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

So this is Nakano speaking. Thank you very much for participating despite your busy schedule. So without further ado, please refer to the PowerPoint material that you should have. So this is on page 2, we have the table of content. As Mr. Kaji has said, the #1 is the agenda that I would like to cover for today. For #2 and 3, this will be -- Mr. Nishii is going to cover tomorrow. Going to Page 4. This is about the FY 2020 summary results. For the full year, the sales, overall, if we exclude the impact of the currency, year-over-year, we have been able to recover it to last year's level. In terms of the business profit, the specialty chemicals sales increased and seasonings and food and frozen foods sales increased and product mix improved. And SG&A expenses have declined year-over-year. It was 114% increase of the profit. In terms of the business profit, this has been a record high level for us. And if you look at the impairment losses of JPY 18.5 billion, mainly, this is for the animal nutrition business. For the profit attributable to owners of the parent company, this is JPY 59.4 billion. In terms of the structural reform, this is mainly being conducted in the animal mutation business as planned. Compared to last year, the impairment loss has been less. And this fiscal year, we have been able to sell our idle assets. So year-over-year, we have been able to see a substantial increase of profit. Towards the -- against the previous forecast in January, the sales is basically in line with that forecast. In terms of the business profit, it has gone up by JPY 3.1 billion. In terms of the profit attributable to owners of the parent company, it has been a substantial overshoot because the gains coming from the sales of the idle assets has been more than expected. In terms of the removal costs and the allowances, has been less than expected. Going to the next slide. So this is the fourth quarter summary. In the fourth quarter, in each of the markets, the pandemic has continued to spread and has been -- the business has been impacted. Both sales and profit declined. But in terms of SG&A, there were some in-store promotional expenses that were not used as planned. Going to the next slide, this is I-3, supposed to be Page 6 in the presentation. So on a comparable basis for the year, sales towards the foodservice industry has declined, and so this has impacted our sales. But specialty chemicals, seasonings and foods and frozen foods, for the home used products, has increased sales and the improvement of the product mix led to increase of the gross profit. And due to the decrease in the marketing cost and logistics cost has contributed to the increase of the profit. Going to the next slide, this is on Page 7. This is the sales and business profit by segment. On the right-hand side, I guess the forecast. I would like to give you some information in terms of sales, in terms of sales. In terms of the seasonings and foods and frozen foods, in each of the countries, they have seen the infection respreading again and recovery for the foodservice industry In the fourth quarter was weaker than expected. In terms of the healthcare and others, the specialty chemicals versus electronic materials, it continues to be strong. In terms of the business profit, and the seasonings and foods and frozen foods, we have seen the improvement of the product mix. And in the specialty chemicals under healthcare, we have seen increase of sales that led to increase of profit. This is -- next I-5, this is Page 8. This is a sales and business profit by region. In terms of sales and business profit, both was largely impacted by the foreign exchange. More specifically, in Asia, Thai baht, Indonesian Rupia; in the Americas, Brazilian Real and U.S. dollars. These were the currencies that have impacted our business. Excluding this impact, for the seasonings and foods in the Asian market and the Americas, it will have been both increase in sales and profit. Overall, the business profit has been able to absorb the impact of the ForEx and all the areas we saw increased profit. This is Page 9, I-6. These are the items that impact the business results for the FY 2021. These are the assumptions. For the United States, they are 1 step ahead in terms of the post-COVID situation. For the other countries, we are assuming that they will be impacted by the COVID-19 outbreak. Against this backdrop, for the at-home dining, demand will continue to be an opportunity for our organic growth. And in terms of the growth of dining out, this will see a more slow recovery. In terms of the price increase for the raw material and fuel cost, it is happening, but we have to take agile countermeasures against this, and this will be very important. Next slide is the forecast for FY 2021, this is Page 10. And this is the P&L for that. On the animal nutrition, we have conducted structural reform and the healthcare business is going to go down about JPY 30 billion. So we are assuming that we're going to see a decline in the sales. But for seasonings and food, for the frozen foods and the specialty chemicals, we're going to expect an increase of sales. For the at-home cooking, demand is going to be contributing. And through the increase of sales and the increase of unit price, we will be able to absorb the higher raw material and fuel cost and the rebound of the SG&A from the lower level from last fiscal year. And at the same time, we will be going in to -- tap into maybe the slow but the recovery of the dining out opportunities. In terms of electronic materials, on the back of the very strong market growth, we will want to increase this business. On the other hand, we would like to conduct investment towards the future growth to be able to transform our business model. And at the same time, we want to, overall, target an increase in profit. In terms of the structural reform cost from '20 -- FY 2020/'21, it will be the Phase I. So the structural reform will be established. For this time around, for the structural reform cost for FY 2021, we are assuming about JPY 10 billion. For the profit attributable to owners of the parent, at that level, we are targeting JPY 60 billion. Going to the next slide, this is a waterfall chart that illustrates what I've said. For the seasonings and foods, for the frozen foods, we want to achieve about 60% of organic growth. At the same time, through the improvement of ingredient cost and absorbing the raw material and fuel cost, we want to increase the gross profit steadily. At the same time, for the new businesses and the transformation of the business model for these growth investments and spending market expenses to core products to improve our share -- to recover our share, including these, we would like to achieve the future growth. Going to the next slide, this is Page 12. Afterwards, I would like to talk more in detail about this slide. But in terms of this -- besides the structural reform in the animal nutrition business, in the key 6 businesses, we want to achieve organic growth. In terms of the seasonings and foods, you can see that the profit is going to go down slightly. But the overseas seasonings and the overseas quick nutrition, this is going to increase. In terms of the domestic quick nutrition, because the new factory is going to restart operation in Japan, and if the volume goes up, we'll be able to offset this -- the cost. But in the first year, it's going to be slightly down. Services and ingredients, we are anticipating a decrease in the profit. Next, on Page 13. This is the results by segment -- the sales by region. I would like to come back to details later on. And then going on to Page 14, I-11 actually. This is important management indicators. Due to the progress of structural reform in fiscal 2020, we have been able to overachieve the important indicators more than planned. Next fiscal year, we are aiming for an increase in profit again. However, the scope of improvement will be limited. However, we would like to properly lead the resource allocation, which is one of the initiatives under our asset-light policy. EPS, over the last several years, declined due to the recording of a large amount of impairment losses. However, at last, we were able to recover the JPY 100 level. Next fiscal year, we would like to further increase the EPS. The next page, Page 15, the investment for growth and shareholder returns. For operating cash flow for the period between fiscal 2020 to 2022, over JPY 400 billion was indicated as our medium-term target. And through various efforts, we would like to achieve higher level of cash generation, more than what I have just stated. As just 1 example, in accordance with the improvement of performance, we will, of course, raise EBITDA. But more than that, we will -- we are now implementing measures to utilize the receivables, and that's generating cash. And for the future, through supply chain management transformation using DX, through these measures, we would like to further reduce the inventory level. This is what we are planning for the future. So with these measures, we would like to further improve the cash generation capability. The next page, I-12. In order for us to deliver on the planned shareholder returns of over JPY 100 billion, in order to deliver on this process -- on this promise, this time around, we have decided to -- on a dividend hike for the annual dividend and also conduct a share repurchase program. And today, we have announced these measures. Furthermore, in fiscal 2021, we will aim for higher EPS, and we will schedule a dividend hike for fiscal 2021. So the annual dividend is planned to be JPY 44. Our policy is to improve our shareholder returns over the long term in a stable fashion. First and foremost, we will raise the payout ratio starting this 3-year period to 40%. And then the total shareholder return ratio will be raised to over 50%. This has been the plan, and we would like to properly deliver on this promise. And that's all for the presentation on the materials, but I would like to continue with some statements. In the attachment document -- associated document, that's the financial summary results, A4 document, if you look at the backside of that document, you'll be able to see the results by segment of the financial results -- the results by segment. And I would just like to briefly touch upon the sales of the food business, especially focusing on the fourth quarter performance. And also, I would also like to share with you the actual recent situation in the key markets and the results for the past year. And finally, I would like to talk about the fiscal '21 forecast by segment. First of all, the actual results by segment for the January to March period, actually, the fourth quarter of fiscal 2020, I would like to highlight on these points just briefly. As you can see there, in the fourth quarter, the seasonings and food was minus JPY 4 billion. But in the local currency basis, excluding the ForEx impact, this has actually achieved a lower single-digit increase for the seasoning part. And for the domestic business, this was comparable to the previous fiscal year. For Japan, the domestic market in the February, March time frame of last year, we have seen the impact from COVID-19. So therefore, what I'm saying comparable is that level. Overseas, overall, on a local currency basis, Ajinomoto recorded a decline of mid-single-digit level. On the other hand, flavor seasonings increased by mid-single-digit level and the menu-specific seasoning recorded a 2-digit increase. Those are the performance of the seasonings business. And now if you look at the packaged nutrition food, minus 12 (sic) [ minus JPY 1.2 billion ] you see there. But on a local currency basis, actually, was limited to a decline of a lower single-digit level. For Japan, the mid-single-digit level decline was recorded. And this was due to the AGF restaurant industry use recorded a decline of 2 digits, but that was offset by the home use. And therefore, the net decrease was limited to mid-single digit. On overseas, local currency basis, beverages recorded a decline of mid-single-digit level, for these are included here. And also for instant noodles, recorded a 2-digit increase and other process in packaged food are comparable to the previous fiscal year, including nutritious packaged food. And solution and ingredients, local currency basis, recorded a decline of mid-single-digit level. And the out-of-home deli recorded a 2-digit decline. However, the Umami seasonings, local currency basis, increased by upper single-digit level. Next, for the frozen food, on a local currency basis, minus 52 (sic) [ minus JPY 5.2 billion ] for the January-March period. But in a local currency basis, this was only up a limit decrease. In Japan, because the -- there was a special demand for frozen food due to the last minute buying before the issuance of the state of emergency. But in reaction to that, there was a 2-digit decline in the January-March period and also for overseas. In the United States, in particular, the production was limited due to cold weather, and therefore, it recorded a decrease of upper single-digit level in overseas. The next one, if you look at Page 3 of that material, you see the segment information by region. So just briefly, I would like to talk about the recent performance in key markets. And also the results for the year ended in these key markets. As far as Japan is concerned, Japan, if you look at the Japan area in that performance by country, I won't go into the details of the recent performance. But -- so I would like to talk about the breakdown of the results by segment of each region. The foods and seasoning, minus 91 is the number you see there. The breakdown of which includes seasonings increased by mid-single digits. This was due to consomme and nabe cube new businesses and the Chinese and Japanese flavor seasonings and also the menu-specific seasonings all recorded an increase in revenues. Because there were more opportunities for cooking at home, and we also used -- collaborated with Ajinomoto Park and conducted lots of digital measures and those delivered tangible results. For the nutritious packaged foods, in Japan, this recorded a decline of mid-single-digit level. Soup, last year, in the April, June period, we have seen an out of stock issue -- problem in Japan for soup. But on a full year basis, we were able to achieve results higher than the previous fiscal year. AGF recorded a decline of mid-single-digit level. And for the last portion of this seasoning and food, S&I, solution & ingredients, for eating out demand. On a full year basis, this was limited to only 85% of the previous year level. That was the -- how the numbers came in for solution & ingredients. If you look at the bracket #2, the local currency basis of the key market sales, I will just talk about the key markets here. First of all, Thailand. Recently, after March, in the areas around Bangkok, the number of infection cases are increasing. And therefore, a lot of restrictions are still in force. The government has implemented measures to support the consumer. And therefore, these have been effective to recover the consumption just gradually. In this environment, in fiscal 2020, on a local currency basis, there was a decline of 3%. So therefore, the performance was 97% of the previous year's level. You have seen, as you can see there, the recovery has been continuing gradually from the first quarter all the way to the fourth quarter. For Ajinomoto, it has recovered to a decline of only mid-single-digit level. And the flavor seasonings returned to almost comparable to the previous fiscal year. The menu-specific seasoning recorded an increase of mid-single-digit level. The RTD, the ready-to-drink, beverage recorded a slight decrease. And for 3 in 1, this has recorded a lower single-digit increase, and instant noodles performed lower compared to the previous fiscal year. The next market, Indonesia. Recently, the spirals of infections is waxing and waning. And of course, the social activities are still restricted. In this environment, the uptrend, the growth trend of the in-home seasonings is increasing, is continuing. On the other hand, the GDP is in a negative growth area and the unemployment may become a potential risk for the future. In this environment, during the last fiscal year, on a full-year basis, local currency basis, the sales performance was 109%. Ajinomoto comparables of the previous fiscal year, flavor seasoning upper single-digit increase and menu-specific seasoning increased by 2 digits, especially driven by the deep-fried food segment. Cooking and sauce saw also 2-digit increase. Vietnam. Vietnam in fiscal 2020. The GDP of this market recorded a 2.9% increase. So despite all the other Asian countries recording a decrease, Vietnam was in a positive territory. In this environment, in a local currency basis, our performance was 103%. Ajinomoto recorded a mid-single-digit increase; flavor seasonings, almost comparable to the previous fiscal year because we have implemented a lot of countermeasures against the competition; menu-specific seasonings and cooking sauce, 2-digit increase. And the Philippines. The recent market situation, also the infection status continues to be moving backwards and forwards and restrictions are still in place. GDP minus 9%, the lowest in the Asian countries. On the local currency basis, we have achieved 105% versus the previous fiscal year. Ajinomoto recorded a mid-single-digit increase; flavor seasoning, a decrease of mid-single digit; menu-specific seasoning, 2-digit increase driven by the flavors for the deep fried products. Brazil. Finally, the situation remains very harsh in terms of the infections. However, for us, it's favorable that we are seeing a continued trend for cooking at home. Local currency basis, 109% was the number for Brazil, and the flavor seasonings, among all the products, recorded a 2-digit increase. This is the largest product in terms of the volume. And also, there's a separate sheet, you see the green and yellow sheets there. This shows the forecast by segment for fiscal 2021. I'll just talk about the seasoning and foods segment in terms of sales. Seasonings and foods, JPY 34.2 billion increase is estimated here. And this represents a 105% level compared to the previous fiscal year. And among that, the seasonings, in particular, is expected to increase 106%. And the breakdown for that is that Japan, lower single-digit increase, and overseas, upper single-digit increase in revenues are estimated as a breakdown for the seasonings. Driven by Thai, Brazil, Philippines and Indonesia. All these markets are expected to record an increase in revenues. We would like to concentrate our strategy for the core brands and also we take response so that we can live together with COVID-19 and make contributions to solve health and health-related issues. Especially, we'll talk about reduced salt product and other premium products, and also conduct price increases in responses to the increase in fuel and raw material costs and also respond to the changes in distribution channel in all markets. And if you look at the nutritious and packaged food, this again is also expected to increase 106% vis-à-vis the previous fiscal year. The domestic Japanese market is expected to increase by mid-single-digit level, but overseas 2 digits. In Japan, for soups, we will take proper measures to boost our sales of soup. And for overseas, we are expecting recovery. The instant noodle market in Thailand and ready-to-drink, the light sugar type, is also achieving a favorable performance. So we would like to sell these important products. Through these measures, in the seasonings and foods segment, organic growth is estimated to be 6%. Frozen food, next. Overall, increase of JPY 9.9 billion, so 105% increase. In Japan, we are expecting a single -- mid-single-digit decrease in revenues because the home-use is expected to achieve a higher than market average growth. But the restaurant industrial structural reform will be the priority issue, and therefore, we would like to reduce the SKUs. And for the home-use, we would like to focus on the products that will provide health value and also the Gyoza dumplings that could be cooked in the -- in your microwave so that we can support smart cooking. For overseas, we are expecting a 2-digit increase. The Gyoza dumpings and also the higher added value in Mexican food is now producing -- having extra capacity. So we'll take full advantage of that. And for the restaurant and industrial use, we are seeing a rapid recovery of this market, especially in North America. So we'd like to capture these opportunities. Organic growth in frozen foods is estimated to be 6%. That is the plan. That's all. Just briefly -- I'm sorry for taking such a long time for my presentation, but that was the overview of the results and also the forecast for fiscal 2021. Thank you very much for your attention.

Mr. Nakano, thank you very much. Let's go to Q&A.

So going to the first question from Nomura Securities, Fujiwara-san.

This is Fujiwara from Nomura Securities. So 1 question. So this fiscal year plan, in terms of the increase and decrease of the profit, it's on Page 11. So it has GP, sales, SG&A, you have forecast. So I would like to talk about the SG&A. Last fiscal year, JPY 7.8 billion, has been increasing and this is going to push up by JPY 7.8 billion. But this time around, it's going to push it down by JPY 23.4 billion. In terms of strategic investment, it's going to double -- more than double for this fiscal year's investment. So I would like to enlighten me about the background of this thinking?

It is true that within our company, we have been debating a lot about this point. Even so, one thing I want to mention is that as I have explained -- as we have said, new business, transformation of the business model is about JPY 6 billion for those investments. This JPY 11 billion portion, this is mainly for investment for our key products. So there are some key products that we have lost some share. And for future growth, we are determined to invest to be able to recover our share. So last fiscal year, we have seen a decrease of the type of spending. But we were going to spend more this fiscal year. This -- well, this will be -- in terms of the ratio of SG&A against the top line, we are managing that. So this investment will be in line with our plan. So this cost -- just invest and then we'll be able to generate it as the profit level of sales and profit, we will manage the spending. So those things won't happen.

So related to this, in terms of logistics costs, last year, how much did it decline? Would you please enlighten me about that?

Yes. Last fiscal year, this declined by JPY 4 billion compared to the previous year.

Understood.

So in terms of fixed cost last year is JPY 11.8 billion, JPY 7.8 billion plus this JPY 4 billion. So that's the kind of a decrease of the fixed cost for last fiscal year. So SG&A for the sales cost, I was -- SG&A you have JPY 11 billion. So reduction JPY 7 billion for that fiscal year.

The next question is from Saji-san of Mizuho Securities.

I also have 1 question. I'm looking at the forecast by segment, the green and yellow sheet that you have presented separately, the larger size paper. I just wanted to have your comment on the good news and bad news here. One is solution & ingredients business. The decrease of revenues of JPY 1.4 billion and the price decrease of Umami seasonings is included here. So what is the current situation? Can you explain about that? And also, healthcare and others, biopharma service & ingredients. I think in the fourth quarter -- I think you have seen some improvement since the fourth quarter. But up until now, this has been posing difficulty for the management of the company due partly to COVID-19. And also for specialty chemicals, especially electronic materials, 42% profit margin. So I think this is generating profit, that's good. So there are 2 good news about that. So I just wanted to here about what are the premises for you to come up with these good numbers?

First of all, for the solution & ingredients business -- our philosophy for the solution & ingredients. If you look at that, out of them, the eating out [ Delica ] or the industrial use part, mid-single-digit increase in revenues are estimated for that portion. And also the sugar products, sweeteners also for the processing is also expecting a slight decrease. And there are 2 factors behind this: The nucleotides and also Ajinomoto, those are the 2 factors. As far as Ajinomoto is concerned, especially in China, the demand is quite high in markets like China. But on the other hand, the competition is now ramping up their production. So the unit price is expected to come down for this product in the future. For nucleotides, continuously in China, the demand is continued to be quite risk. However, the price is expected to remain unchanged. That is included in our assumption. And also for biopharma and ingredients, roughly speaking medical pharmaceutical and biopharma services, those are the 2 major categories here. Among this, amino acid in the COVID-19 environment, the amino acids for infusions are expected to be brisk, and we are seeing a lot of increase in demand and increase of production. So therefore, mid-single-digit increase in revenues are estimated for that. For the biopharma services, this fiscal year, especially in the United States. The sales in the United States due to the delay in the cultivation of new customers. And of course, the development process has been stalled. So there has been a delay. But this fiscal year, we believe there will be a slight recovery in these activities. Therefore, a 2-digit increase in revenues are expected for that. And also, for the functional materials, electronic materials are included in there. And for this functional materials, the market -- the semiconductor market is estimated to increase by 8 percentage points. So with that view, we ourselves are also expecting a similar level -- the upper single-digit level of growth is estimated by the company. Therefore, for the services, products for the service and also for the networks, we are expecting to see brisk demand for those demands.

Let's go to the next question. From UBS Securities, Kawasaki-san.

Kawasaki from UBS Securities., Can you hear me?

Yes, we can hear you.

So I want to ask about the waterfall chart, about the actual results and this year's guidance, this gross profit, increase and decrease. I would like to ask about this part. So Page 11. If I look at Page 11, this fiscal year, it seems that gross profit will continue to improve. That's your plan. Is that -- was the raw material increase and the ForEx impact, minus JPY 0.20 billion net out about the JPY 7.6 billion, meaning that you're going to increase the prices. So is that the reflection of what you are planning? And even if you are able to improve the -- increase the price of the products or the product mix will have an impact. So plus JPY 7 billion from the overseas portion. Excluding the international consumer products, for the other areas, it's going to continue to improve, I guess, last year. So is it a price increase is the main driver of this improvement?

Thank you for your question, Kawasaki-san. So on the top, this JPY 1.8 billion, increase of raw material and food ingredients. So in reality, all the raw material and fuel and the food ingredients, the cost is going up. And out of which already, within our budget -- within our forecast, there are already some that have been absorbed. So that JPY 1.8 billion is a risk that is over that we have already reflected to our forecast. In terms of currency translation, currently, there's no difference from what we have put in the presentation. So the JPY 7 billion is the international consumer product. So we're going to increase the price and improve the unit price. For the other areas, the biggest portion would be for the food and frozen food, and healthcare included for the -- in total, 6% organic growth is going to be achieved. I think that will be the major driver of the increase of gross profit. So does that answer your question?

So if that is the case -- so legally, you're going to negotiate about the pricing. But if you look at the fourth quarter, the GP improvement is only about JPY 1 billion. But -- so if it is going to improve, meaning that during this fiscal year, the pricing increase is going to be contributing. So in terms of the time horizon, in the first half, is -- are we going to see some of that already coming out as the impact in the first half?

Yes, of course. The impact of the COVID, it is very difficult to see what's going to happen. So I think it's more to the second half of this fiscal year in terms of the growth trajectory, that's our plan. So on the first quarter already, we have started to see results through our initiatives.

Understood. Can I confirm one more point? You talked about the raw materials and fuel costs. So this JPY 1.8 billion, this is -- is included in this GP column in this waterfall chart?

Yes. It is.

Understood. But currently, it's a quarter alone, so this JPY 800 million already. So there is a possibility that this portion will increase. So that's what you mentioned?

Yes, that's true. But already -- it is already reflected into our forecast. In terms of the -- it's going to be absorbed through our price increase or the unit price increase. So the -- to be able to disseminate -- the marketing expenses to be able to service this price increase, it's included. Yes, that will be necessary for us to spend.

The next question will be from Daiwa Securities, Morita-san.

I'm Morita from Daiwa Securities. On a related note to Kawasaki-san's question, this time around, you -- one of the things that you will be tackling would be the price increase. But in the major markets, you have announced price increases. If there's any plan, any announcements that you would have made to the extent you can share with us, please let us know. And also, can you also give us the details in the magnitude -- in the order of the magnitude of such impact? And also, the time horizon may vary, but this fiscal year, on a full-year basis, your business profit is estimated to stay flat. But on a quarter basis -- quarterly basis, also maybe between the first half and second half, is there any difference? Please let us know in the business profit level.

First of all, regarding the price increase, already -- some things have been already announced, like the mayonnaise in the Japanese market that was already announced for price increase, and for the price increase in other core markets. Because of competitive reasons, we would like to reserve our comments. Last fiscal year, actually, in this COVID-19 environment, in Brazil, the flavor seasonings prices were increased. And in Indonesia, the key products of flavor seasonings were increased in terms of prices. So on a continuous basis, for the price increase, those products, where we have the largest market share, in such markets, looking at the progress of the GP level, we will properly adjust the prices. And the quarterly profit generation, let me give you some image. I just -- as I just alluded to earlier, next fiscal year, as a result of this unit price increase measures and also for the health management and also for the -- with the reduction -- reduced salt products introduction, we will be implementing all these measures one by one. Therefore, in the second half of the year, we believe the revenue increase will be more apparent in the second half of the year compared to the first half of the year. And what we cannot foresee most is that the recovery of the eating-out market. Most recently in North America, we have seen a rapid recovery of the eating-out demand, especially in North America. So we would like to properly capture these rising demand. But on a global scale, still, the eating-out market is difficult to foresee, and it's not recovering at all on a global basis, but we see a gradual improvement over the coming months and years. So we would like to capture these demands as appropriate.

So on a full year basis, are you expecting a flat growth, a decline in the first half and recovery in the second half? Is that correct?

Yes. Well, there are things that we cannot foresee at this point, including the situation, for example, in North America. Like in recent months, we have seen a steady recovery -- a very strong recovery. But will this -- will we really be able to capture that? Then if that is the case, we shall be able to achieve a growth in the first half as well. So that's the point that we cannot foresee at this point.

And also, for the year ended, the overseas consumer prices increased by 2.8%. Out of that, what was the impact favored by the COVID-19? What was the tailwind? And what was the impact resulting from the structural reform? Can you give us a breakdown? And you're talking about a 2% unit price increase. But what is the contribution of the mix improvement and also the added value through the reduced salt product? And so if you separate between the -- just the simple price raise, what is the image that you have between all these demarcations between the different?

As for the mix improvement -- product mix improvement, actually, we have made good progress already. So the 2.0% increase this year, part of that is driven by the change of mix. And we will continue this change of mix, and that will continue to have an impact. But most of the impact will come from the price increases and also the introduction or the shift towards the value-added products. So those account for larger bulk.

And the 2.8% increase last year. Out of that, what was the contribution from the large-capacity products, decreases of the large-capacity product?

Actually, we haven't been able to analyze -- complete analyze -- analysis of that yet. So I cannot give you any further comments at this point of time.

Next, I would like to receive the questions from overseas. D Research Management, [indiscernible].

This is [indiscernible] Malaysia. May I know of the business profit of JPY 26. 2 billion under healthcare and others last financial year, if we exclude specialty chemicals, what's the remaining level of profit? And relating -- in relation to that, what are the challenges that Ajinomoto face in growing of bio-CDMO business over the long run? Is this notwithstanding the COVID impact that you mentioned, but what are the longer-term challenges for your bio-CDMO business?

So in terms of the growth of the health care business, one would be in the biopharma services business. So here, we want to -- we will not be focusing on expanding the scale. So the oligonucleotides pharma and antibody pharma and for the other contract manufacturing services or the research businesses, these would be the 3 pillars for us in terms of the size of Japan, Europe and North America. So we have the big major sites here. So as one team, we will be responding to our customers. So we have this unique CDMO business. We will be targeting for the CDMO business. So we want to grow more than the market growth of 8%, and that is what we want to achieve. So the next largest contribution will be the functional -- within functional materials, that will be the electronic materials. So going forward, so for the [ electronic materials ] CAGR would be more than 8% for the following 5 years. So we'd like to leverage this business. So there has been some issues or concerns that have been reported about supply volume, but we have a very flexible production capacity. So even now or in the future, in terms of the capacity, there are no issues. So I hope we'll be able to -- we are going to be growing, looking into the future.

We are very sorry, but we are almost running out of the time. So this will be the last question. The last question is from Miura-san of Citigroup Securities.

My name is Miura from Citigroup Securities. Please bear with me. For the year ended for fiscal 2020, in retrospect, the intrinsic strength of Ajinomoto, I think, was once again recognized but what do you think is the intrinsic strength of Ajinomoto?

I perhaps believe that tomorrow, our President, Mr. Nishii, will elaborate on that and present that to you. That's what I believe. But for myself, in my capacity, when I look at things from my position, I thought that this time around, it was very difficult to make a prediction because whatever that we had planned and assumed was overturned. Every quarter, something new and different occurred in each region and each country. That's what we have seen. In this environment, we have always revised our financial outlook from time to time. And until the end, we were able to deliver on 1 thing, that is, especially in the Southeast Asian markets. The fact that we have a direct sales team enabled us to understand the situation in the market properly. And because of that, the business for modern trade was revised and modified and also our priority activities have been changed. So we were able to respond to such changes. And the other strength that we have is that every factory -- all the factories never stopped or suspended its production, and that was due to the employees cooperation for taking countermeasures against the spread of infections. It's not just unique to Japanese companies, but I think we -- just like quality measures, we have been able to take proper measures against the spread of infection. So each factory -- every one of -- every factory was able to produce based on its capacity limit throughout the year. And I think that's the strength of our company. So the engagement -- according to the engagement survey of our employees, we see that reflected. So this is now serving as a pride, something that the employees think -- take pride in. And I think that will lead to our future growth. I'm so sorry for this comment that is not really well summarized.

Well, I believe Ajinomoto, as a name, these people are working for the company called Ajinomoto. So this is maybe taken for granted. But in the last 1 year, people becoming sensitive to price increases or the consumption pattern changing compared to before. So the changes in the employee mindset or the response to crisis situation, has that improved? If that was the case, what caused such changes? Have you -- do you have any idea what has caused these changes?

For one thing, the management, including the top management, Mr. Nishii, or the management team now are united in terms of their ambition. I think we are now united in our thoughts and ambition. So this time, with the guidance or the forecast -- in developing the forecast this time around, actually, the management team, the General Manager of the business divisions and the corporate -- the officer responsible for corporate affairs and myself and Nishii-san conducted a series of meetings quite frequently. And what to do with the FDA, that was indicated by 1 questioner previously and response to the increase of more material and fuel costs. So for those matters, we have had a very serious discussions. And going forward, we will continue to make proper commitments to what we have planned and announced.

And just 1 more point. Why this year -- why did you come up with this flat growth projection this year? So the business profit is estimated to remain flat, but what is the rationale behind that? Are you just having a strong result that you will never want to have a negative growth? Or is this just a conservative forecast that you may want to cause a surprise later?

Well, actually, the adherence to the plan is quite high. So we would like to deliver on the plan as -- definitely. But this time around -- last year was a very unique year, a very special and exceptional year in that expenses did not incur as planned. So of course, we were able to establish a viable business. But if that result, if you call us -- if you ask us if that was good, only the mainstay and core products sold in a brisk manner. But other than that, those products that will lead us to the next phase of growth, we haven't been able to make proper investments for that. So those are the points that we have to reflect upon. So last year -- those irregular factors for last year. We just talked about the home-use and also the eating out products. The composition has changed dramatically. That happened last year, and that was another irregular factor. And also the expenses was -- came in quite lower compared to the plan. And through -- we tried to overcome that through GP and lead it to the next phase of growth through investments. So in those options, we will aim for profit growth, but still the growth of profit is limited. That's how we developed the plan for this fiscal year. So -- excuse me if I was not able to answer your question clearly.

So I'd like to end the Q&A session. So Mr. Nakano will say some closing remarks.

Thank you very much for your participation. So this time around, so in terms of the bottom line, it has been higher than expected because we have been able to sell our idle assets more -- much more than we had expected. So that is reflected. So initially, we did not think that we have been able to increase the dividend to this level, but have been able to go up to 40%. We have been able to increase the dividend in itself. And in terms of -- we are determined to continue initiatives on shareholders' return. And as we have been talking internally, we have discussed this numerous times internally for this forecast. So I think it's very important for us to achieve these forecasts. Thank you very much for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]