Ajinomoto eyes emerging markets for profit growth

Tuesday, 8 March 2011 00:02 -     - {{hitsCtrl.values.hits}}

TOKYO (Reuters): Ajinomoto Co, Japan’s top seasonings maker, aims to raise its operating profit by just over a quarter over the next three years by ramping up its business overseas even as prices for raw materials surge.

The firm, which competes with Nestle and Unilever in seasonings, is targeting an operating profit of 87 billion yen ($1.06 billion) for the year starting in April 2013, up from an estimated 69 billion yen in the current year.

In addition, Ajinomoto, which also sells condiments, frozen food, instant noodles and soft drinks, is planning capital spending of 180 billion yen over the three business years starting in April, with the emphasis on emerging markets.

The creator of Monosodium Glutamate (MSG), a staple of fast food around the world, is also eyeing overseas alliances and acquisitions as it works to boost its business to capitalise on rising consumer demand for seasonings used in processed foods.

“There is no fixed framework for investment, but we may spend hundreds of billions of yen to lift the growth of the whole company,” President and CEO Masatoshi Ito said at a briefing about the firm’s mid-term strategic plans on Friday.

Ajinomoto, which means base of flavour in Japanese, plans to lift overseas revenue to 62 per cent of its total in the 2013/14 business year from projections of 59 percent in the current financial year.

Growing demand from developing economies and tight commodity supplies following catastrophic storms and droughts in leading agricultural producers and turmoil in the Middle East, has seen jumps in prices of raw materials such as corn and crude oil. Ito said Ajinomto has taken a hit of about 17 billion yen from rising raw material prices so far this business year, up from a loss of around 2.5 billion yen the previous year, but the impact has been lessened by cost cuts and price increases.

“Over the past five years we have reduced our use of crude oil by 80 per cent and with that the impact (of rising prices) has fallen,” said Ito, whose firm is over 20 per cent owned by foreign investors.

“We have lifted our use of bio-mass, natural gas and coal, and over the next three to four years I look to continue adopting changes in fuel use at our factories across the world.”

Ajinomoto, which is also the world’s largest maker of amino acids, used in animal feed and pharmaceuticals, has also lifted prices on many of its major animal feed additives, such as lysine, to offset rising raw material costs.