Slide 1: Consolidated Financial Results for the Six Months Ended June 30, 2023 and Mid-term Plan Progress
Consolidated Financial Results for the Six Months Ended June 30, 2023 and Mid-term Plan Progress Kao Corporation August 3, 2023
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 Financial Results for the Six Months Ended June 30, 2023 02 FY2023 Forecast 03 Mid-term Plan “K25” Progress 04 Appendix
Slide 4: Financial Results
01 Financial Results for the Six Months Ended June 30, 2023
Slide 5: Notice of Revision of Operating Results Forecast released on Aug. 3, 2023
Notice of Revision of Operating Results Forecast released on Aug. 3, 2023 5
Slide 6: Consumer Products Market in Japan
Consumer Products Market in Japan Growth of H&PC Market 87 categories, SRI+1 Growth of Cosmetics Market 26 categories, SLI2 (%) Year-on-year growth due to price increases and increase in going out. (%) Growth driven by makeup and UV care products due to an increase in going out. 160 160 22 Q3 22 Q4
Slide 7: Kao's Main Markets outside Japan
Kao’s Main Markets outside Japan • China : Year-on-year decreases continued, although there were signs of recovery in consumption after the end Asia of actors included lockdowns. • Indonesia: Market growth continued, but at a somewhat slower rate due to selling price hikes. • Thailand : Growth conti
Slide 8: Highlights of Consolidated Financial Results
Highlights of Consolidated Financial Results Billion yen FY2022 H1 FY2023 H1 Growth % Change Net sales 733.9 738.5 +0.6 +4.6 Effect of currency translation +2.9 * +21.6 Like-for-like growth (2.3) (17.0) Core operating income 53.7 34.5 (35.8) (19.2) Core operating margin 7.3% 4.7% - - Operating incom
Slide 9: Key Points of H1 Results
Key Points of H1 Results Core operating income 34.5 billion yen Net sales 738.5 billion yen (-19.2 billion yen); margin 4.7% -2.3% on a like-for-like basis vs. plan +1.5 billion yen Household and Personal Care Business • Amid market recovery, Q2 sales in Japan increased 5.9%, due in part to the effe
Slide 10: Consolidated Net Sales by Segment/Geographic Region in H1
Consolidated Net Sales by Segment/Geographic Region in H1 Billion yen Japan Asia Americas Europe Consolidated H1 134.4 22.1 2.0 - 158.6 Fabric & Home Care Like-for-like % +1.4 (0.9) +13.4 - +1.2 H1 40.0 47.1 0.0 - 87.1 Sanitary Like-for-like % +8.0 (2.4) (24.0) - +2.2 Hygiene and Living Care H1 174.
Slide 11: Consolidated Results by Segment in H1
Consolidated Results by Segment in H1 Net sales Core operating income Billion yen Like-for-like % Core H1 H1 Change operating By Volume % By Price % margin % Hygiene and Living 245.7 +1.6 (2.2) +3.8 9.8 (3.2) 4.0 Care Business Health and Beauty Care Business 188.8 +3.1 +1.2 +1.9 16.0 (2.2) 8.5 Life
Slide 12: Q2 Consolidated Net Sales by Segment/Geographic Region
Q2 Consolidated Net Sales by Segment/Geographic Region (April-June) Billion yen Japan Asia Americas Europe Consolidated Q2 75.8 10.8 1.0 - 87.7 Fabric & Home Care Like-for-like % +4.1 +1.4 +20.1 - +3.9 Q2 21.8 22.5 0.0 - 44.3 Sanitary Like-for-like % +15.4 +1.9 +31.7 - +8.2 Hygiene and Living Care Q
Slide 13: Q2 Consolidated Results by Segment
Q2 Consolidated Results by Segment (April-June) Net sales Core operating income Billion yen Like-for-like % Core Q2 Q2 Change operating By Volume % By Price % margin % Hygiene and Living 132.0 +5.3 +1.0 +4.3 7.1 +0.9 5.4 Care Business Health and Beauty Care Business 101.9 +3.4 +1.1 +2.2 10.2 (1.7) 1
Slide 14: Consumer Products Business in H1
Consumer Products Business in H1 Core operating Billion yen Net sales Core operating income margin % Like-for- FY2022 FY2023 Growth like % FY2022 FY2023 Change FY2022 FY2023 % H1 H1 H1 H1 H1 H1 Japan 359.4 368.1 +2.4 +2.4 11.9 6.0 (5.9) 3.3 1.6 Asia 113.2 113.4 +0.2 (4.4) 18.1 13.4 (4.7) 16.0 11.8 A
Slide 15: Breakdown of Year-on-Year Changes in Operating Income Q1 and Q2
Breakdown of Year-on-Year Changes in Operating Income during Q1 (Jan.–Mar.) and Q2 (Apr.–Jun.) (Billion yen) Including Total Cost Reduction (TCR) +2.0 FY2022 Q1 Operating Income Raw material Price increases Volume FY2023 FY2023 H&PC (5.5) +5.0 (4.0) Core Operating Cosmetics 0.0 (1.0) (3.5) Operating
Slide 16: Analysis of Change in Operating Income in H1
Analysis of Change in Operating Income in H1 (Year-on-Year Change) (Billion yen) Including Total Cost Reduction (TCR) +4.5 H1 FY2022 Operating FY2023 Raw material Price increases Volume Income Core H&PC (9.5) +13.0 (4.0) FY2023 Operating Operating Cosmetics (0.5) (1.5) +0.5 Income Income Raw materia
Slide 17: Hygiene and Living Care Business in H1
Hygiene and Living Care Business in H1 • Sales: 245.7 billion yen (+1.6%) Core operating income: 9.8 billion yen (-3.2 billion yen) Core operating margin: 4.0% • Decisive investment increased sales and market share of laundry detergents and dishwashing detergents. • Implemented price increases that
Slide 18: Health and Beauty Care Business in H1
Health and Beauty Care Business in H1 • Sales: 188.8 billion yen (+3.1%) Core operating income: 16.0 billion yen (-2.2 billion yen) Core operating margin: 8.5% • Increased sales prices of UV care products when launching new and improved high-performance products, while achieving growth and expanding
Slide 19: Increasing Market Share, Unit Prices and Profits through High-value-added Products
Increasing Market Share, Unit Prices and Profits through High-value-added Products 19
Slide 20: Improvement of Underperforming Businesses through New Marketing Methods
Improvement of Underperforming Businesses through Rollout of New Marketing Methods ● ● 20
Slide 21: Life Care Business in H1
Life Care Business in H1 • Sales: 26.7 billion yen (+1.2%) Core operating income: -1.1 billion yen (-1.0 billion yen) Core operating margin: -4.1% • Despite the market recovery, commercial-use hygiene products were affected by the shrinkage of the sanitizer market. Increased loyal users of health dr
Slide 22: Cosmetics Business in H1
Cosmetics Business in H1 • Sales: 115.8 billion yen (-1.6%) Core operating income: -2.0 billion yen (-4.2 billion yen) Core operating margin: -1.7% • Sales of G11 brands grew, driven by KATE and KANEBO. Amid the recovery trend in the market in China from the start of Q2, sales and profits rebounded.
Slide 23: Cosmetics Business in H1
Cosmetics Business in H1 Year-on-Year Growth/Share of Sales Received numerous Best Cosmetics Awards in Japan FY2022 H1 FY2023 H1 Share of Share of Growth Growth Sales Sales G11 +4% 69% ＋3%* 73% R8 +2% 21% (8)% 19% Other (17)% 10％ (15)% 8% RADIANT SKIN AS MICRO PROTECTING DAY DESIGNING REFINER MOUSSE
Slide 24: Chemical Business in H1
Chemical Business in H1 • Sales: 183.7 billion yen (-12.5%) Core operating income: 11.1 billion yen (-9.0 billion yen) Core operating margin: 6.0% • Both sales and profits decreased due to the impact of inventory adjustments by customers and shrinking margins, mainly for oleo chemicals. Improved pro
Slide 25: FY2023 Forecast
02 | FY2023 Forecast
Slide 26: Revisions to FY2023 Forecast
Revisions to FY2023 Forecast (Billion yen) As of May 10 As of August 3 Core operating income － 120.0 or more Structural reforms expenses* － (60.0) or more Operating income 120.0 or more 60.0 or more Profit improvement effect Some effects are expected to begin appearing in FY2024, with approx. 30.0 A
Slide 27: Overview of Structural Reforms
Overview of Structural Reforms • Baby diaper business ✓ Termination of production in China ✓ Optimize production system in Japan Conduct a drastic strategic review and reorganization of • Complete structural reforms of the cosmetics business inefficient businesses ✓ Make final touches in restructuri
Slide 28: FY2023 Forecast
FY2023 Forecast Billion yen FY2022 Growth % FY2023 Forecast Growth % Change (Announced on Aug. 3) 1,551.1 +9.3 1,580.0 +1.9 +28.9 Net sales Effect of currency translation* +2.0 +30.6 Like-for-like growth (0.1) (1.6) Core operating income 110.1 (23.3) 120.0 +9.0 +9.9 Core operating margin 7.1% - 7.6%
Slide 29: Sales Forecast for FY2023
Sales Forecast for FY2023 Billion yen Japan Consolidated Billion yen Consolidated Growth Like-for-like Like-for-like ％ growth％ growth％ Hygiene and Living Care Business 377.0 +1.8 522.0 +1.0 Japan 893.0 +1.9 Health and Beauty Care Business 207.0 +3.4 393.0 +4.0 Asia 326.0 (2.6) Life Care Business 45.
Slide 30: Analysis of Change in Operating Income (Year-on-Year Change)
Analysis of Change in Operating Income (Year-on-Year Change) (Billion yen) FY2023 Core FY2022 Including Total Operating H2 Operating Raw material Price increases Volume Cost Reduction Income FY2023 Income H&PC 0.0 +17.0 (1.5) (TCR) +5.5 Operating Cosmetics 0.0 +2.0 +5.0 Income FY2023 Full FY2022 Cor
Slide 31: Changes in Raw Material Prices and Effects of Price Increases
Changes in Raw Material Prices and Effects of Price Increases (Consumer Products Business) • Plan to cover approximately 80% of 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.
Slide 32: Measures in H2: Household and Personal Care Business
Measures in H2: Household and Personal Care Business Market Japan • Double-digit growth for UV care products, over 5% growth for makeup removers and styling products in H1 due to market recovery as opportunities for going out increased. Overall growth of 1-2% expected for the year. Asia • China: The
Slide 33: Launch of Attack ZERO Perfect Stick
Aug.アタックZERO 5, 2023 Launch ofパーフェクトスティック Attack ZERO Perfect Stick 商品概要 Advent of a new stick-shaped detergent that will transform1 doing laundry in Japan Uses a next-generation effervescent powder2 with overwhelming cleaning power that goes beyond liquid detergents3 Briefing on July 27 to announce
Slide 34: Measures in H2: Cosmetics Business
Measures in H2: Cosmetics Business Market • In Japan, mask wearing is on the decline and makeup market is showing signs of recovery. Inbound demand is also expected to increase. • In China, the market is on a recovery track, but the pace of recovery is expected to be moderate. • In Europe, steady gr
Slide 35: Measures in H2: Chemical Business
Measures in H2: Chemical Business Market Conditions • In H1, demand was weak as inventories piled up due to logistics disruptions, mainly in the Americas and Europe, and the subsequent economic slowdown. • Demand is expected to recover from Q4. Measures to Increase Profits in H2 ✓ Expand business by
Slide 36: Mid-term Plan K25 Progress
03 Mid-term Plan “K25” Progress
Slide 37: Mid-term Plan K25 Progress and K27
1) Mid-term Plan “K25” Progress and “K27” 37
Slide 38: Progress of Kao Mid-term Plan 2025 K25
Progress of Kao Mid-term Plan 2025 “ K25 ” • The Kao Group clarified the factors causing deviation from its K25 plans to revise the mid-term plan, centered on structural reforms and growth strategies. Delay in global rollout and worsening capital efficiency are issues. 300 income Operating (Billion
Slide 39: Direction of the Kao Group: Mid-term Plan K27
Direction of the Kao Group • Determine a specific growth trajectory without changing the management policy set in K25. 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
Slide 40: Targets of Mid-term Plan K27
Targets of Mid-term Plan K27 • Two new management indicators, ROIC and sales outside Japan, have been established to improve capital efficiency and ramp up global rollout. FY2022 FY2025 FY2027 (Billion yen) Results Estimate Targets ROIC 7.8% 9.0% 11.0% or more EVA 14.7 35.0 70.0 or more Record-high
Slide 41: K27 Roadmap
K27 Roadmap 2023 2024 2025 2026 2027 Growth strategy 2: A new co-creation businesses with partner companies 1. Conduct co-creation with the No. 1 companies in the target segments 2. Build new playing fields in new business areas Growth strategy 1: Global expansion of growth driver areas 1. Skin Care
Slide 42: Structural Reforms (Stronger Competitiveness for Mainstay Businesses)
2) Structural Reforms (Stronger Competitiveness for Mainstay Businesses) 42
Slide 43: Overview of Structural Reforms
Overview of Structural Reforms • Baby diaper business ✓ Termination of production in China ✓ Optimize production system in Japan Conduct a drastic strategic review and reorganization of • Complete structural reforms of the cosmetics business inefficient businesses ✓ Make final touches in restructuri
Slide 44: Effects and One-Time Expenses Associated with Structural Reforms
Effects and One-Time Expenses Associated with Structural Reforms (Billion yen) As of May 10 As of August 3 Core operating income － 120.0 or more Structural reforms expenses* － (60.0) or more Operating income 120.0 or more 60.0 or more Profit improvement effect Some effects are expected to begin appe
Slide 45: Mid-term Plan K27: Envisioned Progress
Mid-term Plan K27: Envisioned Progress ROIC (Estimate) Operating Income (Estimate) Operating income ROIC (Billion yen) EVA (%) (Billion yen) Record-high operating 11% or more income 11% 200 Growth strategy 70.0 billion +60.0 ROIC yen or more 70 billion yen+α +90.0 7.8% billion yen+α 150 (vs FY23) St
Slide 46: Mid-term Capital Policy
Mid-term Capital Policy • Invest for future development and make shareholder returns from an EVA perspective. Five Years Five Years Cumulative Cumulative (FY2023-FY2027) (FY2023-FY2027) Shareholder Maintain and continue Returns stable dividends Operating Cash Flow Use strengthened ROIC management to
Slide 47: Overview of K27
Overview of K27 • The Kao Group clarified the factors causing deviation from its K25 plans to revise the mid-term plan, centered on structural reforms and growth strategies. Delay in global rollout and worsening capital efficiency are issues. ✓ Build Global Sharp Top businesses Accelerate ✓ Concentr
Slide 48: Global Expansion in Growth Driver Areas
3) Global Expansion in Growth Driver Areas 48
Slide 49: Growth Strategy Targets of K27
Growth Strategy Targets of K27 Business Stable Earnings Growth Driver Transformation Basic Policy Improve Profitability and Growth Investment and Maintain and Expand Share Improve Profitability Global Growth • Products for hair salons • Hair care • Skin care Reforms underway to shift to • Fabric car
Slide 50: Global Expansion in Growth Driver Areas - Skin care business
Global Expansion in Growth Driver Areas -Skin care business- ・Aim to be the Global Sharp Top in skin protection* Establish Business Establish Business Foundation in the Americas Toward the Global Sharp Top Foundation in Japan and Europe UV care business UV care and self-tanning Total skin protection
Slide 51: Global Rollout of Skin Protection (UV care/Self-tanning)
Global Rollout of Skin Protection (UV care/Self-tanning) ・Swiftly ramp up global rollout through synergies between brands, intellectual properties, technologies, sales channels and other assets of Kao and Bondi Sands. Europe Japan/Asia North America Market Market Market • UV care: 304.2 billion yen
Slide 52: New Precision Marketing Strategy - Skin Care Business
New Precision Marketing Strategy -Skin Care Business- Kao Precision Skin Care High高機能 Functionality 高精細 High Precision 高適性 High Applicability Skin Protection Skin Monitoring RNA Monitoring Kirei skin analysis UV care skin Personal attributes from a combination of • Ease of application DNA and lifest
Slide 53: Global Expansion in Growth Driver Areas - Cosmetics Business
Global Expansion in Growth Driver Areas -Cosmetics Business- ・Ramp up global rollouts of Curél, SENSAI and MOLTON BROWN Accelerate brand growth Build a foundation for Ramp up efforts and establish strategy through aggressive global competition a full-fledged global business investment Global Busines
Slide 54: Ramp Up a Global Rollout Centered on the 1st Runners of Three Brands
Ramp Up a Global Rollout Centered on the 1st Runners of Three Brands -Cosmetics Business- Global Sales Global Sales 2022 2030 Outside Europe CAGR Outside +13% or more Europe Europe Europe To prestige markets in the Outside growth areas of China and Asia Outside Europe Europe CAGR +6% or more Europe
Slide 55: Global Area Strategy/Brand Identities - Cosmetics Business
Global Area Strategy/Brand Identities -Cosmetics Business- ・Globally competitive brands based on distinctive craftsmanship that melds brand identity with Kao Group technologies British style/Commitment to Brand Identity Achieve silky skin with Koishimaru Silk* the finest fragrances Ultra-wealthy, em
Slide 56: Global Area Strategy/Brand Identities - Cosmetics Business
Global Area Strategy/Brand Identities -Cosmetics Business- ・Become a competitive brand in the global sensitive skin market by providing solutions based on brand uniqueness (ceramide care technology), the local climate in each region of operations, and skin concerns. Ceramide care technology × Specif
Slide 57: Global Expansion in Growth Driver Areas - Chemical Business
Global Expansion in Growth Driver Areas -Chemical Business- • We will grow our business by solving environmental and social issues. Focus on strengths Expand business New portfolio -Creation of new value utilizing the -Enhancement of the value chain- -Value co-creation- core technologies- Fundamenta
Slide 58: Example of Major Materials and Products - Chemical Business
Example of Major Materials and Products -Chemical Business- In the leading group worldwide In the leading group within Japan Fat and oil • Natural fatty alcohols Plastics ＆Rubbers • Silica dispersants for derivatives • Tertiary amines fuel-efficient tires Detergents & Agrochemicals • Adjuvants for a
Slide 59: Global Expansion of One-of-a-Kind Technologies - Chemical Business
Global Expansion of One-of-a-Kind Technologies -Chemical Business- Adjuvants Asphalt Modifier Made from Waste PET - Contribute to Smart Agriculture - Contribute to Adding Resilience and Environment Preservation - to Infrastructure - • Special feature: We contribute to creation of a resource • Specia
Slide 60: Global Expansion of One-of-a-Kind Technologies - Chemical Business
Global Expansion of One-of-a-Kind Technologies -Chemical Business- Semiconductor Chemicals Hydrophobic-modified Cellulose nanofiber -contribution to improving -Contributes to Functional Innovations in semiconductor performance- Various Applications- • Special feature: Sustainable high-performance ma
Slide 61: Further Bolster Strong Businesses - Chemical Business
Further Bolster Strong Businesses -Chemical Business- Aim to establish a firm No. 1 position in the global market and increase global share from 35% Tertiary amines to over 40% by strengthening the three-region structure and rolling out products that meet customer needs. Europe Growing demand for As
Slide 62: Overview of K27 Growth Strategy
Overview of K27 Growth Strategy Stable Growth Driver Earnings Fabric and Hair care* Business Skin care Cosmetics Chemical including products for Home care hair salons Targets ROIC 20% or more 12% or more Targets Operating Up approx. 20.0 Income billion yen or more Up approx. 70.0 billion yen or more
Slide 63: Key Points of Management Reform
Key Points of Management Reform Aim to be a company that sustains Global Sharp Top businesses. Aim to be global No. 1 in leading-edge priority domains rather than in terms of total business scale. Take rapid, decisive action on structural reforms and accelerate toward global growth Business Reform D
Slide 64: Targets of Mid-term Plan K27
Targets of Mid-term Plan K27 • Two new management indicators, ROIC and sales outside Japan, have been established to improve capital efficiency and ramp up global rollout. (Billion yen) FY2022 Results FY2027 Targets ROIC 7.8% 11.0% or more EVA 14.7 70.0 or more Record-high Operating Income 110.1 ope
Slide 65: Upcoming Event
Upcoming Event • Cosmetics Business and Mass Market Skin Care Business Growth Strategy Briefing Tuesday, September 26, 2023 65
Slide 66: Appendix
04 | Appendix
Slide 67: Co-creation Businesses with Partners
Co-creation Businesses with Partners • Rollouts through co-creation with top-class companies in each industry Target Businesses Skin care Cosmetics Brands/Technologies Deployment 2.0 New generation of insect Protective membrane on the Technical Features repellents that don’t contain skin surface mad
Slide 68: Acquisition of Bondi Sands of Australia
Acquisition of Bondi Sands of Australia Bondi Sands Australia Pty Ltd (Headquarters: Melbourne, Australia; established 2012) Self-tanning, UV care, skin care and other products available in countries including Australia, the United Kingdom and the United States No. 1 share1 in the market for self-ta
Slide 69: KAO
KAO Kirei-Making Life Beautiful