Message from the President & CEO
We will complete the FY2014-2016 Medium-Term Management Plan and achieve profit growth to become a “Genuine Global Specialty Company.”
Carrying on the “Aspiration of Our Founding” to Contribute to the Healthy Future of the Humanity and the Earth
It has been 107 years since businessman Saburosuke Suzuki II founded Ajinomoto Co., Inc., a year after Professor Kikunae Ikeda discovered the fifth basic taste, umami. The aspiration of these two men to promote the health of Japanese people by improving nutrition with umami has extended across the globe. Furthermore, the Ajinomoto Group has engaged in research and development throughout the years centered on glutamic acid, whose taste was identified by Professor Ikeda as umami, and pursued original leading edge bioscience and fi ne chemical technologies as well as world-leading seasoning technologies. With these technologies acting as our core, we have evolved into a unique food company group, diversifying our business to span a wide range of fields, from food to healthcare and life support.
In the 21st century, various issues have emerged resulting from the cumulative activities of humankind. Among such issues there certainly are the issues the Ajinomoto Group can resolve by creating value through its business activities. While engaging in business around the world, we have come to realize this fact and have felt the gravity of the responsibilities and the expectations we must fulfill. In addition, we have clarified the issues for which we should prioritize our initiatives by engaging in dialogue with a number of stakeholders. These priority issues are global sustainability, food resources, and healthy living, which represent the issues facing the 21st century human society.
These three issues intertwine and relate in a complex manner. As an enterprise centered on food, the Ajinomoto Group has a responsibility to help provide sustainable food and nutrition. Keeping the aspiration of our founding in our hearts, we will continue to contribute to a healthy future for the humanity and the earth through products and services supported by science and technology through our overall business activities. In doing so, we will realize sustainable growth for the Group going forward.
Promoting Business Strategies Through the Pursuit of “Specialty”
As the Ajinomoto Group’s “Specialty” adopted under the FY2014–2016 Medium-Term Management Plan, we are sharpening technologies unique to the Group and pursuing value creation that responds to a diverse range of issues and customer needs. We will realize our goal of becoming a food company with specialties through two elements: our leading edge bioscience and fi ne chemical technologies that other companies cannot imitate and our ability to create customer value, which allows us to comprehensively understand our customers and identify customer needs better than anyone else.
Specifically, in the food products business, our basic strategy is global rollout of our world-leading seasoning technologies. The product development, which makes the most of local dishes in deliciousness, leads well-being as well as nutritional improvement, so that we realize “Eat Well, Live Well.” and expand our businesses in Japan and emerging countries. In developed countries, we are working to offer frozen foods to present well-balanced nutrition of Japanese food and food culture. In North America, we are going to accelerate the development of Japanese food products by leveraging the business foundation of Ajinomoto Windsor, Inc., which was launched in 2014 after the acquisition of Windsor Quality Holdings, LP. Furthermore, in Europe, we are also working to create a foundation for the frozen food business. On the other hand, in the industrial-use seasonings, guided by the concept of “delicious solutions” that draw on our unique ingredients and technologies, we are focusing our efforts on businesses that enhance the ability to resolve the food-related issues of each country and region collaborating with processed food manufacturers, as well as our clients in the food service industry.
In the AminoScience business, for the field of healthcare, as the No. 1 amino acid manufacturer, we aim to produce all of our amino acids through fermentation without using materials derived from animals. By doing so, we are enhancing our ability to resolve issues and realizing business growth in the healthcare market, starting with the area of biopharmaceuticals, where a safe and secure raw material supply with a high level of traceability is required. In addition, iPS cell culture medium, which we have successfully developed through industry-academia collaboration and are currently working to commercialize, and the antibody drug contract development and manufacturing business of Ajinomoto Althea, Inc. in the United States are proving the technologies and expertise we have long cultivated to show new potential in the field of healthcare. As such, we anticipate that the healthcare field will act as a core business for us in the future.
For the field of life support in the AminoScience business, we are working to improve the nutritional status of livestock with amino acid materials. At the moment, the creation of specialty markets, including AjiPro® -L, which was launched as a feed additive for dairy cows, is our most important business theme. At the same time, by utilizing technology for fermentation using fewer resources, which allows for the production of amino acids using only a small amount of raw materials, we are vigorously promoting both reductions in our environmental burden and increases in production of animal husbandry, which in turn is helping to reduce costs. Furthermore, sales of our insulation fi lm for personal computers, which we developed based on the technologies cultivated in amino acid manufacturing, have grown to the extent that we now boast a global market share. Going forward, we anticipate its expansive application into smartphones and tablets.
Dealing with the Issues Facing Our Management
Amid our global expansion, we are constantly facing fluctuation risks in exchange rates and prices of raw materials and fuel. To respond to these kinds of risks, we will work to strengthen our business structure through the promotion of “Specialty” and revise our business portfolio. In addition, by striving to maintain a healthy balance in the ratio of our businesses in Japan, the United States, and European countries, to those in emerging countries, including the “Five Stars,” we aim to create a situation where we can benefit from the effects of natural hedging. Furthermore, while prioritizing the safety of our employees above all else, we will need to continue promoting our businesses in a steadfast manner in emerging countries that face potential geopolitical risks in order to have these businesses act as the engine for future growth.
In addition to economic and geopolitical risks, the environment in which the Ajinomoto Group operates faces global environmental issues that are becoming more and more severe as well as increasingly more intense demands from consumers for safe and trustworthy products. As such, the level of customer needs is becoming higher and more diverse from the perspective of co-existence and co-prosperity between society and the earth. In light of this situation, we will enhance our ability to respond to the individual issues in our six areas of operation, which are Japan, ASEAN, China, Europe & Africa, North America, and South America, in accordance with our business strategy of pursuing “Specialty.” At the same time, prompt management with effective governance by establishing consistent Group-wide standards for business conduct and policies for business execution is necessary.
Pursuing ASV, the Very Essence of the Ajinomoto Group’s Business Activities
The Ajinomoto Group has adopted the target of becoming a global top 10 class food company around 2020. As the key to achieving this target, we are making efforts to advance ASV (The Ajinomoto Group Creating Shared Value). ASV is a highly strategic initiative to accelerate business growth while creating both social and economic value. This value creation is achieved by contributing to the resolutions of issues facing the 21st century human society through our “Specialty” products and services, which are supported by the Group’s unique technologies and expertise related to food and amino acids. ASV represents the chain of events that will allow us to realize our goal of becoming a “Genuine Global Specialty Company” and continue to grow in a sustainable manner.
We have identified several materiality items based on the level of importance to the Group’s business and society as a whole. We have also established global sustainability, food resources, and healthy living as three issues facing the 21st century for which we should work to resolve through our business. We aim to create social value by specifically incorporating measures to resolve these three issues in our medium-term management plan. As there is high social need for resolving issues related to people’s health and nutrition, the most significant challenge for us as a company that centers its business on food and healthcare is meeting the expectations that society has of us. Also, in regard to environmental issues such as global sustainability and food resources, we will proactively participate in the United Nation’s Sustainable Development Goals and The Consumer Goods Forum.
Going forward, we will advance our ASV initiatives in each country and region of operations. To further enhance the value that exists in these countries and regions, sharing information on the evolution of ASV with our stakeholders is absolutely essential. As such, we will proactively inform our stakeholders on the kind of social value we aim to create as well as the initiatives we will take to create that value. At the same time, we will convey to stakeholders the efforts that each Group company is making toward our mission of resolving such issues as global sustainability, food resources, and healthy living, as well as the progress of those efforts, which in turn will further clarify the Group’s path toward growth. In these ways, we will realize a situation where we can continue to advance our ASV initiatives in a transparent manner. In order to make our ASV initiatives even more effective, in April 2016, we established Global Communications Department with the purpose of enhancing our ability to communicate globally, and Global Human Resources Department with the purpose of promoting diversity and encourage the utilization of global human resources.
The Ajinomoto Group positions ASV as a valuable initiative to promote in each country and region. As such, all Group companies in Japan and overseas, in addition to Ajinomoto Co., Inc., will make dedicated efforts to evolve ASV going forward.
Formulating Integrated Targets of Financial and Non-Financial Targets to Evolve ASV, and Becoming a “Genuine Global Specialty Company”
With the slogan of becoming a “Genuine Global Specialty Company,” this integrated report indicates the direction and vision that the entire Group aims to achieve. specifically, this report declares our strong ambition to demonstrate our value to the global society and realize an indispensable existence to that society through unique initiatives that leverage our strength of “Specialty,” allowing us to continue to perform the tasks that other companies cannot. At the same time, the report comprehensively introduces the initiatives we are undertaking in each country and region of operation to resolve the issues facing the 21st century human society, as well as our approach to realizing sustainable growth. Now, we are working to set our FY2017-2019 Medium-Term Management Plan. As a part of the plan, we are working to further clarify our corporate vision that setting 2020 as our milestone year, we can gain the trust of all our stakeholders and raise their expectations of us as a “Genuine Global Specialty Company.” To this end, we are currently formulating “Integrated ASV Targets”, which combine financial and non-financial targets. In order to continue to coexist in harmony with society going forward, we plan to comprehensively convey our path for the future, including how we will contribute to improving people’s nutrition, how we will respond to environmental and social issues amid rising international demands and expectations for sustainable development targets, and how we will connect these kinds of non-financial initiatives to financial growth.
As for governance, which is something a “Genuine Global Specialty Company” should have firmly in place, we are working to improve the quality of our management in accordance with the various regulations of Japan’s Corporate Governance Code. At the same time, in regard to our system for business execution, we have created the concept of “Governing HQ” and “Delegated Front” in order to accelerate the pace of growth, especially overseas. While working to delegate authority to “Delegated Front,” we have established the Global Governance Policy (GGP), which stipulates policies for proposing plans, completing transactions, and making reports. In these ways, we are making concerted efforts to strengthen our management foundation. Moreover, we are actively promoting interaction with global human resources with the aim of assembling a group of high-quality right personnel to be assigned for the job.
Strengthening our management foundation in this manner is essential to realizing our goal of becoming a “Genuine Global Specialty Company.” We will continue these efforts going forward based on dialogue with our stakeholders.
To Our Shareholders and Investors
The Group aims to realize ¥150.0 billion in operating income around 2020. In fiscal 2016, the last year of the FY2014–2016 Medium-Term Management Plan, we set a target for operating income of ¥91.0 billion. In fiscal 2015, as a result of the efforts we have made in structural reforms during the first two years of the plan, we were able to achieve that figure one year ahead of schedule. While we anticipate that fluctuating exchange rates and prices of raw materials and fuel will have a negative impact on our performance in fiscal 2016, we will maintain our dedication to achieving all of our targets for the final year of the FY2014– 2016 Medium-Term Management Plan.
In fiscal 2015, we were able to display a sign of confidence in our sound management to our shareholders and investors by announcing dividend increases and share repurchase of ¥30.0 billion. In addition, we adopted the policy of having total shareholder returns of minimum 50% over the three-year period of the FY2014–2016 Medium-Term Management Plan. Based on forecasts for our business performance as of May 2016, we are now anticipating total shareholder returns of 68%. In order to further improve our corporate value going forward, we will accelerate the pace for growth through the evolution of ASV while working to enhance shareholder returns. In these ways, we will fully prepare ourselves to live up to the expectations of our stakeholders.
July 2016
Takaaki Nishii
Representative Director,
President & Chief Executive Officer
