤㻑
㻝㻚㻝㻑

㻞㻚㻠㻑

㻙㻜㻚㻟㻑 㻙㻜㻚㻡㻑

㻝㻚㻡㻑

㻜㻚㻜㻑

㻝㻚㻡㻑
㻙㻜㻚㻝㻑

㻙㻞㻚㻜㻑

㻙㻝㻚㻣㻑

㻙㻟㻚㻜㻑

㻭㼜㼞㻙㻝㻢

㻟㻚㻞㻑

㻟㻚㻜㻑

㻜㻚㻜㻑

㻙㻝㻚㻜㻑

㻠㻚㻡㻑

㻡㻚㻟㻑

㻡㻚㻟㻑

㻞㻚㻤㻑

㻟㻚㻜㻑
㻞㻚㻜㻑

㻡㻚㻠㻑

㻶㼡㼚㻙㻝㻢

㻭㼡㼓㻙㻝㻢

㻙㻝㻚㻥㻑㻻㼏㼠㻙㻝㻢

㻰㼑㼏㻙㻝㻢

㻲㼑㼎㻙㻝㻣

㻭㼜㼞㻙㻝㻣

Source: Prepared by FISCO from data from Japan Food Service Association, Japan Supermarket Association and Japan
Franchise Association

In this sort of market environment, the Company’s net sales increased 5.8% YoY and grew at a pace above thegrowth of the restaurant and HMR markets. Looking at net sales by field, they grew significantly for CVS, by 15%
YoY, while they increased 11% for restaurants and 3.7% for mass retailers, so sales rose for all of the main markets.
Sales trended particularly favorably for CVS thanks to the increased adoption of processed egg products for items
such as lunch boxes, sandwiches, and noodles. Another factor behind the increase in sales was the performanceof small-package, long-life salads that have been adopted as PB products and become long-running hits. Further,
for the restaurant industry, sales of sauces grew following the recovery of a major hamburger chain that is a main
customer, while sales of processed egg products for CVS continued to trend strongly. In addition, sales rose of fresh
delicatessen daily items for mass-retailers, while sales of cut vegetables sold exclusively in Hokkaido also trended
strongly. However, there were restrictions on the delivery of potato salads and related products due to the impactof the fall in the supply volume of potatoes in Q4, and the sales increase rate was around 4%, which is lower thanthe Company-wide average.
Looking at the factors causing recurring profit to increase and decrease, the increase factors were the effects of thehigher sales of ¥694mn, the improvement in production efficiency, mainly at a consolidated subsidiary, of ¥86mn,
and the reduction in logistics costs of ¥99mn, which absorbed the fluctuation in raw-materials prices of ¥37mn andthe increase in fixed costs of ¥325mn, including for personnel costs and IT investment. In the prices of raw materials,
while the price of potatoes soared in 2H, the impact of this was exceeded by the effects of cost reductions from thefall in prices in the egg and cooking-oil markets.

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

10 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Results trends㻾㼑㼏㼡㼞㼞㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㼏㼔㼍㼚㼓㼑㻌㼒㼍㼏㼠㼛㼞㼟㻌㻔㻲㼅㻟㻛㻝㻣㻕

㻔¥㼙㼚㻕
㻠㻘㻡㻜㻜

㻗37
㻗99
㻗86
㻠㻘㻜㻜㻜

㻗694

㻵㼙㼜㼞㼛㼢㼑㼐㻌㼜㼞㼛㼐㼡㼏㼠㼕㼛㼚㻌㼑㼒㼒㼕㼏㼕㼑㼚㼏㼥

㻟㻘㻡㻜㻜
㻟㻘㻠㻞㻢

㻙㻟㻞㻡

㻱㼒㼒㼑㼏㼠㼟㻌㼛㼒㻌㻾㼑㼐㼡㼏㼑㼐㻌
㼘㼛㼓㼕㼟㼠㼕㼏㼟㻌 㼒㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟㻌㼕㼚㻌㼞㼍㼣㻙㼙㼍㼠㼑㼞㼕㼍㼘㼟㻌 㻵㼚㼏㼞㼑㼍㼟㼑㻌㼕㼚㻌㼏㼛㼟㼠㼟㼜㼞㼕㼏㼑㼟
㼒㼕㼤㼑㼐㻌㼏㼛㼟㼠㼟㻘㻌
㼑㼠㼏㻚
㻠㻘㻜㻝㻣

㻱㼒㼒㼑㼏㼠㼟㻌㼛㼒㻌㼔㼕㼓㼔㼑㼞㻌㼟㼍㼘㼑㼟㻟㻘㻜㻜㻜㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company's results briefing materials

Also, in non-operating profit, the loss in the equity in net profit (loss) in affiliates shrunk to ¥32mn (compared to a lossof ¥81mn in the previous fiscal year). The main reason for this was the higher sales of liquid eggs and commercial-use
mayonnaise following a rise in the number of Japanese restaurants entering-into Indonesia. The net profit increase
rate grew, but this was mainly due to the reduction in the amount of the extraordinary loss recorded in this fiscal
year, which in the previous fiscal year was ¥885mn as the total of a loss on the disposal of fixed assets and an
impairment loss.

The growth drivers are processed egg products among the products
and the CVS market among the markets
2. Trends by business segment(1) Seasoning and processed food businessIn this business, net sales increased 6.3% YoY to ¥58,511mn and the segment profit rose 5.2% to ¥3,012mn,
continuing the trend for increases in both revenues and profits.

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

11 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Results trends㻾㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㼟㼑㼍㼟㼛㼚㼕㼚㼓㻌㼍㼚㼐㻌㼜㼞㼛㼏㼑㼟㼟㼑㼐㻌㼒㼛㼛㼐㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻔¥㼙㼚㻕㻿㼍㼘㼍㼐㼟㻌㼍㼚㼐㻌㼐㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻌㼕㼠㼑㼙㼟㻌㻔㼘㼑㼒㼠㻕㻼㼞㼛㼏㼑㼟㼟㼑㼐㻌㼑㼓㼓㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㻔㼘㼑㼒㼠㻕㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻌㼍㼚㼐㻌㼐㼞㼑㼟㼟㼕㼚㼓㼟㻌㻔㼘㼑㼒㼠㻕㻻㼠㼔㼑㼞㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻣㻜㻘㻜㻜㻜

㻢㻜㻘㻜㻜㻜

㻞㻘㻤㻢㻞
㻞㻘㻢㻠㻤

㻠㻜㻘㻜㻜㻜

㻝㻘㻟㻥㻜

㻝㻘㻞㻣㻢

㻡㻜㻘㻜㻜㻜

㻝㻘㻜㻤㻣㻝㻡㻘㻝㻝㻢

㻟㻜㻘㻜㻜㻜
㻝㻢㻘㻣㻣㻞

㻟㻘㻡㻜㻜

㻟㻘㻜㻝㻞

㻝㻥㻘㻤㻢㻜
㻝㻣㻘㻣㻥㻞

㻝㻣㻘㻜㻢㻠

㻞㻘㻡㻜㻜
㻞㻘㻜㻜㻜

㻝㻣㻘㻡㻣㻢

㻞㻜㻘㻜㻜㻜
㻝㻜㻘㻜㻜㻜

㻟㻘㻜㻜㻜

㻝㻘㻡㻜㻜
㻝㻘㻜㻜㻜

㻝㻢㻘㻣㻡㻤

㻝㻤㻘㻥㻜㻟

㻝㻥㻘㻢㻤㻡

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻜㻡㻜㻜㻜

Source: Prepared by FISCO from the Company's results briefing materials

Looking at the sales trends by product, sales of salads and delicatessen items increased 4.1% to ¥19,685mn(sales volume, up 2.3%), mayonnaise and dressings rose 3.0% to ¥17,576mn (up 3.6%), and processed egg
products grew 11.6% to ¥19,860mn (up 14.0%), meaning sales of every product increased.
In salads and delicatessen products, sales of small-package long-life salads, mainly for CVS, trended strongly,
up 20% YoY. In Japanese side dishes, the Company enhanced the WASAI BANSAI® series product lineup from
6 items at the end of the previous fiscal year to 11 items, and these products are being adopted by an increasing
number of mass retailers and restaurants. It also announced a new brand of MAGOKORO SHOKUSAI® thattargets the hospital- and nursing-meals market, and although still small scale, its sales grew, mainly for hospitals.
In mayonnaise and dressings, sales of 1kg mayonnaise packages grew for mass retailers, bread manufacturers,
and for exports. Sales also grew of 500ml dressing packages and nugget sauce for the fast food market, and ofsmall-package products for the CVS market. In World Traveler Dressings®, which was launched as a new series
in the previous fiscal year, the Company announced three new products, including from the information collected
and developed into products at the Vancouver Research Office in Canada, which was opened in July 2015, for a
total of four products. In addition, responding to the demand for high-value added and health-conscious products,
it released three items in the Triple Balance® series of non-oil dressings that have the keywords of low calorie, lowsugar, and reduced salt, and these products have been favorably received by restaurants and other customers.
The growth in processed egg products was mainly for the CVS market, from egg salads for sandwiches andfor delicatessen bakery products, Atsuyaki (thick omelet) for sushi rolls, and Kinshi-tamago, thin omelet cut into
string-like strips, for noodles. In boiled egg products also, the Company continued to adopt various products,
including for restaurants and for bread with filling, and the double-digit growth continued.
(2) Delicatessen-related businessNet sales in this business increased 3.8% YoY to ¥11,062mn, while on a profit basis, segment profit grewsignificantly, up 58.5% to ¥1,023mn.

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

12 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir

Results trends㻾㼑㼟㼡㼘㼠㼟㻌㼕㼚㻌㼠㼔㼑㻌㼐㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻙㼞㼑㼘㼍㼠㼑㼐㻌㼎㼡㼟㼕㼚㼑㼟㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻝㻞㻘㻜㻜㻜
㻝㻜㻘㻜㻜㻜

㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕㻝㻜㻘㻢㻢㻜

㻝㻝㻘㻜㻢㻞

㻥㻘㻠㻝㻥

㻔¥㼙㼚㻕
㻝㻘㻞㻜㻜
㻝㻘㻜㻜㻜

㻝㻘㻜㻞㻟
㻤㻘㻜㻜㻜

㻤㻜㻜

㻢㻘㻜㻜㻜

㻢㻜㻜

㻢㻠㻡

㻠㻘㻜㻜㻜
㻞㻘㻜㻜㻜

㻠㻜㻜
㻟㻠㻤

㻞㻜㻜

㻜

㻜

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company's results briefing materials

Due to the impact of the poor potato harvest, sales of the basic product of potato salad slumped, and if looking
only at Q4, growth became sluggish with net sales increasing only 1.1% YoY and segment profit rising 6.9%.
However, this was covered by the growth in other products, including macaroni salads using ham, seasoned codroe, and eggs; spaghetti salads using 10 vegetables; and Japanese delicatessen items. Sales of cut vegetables
limited to the Hokkaido area also trended favorably. The segment profit margin rose from 6.1% in the previous fiscal
year to 9.2%, with the main factors including the measures to improve productivity carried out at a consolidated
subsidiary. Specifically, progress was made in improving the food-disposal loss (improving the yield) and also inincreasing production efficiency through reviewing the production lines.
(3) Other businesses
Other businesses includes in its results the equity in net profit (loss) of affiliates from overseas operations, inaddition to revenue from the Company’s specialty salad shops operated by its consolidated subsidiary Salad
Cafe Inc. Sales were flat YoY at ¥1,238mn and the segment loss was ¥31mn (compared to a loss of ¥77mn inthe same period in the previous fiscal year).

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

13 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir

Results trends㻻㼠㼔㼑㼞㻌㼎㼡㼟㼕㼚㼑㼟㼟㼑㼟㻌㼞㼑㼟㼡㼘㼠㼟
㻔¥㼙㼚㻕
㻝㻘㻠㻜㻜

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻰㼛㼙㼑㼟㼠㼕㼏㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕㻻㼢㼑㼞㼟㼑㼍㼟㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻕

㻝㻣

㻠

㻝

㻡㻜

㻝㻘㻞㻜㻜

㻝㻘㻜㻜㻜

㻔¥㼙㼚㻕

㻜
㻙㻟㻞

㻝㻘㻝㻣㻡

㻤㻜㻜

㻙㻡㻜
㻙㻝㻜㻜

㻙㻤㻝

㻢㻜㻜

㻙㻝㻡㻜
㻝㻘㻞㻟㻤

㻝㻘㻞㻟㻤

㻠㻜㻜

㻙㻞㻜㻜

㻞㻜㻜

㻙㻞㻡㻜
㻙㻞㻠㻢

㻜

㻙㻟㻜㻜
㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company's results briefing materials

For Salad Cafe, the number of stores increased by 1 on the end of the previous fiscal year to 18. A store was newly
opened in March 2016 under the new brand WaSaRa Kintetsu Abeno Harukas, which provides “Japanese-stylesalads” with an emphasis on Japanese ingredients and tastes. Its sales are growing on the back of the boom inJapanese food, so in March 2017 the Company also opened Imotamaya Isetan Shinjuku Cafe, which specializes
in Japanese side dishes, mainly made of potato and egg, as foods familiar to a wide range of age groups. Profits
decreased slightly due to the rise in store-opening costs.
On the other hand, in the overseas business, as previously mentioned the loss in the equity in net profit (loss) inan affiliate in Indonesia was reduced.

Raised ¥6,400mn in a capital increase through a public offering in
preparation for large-scale capital investment
3. Financial position and management indicators
Looking at the financial condition at the end of March 2017, total assets were up ¥9,136mn on the end of theprevious fiscal year to ¥51,442mn. The main increase factors were that in current assets, cash and deposits rose
¥6,366mn due to a capital increase through a public offering carried out in February 2017, while accounts receivablerose ¥524mn. In fixed assets, tangible fixed assets increased ¥1,599mn following the investment to strengthen the
production capacity.
Total liabilities were down ¥8mn on the end of the previous fiscal year to ¥22,985mn. In current liabilities, accounts
payable increased ¥717mn, while equipment-related notes payable decreased ¥672mn. In fixed liabilities, on the
one hand long-term loans payable fell ¥695mn, but on the other hand long-term accounts payable rose ¥536mn,
and in total, interest-bearing debt increased ¥34mn. Also, net assets were up ¥9,144mn on the end of the previous
fiscal year to ¥28,456mn. This was due to an increase in retained earnings of ¥2,527mn following the recording of
net profit attributable to parent shareholders, and also as the capital and capital surplus increased ¥6,487mn on
the implementation of the capital increase through a public offering.

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14 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Results trends

Looking at the management indicators, the shareholders’ equity ratio rose by 9.7 percentage points on the end of
the previous fiscal year to 55.3%, which exceeds the level of 50% targeted in the Mid-term Management Plan. In
addition, the interest-bearing debt ratio fell by 12.5 points to 26.9%, so it can be said that the Company has greatly
strengthened its financial base. However, it is aiming to further expand the Group’s production capacity and plansto spend a total of ¥15,900mn up to March 2019 at 4 domestic bases to expand the production capacity of its
existing factories and to build new factories. The level of cash and deposits at the end of FY3/17 was ¥13,700mn,
so the Company plans to cover the shortfall from borrowing from banks, and therefore the shareholders’ equity ratio
may again fall in the future. But in the context of the continuing ultra-low interest rates, it is expected to be able tomaintain its financial soundness.
In the indicators of profitability, ROE was 12.0% and the consolidated recurring profit margin was 5.6%, and bothincreased for the third consecutive fiscal year. Profitability is continuing to improve from the effects of the higher
sales, mainly of processed egg products. The forecast for FY3/18 is that the consolidated recurring profit margin will
fall to 5.5%, because the rise in the price of raw materials and in personnel costs and other fixed costs will overlap
with the costs to prepare for the construction of the new factories. However, it will still be maintained at above the
5% level, which is the target in the Mid-term Management Plan.
Consolidated balance sheet(¥mn)
FY3/14

FY3/15

FY3/16

FY3/17

ChangeCurrent assets

18,09518,704

21,83629,196

7,360

Cash and deposits

3,884

4,778

7,412

13,7796,366

Inventories

2,135

2,309

2,601

2,817

216

Fixed assets

21,59020,744

20,46922,245

1,775

Total assets

39,68639,44842,30651,442

9,136

Current liabilities

14,86014,422

16,313

16,487

173

Fixed liabilities

9,015

7,058

6,680

6,498

-182
34

Interest-bearing debt*

9,943

8,584

7,617

7,651

Total liabilities

23,87621,481

22,99422,985-8

Total net assets

15,81017,967

19,311

28,456

9,144

Current ratio

121.8%

129.7%

133.9%

177.1%

Shareholders’ equity ratio

39.8%

45.5%

45.6%

55.3%

Interest-bearing debt ratio

62.9%

47.8%

39.4%

26.9%

ROE (return on equity)

8.3%

9.6%

11.2%

12.0%

Recurring profit/net sales

4.2%

5.0%

5.1%

5.6%

Stability

Profitability*Interest-bearing debt includes long-term accounts payable
Source: Prepared by FISCO from the Company's financial results and results briefing materials

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15 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir██Future outlook
In FY3/18, profits will decline in 1H due to the soaring prices of a raw
material, but will recover in 2H
1. Outlook for the FY3/18
The forecasts for the FY3/18 consolidated results are for the higher sales and profits to continue, with net sales
to increase 5.9% YoY to ¥75,000mn, operating profit to grow 2.3% to ¥4,080, recurring profit to rise 2.1% to¥4,100mn, and net profit attributable to parent shareholders to increase 0.1% to ¥2,870mn, so the outlook is once
again for record-high results. While profits are expected to decline in 1H due to the impact of the soaring price ofpotatoes, they will recover from 2H onwards and the growth in profits will be maintained for the full fiscal year. A
return to a single-digit increase in sales is expected for Q1.
The FY3/18 consolidated outlook(¥mn)
FY3/17Full-year
resultFY3/18
YoY

1H
forecast

YoY

Full-year
forecast

YoY

Net sales

70,812+5.8%

37,880+5.2%

75,000+5.9%

Operating profit

3,987+16.0%

2,200-11.2%

4,080

+2.3%

Recurring profit

4,017+17.2%

2,210-11.3%

4,100

+2.1%

Net profit

2,867+37.5%

1,550

-8.3%

2,870

+0.1%

Earnings per share (¥)

194.8894.08

174.20*Net profit: Net profit attributable to parent shareholders
Source: Prepared by FISCO from the Company's financial results

In terms of the factors causing recurring profit to increase and decrease, the increase factors will be the effects of thehigher sales of ¥375mn, the improvement in production efficiency of ¥90mn, and the reduction in logistics costs of¥58mn, while the decrease factors will be the fluctuation in raw-materials prices of ¥80mn and the increase in fixed
costs of ¥360mn.These forecasts assume that the price of eggs, which are a main raw material, will stay at aroundthe same level of the previous fiscal year of ¥205/kg, and that the price of potatoes will fall 6.7% to ¥180/kg due tothe recovery of the harvest yield. However, the reasons why despite this, profits are forecast to decline ¥80mn are
the expected rise in the market price of cooking oil and the increase in costs for the import of tuna and other raw
materials. The impact from cooking oil will be kept down as the Company concludes forward contracts from morethan half of its annual amount, so it is not considered that there will be a major fluctuation. Therefore, the market
conditions for eggs and potatoes may be the factors causing profits to change in the future.
In April and June, the price of eggs rose by more than 5% compared to the same period in the previous fiscal year,
which seems to have been due to the impact of the avian influenza that occurred in Miyagi Prefecture and Chiba
Prefecture in March. However, currently this situation has settled down, so it seems that going forward the pricewill trend around the same level YoY. Also, potatoes planted in the spring are harvested in the fall, but due to theunseasonable weather in 2016, the harvest yield declined greatly, by 9% YoY, so the average wholesale price rose
sharply, up 21% (¥159/kg in 2015  ¥193/kg in 2016). Therefore, the wholesale price in 2017 will depend on theharvest yield and the Company is assuming a recovery of 2% YoY and so expects the wholesale price to fall. If theweather is good and the harvest yield recovers to the level of two years ago, it is possible that the wholesale pricewill fall more than the Company expects.

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16 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir

Future outlook㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼜㼞㼕㼏㼑㻌㻔㼀㼛㼗㼥㼛㻕㻌㼛㼒㻌㼠㼔㼑㻌㻺㼍㼠㼕㼛㼚㼍㼘㻌㻲㼑㼐㼑㼞㼍㼠㼕㼛㼚㻌㼛㼒㻌㻭㼓㼞㼕㼏㼡㼘㼠㼡㼞㼍㼘㻌㻯㼛㼛㼜㼑㼞㼍㼠㼕㼢㼑㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚㼟㻌㻔㼆㻱㻺㻙㻺㻻㻴㻕㻌㼙㼑㼐㼕㼡㼙㻙㼟㼕㼦㼑㼐㻌㼑㼓㼓㼟㻔¥㻛㼗㼓㻕

㻲㼅㻞㻜㻝㻡

㻲㼅㻞㻜㻝㻢

㻲㼅㻞㻜㻝㻣

㻞㻤㻜
㻞㻢㻜
㻞㻠㻜
㻞㻞㻜

㻞㻡㻜

㻞㻠㻣

㻞㻞㻣
㻞㻝㻡

㻞㻟㻝

㻞㻟㻜

㻞㻞㻟

㻞㻝㻢

㻞㻝㻟

㻞㻝㻥

㻞㻡㻡

㻞㻠㻡

㻞㻝㻝

㻝㻥㻣

㻞㻜㻠

㻞㻜㻜

㻞㻡㻞

㻞㻜㻥

㻞㻝㻡

㻝㻥㻞
㻝㻤㻠

㻞㻝㻣

㻞㻜㻠

㻝㻤㻞

㻝㻤㻜

㻝㻤㻜
㻝㻣㻥
㻝㻢㻜
㻝㻠㻜
㻭㼜㼞㼕㼘

㻶㼡㼚㼑

㻭㼡㼓㼡㼟㼠

㻻㼏㼠㼛㼎㼑㼞

㻰㼑㼏㼑㼙㼎㼑㼞

㻲㼑㼎㼞㼡㼍㼞㼥

Source: Prepared by FISCO from data from ja-z-tamago. Co., Ltd.

㼀㼔㼑㻌㼜㼛㼠㼍㼠㼛㻌㼣㼔㼛㼘㼑㼟㼍㼘㼑㻌㼜㼞㼕㼏㼑㻌㼍㼚㼐㻌㼠㼔㼑㻌㼔㼍㼞㼢㼑㼟㼠㻌㼥㼕㼑㼘㼐㻴㼍㼞㼢㼑㼟㼠㻌㼥㼕㼑㼘㼐㻌㻔㼘㼑㼒㼠㻕㻔㼙㼕㼘㼘㼕㼛㼚㻌㼠㼛㼚㼟㻕㻭㼢㼑㼞㼍㼓㼑㻌㼣㼔㼛㼘㼑㼟㼍㼘㼑㻌㼜㼞㼕㼏㼑㻌㻔㼞㼕㼓㼔㼠㻕

㻝㻥㻟

㻞㻚㻠㻜

㻝㻤㻜

㻔¥㻛㼗㼓㻕

㻞㻜㻜

㻝㻡㻥

㻞㻚㻟㻜

㻝㻡㻜

㻞㻚㻞㻜

㻝㻜㻜
㻞㻚㻟㻢

㻞㻚㻝㻜

㻞㻚㻞㻜

㻡㻜

㻞㻚㻝㻡
㻞㻚㻜㻜

㻜

㻞㻜㻝㻡

㻞㻜㻝㻢

㻞㻜㻝㻣㻌㻱

Source: Prepared by FISCO from the Company's results briefing materials

2. Sales outlook by segment
In the sales forecasts by segment, in the seasoning and processed food business, sales are expected to increase
5.1% YoY to ¥61,477mn; in the delicatessen-related business, to rise 10.4% to ¥12,210mn, and in others, toincrease 6.1% to ¥1,313mn. As the measures for this fiscal year, the Company is developing products in response to
the changes in the markets and in customer needs, including for health-conscious products and for labor shortages.
Its policy is to expand sales by developing new products from novel concepts without being constrained by existing
concepts, while also expanding sales channels through conducting further market directing.

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17 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Future outlook

Net sales by segment(¥mn)
FY3/15

FY3/16

FY3/17

FY3/18Growth rate

49,73355,03558,511

61,477

5.1%

Salads & delicatessen

16,75818,903

19,685

20,7295.3%

Mayonnaise & dressings

16,772

17,064

17,576

18,2984.1%

Processed egg products

15,116

17,792

19,86021,075

6.1%

Others

1,087

1,276

1,390

1,375

-1.1%

Delicatessen-related business

9,419

10,66011,062

12,210

10.4%

Other business

1,175

1,238

1,238

1,313

6.1%

Total

60,327

66,93370,81275,000

5.9%

Seasonings & processed foods

Source: Prepared by FISCO from the Company's results briefing materials

In the seasoning and processed food business, sales of salads and delicatessen products are forecast to increase
5.3% YoY. 2017 marks the 40th anniversary of the launch of the long-life salads Fashion Delica Foods®, so theCompany plans to launch new products and to implement various measures to unify and improve the brand image inconjunction with the Group’s comprehensive fairs that it holds in Tokyo and Osaka every fall. As the product strategy,
it intends to continue to grow sales of small-package, long-life salads, as well as strengthening the product lineup,
including of new material-related potato products.
Sales of mayonnaise and dressings are forecast to increase 4.1% YoY. The Company is aiming to increase sales bydeveloping high value-added products using new manufacturing methods with an awareness of health consciousness, launching new commercial-use products for the seasoning (sauces) market, and expanding its business areas.
Sales of processed egg products are forecast to increase 6.1% YoY. The Company will continues to expand
domestic and overseas sales of the Sozaitei® series, which grew rapidly by 2.3 times following many inquiries in
the previous fiscal year. For egg salads also, it is responding to the increase in demand and since March 2017 it has
strengthened production capacity at the Atsugi Factory and it plans to actively expand sales channels.
Sales are also forecast to increase in others from the rise in the number of Salad Cafe stores, while the aim is tochange the loss in the equity in net profit (loss) in an affiliate in Indonesia to a profit in this fiscal year.

██Longer-term management strategy
The four new factories will become operational in FY3/19 and theaim is to further expand earnings through large-scale investment
1. The concept for the Group’s production bases
For its domestic bases, the Company plans to expand facilities at two factories and build two new factories towards
growth from FY3/19 onwards. Specifically, it plans to increase production facilities at the Shizuoka Fujisan Factory(main products: omelet products) and the Nishi-Nihon Factory (long-life salads and dressings) and build new factories
at its consolidated subsidiaries of KANTOH DIETCOOK Co., Ltd. (fresh delicatessen items) and DIETCOOK SHIRAOI
Co., Ltd. (fresh delicatessen items and long-life salads). Once these construction projects are completed, it will add
production capacity equivalent to sales of more than ¥10,000mn a year.

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18 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Longer-term management strategy

The concept for the Group’s production bases
Factory / subsidiary

Main productConstruction
start date

Scheduledcompletion
date

Capitalinvestment(unit: ¥mn)

July 2017

February 2019

4,167

Processed egg products will
increase by approximately 3,020t
a yearFebruary 2018

March 2019

5,636

Salads and delicatessen products
will increase by approximately
4,300t a year

Increase in capacity on completion(forecast)

Shizuoka Fujisan Factory (FujiCity, Shizuoka Prefecture)

Omelet products

Nishi-Nihon Factory (Maizuru
City, Kyoto Prefecture)

Long-life salads anddressings

KANTOH DIETCOOK (Odawara
City, Kanagawa Prefecture)

Fresh delicatessen items

June 2017

June 2018

3,550

Sales of salads and delicatessen
products will increase byapproximately ¥6,000mn a year

DIETCOOK SHIRAOI (Shiraoigun, Hokkaido)

Fresh delicatessen items
and long-life salads

July 2017

April 2018

2,547

Salads and delicatessen products
will increase by approximately
3,000t a year

Source: Prepared by FISCO from the Company's results briefing materials

Shizuoka Fujisan Factory is a facility dedicated to the production of processed egg products that was newly opened
in March 2014, and in the last few years it has been one of the driving forces behind the Company’s growth. It had
an annual production capacity of about 6,000 tons, but since the space in the existing factory has been almost
entirely filled, the Company decided to expand the factory facilities within the same site. The capital investment will
be more than ¥4,000mn and the construction is scheduled for completion in February 2019, after which the annual
production capacity will increase by around 3,020 tons. It is considered that the Company is aiming to expand its
share of the omelet market, in which it is currently ranked third, and become the second-ranked company.
The Nishi-Nihon Factory produces long-life salads and dressings. The annual production capacity of the existing
factory is approximately 18,000 tones and it is the Company’s main base in the West Japan area. The current
construction work will increased its annual production capacity by around 4,300 tons. It is scheduled for completionby March 2019 and this expansion in production capacity is expected to result in higher sales of long-life salads.
Since KANTOH DIETCOOK’s existing factory in Tokorozawa had become too small, the Company newly purchased
land in Odawara City, Kanagawa Prefecture, as the site to build a new factory to produce fresh delicatessen items.
Its construction is scheduled for completion in June 2018 and it is expected to increase sales by approximately¥6,000mn.
DIETCOOK SHIRAOI’s existing factory has become obsolete, so the Company decided to construct a new factory
within Ishiyama Industrial Park in Shiraoi Town, which is scheduled for completion in April 2018. In addition to fresh
delicatessen items, the plan is to increase the production capacity for new material-related potato products, andthe annual production capacity will increase by around 3,000 tons.
The completion of the construction at these four factories will further expand the Group’s production capacity. As
they will become operational from FY3/19 onwards, deprecation expenses are forecast to increase. But if the start ofoperations at the factories goes smoothly, then it is expected that this increase will be fully absorbed by the effectsof the higher sales, so the outlook is for the recurring profit margin to be maintained at above 5%.
The capital investment amount in FY3/18 will be ¥600mn and no particularly large investments are planned.
Depreciation expenses are forecast to be ¥1,700mn, a slight decrease YoY.

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19 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.

31-Jul.-2017

2915 Tokyo Stock Exchange First Section

http://www.kenkomayo.co.jp/en/ir

Longer-term management strategy㻯㼔㼍㼚㼓㼑㻌㼕㼚㻌㼏㼍㼜㼕㼠㼍㼘㻌㼑㼤㼜㼑㼚㼐㼕㼠㼡㼞㼑㻌㼍㼚㼐㻌㼐㼑㼜㼞㼑㼏㼕㼍㼠㼕㼛㼚
㻔¥㼙㼚㻕
㻣㻘㻜㻜㻜

㻯㼍㼜㼕㼠㼍㼘㻌㼕㼚㼢㼑㼟㼠㼙㼑㼚㼠㻰㼑㼜㼞㼑㼏㼕㼍㼠㼕㼛㼚

㻢㻘㻠㻞㻠

㻢㻘㻜㻜㻜

㻿㼔㼕㼦㼡㼛㼗㼍㻌㻲㼡㼖㼕㼟㼍㼚㻌
Factory ¥4,530mn

㻡㻘㻜㻜㻜
㻠㻘㻜㻜㻜

㻟㻘㻜㻜㻜
㻞㻘㻜㻜㻜

㻝㻘㻣㻢㻥

㻝㻘㻠㻞㻝
㻝㻘㻜㻜㻠

㻝㻘㻡㻜㻤

㻝㻘㻡㻜㻜

㻝㻘㻣㻡㻠

㻣㻢㻢

㻝㻘㻜㻜㻜

㻝㻘㻣㻜㻜

㻢㻜㻜

㻜
㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company's financial results

Is making steady progress with the Mid-term Management Plan andit can achieve all of its targets
2. The progress made in the Mid-term Management Plan
FY3/18 is the final year of the Mid-term Management Plan KENKO Five Code 2015-2017. The Plan’s managementtargets are consolidated sales of ¥75,000mn, a consolidated recurring profit margin of 5%, a shareholders’ equity
ratio of 50%, and to maintain ROE at 8% or above. The Company made excellent progress up to the previous
fiscal year and it has already achieved the targeted levels for the recurring profit margin, shareholders’ equity ratio
and ROE. If it achieves net sales of ¥75,000mn in FY3/18, it is highly likely that it will have achieved all of thesenumerical targets.
KENKO Five Code 2015-2017(¥mn)
FY3/18
FY3/15 result

FY3/16 result

FY3/17 result

Mid-term Plan
targets

Current
forecasts

Net sales

60,327

66,93370,81275,00075,000Recurring profit

2,776

3,426

4,017

3,750

4,100

Recurring profit margin

4.6%

5.1%

5.6%

5.0%

5.5%

Shareholders’ equity ratio

45.5%

45.6%

55.3%

50.0%

-

ROE

9.6%

11.2%

12.0%

At least 8%

9.7%

Source: Prepared by FISCO from the Company's results briefing materials

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20 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir

Longer-term management strategy

There are three main reasons why results are trending favorably. The first reason is the steady expansion of therestaurants and HMR markets, which are the Company’s main markets, due to factors such as the increase insingle-person households and the greater participation by women in society, for example more working women. The
second reason is that the Company continues to propose detailed menus and conduct sales activities tailored to
specific industries and formats in order to respond to the issues in the restaurant industry, that it requires products
and menus that contribute to the “simplification” of cooking due to its chronic shortage of labor, and also thedevelopment of menus that reflect the rising awareness of health among consumers. This is enabling the Company
to expand its share of business with existing customers and also develop new customers. The third reason is that
results have improved at a pace faster than expected due to the strong sales of processed egg products for CVS
and of small-package long-life salads as PB products.
Further, within business strategies aimed at achieving the mid-term management plan, the Company is tackling thefollowing three major initiatives – “Establishing our position as the ‘Leading Company in Salads,’” “Further evolving
Salad Cuisine,” and “Strengthening the management platform to proactively promote expansion into global markets.”
In order to establish its position as the ‘Leading Company in Salads,’ the Company’s policy is to expand the scope ofsales in its various existing businesses. To further evolve Salad Cuisine, it intends to strengthen information provision
through the media and its own website, strengthen branding, and promote its Salad Cuisine cooking schools andSalad Cafe shops. On its own website, the Company has posted more than 1,200 recipes, including by businessformat and by season, and it disseminates information on trends on its “salads information specialty site” that is
visited by people interested in salads. The Company has set August 24 as “Dressings Day” and his registered itwith the Japan Anniversary Association.
As part of its strengthening of the management platform to proactively promote expansion into global markets, theCompany newly established a research office in Vancouver, Canada, in July 2015. Specific results have alreadystarted to appear from the information collected by this base, including the early launch of new products in theWorld Traveler Dressings® series. It is difficult for the Company to expand its export business quickly due to thevarious hurdles that must be cleared, such as meeting each country’s import restrictions, but it intends to expand
profits centered on exports of mayonnaise and dressings, aiming for net sales of ¥1,000mn in FY3/18 (they wereabout ¥700mn in FY3/17).

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

21 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise Co., Ltd.
2915 Tokyo Stock Exchange First Section

31-Jul.-2017
http://www.kenkomayo.co.jp/en/ir██Shareholder return policy
Benchmark is a dividend payout ratio of 20% and it also provides
gifts to shareholders
As its policy to return profits to shareholders, the Company pays dividends and provides gifts to shareholders. Its
dividend policy is to raise dividends to a high level in line with earnings growth based on a benchmark consolidated
dividend payout ratio of 20%, while also taking into consideration the continuity of dividends. In FY3/18, it plans toleave the dividend per share unchanged YoY at ¥37.0 (payout ratio, 21.2%), while we can expect dividend growthin the future if earnings continue to increase.
At the same time, the Company gives its products as gifts to shareholders registered on March 31 of each fiscal
year. A present with a value of ¥1,000 is given to shareholders with 100 to 999 shares, while a present with a valueof ¥2,500 is given to shareholders with 1,000 or more shares.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻔¥㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕

㻠㻜㻚㻜

㻟㻜㻚㻜

㻟㻡㻚㻜
㻟㻜㻚㻜

㻞㻟㻚㻢㻌
㻞㻝㻚㻞㻌

㻞㻝㻚㻞㻌

㻝㻥㻚㻥㻌

㻝㻥㻚㻝㻌

㻝㻥㻚㻜㻌

㻞㻜㻚㻜

㻟㻣㻚㻜㻌

㻝㻡㻚㻜

㻟㻣㻚㻜㻌

㻞㻤㻚㻜㻌
㻞㻝㻚㻜㻌

㻞㻝㻚㻜㻌

㻞㻡㻚㻜
㻞㻜㻚㻜

㻞㻡㻚㻜

㻝㻜㻚㻜

（㻑）

㻝㻡㻚㻜
㻝㻜㻚㻜

㻞㻟㻚㻜㻌

㻡㻚㻜

㻡㻚㻜
㻜㻚㻜

㻜㻚㻜

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company's financial results

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

22 22

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
properties of the Tokyo Stock Exchange, and therefore all rights to them belong to the Tokyo
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This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
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use. We provide this report solely for the purpose of information, not to induce investment or
any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
this report are subject to change without prior notice.
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The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.