Financial Results for the Fiscal Year Ended April 3, 216 June 216 ITO EN, LTD.
Index 1. Beverage Market in Japan 2. Results of Operations FYE April 216 3. Annual Forecasts FYE April 217 4. Management 5. Category Results & Forecasts (Non-Consolidated) 6. Brand Strategy: Brand development and enhancement 7. Brand Strategy: Leaf 8. Brand Strategy: RTD Japanese Tea "Oi Ocha" 9. Brand Strategy: Healthy Mineral Barley Tea & TULLY'S COFFEE 1. Domestic Businesses: TULLY'S COFFEE & Chichiyasu 11. Overseas Businesses 12. Medium and Long-Term Management Plan (Appendix) 1. About ITO EN 2. An Agricultural Model Striving to Solve Issues 3. CSR Initiatives 4. ESG information 5. Summary of Consolidated Balance Sheet & Others 6. Key Management Indexes (Consolidated)
1. Beverage Market in Japan Beverage market recovered in 215. It is expected to expand in 216. Market Trend Market Size by Channel chart① グラフ② chart② ( billion) 4, Tea was Popular 3,63.1 218.4 152.3 156.7 26. 26.1 97.7 3, 2,77.5 447.4 1985 Pioneering of Canned Green Tea 145.6 198 Pioneering of Canned Oolong Tea 922.3 276.3 157.5 376.4 159.2 955.1 252.7 325. 15.1 948. 3,66. 3,678. 16. 182.6 187. 252.2 26. 244.2 244. 232. 244. 258.2 267. 222. 3,1.2 2, 3,637.5 3,68. 3,612.7 3,54.3 Carbonated was popular 21 Total Coffee was popular 325.7 329.9 317. 35. 215 3,71. 17. Others/Functional 243.7 Sports Drink ITO EN Others 25% 11% 34% 275. 35.9 Mineral Water Vending Machines 16% Fruit 35% Super markets 36% Others 17% Vending Machines 29% 16% 164.4 147.2 14. 952. 938.7 929.3 942. 143.9 947. 38% Super markets 4% 22% 2% Convenience Convenience Market Stores Stores 27% 23% 167.4 11% Source: ITO EN Inner circle (Market): Calendar year Outer circle (ITO EN): May 215 to Apr 216 Vegetable Monthly Sales Trends chart③ Coffee YOY グラフ③ ITO EN 1 7. 6. Carbonated 538.5 642.5 68. 698. 75. 72. 73. 5 2. 648.9 (931.3) (796.4) 484.3 (872.5) (871.5) (885.) (876.5) (873.) (894.5) 497.5 488.5 48. 475.5 458. 464.5 (Tea total) Other Tea -5 5. 1. 6. 2. 2. 1. 1. -2. -3. -8. 579.3 2. 4. 5. 4. 4. 4. 4. 1. 3. 1. -1. 1, 5. 6. 1. 1.. -1. -1. Market -1 447. 375. 383. 45. 41. 415. 43. 217.1-15 85.2 198 Source : ITO EN 1985 199 1995 2-12. Green Tea 25 211 212 213 214 215 216 Forecast Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr -1-
2. Results of Operations FYE April 216 Summary of Operations (Consolidated and Non-Consolidated) (\ million) Performances of Subsidiaries (\ million) Consolidated Non-Consolidated For the Year Ended Apr. 3, 215 Sales Composition For the Year Ended Apr. 3, 216 Sales Composition YOY % Net Sales 43,541 1.% 465,579 1.% 8.1% Gross Profit 27,49 48.2% 218,818 47.% 5.5% Selling Commission 74,468 17.3% 77,574 16.7% 4.2% Advertising 13,759 3.2% 11,56 2.4% -19.6% Transportation 11,455 2.7% 12,184 2.6% 6.4% Depreciation and Amortization Selling, General and Administrative Expenses 13,611 3.2% 13,988 3.% 2.8% 196,16 45.5% 21,574 43.3% 2.8% Operating Income 11,393 17,243 Ordinary Income 11,229 15,74 Extraordinary Expenses and Income 2.6% 3.7% 51.4% Exchange rate (US$) 111.2 119.3 2.6% 3.2% 34.2% -336 - -148 - - Net Income 7,292 8,615 1.7% 1.9% 18.1% Net Sales 353,754 365,276 1.% 1.% 3.3% Gross Profit 164,289 17,229 Upper: Net Sales Bottom: Operating Income ITO EN (North America) INC. Tully's Coffee Japan Co., Ltd Chichiyasu Company Domestic Subsidiaries Foreign Subsidiaries Elimination of Internal Transactions (average during a year) Breakdown of Gross Profit (Non-Consolidated) 46.4% 46.6% 3.6% Sales s For the Year Ended Apr. 3, 215 For the Year Ended Apr. 3, 216 9,34 28,896 95 1,489 83,781$thousand 241,87$thousand 1,18$thousand 12,441$thousand 26,36 27,751 3,572 2,879 13,186 13,89 87 253 76,518 77,915 2,18 2,16 5,841 7,284 212 366-54,135-55,431-1,162-1,785 For the Year Ended Apr. 3, 215 YOY % 29.4% 1456.5% 187.8% 122.6% 6.6% -19.4% 5.3% 188.4% 1.8% -.1% 24.7% 72.7% - - ( billion) For the Year Ended Apr. 3, 216-4.5 5.3 Operating Income 6,478 1.8% 11,934 3.3% 84.2% s in Product Mix, etc. -.2.2 Ordinary Income 6,929 2.% 12,821 3.5% 85.% Fluctuations in Raw Material Costs, etc. -.2.4-2 -
3. Annual Forecasts FYE April 217 Summary of Operations (Consolidated and Non-Consolidated) (\ million) Forecasts of Subsidiaries (\ million) Consolidated Non-Consolidated For the Year Ended Apr. 3, 216 Sales Composition For the Year Ending Apr. 3, 217 Est. Sales Composition YOY % Net Sales 465,579 1.% 471,5 1.% 1.3% ITO EN (North America) Gross Profit 218,818 47.% 221,4 47.% 1.2% INC. Selling Commission 77,574 16.7% 77,489 16.4% 3.7% 4.2% 16.% Exchange rate (US$) 119.3 11. 3.2% 4.1% 28.7% -148 - -7 - - 1.9% 2.5% 37.% 1.% 1.% 1.3% Upper: Net Sales Bottom: Operating Income (average during a year) 46.6% 46.5% 1.% Sales s For the Year Ended Apr. 3, 216 For the Year Ending Apr. 3, 217 Est. 28,896 27,96 1,489 1,56 241,87$thousand 246,335$thousand 12,441$thousand 13,7$thousand 27,751 29,3 2,879 3, 13,89 14,55 253 3 77,915 55,745 2,16 1,19 7,284 7,173 366 47-55,431-32,364-1,785-1,885 YOY % -6.2% 1.2% 2.2% 1.1% 5.6% 4.2% 4.7% 18.5% -28.5% -47.3% -1.5% 28.4% - - Operating Income 11,934 3.3% 15,5 4.2% 29.9% s in Product Mix, etc..2.1 Ordinary Income 12,821 3.5% 17,1 4.6% 33.4% Fluctuations in Raw Material Costs, etc..4 -.5 -.1% Advertising 11,56 2.4% 12,364 2.6% 11.8% Transportation 12,184 2.6% 12,19 2.5% -1.4% Depreciation and Amortization Selling, General and Administrative Expenses Extraordinary Expenses and Income 13,988 3.% 11,874 2.5% -15.1% 21,574 43.3% 21,4 42.7% -.1% Operating Income 17,243 2, Ordinary Income 15,74 19,4 Net Income 8,615 11,8 Net Sales 365,276 37, Gross Profit 17,229 172, Tully's Coffee Japan Co., Ltd Chichiyasu Company Domestic Subsidiaries Foreign Subsidiaries Elimination of Internal Transactions Breakdown of Gross Profit (Non-Consolidated) For the Year Ended Apr. 3, 216 ( billion) For the Year Ending Apr. 3, 217 Est. 5.3 2.2-3 -
4. Management Bolstering domestic infrastructure on the way to becoming a global tea company Management Strategies Consolidated Cash Flow 1.Improving earnings of domestic businesses Acquire new customers Strengthen sales-visiting Strengthen ties with existing customers and strengthen introducing Strengthen Branding Enlarge share in major brand (over 1 million cases sales in annual) Enlarge share in the Green tea leaves Introducing foods labeled with health-promoting benefits, making point-of-sale suggestions Action for Agricultural Production Corporation Promote to improve profitability on vending machines Reducing and streamlining distribution costs Reducing total costs and boosting cost effectiveness Generate synergetic effects among the group 2.Expansion and further growth of overseas businesses Expand ITO EN (North America) business and growth investment Lay the foundation and expand business in Asia 3.Strengthen ROE management Higher profitability and capital efficiency Increase EPS Stable return to stockholders Investment on Software 271 225 372 362 519 Capital Investments 6,368 4,663 3,359 8,241 7,24 Depr. and Amort. 3,917 4,24 4,568 5,23 5,366 Leased Assets Depr. 9,851 1,936 11,85 1,872 8,99 Repayment of Lease obligations (from investing activities) ( million) CF from operating activities 35, CF from investing activities Free CF 25, 15, 5, 5, 15, 24,42 24,3 14,769 9,272 19,72 4,598 17,751 8,58 9,242 3,85 21,935 25,7 17,78 8,15 7,92 '13/4 '14/4 '15/4 '16/4 '17/4 Est. -1,979-12,456-12,143-11,236-1,765-4 -
5. Category Results & Forecasts (Non-Consolidated) Net Sales Tea Leaves Drinks Others Japanese Tea /Healthy Tea Chinese Tea For the Year Ended Apr. 3, 215 YOY % Sales Composition For the Year Ended Apr. 3, 216 YOY % Sales Composition (\ million) For the Year Ending Apr. 3, 217 Est. YOY % Sales Composition 353,754-2.7% 1.% 365,276 3.3% 1.% 37, 1.3% 1.% 31,25 1.3% 8.8% 32,468 4.7% 8.9% 34,11 5.% 9.2% 319,471-3.1% 9.3% 329,455 3.1% 9.2% 332,465.9% 89.9% 3,257 6.8%.9% 3,351 2.9%.9% 3,433 2.4%.9% 173,21 -.1% 49.% 181,126 4.6% 49.6% 184,288 1.7% 49.8% 16,437 -.7% 4.6% 17,483 6.4% 4.8% 16,813-3.8% 4.5% Breakdown of Drinks Vegetable Fruit Coffee Black Tea Functional Mineral Water Carbonated Others 44,23-11.7% 12.4% 42,931-2.5% 11.7% 42,745 -.4% 11.6% 13,372-1.% 3.8% 1,933-18.2% 3.% 9,982-8.7% 2.7% 33,935 9.1% 9.6% 41,143 21.2% 11.3% 42,386 3.% 11.5% 1,537-17.4% 3.% 6,82-42.3% 1.7% 6,72 -.2% 1.6% 5,373-14.8% 1.5% 6,918 28.8% 1.9% 6,913 -.1% 1.9% 8,128-1.3% 2.3% 9,312 14.6% 2.5% 9,568 2.7% 2.6% 1,8-13.% 2.8% 9,751-3.3% 2.7% 9,87 1.2% 2.7% 4,382-24.2% 1.2% 3,772-13.9% 1.% 3,824 1.4% 1.% - 5 -
6. Brand Strategy: Brand development and enhancement Enlarge share in major brand Brand Strategy 1.Strengthening the brand lineup 2.Sales related to tea (leaf) and beverages 3.Development of new containers Creation of selling spaces 1.Product launches and point-of-sale suggestions 2.Commitment to visiting customers Leaf RTD Green Tea RTD Barley Tea Canned bottle coffee 1% vegetable Aojiru (Green Juice) FOSHU & Foods with Functional Claims Hydrogen Water Proprietary hydrogen encapsulation method (Patent No. 5746411) Major brands (brands selling over 1 million cases) and products selling well - 6 -
7. Brand Strategy: Leaf Initiatives aimed at demand creation to boost sales of tea (leaf) Easy-to-Use Green Tea Product Market グラフ 1 Expand ITO EN share while growing of easy-to-use products ( billion) 3 market every year 8% ITO EN share Instant 3.6 4.2 4.7 6% 2 3.4 3.2 38% 39% 41% 42% 44% 4% 1 19.1 19.7 2.3 16. 17. 2% Tea bags Tea bags continued to perform well Stimulating demand for chilled green tea Tea bags Instant May 215 to Apr 216 total Up 1% YOY Up 14% YOY Green Tea Leaves Demand Awakening Generating appeal for chilled tea Reinforcing the product lineup '11 '12 '13 '14 '15 Source: ITO EN, Market: Calendar year ITO EN: May to Apr % Promotion of ITO EN characterized by Ocha (tea) Holding of large tea ceremonies around Japan Conduct when enjoying tea by employees holding tea-related certification (tea tasters) Meeting the Inbound Demands Opening directly-operated specialty stores for tea in airports with large numbers of foreign visitors "Matcha Big Tea Ceremonies" "Shincha (the first leaves of spring) Big Tea Ceremonies" at Senso-ji, Tokyo Apr 216 International terminal building at New Chitose Airport TAX FREE ITO EN - 7 -
8. Brand Strategy: RTD Japanese Tea "Oi Ocha" Expanding market share through total marketing ( billion) 5 4 3 2 1 217.1 31% 268.5 279.2 39.4 28% 31% 33% 447. 49.3 421. 415. 42. 382. 375. 375. 383. 45. 43. 415. 41. 29% 29% RTD Green Tea Market ITO EN share 32% 34% 36% 37% 39% 38% 37% 35% 35% 35% 35% ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 Est. Source: ITO EN, Calendar year Oi Ocha Brand Strategy ITO EN chart1 1% 8% 7% 6% 5% 4% 3% 2% 1% % 8% 6% 4% 2% % The four types of Oi Ocha product Monthly Sales Amount Share of the RTD Green Tea in the supermarket chart2 packages with designs using autumn maple leaves (late Aug 215) cherry blossoms (late Jan 216) グラフ 2 グラフ3 42% 39% 4% 4% 43% 41% 39% 39% 38% 42% 39% 4% ITO EN May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Source: INTAGE Inc. SRI, May 215 to Apr 216 Market share by sales amount for all green tea beverage PET containers and quantities (total for supermarkets) Stimulating new demand and generating appeal for iced tea Foods with Functional Claims Expand the tea-drinking population by conveying the good taste of tea Strengthening the four major products plus some extra Product groups that stimulate demand and the ability to create selling spaces Share the increase and strengthening of brand power in all business categories Launched on Jun 13 375ml 1, Launched on Jun 13 525ml 14 5ml 143 (all tax excluded) - 8 -
9. Brand Strategy: Healthy Mineral Barley Tea & TULLY'S COFFEE Roasting technologies to bring out aroma and flavor in composition ratio for coffee s in the barley tea and blended tea markets ( billion) 2 グラフ② chart② chart① million cases 1% 15 112.5 122. 144.5 1 133. 126.5 12. 118. Blended Tea 71. 31.2 32.2 34.5 39.5 45.5 75. Barley Tea 51. ITO EN share (Barley Tea) '8 '9 '1 '11 '12 '13 '14 '15 45% 47% 52% 6% 58% 61% 56% 55% '16 Est. 52% Source: ITO EN, Market: Calendar year ITO EN: May to Apr RTD Healthy Mineral Barley Tea Brand Strategy Launched on Apr 11 Launched on Jul 4 No.1 share in Caffeine Free RTD tea * Aiming for 3 million cases May 215 to Apr 216 total Up 13 YOY 6ml 13 * Jan 215 to Dec 215 8 126 2ml Can 4% 2% 12 PET bottles 6% 4% 63. 13.6 115. 122. 5 16 Sales Volume of "TULLY'S COFFEE" Others 8% 41% 39% 38% 35% 31% 4 21 599ml Can 11% 12% 13% 14% 16% '1 '11 '12 '13 '14 2% % '15 Source Market: INTAGE Inc. SRI, 21 to 215 ITO EN: May 21 to Apr 215 Market share by sales amount for all coffee beverage containers and quantities (total for supermarkets, convenience stores and drug stores) "TULLY'S COFFEE" Brand Strategy May 215 to Apr 216 total Up 28 YOY Launched on May 16 The 4th of our major brand (over 1 million cases sales annual sales) Continue to drive the bottle can coffee market 37ml 15 (all tax excluded) -9-
1. Domestic Businesses: TULLY'S COFFEE & Chichiyasu For the Year Ended Apr. 3, 215 YOY % For the Year Ended Apr. 3, 216 YOY % For the Year Ending Apr. 3, 217 Est. (\ million) YOY % Tully's Coffee Japan Co.,Ltd 26,36 9.1% 27,751 6.6% 29,3 5.6% Chichiyasu Company 13,186 3.4% 13,89 5.3% 14,55 4.7% Domestic Subsidiaries 76,518-2.8% 77,915 1.8% 55,745-28.5% Net Sales 115,741.4% 119,558 3.3% 99,595-16.7% Tully's Coffee Japan Co.,Ltd 3,572 12.4% 2,879-19.4% 3, 4.2% Chichiyasu Company 87-59.9% 253 188.4% 3 18.5% Domestic Subsidiaries 2,18-6.6% 2,16 -.1% 1,19-47.3% Operating Income 5,769 2.% 5,239-9.2% 4,49-15.8% *Excluding ITO EN. Before elimination of internal transactions ( billion) 35 3 25 2 15 1 5 299 5.4 TULLY'S COFFEE Business Overview 12.5 13.9 13.9 15.3 328 357 375 41 Net Sales 19.3 21. 461 23.8 513 555 26. 588 Shops 27.7 29.3 638 663 '7/3 '8/3 '9/3 '1/3 '11/3 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. Shop number:including "CAFE-KAI" (Shops) 1, 75 5 25 Newly-opened stores performing steadily Actively opening shops in good locations (As of Apr 216 638 shops) Development of concept stores Revitalizing existing stores Increase sales and average customer spend TULLY'S COFFEE PRIME FIVE Tokyu- Plaza-Ginza Largest store in Tokyo Introduction to new Tully's Coffee stores Chichiyasu Business Overview Release of popular Greek yoghurt series 13th anniversary full-scale expansion into east Japan TULLY'S COFFEE Tamachi Morinaga Plaza Building Presenting a relaxing space surrounded by fireplaces Launched product of collaboration TULLY'S COFFEE & Chichiyasu Topping popular ice rush shaved ice with Greek yogurt from Chichiyasu - 1 -
11. Overseas Businesses(1) *Excluding ITO EN. Before elimination of internal transactions For the Year Ended Apr. 3, 215 YOY% For the Year Ended Apr. 3, 216 YOY% For the Year Ending Apr. 3, 217 Est. (\ million) YOY% ITO EN (North America) INC. 9,34 17.7% 28,896 29.4% 27,96-6.2% US business 11,81 17.1% 31,741 169.% 29,846-6.% 15,971$thousand 5.8% 264,929$thousand 15.% 271,333$thousand 2.4% Asia/Australia business 3,38 36.% 4,438 31.3% 4,423 -.3% Net Sales 15,181 2.8% 36,18 138.3% 34,269-5.3% ITO EN (North America) INC. 95-82.% 1,489 1456.5% 1,56 1.2% US business 175-71.5% 1,581 82.4% 1,611 1.9% 1,877$thousand -69.5% 13,26$thousand 63.6% 14,648$thousand 1.9% Asia/Australia business 132 193.1% 275 17.5% 366 33.% Operating Income 37-53.3% 1,856 52.9% 1,977 6.5% Exchange rate (US$) 111.2 119.3 11. *Including DLTC company's results from the First half of FYE 4/216 To be a "Global Tea Company" Global expansion with a focus on green tea beverages and leaves (tea bags, instant, matcha ) ( billion) 4. 3. 2. 1.. Overseas Business Sales Ratio Target Over 1% 2.% US business Asia/Australia business 2.3% 2.9% 3.5% Expand "Global Brand" to various countries with a focus on the United States 7.8% 7.3% '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. 2.% 15.% 1.% 5.%.% 1.Expanding size of business in the United States Add Company DLTC as a Group company and implement new expansion Further expansion of the leaf business in addition to the beverage business Medium-term Target: business dealings with Hundred thousand stores overseas New York 2.Take on new challenges in Asian and Southeast Asian countries Product development that reflects the tastes of local markets Singapore Australia - 11 -
11. Overseas Businesses(2) Business in USA Offer RTD tea Green tea wave The spread of matcha Expand distribution channels Launched in 22 Matcha enjoys popularity in places such as IT firms in Silicon Valley Developing tea shop the "matcha LOVE" Beginning the Worldwide Expansion of the Global Brand DLTC became a consolidated subsidiary of ITO EN Increase health consciousness Matcha wave Japanese cuisine was recognized by UNESCO as an intangible cultural heritage To be a "Global Tea Company" Business in Asia Produce tea leaf Started sales of RTD tea in China Develop into South-eastern Asia Produce tea leaf in Australia and China China (Shanghai Hong Kong) Thai Singapore Indonesia "kiyora" 1.Over 1% overseas sales composition 2. Sales toward profitability in Asia ITO EN BEVERAGE (SHANGHAI), LTD. moved into the black achieved a year ahead of schedule - 12 -
12. Medium and Long-Term Management Plan To be a "Global Tea Company" - Long-term management vision Sustainable sales growth Maintain an OP margin level of domestic beverage business at least 5% and invest excess earnings for growth Medium and Long-Term Management Plan when announced 1. Strategic investments to becoming a domestic beverage maker 2. Expand business in China and Southeast Asia CHALLENGE! Final Year of the Mediumterm Management Plan 1. Strengthen domestic foundation 2. Challenge to new field in Japan 3. Strategic investments for establishment of overseas business foundations To be a "Global Tea Company" Bring forward a rich and healthy life to customer in the world Improve brand building of beverage, tea bag, and instant products Improve new business field FYE April 211 Net Sales: 351.6 billion Operating Income: 17.6 billion ROE: 7.6% (Consolidated) FYE April 217 Net Sales: more than 5 billion ROE: 1% Payout ratio: 4% (Consolidated) ROE: 1% Payout ratio: 4% - 13 -
(Appendix 1) About ITO EN Basic Management Policy Concept for Product Development Corporate History Always Putting the Customer First ITO EN credo Mission Statement Our mission is to put the customer first, make integrity our stock in trade, spare no effort, and earn the confidence and trust of society Business Model of ITO EN Customer Direct visiting by the sales team members Communication build-up, Selling space proposals Corporate-wide proposal system by employees & customers R & D Voice System Sales Management Delicious Welldesigned Retailers/stores Quality control system Natural Safe Production Healthy Block production and logistics system 5 blocks Beverages Fabricationless Production to reduce capital expenditures and transportation cost 1966 Established. 198 Develops the world's first Canned Oolong Tea 1984 Develops the world's first Canned Green Tea. (launched in 1985) 1989 s the name of Canned Green Tea products to Oi Ocha. 199 Releases the world s first PET bottled green tea drinks ( Oi Ocha Green Tea, 1.5L). 1998 Stock advanced to the First Section of the Tokyo Stock Exchange. 21 Established ITO EN (North America) INC. 26 Tully's Coffee chain, into a consolidated subsidiary. 27 Class 1 Preferred Stock listed on the First Section of the Tokyo Stock Exchange. 214 3th anniversary of its launch of RTD green tea. "Oi Ocha" total sales volume exceeded 25 billion bottles in total. * 215 Beginning the Worldwide Expansion of the Global Brand. Tea Leaves Plant (Shizuoka Sagara Plant :Shizuoka Prefecture) *Converted to 5ml bottle as of Dec. 214 Leaves for green tea & coffee Own Manufacturing System Realization of High Quality Plant for tea bags manufacturing (ITO EN KANSAI CHAGYO in Hyogo) Central Research Institute Own roasting plant (Established in parallel inside the Shizuoka Sagara Plant) Appendix 1
(Appendix 2) An Agricultural Model Striving to Solve Issues Total Volume of Domestic Green Tea Agricultural model (ton) 1, 8, 95,5 86, 85, 84,1 Total Domestic Tea Leaf Production ITO EN Consumption ITO EN Consumption (%) 6% 87,9 84,8 83,5 79,5 5% Project to develop tea producing regions that will help solve issues in Japanese agriculture ~Business Characteristics~ ~Towards solving agricultural issues~ 6, 4, 2, 24% 25% 28% 27% 25% 23% 24% 25% 4% 3% 2% 1% 1. Operation of large-scale tea plantations 2. Mechanization and introduction of IT 3. Introduction of proprietary production technologies Utilization of deserted cultivated land, promotion of sixth-order industrialization Streamlining of effort and the promotion of low-cost agriculture Creation of new entrants, high-quality tea leaf production % '8 '9 '1 '11 '12 '13 '14 '15 Source: ITO EN The current state of Japanese agriculture Aging population and shortage of heirs Agricultural worker population: 2.97 million Average age: 66.4 (percentage 65 and older: 63.5%) Problem of deserted cultivated land Area of deserted cultivated land: Approx. 42, hectares Current circumstances concerning the production of tea 3 percent of tea plantations contain trees at least 3 years old and ages are increasing Decreased yield and quality is a concern Materials: Ministry of Agriculture, Forestry and Fisheries Toyama Tokyo 4. Contractual dealings (ton) 6, 5, 4, 3, 2, 1, 2,81 88 Securing safe, reliable and highquality raw materials Project of the Developing Green Tea-Producing Regions Production volume (ton) Area of green tea farms (ha) Long -term target 2 ha 3,3 3,63 96 1, 4,2 1,2 '13 '14 '15 '16 *Including contract cultivation farms Est. 2, Stable revenue for tea farmers (ha) 2,5 2, 1,5 1, 5 Overseas production (Australia) 7ha (Domestic Tea Leaf Production:about 3t) ITO EN AUSTRALIA PTY.LIMITED Victoria, Australia Appendix 2
(Appendix 3) CSR Initiatives CSR Initiatives The ITO EN Group will thoroughly practice is management philosophy of putting customers first, tackle the seven core subjects as defined by ISO 26, and strive to become a worldwide tea company. ITO EN Group s Fundamental concepts of CSR (for each core subject of ISO26) *Excerpts from the ITO EN GROUP CSR Charter Established in March 213 and revised in February 214. The seven core subjects of social responsibility <The basic idea of CSR> Organizational governance Establishment of the corporate governance Communications with stakeholders Description of timely and appropriate information disclosure Human rights Respect for basic human rights Creating a workplace characterized by diversity Labor practices Improvement of workplace environment (workplace environment improvement committee) Implementation of no overtime work days Tea taster system Fair Business Practices Devising of compliance system (establishment of in-house reporting or whistle-blower counter, etc.) Priority Theme of CSV Environmental Initiatives All departments across the Company, including sales offi ces, received ISO 141 certifi cation Consumer Issues Maintenance of quality control system Ensure traceability Community Involvement and Development Disaster support Self-cultivation through tea culture Awards New eco-friendly beverage carton Prize of the Minister of the Environment in the Global Environment Grand Prize Award (216) Recognition from society Non-aluminum beverage carton (Commonly called an eco-friendly carton) ( Overall management a Porter Prize (213) n Expansion of Individual Investors Award (24) G c e Disclosure Award (24, 1999) )E n v i r NS system(room-temperature aseptic filling method that does not use a sterilizer E o to sterilize PET bottles.) Eco-Friendly PET Bottles n Environmental Performance Award PET bottle cap: 2.6g m (Outstanding Performance Award) (215) (About 13% lighter) e NS = Non-Sterilant Label thickness: n Used tea leaves recycling system 45μm 2μm t Prize of the Minister of the Environment Bottle: 26g 19g )in the Global Environment Grand Prize Award (211) (5ml) The tea-producing region development project ( Nikkei Social Initiative Award for the corporate sector (215) S Making Japan Beautiful Through Tea and o Making Lake Biwa Beautiful Through Tea c Oi Ocha New Haiku Contest t Encouragement Prize of the review board of the Ministry of Education, y Culture, Sports, Science and Technology for the recognition of ) Prize of the Minister of Economy, Trade and Industry in the Japan Water Grand Prize award (215) S i e enterprises for their support of young people s activities (215) (G o v e r n Appendix 3
(Appendix 4) ESG information Status of SRI index incorporation Since 211, ITO EN has been selected as one of the companies making up the international FTSE4Good index. (As of Jan 216) Major ESG initiatives FTSE4Good Index Social Responsibility Index (SRI) provided by the UK-based FTSE (Financial Times Stock Exchange). Companies highly regarded from a perspective of environmental, social and governance (ESG) are selected to serve as an important standard to instruct the investment decisions of worldwide investors interested in social responsibility on the part of companies. Environmental and social initiatives Shared value produced by a unique value chain ~Integrated system from tea plantation to tea grounds~ Raw materials Production and Logistics Sales and distribution Products and Recycling Corporate governance policy Establishment of corporate governance guidelines (Dec 215) Highcapability to procure crude tea Handles approximately one quarter of Japan s crude tea production The Tea - Producing Region Development Project The effective utilization abandoned farmland Training tea farmer Fabless method (Beverage products) Reduction of capital investment costs Quality control system Meet the consumer requests for security and safety Block production and logistics systems Reduction of distribution costs and rapid product supply Route sales The community-based sales system Retailers Eco-friendly Protection inheritance of tea culture and japanese tradition Used Tea Leaves Recycling System Reduce costs through resource conservation and recycling The main activities and results (214) Companywide reduction of 9.5% in CO2 emissions compared with fiscal 29 [unit requirement] Recycled corrugated cardboard employing used tea leaves: 5 million cases Educational activities of green tea: 837 times Corrugated cardboard made with used tea leaves 91.5% food recycling rate 83.9% installation rate of heat pump-type vending machines Aggressive adoption of an operation ratio for energy-saving vehicles comprising 87.8% Appendix 4
(Appendix 5) Summary of Consolidated Balance Sheet & Others (\ million) Items 215/4 216/4 Description of change Current assets (Major contents) 153,597 159,517 5,919 Cash and deposits Notes and accounts receivable Inventories Fixed assets (Major contents) Land Lease assets Others Intangible fixed assets (Major contents) Goodwill Investments and other assets 18,192 2,12 1,82 Total assets Current liabilities (Major contents) 285,947 76,38 287,72 1,756 1,755 24,718 Notes and accounts payable Short-term loans payable Current portion of bonds Accrued expenses Income taxes payable Non-current liabilities (Major contents) Corporate bond Long-term loans payable Lease obligations Total non-current liabilities Balance Sheet as of April 3, 215 and 216 48,922 53,259 4,336 86,183 88,69 2,426 8,115 81,18 93 19,413 2,644 1,231 33,19 29,154 4,36 27,511 31,219 3,78 34,42 27,154 6,887 27,791 2,179 7,612 33,34 33,353 48 83 1,81 998-2, 2, Bond redemption planned 21,325 23,194 1,869 for Feb 217 1,251 3,945 2,694 Due to increase in profit 82,146 59,729 22,417 2, - 2, 3,551 29,653 897 19,998 16,63 3,368 158,185 16,486 2,31 Total liabilities and net assets 127,761 127,215 545 Due to a calculation of the Fair Value of DLTC & other factors Deferred Tax Assets and other factors Mainly related to vending machines, etc. Bond Rating A+ Corporate bond registration Straight bond 6 billion yen (unissued 4 billion yen) Equity ratio '16/4 43.9% '15/4 44.4% Net assets Decreased.5 billion yen (breakdown) Capital surplus 1.6 billion yen Retained earnings 3.3 billion yen Valuation difference on available-for-sale securities.2 billion yen Foreign currency translation adjustments 1.3 billion yen Remeasurements of defined benefit plans.7 billion yen others Topix For drinks raw material tea processing plant (expected completion image) (Kobe Plant:Kobe Prefecture) *Aug 216 operation plan BCP response (strengthening west Japan) Reducing costs by shortening raw material transportation times Major tea producing regions Flow of raw tea materials Shizuoka Sagara Plant (Shizuoka Prefecture) Kobe Plant (Kobe Prefecture) Appendix 5
(Appendix 6) Key Management Indexes (Consolidated) Net Sales & % Cost of Sales chart1 Operating Income chart2 Net Income & ROE グラフ chart3 3 ( billion) Net Sales 5 4 3 2 1 332.9 351.6 5.9 5.6 % Cost of Sales 369.2 43.9 52.1 52.4 437.7 43.5 51.6 51.8 465.5 471.5 53. 53. (%) 65 55 45 ( billion) Operating Income 25 % Operating Income 2 15 1 5 12.4 3.7 17.6 18.9 2.2 21.1 5. 5.1 5. 4.8 11.3 2.6 17.2 3.7 2. 4.2 (%) 12 1 8 6 4 ( billion) 15 1 5 5.9 6. 7.6 7.6 Net income ROE 9.2 8.9 11.2 12. 1.3 1.4 7.2 5.9 8.6 6.8 11.8 9.1 (%) 25 2 15 1 5 '1/4 '11/4 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. 35 '1/4 '11/4 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. 2 '1/4 '11/4 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. ( billion) CF from Operating Activities 3 2 1-1 -2 17.1 1.6-6.5 CF from Investing Activities Free CF 19.7 17.5-2.1 21.4 13.3-8. Cash Flow 24. 24.3 14.7-9.2 19.7-4.5 17.7 8.5 chart4 3. 21.9 25.7 17.7-9.2-8.1-7.9 '1/4 '11/4 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. ( billion) 12 1 8 6 4 2 3.8 5.5 3.1 3.4 1.8 1.8 Capital investments & Depr. & Amort. chart5 Software Capital Investments Depr. & Amort. Leased Assets Depr. 7.2 3.6 3.8 5.3 9.8 6.3 1.9 11. 1.8 4.1 4.6 4.5 3.3 5.2 5.3 '1/4 '11/4 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. 8.2 8. 7. ( ) 8 6 4 2 Dividend & Payout Ratio Dividend(Common Stock) Dividend(Preferred Stock) Payout Ratio chart6 81.4 48 48 48 49 5 5 5 48 61. 65.6 72. 44.5 54.4 4 4 4 44.5 42.4 38 38 39 38 38 '1/4 '11/4 '12/4 '13/4 '14/4 '15/4 '16/4 '17/4 Est. (%) 13 11 9 7 5 3 1 (1) Appendix 6
The purpose of the materials you have received is to provide the means for a more thorough understanding of ITO EN and should not necessarily be regarded as a recommendation to invest. Furthermore, the data in these materials is based on what we believe is the most accurate information. However, please understand that even without advance notice, both past data and future forecasts may be revised.