Annual Report 2012
Year ended March 31, 2012
Our founder,
Dr. Minoru Shirota, successfully strengthened and cultivated Lactobacillus casei strain Shirota while working in a microbiology laboratory at Kyoto Imperial University School of Medicine (now Kyoto University). In 1935, he began sales of a fermented milk drink under the brand name Yakult.
Contents
01 02 04 06 10 14 16 22 24 26 29 30 56 57 The Sources of Yakult’s Strength Yakult Consumption around the World / Financial Highlights Message from the Chairman and President Interview with the Chairman and President Special Feature: Global Yakult, Global Smile Operating Performance Highlights Review of Operations Corporate Social Responsibility (CSR) Research & Development Corporate Governance Board of Directors and Corporate Auditors Financial Section Global Network Corporate Data
More than 75 years since then,
Yakult has conducted its business activities around the world in ways based on Dr. Shirota’s philosophy—Shirotaism (preventive medicine, the link between a healthy intestinal tract and a long life, and offering products at a price affordable to everyone)—explained on the next page.
As of March 31, 2012,
as a Probiotics* pioneer, we help to protect people’s health in 32 countries and regions, including Japan. In addition to fermented milk drinks, Yakult operations in Japan today include a pharmaceuticals business, in which we handle an anticancer drug widely used worldwide, as well as a cosmetics business.
Forward-Looking Statements Statements contained in the Annual Report 2012 regarding business results for fiscal 2012 represent judgments based on currently available information. It should be noted that there is a possibility that actual results could differ significantly from those anticipated due to such factors as exchange rate fluctuations.
* Probiotics: Live microorganisms that provide health benefits by improving the balance of intestinal flora.
Preventive medicine
The Sources of Yakult’s Strength
Yakult has three unique sources of strength:
Products Power
Sales Power
R&D Power
A healthy intestinal tract leads to a long life
Shirota-ism
Products Power:
More Than 75 Years of a Global Classic
From its founding more than 75 years ago, Yakult has been a pioneer in the field of Probiotics, delivering products that contribute to good health. Today, Yakult has expanded beyond food and beverages to play an active part in the pharmaceuticals and cosmetics businesses as well.
A price anyone can afford
Dynamic R&D:
The Wellspring of Future Competitiveness
For Yakult, R&D activities vitally underpin its ability to create products that promote good health today and in the future. The R&D Division pursues fundamental research in life science aimed at developing and applying basic materials in food, pharmaceuticals, cosmetics and other areas.
The Yakult Lady System:
Everywhere Is Local
Yakult supplies its products via two sales channels: home delivery sales by Yakult Ladies, and retail sales via high-volume retailers, vending machines, and other points of sale. Together, these two channels are better than one, creating synergies that underpin Yakult’s powerful sales capabilities. Our unique home delivery system offers opportunities to meet customers faceto-face and explain to them how lactobacilli work to support good health. It also enables customers to experience for themselves the benefits of Yakult products.
Lactobacillus casei strain Shirota Bifidobacterium breve strain Yakult
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Yakult Consumption around the World
Belgium* United Kingdom*
203
United States*
76
125 (Thousands of bottles/day)
THE AMERICAS 3,309
Mexico*
EUROPE
Sales Volume by Region in 2012
(Thousands of bottles/day)
Financial Highlights
YAKULT HONSHA CO., LTD. and consolidated subsidiaries March 31, 2012, 2011, 2010, 2009 and 2008
Brazil*
Thousands of U.S. dollars (Note 2)
1,706
Millions of yen
30,000 24,866 25,099 26,395 27,494
28,698
2008 For the year: Net sales Operating income Net income At the year-end: Total assets Total liabilities Total equity Financial ratio: Return on equity (ROE) (%) Per share of common stock: Basic net income Total equity (Note 3) Cash dividends applicable to the year ¥317,335 22,502 16,675 ¥384,569 118,566 266,003 7.0
2009 ¥293,490 16,744 11,325 ¥361,902 134,936 226,966 5.1
2010 ¥290,678 18,991 13,249 ¥389,892 140,970 248,922 6.2
Yen
2011 ¥305,944 20,401 13,169 ¥392,828 141,857 250,971 5.9
2012
2012
¥312,553 $3,811,621 20,817 253,868 13,292 162,097 ¥397,214 $4,844,071 144,971 1,767,937 252,243 3,076,134 5.8
U.S. dollars (Note 2)
20,000
10,000
¥ 95.93 1,376.41 20.00
¥ 65.75 1,195.60 20.00
¥ 77.11 1,300.21 20.00
¥ 76.55 1,313.37 22.00
¥ 77.32 $ 1,328.61 22.00
0.94 16.20 0.27 Argentina
Notes: 1. Figures are rounded to the nearest million. 2. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of ¥82 to U.S.$1, the approximate rate of exchange at March 31, 2012. 3. Minority interests are not included in equity on process of calculation.
20
0 Mar. 2008
The Americas
09
10
11
Europe
12
Japan
Asia and Oceania
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Net Sales and Operating Margin
(Billions of yen)
400 400 400 300 300 300
(%)
10.0 10.0 10.0 7.5 7.5 7.5 5.0 5.0 5.0 2.5 2.5 2.5
The Netherlands*
220 105
South Korea China (total)
Germany
2,309
4,001
200 200 200 100 100 100 0 09 10 0 Mar. 2008 09 10 0 Mar. sales (left scale) Net 2008 Mar. sales (left scale) 09 Net 2008 Operating margin (right scale) 10 Net sales (left scale) Operating margin (right scale) Operating margin (right scale)
Austria
Breakdown as follows: ・Guangzhou 1,235 311 ・Shanghai 167 ・Beijing 595 ・China
17
Italy
11 11 11
12 12 12
0 0 0
Japan
8,678
Taiwan
Net Income and Net Income per Share (Basic)
(Billions of yen) 20
64
20 20 15 15 15 10 10 10
(Yen) 100
100 100 75 75 75 50 50 50 25 25 25
890
Hong Kong
481
India
48
Thailand
The Philippines
1,295
5 5 5 0 09 10 0 Mar. 2008 09 10 0 Mar. income (left scale) Net 2008 Mar. income per share (basic) (right scale) 2008 (left scale) 09 10 Net Net income (left share (basic) (right scale) per scale) Net income per share (basic) (right scale)
ASIA AND OCEANIA 194
Malaysia Singapore* Indonesia
2,234
Vietnam
68
11 11 11
12 12 12
0 0 0
194
2,253
ROE 10.0
(%) 10.0 10.0
8.0 8.0 8.0
Australia*
207
6.0 6.0 6.0 4.0 4.0 4.0 2.0 2.0 2.0
* The sales of bottles for the following countries are included: Uruguay (Brazil), Belize (Mexico), Canada (the United States), Luxembourg (Belgium), France (the Netherlands), Spain (the Netherlands), Ireland (the United Kingdom), Brunei (Singapore), and New Zealand (Australia).
0 0 Mar. 2008 0 Mar. 2008
Mar. 2008
09 09 09
10 10 10
11 11 11
12 12 12
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Message from the Chairman and President
Takashige Negishi
President and Representative Director Chief Operating Officer (COO)
Sumiya Hori
Chairman and Representative Director Chief Executive Officer (CEO)
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YAKULT HONSHA CO., LTD.
Delivering health and smiles to as many people as possible
Under the corporate philosophy of “We contribute to the health and happiness of people around the world through pursuit of excellence in life science in general and our research and experience in microorganisms in particular,” and through the principles of Shirota-ism, which serves as the bedrock of our operations, Yakult aims to evolve in tandem with local communities. The founder of Yakult, Dr. Minoru Shirota, advocated “preventive medicine,” which emphasizes the importance of preventing illnesses rather than just treating them, and the idea that “a healthy intestinal tract leads to a long life,” which is the belief that by strengthening the intestinal tract—from which the body absorbs nutrients—we can live healthier, longer lives. Advocating these and other ideas, Dr. Shirota had a strong desire to contribute to better health for people in Japan as well as elsewhere worldwide with Yakult. We have actively promoted the value of Lactobacillus casei strain Shirota, Yakult’s unique proprietary Probiotic strain. Currently, the fermented milk drink Yakult is enjoyed by people in 32 countries and regions across the globe. The importance of the Probiotic strain, which provides health benefits to people, is expected to continue to grow in the future. As a pioneer in the field of Probiotics, the Yakult Group will continue to not only communicate the superiority and safety of its products but also promote the research and development of new products to meet customers’ needs. Furthermore, while striving to improve the Group’s unique home delivery system to promote good health for as many people as possible, we will strengthen measures to improve product distribution to stores, in an effort to actively expand the Yakult business as a global brand. Going forward, the business environment is expected to undergo drastic changes. Nonetheless, we aim to ensure sustained growth by continuing to adhere to our principles and roots, which represent the value of our existence as a company. We invite you to expect results from this renewed pitch for growth. August 2012
Sumiya Hori
Chairman and Representative Director Chief Executive Officer (CEO)
Takashige Negishi
President and Representative Director Chief Operating Officer (COO)
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Interview with the Chairman and President
Guided by Shirota-ism and our corporate philosophy, which together serve as the Company’s foundation, we aim to establish Yakult as a truly global brand.
Q A
Reflecting on the Fiscal Year Ended March 31, 2012
Please summarize the business results for the fiscal year ended March 31, 2012.
Our international business performed strongly, and we achieved increases in revenues and income. communicate the superiority of our products. In addition, we sought to boost performance by taking steps to shore up our sales organization, research and develop new products, upgrade our production facilities, and vigorously enhance our overseas operations and pharmaceuticals business. A s a re s u l t o f t h e s e e ff o r t s , w e re c o rd e d consolidated net sales of ¥312.6 billion, up 2.2% from the previous fiscal year, while operating income climbed 2.0%, to ¥20.8 billion. Net income increased 0.9%, to ¥13.3 billion. Several key points can be mentioned with regard to business performance during the year under review. In the domestic food and beverages business, we recorded declines in revenues and income for the full year despite a recovery from the impact of the Great East Japan Earthquake. In international business, in Asia and Oceania, our consolidated subsidiaries recorded robust increases in revenues and income, with the annual average for the number of dairy products sold per day rising 30.2% compared with the previous year’s level. In the pharmaceuticals business, operating income remained generally flat due in part to the increase in research and development investment.
Although the business environment fluctuated wildly both in Japan and overseas during the year under review, we worked to build awareness and understanding of Probiotics, which constitutes the bedrock of our operations, while striving to
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Q A
The Prospect for Business Management in the Future (1)
Please discuss current measures being taken in the food and beverages business.
We aim to return to a growth trend in Japan as well as make the next leap forward in our international business.
In regard to dairy products, we will further reinforce our main brands, the Yakult series and the Yakult 400 series. We also aim to revitalize the drinkable yogurt brand Joie by renewing its design and launching special products for a limited time only. In the category of juices and other beverages, we have launched a new brand, Mitsuboshi Factory, targeting women in their 20s and 30s in particular, as we seek to attract new customers. In terms of each channel, in our home delivery channel we will increase our focus on forging a close bond with communities to expand our business for the next generation. In our retail store channel, placing the greatest importance on retail stores and school and hospital meals, we will strengthen the bond with our business partners and customers to enhance our brand value. With respect to sales companies, we will work to streamline their management by deepening our understanding of how to develop together with each community and discussing the matters associated with each community to form a new business model. We would now like to discuss our international food and beverages business. The annual average number of bottles sold overseas per day exceeded 20 million bottles for the first time in 2011, which was a recordhigh sales volume. We continue to aim at establishing Yakult as a truly global brand. In the Yakult business in China, sales volume is increasing steadily, showing a very strong sales performance. W ith the establishment of new sales bases in Xi’an and Changsha in 2012, our sales structure now comprises 21 bases. We are implementing on schedule our fundamental plan to boost the number of sales bases to 27 locations by 2015. Moreover, following Guangzhou, Shanghai and Beijing, we started operating home delivery sales in Tianjin from the end of March 2012. Our business in Indonesia is also robust, maintaining double-digit increases in sales volume. Because of the rise in sales volume, we expect the plant’s production capacity to soon reach its upper limit. Accordingly, we will start constructing a second plant with operation scheduled for the end of 2013, to promote market expansion in the future. Although there are concerns over a decline in the domestic demand in Mexico and Brazil, we will strengthen our sales structures there by subdividing the existing areas where Yakult Ladies make deliveries and developing new customers as well as by expanding sales into unexplored local cities.
Let us speak first about the domestic food and beverages business. During the year in review, the number of bottles of dairy products sold per day, which had been growing for four consecutive years, declined for the first time in five years due to the Great East Japan Earthquake. In the fiscal year ending March 31, 2013, guided by a basic policy of “seeking to further enhance corporate values,” we will promote the value and appeal of our proprietary living Lactobacillus casei strain Shirota and Bifidobacterium breve strain Yakult more vigorously and thoroughly, by means of both home delivery and retail store sales channels, as we strive to return to a growth trend.
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Q A
The Prospect for Business Management in the Future (2)
Could you discuss recent initiatives undertaken in the pharmaceuticals business?
In the pharmaceuticals business we see new possibilities, including expansion of indications for Elplat, our core cancer chemotherapeutic agent. advanced or recurrent colorectal cancer, in an effort to make greater inroads into this segment. To expand indications of Elplat further, we will complete a phase II clinical trial for pancreatic cancer, with the aim of applying for the approval in 2012. Additionally, we will complete the evaluation of a
The core product of our pharmaceuticals business, Elplat, is highly rated as a key drug for the treatment of advanced or recurrent colorectal cancer and for the adjuvant treatment of colon cancer after surgery. The price of Elplat came down by 15% beginning April 2012 as a result of repricing by the Central Social Insurance Medical Council of drugs whose market sizes had grown beyond manufacturers’ initial expectations. To compensate for the price reduction, we are targeting a substantial increase in sales volume (up 25% year on year) for the fiscal year ending March 31, 2013. Specific activities to boost sales include stepped-up efforts to obtain information on the usage of XELOX regimen approved for postoperative adjuvant chemotherapy of colon cancer in November 2011. The regimen is currently administered to only about 10% of patients in Japan, in contrast of those in Europe and the United States. We are accelerating the market penetration of the adjuvant treatment using Elplat, which shows higher efficacy than conventional drugs. In addition, we will focus on promoting the proper use of Elplat for patients with unresectable
phase III clinical trial of Elplat for gastric cancer, with the aim of filing for the approval in December 2012; at the same time, we will accelerate development work for adjuvant treatment of gastric cancer by conducting a phase II clinical trial of XELOX regimen and by planning a phase II trial of SOX regimen. To boost sales of drugs other than Elplat, our marketing will continue to focus on the oncological field, including actions to capture a greater share for cancer chemotherapeutic agent Campto in Japan and to increase marketing channels for nucleoside analog used as cancer chemotherapy, Gemcitabine Yakult. Outside Japan, we will continue to further differentiate Campto from its generic drugs.
Q A
Long-Term Vision
Please tell us about future prospects in the medium to long term.
Guided by “Yakult Vision 2020” formulated in 2011, we will make a comprehensive effort to grow as a global company. regardless of the business environment. Based on this long-term vision, the Yakult Group has built a business portfolio that divides the global market into four stages (development, growth, maturation and reconstruction). Allocating business resources and implementing strategies in an optimal manner, we will disperse
The Yakult Group has formulated and implemented “Yakult Vision 2020,” a long-term vision covering fiscal 2011 to 2020. The goal of this vision is to achieve sustainable growth as a global company while maintaining the consistency in our conventional business management, while responding to changes flexibly
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
QUANTITATIVE GOALS
Number of Bottles of Dairy Products Sold (10,000 bottles/day) business risks and create a cycle of sustainable growth. Specifically, in the markets at the development stage and growth stage, we will further cultivate existing markets while exploring new markets to boost the recognition of Yakult as well as contribute actively to people’s health and happiness through the provision of products. In the domestic market, at the maturation stage and reconstruction stage, we will develop a new business model with health services as the nucleus, starting with the dairy product business. We will then expand the business model itself on a global basis, leading to a recovery in growth.
Our goal is to achieve net sales of ¥500 billion and operating income of ¥50 billion in 2020.
Consolidated Sales
(100 million yen)
Consolidated Operating (100 million yen) Income
38% growth 10 million bottles
UP
(22% in Japan; 46% overseas)
72% growth
UP
163% growth
UP
roughly twofold 5,000
roughly threefold 500
3,650
2,640
2,600 Overseas
2,907
1,777
190
6.5% of sales
FY 2009 FY 2020 results target
(Mar. 2010) (Mar. 2021)
863
1,050 Japan
10.0% of sales
Q A
To Shareholders
FY 2009 FY 2020 results target
(Mar. 2010) (Mar. 2021)
FY 2009 FY 2020 results target
(Mar. 2010) (Mar. 2021)
What is your message for Yakult shareholders with regard to shareholder returns, among others?
Going forward, we will meet shareholders’ expectations through business expansion and improvement in profitability, as well as by delivering steady shareholder returns.
With respect to the year-end dividend for the year under review, in addition to payment of a standard dividend of ¥20.0 decided based on the policy just described, we added a commemorative dividend of ¥2.0 for our 75th anniversary, which we celebrated in the previous fiscal year. As a result, we paid an annual dividend of ¥22.0 per share.
Furthermore, in the current fiscal year, we plan to pay an annual dividend of ¥23.0 per share, an increase of ¥1.0 from the year under review, to return profits to shareholders. On a final note, the Yakult Group has been operating its business for 77 years under the corporate philosophy of delivering health to people around the world through Lactobacillus casei strain Shirota. We believe that continuing to maintain this spirit for many years to come is the core value of the Company’s existence. We ask our shareholders and investors for their continued support and understanding.
We give top priority to the payment of a higher and stable dividend to shareholders by setting the annual dividend at a base of ¥20.0 per share. The total dividend paid is based on business performance for the year, after comprehensively taking into account the need for funds for future business expansion and increasing earnings, as well as the financial position.
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Special Feature
Globally Popular Yakult: Delivering Health and Smiles to as Many People as Possible
Since the start of overseas operations in Taiwan in 1964, Yakult has helped protect human health in 31 countries and regions in the world (excluding Japan). We will expand business operations by thoroughly conducting activities based on our corporate philosophy, “We contribute to the health and happiness of people around the world through pursuit of excellence in life science in general and our research and experience in microorganisms in particular.”
History of Yakult’s International Business
Since our founder, Dr. Minoru Shirota, had a dream to “protect human health throughout the world,” it was natural for Yakult to expand its operations to overseas markets. Through three stages, Dr. Shirota’s dream has led to the development of today’s international business. In the first stage (1964–1990), we established a foundation for the international business, entering markets in nine countries with a focus on Asia and Latin America. The hygienic environment in these countries and regions was poor, causing infectious diseases and other problems. Yakult, our product embodying Shirota-ism (preventive medicine, the link between a healthy intestinal tract and a long life and offering products at a price affordable to everyone), was very well received by people in these regions.
While cold chain distribution was not developed at the time, the Yakult Ladies delivered Yakult directly to customers, promoting our product and service values. Furthermore, the introduction of the Yakult Lady system created employment opportunities for women, playing a major role in helping Yakult to take root in local communities. In the second stage (1991–2000), we made a full-fledged entry into the European market, gaining international recognition. We expanded into 11
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YAKULT HONSHA CO., LTD.
countries during a period of nine years, and our entries into nations with advanced dairy industries such as the Netherlands were particularly significant. To promote business operations, we made efforts to spread Yakult’s product values and Shirota-ism through public relations in the mass media and faceto-face communication through demonstrations at stores. Furthermore, a global dairy product company in Europe launched a product with a concept similar to that of Yakult. This unprecedented competitive environment indicated that Shirota-ism was internationally recognized through Probiotics, forecasting the beginning of a new stage in the establishment of a global brand. In the third stage, we entered markets in 11 countries and regions during a period of 10 years
between 2001 and 2010. Making use of international competitiveness and expertise that we had accumulated by the second stage, we entered China, India and the United States, the three most populated countries in the world, with the goal of establishing Yakult as a truly global brand. In particular, the start of full-fledged sales operations in China (with the world’s largest population) as well as in the United States (the world’s economic giant) was a major epoch in our history. We also expanded sales territories in the countries and regions into which we had already entered, deeply cultivating the markets so that Yakult could be enjoyed by as many customers as possible.
With the fourth stage already begun last year, we consider this stage an important phase in accelerating the growth of the international business, making 2013 a mid-stage year. As of March 2012, Yakult and other products are manufactured and sold in 31 countries and regions (excluding Japan), with an average of approximately 20.10 million bottles of Yakult sold overseas per day during the year counted from January. F o r t h e d e t a i l s o f t h e c u r re n t a n d f u t u re international business, see “Future Strategies for Yakult’s International Business” below.
20,000,000
Global Progress of Yakult Bottle Sales*
(bottles/day)
*Japan not included
Number of Yakult bottles sold per day
1964
Countries Entered
3
1974
7
ANNUAL REPORT 2012
1984
9
1994
21
2004
31
2011
11
YAKULT HONSHA CO., LTD.
Yakult’s Philosophy for International Business
Yakult is a product for consuming live cultures of Lactobacillus casei strain Shirota, a beneficial bacteria strain unique to our company. The concept of drinking live bacteria had not existed in any country until Yakult was founded in Japan. In other words, there was no market. Therefore, the top priority of Yakult’s strategies overseas is to spread the knowledge that Lactobacillus casei strain Shirota is a strain of bacteria that promotes health. This begins by explaining that there are both good and bad bacteria in the intestinal tract, and that drinking Yakult improves the balance of the bacteria and helps maintain the intestinal tract’s health. To explain this, it is necessary to make steady efforts to convey the values of Yakult and promote understanding. In addition to explaining the products and scientific facts on the bacteria by visiting individual homes and demonstrating products at stores, steady grassroots efforts are essential, such as implementing public relations activities in elementary schools, kindergartens and community centers and giving presentations to hospital staffs such as nutritionists. Yakult calls these efforts value dissemination activities. Unlike the “hunting” approach to marketing, which pursues short-term results through major
advertising campaigns, these value dissemination activities take a “farming” approach to marketing, which requires repeated steady and thorough efforts as if cultivating a field. Since its establishment, Yakult has consistently implemented the latter, and for overseas business this philosophy is unchanged. First, we aim to thoroughly understand the culture and customs of a country in which we operate, and then implement activities to clearly explain and promote the understanding of Yakult’s philosophy. Through such activities, we create our customer base and establish an overseas market from the ground up.
Implementing the Same Promotional Activities Overseas as Those in Japan
Ya k u l t i s a p r o d u c t f o r d a i l y c o n s u m p t i o n . Encouraging this daily routine requires meeting directly with customers to convey the value and promote understanding of Yakult. The Yakult Ladies play a vital role in fulfilling this mission. For nearly 50 years, delivery by Yakult Ladies has been a constant since the Yakult Lady System, which is unique to Yakult, was introduced in 1963 in Japan. With the spirit of “Anytime, anywhere and even single bottles,” home delivery by Yakult Ladies was born of the desire to protect human health and encourage people to drink one bottle of Yakult a day. Currently, Yakult Ladies are active in many countries and regions, numbering approximately 41,000 as of the end of March 2012. Visits to individual homes are difficult in some countries and regions, and there are no customs for home delivery in certain countries and regions. In such cases, we train local staff members and have them give a clear explanation of our products to each customer at the store while encouraging tasting, providing opportunities to enjoy product values as well as benefits of the bacteria.
Ensuring “Japanese Quality” Overseas
Since Yakult (which contains live Lactobacillus casei strain Shirota) is a dairy product, it cannot be preserved for a long time. Because of this, local production is essentially required. Currently, there are 23 plants in the world, excluding Japan, that produce Yakult and other products daily for their respective areas. The plants regularly receive the supply of Lactobacillus casei strain Shirota, the key ingredient, from the Yakult Central Institute for Microbiological Research in Japan. Using raw materials that have cleared a strict quality check, they manufacture products under the same high-level hygiene control conditions as those in Japan while ensuring that standardized strict quality standards are maintained.
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Future Strategies for Yakult’s International Business
International Market with a Large Potential for Growth
There are over 190 countries in the world with a population of approximately seven billion. While we currently sell Yakult products in 31 countries and regions, we will continue to conduct market research and determine the countries to enter so that we can deliver health to as many people as possible. substantial potential for growth. We will promote sales activities so that Yakult is available to as many people as possible and as soon as possible. With regard to further cultivation of sales territories in existing markets, we will gauge our market penetration rate for each country and region by measuring the number of bottles sold per population, as well as support promotional activities implemented by Yakult Ladies and sales representatives. At the same time, we will subdivide the areas managed by sales bases in each country or region at appropriate times, according to how mature the market is, carefully managing the markets and diversifying products as needed. For example, China has started to rise rapidly as a market. The market penetration rate of Yakult in China is an average of 0.8%. When compared with 3.94% in Mexico, which we entered before China, it is clear that the growth potential is huge in the Chinese market. In China, we started sales in Guangzhou in 2002, followed by the establishment of additional sales bases in coastal areas such as Shanghai and Beijing. In 2012, we launched operations in the interior cities of Xi’an and Changsha, following Wuhan. In total, we have established sales bases in 21 major cities. In Guangzhou, the first market we entered in China, sales have been strong, exceeding the previous year’s sales by more than 30%, with an increase in the market penetration rate to 1.57%. We also expect the market penetration rate to continue to rise in the markets that we entered later. In China, as living standards have improved, there has been an increasing awareness of food safety and health, which is providing a boost to Yakult, a brand known for its safety and reliability. In the future, promoting the expansion of sales bases in the interior region, we will further strengthen our organizational structure for the inland provinces, planning to build a structure consisting of 27 bases by 2015.
Potential Demand
(Billions of people)
Global Population
6.97
As in China, we will also focus on other markets, including Indonesia, Brazil and other emerging countries. The previous year’s market penetration rates were 1.41% in Indonesia and 1.69% in Brazil, suggesting a substantial growth potential in these countries. Taking advantage of rising health awareness, we will continue to improve our sales structure, which will allow us to offer meticulous services, to further cultivate the markets. Along with an increase in sales volume, we have been improving the system for supplying products. In addition to the plants in Guangzhou and Shanghai, we began operations at the plant in Tianjin, our third location in China, in August 2011. Furthermore, the construction of a second plant in Guangzhou is also under review. We are moving forward with construction of a plant in the United States and a second plant in Indonesia, aiming to systematically reinforce our business in terms of both manufacturing and sales. Yakult will continue to create markets through steady, thorough efforts to deliver health and smiles to as many people as possible in the world.
6.13
Population of Countiries and Areas Where Yakult Is Sold
4.25 1.32 0.57
Marketing Population
China Market
Areas entered
1.33
2001
2011
Expansion and Further Cultivation of Existing Markets
Approximately 4.3 billion people live in the 31 countries and regions where we currently operate our business. Of these, our marketing population covers approximately 1.33 billion people, or approximately 31% of the total population in these countries and regions, which means that existing markets still offer a
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Operating Performance Highlights
Note: Sales by business segment includes intersegment transactions.
At a Glance
Japan
Net Sales
(Billions of yen)
Operating Income
(Billions of yen)
300
30
200
20
100
10
Yakult pursues several businesses in Japan. In addition to the Food and Beverages business centered largely on Probiotic products, our Pharmaceuticals business entails manufacture and sales aimed at developing Yakult into a pharmaceuticals specialist in the treatment of cancer. Cosmetics and a professional baseball team, meanwhile, are central operations in our "Others" business segment. For the fiscal year ended March 31, 2012, net sales in Japan came to ¥245.9 billion.
12
0
Mar. 2010
11
12
0
Mar. 2010
11
Food and Beverages
In the Food and Beverages segment, we sell both Probiotic products and Juices and Other Beverages through our home delivery and retail store sales channels. In Probiotic products, business activities are centered on Yakult, which delivers live cultures of Lactobacillus casei strain Shirota to the intestinal tract. In Juices and Other Beverages, business operations emphasize products with functional properties. For the fiscal year ended March 31, 2012, net sales in Food and Beverages were ¥188.0 billion.
Pharmaceuticals
In Pharmaceuticals, Yakult specializes in the oncology business, especially focused on sales and marketing of Campto and Elplat, two key drugs for the treatment of colorectal cancer. Net sales in this segment for the fiscal year ended March 31, 2012 were ¥39.4 billion.
Others
In Others, the Company is involved in the cosmetics business, founded on the beneficial effects of lactic acid bacteria for the skin, as well as management of a professional baseball team, the Tokyo Yakult Swallows. Net sales in this segment for the fiscal year ended March 31, 2012 were ¥18.6 billion.
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
International Business
Net Sales
(Billions of yen)
Operating Income
(Billions of yen)
90
20
15 60 10 30 5
0
Mar. 2010
The Americas
11
Asia and Oceania
12
Europe
0
Mar. 2010
The Americas
11
Asia and Oceania
12
Europe
Outside Japan, we are developing the Company’s Probiotics operations in three regions—the Americas, Asia and Oceania, and Europe—with the goal of establishing Yakult as a truly global brand. As of March 31, 2012,Yakult Probiotic drinks and other products are sold in 31 countries and regions outside of Japan, with an average of 20.02 million bottles of Yakult sold per day during the year under review. For the fisacl year ended March 31, 2012, the International Business recorded sales volume of 11.6 million bottles per day, and sales of ¥79.0 billion.
The Americas
In addition to Brazil and Mexico, where Yakult has a long-established presence, the Company recently made a full-fledged advance into the United States, and unit sales there are on a steady rise. In the Americas, net sales for the fiscal year ended March 31, 2012 were ¥39.0 billion.
[Operating Countries and Regions]
Brazil, Uruguay, Mexico, Belize, Argentina, the United States, Canada
Asia and Oceania
Yakult’s first foray into the region, and first overseas expansion, was in Taiwan in 1964. More recently, the Company has been developing business in population-rich China and India. In Asia and Oceania, net sales for the fiscal year ended March 31, 2012 were ¥32.0 billion.
[Operating Countries and Regions]
Taiwan, Hong Kong, Thailand, South Korea, the Philippines, Singapore, Brunei, Indonesia, Australia, New Zealand, Malaysia, Vietnam, India, China
Europe
Retail stores are the center of business activities in Europe, which Yakult entered in the 1990s. Net sales for the fiscal year ended March 31, 2012 came to ¥8.0 billion.
[Operating Countries and Regions]
The Netherlands, Belgium, Luxembourg, the United Kingdom, Ireland, Germany, Austria, Italy, France, Spain
Mexico
China (Guangzhou)
United Kingdom
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Review of Operations
Note: Sales by business segment and percentage of net sales by region include intersegment transactions.
Japan
Percentage of Net Sales by Region (%)
75.7%
Japan International Business
Food and Beverages
Yakult
Yakult 400
Joie
Mil-Mil
Pretio
Breakdown of Probiotic Products Sales by Channel (%)
Sales by Yakult Ladies Sales via supermarkets, convenience stores, and other outside channels
In Probiotic products, Yakult launched activities to thoroughly promote the value and appeal of our proprietary living Lactobacillus casei strain Shirota and Bifidobacterium breve strain Yakult. In our home delivery channel, we strengthened efforts to develop loyal customers for Yakult 400 and Mil-Mil series products via sales activities that
encourage people to try our products through samples or trial use. In our retail store channel, Yakult sales promotion staff took steps to highlight the value and appeal of products, centered on the fermented milk drink Yakult and Mil-Mil, a drinkable yogurt containing Bifidobacteria. We also focused on the marketing of the fermented milk drink Yakult
41.2%
58.8%
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Calorie Half, which contains fewer calories and tastes less sweet than the regular Yakult, after the product was revamped in September 2011. Another product that underwent renewal was Pretio, which has been designated by the government as a “Food for Specified Health Uses” and designed for people with relatively high blood pressure. To boost sales, we staged a synchronized ad campaign titled “Try Four Weeks and See for Yourself” across TV, newspapers, the Internet and other media, as well as in-store promotions throughout Japan, beginning in January 2012. Nevertheless, our full-year sales fell slightly short of the level achieved in the previous fiscal year, reflecting the repercussions of the Great East Japan Earthquake, despite a year-on-year increase for the second half of the fiscal year as the product distribution structure was restored. In Juices and Other Beverages, we completed the revamping of Toughman, our mainstay brand,
on the occasion of the product’s 30th anniversary in May 2011. Activities to boost the Toughman brand continued throughout the year under review and included the launch of Toughman Super in October. Efforts to capture a greater share in the soft drink market included the product renewal for Milouge Ca Plus in April 2011, followed by the package renewal for Milouge Soda in June. To drive sales growth in the functional beverage and food sphere, we launched Plum Drink with Galacto-oligosaccharide, a “Food for Specified Health Uses,” and the Gyutto Kenko Citrulline functional drink in September and October, respectively. The enhanced product lines in the functional beverage and food category resulted in a year-on-year increase in sales for Juices and Other Beverages as a whole. As a result, net sales in the Food and Beverages segment decreased to ¥188.0 billion, or 0.9%, from the prior fiscal year.
Net Sales of Food and Beverages
(Billions of yen)
200
150
100
50
0
Mar. 2010
11
12
Pharmaceuticals
CAMPTO 40mg for I.V. infusion
ELPLAT I.V. INFUSION SOLUTION 100mg
Gemcitabine for I.V. infusion 200mg Yakult」 「
In Japan, we focused on promoting the proper use of the cancer chemotherapeutic agent Elplat, actively sponsoring lectures and presentations targeting healthcare professionals in this area. Similarly, in November 2011, we obtained approval
for a change in Elplat’s dosage and administration in connection with the postoperative adjuvant chemotherapy for colon cancer patients. Thereafter, we redoubled efforts to recommend combination chemotherapy of Elplat and oral anticancer agent
Capecitabine, known as XELOX regimen, which offers convenient dosing to patients and medical practitioners. In addition, we sought higher sales and market share by specializing in oncology through by activating the marketing and sales
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
channel expansion for cancer chemotherapeutic agent Campto and others. In April 2011, an exclusive license was granted by 4SC AG for the development and commercialization in Japan of oral HDAC inhibitor Resminostat, whose patent rights and expertise are owned and under development by 4SC as an anticancer drug. Furthermore, we concluded an option agreement in November 2011 with Liv Tech Inc., for LIV-2008, and humanized a monoclonal anti-cancer antibodies program under the condition that when option rights are exercised, we will obtain exclusive license for the development, manufacturing and commercialization of LIV-2008 antibodies worldwide. We are expanding
the development pipeline for these drugs as well as for multi-kinase inhibitors PR509 and PR610 by Proacta Inc. and Akt inhibitor Perifosine by Æterna Zentaris Inc., for which Yakult signed agreements, in an effort to strengthen these drugs’ position in the cancer treatment area. Outside Japan, we worked hard to boost sales of Campto, whose market share has declined since the price erosion caused by generic drugs. As a result, brisk growth in domestic sales o v e rc a m e a y e a r- o n - y e a r d ro p i n o v e r s e a s sales, resulting in an increase in net sales in the Pharmaceuticals segment of 1.3%, to ¥39.4 billion.
Net Sales of Pharmaceuticals
(Billions of yen)
40
30
20
10
0
Mar. 2010
11
12
Others
In our cosmetics operations, we continued to promote the value and appeal of basic skin care products—namely, our core brands Parabio, Revecy and Revecy White—based on home visits to counsel customers on cosmetics. In an attempt to better address customers’ growing needs for complexion lightening care, we revamped the Revecy White series in June 2011 with the introduction of the new Revecy White “Transparent White” series featuring a new moisturizing formula. To take customer satisfaction a step further and to drive sales growth, in November 2011 we rolled out Agetics Moist Repair Essence, which is designed to reduce the appearance of dry fine lines and wrinkles. We followed this with the release in January 2012 of Lactdew S.E. Hyalurongel featuring proprietary moisturizing ingredients. In our professional baseball team operations, the Tokyo Yakult Swallows competed for the championship during the regular season and advanced to the Climax Series. Attendance at Jingu Stadium rose from the previous fiscal year, bolstered by a variety of fan appreciation events and active information dissemination. As a result, the Others segment saw net sales rise 8.0%, to ¥18.6 billion.
Net Sales of Others
(Billions of yen)
20
15
10
5
0
Mar. 2010
11
12
Parabio
Revecy White ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
International Business
Percentage of Net Sales by Region (%)
24.3%
Japan International Business
The Americas
Brazil, Uruguay, Mexico, Belize, Argentina, the United States, Canada
United States
In the Americas, Yakult manufactures and sells the
Brazil Mexico Argentina United States
fermented milk drink Yakult and other products in Brazil and Mexico, and imports products for sale in Argentina, the United States and other countries.
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
In the United States, preparation is underway for the construction of the first Yakult production facility in that country. It will be situated in Fountain Valley, California and is scheduled to commence production in the fall of 2013. Net sales in the Americas increased to ¥39.0 billion, up 3.9%, from the prior fiscal year.
Net Sales in the Americas
(Billions of yen)
50
25
Brazil
0
Mar. 2010
11
12
Taiwan, Hong Kong,Thailand, South Korea, the Philippines, Singapore, Brunei, Indonesia, Australia, New Zealand, Malaysia,Vietnam, India, China
Asia and Oceania
Vietnam
Net Sales in Asia and Oceania
Indonesia Australia China (Shanghai) India Vietnam
(Billions of yen)
40
In Asia and Oceania, Yakult manufactures and sells the fermented milk drink Yakult and other products in Hong Kong, Singapore, Indonesia, Australia, Malaysia, Vietnam, India, China and other countries. In China, in an effort to boost sales in the interior, we opened branch offices in Xi’an, Shaanxi Province in February 2012 and Changsha, Hunan Province in March, following the branch opening in Wuhan, Hubei Province. In August 2011, our third production facility
in China located at Tianjin Yakult Co., Ltd. began production of Yakult. A second production plant is planned for Guangzhou Yakult Co., Ltd. in anticipation of consistent sales growth in the provinces of Guangzhou and Hainan. In India, sales of Yakult began in the city of Hyderabad in February 2012 and Chennai in April 2012 via the retail store channel. To disseminate the Probiotics concept to a broad spectrum of
30
20
10
0
Mar. 2010
11
12
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
people, we established the Yakult India Microbiota and Probiotic Science Foundation, which hosted a probiotics symposium in December 2011. In Thailand, two production facilities under Yakult (Thailand) Co., Ltd., an associated company accounted for by the equity method, suffered damage caused by flooding in October 2011, and its operations were suspended. It resumed shipments in December 2011. Net sales in Asia and Oceania increased to ¥32.0 billion, up 25.4%, from the prior fiscal year.
Hong Kong
Europe
The Netherlands, Belgium, Luxembourg, the United Kingdom, Ireland, Germany, Austria, Italy, France, Spain
Italy
Net Sales in Europe
The Netherlands Belgium United Kingdom Austria Italy
(Billions of yen)
10
In Europe, Yakult manufactures the fermented milk
drink Yakult and other products in the Netherlands, and sells them in the Netherlands, Belgium, the United Kingdom, Germany, Austria, Italy and other countries. Overall European sales in yen amounts were impacted by the yen’s strength, but sales in the Netherlands and Italy showed solid growth. Net sales in Europe decreased to ¥8.0 billion, down 7.0%, from the prior fiscal year.
5
Austria
0
Mar. 2010
11
12
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Corporate Social Responsibility (CSR)
As a leading Probiotics company, Yakult believes it can fulfill its social responsibilities by putting into practice its corporate philosophy of "We contribute to the health and happiness of people around the world through pursuit of excellence in life science in general and our research and experience in microorganisms in particular." This is accomplished through the principles of Shirota-ism, which we have followed since the founding of the Company. At the same time, considering the critical situation that the global environment is in, we recognize that it is an extremely important issue for us to create a resource-recycling, sustainable society and that this is one of the responsibilities we must fulfill.
The Environment
Yakult first established an internal organization dedicated to preserving the global environment back in November 1991. This was followed in June 1997 by the creation of the “Yakult Basic Policy on the Environment,” which encompasses the entire Group. Guided by the environmental philosophy and directives for action found in this policy, we promote environmental protection activities in every aspect of our business operations. In March 2004, our directives for action were revised to make these guidelines more specific. Furthermore, to contribute to the conservation of biodiversity, we revised the directives in January 2010. For Yakult, a company that thrives on the bounty of nature represented by the lactobacillus in our products, we have spelled out our stance that being mindful of the global environment and biodiversity is indispensable to conducting sustainable corporate activities. In January 2000, the Company drafted the first stage plan of the “Yakult Environmental Action Plan,” and starting from the fiscal year ended March 31, 2001 we have implemented environmental protection measures across all business areas, including R&D, production, sales and administration, to reduce the environmental burden caused by our business activities. Since the fiscal year ended March 31, 2011, we have implemented the fourth stage of our plan, which includes measures for reducing greenhouse gas emissions and waste, and cutting the volume of printer paper the Company uses. In recognition of the need to continuously implement such activities in tandem with business operations, in March 2004 we attempted to transform all of our Group companies in Japan into “green companies” by 2010. In this way, we established the “Yakult Eco Vision 2010,” which aims to contribute to the preservation of the global environment and the formation of a sustainable society and has produced successful results. This was followed by the start of “Yakult Sustainable Ecology 2020” from the fiscal year ending March 31, 2013 to the target year of 2020. While describing the future of the Company in specific terms according to the three aspects of “realization of a lowcarbon society,” “promotion of efficient use of resources” and “preservation of biodiversity,” this aims to form a sustainable society in harmony with our stakeholders. In the fiscal year ending March 31, 2013, we will implement activities for the realization of “Yakult Sustainable Ecology 2020.” In the fiscal year ended March 31, 2012, Yakult carried on its initiatives from the previous year, continuing to introduce renewable energy with solar and wind power generation and other forms, implementing greenhouse gas reduction efforts at dairy product plants and in logistics operations, striving to achieve zero waste emissions, and promoting fuel conversion. All these initiatives produced successful results. Every year since the fiscal year ended March 31, 1995, the entire Yakult Group has conducted the Yakult Environmental Protection Campaign as part of environmental education. More than 110,000 people have participated since the inception of the program, and it is believed that the Company has had a considerable effect in steadily increasing environmental consciousness and social contributions among the Yakult Group employees.
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Community Activities
Promoting Reconstruction Support
As part of reconstruction support efforts in response to the Great East Japan Earthquake, Yakult donated combinedtreatment septic tanks using Yakult bottles to three temporary medical-care facilities in the affected areas of Iwate Prefecture. Yakult has been committed to assisting with the efforts through the provision of the system and the defrayment of incidental expenses incurred by the installation and operation when the Iwate Prefectural authorities set up the temporary medical-care facilities. In this system, Yakult bottles with their bottoms removed are placed in wastewater where various types of microorganisms take up residence on the Yakult bottles. These microorganisms break down and digest the substances that contribute to water pollution. The system has been introduced into the Company’s dairy product plants, and has achieved considerable progress in river and pond treatment projects conducted by the national and local governments.
Public Access to Plants
To deepen people’s understanding of Yakult’s products and the Group’s commitment to environmental awareness and safe, reliable products, we conduct tours of Yakult Honsha and other Group company plants. In 2011, tours were held at all domestic plants, except at those where tours were temporarily suspended due to equipment work, and approximately 220,000 people from the general public participated. Plant tours also take place at nearly all overseas plants. In addition, each year we hold plant festivals, and invite the local community and the families of our employees to participate, with the aim of improving relations with local communities. In 2011, a total of about 30,000 people participated in these festivals.
Yakult bottles to be used for combined-treatment septic tank
Initiatives by the Yakult Ladies
Since 1972, the Yakult Ladies have been carrying out “Courtesy Visit Activities,” which entail checking on the wellbeing of elderly people living alone and chatting with them while delivering Yakult products. In September 2011, as part of this initiative, the Yakult Ladies presented elderly people living on their own with flowers and a message card. It is the
seventh instance of this program, and because the program has brought such joy both to the Yakult Ladies presenting the flowers and to elderly recipients alike, we plan to continue these activities in the hope that everyone involved will continue to enjoy happy and healthy lives. The Yakult Ladies also contribute to safety and peace of mind in local communities by organizing crime prevention and safety patrols and maintaining contact with the police and local governments.
Welcome festival at the Plant
Establishing a Science Foundation in India
Yakult and Danone of France established the Yakult India Microbiota and Probiotics Science Foundation, as part of the activities undertaken by the Global Probiotics Council, which was formed jointly by the two companies. The objectives of the foundation are to promote Probiotics research in India, exchange scientific knowledge, and disseminate the concept of Probiotics over a wide area. Yakult and Danone have co-sponsored the Probiotics Symposium in India every
ANNUAL REPORT 2012
Courtesy Visit Activities
year since 2007 with the aim of spreading and promoting probiotics. Going forward the symposium will be sponsored by the newly established Yakult India Microbiota and Probiotics Science Foundation. In December 2011, the Foundation’s first symposium was held under the theme of “Health Impact of Probiotics — Vision and Opportunities.” Participants included internal medicine physicians, pediatricians, and microbiologists in India.
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YAKULT HONSHA CO., LTD.
Research & Development
Since our founding, Yakult’s R&D activities have vitally underpinned its ability to create products that promote good health today and in the future. The R&D Division pursues fundamental research in life science aimed at developing and applying basic materials in food, pharmaceuticals, cosmetics and other areas.
Lactobacillus casei strain Shirota
The Yakult Central Institute and the Yakult Honsha European Research Center
Located in Kunitachi, Tokyo, since 1967, the Yakult Central Institute for Microbiological Research, originally established in Kyoto in 1955 as the Shirota Research Institute, is a cuttingedge research facility in the Probiotics field investigating life science for the benefit of human health. The study of useful microorganisms, particularly intestinal microflora, is the guiding theme of research, with the institute having many achievements, including the discovery and use of lactic acid bacteria with high levels of functionality. The Yakult Central Institute has undergone building renovation and additions, as well as the construction of new buildings, including a new food research building equipped with the latest in laboratory facilities that was completed in April 2010. We plan to construct four additional new research buildings (for research management, pharmaceuticals and cosmetics, basic studies, and quality and technological development) slated for completion in 2015. Designed to blend in perfectly with its surroundings of lush green fields, the Yakult Central Institute will be enhanced with more cutting-edge facilities to allow researchers to efficiently carry out developmental projects and joint research. The Yakult Honsha European Research Center for Microbiology, ESV (YHER) was established in Ghent, Belgium, in May 2005. YHER is working to accumulate scientific evidence on the benefits of drinking our Probiotic products. By establishing a research base in Europe, the birthplace of the Probiotics concept, our goal is to support global business expansion encompassing not only Europe, but also the Americas and Asia.
Organization of the Yakult Central Institute for Microbiological Research
Research & Development
Basic Studies •Intestinal flora •Biophylaxis •Probiotics •Cancer prevention •Intestinal immunity •Genomic analysis of microorganisms •Discovery of yet-unknown intestinal bacteria Screening of Basic Materials of Food, Pharmaceuticals, and Cosmetics •Discovery and improvement of useful microorganisms •High-level purification and processing of enzymes •Development of techniques for utilization of food materials •Discovery and utilization of effective components in natural organic substances •Detection and improvement of useful components of milk •Chemical synthesis and modification of organic compounds Veri cation of functions of food materials Determining pharmacological effects and mechanisms Veri cation of functions of cosmetic ingredients
Product Feasibility Tests
Safety testing Industrial feasibility tests
New food materials
New pharmaceutical materials
New cosmetic materials
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Recent R&D Accomplishments
Improvements in Bowel Movements Observed in Subjects Who Took Probiotics (Lactobacillus casei strain Shirota) on a Continuous Basis
—Test conducted in Ghent, Belgium
The Yakult Honsha European Research Center for Microbiology conducted a clinical trial on healthy adults living in Ghent, Belgium, who were instructed to drink Yakult Light (a product marketed in Europe) continually for three weeks. It was confirmed that the percentage of the subjects experiencing hard or lumpy stools frequently (at least one out of four stools) dropped after taking Yakult Light. In addition, improvements in stool conditions as measured against the stool score were observed. The results were published in the International Journal of Food Sciences and Nutrition, an international scientific periodical on food science. The study revealed that the continuous intake of the fermented milk product containing Lactobacillus casei strain Shirota improved bowel movements in healthy adults in Europe. We are planning to conduct more studies around the globe in an attempt to prove the efficacy of our products.
Exterior view of bio-incubator facility located in the Technologiepark * The YHER is located on the first floor of this building.
Analysis of Intestinal Bacteria Involved in Soy Isoflavone Metabolism
—Joint research with the University of Tokyo and Mito Saiseikai General Hospital
With the University of Tokyo and Mito Saiseikai General Hospital, Yakult conducted joint research on intestinal bacteria that play a role in soy isoflavone metabolism. Soy isoflavones and their metabolic products, whose structures are similar to those of female hormones, are expected to contribute to the prevention of breast cancer and prostate cancer. Through our research, we discovered that Slackia sp., an intestinal bacterium, produces highly active equol out of daidzein, a soy isoflavone, and that the intestinal bacterium is found in about 40% of healthy adults in Japan. In addition, we analyzed the isolated Slackia sp. strain NATTS at the genetic level and confirmed that the equol production from daidzein is carried out with the action of three enzymes. These findings by Yakult are expected to provide strong momentum for further advances in the study of the cancer-preventive effects of equol.
Yakult Central Institute for Microbiological Research
ANNUAL REPORT 2012
25
YAKULT HONSHA CO., LTD.
Corporate Governance
1. Basic Stance
Our basic stance on corporate governance is to promote highly transparent management that is committed to the steady development of operations in our core business domain. Our corporate philosophy is “We contribute to the health and happiness of people around the world through pursuit of excellence in life science in general and our research and experience in microorganisms in particular.” In pursuing this philosophy, we believe it is important to implement transparent management with an emphasis on well-developed internal control functions. This includes efforts to ensure an appropriate management organization and decision-making processes. Corporate governance at the Company is also underpinned by the “company with corporate auditors” system.
3. Governing Bodies, Organizational Operations and Operational Execution
Board of Directors
The Board of Directors is composed of 15 directors, including four outside directors, and holds meetings in principle seven times each year, in addition to convening special meetings as needed. The seven corporate auditors also attend meetings. The Board of Directors deliberates on matters within its jurisdiction as defined by law and company rules, and is responsible for supervising the status of business execution.
Name Outside Positions as Representative
The Company introduced the Executive Officer System in June 2011. This system strengthens the decision making of the Board of Directors and business supervision functions, and clarifies responsibilities for business execution, thereby increasing the efficiency of these functions. As a system of support for outside directors, the General Affairs Department functions as the secretariat for the Board of Directors, and serves in this capacity as a point of contact for all Company officers, including outside directors. The four outside directors are listed in the chart below.
(As of June 20, 2012)
Reason for Appointment as Outside Director
Ryuji Yasuda
2. Capital Composition
The distribution of ownership among shareholders (on a number of shares basis) and major shareholders are as follows:
Professor, International Business Strategy, Graduate School of International Corporate Strategy, Hitotsubashi University; Outside Director, Daiwa Securities Group Inc.; Outside Director, Fukuoka Financial Group, Inc.; Outside Director, The Bank of Fukuoka, Ltd.; Outside Director, Sony Corp.; Director, Sony Financial Holdings Inc.; Outside Auditor, the Asahi Shimbun Company Professor of Hakuoh University Faculty of Law; specially approved visiting Professor of Tohoku Fukushi University; Assist (Japan) Secretary General
Mr. Yasuda was appointed on the expectation that he would offer pertinent advice regarding the overall management of the Company that would further strengthen and enrich its management structure based on the expertise in business strategy he has accumulated over the years in wide-ranging positions including those of university professor, consultant and business manager.
Distribution of Ownership Among Shareholders
(As of March 31, 2012)
● Japanese ● Japanese ● Other
Masayuki Fukuoka
financial institutions securities companies
Japanese corporations institutions and others individuals and others stock
● Foreign
● Japanese ● Treasury
15.83% 0.24% 31.71% 28.74% 21.59% 1.89%
Mr. Fukuoka was appointed on the expectation that he would offer objective views to the Company’s management that would lead to further reinforcement and enhancement of the management structure based on his expertise and experience as a university professor of political science studies. While he has no experience of direct involvement in management of a company except as an outside officer, the Company believes that he will be able to perform the duty of outside director appropriately for the above reason. Mr. Neu was appointed on the expectation that he would offer pertinent advice from a broad perspective regarding overall management, including future business development, which would lead to further strengthening of the management structure based on the high rating of his abundant overseas management experience. Same as above.
Christian Neu
Major Shareholders
MLPFS NOMINEE· DANONE ASIA HOLDINGS PTE. LTD. Matsusho Co., Ltd. Fuji Media Holdings, Inc. Mizuho Trust & Banking Co., Ltd. (retirement benefit trust [Mizuho Bank account]) Kyoshinkai State Street Bank and Trust Company 505041 Kirin Beverage Corporation Mizuho Bank, Ltd. Nippon Life Insurance Company Teruo Nakamura
Strategic Advisor, Danone S.A.; Member of strategic council of Groupe ARC International
(As of March 31, 2012)
Percentage of Total Shares Issued
20.02% 6.55 3.69 2.82 2.44 2.19 1.40 1.24 1.21 1.15
Bertrand Austruy
Danone S.A. Group General Counsel
Management Policy Council and the Executive Officers Committee
The Company has established a set of meetings, the Management Policy Council and the Executive Officers Committee, designed to promote effective management activities and accelerate decision making. These meetings are, in principle, convened on a weekly basis.
Corporate Auditors
The Company has seven corporate auditors, including four outside corporate auditors. All corporate auditors attend meetings of the Board of Directors and other important company meetings and audit the operational execution of the directors by examining documents related to decision making and other matters. The corporate auditors strive to enhance the
Note: In addition to the above, the Company holds 1.89% of its own shares.
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
(As of June 20, 2012)
effectiveness of their audits by forging close ties with the Internal Audit Department and the accounting auditor. The system of support for the Board of Auditors consists of a staff assigned exclusively to the corporate auditors that functions as the secretariat for the board. Furthermore, the Board of Auditors convenes prior to meetings of the Board of Directors and other important meetings to discuss the proposed agenda for the meetings, and to share information gathered from materials provided by relevant department and division heads, as well as information gained from explanations received firsthand and by other means. Furthermore, with respect to systems for conveying information to outside corporate auditors, the full-time corporate auditors issue progress reports on a regular basis, and provide the outside corporate auditors with a range of materials, including those from important company meetings and decision making and audit-related materials. The four outside corporate auditors are listed in the chart on the right.
Name
Outside Positions as Representative
Reason for Appointment as Outside Auditors
Akihiko Okudaira
Lawyer
Mr. Okudaira was appointed on the expectation that his expertise as a lawyer and abundant experience would be reflected in auditing of the Company that would lead to further reinforcement and enhancement of the Company’s management structure. While he has no experience of being directly involved in the management of a company except as an outside officer, the Company believes that he will be able to continue to perform the duty as an outside auditor appropriately for the above reason. Mr. Sumiya was appointed on the expectation that his expertise as an accountant and abundant experience in corporate accounting would be reflected in auditing of the Company that would lead to further reinforcement and enhancement of the Company’s management structure. While he has no experience of being directly involved in the management of a company except as an outside officer, the Company believes that he will be able to continue to perform the duty as an outside auditor appropriately for the above reason. Mr. Tanigawa was appointed on the expectation that his long record of managing a Yakult sales company would be an advantage when performing audit operations primarily on the legality of the directors’ execution of duties, thus contributing significantly to the development of the entire Yakult Group. Same as above.
Ryohei Sumiya
Certified Public Accountant
Seijuro Tanigawa
President of Yakult Kobe Sales Co., Ltd.
Setsuko Kobayashi
President of Yakult Joetsu Sales Co., Ltd.
Internal Audits
Internal audits are conducted by the Audit Office, an organization that reports directly to the Company’s President and that performs financial and operational audits, including those of Group companies in Japan and overseas. The head of the Audit Office currently oversees a 15-member staff responsible for risk avoidance and other internal audit functions. These personnel conduct internal audits spanning the operations of all internal departments and Group companies, as well as issuing concrete advice and warnings with respect to operational improvements.
Corporate Governance Framework
Shareholders/General Shareholders’ Meeting Appointment/Removal Corporate Auditors/ Board of Auditors Appointment/Removal Board of Directors Appointment/ Removal Accounting Auditor Corporate Ethics Committee
Audits
Audits
Coordination
Management Policy Council (Internal Control)
Representative Director (Chairman and CEO) (President and COO)
Advice and Guidance Advice and Guidance Advice and Guidance
Accounting Auditor
The Company has appointed Deloitte Touche Tohmatsu LLC to serve as the accounting auditor for the audit of its business accounts as required by law. Compensation is paid to the accounting auditor based on an auditing contract signed with Deloitte Touche Tohmatsu.
Executive Officers Committee
Compliance Committee
Audit Office (Internal Audit Department) Within the Company
Legal Office Business Execution (Compliance Management (All Divisions) Department) (Business Execution)
Corporate Lawyer
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
4. Internal Control Systems and Policies
The Company resolved at the Board of Directors’ meeting on May 19, 2006 to establish an internal control system as mandated for a large company with a Board of Directors by the Companies Act and its enforcement regulations. The Company
i) Systems to ensure that the performance of duties by directors and employees complies with laws and articles of incorporation As standards for executives and workers to properly perform business activities, the Company has established the Yakult Code of Ethics and Code of Practice. The Yakult Code of Ethics and Code of Practice have been distributed to all persons concerned, aiming to familiarize them with the details of the codes. At the same time, the Company is continuously offering in-house training programs regarding compliance. In addition, a meeting of the Compliance Committee, which consists of external knowledgeable persons, is held on a regular basis to receive advice regarding the development of the Company’s compliance system. Furthermore, the Company has established an “internal reporting system,” aiming to improve the self-cleaning functions by which it detects its own violations of law and takes corrective actions. In addition, the Company will resolutely block and repudiate anti-social forces that pose a threat to business activities. We will also maintain a close relationship with the police under normal circumstances. At the same time, we will endeavor to supervise transactions through the Corporate Ethics Committee, which consists of external experts as the main committee members, and will tackle any unreasonable claims organizationally and take all possible legal measures. ii) Systems regarding preservation and management of information related to the performance of duties by directors Minutes of general shareholders meetings and Board of Directors meetings are preserved properly in accordance with law. In addition, in line with the Rules for Handling Documents, information related to the performance of duties by directors is recorded and preserved in documents or electromagnetic media (hereinafter referred to as “documents and other media”). Directors and auditors can look through the minutes and the documents and other media at any time. Furthermore, the Rules for Handling Documents include rules regarding maintaining confidentiality and taking preventive measures against information leakage. iii) Rules and other systems regarding the management of risks for losses The Administrative Division plays a central role in supervising the conditions of cross-sectional risk and making company-wide responses. The department concerned handles the management of risks related to the operations of each department.
revises the details of this resolution promptly in response to changes inside and outside the Company. At the current time, the details are as follows: The Company aims to proceed with its business activities in accordance with its corporate philosophy, “We contribute to vi) Matters regarding employees who support the duties of auditors in cases in which auditors make a request to assign such employees Employees who have a thorough knowledge of the Company’s business operations and can properly support the duties of auditors serve as full-time staff members who support auditors. In terms of the organizational structure, the staff members serve as “auditing officers” and are independent of the Auditing Department, which is an internal auditing department. They carry out operations under the direct supervision of auditors. vii) Matters regarding the independence of employees who support the duties of auditors, who are mentioned in the previous item, from directors To secure the independence of full-time employees who support the duties of auditors from directors, such employees do not belong to any department in the organization and are not under the supervision of directors. In addition, full-time auditors directly evaluate the performance of such employees to respect their independence. viii) Systems for directors and employees to provide reports to auditors and other systems regarding reports provided to auditors Auditors attend Board of Directors meetings and other important meetings and read minutes of such meetings on an as-needed basis. In addition, auditors confirm the details of important requests. There is a system in which auditors can be apprised of the details of such requests. Furthermore, reports regarding the results of internal audits are provided to auditors on a regular basis. The Rules for Audits by Auditors also stipulate that auditors can request directors to provide business reports and request related departments, subsidiaries, and other parties to provide reports if necessary. ix) Other systems to ensure that audit operations of auditors are carried out effectively The Rules for Audits by Auditors ensure that auditors effectively exercise the authority to “attend board of directors meetings and other important meetings,” “ask for explanations in cases of failure to attend meetings and read minutes and documents,” “read documents necessary to investigate business conditions and request related departments to provide reports,” and “request subsidiaries and affiliates to provide reports and investigate business and asset conditions.” In addition, they can hear opinions from lawyers, certified public accountants, consultants, and other outside experts if necessary.
In addition, to respond to crises that appear suddenly, there are the Risk Management Rules, which include a rule to have the Company’s President or general managers serve as the head of various task forces set up in accordance with the details of crisis situations. Furthermore, to provide safe products to customers and establish a quality assurance system, the Quality Assurance Committee has been established and its meetings are being held. In addition, the Food & Beverages Quality Assurance Department has been established as an independent department to carry out exclusive company-wide supervisory operations related to food quality assurance. iv) Systems to ensure that the performance of duties by directors is efficient The Company has introduced the Executive Officer System to strengthen the functions of the Board of Directors to make decisions and supervise as well as to define the responsibilities in executing operations, and ultimately to improve the efficiency of these functions. In addition, the Company’s decision-making methods are stipulated in the Rules for Decision-Making, aiming to make decisions in line with the level of importance. At the same time, a management policy meeting and the Executive Officers Committee are held every week in principle, aiming to speed up decision making. Moreover, to carry out business operations efficiently, the organizational structure of the Company and its management standards are stipulated in the Organization Rules and the Table of Division of Duties. v) Systems to ensure that operations at the concerned joint-stock company and the corporate group consisting of the joint-stock company’s parent company and subsidiaries are appropriate The Company endeavors to ensure that operations at its subsidiaries are appropriate by sending its executives or employees to the subsidiaries and having them serve as executives of the subsidiaries. In addition, the Rules for the Management of Affiliates include provisions to require the subsidiaries and affiliates to obtain advance approval and provide reports. At the same time, the Company has established an internal support system by setting up a department in charge of the management of the subsidiaries for securing the appropriate operations. Furthermore, the Auditing Department, which is the Company’s internal auditing department, carries out audits.
the health and happiness of people around the world through pursuit of excellence in life science in general and our research and experience in microorganisms in particular.” To achieve this, the Company believes that it is important to implement management that places emphasis on strengthening and enhancing internal control functions as a company that is widely trusted by society. Based on this perspective, the Company has made the following resolutions on basic policies regarding building internal control systems after reconfirming the current situation at the Company in relation to the development of internal control systems. Meanwhile, the contents of the resolutions will be revised on a timely basis in line with revisions to laws and environmental changes inside and outside the Company, aiming to further strengthen and enhance internal control systems.
5. Other Corporate Governance Systems
(1) Basic approach regarding timely disclosure
With respect to information disclosure, especially in a timely manner, in the Yakult Code of Ethics and Code of Practice, the Company makes the following commitment: “The Company will actively disclose all relevant information to our customers, shareholders, employees and business partners and increase the transparency of management, to gain the full trust of society through our corporate activities.” Based on this approach, the Company is disclosing information in a timely manner.
(2) Internal structure related to timely disclosure
• Facts and data appropriate for public disclosure from each department within the Company (including subsidiaries) are compiled by the Public Relations Department. In parallel, each department within the Company, pursuant to the Rules for Decision-Making, decides items for disclosure based on prescribed decision-making procedures. Facts and data not vetted in this manner are not publicly disclosed. When making final decisions, the disclosing department liaises with the General Affairs Department, the body responsible for
ANNUAL REPORT 2012
28
YAKULT HONSHA CO., LTD.
Board of Directors and Corporate Auditors
(As of June 20, 2012)
coordinating timely disclosure, as it moves decision-making procedures forward, during which time a determination is made of the necessity for timely disclosure. The General Affairs Department refers to two standards in making this determination: the Rules for Timely Disclosure and the status of other finalized disclosure decisions within the Company. The decision is then made to officially conduct the timely disclosure of facts and data meeting these criteria. • The Company is listed on the Tokyo Stock Exchange (TSE). Any information from the Company marked for timely disclosure is registered on TDnet, a system for timely disclosure provided by TSE. The registration of information for timely disclosure and responses to inquiries from TSE personnel are conducted by the General Affairs Department, the body responsible for coordinating timely disclosure. Following registration, information targeted for timely disclosure is quickly transmitted simultaneously to all relevant media outlets, with related materials disclosed at the same time on the Company’s website.
Chairman and Representative Director Chief Executive Officer
President and Representative Director Chief Operating Officer
Chairman and Representative Director Chief Executive Officer
Sumiya Hori
President and Representative Director Chief Operating Officer
Takashige Negishi
Directors
Sumiya Hori
Takashige Negishi
Yoshihiro Kawabata Chizuka Kai Masahiro Negishi Shigeyoshi Sakamoto Hiroshi Narita Richard Hall
Directors (Part-time)
Directors
(3) Check functions to mitigate risks associated with the improper execution of timely disclosure
• The Company has considered a variety of risk scenarios, including those in which information marked for timely disclosure is inadvertently overlooked; information is prematurely disclosed; and data pertaining to sudden crises are not promptly disclosed. A single department, the General Affairs Department, which is responsible for coordinating timely disclosure, acquires and shares information about the criteria for determining the necessity of timely disclosure, and checks information pertaining to final decisions made internally, as well as primary information when sudden crises and incidents arise. This configuration allows check functions to work and enables timely disclosure without any omissions.
Ryuji Yasuda Masayuki Fukuoka Christian Neu Bertrand Austruy Yasuo Ozeki Koso Yamamoto Takashi Matsuzono
Senior Corporate Auditors
Yoshihiro Kawabata
Divisional General Manager of Administrative Division, and International Business Division
Chizuka Kai
Divisional General Manager of Research & Development Division, and Production Division
Masahiro Negishi
Divisional General Manager of Food and Beverages Business Division, and Cosmetics Business Division
Akinori Abe Hiroshi Yamakami
Corporate Auditors
Akihiko Okudaira Ryohei Sumiya Seijuro Tanigawa Setsuko Kobayashi Koichi Yoshida
Shigeyoshi Sakamoto
Divisional General Manager of Pharmaceuticals Business Division
Hiroshi Narita
Divisional General Manager of Management Support Division
Richard Hall
ANNUAL REPORT 2012
29
YAKULT HONSHA CO., LTD.
Financial Section
Consolidated Five-Year Summary
YAKULT HONSHA CO., LTD. and subsidiaries Years ended March 31, 2012, 2011, 2010, 2009 and 2008
Millions of yen
Thousands of U.S. dollars (Note 2)
2008 For the year: Net sales............................................................................................................ Selling, general and administrative expenses ...................................................... Operating income .............................................................................................. Net income ........................................................................................................ Research and development costs ...................................................................... Capital investments ............................................................................................ Depreciation and amortization ........................................................................... At the year-end: Total assets ........................................................................................................ Net property, plant and equipment ..................................................................... Total liabilities ..................................................................................................... Total equity ....................................................................................................... ¥ 317,335 146,693 22,502 16,675 8,952 28,973 12,054
2009 ¥ 293,490 138,113 16,744 11,325 9,248 27,967 18,571
2010 ¥ 290,678 138,584 18,991 13,249 9,622 19,980 18,913
2011 ¥ 305,944 147,139 20,401 13,169 11,480 23,970 19,628
2012 ¥312,553 149,214 20,817 13,292 12,414 25,007 18,337
2012 $3,811,621 1,819,684 253,868 162,097 151,393 304,964 223,622
¥ 384,569 116,078 118,566 266,003
¥ 361,902 131,321 134,936 226,966
¥ 389,892 130,391 140,970 248,922
¥ 392,828 133,717 141,857 250,971
¥397,214 136,963 144,971 252,243
$4,844,071 1,670,275 1,767,937 3,076,134
U.S. dollars (Note 2)
Yen
Per share of common stock: Basic net income ............................................................................................... Total equity (Note 3) ........................................................................................... Cash dividends applicable to the year ................................................................ Financial ratios: Return on equity (ROE) (%) ................................................................................ Equity ratio (%) ...................................................................................................
¥
95.93 1,376.41 20.00
¥
65.75 1,195.60 20.00
¥
77.11 1,300.21 20.00
¥
76.55 1,313.37 22.00
¥
77.32 1,328.61 22.00
$
0.94 16.20 0.27
7.0 61.7
5.1 56.8
6.2 57.4
5.9 57.5
5.8 57.6
Notes: 1. Figures are rounded to the nearest million. 2. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of ¥82 to U.S.$1, the approximate rate of exchange at March 31, 2012. 3. Minority interests are not included in equity for the calculation.
Financial Section Contents 31 Management’s Discussion and Analysis 37 Consolidated Balance Sheet 38 Consolidated Statement of Income Consolidated Statement of Comprehensive Income
39 40 41 55
Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Independent Auditors’ Report
ANNUAL REPORT 2012
30
YAKULT HONSHA CO., LTD.
Management’s Discussion and Analysis
OVERVIEW
In the fiscal year ended March 31, 2012, Japan’s economy was buoyed by the restored supply chain and a series of stimulus measures and underwent a mild recovery. This occurred despite downside risks caused by the consequences of the Great East Japan Earthquake in March 2011, the global economic slowdown, and the eroding employment situation in Japan. In these circumstances, the Yakult Group (the “Group”) worked to build awareness and understanding of the Probiotics—living microorganisms that provide health benefits by improving the balance of intestinal flora—that constitute the bedrock of our operations, while striving to communicate the superiority of our products. In addition, the Group endeavored to improve its performance by taking steps to shore up its sales organization, develop new products, upgrade its production facilities, and vigorously enhance its overseas operations and pharmaceuticals business. As a result of these efforts, the Group recorded consolidated net sales of ¥312.6 billion. Operating income climbed 2.0%, to ¥20.8 billion, while the operating margin was 6.7%, unchanged from a year earlier. Consequently, net income increased 0.9%, to ¥13.3 billion, and the return on sales was 4.3%, unchanged from the previous fiscal year.
SALES, COSTS, EXPENSES AND EARNINGS
SALES Net sales increased 2.2%, to ¥312.6 billion, despite the impact of negative ¥4.2 billion from foreign currency fluctuations. Looking at net sales by reporting segment (before reconciliation), Food and Beverages (Japan) accounted for 57.9% of sales, or 1.9 percentage point lower than in the previous fiscal year. Food and Beverages (Overseas) accounted for 24.3% of sales, or 1.7 percentage point higher than in the previous fiscal year. Pharmaceuticals generated 12.1%, down 0.1 percentage point from the previous fiscal year, and Others contributed 5.7%, up 0.3 percentage point from the previous fiscal year. In the Americas, sales increased 3.9%, to ¥39.0 billion, due to sales growth in the United States as Yakult expanded its sales area and the number of stores that sell its products. Growth in sales volume was also noted in Brazil and Mexico despite adverse economic conditions in these markets. In Asia and Oceania, sales climbed 25.4%, to ¥32.0 billion, supported by steady sales growth in China and other key countries and regions. In contrast, sales in Europe declined 7.0% to ¥8.0 billion mainly due to the impact of foreign currency fluctuations, while robust sales were recorded in the Netherlands and Italy.
Net Sales
(Billions of yen) 400
Breakdown of Net SalesSales Breakdown of Net Net Breakdown of Sales (before eliminations) (FY2012) (before eliminations) (FY2012) (before eliminations) (FY2012)
(%) (%) (%)
Overseas Net Sales/ Overseas Net Net Sales/ Overseas Sales/ RatioRatio to Total Net Sales Ratio to Total Net Sales to Total Net Sales
(Billions ofof yen) yen) (Billions yen) of (Billions 80 80 80 (%) (%) (%) 40.0 40.0 40.0
Operating Income and and Operating Income and Operating Income Operating Margin Operating Margin Operating Margin
(Billions ofof yen) yen) (Billions yen) of (Billions 25 25 25 (%) (%) (%) 10.0 10.0 10.0
300
60 60
60
30.0 30.0 30.0
20 20
20
8.0 8.0 8.0
15 15 200 40 40 40 20.0 20.0 20.0 10 10 100
15
6.0 6.0 6.0
10
4.0 4.0 4.0
0
FY 08 09 10 11 12
Food and Beverages (Japan) 57.9%57.9% FoodFood Beverages (Japan) 57.9% and and Beverages (Japan) Food and Beverages (Overseas) 24.3%24.3% FoodFood Beverages (Overseas) 24.3% and and Beverages (Overseas) Pharmaceuticals Pharmaceuticals Pharmaceuticals 12.1%12.1% 12.1% OthersOthers Others 5.7% 5.7% 5.7%
20 20
20
10.0 10.0 10.0
55
5
2.0 2.0 2.0
00
0 FY 08 09 10 11 12 120 FY 08 08 09 10 11 0 FY 09 10 11 12
0
00
0 FY 09 10 11 12 FY 08 09 10 11 12 12 FY 08 08 09 10 11 0 0
0
Overseas net sales (left scale) scale) Overseas net salessales scale) Overseas net (left (left Ratio toto total totalsalessalesscale) scale) RatioRatio to net net(right (right total net sales (right scale)
Operating income (left scale) scale) Operating income (left scale) Operating income (left Operating marginmarginscale) scale) Operating margin (right(right Operating (right scale)
ANNUAL REPORT 2012
31
YAKULT HONSHA CO., LTD.
COSTS, EXPENSES AND EARNINGS Consolidated cost of sales increased 3.0%, to ¥142.5 billion. As a result, the cost of sales
Breakdown of increased ratio rose 0.4 of a percentage point, to 45.6%. Gross profit Net Sales 1.5%, to ¥170.0
OVERVIEW BY SEGMENT
FOOD AND BEVERAGES (JAPAN): In Probiotic products, Yakult began activities aimed
Overseas Net Sales/ at vigorously promoting the value and appeal Operating Income and of our proprietary living Lactobacillus casei Ratio to Total Net Sales Operating Margin (before eliminations) (FY2012)
billion, and the gross profit margin decreased 0.4 (%) a percentage point, to 54.4%. of Selling, general and administrative (SG&A) expenses increased 1.4%, to ¥149.2 billion. This increase resulted mainly from increased R&D expenses for new drug development. The SG&A expense ratio decreased 0.4 of a percentage point, to 47.7%. R&D expenses edged up ¥0.9 billion year on year, to ¥12.4 billion. As a percentage of net sales, R&D expenses increased 0.2 of a percentage point, to 4.0%. As a result, operating income rose 2.0%, to ¥20.8 billion, with the operating margin unchanged from the previous fiscal year at 6.7%. ¥4.1 billion from a year earlier, mainly Other income—net amounted to ¥5.1 billion, up Food and Beverages (Overseas) 24.3%
Pharmaceuticals due to refund of social insurance premium and a foreign exchange gain. 12.1% Food and Beverages (Japan) Others 57.9% 5.7%
strain Shirota (Billions of yen)
80
and Bifidobacterium breve strain(Billions of yen) Yakult. (%)
(%)
In our home delivery channel, we worked to develop more long-term customers using 10.0 25 40.0
sales activities that get people to try our products through samples or trial use. The focus
20 of these activities was Yakult 400 series products, including both our mainstay8.0 Yakult 400 60 30.0
fermented milk drink and Yakult 400LT.
40
In our retail store channel, Yakult sales promotion staff took steps to highlight the value 20.0
15
6.0
10 and appeal of products, centered on fermented milk drink Yakult and Mil-Mil, 4.0 drinkable a
yogurt containing Bifidobacteria. We focused aggressively on the marketing of fermented 20 10.0 milk drink Yakult Calorie Half, which contains fewer calories and tastes less sweet than the regular Yakult, after the product was revamped in September 2011. 0 0 0
FY 08 09 10 11 12
Overseas net sales (left scale)
5 2.0
Income taxes came to ¥8.6 billion. was 4.3%, unchanged from the previous fiscal year.
Another product that underwent renewal was Pretio, which has been designated by
Operating income (left scale)
FY 08 09 10 11 12
0
Consequently, net income increased 0.9%, to ¥13.3 billion, and the return on sales
Ratio to total net sales (right food Operating margin (right for people with relatively the government as a scale) for specified health uses and designed scale)
high blood pressure. We staged a synchronized ad campaign titled “Try Four Weeks and See for Yourself” across TV, newspapers, the Internet and other media, as well as in-store promotions throughout Japan, beginning in January 2012, to boost sales. In the first half of the fiscal year, our sales were affected by disruptions in product distribution caused by production suspensions at some of the facilities hit by the Great East Japan Earthquake in March 2011, and sales disruptions at the damaged sales offices
Net Income
(Billions of yen) 20
Operating Income (loss) by Business Segment
(Billions of yen) 20
Total Assets and Equity power shortages. (Excluding Minority Interests)
(Billions of yen) 400
primarily along the Pacific Coast in northeastern Japan. The difficulty was aggravated by
Capital Investments and Depreciation and Amortization
30 (Billions of yen) We redoubled sales efforts in the second half of the fiscal year as the product distribu-
tion structure was restored, and managed to post a year-on-year increase for the second half. Nevertheless, our full-year sales fell slightly short of the level achieved in the previous fiscal year.
300
15
15
10 10 5 5
In juices and other beverages, we completed the revamping of Toughman, our main200 stay brand, on the occasion of the product’s 30th anniversary in May 2011. Activities to
20
boost the Toughman brand continued throughout10 fiscal year and included the launch the
100 of Toughman Super, a more potent version fortified with royal jelly and higher Korean
0
Ginseng content than the regular Toughman. Efforts to capture a greater share in the
0
FY 08 09 10 11 12
–5
FY 08
09
10
11
12
0 0 FY 08 09 10 11 12 FY 08 for Milouge Ca general fermented milk market included the product renewal09 10 11 12 Plus in April
Food and Beverages (Japan) Food and Beverages (Overseas) Pharmaceuticals Others
Total assets Capital investments 2011, followed by the package renewal for Milouge Soda in June. To drive sales growth in
the functional beverage and food sphere, we renewed Plum Drink with Galactooligosaccharide, a food for specified health uses, and the Gyutto Kenko Citrulline functional
Equity (excluding minority interests)
Depreciation and amortization
ANNUAL REPORT 2012
32
YAKULT HONSHA CO., LTD.
drink in September and October, respectively. The enhanced product lines in the functional beverage and food category resulted in a year-on-year increase in sales for juices and other beverages as a whole. As a result, net sales decreased to ¥188.0 billion, or 0.9%, from the prior fiscal year, and operating income fell 10.4%, to ¥9.9 billion. FOOD AND BEVERAGES (OVERSEAS): Yakult’s overseas operations commenced in March 1964 with the establishment of Yakult Co., Ltd. (Taiwan). They now extend to 31 countries and regions outside Japan, and are centered on 28 business bases and 1 research center. These operations focus primarily on the production and sale of the fermented milk drink Yakult. Average daily sales of all Yakult products overseas were approximately 21.17 million bottles in March 2012. In the Americas, Yakult manufactures and sells the fermented milk drink Yakult and other products in Brazil and Mexico, and imports products for sale in Argentina, the United States, and other countries. In the United States, preparation is underway for the construction of the first Yakult production facility in that country. It will be situated in Fountain Valley, California, and is scheduled to commence production in the fall of 2013. Net sales in the Americas increased to ¥39.0 billion, or 3.9%, from the prior fiscal year, and operating income climbed 6.0%, to ¥8.8 billion. In Asia and Oceania, Yakult manufactures and sells the fermented milk drink Yakult and other products in Hong Kong, Singapore, Indonesia, Australia, Malaysia, Vietnam, India, China, and other countries. In China, in an effort to boost sales in the interior, we opened branch offices in Xi’an, Shaanxi Province in February 2011 and Changsha, Hunan Province in March, following the branch opening in Wuhan, Hubei Province. In August 2011, our third production facility in China located at Tianjin Yakult Dairy Co., Ltd. began production of Yakult. The second production plant is planned for Guangzhou Yakult Co., Ltd. in anticipation of consistent sales growth in the provinces of Guangzhou and Hainan. In India, sales of Yakult began in the city of Hyderabad in February 2012 via the retail store channel. To disseminate the Probiotics concept to a broad spectrum of people, we established Yakult India Microbiota and Probiotic Science Foundation, which hosted a probiotics symposium in December 2011. In Thailand, two production facilities under Yakult (Thailand) Co., Ltd., an associated company accounted for by the equity method, suffered damages caused by flooding in October 2011, and their operation was suspended. They resumed shipments in December 2011. Net sales in Asia and Oceania increased to ¥32.0 billion, or 25.4%, from the prior
fiscal year, and operating income jumped 34.7%, to ¥5.5 billion. In Europe, Yakult manufactures the fermented milk drink Yakult and other products in the Netherlands, and sells them in the Netherlands, Belgium, the United Kingdom, Germany, Austria, Italy, and other countries. Overall European sales in yen amounts were affected by the yen’s strength, but sales in the Netherlands and Italy showed solid growth. Net sales in Europe decreased to ¥8.0 billion, or 7.0%, from the prior fiscal year, and operating income fell 73.6%, to ¥0.2 billion. PHARMACEUTICALS: In Japan, we focused on promoting the proper use of the cancer chemotherapeutic agent Elplat, actively sponsoring lectures and presentations targeting healthcare professionals in this area. Similarly, in November 2011, we obtained approval for a change in Elplat’s dosage and administration in connection with the postsurgical adjuvant chemotherapy for colon cancer patients. Since then, we have redoubled efforts to recommend the parallel administration of Elplat with Capecitabine, an orally administered antineoplastic agent used in the XELOX regimen of chemotherapy known for its dosing convenience offered to patients and medical practitioners. In addition, we sought higher sales and higher market shares by specializing in oncology treatments and through active marketing and sales channel expansion for cancer chemotherapeutic agent Campto, activated folic acid drug Levofolinate Yakult, antineoplastic antimetabolite Gemcitabine Yakult, and recombinant DNA G-CSF chemotherapy treatment Neu-up. In the area of R&D, an exclusive license was granted by 4SC AG in April 2011 for the development and commercialization in Japan of oral HDAC inhibitor Resminostat, which is owned and under development by 4SC as a cancer treatment drug. This was followed by an option agreement in November 2011 with LivTech Inc. concerning an exclusive, worldwide license for the development, manufacturing and commercialization of LIV-2008, humanized monoclonal anticancer antibodies program created by LivTech Inc. We are expanding the development pipeline for these drugs as well as for multi-kinase inhibitors PR509 and PR610 by Proacta Inc. and Akt inhibitor Perifosine by Æterna Zentaris Inc., for which Yakult signed agreements, in an effort to strengthen their position in the cancer treatment area. Outside Japan, we worked hard to boost sales of Campto, whose market share has declined since the emergence of generic drugs. As a result, brisk growth in domestic sales overcame a year-on-year drop in overseas sales, resulting in an increase in consolidated sales in the Pharmaceuticals segment of 1.3%, to ¥39.4 billion. Operating income decreased 1.0%, to ¥10.1 billion.
ANNUAL REPORT 2012
33
YAKULT HONSHA CO., LTD.
Operating Income (loss) (loss) by Operating Income by Business Segment Business Segment
Total Assets and EquityEquity Total Assets and (Excluding Minority Interests) (Excluding Minority Interests)
400 400
Capital Investm Capital In Depreciation an Deprecia
30 30
OTHERS: This segment encompasses Yakult’s cosmetics operations as well as its profesOverseas Net Sales/Sales/ Overseas Net Operating Income and and Operating Income In our cosmetics operations, we continued to promote the value and appeal of basic Ratio Ratio to Net Sales Sales to Total Total Net Operating Margin Operating Margin
(Billions (Billions products, of yen) skin care of yen) 80 80 40.0 home visits to counsel customers on40.0 cosmetics. 25 25 10.0 10.0
(Billions (Billions a yen) of yen) of result, As 20
(Billions (Billions of yen) of yen) the Others segment saw consolidated sales rise 8.0%, to ¥18.6 billion, and
(Billions (Billions of y of yen)
sional baseball team operations.
20 posted operating income of ¥0.6 billion. 15
)
(Billions (Billions of yen) yen) namely, our core brands Parabio,ofRevecy and Revecy White (%) (%)on based (%) (%)
15
FINANCIAL POSITION
300
300 20 20
10 Total 10 assets 5 5
at year-end amounted to ¥397.2 billion, climbing 1.1% year on year.
In an attempt to better address customers’ growing needs for complexion lightening
60 60 care, we revamped the Revecy 30.0 30.0 White series in June 2011 with the introduction of the new 20 20 8.0 8.0
200 200 Current assets decreased ¥5.2 billion, or 2.9%, from the prior fiscal year-end, to ¥177.6
billion, principally due to decreases in cash and cash equivalents and deferred tax assets.
0 100 100 Net property, plant and equipment increased ¥3.2 billion, to ¥137.0 billion. This was 0
10
10
Revecy White “Transparent White” series featuring 15 new moisturizing formula. a 15
40To take 40
6.0
6.0
20.0 step customer satisfaction a 20.0 further and to drive sales growth, in November
primarily due to an increase in construction in progress.
–5 0 Investments09 other 11 12increased ¥6.4 billion, or08 10 11 ¥82.7 12 and 11 12 assets FY –5 FY 08 08 09 10 10 FY 008FY098.4%, to 12 billion, mainly 09 10 11 0
4.0 4.0 10 10 2011, we rolled out Agetics Moist Repair Essence, which is designed to reduce the
FY 008F
7.9% 4.3% 2.1% 5.7%
appearance of dry fine lines and wrinkles. We followed this with the release in January 20 20 10.0 10.0 2012 of Lactdew S.E. Hyalurongel featuring proprietary moisturizing ingredients.
0As 5 5 2.0 2.0
the previoussales (leftyear, despite the impact of the earthquake and tsunami, which affected Overseas net fiscal scale) scale) Overseas net sales (left Operating income income (left scale) Operating (left scale) sales operations.
Ratio toRatio to total net sales (right scale) total net sales (right scale) Operating margin margin (right scale) Operating (right scale)
a 08FY 09 10 11 12 12 0 of 09 10 11 0 FY0 08FY achieved10 11 0 FY0result08 the above, the0 overall Cosmetics operations 09 10 11 12 surpassing 08 09 results 12 0
Food and Beveragesincreases in investment securities.Total assets assets Food and Beverages Total because of (Japan) (Japan) Food and Beverages (Overseas) Food and Beverages (Overseas) Equity (excluding minorityminority interests) Equity (excluding interests) Pharmaceuticals fiscal year under review, capital investments increased 4.3%, to ¥25.0 Pharmaceuticals In the Others Others
billion.
Capital investmen Capital in Depreciation and Deprecia
Total liabilities grew 2.2%, to ¥145.0 billion. The major component of this increase was
rises in payables of ¥5.6 billion, despite a decline of ¥1.2 billion in interest-bearing debt. The debt-to-equity ratio improved 0.8 percentage point to 24.7%. Equity increased 1.2% to ¥228.6 billion, from ¥225.9 billion a year earlier. This rise was primarily due to a growth in retained earnings. As a result, the equity ratio improved 0.1 percentage point, to 57.6%. Return on equity (ROE) dropped 0.1 percentage point, to 5.8%, principally. Return on assets (ROA) increased 0.1 percentage point, to 5.3%.
In our professional baseball team operations, the Tokyo Yakult Swallows competed for the championship until the final stage of the regular season and advanced to the Climax Series. Attendance at Jingu Stadium rose from the previous fiscal year, bolstered by a variety of fan appreciation events and active information dissemination.
Total Assets and EquityEquity Total Assets and (Excluding Minority Interests) (Excluding Minority Interests)
(Billions (Billions of yen) of yen) 400 400
Capital Investments and and Capital Investments Depreciation and Amortization Depreciation and Amortization
(Billions (Billions of yen) of yen) 30 30
Interest-Bearing Debt and and Interest-Bearing Debt Debt-to-Equity Ratio Ratio Debt-to-Equity
(Billions (Billions of yen) of yen) 70 70 (%) 70 (%) 70
ROE and ROA ROA ROE and
(%) 10.0 (%) 10.0
Dividends Divid
(Yen) 25 (Yen)
25
300
300 20 20
8.0
8.0
20
20
6.0 200 200 10 100 100 10 2.0 35 35 35 35 4.0
6.0
15
15
4.0
10
10
2.0
5
5
1 2
12
0
FY0 08FY 09 10 11 12 12 08 09 10 11
0
FY0 08FY 09 10 11 12 12 08 09 10 11
0
FY008 FY09 10 11 12 0 08 09 10 11 12
0
0
FY 008 FY09 10 11 12 12 08 09 10 11
0
FY 0
Total assets assets Total Equity (excluding minority interests) Equity (excluding minority interests)
Capital Capital investments investments Depreciation and amortization Depreciation and amortization
Interest-bearing debt (left scale) scale) Interest-bearing debt (left Debt-to-equity ratio (right scale) scale) Debt-to-equity ratio (right
ROE ROE ROA ROA Note: ROA is calculated based on operating income.income. Note: ROA is calculated based on operating
ANNUAL REPORT 2012
34
YAKULT HONSHA CO., LTD.
Total Assets and Equity (Excluding Minority Interests)
(Billions of yen) 400
Capital Investments and Depreciation and Amortization
(Billions of yen) 30
CASH FLOWS
For the fiscal year ended March 31, 2012, we decided to declare an annual dividend of ¥22.0 per share, which consisted of the base dividend of ¥20.0 per share in line with the above policy plus an additional ordinary dividend of ¥2.0 to match the commemorative dividend declared in the previous fiscal year for the 75th anniversary of the Yakult Group. We have already declared and paid an interim dividend of ¥11.0 per share, and the balance of ¥11.0 per share will be distributed to our shareholders as the year-end dividend. In the fiscal year ending March 31, 2013, we plan to increase the annual dividend by ¥1.0 to ¥23.0 in an effort to offer higher returns to shareholders. Internal reserves will be used for R&D investment and facility renewal projects designed to strengthen our corporate structure and enhance our competitiveness.
Net cash provided by operating activities was down ¥7.5 billion from the previous year, to ¥33.4 billion. This primarily resulted from an increase in inventories and an increase in receivables despite an increase in income before20 income taxes and minority interests.
300
Net cash used in investing activities increased ¥6.7 billion, to ¥28.3 billion. Cash was
10
200
mainly used for purchases of property, plant and equipment, specifically for the new establishment and expansion of production facilities. Net cash used in financing activities was ¥9.3 billion, an decrease of ¥3.1 billion from
0
100
the previous fiscal year. This payment was mainly attributed to the repayment of lease
FY 08 and the payment obligations 09 10 11 12 of dividends.
Total assets a result, cash and As Equity (excluding minority interests)
0
FY 08 09 10 11 12
cash equivalents at Capital investments year-end amounted to ¥75.6 billion, a net
Depreciation and amortization
decrease of ¥11.0 billion from the previous fiscal year-end.
FORWARD LOOKING STATEMENT
FOOD AND BEVERAGES In our Probiotics business, we will continue to develop more robust activities in both home delivery and retail store channels that underscore the value of the Lactobacillus casei strain Shirota and the enhanced Bifidobacterium breve strain Yakult. We will strive to generate higher sales for our home delivery channel by building sales strategies around Yakult 400, Yakult 400LT, Mil-MilS and Pretio, while centering sales efforts for the retail store channel on Yakult products such as Yakult and Yakult Calorie Half in addition to Mil-Mil. Moreover, we will take special action in the retail and home delivery channels to revitalize the brand of our long-selling Joie.
DIVIDENDS
We give top priority to the payment of a higher and stable dividend to shareholders by setting the annual dividend at a base of ¥20.0 per share. The total dividend will be decided based on business performance for the year, after comprehensively taking into account the need for funds for future business expansion and increasing earnings, as well as financial position.
ROE FreeROA Flow and Cash
(%) 70 (%) (Billions of yen) 20
Dividends
(Yen) 25
In juices and other beverages, we will aim to increase sales of products, namely, our core brands Toughman, Bansoreicha and Milouge. Overseas, we will develop operations with “Yakult Vision 2020,” our medium- to longterm plan, which was launched in fiscal 2011, as a guiding framework. In countries where we have already established a local presence, we will work to achieve further business growth, establish solid financial bases and generate higher profits. In countries where we are gaining a foothold, such as Vietnam, India, China and the United States, we will seek to strengthen our business base and drive business growth. Decisions to advance operations in new countries and regions will be made following careful consideration of our internal and external business climate.
10.0
8.0 10 6.0 35 4.0 0 2.0
20
15
10
5
0
0
-10
FY 08 08 09 10 11 12 FY 09 10 11 12
0
FY 08 09 10 11 12
ROE ROA Note: ROA is calculated based on operating income.
PHARMACEUTICALS In Japan, the price of Elplat was reduced by 15% in April 2012 as a result of repricing by the Central Social Insurance Medical Council of drugs whose market sizes had grown beyond manufacturers’ initial expectations. To achieve further business growth, we will
ANNUAL REPORT 2012
35
YAKULT HONSHA CO., LTD.
continue to encourage the proper use of Elplat and advocate the XELOX therapy through lectures and seminars for medical professionals. Parallel to this, we will step up efforts to defend the market share of cancer chemotherapeutic agent Campto and expand sales channels for antineoplastic antimetabolite Gemcitabine Yakult, in a drive to establish ourselves as a specialist in cancer treatments. Overseas, we will remain committed to further differentiating Campto from generic products. OTHERS In our cosmetics operations, we will continue to revitalize marketing activities, underscoring the value of basic skin care products, namely, our core brands Parabio, Revecy and Revecy White with a focus on home visits to counsel customers on cosmetics. Other measures aimed at increasing contacts with prospective customers and to drive sales growth will include the selection of a featured product and a special topic every quarter and activities to enhance the existing product brands.
the unforeseen establishment, amendment, or abolition of certain laws and regulations could provoke problems with respect to Group business activities. The occurrence of such issues could adversely impact our business performance and financial condition. 2. Risks Related to Product Safety Growing concern regarding food safety and quality assurance among consumers today is placing strong pressure on companies to provide unquestionably reliable and safe food products. The Group recognizes that this trend demands greater levels of safety and quality assurance for the products it handles, which are subject to Japan’s Food Sanitation Law, Pharmaceutical Affairs Law, and other regulations. As a Group, we also strive to strengthen our quality assurance system, with the provision of safe products as our highest priority. These efforts notwithstanding, the unexpected occurrence of incidents related to the Group’s food products could have an extremely adverse impact on our business results and financial condition. For this reason, every available step is taken to improve the safety and quality of our food products. 3. Risks Pertaining to Raw Material Prices The Group’s main products consist of dairy products and lactobacillus-based drinks. Sharp increases in procurement prices for the raw materials required for these products, due largely to market supply and demand, could impact manufacturing costs, including costs for containers and other packaging. Moreover, price increases in the crude oil market, especially those sustained over extended periods, could adversely affect transportation costs related to our products. In the event that we are unable to cover the effects of higher raw material prices through cost reductions, or are prevented from enacting price revisions due to market conditions, these trends could have a tremendously adverse impact on the Group’s financial condition. In addition to the aforementioned, the Group faces a range of other risks, including the risks related to unseasonable weather conditions and natural disasters. As such, the aforementioned risks are not an exhaustive list of those that could negatively impact the Group business operations. The Group is aware of these risks, however, and strives to mitigate or to avoid their occurrence.
BUSINESS RISKS
This section includes an explanation of business risks associated with business conditions, accounting, and other factors stated in our securities report. This discussion will focus on factors that may have a material impact on investor decisions. Forward-looking statements contained herein are based on the Group’s judgment as of the date of filing of our securities report. 1. Risks Accompanying Global Business Operations The Group conducts business operations worldwide, and is involved in production and sales activities overseas. As these overseas business sites gain stronger footing, the proportion of overseas business results is growing each year. This trend notwithstanding, consolidated business results as reported in the financial statements are impacted by currency exchange rate fluctuations. Moreover, the regions where the Group operates overseas include countries marked by political and economic instability. While we work to mitigate these risks in various ways, there is no guarantee that such risks can be completely avoided. Moreover, given the underlying differences of social background between many overseas countries and regions and Japan, there is a risk that
ANNUAL REPORT 2012
36
YAKULT HONSHA CO., LTD.
Consolidated Balance Sheet
YAKULT HONSHA CO., LTD. and subsidiaries March 31, 2012
Millions of yen
Thousands of U.S. dollars (Note 1)
Millions of yen
Thousands of U.S. dollars (Note 1)
2012
2011
2012
2012
2011
2012
ASSETS Current assets: Cash and cash equivalents (Note 11) ....................... ¥ 75,559 Time deposits (Note 11) ............................................ Receivables (Note 11): Notes and accounts receivable ............................. Associated companies .......................................... Other .................................................................... Inventories (Note 3) ................................................... Deferred tax assets (Note 8)...................................... Other current assets ................................................. Allowance for doubtful accounts (Note 11) ................ Total current assets ........................................ Property, plant and equipment: Land (Note 5) ............................................................ Buildings and structures (Note 5) .............................. Machinery, equipment and vehicles........................... Furniture and fixtures ................................................ Lease assets (Note 9) ............................................... Construction in progress ........................................... Total................................................................. Net property, plant and equipment ................... Investments and other assets: Investment securities (Notes 4 and 11) ..................... Investments in and advances to associated companies (Note 11)............................................... Long-term loans ....................................................... Goodwill ................................................................... Deferred tax assets (Note 8) ..................................... Other assets ............................................................. Total investments and other assets .................. See notes to consolidated financial statements.
ANNUAL REPORT 2012
¥ 86,551 2,287 46,087 3,333 4,390 27,740 9,240 3,655 (453) 182,830
$
921,453 43,425 592,522 52,214 40,669 380,548 91,102 47,525 (3,672) 2,165,786
3,561 48,587 4,281 3,335 31,205 7,470 3,897 (301) 177,594
LIABILITIES AND EQUITY Current liabilities: Short-term borrowings (Notes 5 and 11) ................... ¥ 4,571 Current portion of long-term debt (Notes 5, 9 and 11) .......... 4,061 Payables (Note 11): Notes and accounts payable................................. 24,638 Associated companies ......................................... 127 Other .................................................................... 9,136 Income taxes payable (Note 8) .................................. 1,440 Accrued expenses .................................................... 17,514 Allowance for loss on plants reorganization .............. 1,530 Allowance for losses from a natural disaster ............. Deferred tax liabilities (Note 8) ................................... 250 Other current liabilities............................................... 8,715 Total current liabilities ....................................... 71,982 Long-term liabilities: Long-term debt (Notes 5, 9 and 11).......................... Liability for retirement benefits (Note 6)...................... Allowance for loss on plants reorganization ............... Asset retirement obligations ...................................... Deferred tax liabilities (Note 8) ................................... Other long-term liabilities .......................................... Total long-term liabilities ................................... Commitments and contingent liabilities (Note 9) Equity (Notes 7 and 15): Common stock— authorized, 700,000,000 shares; issued, 175,910,218 shares in 2012 and 2011 ..... 31,118 Capital surplus .......................................................... 41,291 Retained earnings ..................................................... 210,536 Treasury stock—at cost 3,831,586 shares in 2012 and 3,920,724 shares in 2011 ... (8,697) Accumulated other comprehensive income: Unrealized gain (loss) on available-for-sale securities ... 511 Foreign currency translation adjustments .............. (46,132) Total................................................................. 228,627 Minority interests....................................................... 23,616 Total equity ...................................................... 252,243 Total ............................................................................ ¥397,214
¥
2,671 4,985 22,168 92 6,081 3,335 16,589 162 713 41 6,339 63,176
$
55,736 49,519 300,464 1,553 111,416 17,565 213,589 18,659 3,045 106,278 877,824
34,003 101,594 98,802 18,957 22,410 14,314 290,080 136,963
34,629 100,126 97,150 18,383 23,615 8,920 282,823 (149,106) 133,717
414,669 1,238,949 1,204,902 231,186 273,288 174,560 3,537,554 (1,867,279) 1,670,275
47,796 18,219 638 807 1,791 3,738 72,989
49,946 19,246 2,148 785 2,610 3,946 78,681
582,883 222,177 7,781 9,844 21,844 45,584 890,113
Accumulated depreciation ........................................ (153,117)
34,063 31,216 584 131 5,314 11,349 82,657
26,474 30,815 602 272 6,892 11,226 76,281 ¥ 392,828
415,403 380,685 7,124 1,595 64,804 138,399 1,008,010 $ 4,844,071
31,118 41,192 200,997 (9,051) (935) (37,435) 225,886 25,085 250,971 ¥392,828
379,484 503,545 2,567,516 (106,065) 6,234 (562,590) 2,788,124 288,010 3,076,134 $4,844,071
Total ............................................................................ ¥ 397,214
37
YAKULT HONSHA CO., LTD.
Consolidated Statement of Income
YAKULT HONSHA CO., LTD. and subsidiaries Year ended March 31, 2012
Consolidated Statement of Comprehensive Income
YAKULT HONSHA CO., LTD. and subsidiaries Year ended March 31, 2012
Millions of yen
Thousands of U.S. dollars (Note 1)
Millions of yen
Thousands of U.S. dollars (Note 1)
2012
2011
2012
2012
2011
2012
Net sales..................................................................... ¥312,553 Cost of sales (Notes 6, 9 and 13).................................. 142,522 Gross profit ............................................................ 170,031 Selling, general and administrative expenses (Notes 6, 9 and 13) ..................................... 149,214 Operating income .................................................. 20,817 Other income (expenses): Interest and dividend income .................................... Interest expense ....................................................... Foreign exchange gain (loss) ..................................... Equity in earnings of associated companies .............. Valuation loss on investment securities (Note 4) ........ Provision for loss on plants reorganization................. Losses from a natural disaster (Note 14) ................... Reversal of allowance for loss on disasters ............... Refund of social insurance premium ......................... Loss on adjustment for a change in accounting standard for asset retirement obligation .................. Other—net (Note 4) ................................................... Other income—net ............................................... Income before income taxes and minority interests ... Income taxes (Note 8): Current ..................................................................... Deferred ................................................................... Total income taxes ................................................ Net income before minority interests .......................... Minority interests in net income.....................................
¥305,944 138,404 167,540 147,139 20,401
$3,811,621 1,738,069 2,073,552 1,819,684 253,868
3,092 (696) 1,513 2,529 (1,187) (69) (1,056) 335 1,437
2,553 (812) (334) 2,131 (607) (218) (1,657)
37,710 (8,484) 18,447 30,846 (14,476) (841) (12,874) 4,090 17,520
Net income before minority interests ...................... ¥ 17,380 Other comprehensive income (Note 12): Unrealized gain (loss) on available-for-sale securities ..................................... 1,522 Foreign currency translation adjustments .................. (12,557) Share of other comprehensive income in associates ........................................................... (114) Total other comprehensive income .................. (11,149) Comprehensive income ............................................ ¥ 6,231 Total comprehensive income attributed to: Owners of the parent ................................................ ¥ 6,041 Minority interests....................................................... 190
See notes to consolidated financial statements.
¥ 16,135
$ 211,946
(2,162) (10,213) 46 (12,329) ¥ 3,806
18,562 (153,134) (1,392) (135,964) $ 75,982
¥ 2,839 967
$ 73,664 2,318
(767) 5,131 25,948
(615) 561 1,002 21,403
(9,364) 62,574 316,442
6,928 1,640 8,568 17,380 4,088
8,205 (2,937) 5,268 16,135 2,966 ¥ 13,169
84,493 20,003 104,496 211,946 49,849 $ 162,097
U.S. dollars (Note 1)
Net income .................................................................. ¥ 13,292
Per share of common stock (Notes 2 (Q) and 16): Basic net income ...................................................... ¥ Cash dividends applicable to the year .......................
Yen
77.32 22.00
¥
76.55 22.00
$
0.94 0.27
Diluted net income per share of common stock for 2012 and 2011 was not calculated due to the absence of dilutive securities. See notes to consolidated financial statements.
ANNUAL REPORT 2012
38
YAKULT HONSHA CO., LTD.
Consolidated Statement of Changes in Equity
YAKULT HONSHA CO., LTD. and subsidiaries Year ended March 31, 2012
Thousands
Millions of yen Accumulated other comprehensive income
Outstanding number of shares of common stock
Common stock
Capital surplus
Retained earnings
Treasury stock
Unrealized gain (loss) on availablefor-sale securities
Foreign currency translation adjustments
Total
Minority interests
Total equity
Balance, April 1, 2010 ............................................... Beginning balance effect of change in accounting policy for foreign associated companies ................ Net income ............................................................. Cash dividends, ¥20.0 per share ............................. Increase due to change in scope of consolidation ... Repurchase of treasury stock .................................. Other increase in treasury stock .............................. Net change in the year ............................................ Balance, March 31, 2011 .......................................... Net income ............................................................. Surplus from disposal of treasury stock ................... Cash dividends, ¥22.0 per share ............................. Increase due to change in scope of consolidation ... Repurchase of treasury stock .................................. Other increase in treasury stock .............................. Net change in the year ............................................ Balance, March 31, 2012 ..........................................
172,177
¥31,118
¥41,230 (38)
¥187,991 1,767 13,169 (3,439) 1,509
¥(8,432)
¥ 1,161
¥(29,202)
¥223,866 1,729 13,169 (3,439) 1,509
¥25,056
¥248,922 1,729 13,169 (3,439) 1,509 (36) (583)
(15) (172)
(36) (583) (2,096) (8,233) (37,435)
(36) (583) (10,329) 225,886 13,292 99 (3,953) 200 29 25,085
(10,300) 250,971 13,292 99 (3,953) 200 (205) 559
171,990
31,118
41,192 99
200,997 13,292 (3,953) 200
(9,051)
(935)
(138) 227 172,079 ¥31,118 ¥41,291 ¥210,536
(205) 559 1,446 ¥(8,697) ¥ 511 (8,697) ¥(46,132)
(205) 559 (7,251) ¥228,627 (1,469) ¥23,616
(8,720) ¥252,243
Thousands of U.S. dollars (Note 1) Accumulated other comprehensive income Common stock Capital surplus Retained earnings Treasury stock Unrealized gain (loss) on availablefor-sale securities Foreign currency translation adjustments Minority interests
Total
Total equity
Balance, March 31, 2011 ............................................................................. $379,484 Net income ................................................................................................ Surplus from disposal of treasury stock ...................................................... Cash dividends, $0.27 per share ................................................................ Increase due to change in scope of consolidation ...................................... Repurchase of treasury stock ..................................................................... Other increase in treasury stock ................................................................. Net change in the year .............................................................................. Balance, March 31, 2012 ............................................................................ $379,484 See notes to consolidated financial statements.
$502,342 1,203
$2,451,183 162,097 (48,202) 2,438
$(110,372)
$(11,402)
$(456,521)
$2,754,714 162,097 1,203 (48,202) 2,438
$305,915
$3,060,629 162,097 1,203 (48,202) 2,438 (2,505) 6,812
(2,505) 6,812 17,636 $503,545 $2,567,516 $(106,065) $ 6,234 (106,069) $(562,590)
(2,505) 6,812 (88,433) $2,788,124 (17,905) $288,010
(106,338) $3,076,134
ANNUAL REPORT 2012
39
YAKULT HONSHA CO., LTD.
Consolidated Statement of Cash Flows
YAKULT HONSHA CO., LTD. and subsidiaries Year ended March 31, 2012
Millions of yen
Thousands of U.S. dollars (Note 1)
Millions of yen
Thousands of U.S. dollars (Note 1)
2012
2011
2012
2012
2011
2012
Operating activities: Income before income taxes and minority interests ... ¥ 25,948 Adjustments for: Income taxes—paid .............................................. (9,159) Depreciation and amortization ............................... 18,337 Loss on disposals and sales of property, plant and equipment ........................................... 1,166 Losses from a natural disaster .............................. Loss on adjustment for a change of accounting standard for asset retirement obligations ............. Equity in earnings of associated companies .......... (2,529) Loss on valuation of investment securities ............. 1,187 Changes in operating assets and liabilities: Increase in receivables ...................................... (4,181) (Increase) decrease in inventories ...................... (4,170) Increase in payables .......................................... 2,704 (Decrease) increase in liability for retirement benefits .......................................... (920) Other—net ............................................................ 5,062 Total adjustments...................................................... 7,497 Net cash provided by operating activities .............. 33,445 Investing activities: Transfers to time deposits ......................................... Proceeds from withdrawing time deposits................. Purchases of property, plant and equipment ............. Proceeds from sales of property, plant and equipment ... Purchases of investment securities ........................... Acquisition of controlling interest in companies ......... Increase in loans receivable ...................................... Collection of loans receivable .................................... Other—net (Note 4) ................................................... Net cash used in investing activities ...................... (9,690) 8,446 (20,705) 718 (6,526) (83) (126) 155 (485) (28,296)
¥ 21,403
$
316,442
(7,079) $ (111,694) 19,628 223,622 666 945 615 (2,131) 607 (758) 3,104 1,139 1,149 1,700 19,585 40,988 14,215
(30,846) 14,476 (50,985) (50,852) 32,974 (11,226) 61,739 91,423 407,865
Financing activities: Net increase in short-term loans ............................... 1,928 Payments for settlement of long-term debt ............... (5,288) Repurchase of treasury stock ................................... (1) Sales of treasury stock ............................................. 581 Dividends paid .......................................................... (3,945) Dividends paid to minority shareholders ..................... (2,557) Net cash used in financing activities ...................... (9,282) Foreign currency translation adjustments on cash and cash equivalents ................................ (6,723) Net (decrease) increase in cash and cash equivalents ...................................................... (10,856) Cash and cash equivalents resulting from changing scope of consolidation, beginning of year ............ (172) Cash and cash equivalents, increased by merger..... 36 Cash and cash equivalents, beginning of year ....... 86,551 Cash and cash equivalents, end of year ................. ¥ 75,559
See notes to consolidated financial statements.
(1,699) (6,651) (36) (3,434) (594) (12,414) (4,444) 2,504 857 83,190 ¥ 86,551
23,517 (64,484) (15) 7,083 (48,106) (31,183) (113,188) (81,993) (132,386) (2,098) 439 1,055,498 $ 921,453
(3,531) 4,005 (22,165) 890 (858) (160) (41) 272 (38) (21,626)
(118,165) 102,995 (252,494) 8,760 (79,584) (1,010) (1,539) 1,885 (5,918) (345,070)
ANNUAL REPORT 2012
40
YAKULT HONSHA CO., LTD.
Notes to Consolidated Financial Statements
YAKULT HONSHA CO., LTD. and subsidiaries Year ended March 31, 2012
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2011 financial statements to conform to the classifications used in 2012. The consolidated financial statements are stated in Japanese yen, the currency of the country in which YAKULT HONSHA CO., LTD. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥82 to U.S.$1, the approximate rate of exchange at March 31, 2012. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
(B) UNIFICATION OF ACCOUNTING POLICIES APPLIED TO FOREIGN SUBSIDIARIES FOR THE CONSOLIDATED FINANCIAL STATEMENTS In May 2006, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Practical Issues Task Force (PITF) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements”. PITF No. 18 prescribes: (1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements, (2) financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States of America tentatively may be used for the consolidation process, (3) however, the following items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; and 5) exclusion of minority interests from net income, if contained. (C) UNIFICATION OF ACCOUNTING POLICIES APPLIED TO FOREIGN ASSOCIATED COMPANIES FOR THE EQUITY METHOD In March 2008, the ASBJ issued ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments”. The accounting standard requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s financial statements are used in applying the equity method unless it is impracticable to determine adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; and 5) exclusion of minority interests from net income, if contained.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) CONSOLIDATION The consolidated financial statements as of March 31, 2012 include the accounts of the Company and its 79 (81 in 2011) subsidiaries (together, the “Group”). Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method. Investments in 4 (4 in 2011) associated companies are accounted for by the equity method. Investments in the remaining associated companies are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material. The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiaries at the date of acquisition is being amortized on a straight-line basis over 10 years. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
(D) BUSINESS COMBINATION In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, “Accounting Standard for Business Combinations”. Major accounting changes under the revised accounting standard are as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the pooling of interests method of accounting is no longer allowed. (2) The previous accounting standard required research and development costs to be charged to income as incurred. Under the revised standard, in-process research and development acquired in the business combination is capitalized as an intangible asset. (3) The previous accounting standard provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the procedures used in the purchase allocation. The revised standard was applicable to business combinations undertaken on or after April 1, 2010.
• Foreign subsidiaries Buildings and structures Machinery, equipment and vehicles 3 to 40 years 2 to 20 years
The useful lives for leased assets are the terms of the respective leases. (H) LONG-LIVED ASSETS The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. ( I ) INVESTMENT SECURITIES
(E) CASH EQUIVALENTS Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificate of deposits, commercial paper and bond funds, all of which mature or become due within three months of the date of acquisition. (F) INVENTORIES Inventories are stated at the lower of cost, determined by the average method, or net selling value. (G) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic subsidiaries is computed by the declining-balance method. On the other hand, the straight-line method is principally applied to the property, plant and equipment of foreign subsidiaries. Estimated useful lives are as follows: • The Company and its domestic subsidiaries Buildings and structures Machinery, equipment and vehicles 7 to 50 years 4 to 17 years
The Group classifies all securities as available-for-sale securities, and reports marketable securities at fair value, with unrealized gains and losses (net of applicable taxes) as a separate component of equity. Non-marketable available-for-sale securities are stated at cost determined by the movingaverage method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. (J) RETIREMENT AND PENSION PLANS The Company and certain subsidiaries have non-contributory and contributory funded pension plans covering substantially all of their employees. Certain subsidiaries have unfunded retirement benefit plans. Retirement benefits to directors and corporate auditors of certain subsidiaries are provided at the amount which would be required if all directors and corporate auditors retired at each balance sheet date. (K) ASSET RETIREMENT OBLIGATIONS In March 2008, the ASBJ published the accounting standard for asset retirement obligations, ASBJ Statement No. 18 “Accounting Standard for Asset Retirement Obligations” and ASBJ
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Guidance No. 21 “Guidance on Accounting Standard for Asset Retirement Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. (L) RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to income as incurred. (M) LEASES All finance lease transactions are capitalized to recognize lease assets and lease obligations in the balance sheet. All other leases are accounted for as operating leases. (N) INCOME TAXES The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. (O) FOREIGN CURRENCY TRANSACTIONS All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The
foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts. (P) FOREIGN CURRENCY FINANCIAL STATEMENTS The balance sheet accounts of the foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation were shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of foreign subsidiaries and associated companies are translated into Japanese yen at the average exchange rate. (Q) PER SHARE INFORMATION Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share for the years ended March 31, 2012 and 2011 is not disclosed due to the absence of dilutive securities. Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective years including dividends to be paid after the end of the year. (R) ACCOUNTING CHANGES AND ERROR CORRECTIONS In December 2009, ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections”, and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections”. Accounting treatments under this standard and guidance are as follows; (1) Changes in Accounting Policies: When a new accounting policy is applied with a revision of accounting standards, the new policy is applied retrospectively unless the revised accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply with the specific transitional provisions. (2) Changes in Presentations When the presentation of financial statements is changed, prior period financial statements are reclassified in accordance with the new presentation.
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(3) Changes in Accounting Estimates A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior Period Errors When an error in prior period financial statements is discovered, those statements are restated. This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011. (S) NEW ACCOUNTING PRONOUNCEMENTS Accounting Standard for Retirement Benefits On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in 1998 with effective date of April 1, 2000 and the other related practical guidances, being followed by partial amendments from time to time through 2009. Major changes are as follows: (1) Treatment in the balance sheet Under the current requirements, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference between retirement benefit obligations and plan assets (hereinafter, “deficit or surplus”), adjusted by such unrecognized amounts, are recognized as a liability or asset. Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss shall be recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits). (2) Treatment in the statement of income and the statement of comprehensive income The revised accounting standard would not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts would be recognized in profit or loss over a certain period no longer than the expected average remaining working lives of the employees. However, actuarial gains and losses and past service costs that arose in
the current period and yet to be recognized in profit or loss shall be included in other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments. This accounting standard and the guidance are effective for the end of annual periods beginning on or after April 1, 2013 with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required. The Company expects to apply the revised accounting standard from the end of the annual period beginning on April 1, 2013 and is in the process of measuring the effects of applying the revised accounting standard for the year ending March 31, 2014.
3. INVENTORIES
Inventories at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of U.S. dollars
2012
2011
2012
Merchandise and finished products .............................. Work in process ........................................................... Raw materials and supplies .......................................... Total.................................................................
¥ 9,822 5,117 16,266 ¥31,205
¥ 8,380 2,943 16,417 ¥27,740
$119,775 62,402 198,371 $380,548
4. INVESTMENT SECURITIES
Investment securities at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of U.S. dollars
2012
2011
2012
Investment securities: Marketable equity securities ...................................... Government and corporate bonds ............................ Trust fund investments and other .............................. Total ...................................................................... ¥33,145 5 913 ¥34,063 ¥25,617 5 852 ¥26,474 $404,204 63 11,136 $415,403
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The costs and aggregate fair values of investment securities at March 31, 2012 and 2011 were as follows:
Millions of yen Cost Unrealized Gains Unrealized Losses Fair Value
5. SHORT-TERM BORROwINGS AND LONG-TERM DEBT
Short-term borrowings mainly consisting of bank loans, which include notes to banks and bank overdrafts, at March 31, 2012 and 2011, were ¥4,571 million ($55,736 thousand) and ¥2,671 million, respectively. The annual interest rates applicable to short-term bank loans outstanding at March 31, 2012 and 2011 ranged from 0.01% to 15.91% and 0.38% to 1.98%, respectively. Long-term debt at March 31, 2012 and 2011 consisted of the following:
Thousands of U.S. dollars
March 31, 2012 Securities classified as— Available-for-sale: Equity securities ................................. Debt securities ................................... Other ................................................. March 31, 2011 Securities classified as— Available-for-sale: Equity securities ................................. Debt securities ................................... Other ................................................. ¥28,457 5 12
Thousands of U.S. dollars Cost Unrealized Gains Unrealized Losses Fair Value
¥33,970 5 7
¥3,146
¥3,971
¥33,145 5 7 Loans from banks and other financial institutions, 0.42% to 2.45% (0.42% to 4.90% in 2011), due serially to 2025: Collateralized ........................................................ Unsecured ............................................................
Millions of yen
2012
2011
2012
¥
898 8,967
¥ 1,392 42,355 11,184 54,931 (4,985) ¥49,946
$ 10,955 512,092 109,355 632,402 (49,519) $582,883
41,992 51,857 (4,061) ¥47,796
¥1,362
¥4,202
¥25,617 5 12
Obligations under finance leases (Note 9) ..................... Total................................................................. Less current portion...................................................... Long-term debt, less current portion.............................
Annual maturities of long-term debt as of March 31, 2012 were as follows:
Year ending March 31 Millions of yen Thousands of U.S. dollars
March 31, 2012 Securities classified as— Available-for-sale: Equity securities ................................. $414,264 Debt securities ................................... Other ................................................. 58 84 $38,368 5 $48,428 $404,204 63 84
2013............................................................................. 2014............................................................................. 2015............................................................................. 2016............................................................................. 2017............................................................................. 2018 and thereafter ...................................................... Total.................................................................
¥ 4,061 42,903 1,981 1,290 713 909 ¥51,857
$ 49,519 523,204 24,163 15,731 8,695 11,090 $632,402
Available-for-sale securities whose fair value cannot be reliably determined at March 31, 2012 and 2011 were ¥906 million ($11,052 thousand) and ¥840 million, respectively. Proceeds from sales of available-for-sale securities for the years ended March 31, 2012 and 2011 were ¥14 million ($172 thousand) and ¥64 million, respectively. Gross realized gain on these sales for the years ended March 31, 2012 and 2011, computed on the moving average cost basis, were ¥0 million ($1 thousand) and ¥20 million, respectively. Gross realized losses on these sales for the years ended March 31, 2012 and 2011 were ¥8 million ($99 thousand) and ¥1 million, respectively. The valuation loss on available-for-sale equity securities for the years ended March 31, 2012 and 2011 were ¥1,187 million ($14,476 thousand) and ¥607 million, respectively.
The carrying amounts of assets pledged as collateral for long-term debt at March 31, 2012 were as follows:
Year ended March 31 Millions of yen Thousands of U.S. dollars
Land ............................................................................. Buildings and structures—net of accumulated depreciation................................................................ Total.................................................................
¥4,176 1,467 ¥5,643
$50,923 17,889 $68,812
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As is customary in Japan, the Company maintains substantial deposit balances with the banks with which it has borrowings. Such deposit balances are not legally or contractually restricted as to withdrawal. General agreements with respective banks provide, as is customary in Japan, that additional collateral must be provided under certain circumstances if requested by such banks and that certain banks have the right to offset cash deposited with them against any long-term or short-term debt or obligation that becomes due and, in case of default and certain other specified events, against all other debt payable to the banks. The Company has never been requested to provide any additional collateral.
The components of net periodic retirement benefit costs for the years ended March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of U.S. dollars
2012
2011
2012
Service cost.................................................................. Interest cost ................................................................. Expected return on plan assets .................................... Recognized actuarial loss ............................................. Variance (from simplified method to regular method) ..... Net periodic retirement benefit costs.............................
¥2,515 1,121 (793) 1,249 ¥4,092
¥2,540 1,104 (791) 1,849 245 ¥4,947
$30,666 13,676 (9,667) 15,230 $49,905
6. RETIREMENT AND PENSION PLANS
The Company and certain subsidiaries have severance payment plans for employees. Certain subsidiaries have severance payment plans for directors and corporate auditors. The plans provide benefits based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from certain subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments by voluntary retirement at certain specific ages prior to the mandatory retirement age. The liability for retirement benefits at March 31, 2012 and 2011 included the amounts of ¥356 million ($4,333 thousand) and ¥390 million respectively for directors and corporate auditors. The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders. The Company and certain subsidiaries have various non-contributory and contributory plans and other retirement benefit plans. The liability (asset) for employees’ retirement benefits at March 31, 2012 and 2011 consisted of the following:
Millions of yen Thousands of U.S. dollars
Assumptions used for the years ended March 31, 2012 and 2011 were as follows:
2012 2011
Discount rate ................................................................................... Expected rate of return on plan assets............................................. Recognition period of actuarial gain/loss ..........................................
1.8% 2.5% 10 years
2.0% 2.5% 10 years
7. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: (A) DIVIDENDS Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all the above criteria. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
2012
2011
2012
Projected benefit obligation .......................................... ¥ 61,310 Fair value of plan assets................................................ Unrecognized actuarial loss .......................................... Net liability ................................................................ Prepaid pension cost .................................................... (34,968) (8,502) 17,840 23
¥ 59,462 (33,086) (7,552) 18,824 32 ¥ 18,856
$ 747,685 (426,446) (103,679) 217,560 284 $ 217,844
Liability for employees’ retirement benefits .................... ¥ 17,863
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(B) INCREASES/DECREASES AND TRANSFER OF COMMON STOCK, RESERVE AND SURPLUS The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total aggregate amount of the legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders. (C) TREASURY STOCK AND TREASURY STOCK ACQUISITION RIGHTS The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.
8. INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 40.69% for the years ended March 31, 2012 and 2011. Foreign subsidiaries are subject to income taxes of the countries in which they operate. The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of U.S. dollars
2012
2011
2012
Deferred tax assets: Pension and severance costs ................................... Tax loss carryforwards .............................................. Other ........................................................................ Less valuation allowance .......................................... Total ...................................................................... Deferred tax liabilities: Undistributed earnings of foreign subsidiaries and associated companies ..................................... Unrealized gain on land held by subsidiaries ............. Other ........................................................................ Total ...................................................................... Net deferred tax assets................................................. ¥ 2,503 1,855 2,569 ¥ 6,927 ¥10,743 ¥ 2,833 2,237 2,718 ¥ 7,788 ¥13,481 $ 30,524 22,621 31,332 $ 84,477 $ 131,017 ¥ 6,414 4,761 16,122 (9,627) ¥17,670 ¥ 7,599 4,263 18,437 (9,030) ¥21,269 $ 78,227 58,062 196,605 (117,400) $ 215,494
On December 2, 2011, new tax reform laws were enacted in Japan, which changed the normal effective statutory tax rate from approximately 40.69% to 38.01% effective for the fiscal years beginning on or after April 1, 2012 through March 31, 2015, and to 35.64% afterwards. The effect of this change was to decrease deferred taxes by ¥871 million ($10,623 thousand) and to increase unrealized gain on available-for-sale securities by ¥17 million ($204 thousand) in the consolidated balance sheet as of March 31, 2012. Income taxes-deferred in the consolidated statement of income for the year then ended increased by ¥888 million ($10,827 thousand).
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A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2012 was as follows:
2012
9. LEASES
The Group leases certain machinery, research apparatus, vending machines, computer equipment and other assets. Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows:
Millions of yen Thousands of U.S. dollars
Normal effective statutory tax rate........................................................................ Equity in earnings of associated companies......................................................... Tax exemption ..................................................................................................... Social expenses not deductible for income tax purposes ..................................... Tax rate differences in foreign subsidiaries............................................................ Effect of revised corporate tax rate ...................................................................... Other—net .......................................................................................................... Actual effective tax rate........................................................................................
40.69% (2.85) (2.00) 1.48 (9.99) 3.42 2.27 33.02%
2012
Finance leases Operating leases Finance leases
2012
Operating leases
Due within one year ................................... Due after one year ..................................... Total..............................................
¥3,513 5,454 ¥8,967
Millions of yen
¥ 606 990 ¥1,596
$ 42,840 66,515 $109,355
$ 7,387 12,073 $19,460
At March 31, 2012, certain subsidiaries had tax loss carryforwards aggregating to approximately ¥15,392 million ($187,711 thousand), which were available to be offset against taxable income of such subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:
Year ending March 31 Millions of yen Thousands of U.S. dollars
2011
Finance leases Operating leases
Due within one year ................................... Due after one year ..................................... Total..............................................
¥ 4,189 6,995 ¥11,184
¥ 444 756 ¥1,200
2013............................................................................. 2014............................................................................. 2015............................................................................. 2016............................................................................. 2017............................................................................. 2018 and thereafter ...................................................... Total.................................................................
¥
234 329 1,251 500 261 12,817
$
2,857 4,016 15,257 6,097 3,184 156,300
¥15,392
$187,711
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10. RELATED PARTY DISCLOSURES
Transactions of the Company with related parties which are owned by directors, corporate auditors and their close relatives for the years ended March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of U.S. dollars
(2) NATURE, EXTENT OF RISK AND RISK MANAGEMENT SYSTEM FOR FINANCIAL INSTRUMENTS Notes and accounts receivable are exposed to customer credit risk. To manage such credit risk, the Group monitors payment terms and credit information of major customers. Investment securities, mainly held for business-related purposes, are exposed to the risk of market price fluctuations. To manage such market risk, the fair value of the investments are obtained regularly and reported to the Company’s board of directors. Payment terms of notes and accounts payable are usually within one year. Loans are made principally in connection with capital investments. Most of the loans are at variable interest rates and exposed to the risk of interest rate fluctuations. It is the Group policy not to hedge such market risk by derivatives such as interest-rate swaps as a result of considering the financial market situation and outstanding balance. Payables and loans are exposed to liquidity risk. The Group manages the risk by reviewing cash-flow projections prepared by the accounting and related departments. (3) FAIR VALUES OF FINANCIAL INSTRUMENTS Fair value of financial instruments are based on the quoted price in active markets. If quoted price is not available, other rational valuation techniques are used instead. The result of estimation might differ if other valuation techniques were taken.
Millions of yen Carrying amount Fair Value Unrealized gain/loss
2012
2011
2012
Sales ............................................................................ Sales discount and rebate ............................................ Purchases .................................................................... Collection of loans ........................................................ Rent of vending machines ............................................ Temporary receipt ......................................................... Subsidy of sales expenses............................................
¥9,997 132 43 37 60 1,551 98
¥10,403 154 44 89 104 1,863 122
$121,917 1,618 522 453 729 18,914 1,192
Thousands of U.S. dollars
The balances due to or from these related parties at March 31, 2012 and 2011 were as follows:
Millions of yen
2012
2011
2012
Notes and accounts receivable ..................................... Other receivables .......................................................... Long-term loans ........................................................... Notes and accounts payable ........................................ Other payables ............................................................. Accrued expenses ........................................................ Other current liabilities ..................................................
¥1,936 13 81 10 46 19 2
¥2,139 21 119 48 20 15
$23,615 160 993 116 556 231 20
March 31, 2012 Cash and cash equivalents .......................................... Time deposits .............................................................. Receivables ................................................................. Allowance for doubtful accounts .............................. Receivables—net ..................................................... Investment securities ................................................... Total................................................................ Short-term borrowings ................................................ Payables...................................................................... Long-term debt (exclude obligations under finance leases) ................. Total................................................................ ¥ 75,559 3,561 56,203 (301) 55,902 33,157 ¥168,179 ¥ 4,571 33,901 42,890 ¥ 81,362 55,902 33,157 ¥168,179 ¥ 4,571 33,901 43,020 ¥ 81,492 ¥130 ¥130 ¥ 75,559 3,561
Transactions of the Company with a corporate auditor and his close relatives for the years ended March 31, 2012 and 2011 were as follows:
Millions of yen Thousands of U.S. dollars
2012
2011
2012
Acquisition of shares owned .........................................
¥151
$1,838
11. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
(1) GROUP POLICY FOR FINANCIAL INSTRUMENTS The Group uses bank loans based on its capital investment plan mainly for the food and beverages business. Temporal surplus funds are invested in short-term investments exposed to an insignificant risk of changes in value such as bank deposits. The Group does not invest in speculative instruments in compliance with the Group policy.
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Millions of yen Carrying amount Fair Value Unrealized gain/loss
Cash and cash equivalents, Time deposits and Receivables The carrying values of cash and cash equivalents, time deposits and receivables approximate fair value because of their short maturities.
March 31, 2011 Cash and cash equivalents .......................................... Time deposits .............................................................. Receivables ................................................................. Allowance for doubtful accounts .............................. Receivables—net ..................................................... Investment securities ................................................... Total................................................................ Short-term borrowings ................................................ Payables...................................................................... Long-term debt (exclude obligations under finance leases) ................. Total................................................................ ¥ 86,551 2,287 53,810 (453) 53,357 25,634 ¥167,829 ¥ 2,671 28,341 43,747 ¥ 74,759 53,357 25,634 ¥167,829 ¥ 86,551 2,287
Investment securities The fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments, and at the quoted price obtained from the financial institution for certain debt instruments. The information on the fair value for the investment securities by classification is included in Note 4. Short-term borrowings and Payables (excluding current portion of long-term debt)
¥
2,671 28,341 43,868 ¥121 ¥121
The carrying values of short-term borrowings and payables (excluding current portion of longterm debt) approximate fair value because of their short maturities. Long-term debt (including current portion of long-term debt) The fair value of long-term borrowings are determined by discounting the cash flows related to the debt at the Group’s assumed corporate discount rate. (4) FINANCIAL INSTRUMENTS WHOSE FAIR VALUE CANNOT BE RELIABLY DETERMINED
Carrying amount Millions of yen Thousands of U.S. dollars
¥ 74,880
Thousands of U.S. dollars Carrying amount Fair Value Unrealized gain/loss
March 31, 2012 Cash and cash equivalents .......................................... $ 921,453 $ 921,453 Time deposits .............................................................. Receivables ................................................................. Allowance for doubtful accounts .............................. Receivables—net ..................................................... Investment securities ................................................... 43,425 685,405 (3,672) 681,733 404,351 681,733 404,351 43,425
2012
2011
2012
Investments in equity instruments that do not have a quoted market price in an active market and investments in associated companies ....................................................
¥32,122
¥31,655
$391,737
Total................................................................ $2,050,962 $2,050,962 Short-term borrowings ................................................ $ Payables...................................................................... Long-term debt (exclude obligations under finance leases) ................. 55,736 $ 413,433 523,047 55,736 413,433 524,632 $1,585 $1,585
(5) MATURITY ANALYSIS FOR FINANCIAL ASSETS AND SECURITIES WITH CONTRACTUAL MATURITIES
Millions of yen Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years
March 31, 2012 Cash and cash equivalents ........................ ¥ 75,559 Time deposits ............................................ Receivables ............................................... 3,561 56,203
Total................................................................ $ 992,216 $ 993,801
Total.............................................. ¥135,323
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Thousands of U.S. dollars Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years
13. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥12,414 million ($151,393 thousand) and ¥11,480 million for the years ended March 31, 2012 and 2011, respectively.
March 31, 2012 Cash and cash equivalents ........................ $ 921,453 Time deposits ............................................ Receivables ............................................... 43,425 685,405
14. LOSSES FROM A NATURAL DISASTER
Losses from a natural disaster were recorded to estimate losses and expenses incurred due to the Great East Japan Earthquake, which included fixed cost incurred during the period of suspended operation for recovery at devastated plants, restoring cost for facilities in the plants, damages for inventories and fixed assets and supporting cost for recovery for the years ended March 31, 2012 and 2011, respectively.
Total.............................................. $1,650,283
12. COMPREHENSIVE INCOME
The components of other comprehensive income for the year ended March 31, 2012 were as follows:
Millions of yen Thousands of U.S. dollars
15. SUBSEQUENT EVENT
The following appropriation of retained earnings at March 31, 2012 was approved at the Company’s board of directors‘ meeting held on May 11, 2012:
Thousands of U.S. dollars
2012
2012
Unrealized gain on available-for-sale securities: Gain arising during the year ...................................... Reclassification adjustments to profit or loss ............. Amount before income tax effect .............................. Income tax effect ...................................................... Total................................................................. ¥1,276 1,171 2,447 (925) ¥1,522
Millions of yen
$15,560 14,277 29,837 (11,275) $18,562
Thousands of U.S. dollars
Millions of yen
Year-end cash dividends, ¥11.0 ($0.13) per share ........
¥1,898
$23,152
16. NET INCOME PER SHARE
Basic net income per share (“EPS”) is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share for the years ended March 31, 2012 and 2011 is not disclosed due to the absence of dilutive securities.
Thousands of shares Weighted average shares
2012
2012
Foreign currency translation adjustment: Gain arising during the year ...................................... Total................................................................. ¥(12,557) ¥(12,557)
Millions of yen
$(153,134) $(153,134)
Thousands of U.S. dollars Millions of yen Net income
Yen EPS
U.S. dollars
For the year ended March 31, 2012 Basic EPS: Net income available to common shareholders ........................................ ¥13,292
Millions of yen Net income
2012
2012
Share of other comprehensive income in associates: Gain arising during the year ...................................... Reclassification adjustments to profit or loss ............. Total................................................................. Total other comprehensive income ...............................
¥ ¥
36 (150) (114)
$ $
440 (1,832) (1,392)
171,904
Thousands of shares Weighted average shares
¥77.32
Yen EPS
$0.94
¥(11,149)
$(135,964) For the year ended March 31, 2011 Basic EPS: Net income available to common shareholders ........................................
The corresponding information for the year ended March 31, 2011 was not required under the accounting standard for presentation of comprehensive income as an exemption for the first year of adopting that standard and not disclosed herein.
¥13,169
172,016
¥76.55
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YAKULT HONSHA CO., LTD.
17. SEGMENT INFORMATION
Under the ASBJ Statement No. 17 “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20 “Guidance on Accounting Standard for Segment Information Disclosures”, an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. (1) DESCRIPTION OF REPORTABLE SEGMENTS The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s management is performed in order to decide how resources are allocated among the Group. Therefore, the Group consists of the Food and Beverages (Japan), Food and Bevarages (The Americas), Food and Bevarages (Asia and Oceania), Food and Bevarages (Europe), Pharmaceuticals and Others. Food and Beverages (Japan) consists of fermented milk drinks, juice and noodles, etc. Food and Beverages (The Americas) consists of fermented milk drinks, etc. Food and Beverages (Asia and Oceania) consists of fermented milk drinks, etc. Food and Beverages (Europe) consists of fermented milk drinks, etc. Pharmaceuticals consists of anticancer drugs and other pharmaceuticals. Others consist of cosmetics and professional baseball team operation.
(2) METHODS OF MEASUREMENT FOR THE AMOUNTS OF SALES, PROFIT (LOSS), ASSETS, AND OTHER ITEMS FOR EACH REPORTABLE SEGMENT The accounting policies of each reportable segment are consistent to those disclosed in Note 2, “Summary of Significant Accounting Policies”. (3) INFORMATION ABOUT SALES, PROFIT (LOSS), ASSETS AND OTHER ITEMS IS AS FOLLOWS.
Millions of yen
2012
Japan Food and Beverages The Asia and Americas Oceania Europe Pharmaceuticals Others Reconciliation Consolidated
Sales Sales to external customers.................. Intersegment sales or transfers ................ Total ............... Segment profit (loss) .......... Segment assets ................. Other: Depreciation and amortization ............... Amortization of goodwill ..................... Investment in associates.................. Increase in property, plant and equipment and intangible assets ....
¥178,010 10,031 188,041 9,864 166,606
¥39,040
¥31,953
¥8,003
¥39,373
¥16,174 2,407 18,581 627 9,955
¥312,553 ¥(12,438) (12,438) 312,553 (14,294) 20,817 65,637 397,214
39,040 8,798 49,665
31,953 5,527 62,582
8,003 150 6,764
39,373 10,145 36,005
11,871 121
1,597 3
2,101 92 29,871
346
708
366
1,348
18,337 216 29,871
18,823
1,422
3,148
249
839
555
1,679
26,715
Notes: 1. Reconciliation in segment profit (loss) mainly consists of ¥12,433 million of corporate expense that is not allocated to each segment. 2. Reconciliation in segment assets mainly consists of ¥66,773 million of corporate assets that is not allocated to each segment. 3. Reconciliation in depreciation consists of ¥1,348 million of depreciation of head office. 4. Reconciliation in capital expenditure consists of ¥1,679 million of capital expenditure of head office.
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YAKULT HONSHA CO., LTD.
Millions of yen
Thousands of U.S. dollars
2011
Japan Food and Beverages The Asia and Americas Oceania Europe Pharmaceuticals Others Reconciliation Consolidated Japan Food and Beverages The Asia and Americas Oceania Europe
2012
Pharmaceuticals Others Reconciliation Consolidated
Sales Sales to external customers.................. Intersegment sales or transfers ................ Total ............... Segment profit (loss) .......... Segment assets ................. Other: Depreciation and amortization ............... Amortization of goodwill ..................... Investment in associates.................. Increase in property, plant and equipment and intangible assets ....
¥179,515 10,263 189,778 11,010 155,693
¥37,586
¥25,477
¥8,609
¥38,879
¥15,878 1,319 17,197 (669) 9,180
¥305,944 ¥(11,582) (11,582) 305,944 (13,155) 20,401 72,400 392,828
37,586 8,299 54,845
25,477 4,102 59,738
8,609 571 7,467
38,879 10,243 33,505
13,472 50
1,574
1,926 92 29,854
409
708
426
1,113
19,628 142 29,854
15,596
2,081
5,109
375
589
315
2,238
26,303
Sales Sales to external customers.................. $2,170,855 $476,093 $389,672 Intersegment sales 122,327 or transfers ................ Total ............... 2,293,182 476,093 389,672 Segment profit (loss) .......... 120,288 107,288 67,402 Segment assets ................. 2,031,781 605,672 763,194 Other: Depreciation and 144,774 19,470 25,617 amortization ............... Amortization of 1,471 43 1,120 goodwill ..................... Investment in 364,276 associates.................. Increase in property, plant and equipment 229,548 17,338 38,396 and intangible assets ....
$97,594
$480,162 $197,245
$3,811,621
97,594 1,834 82,490
480,162 123,721 439,078
29,355 $(151,682) 226,600 (151,682) 3,811,621 7,648 (174,313) 253,868 121,404 800,452 4,844,071
4,221
8,637
4,462
16,441
223,622 2,634 364,276
3,030
10,232
6,766
20,479
325,789
Notes: 1. Reconciliation in segment profit (loss) mainly consists of ¥11,558 million of corporate expense that is not allocated to each segment. 2. Reconciliation in segment assets mainly consists of ¥78,605 million of corporate assets that is not allocated to each segment. 3. Reconciliation in depreciation consists of ¥1,113 million of depreciation of head office. 4. Reconciliation in capital expenditure consists of ¥2,238 million of capital expenditure of head office.
Notes: 1. Reconciliation in segment profit (loss) mainly consists of $151,623 thousand of corporate expense that is not allocated to each segment. 2. Reconciliation in segment assets mainly consists of $814,308 thousand of corporate assets that is not allocated to each segment. 3. Reconciliation in depreciation consists of $16,441 thousand of depreciation of head office. 4. Reconciliation in capital expenditure consists of $20,479 thousand of capital expenditure of head office.
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YAKULT HONSHA CO., LTD.
(4) Related information 1. Information about geographical areas a. Sales
Millions of yen
2. Information about goodwill
Millions of yen
2012
Japan Europe Total Food and Beverages The Asia and Americas Oceania Europe Pharmaceuticals Others Eliminations/ Corporate Consolidated
2012
Japan The Americas Asia and Oceania
Goodwill at March 31, 2012 ..........
¥131
Millions of yen
¥131
¥229,417
¥39,040
¥34,340
Millions of yen
¥9,756
¥312,553 2011
2011
Japan The Americas Asia and Oceania Europe Total Japan
¥230,911
¥37,655
¥27,381
Thousands of U.S. dollars
¥9,997
¥305,944
Food and Beverages The Asia and Americas Oceania
Europe
Pharmaceuticals
Others
Eliminations/ Corporate
Consolidated
Goodwill at March 31, 2011 ..........
¥180
¥92
Thousands of U.S. dollars
¥272
2012
Japan The Americas Asia and Oceania Europe Total
$2,797,773
$476,093
$418,774
$118,981
$3,811,621
Japan
2012
Food and Beverages The Asia and Americas Oceania Europe Pharmaceuticals Others Eliminations/ Corporate Consolidated
Note: Sales are classified in countries or regions based on location of customers.
b. Property, plant and equipment
Millions of yen
Goodwill at March 31, 2012 .......... 2012
$1,595
$1,595
Japan
The Americas
Asia and Oceania
Europe
Total
¥107,235
¥8,606
¥18,763
Millions of yen
¥2,359
¥136,963
2011
Japan The Americas Asia and Oceania Europe Total
¥102,480
¥10,169
¥18,432
Thousands of U.S. dollars
¥2,636
¥133,717
2012
Japan The Americas Asia and Oceania Europe Total
$1,307,744
$104,942
$228,819
$28,770
$1,670,275
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YAKULT HONSHA CO., LTD.
Independent Auditors’ Report
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Global Network
(As of March 31, 2012)
26 26
25
23 24 27 28 29 16 18 5 15 13 14 17 2 6
22 3 4 10 7 8 11
1
20
12
19 21 9
9
PRINCIPAL INTERNATIONAL SUBSIDIARIES AND AFFILIATES
1
Yakult Honsha Co., Ltd.
10 Yakult (Malaysia) Sdn. Bhd.
11 12 13 14 15
22
Yakult U.S.A. Inc.
★ Yakult Central Institute for Microbiological Research
2 3 4 5 6 7 8
Yakult Vietnam Co., Ltd. Yakult Danone India Pvt. Ltd. Yakult (China) Co., Ltd. Guangzhou Yakult Co., Ltd. Shanghai Yakult Co., Ltd. Shanghai Yakult Marketing Co., Ltd.
23 Yakult Europe B.V. 24 Yakult Nederland B.V. 25 Yakult Belgium S.A./N.V.
26 Yakult UK Ltd. • Ireland Branch 27 28 29
Yakult Co., Ltd. (Taiwan) Hong Kong Yakult Co., Ltd. Yakult (Thailand) Co., Ltd. Korea Yakult Co., Ltd. Yakult Philippines, Inc. Yakult (Singapore) Pte., Ltd. P.T. Yakult Indonesia Persada
16 Beijing Yakult Co., Ltd.
17
Yakult Deutschland GmbH Yakult Oesterreich GmbH Yakult Italia S.R.L.
18 Tianjin Yakult Co., Ltd. 19 Yakult S/A Ind. E. Com. (Brazil)
20 21
9 Yakult Australia Pty. Ltd. • New Zealand Branch
Yakult S.A. de C.V. (Mexico) Yakult Argentina S.A.
★ Yakult Honsha European Research Center for Microbiology, ESV
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Corporate Data
(As of March 31, 2012)
CORPORATE NAME DATE FOUNDED DATE INCORPORATED HEAD OFFICE
YAKULT HONSHA CO., LTD. 1935 April 9, 1955 1-19, Higashi Shimbashi 1-chome, Minato-ku, Tokyo 105-8660, Japan Phone: +81-3-3574-8960 URL: http://www.yakult.co.jp/ ¥31,117,654,815
OFFICES
1 head office, 1 institute, 5 branches, 9 plants ● Head Office ★ Yakult Central Institute for Microbiological Research
MAjOR SUBSIDIARIES IN jAPAN
Yakult Tokyo Sales Co., Ltd. Yakult Kobe Plant Co., Ltd. Yakult Corporation Co., Ltd. Yakult Materials Co., Ltd. Yakult Health Foods Co., Ltd. Yakult East Logistics Co., Ltd. Yakult Kyudan Co., Ltd.
A
Branches A B C D E
1 2
PAID-IN CAPITAL ANNUAL ACCOUNT SETTLEMENT DATE NUMBER OF EMPLOYEES NUMBER OF ISSUED AND OUTSTANDING SHARES NUMBER OF SHAREHOLDERS
Hokkaido Branch East Japan Branch Metropolitan Branch Central Japan Branch West Japan Branch
March 31 18,563 (Consolidated)
Plants
Fukushima Plant Ibaraki Plant 3 Shonan Cosmetics Plant 4 Fuji Susono Plant 5 Fuji Susono Pharmaceuticals Plant 6 Kyoto Plant 7 Fukuyama Plant 8 Saga Plant 9 Kumamoto Plant
2 54 3
1 E 8 9
7
D
6
B C
7 E 8 9
D
6
175,910,218
28,036
* Including shareholders who own shares of less than one unit
SHARE PRICE MOVEMENT
Trading Volume
12,000 Trading Volume (left scale) Yakult Honsha’s Stock Price (Closing) (right scale) (Thousands of shares)
Yakult Honsha’s Stock Price (Closing)
(Yen) 4,000
9,000
3,000
6,000
2,000
3,000
1,000
0 Apr.
2011
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Jan. 2012
Feb.
Mar.
0
ANNUAL REPORT 2012
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YAKULT HONSHA CO., LTD.
Yakult HonsHa Co., ltd.
1-19, Higashi Shimbashi 1-chome, Minato-ku, Tokyo 105-8660, Japan Phone: +81-3-3574-8960 URL: http://www.yakult.co.jp/
1208RV1800 Printed in Japan 