Net Sales
Net sales increased ¥15,008 million, or 2.9%, year on year to
¥533,749 million.
By business segment, in the Japanese Alcoholic Beverages segment, sales volumes dropped from the previous fiscal year in beer and beer-type beverages. However, in the International segment, beer sales volume in North America and Vietnam exceeded the previous fiscal year, and the inclusion of Country Pure Foods, Inc. as a consolidated subsidiary led to a sharp gain in sales value. The Food &
Soft Drinks segment saw increased sales volumes in the Japanese food & soft drinks and overseas soft drinks businesses from the previ-ous fiscal year. The stronger sales volumes combined with the benefit of a weaker yen contributed to a sales increase in the International and Food & Soft Drinks segments. The Real Estate segment saw sales decrease, owing to the sale of the Group’s equity stake in Sapporo Sports Plaza Co., Ltd. and several rental properties.
Cost of Sales and Selling, General and Administrative Expenses
Cost of sales increased ¥16,420 million, or 4.9%, year on year to
¥352,808 million.
This mainly reflects the inclusion of Country Pure Foods, Inc. as a consolidated subsidiary and the impact of the yen’s depreciation.
The cost of sales ratio increased 1.3 percentage points to 66.1%, primarily due to an increase in raw material costs in the Japanese Alcoholic Beverages segment, as well as an increase in manufactur-ing costs in the International and Food & Soft Drinks segments.
Selling, general and administrative (SG&A) expenses decreased ¥633 million, or 0.4%, year on year to ¥166,990 million. This was chiefly due to a decline in facility costs and so forth in the Japanese Alcoholic Beverages segment.
Operating Income
Operating income decreased ¥779 million, or 5.3%, year on year to
¥13,950 million.
In the Japanese Alcoholic Beverages segment, a decline in sales of beer and beer-type beverages outweighed the positive impact of further cuts to fixed costs. The Food & Soft Drinks segment posted higher profits reflecting increased sales of food and soft drinks in Japan and soft drinks in overseas markets. The Restaurants segment achieved profit growth as it boosted sales at existing stores. Lastly, the Real Estate segment also achieved profit growth, thanks to an increase in rental income from core properties.
Other Income (Expenses)
Other expenses improved ¥9,775 million year on year to ¥2,259 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 ¥904 million in fiscal 2015. 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 ¥7,453 million owing to the sale of trust beneficiary rights in the Shibuya Sakuragaoka Square office building.
The Company recorded foreign exchange losses of ¥537 million due to the yen’s appreciation.
Loss on disposal of property, plant and equipment of ¥1,534 million was recorded due to disposal of beer and soft drink produc-tion facilities.
Loss on impairment of property, plant and equipment of
¥5,956 million was recorded due to losses associated with the sale of idle real estate and welfare facilities in the Japanese Alcoholic Beverages segment and a decline in profitability at a subsidiary in the International segment.
Loss on devaluation of marketable securities and investments of
¥1,758 million was recorded due to a decline in performance at investees.
Income before Income Taxes and Minority Interests
As a result of the aforementioned and other factors, income before income taxes and minority interests increased ¥8,996 million to¥11,691 million.
Income Taxes and Net Income
Income taxes applicable to the Company, calculated as the sum of corporation, inhabitants’ and enterprise taxes, were ¥5,579 million.
Income taxes accounted for 48% of income before income taxes and minority interests. The difference between this percentage and the statutory effective tax rate of 35% mainly reflected the recording of an amortization of goodwill.
As a result, net income increased ¥5,769 million, or 1,696.6%, year on year to ¥6,109 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 ¥273,652 ¥8,635 ¥8,144 ¥4,608
International 70,501 154 3,381 2,559
Food & Soft Drinks 135,671 434 6,186 5,117
Restaurants 27,004 523 668 844
Real Estate 20,872 8,282 4,202 6,197
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, 2015 stood at ¥620,388 million, down
¥5,051 million, or 0.8%, from a year earlier.
Overall assets declined owing to a decrease in land on the consoli-dated balance sheets following the sale of trust beneficiary rights to the Shibuya Sakuragaoka Square office building, which outweighed the addition of assets from the newly consolidated Country Pure Foods, Inc. and an increase in construction in progress related to the construction of GINZA PLACE.
Liabilities
Financial liabilities decreased ¥12,815 million to ¥234,742 million.
Due to decreases in commercial paper and long-term debt, which outweighed increases in the current portion of long-term debt and income taxes payable, total liabilities decreased ¥8,869 million, or 1.9%, to ¥456,566 million.
Net Assets
Retained earnings increased ¥276 million to ¥35,190 million.
Asset growth was supported by increases in unrealized holding gain on securities and the posting of net income, which were partly offset by a decline in foreign currency translation adjustments and the payment of dividends.
As a result, net assets increased ¥3,818 million from a year earlier to ¥163,822 million.
Cash Flows
Consolidated cash and cash equivalents as of December 31, 2015 were ¥10,399 million, an increase of ¥651 million, or 6.7%, 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 ¥35,266 million, ¥12,981 million, or 58.3%, more than in the previous fiscal year.
Major sources of operating cash flow included ¥11,691 million from income before income taxes and minority interests, ¥24,224 million from depreciation and amortization and ¥5,956 million from loss on impairment of property, plant and equipment and leased assets. These were partially offset by a ¥7,453 million gain on sales of property, plant and equipment.
Cash Flows from Investing Activities
Investing activities used net cash of ¥9,756 million, ¥7,474 million less than the net cash used in the previous fiscal year.
Major investment outflows included purchases of property, plant and equipment of ¥18,298 million, purchases of subsidiaries’ shares resulting in change in scope of consolidation of ¥3,989 million and purchases of affiliates, securities of ¥3,261 million, the sum of which outweighed inflows from proceeds from sales of property, plant and equipment of ¥19,564 million.
Cash Flows from Financing Activities
Financing activities used net cash of ¥24,803 million, ¥17,495 million, or 239.4%, more than the net cash used in the previous fiscal year.
Major inflows included ¥14,319 million in proceeds from long-term debt and ¥9,960 million in proceeds from issuance of bonds. These inflows were more than offset by outflows including a ¥13,000 million net decrease in commercial paper, ¥16,626 million for the repayment of long-term debt, and ¥12,000 million in redemption of bonds.
Cautionary Statement
The Company’s financial statements in English have not been audited by independent auditors. However, the original Japanese financial statements on which they are based have been audited by independent auditors.
Management Indicators
The current ratio fell 6.9 percentage points from 73.8% to 66.9%.
The decline reflects a decline in current assets of ¥8 million and an increase in current liabilities of ¥21,872 million due to factors such as the drawing of short-term bank loans.
The equity ratio rose from 25.0% a year earlier to 25.5%, mainly reflecting increases in unrealized holding gain on securities and net income.
Return on equity (ROE) increased from 0.2% to 3.9%, due to the year-on-year increase in net income.
The debt-to-equity (D/E) ratio, calculated as financial liabilities divided by net assets, decreased from 1.5 to 1.4 in line with the decrease in financial liabilities.
Outlook for 2016
In 2016, the final year of Sapporo Group Management Plan 2016, the Sapporo Group will redouble its efforts to further strengthen the Group foundations and accelerate investment in its growth strategies. These strategies are aimed at fully displaying the special characteristics that position the Sapporo Group as a distinctive food company. Standing on the strong foundation and stable earnings provided by its Japanese Alcoholic Beverages and Real Estate seg-ments, the Sapporo Group will continue investing in the growth of its International and Food & Soft Drinks segments, while also plant-ing the seeds for future growth through continued R&D investment.
Consequently, in its outlook for 2016, the Company is forecasting consolidated net sales of ¥565,400 million (up 5.9% year on year), operating income of ¥21,100 million (up 51.3% year on year), and net income of ¥10,500 million (up 71.9% year on year).
Please see Key Strategies under Sapporo Group Management Plan 2016 on pages 14 to 21 for details on strategies and targets for sales and operating income by segment.
For 2016, the Company plans to maintain an annual dividend of ¥7 per share by steadily executing the management plan, while also making strategic investments and strengthening its financial foundation.
Furthermore, Japanese stock exchanges aim to consolidate 100 shares of common stock of listed domestic companies into single trading units. To comply with this aim and adjust its trading unit to an appropriate level, Sapporo Holdings has decided to change the trading unit of its shares to 100 shares from July 1, 2016, and simulta-neously conduct a consolidation of its common stock at a ratio of one share for five shares. In conjunction with this, the per-share dividend is expected to become ¥35.