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| Over the past three fiscal years, Ajinomoto executed a management plan designed to solidify the Company’s position as a global corporation in food and amino acid products. I am proud to report to shareholders that your company achieved almost all of the plan’s objectives. |
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During fiscal 2001, ended March 31, 2002, a global economic slowdown was exacerbated by the terrorist attacks on the United States, while the economic recession in Japan worsened due to deflation and continued weakness in consumer spending. The operating environment in the domestic food market, Ajinomoto’s main business area, remained challenging as this market’s maturity and the diversification of consumer tastes have led to increasingly stringent competition. Our drive under the recently accomplished management plan to reduce costs and improve global business development capabilities, however, resulted in gains in both sales and income for the fiscal year. Consolidated net sales increased 3.9 percent to ¥943.5 billion, and operating income expanded 29.7 percent to ¥49.0 billion. Net income totaled ¥31.4 billion, a gain of ¥42.9 billion compared to the net loss of the previous fiscal year that resulted from a one-time charge to income due to the implementation of new accounting standards for retirement benefits. Return on equity (ROE) was 8.5 percent for the fiscal year. The cash dividend for the year was ¥10.0 per share. |
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Over the three years since Ajinomoto set goals under its management plan that ended in March 2002, our operating environment deteriorated rapidly due to factors such as the economic recession and deflation in Japan, slow growth worldwide and intensifying global competition. Consequently, Ajinomoto just missed achieving its target of sales of ¥1 trillion, but the Company achieved its targets of net income of ¥30.0 billion and ROE of at least 6.0 percent despite these factors.
Ajinomoto was also successful in implementing the five main initiatives of the recently accomplished management plan: improving consolidated management; strengthening our brands; establishing world-leading cost competitiveness; enhancing our R&D system; and contributing to society. As discussed in last year’s annual report, Ajinomoto has made outstanding progress in consolidating Group operations and logistics for greater efficiency, restructuring and strengthening the domestic food business, and aggressively executing acquisitions and alliances.
The World Number 1 Network (WIN) plan continued to reduce costs, particularly in our global amino acids and nucleotides businesses. At the same time, Ajinomoto prepared to meet growing demand and expand market share through carefully targeted investments in production capacity for monosodium glutamate in Brazil, nucleotides in Thailand, feed-grade Lysine in the United States, Italy and Thailand, and feed-grade Threonine in the United States and France.
We also worked to expand our participation in global food products markets and build a foundation for further growth, exemplified by the creation of SHANGHAI HOUSE AJINOMOTO FOODS CO., LTD. in China in cooperation with House Foods Corporation of Japan. The new company will meet the needs of the high-potential Chinese market, with a focus on production and marketing of retort pouch meals such as curry-based products.
In our pharmaceuticals business, we concluded an agreement to license development, production and marketing rights for an anti-cancer agent in Ajinomoto’s R&D pipeline to global pharmaceutical industry leader Aventis Pharma S.A. In addition, we obtained approval to manufacture a treatment for osteoporosis that we have developed jointly with Aventis Pharma Ltd. and Takeda Chemical Industries, Ltd. Our progress in working with strong partners has strengthened Ajinomoto’s foundation for achieving its objectives in building its pharmaceuticals business. |
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Throughout the Ajinomoto Group, our people are enthusiastically embracing change and working toward our shared objectives. We intend to increase our momentum under our new three-year management plan. By the end of fiscal 2004 in March 2005, Ajinomoto has targeted net sales of ¥1.1 trillion, operating income of ¥75 billion, net income of ¥45 billion and ROE of at least 10 percent. These are ambitious targets, and we intend to achieve them through the following five management strategies.
• Expanding business in growth sectors
The global nutritional health business is growing. It will be a primary area of focus, and programs are under way throughout the Ajinomoto Group to create products for this market segment. The retail food markets of Southeast Asia, Central and South America and China offer Ajinomoto excellent potential, and in our global bulk ingredients business, we will further reinforce our strong number one position through capacity expansion, optimum plant location and continued cost reductions. In the pharmaceuticals business, we will strengthen our programs covering clinical nutrition, gastrointestinal diseases and lifestyle-related diseases such as diabetes, while building on alliances with global pharmaceutical leaders. Ajinomoto has also created a team to aggressively investigate acquisitions and alliances that will help the Company expand operations in growth sectors.
• Shifting toward a high-earnings structure
We will continue to focus on the themes of selection, concentration and expansion in strengthening our domestic food business. Key initiatives include concentrating resources on brands with number one or strong number two market shares and further reducing costs. We also intend to restructure the Corporate Division into a small, select group to contribute to improved profitability.
• Strengthening corporate governance
The implementation of our internal company system as of April 1, 2002 builds on the progress we have made in consolidating Group operations and building critical mass. Ajinomoto is now structured as three internal companies, one company that has been spun off, four business tie-ups, subsidiaries and affiliates and the Corporate Division. The new internal companies are vertically integrated to facilitate decision making, allocate capital and responsibilities more effectively, and support Ajinomoto’s total returns.
• Nurturing personnel capable of working in the global arena
Ajinomoto needs employees who are able to succeed globally, and we intend to make employees even better able to maximize their potential — and their contribution. We plan to harness our corporate culture more closely to merit, and create the flexibility necessary to support the achievement of our goals. Moreover, we plan to construct a training center where we will train and develop personnel on a Groupwide basis both domestically and overseas, while disseminating the “Ajinomoto Way” policy throughout the Group.
• Operating in harmony with society as a good corporate citizen
In response to incidents involving food quality at Japanese manufacturers and the worldwide problem of bovine spongiform encephalopathy (BSE), Ajinomoto has strengthened its intragroup auditing functions, and is further improving upon its thorough, high-level quality standards. The Company is also responding to environmental issues under its exhaustive, global environmental protection standards. Ajinomoto supports a wide range of activities ranging from research into food culture to promoting better health and education. A commitment to broadly based contribution to the communities we serve in regions worldwide permeates the attitudes and philosophy of the Ajinomoto Group. |
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Ajinomoto’s brands are one of the Company’s greatest strengths. Over the past three years, we measurably strengthened both our corporate and individual brands, and intend to continue doing so. Our corporate brand strategy has added the theme of amino acids to our “From the field, AJI-NO-MOTO” campaign. New product Amino Vital has become a major hit because of effective communication that created strong awareness of the goodness of amino acids among consumers. Our efforts to further build the Amino Vital brand should therefore benefit from the consistent implementation of our corporate brand strategy.
The management plan we have just accomplished brought Ajinomoto to the threshold of being a truly global company. We believe that being a global company means more than simply having operating bases around the world or a certain level of sales and earnings. We must also be a unique and distinctive company trusted by people around the world, and consider the following to be essential for us to become such a company:
- Products loved by people worldwide
- An Ajinomoto brand that assures reliability and safety
- Creative and individual personnel who take an active role in the global arena
- Innovative technologies with a primary focus on amino acids derived from the field of life science
I firmly believe that the Ajinomoto Group can become a truly global company by achieving the goals contained in our new three-year management plan.
Until now, the Japanese food industry has been relatively uninvolved in global competition, and so has been slow to develop a global perspective. Yet this industry has recently begun to be affected by globalization, and has therefore gradually become more internationally aware. I believe that only companies that can create high-value-added products based on technology will survive, and that all of us at Ajinomoto must use our unique strengths to deliver value to the peoples of the world. The goals of our new three-year management plan are designed to increase corporate value, and we are devoting maximum effort to meeting the expectations of our shareholders.
July 2002
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Kunio Egashira
President
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