Ito En : Financial Results Presentation for FY2020 3Q

Financial Results Presentation for FY2020 3Q

(Fiscal Year Ending April 30, 2021)

March 1, 2021 ITO EN, LTD.

■ Summary of Operations (Consolidated and Non-Consolidated)

( million)

FY 2019 3Q(9months) Sa le s Com position	FY 2020 3Q(9months)
Sales Com position	YoY % Cha nge
Net Sales	379,214	100.0%	338,641	100.0%	-10.7%
Gross Profit	182,394	48.1%	161,138	47.6%	-11.7%
Sales Commission Advertising Freight Depreciation and Amortization Selling, General and Administrative Expenses	63,195	16.7%	56,828	16.8%	-10.1%
9,201	2.4%	7,943	2.3%	-13.7%
11,519	3.0%	10,573	3.1%	-8.2%
8,312	2.2%	7,689	2.3%	-7.5%
164,542	43.4%	150,701	44.5%	-8.4%
Operating Income	17,852	4.7%	10,436	3.1%	-41.5%
Ordinary Income	17,690	4.7%	10,240	3.0%	-42.1%
Extraordinary Losses and Income	-33	-	-309	-	-
Net Income	11,299	3.0%	5,754	1.7%	-49.1%

Consolidated

Net Sales	295,751	100.0%	268,458	100.0%	-9.2%
Gross Profit	140,446	47.5%	127,014	47.3%	-9.6%
Operating Income	13,342	4.5%	9,688	3.6%	-27.4%
Ordinary Income	15,167	5.1%	10,936	4.1%	-27.9%

Non-Consolidated

■ Performances of Subsidiaries

( million, $ thousand)

Upper: Net Sales	FY 2019	FY 2020
Bottom: Operating Income	3Q(9months)	3Q(9months)	YoY % Change
Domestic Subsidiaries	81,170	69,111	-14.9%
4,350	88	-98.0%
Tully's Coffee Japan Co., Ltd.	27,267	19,454	-28.7%
2,878	- 1,106	-
Chichiyasu Company	10,631	10,517	-1.1%
348	573	64.5%
Overseas Subsidiaries	27,718	26,098	-5.8%
1,292	1,392	7.9%
US Business	23,382	21,970	-6.0%
453	487	7.8%
$ 215,723	$ 207,977	-3.6%
$ 4,184	$ 4,619	10.4%
Other Overseas Subsidiaries	4,336	4,127	-4.8%
839	904	7.9%
Elimination of Internal Transactions	- 25,424	- 25,026	-
- 1,132	- 732	-

Exchange rate (US$)

(3Q average rate)

108.39

105.64

Monthly Sales Volume Trends

Beverage business of ITO EN (non-consolidated)

*Unit: Price base

(％) 10 0 -10 -20 -30

MayJunJulAugSepOctNov

*Source: ITO EN. May 2020 to Jan 2021

(％)

10

0 -10 -20 -30

MayJun

JulAugSepOctNov

*Source: ITO EN. May 2019 to Jan 2020

Topics of Soft Drink Market

DecJanDecJan

• 2020 Apr

  May

  Declaration of the State of Emergency Lifting of the State of Emergency

  Jul Aug

  Record amount of rainfall and long rainy season

  Surge in COVID-19 (2nd wave) Reduced summer holiday and self-restraint on events

  Oct

  Voluntary restraint on outdoor amusement events and athletic meets in autumn

  Dec

  Voluntary restraint on year-end events and homecoming visits

• 2021 Jan

Voluntary restraint on New Year's events such as New Year's visit to shrines

Declaration of the State of Emergency (2nd time)

FY 2020 3Q(May 2020 to Jan 2021) YoY －10.3%

Proportional sales 2%3%

11% 14%

Shares in soft drink market

YoY

Ａ 25.6 %

6%

64%

Tea total	－ 10.6 ％
Vegetable	＋ 0.6 ％	Ｂ 22.6 %
Coffee	－ 10.4 ％	Ｃ 14.0 %
Mineral Water	－ 23.1 ％	ITO EN 12.2
Carbonated	－ 15.3 ％	Ｄ 12.0 %
Others	－ 20.1 ％	Other 13.6
*2020 year / Qu Ratio of sugar-free beverages： 75 %

%

%

12.2 %

%

%

*2020 year / Quantity based

( million)

3Q(9months)	FY 2019 Res ults SalesComposition	FY 2020 Res ults SalesComposition
YoY % Change	YoY % Change
Drinks Tea total	267,594	100.0%	-2.8%	240,060	100.0%	-10.3%
172,627	64.5%	0.4%	154,345	64.3%	-10.6%
Japanese Tea/Healthy Tea	152,678	57.1%	-1.0%	139,976	58.3%	-8.3%
Chinese Tea	13,775	5.1%	6.8%	11,385	4.7%	-17.4%
Black Tea	6,174	2.3%	28.3%	2,984	1.2%	-51.7%
Vegetable	33,120	12.4%	-5.4%	33,326	13.9%	0.6%
Coffee	28,577	10.7%	-10.9%	25,591	10.7%	-10.4%
Mineral Water	7,581	2.8%	-13.9%	5,830	2.4%	-23.1%
Carbonated	9,209	3.4%	-5.4%	7,802	3.3%	-15.3%
Others	16,480	6.2%	-6.7%	13,166	5.5%	-20.1%

Source: ITO EN

3

Effects of COVID-19

ITO EN (non-consolidated) Main impact on sales *3Q ( Nov 2020 to Jan 2021 )

Shift to telecommuting

• ○ Decrease in visits to convenience stores particularly in urban areas

• ○ Decline in purchase from vending machines at offices

• ○ Increase in consumers making tea and coffee from leaves and beans at home

Nationwide re-expansion of COVID-19 cases (serious cases)

• ○ Voluntary restraint on year-end events, homecoming visits and New Year's events including New Year's visit to shrines

• ○ Suspension of business of supermarkets, etc. for the first three days of the New Year

• ○ The government declared the state of emergency(2nd time) in Tokyo and three neighboring prefectures on January 7, 2021

  *Coverage areas were expanded to 11 prefectures on January 13

Subsidiaries Main impact on sales *3Q ( Nov 2020 to Jan 2021 )

• ○ Business hours have been shortened in the coverage areas of the state of emergency since January 2021.

  Sales results YoY	( April )	November	December	January	All Pref
  Sales Ratio ofshops that suspended operations or shortened business hours (at the end ofthe month)	- 75% 97%	- 20% 17%	- 9% 23%	- 35% 61%

  Prefectures

  Ratio of shops that suspended operations 76 %

  Ratio of shops that shortened business hours 21 %

  China Business

  ＋ ４%

  • ○ Sales are on a recovery trend, reflecting the slowdown in the spread of COVID-19.

  *With respect the China business, numbers are based on results for the period from Oct to Dec, 2020.

• ○ It has an impact on stores in urban areas and around transportation, but its impact is relatively minor compared with the time of the previous state of emergency because fewer stores suspend operations.

As of April 30, 2020

As of January 31, 2021

Area subject to Emergency Declaration

Oct to Dec, 2020

Tully's Coffee Japan

Area subject to Emergency Declaration

11 Prefectures

Tully's Coffee Japan

Ratio of shops that suspended operations 1 %

Ratio of shops that shortened business hours 60 %

Reference: 2Q

( Jul to Sep, 2020 )

March 15, 2021

Japan's first food with function claims that reduces body fat in people with high body mass index*

"Premium Oi Ocha" (Japanese green tea leaf product)

*Japan' first food with function claims that reduces body fat by gallate catechins as functional ingredients in the green tea leaf product category

Three kinds of green tea leaf products of food with function claims that reduces body fat supported by gallate catechins' functions will go on sale nationwide on March 15. They will contribute to the health of customers by adding new value to green tea leaf products, which are growing on the back of a recent increase in "at-home demand".

Features

・Functional ingredients: Gallate catechins

・Procurement of raw materials and a quality control system able to solidly secure functional ingredients

*ITO EN handles about 25% of the crude tea production volume in Japan.

100g/1,000yen

100g/1,200yen

100g/1,500yen

Content of gallate catechins, functional ingredients of food with function claims: 340 mg (after extraction)

[Notification labeling] This product contains gallate catechins. Gallate catechins are reported to have a function of reducing the body fat of people with high BMI. ●A dietary lifestyle should consider a dietary balance based on a staple food, a main dish and a side dish. ●This product is not for the diagnosis, treatment and prevention of diseases. ●This product does not obtain a license from the government.

Reference: Status of research and development

ITO EN has been working on extensive research and development on tea to open up its possibilities for about half a century. ITO EN will continue to create and provide health value in response to changes in lifestyles in collaboration with various stakeholders.

Three key themes

• ○ Healthy

• ○ Delicious

• ○ Environment

Status of research and development of five main beverage manufacturers

• ○ Total number of FOSHU-certified products and food with function claims*

No.1 （Total 85 cases）

Of which, a total of 33 products contain tea catechins

as functional ingredients.

As of February 16, 2021 / Source: The Consumer Affairs Agency

*FOSHU-certified products: Number of licenses / Food with function claims: Number of items issued

• ○ Number of tea-related patents owned*

No.1 （Total 103 cases）

As of February 16, 2021 / Source: The National Center for Industrial Property Information and Training

*Tea; tea substitutes; preparations thereof (A23F3)

Appendix： Forecasts for FY 2020

■ Summary of Operations (Consolidated and Non-Consolidated)

( million)

*Earnings forecast announced on December 1, 2020

■ Performances of Subsidiaries

( million, $ thousand)

Upper: Net Sales	FY 2019	FY 2020
Bottom: Operating Income	Results	Forecas t	YoY % Change
Domestic Subsidiaries	102,885	92,745	-9.9%
3,196	-1,772	-
Tully's Coffee Japan Co., Ltd.	32,811	27,500	-16.2%
1,725	-1,500	-
Chichiyasu Company	14,251	14,042	-1.5%
410	648	58.0%
Overseas Subsidiaries	36,282	35,314	-2.7%
1,617	2,077	28.4%
US Business	30,971	29,920	-3.4%
654	941	43.9%
$ 285,736	$ 277,043	-3.0%
$ 6,034	$ 8,714	44.4%
Other Overseas Subsidiaries	5,311	5,394	1.6%
963	1,136	18.0%
Elimination of Internal Transactions	-33,595	-34,059	-
-1,500	-2,305	-

Exchange rate (US$) (average during a year)

108.39

108.00

■ Breakdown of Gross Profit Change (Non-Consolidated)

180.9

－10.2

（¥ billion）

0

+0.3

171.0

FY 2019

Sales Changes

Changes in Product Mix, etc.

Fluctuations in Raw Material

Costs, etc.

FY 2020Est.

Appendix：Related materials

ITO EN (non-consolidated) Results & forecast by Category

( million)
3Q(9months )	FY 2019	FY 2020
Sales	YoY %	Sales	YoY %
Com position	Change	Com position	Change
Net Sales	295,751	100.0%	-3.0%	268,458	100.0%	-9.2%
Tea Leaves	25,649	8.7%	-5.2%	26,532	9.8%	3.4%
Drinks	267,594	90.5%	-2.8%	240,060	89.7%	-10.3%
Tea total	172,627	58.4%	0.4%	154,345	57.5%	-10.6%
Japanese Tea/Healthy Tea	152,678	51.6%	-1.0%	139,976	52.5%	-8.3%
Chinese Tea	13,775	4.7%	6.8%	11,385	4.2%	-17.4%
Black Tea	6,174	2.1%	28.3%	2,984	1.1%	-51.7%
Vegetable	33,120	11.2%	-5.4%	33,326	12.4%	0.6%
Coffee	28,577	9.7%	-10.9%	25,591	9.5%	-10.4%
Mineral Water	7,581	2.6%	-13.9%	5,830	2.2%	-23.1%
Carbonated	9,209	3.1%	-5.4%	7,802	2.9%	-15.3%
Fruit	7,087	2.4%	-13.2%	5,721	2.1%	-19.3%
Others	9,388	3.1%	-1.2%	7,437	2.8%	-20.8%
Others	2,506	0.8%	-2.7%	1,866	0.7%	-25.6%
*Earnings forecast announced on December 1, 2020

( million)

Sales composition by Channels (Non-Consolidated)

Full-year (2020/5-2021/4)	FY 2019 Res ults	FY 2020 Forecas t
Sales Com position	YoY % Change	Sales Com position	YoY % Change
Net Sales Tea Leaves Drinks Tea total	377,787	100.0%	-4.2%	356,000	100.0%	-5.8%
35,269	9.3%	-4.6%	36,142	10.2%	2.5%
339,395	89.9%	-4.1%	316,838	89.0%	-6.6%
218,142	57.8%	-1.4%	202,790	57.0%	-7.0%
Japanese Tea/Healthy Tea	193,246	51.2%	-2.8%	183,814	51.6%	-4.9%
Chinese Tea	17,219	4.6%	2.6%	14,838	4.2%	-13.8%
Black Tea	7,677	2.0%	34.1%	4,138	1.2%	-46.1%
Vegetable	43,960	11.6%	-3.5%	44,741	12.6%	1.8%
Coffee	36,538	9.7%	-12.5%	33,895	9.5%	-7.2%
Mineral Water	9,396	2.5%	-14.9%	7,547	2.1%	-19.7%
Carbonated	11,175	3.0%	-6.2%	10,101	2.8%	-9.6%
Fruit	8,855	2.3%	-15.3%	7,797	2.2%	-11.9%
Others	11,325	3.0%	-4.9%	9,965	2.8%	-12.0%
Others	3,122	0.8%	-13.4%	3,019	0.8%	-3.3%

Sales composition by Packaging (Non-Consolidated)

3Q(9months)	FY 2019	FY 2020 YOY % ChangeComposition ratio YOY
Drink Total	182,543	165,687	-9.2%	-
Cans	18,374	18,680	1.7%	+ 1 pt
PET(large)	56,119	53,738	-4.2%	+ 2 pt
PET(small)	84,566	71,545	-15.4%	- 3 pt
Cartons	21,656	20,463	-5.5%	+ 0 pt
Others	1,828	1,259	-31.1%	- 0 pt

Unit: thousand cases May 2020 to Jan 2021

The purpose of the materials you have received is to provide the means for a more thorough understanding of ITO EN and should not necessarily be regarded as a recommendation to invest. Furthermore, the data in these materials is based on what we believe is the most accurate information. However, please understand that even without advance notice, both past data and future forecasts may be revised.