LIXIL : Financial Highlights, CFO Message

FYE2018

PERFORMANCE

"The future	Revenue
	¥1,664.8 billion
is bright for
Core Earnings Ratio
companies that
	4.5%
can respond to
	ROE
new opportu-	9.4%
nities. I believe
	Net Interest-Bearing Debt / EBITDA
4.0 times
	our industry is
well positioned	Ratio of Equity Attributable to Owners
	of the Parent
to respond to	29.3%
megatrends in
	Year ended March 31, 2018
demography
and technology."
Kinya Seto, President and
Chief Executive Officer

Financial Highlights

Net Interest-Bearing Debt / Net Debt-to-Equity Ratio YoY 14.0%

(¥ billion)

LIXIL Group Corporation and Consolidated Subsidiaries Year ended March 31

Equity Attributable to Owners of the Parent Ratio of Equity Attributable to Owners of the Parent

YoY 12.7%YoY 2.5 Points

800

160%

(¥ billion)

800

60%

Revenue

YoY 1.9%

Core Earnings / Core Earnings Ratio

YoY 16.1%

616.9

(¥ billion)

(¥ billion)

100

8.0%

0

15

16

17

18

0.0%

Net Interest-Bearing DebtNet Debt-to-Equity Ratio (right)

0

15

16

17

18

0.0%

Repayment of interest-bearing debt has been proceeding steadily, and net interest-bearing debt as of March 31, 2018 was down by 14.0% year on year at ¥549.2 billion, representing a further enhancement of the Company's overall financial soundness.

Equity Attributable to Owners of the ParentRatio of Equity Attributable to Owners of the Parent (right)

0

15

16

17

18

0

15

16

17

18

0.0%

JapanOverseas

Core EarningsCore Earnings Ratio (right)

Equity attributable to owners of the parent, taking into account the profit for the year attributable to owners of the parent, stood at ¥616.9 billion as of March 31, 2018. The ratio of equity attributable to owners of the parent rose by 2.5 percentage points year on year to reach 29.3%.

Revenue increased by 1.9% year on year to ¥1,664.8 billion, reflecting, among other factors, an upturn in sales of plumbing products, both within and outside Japan, due to effective marketing activities.

Core earnings declined by 16.1% year on year to ¥75.3 billion, due to the combined impact of an increase in distribution costs resulting from increased sales, the rising price of raw materials and a substantial rise in SG&A expenses relating to upfront investments.

Earnings per Share (EPS)

YoY ¥41.1

Dividends per Share / Dividend Payout Ratio

YoY ¥5

Purchase of Property, Plant and Equipment and Purchase of Intangible Assets

YoY 2.5%

Depreciation and Amortization

YoY 6.5%

SG&A Expenses / SG&A Ratio

YoY 5.7%

EBITDA / EBITDA Ratio

YoY 6.3%

(¥)

(¥ billion)

189.1

100

(¥ billion)

(¥ billion)

600

60.0%

200

12.0%

488.2

137.1

0

15

16

17

18

Earnings per Share (EPS)Dividends per SharePayout Ratio (right)

0

15

16

17

18

0.0%

0

15

16

17

18

0.0%

Purchase of Property, Plant and Equipment and Purchase of Intangible Assets

Depreciation and

AmortizationSG&A ExpensesSG&A Ratio (right)

EBITDAEBITDA Ratio (right）

SG&A expenses rose by 5.7% year on year to ¥488.2 billion as a result of upfront investments, including marketing expenses and IT systems depreciation costs. The SG&A expenses ratio also rose, increasing by 1.1 percentage points year on year to 29.3%.

EBITDA declined by 6.3% year on year to ¥137.1 billion, because of the fall in core earnings.

In the fiscal year ended March 31, 2018, earnings per share (EPS) rose by ¥41.1 year on year to ¥189.13, and dividends per share rose by ¥5 year on year to reach ¥65. LIXIL's dividend policy is to maintain a payout ratio (on a consolidated basis) of at least 30%.

Purchase of property, plant and equipment as well as of intangible assets amounted to ¥70.0 billion for the fiscal year ended March 31, 2018, mainly as a result of investment in new plants to expand production capacity.

Cash Conversion Cycle (CCC)Profit (Loss) for the Year Attributable to Owners of the Parent

YoY 28.4%

Total Assets ROA

YoY 3.2%YoY 0.6 Points

(Days)

ROE

YoY 1.5 Points

(¥ billion)

(¥ billion)

54.6

2,107.1

60

15.0%

3,000

2.6%

3.0%

74

72

70

68

0

0.0%

15

16

17

18

JGAAP and Including Global Measures*IFRS

-30

-7.5%

-1.5%

* Excluding project businesses

-60

15

16

17

18

-15.0%

15

16

17

18

-3.0%

Profit (Loss) for the Year Attributable to Owners of the ParentROE (right)

Total AssetsROA (right)

As a result of the accumulated benefits from activities implemented to improve the cash conversion cycle (CCC), as of March 31, 2018, the average time elapsing from purchase of materials through to sales and receipt of payment was 76.6 days.

Profit for the year attributable to owners of the parent rose by 28.4% year on year to ¥54.6 billion, mainly due to an increase in profit before tax caused by gains on sales of unused assets and shares of subsidiaries and an affiliate.

Total assets as of March 31, 2018 increased by ¥65.0 billion year on year to ¥2,107.1 billion, reflecting the impact of foreign currency translation adjustment and the fact that banks were closed on the last day of the fiscal year, as well as the increase in goodwill deriving from the acquisition of new subsidiaries and other intangible assets.

Notes: 1. Due to the Company's decision to divest consolidated subsidiary Permasteelisa S.p.A. in August 2017, the Company has classified the operations of

Permasteelisa and all of its subsidiaries as discontinued operations. For this reason, figures for revenue, core earnings, SG&A expenses, and EBITDA since the fiscal year ended March 31, 2017 include only the results for continuing operations.

2. The Company has adopted International Financial Reporting Standards (IFRS) from the fiscal year ended March 31, 2016. Figures for the fiscal year ended March 31, 2015, have been restated based on IFRS for comparative purposes.

CFO Message

We have solidified the foundations for new growth, and are making steady progress with the accounting and financial aspects of the Medium-Term Plan

Establishing a More Sound Financial Condition

In FYE2014, to enhance its financial strength, LIXIL set a goal of generating ¥100 billion in free cash flow through improvement in its cash conversion cycle (CCC). We have so far achieved ¥71.8 billion of the ¥88.0 billion forecasted for the end of FYE2018.

Future capital investments will be made within the scope of depreciation, in line with the return from investment, in order to reduce the absolute cost of borrowing and improve the net Debt / EBITDA ratio.

connects the inside and outside environments with the same pleasing comfort of a veranda.

One of the main reasons behind the push to improve financial strength was our past problems with regulating supply and de-mand on a global level. Insufficient supply capacity for strong-selling products had resulted in opportunity loss. To address this issue, as well as to reduce shipping costs, we have built or expanded production facilities to meet the needs of particular regions.

Streamlining of Business Portfolio Revision and Investment in Differentiated Products

LIXIL has been pursuing M&A with overseas companies, and to further enhance the effectiveness of this strategy we have taken a proactive stance toward revising the business portfolio.

SACHIO MATSUMOTO

Representative Executive Officer

Executive Vice President, Finance, Treasury, and M&A Chief Financial Officer (CFO)

As a result of this capital investment, working capital tempo-rarily increased during the subject fiscal year due to adjustments for reasonable inventory levels, and our CCC was extended. However, with the full-fledged operation of these plants to devel-op competitive products, we are generating a positive cycle in which invested capital contributes to increased earnings.

In August 2017, LIXIL decided to divest the Italian construction group Permasteelisa. As a result, the equity ratio improved. We have further strengthened our financial base by selling shares and land, including dissolving our joint venture in China with the Haier Group.

Another important strategy is to fully utilize LIXIL's "intangible assets" of design and brand to offer differentiated products that consumers are seeking across the world. This is particularly rel-evant to global business development for innovative kitchen and bath products. While utilizing common platforms for the basic technologies and product frameworks to realize efficiencies in procurement, production, and inventory, we will also pursue dif-ferentiation with exceptional design and brand, offering a global lineup of attractive, high value-added products.

Our measures during the fiscal year ended March 31, 2018 (FYE2018), based on the guiding principles for Phase I of the Medium-Term Plan (MTP), were centered on improving the balance sheet to establish a foundation for growth. We also concentrated on strengthening the governance structure for the entire corporate group, and by establishing a more sound finan-cial standing, worked to lay the foundation for new growth in the future. In April 2018, we shifted to measures for the next stage of the plan - strengthening profitability.

More Sophisticated Management and Stronger Governance LIXIL is pursuing a global auditing and internal control structure to further enhance its business management and strengthen governance. To improve the cash and financial control structure of the corporate group, we have introduced a Treasury Manage-ment System (TMS) to clarify cash positions and manage ex-change risks on a global basis. We have now established and are operating Regional Treasury Centers (RTCs) in four locations worldwide.

At the same time, in line with the new MTP, LIXIL is utilizing the cash generated to make strategic capital investments in sec-tors where we anticipate sustainable growth in enterprise value. This includes launching competitive new products to generate earnings in a difficult market environment. One recent success is LIXIL Housing Technology (LHT)'s new LW large-opening win-dow sash announced in May 2018. This innovative new product

By continually revising our business portfolio we have steadily generated synergies, expanding overseas sales to ¥414.5 billion over the last four years, from ¥409.2 billion in FYE2015. This was despite the reclassification of sales revenue of the Permasteelisa Group of ¥164.5 billion in FYE2018 from continu-ing operations to discontinued operations, due to the decision to divest of the company and its subsidiaries in August 2017.

In the future, we will continue to provide the accounting and financial support to advance business strategies focused on the development of products that create new value.

Net Interest-Bearing Debt and Net Debt / EBITDA

Cash Flows

(¥ billion)

Times

(¥ billion)

200

We are also adopting shared services operations in order to unify and standardize accounting processes across the corporate group. The first Financial Shared Services Center (FSSC) was opened in China in December 2017, and we plan to steadily ex-pand this system worldwide. By introducing and adhering to this new framework, we are enhancing the governance function in terms of financial and institutional accounting for the entire LIXIL Group in Japan and worldwide.

121.1

0

0.0

16

17

18

-119.0

Net Interest-Bearing Debt (IFRS)Net Debt / EBITDA

-150

15

16

17

18

Considerable Improvement in Cash Flows

Our financial measures have led to a significant improvement in cash flows. We will continue to improve working capital by focus-ing on the CCC, and are pursuing capital investment with a priority on optimizing investment efficiency. Specifically, we measure our return on invested capital (ROIC), and by investing in the areas with the highest returns, are able to make invest-ment decisions that facilitate future growth and greater profitability.

Cash Flows from Operating ActivitiesCash Flows from Investing ActivitiesFree Cash flow*

* Free Cash Flow is calculated as Cash Flows from Operating Activities +

Cash Flows from Investing Activities.

Note: See P98 for details on cash flow figures. These figures are based on IFRS Standards.