Suntory Beverage & Food : Summary of Consolidated Financial Results for Q2 of FY2020

English Translation

August 5, 2020

	Summary of Consolidated Financial Results
	for the First Six Months of the Year Ending December 31, 2020
	(UNAUDITED)
Company name:	Suntory Beverage & Food Limited
Shares listed:	First Section, Tokyo Stock Exchange
Securities code:	2587
URL:	https://www.suntory.com/sbf/
Representative:	Kazuhiro Saito, Chief Executive Officer
Inquiries:	Takayuki Sanno, Chief Financial Officer, Corporate Strategy Division
	TEL: [phone] (from overseas)

Scheduled date to file quarterly securities report:	August 12, 2020
Scheduled date to commence dividend payments:	September 2, 2020
Attachment of supplementary material on quarterly financial results:	Yes
Holding of quarterly financial results briefing meeting (for institutional investors and analysts):	Yes

(Millions of yen with fractional amounts discarded, unless otherwise noted)

1. Consolidated financial results for the first six months of the year ending December 31, 2020 (from January 1, 2020 to June 30, 2020)

(1)	Consolidated operating results
							(Percentages indicate year-on-year changes)
			Revenue		Operating income	Profit before tax for the	Profit for the period
				period
	Six months ended	(Millions of yen)	(%)	(Millions of yen)	(%)	(Millions of yen)	(%)	(Millions of yen)	(%)
	June 30, 2020	552,529	(12.0)	35,712	(29.8)	35,113	(29.7)	26,558	(28.8)
	June 30, 2019	627,770	2.3	50,900	(9.7)	49,922	(10.4)	37,296	(18.0)
			Profit for the period	Comprehensive income	Basic earnings	Diluted earnings
			attributable to owners of
			for the period	per share		per share
			the Company
	Six months ended	(Millions of yen)	(%)	(Millions of yen)	(%)		(Yen)		(Yen)
	June 30, 2020	20,922	(34.1)	5,666	(75.3)		67.71		-
	June 30, 2019	31,770	(23.1)	22,919	30.3		102.82		-
(2)	Consolidated financial position
									Ratio of equity attributable
			Total assets		Total equity	Equity attributable to	to owners of
				owners of the Company	the Company
									to total assets
	As at	(Millions of yen)	(Millions of yen)	(Millions of yen)		(%)
	June 30, 2020	1,603,147		828,887		746,446		46.6
	December 31, 2019	1,567,299		837,565		756,568		48.3

(3) Consolidated cash flows

	Net cash inflow (outflow)	Net cash inflow (outflow)	Net cash inflow (outflow)	Cash and cash equivalents
	from operating activities	from investing activities	from financing activities	at the end of the period
Six months ended	(Millions of yen)	(Millions of yen)	(Millions of yen)	(Millions of yen)
June 30, 2020	43,897	(30,662)	28,869	183,288
June 30, 2019	51,866	(30,880)	(63,894)	103,326

2. Dividends

				Annual cash dividends
		First quarter-end	Second quarter-end	Third quarter-end	Year-end	Total
		(Yen)	(Yen)	(Yen)	(Yen)	(Yen)
Year ended	-	39.00	-	39.00	78.00
December 31, 2019
Year ending	-	39.00
December 31, 2020
Year ending
December 31, 2020			-	39.00	78.00
(Forecast)
Note:	Revisions to the forecast of dividends most recently announced: None

3. Consolidated earnings forecast for the year ending December 31, 2020 (from January 1, 2020 to December 31, 2020)

(Percentages indicate year-on-year changes)

Profit for the year

Revenue

Operating income

Profit before tax

Profit for the year

attributable to

Basic earnings

owners of

per share

the Company

(Millions of

(%)

(Millions of

(%)

(Millions of

(%)

(Millions of

(%)

(Millions of

(%)

(Yen)

yen)

yen)

yen)

yen)

yen)

Year ending

-

-

-

-

-

-

-

-

-

-

-

December 31, 2020

Note:

Revisions to the earnings forecast most recently announced: Yes

The consolidated earnings forecast for the year ending December 31, 2020 has been withdrawn as the Company has judged that it is difficult to estimate financial results currently. Going forward, the Company will announce the forecast once it is formulated after considering the impacts of COVID-19 and other risk factors.

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None
2. Changes in accounting policies and changes in accounting estimates

a.	Changes in accounting policies required by IFRS:	None
b.	Changes in accounting policies due to other reasons:	None
c.	Changes in accounting estimates:	None

1. Number of issued shares (ordinary shares)
   a. Total number of issued shares at the end of the period (including treasury shares)

As at June 30, 2020	309,000,000 shares
As at December 31, 2019	309,000,000 shares

1. Number of treasury shares at the end of the period

As at June 30, 2020	3 shares
As at December 31, 2019	3 shares

1. Average number of outstanding shares during the period (cumulative from the beginning of the year)

Six months ended June 30, 2020	308,999,997 shares
Six months ended June 30, 2019	309,000,000 shares

• Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecast, and other special matters

The earnings forecast contained in these materials are based on our judgment attributable to information available to the Company and the Group as of the date of announcement of these materials, and include certain risks and uncertainties. These statements are not intended as a promise by the Company to achieve such results. Actual business results may differ substantially due to various factors such as economic situation surrounding the Company and the Group, market trend, exchange rates and other factors.

Attached Materials

Index

1.	Qualitative Information Regarding Settlement of Accounts for the First Six Months.....................	2
(1)	Operating results ..............................................................................................................................	2
(2)	Financial position.............................................................................................................................	3
(3)	Analysis of cash flows .....................................................................................................................	3
(4)	Consolidated earnings forecast and other forward-looking statements ...........................................	4

2. Condensed Quarterly Consolidated Financial Statements and Significant Notes Thereto

(Unaudited)..................................................................................................................................................	5
(1)	Condensed quarterly consolidated statement of financial position ..................................................	5
(2)	Condensed quarterly consolidated statement of profit or loss .........................................................	7
(3)	Condensed quarterly consolidated statement of comprehensive income .........................................	8
(4)	Condensed quarterly consolidated statement of changes in equity..................................................	9
(5)	Condensed quarterly consolidated statement of cash flows...........................................................	10
(6)	Notes to condensed quarterly consolidated financial statements ...................................................	11
	(Going concern) .............................................................................................................................	11

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1. Qualitative Information Regarding Settlement of Accounts for the First Six Months

1. Operating results
   Suntory Beverage & Food Limited Group (the Group), based on the philosophy of enriching consumers' lives by proposing premium and unique products that match the tastes and needs of consumers, put effort into brand reinforcement and new demand creation, and worked to improve the quality of products. In addition, the Group worked to strengthen profitability in each area.
   However, the impact of the novel coronavirus disease (COVID-19) currently spreading globally has greatly changed the environment of each major country. The effect on businesses of the Group both in Japan and overseas became severe from March onwards. In particular, the effect of lockdowns and requests for voluntary business shutdowns issued by each major country from April through May pushed down revenue. Following the lifting of lockdowns and requests for voluntary business shutdowns in June, human activity increased and the Group's businesses are on a recovery track, but a growing number of infected cases is being reported again in some countries. We will keep an eye on the situation going forward. On the other hand, in terms of profit, we reduced costs, rescheduled investment in marketing expenses and engaged in other productivity initiatives, but profit decreased due to the impact of a decrease in sales.
   As a result of the above, for the operating results of the first six months of the year ending December 31, 2020, the Group reported consolidated revenue of ¥552.5 billion, down 12.0% year on year. Consolidated operating income was ¥35.7 billion, down 29.8% year on year. Profit for the period attributable to owners of the Company was ¥20.9 billion, down 34.1% year on year.
   Results by segment are described below.

< Japan business >

The Group worked on strengthening core brands with a focus on water, coffee, and sugar-free tea categories, but sales volume dropped year on year, despite outperforming the overall beverage market, due to the effects of COVID-19. Sales volume for the Suntory Tennensui brand as a whole decreased only slightly year on year with growing demand for large formats for stockpiling at home and the renewal of Suntory Tennensui Sparkling Lemon being contributing factors. For the BOSS brand, despite an active rollout of marketing activities and our efforts to revitalize the market through the new launch of Craft BOSS LEMON TEA, sales volume for the BOSS brand as a whole was lower year on year. In the sugar-free tea category, we carried out the most significant renewal of the Iyemon brand since launch in April, with the aim of creating a bottled green tea that allows customers to enjoy "green tea that is like freshly brewed tea." As a result of this, sales volume for the brand as a whole increased year on year. The overall sales volume for the GREEN DAKARA brand increased year on year with Green DAKARA Yasashii Mugicha remaining strong.

In terms of profit, we undertook initiatives to reduce the cost of ingredients, carried out cost-cutting activities, and also worked to improve efficiency in the use of marketing expenses, but the decline in sales volume and the change of channel mix impacted negatively.

As a result, the Japan business reported revenue of ¥298.7 billion, down 11.1% year on year, and segment profit of ¥11.1 billion, down 51.2% year on year.

< Europe business >

In France, sales volume for the core brands Orangina and Oasis posted a year-on-year decline due to the impact of COVID-19 from March onwards. In the UK, the Lucozade Energy brand recorded a strong performance, but the self-restraint in relation to sporting activity had a significant impact, and Lucozade Sport brand sales volume declined year on year. In Spain, sales volume for the core Schweppes brand was firm in the off-premise channel, but down year on year in the on-premise

- 2 -

channel due to the significant impact of the lockdown.

In terms of profit, despite the contributions from working to improve efficiency in the use of marketing expenses and reducing the cost of ingredients, profit declined due to the impact of the decrease in sales.

As a result, the Europe business reported revenue of ¥87.7 billion, down 21.1% year on year, and segment profit of ¥10.5 billion, down 28.2% year on year.

< Asia business >

In the beverage business, sales slightly decreased year on year both in Vietnam and Thailand due to the impact of COVID-19, but currently are on a recovery track.

Regarding the health supplement business, the Group promoted its initiatives for mainstay product BRAND'S Essence of Chicken in Thailand, but sales of BRAND'S Bird's Nest struggled due to a decline in tourists from China, resulting in a year-on-year drop.

As a result, the Asia business reported revenue of ¥104.5 billion, down 9.3% year on year. Segment profit was ¥14.7 billion, up 15.5% year on year.

< Oceania business >

Regarding the beverage business, in addition to focusing efforts on strengthening marketing for energy drinks such as V, the Group worked on strengthening its core brands in the fresh coffee business. However, sales declined year on year due to the impact of COVID-19.

As a result, the Oceania business reported revenue of ¥23.1 billion, down 9.2% year on year, and segment profit of ¥1.9 billion, down 25.4% year on year.

< Americas business >

In addition to further strengthening sales of the core carbonated beverage brand products, the Group also focused on the growing non-carbonated beverage category, which included water and RTD coffee, but sales declined year on year due to the impact of COVID-19.

As a result, the Americas business reported revenue of ¥38.6 billion, down 3.4% year on year, and segment profit of ¥2.9 billion, down 22.1% year on year.

1. Financial position
   Total assets as of June 30, 2020 stood at ¥1,603.1 billion, an increase of ¥35.8 billion compared to December 31, 2019. The main factors were increases in cash and cash equivalents, and trade and other receivables.
   Total liabilities stood at ¥774.3 billion, an increase of ¥44.5 billion compared to December 31, 2019. This was due in part to an increase in bonds and borrowings.
   Total equity stood at ¥828.9 billion, a decrease of ¥8.7 billion compared to December 31, 2019, due in part to a decrease in other components of equity.
2. Analysis of cash flows
   Cash and cash equivalents as at June 30, 2020 amounted to ¥183.3 billion, an increase of ¥39.7 billion compared to December 31, 2019.
   Net cash inflow from operating activities was ¥43.9 billion, a decrease of ¥8.0 billion compared to the same period of the previous year. This was mainly the result of an increase in trade and other receivables of ¥13.2 billion, and an increase in inventories of ¥10.4 billion, despite profit before tax for the period of ¥35.1 billion, and depreciation and amortization of ¥35.3 billion.
   Net cash outflow from investing activities was ¥30.7 billion, a decrease of ¥0.2 billion compared to the same period of the previous year. This was mainly the result of the payments for property, plant and equipment and intangible assets of ¥31.1 billion.
   Net cash inflow from financing activities was ¥28.9 billion, an increase of ¥92.8 billion compared to the same period of the previous year. This was mainly the result of an increase in short-term
3. • 3 -

borrowings and commercial paper of ¥53.0 billion and proceeds from long-term borrowings of ¥30.0 billion.

1. Consolidated earnings forecast and other forward-looking statements
   The impact of COVID-19 currently spreading globally has greatly changed the business environment of each major country, and the effect on businesses of the Group both in Japan and overseas became severe from March onwards.
   Although business has been on a recovery trend, with increased human activity since June as a result of the lifting of lockdowns and of requests to refrain from business operations, we cannot rule out further impacts due to the risk of COVID-19, unfavorable weather and other uncertainties.
   As a result, the consolidated earnings forecast for the year ending December 31, 2020 has been withdrawn as the Company has judged that it is difficult to estimate financial results currently. Going forward, the Company will announce the forecast once it is formulated after considering these impacts.
   Revision to the consolidated earnings forecast for the year ending December 31, 2020 (from January 1, 2020 to December 31, 2020)

					Profit for the
	Revenue	Operating	Profit before tax	Profit for the	year attributable	Basic earnings
	income	year	to owners of the	per share
					Company
	(Millions of yen)	(Millions of yen)	(Millions of yen)	(Millions of yen)	(Millions of yen)	(Yen)
Previous forecast (A)	1,338,000	117,000	115,500	83,000	70,000	226.54
Revised forecast (B)	-	-	-	-	-	-
Change in amount	-	-	-	-	-	-
(B-A)
Change (%)	-	-	-	-	-	-
(Reference)
Actual results	1,299,385	113,948	112,186	80,080	68,888	222.94
for the year ended
December 31, 2019

- 4 -

2. Condensed Quarterly Consolidated Financial Statements and Significant Notes Thereto (Unaudited)

1. Condensed quarterly consolidated statement of financial position

	Millions of yen
	As at December 31,		As at June 30,
	2019	2020
Assets
Current assets:
Cash and cash equivalents	143,564	183,288
Trade and other receivables	191,240	201,493
Other financial assets	6,200	1,814
Inventories	84,916	93,769
Other current assets	20,287		25,295
Subtotal	446,210	505,660
Assets held for sale	104		0
Total current assets	446,314	505,660
Non-current assets:
Property, plant and equipment	372,036	364,076
Right-of-use assets	47,446	49,190
Goodwill	247,851	245,016
Intangible assets	411,374	393,424
Investments accounted for using the equity method	1,107	921
Other financial assets	17,162	17,000
Deferred tax assets	14,428	17,152
Other non-current assets	9,575		10,704
Total non-current assets	1,120,984		1,097,486
Total assets	1,567,299		1,603,147

- 5 -

	Millions of yen
	As at December 31,		As at June 30,
	2019	2020
Liabilities and equity
Liabilities
Current liabilities:
Bonds and borrowings	74,652	108,525
Trade and other payables	322,455	319,333
Other financial liabilities	38,444	41,065
Accrued income taxes	18,815	16,292
Provisions	1,511	1,690
Other current liabilities	6,026		7,579
Total current liabilities	461,905	494,486
Non-current liabilities:
Bonds and borrowings	132,716	144,090
Other financial liabilities	45,752	48,071
Post-employment benefit liabilities	15,405	15,846
Provisions	2,557	2,210
Deferred tax liabilities	65,835	64,007
Other non-current liabilities	5,561		5,547
Total non-current liabilities	267,828		279,773
Total liabilities	729,733	774,260
Equity
Share capital	168,384	168,384
Share premium	182,349	182,431
Retained earnings	464,705	473,573
Treasury shares	(0)	(0)
Other components of equity	(58,870)		(77,942)
Total equity attributable to owners of the Company	756,568	746,446
Non-controlling interests	80,997		82,440
Total equity	837,565		828,887
Total liabilities and equity	1,567,299		1,603,147

- 6 -

(2) Condensed quarterly consolidated statement of profit or loss

Millions of yen

		Six months ended		Six months ended
		June 30, 2019		June 30, 2020
Revenue	627,770	552,529
Cost of sales	(368,589)		(327,330)
Gross profit	259,180	225,199
Selling, general and administrative expenses	(206,778)	(188,639)
Gain on investments accounted for using the equity method	(7)	(83)
Other income	876	1,520
Other expenses	(2,370)		(2,284)
Operating income	50,900	35,712
Finance income	738	587
Finance costs	(1,716)		(1,186)
Profit before tax for the period	49,922	35,113
Income tax expense	(12,625)		(8,555)
Profit for the period	37,296	26,558
Attributable to:
Owners of the Company	31,770	20,922
Non-controlling interests	5,525		5,635
Profit for the period	37,296	26,558
Earnings per share (Yen)	102.82	67.71

- 7 -

1. Condensed quarterly consolidated statement of comprehensive income Millions of yen

		Six months ended		Six months ended
		June 30, 2019		June 30, 2020
Profit for the period	37,296	26,558
Other comprehensive income
Items that will not be reclassified to profit or loss:
Changes in the fair value of financial assets	219	(691)
Remeasurement of post-employment benefit plans	(478)		(81)
Total	(259)	(773)
Items that may be reclassified to profit or loss:
Translation adjustments of foreign operations	(13,886)	(19,906)
Changes in the fair value of cash flow hedges	(219)	(161)
Changes in comprehensive income of investments	(11)	(51)
accounted for using the equity method
Total	(14,117)		(20,118)
Other comprehensive income for the period, net of tax	(14,376)		(20,891)
Comprehensive income for the period	22,919	5,666
Attributable to:
Owners of the Company	18,438	1,846
Non-controlling interests	4,481		3,819
Comprehensive income for the period	22,919	5,666

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1. Condensed quarterly consolidated statement of changes in equity Six months ended June 30, 2019

Millions of yen

Attributable to owners of the Company

Balance at December 31, 2018 Cumulative effect of adopting new accounting standards

Balance at January 1, 2019 Profit for the period

Other comprehensive income Total comprehensive income for the period

Dividends

Transactions with non-controlling interests

Reclassification to retained earnings

Total transactions with owners of the Company

Balance at June 30, 2019

								Other				Non-		Total
Share		Share		Retained		Treasury		compo-		Total		controlling		equity
capital		premium		earnings		shares		nents of
							interests
								equity
168,384	182,349	420,638		-	(56,548)	714,823	84,054	798,877
			(710)					(710)	(165)	(876)
168,384	182,349	419,927		-	(56,548)	714,112	83,888	798,000
			31,770					31,770	5,525	37,296
								(13,332)		(13,332)		(1,044)		(14,376)
-		-	31,770		-	(13,332)	18,438	4,481	22,919
			(12,051)					(12,051)	(2,818)	(14,869)
										-	(2)	(2)
			(12)			12		-				-
-		-	(12,063)		-	12	(12,051)	(2,821)	(14,872)
168,384	182,349	439,634		-	(69,868)	720,499	85,548	806,048

Six months ended June 30, 2020

Millions of yen

Attributable to owners of the Company

Balance at January 1, 2020 Profit for the period

Other comprehensive income Total comprehensive income for the period

Dividends

Transactions with non-controlling interests

Reclassification to retained earnings

Total transactions with owners of the Company

Balance at June 30, 2020

								Other				Non-		Total
Share		Share		Retained		Treasury		compo-		Total		controlling		equity
capital		premium		earnings		shares		nents of
							interests
								equity
168,384	182,349	464,705	(0)	(58,870)	756,568	80,997	837,565
			20,922					20,922	5,635	26,558
								(19,075)		(19,075)		(1,816)		(20,891)
-		-	20,922		-	(19,075)	1,846	3,819	5,666
			(12,050)					(12,050)	(2,320)	(14,371)
	82							82	(54)	27
			(3)			3		-				-
-	82	(12,054)		-	3	(11,968)	(2,375)	(14,344)
168,384	182,431	473,573	(0)	(77,942)	746,446	82,440	828,887

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(5) Condensed quarterly consolidated statement of cash flows

Millions of yen

Six months ended	Six months ended
June 30, 2019	June 30, 2020

Cash flows from operating activities Profit before tax for the period

Depreciation and amortization

Impairment losses (reversal of impairment losses) Interest and dividends income

Interest expense

Loss (gain) on investments accounted for using the equity method

Decrease (increase) in inventories

Decrease (increase) in trade and other receivables Increase (decrease) in trade and other payables Other

Subtotal

Interest and dividends received Interest paid

Income tax paid

Net cash inflow (outflow) from operating activities

Cash flows from investing activities

Payments for property, plant and equipment and intangible assets

Proceeds on sale of property, plant and equipment and intangible assets

Payments for purchase of shares of subsidiaries Other

Net cash inflow (outflow) from investing activities

Cash flows from financing activities

Increase (decrease) in short-term borrowings and commercial papers

Proceeds from long-term borrowings Repayments of long-term borrowings Redemption of bonds

Payments of lease liabilities

Dividends paid to owners of the Company Dividends paid to non-controlling interests Other

Net cash inflow (outflow) from financing activities

Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the period

49,922	35,113
35,605	35,311
(6)	170
(695)	(576)
1,345	1,127
7	83
(14,006)	(10,420)
(39,921)	(13,231)
36,603	6,730
(2,392)		2,565
66,461	56,874
650	633
(1,270)	(1,311)
(13,974)		(12,297)
51,866	43,897
(29,803)	(31,138)
55	154
(900)		-
(232)		321
(30,880)	(30,662)
11,011	52,959
-	30,000
(27,331)	(32,194)
(25,000)		-
(7,568)	(6,864)
(12,051)	(12,050)
(2,818)	(2,979)
(136)		-
(63,894)		28,869
(42,908)	42,104
146,535	143,564
(300)	(2,381)
103,326	183,288

- 10 -

1. Notes to condensed quarterly consolidated financial statements (Going concern)
   The condensed quarterly consolidated financial statements are prepared on going concern basis.

- 11 -