Results for the First Half of Fiscal 2023: Supplementary Materials

First Half of Fiscal 2023

Supplementary Material

POLA ORBIS HOLDINGS INC.

Representative Director and President

Yoshikazu Yokote

• 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.
• POLA ORBIS HOLDINGS INC. has applied Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. from fiscal 2022. The results for fiscal 2021 in this presentation have been calculated using the same accounting standards as those in fiscal 2022, and are shown as reference information (unaudited) for the purpose of comparison.

1. Highlights of Consolidated Performance
2. Segment Analysis
3. Forecasts for Fiscal 2023
4. Initiatives Going Forward & Appendices

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Q2 Key Topics

Cosmetics Market

• The scale of the Japanese cosmetics market (including exports) was strong.
• In terms of domestic demand, as COVID-19 was reclassified as Class 5 infectious disease, customer traffic increased with more people going out, and economic activity progressed toward normalization, resulting in a steady upturn in personal consumption.
• Signs of a recovery were seen in inbound demand due to an increase in the number of foreign tourists (consolidated inbound net sales for the first half: up approx. 60% YoY, a revenue increase of approx. ¥0.5 billion).
• Recovery in the cosmetics market in mainland China was moderate, against the Company's expectations.

Our Group

Source: Ministry of Economy, Trade and Industry, Ministry of Internal Affairs and Communications, Japan Tourism Agency, Japan Department Stores Association, Intage SLI, and National Bureau of Statistics of China

• Revenue increased both in Japan and overseas with a substantial increase in operating income (consolidated net sales in Japan up 7% YoY, overseas net sales up 20% YoY).
• POLA's revenue increased across all sales channels in Japan, supported by vigorous activity as seen in growth in aesthetic treatment and B.A, while overseas revenue increased by 33%, driving the Group's overseas business
• ORBIS's performance also grew in Japan and the margin of revenue increase expanded from the first quarter, achieving a double-digit rise in revenue in the second quarter.
• Jurlique's revenue increased in the first half, losses were ameliorated in the second quarter.
• Losses from brands under development were ameliorated.

Medium-term Management

Plan Indicators (FY2023 H1)

Overseas sales ratio	17.7%
(+0.3 ppt*)
Domestic e-commerce	27.8%
sales ratio	(+0.9 ppt*)
	*vs Dec. 2022

YoY Change in Consolidated Monthly Net Sales

		Jan.-Mar.		Apr.-Jun.
(%)		11.9%	6.4%
20

10

• The revenue growth trend continued both in Japan and overseas.
• Strengthened further the appeal that captures the shift away from masks and an increase in opportunities to go out, resulting in growth in products that improve wrinkles and UV care products.

	Month by month
0	Cumulative total	2

Consolidated P&L Changes Analysis

Net Sales to Operating Income

					FY2022	FY2023	YoY Change
	(mil. yen)		H1 Results	H1 Results	Amount		%
	Consolidated net sales	78,748	85,836	7,088		9.0%
		Cost of sales	14,263	15,177	913		6.4%
	Gross profit	64,484	70,659	6,174		9.6%
		SG&A expenses	59,567	61,692	2,125		3.6%
	Operating income	4,917	8,966	4,049		82.3%
		Key Factors
			Revenue increased both in Japan and overseas.
		■ Consol. net sales
		■ Cost of sales	Cost of sales ratio declined due to higher sales ratio from POLA.
				Cost of sales ratio 2022H1 : 18.1% ⇒ 2023H1 : 17.7%
		■ SG&A expenses	Labor expenses: up ¥170 mil. YoY
				Sales commissions: up ¥957 mil. YoY
				Sales related expenses: up ¥617 mil. YoY
				Administrative expenses, etc.: up ¥380 mil. YoY
		■ Operating income	Operating margin 2022H1: 6.2% ⇒ 2023H1: 10.4%

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Consolidated P&L Changes Analysis

Operating Income to Profit Attributable to Owners of Parent

				FY2022	FY2023	YoY Change
	(mil. yen)	H1 Results	H1 Results	Amount	%
	Operating income	4,917	8,966	4,049	82.3%
		Non-operating income	4,168	2,560	(1,608)	(38.6%)
		Non-operating expenses	209	137	(72)	(34.6%)
	Ordinary income	8,876	11,389	2,513	28.3%
		Extraordinary income	-	376	376	-
		Extraordinary losses	621	1,046	424	68.3%
	Profit before income taxes	8,254	10,720	2,465	29.9%
		Income taxes etc.	(2,688)	3,275	5,964	-
		Profit attributable to non-	39	40	1	3.4%
		controlling interests
	Profit attributable to	10,904	7,404	(3,499)	(32.1%)
	owners of parent
		Key Factors

• Non-operatingincome: Decrease in foreign exchange gain (foreign exchange gain 2022H1: ¥3,938 mil., 2023H1: ¥2,288 mil.)

◼ Extraordinary losses:	Extraordinary losses due to discontinuation of Amplitude and ITRIM ¥589 mil.
◼ Income taxes etc.:	Reduction in income taxes etc. - recorded in the same period last year due to liquidation of H2O PLUS
	¥4,466 mil.

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