Kobe Bussan : Supplementary Material for FY2024 Q1 Financial Results

Supplementary Material for

FY2024 Q1 Financial Results

March 14, 2024

Securities code: 3038

◤◤ Contents

⚫	Consolidated Financial Highlights	2
⚫	Gyomu Super Business	4
⚫ Outline of Gyomu Super Franchise Agreement	5
⚫ Changes in Total Number of Gyomu Super Stores	6
⚫ Year-on-year Changes in Product Shipments to Gyomu Super Stores	7
⚫ Kobe Bussan's Strengths: "Unique Products with Competitive Advantages"	8
⚫	Restaurant & Delicatessen Business	9
⚫ Eco Renewable Energy Business	13
⚫	Shareholder Returns	15
⚫	Consolidated Financial Forecast	16
⚫	Medium-term Management Plan	17

1

◤◤ Consolidated Financial Highlights

			Net Sales
130,000
110,000
90,000									120,904
					96,809	107,942
70,000			85,045
81,597
50,000
	FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1
		SG&A Expenses
8,000	9.0%								10.0%
6,000									8.0%
					4.5%	4.6%		4.7%	6.0%
4,000			4.0%
7,346
								4.0%
								5,699
					4,335	4,922
2,000
		3,410					2.0%
0									0.0%
	FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1
			SG&A expenses	SG&A ratio

			Gross Profit
	15.9%
15,000																							16.0%
				12.3%	12.2%							11.8%
13,000
11,000																10.4%					12.0%
																						8.0%
																		14,231
9,000	12,980
10,444	11,781				11,261					4.0%
7,000
5,000																							0.0%
FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1
					Gross profit									Gross margin

						Operating Profit
10,000																						10.0%
				8.3%	7.7%
8,000	6.9%													7.1%	8.0%
											5.9%
6,000																		6.0%
																		8,531
4,000																			4.0%
5,634		7,034	7,446		6,338
2,000																			2.0%
0																						0.0%
FY20 Q1	FY21 Q1	FY22 Q1		FY23 Q1	FY24 Q1
								Operating profit						Operating margin

Note: Fiscal year (FY) represents the one-year period from November 1 to October 31 of the following year.

2

◤◤ Consolidated Financial Highlights

					Ordinary Profit
10,000																								10.0%
					8.3%	7.9%
		7.0%
8,000																					8.0%
																			6.7%
6,000																					6.0%
4,000						7,019	7,629		2.0%	8,063		4.0%
		5,751
2,000																					2.0%
																		2,118
0																								0.0%
FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1
									Ordinary profit					Ordinary margin

			Profit Attributable to
								Owners of Parent
	8,000										8.0%
	6,000						5.4%	5.3%									6.0%
	4.4%												4.6%
	4,000													4.0%
					4,598	5,121	1.2%	5,524
	2,000						2.0%
	3,559
	0												1,348				0.0%
				FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1
				Profit attributable to owners of parent					Net margin

[Financial Overview]

• Net sales
  Net sales increased by ¥12,961 million (12.0%) year on year with robust new store openings and continued strong product shipments to existing stores.
• Gross profit
  Gross profit increased by ¥2,969 million (26.4%) year on year due to the continued strong net sales despite the impact of the exchange rate fluctuations.
• SG&A expenses
  SG&A expenses increased by ¥776 million (15.8%) year on year due to increases in freight costs for the Gyomu Super Business and personnel and rent expenses resulting from the opening of our directly operated BBQ restaurants.
• Operating profit
  As a result of the factors above, operating profit increased by ¥2,193million (34.6%) year on year.
• Ordinary profit
  Ordinary profit increased by ¥5,944 million (280.6%) year on year due to the impact of the exchange rate fluctuations in FY2024 being smaller than in FY2023, when the significant valuation loss on forward exchange contracts was recorded by rapid appreciation of the yen at the beginning of the fiscal year.
• Profit attributable to owners of parent
  As a result of the factors above, profit attributable to owners of parent increased by ¥4,175 million (309.7%) year on year.

3

◤◤ Gyomu Super Business

Gyomu Super is our core business. Operating results of this business segment reflect wholesale sales to, and royalty fee from, Gyomu Super franchisees earned by Kobe Bussan, a franchisor (franchising headquarters), as well as earnings of Kobe Bussan Group's plants.

• Gyomu Super stores have expanded nationwide with 1,051 stores as of January 31, 2024.
• Net sales for FY2024 Q1 exceeded the planned amount due to strong performance of the existing stores.
• The number of customer visits improved across the country thanks to a rise in a savings-oriented attitude of consumers.

Inside the Gyomu Super Yokohama Izumi Store

		Net Sales
130,000
110,000
90,000
								94,579			104,818			116,817
70,000
					83,709
	71,792
50,000
FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1

	Operating Profit
10,000		9.4%	8.9%			10.0%
8.5%			8.1%
9,000				7.0%		8.0%
8,000						6.0%
7,000					9,432	4.0%
		8,408
		7,853
6,000			7,306		2.0%
	6,074
5,000						0.0%
	FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1

Operating profit						Operating margin

Note: Due to a change in the reportable segment structure in FY2021, the figures for FY2020 are reclassified retrospectively to reflect the change.

4

◤◤ Outline of Gyomu Super Franchise Agreement

We operate Gyomu Super stores under a franchise system except 4 stores of our own.

Our franchise agreement has 2 types as follows:

• General franchise contract, which allows a franchisee to open 1 store in our directly managed areas (*1).
• Area franchise contract, which allows a franchisee to open multiple stores in a defined prefecture in our indirectly managed

areas (*2).

Also, we own 4 stores in Hyogo, Osaka and Kanagawa prefectures under direct operations.

*1 Directly managed areas

• Hokkaido area: Hokkaido prefecture

•	Kanto area:	Tokyo, Chiba, Kanagawa, and Saitama prefectures
•	Kansai area:	Osaka, Kyoto, Hyogo (excl. Awaji Island), Nara, Wakayama, and Shiga prefectures

• Kyushu area: Fukuoka, Saga, Nagasaki, Kumamoto, Oita, and Miyazaki prefectures

*2 Indirectly managed areas

• Other areas:

Prefectures other than those listed above

Outline of Franchise Contract & Requirements

(as of January 31, 2024)

	Directly managed areas	Indirectly managed areas
Number of franchisees	90	15
		Multi-unit franchise
Type of franchise	Single-unit franchise	(An area franchisee has an
(A general franchisee can open	exclusive right to open multiple
agreement
1 store per contract.)	stores in a prefecture defined
		under the contract.)
Initial franchise fee	¥2,000,000	Population in the prefecture x ¥2
(excl. consumption taxes)
Franchise deposit	¥10,000,000	Population in the prefecture x ¥5
Royalty fee	1% of total purchase of goods	1% of purchase of defined goods
	It costs between ¥32 million and ¥38 million to construct racks for
	shelf-stable foods and refrigeration equipment (the above
Facility expenses	construction cost is a rough estimate and varies depending on
	properties). Equipment, construction work, POS registers, and other
	funds for start-up are required separately.
Distribution expenses	Principally paid by	Negotiable
franchise headquarters

Simulated Earnings

(Standard Store Franchisees)

P&L account	Monthly	Composition
amount
Net sales	¥43,500,000	100.0％
Gross profit	¥7,395,000	17.0％
SG&A expenses	¥6,499,000	14.9％
(Rent expenses)	¥1,300,000	3.0％
(Personnel expenses)	¥2,393,000	5.5％
Operating profit	¥896,000	2.1％

• By purchasing items such as fresh food separately, many of franchisees operate more efficiently than the above simulation.

5

◤◤ Changes in Total Number of Gyomu Super Stores

Number of Stores by Area

Gyomu Super opened 3 stores and closed none during FY2024 Q1.

The progress at the end of FY2024 Q1 was 9% toward the full-year target of a net increase of 35 stores.

During FY2024 Q1, we expanded store openings in "Other" indirectly managed area.

Total Number of Gyomu Supper Stores

(Stores)(cumulative)

1,100	1,083
1,051
	1,012
1,000
956
900	900

800

700

600

FY2021	FY2022	FY2023	FY2024	FY2024
Q1	Q1	Q1	Q1	Target

1,012 stores as of January 31, 2023

Hokkaido

28

Kansai

261

Other

371

1,051 stores as of January 31, 2024 (+39)

Hokkaido

33 (+5)

Kansai

266

(+5)

Other

383

(+12)

Kyushu

76

		Chiba
		51
Kanto	Saitama
65	Kanagawa
276

76

Tokyo

84

Kyushu 87 (+11)

		Chiba
		57
Kanto	Saitama	(+6)
282	65	Kanagawa
(±0)	77
(+6)
Tokyo (+1)

83

(-1)

Directly managed areas: Hokkaido, Kanto, Kansai, and Kyushu

Indirectly managed areas: Other

6

◤◤ Year-on-year Changes in Product Shipments to Gyomu Super Stores

• Product shipments to existing stores during FY2024 Q1 remained strong, along with recovering the number of customer visits nationwide.

<YoY Change(%)>	[Existing Stores in Directly Managed Areas]					<YoY Change(%)>				[All Stores Nationwide]
										Monthly Trends for Product Shipments													Monthly Trends for Product Shipments
112.0																								111.9			111.1		120.0		118.6
	110.2			110.6			110.5				110.3																							117.3
110.0																										109					117.0													116.6
																																										114.4									115.3			115.3
108.0				107.2	106.8	106.8			105.6												114.0		113.1	112.5					113.2				113.6					113.4
108.7
																																								112.7
106.0									105.3								104.9			105.1						112			111.8							112.3
					106.9
					103.9																111.0								111.2							110.3
	105.6															103.4
104.0	103.1	105.5									111.6
																																												110.5
																															108.0					110.5							110.3 110.0
																																							110.3109.3
102.0									103.1			103.2102.9																					108.6	108.3											108.3
					102.4
																					101.7
100.0									101.1															105.0
			Nov.	Dec.	Jan. Feb.	Mar. Apr. May	June July Aug. Sept.	Oct.		Nov.	Dec.	Jan. Feb.	Mar. Apr. May	June July Aug. Sept. Oct.

FY2022

FY2023

FY2024

FY2022

FY2023

FY2024

[Year-on-year % Changes in Product Shipments to Gyomu Super Stores]

									FY2023								FY2024
		Nov.	Dec.	Jan.	Feb.	Mar.	Apr.	H1	May	June	July	Aug.	Sept.	Oct.	H2	Full	Nov.	Dec.	Jan.
Directly	Existing	105.6	107.2	103.9	106.8	103.2	106.8	105.6	110.5	105.6	110.3	111.9	109.0	111.1	109.4	107.7	108.7	106.9	110.6
managed	stores
All	112.1	112.6	109.5	112.5	108.5	112.7	111.4	116.5	111.1	115.5	117.1	113.4	114.7	114.7	113.1	112.7	110.2	113.8
areas
stores
Nationwide	All	111.6	112.5	109.3	112.0	108.3	111.8	111.0	116.6	110.3	115.3	117.3	113.4	115.3	114.7	112.9	113.1	110.5	114.4
stores

Note: "Nationwide" represents the product shipments to the stores in both directly and indirectly managed areas.

7

◤◤ Kobe Bussan's Strengths:

"Unique Products with Competitive Advantages"

Enhancing Original Products		Samples of Private Label Products

Ratio of Private Label Products
35.0%	34.82%
	34.75%	34.74%
34.47%	34.74%	34.68%
34.5%
		34.57%
34.29%
34.23%	Produced by our plants：10.9%
	Imported：23.4%
34.0%
33.5%
Q1	Q2	Q3	Q4
FY2022	FY2023		FY2024

• While shipments of private label products were on the rise, national brand products remained even stronger.
• The price revision of national brand products continued to lower the ratio of private label products.

• Products produced by Kobe Bussan Group's plants

	Curry with melted	Frozen Sanuki
Thick pork cutlet	vegetables and fruits	udon noodles
¥645 (700 g)	¥321 (200g x 5)	¥178 (250 g x 5)

• Import products

Tempe	Organic
	oat flakes	Frozen jackfruit
¥375 (450 g)	¥267 (500 g)	¥494 (500g)

Note: All prices include tax.

Products and prices are different depending on stores and seasons.

8

◤◤ Restaurant & Delicatessen Business

The Restaurant & Delicatessen Business covers restaurants and delicatessen shops that we operate directly or as a franchisor (franchising headquarters). This business segment includes Kobe Cook World Buffet, a buffet-style restaurant chain; Premium Karubi, a served a-la-carte buffet style BBQ restaurant chain; and Chisouna, a delicatessen shop chain.

• All the three brands performed well.
• Each brand increased its media exposure as we successfully differentiated ourselves from competitors in terms of prices and menu items.

As a result of the above, the segment performance improved significantly.

Kobe Cook World Buffet

Premium Karubi

Chisouna

	Net Sales
3,500
3,000
2,500
2,000
					3,145
1,500
				2,417
1,000
			1,592
500
839		750
0
FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1

	Operating Profit
200					10.0%
					6.3%
100	25				5.0%
					198
			-62	17
0				0.0%
	3.0%	-46		0.7%
-100			-3.9%		-5.0%
-200		-6.1%			-10.0%
	FY20 Q1	FY21 Q1	FY22 Q1	FY23 Q1	FY24 Q1
		Operating profit	Operating margin

Note: Due to a change in the reportable segment structure in FY2021, the figures for FY2020 are reclassified retrospectively to reflect the change.

9