Steady Implementation of a Growth Strategy of Profit Base with an - - PowerPoint PPT Presentation

Steady Implementation of a Growth Strategy of Profit Base with an Appropriate Response to Drastic Change

– –Sales and Profit Increases through Growth in Processed Foods for Commercial Use and a Return to Profitability in Marine Products– –

Presentation May 15, 2008

(Stock code: 2871)

Nichirei Corporation

Tel: (+81-3) 3248-2132 E-mail: takeshitas@nichirei.co.jp URL: http://www.nichirei.co.jp/ir/en/index.html

Notes: 1. Figures shown in graphs and tables have been rounded to the nearest unit where necessary, except where otherwise specified.

• 2. “E” in graphs indicates estimates announced on May 13, 2008, and “P” indicates estimates announced on May 15, 2007 in the figures in the Medium-Term

Business Plan

Table of Contents

[Overview] [Business Strategy: Marine Products] ROE: Currently Trending in the 8% Range. Medium-Term Target at 10% Through Increased Investment in Growth Sectors 1 Achieve Positive Operating Income Coupled with Realization of an Operational Structure Resistant to Changes in Market Conditions 9 Capital Investment for Profit Base Expansion to Be Six Months Behind the Schedule in the Medium-Term Business Plan 2 [Business Strategy: Logistics] FY 09/3: Sales and Earnings Increases through Growth in Processed Foods for Commercial Use and a Return to Profitability in Marine Products 3 Downward Pressure on Earnings from Rising Cost for Fuel Oil and Electric Power Amid Strong Demand 10 [Business Strategy: Processed Foods] Poland: Construction of a New Cold Storage Facility to Support Further Business Development in a Booming Consumer Market 11 Growth Driven by Pre-Cooked Frozen Foods for Commercial Use and Market Expansion for Wellness Food 4 Regional Storage: Increasing Competitive Edge in an Adverse Industry Environment 12 Strength in Pre-Cooked Frozen Foods for Commercial Use: Agile Response to Needs in the "Home Meal Replacement" Market 5 Sales Increase for Transport Due to Customer Category Expansion, Profit Contribution from New TC Operation from FY10/3 Onward 13 Wellness Business: Contributes to Earnings upon Full-Scale Implementation of Metabolic Syndrome Countermeasures 6 [Reference Materials] Wellness Business: Medium-Term Growth from Businesses Including Diet and Anti-Aging Foods Sectors 7 Segment Data 14 Increasing Costs of Raw Materials during FY 09/3 to Be Absorbed through Price Adjustments and the Benefits of Yen Appreciation 8

ROE: Currently Trending in the 8% Range Medium-Term Target at 10% through Increased Investment in Growth Sectors

1

Notes: 1. ROE is calculated from net income (loss). Negative figures for FY 98/3 and FY 04/3 reflect restructuring support losses in investment businesses and reorganization losses.

• 2. Figures for FY 07/3 include an extraordinary gain of ¥3.0 billion on the sale of shares

in an affiliated company. Excluding this gain, ROE is 8.5%.

• 3. An extraordinary loss of ¥1.5 billion due to a prior period adjustment resulting from the

introduction of new lease accounting method. Excluding this loss, ROE is 8.4%.

• 1. Operating income margin in Processed Foods in FY 08/3 decreased owing to factors including a slump in sales of pre-cooked frozen

foods for household use. However, the capital employed turnover ratio improved thanks to further contraction of interest bearing debt, which was partly due to delays in capital investment. As a result, the ratio of operating income to capital employed remained at the previous year level during FY 08/3.

• 2. ROE was 8.5% in FY 08/3, roughly the same level as in FY 07/3 excluding the positive impact from the sale of shares in an affiliated
• company. As an extraordinary loss of ¥1.5 billion due to a prior period adjustment resulting from the introduction of new lease accounting

method will be recorded in FY 09/3, which will decrease ROE to below the 8% range.

• 3. Overall strategy and targets in the Medium-Term Business Plan, which concludes in FY 10/3:

(i) Expand the business base in new growth sectors. (ii) Halt further contraction of interest bearing debt, maintaining it at the current level, and actively appropriate operating cash flow to capital investment. (iii) Set a medium-term (for the coming five years) ROE target of 10%, and maintain shareholder returns at the level of a DOE of 2.5% and a payout ratio of 25%.

ROIC and ROE

1.9 2.0 2.0 2.1 2.1 2.2 2.3 2.2 2.4 2.5 2.5 2.5 2.7 2.0 2.2 1.8% 1.4% 1.0% 1.4% 3.0% 3.3% 2.5% 3.2% 2.8% 2.9% 3.4% 4.0% 3.8% 3.7% 4.2% 3.6% 2.9% 2.1% 2.8% 6.1% 6.9% 5.4% 7.4% 6.2% 6.4% 8.1% 0.2% 2.0%

• 5.6%

0.2% 5.3% 4.7% 4.5% 5.8%

• 2.0%

5.4% 6.4% 10.1% 8.9% 11.2% 9.7% 9.5% 9.6% 7.7% 8.5%

• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 96/3 97/3 98/3 99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3Ｅ 10/3Ｐ Operating Margin 0.0 0.5 1.0 1.5 2.0 2.5 Turnover Rate Employed capital turnover rate Operating margin ratio Employed capital operating margin Return on shareholders' equity

Debt/Equity Ratio (Consolidated)

1,873 1,898 1,931 1,917 2,006 2,173 1,959 1,948 1,727 1,674 1,453 1,243 1,120 862 729 661 0.58 0.66 0.84 1.19 1.38 1.60 1.91 1.93 2.36 2.43 2.51 2.14 2.03 2.00 2.16 2.23 500 1,000 1,500 2,000 93/3 94/3 95/3 96/3 97/3 98/3 99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 100 million yen 0.00 0.50 1.00 1.50 2.00 2.50 Interest bearing debt Shareholders' equity Debt/equity ratio FY

Capital Investment for Profit Base Expansion to Be Six Months Behind the Schedule in the Medium-Term Business Plan

2

• 1. The pace of capital investment is lagging for six months from the schedule in the Medium-Term Business Plan.
• 2. Capital investment during FY 09/3 is forecast at ¥20.7 billion, higher than the amount in the Medium-Term Business Plan. To make

up the delay, capital investment will be accelerated to return to the level in the Medium-Term Business Plan during FY 10/3

• 3. As a result, overall capital investment during the three-year term of Medium-Term Business Plan is forecast to be ¥6.4 billion lower

than the initial plan of ¥54.0 billion.

Change in Level of Capital Investment

44 38 38 34 30 32 42 32 115 103 115 36 43 24 11 13 27 40 25 66 91 41 17 9 14 7 7 7 8 13 16 13 18 97 90 76 52 50 66 90 70 197 207 174 50 100 150 200 Actual Plan Estimate Plan 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 100 million yen

Capital investment (Logistics) Capital investment (Processed foods) Capital investment (Other)

FY 09/3: Sales and Earnings Increases through Growth in Processed Foods for Commercial Use and a Return to Profitability in Marine Products

3

• 1. Targets for FY 09/3

(i) Net sales are forecast to increase by 4%, or ¥16.0 billion. Pre-cocked frozen foods for commercial use are set to stimulate strong growth in Processed Foods and net sales are expected to increase in all businesses except Marine Products. (ii) Operating income is forecast to rise by ¥0.4 billion due to increases of ¥1.6 billion in Processed Foods and ¥0.7 billion from a return to profit in Marine Products, which are partially offsetting declines in earnings of ¥0.7 billion in Real Estate and Logistics, respectively.

Net Sales by Segment

1,848 1,773 1,750 1,878 2,000 811 747 747 744 900 846 809 839 860 1,000 1,590

• 225
• 250
• 314

1,271 1,341 1,387 1,425 100 79 75 73 74 87 70 63 66 81

• 269
• 242

4,636 4,577 4,694 4,796 5,331

• 1,000

1,000 2,000 3,000 4,000 5,000 6,000 06/3 07/3 08/3 09/3E 10/3P FY 100 million yen

Intercompany elimination Other Real estate Logistics Meat and poultry Marine products Processed foods

Operating Income by Segment

55 60 41 57 97 85 78 78 43 36 34 6 2

• 5
• 17
• 4

6 9 8 3 6 58 72 61 45 1 1 2 1 5

• 1

1 2

• 4
• 3

226 178 174 160 181

• 25

25 50 75 100 125 150 175 200 225 06/3 07/3 08/3 09/3E 10/3P FY 100 million yen

Intercompany elimination Other Real estate Logistics Meat and poultry Marine products Processed foods Consolidated

• perating income

(Amounts less than 100 million yen are omitted)

08/3(Actual)

09/3 (E)

08/3 (Comparison) 10/3 (Plan) 08/3 (Comparison) Net Sales 4,635 4,796 104% 5,331 115% Operating Income 173 178 103% 226 130% Recurring Income 168 162 96% 208 123% Net Income 96 90 94% 114 118% ROE 9% 8% 9% EPS 31 yen 29 yen 36 yen

Business Strategy: Processed Foods

< Business Strategy: Processed Foods >

Growth Driven by Pre-Cooked Frozen Foods for Commercial Use and Market Expansion for Wellness Food

• 1. Sales during FY 09/3 are forecast to increase by 6% year-on-year driven once again by pre-cooked frozen foods for commercial use,

principally those products of chicken and potatoes.

• 2. Sales in pre-cooked frozen foods for household use during FY 09/3 are forecast to increase by only 2% from FY 08/3 because an

adverse impact of the tainted gyoza incident is expected to continue until the second quarter. To engineer a recovery in sales, for which have consecutively been declining since FY 07/3, the product development system is being restructured and reinforced.

• 3. In the Health Value business, Wellness Foods has completed development of sales channels and an increase in production capacity,

and will contribute to earnings beginning in FY09/3, when the mandatory public health guidance system is inaugurated.

• 4. Cost increase of ¥7.7 billion is forecast during FY 09/3 due to factors including price increase in raw materials. To counter these cost

increases in addition to the impact of the price hike implemented in October 2007 and relief of recent yen appreciation, additional price hikes and rationalization for certain products for which raw materials prices have increased markedly are planned.

09/3 E 57 Other -4 Increase in fixed costs -5 Wellness foods +2 Acerola +6 Effects of tainted gyoza incident -8 Raw materials -77 Increase in sales volume +6 Effect of price hike in FY08 +36 Effect of price hike in FY07 +47 08/3 41 Increase in fixed costs -4 Advertising -3 Frozen foods for firm products -3 Acerola -4 Effects of tainted gyoza incident -4 Raw materials -14 Yen appreciation +3 Effect of price hike in FY07 +16 07/3 60 30 40 50 60 70 80 90 100 110 120 130 100 million yen

Factors Affected Operating Income in Processed Foods in FY09/3 (Compared with FY08/3)

Pre-cooked frozen foods Pre-cooked frozen foods Commercial distribution expense ratios in pre-cooked frozen foods -6 Yen appreciation +13

Net Sales and Operating Income Margin of Processed Foods

556 504 466 475 798 803 839 888 128 122 366 344 326 338 1,848 1,773 1,750 119 177 1,878 3.0% 3.4% 2.3% 3.0% 500 1,000 1,500 2,000 06/3 07/3 08/3 09/3E FY 100 million yen Pre-cooked frozen foods for household use Pre-cooked frozen foods for commercial use Health value Other Operating profit ratio

4

Change in Foodservice Industry Market Size Taking 1998 as 100

100 111 87 86 86 86 86 89 91 95 96 122 122 120 117 116 114 114 110 80 90 100 110 120 130 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

CY

Restaurant and fast food Hom e m eal repl acem ent

< Business Strategy: Processed Foods >

Strength in Pre-Cooked Frozen Foods for Commercial Use: Agile Response to Needs in the “Home Meal Replacement” Market

• 1. Pre-cooked frozen foods for commercial use continue to show high growth, supported by growth from proposal-based products for the

“Home meal replacement” market (delicatessen sections of supermarkets, convenience stores, fast food chains, etc.).

• 2. “Home meal replacement” market has been expanding by adopting the great benefits of frozen foods products, which enable operators

to provide high-quality products to customers with no loss in a simple operation.

• 3. Nichirei’s strengths in proposal-based products:

(i) Expertise and an efficient product development cycle to meet market needs in a short time. (ii) An unparalleled R&D system in the frozen foods industry R&D expenses of ¥2.0 billion (R&D expenses / sales: 1.1%)

5

Net Sales of Pre-Cooked Frozen Foods for Commercial Use

322 356 386 426 476 447 453 462 798 803 839 888

100 200 300 400 500 600 700 800 900 06/3 07/3 08/3 09/3E

100 million yen

Proposal

• based

products G eneral products

（Prepared by Nichirei based on information from Foodservice Industry Research Institute）

< Business Strategy: Processed Foods >

Wellness Business: Contributes to Earnings upon Full-Scale Implementation of Metabolic Syndrome Countermeasures

• 1. Expansion of production system, which had been a bottleneck to sales expansion of frozen calorie controlled foods, was

accomplished in April 2008 to quadruple its capacity from the previous 120,000 meals per month to 520,000 meals.

• 2. Wellness Foods will increase the number of menu items of Kikubari Gozen frozen calorie controlled food. Smile Diner, a

subsidiary newly established last autumn jointly with Mitsubishi Corporation, has commenced full-scale operation to seek to increase frequency of use among heavy users including people under mandatory public health guidance by new product lines specifically used for counter metabolic syndrome through the sales channel from medical facilities introduction.

• 3. Anti-aging foods business has started in November 2007 when Heart & Heart Life Support Inc. in Kyoto engaging in the meal

delivery business became a subsidiary through share acquisition.

6

Net Sales of Wellness Business

17 18 29 60 4 15 3 11 15 4 8 17 21 48 98 20 40 60 80 100 07/3 08/3 09/3E 10/3P 100 million yen

Beauty-related foods Anti-aging foods (for prevention of life-style diseases) Special public health guidance program Calorie-controlled foods, etc.

< Business Strategy: Processed Foods >

Wellness Business: Medium-Term Growth from Businesses Including Diet and Anti-Aging Foods Sectors

7

Target market

Metabolic syndrome prevention

Diet Anti-aging

Net sales in FY 09/3

Specific health guidance Ordinary merchandise

Core target Market characteristics

Metabolic syndrome patients age 40–65

People designated as having metabolic syndrome in specific health checks to whom insurers are obligated to provide guidance. Great impact on public health insurance finance.

People age 30–70 who are highly sensitive to health

Heightened interest in diet improvement for health benefits due to specific health guidance.

Women age 30–49

Sharp increase in quality and satisfaction due to use

• f frozen foods as beauty

diet food.

Men and women age 50 and over

Dispensed and delivered meals for the elderly that meet needs for osteoporosis and prostatitis patients, prevention

• f senile dementia, and

improvement of malnutrition.

Estimated market size in five years ¥170 billion ¥90 billion ¥100 billion

Sales channel Nichirei Foods Direct

B-to-C (Mail order for general

customers) Website, direct mail, TV direct sales Kizuki Shoku (dietary instructional material) Frozen “Kikubari Gozen” Frozen Chef’s Balance Room temperature and frozen diabetic meals Individual diet foods Frozen boxed lunch diet meals Anti-aging prepared foods, etc.

Sales in FY 08/3 ¥1.1 billion Sales increase in FY 09/3 0.1 0.3 0.2 0.3 2.0 Direct sales

B-to-B (Third-party direct sales

channel, etc.) Sales expansion to specified health check providers and health insurance societies. Kizuki Shoku (dietary instructional material) LiSM10! program “Kikubari Gozen” Diabetic meals and other frozen lunch boxes for vending machines Individual diet foods Frozen boxed lunch diet meals

¥0.7 billion 0.1 0.4 0.2 1.4

Smile Diner (joint venture with Mitsubishi Corporation)

B-to-B-to-C

(Direct sales in the medical facilities introduction channel) Kizuki Shoku (dietary instructional material) (Physician edited) Doctor’s Bento, Smartdeli (Physician edited) Doctor’s Bento, Smartdeli Room temperature and frozen diabetic meals Individual diet foods Frozen boxed lunch diet meals Anti-aging prepared foods, etc.

¥0.0 billion 0.2 0.4 0.0 0.2 0.8 Heart & Heart Life Support

Delivered meals and meals provided at facilities

Meal delivery business in Kyoto Meals provided at day care facilities Home delivery of anti-aging prepared foods, etc. Meals provided at day care facilities

(Six months) ¥0.3 billion 0.3 0.6

B-to-C (OEM supply to mail-order

retailers) Program diet (Foodstuffs + diet theory)

• Sales in FY08/3 ¥2.1 billion

0.4 1.1 0.4 0.8 4.8 Notes: 1. As Heart & Heart Life Support is a newly consolidated subsidiary in FY 08/3, the sales figure above is for six months.

• 2. Product names and descriptions in black text are items that have already been commercialized and launched, and those in red text are items planned for commercialization.

¥3.6 billion in FY 09/3 generated from absorption measures to be implemented Year-on-year increase of ¥7.7 billion in raw materials costs, etc. anticipated in FY09/3 Cost increase to be offset by the ¥4.7 billion year-on-year sales increase derived from the Oct. 2007 price hike

０

¥5.0 billion ¥10.0 billion

< Business Strategy: Processed Foods >

Increasing Costs of Raw Materials during FY09/3 to be Absorbed through Price Adjustments and the Benefits of Yen Appreciation

• 1. Continuing increases both in manufacturing costs and procurement costs are expected during FY09/3 due to rising raw materials prices

and electric power bills in addition to those cost increases from raw materials such as chicken and other meats, flour, cooking oil.

• 2. Future measures to absorb cost increases:

(i) Full implementation of price hike negotiation pending from October 2007. (ii) Additional price adjustment for chicken products and other products for which raw materials prices have risen sharply, and review of procurement method. (iii) Partial price hike for products for household use in the second half and beyond.

• 3. Yen appreciation to mitigate some profit-impacting factors due to cost increases.
• 4. Declining demand for frozen food products, principally those made in China, and the supply system.

(i) Household use products: Impact of the tainted gyoza incident expected to continue until the second quarter. (ii) Commercial use products: Little impact found. (iii) Adverse impact of tightening of inspections at the time of export by the Chinese quarantine authorities: Improving from late March

• nward.

8 Manufacturing Cost Increases in FY 09/3 and Absorption Measures

Business Strategy: Marine Products

< Business Strategy: Marine Products >

Achieve Positive Operating Income Coupled with Realization of an Operational Structure Resistant to Changes in Market Conditions

• 1. Improvement in profitability through higher contribution from growth drivers set forth in the Revitalization Plan.

(i) Sales of shrimp, a mainstay product, have recovered following deterioration in market conditions during the first half of FY08/3 and are expected to improve by ¥0.3 billion or more year on year in FY 09/3. (ii) Product offering in the growth drivers will be reinforced especially in seafood products for raw consumption. Particular emphasis will be placed on product development for sushi toppings, which offer high freshness and a high level of operational control.

• 2. Further contraction of fixed costs through clear definition of target customers, and realization of an effective sales system.

(i) Improving ratio of fixed costs to sales of 0.4 points (¥0.3 billion) during FY 09/3 through reduction of 30 employees and business site consolidation. (ii) Avoidance of opportunity loss and unsold inventory by fully enforcing timely procurement for the proper quantity based on actual user needs through integration of procurement department at headquarters and the Tokyo metropolitan area sales department. (iii) Concentration of personnel in large metropolitan areas to reinforce the relationship with major users.

9

<Growth Drivers>

Product lines targeted for development of promising products to become the core of future growth under the project structure in the Revitalization Plan. Products in the growth drivers category are those which can demonstrate competitive advantage, such as high market share, sales stability, or historical strength. Principal products include shrimp, octopus, crab, roe, and shellfish.

Sales Composition and Profitability Trends by Strategic Category in Marine Products Composition Ratio

55% 58% 32% 34% 38% 14% 11% 3% 66% 53% 31% 4% 3.3% 3.9% 4.1% 4.2% 2.0% 1.3% 2.3% 2.6% 1.8% 0.7% 4.2% 4.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 06/3 07/3 08/3 09/3E Composition ratio 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Profitability before deduction

• f operating expenses

Growth Drivers Basic Products Marginal Products Growth Drivers Basic Products Marginal Products

Business Strategy: Logistics

< Business Strategy: Logistics >

Downward Pressure on Earnings from Rising Cost for Fuel Oil and Electric Power Amid Strong Demand

• 1. Overseas business is forecast to remain at the favorable FY 08/3 level. Commencement of construction of a new cold storage

facility in Poland and expansion of a fruit juice cold storage facility at Rotterdam Harbor in preparation for sustainable growth in FY 10/3 and beyond.

• 2. Regional Storage business, amid a downtrend in the capacity utilization in the industry as a whole, aims to maintain the current

inventory level to increase sales during FY 09/3. However, operating income is forecast to decrease due to rising electric power bills and higher costs associated with construction and expansion of cold storage facilities. Capital investment in cold storage facilities, which is about six months behind the schedule in the Medium-Term Business Plan, will be actively carried on amid increasing competitive ability to attract cargo in the market.

• 3. Logistics Network business is expected to expand sales and earnings during FY 09/3, but at a slowing growth rate. Expansion of

both the own track fleet and customer categories will be aimed to counter the adverse impact on profitability from rising fuel oil costs in the transport sector and the difficulty of making competitive proposals to customers. The transfer center business will actively seek to acquire new orders for projects inaugurating in FY 10/3.

10

Logistics: Net Sales by Sub-Segment

632 688 709 718 463 454 442 455 156 178 224 226 1,271 1,341 1,387 1,425 26 12 21 20 500 1,000 1,500 06/3 07/3 08/3 09/3E FY 100 million yen

Logistics network Regional storage Overseas Other

Logistics: Operating Income by Sub-Segment

13 17 22 23 47 53 49 44 6 7 16 15 1 1 1

• 9
• 6
• 2
• 5

78 85 72 58

• 20

20 40 60 80 100 06/3 07/3 08/3 09/3E FY 100 million yen Logistics network Regional storage Overseas Other Inter-segment Total operating indome

< Business Strategy: Logistics >

Poland: Construction of a New Cold Storage Facility to Support Further Business

Development in a Booming Consumer Market

• 1. Population of Poland: 38.6 million (2004)
• 2. Poland has seen even more notable growth in personal consumption

following entry into the EU in 2004. Tesco, Carrefour and other West European retailers have actively entered into the market.

• 3. Needs for high-quality logistics are strong and increasing, and the new

cold storage facility is constructed by the request from a major ice cream

• manufacturer. Service of providing consigned transport logistics to major

retailers is under study.

11

Location of existing facility: Znin Capacity: 26,300 tons Principal cargo: Ice cream for a major manufacturer, agricultural produce Sales: PLN (zloty) 15,679,000 in 2007; PLN 17,233,000 planned for 2013 Location of new facility: Radomsko Capacity: 49,500 tons Start of operation: October 2009 (planned) Principal cargo (planned): Ice cream for a major manufacturer, etc. Sales: PLN 26,500,000 planned for 2013

Change in Personal Consumption Expenditures in Poland 450,000 500,000 550,000 600,000 650,000 700,000 00 01 02 03 04 05 06 CY

Million PLN

100% 107% 112% 116% 128% 134% 142% Source: Central Statistical Office (Poland) Statistical Bulletin Since EU membership Denmark Russia Lithuania Germany Czech Republic Ukraine Hungary Slovak Republic

Poland

Warszawa Pomorskie Warmiń sko-mazurskie Podlaskie Kujawsko- pomorskie Mazowieckie Wielkopolskie Lubuskie Lubelskie łódzkie Dolnośląskie Opolskie świętokrzyskie

Existing facility in Znin New facility in Radomsko

Republic of Belarus

< Business Strategy: Logistics >

Regional Storage: Increasing Competitive Edge in an Adverse Industry Environment

• 1. Capacity utilization exceeded the previous year level amid a notable industry-wide decline in inventory volume since fiscal 2006,

primarily for livestock, and has been consistently exceeding the industry average, and the difference as of March 31 was 9%. Nichirei’s strengths are: (i) The largest facilities capacity in the industry, a nationwide logistics network, and the ability to develop ideal logistics solutions. (ii) Customer satisfaction and trust in the capability to assure logistics quality that leverages the ability to maintain quality of stored cargo and a solid track record in managing the operation of transfer centers consigned for major retailers. (iii) Spinning off regional companies in April 2004 aiming at self-sufficient operation helped reinforce local marketing capability making possible rapid identification and response to highly specific customer needs.

• 2. Stepping up of scrap and build of cold storage facilities. Capital investment is lagging about six months from the schedule in

the Medium-Term Business Plan.

12

[Current Capital Investment Projects]

Yokohama: 11,057-ton cold storage facility scheduled to begin operation in FY 09/3 1st half Osaka: 20,000-ton cold storage facility scheduled to begin operation in FY 10/3 2nd half Kawasaki: 40,000-ton cold storage facility scheduled to begin operation in FY 11/3 1st half Yokohama: 10,000-ton cold storage facility scheduled to begin operation in FY 11/3 1st half

Note: Figures for Nichirei are nationwide results. Figures for the industry as a whole are for Japan’s 12 major cities. Source: Figures for the industry as a whole were compiled using data from the Japan Association of Refrigerated Warehouses

Change in Cold Storage Inventory Rate

31.0% 33.0% 35.0% 37.0% 39.0% 41.0% 43.0% 45.0% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Nichirei FY06/3 Nichirei FY07/3 Nichirei FY08/3 Industry as a whole FY06/3 Industry as a whole FY07/3 Industry as a whole FY08/3

Change in the Number of Transfer Centers 8 11 12 14 19 21 23 22 22 26 5 10 15 20 25 30 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3E 10/3P

(Places)

< Business Strategy: Logistics >

Sales Increase for Transport Due to Customer Category Expansion, Profit Contribution from New TC Operation from FY10/3 Onward

• 1. Transfer center (TC) sales during FY 09/3 to be flat year on year.

(i) Measures to improve profitability at existing centers have been successfully implemented with little further upside. (ii) Sales efforts for consignment orders in new transfer centers are expected to materialize the additional flow of revenues in FY 10/3 as promising discussions of two TC projects in addition to firm orders for two new TCs starting in FY 10/3.

• 2. Sales in Transport business to increase by 8% year on year during FY 09/3. Marketing efforts to win customers in new categories

continue in reinforced collaboration with the cold storage facilities of cold storage companies. (i) Services to customers in new categories, such as CVS chains and fresh produce, commenced during FY 08/3 for sales increase. (ii) Business infrastructure to be reinforced during FY09/3 driven by close collaboration with a transport partners of Logistics Network

• Inc. and possible M&A activity.

13

Change in Network Business Sales By Segment 261 269 277 300 233 279 290 290 138 140 142 128 632 688 709 718 100 200 300 400 500 600 700 800 06/3 07/3 08/3 09/3E

100 million yen

Other TC Logistics

Reference Materials

14

Segment Data

Sales and Operating Income by Segment

100 million yen (Amount less than 100 million yen are rounded off.) 06/3 07/3 08/3 09/3 (E) 10/3 (Plan) 1,848 1,773 1,750 1,878 2,000 811 747 747 744 900 846 809 839 860 1,000 1,271 1,341 1,387 1,425 1,590 100 79 75 73 74 87 70 63 66 81

• 269
• 242
• 225
• 250
• 314

4,694 4,577 4,636 4,796 5,331 55 60 41 57 97

• 17
• 4
• 5

2 6 3 6 6 8 9 58 72 85 78 78 61 45 43 36 34 1 1 2 1 5

• 1

1 2

• 4
• 3

160 181 174 178 226 (Net Sales) Processed Foods Marine Products Meat and Poultry Products Logistics Real Estate Other Intercompany Elimination Total (Operating Income) Processed Foods Marine Products Meat and Poultry Products Logistics Real Estate Other Intercompany Elimination Total

Aside from historical facts, Nichirei’s present plans, forecasts and strategies as outlined in this publication consist of forward- looking statements about future business performance. These forecasts of future business performance and explanations of future business activities may or may not include words such as “believe,” “expect,” “plan,” “strategy,” “estimate,” “anticipate” or other similar expressions. These statements are based on the information available to Nichirei management at the time of publication. Actual results may differ significantly from these forecasts for a variety of reasons, and readers are therefore advised to refrain from making investment decisions based solely on these forward-looking statements. Nichirei will not necessarily revise its forward-looking statements in accordance with new information, future events, and other results. Risks and uncertainties that could affect Nichirei’s actual business results include, but are not limited to: (1) Changes in the economic conditions and business environment that may affect the Nichirei Group’s business activities. (2) Foreign exchange rate risks, especially as regards the US dollar and the Euro. (3) Risks associated with the practicability of maintaining quality controls throughout the process from product procurement development, of raw materials, production, and sale. (4) Risks associated with the practicability of development of new products and services. (5) Risks associated with the practicability of growth strategies and implementation of low-cost systems. (6) Risks associated with the practicability of achieving benefits through alliances with outside companies. (7) Contingency risks. However, factors that may affect the performance of the Nichirei Group are not limited to those listed above. Further, risks and uncertainties include the possibility of future events that may have a serious and unpredictable impact on the Group. This publication is provided for the sole purpose of enhancing the reader’s understanding of the Nichirei Group, and should not be taken as a recommendation regarding investment decisions.

Forward-Looking Statements