Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2019 [Based on Japanese GAAP] November 7, 2018

Transcription

1 Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2019 [Based on Japanese GAAP] November 7, 2018 Name of Listed Company: Meiji Holdings Co., Ltd. Listed exchange: 1st Section, Tokyo Stock Exchange Code Number: 2269 URL: Representative: Kazuo Kawamura, President and Representative Director Inquiries: Jun Furuta, Member of the Board and Managing Executive Officer, General Manager of PR&IR Dept. Telephone: Submission of quarterly report: November 9, 2018 Dividend payment commencement: December 6, 2018 Preparation of explanatory materials for quarterly financial results: Yes Holding of a briefing on quarterly financial results: Yes (Amounts are rounded down to the nearest million yen.) 1. Consolidated Financial Results for the First Six Months of the Fiscal Year Ending March 31, 2019 (April 1, 2018 to September 30, 2018) (1) Consolidated operating results (% of change from the previous fiscal year) Net Sales Operating Income Ordinary Income Net income attributable to shareholders of parent company First six months ended Millions of yen % Millions of yen % Millions of yen % Millions of yen % September 30, , , , , September 30, , , , , (Note) Comprehensive income: First six months ended September 30, 2018: JPY 43,865 million (19.6%) First six months ended September 30, 2017: JPY 36,673 million (206.1%) Net Income per Share Diluted Net Income per Share First six months ended Yen Yen September 30, September 30, (2) Consolidated financial position Total Assets Net Assets Equity Ratio Net Assets per Share Millions of yen Millions of yen % Yen As of September 30, ,003, , , As of March 31, , , , (Reference) Shareholders equity: As of September 30, 2018: JPY 520,465 million As of March 31, 2018: JPY 487,310 million (Note) We apply the Partial Revisions to Accounting Standards for Tax Effect Accounting (Corporate Accounting Standards No. 28, February 16, 2018) as of the first six months of the current consolidated accounting period. As such, major management benchmarks for the previous consolidated accounting period have been adjusted to retroactively apply said accounting standards. Disclaimer: These financial statements have been prepared in accordance with generally accepted accounting principles in Japan. This English translation is prepared for the reader s convenience. When there are any discrepancies between the original Japanese version and English translation version, the original Japanese version always prevails.

2 2. Dividends Cash Dividends Per Share 1Q 2Q 3Q Financial year end Annual Fiscal year ended (or ending) Yen Yen Yen Yen Yen March 31, March 31, March 31, 2019 (Projected) (Note) Amendment to projected dividends recently announced: None 3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending March 31, 2019 (April 1, 2018 to March 31, 2019) (% of change from the previous fiscal year) Net Sales Operating Income Ordinary Income Net Income attributable to shareholders of parent company Net Income per Share Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen Full year 1,265, , , , (Note) Amendment to forecasts of consolidated financial results recently announced: Yes (Note) For details, refer to page 10 of 1. Qualitative Information (3) Explanation Concerning Forecasts for Consolidated Earnings Notes (1) Changes in significant subsidiaries during the current fiscal year under review (Changes in subsidiaries affecting the scope of consolidation): Yes Added to scope of consolidation (2 companies): KMB Co., Ltd., KM Biologics Co., Ltd. Removed from scope of consolidation (1 company): KMB Co., Ltd. (2) Application of specific accounting treatments in the preparation of quarterly consolidated financial statements: Yes For details, refer to page 17 of 2. Quarterly Consolidated Financial Statements (4) Notes Concerning Quarterly Financial Statements (Adoption of Special Accounting Methods for Preparation of Quarterly Consolidated Financial Statements) (3) Changes in accounting policy, changes in accounting estimates, restatements 1. Changes in accounting policy due to revisions of accounting standards: None 2. Other changes in accounting policy: Yes 3. Changes in accounting estimates: Yes 4. Restatements: None (3) Number of shares outstanding (common stock) 1. Number of shares outstanding at end of period (including treasury stock) As of Sep. 30, ,683,400 shares As of Mar. 31, ,683,400 shares 2. Number of treasury stock at end of period As of Sep. 30, ,648,035 shares As of Mar. 31, ,680,613 shares 3. Average number of shares during period As of Sep. 30, ,012,822 shares As of Sep. 30, ,308,427 shares * The earnings summary is not subject to audit. * Forwardlooking statements and other special notes (Notice concerning forwardlooking statements) The forwardlooking statements described in this document, such as business forecasts, are based on information available at the time of the release of these materials and reasonable assumptions made by the Company, and do not represent a commitment from the Company that they will be achieved. For earnings forecasts assumptions and other related items, refer to page 10 of 1. Qualitative Information (3) Explanation Concerning Forecasts for Consolidated Earnings 2

3 (Explanatory material for financial results) Explanatory materials for financial results are disclosed through TDnet together with these financial statements. This information also is posted on our website on the same day. 3

4 1. Qualitative Information (1) Explanation Concerning Operating Results Meiji group entered the inaugural year of MediumTerm Business Plan for FYE March Based on our basic concept of Address strategic issues continuously and Challenge for the further growth, we began to promote our growth strategy for Expand share and achieve high revenues in core businesses, Expand aggressively in overseas markets and establish growth platform, Propose new value in health care domain, Continue structural reforms and resolve specific business issues in each business, and Enhance Meiji Group management platform and promote CSR. During the FYE March 2019, we expand sales by focusing management resources on core segments and growth segments both in the food and pharmaceutical domains as we work towards the goals of our 2020 MediumTerm Business Plan. Meanwhile, we aggressively expand business in overseas markets. Market conditions are difficult in both segments. The food segment faces rising logistics and personnel expenses while the pharmaceutical segment is severely impacted by NHI pricing revisions. Amid such environments, we manage expenditure effectively and improve productivity. These factors resulted in net sales of JPY billion (up 0.1%, year on year), operating income of JPY billion (down 2.9%, year on year), and ordinary income of JPY billion (down 4.9%, year on year) during the first six months of fiscal year ending March Net income attributable to shareholders of parent company was JPY billion (up 21.9%, year on year). On July 2, 2018, Meiji Holdings and Meiji Seika Pharma Co., Ltd., our business subsidiary, acquired 49% of the shares of KM Biologics Co., Ltd., to make KM Biologics a consolidated subsidiary. KM Biologics took over the main business operations of The ChemoSeroTherapeutic Research Institute in December First six months of First six months of (from Apr. 1, 2017 (from Apr. 1, 2018 to Sep. 30, 2017) to Sep. 30, 2018) FYE March FYE March Change Main factors for Change Net sales Details indicated on segmentspecific overview Operating income Details indicated on segmentspecific overview Equity in income of affiliates (0.3) Foreign exchange gains (0.1) Nonoperating income Nonoperating expenses Foreign exchange losses (+0.5) Ordinary income Extraordinary income Extraordinary losses Income before income taxes Income taxestotal Net income attributable to noncontrolling shareholders Net income attributable to shareholders of parent company Gain on bargain purchase (+6.5) Gain on sales of fixed assets (+3.7) Loss on disaster (+1.0) Impairment loss (+0.8) Loss on retirement of noncurrent assets (0.9) 4

5 Below is an overview by segment. 1) Food segment Net sales decreased year on year. Net sales of processed food business, nutrition business, and overseas business increased year on year. Net sales of fresh and fermented dairy business decreased year on year due to decrease in sales of functional yogurt and drinking milk. Net sales of the confectionery business decreased year on year due to the change in our commercial transaction system and decrease in sales of chocolate. Overall operating income decreased year on year due to decrease in sales of functional yogurt and chocolate. First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) % Change Net sales % Operating income % Analysis of Consolidated Operating Income Q1Q2 Results FYE March Due to increased/decreased sales 2.8 Changes in costs of goods sold +1.5 Changes in other SG&A expenses Other (incl. change in results of subsidiaries) Q1Q2 Results FYE March Below is an overview of each of food segment s main businesses. Fresh and Fermented Dairy Processed Food Confectionery Nutrition Overseas Other Domestic Subsidiaries Corporate Expenses First six months of First six months of FYE March 2018 FYE March 2019 % Change (from Apr. 1, 2017 to (from Apr. 1, 2018 to Sep. 30, 2017) Sep. 30, 2018) Net sales Operating income Net sales Operating income Net sales Operating income Net sales Operating income Net sales Operating income Net sales Operating income Net sales Operating income Fresh and Fermented Dairy business (Yogurt, drinking milk, beverages, etc.) Net sales decreased year on year. Net sales of Meiji Bulgaria Yogurt increased year on year thanks to contributions from revamped plain yogurt. Net sales of functional yogurt and drinking milk decreased year on year. Operating income decreased year on year due to decreased revenues as well as increased logistics expenses. 5

6 Processed Food business (Cheese, butter and margarine, cream, ice cream, frozen food, etc.) Overall net sales increased year on year. Net sales of Meiji Hokkaido Tokachi Camembert Cheese and fresh cream for professional use were favorable. Net sales of ice cream increased year on year thanks to contributions from Meiji Essel Super Cup series. Operating income increased year on year due to increase in sales of our mainstay products. Confectionery business (Chocolate, gummy, chewing gum, etc.) Net sales decreased significantly year on year due to the sales price reduction because of commercial transaction system revised in April 2018, decreased revenues from chocolate, and the cut its sales area for the savory snack Karl implemented in August Operating income decreased significantly year on year due to decrease in sales. Nutrition business (Sports nutrition, infant formula, enteral formula, beauty supplement, OTC drugs, etc.) Net sales increased year on year thanks to the favorable growth of infant formula. Net sales of Meiji Mei Balance series increased year on year. Operating income were largely unchanged year on year. Sales promotion expenses increased, but this was compensated for by higher revenues from mainstay products. Overseas (Overseas subsidiaries, exports) Net sales increased year on year. Among exports business, net sales of infant formula to Vietnam were favorable. Net sales of businesses in China were favorable growth. Operating income increased significantly year on year due to the increase in sales of export business and subsidiaries in China. Taiwan Meiji Food Co., Ltd. was newly consolidated in April Other domestic subsidiaries (Feedstuffs, livestock products, sugar and corn sweeteners, logistics, etc.) Sales were largely unchanged year on year. Sales of our sugar trade subsidiary and our livestock products subsidiary decreased, but this was compensated for by increased revenues from our logistics subsidiary and our feed subsidiary. Operating income decreased significantly year on year due to lower revenues from our livestock subsidiary. 6

7 2) Pharmaceutical segment Net sales increased significantly year on year. Although sales were impacted by NHI pricing revisions enacted in April 2018, sales volume for mainstay products grew in Japan. Strong growth of overseas subsidiaries and sales of KM Biologics consolidated in July 2018, also contributed. Operating income increased significantly year on year. To overcome the impact of NHI pricing revisions, we worked hard to expand sales of domestic mainstay products and to reduce costs. Additionally, income increased significantly thanks to contributions from KM Biologics. First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) % Change Net sales Operating income Q1Q2 Results FYE March 2018 Due to increased/decreased sales Impact of drug price revision Analysis of Consolidated Operating Income Changes in costs of goods sold Changes in other SG&A expenses Other (incl. change in results of subsidiaries) Q1Q2 Results FYE March Below is an overview of each of pharmaceutical segment s main businesses. First six months of First six months of FYE March 2018 FYE March 2019 % Change (from Apr. 1, 2017 to Sep. 30, 2017) (from Apr. 1, 2018 to Sep. 30, 2018) Net sales Japan Operating income Net sales Overseas Operating income Net sales 9.9 Biologicals* Operating income 1.6 (Note) The difference between the sum of net sales/operating income in above table and consolidated net sales/operating are intersegment eliminations. * Refers to KM Biologics Japan Net sales in Japan were largely unchanged year on year. Sales of ethical pharmaceuticals were impacted by NHI pricing revisions, but sales of the schizophrenia drug SYCREST and the antiallergy drug BILANOA grew significantly. Sales of the influenza HA vaccine KMB launched in September 2018 also contributed. Net sales for the agricultural chemicals increased due to the onetime revenues incidental to the licensing agreement with BASF for the new agricultural insecticide AFIDOPYROPEN. Operating income increased significantly year on year. Income was impacted by NHI pricing revisions, but we strived to increase revenues from mainstay products and to reduce costs. A part of R&D expenses were carried over to second half. As of April 2018, we made Me Pharma Co., Ltd. a consolidated subsidiary. 7

8 Overseas Net sales increased significantly year on year. Export sales of antibacterial drug MEIACT and KANAMYCIN increased significantly year on year. Net sales of subsidiaries in India and Indonesia increased significantly year on year. Operating income decreased significantly year on year due to increased costs for export products. Biologicals Net sales were favorable for the mainstay influenza vaccine and the 4way vaccine Quattrovac. Operating income transitioned in line with plans. 8

9 (2) Financial status 1) Assets, Liabilities, and Net Assets As of March 31, 2018 As of Sep. 30, 2018 Change Current assets Fixed assets Total assets , Current liabilities Main Factors for Change Goods and products (+19.0) Notes and accounts receivable (+7.5) Raw materials and supplies (+7.5) Buildings and structures (net) (+18.2) Machinery and equipment (net) (+13.0) Investment securities (+7.5) Construction in progress (+6.3) Commercial paper (+11.0) Shortterm loans payable (8.4) Income taxes payable (1.7) Longterm liabilities Longterm loans payable (+15.1) Total liabilities Shareholders equity Retained earnings (+27.5) Accumulated other comprehensive income Minority interests Total net assets Total liabilities and net assets , Interest bearing debt Equity Ratio (%) pt Valuation difference on availableforsale securities (+5.7) Longterm loans payable (+15.1) Commercial paper (+11.0) Shortterm loans payable (8.4) 2) Status of cash flows Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Cash and cash equivalents at end of period First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) Change Main factors for Change Payments for purchase of shares of subsidiaries resulting in change in scope of consolidation (33.8) Proceeds from sales of property, plant and equipment and intangible fixed assets (+5.7) Proceeds from longterm loans payable (+14.9) Proceeds from share issuance to noncontrolling shareholders (+10.2) Free cash flow

10 (3) Explanation Concerning Forecasts for Consolidated Earnings For our consolidated earnings forecast, we have revised our consolidated earnings forecasts for the fullyear of FYE March 2019 indicated in the Consolidated Financial Results for the Fiscal Year Ended March 31, 2018 published on May 11, Due to the addition of KM Biologics to the scope of consolidation in July 2018, we recorded extraordinary income of JPY 6,584 million as negative goodwill for the first six months of FYE March 2019, which resulted in net sales, operating income, ordinary income, and net income attributable to shareholders of parent company that exceeded our previously published earnings forecasts. Accordingly, we conducted an upward revision for our earnings forecasts. Revisions to Financial Forecasts for the Fiscal Year Ending March 31, 2019 (April 1, 2018 to March 31, 2019) Net income Net sales Operating Ordinary attributable to Net income income income shareholders of per share parent company millions of yen millions of yen millions of yen millions of yen yen Previous forecasts (A) 1,260,000 99,500 99,500 63, Revised forecasts (B) 1,265, , ,000 71, Change (BA) 5,500 1,500 1,500 8,000 Percentage of change (Reference) Actual results for the fiscal year ended March 31, 2018 (April 1, 2017 to March 31, 2018) 1,240,860 94,673 95,877 61,

11 2. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheets (Millions of yen) As of March 31, 2018 As of September 30, 2018 ASSETS Current assets Cash and deposits 27,613 22,829 Notes and accounts receivable 195, ,351 Goods and products 86, ,027 Work in process 3,344 4,411 Raw materials and supplies 46,194 53,756 Others 23,364 25,749 Allowance for doubtful accounts Total current assets 383, ,879 Fixed assets Property, plants and equipment Buildings and structures 319, ,213 Less accumulated depreciation 173, ,874 Buildings and structures (net) 146, ,338 Machinery and equipment 504, ,295 Less accumulated depreciation 372, ,818 Machinery and equipment (net) 132, ,477 Tools and furniture 53,736 55,272 Less accumulated depreciation 42,763 43,030 Tools and furniture (net) 10,972 12,241 Land 71,454 69,816 Lease assets 2,710 2,823 Less accumulated depreciation 2,063 2,130 Lease assets (net) Construction in progress 22,323 28,720 Total property, plants and equipment 383, ,287 Intangible assets Goodwill 10,590 10,482 Other 11,964 13,718 Total intangible assets 22,555 24,201 Investments and other fixed assets Investment securities 90,874 98,440 Net defined benefit asset 20,777 21,491 Other 24,156 22,696 Allowance for doubtful accounts Total investments and other fixed assets 135, ,537 Total fixed assets 542, ,025 Total assets 925,237 1,003,905 11

12 (Millions of yen) As of March 31, 2018 As of September 30, 2018 LIABILITIES Current liabilities Notes and accounts payable 120, ,494 Shortterm loans payable 49,749 41,266 Commercial paper 11,000 Income taxes payable 18,253 16,505 Accrued bonuses for employees 10,857 10,850 Allowance for sales returns Allowance for sales rebates 1,943 1,959 Other current liabilities 93,444 92,166 Total current liabilities 294, ,492 Longterm liabilities Bonds 20,000 20,000 Longterm loans payable 49,353 64,491 Retirement benefit liabilities 50,330 51,168 Reserve for directors retirement benefits Other longterm liabilities 15,797 21,792 Total longterm liabilities 135, ,549 Total liabilities 430, ,041 NET ASSETS Shareholders equity Common stock 30,000 30,000 Capital surplus 99, ,018 Retained earnings 366, ,818 Treasury stock, at cost 30,521 30,404 Total shareholders equity 465, ,433 Accumulated other comprehensive income Net unrealized holding gains or losses on securities 33,188 38,978 Deferred gains or losses on hedges Foreign currency translation adjustments 268 1,343 Adjusted cumulative of retirement benefits 11,689 10,628 Total accumulated other comprehensive income 21,714 27,032 Minority interests 7,866 32,398 Total net assets 495, ,863 Total liabilities and net assets 925,237 1,003,905 12

13 (2) Quarterly Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Quarterly Consolidated Statements of Income) (For the First Six Months Ended September 30, 2018) (Millions of yen) First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) Net sales 611, ,971 Cost of sales 391, ,706 Gross profit 219, ,265 Selling, general and administrative expenses 174, ,425 Operating income 45,127 43,840 Nonoperating income Interest income Dividend income Equity in income of affiliates 317 Foreign exchange gains 147 Other Total nonoperating income 1,942 1,488 Nonoperating expenses Interest expenses Share of loss of entities accounted for using equity method 74 Foreign exchange losses 567 Other Total nonoperating expenses 953 1,455 Ordinary income 46,116 43,873 Extraordinary income Gain on sale of property, plants and equipment 2,672 6,451 Gain on bargain purchase 6,584 Gain on liquidation of subsidiaries 464 Other Total extraordinary income 3,390 13,335 Extraordinary losses Loss on disposal of property, plants and equipment 2,039 1,094 Loss on sales of shares of subsidiaries and associates Impairment loss 114 1,007 Loss on disaster 1,021 Other Total extraordinary losses 2,659 4,103 Income before income taxes 46,847 53,105 Income taxestotal 14,856 14,477 Net income 31,990 38,627 Net income or net losses attributable to noncontrolling shareholders Net income attributable to shareholders of parent company 31,433 38,316 13

14 (Quarterly Consolidated Statements of Comprehensive Income) (For the First Six Months Ended September 30, 2018) First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) (Millions of yen) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) Net income 31,990 38,627 Other comprehensive income Net unrealized holding gains or losses on securities 4,733 5,789 Deferred gains or losses on hedges Foreign currency translation adjustments 1,477 1,147 Adjustments related to retirement benefits 1,230 1,060 Equity in affiliates accounted for by equity method Total other comprehensive income 4,682 5,237 Comprehensive income 36,673 43,865 (Breakdown) Comprehensive income attributable to shareholders of parent company 36,154 43,633 Comprehensive income attributable to minority shareholders

15 (3) Quarterly Consolidated Statements of Cash Flow First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) (Millions of yen) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) Cash flows from operating activities Income before income taxes 46,847 53,105 Depreciation and amortization 22,401 20,652 Impairment loss 114 1,007 Amortization of goodwill Gain on bargain purchase 6,584 Loss on disposal of property, plants and equipment 2,039 1,087 Increase (decrease) in allowance for doubtful accounts Increase (decrease) in accrued bonuses to employees Increase (decrease) in retirement benefit liabilities 1,578 1,746 Interest and dividends received Interest expenses Equity in loss (income) of equitymethod affiliates Loss (gain) on sale of property, plants or equipment 2,647 6,225 Loss (gain) on sale of investment securities Decrease (increase) in trade receivables 11,258 1,998 Decrease (increase) in inventories 9,341 2,429 Increase (decrease) in trade payables 9,518 3,654 Others 4,968 3,414 Subtotal 53,478 53,275 Interest and dividends received Interest expenses paid Income taxes paid 15,103 15,355 Net cash provided by operating activities 38,700 38,347 Cash flows from investing activities Payments for purchases of property, plants or equipment 33,929 32,661 Payments for purchases of intangible fixed assets 906 1,646 Proceeds from sales of property, plants or equipment and intangible fixed assets 3,807 9,553 Proceeds from sales of investments in real estate 1 Payments for purchases of investment securities 1, Proceeds from sales of investment securities Payments for purchase of shares of subsidiaries resulting in change in scope of consolidation 33,879 Others 1,006 1,705 Net cash used in investing activities 32,675 60,228 15

16 First six months of FYE March 2018 (from Apr. 1, 2017 to Sep. 30, 2017) (Millions of yen) First six months of FYE March 2019 (from Apr. 1, 2018 to Sep. 30, 2018) Cash flows from financing activities Increase (decrease) in shortterm bank loans 10, Increase (decrease) in commercial paper 8,000 11,000 Proceeds from longterm loans payable 3,157 18,070 Repayment of longterm loans payable 11,581 11,619 Proceeds from issuance of bonds 9,955 Redemption of bonds 10,000 Decrease (increase) in treasury stock 10, Cash dividends paid 9,499 10,483 Cash dividends paid to minority shareholders Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation Proceeds from share issuance to noncontrolling shareholders 10,200 Others Net cash used in financing activities 11,026 16,610 Translation adjustment on cash and cash equivalents Net increase (decrease) in cash and cash equivalents 5,286 5,534 Cash and cash equivalents at beginning of year 22,624 26,913 Increase in cash and cash equivalents from newly consolidated subsidiary 43 Cash and cash equivalents at end of period 17,338 21,422 16

17 (4) Notes Concerning Quarterly Financial Statements (Notes Concerning the Premise of a Going Concern) Not applicable. (Notes Concerning Significant Changes in Shareholders Equity (if any)) Not applicable. (Adoption of Special Accounting Methods for Preparation of Quarterly Consolidated Financial Statements) Tax expenses are calculated by rationally estimating the effective tax rate after application of tax effect accounting to income before income taxes for the consolidated fiscal year, which includes the current quarter under review, then multiplying income before income taxes by the estimated effective tax rate. Income taxesdeferred are shown included in income taxes. (Changes in Accounting Policy) (Change in accounting policies with unclear distinction from change in accounting estimates) (Change in depreciation method for tangible fixed assets) As of the first quarter of the current consolidated fiscal year, we changed to the use of the straightline method as the method of depreciation for the tangible fixed assets of the manufacturing plants of confectionery products, etc. in the food segment and its domestic consolidated subsidiaries. In the past, the declining balance method was adopted except buildings acquired on or after April 1, 1998 and building accessories and structures acquired on or after April 1, During the 2020 MediumTerm Business Plan for FYE March , the first stage of our 2026 vision, we will expand our market share and increase profit in our core business. For example, market for health conscious chocolate is expanding and we have high competitive advantage in the market. Therefore we concentrate management resources on core business and set up the plan for capital investment. After we examined the operation status of production facilities, we estimated we can operate our facilities stably for longer period. Accordingly we believe applying straightline method is appropriate for our future business. As a result of this change, compared to the previous method, operating income, ordinary income, and net income before income taxes for the first six months of the current fiscal year increased by JPY 2,080 million, respectively. (Additional information) (Application of the Partial Revisions to Accounting Standards for Tax Effect Accounting) We apply the Partial Revisions to Accounting Standards for Tax Effect Accounting (Corporate Accounting Standards No. 28, February 16, 2018) as of the first three months of the current consolidated accounting period. As such, deferred tax assets are indicated under Investments and other assets, and deferred tax liabilities are indicated under fixed liabilities. 17

18 (Segment Information, etc.) 1. The First Six Months of the Previous Consolidated Fiscal Year (April 1, 2017 to September 30, 2017) (1) Information on amounts of sales and income/losses for each reporting segment Net Sales (1) Sales to Outside Customers (2) Intersegment Sales and Transfers Reporting Segments Food Pharmaceuticals Total Adjustments (Note 1) (Millions of yen) Amount Presented in Consolidated Statements of Income (Note 2) 534,038 77, , , Total 534,274 77, , ,494 Income by Segment 40,907 4,354 45, ,127 (Notes) 1. Details of Adjustments are as follows: The segment income adjustment of a negative 133 million yen includes intersegment eliminations of 6 million yen and a negative 139 million yen in corporate expenses that are not allocated to individual reporting segments. Corporate expenses mainly consist of administrative expenses for the Company (the holding company). 2. Segment income is adjusted to the operating income recorded in the quarterly consolidated statements of income. (2) Information on impairment loss on fixed assets or good will, etc., for each reporting segment (Significant impairment loss on fixed assets) There was no significant impairment loss on fixed assets. (Significant changes in the amount of goodwill) There were no significant changes in the amount of goodwill. (Significant gain on negative goodwill) No significant negative goodwill was generated. 18

19 2. The First Six Months of the Consolidated Fiscal Year under Review (April 1, 2018 to September 30, 2018) (1) Information on amounts of sales and income/losses for each reporting segment (Millions of yen) Net Sales (1) Sales to Outside Customers (2) Intersegment Sales and Transfers Reporting Segments Food Pharmaceuticals Total Adjustments (Note 1) Amount Presented in Consolidated Statements of Income(Note 2) 524,617 87, , , Total 524,829 87, , ,971 Income by Segment 39,005 5,115 44, ,840 (Notes) 1. Details of Adjustments are as follows: The segment income adjustment of a negative 280 million yen includes intersegment eliminations of 6 million yen and a negative 287 million yen in corporate expenses that are not allocated to individual reporting segments. Corporate expenses mainly consist of administrative expenses for the Company (the holding company). 2. Segment income is adjusted to the operating income recorded in the quarterly consolidated statements of income. (2) Information concerning assets for each reporting segment During the first six months of FYE March 2019, we acquired a portion of the shares of KM Biologics and added the company to the scope of consolidation. As a result, compared to the end of the previous consolidated fiscal year, the value of reporting segment for the first six months of FYE March 2019 increased by 65,261 million yen in the pharmaceuticals segment. (3) Matters concerning changes to reporting segments (Change to depreciation method for tangible fixed assets) As indicated under Changes in Accounting Policy, as of the first quarter of the current consolidated fiscal year, we changed to the straightline method of depreciation for tangible fixed assets belonging to the food segment for Meiji Co., Ltd. and its domestic consolidated subsidiaries. In the past, the declining balance method was adopted except buildings acquired on or after April 1, 1998 and building accessories and structures acquired on or after April 1, As a result of this change, compared to the previous method, food segment income for the first three months of the current fiscal year increased by JPY 2,080 million. (4) Information on impairment loss on fixed assets or goodwill, etc., for each reporting segment (Significant impairment loss on fixed assets) There was no significant impairment loss on fixed assets. (Significant changes in the amount of goodwill) There were no significant changes in the amount of goodwill. (Significant gain on negative goodwill) During the first six months of FYE March 2019, we acquired shares of KM Biologics and added the company to the scope of consolidation. As a result, we recorded negative goodwill of JPY 6,584 million for the pharmaceuticals segment. 19

20 November 8, 2018 Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2019 Supplementary Explanatory Data Contents 1. Consolidated Financial Results 1 2. Segment Information 4 3. Analysis of Operating Income 6 4. Consolidated Financial Positions 7 5. Capital Expenditures, Depreciation, R&D Expenses 8 6. Financial Indicators, consolidated 8 7. Sales by Main Products 9 8. Other 1. List of New Products Under Development Category Changes Within Segments 12 *This document has been translated from the original Japanese as a guide for nonjapanese investors. *Unaudited figures are included in these materials for reference. *The forwardlooking statements described in this document, such as business forecasts, are based on information available at the time of the release of this presentation and reasonable assumptions made by the Company, and do not represent a commitment from the Company that they will be achieved. The revised plan figures were announced on November 7, Note: On November 8, 2018, we revised the figures of in Net Sales of "Overseas" and "Other Domestic Subsidiaries" for Fullyear plan of FYE March 2019 on page.4.

21 1. Consolidated Financial Results 1. Consolidated Operating Results FYE March 2019 % % % % % (Amounts appearing in the tables below have been rounded down to nearest 100 million yen) Q1 Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 plan vs. plan % % % % % Net sales , Cost of sales Gross profit Selling, general and administrative expenses Carriage and storage charges Sales promotion expenses Labor cost Operating income Ordinary income Net income attributable to owners of parent Fullyear plan vs. Fullyear plan (Q1Q2) Results (Q3Q4) Fullyear % Q1 Q1Q2 Q1Q3 Fullyear FYE March 2018 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) (Q3Q4) Fullyear Net sales , , Cost of sales Gross profit Selling, general and administrative expenses Carriage and storage charges Sales promotion expenses Labor cost % % % % % % % % % % Operating income Ordinary income Net income attributable to owners of parent Note: KM Biologics earnings included beginning from the second quarter of FYE March We also will revise plans for FYE March 2019 (second half, fullyear). % Supplementaly Data 1

22 2. Operating Results of Food Segment FYE March 2019 Q1 Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) Results (Q3Q4) Fullyear % % % % % % % % % % Net sales , Cost of sales Gross profit Selling, general and administrative expenses Carriage and storage charges Sales promotion expenses Labor cost Operating income Ordinary income Net income attributable to owners of parent % Q1 Q1Q2 Q1Q3 Fullyear FYE March 2018 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) (Q3Q4) Fullyear Net sales , , Cost of sales Gross profit Selling, general and administrative expenses Carriage and storage charges Sales promotion expenses Labor cost % % % % % % % % % % Operating income Ordinary income Net income attributable to owners of parent % Supplementaly Data 2

23 3. Operating Results of Pharmaceutical Segment FYE March 2019 Q1 Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) Results (Q3Q4) Fullyear % % % % % % % % % % % Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Ordinary income Net income attributable to owners of parent , Q1 Q1Q2 Q1Q3 Fullyear FYE March 2018 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) (Q3Q4) Fullyear % % % % % % % % % % Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income , Ordinary income Net income attributable to owners of parent Note: KM Biologics earnings included beginning from the second quarter of FYE March We also will revise plans for FYE March 2019 (second half, fullyear). % Supplementaly Data 3

24 2. Segment Information 1. Food Segment A. Net Sales Fresh and Fermented Dairy Processed Food Confectionery Nutritionals Overseas Other Domestic Subsidiaries Fresh and Fermented Dairy Processed Food Confectionery Nutritionals Overseas Other Domestic Subsidiaries B. Operating Income FYE March 2019 FYE March 2018 FYE March 2019 Fresh and Fermented Dairy Processed Food Confectionery Nutritionals Overseas Other Domestic Subsidiaries Corporate expenses Q1 plan % % % % Q1 plan Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 vs. plan Fullyear plan Fullyear % % % % % % % % % % % vs. Fullyear plan % % % % Q1Q2 Q1Q3 Fullyear vs. plan Fullyear plan (Q1Q2) Results (Q3Q4) % % % % % % % % % % % % % % Q1 plan vs. Fullyear plan (Q1Q2) (Q3Q4) Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) Results (Q3Q4) Fullyear Fullyear FYE March 2018 Q1 plan Q1Q2 Q1Q3 Fullyear vs. plan % % % % % % % % % % % Fresh and Fermented Dairy Processed Food Confectionery Nutritionals Overseas Other Domestic Subsidiaries Corporate expenses Note: Under this current classification, the postelimination figure is indicated. Corporate expenses are not allocated to each business. Fullyear plan vs. Fullyear plan (Q1Q2) (Q3Q4) Fullyear Supplementaly Data 4

25 2. Pharmaceutical Segment A. Net Sales Q1 Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 FYE March 2019 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) Results (Q3Q4) Fullyear % % % % % % % % % % % Japan Overseas Biologicals Q1 Q1Q2 Q1Q3 Fullyear FYE March 2018 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) (Q3Q4) Fullyear Japan Overseas % % % % % % % % % % % B. Operating Income Q1 Q1Q2 Q1Q3 Fullyear Plan FYE March 2019 FYE March 2019 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) Results (Q3Q4) Fullyear Japan Overseas Biologicals % % % % % % % % % % % Q1 Q1Q2 Q1Q3 Fullyear FYE March 2018 plan vs. plan Fullyear plan vs. Fullyear plan (Q1Q2) (Q3Q4) Fullyear % % % % % % % % % % Japan Overseas Note: From the second quarter of FYE March 2019, we will indicate earnings and plans for the biological agents business (KM Biologics). Note: The difference between the total for net sales and operating income for each business as indicated on this page and pharmaceutical segment (consolidated) net sales and operating income indicated on page 3 represents intersegment eliminations. % Supplementaly Data 5

26 3. Analysis of Operating Income 1. Results FYE March 2019 Q1 Q1Q2 Q1Q3 Fullyear Consolidated Total Food Pharma Other Consolidated Total Food Pharma Other Consolidated Total Food Pharma Other Consolidated Total Food Pharma Other Results FYE March Due to increased/decreased sales Impact of drug price revision Changes in costs of goods sold Changes in other SG&A expenses Other (incl. change in results of subsidiaries) Total change Results FYE March YoY Change in Operating Income Q1Q2 Results FYE March 2018 Due to increased/decreased sales (Breakdown) *1: [Food] Decrease in raw material costs: +0.9, Other: +0.5 [Pharma] Cost reductions and difference due to inventory reevaluation following a production structure review Impact of drug price revision Changes in costs of goods sold Changes in other SG&A expenses Other (incl. change in results of subsidiaries) Q1Q2 Results FYE March (*1) +1.5 (*2) 1.6 *2: [Food] Increase in promotion expenses: 0.9, Increase in Distribution cost: 0.4, Other: +2.3 [Pharma] Decrease in R&D expenses (Carry over to second half): +0.7, Other: Plan FYE March 2019 Consolidated Total (Q1Q2) Results (Q3Q4) Fullyear Food Pharma Other Consolidated Total Food Pharma Other Consolidated Total Food Pharma Other Results FYE March Due to increased/decreased sales Impact of drug price revision Changes in costs of goods sold Changes in other SG&A expenses Other (incl. change in results of subsidiaries) Total change Plan FYE March Note: KM Biologics earnings included in "Other (incl. change in results of subsidiaries)" of Pharma. Supplementaly Data 6

27 4. Consolidated Financial Positions % % % % Total assets , Current assets Fixed assets Total liabilities Current liabilities Longterm liabilities Total net assets Shareholders' equity Note: Incidental to the Partial Revisions to Accounting Standards for Tax Effect Accounting, the change indicated above is calculated relative to fullyear figures for the previous fiscal year after the retroactive application of these revisions. Consolidated interest bearing debt Food segment assets Pharmaceuticals segment assets Note: KM Biologics earnings included beginning from the second quarter of FYE March Reference FYE March 2019 As of Jun, 30 As of Sep. 30 As of Dec. 31 As of Mar. 31 Change from the previous fiscal year end Change from the previous fiscal year end Change from the previous fiscal year end Change from the previous fiscal year end FYE March 2018 As of Jun, 30 As of Sep. 30 As of Dec. 31 As of Mar. 31 Change from the previous fiscal year end Change from the previous fiscal year end Change from the previous fiscal year end Change from the previous fiscal year end % % % % Total assets Current assets Fixed assets Total liabilities Current liabilities Longterm liabilities Total net assets Shareholders' equity Reference Consolidated interest bearing debt Food segment assets Pharmaceuticals segment assets Supplementaly Data 7

28 5. Capital Expenditures, Depreciation, R&D Expenses FYE March 2016 FYE March 2017 FYE March 2018 (Q1Q2) Fullyear (Q1Q2) Fullyear (Q1Q2) Fullyear FYE March 2019 (Q1Q2) Results Fullyear Capital expenditures Food segment Pharmaceutical segment Corporate or elimination Depreciation and amortization Food segment Pharmaceutical segment Corporate or elimination R&D expenses Food segment Pharmaceutical segment Corporate or elimination Note: KM Biologics earnings included in the results of first half and full year plan of FYE March Financial Indicators, consolidated FYE March 2015 FYE March 2016 FYE March 2017 Fullyear Fullyear Fullyear FYE March 2018 Fullyear Net sales 1,161.1 billion yen 1,223.7 billion yen 1,242.4 billion yen 1,240.8 billion yen Operating income 51.5 billion yen 77.7 billion yen 88.3 billion yen Operating income ratio 4.4 % 6.4 % 7.1 % EBITDA 94.0 billion yen billion yen billion yen EBITDA margin 8.1 % 9.9 % 10.9 % Net income attributable to shareholders of parent company 30.8 billion yen 62.5 billion yen 60.7 billion yen Net income ratio 2.7 % 5.1 % 4.9 % Total assets billion yen billion yen billion yen Interest bearing debt billion yen billion yen billion yen Shareholders' equity billion yen billion yen billion yen Shareholders' equity ratio 42.2 % 47.8 % 50.8 % Debt/Equity ratio 0.6 % 0.4 % 0.3 % ROA 6.5 % 9.4 % 10.2 % ROE 8.9 % 16.1 % 14.2 % Cash flows from operating activities 86.4 billion yen billion yen 81.8 billion yen Cash flows from investing activities 92.8 billion yen 9.8 billion yen 44.2 billion yen Free cash flows 6.3 billion yen 95.3 billion yen 37.5 billion yen Net income per share yen yen yen Net assets per share 2, yen 2, yen 3, yen Cash flow per share yen yen yen Cash dividends per share yen yen yen Dividend payout ratio 23.8 % 21.2 % 26.6 % Price/Earnings ratioper 34.9 times 21.3 times 22.4 times Price/Book value ratiopbr 2.9 times 3.3 times 3.0 times Price/Cash flow ratiopcfr 14.8 times 12.7 times 12.7 times 94.6 billion yen 7.6 % billion yen 11.5 % 61.2 billion yen (Note) (Note) (Note) (Note) (Note) (Note) (Note) (Note) (Note) (Note) Op. income + Depreciation and amortization Ordinary income/average net assets Cash flows from operating activities + Cash flows from investing activities Net income attributable to shareholders of parent company / (Number of shares outstanding Number of treasury stock) (Total net assets Noncontrolling interests) / (Number of shares outstanding Number of treasury stock) (Net income attributable to shareholders of parent company + Depreciation and Amortization) / (Number of shares outstanding Number of treasury stock) Yearend stock price/net income per share Yearend stock price/net assets per share Yearend stock price/cash flow per share Note: The above figures per share are calculated by retroactively applying the number of shares resulting from the stock split conducted on October 1, % billion yen billion yen billion yen 52.5 % 0.2 % 10.6 % 13.1 % billion yen 64.3 billion yen 44.3 billion yen yen 3, yen yen yen 30.8 % 19.1 times 2.4 times 10.8 times Net income attributable to shareholders of parent company/average shareholders' equity Supplementaly Data 8