Message from CEO
My name is Hiroshi Shimizu, President and CEO of Fuji Oil Co., Ltd.
I first want to express my condolences for the people who have lost their lives due to the novel coronavirus (COVID-19) and support for those infected by the virus.
I also want to express my sincere gratitude and respect for the medical professionals around the world working to combat the novel coronavirus.
Initiatives related to COVID-19
Fuji Oil has 40 consolidated subsidiaries in 15 countries and regions. and at each location our company is facing the threat of COVID-19 pandemic. Amid such conditions, at one point we did temporarily suspend operations at certain plants but we were able to continue supply operations at all plants. In the situation demand for safety and security of food is increasing, we reconfirmed our mission is to supply ingredients, centered on oil and fats and protein, which is essential for human life.
We will continue to fulfill our mission of maintaining a global food supply structure and contributing to the realization of a more sustainable society.
■FY2019 Earnings and evaluations
We released our FY2019 earnings and FY2020 forecast on May 12, 2020.
FY2019 earnings resulted in revenues of 414.7 billion yen, operating income of 23.6 billion yen, ordinary income of 22.4 billion yen, and net income of 16.4 billion yen.
(*Note: As the first step in the consolidation of financial periods in order to strengthen our global management structure, we changed the accounting periods for our overseas Group companies (excluding Blommer and Industrial Food Services), from ending on December 31 to March 31. As a result, earnings from overseas companies reflect a 15-month fiscal period.)
Vegetable Oils and Fats, Emulsified and Fermented Ingredients, and Soy-based Ingredients were all firm but Industrial Chocolate was significantly below plans due to losses from the impact of cacao futures losses at Blommer, which was added to the scope of consolidation this fiscal year, decreased production due to a production bottleneck, and increased costs.
As a result, we conducted an additional downward revision to the revised forecast we released in November 2019. We recognize the severity of these results.
Progress of Midterm Management Plan
FY2019 was the third year of our midterm management plan Towards a Further Leap 2020 (2017 to 2020). We implemented reforms towards the final year of the plan and set out to achieve steady growth for both the newly acquired Blommer and all existing businesses. The Japanese business achieved record highs due to its solid business base.
However, despite a significant selection and concentration initiative, including resource investments in core competence and the sell-off of non-core businesses, we are not seeing sufficient results. To strengthen our core competence, we conducted investments in the Industrial Chocolate Business, including Blommer and Harald, but an ongoing issue will be to create greater cash flow from these businesses.
The market launch for new ingredients such as stabilized DHA/EPA, a key part of our strategy to develop functional high value-added products, is behind schedule. Our marketing methods did not sufficiently ascertain the market but there is no doubt that population aging will continue to be a social issue. We will take further steps to create markets.
Looking at the Soy-based Ingredients Business, we advanced construction of a new Chiba plant for soy meat (textured soy protein) to provision to Japan’s growing plant-based foods market. The plant is scheduled to launch operations in FY2020. We will create a high value-added business by fruiting our efforts that have maintained a medium- to long-term perspective.
Facing the state of emergency caused by COVID-19, we once again recognized that the strong Vegetable Oil and Fats business centered on sustainable palm oil and the business model in Japan, which we have built up to date, are the strengths that support the Group as a foundation.
Since shifting to a Group holdings company structure in FY2015, we have focused on strengthening our global management infrastructure. This year, we succeeded in our goal of consolidating the accounting periods for overseas Group companies. In addition, as confirmed by the spread of COVID-19 infection, the area representatives are building a system to understand the situation of each overseas group company. We are making steady progress in strengthening the foundation for group-wide management.
■FY2020 earnings forecast
Our earnings forecast for FY2020 is revenues of 370 billion yen, operating income of 19.3 billion yen, and net income of 11.5billion yen.
Under this plan, we project the impact of COVID-19 will peak between April and June, and that the economy will trend towards a recovery through the end of September. Based on these assumptions, these forecasts reflect a negative impact on operating income of approximately 3.9 billion yen for the entire Group.
We are prepared for a very severe year, but an important issue this year is to strengthen the cash flow generation capacity of our global chocolate business in addition to our strong business foundation in Japan.
Although COVID-19 pandemic is heading towards its peak, it is projected that the social and economic impact of the pandemic are not yet fully evident. This creates a future environment that lacks transparency. As noted above, our highest priority is on continuing plant operations. At the same time, we predict that our supply chain, including raw materials procurement and product sales, could be impacted significantly.
Maintaining our financial platform is another critical issue. The Group holdings company will lead efforts to ensure smooth capital recovery and capital procurement in all countries and regions. Amid increasing uncertainty, we will reevaluate investment strategies and other plans to engage aggressively in the top-down elimination of unnecessary and non-urgent expenditures.
■Operations in a new environment
It is important to strongly recognize that even after COVID-19 has converged, it will not return to the same world as before. Everything will change – societal norms, workstyles, consumer perceptions, and market structures – and the breadth and speed of those changes may be greater than we can conceive at this moment.
Amid major changes in our societal structures, only the companies able to adapt to the changing times and provide societal value will survive.
Even before COVID-19, we have been elaborating long-term strategies for change aimed at ESG management. And also, with a sense of crisis regarding major changes, we have been promoting reforms from the perspective of both back casting from the way Fuji Oil should be in the future and forecasting from the current state.
Today, the speed of change in the world is rapidly increasing due to the influence of COVID-19. However, it is in this crisis that we have the opportunity to make even greater reforms.
We, Fuji Oil Group want to be a company that continues to grow by PBFS (Plant-Based Food Solutions), that is, solving social issues through plant-based food ingredient.
We ask for your continued understanding and support.
President and CEO