Sapporo : 1Q Financial Results - Consolidated (Based on IFRS)(393.7KB)

Financial Results

for the three months ended March 31, 2024 - Consolidated (Based on IFRS)

May 14, 2024

Company name	Sapporo Holdings Limited
Security code	2501
Listed on	Tokyo Stock Exchange (Prime Market); Sapporo Securities Exchange
URL	https://www.sapporoholdings.jp/en/
Representative	Masaki Oga, President and Representative Director
Contact	Yosuke Nakamura, Director of the Corporate Planning Department
Telephone	[phone]

Scheduled dates:
Filing of quarterly financial report	May 15, 2024
Commencement of dividend payments	-
Supplementary information to the quarterly earnings results	Available
Quarterly earnings results briefing held	Yes
	(mainly targeted at institutional
	investors and analysts)

1. Consolidated Financial Results for the three months Ended March 31, 2024 (January 1 - March 31, 2024)

(Amounts in million yen rounded to the nearest million yen)

(1) Operating Results

(Percentage figures represent year-over-year changes)

Revenue

Core Operating profit

Operating profit

Profit

million yen

%

million yen

%

million yen

%

million yen

%

Three months ended

112,761

3.7

(3,795)

－

(1,936)

－

(1,970)

－

March 31, 2024

Three months ended

108,768

16.6

(2,935)

－

(3,282)

－

(3,589)

－

March 31, 2023

Profit attributable to

Total comprehensive

Basic earnings

Diluted earnings

owners of parent

income

per share

per share

million yen

%

million yen

%

Yen

Yen

Three months ended

(1,977)

－

8,597

－

(25.38)

(25.38)

March 31, 2024

Three months ended

(3,596)

－

(913)

－

(46.16)

(46.16)

March 31, 2023

Note: Profit before tax

Three months ended March 31, 2024 (1,507) million yen Three months ended March 31, 2023 (3,826) million yen

*Core operating profit is a proprietary profit indicator that measures the performance consistency of our business. Core operating profit is calculated as Revenue - Cost of sales - SG&A expenses.

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(2) Financial Position

			Equity attributable to	Ratio of
	Total assets	Total equity	equity attributable to
	owners of parent	owners of parent to total
				assets
	million yen	million yen	million yen	%
Three months ended	667,550	188,177	187,202	28.0
March 31, 2024
Three months ended	663,573	183,248	182,315	27.5
March 31, 2023

2. Dividends

			Dividend per share
Record date or period	End Q1	End Q2	End Q3	Year-end	Full year
	yen	yen	yen	yen	yen
Year ended December 31, 2023	-	0.00	-	47.00	47.00
Year ended December 31, 2024	-
Year ending December 31, 2024 (forecast)		0.00	-	52.00	52.00

Note: Changes to the latest dividend forecast announced: None

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2024 (January 1 - December 31, 2024)

(Percentage figures represent year-over-year changes)

				Core							Profit attributable to	Basic
	Revenue			Operating profit	Profit		earnings
		operating profit		owners of parent
									per share
	million yen		%	million yen		%	million yen	%	million yen		%	million yen	%	yen
Year ending
December	523,500		0.9	19,000		21.5	17,600	48.9	10,030		14.5	10,000	14.6	128.37
31, 2024

Note: Changes to the latest consolidated results forecast announced: None

*Earnings forecasts for the six months ending June 30, 2024 are omitted because the company manages performance targets on a yearly basis.

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4. Other

1. Changes to scope of consolidation: None
2. Changes in accounting policy, changes in accounting estimates, and retrospective restatement
3. 1. Changes in accounting policies required by IFRS: None
   2. Changes other than 1) above: None
   3. Changes in accounting estimates: None
4. Number of shares issued and outstanding (common stock)

1. Number of shares issued at end of period (treasury stock included): March 31, 2024: 78,794,298 shares
   December 31, 2023: 78,794,298 shares
2. Number of shares held in treasury at end of period:

March 31, 2024: 895,935 shares

December 31, 2023: 895,451 shares

1. Average number of outstanding shares during the period: March 31, 2024: 77,898,566 shares
   March 31, 2023: 77,897,356 shares

Audit Status

The quarterly financial results are outside the scope of audit procedures based on the Financial Instruments and Exchange Act.

Appropriate Use of Earnings Forecasts and Other Important Information

This document contains projections and other forward-looking statements based on information available to the Company as of the date of this document. Actual results may differ from those expressed or implied by forward-looking statements due to various factors. For the assumptions underlying the forecasts herein and other information on the use of earnings forecasts, refer to "1. Analysis of Operating Results and Financial

Condition (4) Consolidated Earnings Forecast" on page 8.

Seasonal factors

The Group's operating results are affected by substantial seasonal variations in demand in the Alcoholic Beverages and Food & Soft Drinks businesses. Revenues consequently tend to be lower in the first quarter than in the other three quarters.

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1. Analysis of Operating Results and Financial Condition

(1) Operating Results

In this quarterly consolidated accounting period (January 1 - March 31, 2024), the uncertain outlook continues, with consumers becoming more cautious with their spending due to the impact of rising geopolitical risks, the depreciation of the yen, inflation from surging prices of raw materials and energy, and Japan's "2024 logistics problem" (an issue arising from strengthened regulations on driver overtime work).

Under these circumstances, the Sapporo Group is decisively implementing structural reforms and accelerating growth to realize our growth strategy in the second year of our "Medium-Term Management Plan (2023-2026)."

Consolidated revenue increased compared to the previous first quarter. This was because of strong beer sales in the Japan alcoholic beverages sector due to the effect of the alcohol tax revisions and strong sales of Sapporo Premium Beer in the US market.

While there was an increase in revenue due to the impact of the Alcoholic Beverages business, consolidated core operating profit decreased year-on-year due to an increase in IT investment, among other factors.

Summary in key figures

			Millions of yen, except percentages
		Core operating		Profit attributable
	Revenue	Operating profit	to owners of
	profit
			parent
Three months
ended	112,761	(3,795)	(1,936)	(1,977)
March 31, 2024
Three months
ended	108,768	(2,935)	(3,282)	(3,596)
March 31, 2023
Change (%)	3.7	-	-	-

*Core operating profit is the Sapporo Group's unique profit benchmark for measuring the performance of its regular business and is calculated by deducting cost of sales, and selling, general and administrative expenses, from revenue.

Results by segment are outlined below.

Alcoholic Beverages

Revenue increased year-on-year due to strong beer sales due to the alcohol tax revisions, strong sales of Sapporo Premium Beer in the US and Asia, and the effect of a weak yen.

Core operating profit and operating profit both increased year-on-year due to the increase in

revenue in the Japan Alcoholic Beverages business, despite the impact of surging raw materials and personnel costs.

■Revenue: ¥80.6 billion (up ¥4.1 billion, or 5.3% year on year)

■Core operating profit: ¥(0.2) billion (compared with a loss of ¥0.5 billion a year earlier)

■Operating profit: ¥(0.3) billion (compared with a loss of ¥0.8 billion a year earlier)

Details of Alcoholic Beverages (Japan and Overseas) and Restaurants in the Alcoholic Beverages business were as follows.

Japan

While the on-trade products market is on par with the previous year as the impact of COVID-19 lessens, the off-trade market softened due to the shrinkage of the happoshu market following alcohol tax revisions. Total domestic demand for beer-type beverages (beer, happoshu (including New Genre) was 98% of the previous year's level and total domestic demand for beer was 109%.

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In this fiscal year, we are focusing more on strengthening beer and RTD* taking into account the liquor tax revision made in October 2023.

In this context, the Group's total domestic sales volume of beer-type beverages was 102% of the previous year's level. On-trade products performed at 104% year-on-year thanks to strong sales of bottled lager beer. While off-trade products were impacted by the shrinkage of the happoshu market following alcohol tax revisions, the sector continued to perform strongly, with sales volume of Black Label cans at 128% year-on-year and RTD cans at 101% year-on-year.

*: RTD, or ready-to-drink beverages, are pre-mixed,low-alcoholcocktail-like beverages that can be consumed as is immediately after opening.

Overseas

With persistent inflation and high interest rates in Canada and the United States, we expect total beer demand will be lower year-on-year. Sales volume of overseas beer brands fell year-on-year due to declining total demand for beer in Canada and the weakening of the craft beer market in the United States. In contrast, the sales volume of Sapporo-brand beer achieved remarkable growth in North America, reaching 107% year-on-year, primarily due to the expansion of the sales network in the US market.

Restaurants

There is a continuing recovery trend in restaurant demand following the COVID-19 pandemic. Amid this, due to price revisions, a recovery in the number of customers, and attracting inbound tourists and senior customers, the Sapporo Group's restaurant business recorded existing store sales for the first quarter at 115% year-on-year.

Food & Soft Drinks

Revenue fell year-on-year due to the impact of product lineup changes in the Japan market and a decline in export sales in Overseas Soft Drinks among other factors.

Despite the positive effect of price revisions and structural reforms, the Japan market is performing on par with last year as a result of surging raw materials and logistics costs. However, core operating profit decreased for the Food & Soft Drinks business as a whole year-on-year due to the downside impact of the decline in export sales for the overseas beverage business.

Operating profit increased year-on-year due to the impact of the reversal of impairment losses on fixed assets in the Japan Food & Soft Drinks business and the sale of land.

■Revenue: ¥26.6 billion (down ¥0.2 billion, or 0.9% year on year)

■Core operating profit: ¥(0.6) billion (compared with a loss of ¥0.3 billion a year earlier)

■Operating profit: ¥1.5 billion (compared with a loss of ¥0.3 billion a year earlier)

Food & Soft Drinks (Japan)

While there were shifts in total demand for soft drinks in Japan due to weather factors, this sector performed at roughly 100% year-on-year due to the recovery of foot traffic, among other factors. Meanwhile, the sales volume of the Group's domestic beverages was 91% of the previous year's level, as overall beverage sales decreased due to product lineup changes and other factors, despite Kireto Lemon, the main brand in the lemon business, performing at 104% year-on-year, and the Tochi and Craft series tea beverages performing well at 106% year-on-year, centered on corn tea, thanks to the effect of price revisions.

Overseas Beverage

In Singapore, sales growth primarily in the off-trade channel contributed to a year-on-year performance of 104% (calculated in the local currency) in terms of sales value.

Additionally, we continue to strengthen the sales structure in Malaysia, a focus area, and sales volume was 136% year-on-year (calculated in the local currency), underpinned partly by strong domestic demand there.

Excluding the above, we are strengthening measures for each export country in the export

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business. In the export business to the Middle East, despite the suspension of sales last year to customers whose financial condition had deteriorated, we are proceeding with selecting new customers with a view to a recovery in sales value.

Real Estate

Revenue increased year-on-year due to an improvement in the office occupancy rate of Yebisu Garden Place.

Despite the effect of increased revenue, core operating profit and operating profit decreased due to the recording of costs associated with the opening of Hotel Sosei Sapporo MGallery, which opened in January 2024, and increased administrative expenses due to surging personnel costs.

■Revenue: ¥5.5 billion (up ¥0.2 billion, or 3.2% year on year)

■Core operating profit: ¥(0.2) billion (compared with a loss of ¥0 billion a year earlier)

■Operating profit: ¥(0.3) billion (compared with a loss of ¥0.1 billion a year earlier)

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(2) Consolidated Financial Condition

As of the end of this Q1 consolidated accounting period, the following were the operative factors in the condition of assets, liabilities and equity.

			(Millions of yen)
	As of December 31,	As of March 31, 2024	Change
	2023
Current assets	176,353	156,444	(19,909)
Non-current assets	487,220	511,106	23,886
Total assets	663,573	667,550	3,977
Current Liabilities	191,204	187,647	(3,557)
Non-current liabilities	289,121	291,726	2,605
Total liabilities	480,325	479,373	(952)
Total equity	183,248	188,177	4,929
Total liabilities and
equity	663,573	667,550	3,977

In end-Q1, assets had increased by ¥4.0 billion to ¥667.5 billion relative to the previous fiscal year end due to an increase in investment property and property, plant and equipment, and other factors which offset the decline in trade and other receivables resulting from seasonal factors.

Consolidated total liabilities came to ¥479.4 billion, which was a decrease of ¥1.0 billion as compared to the end of the previous fiscal year, mainly due to the decrease in other current liabilities resulting from seasonal factors and a decrease in income tax payable, despite an increase in bonds and short- term borrowings.

On the same comparative basis, equity increased by ¥4.9 billion to ¥188.2 billion. Although there was a decrease in retained earnings stemming from the payment of end-period dividends, there were increases in other capital components due to increased exchange differences on translation of foreign operations and financial assets measured at fair value through other comprehensive income.

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1. Consolidated Cash Flows
   At the end-Q1, cash and cash equivalents (collectively "cash") declined by ¥24 million (0.1%) to ¥17.2

billion, relative to the previous consolidated fiscal year-end.

The components of Q1's cash flow categories were as follows.

			(Millions of yen)
Category	As of March 31,	As of March 31,	Change
2023	2024
Cash flows from operating activities	13,499	1,658	(11,840)
Cash flows from investing activities	(2,812)	(10,778)	(7,966)
Free cash flow	10,687	(9,119)	(19,806)
Cash flows from financial activities	(13,335)	8,486	21,820
Effect of exchange rate change on cash and cash
equivalents	1,377	724	(652)
Net increase (decrease) in cash and cash equivalents	(1,271)	91	1,362
Cash and cash equivalents at beginning of period	15,380	17,204	1,824
Cash and cash equivalents included in assets of
disposal groups classified as holdings for sale	-	(114)	(114)
Cash and cash equivalents at end of period	14,109	17,180	3,071

(Cash flows from operating activities)

Cash provided by operating activities was ¥1.7 billion (compared to ¥13.5 billion provided in the previous fiscal year). This was mainly due to increased factors, which was a decrease in trade and other receivables of ¥20.6 billion, which offset decreased factors, which were a decrease in accrued alcohol tax of ¥6.8 billion, income tax paid of ¥5.0 billion, and a decrease in trade and other payables of ¥3.7billion.

(Cash flows from investing activities)

Cash used in investing activities was ¥10.8 billion (compared to ¥2.8 billion used in the previous fiscal year). Although there was income of ¥4.1 billion from the sale of investment securities and ¥1.9 billion from the sale of property, plant and equipment, expenses related to the purchase of investment property of ¥10.8 billion, the purchase of investment property of ¥5.0 billion contributed to this result.

(Cash flows from financing activities)

Cash provided by financing activities was ¥8.5 billion (compared to ¥13.3 billion used in the previous fiscal year). Although there was an outflow of ¥4.5 billion in repayment of long-term borrowings and ¥3.5 billion in dividends paid, there were inflows from a net increase in commercial papers of ¥14.0 billion and a net increase in short-term borrowings of ¥3.5 billion.

(4) Consolidated Earnings Forecast

The consolidated earnings forecast for the full fiscal year to December 31, 2024, is unchanged from the forecast announced by the Company on February 14, 2024.

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2. Consolidated Financial Statements

(1) Consolidated Statement of Financial Position

			(Millions of yen)
	As of December 31, 2023		As of March 31, 2024
Assets
Current assets
Cash and cash equivalents	17,204	17,180
Trade and other receivables	98,023	77,478
Inventories	47,575	49,186
Other financial assets	4,393	4,559
Other current assets	7,589		7,482
Subtotal	174,785		155,886
Assets held for sale	1,568		558
Total current assets	176,353	156,444
Non-current assets
Property, plant and equipment	145,687	152,922
Investment property	211,164	219,721
Goodwill	35,124	36,221
Intangible assets	6,993	7,269
Investments accounted for using equity method	1,359	1,359
Other financial assets	79,400	83,910
Retirement benefit Asset	1,266	3,715
Other non-current assets	3,366	3,284
Deferred tax assets	2,863		2,705
Total non-current assets	487,220		511,106
Total assets	663,573	667,550

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				(Millions of yen)
		As of December 31, 2023		As of March 31, 2024
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables	38,717	35,515
Bonds and borrowings	39,672	56,173
Lease liabilities	3,645	3,324
Income taxes payable	5,919	1,008
Other financial liabilities	37,158	34,781
Provisions	8,504	10,158
Other current liabilities	57,589		46,311
(Sub-total)	191,204		187,269
Liabilities directly associated with assets held	－	378
for sale
Total current liabilities	191,204	187,647
Non-current liabilities
Bonds and borrowings	182,930	179,529
Lease liabilities	19,377	19,568
Other financial liabilities	58,252	61,551
Retirement benefit liability	3,412	3,363
Provisions	2,422	2,329
Other non-current liabilities	897	878
Deferred tax liabilities	21,831		24,508
Total non-current liabilities	289,121		291,726
Total liabilities	480,325	479,373
Equity
Share capital	53,887	53,887
Capital surplus	40,754	40,756
Treasury shares	(1,783)	(1,786)
Retained earnings	50,828	49,300
Other components of equity	38,630		45,045
Total equity attributable to owners of parent	182,315	187,202
Non-controlling interests	933		975
Total equity	183,248		188,177
Total liabilities and equity	663,573	667,550

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