Shiseido : Presentation(Script) for Q3 2019

2019 January-September Results and

Full-Year Forecast

Michael Coombs

Chief Financial Officer

Shiseido Company, Limited

November 7, 2019

• Now I would like to explain our results for the third quarter and the first nine months (January to September) and full- year forecast for 2019.

1

In this document, statements other than historical facts are forward-looking statements that reflect our plans and expectations. These forward-looking statements involve risks, uncertainties and other factors that may cause actual results and achievements to differ from those anticipated in these statements.

2

Key Headlines:

Q3: Resilient performance

despite external challenges

Q3 YTD*1 : Record-high Sales,

Operating profit and Net profit

*1. First nine months

3

• Here are the highlights of the third quarter as well as the first nine months of 2019.
• Firstly, overall Shiseido recorded resilient results in the third quarter despite external challenges with increasing uncertainties.
• Secondly, we recorded our highest-ever sales, operating profit and net profit in the first nine months of 2019.

3

2019 Q3 : Executive Summary

Stable performance with continuing strong fundamentals

11th consecutive quarter of sales growth*1

Operating Profit +13.3%, Operating Margin 12.2%, +1.1 pts

Net Profit growth +22.5%

• Let me start by explaining the key points of the executive summary. During the third quarter, our fundamentals stayed strong, and our profit continued to grow steadily. This was our 11th consecutive quarter of sales growth, with operating profit growing by +13.3%, and operating margin at 12.2%, up 1.1 points.

Net Sales: ¥282.0 Bn YoY change: +3.2% FX-Neutral: +6.6% Like-for-Like*2 : +8.6%
Prestige brands: main driver of global growth with successful launches (+11%*2)	 Net sales amounted to 282.0 billion yen, representing an
China: prestige sell-out remains strong (over +40%*3)	+8.6% increase like for like, excluding the impacts of
Travel Retail: fastest-growing segment	business withdrawals in Japan and a one-off factor related to
Japan: steady; EMEA: strong growth
the implementation of a new ERP system in the Americas in
Improved supply
2019.
Impacts from market*4 uncertainties (Hong Kong, S. Korea)
Operating Profit: ¥34.3 Bn YoY change: +13.3%, +¥4.0 Bn; OPM: 12.2%, +1.1 pts	 Prestige brands maintained their robust momentum as the
Improving profitability from brand mix, strategic marketing investments
main driver of our global growth, with sales growing by +11%,
and cost control
underpinned by the success of key product launches and
Net Profit Attributable to Owners of Parent:
relaunches.
¥20.0 Bn YoY change: +¥3.7 Bn, +22.5%
*1. After we changed financial period from end of March to end of December in 2015	 Despite a high growth rate overall, performance was mixed
and a one-off factor related to the implementation of new ERP in Americas 2019
*2. Like-for-Like, excluding the impacts of business withdrawals (the amenity goods business in 2018 and dermatologic agent brands FERZEA and Encron in 2019) in Japan
*3. Mainland China *4. Country/region	4
	across regions. China sustained strong momentum,
	particularly in prestige brands where sell-out grew over
	+40% on the mainland; Travel Retail was the fastest growing
	segment this quarter; and Japan and EMEA saw ongoing
	solid performance. Improved supply contributed to overall
	growth. On the other hand, we were adversely affected by
	conditions in Hong Kong and Korea.

4-1

2019 Q3 : Executive Summary

Stable performance with continuing strong fundamentals

11th consecutive quarter of sales growth*1

Operating Profit +13.3%, Operating Margin 12.2%, +1.1 pts

Net Profit growth +22.5%

Net Sales: ¥282.0 Bn YoY change: +3.2% FX-Neutral: +6.6% Like-for-Like*2 : +8.6%

• Prestige brands: main driver of global growth with successful launches (+11%*2)
• China: prestige sell-out remains strong (over +40%*3)

Travel Retail: fastest-growing segment

Japan: steady; EMEA: strong growth Improved supply

Impacts from market*4 uncertainties (Hong Kong, S. Korea)

Operating Profit: ¥34.3 Bn YoY change: +13.3%, +¥4.0 Bn; OPM: 12.2%, +1.1 pts Improving profitability from brand mix, strategic marketing investments

and cost control

Net Profit Attributable to Owners of Parent:

	¥20.0 Bn	YoY change: +¥3.7 Bn, +22.5%
*1. After we changed financial period from end of March to end of December in 2015
*2.	Like-for-Like, excluding the impacts of business withdrawals (the amenity goods business in 2018 and dermatologic agent brands FERZEA and Encron in 2019) in Japan
	and a one-off factor related to the implementation of new ERP in Americas 2019
*3.	Mainland China *4. Country/region	4

• Operating profit stood at 34.3 billion yen, growing by +13.3%, and the operating margin reached 12.2%, up 1.1 points versus last year. This is primarily due to increasing sales along with improvements in brand mix and our marketing productivity. Additionally, being conscious of the volatile and uncertain business environment, we have been proactively taking cost control measures, in both A&P and other SG&A.
• Net profit attributable to owners of parent was 20.0 billion yen, up +22.5%, mainly due to higher operating profit as well as extraordinary losses on business withdrawal recorded in the third quarter of 2018.

4-2