Milbon Co., Ltd.
Q1 Financial Results Briefing for the Fiscal Year Ending December 2024
May 14, 2024

Event Summary[Company Name]

Milbon Co., Ltd.

[Company ID]

4919-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q1 Financial Results Briefing for the Fiscal Year Ending December 2024

[Fiscal Period]

FY2024 Q1[Date]

May 14, 2024

[Number of Pages]

19[Venue]Webcast[Number of Speakers]

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Masahiro Murai

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: I would now like to explain the results of Q1.
Please see page three. Here are today’s key points.
Both sales and profits increased, exceeding the initial plan. There are still issues to be addressed, such as
domestic hair coloring products and the market environment in China. However, we believe that we havemade a good, strong start toward achieving full-year results.
Gross profit margin declined due to the effects of raw material price hikes and other factors. However, webelieve the impact is temporary, and the disparity, when compared to the previous year’s performance,expected to diminish gradually.
Third point is that domestic sales and profits increased. Haircare products such as Aujua are driving growth.
Net sales of hair coloring products increased slightly. We expect to see the effects of sales and educational
activities soon.
Also, overseas, we had increased sales and profit in the three major countries. Sales exceeded the plan forSouth Korea, China, and the US. However, as I mentioned earlier, there is still uncertainty regarding the market
conditions in China.
Considering the above, we will leave our full year forecast for FY2024 unchanged.

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Then, continuing on page four.
Net sales were JPY11,508 million, an increase of 11.3% over the previous year. Operating income was JPY1,337
million, an increase of 11.9%.

The operating income has grown significantly. The most significant factor is the increase in gross profit due tohigher net sales.

3As to gross profit margin, a positive factor is a decrease in write-downs. We had write-downs last year and it
decreased this time, which become positive factor.
We changed the standard cost setting last year mainly due to the rising cost of raw materials. Such factors
have been a negative factor for Q1 of this fiscal year.
Then, unfortunately, we have yet to see good performance in hair coloring products. The ratio of haircare
products net sales increased, resulting in a negative product mix.
Then there is an impact of the personnel expenses. This is due to increases in personnel and raises in salaries,
but we have also increased the salary base.
There are many factors as listed. However, as for the impact of each, we do not think it is that great at themoment.

Here are the factors behind the increase or decrease in consolidated operating income compared to the plan.
The big factor is the increase in gross profit from higher net sales.
However, the negative factor is the decrease in gross profit margin, which is write-downs. We are having
write-downs this quarter in some products.
This led to the negative factors, including negative product mix.
As for SG&A expenses, I could say we were able to contain it, but we had deferral of SG&A expenses, which
had big impact. These factors have resulted in a significant increase over the plan.

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The next is the financial results by region and outlook.
We have summarized financial results by region, domestic and overseas. The respective net sales, in Japan,
were JPY8,371 million, and JPY3,136 million overseas.
Both are doing well. Yen’s depreciation worked in a positive way. The positive factor in net sales is the impactof the yen’s depreciation, which is around JPY210 million.

The next is a summary of domestic results.

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As I mentioned earlier, it is unfortunate that hair coloring products did not go as expected in Japan. However,haircare products, especially Aujua, continued to perform very well. As for cosmetics, new eyebrow mascara
products were launched from “IM” brand, and this has been very strong in performance, contributing to alarge increase in net sales.
I have also included quarterly net sales.
Originally, Q1 is a smaller quarter in terms of net sales than subsequent quarters. If you compare this to lastyear’s Q1, it is performing very well.
Please look at quarterly operating income. Q1 sees a slight increase in SG&A expenses. It means that ratio will
increase.
It is the beginning of the fiscal year, and there are various events to be held and new products to be launched.
Therefore, it is still a quarter in which expenses are higher. As a result, we ended up with an increase in profit.

This is a summary of the key points for the current fiscal year in Japan.
We have already explained the main points of the current fiscal year in Japan at the full-year briefing inFebruary. There are two main points. One is the recovery of hair coloring products sales through thepromotion of high-value hair color, and the other is the promotion of Smart Salon.
Let me briefly explain each of them. As for the recovery of hair coloring products net sales through thepromotion of high-value hair color, as I mentioned earlier, I think we are still in preparatory phase fromJanuary to March.
For example, for the organic brand Villa Lodola, we have planned to implement initiatives utilizing a sales
force comprising 350 Field Persons. Of course, we are working on it now, although we necessitated a
preparatory phase extending up to Q1.

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Q1 was a period to strengthen Field Person’s understanding of Villa Lodola, which was not yet fully understoodby the 350 members. This means that a full-scale rollout to come in April.
We also proposed the idea of linking hair coloring products and eyebrow coloring products. New products ofIM, as I mentioned earlier, are performing very well. We believe that this has contributed considerably to thehigher customer spending at salons. Unfortunately, the effect of the market share increase has not yet been
fully realized in terms of hair coloring products net sales.
As to the outlook, for example, we will enhance our hair coloring products sales and educational efforts ateach salon by utilizing an assessment sheet to pinpoint issues related to hair coloring in salons. By doing so,
we will also increase our share of the market for hair coloring products. We believe that this will gradually
become more effective.
In the area of promoting Smart Salons, I would like to start with milbon:iD. As for progress in this area, I think
we are well on our way to achieving the plan. Figures are shown here. In Q1, we had 709,000 registered users,
6,068 salons, and net sales of JPY370 million. We believe that these figures are almost in line with ourexpectations, so we are doing well.
Then this is the progress made after the Smart Salon store development. It says a preparatory phase. We haveset a goal of 100 salons for this fiscal year. As of now, at the end of Q1, we have 29 salons, and we are still inthe early stages of the process.
However, we have seen some positive effects, such as an increase in retail sales, at the salons that have
implemented the system of Smart Salon. I have no doubt that this will gradually increase in the future.

Next. This is the financial results of South Korea.
Net sales have been strong due to the strengthening of initiatives in haircare and perms products. Haircare
products sales were up more than 20%, and perms, although they accounted for only a small portion of thetotal, were up 33.6%, a strong performance.

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However, for hair coloring products, the increase was modest 1.1%, and I believe that shift in trends, whichhas persisted since the previous year, had an impact. Growth in the fashion coloring field has slowed down abit. On the contrary, gray coloring has done relatively well.
Also, since the ratio of haircare products is still low in Korea, we will further promote this kind of initiatives.
In terms of operating income, we expected an increase in expenses due to the increase in staffs, etc. in theoriginal plan, which would result in a decrease in profit.
However, due to delay in hiring, or deferral, and sales considerably exceeding plans, profit has increased.

This is the financial results of China.
Net sales and profits were very strong during the busy season for salons before the Lunar New Year. However,after the Lunar New Year, in February and March, there was a clear slowdown in the number of visits to salons.
In terms of the market condition, the future remains somewhat uncertain.
By category, haircare products grew steadily, while hair coloring products were down slightly. We think thiswas partly due to a slowdown in the frequency of visits by salon customers.
January was quite good, so Q1 as a whole shows an increase in revenue.
As to the operating income, revenue increased more than planned, and profit increased steadily due to cost
containment. However, as I have mentioned many times, there is still some uncertainty about the future.

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This is the financial results of US.
Our mainstay, haircare products, shows stable growth. It is doing well with an increase of 6%. Sales andeducation activities have been strengthened in the area of hair coloring products, which we hope to expandin the future, and the percentage of total sales is gradually increasing. Maybe this is the first time ever to havemore than 10%. Hair coloring products are not originally used in salons with this ratio. In terms of room for
future growth, I would say that there is quite a bit of room left.
This is the quarterly net sales. There were distributor transitions in Q4 last year. Although shipments declined
as a result of this, it is now on the track to recovery.
Then this is the quarterly operating income. The distribution cost reductions, which used to be quite expensive,
are starting to have an effect, and I believe that we can expect more effects in the future.
It looks like we are close to the point to make profit. I think we are still in a phase where we need to focus a
lot on hair coloring products activity, so we think that the deficit will probably continue this year.

9We summarized the outlook for after Q2. Regarding net sales, in Japan, we still expect strong demand forhaircare products, as usual. The demand for hair bleaching design is plateauing.
I don’t think it will decline. I think the situation is the same for the market as a whole, where the demand isplateauing.
However, we have been doing a lot of activities to strengthen the hair coloring products during Q1. We expectthat the effects of such activities will be seen from Q2 onward.
Regarding overseas, China has achieved higher-than-expected growth in both sales and profits. As I havementioned many times, the market environment is still uncertain.
Strong sales continued in South Korea, the US, and other countries, especially in the haircare products.
Regarding profit, it has still been affected by raw material prices. Various cost reduction efforts in purchasing
are implemented as expected, but we expect some negative impacts to continue until H1 of the fiscal year.
Then, we have a situation where the growth rate of haircare products is already outpacing the growth rate ofhair coloring products. In terms of product mix, unfortunately, it has a negative impact.
As for the negative impact on gross profit margin due to the setting of standard costs, we believe the disparity,
when compared to the previous year’s performance, expected to diminish gradually.

10Lastly, this is the outlook for full-year forecast. It has not been changed from full-year forecast, which weannounced in February, and we will be working toward this goal.
Net sales and profits are considerably exceeding the plan at the moment, but as I mentioned that there is a
bit of uncertainty, particularly concerning markets such as China, and there is still a risk.
However, if the result of our activities on hair coloring products and others comes out, I think it will lead togood results.
In any case, at this stage, we are projecting an increase in both sales and income in line with initial plan.
This concludes my explanation.
Thank you very much.

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