Satoshi Masumura President and Chief Executive Officer June 2022
Please tell us about the business situation in the fiscal year ended March 31, 2022 and your forecast for the fiscal year ending March 31, 2023.
In FY2021, the effects of the Covid-19 have gradually calmed down while economic activities have gone through periods of restrictions and relaxation. Although Japanese economy continued to face difficult situations in such areas as personal consumption, employment and income, and corporate profits and business sentiment showed clear signs of a recovery trend.
Given these situations, Takasago Group's net sales increased 8.0% from the previous fiscal year, reaching a record high.
Looking at the business segment, net sales in the flavors business remained steady, particularly for flavor products for drinks in the parent company. In the fragrance business, net sales of fragrance products for air fresheners were strong in US subsidiary. In the aroma ingredients business, net sales increased due to strong sales of specialty products and the effect of currency exchange fluctuation. In the fine chemicals business, sales of pharmaceutical intermediates were strong.
In terms of profit, operating profit increased 40.1% year on year, which was also a record high.
In FY2022, although there are concerns about the impact of soaring resource prices and supply chain instability, we expect the underlying tone to continue to recover as the impact of the Covid-19 on economic activities eases.
In FY2022, Takasago Group's expects net sales of \172,500 million, up 6.2% from the current fiscal year. In addition to continued overseas sales growth, demand is expected to recover further in Japan. On the other hand, operating profits are expected to decrease due to higher raw material costs, manufacturing costs, and distribution costs.
What is the driving force behind your continued growth overseas?
Since our founding, we have built up a diverse range of technologies, a meticulous sales and marketing structure, a procurement structure, a production structure, a quality assurance structure, a supply chain structure, a BCP structure, and sustainability initiatives, all of which have earned us the trust of our customers. We believe this has contributed to our growth not only in Japan but also overseas. In the flavor and fragrance business, it is not possible to continue to generate sales with just one product or technology. We believe that the only way for our customers to choose our flavors and fragrances is to continually improve our overall ability to fulfill our responsibility to supply them.
Since flavor and fragrance preferences differ from region to region, when a flavors and fragrances business fully expands overseas, it is necessary to have local sales, research, and manufacturing personnel and functions in place. Since entering the New York and Paris markets in 1960, we have made direct investments while developing local customers one by one. We have persistently expanded our business, and our overseas sales now account for 58% of total group sales.
In recent years, for example, the savory category in the flavor business have been receiving orders for bouillon in Africa and for instant noodles and snacks in Southeast Asia. We believe this is the result of our continued approach to local customers over the years and the gradual recognition of our technical capabilities and responsiveness.
In the fragrance business, sales of air care category for air fresheners and aroma candles increased due to increased hygiene awareness in the wake of the Covid-19. Our multinational customers have been using our products for many years, and we have worked to earn their trust as a solid supplier through continued deliveries. We believe that the large number of orders we received during the period of increased demand for the Covid-19 was the result of the trust we have built up over the past years.
Customer trust is not something that can be gained overnight. We will continue to enhance our overall capabilities to ensure continued growth.
Please explain the background and purpose of the purchase of business site that you announced on April 25, 2022.
On March 30, 2022, the Company entered into a business site purchase agreement to purchase land in Kajiwara, Kamakura, Kanagawa Prefecture from Chugai Pharmaceutical Co., LTD. This acquisition was made with the intention of relocating the R&D facility that we currently have in Hiratsuka City, Kanagawa Prefecture. Takasago plans to handover of vacant site in late 2025, construct the research center, and move to the new location in 2028.
Since our founding, we have consistently positioned R&D as the core of our corporate management, and have aimed to contribute to society based on the technologies we have cultivated.
In recent years, the role required of flavors and fragrances, and the role they should play, has been expanding in response to diversifying consumer preferences and increasing health consciousness. Furthermore, the R&D environment has evolved significantly due to significant advances in IT, such as artificial intelligence, and the promotion of open innovation.
In response to these changes in the external environment, the R&D area has continued to expand, and a new R&D environment was deemed necessary. Currently, we operate in 28 countries and regions around the world and have research centers in many of them. The technological knowledge gained in each region is accumulated and evolved at our headquarters in Japan, and then deployed again in each region. This 18 accumulation and deployment of the technology is one of our strengths.
The communication function, which stands at the heart of the technology of this global base, will also be strengthened to meet the needs of customers around the world, with the aim of achieving further growth.
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.