Shiseido : Consolidated Settlement of Accounts for Q3 2019

Shiseido Company, Limited (4911) Consolidated Settlement of Accounts for the First Nine Months 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.

November 7, 2019

Consolidated Settlement of Accounts for the First Nine Months 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: November 11, 2019

Start of cash dividend payments: -

Supplementary quarterly materials prepared: Yes

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

1. Performance for the First Nine Months of the Fiscal Year Ending December 31, 2019 (From January 1 to September 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 Nine Months Ended

846,625

[5.1%]

103,324

[1.9%]

100,718

[(1.9)%]

72,458

[13.2%]

September 30, 2019

First Nine Months Ended

805,760

[10.2%]

101,412

[43.5%]

102,663

[45.9%]

64,000

[―%]

September 30, 2018

Note: Comprehensive income

First nine months ended September 30, 2019: ¥65,977 million [1.5%]

First nine months ended September 30, 2018: ¥65,033 million [―%]

Net Profit per Share (Yen)

Fully Diluted

Net Profit per Share (Yen)

First Nine Months Ended

181.42

181.24

September 30, 2019

First Nine Months Ended

160.23

160.04

September 30, 2018

(2) Consolidated Financial Position

				(Millions of yen)
		Total Assets	Net Assets	Equity Ratio
As of September 30, 2019		1,080,301	510,506	45.4%
As of December 31, 2018		1,009,618	468,462	44.4%
[Reference] Equity: As of September 30, 2019:	¥490,450 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)
	1,134,000	[3.6%]	113,000	[4.3%]	109,000	[(0.4%)]	78,500	[27.8%]	196.54
Fiscal Year 2019	to	to	to	to	to	to	to	to	to
	1,139,000	[4.0%]	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 fiscal year 2019. See "2. Consolidated Quarterly Financial Statements (3) Notes Concerning Consolidated Quarterly Financial Statements (Changes in Accounting Policies)" on page 13 for further details.

(4) Shares outstanding (common stock)

1) Number of shares outstanding (including treasury stock)

As of September 30, 2019:	400,000,000
As of December 31, 2018:	400,000,000
2) Number of treasury stock outstanding
As of September 30, 2019:	573,586
As of December 31, 2018:	618,049

1. Average number of shares over the period
   First nine months ended September 30, 2019: 399,404,058
   First nine months ended September 30, 2018: 399,427,535

Implementation status of quarterly review procedures

This Consolidated Settlement of Accounts for the First Nine Months 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 (2) 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 Forecast and Other Forward-Looking Information........................................................	8
2. Consolidated Quarterly Financial Statements ..................................................................................................	9
(1)	Consolidated Quarterly Balance Sheets ...............................................................................................	9
(2)	Consolidated Quarterly Statements of Income and Consolidated Quarterly Statements of
	Comprehensive Income......................................................................................................................	11
(3)	Notes Concerning Consolidated Quarterly Financial Statements ......................................................	13
	(Note on Assumptions of a Going Concern)......................................................................................	13
	(Consolidated Quarterly Statements of Income)................................................................................	13
	(Note in the Event of Major Changes in Shareholders' Equity) ........................................................	13
	(Changes in Accounting Policies)......................................................................................................	13
	(Significant Subsequent Events) ........................................................................................................	14

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 Nine Months of Fiscal	846,625	103,324	100,718		72,458	181.42
Year 2019
First Nine Months of Fiscal	805,760	101,412	102,663		64,000	160.23
Year 2018
Percentage Change Increase	5.1%	1.9%	1.9)%		13.2%	13.2%
(Decrease)
		ሺ
Percentage Change Increase	7.2%
(Decrease) FX-Neutral
Percentage Change Increase	7.7%
(Decrease) Like for Like

For the first nine months 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 continued to rebound and remained firm, due in part to last-minute demand ahead of the consumption tax hike in October and an overall trend of growth in inbound demand supported by foreign travelers to Japan. In the overseas cosmetics market, performance was weak in Europe, where demand varied by country, and the negative growth in makeup also continued in the Americas, resulting in weak delivery overall. China and the rest of Asia were affected by the tough market environments in Hong Kong and other factors. However, growth remained firm overall.

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. In October of this year, the Group announced the acquisition of the Drunk Elephant skincare brand in the "clean" market, which is highly popular with a broad range of consumers, including younger generations known as Millennials and Generation Z (see the press release on October 8, 2019 for further details). Adding this U.S.-based brand with large global demand potential to SHISEIDO, Clé de Peau Beauté, and other Japanese-based brands will further strengthen and expand the core prestige skincare business and reinforce the sales and profit base in the Americas Business.

Net sales in the first nine months of fiscal year 2019 increased 7.2% year on year on an FX-neutral basis. When converted into yen, net sales rose 5.1% year on year to ¥846.6 billion. Like-for-like growth was 7.7% excluding such factors as the impact of withdrawal from the amenity goods business.

Operating profit rose 1.9% year on year to ¥103.3 billion, due to higher margins accompanying growth in sales and other factors, which compensated for greater investments in marketing, research and development, and human resources. The operating profit margin was 12.2%, maintaining continued double-digit profitability.

2