Financial Results
for the 2nd Quarter
Ended March 31, 2020
T．HASEGAWA CO., LTD.
May 29, 2020

AgendaⅠ. Overview of Consolidated Financial Statement
Ⅱ. Measures against Novel Coronavirus and Impact
Ⅲ. Management Policy
Ⅳ. Global Strategies
Ⅴ. Capital Policy
Ⅵ. Appendix

1

Ⅰ. Overview of Consolidated
Financial Statement

2Market Environment
Domestic Market

・Flavors and fragrances market in 2019 expanded approximately 2% compared to the previous year

・Market Trends by Product Category
Category

Trend

Decreased

・Due to prolonged rainy season, significantly decreased in summer, the highest
demand season
・Teas performed well from new products launch and other factors, but it was not
sufficient to cover decrease in summer

2020
Jan toMarch

Decreased

・Low consumption from outing restrictions associated with expansion of novel coronavirus
infection・Sales of new products were stagnant due to voluntary restraint of promotional activities
・Vending machine sales were sluggish due to factors, such as promotion of telework andclosure of commercial facilities
・Large size (1.5 to 2 litter) bottled products performed well for stockpiling

2019

Slightly
Increased

・Rebound decrease in potato chips from significant increase in the previous year. Despite
partial decrease due to price raise, overall potato snacks outperformed previous year by
bounce back of processed potato snacks
・Corn-based snacks market vitalized by new product launch

2020
Jan toMarch

Increased

・Significant increase in potato chips after school temporary closure request
・Corn-based and flour-based snacks had substitute demand from supply shortage of potato
chips

2019

Increased

・High cacao chocolate boom led the market and expanded

2020
Jan toMarch

Decreased

・Rebound decrease in high cacao chocolate from previous year’s significant increase・Demand increase in multi pack chocolate snack products from school temporary closure
request and avoidance of outing was not sufficient to cover decrease

2019

Slightly
Decreased

・Significantly decreased in summer, the highest demand season, due to prolonged rainyseason・Weather condition had been good since fall and market vitalized by new product launch andother factors

2020
Jan toMarch

Increased

・Rebound increase from decrease associated with price raise in March 2019・Demand for packages of treat size products increased from school closure request andavoidance of outing

2019

Beverages

Snacks

Chocolate

Frozen Dessert

Data Source: The Beverage & Food Daily News

3

Performance Overview (Consolidated base)
Sales
Flat comparing to pervious year
Progress ratio against annual plan was 48.4％ (average progress ratio: 47％)
Operating Income
11.2％ increase comparing to pervious year
Progress ratio against annual plan was 50.6％ (average progress ratio: 43％)
（Million Yen）

FY19 2Q
ActualProgressvs.
Annual plan
（※1）

yr/yr

FY20 2Q
Actual％Value
Net sales

24,46824,462

-5

0.0%

48.4%

Cost of sales

15,202

15,114

-88

-0.6%

48.3%

Gross profit

9,265

9,348

82

0.9%

48.7%

SG&A expenses

7,044

6,878

-165

-2.4%

48.0%

Operating income

2,221

2,469

248

11.2%

50.6%

Ordinary income

2,436

2,688

251

10.3%

50.5%

Income before
income taxes

2,422

3,008

586

24.2%

46.6%

Net income

1,761

2,092

330

18.8%

45.1%

EBITDA （※2）

3,917

3,951

34

0.9%

48.7%

※1 Progress rate against revised plan announced on May 8, 2020
※2 EBITDA = Operating income + Depreciation and Amortization + Amortization of goodwill

4Net Sales by Product Segments
Total net sales was flat due to the increase of Flavors and the decrease of Fragrances（Million yen）
Category

FY19 2Q
Actual

FY20 2Q
Actualyr/yrRemarkValue%

Flavors

20,69920,853

154

0.7%

Sales of parent company and the subsidiary in U.S.
increased

Fragrances

3,768

3,608

-159

-4.2%

Sales of parent company and the subsidiary in Indonesia
decreased

Total

24,46824,462

-5

-0.0%

−

yr/yr (%)

FY20 2Q Actual(Million Yen)
+0.7％

Flavors

Domestics

Fragrances

Overseas

Total

-4.2％

-0.0％
0

10,00020,00030,000*FY20 2Q Overseas sales ratio 34.6%

5

Sales by Group Company
・Flat
Increased in U.S. subsidiaries and decrease in China subsidiaries

Currency

Fy2019 2Q

Fy2020 2Q

Yr/Yr

1US$

¥111.55¥108.84

2.4% higher

1RMB¥16.33¥15.52

5.0% higher

1MYR¥27.01¥26.13

3.3% higher（Million Yen）

FY19 2Q
Actual

FY20 2Q
ActualParentcompany

18,11018,147

36

0.2%

U.S.

2,784

3,075

291

10.5%

China

3,341

3,067

-273

-8.2%

Malaysia

468

431

-36

-7.8%

Adjustment

-236

-259

-22

-

Consolidated

24,46824,462-5

0.0%

Parent company(Million Yen)
25,500

yr/yr

%

+36

+291

-273

-36

-22

24,46824,462

23,3000
FY2019 2Q
ActualParentcompany

U.S.

Sales of products for beverages at flavor division increased
Sales of products for toiletry products at flagrance division

China

Malaysia Adjustment

FY2020 2Q
ActualFlat

decreased
U.S.

Sales in food services and beverage areas increased

Increased

China

Sales at flavor division declined from impact of novel coronavirus

Declined

Malaysia

Export declined from impact of lockdown and entry restrictions atneighboring countries

Declined

6Operating Income by Group Company
・Profit increase Factor
Increased in U.S. subsidiaries

Currency

Fy2019 2Q

Fy2020 2Q

Yr/Yr

1US$

¥111.55¥108.84

2.4% higher

1RMB¥16.33¥15.52

5.0% higher

1MYR¥27.01¥26.13

3.3% higher（Million Yen）

(Million Yen)
3,000

FY19 2Q
Actual

FY20 2Q
Actual

yr/yr

%

-66

Parentcompany

1,946

1,880

-66

-3.4%

U.S.

-18

283

301

-

China

255

320

64

25.4%

Malaysia

35

21

-14

-41.1%

Adjustment

1

-36

-37

-

Consolidated

2,221

2,469

248

+301

+64

-14

2,469

2,221

11.2% 1,0000 FY2019 2Q
ActualParentcompany

U.S.

China

Malaysia Adjustment

Deterioration of sales cost ratio

Declined

U.S.

Improvement of sales cost ratio,
SGA expense decrease associated with reduction in goodwill
amortization costs

Increased

China

Improvement of sales cost ratio, SGA expense decrease

Increased

Malaysia

Sales decrease, SGA expense increase

Declined

Parent company-37

FY2020 2Q
Actual7

Revision of Annual Plan for FY Ending Sep. 2020 (Consolidated)
・Annual plan announced on Nov. 8, 2019 was revised on May 8, 2020
FY19
ActualValue

Original Plan
(Nov. 8, 2019)

Share

Value

Share

(Million Yen)
Revised Plan
(May 8, 2020)

Value

vs. FY 19 Actual

vs. Original Plan

value

%

value

%

Share

Net sales

50,493100.0%

51,600100.0%

50,500100.0%

6

0.0%-1,100-2.1%

Cost of sales

31,37362.1%

31,77061.6%

31,300

62.0%

-73

-0.2%

-470

-1.5%

Gross profit

19,12037.9%

19,83038.4%

19,200

38.0%

79

0.4%

-630

-3.2%

SG&A expenses

14,441

28.6%

14,73028.5%

14,320

28.4%

-121

-0.8%

-410

-2.8%

Operating income

4,678

9.3%

5,100

9.9%

4,880

9.7%

201

4.3%

-220

-4.3%

Ordinary income

5,175

10.3%

5,550

10.8%

5,320

10.5%

144

2.8%

-230

-4.1%

Income before
income taxes

5,464

10.8%

5,790

11.2%

6,460

12.8%

995

18.2%

670

11.6%

Net income

4,121

8.2%

4,250

8.2%

4,640

9.2%

518

12.6%

390

9.2%

The exchange rates of Revised Plan
【Reason for Annual Plan Revision】
Sales¥108.84
1US$・Made downward revision to annual plan in light of impact of expansion of¥15.52
1RMB
novel coronavirus infection and cumulative second quarter result for Fiscal¥26.13
1MYR
Year ending in September 2020・For 2020 total, predicted sales decrease from novel coronavirus impact is approx. 1,150 million yen
Profit・In association with downward revision of sales in annual plan, made downward revision to both operating income
and ordinary income
・Made upward revision to current net profit in association with the sale of a part of investment securities in April
2020 and reporting of the gain on sale of investment securities of 867 million yen as extraordinary profit.

8

Ⅱ. Measures against
Novel Coronavirus and Impact

9

Measures against Novel Coronavirus and Impact
Impact of Novel Coronavirus has been recognized in all regions T. Hasegawa Group companies operate
Impact on annual sales for the Fiscal Year ending in September 2020 is predicted as approx. 1,150 million yen

FY ending Sept. 2020
Impact on Sales (Estimate)
RegionFirst Half (Actual)(Oct. 2019 to March 2020)

Second Half
(Estimate)

Annual (Estimate)(April to Sep. 2020)

Japan

None

Approx. 550mil yen
Decrease

Approx. 550mil yen
Decrease

U.S.

None

None

None

China

Approx. 170mil yen
Decrease

Approx. 200mil yen
Decrease

Approx. 370mil yen
Decrease

Southeast Asia

Approx. 20mil yen
Decrease

Approx. 210mil yen
Decrease

Approx. 230mil yen
Decrease

Total

Approx. 190mil yen
Decrease

Approx. 960mil yen
Decrease

Approx. 1,150mil yen
Decrease
10

Measures against Novel Coronavirus and Impact (Japan)
Measures against Novel Coronavirus
Established Companywide Emergency
Headquarters to Deal with Novel
Coronavirus

Thoroughly Implemented Washing
Hands/Gargling, Sterilization, Wearing
Masks and Cough Etiquette

Introduced Stagger Office Hours to All

Avoid Domestic/

Employees

Overseas Business Trips

Restricted Internal Meeting with Large
Number of Attendees and Lasting Long
Hours

Utilize Teleconference/Video Conference
Internally and with Clients/Trade Partners

・Headquarters/Laboratories/Branch Offices:
Implemented teleworking in rotation, further expansion of telework⇒ Put in place framework that enables business continuity
・Factories: Implemented measures, such as facility zoning, securing working traffic line,
worker grouping, shift-work⇒ Implemented measures for reduction/avoidance of infection risks

Impact on Business・Demand decrease in products for professional use due tobusiness closure request to restaurants and avoidance ofouting・Demand increase in products related to hand-wash andsterilization, and instant noodles
・Expecting possible postponement/cancellation of clients’
new product launch

FY ending Sep. 2020
Impact on Sales (Estimate)
1st Half(Actual)2nd Half(Estimate)

Annual(Estimate)

None

Approx.
550mil yen
Decrease

Approx.
550mil yen
Decrease
11

Measures against Novel Coronavirus and Impact (U.S.)
Measures against Novel Coronavirus
Temperature Check at Entrance, Mask-Wearing Requirement, Sterilization

Ban on Business Trips, Stopped Accepting Visitors
・Administrative Division: Telework, in principle(Work at office is limited to required minimum)・Manufacturing Division: Shift-work, arranged seating, use telework⇒ Continue Manufacturing Activities

Impact on Business・Exempted from curfews as Essential Business・No big impact on manufacturing capability
・No impact on procurement and logistics

FY ending Sep. 2020
Impact on Sales (Estimate)
1st Half(Actual)2nd Half(Estimate)

Annual(Estimate)

None

None

None

12

Measures against Novel Coronavirus and Impact (China)
Measures against Novel Coronavirus
Temperature Check at Entrance, Mask-Wearing Requirement
Thorough Implementation of Ventilation when Working in Office (open doors and windows, etc.)
Revised Production Plan associated with Decrease in Attendance Rate of Manufacturing
Personnel⇒ Came back to ordinary manufacturing capability at mid Feb. in Shanghai
and early March in Suzhou
Considered Product Delivery Method associated with Disruption in Logistics⇒ Shipment of inventory of which shipping was stopped due to logistics disruption was
performed from early to mid March except for some regions
・Shanghai: Telework lifted in March, almost 100％ come to work
・Suzhou: Telework not implemented

Impact on Business・Decrease in working days associated with extension ofChinese New Year Holiday
・Temporary decrease in manufacturing capability due todecrease in attendance rate of manufacturing personnel
・Affected by logistics disruption⇒Now, logistics came back to the level of not causing problem in delivery
・As we took action in securing raw materials, no impact on
procurement
・Significant decrease in sales of Jan. to March 2020・Continued impact from economic stagnation in entire China

FY ending Sep. 2020
Impact on Sales (Estimate)
1st Half(Actual)2nd Half(Estimate)

Annual(Estimate)

Approx.
170mil yen
Decrease

Approx.
200mil yen
Decrease

Approx.
370mil yen
Decrease
13

Measures against Novel Coronavirus and Impact (Southeast Asia)
Measures against Novel Coronavirus
Temperature Check at Entrance, Mask-Wearing Requirement, Sterilization
Ban on Business Trips, Stopped Accepting Visitors
・Malaysia: Government initiative to prioritize workers coming to work, implementation ofshift-work, Other employees worked at home
⇒ Now, almost all employees come to work except for some working at home・Thai:
Implemented shift-work
・Indonesia：The country is currently under large scale social restrictions,and all employees are working at home in principle
Only short hours of working at the office is allowed with an approvalof authorities as necessary

Impact on Business・Malaysian subsidiary obtained authorization fromcompetent authorities as indispensable business・For Malaysia, export is affected by lockdown and entry
restrictions of neighboring countries
・For Indonesia, delay in carriage occurred due to significant
reduction in flight from Japan and Malaysia
・For Thai and Indonesia, there is an impact on sales of existingproducts due to postponement of launch/development of new
products, as well as economic recession and voluntary restrictions ofclients’ promotional activities

FY ending Sep. 2020
Impact on Sales (Estimate)
1st Half(Actual)2nd Half(Estimate)

Annual(Estimate)

Approx.
20mil
yen
Decrease

Approx.
210milyen
Decrease

Approx.
230milyen
Decrease14

Ⅲ. Management Policy

15

Management Policy
Become an
Organization that
Takes on Challenge

Promote Reform

Priority Issues

Concentration and
Selection
Improve Human Resources(Foster Human Resources, Hire Experienced Personnel)

Accelerate Penetration inOverseas Market

Basic Strategy
ExpandCompoundFlavors andFragrances
Sales

Secure Profit
in Domestic
MarketGrowth inOverseas
Market16

Ⅳ. Global Strategies

17

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
Reinforce Sales
Structure
Promote SolutionOriented Sales
Activity・Sales Activity Quality Enhancement⇒ Started to consider possible introduction of Free-Address Workspace,that is to work at free desk without assigning fixed desk to individual personnel⇒Draw-up sales expansion measures at the Project Team, progress
management⇒Enhance Support Functions
・ Marketing Division takes initiative in marketing strategy development
and solution-oriented sales project increased
・Grasp “Wants” through utilization of market survey results, analysis

Expand Range of
New Applications

・ Develop substitute flavors for food materials⇒ 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

Speed-Up R&D
Activities

・Promote R&D that make use of cooperation among laboratories

N
Net
Sales

Net Sales

Opereting
Income”Net Sales” and ”Operating Income”（million yen）

50,000Yr/Yr+2.0％

40,000

Yr/Yr
-0.6％

Yr/Yr
+0.9％

Yr/Yr
+2.0％

Yr/Yr
+0.0％

12,00030,0009,000

20,000

6,000

10,0003,000

0Sales composition

Operating
Income15,000Yr/Yr-0.5％

Flavors 86％

FY2020 2Q Sales Performance
Net Sales：18,147 mil. yen（Increased 0.2% YOY）
Operating Income：1,880 mil. yen(Decreased 3.4% YoY)

0
Fy2015Fy2016Fy2017Fy2018Fy2019Fy2020
Plan

18

Overseas Strategy (U.S.)
Basic Strategy：Expand sales of savory flavors, health care products and flavors for beverages
Ongoing projects and progress・ Reinforce organizational power by hiring competent management
resource and key officers
・Management Team restructuring

Reinforce
Management

Reinforce Sales
Activities

・Thorough Pipeline Management⇒Aim at sales expansion at 3 areas: namely, savory flavor, flavor
for health & wellness products and flavor for beverages
・Reinforce marketing structure⇒Draw-up long-term growth strategy by area and strategy by client throughmarket trend analysis

Utilize/Deploy
Japanese
Technology

・Bridge to Tokyo Project: Send project team to Japan to utilize
and deploy Japanese technology in U.S.
・Facilitating bilateral information sharing between Japan and U.S.

N
Net
Sales

”Net sales” and ”Operating Income”

100（ million US$）Operating
Income25

Flavors 100％

Sales composition

FY2020 2Q Sales Performance

Sales
Operating Income

20

80

Yr/Yr
+34.5％

60

40
Yr/Yr
+0.1％

Yr/Yr
+25.1％

Yr/Yr
+2.1％

Yr/Yr
+9.7％

Yr/Yr
+24.6％

10

5

20※Savory flavors : salty flavor for snacks,
dressing for salad, and seasoning etc.

00Fy2015-20

15

Net Sales：28.2 mil. USD(Increased 13.2% YoY)
(3,075 mil. yen)
Operating income：2.6 mil. USD(Returned to profitability)

Fy2016Fy2017Fy2018Fy2019Fy2020
Plan

-5

19

Overseas Strategy (China)
Basic Strategy： Under reinforced organization base, recover performance in both sales and profit through various measures
Fragrances
34％

Ongoing projects and progress・Utilize Marketing Function

Reinforce Sales
Structure

Enhance Profitability
Reinforce R&D
Structure
Net sales⇒Deploy strategic approach to clients, develop new market and potential
demands
・Deepen Sales/R&D Co-work
・Reinforce sales structure by hiring local sales general manager
and increasing number of sales force⇒Focus on local large enterprises and South China area

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

700

500

Operating
Income（Million RMB）

350

600
Yr/Yr
+5.3％

Opereting
Income

Yr/Yr
-0.8％

Sales composition

・Promoting Manufacturing Cost Compression Project”Net sales” and ”Operating Income”

Net sales

Flavors 66％

FY2020 2Q Sales Performance

300
Yr/Yr
+1.8％

Yr/Yr
-2.0％

Yr/Yr
-0.1％

Yr/Yr
-2.2％

250

400

200

300

150

200

100

100

50

Net Sales：197.6 mil. RMB(Decreased 3.4% YoY)
(3,067 mil. yen)
Operating Income：20.6 mil. RMB(Increased 32.0% YoY)
(320mil. yen)

00Fy2020
Plan
From this Fiscal Year, 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 of the sales in the same period of the previous year
Fy2015Fy2016Fy2017Fy2018Fy201920

Overseas Strategy (Southeast Asia)
Basic Strategy：Expand sales through cooperation of sales base in Thailand, Indonesia and production base in Malaysia
Fragrances
14％

Ongoing Projects and Progress
・Hire Sales Personnel/Reinforce Organization to Develop New Clients⇒Increase number of sales force in Malaysia, Thai and Indonesia
Assign sales force to surrounding areas (Vietnam, Philippines, Myanmar)
・Assign General Manager covering entire Southeast Asia region⇒Coordinate organic cooperation among offices in Southeast Asia region

Reinforce Sales
Structure

Sales composition

・Relocated Indonesia Office to integrate office and application laboratory⇒ Enable faster sales activities
・Promote utilization of Application Laboratories (Thai, Indonesia, Taipei)

Speed-Up Client
Care・Utilize THKL, a Halal-certified flavors sales and production company, as a hub in Southeast Asia

Develop Strategy inSoutheast Asia byusing THKL as Hub
N
Net
Sales

Flavors 86％

・Support research and production by dispatching specialists from parent company to train local staffs
・New manufacturing facility construction plan in Malaysia: watch status of progress in light of politicaland economic trend”Net sales” and ”Operating Income”

4,000（ million yen）

Operating
Income2,000

FY2020 2Q Sales Performance

THKL Sales
Other Sales

Net Sales：1,216mil. yen

THKL Operating Income

3,000

Other Operating Income
Yr/Yr+23.5％

Yr/Yr+10.4％

Yr/Yr
+0.1％

Yr/Yr
-2.6％

Yr/Yr
+11.9％

1,500
Yr/Yr
-3.2％

Operating Income：88 mil. yen

2,000

1,000

1,000

500

0
Fy2015Fy2016Fy2017Fy2018(Decreased 7.4% YoY)

Fy2019※売上高は、当社単体売上高に含まれる東南アジアへの輸出売上高を合算して作成

Fy2020Plan(Decreased 45.7% YoY)

021

Ⅴ. Capital Policy

22Capital Policy
Basic Policy
Aiming at continued growth and maximization of corporate value in the future, maintain level ofstockholders’ equity sufficient to appropriately deal with investment and risks.

Fund Utilization Policy
Properly use funds considering maintenance of sound financial strength and improvement of
capital efficiency, etc.
−Shareholder Returns
Paid mid-term dividends and year-end dividends aiming at consolidated dividend payout
ratio of approx. 35%−Capital Investment
Investment for production increase for growth, update/maintenance of existing facilities−M&A
Comprehensive judgment from various viewpoints, such as market size, business risk,
acquisition priceRealize M&A with an expectation of acquisition effect in terms of customer base,technology aspects and personnel aspects

Cross-Shareholdings
Cut down on aggregate number of shares held from viewpoint of enhancement of capitalefficiency, etc. (sale completed for certain portion, and continue to sell during this Fiscal Year).
Validate appropriateness of cross-shareholding from mid to long term viewpoints of purposeand economic reasonableness at the Board of Directors’ meeting every year.
23Capital Policy
Shareholder Returns
・While securing required reserves for further reinforcement of group management base and futurebusiness development, seek to provide profit returns to shareholders according to businessperformance
・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 ending in Sep. 2015 for medium
to long term holding of the shares of our company
・In light of revision of annual performance estimate, increased expected year-end dividends per
share by 2 yen to 20 yen
Dividends per share(JPY)Dividends per share(JPY)

Consolidated payout ratio

60
50

37.3％
34.5％

36.2％

35.3％

33.7％

40
Year-end
dividend

30
20

50%

32

35

35

40%
30%

20

20%

Interimdividend

10%

35

10

18
0%

0
FY2016FY2017FY2018FY2019FY2020 (Forecast)24

Capital Policy
Sale of Shares Held for Facilitation of Business Relationships (Completed)
・March 27, 2020, “Notification of Expected Reporting of Extraordinary income Associated with Sale ofInvestment 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】867 mil yen* To be reported as extraordinary income at 3rd quarter of Fiscal Year ending in Sep. 2020

Decision Made on Matters concerning Acquisition of Treasury Stocks
・March 27, 2020, “Notification concerning Decision Made on Matters concerning Acquisition ofTreasury Stocks” announced【Purpose】
Implementation of proactive capital policy to address changes in management environment,enhancement of capital efficiency and enhancement of shareholder benefits【Aggregate Number of Shares that can be Acquired】
1,000,000 shares (Maximum) (Proportion to aggregate number of issued and outstanding shares[excluding treasury stocks]: 2.4％)【Total Amount of Acquisition Costs】
2,000 mil yen (Maximum)【Acquisition Period】
From March 30, 2020 to September 30, 2020
25

Ⅵ. Appendix

26

Outline of
Flavor and Fragrance Business27

Flavor 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
World market size for Fragrance and Flavor was an approximately 6% growth compared to theprevious year
Transition of world market size for Fragrance and Flavor (Estimated by T. Hasegawa)(Million US$)

30,000South
AmericaAsia

20,000

CAGR
8.1%

4.5%

North
Amrica2.9%

Europe, Africa
and Middle East

3.1%

10,000

0
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

30

Global Market Size of Flavor 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 andfragrances 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● : 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 fragrances 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) , Indonesia (2014) and Taipei (2017)‐T.Hasegawa acquired Peresscol Sdn. Bhd.
[renamed T HASEGAWA FLAVOURS (KUALA LUMPUR)
SDN. BHD. in Apr. 2019] in Kuala Lumpur, Malaysia in 2014
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Market share of the top 10 companies in global flavor and fragrance market
Company nameCountry

Million USD
Sales(2019Yr) Market Share

6

Givaudan
IFF
Firmenich
SymriseWild Flavors
Mane SA

7

Takasago

Japan

1,393

5.5%

8

Sensient Flavors

U.S.

700

2.7%

9

Robertet SA

France

524

2.1%

10

T. Hasegawa

Japan

467

1.8%

Total

−

25,531100.0%

1
2
3
4
5

Switzerland

6,156

24.1%

U.S.

5,140

20.1%

Switzerland

3,872

15.2%

Germany

3,054

12.0%

Germany

2,745

10.7%

France

1,479

5.8%

※ Estimated by T. Hasegawa based on the disclosure materials of each company※ Sales of Mane SA is 2018Yr sales

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

300
250
200
150

(Billion yen)

Natural Aromatics
Aromatic Chemicals
Fragrances
Flavors
16.9
16.6

15.5

14.8

31.1

30.6

30.4

29.5

32.6

34.4

35.6

35.8

128.2

133.3

136.4

141.2

141.5

2015

2016

2017

2018

2019

14.1
29.6

Composition Rate (2019Yr)
Flavors
Fragrances

20%

33.3
80%

100
50
0
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 Magazine

33

Outline of Current Status ofT. Hasegawa

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

Others13.9％
Company N
5.0％

Company T
32.2％

Company S
6.8％
Company G
11.1％
Company O
12.5％

T. Hasegawa
18.5％*Data is based on non-consolidated sales breakdown of top 10 companies in domestic market,(As of Mar. 2019)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 Jan. to Dec. in Company G and O.
*T. Hasegawa’s figures indicated above have been calculated for the period from Apr. 2018 to Mar. 2019.

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.
(Million yen)
T. Hasegawa(Consolidated）

Company T(Consolidated）

FY ended in Sep. 2019

FY ended in Mar. 2020

Sales

Share

Sales

Share

Flavors

43,01885.2%

91,85060.2%

Fragrances

7,474

14.8%

40,74026.7%

Aroma Chemicals

0

0.0%

18,419

12.1%

Others

0

0.0%

1,444

0.9%

Total
50,493100.0%
152,455
100.0%
Ratio of gross profits
37.9%
28.0%
to salesRatio of operating
9.3%
1.7%
income to sales* Sales amount indicated as Aroma chemicals in Company T is composed of Aroma ingredients division and fine chemical division.

T. Hasegawa（Consolidated）

Synthetic andCompany T（Consolidated）
OthersAroma chemicals

Fragrances

Fragrances

Flavors

Flavors36

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. 34%

Instant noodle
Approx. 9%

Confectionary
Approx. 13%

Dairy
Approx. 24%

The share indicated above is calculate as 100% for total non-consolidated sales of
FY2020 2Q 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 an improvement of Cost of sales ratio
and decrease of SG&A expenses(Million yen)yr/yr

FY2019 2Q
ActualFY2020 2Q
ActualNet sales

24,468100.0%

24,462100.0%-5-0.0% Sales decrease of subsidiary in China, Malaysia, Indonesia

Cost of sales

15,202

62.1%

15,11461.8%-88-0.6% At subsidiaries, cost of sales ratio decreased due to sales product mix change

Gross profit

9,265

37.9%

9,348

38.2%

82

0.9%

SG&A expenses

7,044

28.8%

6,878

28.1%

-165

-2.4% previous fiscal year.(FY2019 2Q:146 m. Yen)

Operating income

2,221

9.1%

2,469

10.1%

248

11.2%

Ordinary income

2,436

10.0%

2,688

11.0%

251

10.3%

Profit before
income taxes

2,422

9.9%

3,008

12.3%

586

24.2% income

Net income

1,761

7.2%

2,092

8.6%

330

18.8%

Remarks
Value％
Sales growth of subsidiary in the U.S.

No goodwill amortization of subsidiary in U.S. due to recording of impairement loss in

At parent company, sale of fixed assets of 320 m. Yen was calculated as extraordinary39Consolidated Balance Sheet Highlights(Million yen)
September 30,
2019

March 31,
2020

Increase or
Decrease

Current assets

56,62056,268-351

Fixed assets

57,24355,046-2,196

Total assets

113,863

111,315-2,548Current liabilities

11,7099,039-2,669Long-term liabilities

11,80911,251-558

Total liabilities

23,51920,290-3,228

Total net assets

Total liabilities andnet assets

90,34491,024680

113,863

111,315-2,548Remarks

Increase in Cash and deposits 2,684 m. Yen
Decrease in Notes and accounts receivable - trade -1,220 m. Yen
Decrease in Accounts receivable - other -1,686 m. Yen

Decrease in Property, plant and equipment -949 m. Yen
Decrease in Investment securities -1,224 m. Yen

Decrease in Notes and accounts payable - trade -1,142 m. Yen
Decrease in Income tax payable -791 m. Yen

Decrease in Deferred tax liabilities as Investment securities decreased
with declining market values -440 m. Yen

Profit attributable to owners of parent 2,092 m. Yen
Dividends of surplus -746 m. Yen
Valuation difference on available-for-sale securities as Investment
securities decreased with declining market values -869 m. Yen

40

Consolidated Statement of Cash Flows(Million Yen)FY2019 2Q
ActualCash flows from operating
activities

3,979

FY2020 2Q
Actual2,179

Increase or
Decrease

Remarks-1,800

Profit before income taxes 3,008 m. Yen
Depreciation 1,413 m. Yen
Income taxes paid -1,753 m. Yen
Payments into time deposits -1,614 m. Yen
Proceeds from withdrawal of time deposits 1,562 m. Yen
Purchase of Property, plant and equipment -987 m. Yen
Proceeds from sales of property, plant and equipment 588 m. Yen
Proceeds from sales of investment securities 1,686 m. Yen

Cash flows from investing
activities-2,023

1,163

3,186

Cash flows from financing
activities-2,329-753

1,576 Cash dividends paid -744 m. Yen

Effect of currency change
on cash and cash
equivalents

-19

16

36

41

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

CapitalInvestment

Depreciation&
Amortization

R&D
Expenses

FY2020Full-year plan

FY2020 2Q
ActualProgress(%)

Consolidated

2,563

757

29.5%

Non-consolidated

1,815

388

21.4%

Consolidated

2,953

1,413

47.8%

Non-consolidated

2,007

956

47.6%

Consolidated

4,654

2,200

47.3%

Non-consolidated

3,680

1,713

46.5%

42

T. Hasegawa Non-consolidated ( Actual )（Million Yen）

FY20 2Q
Actual

FY19 2Q
Actualyr/yr％Progressvs.
Annual plan

Value

Share

Value

Share

Net sales

18,110100.0%

18,147100.0%

36

0.2%

48.2%

Cost of sales

11,19861.8%

11,314

62.4%

116

1.0%

48.3%

Gross profit

6,912

38.2%

6,832

37.6%

-79

-1.2%

48.0%

SG&A expenses

4,965

27.4%

4,951

27.3%

-13

-0.3%

47.4%

Operating income

1,946

10.8%

1,880

10.4%

-66

-3.4%

49.9%

Ordinary income

2,169

12.0%

3,100

17.1%

931

42.9%

59.3%

Income before
income taxes

2,156

11.9%

3,414

18.8%

1,258

58.3%

53.9%

Net income

1,604

8.9%

2,590

14.3%

985

61.4%

54.6%

Value

・Despite sales decline in toiletry products at fragrance division, flavors for beverages
increased at flavor division, and total sales was flat.
・Operating income declined due to deterioration of sales cost ratio.
・Operating income increased mainly from reporting of dividends received from Chinese
subsidiary as non-operating profit.
* Progression rate to revised plan announced on May 8, 202043

T. HASEGAWA U.S.A., INC. (Actual)(Million Yen)

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

FY2019 2Q
Value
Share
2,784
100.0%
1,730
62.1%
1,054
37.9%
1,072
38.5%
-18
-21
-16
Yen 111.55 / USD

FY2020 2Q
Value
Share
3,075
100.0%
1,827
59.4%
1,248
40.6%
964
31.4%
283
9.2%
283
9.2%
226
7.4%
Yen 108.84 / USD

yr/yr
Value
291
97
193
-107
301
305
243

％
10.5%
5.6%
18.4%
-10.0%-

2.4% higher(Thousand US$)

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

FY2019 2Q
Value
Share
24,963100.0%
15,513
62.1%
9,449
37.9%
9,613
38.5%
-164
-193
-152
-

FY2020 2Q
Value
Share
28,258100.0%
16,792
59.4%
11,466
40.6%
8,864
31.4%
2,602
9.2%
2,604
9.2%
2,077
7.4%

yr/yr
Value
3,295
1,278
2,016
-749
2,766
2,798
2,229

・ Sales increased mainly from increase in supply for restaurants and beverages.
Achieved double-digit sales growth rate on both yen basis and local currency basis.
・ Operating income increased from improvement of sales cost ratio and decreasein SGA expense associated with decrease of goodwill amortization costs.

％
13.2%
8.2%
21.3%
-7.8%
-

44

China subsidiaries (Consolidated base) (Actual)
Consolidated profit and loss statement for China including T.H. Shanghai and T.H. Suzhou.
(Million Yen)

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

FY2019 2Q
Share
Value
3,341
100.0%
2,310
69.1%
1,031
30.9%
775
23.2%
255
7.6%
290
8.7%
214
6.4%
Yen 16.33 / RMB

FY2020 2Q
Value
Share
3,067
100.0%
2,038
66.4%
1,029
33.6%
708
23.1%
320
10.4%
366
12.0%
273
8.9%
Yen 15.52 / RMB

yr/yr
Value
-273
-271
-2
-66
64
75
58

％
-8.2%
-11.8%
-0.2%
-8.6%
25.4%
26.0%
27.4%

5.0% higher(Thousand RMB)

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

FY2019 2Q
Value
Share
204,611100.0%
141,459
69.1%
63,15230.9%
47,51223.2%
15,6407.6%
17,818
8.7%
13,165
6.4%

FY2020 2Q
Value
Share
197,647
100.0%
131,329
66.4%
66,31733.6%
45,68023.1%
20,637
10.4%
23,61812.0%
17,650
8.9%

yr/yr
Value
-6,964-10,129
3,165-1,832
4,997
5,800
4,485

％
-3.4%
-7.2%
5.0%
-3.9%
32.0%
32.6%
34.1%

・Sales declined mainly due to sales decline at flavor division from impact of novel coronavirus.
・Operating income increased from improvement of sales cost ratio and SG&A expense decrease.

45

T HASEGAWA FLAVOURS (KUALA LUMPUR) SDN. BHD. ( Actual )(Million Yen)

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

FY2019 2Q
Value
Share
468
100.0%
277
59.3%
190
40.7%
154
33.0%
35
7.6%
43
9.2%
31
6.7%
Yen 27.01 / MYR

FY2020 2Q
Value
Share
431
100.0%
249
57.8%
182
42.2%
161
37.4%
21
4.9%
27
6.3%
18
4.3%

yr/yr
％
-7.8%
-10.2%-4.3%
4.2%-41.1%-37.0%-40.9%

Value
-36
-28
-8
6
-14
-15
-12

Yen 26.13 / MYR

3.3% higher(Thousand Malaysian Ringgit)

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

FY2019 2Q
Value
Share
17,333100.0%
10,283
59.3%
7,049
40.7%
5,728
33.0%
1,321
7.6%
1,600
9.2%
1,160
6.7%

FY2020 2Q
Value
Share
16,520100.0%
9,544
57.8%
6,975
42.2%
6,170
37.4%
805
4.9%
1,042
6.3%
709
4.3%

yr/yr
Value
-813
-738
-74
442
-516
-558
-450

％
-4.7%
-7.2%
-1.1%
7.7%
-39.1%-34.9%-38.9%

・Sales declined mainly due to decrease of export resulting from factors, such as
impact of lockdown and entry restrictions at neighboring countries.
・Operating income declined due to sales decline and SGA increase.

46

Caution with Respect to Forward-Looking Statements:
This material is composed based on data as of . May 8th 2020and 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.

47