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

Good morning, ladies and gentlemen. Thank you very much for taking time out of your busy schedule to attend the presentation titled purpose-driven management by midterm ASV Initiatives 2030 Road Map. My name is [ Kaji ] from the IR Group. I'll be your MC for the event. Today we have a hybrid type event and there may be some time lag in the audio services between the venue and those attending online. Please be advised. Let me first introduce our attendees. Representative Executive Officer Fujie.

Nice to speak to you all.

Representative Executive Officer, Executive Vice President, Shiragami.

Nice to speak to you all.

Executive Officer and Senior Vice President and General Manager, Food Product Division Masai.

Thank you very much.

Executive Officer, Vice President, General Manager, Amino Science Division, Maeda. Executive Officer and Vice President, supervision of Frozen Food, Kawana.

Nice to speak to you all.

Executive Officer in charge of Sustainability and Communications, Morishima.

Nice to speak to you all.

Corporate Executive, General Manager of Global Finance Department, Mizutani.

Nice to speak to you all.

We have a total of 17 days today. The session is scheduled for 90 minutes. First 30 minutes will be [indiscernible] presentation which will be followed by QA. The materials are posted on the IR website for your perusal. Today's session will be recorded including the Q&A session and will be posted on the IR website at a later date. Please be advised. Now we'd like to begin the program. Fujie-san, floor is yours.

Good morning, ladies and gentlemen. Thank you very much for taking time out of your busy schedule to attend our briefing. And those of you who are attending online, thank you very much for your participation. Today we'd like to announce the term ASV Initiative 2030 Road map. That is the title of the presentation and I surely look forward to this event. The concrete contents and also our vision as well as our message will be disseminated through my presentation and then we'd like to exchange our views in the QA session afterwards. That is the structure of the meeting. Next slide, please. Let me first start with this slide. The agenda -- this covers the agenda for today. Next slide, please. Today these are my 3 messages. First, the purpose has been renewed to that and then the new purpose has that will contribute to people and community in plenary wellbeing through the power of AminoScience. The second we terminated the MTP formulation and then evolve that into the MTP -- excuse me, midterm SV initiatives under the management transformation. Number 3, we'd like to shift from structural reform to growth. Next slide, please. So let's start with the evolution of our ideal state. As you can see on the slide, in addition to the original purpose, now the new purpose has it that reflects our commitment to contribute to the wellbeing beyond. And that was the story behind the update of the purpose. And then in terms of the outcomes, 2 outcomes, stores 2030 which is to make contribution to the environment and also to the food and nutrition contribution that is also set in stone. Let me first start with the AminoScience. Since the inception by adamantly pursuing the power of amino acids at Ajinomoto, we've accumulated a diverse set of knowledge involving materials and functions and technology of all services. And this AminoScience is a collective term encompassing all these aspects. And this is the source of our competitiveness. Amino acids are very interesting. Including myself, those members attending today and also a lot of employees are a great fan of amino acids. Therefore, amino acids are the building blocks of the body and it presents the taste as well as nutrition and physiology as well as reactivity functions. Those are the 4 separate functions served by amino acids. Since inception, we've been in the food business and nutrition business. We've deployed this texture and taste functions as well as the power of amino acids in our businesses. Therefore, going forward in food businesses, we -- both in food as well as AminoScience, we'd like to pursue the function of amino acids down the road. Next slide, please. And we also evolved our philosophy. Under the slogan of Eat Well and Live Well, this is upheld and it remains unchanged. But we'd like to simplify our message. As I mentioned earlier, the purpose has been renewed and the AGW, Ajinomoto Group Way. These were recombined into the new slogan or into the new philosophy. Next, this shows the -- based on the report submitted by Sustainable Advisory Council, SAC and we had multiple stakeholder dialogues and we identified materiality as a group. As you can see, we incorporated 4 perspectives and 12 conditions or the requirements. And this cycle will be accelerated and this is the essence of our framework for us to create values down the road. And this will be also reflected in the midterm ASV initiative as well. Furthermore, this Sustainability Advisory Council, the Chair, Davis, Mr. Davis, who has been the Chair of the council will be outside director after the June event, the shareholders' meeting. So from a director's point of view, he will continue monitoring the entire process for the materiality going forward. Next, this shows the definition of midterm ASV Initiative. What do we mean by that? To put it simply, we'd like to adamantly pursue ASV with full-fledged or full determination and become more capable of execution. So there are 2 reasons why we are evolving a midterm ASV Initiative. One is to exit the MTP fatigue that we've been creating. And also, second is to create more capacity or becoming more capable of executing the plan. Regarding the 2020 MTP, the structural phase we were in, structural reform phase we were in, but ahead of 1 year we are entering the regrowth phase. And this growth will be further accelerated and further expanded scope. To do so, we'd like to focus on the core businesses as well as BMX business model transformation that will drive growth. Through these 2 pillars, we'd like to shift our growth and focus on the 4 BMX areas, 4 growth areas that would offer values. So those will be the 4 areas where we'll be shifting growth to generate high profit business as well as achieve a robust structure that could attain 50-50 food and AminoScience revenue. So it will be not just a food company, but nor a AminoScience company. But we'd like to achieve a very unique entity combining those 2 elements. And the management team thinks that it's really a proprietary for Ajinomoto. And then by 2030 we'd like to achieve CAGR 10% plus in business profit growth as well as ROIC or ROIC 17%. Those will be the targets we'd like to attain by 2030. In addition, of business profit or business growth, BMX 4 areas will generate by 2030 incremental revenue will top JPY 300 billion. That is our plan. And then business profit, incremental growth. 40% of the business profit incremental growth will come from this BMX 4 areas. Next slide, please. And let's start with the review of the Phase 1 of 2020 and 2025 MTP. So as you can see, thoroughly we have made restructuring and steadily we had achieved organic growth and focusing on core businesses and asset-light measurement. Both business profit as well as sales, we were able to go into the growth trajectory ahead of schedule. Next, please. As a result of evaluation of our initiatives, I think our market capitalization also are increasing. We had enhanced the cash generation capabilities. And in addition to share buybacks, we are able to achieve a sustainable increase of dividend payment. And I think the shareholder's value has been enhanced. At the same time, including myself, the management members have always been studying and thinking how we can enhance our corporate value. So we have employees, shareholders group and those participants will be able to get 100 units of our shares in June. So all in all, our organization as a whole is trying to enhance the corporate value with including our employees. Next, please. This is towards -- the reviewing towards our goal for the MTP. So I think we have an outlook that we can achieve everything. Next, is the important and focusing strategies for the 2030 road map. Last year we issued ASV report. But as is mentioned in this report, we have a calculation formula for corporate value. And based on this we are trying to improve our corporate value. So I think important points 3 are written for the 2030 road map. One, management transformation towards midterm ASV initiatives. 2, evolve portfolio management; and 3, investment to intangible assets with connection to ROIC 3. Of course, and the speed up and scale up. As for management transition, challenging, ambitious 2030 ASV metrics are being raised. And back casting from that we would visualize using data, the reality and its progresses and we want to do a rolling forecast and flexibly come up with countermeasures. So we want to brush up our exercising capabilities continuously. For example, in China and the Philippines where I worked in the past, I did the similar thing. And those members here have also those experiences. So based on that we want to brush up and enhance our implementation capabilities and hence improve the corporate value. And what -- how about the single year forecast? Of course, we would be disclosing them. So please feel safe about it. For fiscal 2030 outlook or forecast. This May, we have a schedule to announce the financial performances and then we will announce -- disclose the target. Next is about the evolution of portfolio management. We saw steady structural reform, but to shift to a growth trajectory we need to add some other perspectives. So using this page and the other page, we want to explain more about this portfolio management. So as you can see on the horizontal axis, we have the growth trajectory with a tailwind. And on the horizontal axis, we have shown you a competitive advantage, AminoScience. I think we want to shift to the businesses where we can take advantage of that capabilities. There are 4 things collect, meaning that we want to collect all the management resources into the area where we can grow and change, the business model should be changed utilizing the tailwind or maybe in a different structure. And start beginning for new businesses, we want to seed and stop meaning that if there are some businesses, we need to make some decisions. We need to decide what to do, including the withdrawal and spinoff of functions so that doing those 4 things we want to keep and maintain our business portfolio. And currently as you can see for the product and the services on the left-hand side, we have that organizational access. But we want to change them along with the 4 values that we provide, health care, food, wellness, ICT and Green. So exceeding that of the organization and conventional business structures, we would like to fully utilize the tangible and intangible assets at an appropriate timing. We want to evolve our organization. Also from April, Ajinomoto group as a whole, we want to enhance the marketing capabilities. So we are going to establish marketing design center and also procurement the strategic department and also in Japan headquarters in North America we want to build a innovation strategic team so that they can provide intelligence regarding investment in M&As. Next, please. Now I'd like to talk about 4 assets that we think -- intangible assets that we think is very important. This is only Ajinomoto can provide. And we have been discussing this in our meat management group meetings and so forth. First, about the technology. As for the Taste design technology and leading [ bio-fine ] technologies, we have a AminoScience. And using the amino functions, we need to have digital capability so that we can be more closer to our customers. So I think this is the center of this activity. The second is about the human assets, meaning that we need to have human resources where they can match our technology with the customer's needs. Also, our strength is that we have a person who can go along with the customers and the site. So we want to hire and educate more of such human resources and enrich the human resources. And in the Page 54, this explains about how we want to make investment in the human resources area. By 2030 we want to make investment of JPY 100 billion worth in this area. For the customers' assets, B2B 70%, B2C 30%, 60% for the overseas and 40% Japan. We are diversified. We have diversified customers. This is very unique and also our assets. And also organizational assets, meaning that adaptability to the local areas or local way of doing things. For example, in the Philippines, I think where I worked in the mountainous area where we had to go 3,000 steps in those stores in these regional locations, we see Ajinomoto products. And I visited a house in the Philippines and saw how local people would actually use our seasonings and how they are being used in their cooking. So I think this type of marketing capabilities need to be fully utilized. So I think product services and sales of things are important so that we can speed up and scale up the innovations happening at the site. Next, please. This shows initiatives connecting regulatory and initiatives to strengthen intangible asset investments. We want to enhance investments. And in 2030 we want to make 17% ROIC and EPS 3x that of the figure in '22. So how are we going to educate this? So next is using the function of the AminoScience orally. Regarding the market growth potential, we'd like to focus on high-growth potential markets and also the areas where we can contribute to social value creation. That is a basic principle. Next slide on, we'd like to introduce our activities in the 4 BMX areas to achieve exponential growth. In the 4 -- of the 4 BMX areas, one is health care. The core businesses already exist. So we'd like to continue growing those core businesses to realize further growth. And we'd like to create our next growth driver, namely nucleic acid as well as nucleic acid medicine as well as the cell culture media for regenerative medicine as well as medical foods. Those are the emerging strategic businesses. Therefore, we'd like to identify and we'd like to focus our efforts to further grow those areas. Next is Food & Wellness. In the Consumer Foods, we'd like to strengthen our area strategy. And also with the Frozen Foods we'd like to shift from structural reform to growth trajectory. Through that, we'd like to further enhance or expand our revenue. And then by integrating food and AminoScience, we'd like to further accelerate our growth. Regarding area strategy, in Asian as well as Latin America we'd like to drive a solid growth, organic growth. And then in Frozen Foods, North America as well as Europe will be the center for the growth of Asian frozen foods, including Gyoza. In terms of -- well, especially with Gyoza that is rapidly growing, the top brand, Ajinomoto is a top brand in Japan. But Western sales is almost catching up with or surpassing the sales in Japan. And also in Western markets, more than 3x or nearly 3x in terms of the volume consumption that is, therefore, that is driving the unit price growth in those markets. And in terms of the frontier areas, we also like to drive growth. And for the domestic businesses which is also important, by have an overarching view in Japan as well as East Asia, we'd like to focus our efforts on the Japanese products as well. And then to reach out to each and every consumer, we'd like to create a direct connection and then new blockbuster will be generated through this direct linkage. As part of the effort, last December as we announced the Ajinomoto's online shop as well as Ajinomoto Park, these IDs were merged together and we now have a total of -- a top level number of consumers and then the monthly unique users topped 8.4 million consumers. By utilizing their information, we'd like to conduct test sales through easy channels to launch promising new products. And now we are seeing plans, seeding plants -- seeding -- sorry, planting seeds and we'll be able to introduce new products down the road. And then by utilizing our strong AminoScience and our understanding towards a diet of consumers all around the world, we'd like to pursue Eat Well and Live Well, those corporate philosophy. Next is ICP. Ajinomoto build up or ABF that is, ABF will increase its capacity according to the plan and we'll also make sure that BCP countermeasures are taken. Next, in addition to PCs and servers, but we'd like to focus on HPC semiconductors and new packages. These are the high-growth areas of the electronics material market where we can utilize our knowledge as well as know-how and expertise. So ABF continual expansion will be further pursued. And the development of new materials as well as new fields will be made progress -- making progress down the road. Next is Green. We are already seeing expansion in the plant-based 13 areas where we'd like to utilize our delicious mesh technology and also technology to design nutrition. We'd like to further improve ourselves and to create a new food system as well as develop B2C channel, utilizing biotechnology cultured meat. For example, CO2 in the air is not being utilized as part of -- to create protein. That technology is already available in the market. However, economically and quality-wise, we have -- we are facing many issues. Therefore, by utilizing our strength, we'd like to create a method to produce those meat with a good texture in a safe manner with affordable price. That is our one promising area where Ajinomoto can contribute to. And also pertaining to the proprietary fermentation technology, we'll be able to develop new materials. And to contribute to a sustainable agriculture in Spain, there is an office of our subsidiary group, Agro2Agri. By utilizing this biostimulant technology, we can offer agri solution that we'd like to further expand. Next slide, please. Regarding the business foundation strengthening, we'd like to create a lean business structure through these initiatives. By 2030 we'd like to reach EBITDA increase of 1% or more versus 2022. That is our goal. And FGD's finance as well as the individual shareholder's ratio will be raised to further reduce WACC or working capital -- excuse me, capital cost. And under ASV metrics, as we let the core KPIs and structure KPIs in the 2020 MTP, those will be evolved to ASV metrics. ASV metric consists of economic value indicators as well as social value indicators on the slide. And these will be addressed by the intangible assets which is also another key element. Next slide, please. This shows that ASV metrics, on top of the items we've already announced, but we added ROE and EBITDA anew as part of ASV metrics. And the 2030 ROIC target was raised from 13% to 17% and the 2025 target was further raised from 10% to 13%. For your reference, by 2030 we'd like to triple EPS from 2022 to 2030 or by '23. Next slide, please. And this pics are the detailed picture. Our growth path by segment. Organic growth will be attained according to the plan which is shown on the slide and also business profit, company-wide in 2025, 12%. That is the target. To secure this, seasonings would like to attain 12%, health care 13%, frozen food more than JPY 10 billion. Those are the targets by segment. And also Frozen Foods in the United States which is undergoing structural reform. And then based on the recent figure, the things are improving now. So we'd like to solidify this growth. And then if so we'll be able to attain this JPY 10 billion figure. Regarding ROIC, as I said earlier, was revised upward. On the other hand, regarding WACC, company-wide, 5% to 6% is expected. Interest rates and other uncomparable elements are taken into account. So we have a conservative view in terms of WACC. However, initiatives will be accelerated to further reduce WACC. That is our effort. Next slide, please. Regarding the social value indicator. By 2030, we'd like to have the environmental burden and also to attain carbon neutral by 2050, we already announced these goals. And to achieve these goals we'd like to make a steady progress. Main topic has been GHG reduction, plastic food loss reduction and sustainable procurement. Those are the major initiatives that will continue to further propel those initiatives. And 2023 biodiversity effort will further evolve itself. Next slide, please. This slide shows the continuation of nutrition with our compromise approach. The progress will be announced and that is measured as the extending [indiscernible] lifespan for JPY 1 billion. The progress will be disclosed from 2022 and onwards. And under this approach, deliciousness, food access as well as regional individual diet will be pursued without compromising any elements and we'd like to achieve low salt, low sugar and low fat as well as promote the consumption of protein and vegetables and foods -- fruits. These are the concrete initiatives that we are propelling. And the most-closest stakeholder that is the employees, we'd like to raise their nutritional literacy amongst our employees and also health-conscious employees need to be healthy. Therefore, including those in the management we'd like to make sure that health and wealthy productivity management at the organization level. Next is the financial strategy and allocation of the management resources. And next page, I think financial strategy we need to talk about the 3 pillars written here. And the details would be explained onwards. First is the cash, organic growth and cash needs to be generated and we need to accelerate the growth as a whole group. In addition, for M&As we would be positively considering them so that by 2030 about JPY 300 billion would be a framework secured for M&As. Of course, we need to do capital investment to support organic growth and JPY 750 billion is expected to be invested in that area. So by doing that kind of investment, the DE ratio will be in the range of between 30% to 50% and we want to do a flexible shareholder returns. Next page, please. So in order to improve EPS continuously, we will be doing 3 initiatives. The most important is continuous and drastic growth of business profit. As mentioned earlier, through rolling forecast we want to quickly grasp the changes in the business environment and flexibly come up with the countermeasures. And what we are strengthening is to cope with raw material, fuel cost and logistics cost surge. We want to visualize globally how these are being increasing and controlled. And we see that effect coming up. Second is management of effective tax rate. We think that this should be 27% which was 34.5% in fiscal 2021. We want to make this 27% that fully take advantage of the tax benefits. Lastly, but not least is the improvement of the capital and asset efficiency. We want to continuously do the flexible share buyback and we want to suppress the denominator, the issued number of shares. And to minimize cash and deposit attend and the excess should be used for the investment and shareholders' returns. Next page, please. This is how we're going to continuously strengthen shareholders' return. This total shareholder return will be more than 50% and share buyback would be continued and there are 2 more new policies. One is the progressive dividend payment and the second is dividend payment based on normalized EPS. So the payment will be based on those 2 policies. As you can see, progressive dividend payment means that even though we have a onetime deterioration of the businesses, we will not decrease the dividend, but we will maintain the level of the dividend. By normalized EPS means that, of course, we want to base the calculation on this business profit which is less affected by the changes of the profit like impairment and so forth. And next page shows how we're doing. If we -- comparing with the actual dividend trend with the theoretical values based on a new calculation, I think we will be able to make improvement for the return of shareholder return. So lastly, but not least, this is going to be in one page summarizing what would be the ASP management, trying to explain to you in one page. So based on this page, we want to steadily manage this company. And through this presentation meeting, I have requested to you investors, analysts, I think you have an ambition and will to grow as well as Ajinomoto for we want to contribute to human planet wellbeing. That is our purpose. And we want to realize Eat Well, Live Well. And we want to solve bigger social challenges. But for that we need economic value. So meaning we need to have profit. We want to improve the corporate value. So a larger profit would contribute to resolving social issues. So how are we going to improve the corporate value and the economic value, together with you and Ajinomoto. I think the purpose, I think could have some duplications and overlays. So that overlays. So we want to clarify it together with you. We would like to do best effort, every effort to grow our business. So Ajinomoto group as one team would like to do our best. Thank you very much for your attention.

Thank you very much Mr. Fujie. Next, we would like to move on to the Q&A session. Today at site and online we will be receiving questions. We would like to explain to you how you can do the questions. For those participating in the hall, please raise your hand. We would point you and we will bring you a microphone, a disinfected microphone. And those of you who are participating through webinars, please push hand-raising button in your screen and we would point to. And if you are being designated, please unmute your microphone. For those participating from overseas, we have simultaneous interpretation service, so you are able to ask questions in English. If we have so many questions being raised, I think we're not able to -- and cover all of those who wanted to make questions. I'm very sorry about it. So we would like to move on to the Q&A session. So please raise your hand at site and the webinars if you have any questions. So Mr. Saji from Mizuho, please ask questions. I'm sorry. I'm sorry. Tsunoyama-san. Tsunoyama-san, I'm sorry, from Mitsubishi Morgan Stanley. Mr. Tsunoyama, please.

This is Tsunoyama, Mitsubishi UFJ Securities. I have 2 questions to raise.

Could you please raise one by one?

Yes, I'd like to address this question of you. This was a very ambitious and challenging presentation, your ASV Initiative that was announced. According to the plan, what is the level of your commitment and confidence level from your point of view, especially with the business profit, CAGR, 10% plus or ROE to 18%. In terms of the level of confidence, could you please outline?

Yes. Thank you very much. Regarding CAGR by 15% growth by '25, we formulated a 2030 road map. The management level discussed this matter and also each division -- each region discusses internally in terms of what is that unattainable goal. We thoroughly debated this internally and carefully considered this figure. By 2025, we are already making preparations. And to what extent are they bearing fruits? That is one part of calculation we made. Of course, there is some invisibility yet. However, in terms of rolling forecast that is performed on a monthly basis, we are taking flexible measures. That is the key. In any way, we have a clear path towards these goals and also making sure that the progress is being made along the path and we are more capable of doing so nowadays, including the management level, in terms of meeting these goals, we are quite confident. Having said that though, there are many uncertainties that could possibly happen in the future and we need to make sure that we can resist those unexpected changes down the road.

Thank you very much. I'm just coming to in front of you, but I suggested that not to cross this line because of the infectious control, but I might be moving forward to show the level of my passion. I'm moving closer and closer to you, but I'd like to keep standing up here somewhere around here. Especially with, I'd like to ask you a follow-up question. In terms of profitability, according to the original plan top line growth remains unchanged, but the profitability including ROIC and EBITDA 1% increase. So profitability compared to 3 years ago has changed to reflect your higher confidence. Is that true? What is the background of this?

Yes. Thank you. In terms of the breakeven point, that needs to be lowered. That is the requirement from the management point of view. So when I came onboard, pass and purpose and OE, through those initiatives we need the OE process to address our business foundation and increased efficiency. By doing so we can buttress and make the business structure more leaner. And by raising price increase or introducing PI, we can actually create more profitability. And that data needs to be visualized to identify where we are succeeding and where we are not. And where we are feeling, we should identify measures to address those inadequacies. In terms of the execution level, we are more capable nowadays. That is one background. Having said that though, our efforts need to be accelerated in a much larger scale, especially towards 2030 to what extent can we achieve growth in those 4 business BMX areas to attain JPY 300 billion. How can we make sure that we attain these goals? We are trying to visualize measures.

Another follow-up question. Regarding business ABF, Electronics Materials business, in particular with ABF. In terms of CapEx plan that was raised this time, in addition BCP measure you added anew. So what are the challenges you are currently facing and what concrete measures are you going to take? Could you please expand on this matter?

Let me first provide that the outline and then Maeda-san can provide more details. Well, regarding the market of ABF, that is -- will grow rapidly. That is our expectation. Of course, as we communicated earlier, for PC applications, inventory adjustments will take place. But in terms of PC exposure, is actually lower than 30%, as we announced earlier. And then be it servers or datacenters, those applications are on the rise. Of those, ABF is evolving to become a high-performance and high function items. And that is increasing in terms of volume. So our [ procreate ] customers, when they place orders, we need to be able to meet those customer needs and investment must be made to meet those customer needs. We are not significantly increasing the level of investment. We are trying to focus our investment into necessary items. Regarding BCP measures, in Gunma and Kawasaki, those are the central areas for BCP initiatives. And the details of -- excuse me, it needs to be better balanced. And also another remote area must be also utilized. So the details can be provided from Maeda-san.

Fujie-san, thank you very much. This is Maeda speaking. I'd like to expand on the matter. As Fujie-san mentioned earlier, a few years ago we expected that high-performance computing described on Page 27 is becoming or advancing on a further accelerated level. It's much faster and 3G, 4G, 5G, 6G, those are the rapid advances that are being made and with the advancement in the required level of specifics in terms of insular property and heat-resistant property, the number of servers is also increasing as well. Volume as well as price-wise increase are taking place as well. So the speed of transformation is faster than expected and this is reflected in recent plan. And the investment level is rising due to the recent inflation. So that is why we calculated JPY 25 billion in order to meet the demand from the market and that shows a level of commitment. Regarding the second question pertaining to BCP, as you are aware, the factor standard has been considered and we have a very high share. If Ajinomoto fails to provide this, then it's going to create a very difficult situation. Therefore, we need to withstand any possible natural disasters at factory level and that is the BCP taking place. We are already doing enough. However, I would like to do more for the foreseeable risks, not to alleviate market concerns. That is why we are focusing on BCP. That is elevated each year.

Next Mr. Saji from Mizuho Securities. The microphone is yours.

I have 2 questions and I would like to simplify and make it into one. First, as a management in ASV metrics, you had incorporated the challenges. I want to clarify. What part is challenging? What are the high priority areas and taking the risks, the plan is to make the return at such a level? Well, I need to know the risks as well. What could be the risks? And then it had designed this to target this metrics. I'm sorry.

Can you go each by each?

Yes. First, why challenging ASV metrics, why have we formulated this?

One thing is that we want to pursue ASV with determination and ambition. We would like to improve operational efficiency and we want to do a best effort. I think if you have a challenging target, that would lead to your growth. That means that we -- in our organization, in Ajinomoto group we had some organization that was able to do, but not some. So that's a reflection. Especially domestic food business in the past 5 years, sales and profit, they are not been able to grow their areas. They were able to protect their market share. I think that is culture. So changing that culture and way you're thinking into a challenger, I think then it could become a driving force for the growth. From yourselves, you have to challenge. And now we see a lot of seeds being planted. And we have Mr. Okamoto as Marketing Executive Director. He is leading that. And Mr. Masai is going to add some comments for this -- the risks here. The future, we cannot actually make forecasts. So in our management we want to grasp risks of such kind as a management risks and we would like to have a committee and larger committee that could address that. Up until now, we've written underneath the risks, [indiscernible] or conflict risks. But to that we did not have enough BCPs. So I think we could assume such risks happen in the future. And those unforeseeable risks, we need to write down what could be -- that could become a bigger risk in the future. So Mr. Masai, could you tell us more about it?

Yes, this is Masai speaking. I'd like to supplement. So for Japan as was mentioned by Mr. Fujie earlier in the past few years, we were not able to grow the business as it should have. So Ajinomoto group, what is the strength? First, we have the food and AminoScience. And we have B2C and B2B business and we have domestic and not just small big overseas business. So in that matrix, the B2C Japan food is not growing well. So here I think -- but in another perspective, we can say that there is still room for growth here. So [indiscernible] mentioned, we want to enhance and improve the marketing. And we have Mr. Okamoto and he is going to head the Marketing Design Center and was mentioned in the presentation earlier, we have a globalized business now. We thought the center was Japan, but East Asia, China, that was directly controlled from Japan headquarters. And we have a keyword here exporting from Japan to China and we have seen them accelerating. So I think enhancing marketing and have a bird's-eye view of the East Asia, not just Japan and the risks. Ukraine war, we have the raw material, energy prices surge. So we are trying to cope with that situation. And for example, competitor's analysis and so forth. So we have been seeing various risks together with the corporate, we are looking at them. So continuously we want to keep an eye on them.

Another thing is a very simple question. I'd like to hear hint from you. This is a relative comparison in the world, in the consumable producing companies, Japan, traditional challenging companies had been now well established including the corporate values in the world. Other consumables companies, amongst others, you want to be a leader. So from an outsider viewpoint, what is appealing? So what is the positioning of Ajinomoto? How could Ajinomoto be sole company of Ajinomoto, providing values as a consumable company? So in a relative comparison with others, what would be the differentiating factor for your company?

Yes, I've been troubled a bit and thinking about how we can differentiate. Yes, especially value creation advisory board, we launched them last April. And we have some experts in that committee and the management meeting also evolved and we are discussing in that committee that interplant. [ Mr. Namiki ] is also involved. And interbrand, how are we going to enhance corporate brand of Ajinomoto from various aspects is given some ideas. Now this is rather multinational corporate brand. But how are we going to bundle that globally? That's very important. So we've started this initiative already. We have various contents and we need to make them and we need to utilize them globally. Eat Well, Live Well, towards that AminoScience company, I think we need to have that recognition globally and we are thinking about what we can do for that. Through those initiatives, I think in each of the countries, the member -- not just the members in the communication and PRs, I think various members and employees engagement and passion would be increasing, I think through those efforts. For example, in Indonesia, we have health provider initiatives. Not just people, but we're thinking about the planet, the health. Meaning that the paper package instead of other packages and they're very selling well. We have the video made and in Indonesia that is shown around and the other region members are also seeing that video. Maybe the Philippines and in other countries they want to make the same video of such. So toward Eat Well and Live Well, how can we fully utilize AminoScience and contribute to the wellbeing of the human being and the planet. So I think that could be a trigger and the road map towards our goal. So we have that plan. And today we have Mr. Morishima in charge of Communications. So in that aspect he's also in charge of sustainability. Sustainability and Communication and corporate brand. I think she is heading that department and doing some various initiatives. So she could explain to us as the initiatives.

Thank you for your question. This is Morishima. I would like to complement Mr. Fujie's comment. Yes, as was mentioned, AminoScience, with AminoScience we want to contribute to the wellbeing of the human beings and the planet. That is our target. And we want to have a shared view by our stakeholders as well. As for the corporate brand, still so far we were having a discussion based on B2C. But AminoScience B2B is also important, and we want to communicate that to our stakeholders through our corporate brand. And as was mentioned earlier, sustainability in various divisions, corporate, we are thinking about how we can be friendly to the earth and the health, for example, to the consumers and [indiscernible]. Ajinomoto is a company providing a traditional seasonings with safety. But we are more than that. So through communication, we would like to strengthen that. Sustainability, doing is very important. But at the same time communicating that to the stakeholder and making them understand and having their support is also important I think. So I would like to do our best in that aspect.

Now those attending from the webinar. We have many questions. So we'd like to invite questions on those attending from those attending online. If you are designated, then please unmute and identify yourself and mention your question. Next is Yoshida-san, JPMorgan Securities.

This is Yoshida speaking from JPMorgan Securities. I'd like to ask 2 questions of you. First, pertaining to the 4 BMX regarding health care, when you mentioned that the strategic core businesses will be driven to propel growth and you earlier mentioned this as well. But to what extent are you going to accelerate the growth under the strategic businesses? Could you be more specific under health care? And also during your presentation, I mean you mentioned medical food and cell culture media and your planting seeds, I understand. But in terms of the entire health care business, how is the growth being accelerated and contribute to the overall growth expansion? That is my first question.

Thank you very much for that question. Now I would like to address that question and then details will be provided from Shiragami-san later. Regarding healthcare we have high hopes for the business. And as we have announced earlier, many seeds were planted. In terms of our legal nuclear assets, customers are placing orders were -- and the pipeline is growing. And regarding the regenerative medicine, cell culture media, we are already planting seeds and bearing fruits. So those will be the areas that are driving future growth. And we need to also accelerate those initiatives down the road. Considering all these, our growth can be certainly achieved, and then details will be reported from Shiragami-san.

Thank you very much for the question. This is Shiragami speaking. I'd like to provide some more details. Regarding the AJIPHASE acceleration, as we have communicated this on the IR events, in the health care, AJIPHASE is now becoming a robust driver. And CAGR 20% growth will come from AJIPHASE. That is the bold target that we have set. To achieve that goal, first, we need to enhance our capacity. Low molecule, small molecule capacity or facility needs to be shifted to AJIPHASE. Part of them can be shifted to AJIPHASE and Tokai plant as well as Belgium Ajinomoto plant will shift from small molecule CDMO business to high-margin AJIPHASE business. Those initiatives are underway and we need to accelerate that. Number 2 is the expansion of portfolio, oligonucleotide medicine consists of multiple compounds and those will be further expanded to enhance our pipeline. Currently, we have a highly promising one compound. On top of that, we have another group consisting of SIRNA. By expanding the scope, we can project a further revision or upward revision for this part. And then, number 3, AJICAP was added anew. Unlike AJIPHASE, this is an unlike oligonucleotide acid, but this is a new technology and that is emerging. Like AJIPHASE, but this is a new type health care business that will be able to engendered utilizing this AJICAP technology. And regarding to the second question, cell culture media as well as medical food, starting with the cell culture media, regenerative medicine cell culture, STEM FIT has become a de facto standard within Japan and also overseas, the sales is increasing. Regenerative medicine launch, as Yamanaka-san won -- the Dr. Yamanaka won the Nobel prize, but it's taking time for the markets to mature. But products are being launched in an increasing number, recent years, and it is being commercialized. So there is a more -- much more clear visibility with this regenerative medicine. So the cell culture media for regenerative medicine purposes will expand. And also regarding the medical food in the United States as well as Ireland, we acquired companies in these 2 regions and we are growing. We are trying to grow medical growth element -- medical food elements, excuse me. This is a therapeutic food for intractable diseases. And the services can be reimbursed or even in a country where these services are not reimbursable, we can actually expand this business. Therefore, medical food will be globally expanded towards the 2030 road map. I hope that answers your question.

Pertaining to the CAGR growth of 20%, you'd like to attain with AJIPHASE, on a sales basis, is that right, towards 2030 that is an ambitious goal?

Yes, that's right. As we've communicated earlier, the previously introduced growth trajectory, trajectory has been announced, yes.

So on the previous IR Day, the graph showed that by 2025, CAGR target for health care was JPY 30 billion with business profit of JPY 12 billion-plus. And the actual was surpassing the targets last year. But you further raised the bar or rather, are you focusing on the previous projection?

Yes, that's right. I'm focusing on the previous projection. And then there will be a small incremental increase than that. But I just mentioned -- reiterated the target of 20% contribution from AJIPHASE.

I understand. So based on the previous announcement, rather than previous announcement, the growth is accelerating. Is that right?

In terms of the growth rate down the road, it's much higher than expected, yes. In the -- yes, that's right. So the current roadmap shows a higher growth proportion. So in terms of the AJIPHASE, the pipeline is increasing.

CDMO oligonucleotide, are you expanding the share?

Yes. As I mentioned earlier, to cover multiple disease areas, multiple oligonucleotides are within our pipeline and their AJIPHASE can be deployed. And we are expanding the adaptation of the technology -- excuse me, adaptation of the technology. Therefore, our penetration will further rise as the adaptation goes up.

I have another question. Regarding Frozen Foods in the United States or North America, the JPY 10 billion business profit, that is the target. But this is a specific area of concern. But the recent months in December and January, things are improving. What is the change? What's driving the change or improvement in Frozen Foods in North America?

Yes. I'd like to address the outline and then Kawana-san can provide some more details. As we mentioned earlier, TDC margin, total delivery cost margin is visualized and carefully monitored. And also the top line unit price, price hike has been then monitored, so price increase as well as TDC margin. Those are the key indicators that we are closely monitoring. And both 2 are improving. To do so, we need to make sure that through a price increase, we need to grow the revenue and also the cost of goods sold at the plant level must be reduced. We are dispatching experts from Japan and details can be provided from Kawana-san. Could you please comment? I'm sure that we are confident that we can meet this goal.

This is Kawana speaking, in charge of Frozen Foods. Thank you very much for the question. Regarding our North American business, broadly speaking, there are 2 areas. One is the high margin, high-growth Asian products. Another is, or the other is low margin American-specific Italian products. So those are the 2 different categories that we need to consider. The structural reform is underway. And we are carefully considering how to reduce the low margin products. But Asian products are increasing. Therefore, we are increasing the capacity. So asset divergence is being promoted in these 2 segments. And this is a so-called [indiscernible] where we are facing, we need to reduce certain level of sales. But yet we need to actually spend more for the asset diversion. And there, the lack of labor as well as the inflation came in. And so we had to face multiple crises. And -- but this has been alleviated after a certain period of time. And the increased capacity is actually fully operated to increase sales. So now structural reform is underway to start generating profit and we are ready to start generating profit. That is the recent situation. Regarding the pandemic, the support provided from Japan has been stalled. But after the pandemic, as we go -- enter the post-pandemic era, we will be able to meet your expectations and rectify the situation.

So going forward, including the price revision, but to the unit price increase to raise your sales to secure a certain level of profit, that's the plan, and you are entering a recovery phase. Is that right?

Yes, within Frozen Foods, there are different categories. So portfolio needs to be shifted towards the high-margin ones. And that shift is underway and we see a clear path. Okay. And then in the United States, and the Western countries, Gyoza and other Asian products are growing steadily. Therefore, as well as in Japan, things are improving. So the performance overall is improving as a result.

So another question from the webinar. Mr. Takagi from SMBC Nikko Securities.

This is Takagi of SMBC Nikko. I have 2 questions. Mr. Fujie, you mentioned about -- we are now fully strengthened that we can go the road map towards the growth. And in the full field, JPY 300 billion, you're going to increase the sales and business profit is 40%. That means that the profit of JPY 40 billion is going to be raised from here. But what is the new growth area? And can you be more specific? I'd like to know, yes, you mentioned that you have the growth trajectory, but which part is going to grow? So what are you expecting most?

Yes, I'd like to talk about the overview and then Mr. Shiragami and Mr. Masai would like to supplement. One, in the area of health care, as was mentioned earlier, health care, we have already seeded and the market is going to grow. That is sure. So in that area, we want to grow our business. As Shiragami mentioned earlier and another one is the green, especially green food. I think, including startups, various companies have entered into this market, as you know. But our company, we have AminoScience and we can utilize this. And from the customers we have a lot of inquiries. In North America, we will have a customer innovation center. And there, the customer can actually visit and taste plant-based food and we are now improving the product. People say that Ajinomoto is different. We have a ecosystem together with our customers. And we have so many customers involved now. With this expertise in U.S. and in Japan and in Europe and in ASEAN, we want to make this. That is our road map and we are now -- that is visible now. So let's supplement.

Yes, this is Shiragami. And I'd like to comment about the JPY 300 billion with the existing core business and the growth of BMX we would -- we have divided them and calculate it differently. JPY 300 billion BMX, I think that is a portion of BMX growth. Amongst the BMX, we have 4 areas or regions. In that health care and ICT, starting from last year, in IR, we have made various explanation, towards '25 to '30 growth plan. Yes. So once again, for this road map, we have reviewed AJIPHASE. It could have incremental growth, that forecast. That is included here, but on the other hand, Food & Wellness and Green. So those 2, this is also included in the JPY 300 billion. Those are the new additions. As for Green, I think last year's IR Day, we've already presented to you green food plant-based protein, bio, meats and also fermentation technology, proteins and crisis. There are so many technologies coming out. We have the fermentation technology and deliciousness designing technology. B2C in the screen business, I think we have opportunity to grow globally. So we have written and we have made this a new pillar for the growth strategy. For Food & Wellness, as was mentioned earlier by Mr. Fujie, one is data is going to be involved. And also Masai-san mentioned about the strengthening marketing. We will have more of the product and we will have challenging initiatives. And in addition to that, the usage of digital technologies, we will be able to acquire personal data there in the coming years. So I think DX in food business is also going to start. So towards that, we want to be the leader. We want to be in advance. So we want to have initiative where Food & Wellness businesses, data-driven, so in the food, wellness and green, several hundred billion yen. The target is JPY 100 billion. That is not included. But several tens of billions or maybe JPY 20 billion or JPY 30 billion is going to be included in the future. But towards next year, in IR days by field or area, we want to present to you specific figures.

Can you break down this JPY 300 billion? This JPY 300 billion incremental sales, can you break them down by health care, ICT, Food & Wellness and Green?

At this point of time today, we're not able to make any disclosure for the breakdowns. Of course, overwhelmingly, health care and ICT, you mean, right? Well, I think when you look at the last and recall last year's IR Day, this is not the mostly JPY 300 billion and you can identify that. Green, Food & Wellness, we have new size of business which could become a new pillar and that is going to be launched.

And another, may I?

Yes.

Another question is within the coming 3 years, I was surprised seasonings and source. This CAGR of business profit is 12%. I think this is an accelerated figure from the past. Before COVID-19 and now, I think profit-wise, you have not grown this business. The level is JPY 80 billion level. But in the coming 3 years, you want to exceed that with JPY 100 billion. How can you do that?

Yes, the first and foremost factor here is that during the COVID situation, we have raised prices. And we want -- we had lowered the breakeven point. So based on that calculation, we came up with that figure. However, I think, of course, there should be some responses. But when you look at the 3 years acceleration and looking at the past, I think it's unlikely to have that kind of acceleration, not just a price increase. We have a new product contributing to the sales. And by combining AminoScience and food, we have a lot of inquiries from our customers. For example, now food manufacturers, person in-charge of food and marketing went there. And they had discussed about the better taste and the texture. But now the members of our sales team, they're studying about AminoScience, amino acid. For example, how it can contribute to the immunology. That idea could be brought to the customer and that could become a new product. And this type of initiative has already started. So that person for that portion of business, we can have higher margin. And it will become a business. Mr. Masai and Mr. Maeda are always having communication. So maybe can you comment on that more in detail?

Yes. This is Masai speaking. As first mentioned by Mr. Fujie earlier, especially in the area of B2B -- we call them customer assets. Customers thought in the past, we were a company of AminoScience and differently a food company. But now they've started to combine this. And we have a lot of inquiries from our customers. So the sales team of both companies, us and our customers getting together and formulating various plans to get to more profit. And in addition, it was written in the Food & Wellness. We have regional strategies and we want to enhance this, strengthen this. This is very important. Of course, in the past, we had regional headquarters. But we want to have a global bird's-eye viewpoint. For example, ASEAN, we think that ASEAN will grow in the coming years. Seasonings was the driver. But along with the economic development and growth, the quality of the peoples' living will shift to the frozen food and other areas. For example, the instant noodles and so forth, we are successful in talent. And we will have more of a new product there. And the region-wise, we do have frontiers. So for example, in ASEAN nations, Cambodia, Lao, Myanmar, not the ASEAN, but Bangladesh, I think we have new markets to grow. For example, in Malaysia, to our new plant, we will be distributing halal identified food, approved food. And that could be exported to other countries, Islamic countries. So we can expand more in the region. And through marketing design center, we can enhance our marketing. The key word is D2C. D2C means we can expand the healthy longevity. So thank you very much. And one more, this is very important, breakeven point lowering that, reducing the breakeven point. We still have a bit of a meatier muscle here. So we want to be more lean and that is, I think, the source. In 2011, I went to the Philippines, the sales was about JPY 10 billion, we didn't really make any profit. But I think towards 2020, we said that we should make this sales triple and more than 10% of the profit. And we made various initiatives there. Of course, the top line will grow from after. First, we wanted to make the company lean, the management lean. So we still have room to grow. So by making this organization more lean, we can improve the top line. This is like having a Chinese medicine. So within our organization, we -- this is proven. So these members have done that. Those are the members of the management executive committee meeting. And of course, this is not their enthusiasm. It is improving the operational excellence as well. We have visualized data and various initiatives. And then I think we can reduce the level of breakeven point and that is going to be an important factor.

Now we'd like to take questions from Fujiwara-san, Nomura Securities.

This is Fujiwara speaking from Nomura Securities. This is a very exciting target and presentation. And it's a full of dreams, ambitious goals for employees as well. Starting with the foods, especially Frozen Foods, in the United States, you mentioned that the structural reform is underway and bearing fruits. But winter was acquired in 2014. And in the last few years, cost inflation you faced. But why to begin with, the process took so long I'm just wondering, could you please mention or answer my question?

Thank you very much for the question. When I came onboard, we needed to increase speed as well as scale. That was a problem that had to be addressed. And also, we need to double our efforts to rectify the situation. That's the reelection we have made. As Fujie-san pointed out, this is being -- has been a challenge and that we are still addressing the issue. The mechanics needs to be in place. Globally, we are operating multiple businesses. And there will be 1 or 2 suffering businesses we have to face or maybe regions we have difficulty with. In the past, each entity, local entity had the responsibility to rectify the situation. That has been the traditional style because it was their local responsibility to address the situation. That was good back then. However, there is some uncontrollable items or crisis developing or escalating into a further difficult level. So there is a certain level of problems that can be addressed locally. But the regional headquarters must engage to rectify another level -- at another level. And then the executive committee must monitor a higher escalated crisis. So we have now classified the crisis into 3 tiers like this. And also with the frozen food in the North American region, the committee, the executive committee is supervising the entire initiatives. What's taking so long in the North America frozen food? That is the reflection point. And it has been driven home for us. Therefore, the executive team is considering what measures need to be taken. And finally, in the latest figures in December and January, we are starting to see signs of improvement finally. So speaking of the frozen food in the United States, amounting to JPY 10 billion sales, but the margin is still at the 4% level is so low.

But for example, growing this into 10%, what is going to take that to grow from 4% to 10%, what needs to take? What is your road map towards reaching 10% profit margin in frozen foods in the North American region?

I'd like to focus on Gyoza and Asian frozen food items. The top line growth, we are about to enter that growth -- top growth phase, top line growth phase to top this JPY 10 billion sales by 2030. Appropriate marketing investments must come to exert effective marketing procedures. By doing so, existing facilities without any major additional CapEx spend, we need to actually concur the market better. Of course, commitment or passion may differ from the level of investors or shareholders. But on a mid- to long-term, this corporate value generating a certain volume growth and this volume incremental increase can be better addressed through the current management method. That is carefully planned and that is the conclusion we derived. And that's why we set the target.

Thank you very much. Well, although we're nearing the end time, we would like to entertain one more question. Morita-san from Daiwa Securities please.

This is Morita from Daiwa Securities. I have one question because of the time limit. Portfolio management, you mentioned that you want to improve that. Well, I think you have done various things to stop doing, but this collect and change. You want to focus on that. I think there should be different difficulty arising. So in order to review portfolio management in thoroughly doing that, what would be the important factor? And I was looking at the health care transitions, Food & Wellness. We need to speed up and are you able to really change this? I do not see a sure aspect. So if you are thinking in this area, M&A is going to be an important tool. And earlier, Mr. Fujie, you mentioned that until 2030, the budget of M&A is JPY 300 billion. From the global point, 2030, only JPY 300 billion, I was sorry to hear that. So can you tell us about how you think about M&A as well?

Yes. First, as was JPY 300 billion. This is just a number. But in the BOD and in the Executive Committee, we are discussing and if there is a necessity, we can increase that. That is not totally denied if we need to do so. And as for the transition of the portfolio management, Morita-san asked about the Sustainability Advisory Committee. We have materiality arising from there. And from AminoScience, we will generate corporate value only by Ajinomoto. And I think we are having that discussion. So we need to go through that discussion. And one thing, relatively speaking, up until now, we have had the various initiatives starting from bottom up. And compared to other competitors around the world, I think we had the capability in the site at the site. But what I reflect is that as a top management, are we enough, are we fast enough? Are we quick enough? And are we really exercising what we need to do? I think I have various communications with other CEOs. And sometimes I feel that and I reflect that we are still lagging behind. So if we are to transform a big portfolio or changes or management, bottom-up is also important, but I think appropriate top-down decision is important. It is not that collective knowledge will tell us. So I think I would like to have that in my mind in BOD and Executive Committee meeting as a top leader of this company. I would like to make decision if in case of need. So that's how I think about portfolio management, especially. As for sustainability promotion in the coming years, how are we going to implement that in the midterm ASV initiatives? For example, purpose. We have the word AminoScience. In the Sustainability Advisory Committee, the hint was given and wellbeing, contribute to wellbeing of the human resources, society and the planet. I think we need to contribute to the wellbeing. So that's important, so having that in mind, we need to evolve our portfolio. So at the right time, we would like to report to you. And hence, we would like to have your appropriate advice. Thank you for your question.

One more and in sustainability, you mentioned that we will have KPI for each individual materiality. As for KPI management and this portfolio management, is it going to be connected and linked?

Yes, yes, that is going to be linked. And first, the materiality, we have [ '28 ] challenges and expectations. And for that, how are we going to address that? We have a big Excel chart like thing. So how are we going to specifically do with that? And in that sense, what can we generate as a social value? And what will be the economic value that could be generated from that? So we will have that impact path or road map. We have visualized that. Of course, not to all of the impact passed what would be the profit or the economic values. Of course, we have -- we want to show it in figures. But what is actually visualized now, we are showing it to you. And those initiatives as a whole would lead to enhanced corporate value. And we think that our portfolio based on the full field that we've shown you is shifting and transferred into the appropriate fields.

Thank you very much indeed Morita-san. Thank you very much. That concludes the Q&A session. Sorry for exceeding the time. Lastly, but not least, Mr. Fujie would like to say a word.

Thank you very much for taking time out of busy schedule to attend our briefing session. And those of you attending online, thank you very much as well for your participation. And there is more that we'd like to communicate down the road. Therefore, we'd like to continue our dialogue with you. We value these opportunities. As I said earlier, when we communicate things, it's when our message can be get across. Therefore, today, we received a numerous advice from you. And we'd like to reflect today's session to identify areas of improvement down the road. We'd like to verbalize this and communicate this to link to the further corporate value enhancement. I'll take my responsibility, with my full responsibility, I'd like to further delve into this matter. Thank you very much once again for all your participation and we'd like to solicit your continued support. Thank you very much. With that, we'd like to conclude our session, our briefing session.

Thank you very much for your kind attention and participation.