Summary of Results Briefing for the Q4 of the Fiscal Year Ending 31 December, 2021
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briefing held by Pigeon Corporation.
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Event Summary
Date:

Tuesday, Feb., 15, 2022 4:00 PM (JST)

Number of Speakers:

3
Norimasa Kitazawa

President and CEO

Tadashi Itakura

Director, Senior Managing Executive Officer

Yasunori Kurachi

Director, Managing Executive Officer

Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Kitazawa: Thank you very much for joining our results briefing. As introduction, we have threehighlights from last year and this year.
The first is that our company was recognized as a "Winner Company" at the 2021 Corporate
Governance of The Year Awards*. This was the first time for us to be named a Winner Company. I
believe that our company's progressive approach to baby care products was highly evaluated.
Secondly, also in 2021, we won the Minister of State Commendation at the 2021 Selection ofConsumer-Oriented Companies for Best Practice. I think that our research activities and productdevelopment that meticulously collect the needs and opinions of consumers were evaluated. In
addition, I believe that the establishment of the human milk bank has contributed to the awards.

*Note: Corporate Governance of the Year Awards is a registered trademark of the Japan Associationof Corporate Directors.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Lastly, in terms of financial highlights, we launched our third-generation nursing bottle in China in
September last year. As a result, our estimated market share mainly EC in the nursing increased to45%, up about 3 percentage points from 2019.
Sales in the Double 11 shopping festival grew by 4% YoY. Compared to 2019, they represented a
28% YoY increase. Besides, according to the JD rankings for Double 11 period, our nursing bottles
continued to maintain the top position.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This shows the results of last year. Sales were 92.3% of the initial plan. They were 98.7% of ourrevised forecast, slightly below against it. Operating income was 80.8% of the initial plan. It was
101.1% of the revised forecast. We achieved Operating income and Ordinary income.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This is the consolidated P&L under New Standard. Sales ended at 99% of the previous year's level.
Operating income was 88.4% YoY.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This is the results by business segment. The China business, Singapore business, and Lansinoh
business all exceeded the previous year's levels. The Japan business ended at 92.8%.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Operating income decreased by JPY1.7 billion YoY, and the first reason for this was a decrease ingross profit due to the decline in sales. The second reason was deterioration in the cost of sales rate,
mainly due to higher maritime transportation costs at Lansinoh. We also spent on sales promotion
and advertising expenses.
In addition, personnel expenses increased by about JPY400 million. JPY150 million out of JPY 400
million was the cost of social insurance in China. In the preceding year, this was exempted amid the
COVID-19 pandemic, but last year, we paid it regularly and that decrease Operating income.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

In the balance sheet, there was a decrease of about JPY1.9 billion in cash and deposits. The main
reason for this is increase of inventories. The amount of inventories increased by around JPY1.3
billion YoY. In addition, there was an increase in net assets. The main reason for the increase of net
assets was the cost of land acquisition for a new factory in Fuji, Japan, the construction of which will
start this year. Also, property acquisition cost for the expansion of our plant in Indonesia increase ournet assets.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This shows a summary of results by business segment. In China, the sell-in result in mainland was
94% YoY on a local currency basis. As I mentioned earlier, the performance in the Double 11 shopping
festival grew 4% YoY, but it was not as great as expected. The cumulative sell-out result was 93% of
the preceding year's level, so we no longer have a huge gap between the sell-in and sell-out results
here. In the core products, we introduced new nursing bottles and nipples to the market, which
contributed a little to sales through an increase in unit prices. Skincare products continued to perform
well and maintained double-digit growth. The ratio of online sales increased to 67%, up about 2
percentage points YoY from the preceding year's 65%. Last year, as an experiment, we launched the
Avocado skincare series exclusively for offline channels, which exceeded 1 million unit sales in thefirst year. We found that we still have a room to grow offline channels such as by launching offlineexclusive products.
Next is the Japan business. Half of the year here was under the State of Emergency, and the business
was considerably affected by it. Net sales in the Baby Care business ended at 94% of the year-before
level. In 2020, there was some residual inbound demand, and special demand for Covid-19 in someconsumables, but these were disappeared and resulting in a year-on-year decline in sales. However,out market shares of core products are increasing, i.e., nursing bottles, skincare products, breast
pumps, and oral care products. In Japan, the market share of our nursing bottles was 88%.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Next is the Singapore business. Full-year sales in India expanded YoY. Sales in Malaysia also
increased YoY. I think we can say that the business in these countries has entered a recovery phase.
In the export market, Vietnam and Australia performed well for the full year, but the Middle East
struggled due to the impact of COVID-19. In terms of the core products, sales of nursing bottles,
breast pumps, and skincare and oral care products marked double-digit YoY growth.
Next is the Lansinoh business. Sales in North America were strong, ending at 106% of the yearbefore level. This growth was seen in both the online channels and mass retailers. Although sales ofnipple creams, a main product, increased, but the sales of nursing pads and other consumables
struggled. Sales of birth prep & postpartum care products which were launched in June exceeded theinitial plan. We expect that they will perform very favorably in the future. In Europe, Germany, Benelux,
the UK, and Turkey, an item which is missing in the slide, sales performed very well in all regions.
Only Lansinoh China struggled due to competition of consumables. In addition, the Lansinoh business
was the most affected by rising ocean freight rates, and its gross margin deteriorated by about 3.3
percentage points.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This is the update of the progress of the 7th Mid-term plan. At the start of the current medium-termbusiness plan, we divided the Company into the four business segments, each with its own R&D
function. They have started to function smoothly, and various new products are now in the stage ofshipment or preparation.
Not only the new nursing bottles and nipples, there were the basic skincare products in China, newbreast pump at Lansinoh, and the electric toothbrushes in China and Japan.
Also, in Japan, we launched the baby Wuggy bouncer, and it has been doing very well. In addition,
Lansinoh has launched birth prep & postpartum care products which are also doing very well. In the
Singapore area, we have introduced botanical skincare products to the market. They have been very
well received. We also launched a new drinking cups in collaboration with Zojirushi Company in China
market.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

As for this year's plan, we set a consolidated sales plan of 106% of the previous year's result. Alongwith that, we would like to achieve operating income of 106.5% YoY.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Next, looking at each business segment, the sales plan for the Japan business is 101.7% of theprevious year's level, and that for the Baby Care business alone is 103% YoY. The sales plan for the
China business is 110%, and that for the Singapore business is 98.3%, which I will explain the reason
later. With the sales plan for the Lansinoh business is 109.6%, and the total sales plan is 106%. The
Singapore business, if you look at external sales alone here, will be up 13% YoY. As the plan for thetwo plants in Thailand is lower compared to the previous year, the plan for the overall Singapore
segment is 98.3%. Just external sales of the Singapore business will be 113% YoY.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This is the main topics of FY Dec. 2022 by segment. As for the overall strategy, we will focus on
nursing bottles and skincare products as a matter of selection and concentration.
In the area of improving profitability, we would like to improve gross profit by 1% or more every year
and the next medium-term business plan starting next year. Also, we need to strengthen our“Monozukuri (manufacturing)”. As for raw materials, although some of them have increased in price,
we do not expect them to have a significant impact on our earnings at this point of time as we aregoing to increase our selling price or improve production efficiency.
As for the China business, we plan growth to 107% YoY in the mainland alone.
At online channel, the replacement of the old nursing bottles and nipples with the new ones is
expected to be done by the end in April. We expect new products will contribute significantly to sales
and profits in 2022 and we would like to increase the market share of nursing bottles from 45% to
50% in China market. Also, we are going to tap a new online platform such as Tiktok, Wechat Mall,and Pinduoduo. In addition, the China business will start selling Pigeon products in North American
market. Sales in North America will start around this month via online. So, we hope this business will
work well.
Not only the baby care goods, we will launch Ssence products for mothers this year, which are partof our product expansion. In addition, skincare products for babies aged three or older will also belaunched this year.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Next is the Japan business.
To talk briefly, we will launch new nursing bottles and nipples onto the market. In addition, we willcompletely renew our basic skincare series, so we believe that we will be able to achieve YoY growthin the Japan business, including the higher unit prices.
In the Singapore business, we will increase our market share by specializing in nursing bottles andskincare products. In the Southeast Asian region, sales of standard-neck nursing bottles and nipples
are still large volume of our sales, but we are gradually shifting to wide-neck bottles and nipples thatare higher prices than standard-neck bottles. I believe that this will improve sales and profitability.
Next is the Lansinoh business. Here we expect growth to 108%, mainly in the core products and preand postpartum care products. As for the pre and postpartum care products, they are still performing
very well. I believe that they will grow to nearly 4% of Lansinoh's total sales for the full year of 2022.
In addition, we are planning to launch the next generation of breast pumps. The Chinese market isthe only one where Lansinoh is struggling, but we will review our product portfolio and make
improvements. However, the soaring ocean freight rates, which are still expected to remain high thisyear, will have some impact on profitability.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

This is about environmental change and our business opportunities.
The decline in the number of births is a global trend that we need to pay attention to. What we will doin response is to concentrate on our most important products, nursing bottles and skincare products,
to increase our market share worldwide. In addition to this, we will work to expand our productcategories by creating new categories: Mother care, Femcare, and Femtech products. The current
market size of Femcare and Femtech products in Japan is said to be approximately 60 billion yen,
and we believe that about half of this market, or 30 billion yen, is a market opportunity for us. We
believe that there is a definite market opportunity for Femcare and Femtech products, as evidenced
by the strong sales in North America of the prenatal and postpartum care category, which waslaunched by Lansinoh last year. At the same time, we would like to expand our lineup of products forfathers in the second half of the next mid-term business plan. There are as many mothers and fathers
as there are babies, so we believe there is ample room for market expansion. We would like toaccelerate the growth of our group while expanding our business in new areas other than babies.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

As for dividends, as we have promised to increase the dividend every year for the current three yearsof the mid-term plan, we continue to forecast an annual dividend increase of ¥2 per share to ¥76 pershare this year. And capital expenditures increased slightly compared to the previous fiscal year. Thisis because we will rebuild the Fuji factory in our Japan business, and construction is scheduled to
begin this year, leading to increased investment.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Finally, we would like to introduce our ESG initiatives. When we announced our current 7th Mid-term
Business Plan, we mentioned that all baby care products sold in Japan that meet our environmental
standards will be labeled with the Pigeon Eco Label. As part of our progress, 115 SKUs, or 34% of all
baby care products, were labeled with the Pigeon Eco Label during the past year alone. In addition,
we are continuously strengthening our lineup of products that address social issues. For example, we
expect to launch baby products that can be used in times of disaster this year.
That is all for the explanation from me. Thank you very much.

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

Question & Answer
Q&As are summarized by Business segment.

[Consolidated]
Q. Why did net sales fall short of the revised plan but operating income exceeded it?
A. Net sales fell short of the revised plan mainly because the sales of the China business in Q4 alone
fell short of the revised plan. On the other hand, the rebates and sales promotions expense forretailers were also decreased linked to this sales decrease. In addition, the company achieved therevised plan in terms of operating income, which was compensated for by cutting SG&A expenses inother businesses.
Q. Please tell us about any areas, timelines, or expectations that Pigeon is working on entering
the femcare and/or femtech market?
A. The first area we are considering is products such as the “Birth-prep and postpartum care” categorythat Lansinoh launched June, 2021. We would like to expand these products not only to the Lansinoh
business, but also to Japan around 2023, and then to China, Singapore, and other countries. Currently,
there are only a few brands of prenatal and postpartum care products in the world, and it is difficult to
calculate the size of the global market in specific numbers, but we believe that there is tremendous
potential in this area for us to create a market in the future. In addition, since "relieving pain in thesensitive areas" is similar to the domain of healthcare products, we believe that high profitability canbe expected by adding value to the product. We would like to consider all possibilities for"manufacturing" in this new area, including collaboration with external partners as well as in-housemanufacturing.
Q. Sales and profits have declined for three consecutive fiscal years. Can you share with us
your review this situation and outlook for the future?
A. In 2020, even with the Covid-19 disaster, there was no extreme decline in earnings, and we thought
it was a year supported by the strength of the brand. However, in 2021, many unexpected changes
in the business environment emerged, including the worldwide and pronounced decline in the numberof births due to the Covid-19, logistics disruptions centered on the Lansinoh business, and soaring
ocean freight costs. In this environment, we believe there is no further negative factors, and we havebegun to implement solutions to each of these changes in the business environment. We would liketo make the following efforts to achieve this goal.
Q. You mentioned that you intend to raise the gross profit margin by one percentage point
each year. How would you achieve it?
A. Currently, we are focusing on "Monozukuri (Core manufacturing)" in each of the four businesses,
but we will also be conscious of increasing the profit margin of our product portfolio by consideringsuch measures as "making it a condition to secure a certain level of gross margin" for the launch of
new products in the future. In addition, we expect that the consumables category, which has relatively
low profitability among the Company's products due to intensifying global price competition, will see

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

a relative decline in its sales composition, but we expect it to contribute to the overall gross profit
margin of the Group in the direction of improvement.
[Japan Business]
Q. 2022 plan does not assume inbound demand, yet Pigeon expects a 3% YoY growth in baby
care business. What is the background of this growth plan?
A. We expect growth drivers to be renewals of our core products, nursing bottles and nipples, andskincare. A new series of "Bonyu-Jikkan" the mainstay nursing bottle, has been on sale in Japan since
February 14, 2022, and the retail price has been raised by 10% from the previous series due to
product value enhancement such as renewal of functions and design. Since there will be a large initial
shipment to replace the old series, we expect sales of nursing bottles and nipples to be particularly
large in the first quarter of 2022. In addition, renewed skincare products were also launched on thesame day, which we believe will also contribute to higher sales and profits.
[China Business]
Q. How were the results of Double 11 shopping festival in 2021?
A. The sales of double 11 period in 2021 was plus 4% YoY, seemingly weaker than in previous years.
On the other hand, China in 2020 saw a large rebound in consumption after Covid-19, and the hurdle
was very high in some aspects. We also heard that during the double 11 period, local brands
sometimes discounted prices by less than half, but we did not step into such excessive pricecompetition, and as a result, we did not spend more than necessary and were ultimately able toincrease our market share of baby bottle feeding machines.
Q. How were the sales by channel for the Q4 alone broken down by sell-in and sell-out?
A. In the Q4 alone, sell-in was -15.3% YoY and sell-out was about -12% YoY in mainland China on a
local currency basis. By channel, online sellout was -8.5% YoY, while offline sellout was -20% YoY.
Offline shipments were expected to be adjusted by the end of Q3, but offline sellout was weaker than
expected, and this had an impact on Q4 sell-in. Now that the inventory reduction has been made to alevel that can almost be called normal, we expect both sell-in and sell-out to grow from onward.
Q. How was the sell-in for nursing bottles and skincare in mainland China Q4 alone, and the
expected growth of both categories in the 2022 plan?
A. In the Q4 alone, sales of nursing bottle and nipple were down about 10% YoY, while sales ofskincare products were up about 11% YoY. In 2021, we plan double-digit growth for bottles andnipples, and more than double-digit growth for skincare products, thanks in part to the effect of new
products launched in 2021.
Q. How was the progress of product replacement and market reaction of new nursing bottles?
A. On a sell-in basis, we plan to complete the switch to the new series of nursing bottles for major EC
platforms around April 2022. So far, the new series has been well accepted by retailers and

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Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

consumers, and we have heard that sellout is also increasing. The increase in selling prices is also
expected to contribute to sales and profits increase.
Q. Tell us what you think about the offline decline. Also, please tell us about the assumptions
for online and offline in 2022 plan.
A. In the offline channel, store closures are continuing to occur. Although this trend had been in placeprior to Covid-19, and it has accelerated due to the Covid-19. In addition, the Covid-19 has also led
to mergers and acquisitions by major chain baby stores, accelerating the pace of store closures andpushing down the offline channel as a whole. However, we believe that the speed of the decline in
the number of stores will slow to a certain extent. In the offline channel, we intend to generate solid
sales by developing exclusive products other than skincare products in the future. We do not expecta sharp recovery in the offline channel, but since it is one of the most important channels for our
consumers, we will try to halt the decline in the offline channel as much as possible through creative
measures. Regarding the growth rate of channels in 2022 plan, we expect more than double-digit
growth online and about 5% growth offline channels.
Q. What is your assumption for the number of births in China in 2022?
A. The number of births in 2021 was approximately 10.6 million, continuing the downward trend from
2020, but the outlook for 2022 is uncertain. However, even if the number of births in 2022 were to
decline by 10% from the previous year, the annual number of births in the Chinese market is still verylarge at nearly 10 million, and we believe that our business growth is possible by increasing our market
share in this market.
Q. The gross profit margin for the China business will increase by 2 percentage points in the2022 plan, but how do you forecast in the soaring prices of raw materials and the use of SG&A
expenses?
A. We believe that the price hikes in raw material prices can be covered by raising product prices,and our plan for 2022 incorporates raw material price trends as far as we are aware at this point intime. We have also raised the price of nursing bottles by 20% with the introduction of a new series,
which will contribute to an increase in the gross profit margin. Regarding the use of SG&A expenses,
we plan to work with a new e-commerce platform as well as develop new products and promote them.
For example, we plan to roll out new products such as skincare for kids aged 3 and up from thesecond half of 2022, and will aggressively use expenses for this as well.
Q. How do you procure the Pigeon products for North American market?
A. In the North American market, we plan to initially launch products that are available in the Japanesemarket, which will soon be sold through major EC retailers.
Q. Do you see any change in the competitive environment in the Chinese market? Also, whatis the probability of achieving the 2022 plan (7% YoY increase on a local currency basis), andwhat is the balance between the first and second half of the year?
A. The competitive environment in the Chinese market has become even tougher due to a decreasein the number of births and the growing presence of local brands. Local brands sometimes take20 / 22

Pigeon Corporation Summary of Results Briefing for the Q4 of the FY December 2021

measures without regard to profit, such as selling at extremely low prices, and most international
brands have been eliminated in the past few years. On the other hand, Pigeon continued to hold the
top share in the nursing bottle category in 2021 and is further increasing its market share.
In 2022, we expect not only a full-year contribution from nursing bottles and nipples, which wererenewed and priced higher in September of last year, but also further growth in skincare, which has
also performed well in the Covid-19. With these two categories as drivers, we believe that 7% YoY
growth in mainland China is a sufficiently feasible figure.
Since sell-in sales were ahead in the first half of 2021, sell-in sales were adjusted in the second half,
and the full year ended below the previous year's level. The first half (1H) of 2022 sales are expected
to be slightly weaker than 1H of previous year, when sell-in sales were strong. However, we expect asolid turnaround to positive sales in the 2H of this year, as 2H of previous year was a tough period.
[Singapore Business]
Q. What are the factors behind the significant YoY year-on-year growth of the Singapore
business, and what is the outlook for 2022 plan?
A. In 2021, we saw a recovery trend in the major markets and some export markets in the Singapore
business, and we were able to outperform the previous year. In the Q4 of 2021, the first batch of
shipment of a new series of "Bonyu Jikkan" nursing bottles from our Thai factory to the Japanesemarket also increased the sales and profit of the Singapore business. As for the 2022 plan, we plan
lower sales and profits due to the hurdles set in the previous year and the fact that the Thai factory is
also factoring in the burden of raw material price hikes. On the other hand, the Singapore businessplans to increase sales to external customers in major markets by more than 10% YoY.
[Lansinoh Business]
Q. Ocean freight rates are soaring, especially in North America. What is the outlook for 2022
plan?
A. We expect ocean freight rates in the Lansinoh business to continue to soar in 2022, and our 2022
plan includes the cost increase for this trend.

[End]

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