Pigeon Corp_2020 Dec_Q2_Conference summary

Pigeon Corporation Q2/2020 Dec. Conference summary
Disclaimer:This conference note is for reference only for those who were unable to attend the result

briefing. This material includes certain forward-looking statements about the Pigeon Group.

To the extent that statements in this material do not related to historical or current facts, they
constitute forward-looking statements. These forward-looking statements are based on thecurrent assumptions and judgments of the Pigeon Group in light of the information currently
available to it, and involve known and unknown risks, uncertainties and other factors, which

may affect the statements made in this material.
[Date]

August 7, 2020

[Venue of the event]Otemachi Sankei Plaza and Live streaming[Number of Speakers]

3

Norimasa KITAZAWA, President and CEO

Eiji AKAMATSU, Director, Senior Managing Executive Officer

Tadashi ITAKURA, Director, Senior Managing Executive Officer

1 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Kitazawa: Hello everyone. Thank you for visiting today in the truly awesome heat. Today in themorning, the temperature was already more than 36 degrees Centigrade, I would like you to becareful not to be affected by heat stroke.

Regarding the semi-annual results, the overall figures were slightly better than our expectations.
First of all, I will explain the timeline of our offices to date.

In India, the factory and office were completely shut down for two months from the middle ofMarch. The plant could not manufacture and the sales office could not operate. Currently, they

have almost recovered. In terms of sales, however, there is still the lockdown in each province,

so we are unable to do business across provinces. On the other hand, sales in Ecommerce, which
account for more than 40% of overall sales, are almost back to normal and Ecommerce sales is
now coming back.

Next is Malaysia. We have a sales office in Malaysia, which was shut down for two months like
India. Even as of the end of May, only 50% of our sales activities could be carried out. In July,
however, it was able to carry out 100% of its activities.

2 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

In Turkey, the factory was not completely stopped, but the utilization rate fell for about twomonths. Currently, it has returned to normal levels. Rather, because of the lockdown andreduced production when the utilization rate fell, it cannot catch up with an ongoing rise in salesof breast pumps in the US. So we would like to catch up with the demand as soon as possible.

The China Business resumed operations immediately after the Chinese New Year and returned
to normal levels in around March. Currently, it remains normal.

There is no shut-down or fall of utilization rate of factories in Japan, Thailand, and Indonesia.

Even among the COVID-19 pandemic, the plants and sales offices continued operations.

First of all, I introduce topics in the second quarter.
In China, there was an Ecommerce festival called “618 festival” on June 18. This year, too, wewere very successful. Sales at the T-mall flagship store were 138% against the previous year’s
result. Sales of Nursing Bottles and Nipples retained the first position at JD Supermarket and Tmall. In addition, Skincare and Other products were ranked first.

3 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

In June, we launched the first line of the Ssence, which we announced last year.
Detailed sales trends are yet to be known since the sale has just started. However, Ssence got
off to the good start as the number of page views exceeded 10 million views, according to
WeChat and other accounts.

4 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

In the Japanese market, we started a new baby stroller category called FUNRIDE. Based on theconcept that "Pigeon's baby strollers move smoothly and are comfortable to ride," we launched
the first product, a baby stroller equipped with cooling fans, for summer.

Based on the concept of FUNRIDE, we will launch more and more products in the future. New

products from a very different angle are scheduled to come out around next year, so I am verymuch looking forward to them.

5 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

In the Singapore Business, the Pigeon brand was finally launched in Nigeria.
We are very excited to let you know the business has finally begun. The photographs show

Pigeon shelf at a baby shop for High-class customers and a bus with our advertising. In Nigeria,

the main advertising media appear to be radio and AD board on streets. As Nigeria is a very large

market with seven million births per year, we aim at sales of approximately USD1 million in two

years, 2022.

6 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Next is Lansinoh.
We have changed the package design for Lansinoh products in succession. In addition, we

launched a new plant-based Organic Nipple Balm that is not made from lanolin. Considering theenvironment, we have also launched washable and reusable breast pads, and they have been
faring very well.

Under the new packages, breast pumps such as Smartpump 2.0 and new product lineups havebeen performing very well recently and we will continue to introduce new products.

7 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Net sales were 92.2% of the year-before result, and operating income was 86.8% YoY.

By segment, net sales in Japan were 89.5% of the year-before level, but the gross profit margin
was relatively low in Japan.

8 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Sales in China were 96.7% of the year-before level in terms of JPY. Sales exceeded 100% on a
local currency basis. The gross profit margin remained at a high level.

Sales in the Singapore and Lansinoh Businesses were 90.7% and 96%, respectively, mainly due
to the impact of foreign exchange rates and other factors. Both sales actually exceeded 100% on
a local currency basis.

In particular, we changed the accounting standards for the Lansinoh Business this year. In
accordance with local accounting standards, we deduct rebates, incentives, and other items

from sales. The figures after returning these items to selling, general and administrative
expenses will be shown later.

The above are the details by segment on a local currency basis. Sales in Japan were 89.5%. Sales
in the former Domestic Baby and Mothers Business alone were 85.0% of the year-before figure.

Sales in the former Child Care Service Business were 94.4%. Sales in the former Health & Elder

Care Business were 106.7% of the year-before level as disinfectants sold well.

9 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Sales in the Singapore Business as a whole were 93% on a local currency basis. Looking at sales
in major countries, those in Singapore were 107.3% and those in the Middle East were 102%, i.e.,
not all regions posted YoY declines in sales.

India and Malaysia were really tough. Sales in both countries saw significant YoY declines due tothe complete lockdowns for two months.

Sales in the China Business, including exports, were 101% of the year-before level. Domestic

sales in China recovered to 105.4%. Sales in Ecommerce increased to 134%. The ratio of
Ecommerce was around 59% in Q1 and rose to 61% in Q2.

Sales in the Lansinoh Business were 99.3% of the year-before level, but this was due to thechange in the accounting standards. Based on the previous accounting standards, overall sales

in the Lansinoh Business would have been 107.5%. Sales in North America alone were extremely
favorable with 113.5% of the year-before level.

This is the growth conditions in the Pigeon brand's main markets.

10 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

In South Korea, although the impact of COVID-19 was significant, Ecommerce accounted for avery high level of 84% of our sales. So sales were up 10% YoY, not affected by declines. China

performed well, as I explained earlier. Sales in the Middle East also grew 2%. Again, sales in India
and Malaysia were far from achieving the targets due to the lockdowns.

This is the state of growth in the Lansinoh brand's major markets.
Sales in the US rose 13%, and those in Canada grew 25%. Sales in Germany, UK, and Turkey also
marked YoY increases.

Sales in France incurred a YoY decline of 1%. The reason for this is that in France, our main

channel is still pharmacies and we are in the process of expanding our sales channels to
Ecommerce, so the impact of COVID-19 was significant.

11 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

This is the balance sheet.
Even in the tough period with COVID-19 pandemic, our cash position increased from the end of

the previous fiscal year. Inventories were also up 8.2%. The increase came from the changes indemand of each product. As breast pumps were growing in the US, we had more breast pumpinventory as the safety stock. In addition, there are some business bases that had large
inventories in preparation for the deterioration of COVID-19.

12 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

This is the latest situation amid the COVID-19 pandemic.
As I mentioned earlier, there had been a very small amount of Ecommerce sales in Malaysia, but
those sales were increasing due to COVID-19. I hope that the ratio of Ecommerce sales in
Malaysia will rise to around 10% in two years.

In addition, India still imposes restrictions on behavior amid COVID-19. The two countries wereheavily affected by COVID-19 and remain in harsh business conditions. I would like to see to what
extent they will recover in the second half of the current fiscal year.

13 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

When it comes to things that don't change amid the COVID-19 pandemic, I feel that "brands that
consumer can trust in emergency situation are strong in the market”. As many of our products

have increased their market shares amid the COVID-19 pandemic, I again recognize theimportance of standard branding activities and comprehensive policy.

What has changed due to the COVID-19 pandemic is the way employees work in the Group. At
the head office in Tokyo, even after the Japanese government lifted its declaration of the stateof emergency, we plan to maintain the office attendance rate at 50% or below until the end of
August. Lansinoh has kept an office attendance rate of around 30% at its offices. In Singapore,

they continue to operate their business by combining on-site working and teleworking on agood balance.

The way we communicate with our customers has also changed due to COVID-19. Online

promotions through social media made progress even further.

14 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Our Group's market shares amid COVID-19. In Japan, the market shares of Nursing Bottles rosefrom 79% to 85% YoY. With inbound demand no longer in place, this year's market shrank froma year earlier, so the amount of our sales fell slightly, but our market share is very high.

15 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

In terms of the share of Nursing Bottles in China, the combined market share at T-mall and JD

finally exceeded 40% in terms of value. Over the medium to long term, we believe that we canaim at 50%.

In the US, Lanolin nipple cream held a high market share of 74%. In the Nipple Cream category,the competing brands have lowered prices, but Lansinoh maintained the high market share of
74%. In addition, as I explained earlier, Lansinoh has launched Organic Nipple Balm, so sales in
our Nipple Cream category were growing even further.

16 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

The market shares of our core products in the US market. Breast Pads kept the first position.

Breast Milk Storage Bags also remained No. 1. Among Breast Pumps, Manual Breast Pumps

continue to be ranked second.

17 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

These are some examples of our activities for communicating with customers through social

media and on-line.

In Japan, we provide advice from specialists, such as pediatricians, on social media.
In China, we utilize live-streaming on WeChat and Weibo.
An online seminar for raising children with breast milk is being held in Malaysia.
At Lansinoh, they created feature pages on the novel COVID-19 on its own website to provide in-depth information.

18 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

This is about the initiatives through our brand. We introduced a new way of branding this year.
This time, in the Best Japan Brands 2020 rankings by Interbrand Japan, Pigeon was ranked 64thout of the top 100 names. The Company was chosen in the rankings for the first time.

The reason is that we heightened customer satisfaction and enhanced the brand value by newly

establishing the purpose of "We want to make the world more baby-friendly by furthering ourcommitment to understanding and addressing babies’ unique needs" in the Pigeon Way.

This purpose has further clarified the direction that the company should take for its employees.

19 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Next is on our Corporate logo. Pigeon previously used a CI and BI.
CI was the corporate identity with a red line sideways, but we abolished this CI and decided touse only our BI, the brand identity. Therefore, all logos on documents, at factories, and on

packages became the BI from this year. The photos above show the Hyogo and Ibaraki plantsthat recently changed their logos.

20 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

We also refurbished the design in our offices around the world, all based on the new brand.

Sales promotion tools are also updated under the new brand style.

21 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

These are our new display shelf used in an exhibition in Japan. In particular, the wave line below
the Pigeon logo is very important in the current branding. All products include this wave line.

The website has been changed to a new brand image since this year.

22 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

We renewed both the brand movie and the corporate movie. I love this brand movie in particular,
so I highly recommend that you take a look at it.

This is about "S" activities of ESG.

23 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

We supported developing a self-diagnosis training kit for breast cancer which led by
Chulalongkorn University of Thailand. This is a training kit for doctors that helps them learn
what they feel when they come into contact with breast cancer. In Singapore, we have begun toinstall collection boxes for nursing bottles as one of our environmental initiatives.

These are measures planned for the second half of the current fiscal year. In China, as the Qingpu

Plant in Shanghai is becoming narrow, we plan to expand the space next to our existing plant.
Also, the expansion of the Indonesian plant is scheduled for completion around this November,
although there are some delays due to COVID-19.

Furthermore, we have decided to go to Canadian market with Pigeon brand. We found a great
local distributor and have completed a contract. Although it is difficult to establish a solid
schedule due to COVID-19, we believe that we will be able to begin selling our products in
Canada around early 2021.

Our China Business is going to handle Pigeon business in the Canadian market. As Asian people
account for a large part in Canada's population, the business is expected to be easily operatedusing the Chinese network.

24 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Over the medium-to-long term, we expect that this scheme under supervision of the China

Business will advance into Amazon in the US. In the future, we intend to create a structure inwhich Pigeon and Lansinoh coexist in all markets around the world.

In addition, starting this year, we divided the Pigeon Group into four segments, delegating
authority and giving development functions to each of them. This division is progressing
smoothly, and we are expecting about 150 SKUs of new products yet to be sold.

As stated here, we feel that we have only a few local products that meet the need of consumers
in each country and only a few hygiene-related products that are used in the event of a pandemic

such as COVID-19. Furthermore, as we have few products that meet the need in the event ofdisasters like an earthquake, we plan to develop more of such products.

On September 1, we plan to open the second breastfeeding bank in Japan on the first floor of

our headquarters. This is a system in which donor milk is sent free of charge for low-birth-weightbabies at hospitals from the breast milk bank.

In addition, we will install solar panels on the roofs of the plant in Thailand and a new plant inIndonesia. In the past, we equipped two plants in China and a plant in India with solar panels.

25 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Finally, this is the full-year forecasts.
There is no change from the full-year forecasts announced on June 4. As there are still many
uncertainties, there is no change in the ranges of the full-year forecasts. However, by our latest

estimate, we see the results may be close to the upper limits of the presented ranges.

26 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Finally, our shareholder return plan.
Even considering the current profit levels, there is no change from the dividend forecast at the
beginning of the fiscal year.

That’s all for my explanation. Thank you very much.

27 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Question & Answer

The following Q&A part is categorized and sorted by Business segment and Others[Japan Business]
Q: Could you tell us about the company’s outlook in 2 nd half?
A: First of all, the average monthly net sales were approximately JPY2.77 billion. On the other

hand, sales in April and July were around JPY1 billion more than other months, respectively, due

to various factors like the Golden Week holidays and retailers' sales fairs. In the current year, if
you compare the first-half results to January-June last year, sales in the whole Japan Businesswere 94.1% of the year-before result and those in the former Domestic Baby & Mother Care

Business were 90.2% of the year-before level. (We changed our accounting period from thecurrent fiscal year. For the Japan Business, the first half of the previous fiscal year was fromFebruary to July). In the first half of the year, sales of baby strollers were in decreased because

there was a restraint on going out. While there was such fall, sales of our baby wipes and otherproducts increased due to special demand. As a whole, sales were at roughly the same level as

the year-before level on an existing customer basis. Inbound sales were 2.2 billion yen in the firsthalf of last year and 0.6 billion yen in the current fiscal year.

For the second half of the current fiscal year, we do not expect a sharp decline in sales because

those on an existing customer basis recovered to the normal pace in June. However, the fall in

inbound demand-related sales will not be able to be covered. In the second half of the fiscal year,

we expect sales will be close to the result in the first half. We should not be concerned over

Inbound demand too much, and we are conducting sales activities in a more realistic way. In
this respect, we view the current situation as a good opportunity for our sales activities.

28 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Q: Market shares of the nursing bottles increases even in the COVID-19. What do you expect
to the market shares in the second half and later?

A: Sales of the nursing bottles and nipples account for around 13% in the Japan Business. Andeven facing the COVID-19 pandemic, our market shares has actually risen to 87% recently,
gaining 8 percentage points since 79% at the end of last year. We should maintain the share of
87%. Nursing bottles are one of mainstays and they led to various other products for babies, so

we will maintain steady sales of nursing bottles and keep delivering them to our customers.

[China Business]
Q: What were the drivers of the sharp recovery of China business in Q2?
A: Looking only at the second quarter, bottles and nipples, and skincare goods mainly grew. In
addition, hand wipes and cleansing goods also grew, but competitors’ products grew more. We
believe that there was some rebounding demand that had emerged during the lockdowns in thefirst quarter. So, the second quarter results were favorable. Actually, sales used to drop after the

618 ecommerce festivals in a conventional year. This year, however, July results were very good

after the festival in June. I guess that there was some rebounding demand and that the market
structure may have changed somewhat for the short term.

Q: What is the reason why you increased the market share of Nursing bottles in China?
A: Reliability was all. We did not have special promotions for Nursing Bottles and Nipples. A risein the number of nursing bottle types may be a factor. As I may have said previously, we havelaunched bottles with handles and with various patterns. They may have contributed to the risein the share.

29 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

Q: What do you expect for the China Business in full year?
A: We expect that the sales of China domestic will probably come within our initial plans.

However, export business seems tough. As conclusion, we are not pretty sure because nobody
knows what COVID-19 looks like end of this year.

Q: What is and will be the reputation of Pigeon brand in China?
A: We expect that the reputation will be higher, particularly that of Nursing Bottles. A cause ofconcern is whether we can expand our brand-name reputation of nursing bottles to other baby

care category. Skincare is certainly faring well. We think we have to consider various measuresin categories other than Skincare and Nursing Bottles. In Japan, one brand covers a variety of

categories. But a feature of the Chinese market is that experts of products are divided and astrong brand is fixed for each product. So, the key is to strengthen the weak point.

The first question is about your prospect for the second half in China. China showed sharp
recovery in the second quarter. What performed well were nursing bottles, skincare anddisinfectants. Will there be changes in consumer demand as there was COVID-19? For example,
have sanitary goods and others begun to be sold? Is the market expanding? Please explain thefactors behind the recovery.

I think that demand tends to be concentrated on the second quarter every year because there

are ecommerce events. Then, do you have to consider the possibility in advance that there will
be reaction in the third quarter? Please comment on the point.

Q: Is there such a trend that people who cannot visit Japan purchase your goods inmainland China?

A: There are cross-border ecommerce sites, which are managed by us and by other businessowners. Sales on these sites have sharply grown. Sales on the sites that are not operated by us

30 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

are not counted as our sales. Part of that demand for the cross-border EC sites probably comesfrom could-be inbound demand of Japan business.

Q: In Ecommerce, is there any pressure on margins as there may be competitive costs
depending on price conditions?

A: There is little difference in margins between sales to wholesalers and those to Ecommerce.

For the future, we expect that there will be more intense competition in Wet Wipes, Breast Pads

and Paper-Related Goods. So, we are prepared for the competition and trying to manufactureother products that can offset the expected sales declines in those goods.

[Lansinoh Business]
Q: US especially seems very strong. What are the growth drivers of Lansinoh Business? Any
update of DME?

A: Overall, the ratio of Ecommerce and Amazon was certainly rising. Amazon accounted forabout 35% of Lansinoh sales in North America. And sales increased even at Walmart and otherretailers. Certainly, the new Smartpump 2.0 had a good reputation and Organic Nipple Balm andWashable Nursing Pads are also doing good.

Sales of Durable Medical Equipment (DME) channel did not grow in the first half of the current

fiscal year. The reason is that production of Smartpump 2.0 could not catch up with demand

due to the utilization rate of the Turkey plant. We believe we will recover sufficiently in thesecond half of the year. Therefore, from the full-year perspective, Lansinoh’s performance will
not fluctuate greatly.

Q: Sales of Lansinoh business were very good and are growing, however, the profit margin
seems lower than other business. Do you think the profitability of Lansinoh business will
improve once DME business gets bigger? I heard Lansinoh does not use distributors, so is

its profitability unlikely to improve without changing the distribution structure drastically?

31 / 32

Pigeon Corp_2020 Dec_Q2_Conference summary

A: We expect DME will grow and record good figures. We actually see that the profitability of

Lansinoh business is relatively high because we don’t use distributors. Overall, Lansinoh’s grossprofit is very high, but it is affected by a fairly high level of SG&A expenses. If we take proper steps
there, we can make an improvement of a rise of around 1 percentage point of the profit margin

during the current medium-term plan.

[Other Questions]
Q: Is new product development going on the plan even in COVID-19 pandemic?
A: I’m very excited our NPD plans. Actually, the period until the launch of a new product is slightly

behind schedule. So, some products, which were scheduled to be launched now, have been

postponed to next year. However, these 150 SKUs are actually being developed for launch, andthey can be released within next year at the latest.

China has lots of NPD plans as always. In addition, the number of new products is sharply
increasing in Singapore. And at Lansinoh, we are working on very interesting and new category.

[END]

32 / 32