The Sapporo Group will realize sustained earnings growth and shareholder returns by steadily investing in growth fields.
Investing in Growth Fields and Enhancing Profitability
In Group Management Plan 2024, Sapporo has included two profit-related targets among the Group’s financial targets: Group consolidated core operating profit of 30.0 billion yen and an increase in the ratio of core operating profit to revenue to 5%.
In addition to pursuing business scale expansion, the Group must also shift to a profitable structure. A concrete example of this is the strategy of the alcoholic beverages business of strengthening the beer business. We will enhance our cash generation capabilities over time by increasing the sales contribution ratio of high-margin products and services. At the same time, we will apply a select-and-focus approach to cost control unconstrained by conventional ideas and ways of thinking in areas such as sales promotion expenses and advertising expenses. We will make carefully selected investments of the cash generated in this way while clearly prioritizing investments in growth areas, placing importance on the profitability and efficiency of the invested capital. Under Group Management Plan 2024, the Group will strive to boost profitability by investing an amount equivalent to operating cash flow through 2024.
To improve the quality of the balance sheet, we have worked to improve asset efficiency by means including liquidation of strategic shareholdings. Sapporo has established a Basic Policy on Strategic Holding of Shares within the Basic Policy on Corporate Governance and flexibly liquidates assets as the need arises while retaining the option of holding assets that provide appropriate investment returns.
Sapporo considers appropriate distribution of profits to shareholders to be an important management policy and has a basic policy on shareholder returns of continuing to pay stable dividends taking into account the company’s operating performance and financial condition. Although profit attributable to owners of parent declined in fiscal 2019, management decided to maintain the dividend per share unchanged.
Pursuing Growth Opportunities and Managing Risks as a Company with Highly Unique Brands
In the Long-Term Management Vision, the Sapporo Group has articulated the group vision of being “a company with highly unique brands” and identified its brand assets as the source of its competitive advantage. Sapporo has positioned three fields as the Group’s core businesses—Alcoholic Beverages, Food, and Soft Drinks—and aims to nurture and strengthen the Group’s brands, along with the real estate business. A diverse brand-centric business approach is a unique characteristic of the Group, and we believe that this approach entails growth opportunities and risks.
For instance, our real estate business is a brand value creation business, and Sapporo’s ongoing independent involvement in community development in the Ebisu district has not only enhanced the area’s brand power and appeal, but also led to enhancement of the brand value of Ebisu Beer as a premium beer.
Under Group Management Plan 2024, from the perspective of financial soundness, Sapporo has set standards for indicators of the balance of capital and profitability relative to the level of interest-bearing debt (net D/E ratio and ratio of interest-bearing debt to EBITDA) and will maintain these at levels that make the current credit rating sustainable. Accelerating business expansion in the Food field and promoting global business expansion are essential for achieving sustained growth over the medium and long term, and Sapporo considers appropriately maintaining a sound financial foundation important for achieving these objectives.
Also, Sapporo is working to mitigate business risks and curb volatility while nurturing and strengthening brand assets by building a unique portfolio of businesses with differing business cycles and terms.
The Role of the Financial Department in Making Growth Investments and Mitigating Risks
Appropriate assessment of business risks is an important role of the financial department. To fulfill this role, the department must constantly maintain a high level of risk sensitivity underpinned by full awareness of what is occurring on the front lines of the business.
Although other management departments are working on streamlining and rationalization, the financial department is working to increase frontline risk awareness and sensitivity by deliberately increasing opportunities for stakeholder interaction within and beyond the Group under the motto “use digital technology to the fullest, but practice analog face-to-face communication”. And, to engage in fruitful dialogue with our shareholders and investors, we will make efforts to continuously deepen the substance of such dialogue through clear and thorough communication, including the relaying of negative information. The Company’s financial documents and this integrated report are a means of communicating Sapporo’s direction and the issues we face, and we prepare these documents with the aim of sparking dialogue and stimulating communication with our shareholders and investors. We hope to continue to benefit from your frank opinions and request your support for our efforts in the coming years.