2008

Sapporo Group 2008 InterimResults Presentation
August 6, 2008

Sapporo Holdings Ltd.
URL http://www.sapporoholdings.jp/Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

Agenda・Overview of 2008 Interim Business Results and Forecast for the Full Fiscal Year

1. Overview of 2008 Interim Business Results◆ Sapporo Group as a whole◆ By segment

2. Forecast for the Full Fiscal Year
Progress with and Future Steps for the Sapporo Group’s 2008–2009
Management Plan
◆ Sapporo Group as a whole◆ By segment◆ Steps to achieve sustainable growth
These materials contain forward-looking statements, which are based on information available when the materials wereprepared and are subject to risks and uncertainties. Actual performance may differ materially from the future outlook
described for various reasons.

1

I.

Overview of 2008 Interim
Business Results

Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

2

Overview of 2008 Interim Business Results
Business Results Over
the Last Five Years

Net sales, operating income,ordinary income, and net income
2004

15.0

2005

224.3

2007

2008

211.4

208.6

193.4

200.1
6.1
3.2
2.8

1.1

9.5

0.0
(5.0)

2004

250.0

10.0
5.0

2006

150.0

(0.7)

(10.0)Net income

2006

2007

2008

400
336.9

10300
265.7
221.2

229.7
184.0

200

5100

50.00.0

Operating income

2005

15200.0

100.0
(0.7)
(1.2)
(1.7)
(2.4)
(3.0)
(2.8)
(5.2)
(3.9)
(5.5)

Financial liabilities, capital investment,
and depreciation and amortization

0Ordinary income(\ bn)Net sales

0
Capital investment
Depreciation and amortization(\ bn)
Financial liabilities

First six months of 2007: Key points
Expanded operations and bolstered earnings base capitalizing on strengths↓Profit increased as a result of tight control of sales promotion expenses to offset a decrease insales in the Alcoholic Beverages and Soft Drinks businesses and a rise in the cost of raw
materials and ingredients■ Profit posted for the interim period for the first time since 2004
Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

3

Overview of 2008 Interim Business Results (All Businesses)
Business Resultsby Segment

Net sales

148.3(\ bn)

2007
2008

5.0

137.1
2007

2008

3.7
3.3

4.0

0.8
0.0

0.0

13.5 12.4

18.1 13.4 14

11.8 11.7

(0.1)

(1.0)
(1.0)

Real Estate

RestaurantsSoft Drinks(2.0)

Copyright,2008 SAPPORO ＨＯＬＤＩＮＧＳ LTD. All rights reserved.

(3.0)

(2.9)

Alcoholic
Beverages(Overseas)

24.1

0.0

(0.3)
(1.1)

RealEstate

1.0

Restaurants

2.0SoftDrinks(\ bn)

Alcoholic
Beverages(Japan)3.0

Alcoholic
Beverages(Japan)Alcoholic
Beverages(Overseas)

160
140
120
10080
60
40
200

Operating income

(4.0)

4

Overview of 2008 Interim Business Results
Alcoholic Beverages (Japan)
By segment: Key points
 Alcoholic Beverages (Japan)
Market Environment: Price hikes in the food industry, increasing consumer belt-tightening,
preference for low prices, price revisions by all Japanese brewers↓Total demand down 4% from last year
Rising cost of raw materials and ingredients, focus on safety,
reliability, and health consciousness
Our Efforts: Price revision in April, focus on mainstay brands, launched products aimed athealth-conscious consumers,
expanded High-value-added products such as Yebisu, increased share in beermarket,launched Mugi to Hop, a new-genre product that offers full-bodied satisfaction
comparable with beer
Response to changes → Reduced fixed costs, reduced cost of sales, increased operating
rates due to closure of the Osaka plant
Safety and reliability → Efforts in a collaborative contract farming ysytem →Awarded Germany's Bundesehrenpreis in Gold (National Honor inGold) (first Japanese company ever to receive the award)
Copyright,2008 SAPPORO ＨＯＬＤＩＮＧＳ LTD. All rights reserved.

5

Overview of 2008 Interim Business Results
Alcoholic Beverages (Overseas)

By segment: Key points
 Alcoholic Beverages (Japan)
Market Environment: U.S. economic slowdown stemming from the subprime debacle↓Slight demand growth in North American beer market, overall expansion in Asian countries
Premium → Value, rising cost of raw materials and ingredients, trend toward stronger yen
Our Efforts: Aggressive marketing in North America, reviewed Sleeman's management
structure
Introduced Yebisu into the U.S. market, exchange rate effects,
sales up 5% at Sleeman Breweries, up 8% at Sapporo USA,up 22% for other export activities

Copyright,2008 SAPPORO ＨＯＬＤＩＮＧＳ LTD. All rights reserved.

6

Overview of 2008 Interim Business Results
Soft Drinks
By segment: Key points
 Soft Drinks
Market Environment: Large number of players, continued intense competition,profits down even at large-companies↓
Total demand at the same level as last year
Our Efforts: Shifted to a stable earnings structure,
strategic alliance with YK,Crescent Partners
Reviewed unprofitable deals, narrowed down the product lineup selectively,sought a more efficient personnel structure, formed mutual alliances in thevending machine business (Itoen Ltd , Pokka Corporation)↓
Reduced magnitude of loss, return to profitability in sight
Building high-value-added brands↓
Bolstered products such as Ocean Spray Cranberry and GerolsteinerCopyright,2008 SAPPORO ＨＯＬＤＩＮＧＳ LTD. All rights reserved.

7

Overview of 2008 Interim Business Results
Restaurants
By segment: Key points
Restaurants
Market Environment: Food safety and reliability, sluggish sales in suburban areas due
to surging gasoline prices, reduced banquet demand due tofoundering corporate performance, rising personnel costs due to tightlabor market, rising costs of inputs such as foodstuffs↓Most of the restaurant industry engaged in tough competition
Our Efforts: Pursuing unique vintage-yet-new value, based on the concept of "Tradition,
Safety, Reliability, Satisfaction," beer halls recovered, improved service andquality levels
Achieved growth by introducing new store formats, developed Japanese-stylechains such as Tomoru, Kakoiya, and Irimoya
Nasu Mori no Beer En opened in April, opened restaurants in key regional cities,
held cost-of-sales ratio in check, increased amount spent per customer
Urban stores dominated → sales up 1.2% at existing establishments
Copyright,2008 SAPPORO ＨＯＬＤＩＮＧＳ LTD. All rights reserved.

8

Overview of 2008 Interim Business Results
Real Estate
By segment: Key pointsReal Estate
Market Environment: Worsening housing market conditions, real estate slump,central-Tokyo office demand firm
Our Efforts: Strategic alliance with the Morgan Stanley Group↓Began co-managing the Yebisu Garden Place property
Expanded asset portfolio → Acquired a new property in Shinjuku, Tokyo(will redevelop to boost its income)
Sapporo Urban Development Co., Ltd.,
commenced operations(plans to acquire new properties in the Hokkaido region)
Worked to boost the value of Group properties → Examining ways to maximize value of theformer Osaka plant site
High occupancy rates at existing properties,
making steady progress in raising rents
Copyright,2008 SAPPORO ＨＯＬＤＩＮＧＳ LTD. All rights reserved.

9II.

Forecast for the Full Fiscal Year
andProgress with and Future Stepsfor the Sapporo Group’s 2008–2009 Management Plan

Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

10

２００８年度通期業績見込み
Forecast for the Full Fiscal Year
Results Forecast
Financial liabilities, capital investment, anddepreciation and amortization

Net sales, operating income, ordinary income,and net income

2004

2005

2006

2007

2008

30.0

400.0

25.0
300.0
20.0
15.0

289.8
220.7

236.0212.4
177.0

200.0

10.0
100.0
5.00.0Capital investment
Depreciation and amortization(\ bn)
Financial liabilities

0.0

Results forecast: Key points◇ Steps to achieve sustainable growth◇ Steadily reform earnings structure to build a solid operating baseRisks anticipated・ Lower pricing, decrease in net sales
・ Rise in the cost of raw materials and ingredients↓・ Implement tighter cost control
Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

11

Forecast for the Full Fiscal Year by Segment and Progress withthe Sapporo Groupʼs 2008‒2009 Management Plan
Forecast by Segment and Progress with 2007–2008 Management Plan(¥ bn)
Net sales

2007 actual2008 forecast

Alcoholic
Beverages(Japan)

315.8

307.5

323.2

321.0

Alcoholic
Beverages(Japan)

6.1

7.5

7.5

8.0

Alcoholic
Beverages(Overseas)

27.7

27.2

28.6

30.0

Alcoholic
Beverages(Overseas)

1.6

1.2

1.2

1.4

Soft Drinks

52.2

37.8

43.6

43.0

Soft Drinks

(0.8)

(0.5)

(0.5)

0.1

Restaurants

(0.6)

0.8

0.8

1.0

Restaurants

28.9

30.1

30.1

32.0

Real Estate

7.0

7.4

7.4

8.4

24.1

23.7

23.7

25.0

Group total(2.3)

(2.9)

(2.9)

(3.4)

Real EstateMedium-termplan target(2009)

Mediumterm plantarget(2009)

Medium-termplan target(2008)

Operatingincome

2007 actual2008
forecast

Mediumterm plantarget (2008)

By segment: Key points
 Alcoholic Beverages (Japan) Work to achieve full-year targets, with a priority on Sapporo
Black Label, Yebisu, and Mugi to Hop
 Alcoholic Beverages (Overseas) Expand operations in North America and other countries,
focusing efforts on Sleeman Breweries
 Soft Drinks Build up high-value-added brands such as Gerolsteiner and Kissui.
 Restaurants Revitalize existing restaurants and open more new-format establishments,including Kakoiya and Irimoya
 Real Estate Expand asset portfolio → Acquire new properties
Maximize the value of Group properties → Former Osaka plant site etc.
Exchange rate conversions: 2007 USD / JPY 114.15, CAD / JPY 116.34; 2008 USD and CAD both JPY 105 ;Medium-term plan target 2008& 2009 USD and CAD both JPY 110

Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

12

2008‒2009 Steps to Achieving Sustainable Growth

Capital investment* ¥20.0 bnBusiness restructuringto create further
added value

Cash flow
fromoperating
activities
Partialdivestiture ofownership inYebisu
Garden Place
2-year total¥100 bn

Expand the Real
Estate businessby acquiring newproperties

StrategicInvestment¥45.0 bn

Business expansion
through M&As etc.
Strengthen
financialbase¥35.0 bn

Reduce balance offinancial liabilities

Enhance
profitability

Bolster
operatingbase

Expandbusiness
opportunities

Respond torisks

Sustained enhancement of corporate
valueOver the two years, execute ¥45.0 bn in strategic investment
and reduce financial liabilities by ¥35.0 bn* Strategic investments includes real estate investments.
Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.

13

2008

2008 Interim Results
Presentation

Thank you for your attention.

Copyright, 2008 SAPPORO HOLDINGS LTD. All rights reserved.