Kao Corporation · TSE:4452
Kao — Kao Corp Ord — FY2023 Earnings Presentation
58 slides from Kao's earnings presentation, Feb 7, 2024
Slide 1: Consolidated Financial Results for the Year Ended December 31, 2023 and FY2024 Forecast
Consolidated Financial Results for the Year Ended December 31, 2023 and FY2024 Forecast Kao Corporation February 7, 2024
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, 2023 03 FY2024 Forecast 04 Summary of Structural Reforms and ROIC by Business 05 Measures and Progress toward Achieving Mid-term Plan K27 -Global Sharp Top Strategy- 06 Appendix
Slide 4: Key Highlights
Key Highlights ⚫ In FY2023, the Kao Group promoted business portfolio management and completed structural reforms roughly on schedule. (Decisive reorganization of baby diaper business, concluded transfer agreements for tea-catechin beverage Healthya and Nyan Tomo Clean Toilet, structural reform of h
Slide 5: Financial Results for the Year Ended December 31, 2023
02 Financial Results for the Year Ended December 31, 2023
Slide 6: Highlights of Consolidated Financial Results
Highlights of Consolidated Financial Results Billion yen FY2022 FY2023 Growth % Change Net sales 1,551.1 1,532.6 (1.2) (18.5) Effect of currency translation +2.6 * +40.0 Like-for-like growth (3.8) (58.5) Core operating income 110.1 114.7 +4.2 +4.6 Core operating margin 7.1% 7.5% - - Operating income
Slide 7: Key Points of Results FY2023, a Year of Laying the Groundwork for a Counteroffensive
Key Points of Results FY2023, a Year of Laying the Groundwork for a Counteroffensive Net sales 1,532.6 billion yen Core operating income 114.7 billion yen -3.8% on a like-for-like basis (+4.6 billion yen); margin 7.5% FY2023 Financial Results • The Household and Personal Care Business in Japan was d
Slide 8: Consolidated Net Sales by Segment/Geographic Region in FY2023
Consolidated Net Sales by Segment/Geographic Region in FY2023 Billion yen Japan Asia Americas Europe Consolidated FY2023 300.3 45.1 3.8 - 349.1 Fabric & Home Care Like-for-like % +2.5 (6.2) +0.9 - +1.3 FY2023 80.4 92.9 0.1 - 173.4 Sanitary Like-for-like % +3.9 (7.7) (23.9) - (2.6) Hygiene and Living
Slide 9: Consolidated Results by Segment in FY2023
Consolidated Results by Segment in FY2023 Profit improved substantially in the Household and Personal Care Business. Conducted structural reforms for businesses with issues. Net sales Core operating income Billion yen Like-for-like % Core FY2023 FY2023 Change operating By Volume % By Price % margin
Slide 10: Breakdown of Year-on-Year Changes in Operating Income during Q3YTD and Q4
Breakdown of Year-on-Year Changes in Operating Income during Q3YTD (Jan.-Sep.) and Q4 (Oct.-Dec.) (Billion yen) Q3 FY2022 FY2023 Including Total Core YTD Operating Raw material Price increases Volume Cost Reduction Operating FY2023 Income Operating H&PC (7.0) +24.0 (5.5) (TCR) +9.0 Income Income Cos
Slide 11: Analysis of Change in Operating Income in FY2023
Analysis of Change in Operating Income in FY2023 (Year-on-Year Change) (Billion yen) Including Total Cost Reduction FY2023 Full FY2022 Core Operating (TCR) +13.0 year Operating Income Income Raw material Price increases Volume FY2023 H&PC (4.0) +35.0 (3.5) Operating Cosmetics (1.0) +1.5 (7.0) Income
Slide 12: Changes in Raw Material Prices and Effects of Price Increases
Changes in Raw Material Prices and Effects of Price Increases (Consumer Products Business) • Nearly offset the cumulative increase in raw material prices starting from 2021 through 2022- 2023. • Shift to profit increase (vs. 2022) starting in 2023 Q2 from ongoing price increases. 【Image】 Changes in
Slide 13: FY2024 Forecast
03 | FY2024 Forecast
Slide 14: FY2024 Forecast
FY2024 Forecast Billion yen FY2023 Growth % FY2024 Forecast Growth % Change 1,532.6 (1.2) 1,580.0 +3.1 +47.4 Net sales +2.6 Effect of currency translation* (0.5) (8.0) (3.8) Like-for-like growth +3.6 +55.4 Core operating income 114.7 +4.2 130.0 +13.3 +15.3 Core operating margin 7.5% - 8.2% - - Opera
Slide 15: Sales Forecast for FY2024
Sales Forecast for FY2024 Billion yen Japan Consolidated Billion yen Consolidated Growth Like-for-like Like-for-like ％ growth％ growth％ Hygiene and Living Care Business 372.0 (2.3) 516.0 (0.7) Japan 883.0 +0.7 Health and Beauty Care Business 211.0 +2.8 422.0 +8.1 Asia 316.0 +4.9 Life Care Business 42
Slide 16: Analysis of Change in Operating Income (2023 Results vs. 2024 Forecast)
Analysis of Change in Operating Income (2023 Results vs. 2024 Forecast) (Billion yen) FY2023 FY2024 Core Operating Operating Income Income Raw material Strategic price Volume Marginal SG&A Impact of prices in CP increases in CP in CP* income in expenses currency Chemical translation and others * Inc
Slide 17: Summary of Structural Reforms and ROIC by Business
04 Summary of Structural Reforms and ROIC by Business
Slide 18: Implementation as Planned of Structural Reforms for K27
Implementation as Planned of Structural Reforms for “K27” (Billion yen) (Billion yen) Profit improvement effect by FY2023 FY2024 structural reforms3 1. Conduct a drastic strategic review and FY2024 After FY2025 reorganization of inefficient businesses • Baby diaper business (Japan/China) • Streamlin
Slide 19: Envisioned ROIC Improvement by Business
Envisioned ROIC Improvement by Business (FY2023 Results ⇒ FY2024 Forecast) Aim to prioritize investment in growth businesses and make improvements for a sound portfolio by strengthening ROIC by business. Business Growth Driver Stable Earnings Transformation High Skin care ✓ Acquisition of Bondi Sand
Slide 20: Improvement in ROIC to Achieve the Target of K27
Improvement in ROIC to Achieve the Target of “K27” ROIC 11% or more 11% Forecasts 8.6% Build businesses through 7.8% co-creation with partners 4.1% Global expansion of growth driver areas (Global Sharp Top strategy and reform of earning power) Structural reforms (Stronger competitiveness for mainsta
Slide 21: Improvement in Capital Efficiency/Profitability by Business Area
Improvement in Capital Efficiency/Profitability by Business Area (FY2023 Results vs. FY2024 Forecast) Improvement in Core Sales Growth Rate Improvement in Operating Income1 (%) ROIC (pt) (Billion yen) Stable Earnings +1.1 +3.1 +3.4 +2.4 Growth Driver +6.3 +6.8 +20.9 +1.8 Business Transformation (0.6
Slide 22: Measures and Progress toward Achieving Mid-term Plan K27
05 Measures and Progress toward Achieving Mid-term Plan K27 -Global Sharp Top Strategy-
Slide 23: Direction of the Kao Group: Mid-term Plan 2027 K27
Direction of the Kao Group Kao Group Mid-term Plan 2027 “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 Introduce ROIC company-wide, dec
Slide 24: K27 Strategic Framework
K27 Strategic Framework 【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 businesses Build Global Sharp Top capit
Slide 25: Build Global Sharp Top Businesses (Progress of K27)
Build Global Sharp Top Businesses (Progress of K27) Global Shift to Essential, Highly Profitable Businesses ✓ Expanded the skin protection business globally Major hit product Bioré UV Aqua Rich, strong sales of Bioré UV care products in Europe and Brazil, acquisition of Bondi Sands Australia Pty Ltd
Slide 26: Global Sharp Top Human Capital/Organizational Management
Global Sharp Top Human Capital/Organizational Management (Progress of K27) Decisive Investment in Human Capital Withdrawal from Matrix Management Prioritize aggressive investment in human Task-based team formation independent of capital centered on dialogue departments Rapid progression using steeri
Slide 27: Improve Capital Efficiency/Profitability (Progress of K27)
Improve Capital Efficiency/Profitability (Progress of K27) Maximize the Value of Management Capital ✓ Achieved high returns and extended leading market shares (Attack, CuCute, Bioré, Curél, Magiclean) FY23 Results ✓ Improved profit by 36.5 billion yen compared with the previous year through strategi
Slide 28: Build Businesses through Co-creation with Partners
Build Businesses through Co-creation with Partners (Progress of K27) Faster maximization of technology assets ✓ Global rollout of Kao’s technologies: Joint businesses ・Insect repellent and eradication technology that does not use insecticides (in collaboration with skin protection) ✓ New value creat
Slide 29: Mid-term Plan K27: Progress
Mid-term Plan K27: Progress ROIC (Estimate) Operating Income (Estimate) Operating income ROIC (Billion yen) EVA (%) (Billion yen) Record-high operating 11% or more income 11% 200 Forecast Growth strategy 8.6% 70.0 billion +60.0 ROIC yen or more 70 billion yen+α +90.0 7.8% Core operating income billi
Slide 30: Targets of Mid-term Plan K27
Targets of Mid-term Plan K27 • Off to a good start toward achieving the ROIC target of K27 FY2022 FY2023 FY2024 FY2027 (Billion yen) Results Results Forecasts Targets ROIC 7.8% 4.1% 8.6% 11.0% or more EVA 14.7 14.9 24.0 70.0 or more Record-high Operating Income1 110.1 114.7 130.0 operating income (F
Slide 31: Key Highlights
Key Highlights ⚫ In FY2023, the Kao Group promoted business portfolio management and completed structural reforms roughly on schedule. (Decisive reorganization of baby diaper business, concluded transfer agreements for tea-catechin beverage Healthya and Nyan Tomo Clean Toilet, structural reform of h
Slide 32: Upcoming Events (Planned)
Upcoming Events (Planned) • Briefing on the Progress of DX Strategies : Marketing Innovations First half of 2024 • Briefing on Strategies for the Hair Care Business Second half of 2024 32
Slide 33: Appendix
06 | Appendix
Slide 34: 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 (%) Year-on-year growth due to price increases and high-value-added products (%) Increase in makeup sales as
Slide 35: Kao's Main Markets outside Japan
Kao’s Main Markets outside Japan • China : Despite a tendency toward gradual recovery in consumption, a downward trend continued. Asia • Indonesia: Although the market continued to grow due to rising selling prices, the rate of growth slowed. • Thailand : Growth continued, although at a somewhat slo
Slide 36: Highlights of Q4 Consolidated Financial Results
Highlights of Q4 Consolidated Financial Results (Oct.-Dec.) • Core operating income +10.8 billion yen. Operating income -23.8 billion yen. Billion yen FY2022 Q4 FY2023 Q4 Growth % Change Net sales 423.3 406.7 (3.9) (16.7) Effect of currency translation* +2.3 +9.6 Like-for-like growth (6.2) (26.3) Co
Slide 37: Q4 Consolidated Net Sales by Segment/Geographic Region
Q4 Consolidated Net Sales by Segment/Geographic Region (Oct.-Dec.) Billion yen Japan Asia Americas Europe Consolidated Q4 88.5 11.3 0.9 - 100.7 Fabric & Home Care Like-for-like % +4.2 (13.6) (11.2) - +1.8 Q4 19.9 22.8 0.0 - 42.7 Sanitary Like-for-like % (10.7) (13.1) +26.1 - (12.0) Hygiene and Livin
Slide 38: Q4 Consolidated Results by Segment
Q4 Consolidated Results by Segment (Oct.-Dec.) Net sales Core operating income Billion yen Like-for-like % Core Q4 Q4 Change operating By Volume % By Price % margin % Fabric & Home Care 100.7 +1.8 (4.8) +6.5 19.8 +5.2 19.7 Sanitary 42.7 (12.0) (17.6) +5.6 (1.8) +1.1 (4.2) Hygiene and Living Care 143
Slide 39: Consumer Products Business
Consumer Products Business Core operating Billion yen Net sales Core operating income margin % Growth Like-for- FY2022 FY2023 % like % FY2022 FY2023 Change FY2022 FY2023 Japan 775.0 781.7 +0.9 +0.9 52.7 61.0 +8.3 6.8 7.8 Asia 236.0 222.6 (5.6) (9.2) 21.9 16.8 (5.2) 9.3 7.5 Americas 112.9 126.6 +12.1
Slide 40: Hygiene and Living Care Business in FY2023
Hygiene and Living Care Business in FY2023 • Sales: 522.5 billion yen (+0.0%) Core operating income: 41.9 billion yen (+11.2 billion yen) Core operating margin: 8.0% • Increased sales and market share by improving the brand power of Attack and CuCute through decisive investment. • Core operating mar
Slide 41: Health and Beauty Care Business in FY2023
Health and Beauty Care Business in FY2023 • Sales: 392.9 billion yen (+3.1%) Core operating income: 42.8 billion yen (+8.2 billion yen) Core operating margin: 10.9% • Increased sales and market share by proactively launching high-performance UV care products. • Core operating margin increased 1.5 po
Slide 42: Life Care Business in FY2023
Life Care Business in FY2023 • Sales: 56.3 billion yen (-0.6%) Core operating income: -1.3 billion yen (-1.3 billion yen) Core operating margin: -2.3% • Although commercial-use hygiene products were affected by the shrinkage of the market for sanitizers in Japan, the market in the Americas recovered
Slide 43: Cosmetics Business in FY2023
Cosmetics Business in FY2023 • Sales: 238.6 billion yen (-6.7%) Core operating income: 5.3 billion yen (-8.8 billion yen) Core operating margin: 2.2% • Sales and profits decreased as results in Japan, the Americas and Europe were unable to offset significant declines in China, travel retail and cros
Slide 44: Cosmetics Business in FY2023
Cosmetics Business in FY2023 Best Cosmetics Award Winners in 2023 H2 Year-on-Year Growth/Share of Sales FY2022 FY2023 Share of Share of Growth Growth Sales Sales G11 +5% 68% (4)%* 70% R8 (1)% 22% (2)% 22% Other (14)% 10％ (15)% 8% Global Shipments by Price * +3% for Japan MELLOW OFF VEIL Synchromatic
Slide 45: Chemical Business in FY2023
Chemical Business in FY2023 • Sales: 366.1 billion yen (-13.4%) Core operating income: 24.8 billion yen (-4.8 billion yen) Core operating margin: 6.8% • Both sales and profits decreased due to a decline in demand caused by delayed economic recovery and shrinking profit margins, mainly for oleo chemi
Slide 46: 2024 Market Outlook and Measures to Increase Profits
2024 Market Outlook and Measures to Increase Profits Consumer Products Market Measures to Increase Profits Japan • The cosmetics market is expected to stay on a recovery track, including inbound demand. Steady • Continue strategic price increases. but slowing growth is expected in the household and
Slide 47: 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 48: Major ESG Investment Indices and Evaluations from External Organizations
Major ESG Investment* Indices and Evaluations from External Organizations ESG indices for which Kao has been selected Evaluations from/activities with external organizations 48 *ESG Investment: Investment that takes into consideration Environmental, Social and Governance factors The FTSE4Good index
Slide 49: Initiatives with a Focus on ESG
Initiatives with a Focus on ESG -Sustainability as the only path- Resolving Social Issues and Expanding Resolving Social Issues (Future Earnings) Business/Creating New Businesses (Current Earnings) World’s First Film-to-Film Recycling of Used Refill Launch of an Innovative Skin Protection* Product3
Slide 50: 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) 1,551.1 1,580.0 1,508.0 1,502.2 1,532.6 1,500 1,418.8 1,382.0 295.1 300 268.4 261.6 230.9 1,000 211.7 216.5 207.7 199.8 200 175.6 143.5 149.6 130.0 110.1 1
Slide 51: Capital Expenditures
Capital Expenditures (Billion yen) 120 Parent Subsidiaries 113.4 100 94.6 93.2 89.1 87.8 90.0 49.8 86.1 80 34.1 32.6 31.9 45.0 32.7 43.0 60 40 63.6 60.5 56.5 53.5 55.9 48.2 47.0 20 0 (FY) 51
Slide 52: ROE & EPS
ROE & EPS1 EPS (Yen) ROE (%) EPS ROE 19.8 ROE (%) 18.9 (Yen) (%) 18.6 20 400 17.6 16.1 14.2 300 314.3 298.3 306.7 11.6 253.4 262.3 9.9 230.6 8.9 10 200 209.8 3 183.3 185.0 210.8 4.5 100 0 0 1 1 2 (FY) Weighted average number of shares outstanding (Million 501.4 499.4 492.8 489.1 483.3 480.9 475.5 46
Slide 53: Cash Dividends per Share
Cash Dividends per Share Cash Dividends per Share (Yen) 1 152 Increase in dividends for 34th consecutive period in FY2023 148150 150 144 140 130 120 110 100 94 80 70 62 64 56 57 58 60 50 52 54 50 38 30 32 24 26 20 14 15 16 0 (FY) 1. Formally decided at the Annual General Meeting of Shareholders Impa
Slide 54: 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 55: EVA
EVA (Billion yen) Cost of Capital EVA 150 93.5 90.4 87.4 73.4 62.3 70.6 58.6 45.1 100 47.6 39.8 14.7 14.9 32.4 73.5 74.1 66.5 69.9 62.7 63.8 50 55.1 56.4 59.1 50.8 53.3 54.8 49.6 0 1 2 2 3 2012 2013 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 2023 (FY) 1. Fiscal year end changed from March 31
Slide 56: 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) 400.0 353.2 336.1 291.7 289.7 268.2 266.0 244.5 200.0 214.7 195.6 202.5 175.5 130.9 0.0 (80.0) (109.3)
Slide 57: Business Segments and Main Product Categories
Business Segments and Main Product Categories ⚫ Laundry detergents FY2023 Net sales: 522.5 billion yen ⚫ Fabric treatments Hygiene and ⚫ Kitchen cleaning products Like-for-like growth1: 0.0 % Living Care ⚫ House cleaning products ⚫ Paper-based cleaning products Share of net sales: 34.1 % Business ⚫
Slide 58: KAO Kirei-Making Life Beautiful
KAO Kirei-Making Life Beautiful