December 2009 1
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Always Putting the Customer First Our basic management principle is to honor each and every customer. Stockholders & All Entities Who Sell Financial Local Consumers Suppliers Investors ITO EN's Products Institutions Communities -34.20% Natural Healthy Safe Well-designed Delicious 1. Beverage Market in Japan 2. Results of Operations 10. TULLY'S COFFEE (The 2nd Quarter of the FY) 11. Business in North America 3. Annual Forecasts 12. Medium Term Goal 4. Management Strategies 5. Vending Machine Business 6. Category Results and Forecasts Reference (Non-consolidated) 7. RTD Green Tea 8. Agricultural Business - Developing Tea Farms 9. RTD Black Tea Annoucement of Financial Results for the Second Quarter of the Fiscal Year Ending April 30, 2010: Explanatory Materials December 2009 1. Beverage Market in Japan Trends in Average Monthly Temperatures Market Trends (Tokyo Area) Monthly Ave. Temp. ITO EN Change from (\ Billion) (Non-consolidated) 11.3 22.7 52.8 105.6 190.2 297.8 308.6 312.6 315.5 Previous Yr. (℃) Precipitation (mm) 4,000 6℃ 277 300 1,424.8 1,883.9 2,707.5 3,100.2 3,540.3 3,631.5 3,715.6 3,616.0 3,509.0 3,506.0 Market 242 242 Monthly 226 Precipitation 183.6 4℃ 200 176.2 183.9 Others/ 163 142 222.0 288.9 174.8 175.0 Functional 282.0 265.9 2.3℃ 99 1.6℃ 260.1 250.0 250.0 Sports Drink 2℃ 74 79 100 211.3 71 1.0℃ 1.2℃ 206.6 214.0 0.9℃ 47 53 97.7 0.8℃ 3,000 201.2 200.0 Mineral Water -0.2℃ 379.6 -0.4℃ 359.6 324.2 0℃ 0 447.4 307.5 300.0 Pioneering of Fruit Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Canned Green Tea 190.0 -0.2℃ 184.5 156.2 149.0 -0.7℃ -0.7℃ 144.1 Vegetable 145.6 -2℃ -1.4℃ -100 Pioneering of Canned Sources: Japan Meteorological Agency, ITO EN, LTD., November 2008 to October 2009 Oolong Tea 2,000 956.6 969.1 955.0 Coffee 922.3 948.2 961.0 Monthly Sales Trends (Volume Basis) (YOY % Change) 9.1% 10% 8.2% ITO EN 6.6% 4.7% 555.9 581.9 592.0 598.7 600.0 Carbonated 648.9 5% 3.8% 2.8% 1,000 2.2% 3.5% 1% 0.4% 1% 0.1% -1% 0% -1.8% 918.2 923.4910.5 871.7 877.0 Tea (Including Green tea) -2% 796.4 -1% -3.1% -2% -5% -4% -4% -4% 421.0 415.0 402.0 382.0 382.0 Green Tea 85.2 -6% -6% 217.1 -7% Market 0 -10% 1981 1985 1990 1995 2000 2006 2007 2008 2009 2010 Forecast Est. Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Source: ITO EN, LTD., Period: Market (Calendar Year), ITO EN (May to April) Note: Market Size of Tea includes Green Tea. Source: ITO EN, LTD., November 2008 to October 2009 - 1 - 2. Results of Operations (The Second Quarter of the FY) First and Second Quarter Totals For the Year Ended For the Year Ending Apr. 30, 2009 Apr. 30, 2010 Performances of Subsidiaries Sales Sales YOY % For the Year Ending ¥ Million Composition ¥ Million Composition Change Apr. 30, 2010 Operating Net Sales Impact of Changes in Lease Accounting Income Net Sales 181,451 100.0% 179,506 100.0% -1.1% \ Million \ Million Policy (non-consolidated) (\ Million) ITO EN 2,665 26 2009/4 2010/4 Gross Profit 89,792 49.5% 87,986 49.0% -2.0% (North America) INC. (2,629) (-253) Second Qr. Second Qr. Tully's Coffee 6,943 353 Lease Expenses Selling Commission 25,873 14.3% 26,005 14.5% 0.5% Japan Co., Ltd (6,933) (218) -506 -1,937 16,865 633 Domestic Subsidiaries Depr. and Amort. Advertising 7,899 4.4% 5,351 3.0% -32.3% (17,490) (742) 453 1,691 852 -14 Other Subsidiaries Interest Expenses Transportation 8,213 4.5% 8,206 4.6% -0.1% (892) (-115) 97 341 Elimination of Internal -17,177 -479 (Lease transactions contracted after Depr. and Amort. 1,265 0.7% 2,456 1.4% 94.1% Transactions (-17,539) (-523) May 2009 were recognized on a balance sheet.) Selling, General and ※( ) is the Second Qr. of FYE April 30, 2009 Administrative Expenses 82,670 45.6% 78,825 43.9% -4.7% Consolidated Operating Income 3.9% 5.1% 28.6% 7,122 9,161 Amortizations of Goodwill (\ Million) Breakdown of Gross Profit Change 2009/4 2010/4 Ordinary Income 7,110 3.9% 8,713 4.9% 22.6% (Non-Consolidated) Second Qr. Second Qr. Extraordinary Expenses For the Year Tully's Coffee Ending -734 - -99 -- Japan Co., Ltd 393 417 and Income Apr. 30, 2010 Net Sales U.S. Subsidiaries Net Income 3,190 1.8% 4,701 2.6% 47.4% \ Billion 60 53 Sales Changes -0.8 Total 454 470 Net Sales 171,045 100.0% 169,357 100.0% -1.0% Changes in Product Mix -1.0 Gross Profit 83,005 48.5% 81,071 47.9% -2.3% Fluctuations in Sales Prices -1.5 Fluctuations in Raw Operating Income 7,053 4.1% 8,642 5.1% 22.5% Material Costs 1.4 Ordinary Income 4.4% 5.2% 17.4% Non-Consolidated 7,461 8,760 - 2 - 3. Annual Forecasts Annual Totals For the Year Ended For the Year Ending Apr. 30, 2009 Apr. 30, 2010 Est. Forecasts of Subsidiaries Sales Sales YOY % For the Year Ending ¥ Million Composition ¥ Million Composition Change Apr. 30, 2010 Est. Operating Net Sales Impact of Changes in Lease Accounting Income Net Sales 332,847 100.0% 335,500 100.0% 0.8% \ Million \ Million Policy (non-consolidated) (\ Million) ITO EN 5,247 0 Gross Profit 163,852 49.2% 163,984 48.9% 0.1% (North America) INC. (4,977) (-399) 2009/4 2010/4 Tully's Coffee 13,860 650 Lease Expenses Selling Commission 47,280 14.2% 47,372 14.1% 0.2% Japan Co., Ltd (13,881) (625) -1,777 -4,474 32,757 1,031 Domestic Subsidiaries Depr. and Amort. Advertising 11,210 3.4% 10,432 3.1% -6.9% (31,751) (1,193) 1,587 3,854 1,758 -83 Other Subsidiaries Interest Expenses Transportation 14,917 4.5% 15,193 4.5% 1.9% (1,669) (-200) 342 770 Elimination of Internal -32,122 -1,098 (Lease transactions contracted after Depr. and Amort. 3,251 1.0% 5,764 1.7% 77.3% Transactions (-32,055) (-833) May 2009 were recoginzed on a balance sheet.) Selling, General and ※( ) is the FYE April 30, 2009 Administrative Expenses 153,239 46.0% 151,984 45.3% -0.8% Consolidated 3.2% 3.6% 13.1% Operating Income 10,613 12,000 Amortizations of Goodwill (\ Million) Breakdown of Gross Profit Change Ordinary Income 10,376 3.1% 11,000 3.3% 6.0%(Non-Consolidated) 2009/4 2010/4 Extraordinary Expenses For the Year Ending Tully's Coffee and Income -597 - -520 -- Apr. 30, 2010 Est. Japan Co., Ltd 786 834 Net Sales U.S. Subsidiaries Net Income 4,765 1.4% 5,200 1.5% 9.1%\ Billion 114 103 Sales Changes0.6 Total 901 938 Net Sales 312,622 100.0% 314,000 100.0% 0.4% Changes in Product Mix -1.8 Fluctuations in -1.9 Gross Profit 150,446 48.1% 150,603 48.0% 0.1% Sales Prices Fluctuations in Raw 3.3 Operating Income 10,227 3.3% 11,500 3.7% 12.4% Material Costs Ordinary Income 3.3% 3.5% 5.3% Non-Consolidated 10,449 11,000 - 3 - 4. Management Strategies Numbers of Customers Management Strategies (Numbers of Sales Compositon by Area Vending Machines & Vending Machines 250,000 and Customers) 228,742 234,817 ~ The severe situation is made the best use 216,408 Chugoku & 198,586 204,175 Shikoku Area Kyushu of as a chance. ~ 200,000 5.7% 7.3% Hokkaido & Tohoku Area Number of Customers 10.4% Product Marketing Strategies 150,000 133,624 137,314 -Oi Ocha towards sales of 100-million cases! 117,124 119,820 123,692 Kansai Area 13.0% -Strengthen brand values of 100,000 TEAS' TEA, TULLY'S COFFEE, and Tennen Mineral Mugicha Chubu Area - Increase contributions from new items Number of Vending 10.0% Kanto Area 50,000 Machines 53.5% Sales & Distribution Basis 0 -Increase the number of customers 2006/4 2007/4 2008/4 2009/4 2010/4 -Diversify product lines Semiannual Period: May to October 2009 -Strengthen field marketing strategies Total -Reinforce vending machine strategies Cash Flows Cost Reductions (\ Million) -Complete cost reduction Net Cash Flow from Operating Activities 20,000 Cash Flow from Investing Activities 15,715 -Improve productivity and cost competitiveness 13,095 11,127 Free Cash Flow 10,000 4,945 5,350 9,890 Oversea Businesses 8,371 - Expand the businesses in the United States, and 0 -3,421 -1,871 improve the profitability -9,221 -4,723 -10,000 -7,222 -5,825 Strategy for Sustainable Growth -14,549 -14,167 -Solidify the business foundation through employee -20,000 training 2006/4 2007/4 2008/4 2009/4 2010/4 -Build new information systems Est. (Started in November 2009) Capital Investments 4,517 4,320 7,085 2,804 1,976 -Share buyback Depr. and Amort. 1,232 1,813 2,330 2,687 3,061 Leased Assets Depr.