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Satoshi Masumura President and Chief Executive Officer June 2022

Please tell us about the business situation in the fiscal year ended March 31, 2023 and the forecast for the fiscal year ending March 31, 2024. 

In the fiscal year ended March 31, 2023, while we continued to be affected by the Covid-19, we saw a gradual recovery in the economy as it gradually became compatible with socioeconomic activities. As for the global economy, there were many causes for concern, including Russia's military invasion of Ukraine, the energy market turmoil triggered by the invasion, the impact of trade friction between the US and China on the economy, global inflation, and exchange rate fluctuations.

Given these situations, Takasago Group's net sales increased 15.0% from the previous fiscal year, reaching a record high. By segment, in Japan, the flavor business focused on developing growth categories and new customers, and achieved steady sales growth. In the fine chemicals business, we increased the available supply volume of existing pharmaceutical intermediates by improving production efficiency, etc., and also acquired new commercial products.

In the Americas, both the flavor and fragrance business maintained growth by expanding sales to domestic and regional customers in addition to multi-national customers. In the fine chemicals business, sales remained strong due to aggressive marketing efforts, including sales expansion of new products.

In Europe, the fragrance business performed well by focusing on sales expansion of cosmetics and other products, and the flavor business achieved business expansion  in African market.

In Asia, sales of beverage and savory, a focused category in the flavor business, were strong, and sales in emerging markets were also favorable. In the fragrance business, sales were strong due to the concentration of management resources on multi-national and major local customers, targeting the air care, personal care, and fabric care categories.

In terms of profit, we focused on expanding sales of mainstay products and new products both in Japan and overseas, and also made efforts to pass on the higher prices of raw materials and other items to customers. However, the operating profit decreased by 32.5%.

In the fiscal year ending March 31, 2024, although the impact of the Covid-19 infection on economic activities has eased, the situation is expected to remain extremely uncertain due to the future situation in Ukraine, resource price trends, and concerns about a downturn in the economies of various countries against a backdrop of global monetary tightening and other factors.

In the flavor and fragrance industry, the competitive environment remains severe, but the market is expected to continue to grow in China and Southeast Asia, while solid growth is also expected in the mature markets of Europe and the United States. However, we anticipate a difficult environment in terms of profits, affected by soaring raw material and energy prices, supply chain disruptions, and other factors. 

 

Please explain about the final year of our Mid-Term Management Plan. 

The fiscal year ending March 31, 2024 is the final year of our Mid-Term Management Plan, New Global Plan-1 【NGP-1】, which is based on three basic policies: " Growth expansion overseas," " Profit improvement in Japan," and " Sustainability promotion".

With regard to the first basic policy, "Growth expansion overseas," we are working to enhance and revitalize the organization at each of our affiliates in order to further expand our overseas business, which has grown steadily in terms of both sales and operating profit and has come to support the overall group performance in recent years. In addition, we are promoting the establishment of a globalERP, and have established a global template with the completion of its installation at our Singapore subsidiary in the previous fiscal year; we will complete its installation in the US subsidiary in the fiscal year ending March 31, 2024, and then proceed with its installation at other affiliates to integrate management resources on a global scale.

On the other hand, in Japan, with the market not expected to expand, we have been facing a difficult situation in terms of profits in recent years. Despite remarkable growth overseas, domestic sales still account for about 40% of total sales, and we are working to improve profits in order to serve as a foundation for generating stable earnings. One of our measures is to reduce manufacturing costs by reviewing our production system, and we will continue to focus on automation and labor saving. In addition, we will continue to review our flavor and fragrance products centering on our business, research, and production departments.

The third of our basic policies is " Sustainability promotion " from the perspective of realizing Vison 2040, which is based on the slogan " Care for People, Respect the Environment," and aiming for long-term business growth. One of these efforts is the development of products with an awareness of their contribution to the SDGs. With regard to development, we need to consider raw materials, manufacturing methods, and production processes from multiple perspectives. Among other things, we are promoting the introduction of the latest biotechnologies and the strengthening of our manufacturing infrastructure using these technologies.

Based on these three basic policies, we will make a concerted effort to achieve the numerical target of 200 billion yen in net sales and accumulate as much operating profit as possible in the final year of NGP-1, the fiscal year ending March 31, 2024, by promoting organizational and cross-functional efforts.

We aspire to share the Group’s determination to achieve further growth with shareholders and we look forward to their continued support on a long-term basis.