Financial Overview for Fiscal Year ended December 2017

Transcription

1 0 Financial Overview for Fiscal Year ended December 2017 February 6, 2018 Akihiro Kobayashi President & Chief Operating Officer Kobayashi Pharmaceutical Co., Ltd.

2 Table of Contents 1/37 11 Consolidated Results for Fiscal Year Ended December 31, 2017 Forecasts for Year Ending December 2018 Returns to Shareholders Progress of the Medium-Term Management Plan for 2017 to 2019 New Growth Investments Activities for ESG

3 2/37 2 Consolidated Results for Fiscal Year Ended December 31, 2017

4 Consolidated Results for Fiscal Year Ended December 31, /37 33 Achieved significant year-on-year growth in both revenue and income FY2017 (Jan. to Dec. 2017) Amount (million yen) Margin (%) Comparable period in 2016 (Jan. to Dec. 2016) Amount (million yen) Percentage (%) Published forecasts (published on February 1, 2017) Amount (million yen) Percentage (%) Net sales 156, , % 150, % Operating income Ordinary income 22, % 18, % 24, % 20, % 20, % 21, % Net income 15, % 15, % 15, % *Comparable period in 2016: Results for January to December 2016 were totaled for the purpose of comparison with FY2017.

5 Achieved increases in net income for 20 consecutive years 4/37 44 (100 million yen) August 2000 Listed on TSE April 1999 Listed on OSE 50 0 Mar Dec. 2017

6 Decreases Increases Highlights of Consolidated Results [Net sales] <Increases/decreases in net sales (change from the comparable period in 2016)> 5/37 55 (1) Increased revenues from overseas business (+4 billion yen) (2) Contribution of new products (+5.4 billion yen) (3) Increase in sales of existing products in Japan (+1 billion yen) (4) Increase in inbound demand (+2 billion yen) (5) Growth in direct marketing business (+0.6 billion yen) (1) Decreased sales in Other Businesses (-1.1 billion yen) * Including decreased revenues in the medical-related business (-1.4 billion yen) Year-on-year change 108.3% *Comparable period in 2016: Results for January to December 2016 were totaled for the purpose of comparison with FY2017.

7 Operating income for Jan. to Dec Sales increase Cost reduction Loss on disposal of inventory Price increase Other costs Advertising expenses Sales promotion expenses R&D expenses Physical distribution costs Other expenses Operating income for Jan. to Dec Highlights of Consolidated Results [Operating income] Assisted growth by actively investing in advertisements and achieved a sharp increase in income. (Unit: 100 million yen) /37 Year-on-year change 124.3% Factor for increase Factor for decrease Production costs SGA expenses *Comparable period in 2016: Results for January to December 2016 were totaled for the purpose of comparison with FY2017.

8 Segment Results 7/37 77 The three major businesses (Domestic Consumer Products, Overseas Consumer Products, and Direct Marketing Businesses) achieved sales increases. Domestic Consumer Products Business (Sales at stores in Japan and Kiribai Chemical) Amount (million yen) Year-on-year change (%) Overseas Consumer Products Business Amount (million yen) Year-on-year change (%) Direct Marketing Business Amount (million yen) Year-on-year change (%) Net sales 123,494 *113, % *106.6% 21, % 10, % Operating income 21,323 *20, % *117.8% % -75 Comparable period in * Net income and operating income excluding Kiribai Chemical *Comparable period in 2016: Results for January to December 2016 were totaled for the purpose of comparison with FY2017.

9 8/37 8 Domestic Consumer Products Business (Sales at stores in Japan and Kiribai Chemical)

10 Performance of Domestic Business 9/37 99 Net sales : billion yen (107.3% year on year) Operating income: 21.3billion yen (119.1% year on year) (100 million yen) 1500 <Net sales> 1,150 1,234 <Operating income> (100 million yen) (%) Operating income Operating margin % 17.3% Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec. Jan. to Dec * The results for each period are prepared using the actual results for the corresponding periods in the past.

11 Sales by Business Category Net sales increased significantly, supported by strong sales of both new and existing products. 10/ FY2017 (Jan. to Dec. 2017) Comparable period in 2016 (Jan. to Dec. 2016) Amount (million yen) Amount (million yen) Difference (million yen) Percentage (%) Healthcare products 58,127 53,494 4, % Household products 52,352 50,334 2, % Skin care products 6,047 5, % Body warmers 6,965 5,873 1, % Total 123, ,090 8, % *Comparable period in 2016: Results for January to December 2016 were totaled for the purpose of comparison with FY2017.

12 Reasons for Strong Sales Initial forecast (Year-on-year change) Reasons for strong sales 11/37 Results 111 First Half (Jan. to Jun. 2017) A significant increase in revenues cannot be expected because sales in the comparable period in 2016 were very high. In line with the projection Customer demand shifted to high value-added products Sales of new products, which were launched three to four years ago, were strong. Better than projected The increase in advertising expenses led to robust sales (especially of pharmaceutical products). Increase in inbound demand (+0.8 billion yen) Year-on-year change 108.1% In line with the projection Second Half (Jul. to Dec. 2017) An increase in revenues is expected but there are some uncertainties in body warmers and some other products. Customer demand shifted to high value-added products Sales of new products, which were launched three to four years ago, were strong. Better than projected The increase in advertising expenses led to robust sales (especially of pharmaceutical products). Year-on-year change 106.7% Strong sales of Kiribai body warmers Increase in inbound demand (+1.2 billion yen)

13 Inbound Demand 12/ Inbound demand is estimated to be 7.5 billion yen (up 2 billion yen year on year) <Estimated inbound demand> (100 million yen) "Twelve Supreme Drugs You Must Buy When You Visit Japan" Source: Sofu (Chinese social media) (Oct. 17, 2014) 19 Jan. to Dec Jan. to Dec Jan. to Dec Jan. to Dec OTC Pharmaceuticals Supplements Household products

14 Contribution of New Product Sales (excluding the Direct Marketing business) Both the initial year contribution rate and the four year contribution rate declined due to the launch of fewer new products in autumn 2016 and spring in 2017, and strong sales growth of existing products. (%) Red: Four year contribution rate Blue: Initial year contribution rate / Year ended Mar Year ended Mar Year ended Mar Year ended Mar Year ended Mar Year ended Dec (nine months) Year ended Dec. 2017

15 Values of Contribution by New Products 14/ Net sales of four-year new products* increased, supported by the development of new products (100 million yen) Red: Net sales of Four year new products Blue: Net sales of Initial year new products *Four-year new products: New products launched over the past four years Year ended Mar Year ended Mar Year ended Mar Year ended Mar Year ended Mar Year ended Dec (nine months) Year ended Dec. 2017

16 15/37 15 Overseas Consumer Products Business

17 Performance of Overseas Business 16/ Body warmers sold well in the U.S., while sales of Netsusama Sheet grew in China and Southeast Asia. Net sales : 21.7 billion yen (122.8% year on year) Operating income: 0.9 billion yen (302.4% year on year) (100 million yen) <Net sales> Net sales Overseas sales ratio (%) % 13.9% Jan. to Dec Jan. to Dec Jan. to Dec. Jan. to Dec. Jan. to Dec * The results for each period are prepared using the actual results for the corresponding periods in the past.

18 17/37 17 Direct Marketing Business

19 Performance of Direct Marketing Business 18/ A V-shaped recovery in net sales continued from the previous year thanks to active investment in advertisements. Net sales : 10.1 billion yen (106.9% year on year) Operating loss: 0.07 billion yen (an operating loss of 0.28 billion yen in the comparable period in 2016) (100 million yen) <Net sales> Supplements Skin care products Year-on-year change 105% 0 Jan. to Dec Jan. to Dec Year-on-year change 113% Jan. to Dec Jan. to Dec Jan. to Dec * The results for each period are prepared using the actual results for the corresponding periods in the past.

20 19/37 19 Forecasts for Year Ending December 2018

21 Highlights of Forecasts for Consolidated Results The Company aims to achieve the 21st consecutive term of growth with increased net sales and increased operating income. 20/ FY2018 forecasts (Jan. to Dec. 2018) Amount (million yen) Margin (%) FY2017 results (Jan. to Dec. 2017) Amount (million yen) Percentage (%) Medium-term Management Plan for (announced on November 1, 2016) Amount (million yen) Net sales 163, , % 165,000 Operating income Ordinary income 23, % 22, % 24, % 24, % 23,000 - Net income 17, % 15, % ROE % - 17,000 Over 10.0%

22 21/37 21 Returns to Shareholders

23 Mar Dec Dec forecast Changes in Dividend Payment 22/ (yen) Achieved an increase in dividend payment for 19 consecutive terms (Interim dividend 28 yen + Year-end dividend 30 yen (+4 yen increase) = Annual dividend 58 yen per share). The aim is to achieve an increase in dividend payment for 20 consecutive terms in FY2018, with an increase of 2 yen/share. Dividend amount Dividend pay-out ratio Interim dividend: 28 yen (paid in Sept. 2017) Year-end dividend: 30 yen (to be paid in March 2018) (%) % 27.9%

24 23/37 23 Progress of the Medium-Term Management Plan for 2017 to 2019

25 Outline of the Medium-Term Management Plan for 2017 to 2019 <Future goals> <Consolidated financial targets> Announced on November 1, 2016 Theme: Growth with real strength To further improve the ability of new product development and cultivation, achieve growth with real strength, and become the No. 1 company in new market creation that can solve customers problems 24/ FY2019 targets *1 Comparable period in 2016 results *2 Year on year change *3 Net sales 165 billion yen billion yen 114% Operating income 23 billion yen 18.4 billion yen 124% Net income 17 billion yen 15 billion yen 113% ROE 10% 10% - *1: The financial targets are minimum targets; the Company will aim for higher results. *2: The results of the comparable period in 2016 are the total of the results for January to December *3: Comparison to results for January to December 2016

26 Outline of the Medium-Term Management Plan for 2017 to 2019 <Outline of strategies> 25/ Promote the four growth businesses* 2. Invest in growth for the future 3. Develop and cultivate new market creator products 4. Aim to be a company where employees can feel growth * Four growth businesses: Overseas, Direct Marketing, Skincare, and Kampo

27 Outline of strategies: Promote the Four Growth Businesses Overseas business Strengthen the OTC Pharmaceuticals business mainly in North America and China. Cultivate products such as Netsusama Sheet, Anmeltz and body warmers. Direct Marketing business Develop new high-profile products that would lead to new customer acquisition. Develop brands by mixing sales at stores and by direct marketing. Skincare business Create a brand that would become the third pillar after Keshimin and Eau de Muge. Kampo business FY2019 target amount 27 billion yen FY2019 target amount 12 billion yen FY2019 target amount 9 billion yen FY2019 target amount 26/ Change from the comparable period in 2016* 150% Change from the comparable period in 2016* 126% Change from the comparable period in 2016* 167% Change from the comparable period in 2016* Continue to pursue the development of products that are easier for customers to choose, depending on their constitution and symptoms 12.5 billion yen 113% * Comparison to results for January to December 2016

28 Progress of the Four Growth Businesses 27/ FY2016 results FY2017 results FY2019 target Overseas business 17.7 billion yen 21.7 billion yen Progress rate 44% 27 billion yen Direct marketing business 9.5 billion yen 10.1 billion yen Progress rate 27% 12 billion yen Skincare business 5.4 billion yen 6 billion yen Progress rate 17% 9 billion yen Kampo business 11.2 billion yen 12.7 billion yen Progress rate 124% 12.5 billion yen Achieved the target * The progress rates are based on the results for Jan. to Dec. 2016, compared with the target values for FY2019.

29 Four Growth Businesses (Overseas Business) 28/ What the Company is striving to achieve: FY2019 target amount FY2017 results progress rate Evaluation Strengthen product marketing, such as body warmers and Netsusama Sheet in North America, China, and Southeast Asia. Strengthen the OTC Pharmaceuticals business. 27 billion yen 21.7 billion yen 44% [Actions in the U.S.] Strengthen the OTC Pharmaceuticals business Renewed the package for MAX FREEZE in Nov Introduced MAX HEAT (Anmeltz in the U.S.) to the U.S. market in fiscal Package renewal New Product Before renewal After renewal

30 Four Growth Businesses (Overseas Business) [Actions in China] Expand sales Brand recognition of Kobayashi Pharmaceutical is high; deliverability has been strengthened. Sales increased significantly in both sales at stores and sales via EC. Brand recognition of Kobayashi Pharmaceutical Brand recognition of Kobayashi Pharmaceutical is very high compared to other Japanese competitors. Don t know the brand 16% Have heard of the brand name 36% Know the Kobayashi brand very well 48% Quantitative survey in May 2017 Males and females in the age bracket 20 to 39, monthly income of 6,000 RMB or higher Six cities (Beijing, Shanghai, Guangzhou, Chengdu, Hangzhou, and Suzhou) N=1,248 Sales at stores (Jan. to Dec. 2017) Year-on-year change 150% Sales via EC (Jan. to Dec. 2017) Year-on-year change 163% EC website 29/

31 Sales at stores Direct marketing Four Growth Businesses (Direct Marketing Business) What the Company is striving to achieve: Develop brands by mixing sales at stores and by direct marketing (example: Salacia) FY2019 target amount 12 billion yen FY2017 results progress rate 30/37 Evaluation 10.1 billion yen 27% 3030 Cultivate the Salacia brand both by direct marketing and at stores TV CM Brand website Academic study Symposium, etc. Expanded sales both by direct marketing and at stores Net sales: 0.3 billion yen (Year-on-year change 605%) Net sales: 0.2 billion yen (Year-on-year change 205%)

32 Four Growth Businesses (Skincare Business) What the Company is striving to achieve: Cultivate Madame Juju and Bioil brands Develop and cultivate the brands and establish their unique market positions FY2019 target amount 9 billion yen Third pillar FY2017 results progress rate 31/37 Evaluation 6 billion yen 17% Fourth pillar 3131 First pillar Second pillar Keshimin Eau de Muge Madame Juju Bioil

33 Four Growth Businesses (Kampo Business) 32/ What the Company is striving to achieve: FY2019 target amount FY2017 results progress rate Evaluation The Company continues the development and marketing of new products under an easy-to-understand concept billion yen 12.7 billion yen 124% Achieved the target New products The Company launched three new products in Existing products Sales of existing products expanded sharply thanks to advertisements under an easy-to-understand concept.

34 Growth of Domestic Business 33/ What the Company is striving to achieve: Health care products Expansion of the medicated skin care products market Brand development in cooperation with the direct marketing business Efforts to develop switch OTC pharmaceuticals Expansion of the product line of foods with function claims Progress toward the target Household products Launch of high value-added products Development of healthcareconscious household products Attempts to create new markets

35 34/37 34 New Growth Investments

36 Invest in Growth for the Future 35/ Medium-Term Management Plan for 2017 to 2019 Invest in Growth for the Future Announced in November 2016 M&A Items R&D and new businesses Investment budget ( ) 30 billion yen 3 billion yen Schedule new large-scale investments in view of the global development of OTC drugs Challenges Increasing production capacity to respond to the expected increase in demand Manufacturing in compliance with global standards (PIC/S) Expansion of the brands to overseas markets, and actions to cope with the global risks Capacity shortage in the current Central R&D Laboratory Actions Build a new production plant Trade mark management in individual countries, security control and other measures Relocation of the Central R&D Laboratory Maximum investment budget (within four to seven years) 30 billion yen * These proposed investments are still in the review stage and not final decisions.

37 36/37 36 Activities for ESG

38 Activities for ESG 37/ E S G Strengthen the functions of the Group Environment Committee Strengthen the PDCA cycle for energy saving Social activities Develop human resources Visualize the growth of employees Establish an assessment council of the Board of Directors (Three outside directors and two outside corporate auditors)

39 <Note> Of the Company s current business performance, plans and strategies included in this material, items that are not historical facts are outlooks on future performance, which are based on the judgment of the Company s management according to currently available information. Therefore, please note that actual performance may differ significantly from the future outlook described in this material due to changes in various factors. 38