Pola Orbis : Summary of Financial Results for Fiscal 2022

Summary of Financial Results

For the Fiscal Year Ended December 31, 2022 (Consolidated)

These financial statements have been prepared in accordance with accounting principles and practices generally accepted in Japan. The following English translation is based on the original Japanese-language document.

		February 14, 2023
POLA ORBIS HOLDINGS INC.
Listing:	Tokyo Stock Exchange, Prime Market (Code No.: 4927)
URL:	https://www.po-holdings.co.jp/
Representative:	Yoshikazu Yokote, Representative Director And President
Contact:	Naoki Kume, Director, Finance	Tel: [phone]
Annual Shareholders' Meeting:	March 28, 2023
Filing Date of Securities Report:	March 28, 2023
Start of Cash Dividend Payment:	March 29, 2023
Supplemental Materials Prepared for Yearly Financial Results:	Yes
Conference Presentation for Yearly Financial Results:	Yes (for analysts)

(Amounts less than one million yen have been truncated)

1. Consolidated Performance for the Fiscal Year Ended December 31, 2022 (January 1, 2022-December31, 2022)

(1) Consolidated Operating Results

(Percentage figures indicate year-on-year change)

	Net Sales		Operating Income	Ordinary Income	Profit
		Attributable
							to Owners of Parent
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
FY2022	166,307	(6.9)	12,581	(25.5)	14,928	(21.3)	11,446	(2.5)
FY2021	178,642	1.3	16,888	22.8	18,968	50.8	11,734	153.3

Note: Comprehensive income: FY2022: ¥10,719million (-3.7%); FY2021: ¥11,134 million (149.4 %)

	Net Income	Diluted Net Income	Return on	Ordinary	Operating
	Shareholders'	Income to	Income to
	Per Share	Per Share
	Equity	Total Assets	Net Sales
	Yen	Yen	%	%	%
FY2022	51.74	51.69	6.7	7.2	7.6
FY2021	53.04	52.99	6.9	9.2	9.5

(2) Consolidated Financial Position

	Total Assets	Net Assets	Equity Ratio	Net Assets
	Per Share
At December 31	Millions of yen	Millions of yen	%	Yen
FY2022	205,935	171,459	83.0	772.60
FY2021	208,039	173,267	83.1	781.11
Reference: Equity	capital: At December 31,	2022: ¥170,924million; At	December 31, 2021: ¥	172,803 million
(3) Consolidated Cash Flows
	Cash Flows from	Cash Flows from	Cash Flows from	Cash and
	Cash Equivalents
	Operating Activities	Investing Activities	Financing Activities
	at End of Period
	Millions of yen	Millions of yen	Millions of yen	Millions of yen
FY2022	15,548	(12,370)	(12,668)	62,562
FY2021	23,830	(2,174)	(9,100)	71,693

2. Dividends

Annual Cash Dividends Per Share

Total

Payout

Dividends

Dividends

to Net

Ratio

Q1-end

Q2-end

Q3-end

Year-end

Total

Paid

Assets

(Consolidated)

(Annual)

(Consolidated)

Yen

Yen

Yen

Yen

Yen

Millions of yen

%

%

FY2021

－

20.00

－

31.00

51.00

11,295

96.1

6.6

FY2022

－

21.00

－

31.00

52.00

11,516

100.5

6.7

FY2023(Forecast)

－

21.00

－

31.00

52.00

115.0

3. Consolidated Performance Forecast for the Fiscal Year Ending December 31, 2023

(January 1, 2023-December 31, 2023)

(Percentage figures indicate year-on-year change)

Profit Attributable

Net Income

Net Sales

Operating Income

Ordinary Income

to

Per Share

Owners of Parent

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Yen

Full year

180,000

8.2

15,100

20.0

15,100

1.2

10,000

(12.6)

45.20

Notes to Summary Information

(1)	Changes in significant subsidiaries during the current year
(Changes in specific subsidiaries resulting in changes in the scope of consolidation)	: None
(2)	Changes in accounting policies, accounting estimates, and restatement
	1)	Changes in accounting policies associated with revision of accounting standards	: Yes
	2)	Changes other than (2)-1)	: None
	3)	Changes in accounting estimates	: None
	4)	Restatement	: None

Note: For details, please refer to page 16, "Changes in Accounting Policies" in "Notes to Consolidated Financial Statements".

1. Number of shares issued and outstanding (common stock)
2. 1. Number of shares issued and outstanding at the end of each period (including treasury stock)

At December 31, 2022	229,136,156 shares
At December 31, 2021	229,136,156 shares
2) Number of shares of treasury stock at the end of each period
At December 31, 2022	7,904,513 shares
At December 31, 2021	7,906,761 shares

3) Average number of shares issued and outstanding in each period

Fiscal year ended December 31, 2022	221,230,520 shares
Fiscal year ended December 31, 2021	221,226,689 shares

Note: The number of shares of treasury stock at December 31, 2022 includes the Company's shares held by the officer compensation Board Incentive Plan (BIP) trust (242,460 shares). The Company's shares held by the officer compensation BIP trust are included in shares of treasury stock that are deducted in the calculation of the average number of shares of treasury stock during the period.

(Reference) Summary of Non-consolidated Financial Performance

1. Non-consolidated Financial Performance for the Fiscal Year Ended December 31, 2022 (January 1, 2022-December31, 2022)

(1) Operating Results

(Percentage figures indicate year-on-year change)

	Net Sales	Operating Income	Ordinary Income	Net Income
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen		%
FY2022	22,141	19.8	13,973	1.3	15,327	2.0	11,972		26.9
FY2021	18,478	(22.0)	13,798	(29.4)	15,024	(25.4)	9,435		(18.8)
	Net Income	Diluted Net Income
	Per Share	Per Share
		Yen		Yen
FY2022		54.12		54.06
FY2021		42.65		42.61
(2) Financial Position
	Total Assets	Net Assets	Equity Ratio	Net Assets Per Share
At December 31		Millions of yen		Millions of yen		%			Yen
FY2022		183,877		98,668		53.5			444.90
FY2021		185,067		98,091		52.9			442.30
Reference: Equity	capital: At December 31,	2022: ¥98,424 million;	At December 31, 2021: ¥	97,848 million

Information Regarding Annual Audit Procedures

The annual financial results report is exempt from annual audit by certified public accountants or accounting firms.

Explanation of Appropriate Use of Performance Forecast and Other Special Items

This report contains projections of performance and other projections based on information currently available and certain assumptions judged to be reasonable. Actual performance may differ materially from these projections resulting from changes in the economic environment and other risks and uncertainties. For performance projections, please refer to "1. Overview of Consolidated Operating Results (4) Performance Forecast" on page 6.

	POLA ORBIS HOLDINGS INC. (4927) FY2022 Financial Summary
Table of Contents
1. Overview of Consolidated Operating Results	2
(1)	Overview of Consolidated Operating Results	2
(2)	Overview of Consolidated Financial Position	5
(3)	Overview of Consolidated Cash Flows	5
(4)	Consolidated Performance Forecast for Fiscal 2023	6
2. Basic Approach to the Selection of Accounting Standards	6
3. Consolidated Financial Statements and Notes	7
(1)	Consolidated Balance Sheets	7
(2)	Consolidated Statements of Income and Consolidated Statements of Comprehensive Income	9
(3)	Consolidated Statements of Changes in Net Assets	12
(4)	Consolidated Statements of Cash Flows	14
(5)	Notes to Consolidated Financial Statements	16
(Going Concern Assumptions)	16
(Changes in Accounting Policies)	16
(Investment and Rental Property)	17
(Segment Information)	18
(Per Share Information)	21
(Subsequent Event)	21

1

POLA ORBIS HOLDINGS INC. (4927) FY2022 Financial Summary

1. Overview of Consolidated Operating Results

(1) Overview of Consolidated Operating Results for Fiscal 2022

During the fiscal year ended December 31, 2022 (January 1-December 31, 2022), while COVID-19 had yet to be contained, the Japanese economy gradually moved toward normalization, with expectations for a full-scale resumption of economic and social activities and economic revitalization. However, the outlook was even more uncertain than before amid factors such as further detections and outbreaks of variant strains, the worsening situation in Ukraine, sharp exchange rate fluctuations, and soaring resource and energy prices.

In the domestic cosmetics market, the easing of activity restrictions had a significant effect, and demand for makeup products, which had been markedly sluggish due to the impact of the COVID-19 pandemic, recovered substantially. On the channel side, demand for face-to-face services is gradually recovering as a result of the easing of activity restrictions. However, neither of them have recovered to levels seen prior to the COVID-19 pandemic. In skincare products, a specialty of the POLA ORBIS Group (the "Group"), we maintained demand through the pandemic mainly using online channels. While online services are driving the overall cosmetics market, marketing costs are soaring as the competitive environment intensifies. The pandemic ushered in behavioral changes through which current lifestyles have taken hold as ordinary. We are now in a situation where further creativity is needed to review the value delivered online and offline, and to expand new services that integrate these two areas.

In the overseas cosmetics market, although there had been variations between countries and regions, the economy was on a recovery trend from the turmoil caused by COVID-19. However, various downward pressures on the economy and consumption in addition to the threat of COVID-19, such as the rise in energy prices and the normalization of high inflation on a broad scale caused by Russia's invasion of Ukraine, have fueled a sense of uncertainty about the future. In the Chinese market, which the Group has designated as a priority market, COVID- 19 showed a resurgence from the end of last year, and the continuation of the zero-COVID policy weighed on the economy and consumption. As well as responding to COVID-19, we need to closely monitor the impact of soaring prices of commodities and energy.

Within this market environment, the Group has worked to achieve the key objectives-"evolving domestic direct sales," "growing overseas businesses profitably," "profit contribution from brands under development," "strengthening operations," and "expanding new brands and domains of 'beauty'." These objectives are in line with the medium-term management plan (from 2021 to 2023) that started in 2021.

As a result, consolidated net sales for fiscal 2022 decreased 6.9% year on year to ¥166,307 million. Driven by decreased gross profit due to decreased net sales, operating income decreased 25.5% year on year to ¥12,581 million, and ordinary income decreased 21.3% year on year to ¥14,928 million due to the recording of foreign exchange gain of ¥2,355 million. Profit attributable to owners of parent decreased 2.5% year on year to ¥11,446 million due to lower income tax - deferred resulting from the resulting liquidation of a subsidiary company, while impairment loss on intangible assets was recorded.

Operating Results Overview				(Millions of yen)
		Twelve Months Ended December 31
	2021	2022	Year-on-Year
	Amount Change	Percent Change (%)
Net Sales	¥178,642	¥166,307	¥(12,334)	(6.9)
Operating Income	16,888	12,581	(4,306)	(25.5)
Ordinary Income	18,968	14,928	(4,040)	(21.3)
Profit Attributable	¥11,734	¥11,446	¥(287)	(2.5)
to Owners of Parent

2