financial results for the first half of 2017financial results for the first half of 2017 august 3,...

Financial Results

for the First Half of 2017

August 3, 2017

Lion CorporationItsuo Hama

Representative Director, President Executive Officer

Financial Results for the First Half of 2017

Financial Forecast for 2017

Progress on 2017 Measures

Contents

3Copyright Lion Corporation. All rights reserved

Financial Results for the First Half of 2017


1st Half2017

1st Half2016

Change

Amount (%)

Net Sales 194.5 188.2 6.3 3.4

Operating Income

（% of Sales）

11.7

(6.1)

10.4

(5.5)1.3 13.1

Ordinary Income 12.8 11.3 1.5 13.4

Profit attributable toowners of parent 8.2 7.1 1.1 15.5

EPS(Yen) 28.47 24.86 3.61 14.5

2017 First Half Consolidated Results

Record-high sales and income

(Billions of yen)


Y-on-Y Changes in Operating Income

(0.6)

(1.3)

+0.7

0 2 4 6 8 10 12 14

Operating income for 1H of2017

Other expenses

Competition expenses

Crude oil and vegetable oilprices

Total cost reduction efforts(manufacturing and logistics

costs)

Sales, product mix and othres

Operating income for 1H of2016 10.4

11.7

+3.3

(0.8)

(Billions of yen)

The Expansion of High-Value-Added Products Led to Improved Competition-Based Expense Efficiency


Results by Business Segment

Sales Segment income (operating income)

1st Half

2017

1st Half

2016

Y-on-Y change 1st Half

2017

1st Half

2016

Y-on-Y change

Amount % Amount %

Consumer

Products138.7 135.7 3.0 2.3 7.5 6.1 1.3 22.0

Industrial

Products26.2 26.6 (0.3) (1.3) 0.9 1.2 (0.2) (21.0)

Overseas 58.2 55.1 3.0 5.6 2.5 2.4 0.0 3.4

Other 14.2 12.1 2.0 17.3 0.5 0.3 0.2 79.2

Subtotal 237.5 229.6 7.9 3.4 11.6 10.2 1.4 14.1

Adjustment (42.9) (41.3) (1.5) － 0.1 0.2 (0.0) (33.5)

Consolidated

total194.5 188.2 6.3 3.4 11.7 10.4 1.3 13.1

The Consumer Products Business

Leads in Improved Results


Results Outstripped Original Targets

Introducing and

nurturing new

products

Expanding high-

value-added

products

Soaring raw

material prices

Cooling inbound

demand

Changes in the external

environment: Lion’s measures:

＜

Consolidated Results Highlights


0

5

10

15

20

1H 2016 1H 2017

+8p

10％

18％

Overview of Consumer Products Business

Major New Products in 1st Half of 2017

Sales Ratio of New Products

(Launched in the 1st Half of 2017)

(including improved products)

CLINICA Kid's ToothpasteUp 212％ year on year

TOP HYGIAUp 23％ year on year

Ban Sweat-Blocking Stick Premium Label

Achieved 116% of targetMethod W.O. Cream

Achieved 110% of target

Sales of New Products Remained Healthy


Toothpastes with a unit price

of ¥500 or more

Toothbrushes with a unit price of

¥250 or more

Antipyretic Analgesic with a unit

price of ¥1,000 or more （Lion survey）

2017 1H year-on-year growth, sales basis

+14%

+4%

+13%

Overview of Consumer Products Business

Mid- to High-Priced Healthcare Products Enjoyed

Continued Growth

10

Chemical Products category

・Anti-sticking agents for tires +12％

Achieved No. 1 Market Share in Asia

Copyright Lion Corporation. All rights reserved

（Lion survey）

Overview of Industrial Products Business

Y-on-Y Changes in Net Sales

Anti-sticking agents are used when temporarily storing rubber for tire production processes.

Lion is striving to

be No. 1 in global

niche markets.

11

Detergent for Institutional Use

category

・Detergent for Food Industry Use +9％


Overview of Industrial Products Business

Y-on-Y Changes in Net Sales

Lion exhibited at the

International Food Machinery &

Technology Exhibition (FOOMA

JAPAN).

Lion’s comprehensive proposals include everything from

detergents tocleaning systems.


All categories Major Personal Care Brands

Thailand +7％Shokubutsu Monogatari

body soap +20％

South Korea +15％ Kirei Kirei hand soap +18％

China +19％ Systema toothbrushes +8％

Overview of the Overseas Business

Stable Business Growth

Continued in Major Countries

Y-on-Y Changes in Net Sales(on a local currency basis)


Kirei Kirei

hand soap

Systema

toothbrushes

ShokubutsuMonogataribody soap

Overview of the Overseas Business

Continually Nurturing Personal Care Products

14

2.MSCI Japan ESG

Select Leaders Index

1.FTSE BlossomJAPAN Index

3.MSCI Japan Empowering

Women Index (WIN) *SRI：Socially responsible investment

GPIF：Government Pension Investment Fund, Japan


Newly Included in SRI IndicesLion Has Been Selected for Inclusion in

3 ESG Indices Used by GPIF


Financial Forecast for 2017


2017 2016Change

Amount (%)

Net Sales 405.0 395.6 9.3 2.4

Operating Income

（% of Sales）

27.0

(6.7)

24.5

(6.2)2.4 10.2

Ordinary Income 28.0 26.2 1.7 6.5

Profit attributable toowners of parent 17.0 15.9 1.0 6.6

EPS(Yen) 58.50 55.13 3.37 6.1

2017 Consolidated Financial Forecast

(Billions of yen)


0

10

20

30

0

2

4

6

2012 2013 2014 2015 2016 2017 (forecast)

(％) 6.7％

12.4

16.3

24.5

27.0

10.8

7.2


Operating income

Ratio (left)

Operating income

(right)

(Billions of yen)

Aiming for Record-High Sales and Income

Aiming for Double-Digit Operating Income Growth

and the 4th Straight Period of Record Profit


②Dividends increased by ¥2 in the 1st half of 2017. ¥15 annual dividend is planned.

5 5 5 5 57

5 5 5 5

8

(8)

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016 2017(forecast)

Year-end dividendInterim dividend 13 yen

15 yen

① Our Stance on Shareholder ReturnsEnsure stable and sustainable returns. Aiming for a 30% consolidated payout ratio.

Approach to Shareholder Returns


Progress on Measures

In 2017


Basic Policies in the 1st Half of 2017

• Make the Management Structure Resilient to the

External Environment.

• Expand Peripheral Areas of Existing Businesses.

• Strengthen the E-Commerce Business.

Theme ① Improve Profitability

Theme ② Establish Foundation for Future

Business Growth


(％)

40

42

44

46

48

2015 1H 2015 2H 2016 1H 2016 2H 2017 1H

41.4％

43.7％

42.1％

41.1％40.8％

Theme① Improve Profitability

Cost of Sales Is Steadily Falling

Change in

Cost of Sales

Ratio


Theme① Improve Profitability

Major Capital Investments in 1st Half of 2017

• Chiba Plant:

liquid detergent1st Half

Results

• Akashi Plant:

oral care

• Thailand:

laundry detergent

2nd

Half

Plans

Boosting Production Capacity,Raising Efficiency

Boost capacity

in the value-

added field

Raise efficiency

of production

system

Expand

investment for

growth


Theme ② Establish Foundation for Future Business Growth

Expanding Peripheral Areas in Oral Care

Strengthening our lineup in the

bad breath prevention category

New brand NONIO

Slated for launch in August 2017

Salivary test systemNurturing the Oral Health Care Business

Enhancing our lineup in the

denture cleaning field

Dent Health Denture Care

Sales began in April 2017 exclusively in Hokkaido.



Strengthen Measures for the E-Commerce

Channel

Enhance Lion's E-Commerce

Business

Strengthen Cross-BorderE-Commerce

Diversify the Ways We Engage

Customers

Expanding the Scale of Lion’s Business byStrengthening the E-Commerce Business



China:

Strengthen Alliance with

the Alibaba Group


Enhance

E-Commerce Business

in Southeast Asia

and Beyond

South Korea:

Began Sales

of Lactoferrin

Expanding the Scale of Lion’s Business byStrengthening the E-Commerce Business

26

Further accelerate

business growthImprove

corporate profit.


V-2 PlanImprove profitability and

establish foundation for the

future business growthＶ-1 Plan

Rebuild the

profit structure

～2014

～2017

～2020

～2030Aiming for Future Growth

Reference Materials

28

Consolidated Statements of Income

(Billions of yen)

1st Half

2017

1st Half

2016

Y-o-Y Change

Amount %

Net sales 194.5 188.2 6.3 3.4

Cost of sales 80.5 77.4 3.1 4.0

Gross profit 113.9 110.7 3.2 2.9

Selling, general and administrative expenses 102.2 100.3 1.8 1.8

Operating Income 11.7 10.4 1.3 13.1

Non-operating income 1.3 1.1 0.1 10.8

Non-operating expenses 0.2 0.2 (0.0) (12.7)

Ordinary income 12.8 11.3 1.5 13.4

Extraordinary income 0.0 - 0.0 -

Extraordinary loss 0.4 0.7 (0.2) (40.8)

Profit before income taxes 12.5 10.6 1.9 18.0

Income taxes-current 2.4 2.9 (0.5) (17.8)

Income taxes-deferred 0.9 (0.1) 1.1 -

Profit 9.0 7.7 1.3 17.1

Profit attributable to owners of parent 8.2 7.1 1.1 15.5

29

Selling, General and Administrative Expenses

1st Half 2017 1st Half 2016 Y-o-Y Change

Amount % of sales Amount % of sales Amount %

Selling, general and

administrative expenses102.2 52.5 100.3 53.3 1.8 1.8

Sales commission 4.2 2.2 4.0 2.1 0.2 5.6

Promotion expenses 44.4 22.8 44.3 23.6 0.0 0.2

Advertising expenses 14.6 7.5 14.1 7.5 0.4 3.4

Transportation and

warehousing expenses9.0 4.7 8.6 4.6 0.4 5.6

Salaries and allowances 7.4 3.8 7.3 3.9 0.0 1.4

Research and

development expenses5.0 2.6 4.7 2.5 0.2 5.9

Other 17.2 8.9 17.0 9.1 0.2 1.2

(Billions of yen)

30

Extraordinary Income or Loss

(Billions of yen)

Jan-Jun 2017 Jan-Jun 2016

Extraordinary

incomeGain on sales of investment

securities0.0

Gain on sales of investment

securities-

Total 0.0 Total -

Extraordinary

loss

Loss on disposal of noncurrent

assets0.0

Loss on disposal of noncurrent

assets0.4

Impairment loss 0.3 Impairment loss 0.0

Other - Other 0.2

Total 0.4 Total 0.7

31

Consolidated Balance Sheets (Selected) I

1st Half 2017(As of Jun. 30, 2017)

2016(As of Dec. 31, 2016) Change

Current assets 172.2 185.4 (13.1)

Cash and deposits 19.2 17.8 1.4

Notes and accounts receivable-trade 55.2 60.2 (5.0)

Short-term investments 48.1 61.0 (12.8)

Inventories 43.7 39.7 3.9

Noncurrent assets 113.8 113.0 0.8

Property, plant and equipment 74.5 74.4 0.1

Intangible assets 1.4 2.8 (1.3)

Investments and other assets 37.8 35.8 2.0

Total assets 286.1 298.5 (12.3)

(Billions of yen)

32

Consolidated Balance Sheets (Selected) II

1st Half 2017(As of Jun. 30, 2017)

2016(As of Dec. 31, 2016) Change

Current liabilities 102.5 123.4 (20.8)

Notes and accounts payable-trade 43.1 50.9 (7.8)

Short-term loans payable 4.6 4.2 0.3

Accounts payable-other and accrued expenses 41.2 51.9 (10.6)

Noncurrent liabilities 17.8 17.1 0.6

Long-term loans payable 1.5 1.6 (0.1)

Net defined benefit liability 11.0 10.4 0.5

Total net assets 165.7 157.8 7.8

Capital surplus 35.2 34.5 0.7

Retained earnings 88.4 82.4 5.9

Treasury shares (5.5) (4.7) (0.8)

Accumulated other comprehensive income 4.5 2.6 1.9

Total liabilities and net assets 286.1 298.5 (12.3)

(Billions of yen)

33

Consolidated Cash Flow

1st Half

2017

1st Half

2016Change

Net cash provided by (used in) operating activities (3.6) 4.5 (8.1)

Net cash provided by (used in) investing activities (5.2) (5.3) 0.0

Net cash provided by (used in) financing activities (3.0) (5.0) 2.0

Effect of exchange rate change on cash and cash equivalents 0.0 (1.7) 1.8

Net increase (decrease) in cash and cash equivalents (11.8) (7.6) (4.2)

Cash and cash equivalents at beginning of period 77.7 61.2 16.4

Cash and cash equivalents at end of period 65.8 53.6 12.2

(Billions of yen)

34

Results by business segment

(Billions of yen)

Sales Segment income (operating income)

1st Half

2017

Y-on-Y change 1st Half

2017

Y-on-Y change

Amount ％ Amount ％

Consumer

Products

138.7 3.0 2.37.5 1.3 22.0

125.1 2.5 2.1

Industrial

Products

26.2 (0.3) (1.3)0.9 (0.2) (21.0)

15.7 0.5 3.4

Overseas58.2 3.0 5.6

2.5 0.0 3.452.3 3.1 6.4

Other14.2 2.0 17.3

0.5 0.2 79.21.4 0.1 11.1

Subtotal 237.5 7.9 3.4 11.6 1.4 14.1

Consolidated

total194.5 6.3 3.4 11.7 1.3 13.1

Upper line: Net sales; Lower line: Sales to external customers

Operating income: Subtotal represents segment income before offsetting inter-company transactions; consolidated total

represents consolidated segment income

35

(Billions of yen)

1st Half

2017

1st Half

2016

Y-on-Y change

Amount %

Oral Care 30.8 29.2 1.5 5.5

Beauty Care 12.7 11.1 1.5 13.8

Fabric Care 38.3 37.4 0.9 2.5

Living Care 9.5 9.9 (0.3) (3.3)

Pharmaceutical 18.1 19.0 (0.9) (4.8)

Other 29.1 28.8 0.2 0.9

Total 138.7 135.7 3.0 2.3

Sales Results by Products Category

Consumer Products Business

[Net sales]

36

Overseas Sales Results by Region

1st Half

2017

1st Half

2016

Y-on-Y

Change

Y-on-Y

Change(%)

Southeast

Asia 39.9 37.8 2.1 5.7

Northeast

Asia18.2 17.3 0.9 5.3

Total 58.2 55.1 3.0 5.6

(Billions of yen)

Southeast Asia ：Thailand, Malaysia, Singapore, andIndonesia (PT. IPPOSHA INDONESIA)

Northeast Asia ：South Korea, China, Taiwan and Hong Kong

[Net sales]

37

2017

Forecast2016

Y-o-Y Change

Amount %

Consumer

Products264.0 261.3 2.6 1.0

Industrial

Products32.0 31.3 0.6 1.9

Overseas 106.0 99.2 6.7 6.8

Other 3.0 3.6 (0.6) (17.1)

Total 405.0 395.6 9.3 2.4

By business segment

[Sales to external customers]


(Billions of yen)

38

4.3

7.2 7.8

3.93.8

5.7 5.4 4.95.4

5.1

13.5

6.1 5.8 5.4

5.75.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Jul-DecJan-Jun

10.810.3

11.2

13.7

11.111.8

8.8

16.0

10.26.5

5.7

4.9 5.66.4

9.4

10.0

5.5 5.2

Capital Expenditures and Depreciation Expenses

plan

Capital expenditures Depreciation expenses(Billion of yen)

Note: Both capital expenditures and depreciation expenses include amounts for intangible assets.

plan

39

Changes in Home Products and OTC Drug Markets

2012 2013 2014 2015 2016Jan.-Jun.

2017

Sales value 101 102 102 103 104 100

Unit sales 102 102 100 100 102 98

Average unit price 99 100 102 102 102 102

2) Environment of OTC Drug Market

2012 2013 2014 2015 2016Jan.-Jun.

2017

Sales value 98 99 100 102 101 100

Unit sales 99 99 98 101 100 98

Average unit price 99 100 102 101 101 102

Market trend of the total of 8 OTC drug markets in which Lion participates.(Percentage change over the year-ago period.)

1) Environment of Home Products

Source: INTAGE Inc. SDI Survey

Market trend of the total of 38 home product markets in which Lion participates.(Percentage change over the year-ago period.)

Source: INTAGE Inc. SRI Survey (Year-on-year data for 2012 is for 42 such markets in which Lion operates; data for 2013 and

2014 is for 40; data for 2015 is for 39; data for 2016 is for 38.)

40

Assumptions for Raw Material Prices and Currency

Crude oil (Dubai) Domestic naphtha Crude palm oil

2017

forecastsUSD52/BBL JPY38,000/KL MYR3,000/ton

US Dollar Thai Baht Korean Won

2017

forecastsJPY112.0 JPY3.2 JPY0.095

Raw material prices

Currency

41

The forecasts and projected operating results contained in this

report are based on information available at the time of

preparation, and thus involve inherent risks and uncertainties.

Accordingly, readers are cautioned that actual results may differ

materially from those projected as a result of a variety of factors.

Note: Figures are rounded down to the digits that are displayed.

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