The Nisshin OilliO Group, Ltd....Financial Results Presentation for Fiscal 2010 First-Half (the Six...

Financial Results Presentation for Fiscal 2010 First-Half(the Six Months Ended September 30, 2010)

November 9, 2010The Nisshin OilliO Group, Ltd.

2

Medium-term Business Plan GROWTH 10 Phase ＩProgress Report and Future Direction

Kazuo OgomePresident

3

Fiscal 2010 First-Half Consolidated Financial Results

(Millions of yen) 1H FY10 1H FY09 Change (%)

Net Sales 149,313 148,493 0.6%Operating Income 3,973 5,891 -32.5%Ordinary Income 3,537 5,651 -37.4%

Net Income 1,600 2,994 -46.6%

(Reference: Non-consolidated Financial Results)

(Millions of yen) 1H FY10 1H FY09 Change (%)

Net Sales 88,231 92,857 -5.0%Operating Income 2,530 4,686 -46.0%Ordinary Income 3,037 4,979 -39.0%

Net Income 1,920 2,909 -34.0%

4

Fiscal 2010 Forecasts

(Millions of yen) FY10 FY09 Change (%)

Net Sales 311,000 301,299 3.2%Operating Income 10,500 10,435 0.6%Ordinary Income 9,800 10,302 -4.9%

Net Income 5,200 5,104 1.9%

(Reference: Non-consolidated Financial Forecasts)

(Millions of yen) FY10 FY09 Change (%)

Net Sales 181,000 185,071 -2.2%Operating Income 6,200 6,650 -6.8%Ordinary Income 6,500 7,138 -8.9%

Net Income 3,900 3,591 8.6%

5

GROWTH 10 PhaseⅠ Results and Issues

Target Position at Completion of PhaseⅠ

As the foundation for transforming ourselves into an international corporate group, become a foods corporate group that possesses a stable earnings structure and original technologies.

¥311.0 billion¥300.0 billionNet sales¥9.8 billion¥15.0 billionOrdinary income

ForecastInitial target

Consolidated sales and income targets

6

PhaseⅠ Results and Issues

◇ Domestic oils and meal business

◇ Processed oils and fats business

・ Stabilize the market by selling at appropriate pricesEstablish sales prices in line with globally high grain pricesExpand sales of Healthy Resetta and Healthy Choleste healthy oils, olive oil and sesame oil for the home-use market

・ Production and sale of high-value-added products, entry into highly-processed fields

Investment in Malaysia-based palm-oil processing equipment and oils and fats for chocolateEntry into the chocolate business through capital participation in Daito Cacao Co., Ltd.

◇ Oils and fats business in China・ Stable operations in Dalian Nisshin Oil Mills and launch of Chinese version of Healthy Resetta “日清減肥油”

Operations of Dalian Nisshin Oil Mills stable; recorded profitsGMP certification obtained for Chinese version of Healthy Resetta “日清減肥油;” market launch

7

PhaseⅠResults and Issues

◇ Healthy foods business

◇ Soy protein business

・ Developing the food lifestyle field and the health linkage field through pursuit of health and good taste

Joint product development with PIETRO Co, Ltd. and merger of mail-order sales businessEntry into the South Korean nursing care foods marketEarnings enhanced through cost reductions and stronger sales

・ Earnings enhanced through cost reductions and stronger salesEnhanced technical support and proposal-based salesCosts reduced through revision of production and purchasing systems

◇ Fine chemicals business

・ Progress in overseas sales of raw materials for cosmeticsIncreased overseas sales through sales bases in Europe and ChinaDeveloped products in the environment-related field using medium-chain triglycerides

8

Status of Cost Reduction Efforts

Production ・ Build a production control system¥0.7 billion

Area Target

Investment

General purchasing and administrative

expenses

Logistics

Other

¥0.5 billion ・ Bolster expense management and promote cost awareness

・ Reduce depreciation and amortization through tight investment profit management

・ Reduce inventory and raise efficiency of logistics network

¥0.4 billion

¥0.2 billion

¥0.2 billion

Major initiatives

◇ ¥2 billion reduction in FY2010 compared with FY2008

¥2 billionTotal

¥0.8 billion

Forecast

¥0.4 billion

¥0.6 billion

¥0.2 billion

¥2 billion

9

Management Environment Going Forward

・ Rising global demand and flow of speculative funds into the market have kept grain prices high

・ Growth in oils, fats, and meal markets in emerging nations (strong expansion in volume and quality)

・ Reduced consumption of oils and fats in Japan due to population aging and decline

・ Rise in imported oils and meal due to reduced or scrapped import duties and the yen’s appreciation

Recognize Future Decline in Demand for Oils, Fats and Meal Due to Globally High Raw Materials Prices and Declining Population and Birthrate in Japan as a Structural Issue

10

Direction Going Forward

Secure stable earnings

・ Reform business operating system for greater efficiency

・ Change to profit-driven activities

◇ Oils and meal business

Realize a stable earning structure and secure growth

We will secure stable earnings in the domestic market going forward despite the structural challenge of declining consumption of oils, fats and meal due to an aging and declining population with a low birthrate.

11


Grow business into a second earnings pillar

・ Make full use of the business base established in Phase 1

・ Aggressively develop overseas markets for oils and fats for chocolate

◇ Processed oils and fats business

Concentrate management resources here to grow and expand the business scale to match that of the oils and meal business

12


Lay the foundations for growth

・ Expand business in China, healthy foods business, fine chemicalsbusiness, and soy protein business

・ Expand domestic and overseas business through pursuit of flavor, health, and beauty

◇ Growth business

Nurture businesses with potential to become earnings pillars alongside the oils and meal business and processed fats and oils business

13


◇ Strengthen operation base

Focus on technology

① Develop products and technologies

Differentiate Nisshin OilliO from competitors through further cultivation of elemental and applied technologies; strengthen earnings capabilities

・ Further cultivate enzyme, separation, and analysis and evaluation technologies

・ Strengthen application technologies

・ Invest in human resources to strengthen product and technology development capabilities

14


・ Realign production and logistics bases to fit product demand and business structure

②Promote cost structure reforms

Reform cost structure based on the assumption that high raw materials costs and shrinking domestic consumption are structural challenges

・ Review operation cost structure and re-allocate management resources

・ Cut costs in purchasing, procurement and logistics. Eliminate unprofitable operations and items

◇ Strengthen operation base

Reform cost structure

15

Takeshi Ootara

Officer General Manager

Financial Department

Outline of Financial Results for Fiscal 2010 First-Half(the Six Months Ended September 30, 2010)

16

Raw Materials Prices & ForeignExchange Rate 1H FY10 Results 1H FY09 Results Change Change (%)

Soy bean Unit Price (USD/t) 449 447 +2 +0%Rapeseed Unit Price (USD/t) 469 440 +29 +7%

Foreign Exchange Rate (JPY/USD) 90 95 -5 -5%

Net Income

1H FY09 Results 1H FY10 ResultsOrdinary Income

1H FY09 Results 1H FY10 Results

Ne t Sale s


Operati ng Income


Outline of Consolidated Financial Results for Fiscal 2010 First-Half

148,493 149,313＋819 (+0.6%)

3,9735,891－1,917 (－32.5%) 5,651 3,537

－2,113 (－37.4%)

2,994 1,600－1,394 (－46.6%)

* Figures for raw materials prices and foreign exchange rates are based on Nisshin OilliO estimates.

Millions of yen

17

500

700

900

1,100

1,300

1,500

1,700

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

US￠/Bu

Soybean Market Prices (Chicago)

Source: Bloomberg

Sep. 27 1,144.00

April – September 2009April – September 2010

Jun. 29 926.00

Jun. 11 1, 291.25

Sep. 15 901.50

Average price (closing price): 1,088

Average price (closing price): 996Percentage decline: 8%

18

300

400

500

600

700

800


CAD/t

Rapeseed Market Prices (Winnipeg)

Source: Bloomberg

Sep. 27 487.30

April – September 2009 April – September 2010

May 12 360.00

May 20 484.10

Sep. 24 376.10

Average price (closing price): 436 Average price (closing price): 424

Percentage decline: 3%

19

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

4,400


MYR/t

Palm Oil Market Prices (Malaysia)

Mar. 11 2,730

January – June 2009

January – June 2010

Jan. 14 2,200

May 13 2,905

Jan. 2 1,720


Percentage increase: 13%


Source: Bloomberg

20

80

85

90

95

100

105

110

115

120

125


JPY/USD

Foreign Exchange Rate

April – September 2010


Apr. 6 101.44

Sep. 28 88.24

Average price (closing price): 89

Percentage decline: 7%

Average price (closing price): 95

May 4 94.99

Sep. 15 82.88

Source: Bloomberg

21

Freight Charges per Ton for Panamax Size Vessels, U.S. to Japan

Source: Based on TDS Maritime Intelligence data

5/20 78.004

7/24 67.442

15

35

55

75

95

115

135

155

175


USD/LT



Average price: 63

Percentage increase: 18%Average price: 53

Jul. 9 46.270

Apr. 7 34.152

Jul. 24 67.442

May 20 78.004

22

50.00

55.00

60.00

65.00

70.00


%

Changes in Value of Meal



Sep. 24 62

Jul. 1 70

Apr. 9 57

Jul. 1 61

Average price: 60

Average price: 65

A fall of 5 points

23

Market Prices: Oils

3,0002,900

4,800

3,300

3,600

155

4,300

3,600

4,2004,100

3,200

179

4,600

219

2,8002,860

3,050

2,950

165.5

166.3167.5

158

145

160157

178

140

203

148

162.5

165.5

160.5153152

153

173

224

219

249

229

209

145

141

166

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


JPY/can

130

150

170

190

210

230

250

270

290

JPY/kg

Soybean oil (can) Soybean oil (bulk) Rapeseed oil (bulk)

24

Market Prices: Meals

Source: The Daily Oils & Fats Special

43,50045,000

50,000

55,000

60,00062,000

45,000

30,00031,500

34,000

32,000

37,000

67,000

31,000

38,000

28,500

32,000

47,500

36,00042,000

57.1

67.9

43,000 40,000

69.2

52,000

59.7

70,000

50,500

61.5

69.0

68.0

70.0

66.1

68.9

58.2

69.4

77.9

75.2

20,000

30,000

40,000

50,000

60,000

70,000


JPY/ｔ

50.0

55.0

60.0

65.0

70.0

75.0

%

Soybean meal Rapeseed meal Rapeseed meal ratio

31,500 31,500 31,500

25

Consolidated Results by Business and Geographic SegmentsMillions of yen

Consolidated 149,313 3,973 148,493 5,891 +0.6% -32.5%

Oils and Meal 136,920 2,969 136,502 5,501 +0.3% -46.0%

Healthy Foods & Soy Protein 5,007 (98) 4,936 (388) +1.4% －

Fine Chemicals 2,945 212 2,801 9 +5.1% +2,119.9%

Other 12,701 887 12,417 780 +2.3% +13.7%

Eliminations/Corporate (8,261) 3 (8,164) (11)

Japan 110,241 2,843 114,506 4,818 -3.7% -41.0%

Asia 42,562 1,122 36,115 1,071 +17.9% +4.8%

Eliminations/Corporate (3,491) 7 (2,128) 1

Percentage of overseas sales

1H FY10 1H FY09 Ｃｈａｎｇｅ

25.7% 21.8% +3.9

1H FY10 1H FY09 Change (%)

Net SalesOperatingIncome(Loss)



26

•Based on data for The Nisshin OilliO Group, Ltd., Settsu Oil Mills Co., Ltd., Daito Cacao Co., Ltd, Daito Cacao Co., Ltd., Dalian Nisshin Oil Mills, Ltd.*, Shanghai Nisshin Oil & Fats, Ltd. * and Intercontinental Specialty Fats Sdn. Bhd. * T.&C. Manufacturing Company Pte. Ltd.*

* Data for January 1 – June 30, 2010

•Figures in parentheses indicate year-on-year percentage point changes.

Breakdown of Sales of Oils & Fats, Meal and Grains(April – September 2010)

Net Sales Sales Volume

Meal: 22% （-1）

Home use: 21% (±0 ）

For processed foodmanufacturers: 10% （-2）

Commercial use: 15% (-1)

Grains: 1% （±0）

Processed oils & fats:31% （＋4）

Home use: 6% （ ±0）

Commercial use: 9% （ ±0）

Processed oils & fats: 27% （＋1）

For processed foodmanufacturers: 8% （-1）

Meal: 49% （ ±0）

Grains: 1% （±0）

Net SalesSales

Volume Net SalesSales

VolumeDomestic 68% 64% 73% 64%

International 32% 36% 27% 36%

1H FY10 1H FY09

27

Changes in Major Raw Material Prices

25,000

35,000

45,000

55,000

65,000

75,000

85,000

Apr. – Sep.

2006

Oct. 2006 –

Mar. 2007

Apr. – Sep.

2007

Oct. 2007 –

Mar. 2008

Apr. – Sep.

2008

Oct. 2008 –

Mar. 2009

Apr. – Sep.

2009

Oct. 2009 –

Mar. 2010

Apr. – Sep.

2010

Oct. 2010 –

Mar. 2011

(forecast)

JPY/t

200.00

300.00

400.00

500.00

600.00

700.00

800.00

USD/t

Soybeans (JPY/t) Rapeseed (JPY/t) Soybeans (USD/t) Rapeseed (USD/t)

28

Change in Unit Sales Prices

Taking Apr. – Sep. 2006 as baseline of 1.0

0.800

1.000

1.200

1.400

1.600

Apr. – Sep.

2006

Oct. 2006 –

Mar. 2007

Apr. – Sep.

2007

Oct. 2007 –

Mar. 2008

Apr. – Sep.

2008

Oct. 2008 –

Mar. 2009

Apr. – Sep.

2009

Oct. 2009 –

Mar. 2010

Apr. – Sep.

2010

(actual result)

Oct. 2010 –

Mar. 2011

(forecast)

Unit price of major oil & fat products (JPY/kg)

29

Major Factors Affecting Operating Income (Year on Year)

Fiscal 2009 First-Half Operating Income: ¥5.9 billion

Down ¥1.9 billion

(Billions of yen)

Fiscal 2010 First-Half Operating Income: ¥4.0 billion

Overseas Operations +0.10

+0.50

+0.60

Healthy Foods & Soy ProteinBusiness/Fine Chemicals Business

Total

Subsidiaries +0.05Others SG&A +1.25

ManufacturingCosts, Other (0.40)

Sub-total +0.85

Total +0.90

Soybeans (0.10)Rapeseed (1.10)Foreign Exchange Rate +2.10

Sub-total +0.90

(2.15)

(2.15)

Total (3.40)

Raw Material Costs

Sales of MealSales of Oils and fats

SG&A Sales Promotion Costs +0.55Advertising Costs +0.20Logistics Expenses +0.10Depreciation +0.10Other +0.30

Sub-total +1.25

Materials andRaw MaterialsCosts ( 0.30)

Energy Costs ( 0.30)

Other +0.20Sub-total ( 0.40)

ManufacturingCosts, Other

30

Consolidated Balance Sheet: ChangesFrom End of Previous Fiscal Year

Millions of yen Millions of yen

Total assets Total liabilities and net assets

Current assets Total liabilitiesCash and deposits Notes and accounts payable-tradeNotes and accounts receivable-trade Interest-bearing debtShort-term investment securities OtherInventoriesshort-term loans receivableOther

Total net assetsNoncurrent assets Retained earnings

Property, plant and equipment Minority interestsIntangible assets OtherInvestments and other assets

+3,950

(1,193)

114,696 (119)

+738

+3,093

+335

(1,648)

+5,276

112,937 +5,395

(1,443)

227,633

+189

+81

(169)

(188)

227,633

129,690

97,943

+7,077

+5,276

(1,801)

+8,504

+5,855

(7,488)

(65)

31

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

FY05 FY06 FY07 FY08 FY09 1H FY10

Nisshin OilliO Group Domestic Subsidiaries Overseas Subsidiaries

Consolidated Interest-Bearing Debt(Millions of yen)

1,206

54,108

25,189 25,082

43,943

51,553

18,000

5,98333,000

15,029

6,080

18,000

34,500

36,000

952

400

6,129

9,043

8,868

6,685

51,014

33,000

4,566

13,499

32

Consolidated Cash Flows

Millions of yen

Net cash provided by operating activitiesIncome before income taxes and minority interestsDepreciation and amortizationDecrease in notes and accounts receivable-trade, inventories, and notes and accounts payable-tradeIncome taxes paidOther

Net cash used in investing activitiesPurchase of property, plant and equipmentPurchase of stocks of subsidiaries and affiliatesOther

Net cash provided by financing activitiesNet increase in short-term loans payable and commercial propertiesRedemption of bondsCash dividends paidOther

+3,834

+1,884

(172)

+285

+1,329

(10)

(861)

+3,070(147)

(1,743)+769

(3,090)

(2,898)

(226)

+33

33

Consolidated Financial Forecasts for Fiscal 2010

* Figures for raw materials prices and foreign exchange rates are based on Nisshin OilliO estimates.

Raw Materials Prices & Foreign

Exchange Rate FY10 FY09

Foreign Exchange Rate (JPY/USD) 88 93

Soybean Unit Price (USD/t) 460 462Rapeseed Unit Price (USD/t) 484 452

-6%

Change

(2)+32(5)

Change

-0%+7%

Millions of yen

ROE = Net Income / Shareholders’ equity

+1.9%

Net Sales

OperatingIncomeOrdinaryIncome

Net Income 1,600

+9,700

+64

+95

311,000

10,500

1H

301,299 148,493149,313

3,973 10,435 5,891

Major Indicators FY09

9,800

5,200

3,537

5,104 2,994

10,302 5,651

Year-on-year

+3.2%

+0.6%

(503) -4.9%

FY10 FY091H

ROA (ordinary income base; %)

ROE (net income base; %) Ratio of Interest-Bearing Debt to Operating

Cash Flow s (times)

FY104.3%

4.7%

4.8

4.6%

4.7%

4.5

34

Consolidated Sales Forecasts by Business and Geographic Segments

Millions of yen

Millions of yen

148,493 +9,701 +3.2%Consolidated 311,000 149,313 301,299

+2,289 +2.9%

Eliminations/Corporate ( 5,000) ( 3,491) ( 5,036) ( 2,128) +36

FY10 FY091H

-418

Consolidated 311,000 149,313 301,299 148,493 +9,701 +3.2%

( 17,000)

Year-on-year1H

Japan 235,500 110,241 228,124 114,506 +7,376 +3.2%

Asia 80,500 42,562 78,211 36,115

FY10 FY09 Year-on-year

+3.1%

+2.4%

+207 +3.6%5,793 2,801

Eliminations/Corporate

6,000

26,000

2,945

25,017

( 8,261) ( 16,582) ( 8,164)

1H

286,000

10,000

1H

277,308 136,502136,920

5,007 9,762 4,936

+3.9%

Oils and Meal

Healthy Foods & SoyProtein

Fine Chemicals

Other 12,701

+8,692

+238

+98312,417

35

Forecasts for Major Factors Affecting Operating Income (FY10 Year on Year)

Fiscal 2009 Operating Income: ¥10.4 billion

Up ¥0.1 billion

(Billions of yen)

Fiscal 2010 Operating Income: ¥10.5 billion

Overseas Operations +0.05

+0.80

Total +0.85

Healthy Foods & Soy ProteinBusiness/Fine Chemicals Business

+0.30SG&A +1.50ManufacturingCosts, Other +0.15

Sub-total +1.65

+1.95

SubsidiariesOthers

Total

SG&ASales Promotion Costs +0.75

Advertising Expenses +0.60

Other +0.15

Sub-total +1.50

Raw Material Costs Soybeans +0.20Rapeseed (2.40)ForeignExchangeRate +4.50

Sub-total +2.30Sales of Meal (6.25)Sales of Oils and fats +1.25

Total (2.70)

Materials andRaw MaterialsCosts (0.30)

Energy Costs (0.55)

Other +1.00

Sub-total +1.50

Materials andRaw MaterialsCosts

36

Capital Expenditures, Research and Development Costs, and Depreciation and Amortization

Capital Expenditures(Millions of yen)

1H FY10 Result FY10 Forecast2,532 7,000

Research and Development Costs(Millions of yen)


Depreciation and Amortization(Millions of yen)


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