Milling & Baking News - December 2, 2008 - 16

Nisshin Flour Mill

Nisshin excelling in difficult
business environment

bakingbusiness.com / world-grain.com

increase of 3.3% in fiscal year 2007, which
ended March 31, 2008, compared to the
previous year, according to the company's annual earnings report released
in May. However, ordinary income fell
2.8% due to a decrease in the company's
equity in earnings of a compound feed
affiliate, which the company said was
affected by soaring grain prices.
The report noted that Nisshin "continues to aim to develop low-cost operations to ensure that earnings are more resistant to the possibility of future wheat
market deregulation. Nevertheless, the
company remains exposed to the risk
of changes in raw material prices and
higher costs for distribution, including
packaging, due to oil prices rises. The
resulting sharp rises in purchasing costs
could make it impossible for the company to achieve cost reductions."
Although Nisshin is looking to cut
costs in some areas, Mr. Shoda said
the company will continue to spend
money in two key areas: construction
of new, more efficient state-of-the-art
production facilities and food safety.

He emphasized that since 2001, Nisshin has made capital investments of
$106 million into a number of food
safety initiatives.
Flour milling
Nisshin continues to strengthen its
position as the dominant player in
the Japanese flour milling industry,
increasing its market share during the
past 10 years from 32% to 38%. Nisshin's flour milling segment, which has
long been the company's core business,
posted positive results in 2007, as sales
increased 6.3% over the previous year
due to the increase in wheat prices and
feed values, and operating incomes
rose 4.7%. Mr. Shoda added that this
was also attributable to increased flour
shipments by tapping into new market needs through the introduction of
five new product lines, and promoting "relationship-based marketing" to
strengthen relations with customers.
New wheat flour products include
the company's latest innovation, Super
Fine flour. Super Fine is whole grain

NISSHIN

isshin Seifun Group, Inc., Japan's largest flour miller and
one of the country's leading
food manufacturers, has continued to
increase its domestic market share and
seek expansion opportunities abroad
despite facing a challenging business
environment.
Although the Japanese economy
has slumped in recent years and grain
prices have skyrocketed in recent
months, the 108-year-old company,
which includes 48 subsidiaries and 15
affiliated companies, has prospered
under the leadership of Nisshin Chairman Osamu Shoda.
World Grain, a sister publication of
Milling & Baking News, traveled to Japan
in March 2008 to visit Nisshin's new
flour mill in Kobe (See story on Page
19) and interview Mr. Shoda and other
Nisshin executives in Tokyo, where the
company is based. Mr. Shoda said the
company's most pressing concern was
(and continues to be) the meteoric rise in
global grain prices, particularly wheat,
which affects nearly all of its nine business divisions: Nisshin Flour Milling
Inc.; Nisshin Foods, Inc.; Oriental Yeast
Co., Ltd.; Nisshin Pharma Inc.; Nisshin
Petfood Inc.; Marubeni Nisshin Feed
Co.; Nisshin Engineering Inc.; NBC
Inc.; and its "Others" division, which
includes grain storage assets.
In Japan, the price of wheat is set by
the Ministry of Agriculture, Forestry
and Fisheries (MAFF), the government body that purchases imported
wheat for Japanese companies.
Since the government introduced
its new market-linked wheat pricing
system in April 2007, the prices for
imported wheat rose by an average
of 1.3% in April 2007, 10% in October
2007, and 30% in April 2008. Yet another large increase - perhaps as high
as 20% - may be coming later this
year, according to recent news reports.
About 90% of the wheat used by Japanese milling companies is imported.
"The negative impact of the increase,
effective April 1, 2008, to Nisshin will
amount to 30 billion yen ($283 million)," Mr. Shoda said.
Even with the 10% increase in wheat
procurement costs in October 2007, Nisshin was able to post an overall net sales

Nisshin Seifun Group, Inc.'s corporate headquarters in Tokyo.
Milling & Baking News

December 2, 2008 / 17

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Milling & Baking News - December 2, 2008

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