Pola Orbis : Summary of Financial Results for Fiscal 2022 Nine Months

Summary of Financial Results

For the Nine Months of the Fiscal Year Ending 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.

		October 31, 2022
POLA ORBIS HOLDINGS INC.
Listing:	Tokyo Stock Exchange, Prime Market (Code No.: 4927)
URL:	https://www.po-holdings.co.jp/
Representative:	Satoshi Suzuki, Representative Director And President
Contact:	Naoki Kume, Director, Finance	Tel: [phone]
Filing Date of Quarterly Securities Report:	November 14, 2022
Start of Cash Dividend Payment:	-
Supplemental Materials Prepared for Quarterly Financial Results:	Yes
Conference Presentation for Quarterly Financial Results:	Yes(for analysts)

(Amounts less than one million yen have been truncated)

1. Consolidated Performance for the Nine Months of Fiscal 2022 (January 1, 2022-September30, 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 Nine Months	119,654	(8.8)	7,668	(37.4)	12,169	(9.4)	13,035	50.5
FY2021 Nine Months	131,164	4.3	12,241	32.7	13,432	72.8	8,661	453.1

Note: Comprehensive income: ¥10,973 million (30.1%) for the nine months ended September 30, 2022; ¥8,437 million (471.5%) for the nine months ended September 30, 2021

		Net Income		Diluted Net Income
		Per Share			Per Share
			Yen				Yen
FY2022 Nine Months		58.92		58.86
FY2021 Nine Months		39.15		39.11
(2) Consolidated Financial Position
		Total Assets			Net Assets		Equity Ratio	Net Assets
					Per Share
		Millions of yen			Millions of yen		%	Yen
FY2022 Third Quarter		202,624		171,705		84.5	773.72
FY2021		208,039		173,267		83.1	781.11
Reference: Equity capital:	FY2022 Third Quarter:	¥171,170 million; FY2021: ¥172,803 million
2. Dividends
		Annual Cash Dividends Per Share
Q1-end	Q2-end	Q3-end		Year-end	Total
	Yen	Yen		Yen		Yen		Yen
FY2021	－	20.00		－	31.00		51.00
FY2022	－	21.00		－
FY2022 (Forecast)						31.00		52.00

Note: Revisions to the cash dividends forecast announced most recently: none

3. Consolidated Performance Forecast for Fiscal Year Ending December 31, 2022 (January 1, 2022-December31, 2022)

							(Percentage figures indicate year-on-year change)
							Profit		Net Income
	Net Sales	Operating Income	Ordinary Income	Attributable to
	Per Share
							Owners of Parent
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Full year	170,000	(4.8)	11,700	(30.7)	15,700	(17.2)	14,000	19.3	63.29

Note: Revisions to the consolidated performance forecast announced most recently: none

Notes to Summary Information

(1) Changes in significant subsidiaries during the current period
(Changes in specific subsidiaries resulting in changes in the scope of consolidation)	: None

1. Application of special accounting methods for the preparation of the quarterly consolidated financial: None statements
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 (3)-1)	: None
3)	Changes in accounting estimates	: None
4)	Restatements	: None

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 September 30, 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 September 30, 2022	7,904,513 shares
At December 31, 2021	7,906,761 shares

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

Nine months ended September 30, 2022	221,230,184 shares
Nine months ended September 30, 2021	221,225,877 shares

Note: The number of shares of treasury stock at September 30, 2022 includes the Company's shares held by the officer compensation Board Incentive Plan (BIP) trust (242,460 shares).

Information Regarding Quarterly Review Procedures

The quarterly financial results report is exempt from quarterly review 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. Qualitative Information on Consolidated Performance for the Nine Months of Fiscal 2022 (3) Explanation of Consolidated Performance Forecast and Other Predictive Information" on page 5.

	POLA ORBIS HOLDINGS INC. (4927) FY2022 Nine Months Financial Summary
Table of Contents
1. Qualitative Information on Consolidated Performance for the Nine Months of Fiscal 2022………………	2
(1)	Explanation of Consolidated Operating Results …………………………………………………………	2
(2)	Explanation of Consolidated Financial Position …………………………………………………………	4
(3)	Explanation of Consolidated Performance Forecast and Other Predictive Information ………………	5
2. Quarterly Consolidated Financial Statements …………………………………………………………………	6
(1)	Consolidated Balance Sheets ………………………………………………………………………………	6
(2)	Consolidated Statements of Income and Consolidated Statements of Comprehensive Income ……….	8
(3)	Notes to Consolidated Financial Statements ………………………………………………………………	10
(Going concern Assumptions) ……………………………………………………………………………….	10
(Significant Changes in Shareholders' Equity) ……………………………………………………………	10
(Changes in Accounting Policies)……………………………………………………………………………	10
(Segment Information) ……………………………………………………………………………………....	11
(Subsequent Events) …………………………………………………………………………………………	12

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POLA ORBIS HOLDINGS INC. (4927) FY2022 Nine Months Financial Summary

1．Qualitative Information on Consolidated Performance for the Nine Months of Fiscal 2022

(1) Explanation of Consolidated Operating Results

During the nine months of fiscal 2022 (January 1-September 30, 2022), as economic and social activities have moved toward normalization since the lifting of COVID-19 activity restrictions, the Japanese economy has been affected by a temporary reduction in footfalls due to the rising number of cases of COVID-19 during the seventh wave, soaring energy and raw material prices due to the disruption of the international community, and rising prices resulting mainly from the significantly weakened yen, but personal consumption has remained steady. The outlook continues to be highly uncertain as the economy faces downside risks other than the COVID-19 pandemic, which has yet to be contained. In the domestic cosmetics market, the mail-order market including e-commerce has continued to expand following the spread of COVID-19. The expansion of services that integrate face-to-face sales, which are highly affected by COVID-19 restrictions, with online sales is expected to remain an important strategy as we look toward the post-pandemic world. Economic growth in overseas markets was slow, and China, which the Group has designated as a priority market, has been affected by intermittent pandemic prevention measures, such as lockdowns, implemented as part of the zero-COVID policy. Economic conditions and personal consumption are expected to continue to be significantly affected by the number of cases of COVID-19 and the countermeasures. As with Japan, we believe that it will be important to prepare for the possibility of severe infection countermeasures.

Within this market environment, the POLA ORBIS Group (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, the Group achieved the following consolidated operating results for the nine months of fiscal 2022.

Consolidated net sales for the nine months of fiscal 2022 decreased 8.8% year on year to ¥119,654 million. Operating income decreased 37.4% year on year to ¥7,668 million as a result of a decrease in gross profit due to decreased sales, and ordinary income decreased 9.4% year on year to ¥12,169 million due to the recording of foreign exchange gains resulting from yen depreciation. As a result of the factors noted above, profit attributable to owners of parent increased 50.5% year on year to ¥13,035 million.

Operating Results Overview				(Millions of yen)
				Nine Months Ended September 30
			2021	2022	Year-on-Year
			Amount Change	Percent Change (%)
Net Sales			¥131,164	¥119,654	¥(11,509)	(8.8)
Operating Income		12,241	7,668	(4,572)	(37.4)
Ordinary Income		13,432	12,169	(1,263)	(9.4)
Profit	Attributable	to	¥8,661	¥13,035	¥4,374	50.5
Owners of Parent

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	POLA ORBIS HOLDINGS INC. (4927) FY2022 Nine Months Financial Summary
Operating Results by Segment
Net Sales (Segment Sales to External Customers)			(Millions of yen)
		Nine Months Ended September 30
	2021	2022	Year-on-Year
	Amount Change	Percent Change (%)
Beauty Care	¥127,834	¥116,231	¥(11,603)	(9.1)
Real Estate	1,581	1,561	(20)	(1.3)
Others	1,748	1,861	113	6.5
Total	¥131,164	¥119,654	¥(11,509)	(8.8)
Segment Profit (Loss) (Operating Income (Loss))			(Millions of yen)
		Nine Months Ended September 30
	2021	2022	Year-on-Year
	Amount Change	Percent Change (%)
Beauty Care	¥12,271	¥8,319	¥(3,951)	(32.2)
Real Estate	382	430	47	12.5
Others	26	68	42	162.2
Reconciliations of Segment	(439)	(1,150)	(711)	161.8
Profit (Note)
Total	¥12,241	¥7,668	¥(4,572)	(37.4)

Note: Reconciliations of segment profit refer to elimination of profits arising from inter-company transactions and expenses not allocated to reportable segments. Please see note 2 in "1. Information about Net Sales and Profit (Loss) by Reportable Segment" on page 11 and 12 for the details of reconciliations of segment income during the period.

Beauty Care

The Beauty Care segment consists of the flagship brands POLA and ORBIS, the overseas brand Jurlique, and the brands under development THREE, DECENCIA, Amplitude, ITRIM, FIVEISM × THREE and FUJIMI.

POLA is seeking to further improve the value of its brand and strengthen its business foundation through efforts to launch highly functional products mainly in the field of anti-aging and skin-brightening, and to focus on China, a priority market, and the growth market of travel retail. In the domestic business, sales growth was seen in the e- commerce channels as a result of efforts to acquire and retain customers seamlessly between real stores and online channels and to improve life time value. Although results are trending toward recovery, we have not been able to fully offset the impact of the decline in Beauty Director operation rate and in the number of customers in consignment sales channels (face-to-face sales) resulting from the COVID-19 pandemic. In the overseas business, in China, a priority market, POLA has focused on marketing with an emphasis on maintaining and improving brand loyalty over the medium to long term by strengthening its promotion efforts through mainly e-commerce platforms where we can control the brand, and improving customer life time value along with acquiring new customers. However, China's zero-COVID policy had a significant impact, and POLA brand net sales and operating income declined year on year.

ORBIS is proceeding with enhancing its presence through the creation of brand differentiation and acquiring skincare product users, with a focus on the ORBIS U anti-aging skincare series, which was renewed this year, to re- grow into a highly profitable business. In Japan, ORBIS continued to strengthen communication by customer segment to increase customer activation. This led to an increase in the purchasing activity rate of existing customers and the revitalization of dormant customers, but the number of customers and spending per customer fell. Overseas, in China, a priority market, ORBIS promoted its brand online through social selling and expanded the area in which the brand is sold offline, but continued to be affected by lockdowns. As a result of the above, overall ORBIS brand net sales and operating income dropped below those of the corresponding period of the previous year.

The Jurlique brand achieved double-digit growth mainly in the e-commerce channel, a growth area, in China, which is positioned as its priority market, despite the impact of intermittent lockdowns in various provinces that caused the closure of offline stores. In Australia, as well, operating results recovered for offline channels, which had been affected by lockdowns in the previous year, and net sales surpassed those of the previous year. On the cost front, although active efforts were made to reduce selling, general and administrative expenses, operating loss rose slightly due to the impact of the foreign exchange rate.

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