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Financial Overview for the Fiscal Year Ended
December 31, 2016
February 2, 2017
Akihiro Kobayashi
President & Chief Operating Officer
Kobayashi Pharmaceutical Co., Ltd.
Table of Contents
Consolidated Results for the Fiscal Year Ended December 31, 2016
Forecast for Year Ending December 2017
Return to Shareholders
The Company’s Efforts in the Future
1/34
Consolidated Results for the Fiscal Year Ended
December 31, 2016
Amount
(million yen)
Margin
(%)
Amount
(million yen)
Percentage
(%)
Amount
(million yen)
Percentage
(%)
Amount
(million yen)
Percentage
(%)
Net sales 120,051 ー △17,159 87.5% 7,595 106.8% 2,751 102.3%
Operating
income17,409 14.5% △850 95.3% 186 101.1% 509 103.0%
Ordinary
income19,499 16.2% 1,550 108.6% 2,409 114.1% 699 103.7%
Net income 14,321 11.9% 855 106.4% 1,559 112.2% 821 106.1%
Changes from
published
forecasts*
FY2016Domestic firms: Apr.-Dec. 2016
Overseas firms: Jan.- Dec. 2016
Changes from previous
fiscal year
Domestic firms: Apr. 2015-Mar. 2016
Overseas firms: Jan.- Dec. 2015
Changes from same
period of previous year
Domestic firms: Apr.-Dec. 2015
Overseas firms: Jan.-Dec. 2015
Consolidated Results for the Fiscal Year Ended
December 31, 2016
Achieved significant year-on-year growth in both revenue and income
* Published May 9, 2016
3/34
Net income
143
0
50
100
150
Mar.'98 Dec.'16
(100 million yen)
The Company has achieved growth in net income for 19 consecutive years, although the
consolidated operating results for the current fiscal year cover nine months due to the change in
accounting period.
Listed on the
Tokyo Stock
Exchange in
Aug.’00
Posted record
net income
Listed on the
Osaka
Securities
Exchange in
Apr.’99
4/34
Highlights of Consolidated Results [Net Sales]
(1) Strong sales of new products (+4.6)
(2) Increased sales of existing products (+1.5)
(3) Increase in inbound demand (+1.1)
(4) Growth in mail order business (+1.0)
(5) Fewer returns at Kiribai Chemical (+1.0)
Incre
ase
De
cre
ase
(1) Decreased revenues for overseas business
(-1.2)
(Local currency basis: +1.2)
(Currency exchange impact due to yen
appreciation: -2.4)
(2) Other (-0.4)
<Increases/decreases in net sales
(change from the same period of the previous year)>
Year-on-
year change
106.8%
(Unit: billion yen)
•The actual figures for the same period of the previous year (FY ended Mar. 2016) were calculated as nine months
(Apr.–Dec. 2015) for Japan + 12 months (Jan.–Dec. 2015) for overseas firms.
5/34
172 174
+54
+16
△1
+4
△13
△42 △2 △5 △6 △1
+1
△3
100
140
180
220
Op
erat
ing
inco
me
for
FY 2
015
Sale
s in
crea
se
Co
st r
edu
ctio
n
Pri
ce in
crea
se
Loss
on
dis
po
sab
leo
f in
ven
tory
Oth
er c
ost
s
Ad
vert
isin
g ex
pe
nse
s
Pro
mo
tio
n e
xpen
ses
Pe
rso
nn
el e
xpe
nse
s
Co
mm
issi
on
fee
s
R&
D e
xpen
ses
Co
mm
un
icat
ion
exp
ense
s
Oth
er e
xpen
ses
Op
erat
ing
inco
me
for
FY 2
016
・・・Factor for increase・・・Factor for decrease
Same period year–on-year
change
101.1%
Production costs SGA expenses
Assisted growth by actively investing in advertisements and secured an increase in income.
<Subject period>Domestic:Apr.-Dec. 2015Overseas:Jan.-Dec. 2015
*Cu
rren
cy e
xch
ange
imp
act
Highlights of Consolidate Results
[Operating Income]
(100 million yen)
6/34
•The actual figures for the same period of the previous year (FY ended Mar. 2016) were calculated as nine months
(Apr.–Dec. 2015) for Japan + 12 months (Jan.–Dec. 2015) for overseas firms.
Segment Results
(1) Figures on the lower line exclude Kiribai Chemical results.
(2) Net sales excluding the impact of the change of fiscal year are 17,599 million yen (92.6% year-on-year).
Sales at stores in Japan and the direct marketing business saw significant
increases, while sales at stores outside Japan ended below last year’s level
due to the warm winter and the strong yen.
Amount
(million yen)
Year-on-
year change
(%)
Amount
(million yen)
Year-on-
year change
(%)
Amount
(million yen)
Year-on-
year change
(%)
92,955 109.6%
85,498 109.1%
16,456 105.7%
15,886 102.7%
Net sales
Operating
income
Direct Marketing BusinessSales at stores in Japan
and Kiribai Chemical
Domestic Consumer
Products Business
61.2%
Operating
income for the
same period of
the previous
year
34
706
18,026 93.4% 7,159 115.9%
△287
Overseas Consumer
Products Business
(1)
(1)
(2)
7/34
* The actual figures for the same period of the previous year (FY ended Mar. 2016) were calculated as
nine months (Apr.–Dec. 2015) for Japan + 12 months (Jan.–Dec. 2015) for overseas firms.
Domestic Consumer Products Business
(Sales at stores in Japan and Kiribai Chemical)
848 930
0
300
600
900
1200
Dec. '12 Dec. '13 Dec. '14 Dec. '15 Dec. '16
156
165
18.3 17.7
0
10
20
30
40
50
0
50
100
150
200
250
Dec. '12 Dec. '13 Dec. '14 Dec. '15 Dec. '16
Operating income
Operating margin
<Net Sales> <Operating Income>(100 million yen) (%)(100 million yen)
Performance of Domestic Business
Net sales : 93.0 billion yen (109.6% year-on-year)
Operating income: 16.5 billion yen (105.7% year-on-year)
9/34
*The actual figures for the same period of each year were calculated as nine months(Apr.-Dec.)for Japan + twelve months(Jan.-Dec.)for overseas
Sales by Business CategoryAll categories saw significant growth due to strong sales of new and
existing products and inbound demand.
FY ended Dec.
2016
Amount
(million yen)
Amount
(million yen)
Difference
(million yen)
Year-on-year change
(%)
Healthcare
products 42,237 37,415 4,822 112.9%
Household
products 41,045 39,335 1,710 104.3%
Skin care products 4,181 3,430 751 121.9%
Body warmers 5,490 4,646 844 118.1%
Total 92,955 84,827 8,127 109.6%
Same period of the previous year
10/34
•The actual figures for the same period of the previous year (FY ended Mar. 2016) were calculated as nine months
(Apr.–Dec. 2015) for Japan + 12 months (Jan.–Dec. 2015) for overseas firms.
823
3015
15
0
10
20
30
40
50
Mar. ’15 Mar. ’16 Dec. ’16
(100 million yen)
<Estimated inbound demand>
23 33(Apr.-Dec.)
Supplements Household products
Pharmaceuticals
Inbound DemandPurchase items and purchase places have increased, with inbound demand in the
fiscal year ended Dec. 2016 of 4.5 billion yen(* Nine-month period).
4345(Apr.-Dec.)
“Twelve Supreme Drugs You Must Buy When You Visit Japan”
Source: Sofu (Chinese social media) (Oct. 17, 2014)
(Nine-month accounting period)
10
10 Apr.-Sep.
Oct.-Dec.
Apr.-Sep.
Oct.-Dec.
Jan.-Mar.
Apr.-Sep.
Oct.- Mar.
11/34
Overseas Consumer Products Business
153
189 176
11.9%
13.8%12.1%
0%
5%
10%
15%
20%
0
50
100
150
200
Mar. '13 Mar. '14 Mar. '15 Mar. '16 Dec. '16
Net sales
Overseas sales ratio
<Overseas net sales and overseas sales ratio>(100 million yen)
Performance of Overseas Business
Net sales decreased from the previous fiscal year due to the warm winter and the
strong yen. The overseas sales ratio declined to 12.1%.
Net sales : 17.6 billion yen (92.6%year-on-year)
Operating income: 0.7 billion yen (61.2%year-on-year)
* Net sales for the period under review (Dec. ’16) have been adjusted for the impact of the fiscal year change.
13/34
Sales Portfolio of the Overseas Business
<Core products by region>
U.S. : Body warmers
South East Asia: Netsusama Sheet,
Anmeltz
China : Body warmers,
Netsusama Sheet
While sales of body warmers were sluggish in the U.S. due to the warm
winter, sales of Netsusama Sheet increased in South East Asia.
45%
39%
19%
23%
26%
28%
6%
6%
4%
4%
Dec. ’15
Dec. '16
<Sales portfolio by region>
U.S. South East Asia China and Hong Kong U.K. Others
57%
50%
20%
21%
10%
12%
13%
17%
Dec. ’15
Dec. '16
<Sales portfolio by product>
Body warmers Netsusama Sheet cooling gel Anmeltz Other
* Both the period under review (Dec. ’16) and the previous year’s period (Mar. ’16) are
calculated for a 12-month period (Jan.–Dec.).
14/34
Direct Marketing Business
76 79 66 62
72
0
20
40
60
80
100
Dec. '12 Dec. '13 Dec. '14 Dec. '15 Dec. '16
(100 million yen)
Performance of the Direct Marketing Business
Year-on-year
114%
<Net sales>
Net sales showed a V-shape recovery due to an increase in the number of customers
supported by the Company’s strategic advertising investment.
Although the Company posted an operating loss, it will try to turn the business around
by increasing the number of regular customers.
Net sales : 7.2 billion yen (115.9% year-on-year)
Operating loss: 0.3 billion yen (operating income of 0.03 billion yen in the previous
year)
<Supplements>
<Skin care>
16/34
Year-on-year
122%
Growth Drivers
2015
Apr.-Mar.
Year-on-
year
change
Consolidated net
sales1,372 106.9%
Inbound demand 43 187.0%
Consolidated net
sales excluding
inbound demand1,329 105.4%
Growth Excluding Inbound Demand
<Growth rate excluding inbound demand *Year-on-year change>
2016
Apr.-Dec.
Year-on-
year
change
1,200 106.8%
45 134.9%
1,156 105.9%
Even if inbound demand is excluded, the Company’s consolidated sales increased
from the preceding years in FY2015 and FY2016.
The development of new products and growth of four businesses (overseas, direct
marketing, skin care, and Kampo) contributed to robust business performance.
(Unit: 100 million yen)
* The actual figures for the same period of the previous year (Apr.-Dec. 2015) and the current year (Apr.-Dec. 2016) were
calculated as nine months (Apr.–Dec.) for Japan + 12months (Jan.–Dec.) for overseas firms.
18/34
Contribution Ratio of New Products
(Excluding Direct Marketing Business)
The four-year contribution ratio has gradually risen thanks to the Company’s efforts to
develop new products.
The initial-year contribution ratio has been on the decline due to sharp growth in the
sales of existing products.
(%)
5.5 7.9 7.5 8.1
7.1 6.8
15.4
18.0 16.9
19.6 20.2
22.8
0
10
20
30
Mar. '12 Mar. '13 Mar. '14 Mar. '15 Mar. '16 Dec. '16(nine-month accounting period)
Red : Four-year contribution ratio
Blue: Initial-year contribution ratio
19/34
Four Growth Businesses (Overseas, Direct Marketing, Skin Care, and Kampo)
Actual results
in FY2013
(12 months)
Actual results
in FY2016
(12 months)
Comparison to FY2013
Difference Growth ratio
Overseas 124 180 +56 145.2%
Direct marketing 107 95 ▲12 88.8%
Skin care 36 54 +18 150.0%
Kampo 87 111 +24 127.6%
Total of the four growth
businesses354 440 86 124.3%
Sales of the four businesses grew by 124.3% compared to those in FY2013 (3 years ago).
Under the medium-management plan, the Company aims to boost sales of the four
growth businesses.
<Reference>
<Net sales of the four businesses>
Consolidated net sales127,200
million yen
144,800
million yen
+17,600
million yen113.8%
(Unit: 100 million yen)
20/34
Forecast for Year Ending December 2017
Highlights of Forecasts of Consolidated
Results
Amount
(million yen)
Margin
(%)
Amount
(million yen)
Percentage
(%)
Amount
(million yen)
Percentage
(%)
Net sales 150,000 - 120,051 124.9% 144,806 103.6%
Operating
income20,000 13.3% 17,409 114.9% 18,446 108.4%
Ordinary
income21,000 14.0% 19,499 107.7% 20,359 103.1%
Net income 15,100 10.1% 14,321 105.4% 15,025 100.5%
FY ending Dec.
2017[Domestic and overseas firms:
Jan.-Dec. 2017]
FY ended Dec. 2016
[Domestic firms: Apr.-Dec. 2016]
[Overseas firms: Jan.-Dec. 2016]
Year-on-year
change[Domestic and overseas firms:
Jan.-Dec. 2016]
22/34
In the FY ending December 2017, the Company will aim to achieve an
increase in profits for 20 consecutive years.
Return to Shareholders
45 48
52
0
10
20
30
40
0
10
20
30
40
50
60
Mar. '99 Mar. '16Dec. '16
Dividend amount
Dividend payout ratio
(%)(Yen)
Return to Shareholders
(Changes in Dividend Payment)
29.0%
Interim dividend :25 yen (to be paid in Dec. 2016)
Year-end dividend:27 yen (to be paid in Mar. 2017)
The Company increased the year-end dividend to 27 yen per share, up 3 yen
from 24 yen, achieving an increase in dividend payment for 18 consecutive
terms.
24/34
The Company’s Efforts in the Future
Outline of the New Medium-Term
Management Plan
FY2019 targets*1 FY2016 results*2 Comparison to
FY2016
Net sales 165.0billion yen 144.8billion yen 114%
Operating income 23.0billion yen 18.4billion yen 124%
Net income 17.0billion yen 15.0billion yen 113%
ROE 10% 10% 100%
<Consolidated numerical targets>
*1: Numerical targets are the minimum target, and the Company will aim for a higher level.
*2: FY2016 results are the sum of January to December 2016.
<Future goals>
Theme: “Growth with real strength”To further improve the ability of new product development and
cultivation, achieve “growth with real strength,” and become the No.
1 company in new market creation that can solve customers’
problems The figures are changed from those released in the
announcement of the medium-term management
plan (on November 1, 2016), since the actual
results for April to December 2016 were fixed.
26/34
<Outline of strategies>
3. Development and cultivation of new market
creator products
4. A company where employees can feel growth
2. Investing in growth for the future
1. Promote the four growth businesses
(overseas, direct marketing, skin care, and Kampo)
27/34Outline of the New Medium-Term
Management Plan
Outline of Strategies:
Promote the Four Growth Businesses
Overseas businessFY2019
target amount
Strengthen the OTC drug business mainly in North America
and China.
27.0 billion
yen
Direct marketing businessFY2019
target amount
Develop large-scale new products that would lead to new
customer acquisition.
12.0 billion
yen
Skin care businessFY2019
target amount
Create a brand that would become the third pillar after
Keshimin and Eau de Muge9.0 billion yen
Kampo businessFY2019
target amount
Continue to pursue the development of products that are
easier for customers to choose depending on their
constitution and symptoms
12.5 billion
yen
28/34
<Inbound demand>Increasing the number of items and shops
Four Growth Businesses
(Overseas Business)
The Company will promptly feed information on inbound demand in Japan back to cross-border
electronic commerce (EC) and sales in local markets.
The Company will aim to acquire a license to manufacture and market pharmaceuticals in China.
<Cross-border EC>Promoting the sales of cosmetics and health foods as a platform.
Sales have been gradually expanding, supported by steady sales of
Keshimin Cream, etc.
<Sales in local markets>Hong Kong : Began marketing Ninocure in
April 2016 and Senacure in
September 2016
South Korea: Began marketing Eyebon in
April 2016
29/34
Four Growth Businesses (Kampo Business)
Hefei Kobayashi Pharmaceutical Co., Ltd. began
full-scale production in January 2017and began
full-fledged in-house development of extracts.
漢方処方
清肺湯(せいはいとう)
Development under
an easy-to-understand
concept
The Company will continue the development of new products under an easy-to-
understand concept.
Makino Botanical Garden Hefei Kobayashi Pharmaceutical Co., Ltd.
The Company will aim to develop new products using
Makino Botanical Garden’s resources and
Kobayashi’s development know-how.
30/34
Create a
new market
Create
sales
boosters
Cultivation productsNew priority
products
Products with market potential
Corporate-
wide
cultivation
First
arrow
Second
arrow
Third
arrowSales R&D
MarketingProduction
Development and Cultivation of New Market
Creator Products
The Company has been making corporate-wide efforts to develop and
cultivate new products that can survive in the market after five to 10 years
from their launch and contribute to its profits.
31/34
1,069
929
15.4%18.0%
16.9%
19.6% 20.2%22.8%
5.5%7.9% 7.5% 8.1% 7.1% 6.8%
0%
5%
10%
15%
20%
25%
30%
35%
0
300
600
900
1200
Mar. '12 Mar. '13 Mar. '14 Mar. '15 Mar. '16 Dec. '16
The four-year contribution ratio has risen thanks to the Company’s efforts to develop
and cultivate new products that can survive in the market, although the initial-year
contribution ratio of new products has been on the decline.
The Company plans to develop and cultivate two or more new products every six
months and have them gain a foothold in the market.
Development and Cultivation of New Market
Creator Products
(Nine-month
accounting period)
<Net sales of the Domestic Consumer Products Business and new
product contribution rate>
Red : Four-year contribution ratio
Blue: Initial-year contribution ratio
(100 million yen)
32/34
Actively Invest for Future Growth
Investment: marketing expense+ capital expenditure + R&D expenseNet income
12.4 billion yen
Net sales
128.3 billion
yen
Investment
29.5 billion
yen
Investment
34.9 billion
yen
Net income
13.4 billion yen
Net sales
137.2 billion
yen
ROE
9.4%
ROE
9.6%
Investment
32.3 billion
yen
Net income
14.3 billion yen
Net sales
120.0
billion yenROE
10.0%
ROE
10.0%
or more
Net income
17.0 billion yen
Net sales
165.0
billion yen
Investment
47.0 billion
yen
March 2015
March 2016
December 2016(Nine-month accounting period)
December 2019
33/34
1,273 1,423
1,650
1,000
1,500
2,000
2,500
2013 2016 2019 20222011–2013
(94th–96th Terms)2014–2016
(97th–99th Terms)2017–2019
(100th–102nd Terms)2020–2022
(103rd–105th Terms)
Take on challenges for
new growth• Cultivate new
growth businesses.
• Implement large M&As.
Perform and
achieve
results
Growth with real
strength• Improve the ability of new
product development and
cultivation.
• Promote the four growth
businesses.
• Aggressively invest in
future growth.
(M&A, R&D)
New market
creation
Ahead of “Growth with Real Strength”
By achieving
“growth with real
strength” in 2017–
2019, generate
“new growth” in
2020–2022.
(100 million yen)
34/34
<Attention>
Of the Company’s current business performance, plans, and strategies that are
included in this material, those that are not historical facts are an outlook on
future performance, and are based on the judgment of the Company’s
management that have been obtained from currently available information.
Therefore, please be aware that the actual performance may differ significantly
from the future outlook described in this material due to changes in various
factors.