CEO message
The company achieved a "revival" through structural reforms.
Our next goal is to "grow" by initiatives on a wide range of challenges.
Introduction
The year 2024 marks the 20th anniversary of our Group. All of our predecessor operating companies led the Japanese oil refining industry and boasted high market shares. The business environment, international situation, and customer needs surrounding the oil refining industry are different from those days, but we believe that recalling our pride as a former industry leader and working hard without being satisfied with the status quo are essential for our sustainable growth. What is necessary now is for our company to continue to take on new challenges, especially for us executives to demonstrate leadership and for all employees to come together and continue to take on new challenges.
Review of FY2023 and progress of structural reforms
In fiscal 2023, we achieved a significant increase in profits, with operating profit reaching 7.2 billion yen and net profit attributable to owners of parent reaching a record high of 6.8 billion yen. My initial goal for the fiscal year was "revival and growth," so I am pleased that we have "revived" in the first place. The business environment in fiscal 2022, when I was appointed president, was extremely tough. We were unable to quickly pass on the increase in raw material prices to product prices, and operating profit for fiscal 2022 was only 700 million yen. We believe that the first priority is to rebuild domestic revenue, and while we have taken various measures, we believe that the major factor in our recovery in performance in fiscal 2023 will be the progress of structural reforms.
As part of our restructuring, we have proceeded with streamlining unprofitable businesses. First, regarding margarine, we have decided to discontinue Household use margarine such as "Rama®", which we have been selling since 1966. This was the result of a careful and rational judgment based on the future prospects of the business, taking into account the aging of our manufacturing facilities and market trends. For Business use margarine, we have significantly scaled back domestic production and transferred production to cost-competitive Malaysia, thereby increasing profitability. By reducing SKUs and revising prices, the profitability of margarine has improved, and we have moved away from a deficit and are now generating profits.
When I evaluate our performance for fiscal 2023, I believe that we are far from being satisfied with it. Profit attributable to owners of parent and dividends per share were at record highs, but operating profit has only returned to the level before fiscal 2020. While we have made progress in restructuring, we have also been told that our growth strategy is difficult to see. As a warm-up exercise for a big leap forward, we have taken a big step back. Now is the time to make the leap. We will be promoting various measures with even greater speed, so please look forward to it.
Overseas business as a growth strategy
As part of its growth strategies, the company has set a target of increasing the overseas operating profit ratio to 7% for fiscal 2026, and is aiming to move away from a high-risk earnings structure that is overly dependent on the domestic Oils and Fats Business and shift to a more stable business portfolio.
The target regions are ASEAN and North America. Currently, Business use margarine and starch are the main products in ASEAN. Malaysian consolidated subsidiary Premium Fats Sdn Bhd (hereinafter PF) and equity method affiliate Premium Vegetable Oils Sdn Bhd manufacture oils and fats and fat processed products such as margarine and shortening. PF sells mainly to ASEAN, but also manufactures oils and fats processed products for Japan. Starch is manufactured by our Thai affiliate Siam Starch (1966) Co., Ltd. and sold by our consolidated subsidiary J-OIL MILLS (THAILAND) Co., Ltd. Sales and exports to Japanese and other local companies have been going well. In North America, we sell edible soybean sheets "MAMENORI SAN"mainly to Japanese restaurants as a substitute for seaweed used in sushi rolls. We will scale up the business scale of "MAMENORI SAN"by developing new uses and expanding the sales area in addition to the current sales channels.
Currently, we offer a limited number of products, but in order to grow our overseas business, we need to speed up our efforts to expand our lineup and business scale. It would take a huge amount of time and money to build sales bases and expand our areas all on our own, so we will utilize all of our management resources to speed up our efforts to make our overseas business a pillar of our profits.
Our Strengths
In order to achieve our goal of "Joy for Life ®-Bringing joy to the future by food," we are committed to "good taste, health, and low burden." As a food manufacturer, we have steadily produced products that embody not only "Good taste" and "healthiness," but also "low impact," and have received high praise. The "Smart Green Pack®" series, which has been expanding its lineup since its launch in August 2021, is an environmentally friendly series of Household use edible oils that are the first to use paper packs in packaging, reducing plastic usage and CO2 emissions. JOYL "AJINOMOTO Double Half," released in August 2023, is a product that deploys Business use technology Household use, reducing the amount of oil used and oil splashes by half, making it easy on the wallet and reducing the burden of housework.
The olive oil market has temporarily shrunk due to the rise in raw material prices caused by drought. In response, in February 2024, we launched JOYL "AJINOMOTO Olive Oil Plenty Cooking Oil," a Household use blended oil that allows you to enjoy the flavor of olive oil. It is a blend of olive oil and Canola Oil, and has been well-received for its affordable price.
Our core business is Business use oils and fats, and we boast a domestic market share of approximately 40%*. In a television commercial in March 2024, we tried our hand at featuring not only Household use products but also Business use products for the first time. We promoted the environmental friendliness of Business use long-lasting oil "Cho Toku"series along with our Household use pack"Smart Green Pack®" series, and received an excited comment from a business partner saying, "This is the first time we've seen a 18-gallon can of oil on a television commercial." Business use products are difficult for ordinary consumers to see, and usually play a behind-the-scenes role, but we were convinced that by making such efforts, we could expect to expand our unique awareness.
Establishing a human resources policy and a culture of taking on challenges
We are reorganizing our personnel management direction in fiscal 2023 and strengthening our "human capital management." The key to human capital is the growth and engagement of each individual. We have formulated our human resources policy so that we can take advantage of opportunities for challenge and growth and lead our company's growth as a team that combines strong individuals. Furthermore, engagement is an essential element for maximizing corporate value, and this improvement can only be achieved by building trust between the company and employees.
I believe that the sense of growth that comes from taking on challenges leads to increased engagement. Companies provide a variety of opportunities, and employees take advantage of these opportunities to grow, increasing their motivation and improving the quality of their work. Corporate value increases when these two wheels work together. In last year's Integrated Report, I mentioned the need for each employee to take on new challenges as part of our "transformation into a challenging corporate culture." This is because, even though we have many talented employees, we are concerned that they are missing out on opportunities by not taking the first step, and conversely, I expect that they could grow even more.
As one of the mechanisms for taking on new challenges, starting from fiscal 2023, our Executive Officer will set numerical targets for employee engagement in personnel evaluations and strive to achieve them. The engagement survey will be closely linked to the evaluations as one of the report cards for our management team.
Aiming for 1x PBR
In the reorganization in July 2023, we introduced a CxO system with the aim of clarifying executive responsibility, which has definitely strengthened the legs of management. Each CxO and executive has a stronger sense of responsibility for their own field and area, and I feel a strong desire to produce results. We have also made progress in refining our revenue plans, and we are feeling a sense of accomplishment as our performance for fiscal 2023 landed almost as planned.
We established the position of CSO (Chief Strategy Officer) in June 2024. The position will be mainly responsible for the achievement of the Sixth Medium-Term Business Plan, non-linear value creation, and measures to improve PBR. The CSO will constantly monitor and verify multiple projects for non-linear growth. We will further strengthen initiatives with CxO to increase corporate value in order to achieve a PBR of 1x.
PBR is an index that measures the reliability of growth. We must not only break out of the current situation where the PBR is less than 1x the Dissolution value, but also strengthen measures to improve reliability from the perspective of whether we are creating the value that we are aiming for. Unless we break away from a revenue structure that is heavily dependent on the domestic Oils and Fats Business, we cannot expect sustainable growth. We will diversify revenue by expanding our overseas business and achieving non-linear growth, show performance trends that show growth, and raise expectations for our shares through shareholder returns. We will work quickly to present a path to growth and have people look forward to "J-OIL MILLS changing."