YUHO
REPORT
Fiscal Year Ended May 31, 2017
Traded TSE1
This report is based on the Company’s Japanese-language annual filing with the Financial Services Agency and supplemented with materials that facilitate comparison with the Company’s peers. The materials from the annual filing with the Financial Services Agency have been edited and reorganized in a format more familiar to the international investment community. All information contained in this report has been obtained from sources believed to be reliable, but the accuracy of the data and the translation and the completeness and timeliness of the information are not warranted by the Company, Pacific Associates, or PRONEXUS. None of the above parties shall be responsible for any error or omission or for results obtained from the use of this information.
Table of Contents
Profile ... 3
Financial highlights ... 3
Peer comparisons ... 3
Business Overview ... 4
Contents of business ... 4
Group companies ... 6
History ... 7
Business policies ... 9
Risk factors ... 9
Operating environment and issues requiring action ... 11
Research and development ... 12
Analysis of financial condition and results of operations ... 13
Corporate governance ... 16
Directors ... 31
Employees ... 32
Union ... 32
Acquisition of treasury shares ... 32
Cash Flows ... 34
Consolidated statement of cash flows ... 34
Capital expenditures ... 35
Dividend policy ... 36
Operations ... 38
Consolidated statement of income ... 38
Consolidated statement of comprehensive income ... 39
Consolidated statement of changes in equity ... 40
Results of operations ... 42
Segment information ... 47
Sales and procurement ... 50
Selling, general and administrative expenses... 50
Capital Structure ... 51
Consolidated balance sheet ... 51
Financial instruments ... 54
Market value of securities ... 57
Derivatives ... 58
Retirement benefits ... 59
Deferred taxes ... 62
Accounting Policies ... 63
Share-related Information ... 65
Profile
Financial highlights
Years ended May 31; Millions of yen 2013 2014 2015 2016 2017 Changes (%)2017/2013
Consolidated
Net sales 50,274 53,922 56,707 58,773 61,844 123.0 Ordinary profit 3,564 3,909 5,808 7,555 8,250 231.5 Profit attributable to owners of parent 3,098 2,681 3,820 5,215 6,112 197.3 Comprehensive income 7,082 4,871 7,440 2,543 6,351 89.7 Net assets 77,686 81,399 87,410 88,886 94,093 121.1 Total assets 89,787 96,414 105,313 108,859 116,169 129.4 Net assets per share (Yen) 1,723.66 1,805.74 1,939.37 1,972.00 2,087.33 121.1 Basic earnings per share (Yen) 68.86 59.58 84.90 115.90 135.83 197.3 Diluted earnings per share (Yen) - - - - -
Net cash provided by (used in) operating activities 715 3,552 4,136 4,384 7,613 1,064.8 Net cash provided by (used in) investing activities 555 (2,018) (1,844) (3,430) (2,901)
Net cash provided by (used in) financing activities (1,082) 41 (945) 335 (2,016)
Cash and cash equivalents at year-end 7,233 9,162 10,639 11,497 14,134 195.4 Employees 1,998 2,038 2,105 2,186 2,275 113.9
Peer comparisons
Percentage 2013 2014 2015 2016 2017
Profit attributable to owners of parent / net sales 6.2 5.0 6.7 8.9 9.9
Peers 1.3 2.5 2.8 1.2 (0.4)
Ordinary profit / net sales 7.1 7.2 10.2 12.9 13.3
Peers 3.2 4.6 4.4 2.5 1.3
Profit attributable to owners of parent / assets 3.6 2.9 3.8 4.9 5.4
Peers 0.9 3.7 3.4 0.1 (6.3)
Ordinary profit / assets 4.1 4.2 5.8 7.1 7.3
Peers 3.6 7.1 5.4 1.8 (1.4)
Equity / assets 86.4 84.3 82.9 81.5 80.9
Peers 50.5 48.3 49.3 47.0 43.5
Profit attributable to owners of parent / equity 4.2 3.4 4.5 5.9 6.7
Peers 3.6 7.6 7.6 1.9 (7.8)
Business Overview
Contents of business
The Corporate Group, composed of Sakata Seed Corporation (“the Company”), 32 subsidiaries and 1 affiliated company, is engaged in selling horticultural products and materials (vegetable seeds, flower seeds, bulbs, seedlings and agricultural and
horticultural products).
The Group’s businesses and the relationship of the Company and its subsidiaries and affiliated company to these businesses are outlined below.
1. Domestic wholesaling (the Company and 7 subsidiaries)
This division produces or procures vegetable seeds, flower seeds, bulbs, seedlings, and agricultural and horticultural products and wholesales these products to
distributors, etc., in Japan.
2. Overseas wholesaling (the Company and 24 subsidiaries)
This division produces or procures vegetable seeds, flower seeds, bulbs, seedlings, and agricultural and horticultural products and wholesales these products to
distributors, etc., overseas. 3. Retailing (the Company)
The retailing division procures products for gardening hobbyists and sells them to home improvement retailers in Japan. It also operates a mail-order sales business and a garden shop.
4. Others (the Company and 2 subsidiaries)
This division provides landscaping construction services for clients in the public and private sectors, and operates a temporary staffing agency. It also grows, processes and sells agricultural products.
Principal operations Main companies involved
Domestic wholesaling
Wholesaling of seeds and agricultural and horticultural products to distributors and other producers
(Products: vegetable seeds, flower seeds, bulbs and seedlings) 3 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiaries)
Sakata Logistics Co., Ltd., Brolead Co., Ltd.
Wholesaling of agricultural and horticultural products to distributors and other producers
(Products: agricultural and horticultural materials) 2 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiary)
Jiffy Pot Products Co. of Japan, Ltd.
Production of seeds and agricultural and horticultural products for distributors and other producers
(Products: vegetable seeds, flower seeds, bulbs and seedlings) 4 companies
(Consolidated subsidiaries)
Yamagata Celltop Co., Ltd., Nagano Celltop Co., Ltd., Hida Celltop Co., Ltd., Fukuoka Celltop Co., Ltd.
Overseas wholesaling
Wholesaling of seeds and agricultural and horticultural products to distributors and other producers
(Products: vegetable seeds, flower seeds, bulbs and seedlings) 22 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiaries)
Sakata Seed America, Inc., Sakata Seed de Mexico, S.A., Sakata Centroamerica, S.A., Sakata Seed de Guatemala S.A., Sakata Seed Sudamerica Ltda., Sakata Korea Co., Ltd., Sakata Vegetables Europe S.A.S., Sakata Ornamentals Europe A/S, Sakata Holland B.V., Sakata Seed Iberica S.L., Sakata UK Limited, Sakata Seed Southern Africa (Pty) Ltd., Sakata Seed India Private Limited and 7 other companies
(Affiliated company) Domina S.R.L. Production of seeds for distributors and other producers
(Products: vegetable seeds, flower seeds, bulbs and seedlings) 3 companies
(Consolidated subsidiaries)
Sakata Seed Chile S.A., Sakata Siam Seed Co., Ltd., Sakata Seed (Suzhou) Co., Ltd.
Retailing
Selling to gardening hobbyists through home improvement retailers
The Company SAKATA SEED CORPORATION
Mail-order sales, garden shop
The Company SAKATA SEED CORPORATION
Others
Landscaping, temporary staffing agency, cultivation of agricultural products
3 companies, including the Company
SAKATA SEED CORPORATION (Consolidated subsidiaries)
Group companies
Millions of yen or as indicated Capital stock Percent ownership
Sakata Logistics Co., Ltd. 30 100
Brolead Co., Ltd. 50 100
Yamagata Celltop Co., Ltd. 50 100
Nagano Celltop Co., Ltd. 60 100
Hida Celltop Co., Ltd. 70 62
Fukuoka Celltop Co., Ltd. 100 100
Jiffy Pot Products Co. of Japan, Ltd. 18 100
Sakata Techno Service Ltd. 13 100
Taneto Farm Co., Ltd. 50 100
Sakata America Holding Company Inc. US$ 4,907 thousand 100
Sakata Seed America, Inc. US$ 1,500 thousand 100
Sakata Seed de Mexico, S.A. Mex$ 26,013 thousand 100
Sakata Mexico, S.A. Mex$ 50 thousand 100
Grupo Sakata Seed de Mexico, S.A. de C.V. Mex$ 23,833 thousand 100
Sakata Centroamerica, S.A. CRC 10 million 100
Sakata Seed de Guatemala S.A. GTQ 1,541 thousand 100
Alfco, LLC US$ 0 thousand 100
European Sakata Holding S.A.S. EUR 49,671 thousand 100
Sakata Holland B.V. EUR 420 thousand 100
Sakata Vegetables Europe S.A.S. EUR 5,630 thousand 100
Sakata Ornamentals Europe A/S DKK 133 million 100
Sakata Seed Iberica S.L. EUR 3 thousand 100
Sakata UK Limited GBP 100 thousand 100
Sakata Tarim Urunleri ve Tohumculuk Sanayi ve
Ticaret Limited Sirketi TRY 13,000 thousand 100
Sakata Seed Southern Africa (Pty) Ltd. ZAR 598 thousand 100
Sakata Vegenetics RSA (Pty) Ltd. ZAR 0 thousand 100
Sakata Seed Chile S.A. CLP 5,089 million 100
Sakata Seed Sudamerica Ltda. BRL 13,776 thousand 100
Sakata Siam Seed Co., Ltd. THB 162 million 100
Sakata Seed India Private Limited INR 530 million 100
Sakata Korea Co., Ltd. KRW 15,540 million 100
History
Year Month Event
1913 July Takeo Sakata (the Company's founder) established Sakata Noen in Shirosato-mura,
Kanagawa (currently, Rokkakubashi, Yokohama).
1916 Company name changed to T. Sakata & Co.
1923 September Company building lost in fire following the Great Kanto Earthquake.
1930 May Chigasaki Breeding Station established.
1942 December Merger of T. Sakata & Co., Atariya Noen, Fujita Zenbei & Co., Enomoto Tokujiro & Co. and Yomoto Co. completed to form T. Sakata & Company, capitalized at 195,000 yen.
1951 December Retail store operations begun (currently, Garden Center Yokohama).
1959 April Misato Research Station established.
1960 April Chogo Research Station established.
1966 August Hazawa Office established.
1967 August Fukuoka Sales Branch (currently, Kyushu Branch) opened.
1971 June Kimitsu Research Station established.
July Sendai Sales Branch (currently, Sendai Sales Office) opened.
1974 August Shirakawa Sales Branch opened (closed in May 2002).
1975 October Shares of Jiffy Pot Products Co. of Japan, Ltd. acquired.
1976 January Okayama Sales Branch opened (closed in May 2004).
1977 July Sakata Seed America, Inc. established.
1979 June Kyoei Noji Co., Ltd. (currently, Sakata Logistics Co., Ltd.) established.
1980 October Sapporo Sales Branch (currently, Hokkaido Branch) opened.
1985 October Nagoya Sales Branch opened (closed in May 2006).
1986 January Corporate name changed to Sakata Seed Corporation.
1987 January Yamagata Vegetable Center, Co., Ltd. (currently, Yamagata Celltop Co., Ltd.) established.
May Shares listed on the Second Section of the Tokyo Stock Exchange.
1988 June Higashimura Seed Co., Ltd. (currently, Brolead Co., Ltd.) established.
December European Representative Office established.
1990 March European Representative Office upgraded to local subsidiary through establishment of Sakata
Seed Europe B.V. (currently, Sakata Holland B.V.).
April Kakegawa Research Center established.
May Nagano Celltop Co., Ltd. established.
June Kanto-Kita Sales Branch opened (closed in May 2006).
November Hokkaido Research Station established.
Shares listed on the First Section of the Tokyo Stock Exchange.
December Hida Celltop Co., Ltd. established.
1991 July Yokohama Sales Branch (currently, East Japan Branch) opened.
August Sakata Seed Chile S.A. established.
1992 May Fukuoka Celltop Co., Ltd. established.
1993 March Sakata Seed de Mexico, S.A. established.
1994 October Sakata Seed do Brasil Ltda. (currently, Sakata Seed Sudamerica Ltda.) established.
Year Month Event
1996 February Hokkaido Sales Branch (currently, Hokkaido Branch) established (through move and change
of name of Sapporo Sales Branch).
March Shares of Samuel Yates Ltd. (currently, Sakata UK Limited) acquired.
April Sakata Seed France S.A.R.L. (currently, Sakata Vegetables Europe S.A.S.) established.
June Osaka Sales Branch (currently, West Japan Branch) opened.
Sakata Siam Seed Co., Ltd. established. Sakata Seed Iberica S.L. established.
September Shares of Flora Feliz S.A. in Costa Rica (currently, Sakata Centroamerica, S.A.) acquired.
1997 March Shares of Chung Won Seed Co., Ltd. (currently, Sakata Korea Co., Ltd.) acquired.
1998 October Garden Center Shonan opened (closed in November 2005).
1999 February Sakata Seed (Suzhou) Co., Ltd. established.
December Shares of MayFord Holdings (Pty) Ltd. (currently, Sakata Seed Southern Africa (Pty) Ltd.)
acquired.
2001 February European Sakata Holding S.A.S. established.
June Sakata Vegenetics RSA (Pty) Ltd. established.
September Sakata Techno Service Ltd. established.
2002 April Narita Office opened.
Alf Christianson Seed Co. and Alfco, Inc. incorporated into Group as subsidiaries through share buyback and retirements.
August System of regional branches (Hokkaido Branch, East Japan Branch, West Japan Branch,
Kyushu Branch) established.
2003 July Sakata Ornamentals Europe A/S established following acquisition of the flower division of L.
Daehnfeldt A/S.
2006 February Yaita Logistics Center opened.
2008 May Sakata Seed India Private Limited established.
2010 February Sakata America Holding Company Inc. established.
2011 September Sakata Tarim Urunleri ve Tohumculuk Sanayi ve Ticaret Limited Sirketi established.
2012 December Nagoya Sales Office established by West Japan Branch.
2013 March Taneto Farm Co., Ltd. established.
April Seaward Investments, Inc., Quincy Investments, LLC and Bayview Ridge Properties, LLC
merged into Alfco, LLC.
2014 April Alf Christianson Seed Co. merged into Sakata Seed America, Inc.
August Nishio Shokubutsu, Co., Ltd. liquidated.
Business policies
Determined to remain one of the world’s leading suppliers of seeds, Sakata Seed is committed to contributing to lifestyles and culture worldwide via the provision of high-quality products and services. The Company’s mission is summarized in its company creed, “Quality, Reliability and Service.”
The Company seeks to build enterprise value based on the pursuit of profit and the development of a solid business base. In addition to developing vegetable and flower seeds to delight producers and consumers alike, the Company aims to be a leader in the global seed industry based on the stable production and supply of high-quality seeds.
Risk factors
The following is a discussion of factors that could negatively impact the Company’s financial performance and financial condition. The forward-looking statements in the discussion are based on judgments made by the Company as of the last day of the fiscal year under review. In this connection, the Company is making every effort to prepare for risks to which the Great East Japan Earthquake recalled its attention, and to apply the lessons learned from that event.
1. Weather-related risks
Climate changes around the world exert a significant impact on sales of
vegetable seeds, flower seeds, bulbs and seedlings; poor weather conditions could thus erode sales and adversely affect the Company’s financial
performance.
The Company carries out seed production in 19 countries around the world. In
each region, the Company takes steps to disperse risk by consigning seed production to multiple outside producers. Despite these precautions, it may be unable to assure sufficient quality and quantity of production in the event of sudden changes in the local weather. Such circumstances may exert a significant negative impact on its financial results.
2. Impact of geopolitical and social systems
The Company is engaged in production, R&D and sales operations in 20 countries around the world. It operates 5 breeding and research stations in Japan and another 10 overseas (in 8 countries). This extensive base of operations exposes the
Company to the following kinds of risks, which could have a significant impact on the Group’s financial performance:
Sudden and unexpected enactment of laws and regulations, or amendments to
existing laws and regulations
Social disorder caused by terrorism or other eruptions of violence
Earthquakes or other natural disasters
Information age-related problems, including computer viruses and information
leakage
3. Development risks, including those related to human resources
The long-term nature of breeding (over 10 years) exposes the Company to the
following kinds of risk:
1) Investment risk—that economic payoffs may fall short of expectations
2) Development risk—that efforts may fail to produce the desired variety
3) Market risk—that market needs may change during the course of
development
4) Competitive risk—that a product may receive a less favorable reception than
a product developed by another company
In addition to access to genetic resources, successful development hinges to a
large extent on the abilities of individual breeders. There is a risk that a breeder may leave the Company midway through a project, thus raising obstacles to its successful completion. Failure to produce an intended high-quality variety could have a significant impact on the Company’s financial performance.
4. Risks related to safety
The Company’s creed, articulated by its founder Takeo Sakata, is “Quality,
Reliability and Service.” With this as a basis, the Company seeks to gain customers’ confidence in the quality and safety of its products. Accordingly, it responds quickly and effectively when complaints arise, and works diligently to prevent problems from occurring.
Because the Company’s products are examples of “living genetics,” however,
appropriate levels of quality or uniformity may not always be achieved. Safety-related problems could also arise from environmental factors or manufacturing technologies, rather than from the seeds themselves.
Safety-related problems could have a significant impact on the Company’s financial performance.
5. Risks related to currency fluctuations
Financial statements prepared in local currencies are translated into yen during
Currency fluctuations may also impair the Company’s ability to procure raw materials and merchandise and pose obstacles to exporting. To minimize such impacts, the Sakata Group maintains a close watch over trends in the foreign exchange markets. Sudden and unexpected market changes could, however, negatively affect the Company’s financial performance despite these efforts. 6. Changes in the value of assets held
Because the Sakata Group holds a wide variety of assets, any decline in the price of land, marketable securities or other assets could negatively impact the Group’s financial performance.
7. Risks from natural disasters and accidents
The occurrence of natural disasters or other unforeseen events could exact major impacts on the financial performance and/or business activities of the Sakata Group.
Operating environment and issues requiring action
In domestic agriculture, amid relentless declines in the farming and general population due to an aging demographic as well as in cultivated acreage, the Japanese government is working to increase food exports and double farming family incomes as part of its economic growth strategy. To support these initiatives, the Company is committed to performing a social role that is increasingly global in scope by supplying high-quality seeds to enable farmers to grow high-value-added agricultural produce.
Meanwhile, the global agrochemical industry continues to consolidate, and to become increasingly dominated by large multinational enterprises.
Against this backdrop, the Company acknowledges its vital role in global society of supplying seeds that can contribute to better human health through vegetables, along with the psychologically soothing effects of flowers.
In response to today’s conditions, the Sakata Group is focused on addressing the issues outlined below. The Group aims to remain a leader in the seed industry based on
sustained R&D activities and global business development, and by seeking to combine high profitability with a strong balance sheet.
1. Establishment of a profitable business model
The Company has developed research capabilities to generate an ongoing
stream of original, high-quality seeds and seedlings to support the reliable and profitable cultivation of land by producers.
To promote development of market-leading strategic products and related
2. Restructuring of loss-making operations
The Company plans to undertake further restructuring of its retail operations
that cater to amateur gardening enthusiasts.
The Company also aims to improve the profitability of its landscaping services
and establish a greater presence in this market.
3. Development of a global supply chain to boost supply reliability and efficiency
With the aim of reducing costs and inventories, the Company is focusing on
development of an efficient global SCM system to help establish production and technical structures to support reliable supplies of high-quality seeds.
4. Internal structural development to foster global enterprise growth
The Company is developing global human resource management structures and
working to upgrade related global management capabilities to support the development of the Sakata Group as a global enterprise of Japanese origin.
Research and development
The R&D Division oversees breeding for vegetables and flowers, and develops new varieties for the world’s markets.
The Company has 5 research facilities in Japan, including its principal research station in Kakegawa, Shizuoka Prefecture. It also conducts research at 10 facilities in overseas locations, including sites in North America, South America, Europe and Asia.
Throughout the Group, 400 people are involved in research and development. Total R&D expenditures amounted to ¥5,440 million during the fiscal year under review. Domestic and overseas wholesaling
Vegetables
1. The Company’s C4-044 spinach and Tobikiri edamame beans both won top prizes
in the 67th annual vegetable variety contest organized by the Japan Seed Trade
Association. Tobikiri simultaneously received the Award of the Minister of
Agriculture, Forestry and Fisheries (MAFF), while SC3-295 daikon radish received
the Award of MAFF at the 2016 annual vegetable variety contest organized by Chiba Prefecture. These awards validated the R&D efforts that have helped the Group to secure high market shares in Japan and overseas.
2. The Company continued R&D into original new varieties designed to delight producers and consumers alike. New introductions included:
Fuyuzuki 90: an especially hardy strain of Chinese cabbage with exceptional
Reigetsu: a large tomato for summer/autumn cultivation delivering
exceptionally firm fruit
Takechiyo: a high-yield summer variety of bunching onion
Power Sweep: a densely packed, well-rounded variety of lettuce
Hamatsuzuki: a variety of mustard spinach with cold and bolting tolerance
3. In overseas markets, the Group has enjoyed strong growth in sales based on the development of vegetable seed varieties tailored to local conditions, in addition to marketing varieties originally developed in Japan. It renovated a research facility in France to develop vegetable varieties for cultivation in Europe, the Middle East and Africa.
4. In other initiatives, the Company joined the Netherlands-based International Licensing Platform (ILP) Vegetable, which aims to promote sector R&D by creating vegetable variety patent pools, along with clearing house capabilities.
Flowers
1. The Company won top prizes in the 62nd flower variety contest organized by the
Japan Seed Trade Association for Profusion Lemon (SM4-226, zinnia), Azumi Rose
Pink (aster), Fiery Red (celosia), Mime Light Pink (stock), and K5-14 (flowering
cabbage). Profusion Lemon also received the Award of MAFF. The Company’s
zinnia variety Profusion Red was recognized twice, receiving a Gold Medal from
Fleuroselect, the Europe-based international organization for the ornamental plants industry, as well as being named the 2017 Flower Winner in the All-America Selections.
2. New flower variety introductions included Clarina® Sapphire (gentiana), A La
Carte Shushu (primula), a downy mildew-resistant variety of sunflowers with Vincent’s® (Type 2)Tangerine DMR, and the Bunny series of flowering cabbage.
3. The Company also developed the world’s first variety of lisianthus that does not produce pollen. This technical breakthrough will take lisianthus to the next stage of commercial development by expanding its potential applications.
Analysis of financial condition and results of operations
1. Significant accounting policies and estimates
The Sakata Group’s consolidated financial statements are prepared in
accordance with accounting principles generally accepted in Japan.
In preparing these statements, the Company makes all necessary estimates based
2. Analysis of financial performance (percentage changes are year-on-year.)
Net sales and operating profit
Net sales: reflecting growth in sales to Asia and North America, net sales
increased 5.2% to ¥61,844 million.
Cost of sales
1) Increased by 2.7% to ¥28,269 million.
2) Gross profit increased by 7.5% to ¥33,574 million.
SG&A expenses
1) Increased by 8.2% to ¥25,871 million.
2) Operating profit thus increased by 5.3% to ¥7,702 million.
Non-operating income and expenses
Net non-operating income rose from ¥237 million in the preceding fiscal year to
¥547 million, reflecting a 72.8% drop in foreign exchange losses to ¥67 million.
Ordinary profit increased by 9.2% to ¥8,250 million.
Extraordinary items and profit before income taxes
Extraordinary items included gains on sales of non-current assets of ¥104
million and impairment losses of ¥36 million.
Net extraordinary income recorded a gain of ¥67 million, compared with a loss
of ¥51 million in the previous year.
Profit before income taxes increased by 10.9% to ¥8,318 million.
Income taxes
Income taxes increased from ¥2,260 million in the previous year to ¥2,172
million.
Profit attributable to owners of parent
The Company recognized profit attributable to owners of parent for the year of
¥6,112 million, an increase of ¥896 million compared to the previous year. 3. Financial condition
Assets
Total assets: increased by ¥7,309 million to ¥116,169 million.
1) Increase of ¥3,804 million in cash and deposits
4) Increase of ¥447 million in property, plant and equipment 5) Decrease of ¥414 million in long-term deferred tax assets
Liabilities
Total liabilities: increased by ¥2,102 million to ¥22,075 million.
1) Increase of ¥2,146 million in notes and accounts payable - trade 2) Increase of ¥238 million in short-term loans payable
3) Decrease of ¥1,077 million in long-term loans payable
4) Decrease of ¥283 million in long-term deferred tax liabilities
Net assets
Total net assets: increased by ¥5,206 million to ¥94,093 million.
Increase in retained earnings of ¥4,987 million
Equity ratio
The equity ratio at year-end was consequently 80.9% compared to 81.5% at the
previous year-end.
4. Analysis of sources of capital and liquidity
2013 2014 2015 2016 2017
Equity ratio (%) 86.4 84.3 82.9 81.5 80.9
Market capitalization ratio (%) 66.1 63.8 93.5 108.9 136.9
Interest-bearing debt ratio (%) 297.9 100.7 91.4 114.8 55.1
Interest coverage ratio (times) 12.7 45.0 61.5 56.4 68.7
(Notes)
Equity ratio: total equity/total assets
Market capitalization ratio: total market capitalization/total assets
Interest-bearing debt ratio: interest-bearing debt (lease obligations excluded)/cash flows Interest coverage ratio: cash flows/interest paid
1. All indicators are calculated on a consolidated basis.
2. The total market value of the Company’s shares is calculated on the basis of the total number of shares outstanding, less treasury shares.
3. Cash flows refer to cash flows from operations from the Company’s consolidated statement of cash flows. 4. Interest-bearing debt includes all debt on the consolidated balance sheet on which the Company pays interest.
Major funding requirements
1) In addition to procurement expenses for seeds and horticultural products, the Sakata Group’s funding requirements revolve principally around
production-related expenses and SG&A and other operating costs. Its major operating expenditure categories include salaries, bonuses and other
2) The Group also maintains a program of ongoing capital investment aimed at upgrading, expanding and rationalizing its production facilities and
strengthening its R&D capabilities.
3) The Sakata Group’s interest payment burden from its interest-bearing debt as of the end of the fiscal year under review was sufficiently low as a
percentage of expenditures. At its current level of interest-bearing debt, the impact on the Group’s operations of an increase in interest rates would be limited.
Possibilities for financing
With respect to liquidity, the Group’s approach is to deal with unforeseen future situations by ensuring that it has sufficient liquidity on hand. With respect to financing, Sakata Seed Corporation and its domestic and overseas subsidiaries all maintain good relationships with their correspondent financial institutions, enabling the respective companies to respond appropriately to situations in their locale.
5. Management’s assessment of issues and its future policies: see discussion under “Business policies” and “Operating environment and issues requiring action.”
Corporate governance
Corporate governance
Basic views regarding corporate governance
Company creed: Quality, Reliability and Service
The Company’s governing ideal is to contribute to the development of agriculture,
horticulture and related businesses while acting ethically in accordance with the spirit of its company creed.
In accordance with this ideal, the Company will aim to achieve the following by
providing high-quality products and services:
1) Contribute to improving the lives and cultural conditions of people around the world
2) Become the world’s leading seed company 1. Structure of corporate governance
(1) Outline of the structure of corporate governance
A company with an Audit & Supervisory Board
2) To increase the transparency and effectiveness of the Board of Directors, the Company has elected 2 outside directors; based on their abundant experience, the directors
a. Participate in important decisions made by the Board
b. Seek to improve the quality of the Board’s decision-making
Composition of Audit & Supervisory Board
1) 3 board members, 2 of whom are appointed from outside the Company
2) The Company establishedan Audit & Supervisory Board Members
Office to support the operations of its audit & supervisory board members and its Audit & Supervisory Board.
Internal Auditing Office, responsible for internal control
1) The Internal Auditing Office audits the Company and its domestic subsidiaries to ensure the health and soundness of their operations. 2) An “internal control evaluator,” appointed by the Board of Directors,
reviews the setup and operations of the Internal Auditing Office. (2) Rationale for adoption of this system
Based on a judgment that this system will contribute to management
transparency, clarification of management responsibilities and strengthening of management oversight
In addition to the Audit & Supervisory Board’s oversight of the Board of
Directors, the appointment of a fair and independent outside director strengthens the system of internal control, ensuring that operations are executed in an appropriate and highly transparent manner.
Through its introduction of a new system of corporate executive officers on
June 1, 2007, moreover, the Company has devolved authority for the execution of operations, allowing it to expedite management
decision-making and to tap the talents of younger personnel. (3) System of internal controls
April 17, 2015: Resolution adopted by the Board of Directors regarding revision of the Company’s basic policy on internal control:
I. System of controls to ensure compliance with laws and regulations and the Company’s Articles of Incorporation in the execution of duties by members of the Board of Directors and employees of the Company and its subsidiaries
Governing ideal (see “Basic views regarding corporate governance” above):
the Company’s major stakeholders are:
1) Persons employed in agriculture and horticulture and related enterprises 2) Shareholders and employees
Establishment and fostering of a system of compliance
The Company has instituted a compliance manual and other related internal rules prescribing the ways in which Sakata Group directors and employees should act in compliance with laws and regulations and in observance of business ethics.
Chaired by the CEO, the Compliance Committee is responsible for
instituting important policies governing the implementation of compliance training and education programs across the Group. It also reports to the Board of Directors on compliance-related matters.
The Company has also established formal internal and external channels via which employees of the Company and its domestic subsidiaries can report or seek counsel regarding any internal matters related to compliance with laws, regulations or standards of business ethics. These channels are designed to protect the confidentiality of anyone seeking counsel or providing
information. In accordance with internal regulations, the provisions of the Whistleblower Protection Act and other laws and regulations, employees shall not face any adverse consequences as a result of making use of such channels.
Elimination of antisocial elements
1) The Sakata Group shall stand firm against extortionists and other
elements and groups that threaten the Group organization or its ability to function in a sound and healthy manner.
2) The Sakata Group shall respond to antisocial elements by abiding by the 3 principles of “making no payments,” “refusal to employ,” and
3) The Sakata Group shall endeavor to gather information from related government agencies; and it shall build a system that enables it to reach these government agencies and/or legal experts on an emergency basis should problems of this nature arise, and thus to deal promptly with such problems.
Improving systems and procedures to ensure the reliability of financial
reporting
1) Establishing regulations for internal control, and developing and adopting basic guidelines for internal control related to financial reporting
2) Based on the foregoing, establishing operating procedures and other regulations to ensure that internal controls for financial reporting are put in place and carried out
3) Establishing a process for review of the effectiveness of internal controls related to financial reporting to be carried out by the internal control evaluator
4) With a senior executive (representative director) assuming
responsibility, preparing a report on internal control as required under the Financial Instruments and Exchange Act
II. System to preserve and manage information on the execution of duties by directors
As prescribed by the Company’s regulations concerning document
management, all documents (including electronic records) related to the execution of duties by directors, along with related materials, shall be preserved and managed by the departments and sections concerned. Such documents, etc., shall be made accessible for viewing on an as-needed basis.
As regards the management of documents, the Company’s basic policy on
information security, its regulations related to the management of personal information, and its regulations on the management of trade secrets shall govern the actions taken.
III. Risk management controls for the Company and its subsidiaries
The Company has compiled an internal manual to minimize potential losses
In accordance with the risk management manual, the Company seeks to ensure a rapid response to any serious risk that emerges affecting the Group based on close cooperation between the divisions that are directly involved and any related divisions.
IV. Organizational structures to ensure the efficient execution of duties by directors of the Company and its subsidiaries
Board of Directors
The Company’s Board of Directors operates appropriately in accordance with internal regulations. The Board meets on a monthly basis, as a rule, to discuss and decide all important matters related to the operations of the Sakata Group as prescribed by laws and regulations, the Company’s Articles of Incorporation, and other relevant rules. The Board of Directors is also responsible for determining the division of duties assigned to directors and corporate executive officers, and to different parts of the Group’s
organization.
Senior management meeting
1) In accordance with the Company’s regulations on senior management meetings, a senior management meeting comprising the president & CEO and all directors above the rank of managing director shall be established. The objective of the senior management meeting shall be to discuss matters pertaining to the management of the Company and the Sakata Group to enable the Board of Directors to discuss and act on such matters in a smooth and expeditious manner.
2) As a rule, the senior management meeting shall be held once every month, as well as at other times as needed.
Corporate executive officer system
The Company has instituted a corporate executive officer system to support faster decision-making and more efficient execution of operations across the Group, as well as to ensure a clear separation of managerial
responsibilities with respect to oversight and execution.
Decision-making by “ringi” (circulation of documents for approval)
Systems for subsidiaries
The Company institutes standards related to management of the Group’s organizational structures, including assignment of positions, command and control hierarchies, delegation of authority, and decision-making processes. The Company also ensures that subsidiaries establish internal systems based on these standards.
Management of policies governing Group operations
The Company’s directors, division general managers and general managers of major subsidiaries hold meetings twice a year, as a rule, to review the Group’s overall management policies and business objectives.
To ensure that operations are appropriate and efficient from a global standpoint, the Company establishes cross-divisional groups (covering domestic and international operations) to manage policies related to R&D, production and logistics, IT, quality control or sales. The relevant central corporate division acts as the secretariat for each cross-divisional group. V. Organizational structures that ensure appropriate execution of operations by the
Group
Subsidiary management and oversight
1) The Corporate Planning Office shall have jurisdiction in this area. 2) In addition, the Company shall assign directors or corporate executive
officers as “directors in charge” of individual subsidiaries.
3) Based on regulations governing the management of subsidiaries and affiliated company, the Corporate Planning Office and directors in charge shall establish a system of coordination under which they shall exchange information and interact individually through subsidiaries’ board of directors’ meetings and other venues to provide proper
guidance to subsidiaries, thus building a stronger internal control system for the Group.
Reporting on execution of duties by directors of subsidiaries
1) Subsidiaries are required to submit monthly reports to the Company on sales performance, financial matters, personnel matters, and other important information.
VI. Internal controls related to assignment of employees to duties stipulated by members of the Audit & Supervisory Board, independence of such employees from directors, and ensuring the effectiveness of orders given to such employees
At the request of members of the Audit & Supervisory Board, the Company
shall establish an Audit & Supervisory Board Members Office and appoint employees to assist members of the Audit & Supervisory Board in their duties.
Prior to the employees’ assignment, the Board of Directors shall hold
discussions with the members of the Audit & Supervisory Board regarding the number, rank, lines of reporting and compensation of such employees, as well as related personnel transfer issues.
VII. Internal controls related to information reported to members of the Audit & Supervisory Board by directors and employees of the Company and its subsidiaries, including safeguards to prevent unfair treatment of informants
Company directors and employees shall report to the members of the Audit
& Supervisory Board any illegal conduct by directors or other actions in violation of relevant laws and regulations or the Company’s Articles of Incorporation that could have a serious material impact on the Group, including instances in which there is reason for suspicion of such conduct.
The Company shall ensure that informants are not treated unfairly for having
reported such information.
To ensure the ability members of the Audit & Supervisory Board to execute
their duties smoothly and effectively, Company directors and employees are required to submit reports concerning important Company-related business matters, or the operational execution status of such matters, upon request to members of the Audit & Supervisory Board in a prompt and appropriate manner.
VIII. Internal controls related to procedures for payment of expenses arising in relation to the execution of duties by members of the Audit & Supervisory Board, and handling of any related financial liabilities
The Company compiles an annual budget covering any expenses that are
expected to arise in relation to the execution of duties by members of the Audit & Supervisory Board.
The Company shall respond promptly to any request for the advance
financial liability related to said request is not necessary to the execution of duties by members of the Audit & Supervisory Board.
IX. Other organizational structures to ensure that audits by the Audit & Supervisory Board members shall be implemented effectively
The representative director(s) and Audit & Supervisory board members shall
endeavor, through regularly held meetings, to enhance mutual communication.
When deemed necessary for operational reasons, the Audit & Supervisory
Board members shall receive reports from and exchange information with the person(s) in charge of internal auditing offices, audit & supervisory board members at subsidiaries, or others of equivalent status on the progress of ongoing audits or the situation with respect to any operation as a means of increasing the effectiveness of their audits.
When deemed necessary, the Audit & Supervisory Board members may
appoint attorneys, CPAs or other external experts to assist in their auditing.
The Audit & Supervisory Board members shall have the right to attend
senior management meetings, meetings of executive officers, meetings of the Compliance Committee and any other important meetings.
The Audit & Supervisory Board members shall have unrestricted access to
any documents related to management approval and financial accounting.
Status of structure of risk management
- Establishment of a risk management structure (see item III under
“Corporate governance” above)
- Risk management under normal circumstances (see item III under “Corporate governance” above)
- At the operational level
1) The BCP Committee oversees the implementation of training and education programs aimed at preventing the emergence of risks, as well as organizing the appropriate response to such risks.
2) Response to specific threats (see item III under “Corporate governance” above)
(4) Content of agreements limiting liability
In accordance with Article 423-1 of the Companies Act, the Company has
These agreements contain a maximum liability for the payment of damages by outside directors and outside Audit & Supervisory Board members, which is the minimum amount prescribed under Article 425-1 of the Companies Act.
2. Status of internal audits and audits by Audit & Supervisory Board members (1) Audit & Supervisory Board
Monthly meetings at which
1) Each Audit & Supervisory Board member reports on important matters related to audits.
2) Necessary discussions and decision-making are conducted in response.
Special meetings held on an as-needed basis
Audits by individual Audit & Supervisory Board members: carried out in
accordance with the Audit & Supervisory Board’s policies and regulations regarding division of duties
(2) Audit & Supervisory Board Members Office
Established in January 2007 to assist the Audit & Supervisory Board
members in the performance of their duties
In June 2008, assignment of a full-time head of the Audit & Supervisory
Board Members Office
Internal audits are carried out by the Internal Auditing Office in accordance
with Company regulations.
(3) Coordination among internal audits, audits by Audit & Supervisory Board members and financial audits
Mutual exchange of information at all times between Audit & Supervisory
Board members and the Internal Auditing Office to maintain effective coordination
Exchange of opinions and relevant information at all times between the
financial auditors and Audit & Supervisory Board members
Regarding the selection of Audit & Supervisory Board members
1) Primary consideration given to the person’s knowledge of finance and accounting
3. Financial audits
Conducted by the following certified public accountants and 24 assistants (5
CPAs and 19 others)
The Company asks KPMG AZSA LLC to conduct its audits in accordance with
the Financial Instruments and Exchange Act and the Companies Act.
Name Affiliation
No. of consecutive years of auditing the Company’s accounts
Designated limited liability partner/engagement partner:
Kazunori Furuyama KPMG AZSA LLC 3 years
Designated limited liability partner/engagement partner:
Yoshinori Saito KPMG AZSA LLC 1 year
4. Relationships between the Company and its outside directors and Audit & Supervisory Board members
The Company has 2 outside directors and 2 outside Audit & Supervisory Board
members.
1) Selection of candidates is based on standards for independence established by the Tokyo Stock Exchange.
2) Although the Company has not established its own standards and policies regarding independence, the TSE’s standards allow it to make selections that avoid risk involving conflicts of interest with shareholders.
Based on wide-ranging knowledge and experience, outside members of the
Board play the vital roles of providing objective oversight over management and enhancing management transparency.
Outside Audit & Supervisory Board member Noboru Hasegawa possesses an
extensive knowledge of financial and accounting matters acquired through many years of experience in the financial services industry.
There is no personal, financial, commercial or other conflict of interest between
the Company and any of outside directors Kunihiko Sugahara or Yoshitaka Ihara or outside Audit & Supervisory Board members Noboru Hasegawa or Yasunori Numata, except as concerns ownership of the Company’s shares as detailed elsewhere in this report.
The Company has registered Kunihiko Sugahara, Yoshitaka Ihara, Noboru
5. Directors’ compensation
Compensation by Board member category; breakdown by type of compensation;
and number of Board members in each category
Millions of yen Amount paid
Total amounts paid out to board members by
type of compensation Number of board
members in each category Compensation Bonuses Retirement benefits
Directors (excluding Outside
Directors) 191 133 30 28 8
Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members)
19 17 - 1 1
Outside Directors and Audit &
Supervisory Board Members 31 29 - 1 5
(Note) In millions of yen, with fractional amounts discarded
Total compensation for each director/ Audit & Supervisory Board member of
the Company: this information is omitted because no individual’s compensation exceeds ¥100 million.
Significant compensation paid to directors who are also employees: not
applicable
Policy regarding amounts paid to Board members and method of calculating
such amounts
1) Basic thinking regarding compensation paid to directors: the system of compensation must
a) Enable the Company to secure the services of management personnel capable of driving the growth of the Company as a global enterprise b) Allow the Company to enhance long-term shareholder value
c) Contribute to a continuous and stable increase in financial performance d) Be highly objective and transparent in terms of the way the amounts of
compensation are determined
2) Amounts paid out as compensation take into consideration
a) Comparisons with other companies, ascertained through surveys by outside consultants
b) A comprehensive range of other factors, including the rank of the director, his/her operational responsibilities, and his/her contributions to the
financial performance of the Company 3) Components of director compensation
b) Bonus evaluations take into account the following for the period under consideration: consolidated sales, consolidated operating profit and consolidated profit attributable to owners of parent; bonuses fluctuate according to the degree to which targets under each of these categories are achieved.
c) To encourage directors to understand that fostering medium-to-long-term growth in enterprise value and shareholder returns is also in their interest, each director contributes a portion of his/her fixed monthly salary to a directors’ share-purchasing plan.
4) Components for Audit & Supervisory Board members and outside directors: in view of their independent oversight function, no bonuses linked to
financial performance are paid. 5) Compensation Committee
a) This committee is organized under the Board of Directors and deliberates on directors’ compensation.
b) By including the outside director as a member of the committee, the Company seeks to ensure the objectivity and transparency of decisions by the committee.
6. Shareholdings in other companies
Shares held by the Company for purposes other than pure investment
Number of issues: 20
Total value on balance sheet: ¥12,195 million
Number, book value and investment purpose of shares held by the Company for
May 2017 term
Millions of yen Number of shares Book value Investment purpose
Kikkoman Corporation (2801) 649,000 2,252 To strengthen business relationships Maruichi Steel Tube Ltd. (5463) 560,000 1,817 To strengthen business relationships Mitsubishi Pencil Co., Ltd. (7976) 187,200 1,196 To strengthen business relationships Yokohama Reito Co., Ltd. (2874) 1,022,000 1,085 To strengthen business relationships MAX Co., Ltd. (6454) 537,000 864 To strengthen business relationships Amano Corp. (6436) 335,000 834 To strengthen business relationships T&D Holdings, Inc. (8795) 411,600 644 To strengthen business relationships
Concordia Financial Group, Ltd. (7186) 866,000 441 To strengthen relationships with financial institutions Maruzen Showa Unyu Co., Ltd. (9068) 982,000 439 To strengthen business relationships
Sotetsu Holdings, Inc. (9003) 736,000 389 To strengthen business relationships
The Gunma Bank, Ltd. (8334) 578,000 339 To strengthen relationships with financial institutions Fuji Nihon Seito Corporation (2114) 563,000 322 To strengthen business relationships
Ono Pharmaceutical Co., Ltd. (4528) 131,500 302 To strengthen business relationships
Sumitomo Mitsui Financial Group, Inc. (8316) 68,300 271 To strengthen relationships with financial institutions Hakuyosha Company, Ltd. (9731) 85,000 255 To strengthen business relationships
Bull-Dog Sauce Co., Ltd. (2804) 115,200 251 To strengthen business relationships Sodick Co., Ltd. (6143) 158,600 184 To strengthen business relationships Okamura Corp. (7994) 175,000 174 To strengthen business relationships
May 2016 term
Millions of yen Number of shares Book value Investment purpose
Kikkoman Corporation (2801) 649,000 2,583 To strengthen business relationships Maruichi Steel Tube Ltd. (5463) 560,000 2,072 To strengthen business relationships Mitsubishi Pencil Co., Ltd. (7976) 187,200 1,078 To strengthen business relationships Yokohama Reito Co., Ltd. (2874) 1,022,000 1,078 To strengthen business relationships MAX Co., Ltd. (6454) 537,000 689 To strengthen business relationships Ono Pharmaceutical Co., Ltd. (4528) 131,500 647 To strengthen business relationships Amano Corp. (6436) 335,000 626 To strengthen business relationships Sotetsu Holdings, Inc. (9003) 736,000 485 To strengthen business relationships T&D Holdings, Inc. (8795) 411,600 455 To strengthen business relationships
Concordia Financial Group, Ltd. (7186) 866,000 447 To strengthen relationships with financial institutions Maruzen Showa Unyu Co., Ltd. (9068) 766,000 311 To strengthen business relationships
Fuji Nihon Seito Corporation (2114) 563,000 257 To strengthen business relationships
The Gunma Bank, Ltd. (8334) 578,000 256 To strengthen relationships with financial institutions Sumitomo Mitsui Financial Group, Inc. (8316) 68,300 247 To strengthen relationships with financial institutions Bull-Dog Sauce Co., Ltd. (2804) 1,152,000 236 To strengthen business relationships
Hakuyosha Company, Ltd. (9731) 850,000 216 To strengthen business relationships Okamura Corp. (7994) 175,000 196 To strengthen business relationships Sodick Co., Ltd. (6143) 158,600 153 To strengthen business relationships
Mizuho Financial Group, Inc. (8411) 530,210 92 To strengthen relationships with financial institutions Mitsubishi UFJ Financial Group, Inc. (8306) 38,900 21 To strengthen relationships with financial institutions
Shares held by the Company for purely investment purposes
2016 2017
Millions of yen Total amount on balance sheet Total amount on balance sheet
Total amount of dividends received
Total amount of gains or losses from
sales Total amount of valuation gains
Unlisted shares 965 1,044 17 -
Shares other than
unlisted shares 175 216 3 - 66
7. Required number of directors
The Company has stipulated in its Articles of Incorporation that there shall be no more than 11 directors.
8. Resolutions for the election of directors
9. Acquisition of the Company’s own shares
The Company has stipulated in its Articles of Incorporation that, in accordance with Article 165-2 of the Companies Act, it is authorized to acquire its own shares through market transactions based on a resolution adopted by the Board of
Directors. The purpose of such acquisitions is to enable the Company to implement agile and efficient strategies with respect to shareholders and financing.
10. Interim dividends
The Company has stipulated in its Articles of Incorporation that, in accordance with Article 454-5 of the Companies Act, it is authorized to pay an interim dividend with a date of record of November 30 each year based on a resolution adopted by the Board of Directors. The purpose of such interim dividends is to enable the Company to execute a dividend policy that is at once stable, agile and proactive.
11. Requirements for special resolutions by the General Meeting of Shareholders With respect to special resolutions by the General Meeting of Shareholders, as provided for under Article 309-2 of the Companies Act, the Company has stipulated in its Articles of Incorporation that approval of such resolutions shall require that shareholders holding one-third or more of the voting rights of all shareholders eligible to vote be in attendance, and that two-thirds of the
shareholders present vote in the affirmative. The aim of this rule is to promote smoother transaction of business at the General Meeting of Shareholders.
Financial auditors’ compensation
1. Compensation paid to financial auditors
2016 2017
Millions of yen Financial audit services Non-audit services Financial audit services Non-audit services
Parent Company 49 - 49
-Subsidiaries - - -
-49 - 49
-2. Other important compensation
3. Compensation policy for financial audit services
Remuneration is determined via discussions with the independent auditors based on the appropriateness of the audit plan and related service charges for the year under review and with reference to the charges levied in previous years for financial auditing services provided, based on the billed hours per audit item for different members of the financial audit team based on seniority.
Directors
Name Title Date joined company Concurrent occupations Date of birth Term Thousandshares
Hiroshi Sakata President and Representative Director
May-1981 14-Feb-1952 2 years from the General Meeting of Shareholders (GMS) held in August 2017
155.7
Risho Uchiyama Managing Director Apr-1984 29-Jan-1962 2 years from GMS
held in August 2017 9.5 Tsutomu Kagami Managing Director Apr-1987 17-Jan-1962 2 years from GMS
held in August 2017 6.4 Hideto Kaneko Director Apr-1990 18-Jun-1962 2 years from GMS
held in August 2017 205.4 Shuitsu Honda Director Apr-1987 25-Nov-1962 2 years from GMS
held in August 2017 5.1 Akifumi Ujita Director May-2009 5-Aug-1957 2 years from GMS
held in August 2017 5.9 Kazuo Kuroiwa Director Apr-1985 21-Jan-1959 2 years from GMS
held in August 2017 3.0 Toshihiko Furuki Director Apr-1988 15-Feb-1966 2 years from GMS
held in August 2017 3.2 Kunihiko Sugahara Director Aug-2013 Certified public
accountant 8-Mar-1952 2 years from GMS held in August 2017 10.0 Yoshitaka Ihara Director Aug-2016 18-Oct-1945 2 years from GMS
held in August 2017 0 Mitsuo Enda Standing Audit &
Supervisory Board Member
Apr-1971 27-Jan-1949 4 years from GMS
held in August 2016 13.6
Noboru Hasegawa Audit & Supervisory
Board Member Aug-2012 9-Oct-1948 4 years from GMS held in August 2016 2.3 Yasunori Numata Audit & Supervisory
Board Member Aug-2016 16-Jun-1948 4 years from GMS held in August 2016 0 421.3
Current assignments and previous positions in the Company have been omitted.
Under law, the Company is required to have a certain number of Audit & Supervisory Board members. To prepare for the possibility that it might not be able to fill the required number of seats, the Company has elected an alternate Audit & Supervisory Board member in accordance with Article 329-3 of the Companies Act.
Name Title Concurrent occupations Date of birth Thousandshares
Tamio Nagashima Alternate Audit & Supervisory
-Employees
Consolidated 2017
Business segment Number
Domestic wholesaling 221
Overseas wholesaling 1,528
Retailing 62
Others 15
Corporate staff 449
2,275
Parent Total or average
Number 680
Average age 37.1
Average years of service 13.6
Average annual salary (thousands of yen) 6,306
Average annual salary includes bonuses and overtime pay.
Union
Sakata Seed Corporation’s union is an intra-Company union independent of any outside umbrella organization. The Company enjoys amicable labor relations.
Acquisition of treasury shares
Types of shares
The acquisition of common shares as stipulated under Article 155-7 of the Companies Act.
Acquisitions which are not based on resolutions adopted by the General Meeting of Shareholders or the Board of Directors
Yen No. of shares Total value
Treasury shares acquired during the year under review 1,385 3,990,052
Disposal and ownership of treasury shares
Fiscal year under review Period of June 1 to July 31
Yen Number of shares disposed sharesTotal value of Number of shares disposed sharesTotal value of
Acquired treasury shares sold to underwriters - - -
-Acquired treasury shares subsequently cancelled - - -
-Acquired treasury shares transferred through mergers,
share exchanges or corporate divisions - - -
-Others
(Treasury shares acquired in response to
shareholders’ requests to purchase shares of less than one unit)
148 194,479 -
-Cash Flows
Consolidated statement of cash flows
Years ended May 31; Millions of yen 2015 2016 2017
Cash flows from operating activities
Profit before income taxes 5,504 7,503 8,318
Depreciation 1,872 1,826 1,864
Amortization of negative goodwill (0) -
-Increase (decrease) in allowance for doubtful accounts (49) (218) (29)
Interest and dividend income (349) (358) (417)
Interest expenses 66 75 109
Foreign exchange losses (gains) (160) 201 (83)
Impairment loss 692 64 36
Loss (gain) on sales of investment securities (71) (13)
-Decrease (increase) in notes and accounts receivable - trade (1,404) 669 (446)
Decrease (increase) in inventories (2,134) (2,372) (2,086)
Increase (decrease) in notes and accounts payable - trade 331 (248) 2,146
Increase (decrease) in accounts payable - other (218) 255 (197)
Others 1,040 (1,043) 201
5,117 6,342 9,416
Interest and dividend income received 353 350 425
Interest expenses paid (67) (77) (110)
Income taxes refunded 56 20 15
Income taxes paid (1,324) (2,250) (2,133)
4,136 4,384 7,613
Cash flows from investing activities
Payments into time deposits (1,940) (3,502) (2,552)
Proceeds from withdrawal of time deposits 1,546 3,194 1,820
Purchase of property, plant and equipment (1,861) (3,069) (2,093)
Proceeds from sales of property, plant and equipment 466 128 295
Purchase of intangible assets (153) (192) (342)
Proceeds from redemption of securities - 100 150
Purchase of investment securities (94) (50) (323)
Proceeds from sales of investment securities 239 21
-Proceeds from redemption of investment securities - - 100
Others (46) (58) 44
Years ended May 31; Millions of yen 2015 2016 2017
Cash flows from financing activities
Net increase (decrease) in short-term loans payable (850) 973 (992)
Proceeds from long-term loans payable 941 537 323
Purchase of treasury shares (3) (3) (3)
Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation - (36)
-Cash dividends paid (901) (1,035) (1,126)
Others (131) (100) (217)
(945) 335 (2,016)
Effect of exchange rate change on cash and cash equivalents 129 (431) (57)
Net increase (decrease) in cash and cash equivalents 1,476 858 2,637
Cash and cash equivalents at beginning of period 9,162 10,639 11,497
Cash and cash equivalents at end of period 10,639 11,497 14,134
Relationship between the balance of cash and cash equivalents as of term-end and balance sheet items
Years ended May 31; Millions of yen 2015 2016 2017
Cash and deposits 17,212 18,321 22,126
Time deposits, etc., of 3 months or longer (6,573) (6,823) (7,991)
Cash and cash equivalents 10,639 11,497 14,134
Capital expenditures
1. Group-wide capital investment (including intangibles): ¥2,599 million
Purchase of assets to establish a farm at a site in Chiba Prefecture: ¥99 million
Trademark purchases by subsidiary Sakata UK Ltd.: ¥213 million
Acquisition of land for Sakata Seed India Pvt Ltd.: ¥99 million
2. Capital investment by business segment
Domestic wholesaling: ¥348 million
Overseas wholesaling: ¥1,911 million
Retailing: ¥21 million
Corporate assets: ¥312 million
Capital expenditures and disposal plans
Expenditures
Millions of yen Items Budgeted amount Expenditures to date commenced Completion dateDate
Chiba Farm
(tentative name) Research facilities 1,850 392 Sep-2015 Jul-2018
Sakata Seed America,
Inc. Research facilities 1,666 581 Mar-2016 Aug-2018
Sakata Seed India
Private Limited Warehousing/research facilities 987 226 Apr-2016 Dec-2018
Disposal
Millions of yen Items Book value at term end Completion date
Kyushu Branch Commercial land/buildings 544 Sep-2017
Dividend policy
Basic stance on dividends
1. The Company considers returning profits to shareholders to be a significant issue for management.
2. Over the medium-to-long term, its basic policy on dividends will be determined by:
The financial results for each term
Management’s need to ensure sufficient retained earnings to enhance its
operational capabilities and to strengthen the foundations of the Company’s business
The need to maintain stability and continuity of payouts
Payouts
1. Frequency of dividend payouts: twice annually
Interim dividend, as approved by the Board of Directors
Year-end dividend, as approved by the General Meeting of Shareholders
2. Dividends for fiscal year ended May 31, 2017:
Interim dividend of ¥10 per share (in accordance with the above policy)
Year-end dividend of ¥18 per share (including a special dividend of ¥3 per share
to reflect record profit performance)
Allocation of retained earnings
1. Strengthen its R&D and production capabilities to respond effectively to market needs
2. Invest in resources that further its global strategies
Articles of Incorporation
With regard to interim dividends, under Article 454-5 of the Companies Act, the Company has provided for the following in its Articles of Incorporation.
“The Company may pay out interim dividends with a date of record of November 30 each year, based on a resolution by its Board of Directors.”
Dividends paid for the year under review are as shown below.
Date of decision Dividend payout Dividend per share
(Millions of yen) (Yen)
January 12, 2017
Resolution of Board of Directors 450 10
August 29, 2017
