Financial Overview First Half of Fiscal 2018(Fiscal Year Ending December

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Financial Overview First Half of Fiscal 2018(Fiscal Year Ending December 0 Financial Overview for the Second Quarter of the Fiscal Year Ending December 31, 2018 August 3, 2018 Akihiro Kobayashi President & Chief Operating Officer Kobayashi Pharmaceutical Co., Ltd. Table of Contents 1/58 11 Consolidated Results for the Second Quarter of the Fiscal Year Ending December 31, 2018 Forecasts for Year Ending December 2018 Returns to Shareholders Creation of Social Value through Business Activities ESG Progress of the Medium-Term Management Plan for 2017 to 2019 Investment in the Construction of New Plants under the Growth Strategy 2/58 2 Consolidated Results for the Second Quarter of the Fiscal Year Ending December 31, 2018 Consolidated Results for the Second Quarter of the 3/58 33 Fiscal Year Ending December 31, 2018 Achieved significant growth in both revenue and income 2Q FY2018 2Q FY2017 (Jan. to Jun. 2018) (Jan. to Jun. 2017) Amount Margin Amount Difference Percentage (million yen) (%) (million yen) (million yen) (%) Net sales 72,678 - 67,307 5,371 108.0% Operating 11,602 16.0% 10,363 1,239 112.0% income Ordinary 11,533 15.9% 10,244 1,289 112.6% income Net income 7,629 10.5% 7,037 592 108.4% EPS 96.58 yen - 89.44 yen 7.14 yen 108.0% Highlights of Consolidated Results [Net sales] 4/58 44 <Increases/decreases in net sales (change from the comparable period in 2017)> (1) Increased revenues from overseas business (+1.7 billion yen) (2) Contribution of new products (+3.1 billion yen) (3) Increase in inbound demand (+1.9 billion yen) (4) Growth in direct marketing business (+0.1 Increases billion yen) Year-on-year (5) Decrease in the return of Kiribai’s body change warmers (+0.4 billion yen) 108.0% (1) Decrease in sales of existing products in Japan (-1.9 billion yen) Decreases Highlights of Consolidated Results [Operating income] 5/58 55 Assisted growth by actively investing in advertisements and achieved a sharp increase in income. Year-on-year (Unit: 100 million yen) change 112.0% +6 +39 +1 -2 -6 116 -10 103 -7 -1 -3 -4 - - - Factor for increase - - - Factor for decrease Production costs SGA expenses Loss on Loss disposal expenses Advertising Other costs Other of of inventory expenses Operating Operating income for income for income Price increase Sales increase R&D expenses Cost reduction Cost Other expenses Other Personnel costs Personnel Sales promotion Sales Jan. to 2017Jun. Jan. to 2018Jun. Segment Results 6/58 66 The three major businesses (Domestic Consumer Products, Overseas Consumer Products, and Direct Marketing Businesses) achieved sales increases. Domestic Consumer Products Business Overseas Consumer Direct Marketing (Sales at stores in Japan and Products Business Business Kiribai Chemical) Year-on- Year-on- Year-on- Amount Amount Amount year year year (million yen) (million yen) (million yen) change (%) change (%) change (%) 57,382 106.4% Net sales 9,646 122.0% 5,109 103.4% *55,715 *105.8% Operating 10,985 110.3% Comparable 154 271.1% 76 period in 2017 income *11,324 *109.3% -67 * Net income and operating income excluding Kiribai Chemical 7/58 7 Domestic Consumer Products Business (Sales at stores in Japan and Kiribai Chemical) Performance of Domestic Business 8/58 88 Net sales : 57.3 billion yen (106.4% year on year) Operating income: 10.9 billion yen (110.3% year on year) (100 million yen) <Net sales> (100 million yen)<Operating income> (%) 600 573 120 Operating income 30 539 Operating margin 109 99 400 80 20 18.5% 19.1% 200 40 10 0 0 0 Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Sales by Business Category 9/58 99 Healthcare and household products and body warmers achieved sales increases. 2nd Quarter 2nd Quarter FY2017 FY2018 (Jan. to Jun. 2017) (Jan. to Jun. 2018) Amount Amount Difference Percentage (million yen) (million yen) (million yen) (%) Healthcare products 29,329 27,483 1,845 106.7% Household products 24,005 22,680 1,324 105.8% Skin care products 2,959 2,983 -24 99.2% Body warmers 1,088 768 319 141.7% Total 57,382 53,915 3,466 106.4% Inbound Demand 10/581010 Inbound demand is estimated to be 5.2 billion yen. In addition to OTC drugs, demand for household products expanded. <Estimated inbound demand> “Twelve Supreme Drugs You Must Buy (100 million yen) 52 When You Visit Japan” Source: Sofu (Chinese social media) (Oct. 17, 2014) 33 25 19 Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. 2015 2016 2017 2018 Pharmaceuticals Supplements Household products 11/5811 Overseas Consumer Products Business Performance of Overseas Business 12/581212 Sales at stores and sales via EC expanded sharply in mainland China. Net sales : 9.6 billion yen (122.0% year on year) Operating income: 0.1 billion yen (271.1% year on year) (100 million yen) <Net sales> (%) 120 20 Net sales Overseas sales ratio 96 15 79 80 11.8% 13.3% 10 40 5 0 0 Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. 2014 2015 2016 2017 2018 13/5813 Direct Marketing Business Performance of Direct Marketing Business 14/581414 Supplements and skin care products sold well. Net sales : 5.1 billion yen (103.4% year on year) Operating income: 0.07 billion yen (an operating loss of 0.06 billion yen in the comparable period in 2017) (100 million yen) <Net sales> Supplements 60 51 49 Year-on-year 40 change 103% Skin care products 20 Year-on-year change 0 Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. Jan. to Jun. 106% 2014 2015 2016 2017 2018 15/5815 Forecasts for Consolidated Results for Year Ending December 2018 Forecasts for Consolidated Results for 16/581616 Year Ending December 2018 The Company aims to achieve the 21st consecutive term of growth with increased net sales and increased operating income. Medium-term Management FY2018 forecasts FY2017 results Plan for 2017–2019 (announced on November 1, (Jan. to Dec. 2018) (Jan. to Dec. 2017) 2016) Amount Margin Amount Percentage Amount (million yen) (%) (million yen) (%) (million yen) Net sales 163,000 - 156,761 104.0% 165,000 Operating 23,700 14.5% 22,925 103.4% income 23,000 Ordinary 24,800 15.2% 24,191 102.5% income - Net income 17,000 10.4% 15,863 107.2% 17,000 EPS 215.33 yen - 201.31 yen 107.0% - ROE - - 10.7% - Over 10.0% 17/5817 Returns to Shareholders Changes in Dividend Payment 18/581818 The Company increases its interim dividend from 30 yen to 31 yen and plans to pay 61 yen for the full year. The aim is to achieve an increase in dividend payment for 20 consecutive terms in FY2018. (Yen) Interim dividend: 31 yen (to be paid in Sep. 2018) (%) 70 40 Year-end dividend: 30 yen (to be paid in Mar. 2019) 61 Dividend amount 60 58 Dividend pay-out ratio 30 50 40 28.3% 20 30 20 10 10 0 0 Mar. 1999 'Dec. 2018 (Forecast) 19/5819 Creation of Social Value through Business Activities Creation of Social Value 20/582020 [Creation of value for each customer] Solve customers’ problems related to their living and health They must endure the problems unless the Kobayashi Pharmaceutical Group develops and markets products. [Leading to the creation of social value] The Kobayashi Pharmaceutical Group will contribute to the solution of societal problems lying behind customers’ problems. Creation of Social Value 21/582121 Solution of troubles Creation of Social Value Alleviating symptoms of “The medicine has freed me menopausal disorders from anxiety and worry.” “The medicine has enabled Abrupt perspiration me to live vigorously and Irritation positively.” “The medicine has enabled Languid me to concentrate on my Stiff shoulders and job without worry.” headache Helping women to play an active role. 22/5822 ESG Efforts (1) Realizing growth 23/582323 A superior delegates tasks to his/her subordinate and periodically tells him/her, “You have grown on this point.” While talking with a superior, a subordinate prepares his/her future goals and action plan to achieve the goals. A subordinate looks back on what he/she has achieved, and a A subordinate carries superior tells his/her out his/her action plan. subordinate what has changed. A superior helps his/her Visualize growth = Realize growth subordinate. Together with a superior, a subordinate checks the progress of his/her action plan and revises the plan as necessary. Efforts (1) Realizing growth 24/582424 The Company compiles tips for dialogue with subordinates and distributes a collection of tips to superiors, since there are many superiors that are not familiar with dialogue with subordinates. For superiors Five tips for dialogue with a subordinate Always prepare to talk about growth with a Observe a subordinate’s behavior and Tip No. 1: subordinate. statements. Sincerely tell both good things and bad things to each Begin with an exchange of opinions by telling Tip No. 2: other. facts objectively. Tip No. 3: Let a subordinate express his/her opinion in his/her Don’t jump to a conclusion, since there are own words. always differences and gaps in thinking. Tip No. 4: Accept subordinate’s idea to execute his/her plan. Increase choices by pooling ideas together. Tip No. 5: Tell a subordinate what you expect him/her to achieve. Express in words the desires and thinking you want to convey as a superior.
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