Financial Results
for the Year Ended December 31, 2018 — Consolidated(Based on IFRS)
February 13, 2019

Company name

Sapporo Holdings Limited

Security code
Listed on
URL

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
http://www.sapporoholdings.jp/english/

Representative
Contact

Masaki Oga, President and Representative Director
Yuru Kobayashi, Director of the Corporate Communications Department

Telephone
Scheduled dates:+81-3-5423-7407

Annual general meeting of shareholders

March 28, 2019

Filing of annual financial report

March 29, 2019

Commencement of dividend payments

March 29, 2019

Supplementary information to the year-end earnings results

Available

Year-end earnings results briefing heldYes(mainly targeted at institutional
investors and analysts)

1. Consolidated Financial Results for the Year Ended December 31, 2018
(January 1 – December 31, 2018)(Amounts in million yen rounded to the nearest million yen)

(1) Operating Results(Percentage figures represent year-over-year changes)
RevenueYear ended

Operating profit

Profit before tax

Profitmillion yen%

million yen%

million yen%

million yen%

521,856(2.7)

10,828(15.4)

9,492(17.7)

7,721

21.3

536,585_

12,806_

11,538

_

6,367

_

December 31, 2018Year ended
December 31, 2017

Profit attributable toTotal comprehensive

owners of parent

Year ended

incomeBasic earnings

Diluted earnings

per shareper share

million yen%

million yen

%

Yen

yen

8,521

18.6

(8,003)_109.40104.46

7,187_

16,252

_

92.27

92.25

December 31, 2018Year ended
December 31, 20171

Ratio of profit to

Ratio of profit

Operating profit

equity attributable tobefore tax to total

marginowners of parent

assets

%

%

%

5.1

1.5

2.1

4.4

1.7

2.4

Year ended
December 31, 2018Year ended
December 31, 2017

Note: Equity method investment gains
Year ended December 31, 2018: 19 million yen
Year ended December 31, 2017: 19 million yen(2) Financial Position
Total assets

Total equity

Equity attributable

Ratio of

Equity per shareto owners ofequity attributable toattributable to owners

parentowners of parent toof parent

total assets
December 31,

million yen

million yen

million yen%

yen639,692

164,735

161,501

25.2

2,073.54

664,731

175,710172,05525.9

2,208.87

2018
December 31,
2017(3) Cash Flows
Cash flows fromoperatingactivities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents at endof period

million yen

million yen

million yen

million yen

Year ended
December 31, 201830,830(18,727)(14,521)

9,989

Year ended
December 31, 201733,794(17,873)(13,911)

12,537

2. Dividends
Dividend per share

Record date or period

Year ended December 31,

Total

Payout ratio

Dividends to equity

dividends(consol.)

attributable to owners of

paidparent(full year)(consol.)

End

End

End

Year- Full year

Q1

Q2

Q3

end

yen

yen

yen

yen

yen

—

0.00

—

40.00

40.00

3,122

43.4

1.9

—

0.00

—

42.00

42.00

3,277

38.4

2.0

—

0.00

—

42.00

42.00

million yen

%

%

2017
Year ended December 31,
2018
Year ending December 31,
2019 (forecast)2—

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2019
(January 1 – December 31, 2019)(Percentage figures represent year-over-year changes)
RevenueYear ending

Operating profit

Profit before tax

ProfitProfit attributable

Basic

to

earnings

owners of parent

per share

million yen%

million yen%

million yen%

million yen%

million yen%%

548,800

5.2

12,60016.4

11,300

19.0

8,200

6.2

8,700

2.1

111.70December 31,
2019

Note: Earnings forecasts for the six months ending June 30, 2019 are omitted because the company
manages performance targets on a yearly basis.

4. Other(1) Changes to scope of consolidation: None
(2) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accounting policies required by IFRS: None
2) Changes other than 1) above: None
3) Changes in accounting estimates: None
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
December 31, 2018: 78,794,298 shares
December 31, 2017: 78,794,298 shares
2) Number of shares held in treasury at end of period:
December 31, 2018: 907,931 shares
December 31, 2017: 901,792 shares
3) Average number of outstanding share during the period:
December 31, 2018: 77,890,590 shares
December 31, 2017: 77,894,040 shares
Audit Status
The year-end financial results are outside the scope of audit procedures based on the Financial
Instruments and Exchange Act.
Appropriate Use of Earnings Forecasts and Other Important Information
This document contains projections and other forward-looking statements based on information
available to the Company as of the date of this document. Actual results may differ from thoseexpressed or implied by forward-looking statements due to various factors. For the assumptions
underlying the forecasts herein and other information on the use of earnings forecasts, refer to“Outlook for the fiscal year ending December 31, 2019” on page 11.

3

1. Analysis of Operating Results and Financial Condition(1) Analysis of Operating Results(a) Review of the fiscal year ended December 31, 2018

Millions of yen, except percentages

Year ended December 31,
2018
Year ended December 31,
2017
Change (%)

Profit before tax

Profit attributable toowners of parents

Revenue

Operating profit

521,856

10,828

9,492

8,521

536,585

12,806

11,538

7,187

(2.7)

(15.4)(17.7)

18.6

In 2018, the Japanese economy stayed on a moderate recovery track, supported by rebounding exports andimproved employment and income environments. However, natural disasters such as July’s torrential rains and
September’s Hokkaido Eastern Iburi Earthquake also had a significant impact on the Japanese economy. Global
economic conditions, meanwhile, remained clouded by US-China trade frictions, rising interest rates, politicalinstability in many countries and other factors that affect investment.
In the domestic alcoholic beverage industry, consumers’ well-entrenched cost-cutting mindset has shifted demand
prominently to lower-priced products. Overseas, the North American beer market appears to have again contracted
from the previous year’s level. Conditions in the Asian beer market vary widely depending on the country, but theVietnam beer market continues to expand. Demand in Japan’s soft drinks industry appears to have increased slightly
year on year. Meanwhile, in the real estate industry, the Greater Tokyo office leasing market continued to benefit from
improving vacancy rates and moderate increases in rents.
In this environment, the Sapporo Group endeavored to accelerate growth under its Long-Term Management Vision“SPEED150” and the First Medium-Term Management Plan 2020 and achieve its financial targets for 2018, as it
strives to be a company with highly unique brands in the fields of "Alcoholic Beverages", "Food", and "Soft Drinks"
around the world.
The Japanese Alcoholic Beverages business redoubled its efforts to strengthen core brands in line with its policyof “Continuation of strengthening of the beer business.” In particular, the launch of an integrated marketing strategy
for Sapporo Draft Beer Black Label, one of those core brands, resulted in a fourth consecutive year of sales growth
for the brand despite the decline in overall beer demand. In non-beer growth areas, we continued to build a highly
diversified product lineup with a focus on high-value-added products in the wine and spirits categories.
The International Business continued to strengthen its position in North America’s premium beer market. In Canada,
SLEEMAN BREWERIES continued aggressive marketing activities. In the United States, Sapporo USA and Anchor
Brewing Company worked together to build a new structure to generate synergies and lead to new growth in the
North American beer market. In the U.S. soft drinks market, we completed the merger of County Pure Foods andSilver Springs Citrus and implemented measures to improve the management of the newly integrated entity. Our
Vietnam business achieved profitability in 2018, the result of various structural reforms.
The Food & Soft Drinks business continued to focus its resources on core brands, investing to expand its lineup ofbeverages made from the highest quality ingredients and its core lemon-based and soup product brands in Japan.
The Restaurants business continued to strengthen its Japan operations by opening new outlets and renovating
existing outlets, with the focus on our core Ginza Lion and Yebisu Bar chains. We also endeavored to improve
profitability by closing unprofitable outlets or changing their format.
The Real Estate business again enjoyed high occupancy rates at its rental properties throughout the year. At Yebisu
Garden Place, our core real estate asset, we continued to upgrade the dining floor and make other efforts to raise
the property’s value and enhance the appeal of the surrounding area. The GINZA PLACE commercial complex
conceived as a “base for information dissemination and exchange” again contributed to earnings in 2018.
As a result of the above factors the Sapporo Group posted the financial results presented below.

4Revenue
In 2018, the Sapporo Group posted consolidated revenue of ¥521.9 billion, down ¥14.7 billion or 3% year on year.
The Japanese Alcoholic Beverages business had somewhat mixed results. Strong sales were achieved by Sapporo
Draft Beer Black Label, thanks to brand strengthening efforts, and by Sapporo Chuhai 99.99 (Four Nines), a new
RTD beverage in which the segment has invested aggressively. On the other hand, shipments of happoshu andnew-genre beer fell below previous-year levels. As a result, segment revenue declined year on year. The
International Business, however, achieved revenue growth in 2018, led by sales growth at Canada’s SLEEMAN
BREWERIES and Sapporo Vietnam. At the Food & Soft Drinks business, domestic shipments of lemon-based
drinks and foods were higher than in 2017, but a weak canned coffee market and lower export sales volumes
pushed segment revenue below the previous year’s level. The Restaurants business also posted a year-on-year
decline in revenue, mainly owing to weak sales at its Japanese food outlets in Japan.
Operating Profit
Operating profit at the Japanese Alcoholic Beverages business declined year on year, reflecting the fall in revenue
noted above. The International Business saw its operating profit decline in 2018 as profit growth following structuralreforms at Sapporo Vietnam was outweighed by an impairment loss for U.S. subsidiary Anchor Brewing Company,
which saw its sales volumes fall on weak demand in its core operating area, San Francisco and the U.S. west coast.
Operating profit also declined at the Food & Soft Drinks business, largely due to falling sales of canned coffee inJapan. The Real Estate business, however, achieved profit growth, supported by increases in rental income andhigher occupancy rates at its core properties.
As a result of the above, consolidated operating profit in 2018 totaled ¥10.8 billion, ¥2.0 billion or 15% less than in
2017.
Profit Attributable to Owners of Parent
In 2018, profit attributable to owners of parent totaled ¥8.5 billion, up ¥1.3 billion or 19% year on year.
Results by segment are outlined below.
(2) Results by Business Segment

Millions of yen, except percentages
Revenue

Operating profit

Year ended
Year ended
Year ended
Year ended
December 31, December 31, Change (%) December 31, December 31, Change (%)
2017
2018
2017
2018
Japanese Alcoholic

261,489

250,867(4.1)

10,0386,711(33.1)

International Business

78,626

79,521

1.1(2,728)(3,397)-

Food & Soft Drinks

132,092

127,219

（3.7）

2,430

2,027

(16.6)

Restaurants

28,63927,569

（3.7）

(515)

(169)

-

Real Estate

23,89324,483

2.5

10,271

12,047

17.3

Beverages

Results by segment are outlined below. From 2018, the export business of Sapporo International Inc., which waspreviously included in the International Business segment, was transferred to Sapporo Breweries Ltd., which isincluded in the Japanese Alcoholic Beverages segment.
To enable year-over-year comparisons in this document, figures for the previous year have been adjusted toreflect the new segmentation.

5

Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer-type beverages in 2018 was 2% lower than in 2017. The
main factors depressing demand were consumers’ shift to RTD*1 beverages, price revisions on returnable bottles
used in the commercial-use market, and the cooling in consumer sentiment caused in part by natural disasters that
hit various parts of Japan from the summer.
In this operating environment, the Japanese Alcoholic Beverages business continued its efforts to realize
management’s vision of “Seek to be No.1 by accumulating one-of-a-kind products” and achieve further growth byconstantly providing customers with a unique value proposal and by investing aggressively in the beer business inline with our policy of “Continuation of strengthening of the beer business.”Among beer products, Sapporo Draft Beer Black Label was again strong, and this core brand achieved sales
growth for the fourth straight year. Meanwhile, the happoshu and new-genre beer categories faced a more difficult
market environment, including stiffer competition and a shift in consumer demand toward RTD products. As aresult, overall shipments of our beer and beer-type beverages in 2018 were 8% lower than in 2017.
In the RTD category, Sapporo Chuhai 99.99 (Four Nines), a “strong”-type high-alcohol beverage launched inAugust achieved our 2018 sales target of two million cases a month early at the end of November. Sales of ourcore RTD collaboration products, including Otoko Ume Sour, Ai no Skal White Sour, and Kireto Lemon Sour, werealso strong. As a result, RTD category sales were up solidly from the previous year.
In the wine category, we continued to strengthen marketing of our fine wines*2, including our Grande Polaire
domestic wines, Taittinger champagne, and the imported wine Penfolds. However, weak sales of our everyday
wines*2 led to a year-on-year decline in sales for the wine category as a whole.
Our spirits business achieved year-on-year sales growth, led by strong sales of products from major overseas
brands, such as Bacardi and Dewar’s.
Our Japanese liquor business continued to enjoy strong sales of Imo Shochu Kokuimo, Japan’s No.1 selling*3
blended imo shochu. Overall category sales, however, were lower than in 2017.
Overall, the Japanese Alcoholic Beverages business’s revenue totaled ¥250.9 billion, down ¥10.6 billion or 4%
year on year. Operating profit was ¥6.7 billion, down ¥3.3 billion or 33%.
*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages that can be consumed as isimmediately after opening.
*2) Fine wines are wines priced in the mid- to high-price range of ¥1,500 or more per bottle, while everyday wines are thosepriced at less than ¥1,500 per bottle.
*3) Based on Intage SRI market research on combined blended imo shochu sales in the supermarket, convenience store, anddirect sales channels from April 2017 to November 2018

International BusinessWe estimate that total demand in the North American beer market in 2018 fell from the 2017 level, with overall
shipments down in both the United States and Canada. In Asian countries, demand is being affected by slower
economic growth and governments introducing or considering new taxes on consumer products.
In this environment, our International Business continued its efforts to strengthen brand recognition, especially inthe premium beer markets in North America and Southeast Asia.
Our Canadian subsidiary SLEEMAN BREWERIES continued to invest in the marketing of its core premium
brands, which enabled it to achieve a year-on-year increase in overall beer sales volume (excluding Sapporo brandbeer). In the U.S. beer market, Sapporo USA’s shipments of Sapporo brand beers declined year on year despite
the subsidiary’s continued efforts to expand sales to the general population as well as to Asian Americans. Anchor
Brewing Company, which we acquired and made a consolidated subsidiary in September 2017, worked with
Sapporo USA to strengthen sales synergies. However, Anchor’s sales declined sharply from 2017 levels owing
primarily to a large drop in demand in its home market in the San Francisco area.
In the U.S. soft drinks market, an increasingly difficult business environment led to a year-on year decrease in
the combined revenue of County Pure Foods and Silver Springs Citrus. During the year, the two U.S. drink
subsidiaries were merged with a view to improving their combined performance.
In Southeast Asia, Sapporo Vietnam carried out reforms to correct its high-cost structure while also endeavoring
to strengthen its export sales. As a result, it sharply increased its beer shipments over the previous year's level and6

recorded an operating profit for the fiscal year.
Reflecting the above results in each region, the International Business’s shipments of Sapporo brand beer inoverseas markets during 2018 fell 2% year on year.
As a result, the International Business posted revenue of ¥79.5 billion, up ¥0.9 billion, or 1%, but recorded an
operating loss of ¥3.4 billion (compared with a loss of ¥2.7 billion in 2017).

Food & Soft Drinks
We estimate that overall demand for soft drinks in Japan in 2018 increased 2% year on year.
In this environment, the Food & Soft Drinks business continued to strengthen its brand lineups and provide
customers with value unique to the Sapporo Group.
In the domestic soft drinks business, sales were driven by our lemon-based drinks and sugar-free teas*1 madefrom domestic tea leaves, such as Kaga Bo-Hojicha. However, overall shipments of soft drinks fell year on year,
reflecting a decline in sales of our coffee drinks in a weak market for canned coffees and the impact from thedisruption of distribution channels caused by the disastrous torrential rainfall that hit western Japan.
Shipments of our lemon-based food products increased 13% year on year, driven by strong sales of our core
Pokka Lemon 100 and the reformulated Lemon kajū o hakkō sasete tsukutta lemon no su, a lemon vinegar madefrom fermented lemon juice. Both these products meet the needs of health-conscious consumers. During the year,
we undertook new initiatives to provide consumers with experiences that increase their appreciation of lemons andlemon-based foods. One such initiative was the establishment in December of the jointly operated Furusato
Nagoya Lemon Garden within Nagoya City’s Togokusan Fruit Park.
In 2018 we promoted the unique qualities of our soup products, such as our mainstay Jikkuri Kotokoto series, theRisorante and the Karao series. Despite these efforts, shipments of our soups declined year on year owing to warm
winter weather. Soy and chilled product sales increased 10% year on year, with a strong contribution from SOYBIO,
a new soymilk yogurt.
At the domestic restaurants business, Pokka Create, the POKKA SAPPORO subsidiary that operates the Caféde Crié coffee shop chain, continued its efforts to boost sales by introducing new menus with seasonal and trendy
dishes. However, the business’s sales were generally flat year on year.
Our overseas soft drinks business maintained its top share*2 in Singapore’s tea drinks market, including its
dominant 70% share of the green tea market. However, exports to other countries in the region were slowed slightly
by new tax regulations in some countries.
Overall, Food & Soft Drinks segment revenue totaled ¥127.2 billion, down ¥4.9 billion or 4% year on year.
Segment operating profit came to ¥2.0 billion, down ¥0.4 billion or 17%.
*1) Cumulative combined sales of four products in the Kaga Bo-Hojicha series from January 1 – November 26, 2018 on a shipped
package basis.
*2) Based on data from Nielsen Singapore MarketTrack October 2018 (Copyright 2018, The Nielsen Company)

Restaurants
Japan’s restaurant industry continued to enjoy year-on-year growth in revenues in 2018, but the industry also
continued to face a severe operating environment characterized by labor shortages and increases in labor costs
and food material procurement prices.
In this environment, our Restaurants business continued to pursue the fulfillment of its philosophy of “Enhancing
the Joy of Living” through constant efforts to deliver safe and sound food and service to customers while also
striving to create restaurants that “deliver 100% satisfaction to customers.”
Our domestic restaurant business faced a particularly difficult operating environment in 2018, as Japan sufferedthrough several natural disasters caused by a series of typhoons, extended periods of rain, and a major earthquake
in Hokkaido. Despite this difficult environment, we continued to open new outlets throughout Japan. We opened
two new Yebisu Bar outlets, including our first Yebisu Bar outlet in Kyushu in the Hakata district of Fukuoka City in
March and an outlet in the Nishinomiya district of Kobe in November. In May we opened a Ginza Lion Beer Garden
in Chiba Prefecture’s Kashiwa City. We also opened two new branches of our mainstay Ginza Lion Beer Hall—one
in Kawasaki in August and the other in Hiroshima in September. In April, we reopened the fully renovated Ginza
Lion outlet in Tokyo’s Aoyama district. Also in April, we opened the first outlet of our new Sobaemon Japanese7

restaurant format in Tokyo’s Osaki area and then added a second outlet in Tokyo’s Aoyama district in November.
Each of the new outlets have won rave reviews from local customers and are performing favorably. On the other
hand, we closed six outlets in 2018, including unprofitable stores. In addition, our affiliate Marushinkawamura Inc.
opened two new outlets in Sapporo. Taishu Tempura Manekiya, a new format tempura restaurant, began serving
customers in August, and Taishu Izakaya Manekiya, a Japanese-style pub, opened in September. After the above
openings and closings, our domestic restaurant business had 195 outlets open for business at the end of
December. Going forward, we will continue to aggressively expand our restaurant chains, opening new stores,
remodeling existing stores, and changing formats when and where desirable.
Turning to the overseas restaurant business in Singapore, where a wave of new entrants has created an
extremely competitive market environment, we transferred certain businesses, including the Japanese restaurant
business, to a local food and beverage company. As a result, we now have only one Ginza Lion store operating in
Singapore. Going forward, the overseas restaurant business will concentrate its resources in the beer hall format
and continue to promote the spread of beer hall culture.
Overall, the Restaurants business’s revenue in 2018 totaled ¥27.6 billion, down ¥1.1 billion or 4% year on year.
The operating loss was ¥0.2 billion (compared with a loss of ¥0.5 billion in 2017).
Real Estate
Japan’s real estate industry remains concerned about a sharp increase in supply of new office space negatively
affecting conditions in the Greater Tokyo office leasing market, but for now vacancy rates remain low as strong
corporate earnings support demand for office space. As a result, rents remain on a moderate upward trend.
In this environment, our real estate leasing business is maintaining high occupancy rates at its properties in the
Greater Tokyo Area, including Yebisu Garden Place Tower, the business’s core source of earnings. In addition, thehigh occupancy rates provide a solid platform for more assertive efforts to increase rents of existing tenants.
Meanwhile we continue to enhance the asset value of our Yebisu Garden Place commercial complex—alandmark in the stylish and sophisticated Ebisu district of Tokyo—through constant efforts to provide tenants andvisitors with enjoyable experiences in comfortable and pleasant surroundings that raise convenience levels andstrengthen the property’s brand appeal.
At the GINZA PLACE commercial complex, we continue to enhance the facility’s information dissemination
capability in line with its original concept as a “base for information dissemination and exchange.” In addition toenhancing the property’s brand value, this effort is increasing the property’s drawing power and making the Ginza
district an even more dynamic and bustling urban center.
The real estate development business continues to contribute to Sapporo City’s urban redevelopment program
focused on the area on the east side of the Sosei River by making good progress with the renovation of the
Sapporo Factory commercial complex. In November, we opened part of the complex’s 3-Jo Kan facility as the firstphase of the program. In 2019, we will continue our efforts to make the Sapporo Factory complex an attractive
urban space.
To further enhance the value of our real estate business, we are carrying out a strategic restructuring of ourproperty portfolio from a long-term perspective. In line with the goals of this restructuring, in November we sold off
the Shinjuku Square office building and the Storia Shirokanedai rental apartment building. Meanwhile, to further
advance our urban development business, we have decided to purchase three office buildings, including one
currently under construction in Ebisu.
As result of the efforts outlined above, our Real Estate business posted revenue of ¥24.5 billion in 2018, up ¥0.6
billion or 2% year on year. Segment operating profit came to ¥12.0 billion, a year-on-year increase of ¥1.8 billion or17%.

8

(2) Consolidated Financial Condition
Consolidated assets as of December 31, 2018, totaled ¥639.7 billion, down ¥25.0 billion from the end of the previous
fiscal year (December 31, 2017). The decline primarily reflects decreases in other financial assets (non-current) andtrade and other receivables, which offset increases in other current assets and in property, plant and equipment.
Consolidated liabilities totaled ¥475.0 billion, down ¥14.1 billion from December 31, 2017, primarily owing to adecrease in bonds and borrowings (current), which offset increases in net defined benefit liabilities and bonds andborrowings (non-current).
Consolidated equity totaled ¥164.7 billion, down ¥11.0 billion from December 31, 2017. This change in total equity
primarily reflects the payment of year-end dividends and a decrease in unrealized holding gain on securities, which
offset an increase in profit attributable to owners of parent.
(3) Consolidated Cash Flows
Cash and cash equivalents (collectively “cash”) totaled ¥10.0 billion as of December 31, 2018, ¥2.5 billion or 20%
less than a year earlier.
Following is an explanation of consolidated cash flows by category in 2018 and the factors that affected cash flows
in each category.
Cash flows from operating activities
Operating activities in 2018 provided net cash of ¥30.8 billion, ¥3.0 billion or 9% less than in 2017. The main cash
inflows were ¥28.5 billion from depreciation and amortization, a ¥5.4 billion loss on impairment of property, plant andequipment, and ¥4.2 billion decrease in trade and other receivables. The largest cash outflow was the ¥10.7 billion
in income taxes paid.
Cash flows from investing activities
Investing activities in 2018 used net cash of ¥18.7 billion, ¥0.9 billion or 5% more than in 2017. The major investment
outflows were ¥13.6 billion for purchases of property, plant and equipment and ¥6.3 billion for purchases of investment
securities. The major inflow from investing activities was ¥7.2 billion from the sale of trust beneficiary rights(investment property).
Cash flows from financing activities
Financing activities in 2018 used net cash of ¥14.5 billion, ¥0.6 billion or 4% more than in 2017. The main outflows
were ¥22.5 billion for repayment of long-term bank loans and ¥10.1 billion for the redemption of bonds. The main
inflow came from the issuance of bonds totaling ¥20.0 billion.
Cash Flow Indicators
As of December 31,
2017
2018
25.9
25.2

Ratio of equity attributable to owners ofparent to total assets (%)
Ratio of equity attributable to owners ofparent to total assets based on market
40.4
27.9
capitalization (%)
Cash flow to interest-bearing debt
8.8
9.4
(years)Interest coverage ratio (%)
14.6
14.0
Ratio of equity attributable to owners of the parent company to total assets based on market capitalization:
Market capitalization / Total assets
Cash flow to interest-bearing debt: Interest-bearing debt / Cash flow
Interest coverage ratio: Cash flow / Interest expense
Notes:
1. All of the above indicators are calculated based on consolidated financial statement data based on IFRS.
2. Market capitalization is calculated based on the number of shares issued and outstanding, excluding treasury
stock.
3. “Cash flow” is operating cash flow.
4. Of the debt carried on the consolidated balance sheet, interest-bearing debt is total debt on which interest is
currently payable.

9(4)Outlook for fiscal year ending December 31, 20192019 forecast
2018 results
Projected increase (%)

Revenue
548,800
521,856
5.2

Operating profit
12,60010,828
16.4

Millions of yen, except percentages
Profit before
Profit attributable totax
owners of parent
11,300
8,700
9,492
8,521
19.0
2.1

2019 is the third year of the Sapporo Group Long-Term Management Vision “SPEED150” and the First Medium-Term
Management Plan 2020. Throughout the year, we will continue our efforts to supply distinctive products and services
worldwide in our three core business areas—“alcoholic beverages”, “food”, and “soft drinks”—and to expand contact
points with customers as we strive to achieve robust growth in line with the goals of our longer term vision and thefirst-stage management plan.
Aiming to secure reliable growth while continuing to nurture and strengthen Group brands, we have decided torestructure our business organization to promote the growth of international business along specific business lines.
Accordingly, reporting segments will be reduced from five to three from 2019, a change that will enable us tostrengthen management oversight of each business.
Our consolidated forecasts and outlook for the Sapporo Group in 2019 are as follows.
Revenue
In the Alcoholic Beverages segment, in line with our "beer revival declaration," we will continue our efforts in Japanto further enhance the value of our core Sapporo Draft Beer Black Label and Yebisu brands as we aim to increase
total shipments of beer and beer-type beverages. In the wine category, we aim to further increase sales and will
strengthen marketing of fine wines to achieve that goal. In the RTD space, we will develop new one-of-a-kind productswith new twists that surprise and delight and will invest aggressively to expand this business. We also will continue
our efforts to expand sales in other growth areas, such as spirits. Overseas, we will expand sales in Vietnam andneighboring countries as we spread the Sapporo brand throughout the region. In North America, we aim to expand
revenue by continuing to grow Canada’s SLEEMAN BREWERIES and generating sales synergies for Sapporo USA
and Anchor Brewing in the United States.
In the Food & Soft Drinks segment, our Japanese food and beverage operation will continue to provide customers
with new value propositions that reflect our superiority in lemon-based foods and soup products as well as in soy
milk–based yogurt products. Overseas, we will continue to strengthen the POKKA brand in the core Singapore
market and surrounding countries.
Overall, we forecast 2019 consolidated revenue will reach ¥548.8 billion, an increase of ¥26.9 billion or 5% over2018.
Operating Profit
We expect the Alcoholic Beverages segment to achieve profit growth on the back of higher sales of our core domestic
beer brands and strengthening of our SLEEMAN and Sapporo Premium brands overseas.
The Food & Soft Drinks segment also is expected to achieve profit growth, driven by increases in revenue inJapan and overseas and improvements in its product mix.
In the Real Estate segment, we expect profit growth will be driven by steady revenue contributions from coreproperties, such as Yebisu Garden Place and GINZA PLACE, and gains on sales of certain other properties.
On the other hand, we expect companywide expenses to increase as we make investments targeted at building
our groupwide management foundation and securing future growth, while also bearing the costs of structural reforms.
Overall, we forecast 2019 consolidated operating profit of ¥12.6 billion, an increase of ¥1.8 billion or 16% over2018.
Profit Attributable to Owners of Parent
We project profit attributable to owners of parent will total ¥8.7 billion in 2019, an increase of ¥0.2 billion or 2% over
2018.

10

The 2019 outlook for each segment is presented below.
(3) Outlook by Business Segment

Millions of yen, except percentages
Revenue

2018

Operating profit

2019
forecast% change

2018

2019
forecast% change

Alcoholic Beverages

330,009

346,000

4.8

3,856

9,700

151.5

Food & Soft Drinks

161,331

172,200

6.7

1,150

1,700

47.8

Real Estate

24,48324,6000.5

12,047

12,1000.4

Alcoholic Beverages(Japan & Asia)
In Japan, we face a difficult market environment in 2019. Given the decrease in the drinking age population, theongoing shift to RTD*1 and other alcoholic beverages, and the likely effect on consumer spending from theconsumption tax hike planned for October, we expect overall demand for beer to be lower than it was in 2018.
In this environment, Sapporo Breweries will continue its efforts to realize our corporate vision—“Seek to be No.1
by accumulating one-of-a-kind products”—as it strives to achieve further growth by constantly providing customers
with a unique value proposal.
It will continue to strengthen its beer brands in line with the business policy set forth in its “beer revival declaration.”
We will aim for a fifth consecutive year of sales growth for Sapporo Draft Beer Black Label in the household andcommercial markets by strengthening its appeal through the unique “Otona no ★ Nama” world view and offer
customers the chance to savor “the perfect draft beer experience." Our Yebisu brand will be celebrating its 130th year
in 2020, and in 2019 we plan to enhance the brand’s reputation as one of Japan’s most well-known beer brands byintroducing Yebisu Premium Ale, a complement to Yebisu Beer that will bring a new flavor to the beer market.
We will also utilize mini breweries that increased in number during 2018 to make unique product proposals thatare based on "high value-added" and lead to the creation of new beer culture.
In the RTD space, we will continue our efforts to develop products from new perspectives that lead to one-of-akind products that surprise and delight consumers. We will accelerate the growth of our RTD business by offering
unique products through collaborations, such as Otoko Ume Sour, and further strengthening our new core brand
Sapporo Chuhai 99.99 (Four Nines).
In the wine category, we will continue strengthening our lineup of fine wines*2. We will seek to expand sales andenhance the brand images of our wine offerings, including our premium Japanese wine Grande Polaire, as well as
our imported brands, especially Penfolds wine and Taittinger champagne. In the everyday wine category, we aim to
expand awareness of our offerings and build the user base by releasing products for commercial-use only.
In the spirits business, we will continue to focus our marketing efforts on such world-famous brands as Bacardi,
the world’s best-selling rum in both sales volume and value*3, as well as Bombay Sapphire, Dewar’s, and Martini.
Our Japanese liquor business will focus on further expanding sales of our blended imo shochu Kokuimo by
proposing new ways to drink shochu that enhance the enjoyment of its pleasing aroma and by disseminating
information that arouses consumer interest in shochu.
In Asia, we expect to see continued growth in the beer market, but the pace of growth in some countries is expected
to slow owing to slowdowns in the wider economy and to stricter regulations on alcoholic sales and consumption.
In that market environment, Sapporo Vietnam is aiming to establish sales channels that will enable it to sustain
profit growth in 2019 and coming years.
(North America)
In Canada, strong consumer spending and capital investment are expected to contribute to higher economic growth.
However, we expect overall demand in Canada’s beer market to be generally flat owing to the widening diversity inconsumers’ alcoholic beverage preferences.
11

In that environment, SLEEMAN BREWERIES will continue to build an optimal product portfolio by strengthening
strategic brands that have the potential for sustained growth. SLEEMAN also plans to move more strongly into the
RTD space while continuing to concentrate management resources on premium brands.
In the United States, rising uncertainties about the government’s trade policy and a diminishing impact from its
large tax cut are expected to weigh on consumer and corporate sentiment. Nonetheless, as with Canada, we expect
overall demand in the beer market to be about the same as in 2018.
Given this business environment, Sapporo USA and Anchor Brewing are scheduled to undergo a management
integration on April 1, 2019, that will enable the two companies to maximize synergies in their manufacturing anddistribution operations. The integration will establish a platform conducive to more dramatic growth for bothcompanies. By clarifying the priority business areas for each company, we will be better able to maximize
management resources and reform the two companies’ current low-profit cost structures.
(Restaurants)
Japan’s restaurant industry is expected to face a difficult operating environment again in 2019, with labor shortages
still pushing up hiring costs, food material procurement prices continuing to rise, and competition intensifying as
cross-industry competition from retailers and other non-traditional players increases.
In this environment, Sapporo Lion will emphasize raising the quality of its menus, service, and store atmospherein a return to basics focused on “delivering 100% satisfaction to customers.” As part of that commitment, thesubsidiary's premises are taking extra care to ensure the provision of safe and sound food and service to theircustomers.
New store openings in 2019 again will focus on developing new formats and territorial expansion for our two coreformats, Ginza Lion and Yebisu Bar, as well as our newer chains, such as Sobaemon. We also will continue torenovate existing outlets and, as needed, shift them to new formats in order to sustain and enhance their earnings
power.
Overseas, we remain devoted to spreading the beer hall culture. In Singapore, we will undertake cost restructuring
to enhance profitability while implementing measures to reestablish the Ginza Lion brand.
*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages that can be consumed as isimmediately after opening.
*2) Fine wines are wines priced in the mid- to high-price range of ¥1,500 or more per bottle, while everyday wines are those priced
at less than ¥1,500 per bottle.
*3) Based on a survey by International Wine & Spirits Research 2017

Food & Soft Drinks(Japan & Asia)
Japan’s soft drinks industry continues to face a difficult operating environment, characterized by the diversification of
consumer preferences, stiff competition among beverage makers, and upward pressures on costs stemming fromrising distribution and personnel costs.
In this environment, POKKA SAPPORO will follow its vision of “continually creating delicious products that enrichand brighten people’s everyday lives” to deliver new value by providing products that delight customers andthoroughly meet their needs.
The domestic soft drinks business will refine the strengths of its core brand areas, including Kireto Lemon, sozaikei (ingredient), shokkan-kei (texture), as it continues to carve out a unique market position.
The domestic food business plans to more aggressively expand its steadily growing instant soup business. To
support that expansion, POKKA SAPPORO is now constructing its Sendai plant within the site of Sapporo Breweries'
Sendai Brewery to install a new line for producing cup-based instant soups and granulation equipment for processing
granulated materials used in its powdered soups. In the lemon-based foods category, we will continue our efforts to
expand demand for Pokka Lemon 100 and lemon vinegar products, including by spreading the word about lemon’s
health benefits. In the commercial-use channel, we will leverage Group synergies to expand sales in all productcategories, from lemon-based products to powdered teas and soups. We regard soymilk business as crucial to theacceleration of our expansion in the foods domain and are planning to develop new soymilk-based yogurt products,
our core strength in this category. Accordingly, POKKA SAPPORO is scheduled to bring on line new soymilk yogurt
manufacturing facilities, including raw soymilk extraction equipment, at its Gunma Plant in March 2019.

12

At the domestic restaurants business, the Café de Crié chain will continue to conduct fine-tuned marketing tostimulate business at its existing outlets and will enhance the Crié brand value by accelerating chain expansion.
The overseas soft drinks business plans to expand sales and increase efficiency while maintaining its dominanceof the tea drinks and juice beverages segments in the core Singapore market. We also plan to raise our presence in
the Asian countries where we have operations by providing products that meet the needs of customers in eachcountry.
(North America)
Country Pure Foods and Silver Springs Citrus have completed their management integration and will be moving
quickly to put their combined management resources to maximum effect.
Real Estate
Japan’s real estate industry expects the supply of floor space in large buildings in the Greater Tokyo office leasing
market to be considerably lower than in 2018. Nonetheless, the office supply is expected to be above the averagelevel seen over the past 10 years. We forecast that vacancy rates at our buildings will remain at low levels, thanks tocontinued robust demand supported by such positive factors as companies’ need to maintain optimal officeenvironments to secure human resources and comply with Japan's work-style reforms. Low vacancy rates should
support a continued moderate upward trend in office rents. However, we also remain aware of the possibility of achange in market conditions caused by changes in the economic environment and intensifying competition between
new buildings and currently existing ones, which could lead to the emergence of secondary vacancies.
In this environment, our Real Estate business will continue its efforts to enhance the competitiveness of its buildings
and related services as it seeks to raise occupancy rates and rent levels at its properties.
At our flagship property, Yebisu Garden Place, we will continue to enhance the convenience of facilities in all areasof the complex, beginning with the commercial areas, as we aim to increase the entire neighborhood’s brand value
by providing new added-value.
At the GINZA PLACE commercial complex, we will continue to enhance the facility’s information dissemination
capability in line with its original concept as a “base for information dissemination and exchange.” In addition toenhancing the property’s brand value, this effort will increase the property’s drawing power and make the Ginza
district an even more dynamic and bustling urban center.
The real estate development business will proceed with the renovation of the Sapporo Factory commercial complex
as part of Sapporo City’s urban redevelopment program focused on the area on the east side of the Sosei River. We
will continue our efforts to make the new complex an attractive urban space.
To enhance the overall value of our Real Estate business we will continue to strategically review and revise ourproperty portfolio, diversify funding methods and expand the functions of our real estate business through the use ofreal estate securitizations, work on development of new business, etc., and advance our urban development projects
in Ebisu and Sapporo.
(NOTE) The outlook for 2019 presented above contains forward-looking statements that are based on information
available when the materials were prepared and are subject to risks and uncertainties. Actual performance
may differ materially from the future outlook described for various reason(5) Dividend Policy and Dividends for 2018 and 2019
The Company considers the appropriate return of profits to its shareholders as a fundamental aspect of management
policy and has adopted a basic policy to undertake stable dividend payments taking into consideration the Company’s
performance and financial condition.
Pursuant to the Sapporo Group Long-Term Management Vision “SPEED 150”, which was announced in November
2016, the Company is implementing the First Medium-Term Management Plan 2020, which was launched in 2017and calls for a dividend payout ratio of 30% as a target for return of profits to its shareholders. However, if profit
attributable to owners of parent changes significantly because of an extraordinary profit or loss stemming from special
factors, the impact may be taken into consideration when deciding the dividend.
Given the above policy and taking into consideration the operating results for the current term and the management
environment etc. going forward, the Company plans to pay a dividend of ¥42 per share for 2018. The Company’s
Articles of Incorporation stipulate that interim dividends may also be distributed, but we currently are distributing anannual dividend once a year. Decisions regarding the payment of dividends from surplus profits are, in the case of13the year-end distribution, approved at the general meeting of shareholders, while the interim dividend, if any, isdetermined at the sole discretion of the Board of Directors.
We plan to pay an annual per-share dividend of ¥42 in 2019.

2. Basic Approach to Selecting Accounting Standards
The Sapporo Group has voluntarily applied the International Financial Reporting Standards (IFRS) to its consolidated
accounts from the first quarter of 2018. This change in accounting standard is aimed at facilitating international
comparisons of Group financial information in the capital markets.

143. Consolidated Financial Statements(1) Consolidated Statement of Financial Position(millions of yen)Transition date
January 1, 2017
AmountDecember 31, 2017

December 31, 2018

AmountAmountAssetsI Current assets
1 Cash and cash equivalents
2 Trade and other receivables
3 Inventories
4 Other financial assets
5 Other current assets
subtotal
6 Assets held for sale
Total current assets

10,476
96,574
37,6199,967
7,386
162,022359
162,381

12,537
98,32537,873
9,107
6,914
164,755
164,755

9,989
93,34037,1094,790
8,316
153,544
153,544

II Non-current assets
1 Property, plant and equipment
2 Investment property
3 Goodwill
4 Intangible assets
5 Investments accounted for using equity method
6 Other financial assets
7 Other non-current assets
8 Deferred tax assets
Total non-current assets
Total assets

151,602223,595
21,483
10,305372
79,2788,921
2,176
497,733
660,114151,334
219,658
24,942
13,339391
78,6779,309
2,326
499,976
664,731

152,676
215,522
21,22912,056410
70,2058,526
5,523
486,148
639,692

December 31, 2017

December 31, 2018

AmountAmountTransition date
January 1, 2017
AmountLiabilities and equity
Liabilities
I Current liabilities
1 Trade and other payables
2 Bonds and borrowings
3 Lease liabilities
4 Income tax payable
5 Other financial liabilities
6 Other current liabilities
Total current liabilities

38,46075,5806,609
1,570
33,10866,424
221,750

36,48880,716
6,533
5,207
33,277
66,590228,80935,29273,863
6,743
1,527
33,90563,260214,591

II Non-current liabilities
1 Bonds and borrowings
2 Lease liabilities
3 Other financial liabilities
4 Net defined benefit liabilities
5 Other non-current liabilities
6 Deferred tax liabilities
Total non-current liabilities
Total liabilities

165,235
24,623
48,125
8,996
2,689
26,455276,122497,872

153,184
24,29545,9566,283
2,621
27,872
260,212
489,021

154,483
24,49545,733
11,715
2,991
20,950260,367
474,957

Equity1 Share capital
2 Capital surplus
3 Treasury shares
4 Retained earnings
5 Other components of equity
Total equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity

53,88740,706(1,796)36,31528,515
157,628
4,613
162,241
660,11453,88740,825(1,807)44,491
34,659172,055
3,655
175,710
664,73153,88740,998(1,822)
46,06522,373
161,501
3,234
164,735
639,69215

(2) Consolidated Statement of Profit and Comprehensive Income
Consolidated Statement of Profit(millions of yen)
Year ended
December 31, 2017
Amount536,585
373,148
163,437

Year ended
December 31, 2018
Amount521,856
362,210
159,646

Selling, general and administrative expenses
Other operating income

145,991

145,237

1,029

3,009

Other operating expense
Operating profit

5,669
12,806

6,590
10,828Financial income
Financial expense
Share of profit of investments accounted for using equity method
Profit before tax

1,338
2,626
19
11,538

1,139
2,494
19
9,492

Income tax expense
Profit

5,170

1,772

6,367

7,721

Owners of parent
Non-controlling interests
Total

7,187
(820)
6,367

8,521
(801)
7,721

Basic earnings per share (JPY)
Diluted earnings per share(JPY)

92.27
92.25

109.40104.46

Year ended
December 31, 2017
Amount6,367

Year ended
December 31, 2018
Amount
7,721

8,202
537

(9,201)(3,688)

Revenue
Cost of sales
Gross profit

Profit attributable toConsolidated Statement of Comprehensive Income

ProfitOther comprehensive income
Items that will not be reclassified to profit
Financial assets measured at fair value through other comprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to profit
Items that might be reclassified to profit
Exchange differences on translation of foreign operations
Effective portion of gains and losses on fair value of cash flow hedges
Total of items that might be reclassified to profit
Other comprehensive income, net of taxes
Comprehensive income

8,739(12,890)

1,032
114
1,146
9,884
16,252(2,765)(69)(2,834)(15,724)(8,003)Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income

17,183(931)
16,252(6,987)(1,016)(8,003)16

(3) Consolidated Statements of Changes in Equity(millions of yen)
Equity attributable to owners of parent
Other components of equity
Share capital

Balance as of January 1, 2017
ProfitOther comprehensive income,net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Share-based payment transactions

Capital surplus

53,887Retainedearnings

Treasury shares

40,706(1,796)

Balance as of December 31, 2017

Balance as of January 1, 201736,315

Effective portion ofgains and losses
on fair value ofcash flow hedges
-

(317)

1,137

126

1,137

126

7,187
-

-

(17)
6

1

7,187

(2,888)117

Transfer from other components ofequity to retained earnings
Other increase (decrease)
Total transactions with owners

Exchangedifferenceson translation offoreign operations

3,876

-

118

(11)

989

-

-

53,88740,825(1,807)44,491

1,137

(191)

Equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair
Total otherRemeasurements ofvalue through othercomponents ofdefined benefit planscomprehensive
equityincome28,83228,515

Total equity
attributable toowners of parent

Non-controllinginterests

157,628

Total equity

4,613

162,241

-

7,187

(820)

6,367

8,195

537

9,996

9,996

(111)

9,884

8,195

537

9,996
-

17,183(17)
7(2,888)
117

(931)
(20)
-

16,252(17)
7(2,907)
117(3,315)(537)(3,852)

24

(24)

-

-

-

17

17

Total transactions with owners(3,315)(537)(3,852)(2,756)(26)(2,783)

Balance as of December 31, 201733,712-

34,659172,055

3,655

175,710

ProfitOther comprehensive income,net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Share-based payment transactions
Transfer from other components ofequity to retained earnings
Other increase (decrease)17

(millions of yen)
Equity attributable to owners of parent
Other components of equity
Share capital

Balance as of January 1, 2018
ProfitOther comprehensive income,net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Issuance of convertible bonds
with stock acquisition rights
Dividends
Share-based payment transactions
Transfer from other components ofequity to retained earnings
Total transactions with owners
Balance as of December 31, 2018

Balance as of January 1, 2018
ProfitOther comprehensive income,net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Issuance of convertible bonds
with stock acquisition rights
Dividends
Share-based payment transactions
Transfer from other components ofequity to retained earnings
Total transactions with owners
Balance as of December 31, 2018

Capital surplus

53,887Retainedearnings

Treasury shares

40,825(1,807)44,491

Exchangedifferenceson translation offoreign operations

Effective portion ofgains and losses
on fair value ofcash flow hedges

1,137

(191)

(2,622)2(2,622)

2

8,521
-

-

(20)
5

0

8,521

182
(3,122)(9)(3,826)
-

173

(15)

(6,947)--53,88740,998(1,822)

46,065(1,485)(188)

Equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair
Total otherRemeasurements ofvalue through othercomponents ofdefined benefit planscomprehensive
equityincome33,712
34,659Total equity
attributable toowners of parent

172,055

Non-controllinginterests

Total equity

3,655

175,710

8,521

(801)

7,721

(9,200)(3,688)(15,508)(15,508)(215)(15,724)(9,200)(3,688)(15,508)-(6,987)(20)
6(1,016)-(8,003)
(20)
6

-

182

-

182

-

(3,122)(9)(8)-(3,130)
(9)

3,222

(603)

603

-

(466)

3,688

(466)

3,688

3,222

(3,566)595(2,972)

24,046-

22,373

161,501

3,234

164,735

18

(4) Consolidated Statements of Cash Flows
Ｙｅａｒ ended
December 31, 2017
Amount(millions of yen)
Ｙｅａｒ ended
December 31, 2018
Amount11,53829,5693,810(1,330)
2,397
(19)

9,492
28,512
5,430(1,123)
2,368
(19)

719
(1,136)333(2,337)132(4,253)39,422
1,383(2,315)(4,696)
33,794

(659)
4,209
70
(830)
(1,950)(2,968)42,533
1,150(2,197)(10,657)
30,830(10,598)
3,086(2,499)(2,197)(1,020)8,278(11,623)(68)
4,267(5,499)(17,873)(13,581)
1,729(4,712)(2,220)(6,345)
1,455(2,523)
7,239
(139)
4,081
(3,712)(18,727)(3,076)(1,000)12,500(12,603)
9,960(10,083)(2,913)(6,686)(17)
7(13,911)(264)(3,500)12,000(22,524)
20,021(10,068)(3,133)(7,038)(20)
6(14,521)

51

(130)

V Net increase (decrease) in cash and cash equivalents

2,061(2,548)VI Cash and cash equivalents at beginning of period
Ⅶ Cash and cash equivalents at end of period

10,476
12,537

12,537
9,989

I Cash flows from operating activities
1 Profit before income taxes
2 Depreciation and amortization
3 Loss on impairment of property, plant and equipment
4 Interest and dividend income
5 Interest expenses
6 Share of loss (profit) of investments accounted for using equity method
7 (Gain) loss on sales and disposal of property, plant and equipment, andintangible assets
8 (Increase) decrease in trade and other receivables
9 (Increase) decrease in inventories
10 Increase (decrease) in trade and other payables
11 Increase (decrease) in liquor taxes payable
12 Other
Sub total
13 Interest and dividends received
14 Interest paid
15 Income taxes paid
Net cash provided by (used in) operating activities
II Cash flows from investing activities
1 Purchases of property, plant and equipment
2 Proceeds from sales of property, plant and equipment
3 Purchase of investment property
4 Purchases of intangibles
5 Purchases of investment securities
6 Proceeds from sale of investment securities
7 Payments for acquisition of subsidiaries
8 Payments for acquisition of trust beneficiary rights (investment property )9 Proceeds from sale of trust beneficiary rights (investment property )10 Payments for long-term loans receivable
11 Collection of long-term loans receivable
12 OtherNet cash provided by (used in) investing activities
III Cash flows from financing activities
1 Net increase (decrease) in short-term bank loans
2 Increase (decrease) in commercial paper
3 Proceeds from long-term bank loans
4 Repayment of long-term bank loans
5 Proceeds from issuance of bonds
6 Redemption of bonds
7 Cash dividends paid
8 Repayment of finance lease obligations
9 Purchase of treasury shares
10 OtherNet cash provided by (used in) financing activities
IV Effect of exchange rate changes on cash and cash equivalents

19

(5)Notes on the Going-concern Assumption
Not applicable(6).Segment Information
1. Overview of reportable segments
The Company’s reportable segments are components of the Sapporo Group about which separate financial information is available. Thesesegments are subject to periodic examinations to enable the Company's board of directors to decide how to allocate resources and assess
performance.
The Group's businesses are segmented mainly based on the products, services, and sales markets of Group companies and their affiliatedcompanies. The Company's five reportable segments are Japanese Alcoholic Beverages, International, Food & Soft Drinks, Restaurants, andReal Estate.
The Japanese Alcoholic Beverages segment produces and sells alcoholic beverages in Japan, while the international segment produces andsells alcoholic beverages and soft drinks overseas.
The Food & Soft Drinks segment produces and sells foods and soft drinks.
The Restaurants segment operates restaurants of various styles.
The Real Estate segment's activities include leasing and development of real estate.

2. Revenue, profit (or loss)(millions of yen)
Year ended December 31, 2017
(January 1, 2017 – December 31, 2017)
Japanese
Alcoholic
Beverages

International

Food &
Soft Drinks

Restaurants Real Estate

Revenue
To outside customers

261,489

78,626132,092

28,639Inter-segment revenue

3,381

108

282

1

2,670

264,870

78,735

132,374

28,64026,563

10,038(2,728)

2,430

(515)

10,271

Total
Operating profit

23,893

Year ended December 31, 2017
(January 1, 2017 – December 31, 2017)
Other *1

Total

Adjustment

Consolidated total

Revenue
To outside customers

11,846

536,585-

Inter-segment revenue

21,00227,445(27,445)

32,848564,030(27,445)536,585(137)

19,359(6,553)12,806

Total
Operating profit

536,585-(millions of yen)
Year ended December 31, 2018
(January 1, 2018 – December 31, 2018)
Japanese
Alcoholic
Beverages

International

Food &
Soft Drinks

Restaurants Real Estate

Revenue
To outside customers

250,867

79,521

127,219

27,569Inter-segment revenue

3,011

500

276

1

2,824

253,878

80,021

127,494

27,57027,307

6,711(3,397)

2,027

(169)

12,047

Total
Operating profit

24,483

Year ended December 31, 2018
(January 1, 2018 – December 31, 2018)
Other *1

Total

Adjustment

Consolidated total

Revenue
To outside customers

12,198521,856-

Inter-segment revenue

21,16927,781(27,781)

33,368549,637(27,781)

521,856

59

17,279(6,451)

10,828

Total
Operating profit

521,856-(1) "Other" comprises businesses, such as logistics businesses, that are not included in reportable segments.
(2) The export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. effective January 1, 2018.
Accordingly, the business was previously included in the International business segment,
but has been included in the Japanese Alcoholic Beverages segment.
The consolidated financial statements for fiscal 2017 have been adjusted retroactively to reflect these changes.

20(Subsequent Events)
At the Board of Directors meeting held on January 31, 2019, the Company resolved to transfer the following
investment property (trust beneficiary rights) owned by Sapporo Real Estate Co., Ltd., a consolidated subsidiary of theCompany.
1. Reason for the transfer
The transfer, via a real estate securitization, was conducted as part of a strategic restructuring of the Company’s
property portfolio and with a view toward diversifying fund procurement methods and expanding the Company’sbusiness functions.
2. Assets to be transferred
One investment property located in Tokyo’s Shibuya Ward.
3. Overview of the transferee
The transferee is planned to be a newly established domestic limited liability company (SPC).
4. Date of sales contract agreement
March 20, 2019 (planned)
5. Date of handoverMarch 20, 2019 (planned)
6. Transfer price¥8,586 million (planned)
7. Impact on earnings
The transfer of the concerned asset is expected to result in a gain of ¥1,881 million to be posted as other operating
income in the Company’s fiscal 2019 consolidated financial accounts.

21

(First time adoption)
Sapporo Group (the Group) started to disclose the consolidated financial statements based on theInternational Financial Reporting Standards (IFRS) from the first quarter of the fiscal year ended December
31, 2018. The last consolidated financial statements prepared based on JGAAP is those for the fiscal year
ended December 31, 2017, and the date of transition to IFRS is January 1, 2017.
In principle, IFRS requires that first-time adopters apply IFRS retrospectively. However, IFRS 1 sets out
exceptions under which first-time adopters are optionally exempted or prohibited from the retrospective
application of some of the standards required by IFRS.
The exemptions applied by the Group are as follows:・ Business combination
As IFRS provides exemptions from IFRS 3 "Business Combinations," the Group elected not to apply thestandards retrospectively to business combinations that occurred before the date of transition to IFRS.
Consequently, the amounts of goodwill arising from business combinations that occurred before the dateof transition to IFRS were recognized based on their book value under JGAAP at the transition date. For
reference, at the transition date, an impairment test was implemented for such goodwill with or without
evidence that indicates impairment loss.
・ Deemed cost
With respect to property, plant and equipment items and intangible assets items, IFRS 1 permits the firsttime adopter to use their fair value at the date of transition to IFRS as deemed cost at the date oftransition to IFRS. The Group applied the exemption to certain property, plant and equipment items andused their fair value at the date of transition to IFRS as deemed cost at the date of transition to IFRS.
・ Exchange differences on translation of foreign operations
As is permitted by IFRS 1, the Group elected to deem the cumulative exchange differences on translationof foreign operations to be zero at the date of transition to IFRS.
・ Designation of financial instruments recognized before the transition dateWith respect to the classification described in IFRS 9, IFRS 1 permits an entity to assess financial assets
on the basis of the facts and circumstances that exist at the date of transition to IFRS, instead of thoseexisted at the initial recognition. In addition, based on the facts and circumstances that exist at the date oftransition to IFRS, an entity may designate change in fair value of equity instruments as financial assets
measured at fair value through other comprehensive income. For the classification described in IFRS 9,
the Company assessed financial assets on the basis of the facts and circumstances that exist at the dateof transition to IFRS, and designated certain equity instruments as financial assets measured at fair value
through other comprehensive income.
・ Lease for lessee
With respect to recognition of lease liabilities and right-of-use assets, IFRS 1 permits a first-time adopterthat is a lessee to measure all of its lease liabilities and right-of-use assets at the date of transition to
IFRS. The Group measured lease liabilities at the date of transition to IFRS at the present value of theremaining lease payments discounted using the lessee’s incremental borrowing rate at the date oftransition to IFRS. The Group also measured right-of-use assets at the date of transition to IFRS at an
amount equal to the lease liabilities.
For leases whose period ends within 12 months from the transition date and leases for which theunderlying asset is of low value, the lease payments are expensed over the lease period with the straightline method or another systematic basis.
The reconciliation which IFRS requires a first-time adaptor to disclose are presented below. For reference,"Presentation reclassification" in the following reconciliation tables include items that do not affect retained
earnings and comprehensive income. "Recognition and measurement differences" include items that
affect retained earnings or comprehensive income.

22

Reconciliations of equity as of the IFRS transition date (January 1, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

AssetsAssetsCurrent assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies

Current assets
10,589

ሺ114)－

10,47696,851

ሺ82)

ሺ194)

96,57424,657

ሺ24,657)－－

13,315

ሺ13,315)－－－

38,343

ሺ724)

Trade and otherreceivables

37,619①

Inventories⑥

Other financial assets

－

7,452

2,516

9,967

15,213(7,696)

(131)

7,386

Deferred tax assets

3,640

ሺ3,640)－－Allowance for doubtfulreceivables

ሺ82)

82

－

－

164,184(3,627)－359

164,184

ሺ3,269)Cash and cash equivalents
①

Other

Total current assets

Other current assets

1,466 162,022－

Subtotal

359

Assets held for sale

1,466 162,381

Total current assets

Fixed assets
Property, plant andequipment

Accounts under IFRS

Non-current assets
345,496

ሺ223,544)

29,651 151,602③④

Property, plant andequipment⑤

Goodwill

Intangible assets
Goodwill

27,439－

ሺ5,956)21,483

Other

10,511

ሺ409)

202

10,305－

223,595－ 223,595

59,296

ሺ59,296)

－

－

－

372

－

372

－

68,783

10,49579,278Long-term loans
receivable

4,790

ሺ4,790)

－

－

Other

14,760

ሺ6,265)

426

8,921

Deferred tax assets

1,071

ሺ3,308)

4,414

2,176

Allowance for doubtfulreceivables

ሺ1,195)

1,195

－

－

462,168

ሺ3,666)39,231 497,733

626,352(6,935)40,697

Intangible assets
Investment property

Investments and otherassetsInvestment securities

Total fixed assets
Total assets

23

660,114

Investments accounted forusing equity method⑥

Other financial assets②

Deferred tax assets

Other non-current assets

Total non-current assets
Total assets

(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities
Current liabilities
Notes and accounts
payable - trade

Liabilities
Current liabilities
38,503－

ሺ43)

38,460

Short-term bank loans

30,337

ሺ30,337)－－

Commercial Paper

33,000ሺ33,000)－－

Current portion of bonds

10,083

ሺ10,083)－－－

73,421

2,159

75,580⑥

Bonds and borrowings

Lease obligations

3,024

－

3,584

6,609

④

Lease liabilities

Income taxes payable

1,681

－

ሺ111)

1,570

－

32,988120

33,108

Accrued bonuses

2,980

ሺ2,980)－－Liquor taxes payable

34,228

ሺ34,228)－－

Deposits received

8,215

ሺ8,215)

－

－

Other

50,072

12,3384,014

66,424

Total current liabilities

212,123

ሺ96)

Trade and other payables

Income tax payables⑥

Other financial liabilities⑦

Other current liabilities

9,724 221,750

Total current liabilities
Non-current liabilities

Long-term liabilities
Bonds
Long-term bank loans

Net defined benefit
liability
Lease obligations
Dealers’ deposits forguarantees

50,129

ሺ50,129)－－

114,594

ሺ114,594)－－－

164,723512 165,235⑥

Bonds and borrowings－

47,609517

48,125⑥

Other non-current financial
liabilities

8,996

－

－

8,996

6,969

－

17,654

24,62333,242

ሺ33,242)－－

Net defined benefit liability④

Lease liabilities

Other
Deferred tax liabilities

15,115

ሺ14,367)

1,941

2,689

18,804

ሺ6,839)14,49026,455

Total long-term liabilities

247,848

ሺ6,839)35,113 276,122

Total non-current liabilities

Total liabilities

459,971

ሺ6,935)44,837 497,872

Total liabilities

Common stock

53,887－－53,887

Capital surplus

46,089－

ሺ5,383)40,706

Treasury stock, at cost

ሺ1,796)－－

ሺ1,796)

Retained earnings

41,932－

ሺ5,617)36,315⑨

Retained earnings

Accumulated othercomprehensive income

20,574－

7,941

28,515⑧

Other components of equity

Other non-current liabilities②

Net assets

Non-controlling interests

Deferred tax liabilities

EquityShare capital⑤

Capital surplus
Treasury shares

157,628

Total equity attributable toowners of parent

4,613

Non-controlling interests

5,694

－

ሺ1,081)

Total net assets

166,381－

ሺ4,140) 162,241

Total equity

Total liabilities and net
assets626,352

ሺ6,935)40,697 660,114

Total liabilities and equity

24

Reconciliations of equity as of the end of FY2017 (December 31, 2017)(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

Assets

Accounts under IFRS
AssetsCurrent assets

Current assets
Cash and cash
equivalents
Trade and otherreceivables

12,718(181)－

12,53798,605

(103)

(176)

98,325

24,681(24,681)－－

13,638(13,638)－－－

38,718(846)

37,873①

Inventories

－

8,216

892

9,107

⑥

Other financial assets

Other

15,413(8,433)

(66)

6,914

Deferred tax assets

3,900(3,878)(22)－

Allowance for doubtfulreceivables

(103)

103

－

－

Total current assets

168,852(3,878)(219)

164,755

Cash and cash equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies①

Other current assets

Total current assets

Fixed assets
Property, plant andequipment

Non-current assets
343,763(219,266)

26,837

151,334③④

Property, plant andequipment⑤

Goodwill

Intangible assets
Goodwill

26,948－(2,006)24,942

Other

13,575(391)

155

13,339Intangible assets－

219,658－

219,658

Investment property

62,146(62,146)

－

－

－

391

－

391

－

66,904

11,77378,677

428

(428)

－

－

Investments and otherassetsInvestment securities

Long-term loans
receivable
Other

14,828(5,938)

419

9,309

Deferred tax assets

1,306(5,201)

6,220

2,326

Allowance for doubtfulreceivables(1,216)

1,216

－

－

461,779(5,201)

43,398499,976

630,631(9,079)43,179664,731

Total fixed assets
Total assets

25

Investments accounted
for using equity method⑥

Other financial assets②

Deferred tax assets

Other non-current assets

Total non-current assets
Total assets

(millions of yen)Accounts under JGAAP

JGAAPPresentation
reclassification

Recognition
andmeasurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities

Liabilities

Current liabilities

Current liabilities

Notes and accounts
payable - trade36,530－(43)

36,488

Short-term bank loans

37,882(37,882)－－

Trade and otherpayablesCommercial paper

32,000(32,000)－－

Current portion of bonds

10,068(10,068)－－－

79,950765

80,716⑥

Bonds and borrowings

Lease obligations

2,691

－

3,842

6,533

④

Lease obligations

Income taxes payable

5,202

－

5

5,207

－

33,060216

33,277

Accrued bonuses

3,090(3,090)－－Liquor taxes payable

34,408(34,408)－－

Deposits received

7,817(7,817)－

Other

50,484

12,2553,850

66,590Total current liabilities

220,173

(0)

8,636

228,809

Income tax payables⑥

Other financial
liabilities⑦

Other current liabilities－
Total current liabilities

Long-term liabilities

Non-current liabilities

Bonds

50,061(50,061)－－Long-term bank loans

103,578(103,578)－－－

153,639(455)

153,184⑥－

45,548408

45,956⑥

Net defined benefit liability

5,493

－

790

6,283

Lease obligations
Dealers’ deposits forguarantees

5,960

－

18,33524,29531,086(31,086)

－

－

Other

15,324(14,462)

1,759

2,621

Deferred tax liabilities

21,292(9,079)15,65827,872

Total long-term liabilities

232,795(9,079)36,496260,212452,968(9,079)45,132

489,021

Total liabilities④②

Lease obligations

Deferred tax liabilities
Total non-current
liabilities
Total liabilities
Equity53,887－－

Capital surplus

46,091－(5,266)40,825

Treasury stock, at cost

(1,807)－－(1,807)Retained earnings

50,023－(5,532)44,491⑨

Accumulated othercomprehensive income

25,274－

9,385

34,659⑧－

53,887⑤

Capital surplus
Treasury shares
Retained earnings

172,055

Non-controlling interests

－

(539)

3,655

Total net assets

177,663－(1,952)

175,710

Total liabilities and net assets

630,631(9,079)43,179664,731

26

Share capital

Other components ofequityTotal equity attributable toowners of parent

4,195

Non-controlling interests

Other financial
liabilities
Net defined benefit
liability

Other non-current
liabilities

Net assets
Common stock

Bonds and borrowings

Total equity
Total liabilities and equity

Notes on reconciliations of equity(1) Presentation reclassification
A. Trade and other receivables
Under JGAAP, “Notes and accounts receivable - trade” and “Allowance for doubtful receivables” were
presented separately, though under IFRS, these line items are included in “Trade and other receivables.”B. Inventories
Under JGAAP, “Merchandise and finished products” and “Raw materials and supplies” were presented
separately, and work in progress was included in “Other,” though under IFRS, these line items are reclassified
as “Inventories.”
C. Other financial assets and other financial liabilities
Based on presentation rules of IFRS, “Other financial assets” and “Other financial liabilities” are presented
separately.
Under JGAAP, “Investment securities” and “Long-term loans receivable” were separately presented andderivative assets were included in “Other” in Fixed assets. Though under IFRS, they are included in “Other
financial assets.”
In addition, under JGAAP, “Deposits received” was separately presented in current liabilities, though under
IFRS, it is included in “Other financial liabilities.”
D. Deferred tax assets and deferred tax liabilities
Under JGAAP, “Deferred tax assets” and “Deferred tax liabilities” were separately presented in current assets
and current liabilities, respectively, though under IFRS, these line items are presented in non-current assets
and non-current liabilities.
E. Assets held for sale
Based on IFRS 5, “Assets held for sale” is presented separately.
F. Investment property
Under JGAAP, fixed assets that meet the definition of investment property was included in “Property, plant andequipment” in fixed assets, though under IFRS, it is presented as “Investment property.”(2) Differences on recognition and measurement
1) Trade and other receivables and inventories
Under JGAAP, revenue was recognized mainly at the point of shipment, though under IFRS, it is recognized
mainly at the point of delivery.
In addition, under JGAAP, goods held mainly for advertisement and promotion were recognized as
inventories, though under IFRS, they are recognized as expenses at the point of purchase.
2) Deferred tax assets and deferred tax liabilities
Amounts of deferred tax assets and deferred tax liabilities have been adjusted for reasons such as temporary
differences arising from transition to IFRS from JGAAP.
3) Property, plant and equipment
In line with adoption of IFRS, the Group revised the depreciation method and other procedures for property,
plant and equipment and reduced their book value. In addition, for certain property, plant and equipment
items, the Group applied the exemption that permits the first-time adopter to use the fair value as of thetransition date as deemed cost. The book value of those property, plant and equipment before the applicationof deemed cost as of the transition date was 39,044 million yen and their total fair value was 71,253 million
yen.
4) Lease obligations
Under JGAAP, lease transactions of lessee were classified into finance lease and operating lease. For
operating lease, lease transactions were accounted for in a similar manner with ordinary rental transactions.
Under IFRS, the Group records all of its lease transactions in both leased assets (right-of-use asset) andlease obligations (lease liabilities), as lease transactions of lessee are not classified into finance lease and27

operating lease.
5) Goodwill
Under JGAAP, goodwill was amortized with the straight-line method over a reasonable period up to 20 years,
though from the date of transition to IFRS, the Group ceased to amortize goodwill and instead started toperform an impairment test every year.
In addition, under JGAAP, changes in ownership interests in subsidiaries that do not result in loss ofcontrol (additional acquisition of ownership interests) were accounted for as external transaction withadjustments of goodwill or income and loss. Under IFRS, such changes are accounted for as equity
transaction, which affects “Capital surplus" without any change in goodwill or income and loss.
6) Other financial assets and other financial liabilities
Under JGAAP, the Group recorded unlisted shares based on their acquisition costs and, if necessary,recognized their impairment when the financial position of an issuer deteriorated, though under IFRS, theGroup has elected to measure them at fair value through other comprehensive income.
In addition, under JGAAP, interest-rate swaps that meet specific requirements were treated with a specificaccounting method. Under IFRS, however, they are treated with principle hedge accounting, where derivative
assets/derivative liabilities are recognized accordingly, and valuation differences are recognized in othercomprehensive income.
7) Other current liabilities
Under JGAAP, unused compensated absences were not required to be accounted for, though under IFRS,
they are recognized as liabilities.
Under JGAAP, levies including real-estate tax were recognized at the time of payment, though under
IFRS, they are recognized on the day when the liability is accrued.
8) Other components of equity
With respect to cumulative exchange differences on translations of foreign operations recognized under
JGAAP, the total amount was transferred to “Retained earnings” as of the transition date.
Under JGAAP, the Group recorded unlisted shares based on their acquisition costs and, if necessary,recognized their impairment when the financial position of an issuer deteriorated. Under IFRS, the Group has
elected to measure them at fair value through other comprehensive income.
Under JGAAP, past service cost was recognized in net assets through other comprehensive income when
they occurred and was expensed using the straight-line method over a certain number of years within the
average remaining service period of the employees. Under IFRS, past service cost is recognized in full as
either profit or loss when it occurs.
9) Retained earnings(millions of yen)Transition dateYear ended(January 1, 2017) December 31,2017
Trade and other receivables and Inventories (see 1)

(418)

(510)

(1,610)(4,851)

Lease obligations (see 4)

252

217

Goodwill (see 5)

－

3,904

Other financial assets、Other financial liabilities (see 6)

263

275

Other current liabilities (see 7)(2,739)(2,643)

Other components of equity (see 8)(1,382)(1,739)16(185)(5,617)(5,532)

Property, plant and equipment (see 3)

OtherTotal adjustments to retained earnings

28

Reconciliations of profit or loss and comprehensive income for FY2017(January 1, 2017 - December 31, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRSNet sales

551,549－(14,963) 536,585①

Revenue

Cost of sales

358,573－

14,576 373,148①②④

Cost of sales

Gross profit

192,976－(29,539) 163,437

175,944－(29,952) 145,991

－

2,716

Selling, general andadministrative expenses(1,687)
(144)

5,669

Other operating expenses(1,130)12,806

5,813

17,033(3,097)

Non-operating income

2,093

ሺ2,093)－－Non-operating expenses

2,715

ሺ2,715)－－Extraordinary gains

6,814

ሺ6,814)－－Extraordinary losses

5,423

ሺ5,423)

－

－

－

6,171

(4,833)

1,338

－

2,324

302

2,626

－

19

(0)

19

17,802－(6,264)

11,5388,182－(3,012)

5,170

9,619

－

(3,252)

6,367

ProfitSelling, general andadministrative expenses
Other operating income

Operating income

Income taxes

①②
③④

1,029

－

Profit before income
taxes

Gross profit

Operating profit⑤

Finance income
Finance costs
Share of profit of investments
accounted for using equity
methods
Profit before tax⑤

Income tax expense
ProfitOther comprehensive
incomeOther comprehensive income

Unrealized holding gain
on securities

3,416

－

4,785

8,202

⑤

Remeasurements ofdefined benefit plans

189

－

348

537

④

Foreign currencytranslation adjustments

1,019

－

13

1,032

Deferred hedge gains(losses)

ሺ60)

－

174

114

Comprehensive income

14,184－

2,068

16,25229

Financial assets measured atfair value through othercomprehensive income
Remeasurements of defined
benefit plans
Exchange differences ontranslation of foreign
operations
Effective portion of gains andlosses on fair value of cash
flow hedges
Comprehensive income

Notes on reconciliations of income and comprehensive income(1) Presentation reclassification
A. Other operating income, other operating expenses, finance income, finance costs and share of profit ofinvestments accounted for using equity methods
With respect to line items presented in “Non-operating income,” “Non-operating expenses,” “Extraordinary
gains” and “Extraordinary losses” under JGAAP, the Group has reclassified financial-related items to “Financeincome” or “Finance costs” and other items to “Other operating income,” “Other operating expenses” or“Share of profit of investments accounted for using equity methods” in accordance with IFRS.
(2) Differences on recognition and measurement
1) Revenue, cost of sales and selling, general and administrative expenses
Under JGAAP, some rebates and other related costs were presented in “Selling, general and administrative
expenses,” though under IFRS, these costs are deducted from “Revenue.”
Under JGAAP, revenue was recognized mainly at the point of shipment, though under IFRS, it isrecognized mainly at the point of delivery.
2) Cost of sales and selling, general and administrative expenses
As the Group revised the depreciation method and other procedures for property, plant and equipment in linewith adoption of IFRS, depreciation expense included in cost of sales and selling, general and administrative
expenses have been changed.
In addition, under JGAAP, levies including real-estate tax were recognized at the time of payment, though
under IFRS, they are recognized on the day when the liability is accrued.
3) Selling, general and administrative expenses
Under JGAAP, goodwill was amortized over the period for which its effects are estimated to last, though under
IFRS, goodwill is no longer amortized after the transition date.
4) Cost of sales, selling, general and administrative expenses, and remeasurements of defined benefit plans
Under JGAAP, past service cost was recognized in net assets through other comprehensive income when
they occurred and was expensed using the straight-line method over a certain number of years within the
average remaining service period of the employees. Under IFRS, past service cost is recognized in full as
either profit or loss when it occurs.
5) Income tax expense, financial assets measured at fair value through other comprehensive income
Under JGAAP, the Group recognized gain on sales of investment securities and tax on the gain in“Extraordinary gains” and “Income taxes,” respectively. Under IFRS, which permits to designate certain equity
instruments as financial assets measured at fair value through other comprehensive income, the Group
recognizes the gain on sales of designate equity instruments as “Other comprehensive income.”

30