Net Sales
Net sales increased ¥17,344 million, or 3.5%, year on year, to ¥509,835 million.
By business segment, Japanese Alcoholic Beverages saw a 1.8%
year-on-year increase in net sales to ¥274,909 million. This was primarily due to a year-over-year increase in sales volumes of beer and beer-type beverages and steady sales growth in wine, Western spirits and shochu, laying the foundations for the multilayering of products.
The International Business saw a 33.5% year-on-year increase in net sales to ¥48,216 million. The main factors behind this were continued growth from sales in North America and Vietnam and the positive impact of yen depreciation.
The Food & Soft Drinks segment saw a 1.3% year-on-year increase in net sales to ¥130,672 million. This rise can be attributed mainly to the net increase in income of a newly consolidated subsidiary, which offset decreased sales of domestic food & soft drinks following consolidation of the product line-up associated with integration.
The Restaurants segment saw a 0.8% year-on-year increase in net sales to ¥26,827 million. This was mainly attributable to favorable sales at existing restaurants and new restaurants.
The Real Estate segment posted sales of ¥22,768 million, down 1.9% year over year. This fall was primarily due to a decline in rental income associated with the redevelopment of Sapporo Ebisu Building (tentative name).
Cost of Sales
Cost of sales increased ¥16,488 million, or 5.3%, year on year to
¥329,606 million.
The cost of sales ratio increased 1.1 percentage points to 64.7%, primarily due to a fall in the component ratio of the Food & Soft Drinks business, which has a low cost of sales ratio.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses decreased ¥74 million year on year to ¥164,885 million. This fall was chiefly due to cost reductions in the Japanese alcoholic beverages business.
Operating Income
Operating income increased ¥929 million, or 6.5%, year on year to
¥15,344 million.
Profit growth was supported by higher sales at the Japanese Alcoholic Beverage business coupled with reduced marketing expenses. The International Business’ sales growth in North American
and Vietnam also contributed to higher profits. The Real Estate business, however, saw profit decline owing to a decline in rental income caused by redevelopment of Seiwa Yebisu Building, which is scheduled to reopen in September 2014 as the Sapporo Ebisu Building (tentative name). Profits were also lower at the Food & Soft Drinks business, mainly owing to the reduction in its product lineup in line with business integration.
Other Income (Expenses)
Other income was ¥1,218 million, compared with other expense of
¥3,903 million in the previous year.
With regard to net financial income (expenses), calculated as the sum of interest and dividend income minus interest expense, the Company recorded expenses of ¥1,661 million in fiscal 2013. Net financial expenses improved from the previous year due to a decrease in financial liabilities and a lower interest rate.
The Company recorded a foreign exchange gain from the depreci-ating yen of ¥849 million and a gain on sales of investment securities of ¥3,492 million. A loss on disposal of property, plant and equipment of ¥1,158 million was recorded mainly due to the demolition of a beer production facility and soft drinks production facility.
An impairment loss of ¥426 million was recorded due to a decrease in the profitability of beer manufacturing facilities as a result of a review of the manufacturing system in the International business and the closure of unprofitable restaurants in the Food & Soft Drinks business and the Restaurants business.
Business structure improvement expenses of ¥253 million were recorded due to expenses for the review of the manufacturing system in the International business and expenses for the reorganization of the Food & Soft Drinks business.
Income before Income Taxes and Minority Interests
As a result of the aforementioned and other factors, income before income taxes and minority interests increased ¥6,050 million to¥16,562 million.
Income Taxes and Net Income
Income taxes applicable to the Company, calculated as the sum of corporation, inhabitants’ and enterprise taxes, were ¥7,143 million.
Income taxes accounted for 43.1% of income before income taxes and minority interests. The difference between this percentage and the statutory effective tax rate of 38.0% mainly reflected the recording of a valuation allowance.
As a result, net income increased ¥4,058 million, or 75.2%, year on year to ¥9,452 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 ¥274,909 ¥9,902 ¥8,684 ¥2,124
International 48,216 1208 1,856 2,219
Food & Soft Drinks 130,672 (1,483) 6,777 8,517
Restaurants 26,827 415 643 813
Real Estate 22,768 8,686 4,412 4,467
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 pres-ent and future operating activities, as well as the repaympres-ent 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, 2013 stood at ¥616,753 million, up
¥19,116 million, or 3.2%, from a year ago.
The increase mainly reflected an increase in notes and account receivable—trade, investment securities, and other factors, which more than offset a decrease in intangible fixed assets related to the amortization of goodwill.
Liabilities
Financial liabilities decreased ¥9,818 million to ¥247,828 million.
Due to a decrease in commercial paper and deposits received, which were partially offset by an increase in short-term bank loans, total liabilities decreased ¥1,303 million, or 0.3%, to ¥461,386 million.
Management’s Discussion and Analysis
Net Assets
Retained earnings increased ¥6,016 million to ¥37,409 million.
Asset growth was supported by an increase in unrealized gains on securities and in the foreign currency translation adjustment account, as well as posting of net income for fiscal 2013.
As a result, net assets increased ¥20,420 million from a year earlier to ¥155,367 million.
Cash Flows
Consolidated cash and cash equivalents as of December 31, 2013 were ¥11,519 million, an increase of ¥1,793 million, or 18.4%, from the previous fiscal year-end. Factors behind this increase were as follows.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥32,862 million, ¥3,244 million, or 11.0%, higher than in the previous fiscal year.
The main contributors were income before income taxes and minority interests of ¥16,562 million and depreciation and amortiza-tion of ¥25,059 million. These were partially offset by a ¥2,315 million increase in notes and accounts receivable, a ¥1,653 million decrease in deposits received, a ¥7,915 million paid income taxes.
Cash Flows from Investing Activities
Investing activities used net cash of ¥13,268 million, a decrease of
¥46,218 million from the net cash used in the previous fiscal year.
This change mainly reflected a ¥12,244 million for purchases of property, plant and equipment, a ¥1,525 million for purchases of intangibles and other factors. These were partially offset by ¥4,436 million in proceeds from sales of investment securities.
Cash Flows from Financing Activities
Financing activities used net cash of ¥19,147 million, a change of
¥49,307 million from the net cash provided by in the previous fiscal year.
This change mainly reflected a net decrease in commercial paper of ¥22,000 million, a ¥21,964 million repayment of long-term debt and a payment of ¥10,000 million for redemption of bonds. These were partially offset by ¥32,250 million in proceeds from long-term debt and ¥19,920 million in proceeds from the issuance 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 rose 7.9 percentage points from 56.9% to 64.8%. This was the combined result of a ¥9,078 million increase in total current assets, which mainly reflected the increase in notes and account receivable, and a ¥15,838 million decrease in current liabilities, which mainly reflected the redemption of commercial paper.
The equity ratio rose from 22.1% a year earlier to 24.6%, mainly reflecting increases in retained earnings and unrealized gains on securities holdings.
Return on equity (ROE) increased from 4.2% to 6.7%, 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 1.9 to 1.6 in line with the increase in net assets.
Outlook for 2014
The Group will continue to work toward the goals for 2016 outlined in the Sapporo Group’s New Management Framework by accelerating the implementation of its four growth strategies—“Create high-value-added products and services,” “Form strategic alliances,” “Promote international expansion,” and “Expand group synergies.” In 2014 and the following two years, we will strive to realize our goals for 2016 by accelerating growth strategies as a “manufacturer of food products”
and realizing sustainable growth. In 2014, we will undertake invest-ments targeted at higher profits in 2015 and beyond and strive for higher levels of consolidated sales.
Consequently, the Company is forecasting consolidated net sales of ¥537,700 million, (up 5.5% year on year), operating income of ¥15,000 million (down 2.2% year on year), and net income of
¥5,000 million (down 47.1% year on year). Please see pages 20 to 27, Management Plan 2014–2016 Key Points for details on targets for sales and operating income by segment, and strategies.
For 2014, the Company plans to maintain annual dividends of ¥7 per share by steadily executing the Sapporo Group Management Plan, while also making strategic investments and strengthening its financial foundation.