Milbon Co., Ltd.
Q2 Financial Results Briefing for the Fiscal Year Ending December 2024
August 9, 2024

Event Summary[Company Name]

Milbon Co., Ltd.

[Company ID]

4919-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending December 2024

[Fiscal Period]

FY2024 Q2[Date]

August 9, 2024

[Number of Pages]

33[Venue]Webcast[Number of Speakers]

2
Hidenori Sakashita
Masahiro Murai

President and CEO
Managing Executive Director

Note: This document has been translated from the Japanese original for reference purposes only. In the eventof any discrepancy between this translated document and the Japanese original, the original shall prevail.

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Presentation

Murai: Now, I would like to begin by explaining our consolidated financial results at the end of Q2. First ofall, this page is a summary of today's important points.
The results exceeded the plan at the beginning of the period, with an increase in both sales and profit.
Domestic haircare products and South Korean businesses performed particularly well. In that sense, I think
we can say that we are on track to meet the consolidated financial results for the full year.
The high cost of raw materials had a considerable impact on us, but this was gradually mitigated, and thegross profit margin showed a recovery trend from Q1 to Q2.
Due in part to strong sales and expenses deferral, operating income was well above projections.
Then, in Japan, we had increased sales and profits. Haircare products such as Aujua have grown very rapidly.
In contrast, unfortunately, hair coloring products delayed a bit.
And as for overseas, both sales and profits have been exceeding the plan. While South Korea and the US
businesses have been very well, China, as you all know, has been in a bit of a difficult situation, and thesetwo countries, which have been doing very well, made up for it. We believe that we will be able to achieve
our full year forecast as expected.

2Here is about consolidated P&L.
As I mentioned earlier, gross profit improved significantly from Q1 to Q2. In terms of profit, we have beenable to significantly exceed the plan partly because we did not use up all of our expenses.

Then I show you the waterfall chart of operating income compared to the same period last year.
As you can see, the biggest factor for the increased income is the increase in gross profit due to higher sales.

3Personnel expenses have increased compared to the previous fiscal year due to an increase in personnel,
salary raises, and base salary increases. Although these items had negative impact, we ended up with anincrease in profit compared to the previous period.

In comparison with the plan, although this was largely due to the increased sales, the decline in the grossprofit margin has eased considerably, and the impact was slight.
As I mentioned earlier, we were relatively able to contain the costs. I am using the expressions of “costcontainment” and “deferral of expenses.”
The “deferral of expenses” means that expenses will be used this fiscal year, and the “cost containment”
means we are now assuming that it is not yet certain that it will be used.

4I would like to continue with the results by region.
Businesses in Japan have been strong. The sales increase was 6.9%, which is doing well.
Overseas sales also increased by 11.4%. However, this was considerably affected by the depreciation of theyen, and excluding this factor, the actual increase was 2.8%.
Looking at it by country, China was still tough. The actual rate of gap was negative, but this was covered bySouth Korea and the US businesses.

5Then, in Japan, haircare products have been doing very well here, with a 9% increase.
Although the figures were small, the cosmetics business has been doing very well this fiscal year.
Unfortunately, however, there has not been much growth in hair coloring products.

I would like to explain the situation in Japan based on what we outlined at the beginning of the year. The
progress of milbon:iD has been very good. Both the number of salons and sales has been favorable.

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Then, for Smart Salon, we planned to launch 100 salons this year in terms of the progress of store
development. Our priority is not so much to meet this number, but to make each salon a success, and I cansay without a doubt that we are beginning to see positive results, as Mr. Sakashita will explain later.
We have been also promoting high-value hair coloring, but the results have yet to reach the point of being
successful, as I have described in my presentation as cloudy.

South Korean business has been continuing to do well.
Haircare products have been going very well. Also, although the figures here are not very large, there has
been a very strong growth in perm.
The growth of hair coloring products, which has a significant weighting, had been stagnant for some time.
However, in Q2 of this fiscal year, growth appears to have picked up slightly. Q2 ended with a positive 4.6%
sales growth rate, contributing to a full-year increase of 2.9%.
Profits were also favorable, but we had expected to incur considerable expenses for hiring additional
employees, but we have not yet been able to recruit smoothly, and this has resulted in an increase in profits.
However, we are planning to increase the number of employees, so it will be delayed but appear later in the
future.

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Then in China, the situation has been very difficult.
It seems that the salons which had been performing well are no longer doing so. We are making our best
efforts to increase sales in this challenging situation by changing our target salons and implementing various
other strategies, but we have not yet seen positive results.

Then, business in US has greatly expanded.

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Haircare products have been growing, and hair coloring has been also beginning to grow. As you can see
from the chart in the middle of the sales figures, things are going very well.
However, in terms of operating income, this quarter's figure was a little negative because we participated in
the largest trade fair in the US, which cost us a considerable amount of money.
In the US, our top priority is to continue growing sales. Therefore, we are focusing our efforts on this goal
rather than on immediate profits. I hope you understand the results presented here.
That's all for me, and now Mr. Sakashita will explain the progress made in FY2024. Thank you.

Sakashita: I will now explain the progress made in FY2024.
First of all, let's look at the overall picture of consolidated sales.
As reported earlier, consolidated net sales increased 8% to JPY24,526 million and are on pace to exceed theinitial plan by 2.3%. Domestic sales, which account for about 75% of total sales, were JPY18,367 million, up
6.9%.
In Japan, we have been growing strongly in the area of haircare products, which accounts for a large
proportion of our sales. Sales of hair coloring products remained almost unchanged and struggled against
the plan, but sales of cosmetics, which are included in other sales, were strong, leading to an increase insales in the domestic market.
Meanwhile, overseas sales, which account for about 25% of sales, totaled JPY6,159 million, an increase of
11.4%. Overseas, both haircare products and hair coloring products performed well, but haircare products
performed particularly well, resulting in an increase in sales. I would like to add a few more details later on
for the figures by the countries.

9Now, I would like to explain what kind of market environment we are facing in Japan.
The chronological order is from left to right, with the top being the hair salon market as a whole, followedby hair color and haircare.
On the far right is the current situation. We estimate that the market as a whole will remain unchanged, but
in terms of content, the impact of the declining population and the high ratio of hair coloring customers
remain high. The hair coloring customer ratio is the percentage of customers who have had their haircolored out of the total number of customers who visited a hair salon, and this ratio has been increasingover the past decade.
And that figures have already risen to nearly 50%. While there is still room for growth, we expect growth tobe moderate. In addition, considering the decline in the number of customers themselves, such as thedecline in the population and the peak passed for the number of workers, we believe that the hurdles togrowth through hair coloring will become even higher.
However, the market environment for haircare products remains very favorable. There is still room for
growth in product sales from hair salons to customers, as only about 15% of customers currently purchaseproducts at salons. Many customers do not buy haircare products at hair salons, so by creating anenvironment where they can easily try salon-exclusive haircare products and encounter products that suit
their hair, the market is expected to continue growing.

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In this situation, in Japan, as I mentioned earlier, we ended H1 of the year with a 6.9% increase in net sales
and a 5.1% increase in operating income. The operating margin was 13.8%, 0.2% lower than last year's 14%,
but as explained earlier, this is an improving trend from the gross profit stage.
By category, hair coloring products sales remained unchanged at 0.1%, while haircare products, which
account for more than 60% of sales, grew 9%, driving overall sales.
Also, for a new eyebrow product launched from IM, the concept of “If you dye your hair, change the color ofyour eyebrows as well; hair-eyebrow color matching” has been highly praised. This product effectively
addresses the struggling area of hair coloring products and is significantly boosting the domestic market as awhole.

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Now, the growth of haircare products is driven by the functioning of both the strategy for premium-priced
haircare products and the strategy for sales from hair salons to customers, which are on a growth trajectory.
First, in terms of our strategy for premium-priced products, the new Aujua series, Presedia, launched in
February, has been performing well and driving overall brand growth.
This series is a scalp care line, and it is the most expensive pricing Aujua has ever implemented. The highperceived effectiveness and expectations for our cutting-edge technology have led many Aujua salons tooffer it as a menu item and recommend it to their customers, resulting in positive outcomes.
Elujuda, shown on the right, is a brand with shipments amount exceeding JPY4 billion. This brand launched a
new product called Elujuda Frizz Fixer in March. The recommended retail price for this is JPY3,000 for the
first time for Elujuda, and it has been performing very well.
As a supplementary note, Elujuda has set the recommended retail price in two price ranges, JPY2,600 and
JPY2,800. This new product has a recommended retail price of JPY3,000. The more you use it, the more it
reduces hair frizz, which is quite excellent. Aujua's Presedia and Elujuda Frizz Fixer, our ability to develop
high-value-added haircare products, and our commensurate value-based pricing have been working well.

12That said, the product mix associated with the decline in the sales composition of hair coloring products due
to strong haircare products sales still needs to be addressed. The product mix also had a negative impact of
JPY91 million on gross profits during this half year. In the medium term, however, the negative effects of the
product mix will be eliminated by developing measures to increase the profitability of haircare products.
In other words, we will reform our business model to consistently generate high gross profit margins,
regardless of whether we sell hair color or haircare products.
As a specific measure and pricing strategy, we will revise the prices of some haircare products brands whose
cost ratio have risen for existing products in H1 of next year. This timing is set to coincide with the current
inventory of products and materials that have the current recommended price printed on them, to minimize
waste.
Including price revisions for these existing products, we will enhance our earning capability in haircare
products by implementing value-based pricing for high-value-added products, while also working on
increasing the sales composition of new, highly profitable products.
The new premium-priced products we have just mentioned are products with a manufacturing cost ratio
equal to or lower than that of hair coloring products. Aujua's Presedia and Elujuda Frizz Fixer, which I
mentioned earlier, already have a lower cost ratio than hair coloring products. I would like to emphasizethat our ability to develop value-added haircare products and implement value-based pricing is effective.
As measures for raw materials, we will strive to use common containers for some of our professional-use
products and reduce the amount of materials used.
For example, to reduce the resin used in hair color product caps, we can make the cap slightly smaller,
ensuring it has minimal impact on opening and closing. This change can reduce the amount of resin used byabout half, leading to cost savings of tens of millions of yen. We aim to proactively implement a series ofsmall improvements that do not affect quality and design.

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We also intend to firmly manage procurement costs by improving our procurement capabilities throughcollaboration among our three factories, such as by researching raw material procurement routes that takeadvantage of our global three-factory system and by taking advantage of economies of scale.

Now, I would like to report on our mid-term sales strategy to expand these haircare products to the market,
the Smart Salon Strategy.
First of all, the progress of our e-commerce platform milbon:iD is steadily on track toward our mid-termtarget of 1 million members by 2026, and we are also on track to surpass 1 million members by 2025, aheadof schedule.
In the future, we will strengthen measures to improve not only the number of members but also the active
ratio, or the ratio of members who purchase products to the number of members.
As a new service, information on products used during the salon experience will be displayed on thecustomer’s smartphone, providing a seamless and stress-free purchasing experience. This service, called
Style Stock, will be launched in phases starting this fall.
In addition, live commerce through the official Milbon channel has been performing well. Last year, theannual sales of retail products were approximately JPY 50 million, whereas this year’s sales are expected to
be around JPY 100 million. By providing product information through our live commerce to customers who
have undergone counseling at hair salons, and encouraging them, these sales are contributing directly to thesalons’ revenue. Given that the sales from live commerce alone are JPY 100 million, I believe this is quite anachievement.
Through these efforts, milbon:iD will become more than just an e-commerce service, but will create a newpurchase experience and new product information contact points, thereby increasing the active rate.

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In the Smart Salon Strategy, which is built on the milbon:iD system, we had 23 salons by the end of last year,
but as of the end of June, we had 44 salons.
The map of Japan is on the left, and the Smart Salons in the area plotted with reddish dots have alreadyopened.
It has only been about a year and a half since we started the development, and since Smart Salons are
opening steadily, it is difficult to provide statistical data yet. However, I would like to introduce one
successful example of an individual salon. The Smart Salon offers various product experience contents, oneof which is called DAGASHI. The strategy of using DAGASHI as an opportunity to purchase products has beenvery successful.
DAGASHI involves selling mini-sachets for a fee. This content matches the needs of customers who want to
try high-value-added and expensive products before purchasing them. Some salons sell sets of four different
types of Aujua mini-sachets, marketed as ‘Your Aujua in 4 Days,’ and they sell these mini-sachets to nearly
500 customers each month, leading to actual product purchases on milbon:iD.
Since the first Smart Salon was launched in February of last year, it is difficult to provide statistical results
and direction, but after two full years, we will be able to provide a more comprehensive report, and wehope you will look forward to it.

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Looking at the detail of hair coloring, the left side is gray color and the right side is fashion color in the chart.
Gray color, which accounts for 40% of sales, increased 7%. Fashion color, which accounts for 60% of total
sales, showed a 4% decrease in sales, resulting in a slight increase in total sales.
In the realm of gray hair coloring, both the organic Villa Lodola Color and the Ordeve Crystal High Bright,
which was launched last year, have been performing well. Their added value propositions, beyond merely
dyeing gray hair, have been well received.
Until last year, Villa Lodola had a dedicated sales force of eight people, but this year the Company switched
to a sales structure with more than 300 field persons, gradually increasing the number of touchpoints. We
plan to slowly put the Company on a solid growth trajectory toward H2 of the year.
Meanwhile, in the realm of fashion coloring, we have been promoting a proposal to link eyebrow and haircolor, initiated by the cosmetics brand IM this year. The concept of matching hair and eyebrow color has
been highly praised by both hair salons and customers, significantly contributing to the growth of cosmetics
sales.
However, it has been challenging to introduce our hair colorants, and we continue to struggle with fashioncolors. As a result, while the idea of matching hair and eyebrow colors is accepted as a suggestion, it isunlikely to lead to an increase in shipments of our hair coloring products.
We will take these results seriously and proceed with a fundamental reform of our fashion colors. We willthoroughly review our hair color marketing strategy and promote branding that resonates with consumers,
aiming to propose increased sales and profit growth for hair salons that are not caught up in pricecompetition.

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Regarding the situation in overseas markets, we are on track to achieve our full-year forecasts, with thepoor market environment in China being compensated for by other regions. The pie chart shows the sales
composition by country or region, with South Korea, China, and the US together accounting for just under
80% of the total.
By country, our business in South Korea has been performing very well in haircare products, as mentioned
earlier. Hair coloring products are also on the road to recovery and have now become the driving force
behind overseas sales.
The Chinese market, which poses a challenge, has been experiencing a decline in the frequency of visits tohair salons. Sales of hair coloring products, which are directly related to the number of salon customers,
have declined, and the Company continues to face a difficult situation. There is a lot of concern about the
Chinese market in the cosmetics industry, but the Company does not have travel retail in the first place.
Additionally, since our business is only for hair salons, there is the issue of visit frequency. However, sincecustomers always come to hair salons, we have maintained our position with a minimal negative margin.
In any case, we are in a difficult situation in terms of sales, but now is the time to focus on improving thecontent of our business. Together with Milbon China and local hairstylists, we will pursue a consumeroriented approach and prepare for growth.
In North America, our strength in haircare products has expanded steadily. Hair coloring products, which we
focus on to create a further growth trajectory, have also been performing well. In June, as mentioned earlier,
we participated in the largest trade show, Premiere Orlando, in the US to increase the visibility ofSophistone and other products.
In the EU, we sell directly to hair salons, mainly in Germany, and we are beginning to grasp the key tosuccess in switching from other companies’ products to Milbon’s products, gaining a winning edge in salon
activities. Although still small in scale, we have been expanding points of contact with customers and sales.
Based on the results and know-how gained from these salon activities, we will conduct market research incountries other than Germany and promote the expansion of sales channels for Milbon products in the EU17

by signing distributorship agreements in each EU region. We aim to find distributors who share Milbon’s
business model and agree with our growth through educational activities for hair salons and hairstylists,
concluding contracts gradually and without haste.

Now, let me explain our thoughts on the long-term growth of overseas markets.
We are already number one in Japan, but the next stage is to become number one in the Asian market,
excluding Japan. To achieve this, we will aim for the top position in the South Korean market, which is atrendsetter in Asian beauty. Many young salons in urban areas of South Korea already use our hair coloringproducts. We also hold beauty events for young hairstylists and have received increasing offers from young
salons to associate with Milbon. We aim to become number one in South Korea while promoting a growthstrategy for haircare products based on hair coloring.
With our influence in both South Korea and Japan, as well as our local education system, we will strive to
become number one in Asia, excluding Japan, leveraging the ripple effect of our brand in conjunction withtrends in East Asia and ASEAN.
Simultaneously, in the EU and US markets, we will increase our presence through the success of haircoloring products, while building on our foundation in haircare products. Milbon has reached a position
where it can aim for the top share among brands handled by distributors in the US, particularly in California
on the West Coast, in the coming years. By accumulating number one positions in specific areas, we will
enhance our presence as a global player.

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Next, I would like to report on our ESG-related initiatives.
Newly updated are the FTSE and MSCI. MSCI continuously rated us as B, but we received 3.5 points from theFTSE, up from 2.3 last year. We consider this a positive evaluation.

Regarding the ESG investment indexes that we have been continuously included in since 2023, we havebeen included in the FTSE Blossom Japan Index following this high evaluation. We will continue to makeappropriate disclosures to remain eligible for ESG investment and to be included in the stock market for
their evaluations.

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We will continue with the forecast for Q3 and beyond.
First, domestic sales of hair coloring products are expected to grow in the gray color market, but there arestill no signs of recovery in fashion colors. However, strong performance from new haircare products andcosmetic eyebrow products is expected to continue, effectively covering the delay in hair coloring products.
As for overseas sales, although there are still no signs of recovery in the market environment in China, sales
in South Korea and the US continue to be strong, especially in haircare products, and are expected to drive
overall overseas growth.
On the other hand, regarding profits, the gross profit margin is on a recovery trend as the impact of the
sharp rise in raw material prices has eased. SG&A expenses will be allocated as planned, but we will makeprogress toward achieving the reported full-year operating income.

20Based on the above, we maintain our full-year forecasts. We will make solid progress toward achieving thisgoal.
These are the progress made in FY2024.

Regarding the forecast for the 2026 mid-term management plan, sales are progressing as planned, but as
you know, there is a delay in the progress of profits.

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As we reported in financial results in this February, in 2021, when we created the mid-term management
plan, we had not anticipated at this time the challenges in our cost structure, mainly cost of goods,
distribution costs, and personnel costs. Personnel cost, in other words, relates to productivity. I would liketo report on the status of our discussions regarding improvement measures for these three issues.
First, regarding the cost of sales, as mentioned in the haircare products business results report, we aredeveloping high-value-added products, implementing value-based pricing, and revising the prices of existingproducts. By doing so, we aim to improve the cost ratio. We will also continue to reduce procurement prices
through our three-plant system.
Additionally, as stated earlier, the hurdles to growth in hair coloring products will increase in the future. We
have already transitioned from making money from hair coloring products to focusing on haircare products.
In this situation, we will strive to improve the profitability of the haircare products category so that haircare
products become the company’s primary revenue source.
Second, we expect a certain level of improvement in logistics costs by reviewing the number of orders,minimum order quantity, and other aspects of logistics services provided to distributors and hair salons.
Currently, orders can be placed daily without a minimum order quantity per order for distributors, leading
to some inefficient deliveries. To address environmental issues, driver shortages, and social issues, we will
request the consolidation of orders within a week. This alone will improve logistics costs.
Furthermore, we aim to reduce logistics costs by sharing variable costs among customers, salons,
distributors, and Milbon, based on the concept of sharing variable costs in logistics for end users, milbon:iD,and e-commerce logistics.
We will fully consider these measures and thoroughly estimate the percentage improvement we can expect
in relation to the sales ratio, incorporating this into our plan.
Third, productivity improvement is about enhancing sales per personnel cost. The idea is to focus on
increasing sales for each salon, meaning the amount of products purchased at one salon will increase. Since
our activities at each salon are our field activities, this concept leads to maximizing results and significantly
contributes to improving productivity.
We have always conducted our business in this manner, resulting in a highly manpower-intensive model,
making it difficult to exceed sales of around JPY100 million per salesperson. However, by growing the smart
salon strategy, milbon:iD, and the cosmetics business, we will effectively increase sales and profits in hairsalons that struggle with securing human resources and customers. This, in turn, will lead to higher
productivity per employee and an improvement in the personnel-cost ratio.
The smart salon experience will encourage purchases from people who might not have bought otherwise.
Cosmetics will become a new selling point and a tool in the hair salon’s arsenal. With milbon:iD, thecompany will be able to build continuous purchases. These positive developments represent the future ofsalons. We hope you will take note of these drivers of productivity improvement.
As for the key medium-term management plan results in 2026, we will disclose them together with the 2025
plan at the time of the announcement of full-year financial results next February. We will quantify the
impact of the improvements in cost, distribution cost, and productivity that we have mentioned and make22

an announcement.

Finally, regarding dividends, the interim dividend for FY2024 will be JPY40 per share, and the year-end
dividend is expected to be JPY48 per share. During the period of the 2026 medium-term management plan,
the minimum dividend will be JPY88, and we do not intend to further reduce the dividend in the future.
This concludes my presentation. Thank you very much.

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