Net Sales
Net sales increased ¥8,099 million, or 1.5%, year on year to
¥541,847 million.
By business segment, in the Japanese Alcoholic Beverages segment, the sales volume of beer and beer-type beverages was unchanged year on year, but a higher sales volume affected by factors such as diversified offerings pushed up sales year on year. In the International segment, on the other hand, although sales volume in North America and Vietnam increased year on year and the fruit juice sherbet business acquired by Country Pure Foods, Inc. made a contribution, the impact of exchange rates led to a decrease in sales.
The Food & Soft Drinks segment increased sales and achieved higher sales volumes for its food and beverage products in Japan. In the Restaurants segment, the new consolidation of Marushinkawamura Inc. and Ginrin Suisan Inc. boosted sales. In the Real Estate segment, sales increased thanks to contributors such as GINZA PLACE, which opened in September 2016.
Cost of Sales and Selling, General and Administrative Expenses
Cost of sales decreased ¥387 million, or 0.1%, year on year to
¥352,421 million.
This reflected a decrease in the cost of raw materials in the Japanese Alcoholic Beverages segment and the Food & Soft Drinks segment and the impact of the yen’s appreciation.
The cost of sales ratio decreased 1.1 percentage points to 65.0%, primarily due to a decrease in manufacturing costs in the Japanese Alcoholic Beverages segment, the International segment, and the Food & Soft Drinks segment in line with the decrease in the cost of
Selling, general and administrative (SG&A) expenses increased
¥2,169 million, or 1.3%, year on year to ¥169,159 million. This was chiefly due to an increase in sales promotion expenses in the Japanese Alcoholic Beverages segment.
Operating Income
Operating income increased ¥6,317 million, or 45.3%, year on year to
¥20,267 million.
The Japanese Alcoholic Beverages segment posted an increase in profits as improvements in the product mix with an increase in the sales volume of beer and efforts to reduce costs outweighed an increase in sales promotion expenses. In the International segment, an increase in sales volumes in North America and a reduction in costs contributed to an increase in profits. In the Food & Soft Drinks segment, profits increased atop growth in sales in food and beverages in Japan, despite an increase in sales promotion expenses and logistics expenses. In the Restaurants segment, although the cost margin increased due to a surge in the cost of materials, the Company recorded an increase in profits, partly due to the closure of unprofit-able outlets. In the Real Estate segment, profits grew atop a rise in the occupancy rate at existing rental properties and an increase in rental income due to the opening of GINZA PLACE.
Other Income (Expenses)
Other expenses increased ¥1,605 million year on year to ¥3,864 million.
With regard to net financial income (expenses), calculated as the sum of interest and dividend income minus interest expense, the Company recorded net financial expenses of ¥800 million in fiscal 2016. Net financial expenses improved from the previous year due to a lower interest rate.
The Company recorded a gain on sales of property, plant and equipment of ¥46 million.
The Company recorded a loss on valuation of derivatives of ¥252 million.
Loss on disposal of property, plant and equipment of
¥1,413 million was recorded due to disposal of beer and soft drink production facilities.
Loss on impairment of property, plant and equipment of
¥1,019 million was recorded, mainly due to a decline in profitability of subsidiaries in the Food & Soft Drinks segment and the closure of unprofitable outlets in the Restaurants segment.
Income Taxes and Profit Attributable to Owners of Parent
Income taxes applicable to the Company, calculated as the sum of corporation, inhabitants’ and enterprise taxes, were ¥7,023 million.Income taxes accounted for 42.8% of profit before income taxes.
The difference between this percentage and the statutory effective tax rate of 33.1% mainly reflected the recording of an amortization of goodwill.
As a result, profit attributable to owners of parent increased ¥3,361 million, or 55.0%, year on year to ¥9,469 million.
Segment Information
Millions of yen
Net sales
Operating income
Depreciation and amortization
Increase in property, plant and equipment and intangible fixed assets Japanese Alcoholic
Beverages ¥279,476 ¥11,746 ¥7,222 ¥2,691
International 65,401 907 3,042 2,650
Food & Soft Drinks 137,918 1,314 5,711 8,096
Restaurants 28,120 664 522 1,144
Real Estate 22,900 10,328 4,125 9,649
Assets, Liabilities and Shareholders’ Equity
The Sapporo Group has a cash management system (CMS), which enables Sapporo Holdings to centrally manage fund allocation within the Group in Japan.
The concentration at the Company of cash flows generated by individual Group companies helps preserve fund liquidity, while flex-ible and efficient fund allocation within the Group serves to minimize financial liabilities.
The Company strives to secure fund procurement channels and liquidity to make certain that ample funds are on hand to cover present and future operating activities, as well as the repayment of debts and other funding needs. Necessary funds are procured mainly from cash flows from operating activities and loans, primarily from financial institutions.
Assets
Total assets at December 31, 2016 stood at ¥626,352 million, up
¥5,964 million, or 1.0%, from a year earlier.
The asset growth reflects increases in notes and accounts receivable—trade, land and certain other assets, which offset declines related to goodwill amortization and investment securities.
debt, which outweighed a decrease in short-term bank loans. Total liabilities increased ¥3,405 million, or 0.7%, to ¥459,971 million.
Net Assets
Retained earnings increased ¥6,743 million to ¥41,932 million.
Asset growth was supported by the recording of profit attributable to owners of parent, partially offset by a decline in remeasurements of defined benefit plans and the payment of a year-end dividend.
As a result, net assets increased ¥2,558 million from a year earlier to
¥166,381 million.
Cash Flows
Consolidated cash and cash equivalents as of December 31, 2016 were ¥10,476 million, an increase of ¥76 million, or 0.7%, from the previous fiscal year-end.
Factors behind this decline were as follows.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥32,571 million, ¥2,695 million, or 7.6%, less than in the previous fiscal year.
Major sources of operating cash flow included ¥16,404 million from profit before income taxes and ¥22,342 million from deprecia-tion and amortizadeprecia-tion. These were partially offset by recording ¥10,986 million in income taxes paid.
Cash Flows from Investing Activities
Investing activities used net cash of ¥27,587 million, ¥17,831 million, or 182.8%, more than the net cash used in the previous fiscal year.
Major investment outflows included purchases of property, plant and equipment of ¥19,748 million and purchases of intangibles of
¥2,061 million.
Cash Flows from Financing Activities
Financing activities used net cash of ¥4,828 million, ¥19,975 million, or 80.5%, less than the net cash used in the previous fiscal year.
Major inflows included ¥32,746 million in proceeds from long-term debt and a ¥16,000 million net increase in commercial paper. These inflows were more than offset by outflows including ¥46,595 million for the repayment of long-term debt and ¥10,017 million in redemp-tion of bonds.
financial statements on which they are based have been audited by independent auditors.
Management Indicators
The current ratio rose 10.5 percentage points from 66.9% to 77.4%.
The increase reflects an increase in current assets of ¥7,819 million and a decline in current liabilities of ¥21,521 million due to factors such as a decline in short-term bank loans.
The equity ratio rose from 25.5% a year earlier to 25.7%, mainly reflecting an increase in shareholders’ equity due to the recording of profit attributable to owners of parent, partially offset by the decline in remeasurements of defined benefit plans and the payment of a year-end dividend, among other factors.
Return on equity (ROE) increased from 3.9% to 5.9% due to the year-on-year increase in profit attributable to owners of parent.
The debt-to-equity (D/E) ratio, calculated as financial liabilities divided by net assets, was little changed from the previous fiscal year at 1.5 times as financial liabilities were level with the previous fiscal year.
Outlook for 2017
In 2017, the first year of the Sapporo Group Long-Term Management Vision “SPEED150” and the First Medium-Term Management Plan 2020, the Sapporo Group will endeavor to supply distinctive products and services worldwide in its three core business areas—“Alcoholic beverages,” “Food” and “Soft drinks”—and expand contact points with customers as it strives to achieve robust growth.
Consequently, in its outlook for 2017, the Company is forecasting consolidated net sales of ¥563,800 million (up 4.1% year on year), operating income of ¥21,300 million (up 5.1% year on year), and profit attributable to owners of parent of ¥10,700 million (up 13.0%
year on year).
Please see Key Strategies under the First Medium-Term Management Plan on pages 16 to 23 for details on strategies and targets for sales and operating income by segment.
With regard to returning profits to shareholders, the Company is targeting a dividend payout ratio of 30%(*) as a financial indicator under the First Medium-Term Management Plan. As the dividend from surplus for 2017, the company plans to pay ¥37 per share.
(*) If profit attributable to owners of parent changes significantly because of an extraordinary profit or loss stemming from special factors, the impact from this may be taken into consideration when deciding the dividend amount.