Kao Corporation · TSE:4452
Kao — Kao Corp Ord — FY2024 Earnings Presentation
65 slides from Kao's earnings presentation, Feb 6, 2025
Slide 1: Consolidated Financial Results for the Year Ended December 31, 2024 and FY2025 Forecast
Consolidated Financial Results for the Year Ended December 31, 2024 and FY2025 Forecast Kao Corporation February 6, 2025
Slide 2: Disclaimer
Disclaimer Forward-looking statements such as earnings forecasts and other projections contained in this release are based on information available at this time and assumptions that management believes to be reasonable, and do not constitute guarantees of future performance. Actual results may diffe
Slide 3: Contents
Contents 01 Key Highlights 02 Financial Results for the Year Ended December 31, 2024 03 FY2025 Forecast 04 Significant Progress on the K27 Strategy 05 Appendix
Slide 4: Key Highlights
Key Highlights • In FY2024, the Kao Group took a vigorous step toward achieving K27 by posting results that exceeded its plans. ［Background］ 1. Restored profit through structural reforms Reformed earning power Further advanced 2. Improved competitive advantages for core brands (Effects of structural
Slide 5: K27 Progress
K27 Progress ROIC (Estimate) Operating income Operating Income (Estimate) （Billion yen） EVA Record-high ROIC operating income over （Billion yen） （%） 211.7 billion yen 11% or more 11% 200.0 Growth strategy ROIC 9.2% +40.0 billion yen 70.0 billion 70 70.0 +α 160.0 7.8% yen or more +95.0 billion Reform
Slide 6: Financial Results for the Year Ended December 31, 2024
02 Financial Results for the Year Ended December 31, 2024
Slide 7: Highlights of Consolidated Financial Results
Highlights of Consolidated Financial Results • The gross margin increased 1.9 pts and operating income increased 31.9 billion yen (+27.8%) to 146.6 billion yen due to contributions from H&PC products in Japan and the Chemicals Business, in addition to the effects of structural reforms. Billion yen F
Slide 8: Highlights of Q4 Consolidated Financial Results (Oct.-Dec.)
Highlights of Q4 Consolidated Financial Results (Oct.-Dec.) • The gross margin increased 0.1 pts and operating income increased 1.7 billion yen (+3.8%) to 45.6 billion. Billion yen FY2023 Q4 FY2024 Q4 Growth % Change Net sales 406.7 438.4 +7.8 +31.7 Effect of currency translation +1.3 +5.2 Like-for-
Slide 9: Key Points of FY2024 Results
Key Points of FY2024 Results Net sales 1,628.4 billion yen Operating income 146.6 billion yen +3.3% on a like-for-like basis (+31.9 billion yen; +27.8%*); margin 9.0% FY2024 Financial Results Profit growth • Fabric and Home Care sales increased 6.8% and the operating margin rose to 18.2% due to fast
Slide 10: Consolidated Net Sales by Segment/Geographic Region in FY2024
Consolidated Net Sales by Segment/Geographic Region in FY2024 • Achieved higher-than-market growth in major categories as the consumer products market in Japan grew. • Net sales of the Consumer Products Business in Asia, excluding China decreased 2.1% due to a focus on improving profitability. Billi
Slide 11: Consolidated Results by Segment in FY2024
Consolidated Results by Segment in FY2024 • The Fabric & Home Care, Health & Beauty Care and Chemical Business achieved both price and sales volume increases. • The operating margin of the Chemical Business increased 1.8 pts to 8.5% due to promotion of tertiary amines and other high- value-added pro
Slide 12: Q4 Consolidated Net Sales by Segment/Geographic Region (Oct.-Dec.)
Q4 Consolidated Net Sales by Segment/Geographic Region (Oct.-Dec.) • Achieved higher-than-market growth in major categories as the consumer products market in Japan grew. • Sales outpaced the plan, driven by factors including sales expansion for high-value-added products of the Chemical Business. Bi
Slide 13: Q4 Consolidated Results by Segment (Oct.-Dec.)
Q4 Consolidated Results by Segment (Oct.-Dec.) • The operating margin of the Chemical Business increased 2.3 pts to 9.2% due to promotion of tertiary amines and other high- value-added products, in addition to market recovery. Net sales Operating income Billion yen Like-for-like Operating Q4 Q4 Chan
Slide 14: Analysis of Change in Operating Income in FY2024
Analysis of Change in Operating Income in FY2024 (Year-on-Year Change) • In Household and Personal Care, in addition to promoting high-value-added products, earning power reforms, including price revisions, productivity improvements and cost reductions, had a substantial effect, and sales volume als
Slide 15: Improvement of Profit Margin through Progress of Earning Power Reforms
Improvement of Profit Margin through Progress of Earning Power Reforms • The gross margin improved 1.9 pts year on year. • Enacted price revisions based on the promotion of high-value-added products and increased brand loyalty, and improved cost competitiveness through productivity improvements, etc
Slide 16: FY2025 Forecast
03 | FY2025 Forecast
Slide 17: FY2025 Forecast
FY2025 Forecast Billion yen FY2024 Growth %* FY2025 Forecast Growth % Change 1,628.4 +6.3 1,670.0 +2.6 +41.6 Net sales Effect of currency translation +3.0 Effect of currency translation (0.5) (9.5) Like-for-like growth +3.3 Like-for-like growth +3.1 +51.1 Operating income 146.6 +27.8 160.0 +9.1 +13.
Slide 18: Sales Forecast for FY2025
Sales Forecast for FY2025 (By Segment) (By Region) Billion yen Japan Consolidated Billion yen Consolidated Growth Like-for-like Like-for-like ％ growth％ growth％ Hygiene Living Care Business 405.0 +0.1 546.0 +0.2 Japan 939.0 +1.8 Health Beauty Care Business 222.0 +4.7 448.0 +6.9 Asia 323.0 +4.5 Cosmet
Slide 19: Forecast of Factors in Operating Income in FY2025
Forecast of Factors in Operating Income in FY2025 (vs. FY2024 Results) • Expecting an approximately 13.0 billion yen increase in income3 from cost reductions, productivity improvements and other earning power reforms. • Price adjustments will continue in response to rising raw material prices for ho
Slide 20: Raw Material Prices Outlook
Raw Material Prices Outlook (Global Consumer Care Business; vs. FY2024) • Substantial impact from rising raw material prices, particularly for fats and oils, is expected in the first half. Personnel expenses are expected to rise throughout the year. Natural fats and oils Petrochemical raw meterials
Slide 21: Promoting ROIC Management
Promoting ROIC Management (%) 44.0 [Gross margin] 42.0 40.4 40.0 39.2 37.3 YoY+1.9pts 38.0 (CP +2.0pts) 35.4 36.0 ➢ Aim to increase ROIC by managing invested capital and improving gross 34.0 margin by +1pts each year in the GC business. Gross margin for FY2023 represents “core gross margin.” 32.0 FY
Slide 22: Creating Capital for the Next Stage of Growth - ROIC Management
Creating Capital for the Next Stage of Growth - ROIC Management - • Extending the value lifespan of products and reducing the number of development SKUs by increasing brand loyalty. • Management resources are generated by increasing the speed of product development in addition to reducing the number
Slide 23: Improvement Results and Targets for Capital Efficiency and Profitability by Business Area
FY2024 Improvement Results (vs. FY2023 Results) and Targets for Capital Efficiency and Profitability by Business Area ・ In FY2024, ROIC improved substantially in the stable earnings and business transformation areas. ・ The Growth driver area was impacted by Cosmetics in China, but growth is expected
Slide 24: Strategies by Area for FY2025
Strategies by Area for FY2025 • Deploy cash generated in the stable earnings area into the growth driver area for global growth. • Business transformation will simultaneously improve profitability and capital efficiency, aiming for an early shift to stable earnings and growth drivers. Business Stabl
Slide 25: K27 Progress
K27 Progress ROIC (Estimate) Operating income Operating Income (Estimate) （Billion yen） EVA Record-high ROIC operating income over （Billion yen） （%） 211.7 billion yen 11% or more 11% 200.0 Growth strategy ROIC 9.2% +40.0 billion yen 70.0 billion 70 70.0 +α 160.0 7.8% yen or more +95.0 billion Reform
Slide 26: Significant Progress on the K27 Strategy
04 Significant Progress on the K27 Strategy
Slide 27: Steady Progress in Achieving the K27 targets
Steady Progress in Achieving the K27 targets • The Kao group has exceeded the FY2024 targets and remains on track to deliver on its commitments. • The Kao group has made excellent progress on its four targets that have been set for improving capital efficiency and profitability, and for achieving gl
Slide 28: Kao Group Mid-term Plan K27
Kao Group Mid-term Plan K27 Vision Saving future lives 【K27 Basic Policy】 1. Become an essential company in a sustainable world 2. Transform to build robust business through investment 3. Maximize the power and potential of employees Strategies for achieving K27 Global Sharp Top human Build business
Slide 29: Three Strategic Areas Enabling Global Growth
Three Strategic Areas Enabling Global Growth Global growth Stable Earnings Growth Driver Business Transformation Fabric Home Care Skin Care Sanitary (Diapers, Sanitary napkins) →Aim to shift to “Stable Earnings” Personal Health Chemical 2024 Transfer of pet care business 2024 Transfer of beverage bu
Slide 30: Stable Earnings: Expanded Leadership Position in Fabric Home Care Business in Japan
Stable Earnings: Expanded Leadership Position in the Fabric Home Care Business in Japan Stable Growth Business Earnings Driver Transformation • Profitability improved significantly from strategic price increases and promotion of high-value-added products in response to rising raw material prices, fo
Slide 31: Data-driven Management to Enhance Profitability and Capital Efficiency
Data-driven Management to Enhance Profitability and Capital Efficiency Stable Growth Business Earnings Driver Transformation Outcomes ： Approx. 24.0 billion yen reduction in inventory 1 Approx. 4.8% improvement Approx. 70.0 billion yen in ROIC 2 in strategic price increases2 Approx. 13% improvement
Slide 32: A Profitable Growth Strategy Based on High-speed Yoki-monozukuri
A Profitable Growth Strategy Based on “High-speed Yoki-monozukuri” Stable Growth Business Earnings Driver Transformation Improve unit price and create new customers with new products Innovation High-value-added products that create a new playing field Creativity High-speed Effectiveness Eco-friendly
Slide 33: Business Transformation: Reorganizing Businesses to Enhance Efficiency
Business Transformation: Reorganizing Businesses to Enhance Efficiency Stable Growth Business Earnings Driver Transformation • To enhance ROIC, Kao transferred its underperforming pet care and beverage businesses and ended local production of baby diapers in China. • Reforming the Sanitary business,
Slide 34: Growth Driver: Delivering Growth through Global Sharp Top Strategy
Growth Driver: Delivering Growth through Global Sharp Top Strategy • The Skin care, Chemicals and Cosmetics business, prime examples of the Global Sharp Top strategy, saw significant sales growth in targeted areas and customer segments. Stable Growth Business Earnings Driver Transformation Skin Care
Slide 35: Kao's Global Growth Strategy - Global Sharp Top Strategy
Kao’s Global Growth Strategy Stable Growth Business -Global Sharp Top Strategy- Earnings Driver Transformation [Definition] Contribute as global No. 1 with leading-edge solutions and brands that address critical needs in specific areas and customer segments. [Rationale] Given the level of severity a
Slide 36: Global Sharp Top in the Chemical Business
Global Sharp Top in the Chemical Business Stable Earnings Growth Driver Business Transformation -Exclusive Uniqueness and Social Significance- Global Sharp Top Global Top Global Sharp Sharp Top Sales Sales Sales Sales CAGR* CAGR* CAGR* CAGR* 4％ 4％ 10％ 6％ Current Expanding sharply Executing an exclus
Slide 37: Global Sharp Top in the Global Consumer Care Business
Global Sharp Top in the Global Consumer Care Business Stable Earnings Growth Driver Business Transformation • Given the level of severity and importance of solving today's rapidly evolving social challenges, Kao is delivering critical market solutions that will generate meaningful and sustainable gl
Slide 38: Global Sharp Top in the Skin Protection Business
Global Sharp Top in the Skin Protection Business Stable Earnings Growth Driver Business Transformation • Capture global demand, particularly for UV care, which is growing due to global warming, with its precision protective coating technology that excels in durability. • Strengthen regulatory compli
Slide 39: Beauty Care Business Marketing DX
Beauty Care* Business Marketing DX Stable Earnings Growth Driver Business Transformation • Sharp-top measures that use fast PDCA cycles in exclusive chains Expand and and areas to derive successful patterns and expand with highly improve from learning successful strategies. Scaling up • Continuously
Slide 40: Achievements of Marketing DX - Examples of Beauty Care
Stable Growth Business Achievements of Marketing DX -Examples of Beauty Care- Earnings Driver Transformation A makeup experience in which you can Realization of continuous, and discover a new you high-speed PDCA Digital space for co- Quickly detect customer evaluations of test creation with hard- ma
Slide 41: Global Sharp Top in the Cosmetics Business
Global Sharp Top in the Cosmetics Business Stable Earnings Growth Driver Business Transformation • Global expansion of six highly distinctive brands through the Sharp Top strategy. (FY24→27) CAGR Target for sales: +10% ＊Market CAGR +5%* FY24→27 Sales CAGR Crafting a luxurious lifestyle +9％ Fusion of
Slide 42: Build Businesses through Co-creation with Partners
Build Businesses through Co-creation with Partners Business expansion through collaboration with highly specialized companies Co-creation with global customers • Joint development with Panasonic Corporation • Collaboration with C.P. (Charoen Pokphand) Group, a major Thai conglomerate Pioneering acti
Slide 43: Key Highlights
Key Highlights • In FY2024, the Kao Group took a vigorous step toward achieving K27 by posting results that exceeded its plans. ［Background］ 1. Restored profit through structural reforms Reformed earning power Further advanced 2. Improved competitive advantages for core brands (Effects of structural
Slide 44: Appendix
05 | Appendix
Slide 45: Consumer Products Market in Japan
Consumer Products Market in Japan 87 categories SRI+1 26 categories SLI2 Growth of H&PC Market Market growth rate in value terms Growth of Cosmetics Market Market growth rate in value terms (%) Continuing year-on-year growth from last year due to promotion of (%) Increases in nearly all categories d
Slide 46: Kao's Main Markets outside Japan
Kao’s Main Markets outside Japan Asia China (including e-commerce) Indonesia Thailand vs. previous year 24 Q1 24 Q2 24 Q3 24 Q4 24 Q1 24 Q2 24 Q3 24 Q4 24 Q1 24 Q2 24 Q3 24 Q4 Baby diapers - - - - 95 94 97 98 89 87 89 81 Sanitary napkins and panty liners 102 103 106 106 110 110 109 108 103 102 103 1
Slide 47: Consumer Products Business in FY2024
Consumer Products Business in FY2024 Operating Billion yen Net sales Operating income margin % Growth Like-for- FY2023 FY2024 % like % FY2023 FY2024 Change FY2023 FY2024 Japan 781.7 823.2 +5.3 +5.3 54.6 89.0 +34.4 7.0 10.8 Asia 222.6 212.5 (4.6) (9.7) 23.2 16.7 (6.5) 10.4 7.8 Americas 126.6 139.1 +9
Slide 48: Hygiene and Living Care Business in FY2024
Hygiene and Living Care Business in FY2024 • Sales: 544.3 billion yen (+2.8%) Operating income: 75.8 billion yen (+33.9 billion yen*) Operating margin: 13.9% • Due to promotion of high-value-added products and effective deployment of marketing expenses, the brand power of Attack, CuCute, Magiclean a
Slide 49: Health and Beauty Care Business in FY2024
Health and Beauty Care Business in FY2024 • Sales: 424.0 billion yen (+4.1%) Operating income: 34.4 billion yen (-8.4 billion yen*) Operating margin: 8.1% • High-value-added Bioré products sold strongly due to effective deployment of marketing expenses. Ramped up rollout of UV care products outside
Slide 50: Life Care Business in FY2024
Life Care Business in FY2024 • Sales: 55.9 billion yen (-2.6%) Operating income: 6.3 billion yen ( +7.6 billion yen*) Operating margin: 11.3% • The operating margin increased 13.6 pts to 11.3% due to a 6.3 billion yen gain on the transfer of the beverage business. • Commercial-use hygiene product sa
Slide 51: Cosmetics Business in FY2024
Cosmetics Business in FY2024 • Sales: 244.1 billion yen (+0.0%1) Operating income: -3.7 billion yen (-9.0 billion yen2) Operating margin: -1.5% • Sales decreased as strong performance in Japan and Europe was not enough to offset the downturn in Asia. • Income was substantially impacted by the optimi
Slide 52: Chemical Business in FY2024
Chemical Business in FY2024 • Sales: 405.9 billion yen (+6.1%) Operating income: 34.6 billion yen (+9.9 billion yen*) Operating margin: 8.5% • Income increased due to higher sales in sectors that grew as a result of expanded sales of high-value-added products and improved profit margins, mainly in o
Slide 53: Use of Cash Flow and Shareholder Returns
Use of Cash Flow* and Shareholder Returns Use steadily generated cash flow effectively from an EVA and ROIC standpoint as shown below toward further development. • Investment for future development (capital expenditures, M&A, etc.) • Steady and continuous cash dividends • Share repurchases * Net cas
Slide 54: ESG Evaluations by external organizations
ESG Evaluations by external organizations As of January 2025 Kao's ESG activities which are highly rated by external organizations Evaluation by external organizations < 4 consecutive years > < 18 consecutive years > Only one in Japan Only one in Asia Only 10 companies globally Only 6 companies glob
Slide 55: Initiatives with a Focus on ESG
Initiatives with a Focus on ESG -Sustainability as the only path- Resolving Social Issues Resolving Social Issues and Expanding Business/Creating New Businesses Building a Sustainable Palm Oil Supply Chain1 New Magiclean Toilet Cleaner Offering Drives the Market • Disclosed the results of an analysi
Slide 56: Consolidated Net Sales/EBITDA/Operating Income
Consolidated Net Sales/EBITDA/Operating Income Net sales EBITDA / Operating income (Billion yen) Net sales EBITDA Operating income (Billion yen) 1,670.0 1,628.4 1,551.1 1,532.6 1,502.2 1,500 1,418.8 1,382.0 295.1 300 261.6 246.0 230.9 235.1 1,000 211.7 199.8 200 175.6 160.0 143.5 149.6 146.6 2 110.1
Slide 57: Capital Expenditures
Capital Expenditures (Billion yen) 120 Parent Subsidiaries 113.4 100 94.6 93.5 93.2 86.1 87.8 88.0 49.8 80 34.1 32.7 31.9 45.0 46.9 37.0 60 40 63.6 60.5 53.5 55.9 48.2 46.6 51.0 20 0 (FY) 57
Slide 58: ROE & EPS
ROE & EPS EPS (Yen) ROE (%) EPS ROE 19.8 ROE (%) 18.9 (Yen) (%) 18.6 20 400 17.6 14.2 300 314.3 298.3 306.7 11.6 10.5 10.8 253.4 262.3 230.6 8.9 10 200 231.9 249.7 3 183.3 185.0 4.5 100 0 0 1 2 (FY) Weighted average number of shares outstanding (Million 499.4 492.8 489.1 483.3 480.9 475.5 469.4 464.
Slide 59: Cash Dividends per Share
Cash Dividends per Share Cash Dividends per Share (Yen) 1 152154 Increase in dividends for 35th consecutive period in FY2024 148150 150 144 140 130 120 110 100 94 80 70 64 58 60 62 54 56 57 50 52 50 38 30 32 24 26 20 14 15 16 0 (FY) 1. Formally decided at the Annual General Meeting of Shareholders I
Slide 60: Shareholder Returns
Shareholder Returns (Billion yen) 150 Share Repurchases: Aggregate to 693.8 billion yen Total Dividends Amount of Share Repurchases Net Income (J-GAAP) / Net Income Attributable to Owners of The Parent (IFRS) 100 50.0 50.0 50.0 50.0 50.0 50.0 77.2 70.0 30.0 50 30.0 56.8 30.0 36.7 29.5 28.6 5.0 0 1 2
Slide 61: EVA
EVA (Billion yen) Cost of Capital EVA 150 93.5 90.4 87.4 73.4 62.3 70.6 58.6 45.1 33.2 100 47.6 39.8 14.7 14.9 32.4 77.8 69.9 73.5 74.1 50 59.1 62.7 63.8 66.5 55.1 54.8 56.4 49.6 50.8 53.3 0 2 1 2 3 2012 2013 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (FY) 1. Fiscal year end changed
Slide 62: Cash Flows
Cash Flows Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Cash and cash equivalents at the end of the year (Billion yen) 400.0 353.2 336.1 357.7 291.7 289.7 268.2 244.5 214.7 202.5 201.6 200.0 175.5 130.9 0.0 (45.9) (80.0) (
Slide 63: Business Segments and Main Product Categories
Business Segments and Main Product Categories ⚫ Laundry detergents FY2024 Net sales: 544.3 billion yen ⚫ Fabric treatments Hygiene and ⚫ Kitchen cleaning products Like-for-like growth1: +2.8 % Living Care ⚫ House cleaning products ⚫ Paper-based cleaning products Share of net sales: 33.5 % Business ⚫
Slide 64: Changes in Reportable Segments (From January 2025)
Changes in Reportable Segments (From January 2025) To further ramp up global growth, the Kao Group restructured its organization and functions as of January 2025. 【Changes of Names】 • The “Consumer Products Business” has been renamed as the “Global Consumer Care Business.” • The “Hygiene and Living
Slide 65: KAO
KAO Kirei-Making Life Beautiful