Message from the President

We would like to express our sincerest condolences to the people impacted by the 2018 Hokkaido Eastern Iburi Earthquake and other natural disasters, including the typhoons, heavy rains, and other earthquakes that occurred this year.

The Japanese economy for the first half of the fiscal year under review showed signs of a mild recovery that is expected to continue for the foreseeable future. At the same time, there are concerns about the impact of trade friction and uncertainty in overseas economies. In the food industry, we are seeing companies reflect cost increases in their product pricing. At the same time, we as seeing the diversification of consumer preferences. As a result, companies are introducing products that pursue functionality as well as products that pursue low costs.

Amid such an environment, our Group worked to diversify our revenue platform and maximize cash flow in accordance with our Group Medium-term Management Plan 2019.
We improved our product mix to expand sales of value added products such as functional yogurt and mainstay products such as cheese. We also continued with marketing investments in the nutrition business to expand business scope. Through these initiatives, we worked to strengthen our revenue platform for future growth. Additionally, we revised our pricing and package volumes to respond as originally planned to changes in our operating environment such as higher raw milk costs and higher logistics costs.

As a result of the above, we recorded higher revenues and lower income for the cumulative consolidated second quarter. Net sales were 305,369 million yen (up 0.6% YoY), operating profit was 9,587 million yen (down 13.4% YoY), ordinary profit was 10,253 million yen (down 13.0% YoY), and profit attributable to owners of parent was 6,422 million yen (down 10.6% YoY).
Compared to original forecasts, net sales were 99.1% and operating profit was 98.8% of plans, respectively. Considering the impact of natural disasters, earnings were largely on par with original plans.

We are positioning the second half of this fiscal year as the period for implementing core initiatives, including increasing yogurt and cheese sales, and improving our product mix. Through these initiatives, we will achieve our FYE March 2019 management goals and build a business platform for the upcoming fiscal year.

Every executive and employee will remain dedicated to compliance and quality management as we proactively promote CSR management and work towards the realization of becoming a Future Creation Company with Milk.

We ask for your continued understanding and support.

November 8, 2018

Keiji Nishio
Representative Director and President
Megmilk Snow Brand Co., Ltd.