Morinaga : Financial Summary for the Three Months Ended June 30, 2017

Consolidated Financial Summary for the Three Months Ended June 30, 2017 (1Q) (Japanese Accounting Standards)

Company name: MORINAGA & CO., LTD. Stock listing: Tokyo Stock Exchange

August 9, 2017

Stock code: 2201 URL: http://www.morinaga.co.jp/english/ Representative: Toru Arai, Representative Director, President

Contact: Ayako Kunichika, General Manager, Corporate Communication Division TEL [phone]

Scheduled date to submit the Quarterly Securities Report: August 14, 2017 Scheduled date for commencement of dividend payments: - Supplementary documents for quarterly results: None

Quarterly results briefing: None

(The figures are rounded down to the nearest million yen.)

1. Consolidated Financial Results for the First Quarter Ended June 30, 2017 (April 1, 2017 - June 30, 2017)

2. Consolidated operating results (Accumulated total) (The percentages are year-on-year percentage changes.)

   Net sales		Operating income		Ordinary income		Profit attributable to owners of parent
   1Q ended June 30, 2017	Million yen	%	Million yen	%	Million yen	%	Million yen	%
   	52,062	9.3	6,105	16.1	6,449	16.0	4,343	14.1
   1Q ended June 30, 2016	47,651	7.3	5,258	86.3	5,558	80.5	3,806	60.8

   Net income per share	Diluted net income per share
   1Q ended June 30, 2017	Yen	Yen
   	83.48	-
   1Q ended June 30, 2016	73.14	-

   (Note) Comprehensive income:	1Q ended June 30, 2017:	4,818 million yen (5.7%);
   1Q ended June 30, 2016:	4,557 million yen (83.7%)

   * A reverse stock split of five common shares to one was implemented on October 1, 2016. Net income per share has been calculated by assuming that this reverse stock split was implemented at the beginning of the previous consolidated fiscal year.

3. Consolidated financial situation

4. Total assets	Net assets	Shareholders' equity ratio
   1Q ended June 30, 2017	Million yen	Million yen	%
   	185,871	94,232	49.3
   Year ended Mar. 31, 2017	185,032	91,763	48.2

   (Reference) Shareholders' equity: 1Q ended June 30, 2017: 91,656 million yen;

   Year ended March 31, 2017: 89,161 million yen

5. Dividends

   Annual dividends
   End of 1Q	End of 2Q	End of 3Q	Year end	Total
   Year ended Mar. 31, 2017	Yen	Yen	Yen	Yen	Yen
   	-	0.00	-	45.00	45.00
   Year ending March 31, 2018	-
   Year ending March 31, 2018 (forecast)	0.00	-	45.00	45.00

   (Note) Revisions to dividend forecasts published most recently: None

6. Consolidated Results Forecasts for the Fiscal Year Ending March 31, 2018 (Apr. 1, 2017 - Mar. 31, 2018)

7. (The percentages are year-on-year percentage changes.)

   Net sales		Operating income		Ordinary income		Profit attributable to owners of parent		Net income per share
   Interim	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
   	106,000	7.1	12,100	7.9	12,500	8.1	8,500	8.6	163.35
   Full year	207,500	4.0	19,300	9.6	19,900	8.6	13,400	20.5	257.52

   (Note) Revisions to results forecasts published most recently: Yes

   • Notes

   • Important changes in subsidiaries during the quarter (changes in specified subsidiaries accompanied by changes in the scope of consolidation): None

   • Application of accounting treatment unique to the preparation of quarterly consolidated financial statements:

     None

   • Changes in accounting policies, changes of accounting estimates and restatement

   • Changes in accounting policies associated with revisions to accounting standards: None

   • Changes in accounting policies other than changes in (i): None

   • Changes in accounting estimates: None

   • Restatement: None

   • Number of shares issued (common shares)

   • Number of shares issued at end of period (including treasury stock)

     1Q ended June 30, 2017: 54,189,769 Year ended March 31, 2017: 54,189,769

   • Number of shares of treasury stock at end of period

     1Q ended June 30, 2017: 2,155,828 Year ended March 31, 2017: 2,154,628

   • Average number of shares during 1Q

   • 1Q ended June 30, 2017: 52,034,429 1Q ended June 30, 2016: 52,046,212

   • A reverse stock split of five common shares to one was implemented on October 1, 2016. The average number of shares during the period have been calculated by assuming that this reverse stock split was implemented at the beginning of the previous consolidated fiscal year.

   • This financial summary is not subject to statutory quarterly review.

   • Explanation about the proper use of results forecasts, and additional information

   The results forecasts are prepared based on adequate information, but actual results might be different from them, depending on a range of factors. For details, please refer to "(3) Qualitative information on future forecasts, including the consolidated results forecasts of Section 1. Qualitative Information on Consolidated Results for the First Quarter" on page 3 of the accompanying materials.

   • Accompanying Materials - Contents

8. Qualitative Information on Consolidated Results for the First Quarter 2

9. Qualitative information on consolidated results 2

10. Qualitative information on consolidated financial position 3

11. Qualitative information on future forecasts, including consolidated results forecasts 3

12. Quarterly Consolidated Financial Statements and Major Notes 5

13. Quarterly Consolidated Balance Sheets 5

14. Quarterly Consolidated Statements of Operations and Quarterly Consolidated Statement of Comprehensive Income 7

    Quarterly Consolidated Statements of Operations

    First quarter ended June 30, 2017 7

    Quarterly Consolidated Statement of Comprehensive Income

    First quarter ended June 30, 2017 8

15. Notes to the Quarterly Consolidated Financial Statements 9

    (Notes on the going concern assumption) 9

    (Notes if there is a significant change in the amount of shareholders' equity) 9

    (Segment information) 9

16. Supplementary Information 10

17. 1. Qualitative Information on Consolidated Results for the First Quarter

    (1) Qualitative information on consolidated results

    Consolidated results for the first quarter under review were as follows:

    Net sales rose 4,411 million yen, or 9.3% year on year, to 52,062 million yen in total, reflecting the strong results of the mainstay Food Manufacturing business.

    Operating income increased by 847 million yen, or 16.1% year on year, to 6,105 million yen, and ordinary income climbed by 891 million yen, or 16.0% year on year, to 6,449 million yen, largely attributable to growth in net sales and cost cutting of goods sold.

    Profit attributable to owners of parent also increased 537 million yen, or 14.1% year on year, to 4,343 million yen.

    The following is consolidated results by business segment.

    Food Manufacturing

    Confectionery & Foodstuffs

    Among the mainstay brands in Japan, sales of a standard product, Chocoball chocolate, of which this year marks the 50th year since its release, remained strong and rose significantly from the level a year earlier. While sales of Milk Caramel, Morinaga Biscuits, and DARS chocolate declined from the same period of the previous fiscal year, sales of HI-CHEW candies and Ottotto snack, of which the standard items remained steady, and Morinaga Cocoa, which drew attention to its health effects, increased year on year. As a result, total sales of the mainstay brands increased year on year.

    In terms of other brands, sales of Carre de chocolat, featuring the benefit of high polyphenol content, and Amazake, whose customer base expanded thanks to increased promotion of its nutritional functions, increased year on year. As a result, total domestic sales were higher than the level a year earlier.

    Total overseas sales decreased year on year, due to significantly lower year-on-year sales in Indonesia, which offset the year-on-year growth in the United States and Taiwan and sales in China that remained flat from the level a year earlier.

    As a result, total sales for this segment rose 1,745 million yen, or 6.4% year on year, to 29,152 million yen.

    Frozen Desserts

    Sales of Choco Monaka Jumbo, a mainstay brand, and Vanilla Monaka Jumbo, namely the Jumbo Group as a whole, remained strong and substantially exceeded the level a year earlier. While sales of multipack products such as PAXIEL declined year on year, sales of ICEBOX and premium products for convenience stores saw solid growth, registering year-on-year rises.

    As a result, total sales for this segment increased 723 million yen, or 7.2% year on year, to 10,817 million yen.

    Health Products

    Sales of in Jelly, a mainstay brand, were significantly higher than those from the same period of the previous fiscal year, chiefly reflecting the impact of marketing and advertising that spotlighted product functionality. Sales of Delicious Collagen Drink and products related to Passienol™ in the mail-order series of Healthy Angel products remained strong, resulting in significant year-on-year growth in sales in the mail-order business.

    As a result of the above, sales for this segment rose 1,804 million yen, or 22.6% year on year, to 9,802 million yen.