Message from CEO

May 31, 2024

Refine CSV Management to Maximize Corporate Value
from a Medium- to Long-term Perspective

Yoshinori Isozaki

Representative Director
of the Board & CEO
Kirin Holdings Company, Limited

Achieved record-high normalized operating profit through
CSV-oriented business portfolio management

The year 2023 was also full of many environmental changes. In an unstable international situation with heightened geopolitical risks, soaring raw material and energy costs, global inflation, and significant exchange rate fluctuations are affecting operations. There is also a strong concern about the loss of natural capital and increased risk of disease outbreaks due to climate change. The COVID-19 pandemic has finally subsided, but the pandemic encouraged the diversification of people’s consumption behaviors and work styles. Additionally, the rapid evolution of digital ICT (information and communication technology) is significantly changing the way we live and work.

In times of increasing uncertainty, the Kirin Group has set Creating Shared Value (CSV) as the compass of its management. We aim to maximize corporate value through CSV management, in which we use the Group's strengths to solve society's issues and at the same time create economic value as a corporation. In the Long-Term Management Vision, Kirin Group Vision 2027 (KV2027), we declared we would “become a global leader in CSV.” We believe that a company should constantly evolve through continuous market creation by innovating in response to social changes and achieve sustainable growth while having a positive impact on society.

Now, regarding business performance, we have achieved our highest-ever normalized operating profit in 2023. We believe this is the result of our unique business portfolio of Alcoholic/Non-alcoholic Beverages, Pharmaceuticals, and Health Science businesses, leveraging our strengths in fermentation and biotechnology, and our flexibility in responding to severe changes in the operating environment.

In particular, Kyowa Kirin, which is responsible for the Pharmaceuticals business, was a major profit driver. Looking back, the Kirin Group entered the Pharmaceuticals business more than 40 years ago with an eye on the future of the domestic alcoholic beverage market, leveraging its strengths in genetic modification, fermentation, and biotechnology. Although not all were in favor of the move at the time, as it was not profitable for about 10 years, the current Kyowa Kirin was formed in 2008 and has grown to become a major contributor to the Kirin Group's business performance. This is the achievement of ambidextrous management, which is developing the Pharmaceutical business as the second pillar of our operations while the Alcoholic/Non-alcoholic Beverages business remains strong. The Pharmaceuticals business is an important business for the Kirin Group that embodies CSV management, as it solves social issues and at the same time creates economic value as a company.

Additionally, the Kirin Group has a history of taking on the challenge of expanding overseas from early on. We invested in what is now Coca-Cola Beverages Northeast more than 40 years ago and in Australia’s Lion and the Philippines’ San Miguel Brewery about 20 years ago. In addition, the Pharmaceuticals business is also growing overseas. Today, overseas operations account for more than half of the Group's normalized operating profit and EPS (earnings per share), and the Group’s globalization is expected to accelerate in the future. We have not limited ourselves to the domestic Alcoholic/Non-alcoholic Beverage business, but have taken on the challenge of diversifying our business and expanding overseas in the past, which is why we have achieved the results we have today.

Pursuing an optimal business portfolio that maximizes corporate value

We will pursue an optimal business portfolio that maximizes corporate value by appropriately allocating management resources to each business at different stages. While maintaining financial discipline to achieve an ROIC of 10% or more* from the perspective of investment efficiency, we will execute M&A investments to achieve our medium- to long-term growth strategy and strengthen organizational capabilities through investments in intangible assets.
*We will aim for an ROE of approximately 15%

To achieve our Group’s growth, investing in the “human capital” which is responsible for implementing strategies is of the utmost importance. The Kirin Group practices “human capital management” and focuses on developing human capital that are highly specialized so that they can respond to changes in the business environment and diverse enough to make the most of different perspectives and values. In particular, we have no time to waste in acquiring human capital that can take charge of DX (digital transformation). Nevertheless, we have been attracting diverse human capital with high expertise not only in the digital field but also in other fields regardless of nationality, motivated by their empathy with the Kirin Group's CSV management. I am convinced that our decision to adopt CSV management in 2013 and to continue it for more than 10 years has not been a mistake.

Shifting to a new management structure and enhancing execution

By refining the Kirin Group's CSV management, we will create a cycle that maximizes corporate value not only in the short-term but also in the medium- and long-term by solving social issues and reinvesting the cash obtained as economic value in further growth. We will strive to maximize corporate value by achieving sustainable growth as a company while contributing to the sustainability of society.

We will continue to meet the expectations of our investors by taking steps to become a global leader in CSV. We look forward to your continued support.