Raw Material Price Fluctuations and Domestic Potato Procurement Risk

「Meanwhile, the global surge in raw material prices has substantially increased the Company's business costs, particularly manufacturing costs, both in Japan and overseas. The situation in the Middle East has exacerbated this, and we recognize that the impact of shortages in the physical supply of materials, not only higher prices, cannot be ignored by the Company.」

「Meanwhile, potato quality deteriorated as a result of recent temperature increases, causing potato yields to fall well below expectations and manufacturing costs to rise sharply. Combined with higher costs for other raw materials and increases in labor costs due to wage increases and higher headcount, this resulted in higher sales but lower profits.」

「In the Taiwan business, product distribution to mid-sized and major retailers progressed, and sales grew, led by the core Karamucho brand. In addition, stronger earnings management and rigorous control of promotional expenses, together with the smooth procurement of domestic potatoes from Taiwan, kept costs under control and resulted in substantial increases in both sales and profits.」

「Meanwhile, although costs continue to be affected by higher raw material prices and utility costs, we worked to secure profits by implementing cost-reduction measures, including greater production and logistics efficiency, and revising prices to maintain product quality and secure stable profits.」

「In the Taiwan business, although domestic potatoes from Taiwan remain in short supply, substantial price revisions for various potato chips have enabled both sales and profits to remain strong. We also plan to launch new products using ingredients other than potatoes and are considering measures to reduce our dependence on potato-based raw materials by increasing the sales ratio of product categories other than potato chips.」

「Meanwhile, on the cost side, the global surge in raw material prices has substantially increased the Company's business costs, particularly manufacturing costs, both in Japan and overseas.」

「Meanwhile, costs have increased substantially because of global inflation and the historically weak yen, and we worked to secure profits through price revisions and by expanding the sales mix of high-value-added products.」

「Meanwhile, costs increased substantially because of global inflation and the historically weak yen, but we worked to secure profits through price revisions and by expanding the sales mix of high-value-added products. Overseas, the effects of higher raw material prices and ocean freight rates emerged earlier and more severely than in Japan, making it difficult to secure profits.」

「Meanwhile, uncertainty over the impact of global inflation has continued. In addition to revising prices, we worked to reduce various costs and expand the sales mix of high-value-added products. Overseas, the effects of higher raw material prices and ocean freight rates emerged earlier and more severely than in Japan, making it difficult to secure profits.」

「The global surge in commodity prices has substantially increased the Company's business costs, particularly manufacturing costs, both in Japan and overseas.」

「Meanwhile, driven by the global rise in commodity prices, the sharp increase in the prices of raw materials and supplies procured by the Company, including palm oil and corn, increased expenses, particularly manufacturing costs, and put considerable pressure on profits.」

「Meanwhile, soaring raw-material prices, including palm oil, have become an extremely serious cause of profit pressure. Going forward, we will pursue measures including product redesign and price reviews. In addition, potatoes are in short supply due to sales conditions and unfavorable weather this summer, and we are working to increase harvest volumes through measures such as contracts with new production areas.」

「In the Taiwan business, corn- and wheat-based products continued to sell well, and sales of the high-margin “Jagaimo Cocochi” potato chips were expanded. However, profit deteriorated year on year because the poor 2020 Taiwan potato harvest increased the use of imported potatoes and changes in the local distribution structure led retailers to demand higher promotional expenses.」

「In the Taiwan business, the adverse impact of the poor 2020 Taiwan potato harvest on sales and profit exceeded expectations. However, corn- and wheat-based products continued to sell well, and sales and profit progressed broadly in line with the plan through expanded sales of the high-margin “Jagaimo Cocochi” potato chips.」

「In the Taiwan business, although the poor 2020 potato harvest in Taiwan adversely affected both sales and profit, sales and profit progressed broadly in line with the plan as sales expanded for highly profitable corn- and wheat-based products and, among potato chips, “Jagaimo Cocochi.”」

「In the Taiwan business, major retail chains continued to make stringent demands for promotional expenses, while the business was affected from early 2020 by the poor harvest of potatoes grown in 2020, resulting in cost increases exceeding initial expectations.」

「In the Taiwan business, we refrained from excessive promotion of potato chips in response to the potato shortage, worked to expand sales of products made with non-potato ingredients, such as “Polinky,” and sought to shift the product portfolio, resulting in steady performance.」

「In the Taiwan business, we prioritized securing profit by refraining from excessive promotion of potato chips in response to the potato shortage, while working to expand sales of products using non-potato ingredients, such as “Polinky,” and the business continued to perform well.」

「In the overseas business, sales in Taiwan fell below the prior year because promotional activity was curtailed due to the potato shortage. However, profit performed in line with the plan, supported by lower promotional expenses and strong sales of products other than potato chips, including the Polinky brand.」

「In the overseas business, sales in Taiwan fell below the prior-year period due to reduced promotional activity resulting from the potato shortage.」

「In the first half, the disruption in the snack market caused by the shortage of Hokkaido-grown potatoes following the August 2016 typhoon remained (the “potato shock”), and performance was weak both year on year and against the plan. In the second half, however, the effects of the potato shock were eliminated and sales significantly exceeded the prior-year period, as proactive product initiatives proved effective and upfront investment in advertising bore fruit.」

「Alongside the renewal of the “Koikeya Potato Chips” series, we declared the return of Hokkaido-grown potatoes following the shortage caused by the August 2016 typhoon, and held the “Koikeya Potato Revival Appreciation Festival” to express our gratitude to those who supported us. We worked to revitalize existing brands, resulting in higher revenue.」

「The market environment surrounding potato chips remained difficult, as the impact of exceptional factors, including the shortage of Hokkaido-grown potatoes caused by a typhoon that caused extensive damage in Hokkaido at the end of August 2016, persisted and led to the temporary suspension and discontinuation of some products. Sales of existing-brand products also declined, resulting in lower revenue.」

「In Taiwan, the overseas business was affected by a poor potato harvest in the previous fiscal year, which pressured profit. However, potatoes harvested in fiscal 2017 grew well, and both sales and profit increased.」

「During the consolidated fiscal year, the snacks division faced unprecedented exceptional factors, including factory shutdowns caused by typhoons, insufficient potato yields, the temporary suspension and discontinuation of some products, and a poor potato harvest in Taiwan.」

「Although we sought to expand sales of corn-snack products, the adjustment of orders for some potato chip products due to concerns about potato procurement shortages caused by typhoons was a factor behind the decline in revenue. Profit was affected by temporary cost increases resulting from poor potato crop conditions in the overseas business, resulting in operating profit of ¥169 million, down 67.7% year on year, ordinary profit of ¥264 million, down 53.3%, and profit attributable to owners of the parent of ¥182 million, down 44.5%.」

「Sales for the cumulative second quarter of the current consolidated fiscal year were ¥15,654 million, down 3.0% year on year, partly due to the impact of typhoons on potato procurement. Profit was affected by temporary cost increases resulting from poor potato crop conditions in the overseas business, resulting in operating profit of ¥354 million, down 18.9% year on year, ordinary profit of ¥369 million, down 20.5%, and profit attributable to owners of the parent of ¥248 million, down 11.0%.」

「Fluctuations in raw-material prices are a factor that could affect our group’s business results and financial position. Rising grain prices can lead to higher prices for edible oils and corn-snack ingredients, while surging crude oil and other energy prices can affect factory fuel costs and packaging-material prices.」