MSG Maker Ajinomoto May Raise Japan Prices as Raw-Material Costs Increase

Ajinomoto Co., the Japanese seasonings maker that first sold monosodium glutamate, may raise prices in Japan after raw-material costs increased.

“We may have to pass on higher costs” of wheat and coffee, Keiichi Yokoyama, a senior vice president, told reporters in Tokyo today. “Higher raw material costs and a stronger yen affected earnings by more than 11 billion yen ($132 million) in the fiscal first half.”

Ajinomoto, which began selling monosodium glutamate, or MSG, as a food flavoring a century ago, lost 30 percent of its market value in the five years ended in December as earnings fell. Deflation in the world’s second-biggest economy has prevented some Japanese companies from raising prices. Consumer prices excluding fresh food have fallen for 21 straight months.

“All food-related companies face the same problem, but it’s quite difficult for them to increase prices since deflation still continues in Japan,” Naozumi Nishimura, an analyst at TIW Inc. in Tokyo, said. “The company must consider further mergers and acquisitions outside Japan, making best use of the strong yen,” said Nishimura, who rates Ajinomoto stock “positive.”

Ajinomoto rose 1.6 percent to 884 yen at the 3 p.m. close of trading in Tokyo, trimming its loss over the past 12 months to 4.1 percent.

Looking Overseas

The Tokyo-based food and seasonings maker hasn’t announced any acquisitions since saying in 2009 it may spend more than 100 billion yen over three years to expand overseas.

Producer prices in Japan advanced 0.9 percent in November from a year earlier, matching the biggest increase since December 2008, a sign that companies are coming under more pressure to raise prices to preserve margins.

Still, Zensho Co., a nationwide beef-bowl restaurant chain, last month lowered prices by 11 percent to increase sales, its third reduction in 2010.

Ajinomoto has said it seeks to expand outside Japan as a shrinking population dims prospects in its home market., The company, which also makes beverages and processed food, aims for overseas sales to make up 40 percent of total revenue by 2016, Chief Executive Officer Masatoshi Ito said in 2009. About 33 percent of sales came from outside Japan as of September.

Profit in the six months ended September dropped 19 percent to 17.6 billion yen while sales rose 5.3 percent to 616 billion yen. Ajinomoto’s net income was 16.7 billion in the fiscal year ended March 2010, 63 percent lower than in the 12 months ended March 2005.

The food and seasonings maker forecast net income to rise 44 percent to 24 billion yen in the year ending March.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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