Ajinomoto : Financial Report 2023

Ajinomoto Group

Appendix: Financial Report 2023

Management's Discussion and Analysis

Ajinomoto Co., Inc. and Consolidated Subsidiaries for fiscal 2022, ended March 31, 2023

Review of Operations

Upon the adoption of IFRS, the Ajinomoto Group has introduced "business profit" as a new profit level that will better enable investors, the Board of Directors, and the Management Committee to grasp the core business results and future outlook of each business while also facilitating continual evaluation of the Group's business portfolio by the Board of Directors and the Management Committee. "Business profit" is defined as sales and share of profit of associates and joint ventures minus cost of sales, selling expenses, research and development expenses, and general and administrative expenses. Business profit does not include other operating income or other operating expenses.

Performance Overview

During the fiscal year ended March 31, 2023, the Company's consolidated sales increased 18.2% year on year, or ¥209.7 billion, to ¥1,359.1 billion. This was due to the effect of currency translation and increases in sales in the Seasonings and Foods segment, the Frozen Foods segment, and the Healthcare and Others segment.

Business profit increased 11.9% year on year, or ¥14.4 billion, to ¥135.3 billion, primarily due to the effect of currency translation and an increase in sales in the Healthcare and Others segment, despite increases in costs, such as for raw materials.

Operating profit increased 19.6% year on year, or ¥24.3 billion, to ¥148.9 billion mainly as a result of gain on sale of non-current assets (idle assets) recorded in other operating income despite the impairment loss on goodwill related to Ajinomoto Foods North America, Inc. recorded in other operating expenses, as well as other factors.

Profit attributable to owners of the parent company totaled ¥94.0 billion, up 24.2%, or ¥18.3 billion.

Ajinomoto Group 01 Financial Report 2023

Management's Discussion and Analysis

Financial Review

Sales

Sales were up 18.2% or ¥209.7 billion to ¥1,359.1 billion. In Japan, sales increased 5.0% or ¥24.1 billion to ¥509.9 billion. Overseas sales grew by 28.0% or ¥185.6 billion to ¥849.1 billion. In Asia, the Americas, and Europe, sales were up 23.4% to ¥352.0 billion, up 34.8% to ¥353.9 billion, and up 23.7%

to ¥143.1 billion, respectively. The overseas share of sales increased to 62.5% from 57.7% in the previous fiscal year.

Cost of Sales, Selling Expenses, Research and Development Expenses, General and Administrative Expenses, and Share of Profit of Associates and Joint Ventures

As sales increased, the cost of sales rose by 22.8% or

¥165.2 billion to ¥888.7 billion, equivalent to 65.4% of sales. The ratio of cost to sales worsened by 2.4 percentage points year on year, mainly owing to the effect of higher costs of raw materials and other inputs.

Selling expenses increased 10.4% or ¥17.6 billion to ¥186.4 billion, due in part to increased logistics expenses, resulting mainly from foreign exchange effects and steeply rising marine transport expenses. Research and development expenses increased 4.1% or ¥1.0 billion to ¥25.8 billion. General and administrative expenses increased 13.1% or ¥14.7 billion to ¥127.0 billion, due notably to foreign exchange effects. The Group's share of profit of associates and joint ventures totaled ¥4.3 billion compared to ¥0.9 billion in the previous fiscal year.

Business Profit

Business profit grew 11.9% or ¥14.4 billion to ¥135.3 billion. In Japan, business profit rose 2.7% to ¥56.0 billion. Overseas business profit also grew by 19.5% to ¥79.3 billion. In Asia, the Americas, and Europe, business profit was up 8.4% to ¥51.4 billion, up 56.9% to ¥18.3 billion, and up 32.1% to ¥9.5 billion, respectively. The overseas share of business profit fell to 58.6% from 54.9% in the previous fiscal year.

Other Operating Income and Expenses

Other operating income increased 53.0% or ¥14.1 billion to ¥40.9 billion, mainly as a result of gain on sale of non-current assets (idle assets). Other operating expenses increased 18.4% or ¥4.2 billion to ¥27.3 billion, mainly due to the impairment loss on goodwill related to Ajinomoto Foods North America, Inc.

Operating Profit

Operating profit grew 19.6% or ¥24.3 billion to ¥148.9 billion.

Financial Income and Expenses

Financial income shrank 11.2% or ¥0.7 billion to ¥6.0 billion. Financial expenses rose 67.2% or ¥6.0 billion to ¥14.9 billion.

Profit Attributable to Owners of the Parent Company

Profit attributable to owners of the parent company increased 24.2% or ¥18.3 billion to ¥94.0 billion, equivalent to ¥175.97 per share, up from ¥139.42 in the previous fiscal year.

Ajinomoto Group 02 Financial Report 2023

Management's Discussion and Analysis

Domestic and Overseas Sales

Interest Coverage Ratio

Billions of yen					Times
1,500					1,359.1	80
1,200	1,114.3	1,100.0	1,071.3	1,149.3		60			49.2	45.0
900
						38.1	32.6
						40			31.4
600
300						20
0						0
	FY2018	FY2019	FY2020	FY2021	FY2022		FY2018	FY2019	FY2020	FY2021	FY2022

Japan Overseas

Note: Excludes interarea sales and transfers

Operating Income/Business Profit &

Operating Income/Business Profit Margin

Billions of yen		10.6	10.5	10.0	%
180		9.0			10.0
8.4
150
				135.3	8.0
			113.1	120.9
120		99.2		6.0
	93.2
90
60						4.0
30						2.0
0						0.0
	FY2018	FY2019	FY2020	FY2021	FY2022

Operating income/Business profit (Billions of yen)

Operating income/Business profit margin (%)

Costs, Expenses, and Profit as Percentages of Sales

Years ended March 31		FY2022	FY2021
		Percentage	Change	Percentage
Cost of sales	65.4%	2.5	62.9%
Gross profit	34.6	(2.5)	37.1
Selling, R&D, and G&A expenses	25.0	(1.6)	26.6
Business profit	10.0	(0.5)	10.5
Profit	before income taxes	10.3	(0.4)	10.7
Profit	attributable to owners of the parent company	6.9	0.3	6.6

Note: Change represents change in percentage points from the previous year.

Ajinomoto Group 03 Financial Report 2023

Management's Discussion and Analysis

Segment Information

					(Billions of yen)
Sales	FY2022	FY2021	Difference	YoY change
Seasonings and Foods	775.0	664.2	110.7	116.7%
Frozen Foods		221.7	45.5	120.5%
267.2
Healthcare and Others		299.6	251.2	48.4	119.3%
Other	17.1	12.1	5.0	141.2%
Total	1,359.1	1,149.3	209.7	118.2%
Business Profit	FY2022	FY2021	Difference	YoY change
Seasonings and Foods	82.9	81.2	1.7	102.1%
Frozen Foods	0.2	(0.6)	0.9	-
Healthcare and Others	52.5	43.3	9.1	121.1%
Other	(0.4)	(3.0)	2.5	-
Total	135.3	120.9	14.4	111.9%

Seasonings and Foods

In the Seasonings and Foods segment, sales increased 16.7% year on year, or ¥110.7 billion, to ¥775.0 billion, primarily because of increases in unit prices and sales volume overseas, in addition to the effect of currency translation. Segment business profit increased 2.1% year on year, or ¥1.7 billion, to ¥82.9 billion, mainly owing to the effect of currency translation and increased revenue, despite the effect of cost increases for raw materials and other inputs.

Main factors affecting segment sales

• Sauce & Seasonings: Overall large increase in revenue.
• • Japan: Decrease in revenue primarily due to the fall back in at-home demand after the increase in the previous year.
  • Overseas: Large increase in revenue due to the impact of

currency translation, and also increased unit sales prices and increased quantity of product sold.

• Quick Nourishment: Overall increase in revenue.
• • Japan: Decrease in revenue, but if the impact of structural reform in coffee products is excluded, increase in revenue.
  • Overseas: Large increase in revenue due to the impact of currency translation, increased unit sales prices, and increased sales of instant noodles, ready to drink beverages, etc.
• Solution & Ingredients: Large increase in revenue primarily due to increased unit sales prices of, and the impact of currency translation on, umami seasonings for processed food manufacturers and increased sales of foodservice- use products.

Market Shares in Main Product Areas (Household Market in Japan) FY2022

		Market Size	Ajinomoto Group Share
Product Area	Brand	(Billions of yen)	(Position)
Umami seasonings	AJI-NO-MOTO®, Hi-Me®	5.5	93% (1)
Japanese flavor seasonings	HONDASHI®	34.5	55% (1)
Consommé	Ajinomoto KK Consomme	11.6	80% (1)
Soup	Knorr®	115.7	29% (1)
Mayonnaise	Pure Select®	64.8	24% (2)
Menu seasonings	Cook Do®, Cook Do® Kyo-no Ohzara®	71.2	27% (1)

Note: Market size is based on consumer purchase prices.

Ajinomoto Group 04 Financial Report 2023