FANCL Group Financial Results Briefing

Transcription

1 FANCL Group Financial Results Briefing (For the period April 1, 2014 to March 31, 2015) May 11,2015

2 Financial Report Executive Managing Director, and General Manager of Group Support Center Kazuyuki Shimada

3 Financial Highlights

4 Financial summary for the year ended March 31, 2015 Consolidated sales: 77,632 million (-4.3% YoY) Operating income: 4,001 million (+1.5% YoY) Sales: 47,471 million (-0.1% YoY) Operating income 5,557 million (+19.2% YoY) Sales by brand: FANCL (+2.7% YoY), ATTENIR (-12.5% YoY) Cosmetics FANCL Domestic (+4.9% YoY) Start of wholesale sales of Mild Cleansing Oil and Facial Washing Powder to drugstores. Sales growth due to makeup products and renewal of high-grade aging care essence Overseas (-10.3% YoY) A decline, due to withdrawal from local retail in Taiwan and Singapore (Period: Jan. to Dec. 2014) ATTENIR Although we renewed our major products, we could not halt the decline in the number of customers, so sales are down Nutritional supplements Other Sales: 23,285 million (-8.3% YoY) Operating income - 4 million (vs. income of 1,125 million last year) Domestic: Although sales declined as a reaction to the increase in sales tax, Calorie Limit for the Mature Aged performed well, with the result that sales have been on a recovering trend since Q2 Overseas: A decline, due to withdrawal from local retail in Taiwan and Singapore (Period: Jan. to Dec. 2014) Hatsuga Genmai: Sales: 2,372 million (-16.2% YoY) Operating income: 97 million (+79.7% YoY) Kale Juice: Sales: 2,679 million (-16.3% YoY) Operating income: 166 million (-25.1% YoY) 4

5 Results for the fiscal year ended March 31, 2015 FY to March 31, 2015 FY to March 31, 2014 (Unit: Millions of yen) Change over previous year Forecasts take into account the impact of the surge in demand prior to the consumption tax increase. FY to March 31, 2015 Change over previous year Sales 77,632 81,118 (4.3%) Cosmetics 47,471 47,525 (0.1%) 79,400 (2.1%) 48, % Nutritional supplements 23,285 25,386 (8.3%) 23,800 (6.2%) Other * 6,876 8,207 (16.2%) Operating income Ordinary income 4,001 3, % 4,283 4, % 6,950 (15.3%) 5, % - - Net income 2,301 1, % - - For details regarding profit and loss in each segment, and sales by channel, please see "Additional material" Reaction to the surge in demand: Sales billion, operating income billion 5

6 Analysis of the change in operating income Results + factors - factors 3,943 FY to March 31, ,380 Decrease in gross profit due to a reduction in sales Operating income increased due to an improvement in the cost-of-sales ratio and a reduction in fixed costs. 1,282 Increase in gross profit due to an improvement in cost-of-sales ratio Variable costs Decrease in other Decrease in variable costs marketing costs 16 Fixed costs Decrease in personnel costs 327 Decrease in other fixed costs (millions of yen) 4,001 FY to March 31, 2015 Cost-of-sales ratio: -1.7% YoY; increase in sales distribution ratio of cosmetics (previous financial period 58.6% current financial period 61.1%) Favorable sales of Calorie Limit for the Mature Aged, sale of beauty clinic business (that had a high cost-of-sales ratio) Marketing costs: million YoY (Breakdown: cosmetics mil., dietary supplements mil., others mil.) Factors of increases/decreases: Cosmetics: Reduction in cost of acquiring new users of ATTENIR, etc. Supplements: An increase in TVCM expenses for supplement Calorie Limit for the Mature Aged Other areas: A slight decrease in investment in marketing of Hatsuga Genmai and Kale Juice businesses 6

7 Full-year outlook

8 Full-year outlook to March 2016 (Unit: Millions of yen) FY to March 2016 FY to March 2015 Change over previous year Sales 90,000 77, % Cosmetics 52,500 47, % Nutritional supplements 29,500 23, % Other * 8,000 6, % Operating income 1,500 4,001 (62.5%) Ordinary income 1,650 4,283 (61.5%) Net income 900 2,301 (60.9%) For information regarding profit and loss by segment and sales by channel, please see Additional material. *Hatsuga Genmai: Net sales 3,100 mil (+30.6%), Operating income - 1,350 mil ( 97 mil. in previous year) Kale juice: Net sales 3,200 million (+19.4%), Operating income million ( 166 mil. in previous year) 8

9 Full-year outlook Analysis of change in operating income Plan + factors - factors 4,001 8,649 売上増 Increase in gross profit with increase in sales Despite a significant increase in sales, operating income is expected to decline due to an increase in marketing expenses 574 Increase in gross profit With decline in cost-of-sales ratio Variable costs -9,581 Increase in Marketing expenses -1,307 Increase in other variable costs -218 Increase in labor costs Fixed costs -617 (millions of yen) 1,500 Increase in other fixed costs FY to March 2015 FY to March 2016 Cost-of-sales ratio: -0.6% YoY. Improvement in production efficiency associated with increase in sales, increase in domestic sales mix of supplements. Marketing costs: + 9,581 mil. YoY (breakdown: Cosmetics + 3,477, Supplements + 4,403, Others + 1,700) Factors of increases: Cosmetics: Increase in TV ad costs, etc., for the facial cleansing category Supplements: Increase in TV ad costs, etc., for new focus products such as Calorie Limit for the Mature Aged and Enkin. Others: Increase in promotion costs for Hatsuga Genmai, Kale Juice. 9

10 New medium-term management plan (FY2016 to FY2018) Founder, Chairman, Representative Director Kenji Ikemori

11 Medium-term strategy (FY2014 to FY2016) review 1 Structural reform, elimination of areas of concern Main structural reforms (1) Elimination of unprofitable divisions Sale of beauty clinic business, withdrawal from retail in Taiwan and Singapore, closure of unprofitable shops (2) Efforts to see things from the customers' perspective (3) Training of professionals The opening of FANCL College Aiming to quadruple the number of training sessions for store staff compared with before the college opened (4) Reduce external dependency FANCL carrying out the renewal of the FANCL Ginza store in house at 1/5th the cost of using outside contractors FANCL Ginza Square Renewed in October

12 Medium-term strategy (FY2014 to FY2016) review 2 Main structural reforms (5) Transition to a holding company structure Split off of each operating company. Enhance specialization, promote management with greater urgency (6) Store reforms Success of new hybrid stores (Sales (to end of Feb.) up approx. 15% YoY) First Store in Kyoto Porta maintaining highest turnover per SqM. High interest from major retail operators. Expansion of "1-product recommendation" activities (See p. 24) (7) Active advancement into the distribution sector Cosmetics: Start of wholesale sales to drugstores throughout Japan (approx. 7,700 stores), Start of wholesale sales to Seven & i Holdings private brand, Botanical Force Health foods: Increase number of stores where these products are introduced (approx. 47,000 stores as of March 31, 2015) up 16,000 stores compared with 2 years ago (8) Improvement in staff motivation FANCL cosmetics (domestic) sales: Up 10% compared with before return to management Supplement business (domestic) sales: A recovery since September last year (only March and November were below last year) 12

13 Medium-term strategy (FY2014 to FY2016) review 3 Shift to a structure which will make it possible to achieve FY2016 goal of operating profit margin of 8% Estimated corporate results for the FY to March 31, 2016 based on current trends Sales 77.6 billion 83 billion Decrease in reaction to the sales tax increase 1.8 billion Operating income 2.6 billion billion 6.5 billion Previous FY (The period to March 31, 2015) Cosmetics +7% Supplements +3% Other ±0% Current FY (The period to March 31, 2016) (Details) FANCL cosmetics: +4% ATTENIR cosmetics: ±0% boscia consolidation: (+2.0 billion yen) 4.0 billion Previous FY (The period to March 31, 2015) 1.0 billion Increase in variable costs Increase in Influence of gross profit surge in from greater demand sales in response to increase in sales tax Current FY (The period to March 31, 2016) Operating profit margin 5% 8% 13

14 Formulation of the new medium-term management plan Formulation of a new medium-term management plan to recognize signs of growth, and aim for even further growth As a result of management reforms, we have eliminated areas of concern, and have a structure to move forward A bold growth strategy will be launched, coinciding with clear signs of growth There is a high level of awareness of the FANCL brand Our headquarters, manufacturing and research have the capacity to support a doubling of sales. In our new medium-term management plan, we will significantly increase sales by using all of these factors effectively 14

15 An outline of new medium-term management plan

16 Major policies Maximum use of investment in advertising, with aim of doubling sales in 5 years 1 Strategic investment in advertising 2 Expansion of distribution and store channels to maximize advertising effects 3 Strengthening cross-selling 16

17 1 Strategic investment in advertising Past investment in advertising Sales have stagnated over the last 10 years The ratio of advertising expenditure to sales (advertising costs sales) has trended at around 10% With restrictions in the income plan, investment in advertising has been half-hearted Trends in domestic sales of FANCL (cosmetics and health foods) and advertising expenditure Domestic sales Ratio of advertising expenditure to sales 10.0% 11.1% 13.1% 10.0% 8.4% 8.9% 10.4% 11.4% 10.5% 10.9% 7.8% 7.4% 7.6% FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12 FY '13 FY '14 FY '15 17

18 1 Strategic investment in advertising Advertising investment Boldly invest in advertising to significantly increase sales This investment will be different to ordinary advertising and will be totaled over a 3-year period. There will be additional advertising expenditure of around 5.0 billion for cosmetics, and around 15.0 billion for health foods We will make the transition to a structure that will increase our sales volume and yield firm profits with ample investment in advertising 18

19 1 Strategic investment in advertising Example of Calorie Limit Since 2010 we have focused our investment in advertising for Calorie Limit, with TV spots 2 or 3 times a year Sales increased to about 3.5 times compared with sales prior to the promotion At the start of investment in advertising, profits decreased, but then significantly increased as sales rose Trends in Calorie Limit sales, advertising expenses and operating income Sales (million yen) 8,000 Sales Advertising expenses Operating income Compared with the FY to March 31, 2010 Sales 2 times higher Advertising expenditure 8 times higher 6,000 4,000 2,000 Operating income down by half Compared with the FY to March 31, 2010 Operating income 2 times higher 0 FY10 FY11 FY12 FY13 FY14 FY15 19

20 2 Maximizing advertising effect Strengthening area marketing Use adverting media that match the local region. Aim to raise name recognition in local regions Present situation In local regions, the number of stores in relation to population is low The amount of advertising is also low Area marketing Result Compared with cities, the level of brand recognition is low The ratio of customers to population is low Local newspapers Local TV stations Town magazines Customers Retail Store Wholesale Aim to raise the level of name recognition through the effective use of local advertising media. Retail stores and Wholesale assigned as, and expand sales 20

21 2 Maximizing advertising effect Expansion of points of sale To maximize the advertising effect, we will first expand points of sale Increase coverage and then push advertising to increase profits 1 Increase the number of stores we distribute product to Health Cosmetics 60,000 50,000 40,000 30,000 Total no. of stores carrying our supplements 41,838 47,316 60,000 stores Promote product value rather then product price, avoiding damaging the value of the brand At present Lawson approx. 11,500 stores Drugstores approx. 7,700 stores 20,000 FY 14/314 期 15/3 FY 15 期 16/3 FY 16 期 17/3 FY 17 期 FY 18/318 期 Measures Develop products exclusively for distribution Cooperate in carrying out sales measures Strengthen the relationship between FANCL and the stores that handle our products Increase placement rate at drugstores and increase sales per store Expand new sales channel, such as specialty shops 21

22 2 Maximizing advertising effect Expansion of points of sale Built up a system of 350 directly managed stores Store opening strategy Few stores in local regions. Stores are concentrated in major urban centers. Therefore, mainly open stores in main cities that have markets that are at least 200 thousand people in size. Open small satellite stores in the areas surrounding flagship stores Use a dominating approach in which we open stores en masse in a specific region to coincide with a rise in the number of stores to which we distribute, to increase the advertising effect (area marketing) Low-cost model Trend in store numbers 164 stores FY stores FY2016 (Plan) 259 stores FY2017 (Plan) 350 stores FY2018 (Plan) Reduce the costs of opening stores by standardizing the stores to reduce furniture and fitting costs Employ part-time workers to reduce store overall personnel costs by 10% After establishing a high-profit model, carry out an intensive storeopening campaign from the following financial year onwards 22

23 3 Strengthen cross-selling - Utilize strengths of full product lineup Issue 1: Only the star products (entry products) are selling Strengthening cross-selling from star products to other products Entry products Vitamins, minerals Different supplements for each kind of ailment afflicting middle-aged and elderly people Hatsuga Genmai, Kale Juice etc. Issue 2: Many customers don't know what they should buy Sell an assortment of supplements, specifically for each gender and for each age bracket, so that customers will find it easier to make choices Supplements formulated for each gender and for each age bracket 1 Base elements that help heal the body's functions 2 Elements that the body produces less of as it ages 23

24 3 Strengthening cross-selling Expansion utilizing the unique characteristics of each channel Retail Store: Encouragement of "1-product recommendations" Trends in average no. of purchases per store No. of purchases FY 2015 Mail order: Improve web marketing Product concurrent purchase analysis Prod. A Prod. B Prod. C Concurrent purchase Rate 6.5% Concurrent purchase Rate 2.4% Concurrent purchase Rate 2.6% Customer data analysis Female 30s Uses stores Prod. D Concurrent purchase Rate 1.9% Buys gifts FY 2014 Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. A 10% rise in average purchase unit price * Excluding foreigners visiting Japan Prod. A Recommendation Analyze customer data for each product and the products that customers concurrently purchase with it. To each customer, introduce the products that we think they are interested in, via the WEB and our magazine. Raise the rate of concurrent purchasing 24

25 Numerical targets of our new medium-term management plan In the first FY, profit levels will be low as a result of proactive investment in advertising, but from the second year onwards, we will start to see return on investment and profitability will significantly increase Consolidated sales Consolidated operating income At least1,500 (%) Operating profit margin 1,250 Units: 100 million yen 200 Cosmetics business (5%) (2%) 100 FY15 FY16 FY17 FY18 FY20 Actual results Targets 47,471 million yen (12%) Annual average growth rate 12% (8%) 66,700million yen (9%) Nutritional supplements 23,285 million yen (0%) Annual average growth rate 25% 46,000 million yen (12%) ROE 3% At least 8% At least 10% 25

26 Health business strategy

27 Health science Japan's national health expenditure problem National health expenditure will reach around 40 trillion yen out of Japan's total tax revenue in This is a dangerous situation (Trillion yen) Trends in national health expenditure Health expenses per person are 307, (this includes people who don't create any health costs) As people age, the health expenditure per person rises, and exceeds 800 thousand year per person over the age of 70 The average age of Japanese citizens is rising, and it will rise higher yet... 27

28 Health science Vision Once again, innovate as a pioneer in the dietary supplement industry Support customers' health across their entire lifetime As Japan's leading health-support company......establish a strong position. Customers achieve Good Aging (Good Aging: Living your whole life in good health, both physically and mentally) 28

29 Health science The relaxation of regulations covering the functional claims displayed on health foods April 2015: The start of a new system covering the functional claims displayed on health foods, as part of Prime Minister Abe's Cabinet's growth strategy. As a pioneer in supplements, we will utilize our research systems, achievements and know-how FANCL Research Institute 145 researchers (as of March 31, 2015) Collaboration with medical institutions Many years of proven evidence-gathering The first health foods displaying functional claims have arrived! Of the initial 8 products recognized under the new system, 2 of them are FANCL products Going on sale on June 19 "Enkin" and Total Fat Support" 29

30 Health Science Appeal of Inner Body Effectiveness Design Promoting product development focusing first on effectiveness within the body About Inner Body Effectiveness Design The body can only absorb a certain amount of amount of nutrients Any excess nutrients taken are discharged from the body, and in some cases can cause harm to your body Inner Body Effectiveness Design considers effectiveness within the body, duration effectiveness, and intake balance absorption accumulation effiacy Continue development of highly unique products with a focus on Inner Body Effectiveness Design, leveraging the high technological capabilities of our R&D Division 30

31 Health science Basic strategy 1 Develop middle-aged and elderly segments 2 Cultivate star products through investment in advertising 3 Develop preventative medicine business ahead of others 31

32 180, , , , , , , , , Health science 1 Development of middle-aged and elderly segments There is a gap in population distribution of people in their 50s or older, with large room for growth Our customer age segments and the Japanese population age distribution Annual purchases of health foods by age group 20,221 Gap 10,253 12,870 7,323 4,778 Age: 20s 30s 40s 50s 60s 70s 80s + Population distribution (,000 people) Customers buying supplements by mail order Few customers aged 50 or over 20s 30s 40s 50s 60s+ Market scale Annual purchases per person Source: Intage SLI survey People in the middle-aged and elderly segments spend more than double that of people in the young adult segment 32

33 Health science1 Development of middle-aged and elderly segments Improve our unique products for the middle-aged and elderly. Make maximum use of the system covering the functional claims displayed on health foods New product "Enkin" that complies with the new system Current packaging New packaging Enkin sales trend Plan +70% Clinical trials carried out (Plan) Launch of free trial campaign for 10,000 customers Deploy advertising that utilizes the system covering functional claims displayed on health foods. This FY we will invest 1.2 billion in advertising, and will grow sales by 70% 33

34 Health science 2 Cultivate star products through investment in advertising Carry out continuous advertising investment in key focus products, to grow them into star products Main products to be emphasized Enkin Calorie Limit for the Mature Aged Ukon kakumei Hatsuga Genmai Kale Juice In addition to these, from next FY onwards, launch sales of potential star products every year FY2016 FY2017 FY2018 Total Amount of additional investment in advertising 5.5 billion 5.0 billion 4.5 billion Approx. 1.5 billion Carefully nurture star products and increase sales through cross-selling 34

35 Health science 2 Advertising investment in Ukon kakumei Ukon kakumei Ukon will go from being a drink to being in capsule form Made possible through FANCL's own "Liquid Ukon Capsule production method" (patent pending) One capsule has 300 times the concentration of Ukon component Won't interfere with your first drink A tasteless, odorless capsule that Promotion Use various media in concert, mainly TV commercials and transit advertising Aim to raise levels of awareness and expand sales Condensed into Capsule form won t alter the flavor of drinks Approx. 100 yen per time June 2015 Osaka area Test using TV commercial, etc. November 2015 Full-scale promotion nationwide Clearly inform viewers of the outstanding product characteristics Plan for a (YoY) sales increase of 4 fold or greater 35

36 Health Science Reinforcement of periodic delivery service New periodic delivery service From September 2014: Began offering periodic delivery service for all health foods, including supplements Subscriber numbers 1.7 times Hatsuga Genmai Kale juice only End of Aug End of Mar *Customers purchasing supplements, Hatsuga Genmai, Kale juice Orders Normal orders Periodic Orders 30%+ *2015/3 Existing customers purchasing supplements, Hatsuga Genmai, Kale juice Rate of continuance 4 times New Normal Periodic Existing 20% UP Normal Periodic In the medium term, raise the proportion of periodic orders to 50% by promoting customer registration with products suitable for periodic deliveries, and campaigns available only for periodic delivery customers 36

37 Health Science Reinforcement of the supplements market 120% Further strengthen through expansion of hybrid stores Supplements at directly managed store sales YoY (2014/4~) 100% 80% Constant YoY increase since July 60% Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Hybrid Shop: Kyoto Porta Store Expansion of supplement displays at all stores from June last year; store front displays also enhanced Expansion of beauty and health hybrid shops - Taking success of Kyoto Porta Store nationwide (Supplements sales mix: +10% vs current model) Current FY: Ten new stores planned as hybrid shops, 40 shops planned for renovations, 90% of stores to be hybrid shops in three years. 37

38 Health science 3 Develop preventative medicine business Good Aging Program Based on customer information, such as their genetic data, suggest ways that doctors or health counselors can combat health risks November 2014 July 2015 Build up know-how Seminar-based: Addition Mail-order deployment Systemization: Multiplication Actual results In 5 months, about 100 seminars were held, and 40% of the attendees requested genetic testing In the future In FY2016 we plan to hold over 200 seminars. The number of business partners, including Nippon Life Insurance Co. are increasing July 2015: Mail-order expansion As a result of the expansion of mail orders, we are aiming for sales of at least 5 billion yen in 3 years' time 38

39 Health science 3 Develop preventative medicine business Health Promotion Program Based on the results of regular health checks, propose programs for promoting health and improving lifestyle habits to 3rd-party companies and organizations. Promote health and reduce medical expenses for employees in companies that we offer our program proposals to Responsible for maintaining health at various companies Company HR / Admin. (Health Co-op) Employees Enhanced employee productivity Reduction in medical costs Health checkup data Offering of health promotion service Activity Amount of activity, body weight, etc. Payment of a service fee FANCL Health Science Analysis of individuals Selection of action policy Dietary, exercise menu Proposals of supplements Analysis of details of activities Adopted by Kanagawa Prefecture as a model business for the proactive disease-prevention industry In-house testing is currently underway. From the second half of 2015, we will aim to introduce this program to other companies 39

40 Health science Roadmap FY 2016 FY 2017 FY 2018 Compliance with system for functional claims on health foods Existing supplements Start of sale of assorted supplements Active investment in advertising for key focus products Emphasize products based on design of "efficiency within the body" Good Aging Program Start sales of 3 new products Expansion of supplements that reduce current risks Health Promotion Program Health Promotion Program in-house expansion Expansion to other companies Functional foods Re-appeal of Hatsuga Genmai Full-scale deployment of Kale Juice in a new form Develop recipes that can provide counseling Commercialize functional foods Launch of healthy restaurants 40

41 Beauty business strategy

42 FANCL cosmetics vision Vision Offering bare-skin beauty to the people of the world, with Mutenka Mission Be beautiful now and in the future. Making healthy, energetic and beautiful skin with Mutenka, to support your lifestyle. 42

43 FANCL Cosmetics Redefinition of the value of Mutenka 1980 Cosmetic pollution Mutenka cosmetics Cosmetics we use for beauty must not interfere with beauty 2015 Women are facing a greater range of stresses Technical Environmental Social Don't inflict stress Remove stress Mutenka anti-stress science People have the power to become beautiful Give you beautiful skin Mutenka cosmetics Cosmetics for "peace of mind" and "safety" with true functionality 43

44 FANCL Cosmetics The cosmetics market and our customer numbers Sales (million yen) 2,500,000 Scale of the cosmetics market The market is flat Our customer numbers in each age segment (FY2015) Challenge: the acquisition of customers aged 50+ 2,000,000 1,500,000 1,000, ,000 FANCL customers (bar graph) Japan s female population (shaded area) 年 05 年 06 年 07 年 08 年 09 年 10 年 11 年 12 年 年 14 年 15 年 16 年 ( 見込 )( 予測 )( 予測 ) (Forecast) (Plan) Source: Fuji Keizai Cosmetics marketing handbook summary 2014 (Plan) Although the market is forecast to remain flat, there is room for growth through the acquisition of customers aged

45 FANCL cosmetics Basic strategy Basic strategy Redefine the value of Mutenka, and further develop it to create a unique position for FANCL centered on anti-stress science 1 Expand sales by enhancing the facial cleansing category 2 Increase number of skin care users who are receptive to the idea of Mutenka" 3 Move into new areas (the mature market / personal cosmetics) 4 Invest in advertising that matches the characteristics of the products 45

46 FANCL cosmetics 1 Enhancing the facial cleansing category Enhancement measure 1 Correctly understand market trends and customers' needs. Expand the range of items. Promote the acquisition of new users by investing in new formulations Cleansing Gel formulations are increasing Facial washes Cream formulations have the No.1 share By investing in formulations for which there is high demand, we can activate the facial cleansing category NEW: Gel-type "Mild Cleansing Oil" "Mild cleansing gel" ( 1,700 (not including tax)) For people who don't like oils NEW: Cream-type facial wash "Aging Care facial cleansing cream" ( 1,400 (not including tax)) Advanced foaming quality Advance sales at Lawson stores began in April 2015 Aim to increase the number of purchasers in the facial cleansing category 46

47 FANCL cosmetics 1 Enhancing the facial cleansing category Enhancement measure 2 Expand promotional activities coordinated with advertising commercials Strengthening of distribution channels and active acquisition of new direct-sales channels Promotional deployment that utilizes the characteristics of each channel Increase the number of stores that we distribute products to. Increase sales per store Sales trend in the facial cleansing category New products Existing products +15% +12% 1 Encourage user acquisition through investment in new formulations 2 Expand promotional activities coordinated with advertising commercials Aim to significantly increase sales FY 14/3 14 期 FY 15/3 15 期 FY 16/3 16 期 FY 17/3 17 期 18/3 FY 18 期 ( 計画 ) ( 計画 ) ( 計画 ) 47

48 FANCL cosmetics 2 Increase the number of skin care users Enhance the functions of skin care items that can maximize "Your ability to become beautiful by yourself." Gradually renew these products Renewal and launch of the "Facial Whitening" line (March and May 2015) Achievable with Mutenka FANCL cosmetics Original concept Whiten your skin yourself March 20, 2015 launch Essense, mask May 20, 2015 launch Cosmetic liquid, emulsion 48

49 FANCL cosmetics 3 Move into new areas (the mature market) Size of the anti-aging cosmetic market Development of products for the mature generation Sales (million yen) 400, , ,000 Has grown 1.5 times in 10 years Mutenka 250, , , ,000 50, 年 05 年 06 年 07 年 08 年 09 年 10 年 11 年 12 年 13 年 14 年 15 年 ( 見込 )( 予測 ) Source: Fuji Keizai "Keshōhin māketingu yōran sōkatsu-hen" Ease of use Own analysis Simple design Develop products and services from our unique perspective. Aim to launch in FY

50 FANCL cosmetics 3 Move into new area (personal cosmetics) Aims of expansion into new area (personal cosmetics) Acquisition of segments with high level of beauty consciousness Use our research and technical abilities to enhance our brand image Personal cosmetics "The present x the future" Personal cosmetics that answer skin problems both in the present and future Analysis of each individual's skin "characteristics and risks" Use of independent technology: The Skin biomarker Analysis Recently announced that sales will begin in the early summer of

51 FANCL cosmetics 4 Advertising strategy Pursue an advertising strategy that has clear aims and purposes Facial cleansing category Appeal elements: Product functions and qualities/ place of purchase Mainly TVCM Appeal elements: Skin care category Brand philosophy/product characteristics Mainly WEB and magazines Effects we're aiming for: Effects we're aiming for: Product functions / greater awareness Channel induction / sales expansion Promotion of understanding / communication of thoughts Acquire customers who have a high level of affinity First round: From May 2015 Promotion coordinated with TV commercial and other media WEB-focused Understanding of concept / gaining of empathy 51

52 ATTENIR Rebuilding the business base / Product strategy Work to rebuild the business base through management reform Return to the starting point. Create a new logo and brand statement ATTENIR founding philosophy: "High quality, low cost, high fashion sense" Corporate logo Brand statement (Translation: Generous is beauty ) Product strategy Develop series of new products that will allow users to feel "a sense of beauty and being lavish" Renewal of main products in the period from November 2014 to April

53 ATTENIR Promotion strategy ATTENIR Promotion strategy Previous financial year Stagnation in sales measures was a factor in flat sales Current financial year Seek a recovery of sales by adding new products and reviewing measures Enhancement of large-scale seasonal campaigns Continuous renewal of main products Strengthening cross-selling from key items to other products Centering on WEB-based promotions, aim to acquire new users and increase levels of customer continuity Cyclic communication Using continuous information dissemination via WEB media such as special sites and SNS, enhance customer loyalty, so that we can "acquire new users" and "increase levels of customer continuity" Get new users to try our products that have a high rate of customer continuity and expand our customer base Evaluate Share Disseminate Try Buy Use Collect evaluations Special sites, SNS, Brand understanding/ affinity Meet Gather 53

54 Beauty roadmap FY 2016 FY 2017 FY 2018 Increase sales by expanding the range of facial cleansing items FANCL cosmetics Expansion of personal cosmetics that use stratum corneum The Skin biomarker Analysis Development of mature market Skin-care item renewal Full-scale promotion Improve distribution channels (increase numbers of stores that handle the products/boost sales of each store) Promote the specialized training of staff so that they can make better suggestions and look after customers properly Cycled communication Full-scale operation Cycled communication Model establishment ATTENIR cosmetics Renew main items Skin care investment for the mature generation Improve collection (develop into original brand) 54

55 Overseas

56 GLOBAL Growing US subsidiary (boscia) is now consolidated The name "boscia" means BOtanical SCIence with Advanced technology US subsidiary, FANCL International, Inc., and boscia will be consolidated from FY2016. A strong partnership with Sephora, a top cosmetic retailer, will continuously support a high growth rate. boscia is the best seller in Sephora's natural skin care category $US,000 20,000 16,000 12,000 Trends in the revenue of FANCL INTERNATIONAL, INC. Continue positive operating margin since Forecast 6% of operating margin FY2015. Annual growth of 20% 8,000 4, boscia is expanding into Asian and European markets with planned stores in NY and LA. boscia will be established as the 3 rd consolidated brand through reverse importation into Japan with expected annual growth of 20%. 56

57 (Reference) FANCL INTERNATIONAL, INC. Summary Business summary boscia brand concept Sales regions Star products Established July 1997 Paid-in Capital US$9.2 million (100% owned by FANCL ASIA (PTE) LTD) Wholesale and mail-order business of boscia brand, mail-order business of FANCL brand boscia uses cutting-edge technology and botanical science to create innovative products without the use of harsh preservatives. (No. of items: approx. 50) On sale in 941 stores of 9 countries, US: 680, Canada: 48, Mexico: 10, China: 173. * No. of Sephora stores that carry boscia products Black Mask Black Cleanser Makeup Remover BB Cream SPF27 Price: $34 Price: $28 Price: $28 Price: $38 57

58 Management base

59 Approach to management base, investments Management base Cost-to-sales ratio reduction Cost reduction Staff training By streamlining our production system over 5 plants, we are handling the increase in sales and reducing our cost ratio Working to enhance profitability in each unit Train highly specialized staff Introduce an HR system to assess professional staff Further improve store staff training to support our plan for 350 stores Actively promote women to management positions (At present, 38% of managers are women) Investment R&D Information system Stores May 2016: Establishment of second laboratory Develop star products and improve of evidence gathering Begin a thorough reform of IT costs Build a system base that doesn't depend on external service providers Aim to have a 350-store system over the course of 3 years 59

60 Capital policy and returns to shareholders

61 Capital policy Improve capital efficiency by growing sales and profits. Aim to achieve a ROE of at least 8% in 3 years' time by carrying out our growth strategy A healthy financial state Growth investment Priority given to growing sales and profits and improving profit margin Returns to shareholders A consolidated dividend payout ratio of at least 40%, and flexible share buy-backs In the 3rd year: a ROE of at least 8% 61

62 Returns to shareholders Shareholder return policy Dividends Acquisition of treasury stock Cancellation of treasury stock Set the dividend payout ratio to be at least 40% of consolidated net income Take into account the supply and demand of funding for facility investment, etc., as well as the movements in the Company' stock price. Carry out policy in a flexible manner with the objective of enhancing capital efficiency. Cancel treasury stock that exceeds roughly 10% of the total number of shares that are outstanding Treasury stock Purpose Total number of shares Total cost of treasury stock purchase Making market offers Treasury stock acquisition is being undertaken in an effort to enhance shareholder returns and to improve capital efficiency by exercising flexible capital asset policy in response to changes in the environment. 150,000 shares (upper limit) Ratio of treasury stock to the total number of outstanding shares, after the cancellation of treasury stock: 2.34% 2,500 million (upper limit) Term From May 12, 2015 to August 31,2015 Dividend forecast The annual forecast dividend for the financial year to March 31, 2016 is 34 per share In the medium term, we aim to increase the consolidated dividend payout ratio to at least 40%, in accordance with Company policy 62

63 April 2015 Sales performance of our main businesses Preliminary figures for domestic sales in the period April 1 to April 30, 2015 Change over previous year Change over period 2 years ago FANCL cosmetics +25% +30% Supplement business +50% +10% * Since these are preliminary figures, there may be some difference between them and the values that we disclose on a monthly basis. FANCL cosmetics: Sales of our Summer Kit and Special Care are doing well In May we plan to hold a "Mild Cleansing Oil" promotion campaign Foreign tourists visiting Japan also contributed. Supplement business: TV advertising spots for Calorie Limit for the Mature Aged in the period from April 10 to 28 The promotion was successful and sales of the Calorie Limit series rose 2.5 times year-on-year 63

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