Financial Results for the 2nd Quarter
Ended March 31, 2015

T．HASEGAWA CO., LTD.
May 19, 2015

T．HASEGAWA CO., LTD.

Copyright© T.HASEGAWA CO., LTD. All rights reserved.

IndexⅠ．Summary of the Consolidated Financial Statements

・・・P2-P8－ Market Environment－ Consolidated Results－ Net sales by Segments, by Region－ Operating Income by Region－ FY15 Annual Plan

Ⅱ. Global Strategies

・・・P9-P15－ Domestic Strategies－ Overseas Strategies

Ⅲ. Shareholder Redemption
Ⅳ. Management Strategies
Ⅴ. Appendix

・・・P16-P17
・・・P18-P20
・・・P21-P44

Note1：T HASEGAWA's date for settlement of accounts is September 30.
Note2：Unless otherwise noted, the indication of the fiscal year are as follows.
・FY14 2Q (From October 2013 to March 2014)
・FY15 2Q (From October 2014 to March 2015)
・FY14(From October 2013 to September 2014)
・FY15(From October 2014 to September 2015)
T．HASEGAWA CO., LTD.

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1

Ⅰ． Summary of the Consolidated
Financial Statements

T．HASEGAWA CO., LTD.

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2

Ⅰ． Summary of the Consolidated
Financial Statements

Market Environment

Domestic Market
Domestic flavors and fragrances market in 2014 shrank by approximately 5% due to cold weather in summer 2014.
Beverage market slightly shrank in 2014.
Although “Non-flavored mineral water” and “Carbonated drinks” contributed to the market growth, tea drinks,
fruit/vegetable juices, sports/vitamin/energy drinks and other functional beverages performed sluggishly.
The market has marked lower levels compared to the same period in the previous year, in reaction to hurried
purchases of products by consumers ahead of the consumption tax raise in April 2014.
Overseas Market
The global flavors and fragrances market in 2014 grew by approximately 4%.
Beverage market in China marked a double-digit growth rate in 2014.
Beverage market in U.S.A. expanded slightly, market for functional/coffee beverages grew steadily.
In Southeast Asia, beverage, instant noodle, snack and yogurt market expanded,with remarkable growth in the tea beverage market.

Note：the indication of “year” on this page are based on the calendar year
T．HASEGAWA CO., LTD.

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3

Ⅰ． Summary of the Consolidated
Financial Statements

Consolidated Results

・Year-on-year: Net sales increased due to the increase of net sales of overseas subsidiaries
Operating income decreased due to the increase in SG&A expenses
・vs. Plan:Net sales was lower than the plan because the parent company was not able to achieve the original plan,
which was largely due to the decrease in sales of “Fruit processing products”
Net sales were also impacted by prolonged a sluggish consumer consumption reaction
following the rushed consumption demand of the tax raise in April 2014 compared with the previous forecast
Yen million

FY14 2Q
Actual

FY15 2Q
Plan

FY15 2Q
Actual

Value

Value

Value

Achievement
Yr/Yr
Value

vs.Plan
％

Value

％

Net sales

21,696

22,13021,879

182

0.8%

-250

-1.1%

Cost of sales

13,62914,08013,875

246

1.8%

-204

-1.5%

Gross profit

8,067

8,050

8,004

-63

-0.8%

-45

-0.6%

SGA expenses

5,855

6,060

6,246

391

6.7%

186

3.1%

Operating income

2,211

1,990

1,757

-454 -20.5%

Ordinary income

2,440

2,090

2,128

-312 -12.8%

38

1.8%

Income before
income taxes

2,414

2,010

2,046

-367 -15.2%

36

1.8%

Net income

1,573

1,380

1,177

-395 -25.1%

T．HASEGAWA CO., LTD.

-232 -11.7%-202 -14.6%

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4

Ⅰ． Summary of the Consolidated
Financial Statements

Net sales by Segments
・While the sales of the parent company shrank in both flavor and fragrance segments,
the sales of the overseas subsidiaries has grown steadily, thus, overall sales increased slightly

Yen million
Yr/Yr

FY14 2Q
Actual

FY15 2Q
ActualFragrances

3,081

3,051

-30

-1.0% Sales for toiletry products decreased

Flavors

18,614

18,828213

1.1%

Sales of the subsidiary in China increased
Increase in sales related to acquisition

21,696

21,879

182

0.8%

－

Total

RemarkValue%

yr/yr (%)

FY15 2Q Actual
Domestics
Fragrances

Overseas-1.0%

Flavors

+1.1%

Total

+0.8%
0

10,00020,00030,000
Yen million

Note:FY15 2Q overseas sales ratio is 32.0%

T．HASEGAWA CO., LTD.

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5

Ⅰ． Summary of the Consolidated
Financial Statements

Net Sales by Region

Consolidated sales increased only slightly due mainly to the decrease of the parent company sales
The sales of overseas subsidiaries increased, making up for the sales decrease of the parent company

Yen million
FY14 2Q
Actual

FY15 2Q
Actualyr/yr

Yenmillion
millionYen

23,000%Parentcompany

17,343

16,724

-618

-3.6%

China

3,399

3,857

458

13.5%

U.S.A.

1,173

1,339

165

14.1%

Malaysia

-

250

250

-

Adjustment

-219

-292

-72

-

Consolidated

21,696

21,879

182

-72
+250
+165
-618

+458
21,87921,696

0.8% 20,0000
FY14 2Q
ActualParentcompany・ Parent company : Flavors sales decreased in “Fruit processing products”
Fragrances sales decreased in products for household/Fabric care/etc
・China:Flavors and Fragrances sales increased
・U.S.A.:
Dollar-based sales decreased due to fractures in ordering schedule.
However, owing to the depreciation of Japanese Yen, sales increased.
・Malaysia:
Sales for snack foods grow steadily
T．HASEGAWA CO., LTD.

China

U.S.A.

Malaysia

Adjustment

FY15 2Q
Actual⇒ Decrease in net sales⇒ Increase in net sales⇒ Increase in net sales

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6

Ⅰ． Summary of the Consolidated
Financial Statements

Operating Income by Region

・Consolidated operating income decreased due to a poor results of the parent company and China subsidiaries

Yen million
FY14 2Q
Actual

FY15 2Q
Actualyr/yr

Yenmillion
million
Yen

3,000

%

Parentcompany

1,304

981

-322

-24.8%

China

915

706

-208

-22.8%U.S.A.

-19

-33

-13

-

-322
-208
Malaysia

-

43

43

-

Adjustment

11

59

47

-

Consolidated

2,211

1,757

-454

-20.5% 1,0000

2,211

-13

+43

+47

1,757

FY14 2Q
ActualParentcompany

China

U.S.A.

Malaysia

Adjustment

FY15 2Q
Actual⇒ Decrease in operating income
・Parent company : Decrease in Net sales
・China : Increase in cost of sales due to a change in sales composition ratios and increase in SG&A expenses⇒ Decrease in operating income
・U.S.A. : Increase in SG&A expenses⇒ Decrease in operating income
・Malaysia: Recorded favorable sales and maintained operating income

T．HASEGAWA CO., LTD.

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7

Ⅰ． Summary of the Consolidated
Financial Statements

FY15 Annual Plan (Consolidated)

・Although the results up to the 2nd quarter for Fiscal 2015 have marked below planned, it is expected that the annual planfor sales will be achieved.
・ Despite the results of the first 2 quarters in parent company sales, a strong order receipt for new products is expectedin the latter half of the year
・Sales for Beverage market which account for approximately 30% of total sales peaks in spring and summer(Accounted in the a second half of the fiscal year)
・The percentage of the 2nd half year's Net sales to a whole year’s is 53% (Average values for the last ten years)(Operating Income)・An improvement in the cost of sales ratio due to reducing manufacturing cost is expected in the latter half of the year
・A percentage of the 2nd half year‘s Operating Income to the whole year’s is 60% (Average values for the last ten years)⇒ No change in FY15 Annual Plan announced on November 7, 2014

Yen million
FY14
Actual

FY15
Plan

FY15 2Q
Achievement

Value

Share

Value

Share

yr/yr

Value

Share

Progress

Net sales

44,917100.0%

47,350100.0%

5.4%

21,879100.0%

46.2%

Cost of sales

28,55863.6%

29,770

62.9%

4.2%

13,875

63.4%

46.6%

Gross profit

16,35936.4%

17,580

37.1%

7.5%

8,004

36.6%

45.5%

SGA expenses

11,97726.7%

12,550

26.5%

4.8%

6,246

28.6%

49.8%

Operating income

4,381

9.8%

5,030

10.6%

14.8%

1,757

8.0%

34.9%

Ordinary income

4,939

11.0%

5,250

11.1%

6.3%

2,128

9.7%

40.5%

Income before
income taxes

4,832

10.8%

5,100

10.8%

5.5%

2,046

9.4%

40.1%

Net income

3,239

7.2%

3,510

7.4%

8.4%

1,177

5.4%

33.6%

T．HASEGAWA CO., LTD.

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8

Ⅱ．Global Strategies

T．HASEGAWA CO., LTD.

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9

Ⅱ．Global Strategies

Domestic Strategies
Basic
Strategy

Expand market shares by anticipating new markets stemming from aging society and healthy trends

FY15 2Q Performance

Ongoing Projects and Progress
Promotion of Solution-Oriented Sales Activities
・Proposition of new materials, such as materials with high durability of aromas andsweet taste, and functional materials, etc.
・Proposition of new flavors and materials, i.e. materials which can reinforce sweet, rich and complex
tastes lost through reduction of sugar.
・Business presentation on new materials and industry trends on a regular basis
Enhancing Capability to Provide Flavors and Fragrances for New Applications
・Focus on new areas such as Non-alcoholic beers and Cocktails, Alcoholic beverages, Healthy foods,
Food for medical uses, etc.
⇒ Receive orders for Alcoholic beverages
・Develop flavors which can replace food materials (e.g. milk, vegetables, fruit juice, meat, etc.)
Netsale”Net sales” and ”Operating Income”

Operating
Income（Million Yen）

50,000Net Sales
16,724 million Yen(-3.6% Yr/Yr)
Operating Income
981 million Yen(-24.8% Yr/Yr)

Sales and profit target(FY19)Net sales
39,400 million Yen
Operating income
4,600 million Yen

15,000NetsalesOpereting
Income

Yr/Yr
-4.5％

40,000

Yr/Yr
-2.4％

Yr/Yr
+4.1％

Yr/Yr
+1.1％

Yr/Yr
+1.1％

12,000

Yr/Yr
-3.1％

Yr/Yr
-0.1％

30,0009,000

20,000

6,000

10,0003,000

00Fy2011Fy2012Fy2013

T．HASEGAWA CO., LTD.

Fy2014Fy2015(Plan)

Fy2016(Plan)

Fy2017(Plan)

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10

Ⅱ．Global Strategies

Overseas Strategies

PolicyPromote step-by-step globalization with effective use of human resources andfunds allocation

1st Phase：Cultivate local markets in China, The U.S. and Southeast Asia
FY15
2Q

1st
Step

Localization of the management
Enhancement of R&D and Sales
Cultivate local market

◎
◎
○

2nd
Step

Enhancement of Production Capacity
Acquisition of local production site
Enhancement of R&D facilities◎◎○

3rd Step

Business alliance, M&A
Enhancement of oversea bases for global business○○◎：Completion○：On-going※ The second expansion
phase of Suzhou plant will
start operation in June 2015

Recentsituation

2nd Phase： Increase business opportunities with global companies
T．HASEGAWA CO., LTD.

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11

Ⅱ．Global Strategies

Overseas Strategies -ChinaBasic
Strategy

Reinforce revenue base for further sales expansion in the Chinese market by active investments
Ongoing Projects and Progress

FY15 2Q Performance

Enhancement of Production Capacity
・2nd phase of the capital investment of T.H.Suzhou plant is progressing as planned,
with no problems in product testing, operation starts in June 2015
・The total investment of this project is expected to be approx. 2 billion Yen
・This project will increase production capacity in China by approximately 30%
・After cutover, approx. 70% capacity utilization is expected throughout T.H.Suzhou plant

Net Sales
204 million RMB (+0.6% Yr/Yr)(3,857 million Yen)
Operating Income
37 million RMB (-31.6% Yr/Yr)(706 million Yen)

Enhancement of R&D Facilities in Shanghai・A project team launched and completed it’s basic design
・The total investment is expected to be approx. 1.5 billion Yen, with a total floor area ofapprox. 5,000 square meters. and the new facilities will start operation in the first half of 2017

Sales and profit target(FY19)

Localize and Strengthen Management Structure to Acquire New Customers,
Further Cooperate with Existing Customers, and to Increase Sales
・Classification of customers: International Companies 60%, Local Companies 30%,
Japanese Companies 10%
・Aim to increase business opportunities with both international and local companies.

Net sales
620 million RMB (10,000 million Yen)
Operating income
120 million RMB (2,000 million Yen)

Netsale”Net sales” and ”Operating Income”（Million RMB）

600

300

NetsalesOpereting
Income

Yr/Yr
+7.9％

500

400

Operating
IncomeYr/Yr+10.9％
Yr/Yr
+3.7％

Yr/Yr
+9.1％

Yr/Yr
+9.2％
250

Yr/Yr
+11.0％
200

Yr/Yr
-1.3％

300

150

200

100

100

50

0

0
Fy2011Fy2012Fy2013

T．HASEGAWA CO., LTD.

Fy2014Fy2015(Plan)

Fy2016(Plan)

Fy2017(Plan)※Consolidated Net sales and operating
income of T. Hasegawa’s two
subsidiaries in China

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12

Ⅱ．Global Strategies

Overseas Strategies -U.S.A.Basic
Strategy

Aim to expand sales of Savory and Beverage flavors
Ongoing Projects and Progress

FY15 2Q Performance

Realignment of New Management Structure
・Recruited CEO, Director of Laboratories and Sales department who are well acquainted withbeverage market.
・Recruited an sales staff, strengthening the efficiency of sales functions to expand beverage market
・Aim at sales growth in local beverage market in the U.S.A.
Beverage market in the U.S.A. can be divided into two categories: beverages for the global market,
and beverages for the local market that capture the tastes of the region -While it can challenging tobecome a global player outside of the Asian and North American area, T. Hasegawa has more thanenough chances to become a big player in the local market.
Enhancement of R&D Facilities Completed
・Renovated R&D and Administration Building started operation in June 2014
- Total investment approx. 0.5 billion Yen
・Strengthening R&D support and maintain close exchanges of information between Japan andthe U.S.A.
・Enhanced collaboration with customers through expanding R&D function
Netsale”Net sales” and ”Operating Income”

40

NetsalesOpereting
IncomeYr/Yr+17.1％

30

20（Million USD）

Yr/Yr
+16.8％

Yr/Yr+12.3％

Yr/Yr+15.8％

Yr/Yr+13.0％

Yr/Yr+12.1％Net Sales
11.5 million US$ (-0.7% Yr/Yr)(1,339 million Yen)
Operating Loss
0.28 million US$(A margin of deficit increased)( 33 million Yen)

Sales and profit target(FY19)Net sales
45 million US$ (4,500 million Yen)
Operating income
5 million US$ (500 million Yen)

Operating
Income
4

3

Yr/Yr
+4.7％

2
Decided topenetrate into
beverage market

10

1

0

0
Fy2011Fy2012Fy2013

T．HASEGAWA CO., LTD.

Fy2014Fy2015(Plan)

Fy2016(Plan)

Fy2017(Plan)

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13

Ⅱ．Global Strategies

Overseas Strategies -Southeast AsiaBasic
Strategy

Expand sales through cooperation of sales base in Thailand/Indonesia and production base in Malaysia
FY15 2Q Performance

Ongoing Projects and Progress

Net Sales
1,043 million Yen (+38.1% Yr/Yr)
Operating Income
170 million Yen (+63.9% Yr/Yr)

Visit with R&D Staff to customers with Sales force
・This effort brought a good result for “Strengthening business relationships with local major
customers located in “High-priority-countries”.
Acquisition of Local Production Base in Malaysia
・Acquired “Peresscol Sdn. Bhd.,” a Halal-certified flavors sales and production company
in Malaysia.
・Peresscol has its strengths in areas such as seasoning powder/liquid flavors

Sales and profit target(FY19)

Expansion of production/sales base in Southeast Asia, Reinforce sales activities
・Assignment of local staff members in Vietnam/Philippines, in addition to Sales basein Thailand/Indonesia
・Strengthen sales activities in Southeast Asia through collaboration of each main bases
Netsale”Net sales” and ”Operating Income”（Million Yen）

4,000

Net sales
3,700million Yen
Operating income
700 million Yen
Operating
Income2,000

NetsalesOpereting
IncomeYr/Yr+17.4％

3,000

Yr/Yr
+7.3％
1,500

Yr/Yr
+43.4％
2,000

Yr/Yr
+1.5％

Yr/Yr
+26.3％

1,000

1,000

500

0

0
Fy2013Fy2014

T．HASEGAWA CO., LTD.

Fy2015(Plan)

Fy2016(Plan)

Fy2017(Plan)

Note: These figures are the total of theparent company’s export sales andsubsidiaries sales to Southeast Asia

Copyright© T.HASEGAWA CO., LTD. All rights reserved.

14

Acquisition of Peresscol Sdn. Bhd.,

Ⅱ．Global Strategies

Background・The Southeast Asian market, with large shares in beverages and snacks,
has high demands for flavors (and fragrances),and is expected to grow rapidly.
・Until now, most products for Southeast Asia have been exported
from Japan, resulting in a lack of competitive prices.

Reasonsforselection

・Peresscol and T. Hasegawa have a history of over 50 years of business relationship including T. Hasegawa’s technicalsupport.
・Peresscol has suitable production facilities and vacant land for further expansion, as well as an established quality assurance
system・Peresscol undertakes sales in Malaysia and export products to neighboring countries via partner companies (sale agents) ,and has an original sales network in Southeast Asia

Advantageofacquisition

・Advantages of acquisition are as bellow,
1.Enables significantly shorter lead times to customers 2.Increases price competitiveness by cost reduction
3.Capture local preferences
4. Provide HALAL certified products
・There is no overlap of customers between Peresscol and T. Hasegawa, allowing us to effectively make use of
the sales networks and production centers of both companies.

Current
situation

Outlook
for thefutureDetermined necessary toensure local production base inSoutheast Asia area

・PMI (post merger integration) initiative is ongoing. Integration process is accelerated to maximize the economic benefits of
the acquisition

・In consideration of the current situation of existing facilities, we aim to implement strategic capital investment as necessary
・After the establishment of management structure as of R&D/Production/Sales have been complete, we plan to implement
capital investment as necessary, to place Peresscol as a regional headquarter in Southeast Asia

T．HASEGAWA CO., LTD.

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15

Ⅲ. Shareholder Redemption

T．HASEGAWA CO., LTD.

Copyright© T.HASEGAWA CO., LTD. All rights reserved.

16

Ⅲ. Shareholder Redemption

Shareholder Redemption
Basic Policy・Strengthening operating foundations and retaining undistributed profits in order to reinvest in future development,
while also meeting shareholders’ expectations by paying dividends which correspond to our business performance・Targeting approx. 35% of consolidated dividend payout ratio for interim and year-end dividends
・Launched a shareholders' courtesy program, prompt investors to hold our stock in the medium- to long-term
Dividends per
share(Yen)Dividends per share(Yen)Consolidated payout ratio

50

Consolidated
payout ratio

50%

40.1％
40

38.5％
35.4％

33.3％

35.5％

30

40%

30%
Year-end
dividend

20

25

25

30

30

10

15

20%

Interimdividend

10%

15
0

0%
FY11

T．HASEGAWA CO., LTD.

FY12

FY13

FY14

FY15(Plan)

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17

Ⅳ. Management Strategies

T．HASEGAWA CO., LTD.

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18

Management Strategies

Ⅳ. Management Strategies

Basic Strategies
Concentrate management resources on high-value added
and profitable compound flavors and fragrances

Make steady revenues in domestic market

Aim for growth in overseas market

China・Enhancement of Production/R&D facilities
・Acquire new customers, further cooperatewith existing customers

Enhancing capability to provide Flavors andFragrances for new applications

U.S.A.

・Strengthen the efficiency of sales
functions to expand beverage market
・Further increase in sales of savory flavors

Shift sales strategies
from "Current: 1.Safe, 2.Secure, 3.Inexpensive" andbringing it to the next level" 1.Trust, 2.New proposals,3.Familiarity"

Southeast
Asia

・Strengthen regional ties through collaboration
oversea bases
・Strengthen business relationship with local
major customers

Recover performance in Domestic Sales

T．HASEGAWA CO., LTD.

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19

Ⅳ. Management Strategies

Management Strategies

Be Open To Change and Bring

Brand to the Next Phase

T．HASEGAWA CO., LTD.

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20

Ⅴ. Appendix

T．HASEGAWA CO., LTD.

Copyright© T.HASEGAWA CO., LTD. All rights reserved.

21

Outlines of Flavors & Fragrances
Business

T．HASEGAWA CO., LTD.

Copyright© T.HASEGAWA CO., LTD. All rights reserved.

22

Ⅴ. Appendix

Flavors & Fragrances Business

Products

Ingredients(compound flavors & fragrances)① Natural aromatics③ Flavoring（Flavors）

Compounding② Aromatic chemicals

Recipes④ Fragrances

Integration of all the R&D
capabilities
The experts who formulate fragrances are known as “perfumers”
The experts who formulate flavors are known as “flavorists”
Fragrances and Flavors are tailor-made in accordance to our customers’ requests⇒ Recipes formulated by perfumers and flavorists are the integration of all
the R&D capabilities of flavors & fragrances companies

T．HASEGAWA CO., LTD.

Copyright© T.HASEGAWA CO., LTD. All rights reserved.

23

Market Size of
Flavors & Fragrances Industry

T．HASEGAWA CO., LTD.

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24

Ⅴ. Appendix

Total World Market of Flavors & Fragrances Industry

・Estimated sales volume of global market： Approx. 2,600bln Yen（Approx. 25bln USD） as of March,2015
North America-Market size: Approx.670bln Yen (*)

Europe, the Middle East and Africa-Market size: Approx. 950bln Yen(*)-Many of the end-users employ a “Preferred supplier
program” and European and American companies
have built the solid business bases-Many of the end-users employ a“Preferred supplier program” andEuropean and American companies havebuilt the solid business bases-T. Hasegawa established a subsidiary in California
in1978,which has a Sales branch in Atlanta, Chicago
and Mexico, and has Laboratory in Princeton.

Asia-Market size: Approx. 770bln Yen (*)(*) = T. Hasegawa estimates● = T. Hasegawa’s offices and plants
T．HASEGAWA CO., LTD.

-Market is growing due to the economic growth ofdeveloping countries including China-Most of the major flavors and fragrances companies
are operating in China-T. Hasegawa established a subsidiary in Shanghai
in 2000, in Suzhou in 2006, in Bangkok in 2003,andin Indonesia in 2014
- T. Hasegawa acquired Peresscol Sdn. Bhd. in
Kuala Lumpur, Malaysia in 2014 as a production
baseSouth America-Market size: Approx. 210bln Yen (*)-The majority of flavors and fragrances
are imported.
-Competition in Brazilian market isbecoming severe due to the economic
growthCopyright© T.HASEGAWA CO., LTD. All rights reserved.

25

Ⅴ. Appendix

Worldwide market scale of flavors and fragrances

・Top11 companies account for approx. 80% of the global market (as of March,2015)

Company nameCountry

USD million
Sales(2014Yr)

Market Share1

Givaudan

Switzerland

4,819

19.4%

2

Firmenich

Switzerland

3,375

13.6%

3

IFF

USA

3,089

12.4%

4

SymriseGermany

2,818

11.3%

5

Takasago

Japan

1,242

5.0%

6

Wild Flavors

Germany

1,241

5.0%

7

Mane SAFrance

1,022

4.1%

8

Frutarom

Israel

820

3.3%

9

Sensient Flavors

USA

725

2.9%

10

Robertet SA

France

518

2.1%

11

T.Hasegawa

Japan

426

1.7%

Subtotal－

20,093

80.7%

Others

－

4,797

19.3%

Total

－

24,890－* US $1≒ 105.6Yen
Source : Leffingwell & Associates
http://www.leffingwell.com/top_10.htm
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26

Ⅴ. Appendix

Size of domestic flavors and fragrances market

・Sales composition of domestic market ⇒ 82% flavors vs. 18% fragrances (50% flavors vs. 50% fragrances worldwide)(Yen billion)

250

Annual Sales
200

12

11

13

12

Fragrances
18%

14
37

34
150

Composition Rate (2014Yr)

Natural Aromatics
Aromatic Chemicals
Fragrances
Ｆｌａｖｏｒｓ

31

34

30
26

25

27

27

28

Flavors
82%

100

134

137

135

139

2010

2011

2012

2013

128

50

0
2014
(Yen billion)

Total

204

212

208

210

200

Year-on-year

7.9%

3.9%

-2.2%

1.0%

-4.8%

T．HASEGAWA CO., LTD.

Source：Japan Flavor and Fragrance
Materials Association

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27

Business Outline of
T. Hasegawa Co., Ltd.

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28

Ⅴ. Appendix

Sales of Domestic Flavor & Fragrance Companies

・Top 5 companies account for approx.80% of the market (as of March,2014)

Others22.3%

Company T
33.4%

Company N
5.3%
Company S
6.9%
Company O
12.4%

T.Hasegawa
19.7%*Based on a survey conducted by a private market research firm, this data was calculated by assuming the total of"non-consolidated sales" of the top 10 companies in domestic market*Fiscal year of Company T, O, S, and N: Apr. – Mar.
*Since fiscal year of T. Hasegawa is Oct. - Sep., numbers indicated in the above pie chart have been adjusted tocorrespond to the Apr. –Mar. fiscal year

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29

Ⅴ. Appendix

Sales Breakdown - Segments - (Consolidated)

・T. Hasegawa integrates business resources into flavors and fragrances
・Wide variety low-volume production ⇒ T. Hasegawa sells approx. 14,000 products per year
Yen million

Yen million

Company S(Consolidated）
FY ended in Mar. 2015
Sales
Share

T. Hasegawa
Company T(Consolidated）(Consolidated）
FY ended in Sep. 2014 FY ended in Mar. 2015
Sales
Share
Sales
Share
Flavors

38,85586.5%

78,355

Fragrances

6,062

13.5%

36,553

Aroma Chemicals

0

0.0%

15,367

Others00.0%

44,917100.0%

Total
Ratio of gross profits
to sales

36.4%

T. Hasegawa（Consolidated）

Compound flavors &Fragrances
27.8% Aroma Chemicals

59.5%

11.7% Overseas
1,376
1.0% Others
131,653
100.0% Subtotal
Ratio of gross profits
30.9%
to salesCompany T（Consolidated）

7,482

45.7%

4,541

27.7%

3,101

19.0%

1,246

7.6%

16,370100.0%

35.0%

Company S（Consolidated）

OthersFragrances

OthersAroma
Chemicals
Overseas

Fragrances

Flavors

T．HASEGAWA CO., LTD.

Compoundflavors &Fragrances

Flavors
Aroma
Chemicals

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30

T. Hasegawa’s Flavors sales by market (Non-Consolidated)

Ⅴ. Appendix

・Seasonal changes in sales exist since sales for beverage market account for thehighest proportion
Seasonings
marketApprox. 10%

Instant noodles
marketApprox. 7%

Confectionery
marketApprox. 14%

OthersApprox. 12%

BeveragemarketApprox. 32%

DairymarketApprox. 25%

Note: This data was calculated by assuming T. Hasegawa’s FY15 2Q sales with identifiable business segments as 100

T．HASEGAWA CO., LTD.

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31

Ⅴ. Appendix

What is HASEAROMA® ?

HASEAROMA® won the “2015 Japan Bioscience, Biotechnology and Agro chemistry Society Award for Achievement inTechnological Research“. This is the first time that the technical development for flavors won this award.
What is the “Japan Bioscience, Biotechnology and Agro chemistry Society Award
for Achievement in Technological Research“?
Awarded to members with technical achievements of practical use in the fields of Bioscience,
Biotechnology, and Agro chemistry by The Japan Bioscience, Biotechnology and Agro chemistrySociety.
It awards companies that record significant achievement in the field of Bioscience, Biotechnology,
and Agro chemistry.
Brochures of HASEAROMA®

What is HASEAROMA® ?
Processed foods are often demanded to equip the same deliciousness as natural foods and meals served at restaurants.
↓
In many cases, the taste of processed foods depend largely on Flavors. Therefore Flavors need to have elements that add
natural and delicious flavors.
↓
HASEAROMA® is a flavor series developed through the discovery of new compounds or functions, as a result of close
cooperation with core technology of R&D of flavors (analysis, synthesis and flavor creation)

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32

Ⅴ. Appendix

What is HASEAROMA® ?

An example of HASEAROMA® Flavor series
Fruit Flavor

Orange, Lemon, Grapefruit, Apple

Savory Flavor

Strawberry, Mango, Guava, etc.
Wagyu beef, Pork, Chicken soup
Dried bonito, Cod roes, Sauce,Corn, Egg

Beverage Flavor

Coffee, Black tea
Ume liqueur

Dairy & Other
Sweet Flavor

Melted butter, Milk, Ricotta cheese

Japanese Flavor

Yuzu, Mandarin orange (Unshu Mikan)

Parmigiano reggiano, etc.

Brown sugar, Wasabi,
Powdered green tea (Matcha/ Maccha)
Soybean flour (Kinako)

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33

Financial Information

T．HASEGAWA CO., LTD.

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34

Ⅴ. Appendix

Comparative Income statements (Consolidated)

・ Although net sales increased , all the profit accounts decreased due to the increase of cost of sales,
and increase of SGA expenses
Yen million
FY14 2Q
Actual

FY15 2Q
Actual

yr/yr
Value

Remark％Net sales

21,696 100.0% 21,879 100.0%

182

0.8%

Cost of sales

13,629

62.8% 13,875

63.4%

246

1.8% ・Sales cost ratio increased due to the sharp rise in prices of raw materials

Gross profit

8,067

37.2%

8,004

36.6%

-63

-0.8%

SGA expenses

5,855

27.0%

6,246

28.6%

391

6.7% SGA expenses increased in personnel expenses

Operating income

2,211

10.2%

1,757

8.0%

-454 -20.5%(FY14 2Q)
Foreign exchange gain of 51m was calculated as Non-operating income-12.8% (FY15 2Q)
Foreign exchange gain of 191m was calculated as Non-operating income

Ordinary income

2,440

11.2%

2,128

9.7%

-312

Income before
income taxes

2,414

11.1%

2,046

9.4%

-367 -15.2%

Net income

1,573

7.3%

1,177

5.4%

-395 -25.1% accordance with the resulting reduction in the effective corporation tax rate from

Increase in tax expenses due to a partial reversal of deferred income taxes innext fiscal year (-233m)

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35

Ⅴ. Appendix

Comparative Balance Sheets (Consolidated)
Yen million

September 30
2014

March 31
2015

Increase or
Decrease

Remark・Decrease in marketable securities: -4,500m Yen
・Decrease in account receivable-trade: -805m Yen
・Increase in cash and deposits: 2,452m Yen
・Increase in Inventries: 507m Yen
・Increase in goodwill: 1,673m Yen
・Increase in leasehold: 888m Yen
・Increase in property, plant and equipment : 1,670m Yen
・Increase in investment securities: 3,813m Yen

Current assets

47,90945,315-2,594

Fixed assets

44,03652,194

8,158

Total assets

91,946

97,509

5,563

Current liabilities

10,370

9,971

-399

・Decrease in account payable-trade: -358m Yen

Long-term liabilities

8,778

10,177

1,398

・Increase in deferred tax liabilities: 1,343m Yen
・Increase in retained earnings: 490m Yen
・Decrease in treasury stock: 59m Yen
・Increase in foreign currency translation adjustments: 1,133m Yen
・Increase in unrealized gains on available-for-sale securities: 2,876m Yen

Total net assets

72,79677,3604,564

Total liabilities andnet assets

91,946

97,509

5,563

T．HASEGAWA CO., LTD.

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36

Ⅴ. Appendix

Comparative Statement of Cash Flows (Consolidated)
Yen million
FY14 2Q

FY15 2Q

Increase or
Decrease

RemarkCash flows from operating
activities

2,695

3,515

820 ・Depreciation & Amortization: 1,431m Yen

Cash flows from investing
activities-1,027-5,249-4,221 ・Acquisition of tangible fixed assets: -2,072m Yen

Cash flows from financing
activities

-835

-639

195 ・Cash dividends paid: -623m Yen

Effect of currency change
on cash and cash
equivalents

92

244

151

―

Net Change in cash andcash equivalents

925-2,129-3,054―

Cash and Cashequivalents at beginningof period

18,59520,8982,303―

Cash and cash
equivalents at end of
period19,52018,769-750―

T．HASEGAWA CO., LTD.

・Income before taxes: 2,046m Yen

・Acquisition of stock in subsidiary: -2,913m Yen

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37

Ⅴ. Appendix

Capital Investment, Depreciation & Amortization, R&D Expenses
Yen million

FY15
Plan
CapitalInvestment
Depreciation&
Amortization
R&D
Expenses

FY15 2Q
ActualProgress(%)

Consolidated

3,732

1,943

52.1%

Non-consolidated

2,599

1,187

45.7%

Consolidated

3,118

1,431

45.9%

Non-consolidated

2,465

1,129

45.8%

Consolidated

4,257

2,054

48.2%

Non-consolidated

3,424

1,611

47.1%

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T. HASEGAWA CO., LTD (Non-consolidated) Income statements

Ⅴ. Appendix

Yen million

FY14 2Q
Actual
Value

Share

FY15 2Q
Plan
Value

Share

FY15 2Q
ActualValue

Achievement

Share

yr/yr

vs Plan

Value

％

Value

％

Net sales

17,343 100.0% 17,810 100.0% 16,724 100.0%

-618

-3.6%

-1,085-6.1%

Cost of sales

11,391

65.7% 11,750

Gross profit

5,951

34.3%

6,060

SGA expenses

4,647

26.8%

Operating income

1,304

Ordinary income

66.0% 11,052

66.1%

-339

-3.0%

-697

-5.9%

34.0%

5,671

33.9%

-279

-4.7%

-388

-6.4%

4,650

26.1%

4,690

28.0%

43

0.9%

40

0.9%

7.5%

1,410

7.9%

981

5.9%

-322 -24.8%-428 -30.4%

1,546

8.9%

1,560

8.8%

1,338

8.0%

-207 -13.4%-221 -14.2%

Income before
income taxes

1,531

8.8%

1,480

8.3%

1,258

7.5%

-272 -17.8%-221 -14.9%

Net income

963

5.6%

1,050

5.9%

658

3.9%

-305 -31.7%-391 -37.3%

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39

T. HASEGAWA Shanghai and Suzhou Comparative Income statements

Ⅴ. Appendix

Note: Consolidated profit and loss statements of T.H. Shanghai and T.H. Suzhou.
Yen million

Yen Basis
Net Sales
Cost of sales
Gross profit
SGA expenses
Operating income
Ordinary income

FY14 2Q
Value
Share
3,399
100.0%
1,724
50.7%
1,674
49.3%
759
22.3%
915
26.9%
946
27.8%

FY15 2Q
Value
Share
3,857
100.0%
2,164
56.1%
1,693
43.9%
987
25.6%
706
18.3%
20.1%
775

Yen16.71/RMB

Yen18.85/RMB

yr/yr
Value
458
439
19
228
-208
-170

％
13.5%
25.5%
1.2%
30.0%
-22.8%-18.0%

12.8% lawer
RMB thousand

Local Currency
Basis
Net Sales
Cost of sales
Gross profit
SGA expenses
Operating income
Ordinary income

FY14 2Q
Value
Share
203,417100.0%
103,21850.7%
100,198
49.3%
45,43722.3%
54,761
26.9%
56,64727.8%

FY15 2Q
Value
Share
204,658
100.0%
114,804
56.1%
89,85343.9%
52,37725.6%
37,47618.3%
41,164
20.1%

yr/yr
Value
1,240
11,585-10,345
6,939-17,284-15,482

％
0.6%
11.2%
-10.3%
15.3%-31.6%-27.3%

・Sales grew slightly on local currency basis,
however sales grew by double digits on a Japanese Yen basis
・Operating income decreased due to increase in both cost of sales andSG&A expenses, resulting from changes in product mix
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Ⅴ. Appendix

T. HASEGAWA U.S.A., INC. Comparative Income statements
Yen million

Yen Basis
Net Sales
Cost of sales
Gross profit
SGA expenses
Operating income
Ordinary income

FY14 2Q
Value
Share
1,173
100.0%
713
60.8%
460
39.2%
479
40.9%
-19
-14
-

FY15 2Q
Value
Share
1,339
100.0%
814
60.8%
525
39.2%
558
41.7%
-33
-39
-

Yen101.62/USD

Yen116.82/USD

yr/yr
Value
165
100
64
78
-13
-24

％
14.1%
14.1%
14.1%
16.4%
-

15.0% lawer
USD thousand

Local Currency
Basis
Net Sales
Cost of sales
Gross profit
SGA expenses
Operating income
Ordinary income

FY14 2Q
Value
Share
11,548100.0%
7,019
60.8%
4,529
39.2%
4,719
40.9%
-190
-142
-

FY15 2Q
Value
Share
11,464100.0%
6,968
60.8%
4,496
39.2%
4,779
41.7%
-283
-335
-

yr/yr
Value
-83
-50
-32
59
-92
-193

％
-0.7%
-0.7%
-0.7%
1.3%
-

・Dollar-based sales decreased due to fractures in ordering schedule.
However, owing to the depreciation of Japanese Yen, sales increased.
・Operating income decreased due to Increase in SG&A expenses

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41

Three-year Plan (Consolidated Income statements )Ⅴ. Appendix

Non-consolidated: It is expected that the declined sales of “Extract products for tea beverages“ is bottoming out
and contributions from new products are expected
China segment: Although economic growth is slowing down, steady sales growth is expected due to further expansion of
the Beverage market
U.S. segment: Steady growth of Savory products and contribution of sales of the beverage segment
Southeast Asian segment: Strong growth is expected in beverage and snack market, which have robust demand for flavor
aim at further sales growth by recent acquisition of local production base
Yen million
Fy2014(Actual)Fy2015(Plan)

Fy2016(Plan)

Fy2017(Plan)Net sales

44,91747,35049,10050,700

Cost of sales

28,55829,77030,75031,310Operating income

4,381

5,030

5,310

5,970

Ordinary income

4,939

5,250

5,520

6,190

Net income

3,239

3,510

3,670

4,120

¥102.33 per U.S.$¥16.67 per RMB¥100.00 per U.S.$¥16.2 per RMB¥100.00 per U.S.$¥16.2 per RMB¥100.00 per U.S.$¥16.2 per RMB

Exchange rates
Sales growth ratio

-0.4%

5.4%

3.7%

3.3%

Sales cost ratio

63.6%

62.9%

62.6%

61.8%

Operating income ratio

9.8%

10.6%

10.8%

11.8%

Ordinary income ratio

11.0%

11.1%

11.2%

12.2%

Net income ratio

7.2%

7.4%

7.5%

8.1%

Overseas net sales ratio

27.8%

29.6%

31.7%

33.5%

※ The ratio of overseas sales during the current interim period was 32.0%
The ratio was above FY2016 estimates 31.7% due to an expansion of overseas sales※Three-Year-Plan of T. Hasegawa group is revised every year
※Please refer to page 43 for details

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42

Ⅴ. Appendix

Three-year Plan (Consolidated Income statements )Yen million

Fy2014(Actual)
Value

Share

Fy2015(Plan)
yr/yr

Value

Share

Fy2016(Plan)
yr/yr

Value

Share

Fy2017(Plan)
yr/yr

Value

Share

yr/yr

Net sales

44,917 100.0%-0.4% 47,350 100.0%

5.4% 49,100 100.0%

3.7% 50,700 100.0%

3.3%

Cost of sales

28,55863.6%

0.8% 29,770

62.9%

4.2% 30,750

62.6%

3.3% 31,310

61.8%

1.8%

Gross profit

16,35936.4%-2.4% 17,580

37.1%

7.5% 18,350

37.4%

4.4% 19,390

38.2%

5.7%

SGA expenses

11,97726.7%

5.8% 12,550

26.5%

4.8% 13,040

26.6%

3.9% 13,420

26.5%

2.9%

Operating income

4,381

9.8% -19.4%

5,030

10.6%

14.8%

5,310

10.8%

5.6%

5,970

11.8%

12.4%

Ordinary income

4,939

11.0% -22.4%

5,250

11.1%

6.3%

5,520

11.2%

5.1%

6,190

12.2%

12.1%

Income before
income taxes

4,832

10.8% -15.3%

5,100

10.8%

5.5%

5,370

10.9%

5.3%

6,040

11.9%

12.5%

Net income

3,239

7.2%

3,510

7.4%

8.4%

3,670

7.5%

4.6%

4,120

8.1%

12.3%

T．HASEGAWA CO., LTD.

-8.0%

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43

Ⅴ. Appendix

Capital Investment, Depreciation & Amortization, R&D Expenses

・Capital investment increased due to the temporary relocation and rebuilding of Headquarters,
and the completion is scheduled in March 2016 （FY2014 ¥1.3bn, FY2015 ¥0.6bn )・The second expansion phase of Suzhou plant is progressing as planned
Operation of the new plant is scheduled to start from June 2015 （ FY2014 ¥1.0bn, FY2015 ¥0.7bn )・Construction of new R&D facility at T.H.Shanghai is planned to start operation in the first half of FY 2017.
（ FY2016 ¥1.0bn, FY2017 ¥0.5bn )・R&D expenses is planned to be kept at around 9% of consolidated sales

Yen million

CapitalInvestment
Depreciation&
Amortization
R&D
Expenses

Fy2014(Actual)Fy2015(Plan)

Fy2016(Plan)

Fy2017(Plan)

Consolidated

5,330

3,732

3,346

1,834

Non-consolidated

3,502

2,599

1,909

1,100

Consolidated

2,910

3,118

3,202

3,049

Non-consolidated

2,419

2,465

2,368

2,089

Consolidated

4,010

4,257

4,331

4,588

Non-consolidated

3,269

3,424

3,375

3,347

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Caution with Respect to Forward-Looking Statements:
This material contains forward-looking statements about the future performance ofT. Hasegawa, which are based on management’s assumptions and beliefs in thelight of information currently available to it.
Therefore, please understand that a number of important risks and uncertainties
could cause actual results to differ materially from those discussed in the forwardlooking statements, and that you should not place undue reliance on them.
Please also note that we will assume no responsibility for any omission or error in
the statements and data in this material.

T．HASEGAWA CO., LTD.

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45