Nichirei Corporation
FY24/3 H2 President’s Small Meeting – Main Q&A
Date & Time, Target Audience: December 7, 2023 (Thursday) 13:30-14:30, Buy side
15:30-16:30, Sell side
Venue: In-person meeting at the Nichirei Higashi-Ginza Building
Presenters: Kenya Okushi, Representative Director, President & Chief Executive Officer
Kenji Suzuki, Director, Senior Executive Officer, Chief Financial Officer
Yasushi Miyakoshi, General Manager, Public Relations & Investor Relations
GeneralApproach to capital expenditure in the next medium-term business plan (FY2025 – FY2027)Q. It’s my understanding capital expenditure in the next medium-term business plan will
be around ¥100 billion, and that overseas investment will be prioritized? Is thiscorrect?
A. In the business plans up to now, the weight has been on domestic investment, but going
forward we plan to increase investment overseas. The figure of “around ¥100 billion” isstill in the consideration stage, so keep in mind that the proportion of overseas
investment in the next business plan could increase significantly. Also, apart from capital
expenditures, we hope to make investments of more than ¥10 billion overseas,including business alliances.
Plan for the next fiscal year (FY2024)
Q. Do you expect to exceed the corporate group’s FY2025 operating profit target of ¥37billion?
A. The drivers for achieving the plan in the next fiscal year remain the mainstay Processed
Foods and Logistics businesses, but other business segments have deviated from plan.
After reviewing our business portfolio, we are currently making adjustments based on
our initial plan of ¥37 billion.
Stance regarding management indicators
Q. If you manage to achieve the current plan target ROE of 10% or higher, do you intend
to aim for even higher ROE?
A. ROE of 10% is the minimum, but since 10% ROE is insufficient to increase the overseas
ratio, we are discussing the target value to set for the future. In addition, I believe thatalong with ROE, targets for other management indicators, such as ROIC, need to beevaluated in each process and utilized in management decisions, rather than justmaking determinations based on results alone.

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Processed Foods
Q. Please tell us about any issues you’ve had as a result of price revisions, and yourthoughts on profit margins in the future.
A. The problem that we found in this round of price revisions is that, although the situation
has improved compared to the past, it still takes time to negotiate the revisions, during
which time the next risk arises, making negotiations even more difficult. Should weneed to revise our prices further in the future, we will consider ways to negotiate more
efficiently.
As for measures to improve profit margins, we believe that we can improve ourmargin in Japan to 7%-8% if we continue to pursue pricing initiatives in response tochanges in the business environment, and enhance productivity with a focus on
categories that are expected to grow in the future, while also scaling back aging facilities
and delivering high-value products to customers. Concerns have raised about the risk ofcustomers switching to private store brands because of price revisions, but we scrutinize
each private brand project based on whether it will improve profitability, and respondaccordingly. Overseas, especially in North America, we believe that we can boost
profitability by improving sales in conjunction with our production functions.
Q. If costs go down, how will you respond in terms of product pricing strategy?
A. We want to avoid price wars if possible. These recent price revisions have taught us that
if we concede to a price reduction, and then face a difficult situation in which we needto raise prices again, it will take a considerable amount of effort to make that happen.
Fundamentally, sales work is about making proposals and exchanging opinions regarding
appealing products and selling methods. When too much time is spent negotiating
prices, and customers are unable to improve their sales floors, both sides lose. To
preclude such a situation, we want to avoid lowering prices.
Q. In today’s explanation, you stated that the sales volume for commercial-use products
has now recovered, when at the time of the first half results announcement this beena factor for decline due to cutbacks in low-margin items. Would you elaborate?
A.

In our presentation of first half results, we stated that sales volume for commercial-use
products, especially prepared foods, was down sharply in the first half due to deliberateconsolidation of less-profitable products. However, volume began to recover in Octoberand November with the introduction of products to major customers, and the launch of
new products to mass retailers.
Similarly, since October, the sales volume for household-use items has exceed thatof a year earlier, mainly because of successful sales promotions.

2Q. What is your assessment of entering the North American appetizer market?
A.

In addition to appetizers, the fact that the North American food market is not shrinking
is extremely appealing, and the many growth opportunities in that market is a factor
that by its very nature promotes growth. As of this year, Nichirei has increased thenumber of appetizer items it offers to five products, and the response has been positive.
As for the future direction, we were considering an in-house production function forappetizers, but at present, in terms of time and cost, our focus is on establishing asystem to supply products by prioritizing alliances with OEM firms. For rice products, wewill increase the operating rate at our in-house production plant, and strengthen thecoordination between manufacturing and sales, aiming for a profit margin of 10% in theNorth American business over the long term.

Logistics
Q. Please elaborate on the new contracts stemming from the regulatory changes that will
come into effect in 2024. Also, do you expect the changes to further accelerate jointdelivery?
A. The number of customer inquiries has risen sharply. We evaluate each of them carefully
from the standpoint of efficiency before concluding a contract. We expect the numberof inquiries and new contracts to increase further from January 2024.
Joint delivery has also expanded significantly in the past few years, and wecooperate with several companies for joint delivery services. However, even if
companies are willing to work together for joint delivery, the fact remains that finalizing
such arrangements can be difficult in terms of asset utilization and IT systems, andnegotiations with certain parties has been prolonged for some time now.
Nichirei has gained a competitive advantage by having a certain amount of owned
assets, base cargo volume beyond a certain level, and the ability to coordinatetransportation functions. At present, in some cases it may be difficult to acquire land forowned assets due to price constraints, but in such cases, we believe that we will be able
to utilize the assets of other companies to adapt to the changes in the industry in 2024,
and expand the scope of joint logistics.
Q. What is your policy regarding overseas profit margins going forward?
A. In Europe, we have reached our current profit margin through a process of continued
M&A that began in the 1980s, acquiring transportation companies with relatively large
sales volumes. As such, we believe that we can raise profit margins further going
forward by increasing coordination between transportation and storage.
At the same time, we do not have sufficient assets to support expansion of a3

combined cross-border transport and storage business, so we would like to establish
bases in port areas, along with bases in inland areas to transport goods from ports to thewhole of Europe. We will consider the best method for developing such bases, whether
to build our own facilities or form alliances, and allocate investments for thedevelopment of overseas facilities.
Q. How do you plan to leverage the company’s strengths to expand business in Southeast
Asia?
A. Cold chain services in Southeast Asia are less developed than in Japan, but demand forfrozen foods is increasing rapidly with the improvement in living standards. We believethat the key to gaining an advantage in Southeast Asia is the extent to which we candevelop our business ahead of the competition.
Nichirei’s strength lies not only in the provision of storage and transportation, butour ability to combine these services with the strengths and customer bases of ouralliance partners to provide logistics services to further meet customer needs. We willconsider such factors as the location of our bases, efficient transportation routes, andreduction of environmental impact, to meet the needs of our customers.

Management Decision-Making
Long-term management vision
Q. What is your long-term vision for the business?
A. In terms of the overall direction, we need to shift the drivers for business growth to fastgrowing overseas markets. Increasing the speed of this shift is important.
At present, the foundation for overseas business growth is the European
temperature-controlled logistics business. We recognize that as in Japan, our strengthlies in our ability to both transport and store goods at the same time, so going forward
we will aim for further growth by addressing human resources and IT system issues, andmaking investments. We also consider Southeast Asia as a potential source of future
earnings, considering the economic development in the region. For the processed foods
business, however, we will focus on North America. We have mainly dealt withhousehold-use products up to now, but in the future, we would like to focus oncommercial-use items as well.
The biggest challenge for overseas business development is human resources. Atpresent, we are selecting candidates who can effectively implement governance in areas
such as finance, legal affairs, and sustainability, and have begun implementing practicalmeasures such as language education. In the next medium-term business plan, we plan
to increase the number of overseas personnel by 7 to 8 persons from the current level.
4The length of overseas assignments has also become longer in recent years asemployees become more immersed in the local business, so we feel that it’s necessary
to reconsider the salary level of expatriates from the standpoint of supporting theirstandard of living.
Change in stance towards the stock market
Q. I get the sense that the speed of management decision-making has increased, andthere have been positive changes in dialogue with investors. What prompted thesechanges in the management stance?
A. When I became president, I received several harsh comments during talks withinvestors, and that offset to my thinking up to that point is one of the reasons for thechange in our management stance. That is why over the last couple of years we havebeen working to reflect this feedback on our management by changing our IR system to
be more responsive, expanding disclosure in areas that had been lacking, and activelyengaging in dialogue with investors.
EndNote: This document is not a complete record of the Q&A session, and has been edited.

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