Financial Results
for the Year Ended December 31, 2017 — Consolidated(Based on Japanese GAAP)
February 15, 2018

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
Toshihiko Umezato, Director of the Corporate Communications Department

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

Annual general meeting of shareholders

March 29, 2018

Filing of annual financial report

March 30, 2018

Commencement of dividend payments

March 30, 2018

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, 2017
(January 1 – December 31, 2017)(Amounts in million yen rounded down to the nearest million yen)

<Note>On July 1, 2016, the Company carried out a share consolidation at a ratio of 1 share for 5
shares of the Company’s common stock. Accordingly, values for the items noted below havebeen recalculated on the assumption that the share consolidation took place at the beginning of
the previous fiscal year.
・Profit per share・Diluted profit per share
・Net assets per share
・Number of shares issued at end of period (treasury stock included)
・Number of shares held in treasury at end of period

・Average number of outstanding shares during the period1(1) Operating Results(Percentage figures represent year-over-year changes)
Net sales

Operating income

Ordinary income

Profit attribute toowners of parent

Year ended

million yen%

million yen%

million yen%

million yen%

551,5481.8

17,032(16.0)

16,410(14.5)

10,97715.9

541,847

1.5

20,26745.3

19,202

45.3

9,469

55.0

December 31, 2017
Year ended
December 31, 2016
Note: Accumulated other comprehensive income
Year ended December 31, 2017: 14,183 million yen (172.2)%
Year ended December 31, 2016: 5,211 million yen (31.2)%

Year ended

Profitper share

Diluted net
income per
share

Return on
equityOrdinary
income tototal assets

Operatingincome tonet sales

Yen

yen

%

%

%

140.93

_

6.6

2.6

3.1

121.56

_

5.9

3.1

3.7

December 31, 2017
Year ended
December 31, 2016
Note: Equity method investment gains
Year ended December 31, 2017: 19 million yen
Year ended December 31, 2016: 15 million yen(2) Financial Position
Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%

yen

December 31, 2017

630,630

177,66227.5

2,227.02

December 31, 2016

626,351

166,38025.7

2,062.86

Note: Shareholders’ equity
December 31, 2017: 173,467million yen
December 31, 2016: 160,687million yen

2(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, 2017

30,004(17,822)(10,171)

12,536

Year ended
December 31, 2016

32,570(27,586)(4,827)

10,475

2. Dividends
Dividend per share
End Q1

Record date or

End Q2End Q3Year-end

Full year

periodTotal

PayoutDividends

dividends

ratio

to netpaid(consol.)assets(full year)
yen

yen

yen

yen

yen

million yen(consol.)%%Year ended
December 31, 2016

—

0.00

—

37.00

37.00

2,887

30.4

1.8

Year ended
December 31, 2017

—

0.00

—

40.00

40.00

3,121

28.4

1.9

Year ending
December 31, 2018
(forecast)

—

0.00

—

40.00

40.00

—

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2018
(January 1 – December 31, 2018)* The Company decided to apply International Financial Reporting Standard (IFRS) from the first quarterof fiscal 2018. As a result, forecasts shown here for fiscal 2018 are based on IFRS.
(Percentage figures represent year-over-year changes)
Revenue

Operating profit

Profit before tax

Profit attribute to

Basicowners of parent

earnings per
sharemillion yen%

million yen%

million yen%

million yen

555,800

0.8

18,7009.8

17,700(0.6)

11,100%Year ending
December 31,
2018
Note: Earnings forecasts for the six months ending June 30, 2018 are omitted because the company
manages performance targets on a yearly basis.

3

Yen

1.1

142.504. Other(1) Changes to scope of consolidation: None
(2) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accordance with amendments to accounting standards etc.: None
2) Changes other than 1) above: None
3) Changes in accounting estimates: None
4) Retrospective restatement: None
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
December 31, 2017: 78,794,298 shares
December 31, 2016: 78,794,298 shares
2) Number of shares held in treasury at end of period:
December 31, 2017: 901,792 shares
December 31, 2016: 898,911 shares
3) Average number of outstanding share during the period:
Year ended December 31, 2017: 77,894,040 sharesYear ended December 31, 2016: 77,900,282 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, 2018” on page 12.

4

1. Analysis of Operating Results and Financial Condition(1) Analysis of Operating Results(a) Review of the fiscal year ended December 31, 2017
Net sales
2017
2016
Change (%)

551,548541,847
1.8

Operating income
17,032
20,267(16.0)

Millions of yen, except percentages
Profit attribute to
Ordinary income
owners of the parent

16,41019,202(14.5)

10,9779,469
15.9

In 2017, the Japanese economy stayed on a moderate recovery track, supported by rebounding exports
and an improved employment and income environment. Nonetheless, rising geopolitical risks andunseasonable weather weighed on investment and consumption, and the overall economic environment
thus remained rather unpredictable.
The domestic alcoholic beverage industry saw demand depressed by unseasonal summer weather,higher store prices following revision of Japan's liquor tax law, and weakness in the pub/restaurant spaceowing to a growing cost-cutting mindset among Japanese consumers. Overseas, the North American
beer market appears to have contracted, but the Asian market continued to exhibit strong growth.
Demand in Japan’s soft drinks industry appears to have been largely the same as in 2016. Meanwhile,
the real estate industry, saw continued improvement in vacancy rates and rents in the Greater Tokyo
office leasing market.
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 target for 2017 as it seeks to be a company with highly unique brands in the fields of "Alcoholic
Beverages", "Food", and "Soft Drinks" around the world.
The Japanese Alcoholic Beverage business redoubled its efforts to strengthen core brands in line withits “Beer Revival Declaration.” In particular, the launch of an integrated marketing strategy for Sapporo
Draft Beer Black Label, one of those core brands, resulted in a third consecutive year of sales growth forthe brand despite the decline in overall beer demand. In non-beer growth areas, we continued to build ahighly 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,
with aggressive marketing campaigns carried out by SLEEMAN BREWERIES in Canada and by Sapporo
USA. In addition, in September we took concrete action to accelerate our growth in North America andpurchased Anchor Brewing Company. In the U.S. soft drinks market, Country Pure Foods achieved sales
growth but Silver Springs Citrus' sales were negatively affected by changes in U.S. consumers’
preferences. In Vietnam, we revised our marketing approach in an effort to improve the business’
profitability.
The Food & Soft Drinks business continued to focus on two key management initiatives in Japan—
strengthening marketing and lowering costs—while concentrating investment on our strengths inbeverages made from the highest quality ingredients and our core lemon-related and soup product brands.
The Restaurants business continued to strengthen its Japan operations by opening new outlets andrenovating existing outlets, with the focus on our core Ginza Lion and Yebisu Bar chains. We alsoendeavored to improve profitability by closing or changing the format of unprofitable outlets. In Singapore,
we continued our efforts to spread the reputation of our Ginza Lion brand to the world.
The Real Estate business enjoyed high occupancy rates at its rental properties throughout 2017. At
Yebisu Garden Place, our core real estate asset, we continued to upgrade the dining floor and take otheractions 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” also contributed
to earnings in 2017.
The efforts outlined above and explained in more detail later in this report enabled the Sapporo Groupto achieve the financial results presented below.
5Net Sales
In 2017, the Sapporo Group posted consolidated net sales of ¥551.5 billion, up ¥9.7 billion or 2% year on
year. At the Japanese Alcoholic Beverage business, efforts to strengthen core brands contributed to solid
sales of beer and diversified alcoholic beverage products, but sales volumes for happoshu and newgenre beers fell below the previous year’s levels. As a result, segment sales were less than in 2016.
Meanwhile, the International Business achieved sales growth, driven by increased shipments of Sapporo
brand beer products overseas and a solid contribution from Country Pure Foods’ fruit juice sorbet
business. The Food & Soft Drinks business expanded its lemon-based drinks and soup products sales
volumes in Japan. However, the Singapore business’ domestic and export sales volumes both declined
year on year. As a result, overall segment sales were largely the same as in 2016. The Restaurants
business achieved sales growth in 2017, supported by solid sales at existing outlets in Japan and fullyear contributions from two new subsidiaries that were consolidated in June 2016—Marushinkawamura
and Ginrin Suisan. The Real Estate business also achieved sales growth, supported in part by the fullyear contribution from the GINZA PLACE commercial complex that opened in September 2016.
Operating Income
Operating income at the Japanese Alcoholic Beverage business was in line with the 2016 level despite
lower sales, as strong sales growth in the beer and diversified alcoholic beverages product offerings
improved our product mix and the business improved manufacturing cost efficiencies. At the International
Business, sales of alcoholic beverages in North America were favorable, but lower sales volumes at Silver
Springs Citrus and expenses related to the acquisition of Anchor Brewing Company weighed on segment
profits, which thus fell below the previous year’s result. Profits also declined at the Food & Soft Drinks
business, largely because of lower sales at the Singapore business. The Restaurants business enjoyedsolid sales but rising prices of food materials and higher labor costs pushed profit below the 2016 level.
Lastly, the Real Estate business achieved year-on-year profit growth, supported by an increase in rental
income at core properties, including the first full-year contribution from GINZA PLACE.
As a result of the above, consolidated operating income totaled ¥17.0 billion, a ¥3.2 billion or 16% yearon-year decline.
Ordinary Income
Consolidated ordinary income totaled ¥16.4 billion, a ¥2.7 billion or 15% year-on-year decline, reflecting
a decrease in the consolidated operating income.
Profit Attributable to Owners of Parent
In 2017, profit attributable to owners of parent totaled ¥10.9 billion, up ¥1.5 billion or 16% year on year,
thanks in part to a ¥4.8 billion gain on sales of investment securities and a ¥1.9 billion gain on sales ofproperty, plant and equipment.
Results by segment are outlined below.

6(2) Results by Business Segment

2016

2017

%
changeMillions of yen, except percentages
Operating income
%
2017
2016
change279,476

278,692(0.3)

11,745

11,7670.2

65,40069,8376.8

906(1,214)-

137,918

137,898

(0.0)

1,314

564

(57.1)

28,12029,140

3.6

663

330

(50.2)

22,90024,1345.4

10,328

11,261

9.0

Net sales
Japanese
Alcoholic
Beverages
International
Business
Food &
Soft Drinks
Restaurants
Real EstateBusiness

Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer-type beverages in 2017 was 2% lower than in
2016, mainly owing to the impact of June’s liquor tax revision and unseasonable summer weather, which
together added fuel to consumers shift into RTD*1 beverages and contraction in the commercial-use
market.
Under such market conditions, the Japanese Alcoholic Beverage business continued its efforts torealize management’s vision of “Seek to be No.1 by accumulating one-of-a-kind products” and achieve
further growth by constantly providing customers with a unique value proposal and by investing
aggressively in the beer business, in line with the business policy outlined in our “Beer Revival
Declaration."
Among beer products, Sapporo Draft Beer Black Label continued to enjoy strong sales, especially thecanned version. Among our Yebisu brand products, Yebisu Hana Miyabi, launched in March, received
favorable response from customers. As a result, total domestic shipments of beers increased 2% year on
year, for a third consecutive year of growth. Meanwhile, in the happoshu category, sales of Goku Zeroand our new-genre category offering Mugi to Hop fell below previous year levels. Overall, shipments ofour beer and beer-type beverages slipped 1.9% year on year, a slightly better result than for the total
domestic demand, as noted above.
In the RTD category, sales were up sharply over the 2016 result, boosted by the nationwide expansionof the sales area for Ai no Skal White Sour, one of our high-value-added collaboration products, andsteady growth in sales of other core RTD products, including Otoko Ume Sour and Kireto Lemon Sour.
We also achieved year-on-year sales growth in the wine category, as we strengthened marketing ofdomestic and imported fine wines*2, including the imported wine Penfolds, Taittinger champagne, and ourdomestic Grande Polaire wines.
Our spirits business achieved year-on-year sales growth, led by strong sales of products from major
overseas brands, such as Dewars..
Our Japanese liquor business also achieved sales growth, driven by continued strong sales of Imo
Shochu Kokuimo, Japan’s No. 1 selling*3 blended imo shochu.
Overall, the Japanese Alcoholic Beverages business posted sales of ¥278.6 billion, down ¥0.7 billion
or 0% year on year, and operating income, at ¥11.7 billion, up ¥0.0 billion or 0%.
*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages thatcan be consumed as is immediately after opening.
*2) Fine wines are wines priced in the mid- to high-price range (¥1,500 and higher per bottle).
*3) Based on Intage SRI market research on combined blended imo shochu sales in the supermarket,
convenience store, and direct sales channels from January 2016 to December 2017.
International BusinessWe estimate that total demand in the North American beer market in 2017 fell from the 2016 level, withoverall shipments down in both the United States and Canada. Meanwhile, demand in Asian markets
was solid but growth momentum slowed in line with the widely divergent pace of growth in national andregional economies.

7

In this environment, our International Business continued its efforts to strengthen brand recognition
primarily in the premium beer markets in North America and Southeast Asia. In addition, we expanded
our sales channel in the U.S. fruit juice market.
Our Canadian subsidiary SLEEMAN BREWERIES continued to invest in the marketing of its core
premium brands and as a result expanded its market share. However, overall beer sales volume(excluding Sapporo brand beer) slipped 1% year on year, reflecting shrinkage of the overall market. In
the U.S. beer market, Sapporo USA’s efforts to expand its customer base among the general population
as well as Asian Americans led to a 6% year-on-year increase in shipments of Sapporo brand beers in
2017. Meanwhile, our position in the North American premium beer market was strengthened by the
September acquisition of Anchor Brewing Company, which became a 100% consolidated subsidiary. In
the U.S. soft drinks market, County Pure Foods achieved strong sales of its commercial-use soft drinks
and its fruit juice sorbet. Silver Springs Citrus, however, saw its sales volume decrease significantly amid
an overall decline in orange juice sales in the United States. The combined sales of these two groupcompanies was lower than in 2016.
In Southeast Asia, our Vietnam business saw its beer shipments decline year on year owing to anincrease in the country’s liquor tax in January and a decrease in the number of sales outlets stocking our
products following a change in our marketing methods. The Singapore business, meanwhile, achieved
growth in beer shipments thanks to its efforts to expand its sales channels in the household- andcommercial-use markets.
Elsewhere in Asia, our Korean business achieved sharp year-on-year growth in beer shipments thanks
to the popularity of Sapporo Premium Beer in both the household- and commercial-use markets and tothe market launch of Yebisu beer. In Oceania, continued efforts to strengthen sales via licensing
agreements with local brewing partners led to a year-on-year growth in beer sales volumes.
The efforts outlined above enabled the International Business to achieve solid 15% year-on-yearincrease in shipments of Sapporo brand products in overseas markets.
As a result, the International Business posted sales of ¥69.8 billion, up ¥4.4 billion or 7% year on year,
but posted an operating loss of ¥1.2 billion, compared with a profit of ¥0.9 billion in 2016.
Food & Soft Drinks
We estimate that overall demand for soft drinks in Japan in 2017 was the same as in 2016.
In this market environment, the Food & Soft Drinks business remained committed to delivering value
unique to the Sapporo Group by strengthening its Kireto Lemon, sozai-kei (ingredient), shokkan-kei(texture), and Gabunomi series of brands in the domestic soft drinks business and bolstering its lineup ofcore lemon-based and soup products in the domestic food business.
In 2017, the domestic soft drinks business launched several new products that leverage our corestrengths, such as Lemon no Genki, a lemon-based drink with a functional food label made possible byour extensive research into lemons, and Nippon Mugi-cha, made from 100% domestic-grown six-row
barley. Meanwhile, our Gabunomi brand created quite a buzz in the market with its offering of uniquely
flavored beverages, such as Gabunomi Lemon Cream Soda. During the year, we received a Most
Impressive Partner (MIP) award from Food Action Nippon for the contribution to raising the organization’sname recognition achieved by our series of sugar-free teas made from domestic tea leaves, which
continued to enjoy strong sales in 2017, driven in particular by Kaga Bo-Hojicha.
The domestic food business enjoyed steady sales of its soup products, including its cold canned soups
and cup-based instant soups. In addition, sales of our soup products increased 5% year on year, as we
stimulated demand in the autumn and winter seasons with the renewal of the Jikkuri Kotokoto Gohobi
Dining series of retort-packaged soups that can easily be heated in a microwave oven and a new TV ad
campaign. Lemon-based food product sales were also strong in 2017, up 8% year on year, led by strong
sales of our core Pokka Lemon 100 brand products. In 2017, we entered into a new partnershipagreement with Hiroshima Prefecture’s Kure City with the aim of promoting the city and its lemons andcontributing to regional revitalization. The new agreement adds to our partnership with Hiroshima
Prefecture, which includes a similar partnership with the town of Osaki-Kamijima. We also enhanced our
lineup of soymilk-based yogurt products by marking the 20th anniversary of the launch of the SOYAFARM
8

Tōnyū de Tsukutta Yogurt series with the series’ first revision in 10 years. These yogurts made from soy
milk have been certified as food for specified health uses (FOSHU).
At the domestic restaurants business, Pokka Create, the POKKA SAPPORO subsidiary that operates
the Café de Crié coffee shop chain, continued its efforts to boost sales by introducing new menus withseasonal and trendy dishes. As a result, existing store sales were solid, supporting growth in the chain’s
overall sales.
Meanwhile, our overseas soft drinks business maintained its top share* in Singapore’s tea drinks
market, including its dominant 70% share of the green tea market. However, exports from Singapore toother countries in the region were slowed a bit by next tax regulations in some countries. In Indonesia,
PT. POKKA DIMA INTERNATIONAL started up commercial production at its new plant in April and beganshipping the plant’s main output, including a 450ml PET bottle of Jasmine Green Tea and a 350ml PET
bottle of Lemon Black Tea.
Overall, the Food & Soft Drinks segment recorded sales of ¥137.8 billion, down ¥0.0 billion or 0%.
Operating income came to ¥0.5 billion, down ¥0.7 billion or 57% year on year.
* Based on data from Nielsen Singapore MarketTrack May 2017 (Copyright 2017, The Nielsen Company)
Restaurants
Japan’s restaurant industry remained on the recovery track in terms of sales in 2017, while grappling witha severe operating environment characterized by labor shortages and the resulting increase in labor costs
as well as upwardly trend in food material procurement prices.
In this environment, the 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 tocustomers while also striving to create restaurants that “deliver 100% satisfaction to customers.”
New store openings in Japan included the February opening of a Yebisu Bar outlet in Hiroshima, thechain's first outlet in the Chugoku–Shikoku region, the March opening of another Yebisu Bar outlet in ShinYokohama, and the May opening of a new Ginza Lion Beer Garden in Omiya, a suburb of Tokyo in
Saitama Prefecture. During the year, we also renovated the Beer Hall LION GINZA 7-Chome outlet, oneof that chain’s flagship stores, and completely renovated the Ginza Lion Haneda Airport outlet. In addition
to these three new openings and two renovations, we closed eight unprofitable outlets, bringing the total
number of outlets in Japan to 195 as of end-2017.
Meanwhile, in Singapore we renovated three Tonkichi stores in the center of the city-state and openeda new RIVE GAUCHE cake shop in the CityLink Mall. We also closed three stores, bringing the Singapore
chain size at year end to 13 stores.
Overall, the Restaurants business sales in 2017 totaled ¥29.1 billion, up ¥1.0 billion or 4% year on year.
Segment operating income was ¥0.3 billion, down ¥0.3 billion or 50%.
Real Estate
Japan’s real estate industry is beginning to anticipate a slowdown in the recent improvement in vacancy
rates in Greater Tokyo’s office leasing market owing to a large supply of new office space becoming
available over the next several years, starting in 2018. Nonetheless, vacancy rates continue to fall andrents are rising slightly as strong corporate earnings continue to buoy demand for office space.
In this environment, during 2017 our real estate business was able to maintain high occupancy rates
at its properties in Tokyo, including Yebisu Garden Place Tower, the business’ core source of earnings. In
addition, the high occupancy rates provided a solid platform for more assertive efforts to increase rentsof existing tenants.
Our efforts in 2017 included the establishment of a consortium-type child day care center that can beused by employees of the many companies with offices in the complex as well as Shibuya Ward residents.
The new facility opened its doors in April. In August, we celebrated the grand opening of the Yebisu
Garden Place Tower’s completely renovated panorama-view restaurant rows on the building’s 38th and39th floors. The renovation was based on the concept of “Grand & Casual — the luxury of casualenjoyment of the essence.” With a “Think the World” theme, the 39th floor now offers a wide selection ofcarefully selected restaurants offering cuisine from around world. The 38th floor meanwhile features9

restaurants offering a wide variety of Japanese cuisine.
GINZA PLACE, the commercial complex we opened in September 2016, made a solid contribution toearnings in 2017, its first full-year of operation. We continue to enhance the facility’s information
dissemination capability in line with its original concept as a “base for information dissemination andexchange.” In addition to enhancing the property’s brand value, these efforts are increasing the property’s
drawing power and helping make the Ginza district an even more dynamic and bustling urban center.
Meanwhile, our real estate development business is making steady progress on the renovation of the
Sapporo Factory commercial complex built on the former site of a Sapporo brewery located on the eastside of the Sosei River, an area which is a focus of Sapporo City’s urban redevelopment program. In May
we completed the redevelopment of the adjacent parking lot into a three-story, 6,900m2 commercial
complex, and in July a housing-related company opened a showroom in the new complex. We willcontinue our efforts to make this complex an attractive urban space that delivers enhanced convenience
to Sapporo residents and visitors.
Meanwhile, we are constantly reviewing and revising our property portfolio from a long-term
perspective. As a result, in October we sold the Seiwa Koraibashi Building in Osaka.
As a result of the efforts outlined above, Real Estate business sales in 2017 totaled ¥24.1 billion, up¥1.2 billion or 5%. Operating income was ¥11.2 billion, for a year-on-year increase of ¥0.9 billion or 9%.

(2) Review of Consolidated Financial Condition
Consolidated total assets as of December 31, 2017, totaled ¥630.6 billion, ¥4.2 billion more than at theend of the previous fiscal year (December 31, 2016). The asset growth reflects increases in notes andaccounts receivable, land holdings, investment securities and certain other assets, which offset
declines related to goodwill amortization and long-term loans receivable.
Consolidated total liabilities totaled ¥452.9 billion, a ¥7.0 billion decrease from December 31, 2016,
primarily owing to decreases in long-term bank loans and net defined benefit liability, which outweighed
increases in short-term bank loans, income taxes payable and some other liability categories.
Consolidated net assets totaled ¥177.6 billion, up ¥11.2 billion from the end of the previous fiscal
year. The increase primarily reflects the posting of profit attributable to owners of parent and anincrease in unrealized holding gain on securities, which outweighed such negative factors as anincrease in the loss attributable to non-controlling interests and the payment of year-end dividends.

10

(3) Review of Consolidated Cash Flows
Cash and cash equivalents (collectively, “cash”) totaled ¥12.5 billion as of December 31, 2017, a ¥2.0
billion or 20% increase from December 31, 2016.
Following is an explanation of consolidated cash flows by category in 2017 and the factors that
affected cash flows in each category.
Cash flows from operating activities
Operating activities in 2017 provided net cash of ¥30.0 billion, ¥2.5 billion or 8% less than in 2016. The
major positive contributors to annual operating cash flow included ¥23.5 billion from depreciation andamortization and ¥17.8 billion from profit before income taxes. The largest cash outflow was the ¥5.5
billion in income taxes paid.
Cash flows from investing activities
Investing activities in 2017 used net cash of ¥17.8 billion, ¥9.7 billion or 35% less than in 2016. Major
investment outflows included ¥13.0 billion for purchases of property, plant and equipment and ¥11.6
billion for the purchase of subsidiaries’ shares resulting in change in scope of consolidation.
Cash flows from financing activities
Financing activities in 2017 used net cash of ¥10.1 billion, a ¥5.3 billion or 111% increase over theamount used in 2016. The main inflows from financing activities were ¥12.5 billion in proceeds fromlong-term bank loans and ¥9.9 billion from the issuance of bonds. These inflows were outweighed by
outflows, including ¥12.6 billion for the repayment of long-term bank loans and ¥10.0 billion forredemption of bonds.
Cash Flow Indicators
2013
24.6

As of December 31,
2014
2015
25.0
25.5

2016
2017
Equity ratio (%)
25.7
27.5
Equity ratio based on
28.0
31.9
33.4
37.4
42.6
market capitalization (%)
Cash flow to interest8.8
13.0
7.8
8.6
9.1
bearing debt (years)
Interest coverage ratio
11.9
8.9
14.8
14.9
15.3
(%)
Equity ratio: Total net assets / Total assets
Equity ratio 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.
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 whichinterest is currently payable.

11(4) Outlook for fiscal year ending December 31, 2018
Millions of yen, except percentages

2018 forecast
2017 results
Projected increase (%)

Revenue
555,800
551,548
0.8

Operating profit
18,70017,032
9.8

Profit before
tax
17,70017,801(0.6)

Profit attribute toowners of parent

11,10010,977
1.1

In 2018, the second year of the Sapporo Group Long-Term Management Vision “SPEED150” and theFirst Medium-Term Management Plan 2020, we will redouble our efforts to supply distinctive products
and services worldwide in our three core business areas - Alcoholic Beverages, Food, and Soft Drinks and expand contact points with customers as we strive to achieve robust growth in line with the goals of
our longer term vision and the first-stage management plan.
In addition, the Company has decided to voluntarily apply International Financial Reporting Standards(IFRS) to its consolidated financial statements for the fiscal year through December 2018. Consequently,
management’s forecasts for the year ending December 31, 2018, are on an IFRS basis. The voluntarily
application of IFRS results in certain types of rebates on product sales being excluded from sales, which
in turn results in sales on an IFRS basis being less than on the Japanese GAAP basis used until now.
Operating income, meanwhile, is positively affected (increased) by removal of Japanese GAAP’s
requirement to amortize goodwill but negatively affected (decreased) by reclassification of income
statement line items, changes in the method for calculating retirement benefit expenses, and otheraccounting changes.
Our consolidated forecasts and outlook for the Sapporo Group in 2018 are as follows.
Net Sales
In line with its commitment to “continue strengthening beer business,” the Japanese Alcoholic Beveragebusiness will continue its efforts to further enhance the value of our core Sapporo Draft Beer Black Labeland Yebisu brands as it aims to increase total shipments of beer and beer-type beverages. The businessalso aims for further increased sales of its wine products and will strengthen fine wine brands to achievethat goal. In the RTD category, we aim for growth by developing one-of-a-kind products that surprise anddelight consumers. We will also redouble our efforts to expand sales in other growth areas, including
spirits and Japanese liquors, as we build a more diverse and multilayered product lineup.
The International business will strive to expand sales volumes of our beer products in overseas markets
by strengthening brand recognition for our core premium beer brands, starting with the Sapporo brands,
especially in North American and Southeast Asian markets, the two regions where the business isconcentrating its resources and efforts. Toward that end, we will execute strategies that match the uniquecharacteristics of the market in each country in which we do business. In North America, we will promotesynergies among the Sapporo, Sleeman, and recently acquired Anchor brands. In Vietnam, we arefocused on expanding sales of Sapporo Premium Beer by carrying out effective and efficient marketing.
The Food & Soft Drinks business will continue strengthen its position in the Japanese food andbeverage markets by providing customers with new value propositions in lemon-based and soup products,
two areas where we have distinct competitive advantages. Overseas, it will focus on strengthening the
POKKA brand in the core Singapore market. In the soy beans and chilled products business, from March2018 we will begin producing and selling Blue Diamond Growers’ Almond Breeze almond drinks while
also aiming for growth of our core soy milk–based yogurt products.
The Restaurants business targets sales growth driven by the steady expansion of its core Ginza Lionand Yebisu Bar formats via new store openings as well as renovations and format changes for existingoutlets. Overseas, our Singapore business continues to strive for growth by increasing the awareness ofthe beer hall format among local consumers.
The Real Estate business will continue its efforts to enhance the competitiveness of its properties,

12

including Yebisu Garden Place and GINZA PLACE, as it seeks to maintain high occupancy rates andachieve higher rent levels. We will continue with the renovation of the Sapporo Factory commercial
complex as part of the redevelopment program of the area on the east side of the Sosei River, a focus of
the Sapporo City’s urban redevelopment program.
We expect the efforts outlined above to generate consolidated revenue of ¥555.8 billion in 2018, a
year-on-year increase of ¥4.2 billion or 1%.
Operating Profit
We expect the Japanese Alcoholic Beverage business to achieve growth in sales and operating
income on a Japanese GAAP basis as it expands sales of its core beer brands and continues todiversify its product offerings. On the newly adopted IFRS basis, however, we forecast a decrease inoperating profit. We expect the International business to achieve profit growth driven by sales ofalcoholic beverages and soft drinks in North America and progress with structural reforms at theVietnam operations. We also expect the Food & Soft Drinks business to achieve profit growth byincreasing sales of its food and soft drinks products and improving the product mix in Japan while
implementing flexible strategies to expand our presence in overseas markets. Profit growth at ourInternational and Food & Soft Drinks businesses will be boosted by the voluntarily application of
IFRS, which will eliminate goodwill amortization. The Restaurants business and the Real Estatebusiness are expected to achieve profit growth—the Restaurants business by increasing sales atexisting stores and opening new outlets while the Real Estate business’ profits should be driven
upwards by contributions from Yebisu Garden Place, GINZA PLACE, and the business’ otherproperties. On the newly adopted IFRS basis, however, we forecast a decrease in operating profit.
Overall, we forecast consolidated operating profit will reach ¥18.7 billion in 2018, an increase of ¥1.6
billion, or 10%, over 2017.
Profit Before Tax
While we expect operating profit to increase in 2018, we forecast consolidated profit before tax will fall
¥0.1 billion, or 1% year on year, to ¥17.7 billion, owing to the absence of the ¥4.8 billion gain on the saleof investment securities and the ¥1.9 billion gain on the sale of property, plant, and equipment that wereboth posted in 2017.
Profit Attributable to Owners of Parent
We project profit attributable to owners of the parent will total ¥11.1 billion in 2018, an increase of ¥0.1
billion or 1% over 2017.
The 2018 outlook for each segment is presented below.

13(2) Outlook by Business Segment
Revenue
2018
2017
forecast
Japanese
Alcoholic
Beverages
International
Business
Food &
Soft Drinks
Restaurants
Real EstateBusiness% change

Millions of yen, except percentages
Operating profit
2018
2017
forecast% change278,692

272,500(2.2)

11,767

10,500(10.8)

69,837

81,90017.3(1,214)

1,400-

137,898

135,600

(1.7)

564

3,600

538.2

29,14028,800

(1.2)

330

100

(69.8)

24,13424,9003.2

11,261

10,500(6.8)

Japanese Alcoholic Beverages
The Japanese Alcoholic Beverages business expects to face a difficult market environment in 2018. In
addition to the impact from price revisions for bottled and keg products, the business expects overall
demand will be lower than in 2017.
In this challenging environment, the Japanese Alcoholic Beverages business will aim for further growthby continuing efforts in line with our vision of “Seek to be No.1 by accumulating one-of-a-kind products”
and by providing customers with value available only from Sapporo.
In the beer business, we will continue to strengthen our beer brands, which have achieved sales growthin each of the past three years. Having set forth the “Continuation of strengthening beer business” as thecore direction, we aim to further expand sales of Sapporo Draft Beer Black Label by strengthening
advertising and sales promotions and by linking the brand's appeal as a beer to be enjoyed at home andat commercial establishments. Our Yebisu brand strategy will seek to strengthen casual gift item sales
and appeal to the brand as a beer that can be enjoyed every day, thus enhancing the value it provides
customers.
In addition, we will seize upon the opportunities provided by diversification of consumption patterns
and changes in the social environment by strengthening the development and cultivation of distinct new
products and introducing a variety of products in smaller lots.
In the RTD*1 space, we will redouble our efforts to date to take advantage of the current accelerationin the market’s growth as well as expected growth in the future. We will strengthen development of uniquevalue products through collaborations with other companies, such as Otoko Ume Sour, and strive todevelop products from new perspectives that lead to one-of-a-kind products that surprise and delight
consumers.
In the wine category, we will continue to strengthen our lineup of fine wines*2. We will seek to expand
sales and enhance the brand images of our wine offerings, including our premium Japanese wine Grande
Polaire, as well as our imported brands, especially Penfors wine and Taittinger champagne. In theeveryday wine space, we plan to bolster sales of power brands by delivering a wide range of products
and through stronger promotional activities.
In the spirits business, we will continue to focus sales efforts on such world-famous brands as Bacardi,
the world’s best-selling rum in both sales volume and value*3, as well as Dewar’s, Bombay Sapphire, andMartini.
In our Japanese liquor business, we will step up efforts to expand sales of our blended imo shochu
Kokuimo, while using our Otoko Ume no Sake and Ume Kaku series of plum-wine based cocktails todeliver to consumers unique drinking experience and value not available from other plum wine (umeshu)
offerings.
The Japanese Alcoholic Beverages business as a whole will strive to achieve its profit targets byspending effectively and efficiently on marketing that enhances brand values while cutting other costs
wherever possible.

14*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages thatcan be consumed as is immediately 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 2016
International BusinessWe look for the world economy to continue to grow at a moderate pace and think the positive impact of
the U.S. large-scale tax cuts on corporate earnings will boost personal consumption. Meanwhile, theCanadian economy should benefit from the stable upswing in crude oil prices. These positives aside, we
forecast overall demand in the North American beer market will stay on a horizontal trend line, reflecting
the ongoing diversification in alcoholic beverage consumption. In the Asian beer market, we expect tosee continued growth in countries with growing populations and firm economic growth. In some countries,
however, economic slowdowns and stricter regulations on alcoholic sales and consumption are expected
to curtail market growth.
Under such circumstances, our International Business will strive to expand sales of its premium beerbrands, beginning with Sapporo Premium Beer, and establish a unique position in North America andSoutheast Asia, the two regions where the business is concentrating its resources and efforts. Towardthat end, we will execute strategies that match the unique characteristics of the market in each country
in which we do business.
In Canada, SLEEMAN BREWERIES will continue to devote its resources to expanding sales of its
premium brands by executing marketing strategies that match the special characteristics of those brands.
In addition, SLEEMAN aims to expand its share of Canada’s beer market and achieve its profit targets
by making efficient use of its nationwide sales network to increase sales of new group member Anchor
Brewing Company’s brands in Canada. In the U.S. beer market, Sapporo USA plans to establish a wider
presence for the Sapporo Premium Beer brand by strategically allocating resources in areas and sales
channels that are expected to grow. Sapporo USA also aims for early realization of synergies with Anchor
Brewing Company in production as well as sales. In the U.S. soft drinks market, we plan to expand sales
and profits by acquiring new sales channels, using cost-efficient operations to realize price-based
competitive advantages, and making transition to a management platform that will leverage the strengthsof our two subsidiaries, Silver Springs Citrus and Country Pure Foods.
In Southeast Asia, we aim to establish a unique brand position in the Vietnam market for Sapporo
Premium Beer through in-store contact with customers. In addition, the Vietnam business plans toimprove its profitability by revamping its sales network and implementing more efficient marketing
methods. In the Singapore market, we will continue to expand sales channels in the household andcommercial markets through cooperative efforts with our local subsidiary.
Food & Soft Drinks
Japan’s soft drinks industry continues to face a difficult operating environment, characterized by thediversification of consumer preferences, stiff competition among beverage makers, and cost increases
caused by forex fluctuations and rising raw material prices.
Under such difficult conditions, our domestic food and soft drinks business plans to deliver new value
to its customers in areas where the Sapporo Group has demonstrated advantages.
The domestic soft drinks business seeks to carve out a unique market position by leveraging the corestrengths of the Sapporo Group and strengthening its Kireto Lemon, sozai-kei (ingredient), shokkan-kei(texture) and Gabunomi series of brands.
With growing needs for simple foods expanding the times and places at which people consume soup,
our domestic food business will continue its efforts to increase demand for its instant soups by developing
soups suitable for consumption in a wider range of situations throughout a year. 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 products
category, we will leverage group synergies to expand sales in all market segments, from our alcoholic15

beverage mixers and raw ingredients for lemon-based products to powdered teas and soups. In thesoymilk product category, we aim to uncover new demand and increase sales by developing new soymilkbased yogurt products, our core strength in this category.
At the domestic restaurants business, the Café de Crié chain will carry out fine-tuned marketing tostimulate business at its existing outlets. It will also accelerate efforts to establish new formats that will
enhance brand value.
The overseas soft drinks business expects to see stiffer competition in its Southeast Asian markets. In
response, the business plans to expand sales by maintaining its advantages in the tea drinks and juice
beverages segments in the core Singapore market. We aim to grow our Southeast Asian business byproviding products that meet the needs of consumers in each priority region, including Indonesia, where
we have already begun full-fledged production and sales activities.
Restaurants
Japan’s restaurant industry is expected to be saddled with a difficult operating environment, with labor
shortages pushing up hiring costs, food material costs continuing to rise, and competition growing evermore intense as foreign restaurant chains entering the Japan market add to the strains already being
applied by cross-industry competition from retailers and other non-traditional players.
In this environment, our Restaurants business will emphasize raising the quality of its menus, service,and store atmosphere in a return to basics focused on “delivering 100% satisfaction to customers.” Aspart of that commitment, our restaurants are taking extra care to ensure the provision of safe and healthy
food to their customers.
New store openings in 2018 again will focus on developing new formats as well as territorial expansion
for our two core formats, Ginza Lion and Yebisu Bar. We will also continue to renovate existing outlets
and, as needed, alter their format in order to sustain and enhance their future earnings power.
Overseas, we remain devoted to spreading Japan’s beer hall culture. In Singapore, we will undertake
cost restructuring to enhance profitability while implementing measures to reestablish the Ginza Lionbrand.
Real Estate
Japan’s real estate industry expects to see a sudden increase in new office supply in the Greater Tokyo
office leasing market in 2018, but we expect that robust demand and other positive factors will keep
vacancy rates at low levels. We think low vacancy rates should support a continued moderate upward
trend in office rents. However, competition between new buildings and currently existing ones is expected
to intensify, which could lead to a change in market conditions, including the emergence of secondary
vacancies.
In this environment, our Real Estate business will continue its efforts to enhance the competitivenessof 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 areas of the complex, beginning with the commercial areas, as we aim to increase the entire
property's brand value by providing new added-value.
At GINZA PLACE, our commercial complex that opened in September 2016, we plan to add to thefacility’s information dissemination capability in line with its original concept as a“base for information
dissemination and exchange.”In addition to enhancing 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 continue with the renovation of the Sapporo Factorycommercial complex as part of Sapporo City’s urban redevelopment program focused on the nearby areaon the east side of the Sosei River. We will continue our efforts to make the new complex an attractive
urban space.
During 2018, we will continue to review and revise our property portfolio to enhance the overall valueof our Real Estate business. We also plan to acquire properties and construct a new business domain
centered on urban renewal.
16

(NOTE) The outlook for 2018 presented above contains forward-looking statements that are based on
information available when the materials were prepared and subject to risks and uncertainties. Actual
performance may differ materially from the future outlook described for various reasons.

(5) Dividend Policy and Dividends for 2017 and 2018
The Company considers the appropriate return of profits to its shareholders as a fundamental aspect ofmanagement policy and has adopted a basic policy to undertake stable dividend payments taking into
consideration the Company’s performance and financial condition.
Meanwhile, pursuant to the Sapporo Group Long-Term Management Vision “SPEED 150”, which
was announced in November 2016, the Company, starting from 2017, is working under the First
Medium-Term Management Plan 2020, which 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 factor, the impact fromthis may be taken in consideration when deciding a dividend amount.
Given the foregoing situation and taking into consideration the operating results for the current term
and the management environment etc. going forward, the Company has decided to pay a dividend of¥40 per share for 2017. The Company’s Articles of Incorporation stipulate that interim dividends may
also be distributed, but we currently are distributing an annual dividend once a year. Decisions
regarding the payment of dividends from surplus are, in the case of the year-end distribution, approvedat the general meeting of shareholders, while the interim dividend, if any, is determined at the sole
discretion of the Board of Directors.
We plan to pay an annual per-share dividend of ¥40 in 2018.

2. Basic Approach to Selecting Accounting Standards
The Sapporo Group plans to voluntarily apply the International Financial Reporting Standards (IFRS) tothe consolidated accounts for the first quarter of 2018. This change in accounting standard is aimed atunifying accounting procedures throughout the Group and facilitating international comparisons of Groupfinancial information in the capital markets.

17

3. Consolidated Financial Statements(1) Consolidated Balance Sheets(millions of yen)

AssetsI Current assets
1 Cash and cash equivalents
2 Notes and accounts receivable - trade
3 Merchandise and finished products
4 Raw materials and supplies
5 Deferred tax assets
6 Other
7 Allowance for doubtful receivables
Total current assets
II Fixed assets
1 Property, plant and equipment(1) Buildings and structures
Accumulated depreciation
Buildings and structures, net(2) Machinery and vehicles
Accumulated depreciation
Machinery and vehicles, net(3) Land(4) Lease assets
Accumulated depreciation
Machinery and vehicles, net(5) Construction in progress(6) Other
Accumulated depreciation
Other, net
Total property, plant and equipment
2 Intangible assets(1) Goodwill(2) Other
Total intangible assets
3 Investments and other assets(1) Investment securities(2) Long-term loans receivable(3) Deferred tax assets(4) Other(5) Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

18

December 31, 2016

December 31, 2017

AmountAmount10,58996,85024,657
13,315
3,639
15,213(82)
164,183

12,71798,604
24,681
13,6383,900
15,413(103)
168,852

393,022(220,233)
172,788
231,559(187,660)
43,898111,636
16,970(7,694)
9,276
3,694
17,731(13,529)4,201
345,495

395,836(224,311)
171,524
230,812(188,393)
42,419113,041
15,081(7,131)
7,949
4,363
17,822(13,358)
4,464
343,763

27,43910,511
37,95026,948
13,57540,52359,296
4,789
1,070
14,760(1,195)78,721
462,168
626,351

62,145427
1,306
14,827(1,216)77,491
461,778
630,630

Liabilities
I Current liabilities
1 Notes and accounts payable - trade
2 Short-term bank loans
3 Commercial Paper
4 Current portion of bonds
5 Lease obligations
6 Liquor taxes payable
7 Income taxes payable
8 Accrued bonuses
9 Deposits received
10 Other
Total current liabilities
II Long-term liabilities
1 Bonds
2 Long-term bank loans
3 Lease obligations
4 Deferred tax liabilities
5 Net defined benefit liability
6 Dealers' deposits for guarantees
7 Other
Total long-term liabilities
Total liabilities
Net Assets
I Shareholders' equity
1 Common stock
2 Capital surplus
3 Retained earnings
4 Treasury stock, at cost
Total shareholders' equity
II Accumulated other comprehensive income
1 Unrealized holding gain on securities
2 Deferred hedge gains (losses)
3 Foreign currency translation adjustments
4 Remeasurements of defined benefit plans
Total accumulated other comprehensive income
III Non-controlling Interests
Total net assets
Total liabilities and net assets

19

December 31, 2016

December 31, 2017

AmountAmount38,50330,33733,00010,083
3,024
34,228
1,680
2,980
8,214
50,071
212,123

36,53037,88232,00010,0682,690
34,408
5,202
3,089
7,817
50,484
220,173

50,128
114,593
6,968
18,804
8,995
33,241
15,115
247,847
459,971

50,060103,578
5,960
21,292
5,492
31,08615,323
232,794452,968

53,88646,08941,932(1,795)140,11253,88646,09050,022(1,806)
148,193

22,51741(1,943)(41)
20,574
5,693
166,380
626,351

25,951
(6)
(818)
148
25,274
4,194
177,662
630,630

(2) Consolidated Statements of Income(millions of yen)

I Net sales
II Cost of sales
Gross profit
III Selling, general and administrative expenses
1 Sales incentives and commissions
2 Advertising and promotion expenses
3 Salaries
4 Provision for bonuses
5 Retirement benefit expenses
6 Other
Total selling, general and administrative expenses
Operating income
IV Non-operating income
1 Interest income
2 Dividend income
3 Equity in income of affiliates
4 Other
Total non-operating income
V Non-operating expenses
1 Interest expense
2 Foreign exchange losses
3 Loss on valuation of derivatives
4 Other
Total non-operating expenses
Ordinary income
VI Extraordinary gains
1 Gain on sales of property, plant and equipment
2 Gain on sales of investment securities
Total extraordinary gains
VII Extraordinary losses
1 Loss on disposal of property, plant and equipment
2 Loss on sales of property, plant and equipment
3 Loss on impairment of property, plant and equipment
4 Loss on devaluation of investment securities
5 Compensation expenses
Total extraordinary losses
Profit before income taxes
Income taxes： current
Income taxes： deferred
Total Income taxes
ProfitLoss attributable to non-controlling interests
Profit attributable to owners of parent
ProfitOther comprehensive income
Unrealized holding gain on securities
Deferred hedge gains (losses)
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

20

Year ended
December 31, 2016
Amount541,847
352,420
189,426

Year ended
December 31, 2017
Amount551,548358,572
192,976

38,75020,42032,0391,726
784
75,438169,159
20,26739,91820,23933,493
1,921
715
79,655
175,943
17,032

231
1,111
15
958
2,316

164
1,162
19
746
2,092

2,142
217
252
769
3,381
19,202

1,924
86
73
629
2,714
16,410

45
13
59

1,977
4,836
6,813

1,413
26
1,018
22
376
2,858
16,403
6,185
838
7,023
9,380
(89)
9,469

1,068
38
3,735
273
307
5,422
17,801
8,243
(61)
8,182
9,619
(1,358)
10,977

9,380

9,619

(1,408)
52

3,416
(60)

(896)
(1,915)(4,168)
5,211

1,019
189
4,564
14,183

5,509
(298)

15,677(1,494)

(3) Statements of Changes in Shareholders' Equity(millions of yen)

Shareholders’ Equity
Common stock
Balance at beginning of year
Changes during period
Balance at end of period

Year ended December 31,
2016
AmountYear ended December 31,
2017
Amount53,88653,886-

Capital surplus
Balance at beginning of year
Changes during period
Disposition of treasury stock
Total changes during period
Balance at end of period
Retained earnings
Balance at beginning of year
Changes during period
Cash dividends
Profit attributable to owners of parent
Total changes during period
Balance at end of period
Treasury stock
Balance at beginning of year
Changes during period
Purchase of treasury stock
Disposition of treasury stock
Total changes during period
Balance at end of period
Total shareholders' equity
Balance at beginning of year
Changes during period
Cash dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposition of treasury stock
Total changes during period
Balance at end of period
Accumulated other comprehensive income
Unrealized holding gain on securities
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period

21-

53,88653,88645,91346,089175
175
46,0891
1
46,09035,18941,932(2,726)9,469
6,742
41,932(2,887)
10,977
8,090
50,022(1,595)(1,795)

(471)
271
(199)
(1,795)

(17)
6
(11)
(1,806)

133,394

140,112(2,726)
9,469
(471)
447
6,718
140,112(2,887)
10,977(17)
7
8,080
148,193

23,926

22,517(1,408)(1,408)22,517

3,433
3,433
25,951

Deferred hedge gains (losses)
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Foreign currency translation adjustments
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Remeasurements of defined benefit plans
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Total accumulated other comprehensive income
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Non-controlling interests
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Total net assets
Balance at beginning of year
Changes during period
Cash dividends
Net income attributable to owners of parent
Purchase of treasury stock
Disposition of treasury stock
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period

22

(11)

41

52
52
41

(47)
(47)
(6)

(1,255)(1,943)

(687)
(687)
(1,943)

1,124
1,124
(818)

1,874

(41)

(1,915)(1,915)
(41)

189
189
148

24,533

20,574(3,959)(3,959)20,5744,700
4,700
25,274

5,894

5,693

(200)
(200)
5,693

(1,498)(1,498)4,194

163,822

166,380(2,726)
9,469
(471)
447
(4,160)2,558
166,380(2,887)
10,977(17)
73,201
11,281
177,662(4) Consolidated Statements of Cash Flows
Year ended
December 31, 2016
Amount(millions of yen)
Year ended
December 31, 2017
Amount16,403
22,341
1,018
3,920(1,720)(53)(1,342)
2,142
(45)
1,440
(13)
22
(3,756)
968
1,608
(807)
338
(623)
350
173
1,999
44,364
1,359(2,190)(10,986)
22
32,57017,801
23,571
3,735
3,954(3,229)34(1,326)
1,924(1,977)
1,107(4,836)273(1,152)196(2,336)
291
131
(401)
(2,155)316(425)
35,495
1,382(1,963)(5,595)685
30,004(19,748)428(2,060)
(235)
137
(154)

(13,056)
3,085(2,197)(1,020)
8,278
(298)

(438)
(1,493)(77)
167(4,112)(27,586)(11,622)(68)
4,265(5,189)(17,822)(1,248)16,00032,746(46,594)
9,960(10,016)(2,730)(9)(2,910)(471)
447(4,827)(3,076)(1,000)12,500(12,603)
9,960(10,083)(2,893)(19)(2,946)(17)
7(10,171)

IV Effect of exchange rate changes on cash and cash equivalents

(79)

50

V Net increase in cash and cash equivalents

76

2,061

10,39910,475

10,475
12,536

I Cash flows from operating activities
1 Profit before income taxes
2 Depreciation and amortization
3 Loss on impairment of property, plant and equipment and leased assets
4 Goodwill amortization
5 Decrease in net defined benefit liability
6 Increase (decrease) in allowance for doubtful receivables
7 Interest and dividend income
8 Interest expense
9 Gain on sales of property, plant and equipment
10 Loss on sales and disposal of property, plant and equipment
11 Gain on sales of investment securities
12 Loss on devaluation of investment securities
13 Increase in notes and accounts receivable - trade
14 Decrease in inventories
15 Increase (decrease) in notes and accounts payable - trade
16 Increase (decrease) in accrued consumption taxes
17 Increase in liquor taxes payable
18 Decrease in deposits received
19 Increase (decrease) in dealers' deposits for guarantees
20 Increase (decrease) in other current liabilities
21 Other
Sub total
22 Interest and dividends received
23 Interest paid
24 Income taxes paid
25 Income taxes refundable
Net cash provided by 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 Purchases of intangibles
4 Payments for purchases of investment securities
5 Proceeds from sale and redemption of investment securities
6 Purchase of affiliates securities
7 Purchase of subsidiaries' shares
resulting in change in scope of consolidation
8 Payments for transfer of business
9 Increase in long-term loans receivable
10 Collection of long-term loans receivable
11 OtherNet cash used in investing activities
III Cash flows from financing activities
1 Net 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 Cash dividends paid to non-controlling interests
9 Repayment of finance lease obligations
10 Purchase of treasury stock
11 Proceeds from sale of treasury stock
Net cash used in financing activities

VI Cash and cash equivalents at beginning of period
Ⅶ Cash and cash equivalents at end of period23

(5) Notes on the Going-concern Assumption
Not applicable(6) Changes in Accounting Policy
Not applicable[Business combination by acquisition]
The Company acquired 100% of the outstanding shares of Anchor Brewing Company, LLC, with the acquisition to bemade through a newly established 100% subsidiary, to be established for the purpose of entering into the agreement.
A)
1. Name and business content of company to be acquired
Name:
Anchor Brewing Company, LLC (and a subsidiary)
Location:
San Francisco, California, USA
Business content:

Beer brewing and sales

2. Purpose of business combination
In November 2016, the Sapporo Group formulated the new Long-Term Management Vision “SPEED 150” through2026, the year marking the Group’s 150th anniversary since its founding. The vision set forth in Speed 150 is for the
Sapporo Group to be a company with highly unique brands in the fields of “Alcoholic Beverages,” “Food,” and “SoftDrinks” around the world.
Regarding its “Promote Global Business Expansion” policy, a key component of the Group’s growth strategy,
Sapporo Group is promoting a distinctive plan that prioritizes expanding business in North America, already a core
part of the Group’s business foundation, and Southeast Asia, a regional market with high growth prospects.
The addition of Anchor’s strong brand power and network to the Sapporo Group’s US beer business portfolio
through the conclusion of this agreement is expected to generate further synergies and accelerate the growth of theGroup’s US business.
3. Transaction counterparty
Anchor Brewers & Distillers, LLC
4. Acquisition dateAugust 31, 2017
5. Legal form of business combination
Equity shares were acquired for a cash consideration.
6. Name of acquired company after acquisition
No change
7. Share of outstanding stock acquired:100%
8. Basis for determining the acquiring company
A Group consolidated subsidiary acquired an equity stake through a cash consideration.
B)
1. Inclusion of acquired company’s results in consolidated financial statements
As the acquisition was deemed completed on September 30, 2017, the acquired company’s results were notincluded in the consolidated statements of income for the nine months ended on that same date.
2. Acquisition cost and consideration paid, by type, for the acquired company
Acquisition cost (cash): ¥11,913 million
3. Main acquisition-related expenses and amount
Advisory fees, commissions, etc.: ¥404 million
4. Goodwill generated by acquisition, reason, amortization method and period
1) Goodwill generated by acquisition: ¥3,532 million
2) Reason for goodwill
Business activities are expected to generate excess profitability in the future.
3) Amortization method and period
12 years with the straight-line method24

5. Assets acquired and liabilities assumed at the date of business combination
Current assets:¥1,126 million
Fixed assets:¥8,034 million
Total assets:¥9,161 million
Current liabilities:
Long-term liabilities:
Total liabilities:¥778 million¥1 million¥780 million

6. Approximate effects on the consolidated statements of income for the year ended December 31, 2017, assumingthat the business combination was completed on January 1, 2017, and method of calculation
Net sales:¥2,577 million
Operating loss:¥(217) million
Loss attributable to Owners of Parent:¥(126) million(Method adopted to estimate approximate effects)
The approximate effects correspond to the acquired company's net sales and income/loss recorded on its
consolidated statements of income assuming that the business combination was completed on January 1, 2017.

25

[Property Leasing]
The Sapporo Group holds office buildings (including land) for lease in the Tokyo
metropolitan and other areas. Net leasing income on those properties in the year ended
December 31, 2016 was ¥9,453 million (leasing income was mainly recorded as operating
revenues; leasing expenses were mainly recorded as operating expenses). Net leasing
income on those properties in the year ended December 31, 2017 was ¥10,625 million(leasing income was mainly recorded as operating revenues; leasing expenses were mainly
recorded as operating expenses).
The carrying value of those properties on the consolidated balance sheets, change incarrying value during the years ended December 31, 2016 and 2017, and the total fair value
appear in the following table.
Year ended December 31,
2016
Carrying value on consolidated balance sheets
January 1
Change during the period
December 31
Fair value at December 31(millions of yen)
Year ended December 31,
2017

197,666
4,097
201,763
389,101

201,763
ᇞ1,761200,001
397,581

Notes:
1. Carrying value on the consolidated balance sheets represents acquisition costs net ofaccumulated depreciation and accumulated impairment loss.
2. The change during the year ended December 31, 2016 comprises increase mainly arisingfrom property acquisitions (¥10,134 million) and decrease mainly due to depreciation (¥3,804 million),
disposal (¥1,911 million).
The change during the year ended December 31, 2017 comprises increase mainly arising from property acquisitions (¥3,742 million)
and decrease mainly due to depreciation (¥4,000 million), sales (¥266 million), disposal (¥405 million).
3. The fair value at December 31 is mainly based on property valuations performed bythird-party real estate appraisers.

26

[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. Calculation methods for sales, income (or loss), assets and other items
Accounting methods applied in reportable segment by business largely correspond to that presented under "The Basis for Preparation ofConsolidated Financial Statements" and "Change in Accounting methods." Reportable segment income is based on operating income.
Intersegment sales or transfers is based on market price. Intra-group sales and transfers are calculated as if the transactions were to third
parties based on market prices.

3. Sales, income (or loss), assets, and other items(millions of yen)
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)
Japanese
Food &
AlcoholicInternational
Restaurants Real Estate
Total
Soft Drinks
Beverages
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

279,476
2,860
282,337
11,745214,326

65,40096
65,497906
66,292

137,918282
138,200
1,314
100,594

28,120028,121
663
13,571

22,9002,569
25,46910,328211,312533,815
5,810
539,625
24,958606,097

7,221

3,042

5,711

521

4,125

20,622

2,691

2,649

8,096

1,143

9,648

24,230Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)
Other *1
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

Total

Adjustment

Amounts reported on thestatements of income*2
541,847

8,031
20,15828,190(95)
10,042541,847
25,968567,815
24,862
616,140(25,968)(25,968)(4,595)
10,211

541,847
20,267626,351

43

20,665

1,675

22,341

58

24,2882,384

26,67327-

(millions of yen)
Year ended December 31, 2017 (January 1, 2017 – December 31, 2017)
Japanese
Alcoholic
Beverages
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

International

Food &
Soft Drinks

278,692
3,526
282,218
11,767
218,40369,837
108
69,945(1,214)76,535

137,898287
138,185564
95,907

29,140029,141
330
12,55024,1342,670
26,804
11,261
212,010539,7026,593
546,296
22,709615,406

7,656

3,159

5,696

609

4,436

21,558

3,468

3,529

4,486

800

2,812

15,097

Restaurants Real Estate

Total

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

Other *1

Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andNotes:

Total

Adjustment

Amounts reported on thestatements of income*2

11,84521,001
32,84751
10,254

551,548
27,595579,143
22,761
625,661(27,595)(27,595)(5,728)
4,969

551,548551,548
17,032630,63085
207

21,643
15,305

1,927
2,225

23,571
17,530(1) "Other" comprises businesses, such as logistics businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly consolidated
statements of income for the corresponding period.

■Reconciliation and main components of differences between income and loss of reportable segments and figures on the statement ofincome (information on differences)(millions of yen)
December 31, 2017
December 31, 2016
Segment income (loss)
Total for reportable segments
24,95822,709
Income(loss) from other segments(95)
51
Unallocated corporate costs*(4,784)(5,880)Intra-segment sales
189
151
Operating income on the statement
20,267
17,032
Note: Unallocated corporate costs consist mainly of SGA that is not attributable to reportable segments.

Segment income (loss)
Total for reportable segments
Assets of other segments

December 31, 2016
606,097
10,042(11,134)
21,345

Unallocated corporate assets*(millions of yen)
December 31, 2017615,406
10,254(14,461)
19,431

Total assets on the consolidated financial statements
626,351
630,630
Note: Unallocated corporate assets do not belong to reportable segments and consist mainly of working funds (cash and cash
equivalents and marketable securities), long-term investments, and assets of general administration divisions.

28

■Related Information
1. Information by product and service
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)
Information by product and service is omitted here, as the same information is disclosed elsewhere.
Year ended December 31, 2017 (January 1, 2017 – December 31, 2017)
Information by product and service is omitted here, as the same information is disclosed elsewhere.
2. Segment Information by Geographic Area
(1) Net sales(millions of yen)

Year ended December 31, 2016(January 1, 2016 – December 31, 2016)
Japan455,001

North America
61,915

Asia
19,910

Other
5,020

Total
541,847

Year ended December 31, 2017(January 1, 2017 – December 31, 2017)
Japan459,611

North America
65,781

Asia
20,631

Other
5,524

Total
551,548(2) Property, plant and equipment
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)
Information has been omitted as total fixed assets held in Japan constituted more than 90% of that shown on the balance sheets.
Year ended December 31, 2017 (January 1, 2017 – December 31, 2017)
Information has been omitted as total fixed assets held in Japan constituted more than 90% of that shown on the balance sheets.
(3) Information by major customer
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)(millions of yen)Company NameNet Sales

KOKUBU & CO.,LTD.

82,686

Segment
Japanese Alcoholic Beverages
Food & Soft Drinks

Year ended December 31, 2017 (January 1, 2017 – December 31, 2017)(millions of yen)Company NameNet Sales

KOKUBU & CO.,LTD.

77,851

Segment
Japanese Alcoholic Beverages
Food & Soft Drinks

3. Impairment loss on fixed assets or goodwill by reportable segment
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)(millions of yen)
Generalcorporate andintercompany
eliminations

Reportable segments

Impairment loss

Japanese
Alcoholic
Beverages
55

Other
Food &
Soft Drinks

International-

Restaurants

819

Real Estate

138

Total
-

1,014

4

Total

-

1,018

Year ended December 31, 2017 (January 1, 2017 – December 31, 2017)(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages
Impairment loss

-

Other
International
2,686

Food &
Soft Drinks
335

Restaurants
548

29Real Estate

Total
-

3,570

164

Generalcorporate andintercompany
eliminations

Total

-

3,735

4. Amortization for and unamortized balance of goodwill
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages

Generalcorporate andintercompany
eliminations

Other
International

Food &
Soft Drinks

Restaurants

Real Estate

Total

Total

Amortization

54

1,670

2,160

34

-

3,920

-

-

3,920

Unamortized
Balance as ofDec. 31, 2016

288

11,214

15,556379-

27,439--27,439Year ended December 31, 2017 (January 1, 2017 – December 31, 2017)(millions of yen)
Generalcorporate andintercompany
eliminations

Reportable segments
Japanese
Alcoholic
Beverages

Other
International

Food &
Soft Drinks

Restaurants

Real Estate

Total

Total

Amortization

54

1,719

2,121

59

-

3,954

-

-

3,954

Unamortized
Balance as ofDec. 31, 2017

233

12,95813,435320-

26,948--26,948

5. Gain on negative goodwill by reportable segment
Year ended December 31, 2016 (January 1, 2016 – December 31, 2016)
Not applicableYear ended December 31, 2017 (January 1, 2017 – December 31, 2017)
Not applicable【Subsequent Events】
None30