Fiscal year ended May 31, 2014 (year on year, percentage changes)
Consolidated net sales up 7.3% to ¥53,922 million; operating income up 66.2% to
¥3,687 million; ordinary income up 9.7% to ¥3,909 million; and net income down 13.5% to ¥2,681 million.
Economic and other factors affecting operations 1. Global economy
The U.S. economic recovery continued, led by strong consumer spending.
In Europe, economic growth was positive for 4 consecutive quarters.
Shareholders' equity Year ended May 31, 2013;
Millions of yen Capital stock Capital surplus Retained earnings Treasury shares
Total shareholders' equity Balance at beginning of current
period
13,500 10,823 56,640 (4,467) 76,495
Changes of items during period
Dividends of surplus (900) (900)
Net income 3,098 3,098
Purchase of treasury shares
(1) (1) Disposal of treasury shares
Net changes of items other than shareholders' equity Total changes of items during period
- - 2,198 (1) 2,197
Balance at end of current period
13,500 10,823 58,838 (4,468) 78,693
Accumulated other comprehensive income
Year ended May 31, 2013;
Millions of yen
Valuation difference on available-for- sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive
income Minority interests Total net assets Balance at beginning of current
period
(7) (5,083) - (5,091) 89 71,494
Changes of items during period
Dividends of surplus (900)
Net income 3,098
Purchase of treasury
shares (1)
Disposal of treasury shares
-Net changes of items other than shareholders' equity
2,124 1,851 - 3,975 19 3,994
Total changes of items during period
2,124 1,851 - 3,975 19 6,192
Balance at end of current period
2,117 (3,232) - (1,115) 108 77,686
The slowdown continued in China, while high inflation curbed growth in other developing countries such as India and Brazil.
2. Domestic economy
Growth was robust in Japan, supported by rising business investment, a surge in exports due to the yen’s depreciation and firm consumer spending.
Demand fell sharply toward the end of the fiscal year following a hike in the consumption tax in April 2014, which pulled demand to be pulled forward.
3. Industry trends and impact on the Sakata Group
The economic expansion contributed to higher sales of vegetable seeds, seedlings and horticultural products in domestic wholesaling operations.
In overseas wholesaling operations, sales of vegetable seeds were higher than in the previous year.
The Group’s retailing operations struggled due to the impact of unusually hot summer weather in 2013 and heavy snowfalls in February 2014.
4. Financial factors
Foreign exchange losses of ¥269 million were recorded (compared with foreign exchange gains of ¥795 million in the previous year).
The gain on sales of investment securities decreased by ¥560 million.
Income taxes - current increased by ¥154 million.
Business segment review
1. Domestic wholesaling: net sales up 3.2% to ¥16,348 million; operating income up 3.5% to ¥5,814 million
The consumption tax hike of April 2014 pulled demand for vegetable seeds, flower seeds and horticultural products forward.
Vegetable seeds: strong sellers included tomatoes and broccoli, with sales growth also seen for sweet corn, leeks and spinach.
Flower seeds: good sellers included stock, lisianthus and sunflower, although sales of some varieties of seeds for potted plants, garden beds and seedlings stagnated.
Seedlings: higher sales achieved by tomato grafted seedlings, melon seedlings and cucumber seedlings.
Horticultural products: strong sales recorded for greenhouse materials, films for agricultural use, high-grade liquid fertilizers and other strategic products.
2. Overseas wholesaling: net sales up 19.1% to ¥26,405 million; operating income up 58.4% to ¥6,009 million
Sales grew substantially across all product lines.
Performance by region:
1) Asia: strong sales growth seen in exports of seeds for broccoli, spinach and lisianthus.
2) North America: higher sales of broccoli and other vegetable seeds helped to offset lower sales of flower seeds.
3) Europe: growth in sales of broccoli, tomatoes, squash and other vegetable seeds
4) South America: higher sales of vegetable seeds
Performance by product:
1) Vegetable seeds: top performers were broccoli, squash, tomatoes and spinach.
2) Flower seeds: sales were boosted by the yen’s depreciation but declined in local currency terms in North America and Europe.
3. Retailing: net sales down 10.4% to ¥10,331 million; operating loss of ¥375 million, down ¥7 million from the previous-year loss of ¥383 million
Home gardening:
1) Sales fell significantly due to record-breaking hot weather in the summer of 2013, followed by a rapid cooling of temperatures in the autumn and fairly heavy snowfalls in February 2014 across eastern Japan.
2) Restricting sales of unprofitable merchandise also led to reduced sales.
3) Efforts to reduce distribution costs and cut SG&A expenses could not fully offset the reduction in gross profit due to lower sales revenues.
Mail order: a redesign of the monthly catalog helped to boost sales of original vegetable, flower seedlings, but the unseasonable weather had a negative impact on sales of vegetable seeds, flower seeds, perennials and flower and tree seedlings.
Garden centers: operations generally struggled amid the hot summer, cold autumn and heavy snows in February, but renovations of March 2013 helped to
augment customer traffic in conjunction with new operations of a fresh fruit and vegetable section and a café. The total visitor number for the year was up 5%. The November 2013 launch of an online shopping site helped to grow sales by attracting orders from new customers.
4. Other businesses: net sales up 12.0% to ¥836 million; operating loss of ¥18 million, down ¥5 million from the previous-year loss of ¥24 million
Landscaping and garden construction work for clients in the public and private sectors generated positive year-on-year growth in sales.
Fiscal year ended May 31, 2013 (year on year, percentage changes)
Net sales up 7.0%, to ¥50,274 million; operating income down 13.4%, to ¥2,219 million; ordinary profit up 23.0%, to ¥3,564 million; and net income up 62.8%, to
¥3,098 million.
Economic and other factors affecting operations 1. Global economy
Steady growth maintained in the United States, led by consumer spending, employment and housing investment
In Europe, a worsening economic decline, with nations enforcing fiscal austerity in the face of sovereign debt problems and capital investment and consumer spending remaining sluggish.
Decelerating growth in emerging nations—China, Brazil and India all trending lower
2. Japanese economy—impacts of the new government’s economic policies
In financial markets, a further weakening of the yen coupled with ongoing gains in equity prices
In the real economy, signs of recovery in exports and personal consumption 3. Industry trends and their impacts on the Sakata Group: continued constrained
domestic demand, accompanied by ongoing strong demand for vegetable and flower seeds in emerging nations
In Japan, both wholesaling and retailing were severely impacted by adverse weather.
1) Extreme heat and torrential rains during summer–autumn of 2012 2) A sudden drop in temperatures at the end of autumn
3) Heavy snow in northern Japan
Positive trends in overseas wholesaling of vegetable and flower seeds
4. Financial factors
Impacting ordinary profit: foreign exchange gains of ¥795 million
Impacting pre-tax income:
1) Gains on sales of fixed assets of ¥193 million
2) Gains on sales of investment securities of ¥697 million
3) No recognition of losses on valuation of investment securities, in contrast to the recognition of ¥377 million in losses for the year ended May 2012 Segment information by business
1. Wholesaling, domestic: net sales down 0.3% to ¥15,834 million; operating income down 6.7% to ¥5,616 million
Vegetable seeds: sales of tomatoes were brisk, one bright spot among an overall sluggishness in sales of vegetable seeds.
Flower seeds: while pansies declined, the following benefited from the introduction of new varieties: primulas, marigolds, stock, zinnia and gypsophila.
Seedlings: sales were higher overall, notably for tomato grafted seedlings and lisianthus and pansy plug seedlings.
Horticultural products: higher year-on-year sales, led by high-grade liquid fertilizers, Plant Plugs, agricultural chemicals and greenhouse materials 2. Wholesaling, overseas: net sales up 19.6%, to ¥22,167 million; operating income
up 17.8%, to ¥3,793 million
In addition to higher sales in local currencies, sales expressed in yen for each region were boosted significantly by the yen’s decline, which began at the end of 2012.
By region:
1) Exports to Asia up, primarily because of stronger sales of carrots 2) North America: despite sharply higher sales of vegetable seeds,
profitability was held down by a steep reduction in seed production caused by poor weather.
3) Europe: sales of both vegetable and flower seeds were strong, contributing to higher revenues.
4) South America: year-on-year growth in sales due to strong sales of vegetable seeds
By product—vegetable seeds: major contributors to sales growth included broccoli, tomatoes, squash and carrots.
By product—flower seeds:
1) North America: higher sales of pansies, sunflowers
2) Europe: higher sales of lisianthus, pansies, sunflowers and petunias
3. Retailing: net sales down 2.6%, to ¥11,525 million; operating loss widened to ¥383 million from ¥171 million in the year-earlier period.
Home gardening
1) Sales, particularly of horticultural materials, were impacted by
unseasonable weather—an autumn heat wave, which shortened the fall home gardening season by around one month, and heavy snows during the winter in eastern Japan and areas to the north, followed by lingering cold weather in the spring.
2) Sales were also negatively affected by the Company’s deliberate reduction of sales of unprofitable merchandise.
3) Profits were impacted by a one-time increase in SG&A expenses
associated with the Company’s reassessment of its distribution system for the home gardening business.
Mail order: a successful magazine-based advertising campaign led to higher sales of flower seeds, bulbs for autumn planting, and vegetable and flower seedlings; but these improvements were offset by weak sales of bulbs for spring planting, other flower seedlings and vegetable seeds—with a resulting overall decline in sales.
Garden center: in addition to the impacts of unseasonable weather, sales were affected by a decline in sales of “green curtain” products and premium packet seeds in the corporate markets, which contributed to solid increases in the previous year; they were also impacted by a temporary closure of the center for renovations (notwithstanding an increase in customer traffic in the three-month period from March to May following reopening).
4. Other businesses: net sales up by 1.4%, to ¥747 million; but operating loss of ¥24 million, falling from plus ¥5 million for the year-earlier period