Message from the Management

Hiroshi Sawada Wataru Aosaki
Hiroshi Sawada
Chairman & Chief
Executive Officer
Wataru Aosaki
President & Chief
Operating Officer


 The Japanese economy remained firm during the term under review. However, uncertainties gradually mounted during the second half of the term, given the fallout from the sharp rise in crude oil prices and the subprime loan problem in the United States, and the progress of the appreciation of the yen and a fall in stock prices.

 In the food industry, prices of raw materials and fuels continued to rise with other costs, and the operating conditions remained severe. Consumer skepticism and concern heightened following a succession of false labeling revelations and a case in which agricultural chemicals were found in frozen foods produced in China. This increased the demands on food companies in terms of safety and security and the disclosure of information.

 In this more challenging business environment, the Group focused on its 05/07 medium-term management plan, which concluded in the term under review, and sought to expand business and enhance earnings capabilities.

 As a part of this effort, Matsuya Flour Mills Co., Ltd., an affiliated company, completed the construction of a buckwheat milling plant in December 2007. In February 2008, NIPPN (Thailand) Co., Ltd., a Thai affiliate, began full-scale operation of a state-of the-art pre-mix factory in the suburbs of Thailand. In April 2008, NPF Japan Co., Ltd., another affiliate, completed a new pet food factory at a site adjacent to the Company's Chiba plant. The Group therefore made active investments in businesses that are expected to grow in the future.

 As a result, the Group's results for the term under review included sales of 250,719 million yen (up 4.7% from the previous term), operating profit of 6,706 million yen (rising 6.0%) and ordinary profit of 6,729 million yen (an increase of 2.3%). Net profit declined 8.1%, to 3,810 million yen, given a deterioration in the performance of a foreign affiliate that is an equity method company.

 Looking ahead, the Japanese economy is expected to stage a moderate recovery, aided by a rise in domestic demand. However, there are many concerns, including slowing U.S. and world economies and worries about the direction of crude oil prices and grain prices. The future course of the economy remains uncertain.

 The food industry faces a shrinking domestic market attributable to a decline in population and rapid aging. Competition among companies is expected to be intensified further in the future.

 In the milling industry, the government raised wheat selling prices significantly, to accommodate a sharp rise in the international prices of wheat. This was the third rise, following hikes in April and October 2007. The environment surrounding the milling industry are more turbulent than ever before. The Company increased its equity share in Tofuku Flour Mills Co., Ltd. in October 2007, entered into a operating alliance with Tofuku Flour Mills Co., Ltd. and sought to boost the competitiveness of its core milling business.

 To deal with this rapidly changing situation, the Group drew up a new 08/09 management plan called SG100, which will apply from April 2008. It also restructured its organizations on April 1, 2008.

 The management plan drawn up this time will cover two years: 2008 and 2009. Its basic strategies call for a bolstering of earnings capabilities, active measures for diversified growth, and the effective use of management resources. We seek to achieve sustainable growth and to increase the corporate value of the Group.

 With these initiatives, the Group aims to achieve sales of 300.0 billion yen and operating profit of 10.0 billion yen (for an operating margin of 3.3%) at the completion of the execution of the plan in 2009. We aspire to become a globally diversified food company.

 We respectfully ask for the continued support of our shareholders.

 Hiroshi Sawada
 Chairman & Chief Executive Officer

 Wataru Aosaki
 President & Chief Operating Officer

 (June 2008, excerpts from the Business Report for the 184th term)