Shiseido : Develops Medium-to-Long-Term Strategy

1. Key Strategies
(1) Improve profitability
1) Rebuild profit structure through fundamental reforms
2) Increase cost competitiveness and improve factory productivity
3) Accelerate growth in Asia, especially China

(2) Focus on Skin Beauty
1) Build a powerful portfolio centered on Skin Beauty Brands
2) Accelerate innovation through external collaborations
3) Develop the inner beauty category

(3) Rebuild Business Foundation
1) Become a truly sustainability-focused company
2) Strengthen brands through innovate marketing and robust organization
3) Build a digitally driven business model and organization
4) Enhance talent and organization through diversity and upskilling

2. Financial strategies
(1) Financial KPIs
We have positioned the three-year period through 2023 as a phase of rebuilding the foundation to build financial muscle through structural reforms and generate stable cash flow. In the process, we will improve operating profit and EBITDA and raise the profitability of the business itself by strengthening the Skin Beauty business, which is our core business, and structural reforms to rebuild business foundation. In 2023, we aim for sales of approximately 1 trillion yen, an operating profit margin of 15%, an EBITDA margin above 20%, and free cash flow of approximately 100 billion yen. Regarding capital efficiency, we aim to achieve 14% for ROIC and 18% for ROE while paying attention to NPV*1 and pay-back rate*2.
*1 NPV: Net Present Value
*2 Pay-back rate: The minimum yield required to make an investment

(2) Cash Flow Structural Reforms and Strategic Investment Allocation
We will generate cash inflow of more than 500 billion yen over the next three years by (1) Improving the underlying profitability through focus on Skin Beauty and structural reforms, (2) Cash flow reforms such as increased inventory efficiency and reduced supply chain lead time, and (3) Reviewing our portfolio. To maximize corporate value, we will allocate this cash for structural reforms to rebuild the business foundation, for growth investment including talent development, for marketing in our core Skin Beauty field, future growth areas such as digital, IT, and factories, and for debt reduction, as well as to strengthen shareholder returns.

(3) Return to shareholders
Our total shareholder return policy emphasizes maximizing returns to shareholders through direct means, in addition to generating medium- and long-term share price gains. Focusing on free cash flow, we will achieve long-term stable and continuous returns with a capital dividend-on-equity ratio (DOE) of 2.5% or higher. With WIN 2023, we aim to achieve a stable dividend increase at DOE of 2.5% or higher regardless of business environment. Thereafter, we will pay dividends in line with EPS growth over the medium to long term.