Operating Results and Financial Analysis

Analysis of Operating Results

Status of operations

In accordance with Group Medium-term Management Plan 2019, the Megmilk Snow Brand Group endeavored to strengthen the earnings base in preparation for future growth through efforts to create multiple earnings bases and maximize cash flow, through product mix improvement accompanying sales growth from high-value-added products such as functional yogurt and from cheese and other mainstay products, and through scale expansion from continued marketing investment in the nutrition business sector.
As a result, consolidated earnings for the current consolidated fiscal year were net sales of 596.1 billion yen (up 1.4% YoY), operating profit of 19.3 billion yen (up 3.3% YoY), ordinary profit of 20.9 billion yen (up 3.6% YoY), and profit attributable to owners of parent of 13.3 billion yen (up 3.1% YoY).

Net sales

The Dairy Products Business (includes Nutrition Business) resulted in net sales of 239.7 billion yen (up 3.2% YoY) on favorable sales driven by promotional activities to take advantage of a growing cheese market. The Beverages and Desserts Business recorded favorable sales on continued activities promoting yogurt made with the Megmilk Snow Brand proprietary lactobacillus strain Lactobacillus gasseri SBT2055.
On the other hand, sales of beverages declined due to the impact of a stagnant market. As a result, net sales were 275.4 billion yen (down 0.7% YoY).
The Feedstuffs and Seed Products Business recorded net sales of 44.7 billion yen (up 4.0% YoY) thanks to increased sales of pasture forage/crop seeds and rising sales prices for compound feeds.
When adding 36.1 billion yen (up 3.2% YoY) in net sales from the Other segment, which includes real estate rental and joint distribution center services among other businesses, segment net sales increased 8.2 billion yen to 596.1 billion yen (up 1.4% YoY).

Operating profit

Operating profit increased 0.6 billion yen to 19.3 billion yen (up 3.3% YoY). Although we recorded various cost increases, including higher promotion costs, raw material costs, and logistics costs, sales growth for cheese in the Dairy Products Business and higher sales for functional yogurt in the Beverages and Desserts Business contributed. EBITDA increased by 0.6 billion yen to 34.5 billion yen (up 1.8% YoY).

<Reference>
Net sales and operating profit by segment

Unit: Billion yen

 FY2017
Net salesOperating profit
IndividualsDairy products2,397121
Beverages and Desserts2,75447
Feedstuffs and Seed Products44713
Other36111
Total5,961193
<Reference>
Nutrition Business (reported under Dairy Products Business) segment net sales

Unit: Billion yen

 FY2017 Net sales
Nutrition194

Analysis of financial status

Assets

Total assets as of the end of the consolidated fiscal year under review increased by 11.3 billion yen year on year. This was mainly attributable to increases in wholesale assets, investment securities, and notes and accounts receivable-trade.

Liabilities and net assets

Total liabilities as of the end of the consolidated fiscal year decreased by 0.4 billion yen year on year. Although notes and accounts payable-trade and accounts payable increased, loans payable and income taxes payable decreased.
Total net assets increased by 11.8 billion yen year on year. This was mainly attributable to increases in retained earnings and valuation difference on available-for-sale securities.

Cash flow analysis

Cash flows from operating activities

We recorded revenues of 22.8 billion yen (previous FY was revenues of 29.9 billion). Compared to the previous fiscal year, while income tax payments decreased, inventory assets increased, resulting in a 7.1 billion yen decline in revenues.

Cash flows from investing activities

We recorded expenditures of 11.7 billion yen (previous fiscal year was expenditures of 14.4 billion yen). Compared to the previous fiscal year, the change is mainly attributable to a decrease in proceeds from sales of property, plant and equipment and intangible assets, which offset a decrease in purchase of property, plant and equipment and intangible assets. This resulted in a decrease in expenditures of 2.6 billion yen.

Cash flows from financing activities

Cash flows from financing activities resulted in revenues of 12.9 billion yen (previous FY was revenues of 14.3 billion). Compared to the previous fiscal year, while expenditures for repayment of long-term loans payable decreased, the net amount for short-term loans payable and revenues from long-term loans decreased, expenditures for the purchase of subsidiary stock not resulting in changes in the scope of consolidation and increased cash dividends paid resulted in decreased expenditures of 1.4 billion yen.