Shiseido : Consolidated Settlement of Accounts for 1H 2019

Shiseido Company, Limited (4911)

Consolidated Settlement of Accounts for the First Half of the Fiscal Year Ending December 31, 2019

The figures for these financial statements are prepared in accordance with the accounting principles based on Japanese law. Accordingly, they do not necessarily match the figures in the Annual Report issued by the Company, which present the same statements in a form that is more familiar to foreign readers through certain reclassifications or the summarization of accounts.

August 8, 2019

Consolidated Settlement of Accounts for

the First Half of the Fiscal Year Ending December 31, 2019

	[Japanese Standards]
Shiseido Company, Limited
Listings:	Tokyo Stock Exchange, First Section (Code Number: 4911)
URL:	https://www.shiseidogroup.com/
Representative:	Masahiko Uotani, Representative Director, President and CEO
Contact:	Harumoto Kitagawa, Vice President, Investor Relations Department
	Tel. [phone]

Filing date of quarterly securities report: August 9, 2019

Start of cash dividend payments: September 3, 2019

Supplementary quarterly materials prepared: Yes

Quarterly financial results information meeting held: Yes (For institutional investors, analysts, etc.)

1. Performance for the First Half of the Fiscal Year Ending December 31, 2019 (From January 1 to June 30, 2019)

* Amounts under one million yen have been rounded down.

(1) Consolidated Operating Results

(Millions of yen; percentage increase

(decrease) figures denote year-on-year change)

Net Profit

Net Sales

Operating Profit

Ordinary Profit

Attributable to

Owners of Parent

First Half Ended

564,647

[6.0%]

68,980

[(3.0)%]

67,965

[(6.7)%]

52,452

[10.0%]

June 30, 2019

First Half Ended

532,596

[12.8%]

71,111

[105.1%]

72,807

[112.9%]

47,666

[153.5%]

June 30, 2018

Note: Comprehensive income

First half ended June 30, 2019: ¥48,997 million [23.1%]

First half ended June 30, 2018: ¥39,808 million [116.5%]

Net Profit per Share (Yen)

Fully Diluted

Net Profit per Share (Yen)

First Half Ended June 30, 2019

131.33

131.20

First Half Ended June 30, 2018

119.32

119.18

(2) Consolidated Financial Position

				(Millions of yen)
		Total Assets	Net Assets	Equity Ratio
As of June 30, 2019		1,069,266	505,411	45.5%
As of December 31, 2018		1,009,618	468,462	44.4%
[Reference] Equity: As of June 30, 2019:	¥486,033 million
As of December 31, 2018:	¥448,580 million

2. Cash Dividends

			Cash Dividends per Share (Yen)
	Q1		Q2		Q3	Year-End	Full Year
Fiscal Year 2018		-	20.00		-	25.00		45.00
Fiscal Year 2019		-	30.00
Fiscal Year 2019 (forecast)					-	30.00		60.00

Note: Revision to the most recently disclosed dividend forecast: None

3. Forecast for the Fiscal Year Ending December 31, 2019 (From January 1 to December 31, 2019)

(Millions of yen; percentage figures denote year-on-year change)

				Net Profit	Net
	Net Sales	Operating Profit	Ordinary Profit	Attributable to	Profit per
				Owners of Parent	Share (Yen)
Fiscal Year 2019	1,164,000 [6.3%]	120,000 [10.8%]	116,000 [5.9%]	83,000 [35.2%]	207.81

Note: Revision to the most recently disclosed performance forecast: Yes

Notes

1. Changes in significant subsidiaries during the period (changes in specific subsidiaries causing a change in the scope of consolidation): None
2. Adoption of special accounting treatment in preparation of consolidated quarterly financial statements: None
3. Changes in accounting policies; changes in accounting estimates; restatements
4. 1. Changes in accounting policies due to amendments of accounting standards: Yes
   2. Other changes in accounting policies: None
   3. Changes in accounting estimates: None
   4. Restatements: None

Group subsidiaries that have adopted IFRS standards have implemented IFRS 16, Leases, from the first quarter of the fiscal year 2019. See "2. Consolidated Quarterly Financial Statements (4) Notes Concerning Consolidated Quarterly Financial Statements (Changes in Accounting Policies)" on page 16 for further details.

(4) Shares outstanding (common stock)

1)	Number of shares outstanding (including treasury stock)
	As of June 30, 2019:	400,000,000
	As of December 31, 2018:	400,000,000
2)	Number of treasury stock outstanding
	As of June 30, 2019:	585,677
	As of December 31, 2018:	618,049
3)	Average number of shares over the period
	First half ended June 30, 2019:	399,395,920
	First half ended June 30, 2018:	399,481,487

Implementation status of quarterly review procedures

This Consolidated Settlement of Accounts for the First Half of the Fiscal Year Ending December 31, 2019 is not subject to quarterly review procedures by a certified public accountant or audit firm.

Appropriate use of business forecasts; other special items

In this report, statements other than historical facts are forward-looking statements that reflect the Company's plans and expectations. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results and achievements to differ from those anticipated in these statements. Please refer to "1. Analysis of Operating Results (3) Consolidated Forecast and Other Forward-Looking Information" on page 8 for information on preconditions underlying the above outlook and other related information.

Contents
1. Analysis of Operating Results.............................................................................................................................	2
(1)	Consolidated Performance......................................................................................................................	2
(2)	Consolidated Financial Position .............................................................................................................	7
(3)	Consolidated Forecast and Other Forward-Looking Information ..........................................................	8
2. Consolidated Quarterly Financial Statements...................................................................................................	10
(1)	Consolidated Quarterly Balance Sheets ...............................................................................................	10
(2)	Consolidated Quarterly Statements of Income and Consolidated Quarterly Statements of
	Comprehensive Income ........................................................................................................................	12
(3)	Consolidated Quarterly Statements of Cash Flows ..............................................................................	14
(4)	Notes Concerning Consolidated Quarterly Financial Statements ........................................................	16
	(Note on Assumptions of a Going Concern) ........................................................................................	16
	(Consolidated Quarterly Statements of Income) ..................................................................................	16
	(Note in the Event of Major Changes in Shareholders' Equity)...........................................................	16
	(Changes in Accounting Policies) ........................................................................................................	16

1

1. Analysis of Operating Results

(1) Consolidated Performance

						(Millions of yen unless otherwise stated)
							Net Profit		Net Profit per
	Net Sales		Operating		Ordinary		Attributable to
					Share
		Profit		Profit		Owners of
						(Yen)
							Parent
First Half of Fiscal Year 2019	564,647	68,980	67,965	52,452		131.33
First Half of Fiscal Year 2018	532,596	71,111	72,807	47,666		119.32
Percentage Change Increase	6.0%	(3.0)%	(6.7)%	10.0%		10.1%
(Decrease)
Percentage Change Increase	7.5%
(Decrease) FX-neutral

For the first half of fiscal year 2019, economic conditions in Japan continued along a path of moderate recovery. This included signs of a positive turnaround in consumer spending underpinned by improvement in employment and income gains. The domestic cosmetics market was also firm thanks to a similar ongoing trend of recovery and inbound demand supported by the continued increase in overseas tourists to Japan. Meanwhile, in overseas cosmetics markets, growth in Europe remained weak with varied performance from country to country. Growth in the Americas contracted, mainly in makeup, while growth in China and the rest of Asia continued to expand steadily.

In 2015, the Shiseido Group (hereafter "the Group") launched its medium-to-long-term strategy VISION 2020 in a bid to ensure that it remains vital for the next 100 years. We are shifting all of our activities toward a consumer-oriented focus and working to globally enhance our brand value to gain a competitive advantage as a global beauty company with Japanese heritage.

Fiscal year 2019 is the second year of the latter three-year period known as the second phase of VISION 2020. We are working to accomplish the new strategy to accelerate growth. To achieve this, we are concentrating marketing investments on prestige brands, a key driver of growth, and "Made in Japan" cosmetics and personal care brands, and are promoting greater investments in digital marketing and innovation. In addition, we are working on building supply capability and improving profitability in the Americas and EMEA, both of which are challenges that need to be addressed.

Net sales in the first half of fiscal year 2019 increased 7.5% year on year on a local currency basis. When converted into yen, net sales rose 6.0% year on year to ¥564.6 billion, achieving like-for-like growth of 7.3% driven by expansion in all regions. However, this excludes the impact of withdrawal from the amenity goods business and from advanced shipment along with the implementation of a new enterprise resource planning system (hereafter "ERP") in the Americas Business. Sales growth accelerated on a quarterly basis to 9.0% in the second quarter, compared to 5.5% growth in the first quarter, on a like-for-like basis. We engaged in strategic cross-border marketing aimed mainly at Chinese consumers across the entire Asian region, spurring growth in China and Travel Retail.

Operating profit decreased 3.0% year on year to ¥69.0 billion, reflecting increased investments in marketing, R&D, and people, which offset an increase in gross profit accompanying the increase in net sales. This was in line with the plan. We concentrated marketing investment in digital, and succeeded in improving the marketing ROI. The operating profit margin was 12.2%, maintaining continued double-digit profitability.

Net profit attributable to owners of parent rose to ¥52.5 billion, an increase of 10.0% year on year, thanks to a decline in tax expenses.

Net sales, operating profit, and net profit attributable to owners of parent all reached record highs in the second quarter.

The major foreign currency exchange rates applicable to income and expense accounting line items in the Company's financial statements are JPY110.1/USD, JPY124.3/EUR, and JPY16.2/CNY for the first half of the fiscal year.

2