Lion : Quarterly Financial Statements Material

Lion Corporation

Financial Results Briefing for the Q3 of Fiscal 2025 November 7, 2025

Event Summary [Company Name] Lion Corporation [Company ID] 4912-QCODE [Event Language] JPN [Event Type] Earnings Announcement [Event Name] Financial Results Briefing for Q3 of FY2025 [Fiscal Period] FY2025 Q3 [Date] November 7, 2025 [Number of Pages] 22 [Time] 17:00 - 18:03

(Total: 63 minutes, Presentation: 25 minutes, Q&A: 38 minutes)

[Venue] Webcast [Venue Size] [Participants] [Number of Speakers] 2

Kengo Fukuda Representative Director, Vice President and Executive Officer

Keita Tanimoto Manager of IR and SR Office, Corporate Planning Department

Presentation Tanimoto: It is now time to commence the quarterly financial results briefing session for Q3 of the fiscal year ending December 2025 of Lion Corporation.

Thank you all very much for taking time out of your busy schedules to join us today. Kengo Fukuda, Representative Director, Vice President and Executive Officer, is attending the meeting today. Keita Tanimoto, Manager of IR and SR Office, Corporate Planning Department, will be the facilitator.

Mr. Fukuda will now explain the details of the financial results for Q3 of the fiscal year ending December 31, 2025, and then we will move on to the Q&A session. The entire meeting will last approximately one hour.

Before we begin the briefing, we would like to remind everyone. In the following discussion, we may make forward-looking statements based on our current expectations, all of which are subject to risks and uncertainties. Actual results may differ from the forecast.

The audio of today's briefing, including questions, will be posted on the Company's website. Please note that the name of the company, your name, and the voice of your question will be uploaded as is.

Mr. Fukuda will now explain the details of the financial results of Q3.

Fukuda: Hello again, my name is Fukuda. Thank you very much for taking time out of your busy schedule to join us today. We would also like to thank you again for your continued support.

Here are the four items on today's agenda.

I will explain our consolidated financial results for Q3.

As for Q3, following the interim period, sales and profits increased in the July-September period, and the results for the first nine months of the fiscal year under review are also on track to achieve the annual target.

In particular, as indicated in the upper part of the slide, the main issue in the first year of the medium-term management plan, improvement of profitability in Japan, continues to be on track. In addition, with new product launched for July through September, we believe the momentum for top-line growth is accelerating.

Overseas, we are tuning our strategy and shifting to a policy of profitable growth amid the increasingly severe business environment in major countries. I would also like to conclude today by mentioning a few initiatives from a medium- to long-term perspective.

Now, let's look at the consolidated results.

Sales for Q3 were JPY304.9 billion, up 1.3% from the same period last year. Since sales increased 0.4% YoY in H1, the sales growth rate improved to 2.9% in the July-September period. Core operating income profit was JPY22.3 billion, an increase of approximately JPY3.7 billion from the same period last year.

Operating income increased significantly, partly due to the recognition of a gain on step acquisitions associated with the acquisition of a wholly owned subsidiary in Vietnam. Net income for the quarter will also increase by 64.3%.

EBITDA was JPY35.5 billion, an increase of JPY3 billion from the same period last year, and the ratio to sales rose 0.9 percentage points to 11.7%.

Next, here are the factors that contributed to the increase or decrease in core operating income profit from the previous year.

In the graph, the blue arrows indicate the factor of increase/decrease in gross profit, which is JPY1.5 billion. The orange arrow shows the factors for the increase or decrease in SG&A expenses, which amounted to JPY2.1 billion. The figures in parentheses are the increase or decrease between July and September.

First, regarding the gross profit factor, the gross profit increase due to value-adding and price increases was JPY2.3 billion, and we believe that cost reductions in response to raw material inflation, price shifting, and a shift to higher-priced products contributed to the improvement in profit margin.

As you can see, the decrease in competition expenses was the major factor in the increase in SG&A expenses. As we explained in Q1 and Q2, this is not a mere straightforward expense cut to generate profit. We are reviewing our costs, which have been rather inflated to secure sales volume, to improve efficiency.

In the July-September period, we have increased advertising for Q2 in Japan, and curbed sales promotion expenses that do not lead to sales in some overseas markets, resulting in a JPY500 million decrease in expenses for the July-September period.

I would like to explain our business performance by segment.

The Consumer Products Business for General Use reported a significant 32% increase in profit, thanks to an increase in sales, an increase in the composition of new high-value-added products, and the effects of profit structure reform measures.

I will explain the situation by sector later on the next slide.

In the industrial products business, sales and profits were up until Q2 but have turned around to an increase in sales and profits on the back of a recovery in the chemical field. Although the current growth rate overseas is slowing down, the addition of a subsidiary in Vietnam in July has enabled the company to continue to increase total sales and profits.

Next is the domestic situation.

This is sales in the domestic sector. First, for oral health care at the top, we have launched new high-value-added products in Q3, which have contributed to this. Then the dental clinic route continued to do well, with a 4.6% increase in revenue.

In the fabric care business, sales were down in H1, but in September we renewed our laundry detergent line, which contributed to an increase in sales during the period from July to September.

As a result, excluding the impact of last year's brand transfer, total growth was 2.4% in real terms, as shown here in green.

Here, to explain in a little more detail, is a separate list of YoY changes for January-June and July-September.

Oral health care, which launched a new product in September, grew 8.2% during the July-September period, with shipments at the time of the new launch contributing to this growth, but the composition of over-the-counter sales is also expected to shift to higher price ranges in the future.

In addition, fabric care, which had been experiencing a decline in sales in H1 of the fiscal year, has turned to an increase in sales during the July-September period as a result of efforts to improve profit margins by controlling price competition and correcting prices.

I will continue with an explanation of our overseas business performance by region.

In Southeast and South Asia, Thailand struggled from July to September due to the deteriorating political situation with neighboring countries, but Malaysia remained strong, and the consolidation of highly profitable Vietnam also contributed to the YoY increase in sales and profit, and the profit margin rose 1.3 percentage points.

Meanwhile, in Northeast Asia, both sales and profits declined in both mainstay China and South Korea, and a shift in strategy is underway. This will be explained later.

I have already explained the situation in the four major countries, so I will skip this part.

I will then explain the status of current initiatives and measures.

First, I would like to discuss the reform of the domestic profit structure.

We have been saying that structural reforms are progressing well, and the progress of KPIs is shown here. JPY2.3 billion in value-added improvement due to price revisions and shift in sales mix. SKUs are also almost on track to achieve their annual target level of efficiency.

As for competition expenses, we have already reached a level close to the mid-term target compared to 2023, partly due to the optimization of sales promotion expenses, which had been somewhat inflated for a long time in response to price competition.

However, we intend to continue to improve these efficiencies and create a cycle in which we actively invest in the development of necessary brands and value-added areas.

I am pleased to report that we are generally off to a good start in the situation with the first of its priority investment products, the situation with new products after Q3.

In the Oral Health Care segment, we launched a new product with the highest price range among our toothpastes, with initial shipments 1.5 times higher than planned. We believe that the storefront has started to show a good start, as we can confirm the uptake of inbound demand (demand from overseas visitors to Japan), etc.

In Q4, as you can see in the lower right-hand corner of this screen, we will introduce toothpaste equipped with our microbiome control technology to the dental clinic route to further accelerate growth in the field as a whole.

In the fabric care field, sales of NANOX one, which underwent renewal from July to September, increased significantly. We have heard that in-store turnover is also favorable, and we have received reports that some chains are getting POS that exceed those of their competitors.

In Q4, we have already launched a renewed Aroma Rich fabric softener in October, and we have also renewed our communication by appointing a new celebrity for the commercials and are promoting advertising investment that is significantly higher than the previous year.

Next, I would like to explain the situation in major overseas countries and the tuning of our strategy.

The first is Southeast Asia, first on the right, Malaysia. The growth of local brands in oral health care and the liquid detergent segment, which has been an issue for a long time, are continuing to do well, with sales growth in the liquid segment.

On the other hand, this is Thailand on the left. Although our mainstay laundry detergent business has been temporarily damaged due to the deteriorating situation in neighboring countries, the personal care business, including body soap and oral health care, has remained strong. Therefore, we are evaluating strategies for oral health care, an area of particular focus. I will explain it on the next slide.

In Thailand, resources have tended to be concentrated too much on laundry detergents, which have a strong market position, but in response to the recent situation, we have begun to strengthen our oral health care business.

We are reevaluating our brands and redesigning and promoting sales strategies for each brand according to its role and target, as well as segregation of distribution areas, business categories, prices, etc. We will share strategies and goals with our joint venture partner distributors, and develop detailed marketing activities, for example, to promote the traditional trade in rural areas, and to increase the distribution rate of this brand to urban convenience stores.

Next is the situation in Northeast Asia.

On the right, South Korea. Although affected by the decline in exports to neighboring countries, there are signs of a recovery in recent months. In South Korea, hand soaps and capsule detergents are performing well, and we will strive to develop capsule detergents and other products in addition to recovering our export business.

This is China on the left. As the economy stagnates, prices are polarizing and down-trading is progressing, and prices of our mainstay mid-priced White & White products have fallen sharply, leading us to shift our strategy to cultivate brands in the higher price range area.

As for White & White, there is a balance with facility operation, and our policy is to maintain this balance while ensuring operations without pursuing excessive sales.

At the same time, we are building on this White & White handling to cultivate higher-priced brands such as Clinica, Systema, and DENT.

This year, we are developing and launching new products by utilizing our research institute in Shanghai, and we are intensively managing the distribution of these high-priced brands to nurture them.

We have been focusing on double-digit growth in our China business, but we have decided that it is not advisable to pursue volume any further, and we are now steering the business toward renewed growth while raising margins.

Next, I would like to discuss this year's full-year forecast.

The annual consolidated earnings forecast remains unchanged from the beginning of the year. Although the overseas business environment remains challenging, we will continue to flexibly invest expenses in growth in Q4 to cover our overall expenses and achieve our annual announcement.

Finally, I would like to share with you my perception of the current situation from a medium- to long-term perspective and then discuss the progress we have made in planting the seeds for growth in the next fiscal year and beyond.

There are three major issues to be addressed in the current medium-term management plan, namely,

"strengthening profitability".

First, in this first year, we have focused on reforming the profit structure of our domestic general consumer goods business. We believe that we have achieved some success in this area, and we will accelerate this process from next year onward.

On the other hand, from the viewpoint of restoring growth potential, we also began investing in focused growth in Japan in H2 of this fiscal year. On the other hand, we believe that the macro environment overseas has changed since the start of the medium-term management plan.

As for tuning our strategy for existing countries, as I explained earlier, we believe it is important to ensure growth in the new countries of Vietnam and Bangladesh, where we entered in the first stage, for the next year.

In terms of management base reforms, we have been working to strengthen governance this year, and from next year onward, we intend to make major changes to our internal management processes and systems to accelerate the promotion of our strategies. I would like to explain about these reforms, especially in the areas of overseas operations and management base reforms.

I will explain specific future initiatives in Vietnam and Bangladesh overseas.

For Vietnam, it is a company with a profitable business model based on expert recommendations, with a focus on pharmaceuticals. Now that it has become a wholly owned subsidiary, we intend to expand our business by adding our personal care field to this model.

Specifically, the company has already introduced a skincare brand this year, which intends to be nurtured. Next year, we are planning to enter the market for high-performance oral health care.

We would like to apply the customer relationship management we have developed for dental clinics in Japan to Vietnam and China and expand our business while maintaining high profitability.

We believe that Vietnam has the potential to become a model case for the pharmaceutical business throughout Asia in the future, as well as a base for supplying products. We intend to expand our business model, which is one of our strengths.

Bangladesh on the other hand. After investing in the company, we have started small-scale production of kitchen detergent and toothbrushes on an outsourced basis, and this year the factory under construction will be completed. We would like to take this opportunity to expand and improve our sales structure and channels and move into full-scale business expansion next year.

In addition, Bangladesh has a young population, and we are planning to develop the KODOMO brand, which has been deployed mainly in Southeast Asia, for the baby care market, which has growth potential.

In addition to these two countries, we are also in the process of studying the incorporation of new resources and the reorganization of our portfolio, and we believe that next year will be the climax of our mid-term business plan in terms of growth.

In order to speed up the implementation of this growth strategy, we plan to make major changes to our internal management process and structure starting next year.

Until now, we have had a parallel organization of functional divisions, in which organizations by function worked together to promote the overall business, but it took time to respond to issues and changes in circumstances, and responsibilities and authority tended to be unclear.

In order to speed up our business and strengthen our ability to execute, we would like to switch from an organizational structure based on horizontal functional headquarters to a vertical structure based on a value chain starting next year. And we want to boldly transfer authority to the top management of the business.

We would like to speed up the process by simplifying the reporting line and utilizing DX to increase our commitment to our goals.

We plan to announce the specific details of the reorganization at the end of this month. In addition to achieving the current annual performance goals, we will plant seeds and make preparations for the second half of the mid-term business plan, and we will bring the results of these efforts to fruition in the next fiscal year and beyond.

That is all for my explanation. Thank you very much.

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