Pola Orbis Holdings Inc. · TSE:4927
Pola Orbis — FY2018 Earnings Presentation
39 slides from Pola Orbis's earnings presentation, February 2019
Slide 1: Fiscal 2018 Supplementary Material
Fiscal 2018 Supplementary Material POLA ORBIS HOLDINGS INC. Representative Director and President Satoshi Suzuki This report contains projections of performance and other projections based on information currently available and certain assumptions judged to be reasonable. Actual performance may diff
Slide 2: Agenda
1. Highlights of Consolidated Performance 2. Segment Analysis 3. Progress of Mid-term Management Plan 4. Forecasts and Initiatives for Fiscal 2019 5. Appendices 1
Slide 3: FY2018 Key Topics
FY2018 Key Topics Cosmetics Market Japanese cosmetics market including exports showed steady growth; however, a slowdown trend in inbound consumption is observed since September and the same situation continues up to the present. Excluding inbound demand, it is assumed that the size of the Japan
Slide 4: Actual vs Planned Variance Analysis
Actual vs Planned Variance Analysis FY2017 FY2018 YoY Change vs. Plan (Nov 26, 2018) (mil. yen) Results Results Amount % Amount % Consol. net sales 244,335 248,574 4,239 1.7% (4,425) (1.7%) Operating income 38,881 39,496 615 1.6% (2,003) (4.8%) Ordinary income 39,250 38,954 (295) (0.8%) (2,545) (6.1
Slide 5: Analysis of Consolidated P&L Changes: Net Sales to Operating Income
Analysis of Consolidated P&L Changes Net Sales to Operating Income FY2017 FY2018 YoY Change (mil. yen) Results Results Amount % Consolidated net sales 244,335 248,574 4,239 1.7% Cost of sales 41,632 41,521 (110) (0.3%) Gross profit 202,703 207,052 4,349 2.1% SG&A* expenses 163,822 167,556 3,734 2.3%
Slide 6: Analysis of Consolidated P&L Changes: Operating Income to Profit
Analysis of Consolidated P&L Changes Operating Income to Profit Attributable to Owners of Parent FY2017 FY2018 YoY (mil. yen) Results Results Amount % Operating income 38,881 39,496 615 1.6% Non-operating income 465 476 10 2.3% Non-operating expenses 96 1,017 921 959.4% Ordinary income 39,250 38,954
Slide 7: Factors Impacting Profit Attributable to Owners of Parent
Factors Impacting Profit Attributable to Owners of Parent Profit attributable to owners of parent was down 69.1% yoy due to extraordinary losses Positive impact Negative impact (mil. yen) Increase in sales Reduction in advertising expenses at POLA at POLA Improved efficiency of promotion expenses at
Slide 8: Agenda: Segment Analysis
1. Highlights of Consolidated Performance 2. Segment Analysis 3. Progress of Mid-term Management Plan 4. Forecasts and Initiatives for Fiscal 2019 5. Appendices 7
Slide 9: Segment Results
Segment Results FY2017 FY2018 YoY (mil yen) Results Results Amount % Consolidated net sales 244,335 248,574 4,239 1.7% Beauty care 227,133 231,207 4,074 1.8% Real estate 2,694 2,707 12 0.5% Others 14,507 14,659 151 1.0% Operating income 38,881 39,496 615 1.6% Beauty care 38,121 38,294 173 0.5% Real
Slide 10: Beauty Care Business Results by Brands
Beauty Care Business Results by Brands FY2017 FY2018 YoY Change (mil. yen) Results Results Amount % Beauty care net sales 227,133 231,207 4,074 1.8% POLA 144,012 150,183 6,170 4.3% ORBIS 53,066 51,051 (2,014) (3.8%) Jurlique 12,772 10,386 (2,385) (18.7%) H2O PLUS 2,303 2,041 (261) (11.4%) Brands und
Slide 11: Brand Analysis (1)
Brand Analysis (1) FY2018 Result Inbound Sales in Japan July - Counterfeits of Wrinkle Shot and buyers Overseas External factors affected the performance in the 2H (see (estimate) Cosmetics Others September - False right), however, POLA maintained stable growth for the article about Innnerlock 1H
Slide 12: Brand Analysis (2)
Brand Analysis (2) FY2018 Result Topics Launched new ORBIS U in October. ORBIS U series (3) Operating income increased by improved cost Sales total : + 34% yoy efficiency, however, restrained discount-type Sales composition ratio : 21% promotions resulted in a decrease in the number (up 6.0pt
Slide 13: Brand Analysis (3)
Brand Analysis (3) FY2018 Result Topics Sales declined by 15.3% yoy (on an AUD basis). New product that symbolizes Sales of the mainstay new products exceeded that the brand won best cosmetics of last year however, the brand continued to awards from beauty magazines struggle due to a reduction
Slide 14: Performance Variance and Impairment Loss of Jurlique
Performance Variance and Impairment Loss of Jurlique Recorded impairment loss (on goodwill, etc.) in the fourth quarter of fiscal 2018 In spite of the measures such as organizational changes and reform in product development system Reasons and marketing plan, it is taking time to reach the expecte
Slide 15: Brand Analysis (4)
Brand Analysis (4) FY2018 Result Topics Sales decreased due to a decrease in the number The brand plans to debut products that are of stores that carry the brand at a retail chain. developed and manufactured by POLA Valuation loss on goods was incurred as a result CHEMICAL INDUSTREIS, INC. in
Slide 16: Brand Analysis (5) Brands Under Development
Brand Analysis (5) Brands Under Development FY2018 Result Topics THREE strengthened customer structure by focusing on Won #1 best cosmetics awards skincare and expanded overseas channel such as duty- from major beauty magazines free and cross-border e-commerce. in 2H Costs for launching new br
Slide 17: Agenda: Progress of Mid-term Management Plan
1. Highlights of Consolidated Performance 2. Segment Analysis 3. Progress of Mid-term Management Plan 4. Forecasts and Initiatives for Fiscal 2019 5. Appendices 16
Slide 18: Progress of 2017–2020 Medium-term Management Plan
Progress of 2017–2020 Medium-term Management Plan 【Management Indicators for 2020】 Net ¥250 bil. or higher OP OP margin 15% or higher sales CAGR 3-4% income CAGR 10% ROE 12% or higher (¥ mil.) Sales / OP income & margin (%) ROE OP income & margin (right axes & line graph) OPM 60,000 300,000 16.0 15.
Slide 19: Growth Strategies
Progress of 2017–2020 Medium-term Management Plan 【Growth Strategies】 Strategies Evaluation - POLA is successfully strengthening customer base. Sustain stable growth of flagship Slightly 1 brands to lead Group earnings - ORBIS is carrying out its branding initiatives, behind however, increase in sal
Slide 20: Agenda: Forecasts and Initiatives for Fiscal 2019
1. Highlights of Consolidated Performance 2. Segment Analysis 3. Progress of Mid-term Management Plan 4. Forecasts and Initiatives for Fiscal 2019 5. Appendices 19
Slide 21: Forecasts for Fiscal 2019
Forecasts for Fiscal 2019 FY2018 YoY Change FY2019 YoY Change (mil. yen) Full-year Results Amount % Full-year Plan Amount % Consol. net sales 248,574 4,239 1.7% 241,000 (7,574) (3.0%) Beauty care 231,207 4,074 1.8% 236,200 4,992 2.2% Real estate 2,707 12 0.5% 2,400 (307) (11.3%) Others 14,659 151 1.
Slide 22: Forecasts for Fiscal 2019 (Half-year)
Forecasts for Fiscal 2019 The Group aims to achieve an increase in OP income for ten consecutive years; however, anticipates a decline in net sales and OP income in 1H based on assumptions below. FY2019 YoY Change FY2019 YoY Change (mil. yen) H1 Plan Amount % H2 Plan Amount % Consol. net sales 117,0
Slide 23: Initiatives Going Forward: Establish brand presence globally
Initiatives Going Forward Establish brand presence in the global market Expand repeat customers Increase stores Japan Improve repeat ratio and build Overseas Develop new customers a customer base that works as primarily in China the foundation for stable growth Promo Product Expand Wrinkle Shot over
Slide 24: Initiatives Going Forward – Japan
Initiatives Going Forward – Japan Expand customer base and further solidify customer structure Strengthen communication related to branding and product value and aim for sustainable brand value improvement Customer base Potential needs 2017 → 2018 Change in survey results from 2015 to 2018 Acquired
Slide 25: Initiatives Going Forward – Overseas
Initiatives Going Forward – Overseas Enhance brand recognition mainly in Asia with the Chinese market as a priority ¥15.0 bil. net sales with 100 stores in 2020 Expand physical touchpoint with customers Introduce Wrinkle Shot at a larger scale (launch on cross-border EC is planned in April) Enha
Slide 26: Initiatives Going Forward: Brand communication centered on products
Initiatives Going Forward Strengthen brand communication centered on products for the growth 2019 – 2020 : Net Sales CAGR 2-3% and 20% OP margin ■ Actively invest in “DEFENCERA”, the first FOSHU* __product for skin that became available in Japan *Foods for Specified Health Uses “Prevents skin mois
Slide 27: Initiatives Going Forward: Review business structure and stop losses
Initiatives Going Forward Fundamentally review on business structure and stop increase in losses Although some temporary costs will be incurred in the course of reform, Jurlique strives to turn profitable after 2020 P&L structure 0 To turn profitable after 2020 Turn profitable -1,000 after 2020 3
Slide 28: Initiatives Going Forward: Enhance brand value of THREE
Initiatives Going Forward Further enhance brand value of THREE; new brands to become next drivers 2019 - 2020 Key Strategies Channels Enhance brand value Accelerate global Reinforce customer expansion (new stores engagement and new countries) Acquire customers Strengthen business structure t
Slide 29: Initiatives Going Forward - Other Brands
Initiatives Going Forward - Other Brands Enhance brand value and cultivate points of contact with new customers ■ Expand channels (department stores and flagship stores) Diversify touchpoints Strengthen customer intimacy in the brand that is not only limited to functional value ■ Reform digital
Slide 30: Strengthen Operations (R&D and Governance)
Strengthen Operations (R&D and Governance) Research & Development Expand new business opportunities by activities of the research organization (MIRC) established in POLA ORBIS HOLDINGS INC. and lead to open innovation Continue to boost R&D investment - Plan to increase expenditure ratio to sales b
Slide 31: Further Improvement in Capital Efficiency and Shareholder Returns
Further improvement in Capital Efficiency and Shareholder Returns Improvement of shareholder return Change in policy on shareholder return With a policy of consolidated payout ratio of 60% or higher, enhance shareholder return by realizing stable profit growth. From a liquidity perspective, the Comp
Slide 32: New Skin Whitening Active Ingredient (Quasi-drug)
New Skin Whitening Active Ingredient (Quasi-drug) Received approval for quasi-drug products with a new skin whitening active ingredient for the first time in about 10 years; products to be launched in May 2019 from POLA “Suppresses melanin accumulation and prevents spots and freckles” as efficacy cl
Slide 33: Agenda: Appendices
1. Highlights of Consolidated Performance 2. Segment Analysis 3. Progress of Mid-term Management Plan 4. Forecasts and Initiatives for Fiscal 2019 5. Appendices 32
Slide 34: About POLA ORBIS Group
(Appendix) About POLA ORBIS Group Beauty care is the core business of the Group, and 9 different cosmetics brands are operated under the Group umbrella FY2018 Consol. Net Sales ¥248.5 bil. Overseas Flagship Brands under Launched in Brands Brands development September 2018 ¥20,000 High Prestige Price
Slide 35: Beauty Care Business Brand Portfolio
(Appendix) Beauty Care Business Brand Portfolio Sales Brand Concept and products Price Sales channel ratio* High-prestige skincare Consignment sales through Approx. Leading-edge technology in Beauty Directors, department store 65% anti-aging and skin-whitening ¥10,000 counters and online Flags
Slide 36: Improvement in Capital Efficiency and Shareholder Returns
(Appendix) Improvement in Capital Efficiency and Shareholder Returns Initiatives to Improve Capital Efficiency Operating income CAGR10% (%) ROE movement Achieve net income growth EPS which is higher than operating 16.0 14.2 Target for 2020 (Earnings per share) income growth by decreasing ROE 12%
Slide 37: Long-term Vision
(Appendix) Long-term Vision STAGE3 Become a highly profitable global enterprise Consolidated net sales STAGE2 Goals for FY2020: •Consol. net sales: ¥250.0 bil. or higher (bil. yen) Further strengthen domestic •Overseas sales ratio: 20% STAGE1 earnings structure and •Operating margin: 13-15% accelera
Slide 38: 2017 – 2020 Medium-term Management Plan
(Appendix) 2017 – 2020 Medium-term Management Plan The final stage of the long-term vision for 2020. Aim to improve profitability in Japan, promote a solid shift toward overall profitability from overseas operations and build a brand structure for next-generation growth. Consolidated net sales Capit
Slide 39: Beauty Care Business Results for FY2016 – FY2018 by Brands
(Appendix) Beauty Care Business Results for FY2016 – FY2018 by Brands FY2016 FY2017 FY2018 2017 vs 2018 YoY Change (mil. yen) Results Results Results Amount % Consolidated net sales 218,482 244,335 248,574 4,239 1.7% Beauty care net sales 202,446 227,133 231,207 4,074 1.8% POLA 116,126 144,012 150,1