6th Medium-Term Business Plan(FY Jan. 2018 to FY Jan. 2020)
March 7, 2017

(Securities Code: 7956)
President & COO

Shigeru Yamashita© All rights reserved by PIGEON Corporation

Contents
1. Review of the 5th Medium-Term Business Plan
2. Our Vision

3. Positioning of the 6th Medium-Term Business Plan
4. Quantitative Target
5. Business Policy
6. Key Strategy
7. Business Strategy

8. Functional Strategy
9. Enhancing Corporate Value
10. Summary of the 6th Medium-Term Business Plan

© All rights reserved by PIGEON Corporation

2

1. Review of the 5th Medium-Term Business Plan: Financial Targets(millions of yen)

5th MTBP

Jan. 2017
Progress
Results
94,64094.6%

3-years
CAGR+6.9%

Net sales

100,000

Gross profit

44,20044,688101.1%+9.0%

Operating income

15,00016,015106.8%+15.6%

Ordinary income

15,00016,462109.8%+14.4%Net Income Attributable to
Owners of Parent

9,000

11,118123.5%+16.8%EPS (¥)

75.15

92.84

123.5%

Gross margin

44.2%

47.2%

+3.0ptOperating margin

15.0%

16.9%

+1.9ptOrdinary margin

15.0%

17.4%

+2.4ptNet Income Attributable to
Owners of Parent margin

9.0%

11.8%

+2.8ptROA

22.0%or more

21.5%

(0.5pt)ROE

21.0%or more

21.8%

+0.8ptROIC

15.0%or more

16.3％

+1.3pt※Our Group carried out a 3-for-1 stock split with respect to its common stock, effective as of May 1, 2015. The values given in the parentheses for
dividend per share above are reference values converted based on the number of shares after the stock split.
※ROA= Ordinary income ÷ Total assets; ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)※ROIC: Return On Invested Capital (NOPAT/Capital Invested, calculated with a tax rate of 40.7%,© All rights reserved by PIGEON Corporation
3
Capital Invested is averaged between beginning and year-end figures)

1. Review of the 5th Medium-Term Business Plan: By Segment
5th MTBP(millions of yen)Jan. 2017 Results

Sales% of Total

Gross
Margin100,000

100.0%

27,000Child Care Service
Business
Health and Elder Care
Business

Gross
MarginProgress
Sales

Gross
Margin

47.2%

94.6%

+3.0pt

33.6%

47.0%

117.9%+1.7pt

7,393

7.8%

10.6%

110.4%(2.1pt)

33.6%

6,901

7.3%

31.4%

86.3%

(2.2pt)

57.3%

49.1%

47,247

49.9%

56.3%

82.5%

+7.2pt―――23,051

24.4%

55.6%

―

―

(Currently defined
China Business)

―

―

―

30,533

32.3%

44.6%

―

―

(Elimination of internal
trading between
segments)―――(6,337)(6.7%)

―

―

―

1,000

1.0%

12.4%

1,273

1.3%

15.6%

127.4%+3.2ptSales% of Total

44.2%

94,640100.0%

27.0%

45.3%

31,823

6,700

6.7%

12.7%

8,000

8.0%

Previously definedOverseas Business

57,300(Currently definedOverseas Business)

Consolidated
Net Sales
Domestic Baby andMother Care Business

Other© All rights reserved by PIGEON Corporation

41. Review of the 5th Medium-Term Business Plan: By Region(millions of yen)

5th Medium-TermBusiness Plan

Jan. 2017

Progress
Status3-years
CAGR

Net Sales% of Total

Net Sales% of Total

57,30057.3%

47,247

49.9%

82.5%

7.0%

China
(incl. Hong Kong)

34,694

34.7%

27,985

29.6%

80.7%

7.7%

Other Asian Countries

9,181

9.2%

6,569

6.9%

71.6%

2.4%

North America

6,418

6.4%

7,061

7.5%

110.0%

9.2%

Near and Middle East

3,072

3.1%

2,382

2.5%

77.5%

4.0%

Other Regions

3,882

3.9%

3,239

3.4%

83.4%

10.3%

Overseas Business(Previously definedOverseas Business)© All rights reserved by PIGEON Corporation

51. Pigeon Won the Grand Prixin the TSE’s “Corporate Value Improvement Awards”<Reasons we were selected for the Grand Prix>
Pigeon Corporation (hereinafter, “the Company”) was recognized for performing at remarkably highlevels “management for increasing corporate value” including its efforts for the improvement with thewhole organization as a united force with its unique management benchmark “PVA (Pigeon Value
Added = Operating income after estimated taxes – Capital cost)” as its important index which indicatesthe amount of corporate value created exceeding capital cost and actually achieved outstanding results.
1. The Company has set and announced investor-conscious high management goals.
2. The Company has established a mechanism of corporate management using its uniquemanagement benchmarks.
3. The Company’s corporate management mechanism aiming for enhancing corporate value haspermeated deeply through the whole organization.
4. The Company engages in releasing information proactively toward the achievement of its
constructive dialogues with investors.
© All rights reserved by PIGEON Corporation

61. Pigeon Won “IR Special Award” and “Porter Prize”<IR Special Award: from Japan Investor Relations Association>
In recent years, the Company’s IR practices have been increasingly highly
valued.
The top management clearly articulates its mid to long-term growth strategy,
issues, and a roadmap to create corporate value. In particular, the Company
has a unique way to explain its specific strategy by using CCC (CashConversion Cycle) and ROIC (Return on Invested Capital), in addition to “PVA
(Pigeon Value Added)” which is its unique EVA (Enterprise Value Added).
Detailed data are disclosed after the Company’s earnings release, and local
information on its overseas operations such as in China is also proactively
disclosed, leading to a favorable evaluation by investors.

<Porter Prize>
Porter Prize was established to recognize Japanese companies that haveachieved and maintained superior profitability by implementing unique andexcellent strategies. Porter Prize Organizing Committee at Hitotsubashi
University Graduate School of International Corporate Strategy is serving as
the organizing body for the prize. Porter Prize was established in 2001 andthe name of the prize is derived from Professor Michel E. Porter of Harvard
University, a leading authority on strategy with a longstanding interest inJapanese corporations.

© All rights reserved by PIGEON Corporation

7

1. We are highly evaluated in terms of …

“ Uniqueness”
We have created our own distinctive “barriers,” orcompetitive advantages—a crucial foundation to
support high profitability.

© All rights reserved by PIGEON Corporation8

2. Our Vision
The Pigeon Way embodies our “heart and soul” and sets
the grounds for our actions to stream from this core.
Corporate Philosophy: “Love”

Credo: “Only love can beget love”

The goal Pigeon Groupaims to achieve© All rights reserved by PIGEON Corporation

92. Our Vision

VisionTo be the baby productmanufacturer most trusted by
the world’s babies and families,
i.e. “Global Number One”

© All rights reserved by PIGEON Corporation

103. Positioning of the 6th Medium-Term Business Plan:
Number of Births in the World
135 million babies are born
every year in the world.
135 million

43 million
(32%)

Other

92 million(68%)

Top 20Top 20 Countries With the Highest Number of Births(Unit: 10 thousand babies/year)
India
China
Nigeria
PakistanIndonesia
United States
Ethiopia
Bangladesh
BrazilCongo
Philippines
MexicoEgyptTanzania
RussiaUgandaVietnamIranTurkeyAfghanistan

2,447
1,708
683
450
428
401
371
357
295
277
245
229
203
186
165
162
151
147
130
126
0

© All rights reserved by PIGEON Corporation

1,000

2,000

3,000
* Research by Pigeon
113. Positioning of the 6th Medium-Term Business Plan:
Details of the Top 20 Countries
Country

Mature Market United States

RussiaTurkeyMexicoIranGrowth Market Brazil($10K to $20K
China
per capita)
Egypt
Indonesia
Philippines“Next Wave” Nigeria($5K to $10K
India
per capita)
Vietnam
Pakistan
Bangladesh
Tanzania“10 Years Later”
Uganda(Less than $5K
Afghanistan
per capita)
Ethiopia
Congo($20K or more
per capita)

Total© All rights reserved by PIGEON Corporation# of births(10K/year)
401
165
130
229
147
295
1,708
203
428
245
683
2,447
151
450
357
186
162
126
371
277

9,160

GDP
Per capita
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

56,30023,70020,50018,50017,80015,80014,30011,50011,300
7,500
6,400
6,300
6,100
4,900
3,600
3,000
2,100
2,000
1,700
800

US=100%
100%
42%
36%
33%
32%
28%
25%
20%
20%
13%
11%
11%
11%
9%
6%
5%
4%
4%
3%
1%

Projected target for
Pigeon products(10K/year)
401
70
47
75
47
83
434
41
86
33
78
274
16
39
23
10
6
4
11
4

1,782
* Research by Pigeon

123. Positioning of the 6th Medium-Term Business Plan:
Projected Market Size Illustrated
Mature Market Growth Market($20K or more
per capita)($10K to $20K
per capita)

US

China

“Next Wave”“10 Years Later”($5K to $10K
per capita)(Less than $5K
per capita)

Indonesia Nigeria

India

Pakistan

Relative size of each market
with US per capital GDP
being indexed as 100

Future market

Current market
-

10

20

30

40

50

60

70

80

90

100

There is still substantial room for growth not only in China but in other countries (million babies/year)* Research by Pigeon(There is indeed room for growth everywhere.)

We need to establish a structure that enables us to compete and win against global peers
to be the Global Number One in the current market and the future market© All rights reserved by PIGEON Corporation

13

3. Positioning of the 6th Medium-Term Business Plan

Building the foundation to be the Global
Number One baby product manufacturer

5th
Mid-Term
Business Plan

3rd & 4th
Mid-Term
Business Plan

10 years ago

6th
Mid-Term
Business Plan

To be the Global
Number One
baby productmanufacturer
In about 10 years

2008/1

2014/1

2017/1(in ¥100 millions of yen)

Results

Results

Results（Plan/Target)

Net sales

492

775

946

1,100

2,100

Gross margin

37.9%

44.5%

47.2％

50.0%

51.0%

Op. income

32

104

160

200

420

Op. margin

6.5%

13.4%

16.9%

18.2%

20.0%

PVA*

9

50

83

105

225

ROE

6.4%
346

19.7%
1,886

21.8%
3,723

Market cap.

* The tax rate of 30% is used when PVA is calculated.
© All rights reserved by PIGEON Corporation

2020/1

About 2026
(Projection)

Over 22%
Over 22%8,500*
5,000** The figures above are indicative only of ourroughly projected scale of corporate value.

144. Quantitative Targets (1) Financial Targets
3-years
CAGR(millions of yen)Jan/17 Result

Jan/18 Plan

Jan/19 Plan

Jan/20 Plan

Net sales

94,64099,800102,300

110,000+5.1%

Gross profit

44,68847,60050,80055,000+7.2%

Operating income

16,01517,00017,90020,000+7.7%

Ordinary income

16,462

17,00017,90020,000+6.7%

Net Income Attributable to
Owners of Parent

11,11811,80012,30013,800+7.5%

EPS (¥)

92.84

98.53

102.70115.23Gross margin

47.2%

47.7%

49.7%

50.0%

Operating margin

16.9%

17.0%

17.5%

18.2%

Ordinary margin

17.4%

17.0%

17.5%

18.2%

Net Income Attributable to
Owners of Parent margin

11.8%

11.8%

12.0%

12.5%

ROE
ROIC

© All rights reserved by PIGEON Corporation

Jan/17 Result

6th MTBP

21.8％

22.0％ or more
20.0％ or more

19.2％

※ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)※ROIC: Return On Invested Capital (NOPAT/Capital Invested, calculated with a tax rate of 30.0%,
15
Capital Invested is averaged between beginning and year-end figures)4. Quantitative Targets (2) Sales & Operating Income by Segment
Jan/17 Result

Jan/18Plan

Jan/19
Plan

% of
Total

Gross
Margin

Sales

Sales

% of
Total

MarginConsolidated net sales

94,640 100.0%

47.2%

99,800 102,300 110,000 100.0%

50.0%

+5.1%

Domestic Baby and Mother Care Business

31,823

33.6%

47.0%

33,10034,94536,526

33.2%

47.6%

+4.7%

Child Care Service Business

7,393

7.8%

10.6%

7,200

2,970

3,000

2.7%

16.8%

－

Health and Elder Care Business

6,901

7.3%

31.4%

7,139

7,390

8,000

7.3%

34.6%

+5.0%

Overseas Business

23,051

24.4%

55.6%

24,55526,43628,951

26.3%

56.1%

+7.9%

China Business

30,533

32.3%

44.6%

33,14135,75039,011

35.5%

45.7%

+8.5%

Elimination of internal trading between segments(6,337)(6.7%)－(6,435)(6,469)(6,949)(6.3%)

－

－

1,273

1.3%

15.6%

1,098

1,277

1,460

1.3%

15.5%

+4.6%

(millions of yen)

Sales

Other
（Sales / ¥ 100 millions）
1,200

Domestic B&M
Overseas

Child-rearing
China

1,000

12
12

800

316

11

Health care
Other
12

Jan/20 Plan
Sales

3-years
Gross CAGR

14
10

12

331

357

230

245

264

69
73

71
72

73
29

80
30

305

390

263
219
600
203

233

400

252
64
67

67
65

67
67
244

280

318

331

349

365

244
Jan/14(Actual)Jan/15(Actual)Jan/16(Actual)Jan/17(Actual)Jan/18(Plan)

Jan/19(Plan)

Jan/20(Plan)

200

0© All rights reserved by PIGEON Corporation

289

16

4. Quantitative Targets (3) Sales by Overseas Region(millions of yen)Jan/17 Result
Sales% of Total

Jan/18Plan

Jan/19Plan

Jan/20 Plan

Sales

Sales

Sales

% of Total

3-years
CAGR

Overseas Business

47,24749.9%

51,261

55,71661,012

55.5%

+8.9%

China (incl. Hong Kong)

27,98529.6%

30,33632,72736,015

32.7%

+8.8%

Other Asian Countries

6,569

6.9%

6,348

6,863

7,534

6.8%

+4.7%

North America

7,061

7.5%

8,109

8,355

8,713

7.9%

+7.3%

Europe

2,262

2.4%

2,671

3,605

4,075

3.7%

+21.7%

Near and Middle East

2,382

2.5%

2,461

2,706

2,994

2.7%

+7.9%

976

1.0%

1,334

1,457

1,678

1.5%

+19.8%

Other Regions

600（Sales / ¥ 100 millions）

China(incl.Hong Kong)
Europe

500

400
300

73

North America
Other Regions
13
24
9
26
23
22
81
70
63
65

279

303

360

282

327

263

Jan/15(Actual)Jan/16(Actual)Jan/17(Actual)Jan/18(Plan)

Jan/19(Plan)

Jan/20(Plan)

9
7
21
16
54

22
20
63

Other Asian Countries
Near and Middle East
12
26
24
76

68

14
27
36

16
29
40
87

83
75
68

61
200
100
0
© All rights reserved by PIGEON Corporation

224

Jan/14(Actual)17

5. Business Policy: Slogan

Building our dreams
into the future
ー By creating a bridge towards
the Global Number One manufacturer of baby products ー© All rights reserved by PIGEON Corporation18

5. Business Policy: Basic Strategy
Social Value Enhancement

1) Based on the Pigeon Way, create and implement all kinds of measures toachieve the goal of becoming ‘an indispensable company’ for the society andmake our Vision “to be the baby product manufacturer most trusted by theworld’s babies and families, i.e. ‘Global Number One’” come true.
Economic Value Enhancement

2) A further increase in corporate value will be pursued through improvement in
profitability and efficiency of the business, and maximization of cash flows.
The organizational structure, management system and governance system
will also be put in place and reinforced to ensure sustainable growth from a
medium to long-term perspective.
3) During the three years of the sixth medium-term business plan, invest
management resources giving priority to the key products and carry out
strategic investments, laying solid foundations for the double-digit growth of
Pigeon Group in the future.

© All rights reserved by PIGEON Corporation

19

5. Business Policy: Links Between the Basic Strategy and 12 Tasks(1)(1)(2)(3)(1)(2)(3)(1)(2)(3)

ESG

Global sharing ofcorporatephilosophy &valuesWorld-classbrand power

Development
capabilities(1)(2)(3)(2)

Sustainable growth
Logical work
process(1)

Salaryincrease

World-class Business
Excellence
Nurture employees’ motivation, satisfaction,
confidence, sense of pride and belonging to
the company(1)(1)(3)(2)

Global humanresource
development

Diversity/
women inmanagement

Global SCM© All rights reserved by PIGEON Corporation

Businessmodel forsuccess(2)

Cash flow
management
（PVA）
(2)

Global cash
management* The numbers indicated as (1), (2) and (3) on this slide correspond to the numbers of the basic policy on the previous slide.

20

6. Key Strategy: Improving Operational Efficiency and Profitability2) A further increase in corporate value will be pursued through improvement in
profitability and efficiency of the business, and maximization of cash flows. The
organizational structure, management system and governance system will also
be put in place and reinforced to ensure sustainable growth from a medium-to
long-term perspective.

Further evolving into a highly profitable organization
with value-based management through: Improvement of Group’s gross margin,
 Reduction of logistic expenses, and CCC improvement.
© All rights reserved by PIGEON Corporation

21

6. Key Strategy: Improving Operational Efficiency and Profitability(in 100 millions of yen)

1,200

1,000

Pursuing higher sales, better product mix,
and improved productivity and procurement
Net sales

Gross profit

51.0%

Gross margin

1,100

1,023

998

50.0% 50.0%

946
49.7%

800

49.0%

47.7%
600

47.2%

446

476

508

550

48.0%

400

47.0%

200

46.0%

0

45.0%

FY Jan/17© All rights reserved by PIGEON Corporation

FY Jan/18

FY Jan/19

FY Jan/20
22

6. Key Strategy: Strategy for Expanding Key Categories
Spreading the overwhelming strength of nursing bottles and nipples
over the entire spectrum of key categories

Disposable
Diapers(China)Large-sized
products(Japan)Pacifiers
Teething
toys

Cups

・Straw cups
・Training cups

Nursingbottles/
Nipples・Baby strollers
・Car seats, etc.

Existing
Flagships© All rights reserved by PIGEON Corporation

New
Flagships

RegionallyMarketed
Products

Breast-feeding Skincare
related products Toiletries
・Breast pumps
Detergents・Breast pads
・Milk bags, etc.

Electric
Products

・ Electricsterilizers
・ Baby bottle
warmers
・ Babymonitors, etc.

* The six key categories consist of theexisting three flagships and the three
new flagships.
23

6. Key Strategy: Strategy for Expanding Key Categories

Points each division should focus on when implementing
the strategy for the 6th Medium-Term Business Plan

 Product:

Products and services with AI, IoT,
and Smart Connected concepts in mind Place:

New distribution channels(including hospitals, or NICU* in particular;
EC and DME* channels in the US)

 Promotion: Direct communications with consumers
implemented in our own way© All rights reserved by PIGEON Corporation*NICU: Neonatal Intensive Care Unit
*DME: Durable Medical Equipment24

7. Business Strategy: China Business
Sales target for the China Business30.5 billion yen (for FY Jan. 2017) ➡ 39.0 billion yen (for FY Jan. 2020)
Business Growth
Increase in market share of the six key categories
・ Nursing bottles/Nipples: Increasing sales by 39％(for the period from FY Jan/17 to FY Jan/20)
・ Launch new products (every year)
Increase in sales of baby disposable diapers
・ From 0.9 billion yen (for FY Jan/17) to 3.5 billion yen (for FY
Jan/20)Reinforcement of Business Foundations
Sales and distribution system
・ Further reinforcement of sales and logistics systems to accommodate the growth of EC
channels

Reinforcement of Communication with Consumers
Strengthening ties with maternity and general hospitals
・ Deepening relationship with targeted maternity and general hospitals(e.g. through conducting joint research with university hospitals)
Reinforcement of direct communication
・ Expanding the number of Pigeon fans by fully utilizing WeChat and
Weibo© All rights reserved by PIGEON Corporation25

7. Business Strategy: Overseas Business
Sales target for the Overseas Business23.1 billion yen (for FY Jan. 2017) ➡ 29.0 billion yen (for FY Jan. 2020)
Business Growth
Increase in market share of the six key categories
・ Nursing bottles: Increase in the current market share of each country
by 15 percentage points
Growth of Lansinoh operations
・ Increase in sales from $99 million (for FY Jan/17) to $135 million (for FY Jan/20)
・ Strengthening sales through the DME channel in the United States

Branding
Developing partnership with NICU
・ Strengthening activities to develop partnership with NICU
in addition to the activities at maternity and general hospitals at each country

Markets to be CultivatedReinforcement in high growth markets
・ India, Indonesia, France (Benelux), and China(with the Lansinoh brand)
Increasing presence in new markets
・ Africa (Nigeria, Kenya, and various countries on the West Coast)© All rights reserved by PIGEON Corporation

26

7. Business Strategy: Domestic Baby and Mother Care Business
Sales target for the Domestic Baby and Mother Care Business31.8 billion yen (for FY Jan. 2017) ➡ 36.5 billion yen (for FY Jan. 2020)
Expansion of the Existing Business
Increase in market share of the six key categories
・ Increasing sales (excl. those of large-sized products) from$30.7 million (for FY Jan/17) to $33.0 million (for FY Jan/20)

Business Growth
Growth in the large-sized product category
・ Achieving growth by increasing shares of baby strollers, car seats, etc.
・ Market share target for the 6th MTBP period: 25％
・ Increasing the category sales from 1 billion yen (for FY Jan/17)
to 3.5 billion yen (for FY Jan/20)

Reinforcement of Communication with Consumers
Reconstruction and re-strengthening of activities at maternity
and general hospitals
・ Strengthening relationship with targeted maternity andgeneral hospitals by expanding seminars for healthcare
professionals (in terms of areas and number of times held
Strengthening direct communication
・ Expanding the number of Pigeon fans by fully utilizing
Pigeon.info (website)© All rights reserved by PIGEON Corporation27

7. Business Strategy:
Health and Elder Care Business/Child Care Service Business
Sales target for the Health and Elder Care Business6.9 billion yen (for FY Jan. 2017) ➡ 8.0 billion yen (for FY Jan. 2020)
Business Growth and Improvement in Profitability
・ Reinforcement of in-company sales system and logistics
system・ Developing and selling new products that empatheticallyincorporate insights of consumers and caretakers throughworking with collaborative partners outside the Group・ Reinforcement of promotion based on four themes that reflect
the benefits of consumers and caretakers

Sales target for the Child Care Service Business7.4 billion yen (for FY Jan. 2017) ➡ 3.0 billion yen (for FY Jan. 2020)
Improvement in the Quality of Operation
・ Implementing highly specialized child-rearing to reflect
the distinctive characteristics of children
・ Striving to find yet further ways to approach safe andsecure management system
・ Improving quality of child-rearing service by fosteringchild care staff© All rights reserved by PIGEON Corporation

28

8. Functional Strategy:
R&D/ Quality Control/ Production, Procurement and Logistics
Research and Development
・ Launch new and renewed products in the six key categories
・ Strengthen research and development of breast pumps establishingthem as a product of primary importance next to nursing bottles
・ Launch products with our distinctive value proposition in the large-sized
product category
・ Establish production and development system to respond to thegrowth speed of the Group・ Develop new products for the hospital (particularly for the NICU) channels
・ Develop products and services conscious of A.I., IoT, and Smart Connected

Quality Control
・ Further intensifying the PPM*-related activities
・ Strengthening support to improve industrial engineeringand the yield rate

Production, Procurement and Logistics
・ Improvement in profitability primarily through higher in-houseproduction rate
・ Achieving the division of production and establishment of operation control system on a global
basis with an aim to efficiently utilize the intra-Group production bases home and abroad・ Accelerating product procurement and concentration of functions to purchase main raw
materials (by achieving the global SCM*)© All rights reserved by PIGEON Corporation※PPM: Pigeon Productive Management※SCM: Supply Chain Management298. Functional Strategy:
Global Personnel System/ Global Governance
Global Personnel System
Promotion of diversity
・ Recruiting and training of personnel with ability of working
on a global stage・ “Improvement of job satisfaction” and “Reform of Work Style”
Personnel system
・ Globalization of management by objectives

Global Governance
Promotion of Global IT system
・ Investing in and developing the IT system to improve efficiency of the Group-wide
performance management
Global Head Office・ Functional enhancement of the company as Global Head Office (GHO)→ Strengthening “the function that can envisage a future of the Group as a whole, ensure
management resources to realize it, allocate them from a total optimization viewpoint,
and evaluate the results for improvement”
・ Three functions of GHO: power to unify the Group, power to promote the business and power
to envisage the future.
© All rights reserved by PIGEON Corporation※MBO: Management By Objectives30

9. Enhancing Corporate Value: ESG
We are committed to contribute to the local community and environment as well as
the well-being of our stakeholders.
Item of Contribution
Climate Change
Resources

Environment
Pollution & Waste
Environmental
Opportunities

Specific Measures
・ Reducing CO2 emissions, and saving
electric power

・ Ensuring sustainable resources
・ Reducing waste and garbage, and,preventing pollution

・ Engaging in tree-planting activities
・ Implementing measures to reduce overtime

Human CapitalSocial

Product Liability

work; and introducing MBO evaluation
system, training programs and global
human resources development program

・ Ensuring product safety and quality
・ Implementing newborn tree-planting

Social Activities

Fair Business Practices
Corporate Governancecampaign, providing support to develop
children’s creativity, and donating
elementary school buildings and facilities

・ Establishing Pigeon Partners Line, andrespecting property rights

・ Strengthening governance system
・ Promoting employee diversity, developing

Governance© All rights reserved by PIGEON Corporation

Diversity & Inclusion

female managers, and supporting childrearing by employees, ensuring complianceand establishing Speak Up as awhistleblowing system

Going forward, we will
provide specificperformance measuresand results.
(Examples)<Female managers>
Performance measure:
Ratio of female managers
Results*: 19.1％<Child-rearing support>
Performance measure:
Utilization rate of “One Month
Together” (one-month paternity
leave) program
Results*: 100% for both maleand female employees* The results as of the end of FY 2016.
31

9. Enhancing Corporate Value: Capital Policy and Shareholder Return
・ Estimated increase in operating cash flow: Approx. 46 billion yen
・ Aggressively making investments for growth (incl. M&A)
Breakdown for investments (incl. M&A) (3-year total: Approx. 20 billion yen)Overseas business: Approx. 14.5 billion yen/Domestic business: Approx. 5.5 billion yen

・ Achieving the consolidated total shareholder return ratio of approx. 55% with a year-onyear increase in dividends for each fiscal year
・ ROE (Return on Equity):

22.0％ or more

ROIC (Return on Invested Capital): To be improved to achieve 20.0％ or more・ Increasing earnings per share through increased profitability
Trends in Cash Dividends Paid

（Yen）

Trends in ROE / Dividend Payout Ratio

60

Div. Payout Ratio
配当性向

ROE
60.0%

50

50.0%
40

40.0%
30

53

20

29
10

15

35

56

42

19

0

30.0%
20.0%
10.0%
0.0%

Jan/12 13/1期
Jan/13 14/1期
Jan/14 15/1期
Jan/15 16/1期
Jan/16 17/1期
Jan/17 18/1期
Jan/18
12/1期

Jan/12
12/1期

Jan/17
17/1期

Jan/18
18/1期(Actual) (Actual)(Plan)(実績)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績) (Forecast)(予定) (計画)(Actual)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績)(Plan)(計画)

As the stock splits were implemented in the fiscal year ended
Jan. 31, 2014 (on August 1, 2013) and the fiscal year ended Jan.
31, 2016 (on May 1, 2015), the figures from FY Jan/12 to FY
Jan/18 are calculated on a post-split basis.

* ROE (Return on Equity) is calculated using the average of balances at the
beginning and end of the fiscal year as a denominator.
* ROIC (Return on Invested Capital) is calculated by dividing NOPAT by invested
capital, which is an average of the beginning and ending balances, at applicabletax rate of 30.0%).

© All rights reserved by PIGEON Corporation

Jan/13
13/1期

Jan/14
14/1期

Jan/15
15/1期

Jan/16
16/1期

32

10. Summary of the 6th Medium-Term Business Plan

Scale of Growth

Performance
Measures
Strengthening
Earnings Structure

FY 2016

FY 2019

Net sales¥94.6 billion¥110.0 billion

Gross profit¥44.7 billion¥55.0 billion

Operating income¥16.0 billion¥20.0 billion

Gross margin

47.2％

50.0％

Operating margin

16.9％

18.2％

¥8.3 billion/74 days ¥10.5 billion/64 days

PVA/CCC

Growth of the China Business

Achieving Growth
on a Global Scale

Business
Strategy

Functional
Strategy
Enhancing
Corporate
Value© All rights reserved by PIGEON Corporation

Growth of Lansinoh
Preparation for the future

Achieving Growth
Through Six Key
Categories &Regionally Marketed
Products¥30.5 billion¥39.0 billion$99 million$135 million
Strengthening efforts to tap into growthmarket and develop new markets

Sales of 6 categories in China
and other overseas markets¥42.2 billion¥56.0 billion

Large-sized products (Japan)¥1.0 billion¥3.5 billion

Disposable diapers (China)¥0.9 billion¥3.5 billion

Strengthening Business
Foundation

Taking on the challenge for improvement and innovation
to create new value and realize agility(R&D, Quality Control, Production/Procurement/Logistics)

Strengthening
Management Foundation

Improving “job satisfaction,” developing the global IT system, andstrengthening head office functions and delegating authority
Strengthening ESG-related initiatives

Realizing Value ofAll the Stakeholders

Achieving ROE of 22％ or more, a year-on-year increasein dividends every year, and total shareholder return ratioof approximately 55% or more
33

Reference: Basis for Estimating our Discount Rate
Components to calculate our WACC of 5％
・ Market capitalization: 372,260 million yen (as of January 31, 2017)
・ Interest-bearing debt: 5,699 million yen
・ Interest rate: 0.3％
・ Tax rate: 30％
・ Risk-free rate: 0.063 (January 2017 average rate of the newly issued
10-year JGB)
・ Beta: 0.99 (based on TOPIX Indices available on December 6, 2016
for the preceding two years on a weekly basis)・ Market risk premium: 5.1％ (based on Ibbotson Associates’ data from1962 to 2015)＊Cost of equity: 5.1％

We have set the target ROIC of 20% or more (at the tax rate of 30%)
for the 6th Medium-term Business Plan.

© All rights reserved by PIGEON Corporation

34

Corporate Overview

Head Office
4-4, Nihonbashi-Hisamatsucho, Chuo-ku, Tokyo
103-8480, Japan

URL http://www.pigeon.co.jp/
http://www.pigeon.com/

Disclaimer on Forward-Looking Statements
This material includes certain forward-looking statements about the Pigeon Group. To
the extent that statements in this material do not related to historical or current facts,
they constitute forward-looking statements.
These forward-looking statements are based on the current assumptions andjudgments of the Pigeon Group in light of the information currently available to it, andinvolve know and unknown risks, uncertainties and other factors, which may affect thestatements made in this material.

© All rights reserved by PIGEON Corporation

35