Pigeon Corporation
Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

Summary of Telephone Conference
for the Q 3 of the Fiscal Year Ending 31 December, 2020

[Points of Attention]
This Summary is a reference for those who would like to review the session of telephone conference held by
Pigeon Corporation.
Please note this is not the entire text of the conference but a summary based on our judgment.
Forward-looking statements in these materials are based on management's assumptions and beliefs in light of
the information currently available to it and involve known and unknown risks, uncertainties and other factors.
Such risks, uncertainties and other factors may affect the Company's performance.
In the event of discrepancy between the English version and the Japanese version of the summaries, theJapanese-language version shall prevail.

Event Summary[Date] November 5th, 2020 16:00 JST[Number of Speakers] 2
Yasuo Kanatsuka Manager, Business Strategy Department
Sho Hiratsuka Assistant Manager, Business Strategy Department

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

Presentation
Hello everyone. Thank you for joining Pigeon Corporation's Financial Results Briefing session for the Third Quarterof the Fiscal Year Ending December 2020. Attending today's conference call from the company is Yasuo Kanatsuka,
Manager of the Business Strategy Department and I, Sho Hiratsuka, Assistant Manager of the Business Strategy
Department.
Today’s press releases of the consolidated business performance for the third quarter, and the forecast of
consolidated business performance for the full year are also available and can be downloaded on the Investor
Relations page of our website.
Now, we will start the explanation.
We will briefly explain about the earthquake in Turkey that occurred last Friday, which some of you were worried
about.
We have a plant operated by our Lansinoh Business in Turkey. Fortunately, the earthquake in Turkey last week
caused no major damage at the plant. There was no damage to people, and no damage to goods. At the time ofthe earthquake, the factory was in operation, but there were no injuries, and production was halted on that day,and all employees returned home. Thereafter, we conducted an inspection of the facilities on the weekend. Afterconfirming safety, it has been operating as usual since Monday this week.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

Well then, we will explain an overview of the consolidated financial results for the third quarter of the fiscal year
ending December 2020. We will talk about sales and other figures on a YoY basis.
The first three quarters of the previous year for Japan domestic business area covered the nine months fromFebruary to October 2019 due to the change in our fiscal year-end made last year. This year, the three quarters inJapan were the nine months from January to September.
Net sales for the third quarter were down JPY3.68 billion YoY. Gross profit was down JPY2.38 billion YoY. Operating
income was down JPY1.22 billion YoY. Ordinary income was down 450 million YoY. Net income attributable toowners of parent was down JPY200 million YoY.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

The main reason for the YoY decline in net sales was the continued slowdown in inbound consumption, and thedecline in shopping demand on an outing in Japan due to COVID-19 since the beginning of the fiscal year. As aresult, sales in the Domestic Baby & Mother Care Business in the Japan Business segment declined JPY2.4 billion
YoY, which was a major factor behind the decline in net sales.
Overseas, net sales in the China Business segment remained strong with a YoY rise on a local currency basis.
However, reported group sales were down around JPY1.23 billion mainly because Japan yen appreciated against
Chinese Yuan and US dollar.
In addition, the Singapore Business incurred a YoY fall in net sales as it supervises the businesses in India andMalaysia, where business activity was affected by COVID-19.
In the Lansinoh Business, sales were down 4.7% YoY affected by deductions from sales under the new accounting
standard. Sales would be up around 3% when compared under the same accounting standard of the previous fiscal
year.
Next, we will explain gross profit.
The main reason for the YoY decrease in gross profit was the decline in net sales. Another reason was in the Japan
Business, demand for sanitizing detergents and wet wipes continued to increase in the third quarter, while sales ofnursing bottles and nipples, which are highly profitable products, declined.
In addition, the gross profit margin in the Lansinoh Business was down 0.6 percentage point YoY as deductions
from sales under the new accounting standard being applied from this year worsened the profit margin. These
factors translated into a fall in group profit worth JPY2.38 billion on a consolidated basis.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

The main reason for the YoY decrease in operating income was SG&A expenses. SG&A expenses decreased JPY1.16
billion YoY, but this decrease failed to absorb the decline in gross profit. As a result, the Company, as a whole,incurred the YoY, a decline of JPY1.22 billion in operating income.
In addition, there are three reasons why SG&A expenses have not declined as much as expected in the cumulative
three quarters. The first factor was an increase in the ratio of distribution costs due to a rise in the proportion of Ecommerce in China, and an increase in direct transactions. The second factor is that special demand for
consumables in Japan caused sales promotion expenses to be roughly unchanged YoY. The third factor was a risein distribution costs due to the worldwide impact of COVID-19. As a result, SG&A expenses did not decrease to the
expected extent.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

In light of these circumstances, today, the Company announced revisions to its full-year earnings forecast.
In the first three quarters of the current fiscal year, the China Business and the Lansinoh Business somewhat
contributed to growth, mainly by expansion of E-commerce, but inbound demand in the Japan Business continued
to decline. In the Singapore Business, the impact of COVID-19 continues to be seen in each country under
supervision. The outlook remains unclear due to the spread and resurgence of infections in Europe, the US, andSoutheast Asian countries, as well as continuing restrictions on travels due to lockdowns and other factors.
Based on the trend of this spread of COVID-19, today we disclosed the revised forecast. Net sales of JPY99 billion,
operating income of JPY14 billion, ordinary income of JPY15.1 billion, and net income of JPY9.8 billion for the full
fiscal year.
Compared to the previous fiscal year’s results, in which the figures in the Japan Business were converted into a 12month basis, net sales are 95.6% of the year-earlier result, operating income is 81.3%, ordinary income is 87.0%,
and net income is 84.5%.
That's all for the quick review.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

Question & Answer*The Questions are ordered by segment here.

[Overall]
Q: Could you tell me what you think about the results against your assumptions? Also, if there were any goodor bad segments, please let me know about them as well.

A: Sales in China were recovering amid COVID-19, but those in the Japan and Singapore segments continued
to face harsh conditions. So, we feel that the third quarter results were moderate. There was no part thatparticularly swung upward. Among profits, gross profit was in line with expectations. In the Japan Business,
the GPM (Gross Profit Margin) deteriorated due to a change in the product mix, such as declines in nursing
bottles and skincare products due to a decline in inbound tourists. The same is happening in the Singapore
Business segment. Operating income was slightly better than expected because some SG&A expenses havebeen carried forward to the fourth quarter.
Among the reportable segments, Japan and Singapore were in tough conditions as they remained affected by
COVID-19. As for Japan, the business conditions were weaker from last year as inbound demand from foreign
visitors to Japan has not yet returned. Sales remained sluggish. The domestic market shares of nursing bottles
and other products continued to be high, but demand for going-out-products slightly decreased amid the selfrestraint on going out.
On the other hand, sales in China, particularly in mainland China, have been growing steadily as the economy
continued to recover since the second quarter. Sales were slightly down in terms of JPY due to the foreignexchange rate, but sales on a local currency-basis maintained growth rates at upper levels in the single-digit
range. However, in China, the export business was weakening due in part to the markets where the impact of
COVID-19 remained.
In the Lansinoh Business, as in the second quarter, growth in North America was very firm in particular. In
North America alone, sales on a local currency basis grew by around 13% YoY. This growth is calculated basedon the accounting standard of previous fiscal year. In the third quarter, shipments to Amazon continued todrive the overall sales, and the business is progressing relatively well.

[Revision of Consolidated Earnings Forecast]
Q: What is the difference in assumptions between this revised plan and the previous one in the second quarter?
A: We would like you to understand that the Company disclosed the figures that it had once solidified in the revised
forecast. In the Japan Business, the effect of COVID-19 has been remained more than our initial expectation. Thenwe expect the business will remain in the severe situation in the second half.
The China Business is enjoying good performance in mainland China, but exports to neighboring countries remainchallenging. As recovery in the export business is likely to lag behind our expectations. We firmly factored thisuncertainty into our revised forecast. The same applies to the Lansinoh and Singapore Businesses. Lansinoh has
recently been performing well in E-commerce and Amazon, but COVID-19 in North America is yet to be constrained.
In addition, while sales to Amazon remained favorable in the third quarter, it is difficult to see the COVID-19
situation in the future. Therefore, we did not disclose expanded figures, but reliable ones from our point of view.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

In terms of profits, SG&A expenses around hundreds of millions of JPY moved from the third quarter to the fourth
quarter. Sales promotional expenses related to the Double 11 Shopping Festival on November 11 in China arerequested in the fourth quarter of each year.
We have heard that the start of China's Double 11 was not bad, but other companies are also trying to reap asmuch profits as possible from the Double 11, so there is some information that competition is getting more intensethan usual. We also plan to increase SG&A expenses to increase promotional expenses from a usual year to obtain
more sales at the Double 11 Festival.
In addition, in the Lansinoh Business, we factored hundreds of millions of JPY, which had not been reported as
SG&A expenses in the past years. This amount is purely technical and not related to the actual business because itis an adjustment amount in consolidation treatment of a subsidiary.

Q: Why is the expected profit in the 4Q single period so small? What about SG&A accrual?
A: First, I would like you to understand the premise that the cost also reads conservatively. The largest differencein SG&A expenses in 4Q YoY is in the China business. In addition, the profit margin is not expected to fall significantly
for the China business for the full year.
In fact, there has been an increasing trend that in the third quarter, shipments for the Double 11 took place earlier.
This means that only sales were reported, and SG&A expenses were not reported. So, the OPM became better. In
the fourth quarter, promotional expenses for distributors and those for the Company’s flagship store will appear.
In addition, we will also have promotions for the Ssence product that we announced in June, so we set aside more
promotional costs this year than a usual year.
Though demand for consumables has been increasing, nursing bottles and nipples remain in the tough situation.
We are struggle with the sharp decrease in inbound demand. As consumables are selling well, we cannot narrow
down promotional expenses for distributors leading to a gradual increase in those expenses.
Talking about the adjustment in the Lansinoh Business again, a Turkish subsidiary belonging to the segmentchanged its base currency for transactions from Turkish Lira to US dollar this year. There will be an adjustment
amount worth several hundreds of millions of yen. In fact, this is not a real amount, but only a conversion problem,so there is no cash-out, and there are no pains in inventories and the profit and loss statement. So, it is a technicalrecording. However, this will be a matter of consolidation. So, the fourth quarter appears to be relatively weak.

Q: Do you have more details of the revised forecast, such as sales or income by segment?
A: We don't offer any specific profit or loss figures by segment. However, in terms of sales, we have an estimatethat sales in the Japan Business will be around 90% to 95% of the previous year’s result on the assumption that theprevious fiscal year had had 12 months, or even compared with the initial forecast.
In the China Business, we expect that the performance will reach the same level as the previous fiscal year or
exceed the year-before results. However, due to the trend of JPY appreciation, the performance will be dull incomparison with the forecast. However, as of the end of the third quarter, sales in mainland China showed a growthrate at upper levels in the single-digit range on a local currency basis, so we expect that our initial forecast for
mainland China will be achieved.
In the Singapore Business, that sales, as a whole, are expected to be around 90% of the previous fiscal year's level,
and around the middle in the 80% range of the initial forecast. The situation is very tough, as there are COVID-19
lockdowns in India, Indonesia, Malaysia, and other countries.

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

In the Lansinoh Business, the accounting standard for the current year is different from that for the previous year.
Based on the current calculation method for disclosures, sales will be around 95% of the previous year’s result, andaround 90% of the plan. Looking at the performance under the accounting standard for the previous year on a local
currency basis, the Lansinoh performance is generally in line with the initial plan, so we expect it will end aroundthe planned level.

[Japan Business]
Q: Looking at 3Q alone, sales in the business seem to have increased. Is it related to the impact of last year's rush
demand?
A: Sales of Japan baby and mama business area have decreased due to sluggish inbound demand. However, In thisyear’s 3Q alone, skincare products, baby food and beverages, and wet tissues have been leading the overall sales,
resulting in the slight increase. Our third quarter in the previous year was August to October due to the adjustmentof the settlement period, so sales increased in September due to the sharp demand prior to the tax hike, but they
decreased in October as the demand retreated.

Q: What is the growth rate in sales from inbound tourists and Japanese, respectively?
A: It is difficult to divide sales into those from inbound tourists and those from Japanese. However, cumulative
sales until 3Q through the so-called existing sales channels such as chained baby shops and drugstores were 100.4%,
almost unchanged YoY. Although we have changed the method of accounting for inbound demand from this year,
we estimate that the cumulative amount of sales from inbound tourists to the third quarter for this fiscal year wasapproximately JPY900 million. As the figure for the previous year was around JPY2.9 billion, inbound-related sales
were down about JPY2 billion.

Q: What is the market share of strollers in Japan and what is the outlook for the future?
A: The latest share of baby strollers has been struggling at around 11%. In October, we launched a new stroller
product, and shipment is smoothly underway. As we think we have to grow strollers, we consider distributing
promotional costs.

Q: What about the status of baby carriers and strollers?
A: In the current fiscal year, both strollers and baby carriers have been affected by the restraint on going out.
Currently, our outing category is in a very difficult situation as we see the stroller category as the core for future
growth in the Japan Business. We are aiming for its recovery in next year onwards.

[China Business]
Q: What about mainland China, where sales appear to be strong again in the third quarter?

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

A: We believe that there may have been partial reaction to the event on June 18, but as a whole, our sales havebeen steady at present. However, as we mentioned earlier, shipments for the Double 11 Festival have been earlier
and earlier. We believe that demand in the third quarter was not that for the quarter alone, but partly for the
fourth quarter.

Q: Why is the gross margin of the China business lower than the previous year?
A: First of all, regarding cumulative sales, our plants were suspended in February due to the impact of COVID-19.
The rate of costs at the plants has been pressured by expenses needed for the resumption of the operations.
Affected by this and other factors, though the product mix and sales composition have recovered the previous
conditions in 3Q, costs at the plants are hard to perceive compared with last year since cost-boosting factors were
included on a cumulative basis. In 3Q alone, nursing bottles were manufactured at our plants for shipment for the
Double 11 and others. When they were transferred to selling companies, they became part of our inventories. As
they were not sold externally, the so-called return of unrealized profits took place, somewhat lowering the GPM.
When the shipments for the Double 11 will clearly be translated into sales in 4Q, as we planned, the GPM will
recover.

Q: What kind of growth did each of E-commerce and offline sales show in 3Q?
A: On a sell-out basis, the cumulative percentage of the third quarter online sales was 61%, and offline sales
accounted for 39%. Online sales grew 24%, and offline sales dipped 12%.

Q: What is the status of Ssence (essence)?
A: We began selling essence from at the end of June, and are now conducting sampling and other measures tospread the quality of the product by word of mouth. We do not hear that its sales have reached a level thatsignificantly affected the sales growth of skincare products.

Q: How is your image of the fourth quarter's profit margin in the China Business segment? Will it be over 30%?
A: We don’t disclose any concrete figures, but we think that it is difficult for the operating profit margin to exceed
30%. However, we do not expect a significant drop in profit margins for the year.

Q: Double Eleven seems to be becoming more and more competitive. What is the situation?
A: We have not heard that new players are emerging. However, we have heard that some competitors are focusing
on promotions in an attempt to recover their sales or are competing with discounts and other measures. We do
not offer excessive discounts or promotions that are very painful in terms of profitability. However, the Double 11
is not only a bargain-sale event, but also a major opportunity to promote branding and our own new products, etcetera. Therefore, from a long-term perspective, we have to be clearly conspicuous, so we have prepared SG&A
expenses.

Q: What about the trend of births in China in 2020?

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Summary of Telephone Conference for the Q3 of the Fiscal Year Ending 31 December 2020

A: We do not expect an increase in the number of births in China in 2020 although there is no official announcementby the authorities.

[Other topics]
Q: In the perspective of less babies next year, what is the impact on the performance?
A: Depending on recovery in China to some extent, we think there is a possibility that the number of births will fallby less than we expect. We expect that the number of births will probably fall next year since the pregnancy rate
has fallen this year. We expect similar trends in other areas in the world.
Regarding the impact on our business performance, as all babies can be our target customers in Japan, there will
be a direct impact, particularly with respect to sales of nursing bottles and other products. Therefore, we think wewill aim for a growth scenario of maintaining or slightly increasing sales by tapping into demand in new categories
such as baby strollers.
In China and other markets, the market share of our nursing bottles is still not as high as Japan. In this sense, we
believe that there is still enough room for growth in the target groups, even if the number of births somewhat falls.
Q: How do you see the number of newborn babies in India, Indonesia, Malaysia, and Singapore etc.?
A: Basically, government statistics are not yet available. However, our understanding is that there is no particularfactor that the number of births is rising this year, so we basically see a downtrend. To add a bit more, we anticipate
that the number of births will also decrease next year as this year's pregnancy rate will probably fall as many people
are reluctant to go to hospitals.

END.

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