Kagome : Consolidated Summary Report for the six months ended June 30, 2021

Consolidated Summary Report

For the six months ended June 30, 2021								July 28,	2021
Company name	: KAGOME CO., LTD	Stock exchange listings: Tokyo and Nagoya
Code number	: 2811		URL http://www.kagome.co.jp
Representative	: Satoshi Yamaguchi, Representative Director & President
For inquiry	: Takeshi Saeki, Executive Officer, General Manager, Finance & Accounting Department
Quarterly securities report issuing date: August 6, 2021						TEL [phone]
			Dividend payment date: -
Supplemental information for financial statements: Available
Schedule for "investor meeting presentation": Scheduled		(Amounts of less than one million yen are rounded down.)
1. Consolidated Financial Data for the Six Months ended June 30, 2021
(1) Operation Results		(% represents the change from the same period in the previous fiscal year.)
								Net Income
	Revenue		Core Operating	Operating		Attributable to	Comprehensive
		Income		Income		Shareholders of	Income
								Parent
Six months ended	million yen	%	million yen	%	million yen	%	million yen	%	million yen	%
June 30, 2021	91,926	3.5	7,114	11.9	6,944		1.0	4,739	3.6	7,899	97.1
June 30, 2020	88,816	0.3	6,358	17.1	6,874		(4.2)	4,572	(16.2)	4,007	(19.7)
	Earnings Per Share	Diluted Earnings
	per Share
Six months ended		yen		yen
June 30, 2021		53.05		52.96
June 30, 2020		51.66		51.57

(Reference) Core Operating Income is the profit index which measures constant business performance by deducting cost of sales and selling, general and administrative expenses from revenue plus share of loss (profit) of entities accounted for using equity method.

(2) Financial Conditions

				Net Assets	Net Assets
				Attributable to
		Total Assets	Total Net Assets	Attributable to
		KAGOME
		KAGOME
				Shareholders to Total
				Shareholders
				Assets
As of		million yen	million yen	million yen	%
June 30, 2021	204,900	117,164	115,130	56.2
December	31, 2021	224,913	112,651	110,976	49.3

2. Dividends on Common Stock

Dividends per Share

Fiscal year ended

1Q-end

2Q-end3Q-end

Year-end

Total

yen

yen

yen

yen

yen

December 31, 2020

－

－

－

36.00

36.00

December 31, 2021

－

－

Fiscal year ending

－

37.00

37.00

December 31, 2021(Forecast)

(Reference) Correction from the dividend forecast, which is published in the most recent: None

3. Consolidated Forecasts for the Fiscal Year Ending December 31, 2021

(% represents the change from the same period in the previous fiscal year)

Net Income

Revenue

Core Operating

Operating

Attributable to

Earnings Per Share

Income

Income

Shareholders of

Parent

For the year ending

million yen

%

million yen

%

million yen

%

million yen

%

yen

December 31, 2021

188,000

2.7

13,700

0.7

13,700

28.2

9,000

21.2

100.74

(Reference) Correction from the consolidated forecast, which is published in the most recent: Yes

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4. Other

(1) Changes in significant subsidiaries during the year: No

Note: This section shows whether or not there is a change in Specified Subsidiaries ("tokutei kogaisha" in Japanese) that led to the change of the consolidation scope during the year.

(2) Changes in accounting policies, procedures, estimates, retrospective restatements, etc.

(A) Changes due to applying IFRS: None

(B) Changes due to reasons other than (A): None

(C) Changes in accounting estimates: None

(3) Number of shares outstanding (common shares):
(A) Total stocks outstanding
June 30, 2021	94,366,944 shares	Dec. 31, 2020	94,366,944 shares
including treasury stocks:
(B) Treasury stocks:	June 30, 2021	5,016,883 shares	Dec. 31, 2020	5,027,707 shares
(C) Total stocks outstanding
June 30, 2021	89,350,061 shares	Dec. 31, 2020	89,339,237 shares
excluding treasury stocks:
(D) Average outstanding stocks:
Six months ended	89,340,768 shares	Six months ended	88,523,966 shares
	June 30, 2021	June 30, 2020

* This "Consolidated Summary Report" ("Tanshin") is outside the scope of the external audit. * Notes for using forecasted information etc.

(Caution regarding forward-looking statements)

This financial summary report contains forward-looking statements regarding estimations, forecasts, targets and plans in relation to the results of operations, financial conditions and other overall management of the company and/or the group as a whole (the "forward-looking statements"). The forward-looking statements are made based upon, among other things, the company's current estimations, perceptions and evaluations. Accordingly, due to various risks and uncertainties, the statements and assumptions are inherently not guarantees of future performance, may be considered differently from alternative perspectives and may result in material differences from the actual result.

(Method for obtaining supplemental information for financial statements)

Supplementary information will be published on TD-net for viewing in Japan, and on Kagome's Website.

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1. Qualitative Information Regarding Financial Results for the First Six Months under Review

(1) Explanation of operating results

The Company aims to become a "strong company that can maintain sustainable growth by resolving social issues through food" under the three-yearmid-term management plan starting from the fiscal year ended December 2019.

The Company is working to further enhance corporate value using the basic strategies of the mid-term management plan: namely, (1) continuous enhancement of earnings power and (2) growth by tackling new businesses and new domains.

Revenue in the first half (January 1, 2021 to June 30, 2021) was solid on demand from people staying at home and rising health-consciousness buoyed by the ongoing impacts from the COVID-19 pandemic. In addition, mainly the domestic processed food business recorded an increase in revenue compared to the previous first half owing to effects of bolstered demand in Japan from implementation of the "Let's Eat Vegetables" campaign. In the international business, mainly Kagome Inc. (United States) saw an increase in revenue following a recovery in food service demand, which had been downtrodden in the previous fiscal year due to the impacts of the COVID-19 pandemic.

Core operating income (*) declined in the domestic processed food business due to higher advertising and sales promotion costs from implementation of the "Let's Eat Vegetables" campaign, but in the international business, core operating income increased compared to the previous first half following an increase in revenue and improved profitability owing to reduced cost of sales and other factors.

As a result, in the first half revenue increased to 91,926 million yen, up 3.5% year on year, and core operating income increased to 7,114 million yen, up 11.9%. Operating income rose to 6,944 million yen, up 1.0% year on year, despite the reactionary decline in gains on the sale of non-current assets recorded in the previous first half from the sale of investment properties, and net income attributable to shareholders of parent increased to 4,739 million yen, up 3.6%.

*Core operating income is the profit index which measures recurring business performance by deducting cost of sales and selling, general and administrative expenses from revenue plus share of profit (loss) of entities accounted for using the equity method.

The overview of business results by segment are outlined below.

Furthermore, effective from the first quarter, the Company has changed the classification of its reporting segments.

The direct marketing business, which was included in the domestic processed foods business until the previous fiscal year, now appears as a separate independent segment from Food, etc. because it has increased in importance in terms of business administration since it has been positioned as a business that is expected to drive the Company's growth.

								(Millions of yen)
				Revenue		Core operating income (loss)
		Segment	Previous	Current	Change	Previous	Current	Change
			consolidated	consolidated	consolidated	consolidated
			first half	first half		first half	first half
		Beverages	36,457	37,189	732	3,560	3,514	(45)
		Direct marketing	5,563	6,011	447	363	399	35
		Food, etc.	21,657	21,780	123	1,622	1,357	(265)
	Processed foods total	63,678	64,981	1,303	5,546	5,271	(275)
	Agriculture	5,353	4,989	(363)	239	100	(139)
	Others	422	577	155	200	22	(178)
	Elimination	(2)	(44)	(42)	－	－	－
	adjustments (Note 1)
	Domestic business total	69,451	70,504	1,052	5,987	5,394	(593)
	International Business	22,578	25,719	3,140	371	1,720	1,349
Elimination adjustments	(3,213)	(4,296)	(1,083)	－	－	－
		(Note 2)
		Total	88,816	91,926	3,110	6,358	7,114	756

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Notes: 1. Revenue between segments within the domestic business is eliminated

2. Revenue between the domestic business and the international business is eliminated

＜Domestic Business＞

Revenue of the domestic business increased to 70,504 million yen, up 1.5% year on year, and core operating income decreased to 5,394 million yen, down 9.9%. Operating performance by business is shown below.

1) Processed food business

In the processed food business, the Company manufactures and sells beverages, condiments, and other products. Revenue of this business increased to 64,981 million yen, up 2.0% year on year, and core operating income fell to 5,271 million yen, down 5.0%.

[Beverages: Yasai Seikatsu 100 series, tomato juice, Yasai Ichinichi Kore Ippon, and others]

In vegetable beverages, the company proactively invested in advertising to implement "Let's Eat Vegetables" campaign aimed at increasing daily vegetable intake by 60g. There was an increase in drinking opportunities driven by the campaign combined and by heightened interest in health due to the COVID-19 pandemic.

The Yasai Seikatsu 100 series enjoyed brisk sales following the release of Yasai Seikatsu 100 Smoothie Vitamin Smoothie in March 2021. Also, Yasai Ichinichi Kore Ippon recorded solid sales.

As a result, revenue of the beverages category increased to 37,189 million yen, up 2.0% year on year, and core operating income decreased to 3,514 million yen, down 1.3%, mainly due to an increase in advertising expenses from the roll out of the "Let's Eat Vegetables" campaign.

[Direct marketing: vegetable beverages, supplements, soups, etc., sold via direct marketing]

In the direct marketing category, the Company engages in Kenko Chokusobin, a direct marketing service involving the manufacture and sale mainly of vegetable beverages, supplements, soups and other products. The category saw brisk sales of vegetable beverages such as Tsubuyori Yasai, supplements such as Sulforaphane, soups and other products, driven by growing use of the direct marketing channel and rising health-consciousness caused by the COVID-19 pandemic.

As a result, revenue of the direct marketing category increased to 6,011 million yen, up 8.0% year on year. Core operating income increased to 399 million yen, up 9.7% compared to the previous first half.

[Food, etc.: tomato ketchup, tomato condiments, sauces, gifts and others]

In the food category, tomato ketchup and pasta sauce continued to see strong sales from the previous fiscal year. In addition, in the first half under review we stepped up the appeal of menu options through the event called Kagome Napolitan Stadium and other measures. However, mainly after March, category sales were below the previous year's level due to the recoil from special demand for eating at home in the previous fiscal year due to COVID-19.

In the category of institutional and industrial use, revenue and profits increased year on year due to the reactionary increase from weaker demand in the previous fiscal year, despite the ongoing delay in recovery in food service demand.

In the gifts and specialty items category, revenue and profits increased on rising demand as a substitute to people returning to their hometowns and strong sales of contract manufactured products.

Based on the above, revenue in the category of food, etc. rose to 21,780 million yen, up 0.6% year on year. Core operating income decreased to 1,357 million yen, down 16.4%.

2) Agriculture business

In the agriculture business, the Company mainly produces and sells fresh tomatoes and mesclun greens, etc.

Furthermore, on January 1, 2021, the Company transferred the agriculture business to Kagome Agri-Fresh Co., Ltd. using a company split. This company will now be the core company of the agriculture segment.

In the first half, sales and core operating income both declined year on year due to weaker selling prices of fresh tomatoes caused by the downturn in market conditions.

Based on the above, revenue of the agriculture business declined to 4,989 million yen, down 6.8% year on year, and core operating income decreased to 100 million yen, down 58.0%.

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3) Other businesses

Other businesses include real estate and contracted service businesses.

Revenue of other businesses increased to 577 million yen, up 36.8% year on year, but core operating income fell to 22 million yen, down 89.0%.

＜International Business＞

Our international business encompasses the development of tomato seeds, agricultural production, product development, processing and sales.

The operating performance of the major subsidiaries in local currencies is as outlined below. KAGOME INC. (United States) recorded an increase in revenue and profit. In the United States, food service demand is in the process of recovery due to the sharp increase in economic activities associated with the rising number of vaccinated persons. As a result, KAGOME INC. experienced a recovery in shipment volume and its increased productivity also contributed to the growth in profits. Holding da Industria Transformadora do Tomate, SGPS S.A. (Portugal) posted a drop in sales, reflecting the recoil from strong sales to food manufacturers owing to the COVID-19 pandemic in the previous first half, but recorded an increase in profits on higher sales prices compared to the previous first half. Kagome Australia Pty Ltd. (Australia) recorded an increase in revenue and profit amid the expanded production of carrot juice concentrate sold within the Group. United Genetics Holdings LLC (United States) achieved gains in revenue and profits, reflecting strong sales of seeds mainly in Europe and the Middle East.

Accordingly, revenue of this business increased to 25,719 million yen, up 13.9% year on year, and core operating income increased to 1,720 million yen, up 363.3% compared to the previous first half.

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