Ajinomoto Co., Inc. (2802.T) Earnings Call Transcript & Summary

Good morning. Thank you for joining Ajinomoto's business briefing meeting on Latin American business despite your busy schedule. This is Kaji from IR. At the outset, I'd like to introduce today's speakers. Representative Executive Officer, President and CEO, Mr. Nakamura; Executive Officer, General Manager of Latin America, President of Ajinomoto Brazil, Ms. Yamamoto. Hello. Nice to have you. Those 2 are the speakers. Yamamoto is joining from Brazil. Other than that, we have participants from Ajinomoto, Mr. Shiragami, Representative Executive Officer and Executive Vice President; Mr. Sasaki, Executive Officer and Senior Vice President, General Manager, Corporate Division; Executive Officer and Senior Vice President, General Manager, Food Products Division; Masai, Executive Officer and Senior Vice President, General Manager Bio-Fine Chemicals division, Maeda; Executive Officer and Vice President in charge of Finance and IR, Mizutani; Executive Officer in charge of diversity and HR, Kayahara; Executive Officer in charge of sustainability, Ono. Nice to have you. So those are the 7 participants. Today's proceedings. First, Mr. Nakamura will make presentation on Latin American regional strategy, followed by growth strategy of Ajinomoto Brazil from Yamamoto and then Q&A session. For the whole session, we are scheduling 1 hour and 30 minutes. Today's material is uploaded on our IR website. So please refer to them. Today's content will be recorded including the Q&A session and will be uploaded on our IR website. I would like to have your understanding. So we would like to start the meeting. Nakamura-san, please.

Thank you very much for taking time out of your busy schedule to attend Ajinomoto's business briefing. I will first discuss the business activities of our group in the Latin American region and our strategy for the future growth. I would like to share 3 points with you today. Have you changed the slide? Okay. Good. First, in Latin America, we operate a broad range of businesses in food and Bio & Fine Chemicals, and we have achieved solid growth based on this strong business foundation. Two, with COP30 taking place in Brazil this November, we will further accelerate our sustainability initiatives centered around Amino Science, creating positive impact while accelerating business growth; three, looking forward, 2030 and beyond, we will pursue new business opportunities alongside expanding existing operations, strengthen intangible assets and global collaboration to achieve further growth. Through these efforts, we will realize the Ajinomoto Group's aspirations and ASV, leading to sustainable enhancement of the corporate value. This is our organizational structure in Latin America. Under the umbrella of Ajinomoto Brazil, we have branches in Argentina and Colombia, Ajinomoto Peru, overseas branches in Chile and Bolivia as well as Ecuador Cepacol and Ajinomoto Mexico, are all covered by the Latin American regional headquarters. The regional headquarters overseeing all of Latin America is located in Brazil. The key hub was in the area. It works in coordination with business and corporate divisions in Tokyo to formulate and advance regional strategies for the entire area. Our group operates under this regional headquarter system for governance and to manage operations by distinguishing between matters advanced globally and those decided locally. Now a brief introduction to Ajinomoto Brazil and Ajinomoto Peru, which play central roles in Latin America. First, this is Ajinomoto Brazil. With 4 factories and approximately 3,000 employees, it is the largest base within our group in Latin America, established in 1956 with a history of approximately 70 years. Our company focused on the post-war resumption of Japanese immigration to Brazil and made a full-scale entry into the Latin American region, expanding the business together with Brazilian economic growth. Initially, we imported and sold the product Ajinomoto. But starting in the 1970s, we began production using local sugarcane. Subsequently, we expanded our product portfolio to align with local food cultures and needs. In the food sector, this includes the flavor seasoning, SAZON, and powdered beverages, MID; various amino acid for pharmaceuticals and foods agricultural materials produced using amino acid fermentation by products; and amino acid lysine preparation for cattle such as AjiPro-L doing a wide range of business in food and Bio & Fine chemicals. The photo in the lower left shows our R&D members. Having local development teams in each country is one of our strengths. Ms. Yamamoto, who succeeded me as President of Ajinomoto Brazil and Head of the Latin America division in April 2025, will explain our growth strategy and specific initiatives later on. Next is Ajinomoto Peru. With approximately 1,500 employees in Peru, it is the second most important base in the region after Brazil. It began selling the product Ajinomoto in 1968 and developed flavor seasonings like Dona Gusta, tailored to the local culinary culture that favors chicken-based soups; and in the 2000s, established instant noodle culture in Peru with Aji-no-men, alongside the company's growth we've contributed to the development of Peru's food culture. In recent years, our business performance has expanded strongly, including the export. The current President, Mr. Iwao is a Japanese Brazilian born in Brazil. After joining the R&D department at Ajinomoto Brasil, he worked in the overseas food division in Tokyo and was seconded to Ajinomoto Indonesia, and then served as Head of the Food business division at Ajinomoto Brazil. Drawing on his diverse regional business experience, he assumed the role of President of Ajinomoto Peru in 2022, while he continues to demonstrate strong leadership. In the Latin American region, we have developed and grown both our Food and Bio & Fine Chemicals business, primarily in Brazil and Peru. As shown in the slide, in the food business, we manufacture and offer products from Umami seasonings Ajinomoto to those rooted in local food culture, as explained earlier, the Brazilian SAZON and Dona Gusta in Peru, instant noodles like Aji-no-men tailored to local needs. We are also expanding in 2 neighboring countries. In Bio & Fine Chemical, we manufacture and sell various products utilizing amino science, including amino acids for pharmaceuticals and food. Furthermore, Brazil serves as a key global manufacturing base for MSG and amino acids. Beyond these business developments, we will further expand product categories in the food business, grow in neighboring countries and further accelerate our Bio & Fine Chemicals and convergence businesses in Latin America. We believe there remains significant overall growth potential. Latin America is a vast region. And while logistics and infrastructure post challenges, our company has built a robust distribution network. As shown here, we have manufacturing bases in core countries, Brazil and Peru, from which we export and sell products to neighboring countries, expanding our business throughout almost all of Latin America. As mentioned earlier, Brazil also serves as an important global amino acid manufacturing base, supplying both products to the entire Ajinomoto group. Sales in Latin America, as a whole, have already reached JPY 125 billion. We will steadily expand our business in Brazil, where the scale of the business is large, while further accelerating the rapid growth in Peru and promoting growth in neighboring countries such as Bolivia and Colombia in order to achieve high business growth throughout the Latin America. So why has Ajinomoto achieved such high growth in Latin America? One reason is our robust business foundation and overwhelming presence in the region. In particular, in Brazil and Peru, our product market share and awareness have been high, thanks to our expansion to date. In Brazil, our flagship flavors seasoning, Tempero SAZON, has a market share of approximately 70%. In Peru, our Umami seasoning Ajinomoto and instant noodles, Aji-no-men, have nearly 100% market share. And our flavor seasoning, Dona Gusta, also has an extremely high share of approximately 80%. Ajinomoto Umami seasoning has an extremely high awareness rate of 93% in Peru, and SAZON in Brazil has an extremely high awareness rate of 96%. Leveraging the strong brand equity, we will accelerate the development of new products. Umami, one of the strengths of our food business has high penetration in areas where rice farming and fishing is common, and thus, rice and fish are consumed. And like ASEAN, our group has developed its business in Latin America based on this food culture. Latin America has a population similar to ASEAN and a large economy, but our group's sales in Latin America are still only about 1/3 of ASEAN, and we believe the region still has great potential. In addition to the growth potential in Brazil and Peru, we also see significant room for growth in neighboring countries. Furthermore, compared to ASEAN, many countries in Latin America share common languages and food cultures, making it easier to pursue cross-regional initiatives than in ASEAN. Currently, we are focusing on basic seasoning such as the Umami seasoning Ajinomoto, the previously mentioned Brazilian, SAZON and Peruvian Dona Gusta However, in recent years, with the economic development of each country, the need for more convenient meals has increased. And sales of Aji-no-men instant noodles made in Peru have grown strongly, with exports also increasing significantly. We will strengthen our expansion in the area going forward, including new initiatives such as the frozen food business we launched in Brazil. To realize this growth potential, we will rapidly develop new products, services and solutions that meet local needs, further strengthen our relationships with customers and accelerate the organic growth of our existing business. We will also leverage the strengths of amino science to maximize the synergies between food and bio and fine chemicals, thereby further expanding our business domains. This growth will be supported, first and foremost, by strengthening our valued intangible assets, brand equity, human capital and digital transformation. Furthermore, as for deepening global collaboration, when I was in Brazil, I felt that disseminating information such as cutting-edge R&D information from Tokyo to each region would lead to greater innovation on the ground, and I am eager to work on deepening such collaboration in each field. Using our regional headquarters as a hub, we will evolve our business operations into more agile and effective ones, while also contributing to the creation of local innovation. By rapidly implementing these initiatives, we will further expand our business in Latin America and contribute to the growth of the entire Ajinomoto Group. In Latin America, we are linking our Food and Bio & Fine Chemical businesses to put ASP initiatives into practice such as improving nutrition, supporting agriculture and reducing environmental impact through products and services that utilize AminoScience. And we believe that our challenge in Latin America are important initiatives that will lead to value creation for the entire Ajinomoto Group. Going forward, the entire company will continue to work together to evolve -- the management, realize our purpose and strive for business growth. Now I would like to ask Yamamoto-san to tell us more about Ajinomoto Brazil. Yamamoto-san, over to you.

Thank you very much. I would like to introduce you Ajinomoto Brazil and its growth strategy. Hereafter, I will refer to Ajinomoto Brazil as ABR, and Ajinomoto Peru as APU. Once again, let me self-introduce. My name is Naoko Yamamoto. I joined Ajinomoto in 1991. And since then, I have been responsible for the food business in and out of Japan. After 2 overseas assignments, I served us Head of Human Resources at Ajinomoto and Vice President of AGF in 2020. And this year, I assumed the role of President of ABR and Head of the Latin America division. By the way, in 2022, I was in HR. And in this IR Day presentation, I talked about HR Capital. Here is what I will be introducing today. First, I will provide an overview of ABR as a whole, followed by our core businesses, and finally, the intangible asset that supports our growth. So first is ABR company overview. As was mentioned by Mr. Nakamura earlier, ABR was established in 1956, and will celebrate the 70th anniversary next year. Sales amount to approximately JPY 100 billion with 3,000 employees. We operate in 3 business segments. Right top, the food business that sells various seasoning and food products to retailers and food services. The second is the Food Ingredients and Agriculture business with sales products like MSG through B2B channels and sales coproducts generated -- or CoPro, we call it, generated during the manufacturing processes as fertilizers; and Bio & Fine Chemical as the last one, which sells amino acid and amino acid-derived products to B2B customers. This is a map of South America and Brazil. I'm in Sao Paulo. We have bases in Brazil, Colombia and Argentina. In addition to our headquarters in Sao Paulo province, we operate 4 factories. The breakdown of sales is as follows. You can see on the left is the pie chart. The food business accounts for approximately 50%; the food ingredients in Agri accounts for 30%; and the Bio & Fine Chemical business at 20%. Compound annual growth rate since FY 2018 is about 8%. We aim to realize sustained growth through FY 2030. Earlier, it was mentioned, one characteristic of ABR is that it serves as a supply base for MSG and amino acid that supports the entire group. Using a button Brazilian sugarcane as raw material, we stably produce and supply high-quality products, thereby contributing to the entire group. From here, I will introduce each of ABR's businesses. First, the food business. As you can see on this slide, our food business covers a wide range of product. Left-hand side, the seasonings business centered on SAZON, which has a strong foundation and has been growing steadily for many years. And next is the processed food, instant soups and the MID, the powdered beverages; and the supplement and frozen foods, where we anticipate new growth as well as commercial products. Right bottom is we have a wide range of products for the food services. So we are expanding our business not only in Brazil, but also in Argentina and Colombia, where ABR has basis and export our products to countries throughout Latin America. Regarding sales in the food business, we have maintained growth. As you can see, from FY 2018, CAGR of 8% and 9% is seen here. As you can see from the graph, the red, the dark red, seasonings, account for primarily large share, and this segment is currently our growth driver. Going forward, we aim to achieve even greater growth by expanding into other areas as well. Next, in order to help you visualize our products, we will introduce Tempero SAZON, a key product within our seasonings portfolio about Tempero SAZON via video. [Presentation]

So how did you find it? Did you get a sense of what Tempero SAZON is about? Let me explain more about Tempero SAZON using the slides. Tempero SAZON was launched in 1988 and is a flavor seasonings loved by Brazilians. We take pride in the seasonings that it has been used for generations by our customers, its use being passed down within families and has become deeply integrated into Brazilian food culture. Brazilian food culture has been influenced by various ethnic groups, including Portuguese, African, indigenous, Italian and Japanese; features diverse regional characteristics brought by the immigrants. For example, this right-hand side, you can see the photograph Feijoada, stew of black beans and pork is very popular. And in this menu, it's often eaten at the homes, and SAZON is used in these menus. And Tempero SAZON is widely used in many of these dishes adding Umami, flavor and color. So frequently, they are used in diverse menus in Brazil. Tempero SAZON is the strength of our food business. It was mentioned in the video as well, but market share of approximately 7% -- 70% and brand recognition of 96%. In 1996, Its love-themed commercial became a hit. Since then, SAZON has become strongly associated with the theme of amortization or love in Portuguese. This has made SAZON more than just a seasoning. It symbolizes love for family and loved ones. This element has become an emotional benefit for SAZON, leading to stronger consumer support. On the right bottom, you can see, in recent years, SAZON has also sponsored the reality show program, the Big Brother Brazil, a national phenomenon in the country. And that has also contributed maintaining its high recognition and market share as well as capturing users and the younger generation. Next is the distribution network, which is also one of our strengths and capability to bring things and products to our customers. We cover all of Brazil with approximately around 80 exclusive distributors. Brazil has very vast land. It is 22.5x the land area of Japan with approximately 80 logistics network is not very developed. And the tech system is very complex. And that makes nationwide business expansion challenging. So taking approximately 40 years, we have collaborated with those distributors and partners to establish a system capable of delivering products throughout Brazil. Thanks to this, our distributors love and treat our products as if they were their own, and as a result, provide exceptionally attentive service throughout Brazil. We firmly believe that our current position is entirely due to the cooperation with these distributors. Here, I would like to talk about -- more about the future. Building on the strength, as I outlined, I will explain how we plan to grow our food business going forward. This is, on the vertical side, the product category; and on the horizontal, you can see the customers; more to the left bottom means existing. So existing category, existing customers, I have already mentioned about Tempero SAZON. We have a very strong position. And in this area, we can propose new cooking applications, introduce product with more distinctive concept and also introduce product with more accessible, affordable concept to attract new customers taking on our strong position. And we also want existing customers to use our products in more cooking scenarios. For example, as a new cooking proposal, we have seasonings for making risotto with left-over rice. For those who stronger focus on cooking, we offer the hub seasonings. And last year, we launched a smaller size of SAZON as a more affordable option. That's what we launched last year. And through those efforts and efforts, initiatives like these, we were able to capture customers we couldn't reach with existing products alone, such as younger generation with strong sustainable values. Furthermore, we would focus on leveraging existing -- using the existing businesses, cash generated from strong existing businesses, we want to play in new categories. Last fiscal year, we launched frozen gyoza. Thanks to all who supported, it's currently performing very well. Going forward, we plan to expand the category and aim to handle a wide range of Aji in frozen food products. Furthermore, as a symbol of the integration of Food and Bio & Fine Chemicals, we will strengthen the supplement sector, including Amino Vital. At the end of last fiscal year, we launched Amino Mov, a supplement targeting middle-aged to senior women. And moving forward, we will thoroughly nurture the products we have launched, provide a new value to society while contributing to food and health in Brazilian society, and we would like to accelerate our growth. Next, I would like to introduce our food ingredients and agri business. In the Food Ingredients business, we sell MSG to processing customers and products for improving texture and flavor on a B2B basis. So we sell functional products. And we also supply these products to our global affiliates. Agribusiness, on the right-hand side, like I mentioned in MSG, we utilize co-products generated during the MSG production process to sell products such as fertilizers. Relevant to this, this is the bio cycle in which we are engaged in, and let me introduce this bio cycle. In Thailand and Vietnam, this is conducted. But at ABR, similar to these countries, we are also engaged in the bio cycle. In Brazil, sugarcane is fermented to produce MSG. Once the fermentation finishes and amino acids are extracted, the remaining liquid known as the coproduct, still contains a lot of nutrients. And we would use that and sell that as a fertilizer product to local farmers. Local farmers would grow sugarcane using this fertilizer. And that sugarcane then becomes raw material for MSG, therefore, creating a cycle. Through these efforts, we are reducing greenhouse gas emission, GHG emission. And from the upper stream, we are able to ensure a stable supply of sugarcane and therefore, contribute to building a sustainable food system. Words alone may be difficult for you to understand, so we have prepared a video which explains this. Please enjoy the video. [Presentation]

In addition to the biocycle initiative you just saw, there is one project that Brazil is engaged in, and I would like to introduce you that. A press release was announced at the end of March. We are participating in cooperation with the Japanese government assistance program for Brazil. And this is a verification study for the recovery of degraded pasture verification. YKK Brazil has pasture. Last week, I just visited there myself. It's 1.7x of the Yamanote line area. And we are testing our products on this degraded pasture. We are now verifying the effectiveness of our products. And through this project, we hope to demonstrate the effectiveness of our products, thereby further contributing to the environment and society, which is ASV while growing our business. Next, I would like to introduce our third business, which is Bio & Fine Chemicals business. This business offers supplements and IV fluids, and amino acid is used in this, and also amino acid-derived products such as moisturizers using cosmetics and surfactants used in detergents as well as value-added feed for livestock is what we offer in this business. Next slide, please. This graph is from a survey conducted by consulting firm, Bain & Company. The red bar represents people whose environmental concerns have increased over the past 2 years. This shows that environmental concerns are growing globally. But upon looking at this result, we saw an increase, particularly notable in Brazil. Against this backdrop of changing awareness among people in Brazil, we want to contribute to solving climate change issues with solutions that utilize Amino Science. And at the same time, we believe that this is an opportunity to accelerate business growth. Now based on that backdrop from here on, I would like to talk about AjiPro-L, which leverages Amino Science and also introduce about sustainable solution examples. As you all know, GHG emissions related to cattle rearing account for approximately 9.5% of global GHG emissions. And this is an urgent issue as one of the causes of global warming. AjiPro-L is a product that can contribute to this. Let me explain the product overview. In raising dairy and beef catalyzing is necessary. But if lysine is given as it is, it's broken down by microorganisms in the rumen of the ruminant cattle, and the nutrients do not reach the small intestine. However, by utilizing our proprietary granulation technology, lysine can pass through the rumen and reach the small intestine as a nutrient. Using AjiPro-L, this allows you to optimize feed such as soybean meal, which was previously given to cattle, and also contributes to reducing CO2 generated during feed cultivation and procurement as well as N2O generated from manure. Although this varies depending on the farming conditions, it is possible to expect a reduction of 1 ton of CO2 per cow per year as well as reduction in feed costs of approximately $100. Currently, [ 2 of ] the major dairy and meat factors in Brazil, we are promoting understanding of the AjiPro-L, and collaboration efforts with these companies are progressing steadily. By strengthening our collaboration with these partners, we hope to achieve even greater results towards reducing GHG emission Brazil is rich in nature, and both agriculture and livestock farming are very thriving. And 6% -- it exceeds 6% to the country's GDP. In the advanced countries, it is below 1%. So engaged in these initiatives in Brazil is something we find to be highly meaningful. By offering solutions, we can make contributions to a sustainable food system. And hence, we would like to dramatically grow our business while making these contributions. Now relevant to this, I would like to talk a little bit about the COP 30. As you know, COP 30 will be held in Belem of Brazil. It's the entrance of Amazon in November of this year. And we plan to introduce AjiPro-L and our efforts in the recovery of degraded pasture verification study. And we would like to communicate to the world that we have concrete solutions that are effective in combating global warming. There are many stakeholders that will attend. And since it's a great opportunity, we would like to also strengthen our network and tie that to business opportunities. This will be my final part, and I would like to introduce our efforts regarding intangible fixed assets. Let me start by introducing our high-speed development system. Nakamura-san cultivated high-speed development system in the electronic materials business and has spoken a lot about this. And so I'm sure many of you are familiar with this. When he was the President of ABR, this initiative started. So it has taken foot not only in development, but also in corporate and also in the factory, this initiative and system is being leveraged. One example is our efforts to develop frozen gyoza, which we will introduce today. As mentioned in his presentation, this high-speed development system is about anticipating needs and acting first and starts by gaining a deep understanding of the market and consumers. In Brazil, we have identified that the restaurant industry is facing labor shortages. Therefore, the needs for convenient food is on the rise. And also the development of cold chains for transporting frozen foods have made advancement. And in Brazil, they eat meals, side dishes and rice, which is well balanced. And due to this, we have found potential in frozen Gyoza. In order to deliver to the market as quickly as possible, we have considered [ varied ] options, but we have decided to use our group's own assets. So we're going to start with import and also consider export, and test sales is conducted at some of the cities. So while our initial strategy was to expand into restaurants, primarily serving Japanese food, we have found that the delicious taste and ease of preparation of frozen Gyoza will have widespread acceptance. So we are now expanding our efforts to incorporate Gyoza into local food culture as an appetizer and restaurants serving local food. And also in the supermarket, we are selling this in the deli section, and we would like to expand channels going forward. These efforts are supported by the corporate culture that we have right now, which is one of the intangible assets. Based on the spirits of fail fast and learn faster, this is common in ABR. We would like to take on challenges without fear and work as one team throughout the entire value change. These kind of product launches usually takes about 1 year or even longer. However, in this case, we were able to achieve this in 6 months. And we believe that our established high-speed development system is a major strength of ABR, and we will continue to proactively take on new challenges. The next topic is about corporate branding. On the left side of the slide, there is a graph. And this shows the difference between awareness of SAZON and the number of people who know that SAZON is actually a product from ABR. While 96% of the people are aware of SAZON, only half are aware that it's an ABR product. People who know 96 -- who know SAZON, but don't know that this is from Ajinomoto, if we tell them that this is from Ajinomoto, the likability actually increases, which is encouraging results. And that's why we would like to, through our communication, link the two. And this is an effort that we have been continuing. There is still room for improvement. However, for SAZON advertising, we are proactively conducting corporate branding so that we can be able to create an ideal relationship between the SAZON awareness and the fact that the product is from ABR. In fact, last year's survey, I said earlier that the people who know SAZON is from ABR is 51% this year, but last year, it was 46%. So although it's a few percentage points, in a short period of time, I think we are seeing some effects through communication and advertising, and we would like to further strengthen this going forward. This will lead to further strengthening our existing businesses. And it will also accelerate new business. The next topic is about digital transformation. ABR began its digital transformation efforts in 2017 with all employees actively participating with ownership. On the right-hand side, this is automating the factory. And in the middle, this is using data. So in another words, data-driven management. And through these initiatives, we are promoting digital transformation. On the left-hand side, where it's just e-commerce, I would like to introduce this a little bit more. In 2022, MeuPedido, a B2B platform was launched. We believe that this is a unique initiative. Like I mentioned earlier, the distributors would use this platform to distribute products to the retailers. So distributors would use this platform to sell not only our products but other commodities and food products. There's still room for growth in this area. But the transaction volume in fiscal 2024 is expected to expand 6.6x compared to the previous year, and we would like to further promote this platform. As the final topic for intangible assets, I'd like to introduce our human capital initiatives. As you all know, human capital are one of the most important assets supporting our business. And we are undertaking a variety of initiatives to develop them. One is a global talent rotation initiative. We have employees seconded from Brazil to other countries where they can share the experience and know-how they have gained in Brazil. And they also learn from the new local area to take back to their home countries. This initiative not only leads to individual growth, but it also promotes knowledge sharing globally and also strengthens D&I so that we can strengthen our power and also strengthens our competitiveness. We currently have 12 colleagues from Brazil working in various countries, including Japan and Thailand. And next month, one other member will be seconded to Malaysia. So there will be a total of 13 colleagues. And today, we would like to introduce 2 of them who are seconded in Thailand, and this is Normando. And the other member is currently working in Japan, and her name is Naralice. So we would like to do a brief self introduction by them and would like for them to talk about what kind of experience they are gaining from their new destination. So let us start off with Normando-san.

Thank you, Nakao-san. So hello, everyone. It's a great pleasure to be here today. My name is Normando Filho. So I have now worked with Ajinomoto for almost 25 years, building my career across sales, marketing, digital, data science and the supply chain management in Brazil. Since July last year, I have been based in Thailand. In Thailand, I handle 2 positions. First is a Deputy Managing Director of Ajinomoto Sales Thailand. And the second position as a Director of Solution Ingredients, S&I, at Ajinomoto Thailand. So here, here in Thailand, I'm supporting the evolution of our distribution system in traditional trade, we call TT, and the food service. We are also focusing on talent development to building a capable future-ready teams. What I learned in Brazil has been essential and the Thailand has added new perspectives that I intend to bring back. Ajinomoto Brazil route to market and the distribution system model shows how long-term partnership and disciplined execution support sustainable growth. So when I return, 3 strategic initiatives I aim to implement are: number one, agile product development through cross-functional teams accelerating innovation; number two, slide asset expansion with our local partners, enabling rapid testing and scaling new categories; and number three, integrate B2B strategies in food service, S&I to create stronger synergies and create value propositions. So this international experience is broadening my perspective and enabling me to contribute to Ajinomoto global growth agenda by connecting market, optimizing operations and develop talent to drive value creation. So together, I believe we can continue to build sustainable growth and a stronger connection across marketing. Thank you very much.

Normando-san, thank you very much. The next member is Naralice-san. Please go ahead.

Hi, everyone. Good morning. My name is Naralice Fuzinelli, and it's a pleasure to be here today talking to you. I started my career at Ajinomoto do Brazil in 2009, right after my graduation. It was my first job. And over the past 16 years, I have grown with the company. I began in the technical center where I spent 10 years focusing on the development of our core technologies. And after that, I moved into sales and business roles. Since 2022, I've been based at Japan headquarters, where I'm in charge of the global production strategy for the amino acids business. This role has deepened my understanding of customer values, market trends and the strength of our production sites and business globally. So when I return back to Brazil, I will bring this broader and more integrated perspective. My priorities will be 3. First, enhance the collaboration between Brazil and global teams to share best practice and accelerate innovation. Second, expand the production capacity and portfolio by leveraging insights from our customers and global network in both business and technical areas. And third, support the development of a strong customer-focused and globally oriented team to drive value creation. So as a result of my experience from the technical roles to global strategy, I feel ready to drive value creation through brother perspectives and strategic insights. So I'm confident that by working together, we can further advance our position in Brazil, not only as a strong local player, but also as an even more integrated and competitive part of our global business. Thank you very much.

Thank you, Naralice-san. With Normando-san, I have online conversations. And when I return to Japan, I met Naralice-san. And the 2 seem to be full of energy while they are working, and I find them to be highly reliable. And these are initiatives that we would like to further reinforce going forward. Finally, let me conclude my presentation with a comment as the General Manager of the Latin America. ABR has both food and bio and fine chemical business functions. And by maximizing these strengths and by utilizing amino science power, we will lead the growth of Latin America as a whole. Furthermore, together with APU in Peru, where business is growing rapidly, we will lead each country and neighboring countries and companies by pursuing synergies. Through these activities, we will contribute to the well-being of the people and society of Latin America and ultimately from Latin America to the entire world, and this will lead to increased corporate value for the Ajinomoto Group. This concludes my presentation. Thank you very much for your attention.

Thank you very much, Nakamura-san and Yamamoto-san. We would like to now move into the Q&A session. First is how to do the Q&A. [Operator Instructions] Those participants from overseas, you are able to ask questions in English. We have simultaneous interpretation service. If we have too many participants who want to ask questions, so we may not be able to entertain all of them. So we would like to start the Q&A. [Operator Instructions] There's the first question. Saji-san from Mizuho Securities, please.

I have one question to Brazil Ajinomoto's seasonings, flavor seasonings and foods business. As was mentioned by the President, I think the scale is low, but it is now going to expand the scale with ASEAN. What is the difference between ASEAN and your business? I think in ASEAN, you are using the route sales. And in Brazil, you have strong partnership with AT and over distributors that you have mentioned. So I think these 2, what are the differences in the strategies going forward, especially for the food and seasonings? If you look at the margin, flavor seasonings, ASEAN is more than 19%, but Latin America is 3 to 5 points reduced. So is this business for Brazil Ajinomoto, will be able to improve your profitability? And at this point of time, you have difference because this comes from the business model difference, then it may be difficult. So in order to reduce the scale difference here. That may be one of the strategies. Could you elaborate on this point?

Yes. Saji-san, thank you very much for the question. Yes, first of all, ASEAN and Brazil, well, Brazil's history of flavor, seasonings flavor is a bit different from ASEAN. I think Latin America, they started with Ajinomoto, and then they went into the flavor seasonings. Sorry, that was ASEAN. ASEAN started from Ajinomoto and then started to flavor seasonings and moved on to other seasonings. But in Latin America, the situation different. Peru, yes, it started with Ajinomoto. But in Brazil, the business started from the SAZON, which is a flavor seasonings. And centering on that -- and that was a driver of our business in Brazil. So compared to ASEAN, Latin America, where most population is there, the Brazil, we have different business model or the history. So I think it started out from the growth of the flavor seasonings and then to menu flavorings. I think people would not do most of the cookings in different ways. So menu flavorings is not growing so much, but rather, they went into a more convenient type of food, like noodles and frozen foods. And so therefore, Masai-san, would you like to supplement, and maybe Yamamoto-san, if you want to provide some supplementary comments, please do so.

So Masai would like to talk about the seasonings. I think there lies difference in the area -- land area. Compared to ASEAN countries, Brazil is very vast. They have Amazon jungles. So I think similar sales models and the sales teams are not able to reach the retailers. This was a successful business model in ASEAN, but it was difficult in Latin America. 30 years ago, Ajinomoto started to rely on reliable distributors around the region. So I think compared to Thailand, Indonesia, Vietnam, ASEAN countries, I think we have lower own the salesperson. I think this is a very efficient sales and distribution model. And in addition to that, it was mentioned that because this is a wide land of area, logistics is quite difficult. So we had to have a longer and strong relationship with the distributors, including the logistics. So that is one feature of Brazil. As was mentioned by Mr. Nakamura, Peru, we have a business model close to ASEAN. So within Latin American countries, I think there lies differences. From the processed food perspective, already, we have been in this business Aji-no-men is a model which is growing, and this is being exported to neighbor countries. Because of the capacity issue, we had a bit of problem. But the Peru last month, we have now newly established noodle facilities, noodle-producing facilities. So we are able to enhance this business. In addition, Argentina, Peru and Paraguay, I think they have different food cultures. So we would like to think about most suitable expanding strategies. Together with Yamamoto, I went to those countries and did the market survey. That's all from me.

And one confirmation from myself. So that means that you have new teams being launched. The margin itself for new business, would you have higher margin? Or are you going to improve the margin in existing product? Can we expect improvement of margin in existing products?

Yes. This is Nakamura. For the margin, improvement, yes, we made us as a factory that we are going to be seeing and we want to improve the existing business so that we can make improvement of margin. And for processed food, especially frozen food outside Japan, I think they could, I think, capture more margins. So from both sides, we will be doing our most efforts. Thank you. Thank you very much, Saji-san.

Next, from Goldman Sachs, Yamanaka-san, please go ahead -- excuse me, it was Miyazaki.

I'm Miyazaki from Goldman Sachs, and I have 2 questions that I would like to ask. This could be overlapping or as an extension of the previous question by Saji-san. About sales, in Peru, because of historical background, you said it's very similar to ASEAN. So up until the phase of menu seasoning, how far have you made progress? Are we in a favorable condition where we can expect improvement going forward? And looking at a few graphs, until 2030, the growth curve seems to be going upward. So through expansion of existing business, how much can we expect? And in addition to that, how much more new business would you need to generate? If you can please explain about that as the first point, that would be very much appreciated. And number two is about the operating margin. In the last few years, I understand that the margin has improved. Is that really the case? And because of new trial, is it actually flat? And in the next few years, is the OP margin going to improve with the new, for example, fermentation process and/or perhaps due to the scalability of processed and frozen food? So in looking towards 2030, I see that you are foreseeing improvement. But what is your assumption in the next couple of years in terms of OP margin perspective?

Miyazaki-san, thank you for the question. To your first question about the sales and your question about Peru. Now in the case of Peru, Ajinomoto, itself, is a big product as well as Aji-no-men and Dona Gusta, which is a flavor seasoning. These 3 are drivers. And recently, Ajino Shirao, which is shoyu or soy sauce is growing. So these are the 4 core businesses that are driving the sales. Whether if there's room to grow until menu seasoning, yes, we believe so. However, as mentioned earlier, Brazil and also Peru, sales is not that significant when it comes to menu seasonings, and the number of product is still yet insufficient. So we would like to have positive expectation. But in terms of leapfrog, I think there is a trend towards convenient food. And that's why we have started frozen food in Brazil. And in Peru, we have started studies so that we can be able to pursue growth in the processed food. Now to your second question about the margin. Looking at the recent margin, appropriate price increases have been conducted so that we can be able to secure profitability. This is one thing that we have communicated and also continuous cost reduction, introducing new technology and also removing redundancies is what we would like to pursue growth. Gyoza is imported from Thailand and is sold. So in terms of improving profitability, if there is enough volume demand, we would like to domestically manufacture Gyoza in Brazil so that we can be able to increase profitability. That would be it from myself. Masai-san, would you like to add anything?

Yes, I, Masai, would like to make one point. I'm not able to disclose the details today. However, in fact, both Brazil and Peru, efforts are being made. Tremendous efforts are being made to reduce costs. And I may be repeating myself, I cannot share with you the details, but cost reduction measures will prove to be effective in the next 1 to 2 years. So this is where we have positive expectations on. Sorry, that's my answer may be lacking the details. Thank you.

Just one more point for me. Sales has been growing stably. And I think your plan is that it will continue to grow stably. So due to scalability, can we foresee improvement in OP margin? Or is it the cost reduction efforts that is going to impact profitability?

I think it's both. So the cost reduction efforts and also increasing distribution and also expanding region for -- so it's both growing sales and also cost reduction efforts.

Yamamoto-san, if you would like to jump in and make further explanation, that's fine.

No, I think enough has been said so I'm fine. Thank you very much.

Thank you very much, Miyazaki-san. Next, we have a question from overseas. Marian from Bernstein, please.

I just wanted to ask you a question about the importance of the U.S.A. as an end market for Ajinomoto Latin America. Can you give us a sense of how big the U.S. market is in terms of revenue and future growth for Latin America -- for your Latin American business? It would be helpful if you could talk about the key products that you're selling to the U.S.A. and how this business is being impacted by tariffs.

Thank you very much for your question, -san. So I think your question was for overall Americas business, not just Latin America. Latin America and North America, we have different -- yes, I think important...

Sorry. Can you clarify the question? The question was about exports from Ajinomoto Brazil to the U.S.A and Ajinomoto Peru to the U.S.A. How important is that?

Thank you very much. Yes. Brazil, yes, it is local consumption, local production. But for Bio & Fine Chemicals, I think to around the world, Brazil is exporting. This is a production hub. So from Brazil to U.S., yes, we do have exports to the United States from Brazil. Yes, we did not anticipate Trump tariff, and that's a very big impact, especially amino acids and part of the co-product and cosmetics products, this is impacted, but that is converted or transferred to other countries. I think cosmetics and co-products are exported to other countries so that we are able to reduce risk, minimize the risk. That's globally done. Bio & Fine Chemicals is headed by Mr. Maeda. So Maeda-san, can you comment on this?

Yes. Thank you very much for your question, -san. Can you go to Page 7 of Yamamoto-san's presentation, you can see export to Brazil -- from Brazil to others. I think Bio & Fine is partial. And part of that goes to U.S. That is the raw material for cosmetics and amino acids for pharmaceuticals and so forth, partially of them. I think this is going to be impacted by Trump tariff. Basic policy for us is for -- of course, we want to pass through the prices we are now negotiating with the customer. That's long-term reduction of cost. But of course, from the short term, we have to pass through the prices to the customers and reduce our costs on our side. That's for short term.

Next, Igarashi from Daiwa Securities.

My name is Igarashi from Daiwa Securities. Just one point for me. And I'd like to hear from Yamamoto-san. So in Latin America, namely Brazil, is there a change in needs or changing consumer behavior that you see within the food culture? And what kind of change in needs would you like to capture? Now in the frozen Gyoza, you talked about convenience and also time-shortening needs. So if there's any other needs in which you have positive expectations for in the future, please share that with us.

Thank you for the question, Igarashi-san. So your question is in Brazil, if there is any change in needs for the food culture. Did I understand your question correctly? Okay. So as Igarashi-san, you have mentioned, people are looking for convenience and time-shortening methods when it comes to cooking. And although we don't have many offerings, there are light snacks and light meals in frozen food that is growing significantly. Looking at the past 5 years, it has been growing double digits. And going forward, if you take a look at your monitor, it is expected to grow also at double digits. So this is an area that is going to grow for sure. Now along with that, even if we say easy cooking, I think people's preferences are also diversifying. Some people, for example, if it's an authentic Japanese food or authentic ethnic food, there's needs. So we believe that there's going to be diversification of needs. But on the other hand, we're seeing inflation and high interest rates from a macroeconomic stance. And there are consumers that are concerned about the economical situation. So I think something that is economically rational will also -- will be important. This is a terminology that we use internally, and we have 3 levels like small, medium and large. So we will offer premium price point as well as affordable price point items so that we can be able to capture diverse needs.

Now relevant to that, I'd like to ask another question. Needs for time-shortening cooking. I understand that in Japan, there's a need by consumers to be able to cook in a shorter period of time. But you see that trend in Brazil. Is there a social reason why there's a need for people to want to shorten cooking time?

So the social backdrop and the changes that we see, it's similar to Japan. Population is declining and aging, and we have smaller families. In the metropolitan area, property land is increased, rent is increasing, and people are now commuting from the suburbs. And I think this is all the social backdrop on why there's a need for why people would like to spend less time in cooking.

Next, Miyake-san from Morgan Stanley MUFG.

This is Miyake speaking. I am watching Slide -- Page 12. One question. You have grown 9% on a CAGR basis. When you look at the volume, what is the increase in volume? What is the impact of the unit price? And you see seasonings is also growing, and we have high brand recognition and -- is growing? Is it the reason for SAZON? Or is there any other drivers that has grown this or led this growth in seasonings? Second question is about e-commerce. In Brazil, in Latin American countries, I think you see a rise of e-commerce. So far, you have distributors network, and they are firmly with you. And I think that's demonstrated your strength so far. So with this rise in e-commerce, would there be any difference in how you deal with the distribution network? Are you also responding to the rise in e-commerce? So the e-commerce percentage, if it is growing in the future, are you still going to rely on? And can you keep this distribution network that you have now? So those are the 2 questions that I have.

Miyake-san, thank you very much for the question. The first one is the volume growth. I do not have detailed figures and numbers here. But yes, we have grown the volumes figures and also increase in prices. As was mentioned to you earlier by Yamamoto-san, based on data, we have -- doing the marketing, data-driven marketing are being carried out. Brazil, when you do shopping there, you would have to carry in the ID numbers like my number in Japan. So to what you have purchase, you get the return or reimbursement from the tax. So when you do shopping, you would have to present that for that purpose. So using that as a data, we can appropriately use those figures how that has contributed to our product. So looking at those data, we have been growing our business. So that's our history. And the second question, e-commerce. Yes, during the COVID-19 period, it grew, and we had much of delivery business going on. But recently, people would like to go to the markets and supermarkets and retailers directly. Yes, commerce itself, of course, we have a Brazilian e-commerce platform, and that is growing, and we can do that. But in order to grow the business, we need to increase the distributors key accounts, Carrefour Pondera is a very big key accounts in Brazil, and we do directly trade with the cash and carry, so to speak. Those volume supermarkets, we are doing it direct trading. So by doing that kind of business, we want to increase the profit. Yamamoto-san, do you have anything to add?

Yes. Thank you for the question. Yes, one comment to supplement. In the earlier presentation, I mentioned about the supplement Amino Vital and so forth. These products, of course, real stores are important to sell them, but I think they are important more in e-commerce. And I think these products, along with the needs, we would do sales promotion, including e-commerce. Earlier, what are the activities beyond now? So in -- by product, I think the significance and meaning of e-commerce will be different. So we have to identify that, and we will be responding to that. And another supplementary comment is that, yes, like was other countries in Brazil, it's social network, I think it is going to be important for the e-commerce. So I think we always would like to focus on those changes in the society and would like to respond.

So in that sense, your trade with e-commerce is going to be directly done by your company. Is my understanding correct? And I think new entrants in the market is going to be easier in this market. So you have a firm network and e-commerce as well. So that you will be able to lead in e-commerce market as well? Is my understanding correct?

Thank you for the question. The first one, yes, yes, Mr. Nakamura mentioned earlier, there are some accounts that we go directly in the e-commerce. But as mentioned earlier, together with the distributor, we do have initiatives. So I think we do both in e-commerce. And the second question, I have may not well taken your question, but e-commerce is it easier to go into the new business or to have new entries? And how we're going to be responding in this market? Is that -- was that your question?

Yes. If it's going to be a new channel and you may have new entrants coming into so that may be your risk -- more risk for you. So based on rates and store channels, maybe there might be more risk of new entrants, is my understanding correct? And if that is correct, how are you going to be responding to those new entrants into the e-commerce market

Thank you very much. Yes. This is my personal hypothetical answer. Depending on the area, I think it may be different. Yes, high unit price product and in a niche market, I think new entrants would come into the market -- new entrants would come into -- through e-commerce. But I think those daily product that we sell, like seasonings and so forth, processed food, I think real store sales are the main market. So we would like to protect that. And if there are new distribution where we see risks, we would like to fully cope with that. Thank you very much.

I see that many hands are still up, but I'm very sorry. But since we are almost close to the time to finish, we would like to take the next question as the last question. From JPMorgan, Fujiwara-san, please go ahead.

I'm Fujiwara from JPMorgan. So I have 2 questions. The first one is, in Yamamoto-san's part, I believe it was Page 8. You talked about the supply chain of your group, and I would like to have a deeper understanding. In Brazil, MSG and Amino Acids are being supplied as a global hub. And I think in ASEAN, there's a similar structure. We talked about the tariff situation in the U.S. earlier. But in Brazil, along with ASEAN, how do you split roles between Brazil and Southeast Asia as a hub to supply products? And the second one is in 2015, I think JV was dissolved for instant noodles. Is there a possibility that you might reenter in the form of JV in Brazil to do instant noodles? Because I understand that in Peru, it is growing. So is there a possibility of reentering instant noodles within Brazil?

Fujiwara-san, thank you for the question. To your first question about the global supply chain, amino acids, we have a global policy in managing where it is produced and where it is applied to. And because of the North America tariff situation, Brazil is being slightly impacted. And the same situation is that for ASEAN. Ajinomoto and amino acids are manufactured in ASEAN. And what is produced there at the optimal price point is supplied globally. And we figure out what is the optimal route when it comes to supply. So antidumping -- of course, what is prioritized at the country will be prioritized locally, but it is being globally managed. And secondly, about the instant noodles in Brazil. At this point at this point in mind -- at this point in time, we are not looking at reentering Brazil. But Masai-san of the Food division, if you have other thoughts, please go ahead and share.

Of course, we have the aspiration of want to reenter instant noodles in Brazil. But for South America, in Peru, Aji-no-men is doing really well. And like we mentioned earlier, we have just increased capacity, and we would like to start there. This is growing. So neighboring countries would be Chile, Bolivia, Colombia and perhaps Argentina going forward. We would like to expand in these neighboring countries and take a look at the situation and see.

How about from Peru to Brazil? Is that route viable from Peru to Brazil?

Could be a viable route. However, in South America, in the middle, there's the Andes Mountain. So land transportation, therefore, is difficult. And if we were to sell by sea, then we have to go around Panama Canal or Masland Sea Strait. And so it's not that realistic.

Okay, I see. Just one more point about my first question. Sorry, that I'm asking such a detailed question. From Brazil, is there a possibility to export to Southeast Asia? And if there -- if that's already happening, what kind of products are they? Because I think in Southeast Asia, I think everything is already being produced within Southeast Asia, but are there products that are being supplied from Brazil to Southeast Asia?

Ajinomoto itself is actually exported as a case from Brazil to Southeast Asia. In Southeast Asia, the basics is locally produced and locally consumed. However, for volume that is not being met like amino acid, Brazil manufactures it, and then it's exported to Southeast Asia.

I see. So Brazil and Southeast Asia, from a global perspective, are important manufacturing hubs.

Yes, they are.

Fujiwara-san, thank you very much for the question. We would like to now close the Q&A session. Lastly, closing remarks from Nakamura will be made.

Okay. Thank you very much for taking time out of your busy schedule to attend this meeting. As I mentioned earlier, this year, November, in Belem of Brazil, COP 30 will be held. Looking at global GHG emissions, the Agrifood system accounts for over 20%. However, efforts to reduce emissions in this sector have lagged behind due to the focus on the energy area. As Yamamoto-san mentioned earlier, our company has several businesses that can contribute to this sector, including solutions such as AjiPro-L, which helps reduce GHG emissions from cattle and a biostimulant derived from a co-product of MSG fermentation. Today, these businesses, combined, have global sales of over JPY 30 billion and generate double-digit profit margins. Furthermore, we aim to expand profits in the future by creating new economic value in the form of carbon credits associated with GHG reduction. At COP 30, we will actively promote these solutions to increase global awareness, further accelerating business growth and creating a positive impact. I will also go to Belem myself. In conjunction with these initiatives, we will steadily grow the business of the entire group and increase the corporate value of the Ajinomoto Group. So we hope that you will continue to look forward to our efforts. Thank you very much, once again, for attending.

This concludes the meeting. Thank you very much for your participation. Thank you, and goodbye. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]