Financial Results
for the Year Ended December 31, 2019 — Consolidated(Based on IFRS)
February 13, 2020

Company name

Sapporo Holdings Limited

Security code
Listed on
URL

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
https://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 27, 2020

Filing of annual financial report

March 30, 2020

Commencement of dividend payments

March 30, 2020

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, 2019
(January 1 – December 31, 2019)(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%

491,896(0.4)

12,208

5.3

11,5889.0

3,820(50.5)

493,908_

11,588_

10,629

_

7,721

_

December 31, 2019Year ended
December 31, 2018Year ended

Profit attributable toTotal comprehensive

owners of parent

incomeBasic earnings
per share

Diluted earnings
per share

million yen%

million yen

%

Yen

Yen

4,356

(48.9)

15,915

_

55.92

52.74

8,521

_

(8,003)_109.40104.46

December 31, 2019Year ended
December 31, 20181

Ratio of profit toequity attributable toowners of parent

Ratio of profit
before tax to total
assetsOperating profit
margin

%

%

%

2.6

1.8

2.5

5.1

1.6

2.3

Year ended
December 31, 2019Year ended
December 31, 2018

Note: Equity method investment gains
Year ended December 31, 2019: 18 million yen
Year ended December 31, 2018: 19 million yen
Note: The profit and loss of the North American soft drinks business has been classified under discontinued
operations because all of the shares in Country Pure Foods, Inc. held by the Sapporo Group were transferred
to BPCP CPF Holdings Inc. in 2019.(Year ended December 31, 2018 of the North American soft drinks
business has been also classified under discontinued operations)(2) Financial Position

Year ended

Total assets

Total equity

Equityattributable toowners of parent

million yen

million yen

638,722

174,524

639,692

Ratio ofequity attributableto owners of parent
to total assets

Equity per share
attributable toowners of parent

million yen%

yen

174,07127.3

2,234.65

164,735

161,501

25.2

2,073.54

Cash flows fromoperatingactivities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents at endof period

December 31, 2019Year ended
December 31, 2018

(3) Cash Flows

million yen

million yen

million yen

million yen

Year ended
December 31, 201936,069(24,930)(5,984)

15,215

Year ended
December 31, 201830,830(18,727)(14,521)9,989

2

2. Dividends
Dividend per share

Record date or period

Total

Payout ratio

Dividends to equity

dividends(consol.)

attributable topaid

owners of parent(full year)(consol.)

End
Q1

End
Q2

End
Q3

Year- Full year
end

yen

yen

yen

yen

yen

Year ended December
31, 2018

—

0.00

—

42.00

42.00

3,277

38.4

2.0

Year ended December
31, 2019

—

0.00

—

42.00

42.00

3,277

75.1

1.9

Year ending December
31, 2020 (forecast)

—

0.00

—

42.00

42.00

million yen

%

%

—

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2020
(January 1 – December 31, 2020)(Percentage figures represent year-over-year changes)

RevenueCore

Operating profit

Profitoperating profit

Profit attributable to

Basicowners of parent

earnings
per share

Year ending
December 31,
2020

million yen%

million yen%

million yen%

million yen%

million yen%%

504,400

2.5

14,000

19.4

8,500

(30.4)

5,000

30.9

5,000

14.8

64.19

Note: Earnings forecasts for the six months ending June 30, 2020 are omitted because the company
manages performance targets on a yearly basis.
Note: Core operating Profit is a proprietary profit indicator that measures the performance consistency of ourbusiness. Core operating profit is calculated as Revenue – Cost of sales – SG&A expenses.

4. Other(1) Changes to scope of consolidation: Yes*Changes affecting the status of significant subsidiaries (scope of consolidation)
Newly excluded: Sapporo International Inc.

(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: None3(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
December 31, 2019: 78,794,298 shares
December 31, 2018: 78,794,298 shares
2) Number of shares held in treasury at end of period:
December 31, 2019: 898,162 shares
December 31, 2018: 907,931 shares
3) Average number of outstanding share during the period:
December 31, 2019: 77,892,507 shares
December 31, 2018: 77,890,590 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, 2020” on page 12.

1. Analysis of Operating Results and Financial Condition(1) Analysis of Operating Results(a) Review of the fiscal year ended December 31, 2019
Millions of yen, except percentages
Profit attributable
Revenue

Operating profit

Profit before tax

to owners ofparentYear ended December 31,
2019
Year ended December 31,
2018
Change (%)

million yen

million yen

million yen

million yen

491,896

12,208

11,5884,356

493,908

11,588

10,629

8,521

(0.4)

5.3

9.0

(48.9)In 2019, the Japanese economy on the whole remained steady as companies increased theircapital expenditure on the back of firm corporate earnings while individual employment andincome improved steadily, despite a decline in domestic demand due to factors such as theconsumption tax hike and natural disasters. Meanwhile, uncertainty in the global economy
4increased owing to heightened US-China trade frictions and rising geopolitical risks such as
the worsening standoff between the US and Iran.
In the domestic alcoholic beverage industry, the cost-cutting mindset of consumers has
shifted demand more prominently to lower priced products. The North American beer market
appears to have contracted from the previous year’s level primarily due to the impact of thecold wave. Conditions in the Asian beer market vary widely depending on the country, but theVietnam beer market continues to expand. In the domestic soft drinks industry, overall demand
appears to have decreased year on year, primarily due to the impact of typhoons. Meanwhile,in the real estate industry, rent levels continued on a gradual upward trend on the back ofsustained solid demand in the Greater Tokyo office leasing market.
In this environment, the Sapporo Group endeavored to accelerate growth under its LongTerm Management Vision ”SPEED 150” and the First Medium-Term Management Plan 2020
and achieve its financial targets for 2019, as it strives to be a company with highly uniquebrands in the fields of “Alcoholic Beverages”, “Food”, and “Soft Drinks” around the world.
The profit and loss of the North American soft drinks business has been classified underdiscontinued operations because all of the shares in Country Pure Foods, Inc. (the company
managing the North American soft drinks business, which falls under Food & Soft Drinks) heldby the Sapporo Group were transferred to BPCP CPF Holdings Inc. in 2019.

Revenue
In 2019, the Sapporo Group posted consolidated revenue of ¥491.9 billion, down ¥2.0 billion
or less than 1% year on year.
The Alcoholic Beverages business had somewhat mixed results. While strong sales wereachieved by mainstay brand Sapporo Draft Beer Black Label and by Sapporo Chuhai 99.99(Four Nines), a new RTD beverage in which the segment has invested aggressively, shipmentsof new genre fell below previous-year levels. As a result, segment revenue declined year on
year. In the Food & Soft Drinks business, segment revenue rose following the consolidation of
Yasuma Co., Ltd., despite a weak canned coffee market and a slump in demand due toinclement weather. The Real Estate Business achieved profit growth supported by increases
in rental income from core properties.

Operating Profit
Operating profit at the Japanese Alcoholic Beverages business rose on the back of cost
control, improved product mix and the impairment loss recorded in 2018 for U.S. subsidiary
Anchor Brewing Company. On the other hand, operating profit declined at the Food & Soft
Drinks business as domestic sales volume fell. The Real Estate business recorded positive
growth thanks to contributions from gains on sale of real estate following a property portfolio
5review, in addition to the increases in rental income from core properties.
As a result, consolidated operating profit came to ¥12.2 billion, up ¥0.6 billion or 5% year on
year.

Profit before tax
Profit before tax in 2019 came to ¥11.6 billion, up ¥1.0 billion or 9% year on year.

Profit Attributable to Owners of Parent
In 2019, profit attributable to owners of parent totaled ¥4.4 billion, down ¥4.2 billion or 49%
year on year. Due to an increase in net loss from discontinued operations following thetransfer of shares of Country Pure Foods, Inc.
(b) Results by Business Segment
Millions of yen, except percentages
Revenue

Operating profit

Year ended Year ended

Year ended Year ended

December

December Change (%) December

December Change (%)

31, 2018

31, 2019

31, 2018

31, 2019

Alcoholic Beverages

330,009324,438

(1.7)

3,856

7,877

104.3

Food & Soft Drinks

133,384

136,876

2.6

1,910

(1,151)－

Real Estate

24,483

24,6900.8

12,047

12,714

5.5

Results by segment are outlined below. From 2019, in order to further strengthen
management oversight of each business, the five reportable segments used up until now
have been reorganized to three reportable segments.
To enable year-on-year comparisons, figures for the previous fiscal year have been adjusted
to reflect the new reportable segments.

Alcoholic Beverages(Japan & Asia)
We estimate that total domestic demand for beer and beer-type beverages was about 1%
lower than the level in 2018.
In this operating environment, our Japanese Alcoholic Beverages business continued towork towards realizing our corporate vision—Seek to be No.1 by accumulating one-of-a-kindproducts—and achieving further growth by constantly providing unique, new value tocustomers.
In the beer category, based on our "beer revival declaration" business policy, sales of6

Sapporo Draft Beer Black Label, Sapporo Lager Beer, and Sapporo Classic remained brisk,
and sales volume increased 1% year on year.
On the other hand, total sales volume for beer and beer-type beverages decreased 3% year
on year with lower sales in the new genre category due to increasingly intense competition.
In the RTD*1 category, revenue increased significantly year on year with consumers
favorably receiving Sapporo Chuhai 99.99 (Four Nines) launched in August 2018, which has
grown to the point where it is now on a par with core collaborative RTD products ranking
alongside the likes of Otoko Ume Sour.
In the wine category, we stepped up marketing of our fine wines*2, including the imported
wine Penfolds, Taittinger champagne, and domestic Grande Polaire wines. However, weaksales of our everyday wines*2 led to revenue being below that of the previous year.
Our spirits business achieved year-on-year revenue growth, driven by strong sales of
products from major overseas brands including Dewar’s.
Our Japanese liquor business posted a year-on-year decline in revenue, despite solid salesof Kokuimo brand, Japan's best-selling*3 blended imo shochu.
In Asia, in the Vietnam market we continued our efforts to establish sales channels capableof generating profit growth.

(North America)
We estimate that total demand in the North American beer market declined year on year inboth U.S. and Canada.
In this environment, our North American business worked to strengthen the mainstay brands,
primarily premium beer brands, and enhance the portfolio for each brand.
In Canada, our subsidiary Sleeman Breweries continued to invest in the marketing of its core
premium brands, but the drop in total demand resulted in a year-on-year decline in beer sales
volume (excluding Sapporo brand beer).
In the U.S., Sapporo USA's sales volume of Sapporo brand beers grew year on year due tothe company's sales promotion activities for Sapporo brands targeting the general population
as well as Asian-Americans. Meanwhile, Anchor Brewing Company worked to bolster sales
synergies with Sapporo USA amid the challenging business environment created by thecontinued decline in demand for craft beer in its home market in the San Francisco area.

(Restaurants)
Japan's restaurant industry continued to enjoy year-on-year growth in revenues, but theoperating environment remained challenging, highlighted by rising hiring costs owing to labor
shortages and increasing raw material procurement prices.
In this environment, based on the philosophy of "Enhancing the Joy of Living," Sapporo Lion
7

worked to deliver safe and sound products to customers while also striving to create restaurantsthat “deliver 100% satisfaction to customers.”
In Japan, despite the impact of store closures for remodeling and closing of unprofitable
outlets, the restaurant business posted revenue growth in 2019 on the back of strong
performance by existing restaurants and the newly consolidated HANEI INC,. We opened nine
new stores including a Rumoi Marche restaurant in Ginza, Tokyo, the second Grande Polaire
Bar in Umeda, Osaka, and one establishment in Shizuoka and two in Osaka of our core format
Yebisu Bar. We renovated a total of four stores including the Shimbashi store, where we
refurbished the first floor and reopened it as the Ginza Lion Shimbashi Training Center.
Meanwhile, we closed 16 restaurants in 2019 due to the expiration of contracts, unprofitability,
and other factors. As a result, we had 195 outlets open for business at the end of December
2019. Going forward, we will continue to aggressively expand our restaurant chains, opening
new stores, remodeling existing stores, and changing formats when and where desirable.
In Singapore, we continued to promote the spread of beer hall culture.
As a result, revenue in the Alcoholic Beverages segment in 2019 came to ¥324.4 billion(down ¥5.6 billion, or 2% year on year), while the segment posted an operating profit of ¥7.9
billion (up ¥4.0 billion, or 104% year on year).
*1) RTD, or ready-to-drink beverages, are pre-mixed, low-alcohol cocktail-like beverages
that can be consumed as is immediately after opening.
*2) Fine wines are wines priced in the mid-to-high price range (¥1,500 or more per bottle),
while everyday wines are those priced at less than ¥1,500 per bottle.
*3) Based on lntage SRI market research on combined blended imo shochu sales in the
supermarket, convenience store, and direct sales channels from April 2018 to December
2019.

Food & Soft Drinks
We estimate that overall demand for soft drinks in Japan in 2019 declined by 2% year on
year.
In this market environment, POKKA SAPPORO implemented initiatives to enhance theunique value propositions of the Soft Drinks business and carried out active investments to lay
the groundwork for future business expansion in the Food business.
In the domestic soft drinks business, product deployment leveraging the company’s strengths
succeeded as lemon-based drinks performed strongly and new brand LEMON MADE was wellreceived by customers. The Kagabo Hojicha series also performed strongly gaining customer
appreciation and sales volume rose year on year. On the other hand, total sales volume of softdrinks fell year on year owing to the impacts of the decline in the canned coffee market as wellas the inclement weather.
8

In the domestic food business, lemon-based food products met the health-related needs ofcustomers and shipments increased 7% year on year driven by strong sales of our coreproducts led by Pokka Lemon 100. Further, in April we began cultivation of lemons inOsakikamijima-cho in Hiroshima Prefecture aimed at revitalizing domestic lemon production in
Japan. In summer, we held the national Lemon Sour Grand Prix 2019 as part of measures toexpand lemon demand and contact points with customers. With regard to soup products, while
we strengthened our production capacity with the start of operation of the Sendai plant, newly
established this year, and enhanced our core products by introducing a lineup with uniquefeatures in the Jikkuri Kotokoto series, sales were lower year on year due to the impact of themild winter. Soy beans and chilled products sales increased 13% year on year as a result of
the strengthening of products suited to various scenarios such as the launch of our soymilk
yogurt under the SOYBIO brand with an unsweetened type in large containers as well as inpacks with straw attached, with the start of operation of the soymilk yogurt production line in
March.
In February, Yasuma Co. Ltd. (a producer of spices and other food ingredients) joined the
Sapporo Group, contributing to revenue.
The introduction of limited menu with seasonal and trendy dishes, etc. proved popular
resulting in increased revenue year on year at the Café de Crié coffee shop chain.
In our overseas soft drinks business, the export business from Singapore is recovering andrevenue in Singapore increased year on year.
Overall, revenue in the Food & Soft Drinks segment came to ¥136.9 billion (up ¥3.5 billion,
or 3% year on year), while the segment posted an operating loss of ¥1.2 billion (compared with
an operating profit of ¥1.9 billion).

Real Estate
While there were concerns in Japan's real estate industry about a sharp increase in supplyof new office space negatively affecting conditions in the Greater Tokyo office leasing market,
vacancy rates continued to remain low as strong corporate earnings supported demand for
office space. As a result, rents remained on a moderate upward trend.
In this environment, our real estate leasing business maintained high occupancy rates at its
properties in the Greater Tokyo area, including Yebisu Garden Place Tower, the business's coresource of earnings. In addition, the high occupancy rates provided a solid platform enabling us
to carry out assertive efforts to increase rents of existing tenants.
Meanwhile, we transformed one section of Glass Square at Yebisu Garden Place commercial
complex (which is celebrating its 25th anniversary) into PORTAL POINT -Ebisu-, a complex
centered on co-working spaces, which has created opportunities for people working there tointeract with visitors to Yebisu Garden Place. We continued to enhance the asset value of the9complex, a landmark in the Ebisu district of Tokyo, through constant efforts to provide tenants
and visitors with enjoyable experiences in comfortable and pleasant surroundings byenhancing convenience and strengthening the property's brand appeal.
We refurbished the entire basement level 1 of the GINZA PLACE commercial complex andopened the Sapporo Draft Beer Black Label THE BAR, a year-round antenna shop, in July,creating a vibrant environment.
The real estate development business proceeded with the renovation of the Sapporo Factorycommercial complex as part of Sapporo City's urban redevelopment program focused on the
nearby area on the east side of the Sosei River, and some floors were opened after renovation.
Amid the changing environment surrounding the complex, we are contributing to thedevelopment of the area through new lifestyles and improved convenience.
We worked on development of new business, etc. while continuing to strategically review
and revise our property portfolio from a long-term perspective so as to enhance the overallvalue of our Real Estate business.
As a result of the efforts outlined above, revenue in the Real Estate business came to ¥24.7
billion (up ¥0.2 billion, or 1% year on year), while operating profit came to ¥12.7 billion (up ¥0.7
billion, or 6% year on year).

10(2) Consolidated Financial Condition
Consolidated assets as of December 31, 2019, totaled ¥638.7 billion, down ¥1.0 billion
from the end of the previous fiscal year (December 31, 2018). The decline primarily reflects
decreases in property, plant and equipment, intangible assets, and goodwill, which offset anincrease in other financial assets (non-current).
Consolidated liabilities totaled ¥464.2 billion, down ¥10.8 billion from December 31, 2018,
primarily owing to decreases in net defined benefit liability and bonds and borrowings (current),
which offset an increase in other financial liabilities.
Consolidated equity totaled ¥174.5 billion, up ¥9.8 billion from December 31, 2018. Thischange in total equity primarily reflects increases in profit attributable to owners of parent andother components of equity, which offset a decrease in non-controlling interests.

(3) Consolidated Cash Flows
Cash and cash equivalents (collectively “cash”) totaled ¥15.2 billion as of December 31,
2019, ¥5.2 billion or 52% more than a year earlier.
Following is an explanation of consolidated cash flows by category in 2019 and the factorsthat affected cash flows in each category.
(Cash flows from operating activities)
Operating activities in 2019 provided net cash of ¥36.1 billion, ¥5.2 billion or 17% more thanin 2018. The main cash inflows were ¥28.2 billion from depreciation and amortization and a¥4.9 billion loss on sale of discontinued operations.
(Cash flows from investing activities)
Investing activities in 2019 used net cash of ¥24.9 billion, ¥6.2 billion or 33% more than in
2018. The major investment outflows were ¥15.0 billion for purchase of property, plant andequipment and ¥13.2 billion for purchases of investment properties. The major inflow frominvesting activities was ¥8.6 billion yen from the sale of trust beneficiary rights (investment
property).
(Cash flows from financing activities)
Financing activities in 2019 used net cash of ¥6.0 billion, ¥8.5 billion or 59% less than in
2018. The main outflows were ¥21.5 billion for repayment of long-term bank loans, ¥10.0 billion
for redemption of bonds, ¥7.0 billion for repayment of lease liabilities, and a ¥6.5 billion decline
in commercial papers. The main inflow came from ¥21.4 billion in proceeds from long-termbank loans and the issuance of bonds totaling ¥20.0 billion.

11

Cash Flow Indicators
As of December 31,

Ratio of equity attributable to owners of

2018

2019

25.2

27.3

27.9

31.5

9.4

8.0

parent to total assets (%)
Ratio of equity attributable to owners ofparent to total assets based on market
capitalization (%)
Cash flow to interest-bearing debt
(years)Interest coverage ratio (%)
14.0
17.2
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. Market capitalization is calculated based on the number of shares issued and outstanding,excluding treasury stock.
2. “Cash flow” is operating cash flow.
3. Of the debt carried on the consolidated balance sheet, interest-bearing debt is total debt on
which interest is currently payable.
(4) Outlook for fiscal year ending December 31, 2020(a) Overall outlook
Millions of yen, except percentages
RevenueCore operating
profitOperating profit

Profit attributable toowners of parent

2020 forecast

504,400

14,000

8,500

5,000

2019 results

491,896

11,724

12,208

4,356

2.5

19.4

(30.4)

14.8

Projected change (%)

2020 is the first year of the “Sapporo Group Management Plan 2024” under the Sapporo
Group Long-Term Management Vision “Speed 150”. Throughout the year, we will continue
our efforts to supply distinctive products and services worldwide in our three core businessareas – “alcoholic beverages”, “food”, and “soft drinks” – and to expand contact points withcustomers as we strive to achieve robust growth in line with the goals of our long-term visionand group management plan.
From next year, we will use core operating profit* as a proprietary profit indicator thatmeasures the performance consistency of our business. Further, the logistics businesses which
until now were listed under “other business”, will be classified under “Alcoholic Beverages”. To
12enable year-over-year comparisons in this document, figures for the previous year have beenadjusted to reflect the new segmentation.
Our consolidated forecasts and outlook for 2020 are as follows.
*Core operating profit is calculated by deducting cost of sales, and selling, general andadministrative expenses from revenue.

Revenue
In the Alcoholic Beverages segment, along with strengthening our beer business, we will
work on rebuilding the new-genre category and further expansion of the RTD business as we
aim to increase the total sale volume of the business as a whole. In Vietnam, in addition to
focusing on nurturing the Sapporo brand locally, we will aim to expand exports to neighboring
countries. In North America, we aim to expand revenue by growing Canada’s SLEEMAN
BREWERIES and by generating sales synergies for Sapporo USA and Anchor Brewing in the
United States.
In the Food & Soft Drinks segment, we will continue to provide customers in Japan with newvalue propositions that reflect our superiority in lemon-based foods and soup products as wellas 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 2020 consolidated revenue will reach ¥504.4 billion, an increase of¥12.5 billion or 3% over 2019.

Core Operating Profit
We expect the Alcoholic Beverages segment to achieve profit growth on the back ofincreased sales volume through continued strengthening of core brands and by reducing
fixed costs.
The Food & Soft Drinks segment is also expected to achieve profit growth driven throughstrengthening of lemon-based foods and soup products and expansion of the soymilk-based
yogurt products business.
In the Real Estate segment, we expect profit growth driven by steady revenue contributions
from Yebisu Garden Place, GINZA PLACE, and other properties.
Overall, we forecast 2020 consolidated core operating profit will reach ¥14.0 billion, an
increase of ¥2.3 billion or 19% over 2019.

Operating Profit
We forecast consolidated operating profit to be ¥8.5 billion (down ¥3.7 billion year on year,
or 30%).

13

Profit Attributable to Owners of Parent
We project profit attributable to owners of a parent will total ¥5.0 billion in 2020, an increaseof ¥0.6 billion or 15% over 2019.
The 2020 outlook for each segment is presented below.
(b) Outlook by Business Segment
Millions of yen, except percentages
Revenue
2019
Alcoholic
Beverages

Core operating profit

2020

Changeforecast

(%)

2019

Operating profit

2020

Changeforecast

(%)

2019

2020

Changeforecast(%)

330,178 336,700

2.0

8,520

9,200

8.0

7,694

7,800

1.4

136,876 142,300

4.0

(470)

400

－

(1,151)

100－

24,6902.5

10,737

11,100

3.4

12,714

12,300(3.3)

Food &
Soft
DrinksReal
Estate25,300Alcoholic Beverages(Japan & Asia)
Our new vision is “Be the first to offer someone the best, Create stronger consumer
connections by enhancing the Sapporo experience. Focus on TWO positions: premium&reasonable values. Have global vision & reach while respecting local perspective.” Along with
continuously honing the quality of our premium value offerings that only we can provide, wewill expand and enhance our provision of products and services that are unique to us while
also being reasonable priced, offering high quality products for less.
In the beer business, we will ensure improved brand presence led by “Sapporo Draft Beer
Black Label” and “Yebisu” brands by placing priority on continuing the strengthening of beer
products leveraging our strength of owning diverse beer brands. Moreover, in the new-genre
market, we will firmly pursue “flavor value” with a two-pillar strategy pairing the new “Sapporo
Gold Star” (launched in February) with “Sapporo Mugi to Hop”.
In the RTD business, we will further strengthen our core brand Sapporo Chuhai 99.99 (FourNines) toward securing a position for the product as an alcoholic beverage consumed during
meals and will accelerate its growth together with unique products created throughcollaborations such as Otoko Ume Sour.
In the wine category, we will continue strengthening our lineup of fine wines while seeking to
expand sales and enhance the brand images of our wine offerings. Simultaneously, we aim to14

expand awareness of our offerings and build the user base of the everyday wine category.
In the spirits business (Western spirits, Japanese liquor), we will continue to focus ourmarketing efforts on such world-famous brands as Bacardi, the world’s best-selling rum in bothsales and volume, as well as Bombay Sapphire and Dewar’s and our thriving blended imo
shochu Kokuimo by disseminating information that arouses consumer interest.
(North America)
In the United States, while there are uncertainties regarding the government’s trade
policies, consumption bolstered by the easing of the financial environment and favorable
employment trends is expected to propel economic growth. In Canada, favorable employment
and export trends are expected to contribute to higher economic growth. However, we expect
overall demand in the North American beer market to be generally flat owing to the widening
diversity in consumers’ alcoholic beverage preferences.
Given this business environment, the North American alcoholic beverages business will work
to build its own position in the market by ensuring the spread of premium brands led by“Sapporo Premium Beer” and implementing strategies that take into account the characteristicsof the respective areas.
In the Canadian market, SLEEMAN BREWERIES will build an optimal product portfolio bystrengthening strategic brands and move more strongly into the RTD space while continuing toconcentrate management resources on premium brands.
In the U.S. market, Sapporo USA and Anchor Brewing will maximize the synergies in their
manufacturing and distribution operations and improve the earnings structure along withstrengthening sales of Sapporo Premium Beer and Anchor brands.
SLEEMAN BREWERIES, Sapporo USA, and Anchor Brewing will be converted tosubsidiaries of Sapporo Breweries on April 1, 2020 to enable a consistent brand strategy within
and outside Japan and to promote optimal global supply chain management.
(Restaurants)
Japan’s restaurant industry is expected to continue to face a difficult operating
environment, with manpower 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 atmosphere in a return to basics focused on “delivering 100% satisfaction tocustomers.” As part of that commitment, the subsidiary’s premises are taking extra care toensure the provision of safe and sound food and service to their customers.
New store openings will be aimed at territorial expansion primarily with our two core formats,
Ginza Lion and Yebisu Bar, while we focus also on development of new formats and new
businesses. We also will continue to renovate existing outlets and, as needed, shift them to15

new formats in order to sustain and enhance their earnings power along with implementing
fundamental cost reforms of existing businesses.

Food & Soft Drinks
In line with the vision of “continually creating delicious products that enrich and brighten
people’s everyday lives,” the domestic Food & Soft Drinks business will expand the fooddomain further through selection and concentration of management resources and propose
new values by providing products that delight customers while reflecting the superiority of our
products.
The domestic soft drinks business will nurture LEMON MADE while refining the Kireto Lemonbrand, and carve out a unique market position with deployment of products that are original to
POKKA SAPPORO.
In the domestic food business, the start of a new plant enabled us to flexible respond to themarket for soup products. In addition to revitalization of our mainstay Jikkuri Kotokoto brand,
we will promote steady market penetration of cup-based instant soups by introducing new
products that reflect the times. In the lemon-based foods category, we will engage in activities
to support further expansion of demand for Pokka Lemon 100 and lemon vinegar products,
including suggestions on usage of lemon and disseminating information regarding its healthbenefits. In the soy beans and chilled products business, we will improve the presence ofsoymilk yogurt and expand contact points with customers to accelerate the growth in the foods
domain. In the commercial-use channel, we will leverage the Sapporo Group synergies toexpand sales in all product categories, from lemon-based products to powdered teas and soups.
At the domestic restaurants business, the Café de Crié chain will continue to conduct finetuned marketing to stimulate business at its existing outlets and will enhance the Crié brandvalue by accelerating chain expansion.
The overseas soft drinks business plans to expand sales and increase efficiency while
maintaining its dominance of the tea drinks and juice beverages segments in the coreSingapore market. We also plan to raise our presence in the markets in each area where wehave operations by providing products that meet the needs of local customers.

Real Estate
Japan’s real estate industry expects a new large-scale supply in the Greater Tokyo officeleasing market, but it is unlikely to cause any major disruption to the supply-demand balancein the short term given the robust demand from businesses. However, amid lingering
uncertainties over world affairs and the direction of the economy post-Tokyo Olympic andParalympic Games, we remain aware of the possibility of a change in market conditions suchas a rise in vacancy rates and decline in rent levels due to economic slowdown and intensifying
16

competition.
In this environment, our Real Estate business will continue 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 convenienceof the complex to cater to diversifying lifestyles and changing work styles and offer new
functions and added-values to continue to maintain and improve earnings and raise the entire
neighborhood’s brand value.
Further, along with Sapporo City’s urban redevelopment program focused on the area on theeast side of the Sosei River and changes in the surrounding environment, we will continue with
our efforts to offer new lifestyles and develop an attractive urban space with the Sapporo
Factory commercial complex as the flagship property of the area.
To enhance the overall value of our Real Estate business we will continue to promote urban
development in Ebisu and Sapporo through measures such as strategic review and revision of
our property portfolio and work on securing profits in new business fields.
(NOTE) The outlook for 2020 presented above contains forward-looking statements that are
based on information available when the materials were prepared and are subject to risks anduncertainties. Actual performance may differ materially from the future outlook described forvarious reasons.

(5) Dividend Policy and Dividends for 2019 and 2020
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 wasannounced in November 2016, the Company is implementing the First Medium-Term
Management Plan 2020, which was launched in 2017 and calls for a dividend payout ratio of
30% as a target for return of profits to its shareholders. However, if profit attributable to ownersof 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 2019. The Company’s Articles of Incorporation stipulate thatinterim dividends may also be distributed, but we currently are distributing an annual dividend
once a year. Decisions regarding the payment of dividends from surplus profits are, in the caseof the year-end distribution, approved at the general meeting of shareholders, while the interim
17dividend, if any, is determined at the sole discretion of the Board of Directors.
We plan to pay an annual per-share dividend of ¥42 in 2020.

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.

18

2. Consolidated Financial Statements(1) Consolidated Statement of Financial Position(millions of yen)

AssetsI Current assets
1 Cash and cash equivalents
2 Trade and other receivables

December 31, 2018

December 31, 2019

AmountAmount9,989
93,34015,21592,5293 Inventories
4 Other financial assets

37,10936,528

4,790

5,403

5 Other current assets

8,316

6,090

Total current assets

153,544

155,765

152,676
215,522147,014219,589

21,22912,056

18,358II Non-current assets
1 Property, plant and equipment
2 Investment property
3 Goodwill
4 Intangible assets
5 Investments accounted for using equity method

8,844

410

428

6 Other financial assets

70,20578,728

7 Other non-current assets
8 Deferred tax assets

8,526
5,523

7,445
2,551

486,148
639,692

482,957
638,722

December 31, 2018

December 31, 2019

AmountAmountTotal non-current assets
Total assets

Liabilities and equity
Liabilities
I Current liabilities
1 Trade and other payables
2 Bonds and borrowings
3 Lease liabilities

35,29273,863

34,475
72,121

6,743

6,538

4 Income tax payable
5 Other financial liabilities
6 Other current liabilities

1,527
33,90563,2602,414
33,021
61,903

Total current liabilities

214,591

210,472

154,483
24,49545,733
11,715

155,220
23,921
46,624
5,007

2,991
20,950260,367
474,957

2,828
20,125
253,725
464,197

53,88740,99853,88740,958(1,792)
51,521
29,497174,071454
174,524
638,722

II Non-current liabilities
1 Bonds and borrowings
2 Lease liabilities
3 Other financial liabilities
4 Retirement benefit liability
5 Other non-current liabilities
6 Deferred tax liabilities
Total non-current liabilities
Total liabilities
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(1,822)
46,06522,373
161,501
3,234
164,735
639,69219

(2) Consolidated Statement of Profit or Loss and Comprehensive Income
Consolidated Statement of Profit or Loss(millions of yen)
Year ended
December 31, 2018
AmountYear ended
December 31, 2019
AmountContinuing operations
Revenue
Cost of sales
Gross profit

493,908
335,631
158,277

491,896336,682
155,213

Selling, general and administrative expenses

143,118

143,490

Other operating income

3,009

3,528

Other operating expenses

6,580

3,044

Operating profit

11,588

12,208Finance income
Finance costs
Share of profit of investments accounted for using equity method
Profit before tax

1,139
2,117
19
10,629

1,227
1,864
18
11,588

Income tax expense
Profit from continuing operations

2,023
8,606

4,259
7,329

Discontinued operations
Loss from discontinued operations(886)(3,509)Profit

7,721

3,820

Profit attributable to
Owners of parent
Non-controlling interests
Profit

8,521
(801)
7,721

4,356
(536)
3,820

Basic earnings (loss) per share
Continuing operations
Discontinued operations
Basic earnings per share

114.55(5.15)
109.4099.39(43.46)
55.92

Diluted earnings (loss) per share
Continuing operations

109.37

93.55

Discontinued operations(4.91)(40.81)

Diluted earnings per share

104.46

52.74

Year ended
December 31, 2018
Amount7,721

Year ended
December 31, 2019
Amount3,820(9,201)(3,688)

6,411
4,595

Consolidated Statement of Comprehensive Income

ProfitOther comprehensive income
Items that will not be reclassified to profit or loss
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 or loss

(12,890)

11,006

Items that may be reclassified to profit
Exchange differences on translation of foreign operations
Effective portion of net change in fair value of cash flow hedges
Total of items that may be reclassified to profit or loss
Other comprehensive income, net of tax
Comprehensive income(2,765)(69)(2,834)(15,724)(8,003)

885
204
1,090
12,095
15,915Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income(6,987)(1,016)(8,003)

16,104(188)
15,91520

(3) Consolidated Statement of Changes in Equity(millions of yen)
Other components of equity

Share capital

Balance as of January 1, 2018

Capital surplus

53,887Retainedearnings

Treasury shares

40,825(1,807)

ProfitExchange differenceson translation offoreign operations

44,491

1,137

(191)

(2,622)2(2,622)

2

8,521

Other comprehensive income
Total comprehensive income--

Purchase of treasury shares

-

8,521

(20)

Disposal of treasury shares

0Issuance of convertible bonds with shareacquisition rights
Dividends

5

182(3,122)

Share-based payment transactions(9)

Transfer to retained earnings(3,826)

Total transactions with owners
Balance as of December 31, 2018

Effective portion of
net change in fair value ofcash flow hedges

-

173

(15)

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

46,065(1,485)(188)

Financial assets measured
Remeasurements of defined Total other components ofat fair value through otherbenefit plans
equitycomprehensive income

Total equity attributable toowners of parent

Other components of equity

Balance as of January 1, 2018

33,712-

ProfitOther comprehensive income,net of taxes
Total comprehensive income

Non-controllinginterests

Total equity

34,659172,055

3,655

-

8,521

(801)

175,710
7,721(9,200)(3,688)(15,508)(15,508)(215)(15,724)(9,200)(3,688)(15,508)(6,987)(1,016)(8,003)Purchase of treasury shares

-

(20)

-

(20)

Disposal of treasury shares

-

6

-

6

Issuance of convertible bonds with shareacquisition rights

-

182

-

182

Dividends-(3,122)(8)(3,130)Share-based payment transactions

-

(9)

-

(9)

Transfer to retained earnings

(466)

3,688

3,222

(603)

603

-

Total transactions with owners

(466)

3,688

3,222

(3,566)595(2,972)

22,373

161,501

3,234

164,735

Balance as of December 31, 2018

24,046-21

(millions of yen)
Other components of equity

Share capital

Balance as of January 1, 2019

Capital surplus

53,887Retainedearnings

Treasury shares

40,998(1,822)

ProfitExchange differenceson translation offoreign operations

46,065(1,485)

(188)

622

120

622

120

4,356

Other comprehensive income
Total comprehensive income--

Purchase of treasury shares

-

0

39

Dividends(3,277)

Disposal of subsidiaries(245)

Share-based payment transactions(41)

Transfer to retained earnings

4,623

Total transactions with owners

Balance as of January 1, 2019

4,356

(9)

Disposal of treasury shares

Balance as of December 31, 2019

Effective portion ofneti change in fair value ofcash flow hedges

53,887

(41)

30

1,100

-

-

40,958(1,792)

51,521

(863)

(68)

Other components of equity
Total equity attributable toFinancial assets measured
Remeasurements of defined Total other components ofowners of parent
at fair value through otherbenefit plans
equitycomprehensive income
24,046
22,373
161,501

ProfitNon-controllinginterests

Total equity

3,234

164,735

4,356

(536)

3,820

Other comprehensive income

6,411

4,595

11,748

11,748348

12,095

Total comprehensive income

6,411

4,595

11,748

16,104(188)

15,915Purchase of treasury shares

-

(9)

-

(9)

Disposal of treasury shares

-

39

-

39

Dividends-(3,277)(12)(3,289)

Disposal of subsidiaries

-

(245)

(2,580)(2,826)

Share-based payment transactions

-

(41)

-

(41)

Transfer to retained earnings(28)(4,595)(4,623)---

Total transactions with owners(28)(4,595)(4,623)(3,534)(2,592)(6,126)30,428-29,497174,071454

174,524

Balance as of December 31, 201922

(4) Consolidated Statement of Cash Flows
Year ended
December 31, 2018
Amount(millions of yen)
Year ended
December 31, 2019
Amount10,629(1,137)

11,588(5,102)

3 Depreciation and amortization
4 Impairment losses

28,512
5,430

28,242
1,342

5 Loss on sale of discontinued operations
6 Interest and dividend income
7 Interest expenses(1,123)

4,886(1,185)

2,368

2,248

(19)

(18)

9 Loss(gain) on sale and retirement of property, plant and equipment, andintangible assets(659)(1,599)10 (Increase) decrease in trade and other receivables
11 (Increase) decrease in inventories
12 Increase (decrease) in trade and other payables

4,209
70
(830)

849
(210)
(754)

13 Increase (decrease) in accured alcohol tax
14 Other
Sub total(1,950)(1,414)(2,968)42,533274
39,149I Cash flows from operating activities
1 Profit before taxes
2 Loss before tax from discontinued operations

8 Share of loss (profit) of investments accounted for using equity method

15 Interest and dividends received
16 Interest paid
17 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 intangible assets
5 Purchases of investment securities
6 Proceeds from sale of investment securities
7 Purchase of investments in subsidiaries resulting in change in scope of
consolidation
8 Payments for sales of subsidiaries' shares resulting in change in scope of
consolidation
9 Proceeds from sale of discontinued operations
10 Purchase of trust beneficiary right (investment property)
11 Proceeds from sale of trust beneficiary right (investment property)
12 Payments for loans receivable
13 Collection of loans receivable
14 Other

1,150

1,188

(2,197)(10,657)(2,101)(2,167)30,83036,069(13,581)(14,995)

1,729(4,712)(2,220)(6,345)
1,455

387(13,211)(2,917)(1,710)
1,045-(1,633)(2,523)
7,239

(491)
1,798
8,586

(139)
4,081
(3,712)(182)
129(1,735)

Net cash provided by (used in) investing activities
III Cash flows from financing activities
1 Net increase (decrease) in short-term borrowings(18,727)(24,930)

(264)

920

2 Net increase (decrease) in commercial papers
3 Proceeds from long-term borrowings
4 Repayment of long-term borrowings(3,500)12,000(6,500)21,370(22,524)(21,486)

20,021(10,068)(3,133)20,000(10,013)(3,290)(7,038)(20)(7,016)(9)

6(14,521)39(5,984)(130)71

V Net increase (decrease) in cash and cash equivalents(2,548)5,226

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

12,537
9,989

9,989
15,215

5 Proceeds from issuance of bonds
6 Redemption of bonds
7 Dividends paid
8 Repayment of lease liabilities
9 Payments for purchase of treasury shares
10 OtherNet cash provided by (used in) financing activities
IV Effect of exchange rate changes on cash and cash equivalents

23

(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. These segments are subject to periodic
examinations to enable the Company’s board of directors to decide how to allocate resources
and assess performance.
Under the Company, which is a pure holding company, Group companies carry out businessactivities and formulate strategies for the products and services they offer and for the sales
markets they cover.
The Group’s businesses are segmented mainly based on the products, services and sales
markets of Group companies and their affiliate companies. The Company’s three reportablesegments are Alcoholic Beverages, Food & Soft Drinks, and Real Estate.
The Alcoholic Beverages segment produces and sells alcoholic beverages and operates
restaurants of various styles.
The Food & Soft Drinks segment produces and sells foods and soft drinks.
The Real Estate segment’s activities include leasing and development of real estate.
Changes to Reportable Segments
Based on the revised management structure launched in January 2017 and in line with The
First Medium-Term Management Plan of the Long-Term Management Vision SPEED150
announced in November 2016, the Company has determined to strategically reallocate
managerial resources to promote continuous group growth, and to implement structuralreforms and promote segment management in an effort to strengthen platform functions.
In the Company’s efforts to maintain steady growth by growing and strengthening its
brands, the five previous business segments have recently been reorganized into three new
segments to better develop international operations as a core business by enhancing
Company management. From the first quarter of 2019, the five previous business segmentsof Japanese Alcoholic Beverages, International, Food & Soft Drinks, Restaurants, and Real
Estate have been reorganized into the three new segments of Alcoholic Beverages, Food &Soft Drinks, and Real Estate.
In conjunction with these changes, the former International segment was split andincorporated into the Alcoholic Beverages and Food & Soft Drinks segments, respectively. In
addition, the former Restaurants segment has been incorporated into the Alcoholic
Beverages segment, and the food business which was part of the former Other segment has
been incorporated into the Food & Soft Drinks segment.
Segment information for year ended of 2018 has been prepared based on the newreportable segments following the changes.
The profit and loss of the North American soft drinks business has been classified underdiscontinued operations because all of the shares in Country Pure Foods, Inc. (the company
managing the North American soft drinks business, which falls under Food & Soft Drinks) held24

by the Sapporo Group were transferred to BPCP CPF Holdings Inc. in 2019.
Consequently, the profit and loss of the North American Soft Drinks business are classified
under discontinued operations and is therefore not included in segment information.
2. Revenue, profit (or loss)(millions of yen)
Year ended December 31, 2018 (January 1, 2018 – December 31, 2018)
Alcoholic
Beverages

Food &
Soft Drinks

Real Estate

133,384

24,483

6,033

Other *1

Total

Consolidated
total

Adjustment

Revenue
To outside customers
Inter-segment revenue
Total
Operating profit (loss)

330,009493,908-

493,908

408

275

2,824

21,58525,093(25,093)-

330,417

133,659

27,307

27,618519,001(25,093)493,908

3,856

1,910

12,047

177

17,990(6,401)

11,588(millions of yen)
Year ended December 31, 2019 (January 1, 2019 – December 31, 2019)
Alcoholic
Beverages

Food &
Soft Drinks

Real Estate

136,876

24,690

5,892

Other *1

Total

Consolidated
total

Adjustment

Revenue
To outside customers
Inter-segment revenue
Total
Operating profit (loss)

324,438

491,896-

491,896

579

295

2,704

22,20325,780(25,780)-

325,017

137,171

27,39328,095

517,676(25,780)

491,896

7,877(1,151)

12,714(169)

19,272(7,065)

12,208(1)"Other" comprises businesses, such as logistics businesses, that are not included inreportable segments.

(Subsequent events)
Early Retirement Incentive Program
At a Board of Directors meeting held on February 13, 2020, the Company resolved to
implement an early retirement incentive program for employees of Sapporo Breweries Ltd.,
which manages Sapporo Group’s Alcoholic Beverages business.
(Reason for implementation of early retirement incentive program)
In order to achieve the aims of the Group Management Plan 2024, the Sapporo Group ispursuing personnel placement optimization in accordance with the basic policies of the plan(making the beer business resilient, shifting to growth fields such as the food products field,
accelerating global expansion, etc.). At this significant turning point, the Sapporo Group willoffer an early retirement incentive plan by enhancing the existing second career support
measures to offer options to employees who intend to find a new career outside the company.
25

(Overview of the early retirement incentive program)
1. Target: Employees who are 45 years of age or older and who have worked at Sapporo
Breweries Ltd. for 10 years or more (some positions are excluded from the program).
2. Upper limit on the number of applicants: No limit is set.
3. Application period:(1) First round: April 1, 2020 to June 10, 2020
(2) Second round: October 1, 2020 to December 10, 2020
4. Effective date of retirement:(1) First round: November 20, 2020
(2) Second round: May 20, 2021
5. Details of support provided
A second career assistance grant will be added on to the ordinary retirement allowance of
those who apply for the program and they will also be entitled to reemployment support services.
(Impact on earnings)
As the application period has not yet commenced, any losses stemming from the second
career support fund, etc. are yet to be determined.

26