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Ajinomoto Co Inc
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Good afternoon, ladies and gentlemen. Thank you very much for sparing your precious time to attend Ajinomoto Group's first quarter conference call for the year ending March 2024. Thank you very much indeed. My name is Kaji of the IR Group. Today's earnings call is attended by Executive Officer and Vice President, Mr. Mizutani. We expect to finish today's session in about 60 minutes. At the outset, Mr. Mizutani will make a presentation for about 20 minutes using the disclosed material followed by a Q&A session. Please be advised that today's session will be recorded so that the content will be posted on the company's IR site later on. Without further ado, we would like to start immediately. Mizutani, the floor is yours.
Once again, thank you very much for your time this afternoon. We thank you very much indeed. So using the material, I would like to start the explanation. So -- this is today's message 4 points. First of all, in the first quarter of 2023, we achieved record high numbers. Secondly, as a result of our aggressive pricing actions from the fourth quarter of last fiscal year, we started to see profit growth in seasoning and food as well as frozen foods, and this growth trend was sustained in the first quarter of this year as well, driving the overall performance of the company. The third point, as for health care and others, Functional Materials was impacted by the adjustments in the semiconductor market, and I mean, assets for pharmaceuticals and Foods was impacted by the inventory adjustment of pharmaceutical raw materials as things started to normalize after COVID-19. So both recorded a decline in revenue and profit in the first quarter, however, we expect to see recovery from the second half of the year with inventory adjustments running its course.
No changes were made to the fiscal 2023 full year guidance. The next page, please. Let me explain the highlights of the results for the first quarter of the year ending March 2024. Sales was JPY 339.5 billion, 15.6% of the level of the same quarter of fiscal 2022 and 102.1% when the foreign exchange impact was excluded. Business profit came in at JPY 42.8 billion, 105.7% of the previous year level and 102.1% excluding the foreign exchange impact. For the viable the full year guidance, the business profit achieved a progress of 28.6%. So we got off to a very good start. The next page, this is the waterfall chart, analyzing the changes in business profit between the first quarters of fiscal 2023 and fiscal 2022. The increase in GP resulting from increased sales was JPY 6.5 billion. The changes in GP caused changes in GP margin was significantly positive in food-related businesses.
However, it was negative in the health care and others business. Accordingly, it remains nearly unchanged overall from the last fiscal year. The profit growth resulting from unit price increases in seasoning and foods and frozen food segments were quite significant, which offset the fuel and raw material cost impact of approximately JPY 6 billion and made up for the decline caused by the reduced sales and GP margin in Healthcare and other business. As for SG&A, in accordance with the strategy set forth in our 2030 road map, we have expanded investments in intangible assets that are required for a sustained growth in the future. In the second quarter and subsequent period, we will aim for further sales increase and GP margin improvement while making necessary investments and thereby strive to achieve double-digit growth in business profit. Next page, please. This is Page 5.
This slide shows FY '22 first quarter versus FY '23 first quarter factors leading to changes in business profit by segment. Also, slide below is changes in business profit FY '23 forecast versus FY '20 actual for your reference. As you can see, comparison with the full year forecast, seasoning and Frozen Foods achieved very strong profit growth. Health care and others with full year forecast of profit increase on the contrary, saw profit decrease for the first quarter. Profit declined in Bio-Pharma Service and Ingredients of which AMENA assets for Pharmaceuticals and Foods ended with decreased profit because the impact of inventory adjustments by our customers with larger inventories for their pharma raw materials was more than our assumption after subsiding COVID 19. We believe that the first quarter is the bottom of the impact from the inventory adjustment, but some should remain in the second quarter. Secondly, Bio-Pharma Service ended with decreased profit because of increased personnel expenses in U.S. and Europe and impact from switching partial production facilities to growth area.
But these are along the line with our initial budget and evenly distributed in the second half, and therefore, we have confidence in achieving our full year forecast. Next is Electronic Materials, which was impacted by ongoing adjustments of the semiconductor market as was anticipated at the beginning of the term. So we think the impact of market adjustment would still remain mainly in the first half toward achieving a full year plan, the company as a whole in the first half was able to successfully progress towards generating profit. Next page, please. Lastly, but not least, we are showing progress towards midterm ASV index by segment. First is organic growth rate. Seasonings Foods was able to keep sales volume about the same as last year's and realized strong unit price growth. More in detail about sales of source and seating and quick nourishment, domestic unit price increased 106% volume, 99%.
Evers unit price 110%, volume, 98%. Frozen Foods, though declined in volume achieved substantial unit price increase. Next is the business profit. seasonings and foods and frozen foods marked large profit increase by overseas and also domestic as a whole achieved profit increase, led by restaurants and industrial use backed by the recovery of eating out, cetera. In major overseas markets, we have already outperformed our business profit ratio to before COVID-19 level. Domestic market is steadily progressing to improve margin with continuous more pricing actions. Health care and others for full year would be realizing profit increase. Lastly is the EBITDA margin. Seasonings and foods and frozen FOP strongly grew their EBITDA margin exceeding our full year forecast and compensated the lower margin of health care and others and realized a high EBITDA margin for the whole company. So that's all from me. Thank you.
So from here, we would like to move on to the Q&A session. [Operator Instructions] The first question, please.
Mr. Saji from Mizuho Securities.
I have a question regarding seasoning food and also quick nutrition nourishment. Regarding your focus for both Japan and overseas business, so how was your progress vis-a-vis your guidance? That's my first question. That was just my single question that I have right now. Like you mentioned and you gave us the quantity and also the unit price growth rate for overseas in Japan. As for overseas, for example, this year, for a seasoning and quick nourishment or overall, I think the unit price growth was expected to be 4%. But in the first quarter, you have already achieved a 10% increase according to what I know. Although the volume was down by 2% or so I'm interested in these numbers, and on the cost side, raw material and production cost is going to increase JPY 4.5 billion and JPY 10 billion overseas. So you have given the quantitative numbers. But in the first quarter, how does this progress? Can you share these points with us?
Saji-san, thank you very much for your questions, first of all, for overseas seasoning and also a quick nourishment, for seasoning and food if you look at the overview of the performance, the highlights. The sales growth in most of the major markets were quite significant, we achieved a significant growth in revenues in most of the major markets. Indonesia, in particular, Vietnam, these markets achieved a double-digit growth in revenue, and I said that the quantity was limited to 98% year-on-year, but excluding some categories, it was already more than 100% vis-a-vis last year.
So I think the results were quite favorable in our view, and also for the quick nourishment for overseas there are equity method companies, Pleased in overseas. This is an equity method subsidiary, and because of the onetime accounting cost adjustment. So if you exclude that, business-wise, because of the significant contribution from the unit price increase, especially instant noodles, they actually achieve that increase in revenue. So I think we can overall say that the progress has often been quite favorable. Your second question regarding the costs. If you can look at the material, pay, I should say Page 4 on Page 4 the bridge, 40.5 billion JPY 6.5 billion represents the increase of raw material and fuel costs being offset, and we achieved a profit increase of JPY 6.5 billion. So because of our unit price increase and the cost reduction initiatives we have undertaken so far are reflected in the JPY 6.5 billion profit increase. So this was actually better than our plan that we had developed in the beginning of the year.
So we managed successfully in our view, just one point of clarification. Promasidor is the equity method affiliate. So in seasoning and food, I think they have achieved JPY 400 million loss. So is that reflected in these numbers here. So by the accounting was, there was a negative accounting impact -- that was just one-off thing, and it's not going to continue. Thank you very much for the question. Exactly, you're right. This is just a one-off thing, accounting treatment. So this is not like the impact in the future. So this one-off accounting treatment will have no repercussions in the future accounting -- thank you.
But in terms of what is the -- can you elaborate on this accounting treatment in more detail?
Well, Promasidor is operating business in many different companies -- countries. In one country, the foreign exchange impact was there.
Next question from JPMorgan, Mr. Yoshida.
Hello. This is Yoshida of JPMorgan. Do you hear me?
Yes, I hear you.
Nonfood area, Bio-Pharma Service & Ingredients, I have a question. Earlier, you mentioned towards full year plan achievement. This is along the line with the plan and doing well. But could you elaborate on this point, especially in the amino-acid pharmaceuticals. More than sales dropped, the profit dropped. I would like to know the background, why the profit dropped here, and also, though we see sales increase, but it is a profit decrease in the service and ingredients. So could you elaborate on this point as well?
Yes, thank you very much for your question. Yes. First of all, the first point is amino assets for pharmaceuticals and foods. Yes, 1.2 billion sales and to that JPY 2 billion of sales, the profit decline. This is because of the product mix, and the second point is Bio-Pharma Services & Ingredients. This is the 3.3% increase in sales, but the profit declined. So for this, there are several reasons. One, the first is that last year, the product mix was very well good, and we have reactionary decline here, and second is in U.S. and Europe, personnel costs increased, and that is impact, and another one thirdly molecule. -- to the profit maker. We are trying to switch production, and in order to switch production to that area, there is one-off expense. So we see a decline in profit. But anyhow, for both business, they are along the line with our business plan -- so that's all for me.
Thank you very much. So for amino acid, the product mix you mentioned. So I think you mentioned about more profitable businesses than this area. This is for the culture, right? That means that the culture area had dropped or CDMO area, you mentioned that reactionary of this product mix declined, but CGM factories went or seeing decline in profit. Is my understanding correct?
First about the culture, yes, for this area for long and midterm perspective, you would have to see this. This is steadily growing, we believe, and for oligo nuclear, this business is also steadily growing. So for this area, as is written here, we would like you to see them not just from the perspective of quarters, but midterm quarters, mid long terms. So if you just cut the 3 months period, it seems to be that the profit is declining. But long-term perspective, it is growing. Yes, we would like to ask to see this from a longer perspective.
The next question will be from Nomura Securities, Fujiwara-san.
This is Fujiwara. Okay. So my first question, you mentioned earlier that you are progressing quite favorably. But the pricing, I think, has the major impact. So therefore, the revenue be it overseas, frozen food, especially North America is not growing that significantly according to what I say. So for seasoning overseas markets, the quantity is minus 2% year-on-year. I think it's weak in my view. But the quantity, minus 2%, can you elaborate the reason why that has happened? And what is your outlook in the future? And also the frozen food in the United States, if the foreign exchange was stayed constant, I think it's not growing that significantly. I think it's affected by the quantity. So how is your outlook for the future? That's my first question, and my second question, I think it was explained during Saji-Son question. The cost increase, I think what was the cost increase for the first quarter, JPY 6 billion, you said? I thought that was -- is that correct? The JPY 6 billion was the total cost increase you recorded in the first quarter?
Okay. Let me first answer the first part of the question regarding the overseas business. Overall, 98% year-on-year, 98% of the previous year's level, but the Indonesia, Vietnam and Thailand, those major markets, seasoning achieved more than 100% of the level of last year. So we believe we are quite favorable in terms of quantity growth, especially Indonesia, Vietnam, these markets achieved a double-digit growth in terms of -- and also the quantity was also more than 100%. So these markets are growing quite steadily. But why 98% overall the powder drinks, beverages was quite somewhat negative. So that was impacting the overall performance. So for those reasons, the quantity was it was 98% of the previous year level. But again, the overseas seeing is performing quite favorably as that's how we see it. The cost increase was JPY 6 billion. That number is correct. That's all.
Sorry. So what about frozen foods, overseas proves and foods performance.
I think this is almost -- affected by the foreign exchange favorability, but the quantity was stagnant for frozen foods but we are in the middle of a structural reform, and as we mentioned the last time, we are now focusing our investments on the categories, core categories that are expected to grow in the future. So we are focusing on those areas. So therefore, the underperforming areas, we are now finishing the sales for that. So that is requiring some cost for cost transformation. So -- but otherwise, the profitability is, therefore, improving quite significantly. So we are concentrating our marketing investment for those core categories, and that resulted in productivity improvement. And during the COVID period, we have not been able to tackle production improvement, and these are also making steady progress. So as a result of these the numbers came in as what you see.
I have a follow-up question. into what you just explained. So seasoning overseas seasonings, you said that the powder beverages has recorded a decline in quantity, and I think our quantity has been gradually decreasing. Have you seen any impact from the general economic conditions in overseas markets?
Well, thank you very much for the question. Let's say, take the example of Thailand. The tourists are now coming back. So therefore, this is a tailwind for our business as well. So the mainstay overseas seasoning, we have already achieved more than 100% of the level last year in terms of our quantity. So therefore, we believe things are moving quite favorably to us. Thank you.
Next question. Morita-san from Daiwa Securities.
This is Morita from Daiwa Securities. I have 2 questions. You mentioned about the frozen food and the seasonings, and you mentioned that the sales is very good. And you made the price increase. Do you see any changes in the market share and especially in U.S., do you see price pressures more? That's a bit of a concern. But this very strong price increase as a result. Is there any changes in your market share and towards the future. Do you think -- can you maintain this price increase effect? And if there are any changes in the market, can you tell us about it?
Thank you very much for your question. Yes, for the frozen food overseas. First, as you can see in reports and results that market share, mostly unchanged, as for this, I'm repeating again that we think we're strong in the core category, and we are focusing our investment in those areas, and I think that is showing effect in the U.S. market, and that has been well taken and U.S. market, we see growth. So that's the situation. So as a result of that, for market share, we see no changes. That's for the North American frozen food business, and earlier, I mentioned about Thailand. For example, Indonesia, seasonings we are challenging to new initiatives. In the first quarter, for example, the packages, in order to appeal sustainability, we have provided packages with QR codes, and our strength in Asian market is distribution network.
So taking advantage of that distribution network, we have new packages, and by introducing such packages, we are promoting sales, and in addition to that, TV commercials, unlike the one we used to do it to the consumers. We are now positively, I think, showing emotional TV commercial done before, and that is showing up. So you're doing well there, and in your disclosure about the Gila, the market share for the April to June is 31%. It became #2, and that's a sensational figure. Is this a onetime factor for this Giza, Japanese frozen foods.
Yes. We did price increase, and this is a reactionary decline to that. But even then, we have been having profit increase Of course, the market share is there, but we are controlling and managing the whole business there, and second point is that earlier, you mentioned about JPY 6 billion of raw material and fuel cost increase. This is full year, JPY 4.5 billion and JPY 10 billion for the overseas. Is this all added to age? You mentioned JPY 6 billion to the full year. What's the progress towards your full year of JPY 14.5 billion.
Yes, as you say, yes, JPY 10 billion plus is the full year cost increase. But the first half, we see in case more, and in the second half, it's a bit less. So progress-wise, I think first half is larger. But according to our plan, it is along the line with the plan…
So in the second quarter, third quarter, you mean that the trend is going to be increasing profit.
Yes, for expense and cost, yes, first half, second half is going to be softer than the first half. So it is along the line with your plan.
Now we would like to take the next question. Morgan Stanley MUFG Securities, Miyake-san.
This is Miyake from Morgan Stanley. I also have a question regarding our progress on the food-related businesses. Your profit growth plan, you have achieved a very strong progress in the first quarter already. So I believe the price increase impact is now manifesting themselves in Asia and also in Japan. So -- but on the other hand, when it comes to Japan from this year in various different categories, you are going to strengthen marketing activities and aiming for revenue expansion according to you what you explained earlier. So the recording of expenses, we are actively making marketing investments and that is going to expand in the second quarter. So despite the progress -- strong progress in the first quarter, we should not stay so bullish about the full year plan. So how should we interpret the first quarter results in terms of profit? Can you separate that for the food business between Japan and overseas, can you give us some more comments regarding that?
Miyake-san, thank you very much for the question, for food-related business, if you divide between Japan and overseas, for overseas, the marketing spend was not that significantly high. So we just made a steady utilization of investments in overseas. However, for Japan, depending on some categories and products, we had to increase the prices, and of course, going forward, we are going to launch new products. So some expenses associated with the launches will be needed. So therefore, -- we are not expecting a significant increase in marketing spend going forward. So I should say things are progressing as planned.
All right, so if that is the case, then the -- towards the annual plan, your progress is already high in the first quarter. So in Japan numbers are progressing as planned. And overseas, you are outperforming your plan. Well, for overseas has been quite favorable, progressing quite favorable. So overseas are driving the performance. In Japan, you are going to make a recovery and accelerate the growth in the -- for Japan going forward in the upcoming quarters. So from declining phase, -- have you seen any incremental marketing spend for Japan? So maybe if the investments are skewed towards the second half of the year rather than the first quarter, if that is the case, should we interpret that you are planning -- progressing as planned?
Yes, we haven't changed the plan at all. So we are progressing just as planned, so especially for overseas, the performance has been quite favorable.
All right, so then relating to Healthcare business, I have another question. Bio-Pharma Service, as you had expected, you achieved a decline in revenue. So that was in line with the plan, and also for the amino acids for pharmaceuticals, you are, by and large, progressing as planned. For functional materials, the first half was supposed to be weaker in your initial plan. But how should we interpret the first quarter performance for revenue and profit, I think, was that in line with your assumptions?
Exactly, so for the functional materials, Functional Materials compared against the initial plan, we are progressing just as planned. So the momentum was just in line with our assumptions.
So when you announced your beginning of the year plan, you said that the fourth quarter around the fourth quarter, once the inventory adjustment run its course, you're expecting to see a huge expansion in profit. So do you think the outlook for the demand in the industry will not change? -- has not changed at all?
Yes, we are reporting the numbers on a quarterly basis, but of course, we are monitoring things on a monthly level, and we are seeing gradual recovery.
Next question is from SMBC Nikko Securities, Takagi-san.
This is Takagi. ABS from second quarter or from the second half, this is going to recover. You mentioned -- how is the degree or level of the recovery? How do you feel it at this point of time?
Yes. In order to give you a plan, I think you need to, I think, increase by 30% to 40%. So how are you going to recover this -- at this point of time, at the recovery level that we had assumed at the initial stage when we had made the plan, we have not changed. Do you mean that you don't have to change it? Yes. At this point of time, we are not going to change internally. We have discussed, and we're not going to change it.
So in the first quarter for electronics material, functional materials, it says minus 22%, but for electronic materials, how is the degree or level of the negative.
Yes, for segment as a whole seems to be the same trend as with the segment, so maybe more than 20% minus, right?
Yes. In the second quarter then, what would be the situation? How much do you think will recover?
Well, at this point of time? And I'm very sorry, but we cannot comment at this point of time. I'm very sorry about this.
Okay. And for food business so you mentioned favorable and going smoothly, well, favorably.
The progress rate is good. But the pricing, I think, that's the effect. The pricing effect is showing more than assumed to the plan.
What is the segment that is doing well than your plan?
Well, yes, the effect of the price hike, yes, is working, and secondly, and in the first quarter we see some cost reduction improvement in the productivity, and we have a bit of volume increase. Well, I think maybe all of the factors. -- in -- for those 3 areas, we have been able to make improvement.
You mentioned about the improvement of productivity for the frozen food, but not just limited to frozen foods. In the area of the foods and seasonings, we are doing various productivity improvements, and that is steadily showing up.
Yes, that is showing effect, and as a result of that, as was mentioned earlier, before COVID-19 level, the business profit rate that we had recorded. Now the situation is higher than that outperforming. Yes, indeed, in that portion.
You mentioned a bit of a volume increase. But the total is minus 2%. But overall, the volume was better than what you had assumed, right?
Yes, just a little bit but better than assumed, yes.
Yes. The business profit rate went higher than the before COVID level. So how much is the level of recovery for full year?
Well, for full year, I'm very sorry, we cannot see how it is going to be.
And for overseas, the first quarter, you mentioned 110% price increase and 98% volume. This is 108. But in the second quarter and afterwards, the volume and the price increase, what would be the balance of the 2.
Well, as you can see, we did a price increase and after to second half, we will be gradually be doing that, and the pricing effect will be reduced gradually. But I think that effect will still be seeing in the second quarter.
And how about volume.
The quantity, I think it's up to our efforts, but we will be having new initiatives, and by doing that for volume, yes, wise, we would like to see increase, yes. So gradually, the price hike increase has softened, and that is going to be well taken and you cannot we expect a recovery in volume then? Well, we will, yes, do our best effort to do that, and for frozen foods, in the first quarter, full year plan profit increase has been hit. Yes, I see it's very good and favorable. But what was a good point for this -- what was for this Yes. First, we had the effect of the price hike, and that was positive for us, more than expected, and secondly, I have not mentioned further, but the total delivery cost to our clients. That means the whole cost last year, we did the project for that, and that result has shown up. For this -- yes, in the first quarter, not just limited to this onwards from the second quarter, we will do this efforts, and we are expecting that to turn up. Thank you very much indeed.
The next question will be from Okasan Securities, Sumoge-san.
This is Sumoge from Okasan Securities. Can you hear me?
Yes, we hear you.
Thank you very much for your continued support to our company. We also have a question regarding overseas seasoning, some follow-up questions. For Vietnam and Indonesia, you said that the double-digit growth is reported there. So what are the reasons behind that? And also another question for overseas seasoning, unit price has increased by more than 10%, which I think is higher than what you had anticipated. So why are you achieving this higher-than-expected growth, not having to pay out rebates, so what are the background behind these numbers? If you can elaborate on those points, that would be appreciated.
Yes, for Vietnam, Indonesia, what lies in common, so this might be somewhat bigger, we have to raise 3 points roughly. I talked about the distribution capability earlier. So in each market, in each country, we have a very robust distribution network in place, and that strength is one factor behind this. Also, the fact is that the pricing, the way we price our products, we have conducted a very effective pricing and also number 3, the product line, we have multiple product lines, and we are skillful mixing up the merchandise when we distribute our products. So this is a long established know-how that we have accumulated over the years and especially the team around this things turned out to be quite successful in the 2 markets of Indonesia and Vietnam. So despite being able to raise our prices, I think we were able to exhibit our strength, but I just elaborated.
All right, thank you very much for the comment. So I think these are the strength that has been accumulated over the years. So this is a competitive advantage that you have enjoyed for many years. So in this quarter, in the first quarter, Vietnam and Indonesia has achieved very bullish numbers. So what was the change, particularly that you -- for this quarter? So what is the macroeconomic environment, macro environment that you have noticed for these markets?
Okay. So I'm so sorry, if I just single out one example of Vietnam only in the first quarter of this year, the -- we activated the sales activities, and we have conducted a very downturn activity, and we strengthened those very basic activity, and so sorry for this very ambiguous comment. But in order to spread out our products throughout the network, we are strengthening our fundamental activity to distribute our products across the network. So -- and as a result of these initiatives, we were able to deliver these numbers. So that was what happened in the first quarter, and also at the same time, not only in Vietnam, -- but we are now trying to capture new demand, especially from the youngsters, so sustainability-related product activities were launched in Vietnam. So a new type of TV commercial was aired in Vietnam so that we can strongly appeal to the young use segment, and in line with that, we had launched new sales activity, and I think these produce very good results.
Okay. So it's overlapping with your previous comment Okay. I got it, so regarding the pricing, 10% the unit price increase for overseas seasoning. So what was the background behind this? Can you elaborate on that point? So is it so that the rebate came in lower than what you anticipated? Or was there any incremental additional price hikes?
Well, the -- we just raise the prices as adequate in line with the cost increase. It has nothing to do with the rebates.
But your plan was that the seasoning overseas price -- unit price increase was only 4%. But compared to that annual plan, this appears to be a very bullish pricing. So you just pass on the price increase to your new prices. Well, this is 10% increases year-on-year. So that's the reason why it looks as though it's quite high.
So this is only for the first quarter, not the full year. So this is just a comparison between the first quarters of this year versus last year. So that appears to be higher. So therefore, depending on if we just 1 quarter, it appears to be stronger than expected. But even out by the fourth quarter, it will dilute to some extent. Yes, if the cost increases in the future, we may have to raise the prices slightly as well, that is planned, so in view of the cost, we will keep a close eye on the cost level and adjust the prices accordingly.
All right, one final supplementary question. The raw material cost, I think you are expecting some slowdown of increase in the second half of the year according to your projections. So if that is the case, then don't you foresee any risk of the competitive environment deteriorating, are there any country of risk where the competitive environment is getting worse as at this point of time.
Well, for the raw materials and the fuel cost, it has plateaued at a very high level versus our budget. Of course, as I mentioned earlier, vis-a-vis the competition, we would like to keep a close eye on the competition, and as we operate our business, so we will look into all these factors and manage our business going forward.
That's it for myself, thank you. Okay, then there's nothing in particular with respect to the deterioration of the competitive environment. The unit price plunge is not foreseen at the moment. I think you are able to successfully manage them.
Yes, we will try to manage these factors, including cost reduction.
Next question, Mitsubishi UFJ Morgan Stanley, Tsunoyama-san.
Hello. Do you hear me? I have one question. Japan seasonings, I think it's -- last year, you have shown us the profit increase sustainability for this. Well, how do you think -- can you sustain this level, including the products? Can you elaborate on this point?
Yes. Your question was about for Japanese food, I guess food business.
Yes, that has that has turned to profit increase, and do you think you can sustain this profit increase -- for Japanese foods.
Yes, we have exerted efforts and doing some various initiatives. One example would be that, for example, less salt or reduced salt together with various municipalities and distributors and on various events. That's one thing, and in addition to that for price increase, we have been doing this appropriately, and thirdly, this is from now on, after August, we will be launching new products, and for that, values that we will be proposing and providing to them, and another thing is that for industrial and restaurant use, that is recovered, and that is one factor that has increased our profit. Yes. On our side, we have various started initiatives to make favorable performances, and for the new product launch, I hope that you would expect them.
Yes, you have the new organization starting from August, you will be launching new products from fall this year. To be specific, I think you have already made announcement to those new products. What are the new products that we should focus on.
Yes, for new products starting from fall this year, we have not announced yet disclosed yet.
No, you have not disclosed.
Yes, for Kudu, Yes, we have already announced for Couto, premium, Kudu is the -- I'm going to make trials. This is -- I cannot comment on this, but for this to the soya bean incurred seasonings compared to the conventional ones. The flavor is better, and this is the premium spicy, soya bean cure flavors, and this is premium. So we are expecting a lot for this to contribute to our profit growth.
Thank you very much. Thank you. We are running out of time. Are there any other questions? [Operator Instructions].
This question is from Fujiwara-san from Nomura Securities. I have an additional comment or question. For Bio-Pharma, profit, you explained the profit for Bio-Pharma business. But on the revenue side, JPY 3.3 billion, I think maybe this was impacted by the foreign exchange. So the growth behind this revenue, can you just elaborate the reason why you have been able to achieve this revenue growth? And also you talked about cost increase. So -- but what about the raw material cost, Frozen food overseas, I'm sure you have been seeing some impact from the reduction of the raw material cost. But can you just talk about the raw material?
Thank you very much, Fujiwara for your question, first of all, regarding your first question, for the Bio-Pharma Service, revenue side. As I mentioned earlier, a little bit, the Bio-Pharma Service, we have many different products than the product mix made a huge contribution, and also the other factor was the foreign exchange. So these were the 2 major factors behind the revenue growth of Bio-Pharma business, and the second question, what was your second question?
So this other question was that, for example, in the United States, I'm sure that raw material prices are coming down, so I think according to what we see from the results presentation while for other companies, the raw material prices are coming down. So are you benefiting there from that raw material price decrease, not necessarily with the frozen fruits only, but have you seen that trend. Well, for the frozen food I'm looking at the individual recipes, but some raw material costs are coming up such as protein cost, and actually, we are heavily using protein.
So we have to keep a close eye on these trends going forward. Of course, wheat and also the flowers are flat for prices are also coming up. So we are keeping close eye on these trends. So we're not seeing a steep increase anyway, but there are some elements that are -- that the prices are coming up. So depending on the segments, the raw material price reduction is not really benefiting you?
Yes, exactly. That's correct.. So the CDMOs product mix, a waterless -- the revenue -- I wasn't really sure about that because -- so the low molecule a middle molecule business low and middle model business is growing. Both of them are growing.
Any other questions -- thank you very much. There seems to be no questions. Yes, we have received one last question. Takagi-san from SMBC Nikko.
I'm sorry. I have to confirm one thing. Bio-Pharma and CDMO business, you mentioned that the increase of profit is expected inclined to the second half. Maybe this is because of the environment, and this is a growth area. Towards the second half the cost and expense is going to take less and the top line is going to increase oligonucleotide increase. So that is the driver for the profit increase. Is that the reason?
Yes, Takagi-san. Yes, it's just what you have mentioned Yes.
Maybe I just want to confirm on this point. Is my understanding, all right?
Yes, it's all your understanding. So in the first half, you had to spend more because of the switching, the cost, yes, we had to spend more in the first half, but not all of them will be gone, but the second half will be less. Yes, it is going to be absorbed.
Well understood. Thank you.
Thank you very much. So that was the end of the Q&A session, and Mani would like to say a few words.
Yes. Thank you very much for your time today. Continuously, we would like to have your support and cooperation from you -- thank you.
Thank you very much, that is the end of the meeting. Thank you for your participation. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]