Financial Results for the Year
Ended September 30, 2020
T．HASEGAWA CO., LTD.
November 25, 2020

AgendaⅠ. Overview of Consolidated Financial Statement
Ⅱ. Impact of COVID-19
Ⅲ. Management Policy
Ⅳ. Global Strategies
Ⅴ. Three-Year-Plan
Ⅵ. Capital Policy
Ⅶ．Appendix

1

Ⅰ. Overview of Consolidated
Financial Statement

2Market Environment
Domestic Market
・2020 Market Trends by Product Category
Category

Trend

Beverages

2020
Jan toSept.

Decreased

・Low consumer spending affected by declaration of state of emergency andavoidance of outing from April to May 2020 associated with expansion of
COVID-19 infection
・Beverages for restaurants were sluggish associated with avoidance of eating-out,and vending machine beverages were also sluggish associated with avoidanceof eating-out
・Similarly as in the previous year, rainy season lasted long and demands did notcome back at summertime, the period of the highest demands

Snacks2020
Jan toSept.

Increased・Among potato snacks, potato chips were strong
・Corn snacks had hard time, and flour-based snacks were flat

Decreased

・Chocolate with high cacao contents had hard time due to rebound decrease
from large increase in the previous year, chocolate bar sales recovered
・Chocolate confections, mainly multi pack products, were strong
・Although the entire market performed steadily from Jan. to June 2020,
experienced significant decrease affected by extreme heat from Aug. to Sept.
2020

Increased

・Rebound increase from decrease associated with price raise in March 2019
・From heightened trend of eating at home, demand for packages of treat size
products increased, professional-use products for restaurants decreased

Increased

・Package-type instant noodles performed well from heightened trend of eating athome・Demand increase for stockpiling in April 2020 contributed to performance ofbowl-type instant noodles

Chocolate2020
Jan toSept.

Frozen Dessert

2020
Jan toSept.

Instant Noodles

2020
Jan toSept.

Data Source: The Beverage & Food Daily News

3

Performance Overview
・Compared to Previous Year
Income decreased mainly due to sales decrease at Parent company(Flavors, Fragrances)
Operating income increased mainly from improvement of Cost of Sales ratio, SG&A expense decrease
Net income increased mainly because impairment loss reported at the previous Fiscal Year for goodwill
related to the U.S. subsidiary was eliminated・Compared to Plan
Unable to achieve projected sales mainly because performance of Parent company was below projection
due to COVID-19 infection
Achieved projected operating income mainly because Cost of Sales and SG&A expenses were less thanprojection(Million Yen)
FY19
Actual

FY20
Plan(Revised in
May 8,2020)

Achievement
FY20
Actual

yr/yr
Value

vs. Plan
％

Value

％

Net sales

50,49350,50050,192

-301

-0.6%

-307

-0.6%

Cost of sales

31,37331,30030,783

-589

-1.9%

-516

-1.6%

Gross profit

19,12019,20019,408

288

1.5%

208

1.1%

SG&A expenses

14,441

14,32014,052

-388

-2.7%

-267

-1.9%

Operating income

4,678

4,880

5,356

677

14.5%

476

9.8%

Ordinary income

5,175

5,320

5,861

685

13.2%

541

10.2%

Income before
income taxes

5,464

6,460

7,028

1,564

28.6%

568

8.8%

Net income

4,121

4,640

5,090

969

23.5%

450

9.7%

EBITDA （※）

8,053

8,116

8,360

307

3.8%

244

2.9%

※ EBITDA = Operating income + Depreciation and Amortization + Amortization of goodwill

4Net Sales by Product Segments
・Contributing Factor for Decrease
Decrease at Parent company (Flavors , Fragrances)(Million Yen)

Category

FY2019ActualFY2020
Actualyr/yrRemarkValue%

Flavors

43,01843,159141

0.3%

Sales increase at U.S. subsidiary and Chinese subsidiary
covered sales decrease at parent company

Fragrances

7,474

7,032

-442

-5.9%

Sales decreased at parent company, Chinese subsidiaryand Indonesian subsidiaryTotal

50,49350,192

-301

-0.6%

－

(Million Yen)yr/yr (%)

FY20 Actual+0.3％
Flavors
Domestics

Fragrances-5.9％

Overseas

-0.6％

Total
0

20,00040,00060,000*FY20 Overseas sales ratio 35.4%

5

Net sales by Group Company
・Contributing Factor for Decline
Decrease at Parent company

Currency

FY2019FY2020

Yr/Yr

1US$

¥110.09¥107.88

2.0% higher

1RMB¥16.00¥15.393.8% higher

1MYR¥26.58¥25.61

3.6% higher（Million Yen）

FY19
Actual

FY20
ActualParentcompany

37,64636,821

-825

-2.2%

U.S.

5,719

6,146

427

7.5%

China

6,693

6,870

177

2.6%

Malaysia

898

902

4

0.5%

Adjustment

-463

-547

-84

-

Consolidated

50,49350,192

-301

-0.6%

yr/yr

(Million Yen)

%

-825

+177

+4

-84

+427

50,49350,1920・Sales of flavors for beverages decreased
・Sales of products for toiletry products at flagrance division decreased

Decreased

U.S.

Newly introduced products for restaurants contributed, sales of
products for instant noodles increased

Increased

China

Sales of flavors for beverages and products for instant noodles
increased

Increased

Malaysia

Sales of seasoning powder, products for beverages increased

Increased

Parent company

6

Operating Income by Group Company
・Contributing Factor for Operating income Increase
Increase at subsidiary in the U.S. and China

Currency

FY2019FY2020

Yr/Yr

1US$

¥110.09¥107.88

2.0% higher

1RMB¥16.00¥15.393.8% higher

1MYR¥26.58¥25.61

3.6% higher（Million Yen）

FY19
Actual

FY20
Actual

yr/yr

%

+42

Parentcompany

3,835

3,704

-131

-3.4%

U.S.

149

549

399

266.8%

China

590

1,084

494

83.7%

Malaysia

49

92

42

85.2%

Adjustment

53

-74

-127

-

Consolidated

4,678

5,356

677

14.5%

Parent company(Million Yen)

-127

+494
-131

+399
5,356

4,678

0

Sales decreased

Decreased

U.S.

Cost of Sales ratio improved
SG&A expense decreased associated with reduction in goodwill
amortization costs

Increased

China

Cost of Sales ratio improved, SG&A expense decreased

Increased

Malaysia

Cost of Sales ratio improved

Increased

7

Ⅱ. Impact of COVID-19

8

Impact of COVID-19
・Impact of COVID-19 has been recognized in all regions T. Hasegawa Group companies operate・Impact on annual sales for Fiscal Year ended September 2020 was approx. 980mil yen decrease
RegionFY ending Sept. 2020
Impact on Sales (Actual)

Impact on Business1st Half

2nd Half

AnnualJapan・Low consumer spending in beverages associated with business closure
request to restaurants and avoidance of outing, as well as penetration ofwork at home (stagnation of beverages and foods for professional use forrestaurants associated with voluntary restraint of eating-out as well as
beverages for vending machines also associated with voluntary restraint of
eating-out)
・Demand increase in products related to hand-wash and sterilization, andInstant noodles
・There were impact of postponement/cancellation of clients’ new productlaunchNone

Approx.
870mil yen
Decrease

Approx.
870mil yen
Decrease

U.S.

・Exempted from curfews as Essential Business・No big impact on manufacturing capability, procurement and logistics
・Impact level differs by client and industry, need to watch closely

None

None

None

China

・Chinese economy recovered from temporary stagnation
・Our Chinese subsidiary also experienced sales decrease temporarily, butthere after recovered・Manufacturing and logistics capability are normal, no problem in procurement
・Demand increase for products for instant noodles

Approx.
170mil yen
Decrease

Approx.
290mil yen
Increase

Approx.
120mil yen
Increase

Southeast
Asia

・Although Malaysian subsidiary obtained authorization to operate as
indispensable business, limitation of number of employees to come toworkplace to 50% continued for 1.5 months
・For Malaysia, domestic demands were low, there was impact on export due tolockdown at neighboring countries
・For Thailand and Indonesia, clients postponed new products launch due toeconomic recession, and voluntary restrictions of promotional activities had
an impact on existing products

Approx.
20mil yen
Decrease

Approx.
210mil yen
Decrease

Approx.
230mil yen
Decrease

Approx.
190mil yen
Decrease

Approx.
790mil yen
Decrease

Approx.
980mil yen
Decrease

Total

9Ⅲ. Management Policy

10Management Policy
Become an
Organization that
Takes on Challenges

Strengthen Proposal
Capabilities
Promote Reform

Focus Areas

Concentration and Selection
Enhance Human Resources(Develop Human Resources, Hire Experienced Personnel)

Accelerate Expansion in Overseas Market

Basic Strategy
ExpandCompounded
Flavors andFragrances
Sales

Secure Profits
in Domestic
MarketGrowth inOverseas
Market11

Ⅳ. Global Strategies

12Domestic Strategy
Basic Strategy：Expand market share by anticipating new market demands stemming from aging
society and heightening of health consciousness
Fragrances
14％

Ongoing Project and Progress
Organizational
ChangePromote SolutionOriented Sales
Activity

・Reinforced cooperation among Sales, R&D, Marketing Divisions⇒Established Business Solution Division
・Sales activity quality and efficiency enhancement⇒ Introduced Free Address system, that is to work at free desk without assigning
fixed desk to individual personnel
Built remote access environment allowing connection to corporate PC & networkfrom remote place, promoted paperless operations⇒Draw-up measures for sales expansion at the Project Team, progress management
・ Marketing Division takes initiative in marketing strategy development andsolution-oriented sales project increased
・Grasp customers’ “Wants” through utilization of market survey results, analysis

Flavors 86％

Sales composition

・ Develop substitute flavors for food materials

Expand Range of
New Applications⇒ Focus on milk products, vegetables, fruit juice, meat substitutes (such as soy meat etc.)
・ Focus on new areas, such as healthy foods, medical foods, and demands for masking living odor,etc.
⇒ Propose new materials, materials that brings good taste to health-oriented foods

FY2020 Sales Performance
Net Sales：36,821 mil. yen（Decreased 2.2% YoY）
Operating Income：3,704 mil. yen(Decreased 3.4% YoY)13

Established Business Solution Division
Purpose・Promote reform based on below policies:① Build organization willing changes, ② Speed-up operations, ③ Information sharing acrossdivisions・Integrate Sales, R&D and Marketing through organizational reform

Organizational Structure
・Reinforce cooperation among Sales, R&D and Marketing Divisions⇒Align directions throughout the organization to proceed towards the same goal・Business Solution Division to develop and promote business strategies, and to clarify main
focus at R&D Division
・Promptly respond to diversified and sophisticated client requests

Business Solution
Division

Sales Division

Sales Planning Division

Business Solution Planning
Department

Marketing Division

R&D Division
14

Overseas Strategy － U.S. －Basic Strategy：Expand sales of savory flavors, flavors for health & wellness products and flavors for beverages
Ongoing Project and Progress
Set up New
Production System

・Promote U.S. 2nd Factory construction plan to set up a new production
system⇒Purchased land and building in California

・Reinforce marketing structure, thorough pipeline management

Reinforce Sales
Activities

Utilize/Deploy
Japanese
Technology⇒ Draw-up long-term growth strategy by area and strategy by client throughmarket trend analysis⇒ Aim at sales expansion at 3 areas: namely, savory flavor, health careproducts and Flavors for beverages

Flavors 100％

Sales composition

・Bridge to Tokyo Project:
Send project team to Japan to utilize and deploy Japanese technology in U.S.
・Completed localization of some technologies in U.S., started sample
proposals to clients

FY2020 Sales Performance
Net Sales：56.9 mil. USD(Increased 9.7% YoY)
(6,146 mil. yen)
Operating income：5.0 mil. USD(Increased 274.4% YoY)(549 mil. yen)
※Savory flavors : salty flavor for snacks, dressing forsalad, and seasoning etc.

15

Overseas Strategy －China－
Basic Strategy： Expand performance through various measures under reinforced organizational baseFragrances
Ongoing Project and Progress
29％

Reinforce Sales
Structure

Enhance Profitability
Reinforce R&D
Structure・Utilize Marketing Function⇒Deploy strategic approach to clients, develop new market and potential
demands
Focus on local large enterprises and South China area
・Deepen Sales/R&D/Marketing Co-work
・Thoroughly enforce pipeline, sales activity management⇒Start consideration of IT tool introduction

Flavors 71％
Sales composition

・ Promoting Manufacturing Cost Compression Project⇒Had accomplishment in manufacturing cost reduction andestablishment of employee’s cost consciousness, etc.

・New laboratory building construction project is underway⇒ Aiming at reinforcement of R&D function, streamlining operations

FY2020 Sales Performance
Net Sales：446.4mil. RMB(Increased 6.7% YoY)
(6,870 mil. yen)
Operating Income：70.4 mil. RMB(Increased 91.0% YoY)
(1,084 mil. yen)

From Fiscal Year 2019, the Company started to apply IFRS 15 “Revenue from Contracts with Customers” for overseas consolidated subsidiaries excluding subsidiaryin the U.S. For ease of comparison, the same standards applied to the calculation f the sales in the same period of the Fy2018 .

16

Overseas Strategy －Southeast Asia－
Basic Strategy：Expand sales through cooperation of sales base in Thailand, Indonesia and production basein Malaysia
Fragrances
12％

Ongoing Project and Progress

Reinforce Sales
Structure

Speed-Up Client
Care

Develop
Strategy in Southeast
Asia by using THKL
as Hub・ Hire sales personnel/reinforce organization for new clients development
・Assign General Manager covering entire Southeast Asia region⇒ Coordinate organic cooperation among offices in Southeast Asia region
・Thoroughly enforce pipeline, sales activity management⇒ Start consideration of IT tool introduction

Flavors 88％

Sales composition

・Promote utilization of Application Laboratories
・While office and application laboratory were apart in Indonesia, relocated office andintegrated office and Application Laboratory⇒ Enable faster sales activities
・Utilize THKL (Halal-certified) as a hub in Southeast Asia
・Support research and production by dispatching specialists from Japan to train local staffs
・Promote efficient R&D activities⇒Increased specialists seconded from Japan, clarified division of roles between R&D andmanagement/strategy planning・New manufacturing facility construction plan in Malaysia: watch status of progress in light of political andeconomic trend

FY2020 Sales Performance
Net Sales： 2,366 mil. yen(Decreased 7.9% YoY)

Operating Income：188 mil. yen(Decreased 37.8% YoY)17

Ⅴ. Three-Year-Plan

18

Preconditions for Drawing up Mid-term 3-year Plan

・ COVID-19 Impact
Anticipate that it will continue up to 2nd Quarter of Fiscal Year ending Sept. 2021, but will
have no impact from 3rd Quarter⇒ Estimated impact on sales for full Fiscal Year ending Sept. 2021 is approx. 1.02bil yen
decrease

RegionImpact on Business (Projected)

FY Ending Sept. 2021
Impact on Sales (Estimate)
1st Half

2nd Half

AnnualNone

Approx.
330mil yen
DecreaseJapan・Low consumer spending in beverages, etc. associatedwith avoidance of outing and work at home will continue(products for vending machines, professional use
products used at restaurants, etc.)
・Demand increase for products related to hand-wash andsterilization and products for instant noodles willcontinue

Approx.
330mil yen
Decrease

U.S.

・Sales decrease of products for restaurant businessassociated with avoidance of outing is projected

Approx.
550mil yen
Decrease

None

Approx.
550mil yen
Decrease

China・Chinese economy had recovered from temporary
stagnation.

None

None

None

Southeast
Asia

・Weak domestic demands will continue in Malaysia
・Impact of recession will continue in Thailand andIndonesia

Approx.
140mil yen
Decrease

None

Approx.
140mil yen
Decrease

None

Approx.
1.02bil yen
Decrease

Total

Approx.
1.02bil yen
Decrease

19

Three-Year Plan (consolidated)
Parent company

Anticipate sales recovery by promotion of solution-oriented sales activities through reinforcement of cooperation
among Sales, R&D and Marketing divisions, focus on expansion of fragrance use, and promotion of various
measures aiming at sales expansion

U.S.

Anticipate sales expansion in savory flavor, health products and beverage flavor through reinforcement ofmarketing structure and thorough enforcement of pipeline management

China

Reinforce sales structure through utilization of marketing function and deepening co-work among Sales, R&D andMarketing, and anticipate sales increase through development of new area and potential demands

Malaysia

Anticipate sales increase through reinforcement of cooperation among locations in Southeast Asia region, andmeasures, such as reinforcement of sales structure, for development of new clients
FY2020(Actual)FY2021(Plan)FY2022(Plan)(Million Yen)FY2023(Plan)Net sales

50,192

52,10054,00056,200

Cost of sales

30,78331,98033,09034,310Operating income

5,356

5,160

5,580

6,120

Ordinary income

5,861

5,570

6,000

6,510

Net income

5,090

4,730

4,840

5,050

¥107.88 per US$¥15.39 per RMB¥105.00 per US$¥15.00 per RMB¥105.00 per US$¥15.00 per RMB¥105.00 per US$¥15.00 per RMB

Exchange rates

Sales growth ratio

-0.6%

3.8%

3.6%

4.1%

Sales cost ratio

61.3%

61.4%

61.3%

61.0%

Operating income ratio

10.7%

9.9%

10.3%

10.9%

Ordinary income ratio

11.7%

10.7%

11.1%

11.6%

Net income ratio

10.1%

9.1%

9.0%

9.0%

Overseas sales ratio

35.4%

34.7%

35.1%

35.7%

* Three-Year-Plan of T. Hasegawa group is revised every year
* Savory flavors : salty flavor for snacks, dressing for salad, and seasoning, etc.
* Detailed information is described on page 47.

20

Capital Investment, Depreciation & Amortization, R&D Expenses
・U.S. 2nd Factory Construction Plan: Approx. 2.8bil yen(Actual – FY ended Sept. 2020: Approx. 1.1bil yen)
(Projection – FY ending Sept. 2021: Approx. 1.4bil yen, FY ending Sept. 2022: Approx. 0.1bil yen,
FY ending Sept. 2023: Approx. 0.2bil yen)・China New Laboratory Building Construction Plan: Approx. 1.6bil yen(Projection – FY ending Sept. 2022: Approx. 1.6bil yen)

・Malaysia New Manufacturing Facility Construction Plan: Approx. 2bil yen(Projection – FY ending Sept. 2022: Approx. 1bil yen, FY ending Sept. 2023: Approx. 1bil yen)・Maintain R&D expenses at level of 9% of consolidated sales
Million Yen

FY2020(Actual)CapitalInvestment
Depreciation&
Amortization
R&D
Expenses

FY2021(Plan)FY2022(Plan)FY2023(Plan)

Consolidated

3,481

3,605

5,285

3,540

Non-consolidated

1,507

1,393

1,800

1,800

Consolidated

2,869

3,158

3,317

3,338

Non-consolidated

1,959

2,084

2,134

2,030

Consolidated

4,523

4,682

4,836

5,029

Non-consolidated

3,550

3,631

3,701

3,762
21

Ⅵ. Capital Policy

22Capital Policy
Basic Policy
・For sustained growth of corporate value for future and its maximization, maintain equity capital
at a level sufficient for investments for growth and proper countermeasures against risks
Fund Utilization Policy

・Properly utilize funds by considering maintenance of sound financial strength andenhancement of capital efficiency, etc.
－Shareholder Returns
Aiming at approx. 35% of consolidated dividend ratio, paid dividends twice a year:
interim dividends and year-end dividends－Capital Investment
Investment for production increase for growth, update/maintenance of existing facilities－M&A
Comprehensively make judgment from viewpoints of market size, business risk, M&A cost, etc.
Realize M&A by which synergy effect on customer base, technology, personnel, etc. can be
expected
Shares Held for Facilitation ofBusiness Relationships
・Reduce total number of shares held for this purpose from viewpoint of enhancement of capitalefficiency, etc. (had already sold some, will continue consideration of sale)・At every annual board meeting, whether or not it is appropriate to hold those shares is validated
from mid to long-term viewpoint based on purpose of holding those shares and economic
reasonableness, etc.
23Capital Policy
Shareholder
Redemption
・While securing required reserves for further reinforcement of group management base and future business development,seek to provide profit returns to shareholders according to business performance
・Aiming at approx. 35% of consolidated dividend ratio, paid dividends twice a year: interim dividends
and year-end dividends
・Shareholder special benefit program was introduced in Fiscal Year ended Sept. 2015 for medium to long term holding of
the shares of our company
・For FY 2020, increased year-end dividends per share by 5 yen from annual dividends in FY ended
Sept. 2019 of 35 yen by comprehensively considering consolidated performance, etc. (annual dividends: 40 yen)24

Capital Policy
Sale of Shares Held for Facilitation of Business Relationships (Completed)
・March 27, 2020, “Notification of Expected Reporting of Extraordinary Profit Associated with Sale of Investment
Securities” announced
・April 2020, completed the sale of the said investment securities【Reason】

Revision of policy of holding shares for facilitation of business relationships【Shares Sold】1 Issue of Listed Securities the Company Owned【Gain on Sales】867mil yen* Reported as extraordinary profit at 3rd quarter of consolidated Fiscal Year ended Sept.2020

Sale of Shares Held for Facilitation of Business Relationships (Plan)
・Sept. 18, 2020, “Notification of Expected Reporting of Extraordinary Profit Associated with Sale of Investment
Securities” announced【Reason】

Revision of policy of holding shares for facilitation of business relationships【Shares Sold】1 Issue of Listed Securities the Company Owned【Scheduled Selling Period】 From Oct. 1, 2020 to Dec. 30, 2020
【Gain on Sales】 1,200mil yen (projection)

Result of Acquisition of Treasury Stocks
・March 27, 2020, “Notification concerning Decision Made on Matters concerning Acquisition of Treasury Stocks”
announced【Purpose】
Implementation of proactive capital policy to address changes in management environment, enhancement of capitalefficiency and enhancement of shareholder benefits【Acquisition Result】0 shareWas unable to purchase treasury stocks during the acquisition period decided through the board resolution because
there was a gap between the market price after the board resolution on March 27, 2020 and buying conditions (market
price) at the acquisition period set at the time of the resolution.

25

Ⅶ. Appendix

26

Outline of
Flavors and Fragrance
Business27

Flavors and Fragrance Business
Products

Ingredients(Compound Flavors and Fragrances)

1. Natural Aromatics

3. Flavors

調合Compounding

2. SynthesizedAroma Chemicals

Recipes

4. Fragrances

Integration of research anddevelopment capabilities

Flavorists : Experts who formulate flavors
Perfumers : Experts who formulate fragrances
Flavors and fragrances are tailor-made in accordance with customer requests⇒ Formulas created by flavorists and perfumers based on experience are invaluableassets for flavor and fragrance companies.
28

Market Size of Flavor andFragrance Industry

29Market Environment
Overseas Market
Transition of world market size for Fragrances and Flavors grew 6% YOY basis.
(Million US$)
CAGR
8.1%

4.5%

2.9%

3.1%

*Figures are estimated by T. Hasegawa

30

Global Market Size of Flavors and Fragrance Industry
Estimated sales volume in global market： 3,000 billion yen ( 27.9 billion USD)

Europe, Africa and Middle East
- Market Size : Approx. 1,100 bil.yen- As many of manufacturing companies using flavor andfragrance products adopt ‘preferred supplier system’,major European and American companies have built thesolid business bases*Figures are estimated by T.Hasegawa*Exchange Rate : 1USD＝109.4JPY
Reference : Report from Leffingwell& Associates● : Office, R&D center and production
base T.Hasegawa owns

North Amrica‐ Market Size : Approx. 770 bil. yen‐ As many of manufacturing companies using flavor and fragrance products
adopt ‘preferred supplier system’, major European and American companies
have built the solid business bases- T.Hasegawa’s subsidiary established in California in 1978
- Acquired FLAVOR INGREDIENT HOLDINGS, LLC（Affinity Flavors） in 2017

Asia
‐Market Size : Approx. 890 bil yen(*)‐Market is growing reflected to economic
growth in developing countries. Main growing
country is China.
- Major flavor and fragrance companies havedeveloped business in China.
‐ T.Hasegawa established subsidiaries inShanghai(2000), Suzhou(2006),
Bangkok(2003) and Indonesia(2014).
‐T.Hasegawa acquired Peresscol
Sdn.Bhd. in Kuala Lumpur, Malaysia in2014 due to establishment of production base in
Asia area.

South America‐ Market size : Approx. 240 bil.yen *‐ Most of flavors and fragrances
are imported from North America
and Mexico- Competition in Brazil is becoming
severe due to economic growth.

31

Sales Ranking of Flavors and Fragrance companies in worldwide

Company nameCountry

Million USD
Sales(2017Yr) Market Share1

Givaudan

Switzerland

6,156

24.1%

2

IFF

USA

5,140

20.1%

3

Firmenich

Switzerland

3,872

15.1%

4

SymriseGermany

3,054

11.9%

5

ADM/Wild Flavors

Germany

2,745

10.7%

6

Mane SAFrance

1,553

6.1%

7

Takasago

Japan

1,393

5.4%

8

Sensient Flavors

USA

700

2.7%

9

Robertet SA

France

524

2.1%

10

T.Hasegawa

Japan

467

1.8%

Subtotal－

25,604100.0%*Prepared by T. Hasegawa based on materials disclosed by each company

32Market Size in Domestic
Flavor market accounts for 80% of Flavors and fragrance total market share in domestic.
(Flavors market covers 50% of flavor and fragrance market in world wide)
Transition of sales in domestic market

2015

2016

2017

(Billion yen)

2018

2019

Total

201.4

212.5

216.2

223.8

227.5

Yr/Yr

0.9%

5.5%

1.7%

3.5%

1.7%
Source of reference : Japan Flavor&Fragrance
Materials Association Newsletter

33

Outline of Current Status ofparent company

34

Market share of the top 10 companies in domestic flavor and fragrance market

Others14.3％

Company T
31.8％

Company N
5.1％
Company S
6.5％
Company G
11.5％
Company O
12.2％

T. Hasegawa
18.6％(As of Mar. 2020)*Data is based on non-consolidated sales breakdown of top 10 companies in domestic market,
calculated by private market research firm. Sales amount of 100% in above graph is the total sales of top 10 companies
in domestic flavor and fragrance company.
*Fiscal year period of Company T, S, and N is from April to March, and fiscal year period of Company O and G isfrom Jan. to Dec.
*T. Hasegawa’s figures indicated above have been calculated for the period from Apr. 2019 to Mar. 2020.

35

Sales Composition Comparison< Policy in T. Hasegawa>• Focus on sales of compound flavors and fragrances with high added value.
• Sells a kind of approximately 12,000 products of fragrance and flavor per year.
T. Hasegawa(Consolidated）
FY ended in Sep. 2020
Sales

Share

(Million Yen)
Company T(Consolidated）
FY ended in Mar. 2020
Sales

Share

Flavors

43,15986.0%

91,85060.3%

Fragrances

7,032

14.0%

40,74026.7%

Aroma Chemicals

0

0.0%

18,419

12.1%

Others

0

0.0%

1,444

0.9%

Total
50,192100.0%
152,455
100.0%
Ratio of gross profits
38.7%
28.0%
to salesRatio of operating
1.7%
10.7%
income to sales* Sales amount indicated as synthetic and Aroma chemicals in Company T is composed of Aroma ingredients division and fine chemical division.

36

Flavor Sales Share by market
Sales share for beverages is high and the sales for beverages has fluctuation in line withseasons.

OthersApprox. 10%
Seasoning
Approx. 10%

Beverages
Approx. 33%

Instant noodle
Approx. 9%

Confectionary
Approx. 13%

Dairy
Approx. 25%*The share indicated above is calculate as 100% for total non-consolidated sales of FY2020
regarding the companies which are possible to separate sales by industry.

37

Additional
Financial Information

38

Consolidated Income Statement Highlights
Operating income increased due to decrease of cost of sales ratio and SG&A expenses(Million Yen)yr/yr

FY2019ActualFY2020
ActualNet sales

50,493 100.0%

50,192 100.0%-301-0.6% ・Sales increased at U.S. subsidiary and Chinese subsidiary

Cost of sales

31,37362.1%

30,783

61.3%

-589

-1.9% change of sales structure

Gross profit

19,12037.9%

19,408

38.7%

288

1.5%

Remarks
Value％
・Sales decreased at parent company

・Cost of Sales ratio improved from sales increase at overseas subsidiaries and14,441

28.6%

14,052

28.0%

-388

・Travel expenses/entertainment expenses decreased from impact of restrictions onsocializing associated with expansion of COVID-19 infection-2.7% ・As impairment loss from goodwill in U.S. was reported in previous Fiscal Year, noreporting of goodwill amortization expense for U.S. subsidiary.

Operating income

4,678

9.3%

5,356

10.7%

677

14.5%

Ordinary income

5,175

10.3%

5,861

11.7%

685

13.2%

SG&A expenses

Profit before
income taxes

5,464

10.8%

7,028

14.0%

1,564

Net income

4,121

8.2%

5,090

10.1%

969

(Extraordinary income)parent company Gain on sales of fixed assets 320 million yen was caliculated
28.6%
Gain on sales of investment securities 867 million yen was caliculated
Chinese subsidiary Gain on sales of land 40 million yen was caliculated

23.5%

39

Consolidated Balance Sheet Highlights(Million Yen)
September 30
2019

September 30
2020

Increase or
Decrease

Remarks

Current assets

56,62059,013

2,393

・Increase in Cash and Cash equivalents: 854 million Yen
・Increase in Securities: 4,000 million Yen
・Declease in Account Receivable: -320 million Yen
・Declease in inventories: -429 million Yen
・Decrease in Receivables from the sale of investment securities in the previous year: -1,686 million Yen

Fixed assets

57,24354,431-2,812・Increase in Construction in progress: 1,205mil Yen
・Decreased due to sale/depreciation of fixed assets: -1,044mil Yen
・Decreased due to sale/market price decline of investment securities: -2,842milion Yen

Total assets

113,863

113,445-418

Current liabilities

11,70910,261-1,448Long-term liabilities

11,80910,965-844

Total liabilities

23,51921,226-2,292

Total net assets

90,344

92,218

1,874

113,863

113,445-418

Total liabilities andnet assets

・Decrease in notes and account payable: -520 million Yen
・Decrease in Income tax payable: -1,017 million Yen

・Decrease in Deferred tax liabilities: -794mil Yen(associated with sale/market price decline of investment securities)

・Net income: 5,090 million Yen
・Dividends of surplus: -1,492 million Yen
・Valuation difference on available-for-sale securities: -1,989 million Yen

40

Consolidated Statement of Cash Flows Highlights(Million Yen)FY2019ActualCash flows from operating
activities

Increase or
Decrease

FY2020
ActualRemarks
・Profit before income taxes: 7,028 million Yen

9,230

6,387

-2,843 ・Depreciation & Amortization: 2,868 million Yen
・Income taxes paid: -2,712 million Yen

・Payments into time deposits: -2,952 million Yen
・Proceeds from withdrawal of time deposits: 2,636 million Yen
・Purchase of Property, plant and equipment: -3,150 million Yen
・Proceeds from sales of Property, plant and equipment: 590 million Yen
・Credit of sale price of investment securities (previous FY): 2,578 million Yen

Cash flows from investing
activities-2,275

-431

1,843

Cash flows from financing
activities-3,035-1,511

1,524 ・Cash dividends paid: -1,491 million Yen

Effect of currency change
on cash and cash
equivalents

-242

17

259

―

Net Change in cash andcash equivalents

3,677

4,461

784

―

Cash and Cashequivalents at beginning of
period17,221

20,898

3,677―

Cash and cash equivalents
at end of period

20,89825,360

4,461

―

41

Capital Investment, Depreciation & Amortization, R&D Expenses (Actual)(Million Yen)FY2020
Plan

CapitalInvestment

Depreciation&
Amortization

R&D
Expenses

FY2020
ActualProgress(%)

Consolidated

2,563

3,481

135.8%

Non-consolidated

1,815

1,507

83.0%

Consolidated

2,953

2,869

97.2%

Non-consolidated

2,007

1,959

97.6%

Consolidated

4,654

4,523

97.2%

Non-consolidated

3,680

3,550

96.5%

42

Non-consolidated (Actual)(Million Yen)FY2019ActualFY2020
Plan(Revised in
8 May,2020)

FY2020
ActualAchievement
yr/yr

vs Plan

Value

Share

Value

Share

Value

Share

Net sales

37,646100.0%

37,650100.0%

36,821100.0%

-825

-2.2%

-828

-2.2%

Cost of sales

23,42562.2%

23,43062.2%

22,914

62.2%

-511

-2.2%

-515

-2.2%

Gross profit

14,22037.8%

14,22037.8%

13,907

37.8%

-313

-2.2%

-312

-2.2%

SG&A expenses

10,385

27.6%

10,45027.8%

10,202

27.7%

-182

-1.8%

-247

-2.4%

Operating income

3,835

10.2%

3,770

10.0%

3,704

10.1%

-131

-3.4%

-65

-1.7%

Ordinary income

4,319

11.5%

5,230

13.9%

5,168

14.0%

848

19.6%

-61

-1.2%

Profit before
income taxes

6,899

18.3%

6,330

16.8%

6,302

17.1%

-596

-8.6%

-27

-0.4%

Net income

5,054

13.4%

4,740

12.6%

4,821

13.1%

-232

-4.6%

81

1.7%

Value

％

Value

％

・Sales declined mainly due to sales decrease in flavors for beverages and toiletry products at fragrance
division.
・Operating income declined mainly due to sales decrease.
・Ordinary income increased mainly from reporting of dividends received from Chinese
subsidiary as non-operating profit.
・Net income declined mainly due to decrease of gain on sale of shares held for facilitation ofbusiness relationships.
43

U.S. Subsidiaries (consolidated base) (Actual)(Million Yen)

Yen Basis
Net Sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

FY2019
Value
Share
5,719
100.0%
3,526
61.7%
2,192
38.3%
2,042
35.7%
149
2.6%
149
2.6%
-1,479Yen 110.09/USD

FY2020
Value
Share
6,146
100.0%
3,642
59.3%
2,503
40.7%
1,953
31.8%
549
8.9%
560
9.1%
436
7.1%
Yen 107.88/USD

yr/yr
Value
427
116
310
-88
399
410
1,915

％
7.5%
3.3%
14.2%
-4.4%
266.8%
274.5%-

2.0% higher(Thousand US$)

Local Currency
Basis
Net Sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

FY2019Value
Share
51,948100.0%
32,031
61.7%
19,91738.3%
18,557
35.7%
1,360
2.6%
1,359
2.6%
-13,436-

FY2020Value
Share
56,972100.0%
33,76859.3%
23,20340.7%
18,112
31.8%
5,091
8.9%
5,195
9.1%
4,042
7.1%

yr/yr
Value
5,023
1,737
3,286
-444
3,731
3,835
17,478

％
9.7%
5.4%
16.5%
-2.4%
274.4%
282.1%-・ Sales increased mainly from contribution of newly introduced products for restaurants and sales
increase in products for instant noodles
・ Operating income increased from improvement of Cost of Sales ratio and decrease in SG&A
expense associated with decrease of goodwill amortization costs.
・ Impairment loss related to goodwill was reported as extraordinary loss in previous Fiscal Year.
44

Chinese Subsidiaries (consolidated base) (Actual)• Consolidated Profit and Loss Statement of two of our Chinese Consolidated Subsidiaries(Million Yen)

Yen Basis
Net Sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

FY2019
Value
Share
6,693
100.0%
4,558
68.1%
2,134
31.9%
1,544
23.1%
590
8.8%
667
10.0%
563
8.4%
Yen16.00/RMB

FY2020
Value
Share
6,870
100.0%
4,382
63.8%
2,488
36.2%
1,403
20.4%
1,084
15.8%
1,173
17.1%
939
13.7%
Yen15.39/RMB

yr/yr
Value
177
-176
353
-141
494
505
376

％
2.6%
-3.9%
16.5%
-9.1%
83.7%
75.6%
66.8%

3.8% higher(Thousand RMB)

Local Currency
Basis
Net Sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

FY2019Value
Share
418,341100.0%
284,91768.1%
133,42331.9%
96,51323.1%
36,9108.8%
41,74510.0%
35,2028.4%

FY2020Value
Share
446,435
100.0%
284,772
63.8%
161,66336.2%
91,17420.4%
70,48915.8%
76,21917.1%
61,039
13.7%

yr/yr
Value
28,094-144
28,239-5,33833,57834,47325,836

％
6.7%
-0.1%
21.2%
-5.5%
91.0%
82.6%
73.4%

・Sales increased mainly from sales increase in Flavors for beverages and products for instant noodles.
・Operating income increased from improvement of Cost of Sales ratio and SG&A expense decrease.
45

Malaysian Subsidiary (Actual)* Profit and Loss Statement of T HASEGAWA FLAVOURS (KUALA LUMPUR) SDN. BHD.

Yen Basis
Net Sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

FY2019
Value
Share
898
100.0%
535
59.6%
362
40.4%
313
34.9%
49
5.5%
67
7.5%
46
5.2%
Yen 26.58/MYR

FY2020
Value
Share
902
100.0%
504
55.9%
398
44.1%
306
33.9%
92
10.2%
104
11.6%
68
7.6%

(Million Yen)

yr/yr
Value
4
-31
35
-6
42
37
22

％
0.5%
-5.8%
9.8%
-2.2%
85.2%
54.9%
47.8%

3.6% higher

Yen 25.61/MYR(Thousand Malaysian Ringgit)

Local Currency
Basis
Net Sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Ordinary income
Net income

FY2019Value
Share
33,789100.0%
20,13659.6%
13,652
40.4%
11,780
34.9%
1,871
5.5%
2,543
7.5%
1,744
5.2%

FY2020Value
Share
35,236100.0%
19,68355.9%
15,55344.1%
11,955
33.9%
3,598
10.2%
4,089
11.6%
2,675
7.6%

yr/yr
Value
1,447
-453
1,900
174
1,726
1,546
931

％
4.3%
-2.3%
13.9%
1.5%
92.2%
60.8%
53.4%

・Sales increased mainly from sales increase in seasoning powder and products for beverages.
・Operating income increased from improvement of Cost of Sales ratio.
46

Three-Year-Plan (Consolidated Income Statement)(Million yen)
FY2020(Actual)FY2021(Plan)

Value

Share

yr/yr

Value

Share

Net sales

50,192100.0%-0.6%

52,100100.0%

Cost of sales

30,783

61.3%

-1.9%

31,980Gross profit

19,408

38.7%

1.5%

SG&A expenses

14,05228.0%

Operating income

5,356

Ordinary income

FY2022(Plan)
yr/yr

Value

Share

3.8%

54,000100.0%

61.4%

3.9%

33,09020,120

38.6%

3.7%

-2.7%

14,960

28.7%

10.7%

14.5%

5,160

5,861

11.7%

13.2%

Profit before
income taxes

7,028

14.0%

Net income

5,090

10.1%

FY2023(Plan)
yr/yr

Value

Share

yr/yr

3.6%

56,200100.0%

4.1%

61.3%

3.5%

34,310

61.0%

3.7%

20,910

38.7%

3.9%

21,890

39.0%

4.7%

6.5%

15,330

28.4%

2.5%

15,770

28.1%

2.9%

9.9%

-3.7%

5,580

10.3%

8.1%

6,120

10.9%

9.7%

5,570

10.7%

-5.0%

6,000

11.1%

7.7%

6,510

11.6%

8.5%

28.6%

6,590

12.6%

-6.2%

6,700

12.4%

1.7%

6,980

12.4%

4.2%

23.5%

4,730

9.1%

-7.1%

4,840

9.0%

2.3%

5,050

9.0%

4.3%

47

Caution with Respect to Forward-Looking Statements:
This material is composed based on data as of Nov. 6th 2020 and the purpose to publish thismaterial is to offer information of management plan and consolidated financial statement.
This material contains forward-looking statements about the future performance of T. Hasegawa,which are based on our management’s assumptions and beliefs taking into account all information
currently available to it. Therefore, please be advised that and uncertainties could cause actual
results to differ materially from those discussed in our forward-looking statements, and in addition,
forward looking statements could be changed without notice. Please also note that we will assume
no responsibility for any omission or error in the statements and data in this material.
Please also note that we will assume no responsibility for any omission or error in the statements
and data in this material. This material is published by T. Hasegawa and all contents belong to thecompany. The content is not to be copied or distributed without permission.

48