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Kyokuyo's 1Q Financial Statement:
Ordinary Profit Falls 39% Despite 10% Rise in Revenues

August 2, 2010

Kyokuyo reported its consolidated financial results for the first quarter. Contributions by Marine Products Purchasing Business and Tuna Business resulted in net sales of \37.479 billion, an increase of 10.6 percent year over year. In contrast, operating profit nosedived 48.3 percent amounting to \374 million and ordinary income slumped 39.3 percent to \472 million, showing precipitous drops in profits. These contractions in profits transpired as a result of a tumbled profit margin in Cooked Frozen Food Business and crippled business performance by refrigerated ocean transportation operations. In addition, a loss on revaluation of investments in securities, in total of \95 million, was registered as an extraordinary loss, leading to the first quarterly net income of \166 million, down 53.3 percentage points.

Marine Products Purchasing Business posted net sales of \17.025 billion, a rise of about \2.9 billion from the comparable period last year. Its operating earnings finished in \318 million, up \90 million. The Business managed to proliferate its sales channels of such raw materials as salmon and Northern fish species for domestic and overseas use. Furthermore, expanded markets for added value products, as crabmeat and shrimp prepared for tempura or deep-fry, played a key role in revenue and profit increases.

Frozen Food Business, which entails frozen seafood, e.g. sushi toppings and boneless fillets, registered sales in the amount of \9.737 billion and operating income of \54 million. Ferocious sale competition forced a profit margin to head downward. Cooked frozen foods also were met with slacked sales.

Sales of Canned Food Business totaled \3.523 billion and operating earnings came to \90 million. The Division made intense efforts to develop new products chiefly of canned marine foods, and seafood appetizers manufactured by a consolidated subsidiary, Jokki, as well as to broaden sales channels.

Strain on Proceeds by Refrigerated Ocean Transportation and Deep Sea Purse Seine Operations

Logistics brought in sales of \1.186 billion, a reduction of \155 million. Operating loss amounted to \54 million, as opposed to \192 million in profit a year ago. Cold storage operation successfully protected its revenues and profits; on the other hand, refrigerated ocean transportation suffered a worldwide downward trend of fees, leading resultantly to posted losses.

The Tuna segment pulled off an approx. \1.6 billion increase in sales, totaling \5.991 billion. Its operating income was \48 million, down \77 million from the corresponding period last year. Despite swollen sales in tuna/bonito processing and distribution, profits failed to reach the previous year performance. Although far seas purse seining realized increased revenues from smooth fishing operations and unfaltering fish prices, there was a reported profit loss stemmed from multiplied expenses because of depreciation.

The Company announced no changes in the second quarter and the current fiscal year projections. The forecasted performance for the financial term is net sales of \76 billion, operating proceeds of \3 billion, ordinary earnings of \2.8 billion, and net income of \1.5 billion.

The original article was published on August 2, 2010 and was translated by Kiyo Hayasaka.

Nippon Suisan Acquires Pollack, Salmon Processor Delmar Co.

July 30, 2010

Nippon Suisan announced on July 29 the acquisition of the entire shares of Delmar Co. (Chiba City; President Masakuni Yanagihara) 100 percent owned by Delmar Holdings, located in Chiba City, Chiba Prefecture.

Delmar Co. boasts production of high degree of processed marine and prepared frozen foods, such as fillets and fries of mainly pollack, salmon and shrimp. Prepared frozen marine foods are manufactured at a factory in Funabasi owned by the Company, a production facility of its subsidiary in Samut Prakan, Thailand, as well as a plant of a Chinese enterprise the Company has a business tie-up with. The manufactured foods have been supplied to restaurant chains and depots in Japan for a number of years.

Nippon Suisan now looks forward to a great degree of future synergy effects made possible by the effective utilization of the Nissui Group's marine resource access ability, production and distribution network, as well as product development capability.

Nippon Suisan commented on the deal: "[The investment] was based on the fundamental policy of the mid-term business plan, a 'group strategy to optimize the value of marine resources.' Through a system of cooperation among Global Links, Local Links, as well as Marine Products Business and Processed Foods Business, [the investment] will buttress contributions to Delmar's clientele, and will be conductive to the business proliferation of the Nissui Group."

Delmar Co. was founded in 1947 with capital of \200 million. The Company racked up sales of \8.724 billion for FY2009.

Picture 1: Inside of the factory in Thailand

The original article was published on July 30, 2010 and was translated by Kiyo Hayasaka.

Nichirei's 1Q Indicates 22% Rise in Operating Profit

July 28, 2010

Nichirei announced its first quarterly business report (April thru June). Sales ended in \108.6 billion, down 1.7 percentage points from the comparable period a year ago, as a result of a transfer of acerola business operation; however, operating profit rose 22 per cent to \4.4 billion. Ordinary earnings surged 30 per cent totaling \4.3 billion. The Company's quarterly net income remained somewhat unchanged from the corresponding time last year, at \2.2 billion. This result was induced by an extraordinary loss of \700 million on adjustment for changes of accounting standard.

Prioritizing Seafood Items Brings About Revenue and Profit Increases

The Marine Products Division, the Meat and Poultry Products Division, and the Low-Temperature Logistics in the Logistics Division, excluding the Processed Foods Division, all racked up revenue increases. The Processed Foods Division was however the biggest contributor to an overall profit hike with the partial production discontinuation of unprofitable OEM processed chicken products, weakened raw materials costs chiefly of poultry, and ameliorated factory productivity.

Processed Foods brought in sales of \39.8 billion, down \3.1 billion from the year-ago period; operating earnings increased \800 million amounting to \1.2 billion.

Placing its primary focus on priority products such as "Kodawari Sozai," the Seafood Division chalked up rises in both sales and earnings. Sales went up by \500 million to \16.8 billion and operating income finished in \400 million with an increase of \300 million. A spiked margin ratio by fueled octopus prices and improved profitability of Chinese-processed flounder, as well as upsized sales channel of shrimp, its flagship item, contributed to the increases. Amid marine foods prices undergoing upward trends engendered by the massive oil spill in the Gulf of Mexico, the Company's leading Southeast Asian shrimp flourished in volume and sales.

The Meat and Poultry Products Division's sales showed a sideway move at \19.5 billion and operating profit resulted in \100 million, half of the previous year performance.

Low-Temperature Logistics marked \34.7 billion in sales, up \400 million, and \1.9 billion in operating earnings, down \100 million. It supplemented Logistics Network Business' challenged areas of "regional storage" and "overseas operations" and overall the Logistics Division is moving along the line of performance forecasts.

Logistics Network Business registered a two percent revenue increase. Its highway transportation and new Transfer Center (TC) operations are going favorably. In addition, the advancement of dispatch control efficiency, one of the top priority issues, is also progressing in a right direction. Its operating profit reported a \300 million rise.

On the other hand, the Regional Storage segment announced a six percent reduction in revenues and a \200 million contraction in operating income. Shrinking inventory volume, a trend seen since late last year, despite its recent upturn, was ascribed to the negative results. Moreover, depreciation on facilities, which were in operation in February and March, was to blame for the decreased income.

Overseas logistics operations ended the quarter with a two percent tumble in revenues and a \100 million drop in operating earnings. However, a downward trend in logistics volume in Europe seems to be hitting the bottom. A French-based logistics subsidiary, acquired in July, will be added to consolidated business statements from the third quarter.

The original article was published on July 28, 2010 and was translated by Kiyo Hayasaka.

Japan Kamaboko Association Announces
Health Benefits of Kamaboko at Seafood Show

July 26, 2010

Kamaboko's Ability to Prevent Diabetes

The Japan Kamaboko Association held its 7th workshop on the health benefits of kamaboko on July 22 at a seafood show at Tokyo Big Site. Professor Fumihiro Kojima of Sendai Shirayuri Women's College presented his research results "Dose-Dependence Analysis of Ameliorating Effect on Brain Function Through Kamaboko Intake"; Kazunaga Yazawa, an affiliate professor of Tokyo University of Marine Science and Technology, shared his research outcomes dubbed "Diabetes Prevention by Kamaboko."

Association Chairman Kimiho Kotani first got the ball rolling by saying, "This program started in 2003 and we have had help from many researchers to scientifically figure out the health benefits of kamaboko. From this point on, we intend to make efforts to spur kamaboko consumption by sharing the research outcomes with consumers."

Mr. Kojima delivered a lecture titled "Dose-Dependence Analysis of Ameliorating Effect on Brain Function Through Kamaboko Intake" at the workshop. He conducted a research experiment that involved the administration of kamaboko on mice with brain damage to examine if the brain damage would ever be mitigated. The research results revealed that kamaboko intake had the recuperative effect on drug-induced amnesia and the life-prolonging effect by brain function protection. The experiment uncovered the fact that just including 10 per cent of kamaboko in mice feed displayed a survival advantage.

Mr. Yazawa subsequently introduced the upshots of his research "Diabetes Prevention by Kamaboko." His study revolved around the effect of administration of kamaboko paste on mice in relation to blood glucose levels.

The result was that, in human terms, kamaboko successfully hampered increases in blood glucose levels by about half compared with sugar. Moreover, it was understood that kamaboko possessed the suppressant effect on liver weight. It was concluded that this action was due to the work of kamaboko to stimulate insulin secretion during glucose administration. This effect does not take place in raw fish; it is generally witnessed in cooked fish. Mr. Yazawa concluded his presentation by stating: "The health benefits of kamaboko are quite important in connection with anti-aging and adult-onset diseases."

The original article was published on July 26, 2010 and was translated by Kiyo Hayasaka.

Kanesan Suisan Operations Transferred to Kyokuyo

July 22, 2010

Kyokuyo announced that operations of Kanesan Suisan, which are intended for civil rehabilitation by way of business transfer, were handed over to Kyokuyo on July 21, and that the company "Kyokuyo Fresh Co." was newly launched. Kanesan Suisan is a seafood company based in Edogawa City, Tokyo, under management of President Keiji Ban, with capital worth \255 million.

The business transfer entailed the following: 1) seafood processing and distribution operations run by Kanesan Suisan; 2) land and facilities ("real estate' thereafter) essential for conducting business; and 3) assets that include machinery and equipment installed on the real estate. The business transfer in value terms is worth \800 million.

Strengthening Comprehensive Power of Tuna Business

A subsidiary that will run the business operations is Kyokuyo Fresh. Kiyotaka Nogami is assigned as a president. The company was founded on June 8, 2010. Its paid in capital amounts to \90 million; Kyokuyo holds 100 percent of its shares. Kyokuyo Fresh has seafood processing and distribution operations, chiefly of tuna.

Target annual transaction volume is 1,500 tons with sales totaling \3 billion for the first year - nine months operation -, and 4,500 tons and sales of \10 billion for the third year.

The Kyokuyo Group's tuna operations division has flung itself into the reinforcement of its operating bases for fisheries and bluefin farming among others. With the new acquisition of Kanesan Suisan fitted well with top-notch processing facilities in Edogawa, Tokyo, the Kyokuyo Group intends for further comprehensive self-empowerment.

Kanesan Suisan came into existence in October 1954. The Company, as one of the leading tuna processers, focused its business on seafood processing and distribution, dealing simultaneously with fresh fish other than tuna and sushi toppings. It reported annual sales of \10.286 billion for FY 2006. It held well established reputations for its high quality product management as well as its self-invented tuna freezing technique.

Kanesan Suisan's business client Explorer Corporation went under in December 2007, inflicting unrecoverable loans on Kanesan Suisan. In addition, a joint venture abroad run by the two companies defaulted on a loan of about \315 million.

Furthermore, a delayed new business operation and contracted sales volume resulted in a decline in annual sales representing roughly \8.563 billion. An inevitable amortization of the bad debt led to an extraordinary loss of approx. \357 million. Also, the Company's aggressive action towards investments in infrastructures added the burden of interest-bearing debt, forcing the Company to file with the Tokyo District Court for court-mandated rehabilitation on January 25. The total debt as of December 2008 added up to around \5.47 billion.

The original article was published on July 22, 2010 and was translated by Kiyo Hayasaka.

Health Examination of Halibut Made Possible by Blood Test

July 21, 2010

The Fisheries Research Agency, in cooperation with the Fisheries Research Division of the Oita Prefectural Agriculture, Forestry and Fisheries Research Center and Nippon Veterinary and Life Science University, achieved the successful development of an "Analysis Chip," an early detection device for farmed halibut.

The Analysis Chip enables the diagnosis of diseases as well as an analysis of the history of disease quickly. Health monitoring through regular checkups becomes possible, as live halibut can be examined.

Numerous antibodies and pathogen proteins are pasted on the Analysis Chip in order to detect the blood components of halibut. Applicable diseases exhibit chromogenic reactions, as a small amount of blood extracted from live halibut, contacts the chip. This procedure facilitates the rapid diagnosis of contracted diseases and their manifestations, as well as the history of disease in the target fish.

The early identification of diseases, which create tremendous damage to halibut farming sites, is made possible by this new technology; averting disease rampancy and diminishing disease-related damage are anticipated.

The detection device will be further simplified and revised in a manner which can be applied easily on site. Moreover, research on a method to manage halibut health through blood tests conducted on a regular basis will be performed.

The original article was published on July 21, 2010 and was translated by Kiyo Hayasaka.

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