Management Information

Message from the President

I would like to express our sincere gratitude to our shareholders and investors for their exceptional support.

In terms of the general business environment surrounding us, corporate earnings have remained strong, but consumption and capital investment have slowed, and the economic outlook remains uncertain. In the food industry, performance is on an improving trend as price hikes reflecting rising raw material costs are becoming more prevalent, but there is a need to respond to consumers' thrifty spending habits in the face of rising food prices. Under these circumstances, we are working to achieve reasonable prices by continuing to propose value-added products through diversification of suppliers and utilization of group production plants, while at the same time reviewing its operations through promotion of DX.

As a result of these efforts, consolidated net sales for the fiscal year ending October 31, 2023 (The 76th Term) increased 6.2% from the previous year to 109,594 million yen, due to increased sales in Japan of dairy products and oils, confectionery ingredients, and confectionery and retail products, partly due to price hikes reflecting higher raw material and energy costs, etc. As a result, net sales increased 6.2% from the previous fiscal year to 109,594 million yen. As for profits, although profits in the U.S. segment declined significantly from the previous fiscal year due to a large increase in profits from the walnut business in the U.S., profits in the Japan segment increased due to the penetration of price increases and improved factory utilization rates, and business in Hong Kong was strong in the China segment as well. As a result, operating income increased 7.6% to 4,034 million yen, ordinary income increased 1.0% to 4,137 million yen, and net income attributable to owners of the parent increased 0.7% to 2,809 million yen.

Regarding the full-year results for the fiscal year ending October 31, 2024 (The 77the Term), inflation is taking hold worldwide, including rising energy costs due to the global geopolitical situation, in addition to fluctuations in crop yields caused by climate change and rising raw material prices due to the yen's depreciation. Since the trend of monetary tightening against the backdrop of inflation is also uncertain and the future of the foreign exchange market remains difficult to predict, the economic environment surrounding our group is expected to remain uncertain.

In this environment, we intend to take advantage of the product exhibition commemorating the 120th anniversary of our founding scheduled in April to further enhance added value and strive to stably procure safe and secure food materials while coping with climate change and fluctuations in foreign exchange rates. We will also strive to further understand the needs of our customers and strengthen our ability to make proposals.

We look forward to your further support and guidance.

President and Representative Director Hidemitsu Honda

Management Environment & Management Strategy

We see the following five management environments that need to be addressed from a medium- to long-term perspective in particular, and have established basic management strategies to address these environments.

 
Management Enviroment

1. Growth strategy as a Trading Company Specializing in Food Products

Pursuit of Supply Chain Sustainability for Major Products

・Promotion of diversifying suppliers through diversification and decentralization of production areas for new development and purchasing products
・Build long-term cooperative relationship by sharing quality control standards risk management with suppliers and approval of process audits,holding regular meetings,etc.

Proposal for Diversity of Food for Healthy and Rich Diet

・Sales activities that respond to new demand such as health-conscious, vegan, and fully nutritious foods.
・Proceed with the discovery of healthy ingredients and strengthen sales activities with creative proposals for dietary diversity.

Strengthening Global Deployment

・Stabilize the surplus of the Chinese business and strengthen the US business.
・Promotion of export business in line with the growth of emerging markets and development of products specialized for local demand.
2. Growth strategy as a food-processing manufacturer

Increase of production system and sales of our own processed products that are value-added products

・Selection of value-added products that meet market needs and establishment of production increase system by capital investment of the corresponding processed products.
・Expansion of the sales area of our own processed products and development of new sales channels.

Efforts to reduce the environmental burden

・Efforts to reduce environmental impact such as consideration of the use of renewable energy, reduction of food loss and waste, reduction of waste by improving yield, introduction of recycled products, etc.

Maintaining a sustainable logistics network

・Efforts to address logistics issues, reviewed the existing logistics network, verified and took measures against the "2024 logistics problem.

Providing safe and secure food

・Strengthening the quality control and assurance system at our own factories, strengthening the quality audit system at our partner factories and suppliers, and maintain a system to provide safe and secure foods.
3. Promotion of Sustainability Management

Promotion of environmental and human rights responses

・To achieve carbon neutrality, we set targets based on accumulated data on CO2 emissions.
・Continued CSR investigations on suppliers' human rights and environmental responses.
・Strengthening responses to human rights issues in the workplace.

Cooperation with stakeholders

・Promotion of CSR (Corporate Social Responsibility) such as consideration for the environment, social contribution, fair and transparent corporate management.
・Continue to promote contributions to the local community by improving the comfortable working environment, improving working conditions, and enhancing welfare.
・Strengthening IR activities to enhance corporate value.
Strengthening Corporate Governance Structure ・Ensuring corporate transparency and accountability through enhanced information disclosure.
・Further enhancement of the corporate governance system by utilizing the Governance Committee and improving the effectiveness of the Board of Directors.
・Thorough risk management and compliance.
Strengthening the management base ・Improving business efficiency by promoting DX, and improving the DX level of our employees.
・Maximize the use of human capital by rebuilding the personnel system, pursuing diversity, and building development programs.
・Build human resources strategies that match the realization of management strategies.


 

Business Risks

Risks with the potential to negatively affect the Group’s financial status and management results are as follows, and we see them as factors that may significantly impact investor decisions. Though the items below include future items, they were interpreted as of January 30, 2024, the day we submitted our securities report.

(1)Food safety

The Group sources products and ingredients from Japanese and overseas manufacturers and producers, and has production subsidiaries in Japan, the US, and China. We endeavor to enhance quality management and secure food safety by measures such as holding regular meetings with participants from the Quality Assurance Department and plants both in Japan and overseas. However, unpredictable issues and accidents in the manufacturing or processing lines could cause large-scale product recalls or large product-liability costs that would affect the Group’s financial status and management results.

(2)Inventory

The Group handles a wide variety of food ingredients and products. In particular, we maintain a certain amount of inventory centering on imported ingredients and products. We focus on inventory management to ensure we carry no excess inventory or expired product, by carefully taking into account harvest timing for agricultural products, production schedules at each plant, shipping schedules to our clients, and food expiry dates, as well as by assigning a person-in-charge for each product, who conducts frequent information exchanges with sales representatives. However, stock disposal due to disparity between sales forecasts and actual results, as well as substantial price fluctuations, could affect the Group’s financial status and management results.

(3)Stable procurement of food ingredients and their rising prices

As the Group sources food ingredients and products in and outside Japan, we face risks such as poor harvests due to natural disasters and climate change, which makes it difficult to secure consistent quality and quantity. We also face the possibility of our purchase and production costs being greatly affected by fluctuations in the overseas market prices of agricultural products due to changes in demand, or by exchange rate fluctuations. To counteract the above, we assign a procurement person-in-charge for each product, and strive to secure a consistent supply by conducting frequent information exchanges with each supplier and verifying the conditions of crops. However, if fluctuations occur on an unpredictable scale, the quality of ingredients and products may be compromised, or shortages may occur, which could impact the Group’s financial status and management results.

(4)Epidemics of communicable diseases or natural disasters

On top of sales offices, the Group also promotes its business through production plants and such. While the Group strives to control risks by such efforts as regularly reviewing the business continuity plan (BCP) and utilizing insurance, unpredictable natural disasters such as large earthquakes and extensive fires could cause loss or damage to the Group’s facilities and plants. In addition, large-scale epidemics of communicable diseases could damage our product supply which rely on ordering and shipping activities, and our production activities which rely on plants, thus affecting the Group’s financial status and management results.

(5)Impact of business globalization

The Group sources a portion of food ingredients and products from overseas, and operates production bases and sales businesses overseas. While the Group aims to manage related risks by designating departments dedicated to overseas procurements and a department to the management of overseas Group companies, wars, terrorism, political or social unrest, disadvantageous taxation and regulations, their amendments and abolition, and other unpredictable circumstances, or a defect in the governance of an overseas Group company, may affect the Group’s financial status and management results.

(6)Trade credit risks

The Group has experienced credit risks owing to accounts receivable of trade partners. We work to prevent credit risks by setting credit limits for each partner based on credit analyses and reviewing the partner based on the approval authority reflecting the credit limit. However, uncollected debts arising from unpredictable circumstances such as bankruptcy of our trade partners could affect the Group’s financial status and management results.

(7)Compliance with legal regulations, etc.

Our business activities are regulated in Japan by laws such as the Food Safety Basic Act and Food Sanitation Act, and in other countries where we conduct businesses by similar legal regulations. Although we have laid out appropriate measures to comply with these regulations, changes in these regulations or receiving a violation warning could limit the Group’s business activities and adversely affect our financial status and management results.

(8)Information and systems

On the back of the advancement of digitalization, besides order, purchase and accounting processing being conducted via information communications and data processing, communication with business partners, information exchanges within the Company, etc. also utilize electronic exchange methods. Therefore, the Group strives to reduce related risks by designating a department dedicated to information systems. However, if an information leakage, data loss, or virus attack occurs, the Group’s corporate activities may be hindered, which may affect the Group’s financial status and management results.

(9)Risks Related to Domestic and International Transportation

In response to labor shortages in the logistics industry, the Group is promoting a modal shift from trucking to rail freight and other modes of transportation, as well as unloading imported cargo at ports close to consumption centers. However, if problems arise, such as delays in product delivery due to a shortage of delivery drivers or a significant increase in logistics costs due to soaring labor and fuel costs, our group's business results may be affected. In addition, the increasing instability in global marine transportation may cause delays in the procurement of products and increases in logistics costs, which may affect the financial position and business performance of the Group.

Corporate Governance

Our Corporate Governance

Our basic approach to corporate governance The Group’s corporate philosophy is to "create a new food culture and contribute to society by consistently providing our customers with safe and reliable food products carefully sourced from domestic and overseas suppliers." To achieve this philosophy, it is important that we continue to exist as a company trusted by our shareholders and all stakeholders of the society, by ensuring healthy management with high transparency. Aiming for sustainable growth and improving our mid- to long-term corporate value, we will work to improve our corporate governance and build and operate a system to monitor and control our business activities.

Organization Chart of Corporate Governance

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