Nichirei Corporation: Summary of Consolidated Results for the First Quarter 2010
(i) Sales were down 8% overall. Slow consumer spending, declines in unit prices and other effects of the economic slowdown compared to the same period of the previous fiscal year were particularly obvious, reports http://www.megafishnet.com/ with reference to Nichirei Corporation.
By segment, sales were down sharply in Meat and Poultry with the impact from the new influenza virus, and in Marine Products, where both volume and unit price declines with the shift in consumption to lower-priced products. Processed Foods sales were also sluggish in commercial use products. Reflecting these circumstances, Nichirei is revising downward its forecast for the interim period by ¥16.1 billion, and full-year period by ¥23.3 billion.
(i) Operating income declined ¥1.2 billion from the same period of the previous fiscal year on the fall in revenue, but overall Nichirei is still on track to meet its interim forecast target. While Processed Foods will fall short of target, this is more than offset by Logistics, where earnings from regional storage again exceeded the previous fiscal year. Nichirei also incurred bad debt as one of its major trading partners began civil rehabilitation proceedings, writing off ¥100 million of the amount.
(ii) Processed Foods operating income was down ¥400 million, due mainly to a decline in sales of products for the delicatessen sections of supermarkets as sales shifted to lower-priced items.
(iii) Nichirei maintains its interim and full-year forecasts for operating income overall.
3.Recurring Income and Net Income
(i) The balance of extraordinary gains and losses improved ¥1.8 billion with the absence of the loss on adoption of new lease accounting standards recorded in the previous fiscal year.
1. Processed Foods
(i) Net sales were down 5% from the same period of the previous fiscal year.
Household use products were on a par with the previous year as sales recovered from the tainted gyoza incident, the impact from the revenue decline due to a reduction in number of items was cleared. Commercial use products were down 6% from a year earlier, with the shift to lower-priced items and decline in sales of products for the delicatessen sections of supermarkets particularly noticeable.
(ii) In terms of profitability, operating income was down ¥400 million from the same period of the previous fiscal year. In household use products, earnings held steady as Nichirei maintained and increased the market share gains made following the tainted gyoza incident, while continuing to hold down sales promotion costs, and maintaining prices focused on national brand (NB) products. In commercial use products, profitability improved as sales in processed chicken products recovered compared to the most recent quarter ended March 31, 2009, and prices for raw ingredients fell. However, the slowdown in products for the delicatessen sections of supermarkets caused results to fall short of target. Nichirei also wrote off ¥100 million in bad debt, and recorded additional expenses for retirement benefits.
(iii) In processed chicken products, in July Nichirei cancelled its contract with its OEM producer in Thailand, covering the shortfall with increased production at its Thailand subsidiary, and recovery in Chinese production. We expect prices and quality to remain stable going forward.
(iv) Nichirei is revising downward its full-year sales forecast by ¥5.0 billion to reflect the slowdown in products for the delicatessen sections of supermarkets, despite sales expansion strategies such as introducing lower-priced products from 2Q. We have also incorporated approximately ¥2.0 billion from shortages in the supply of chicken products due to the termination of the OEM contract.
The forecast for operating income is also revised downward ¥300 million due to the sluggish 1Q.
2. Marine Products
(i) Net sales were down 16% from the same period of the previous fiscal year.
Conditions for the industry are difficult due to such factors as the slowdown in products for restaurants, with sales down 8% on a volume basis, and 6% on unit cost basis. In terms of profitability, earnings were given a boost by the sense of bargain prices for shrimp, and Nichirei secured operating income of ¥100 million. This is down ¥400 million from a year earlier, but in line with plan.
(ii) Nichirei is revising downward its full-year sales forecasts by ¥7.1 billion to reflect market conditions, but maintains its forecast for operating income.