Annual Report 2017 - Glico

1 Annual Report 2017 (Fiscal year ended 31st March, 2017 ) Contents Five-Year Summary 1 Message from the President 2 Operating Results and Financial Status 3 Consolidated Financial Statements 8 Corporate Information 64 1 Five-Year Summary Consolidated Millions of yen Thousands of dollars 2017 2016 2015 2014 2013 2017 Net sales 353,217 338,437 319,393 315,399 293,002 3,148,382 Income before income taxes 26,492 20,962 31,113 17,370 5,027 236,135 Net income attributable to owners of parent 18,147 13,903 21,068 11,033 3,287 161,752 Ye n Per share of common stock.

2 Net income * Cash dividends Millions of yen Balance sheet data: Shareholders' equity 180,435 163,968 153,198 132,700 109,211 1,608,298 Total assets 324,118 274,974 275,302 243,244 219,363 2,889,009 * Ezaki Glico Corporation implemented a share consolidation on its common stock with a ratio of two shares to one share on 1st October, 2014. Net income per share is calculated based on the assumption that consolidation of shares had been carried out at the beginning of the 1st April, 2013.

3 *Dilute net income per share for the years ended 31st March, 2017 and before 2016 has not been disclosed because no dilutive potential shares with dilutive effect existed for the year ended 31st march, 2017 and no dilutive potential shares existed for the year ended before 31st March, 2016. * Fractions of one million yen and thousands of dollars are rounded off (The change in policy has been applied retrospectively to the Consolidated Financial Statements for the past fiscal year.) 2 Message from the President In the consolidated fiscal year under review, there was a concern that the great earthquakes that hit the Kumamoto area during the early part of the fiscal year would adversely impact the Japanese economy. However, the employment and income environment continued to improve, resulting in a mild recovery for the Japanese economy as a whole.

4 By contrast, the uncertainty in overseas economies and fluctuations in the financial and capital markets made prospects for the future continuously unclear. The food industry was helped by relatively stable raw material prices, but personal spending remained anemic, which caused our corporate group to face ongoing difficult conditions. In light of this situation, our corporate group has proactively implemented various measures. These include expanding the sales of our mainstay products and launching new products and products of affiliates. In addition, we have implemented aggressive sales promotion strategies at mass merchandisers and convenience stores. These efforts, based on Glico Group Action Guidelines, reflect our commitment to business operations that continuously earn the trust and respect of stakeholders.

5 Our milk and dairy products posted decreased sales from the previous fiscal year. However, sales of our confectioneries and food products remained nearly at the same levels as the previous fiscal year, while ice cream, food ingredients and other segments recorded increased sales. Consequently, consolidated net sales amounted to 353,217 million, an increase of from the 338,437 million total of the previous fiscal year. Regarding earnings, our overall cost-to-sales ratio decreased, with changes in our product portfolio and an improvement in the cost-to-sales ratio in the confectioneries and food ingredients segments. As for selling, general and administrative (SG&A) expenses, the decreased percentage of milk and dairy products as part of total sales resulted in a decline in the transportation and warehousing expenses-to-sales ratio.

6 Advertising expenses also decreased. The ESOP program with distribution allowance recorded in the previous fiscal year was also cancelled. As a result, operating income amounted to 24,254 million, an increase of 7,144 million from the previous fiscal year ( 17,110 million). Ordinary income was 26,367 million, an increase of 7,137 million from the previous fiscal year ( 19,229 million). Net income attributable to parent company shareholders was 18,147 million, an increase of 4,244 million from the previous fiscal year ( 13,903 million). Although we expect increasing difficulties in our business environment, we will unite the efforts of all Group companies to improve performance and meet the expectations of our shareholders.

7 Your continuing support will be deeply appreciated. July 2017 Katsuhisa Ezaki, President and CEO 3 1. Operating Results and Financial Position (1) Operating Results Results by segment (Unit: millions of yen, %) Segment Net Sales Operating Income Consolidated fiscal year under review vs. Previous consolidated fiscal year Yo Y (%) Consolidated fiscal year under review vs. Previous consolidated fiscal year YoY (%) Confectioneries 121,116 (40) 10,546 1,339 Ice Cream 92,416 11,411 8,444 2,965 Food Products 20,220 37 844 731 Milk and Dairy Products 94,871 (2,949)

8 4,788 272 Food Ingredients 10,434 192 952 460 Others 14,158 6,129 477 518 Adjusted amount (1,798) 855 Total 353,217 14,779 24,254 7,144 Note: The adjusted amount in the above table includes the eliminated amount of intersegment transactions and company-wide expenses not allocated to any reporting segment.

9 The company-wide expenses mainly include the selling, general and administrative (SG&A) expenses not allocated to any reporting segment. [Confectioneries Division] In Japan, overall confectionery sales grew from the previous fiscal year. The main contributors included LIBERA and GABA, both of which are foods with function claims and showed impressive performance. Sales of Caplico and Van Houten Chocolate also increased from the previous fiscal year. Outside Japan, sales revenue of the Chinese subsidiary decreased from the previous fiscal year, although subsidiaries in other countries enjoyed sales increases. As a result, divisional sales amounted to 121,116 million, about the same level as the previous fiscal year ( 121,157 million).

10 As for divisional profits, the cost-to-sales ratio decreased in Japan and at the Thai subsidiary. There was also a reduction in the advertising expenses-to-sales ratio overseas. As a result, operating income was 10,546 million, an increase of 1,339 million from the previous fiscal year ( 9,206 million). [Ice Cream Division] Sales of mainstay products, including Papico, Bokujoshibori and Ice no Mi increased from the previous fiscal year. Moreover, add-on sales were contributed by Glico Frozen (Thailand) Co., Ltd. and Shojikiyanyuuhan Co., Ltd., which was newly included in the scope of consolidation. As a result, divisional sales totaled 92,416 million, a increase over the previous fiscal year ( 81,004 million).