7th Medium-Term Business PlanFY ended Dec.2020 to Dec.2022
February 13, 2020

PIGEON CORPORATION

President & CEO

Norimasa Kitazawa(Securities Code: 7956）

Review of the 6th Mid-term Plan (2017 - 2019)P. 2 - 6

ESG

P. 34 - 37

The 7th Mid-Term Plan

P. 7 - 33

Quantitative Targets, Capital Policy and Long-term Vision P. 38 - 45

AgendaReview of the 6th Mid-term Plan (2017 - 2019)

The 6th MTBP: Trends on PL Results

Profits steadily grew until FY Jan. 2019, but fell short of the target in FY Dec. 2019

(Millions of yen)

110,000

55.0%

50.6%

49.3%
49.7%

70,00047.2%
50,000

Sales - Budget

51.4%

90,0002017.01(Final year of the 5th MTBP)

50.0%

50.0%

2019.01

Gross Margin - Actual

Gross Margin - Budget

47.7%

2018.01

Sales - Actual

2019.1245.0%(12-month adjusted)

Good: The China Business grew as planned.
Not Good:・Huge decline of birth rate in Japan. Rise and fall of special inbound demand from overseas tourists.
・The Singapore Business slowed down sales expansion into the Indian and Indonesian markets.
©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

3

The 6th MTBP: Achievements and Challenges

Achievements

Improved consolidated Gross margin

50.6%

Achieved(12-month adjusted for
FY Dec. 2019) * Hitting the 6th MTBP target of 50%

Prepared for changing market trend

Established a new structure to delegate
authority from Head Office in Japan to local
operations in each region.

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Challenges

Address intensified competition due
to the expansion of the EC market

・New competitors surging ahead as a resultof the lowering of entry barriers.
・Competition with PB products
at retail shops.

Shorten lead time to launch new products

4

The 6th MTBP: Achievements and Challenges by Business Segment
Achievements

Japan
China
Singapore
Lansinoh• Increased the market share of Nursing bottles.
• Launched new products in large-sized category
such as Strollers and Baby carriers.
• Rapid growth of EC sales.
• Started local production of Peach-Leave lotions.
• R&D department demonstrated technologicaladvancement (through conference
presentations on skin research).

• Prepared for conquering the Indonesian market.
‣ Acquired 100% ownership of Pigeon
Indonesia factory (in 2017) .
‣ Established a distribution company (in 2019).
• India : Distributed over 50,000 drug stores.

• Steady growth in each region.
• Strong growth of the new DME channel in US.

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Challenges• Shrinkage of the market (Estimated 5% reduction everyyear).
• Increase the market share of the large-sized products
category.
(The 6th MTBP target of 25% has not been achieved.)• Establish a Monozukuri (craftsmanship) system thatappeals to the new generation of consumers (Gen. Z).
• Strengthen Offline channel.

• Launch the products with competitive price that can fit
to the emerging markets.
• Effective use of our own production facilities in local.
• Further expand India and Indonesian businesses.
• Establish a leading position in Breast pump category.
• Commoditization of the core products due to the rise ofPrivate Labels. (Ex. Breast pads, Breastmilk Storage Bags)• Develop a new categories for medium-term growth.

5China Business: Key Success Factors

Sales:

5.5 times in 15 years
China Business (2004 - 2019)

Evolution of the brandEstablishment of local productdevelopment and manufacturing systems

2004

2009

2014

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

2019

Acceleration of decision making
through delegation of authority

67th Medium-Term Business Plan

Key Theme : 7th Medium-Term Business Plan

Expand the Key Success Factors (KSF) of Chinese market globallyand achieve healthy business growth and profitability in all regions.

Brand strategy:

Develop a brand “chosen by consumers who buy into a business”
rather than a brand “chosen by customers who buy a product.”

Product strategy:

Accelerate growth in our Core products
which we can have a unique competitive advantages in global market.

Regional strategy:

Develop and implement agilely a cycle of “Product development, production and sales” that fitsmarket characteristics and consumer preference of each region.
©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

8Developing a Brand Chosen by Consumers who
Buy into a Business
Brand Strategy

The “Pigeon Way” is the cornerstone of all activities andembodies our “heart and soul” and sets the grounds for ouractions to stream from this core.

We want to make the world morebaby-friendly byfurthering our commitment

to understanding and addressing babies’
unique needs

PurposeOur reason for being and the role we should play in societyBrand Promise:

Celebrate babies
the way they are

“Manufactured messaging istransparent to us. We demand
evidence, not rhetoric.”

GENERATION Z*

Post-millennial generation (born in the late 1990's to 2000's)

“This group is hands-on, results
driven and pragmatic, whichmeans they want authenticity
and consistency.”

GENERATION ZBrand Promise:

Celebrate babies
the way they are

People andactivities

Products &Services

Celebrate babies
the way they areSpace andenvironment
channelCommunication

Simpleandintuitive
designCreate a spacethat resonateswith customers'
five senses

Out-of-thebox thinking

Celebrate babies
the way they are
Capture thebaby's naturalexpression

From

To

Buyinga product

Buying intoa businessAccelerate Growth in Our Core Products which
We Can Have a Unique Competitive Advantages in
Global Market

Product Strategy

Core Products - Our Advantages

Nursing bottles / Nipples

Product development based on our Core asset of “Babies’ sucking research”

Breast pumps

Essential for breastfeeding support, strong presence in the market by
Lansinoh brand

SkincareProduct development based on our vast market experience and thefundamental research of “Babies’ skin”

Oral care

Product development by utilizing our unique fundamental researchoutcome of “Babies’ oral development”, “Babies’ sucking” and“Breastfeeding”©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

20

Core Products - Nursing Bottles / Nipples

We should be able to continue to grow our global market share.
Giving consumers a wider range of products with different models, designs an prices.
2017 world market share (Research by Pigeon)

11%

6%

5%

64%

PigeonCompany C

Company A

Company D

9%5%Target of Global market share

Yr 2019

11.0%

⇒

2022

12.7%

+1.7ptCompany B
Other©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

21Core Products - Skincare

We will offer the products developed based on the fundamental research of “Babies’ skin”.
A new product (Ssence) will develop a new business model for Pigeon.

Presented our research results on infant skin at IFSCC (International Federation ofSocieties of Cosmetic Chemists) Conference held in Milan, Italy in October 2019

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

22Position of Core Product Categories in 7th MTBP
These categories will also continue to contribute significantly
to the Group's growth in Sales and Gross profit

Sales composition ratio

48.9%

Inner circle: 45.1%
2019
Outer: 2022

Core products

Other©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Gross profit composition ratio

In: 2019
Out: 2022

Core products

59.1%
54.5%

Other

Net sales
CAGR 9.7%

Gross profit
CAGR 11.1%
23

Develop and Implement Agilely a Cycle of “Productdevelopment, Production and Sales” that Fits Market
Characteristics and Consumer Preference of Each Region.
Regional Strategy

Organization Design from 2019

Each business unit is responsible for designing its own business.

GHO (Global Head Office)President

Japan

China

Singapore

Lansinoh©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

25

Case 1: Electric Breast Pump (ASEAN / Emerging markets)

2.1“Good quality with Great price” product for emerging markets
Year 2020
Average monthly sales(year on year: forecast) *1

times +・ An Electric breast pump mainly targeting“emerging markets”
・ Attractive not only in price but also in function
and design
・ Will be launched to other emerging markets such
as Latin America.
©Pigeon Corporation All Rights Reserved. │ Strictly Confidential*1: Includes actual results and orders already received

26

Case 2: Electric breast pump (China)

3.8

Product development and manufacture with sharing what eachbusiness unit can do best
2019 sales value ofModel QA56
(year on year) *1

Model: QA56

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

times• Joint development of the Lansinoh Business, which has
expertise in breast pumps, and the China Business, which
has significant market opportunity• The first “Pigeon” brand products manufactured in the“Lansinoh” factory in Turkey• This model became a Key revenue growth driver, doubled
the sales amount of the entire breast pump category in 2019
on a year-on-year basis*1 Sell-in results of Pigeon Shanghai in China

27

Case 3: Bottle Cleaner (Indonesia)

18

Offer the “Pigeon quality” product but price competitive against local
brandsAnnual 2019
Sales (year on year) *1

times +• Switch from import products (made by our factory in Thailand)
to the one made by good local supplier in Indonesia.
• This change made us more price competitive and annual sales
has rapidly grown to 690,000 units from 40,000,• Product quality is always our priority, but we will also consider
to procure more consumable products working with good local
suppliers to be price competitive.
©Pigeon Corporation All Rights Reserved. │ Strictly Confidential*1: Sell-out results of local distributors in Indonesia

28

Develop and Implement Agilely a Cycle of “Productdevelopment, Production and Sales” that Fits Market
Characteristics and Consumer Preference of Each Region.
Regional Strategy - By Business Segment

7th MTBP - Japan BusinessKeystrategy Top market share in the stroller market*(6th MTBP 20% ⇒ 7th MTBP 33.4%)
 Investment to strengthen skincare
category*In terms of value(millions of yen)

60,00050,000Overall
CAGR 2.5%

40,000Sales
targetCore
products*
CAGR 4.6%

30,00020,00010,0000* The CAGR of core products
covers only external sales

2019©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

2022

30

7th MTBP - China BusinessKeystrategy Offering products at higher prices through“Monozukuri” spirit Build a new business model with “Ssence”
 Establish “Shenzhen Creative Studio”(millions of yen)

60,00050,000Overall
CAGR 9.6%

40,000Sales
targetCore
products*
CAGR 9.7%

30,00020,00010,0000*The CAGR of core products
covers only external sales

2019©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

2022

31

7th MTBP - Singapore BusinessKeystrategy

 Increasing production capacity andexpanding items handled by expanding
the factory in Indonesia
 Expansion of locally procured products
in emerging markets (India / Indonesia)(millions of yen)

20,000Overall
CAGR 9.0%

15,000Sales
target10,000Core
products*

CAGR 20.4%

5,000

0

2019

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

2022* The CAGR of coreproducts covers only
external sales

32

7th MTBP - Lansinoh BusinessKeystrategy Brand extension from “Breastfeeding” to“Maternal health”
 Establish position as a breast pump leader(Expansion of products for hospitals and as
well as clinical research)(millions of yen)

20,000Overall
CAGR 9.6%

15,000Sales
target10,000Core
products*

CAGR 13.4%

5,000

0

* The CAGR of core products
covers only external sales

2019©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

2022

33

To Make the World More Baby-Friendly
ESG

Pigeon Sustainable Vision

Celebrate Babies With All

By continuing to truly focus upon babies, we want to make the world more babyfriendly. We aim to achieve sustainable growth as a company by reducing
environmental impact and solving social issues surrounding babies and mothers in all
countries and regions where we conduct business activities. Together with our
stakeholders, we strive to create future, full of joy and freedom, that treasures theamazing brilliance inherent in every baby, that encourages curiosity, and celebrates
diversity.
©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

35Three Major Goals in Sustainable Vision “Celebrate Babies With All”
Three Major Goals

Commitment

Reduce environmental impact

7th
MTBP
targets

Solve social issues surrounding
babies and mothers

Build a strong managementfoundation“Leave a rich earth for the future ofbabies born tomorrow”“Create a world that celebrates babies
the way they are”

“Support sustainable growth tostay close to the baby”

Prevent global warming
・Reduce CO2 emissions.
・Create new Eco-friendly products andpackages.

Develop the products and services as a solution ofsocial issues• Solve issues surrounding babies who need special
support such as hospitalization in NICU and theirfamilies.
(1) Develop new products and services.
(2) Promote our current solution products/services.
• Enhance activities to solve issues surrounding
babies and their families.
(1) Promote ongoing activities (such as setting up
nursing rooms).
(2) Consider and implement new activities.

Responsible dialogue with shareholders
and investors

Response to marine pollution incidents
・Reduce plastic use.
Resource conservation
・Reduce waste.
・Adopt sustainable resources.

• CO2 emission intensity
10% reduction from FY 2018

• Industrial waste
1% reduction per unit per year

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential• Creation of new products andservices

Risk management

Promotion of work-life balance*
Promotion of diversity**Japan only

• Reinforcement of dialogue andcommunication with investors
36

Part of our ESG Activities
A: Nipple for weak sucking babies
B: Nursing bottle for low birth weight infants
C: Nursing bottle for cleft lip and palate

PIGEON INDUSTRIES (CHANGZHOU) CO.,LTD.

For a Low-birth-weight babies

PIGEON MANUFACTURING(SHANGHAI) CO.,LTD.

PIGEON INDIA PVT.LTD.

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

A

B

Eco-friendly
packageC

37

Quantitative Targets(* Excluding impacts of new coronavirus outbreak)Quantitative Targets(millions of yen)

Net sales

Dec. 19 Actual(12-monthadjusted basis)

Gross profit

Operating income

Net income attributable toowners of parent

EPS (yen)

103,513

52,41817,213
11,59396.82

Gross margin

50.6%

Net income attributable toowners of parent margin

11.2%

Operating margin

ROE
ROIC

16.6%

Dec/19 Result
17.5%
17.4%

Dec. 20 Budget

109,000
56,60018,10012,600105.23

51.9%
16.6%
11.6%

Dec. 21 Budget

116,900
61,400Dec. 22 Budget

126,000

20,20014,100117.76

52.5%
17.3%
12.1%

7th MTBP
20.0% or more
19.0% or more

*ROE: Calculated with equity being the average of the beginning and ending balances*ROIC: NOPAT/Invested capital, calculated with a tax rate of 30.0% and invested capital being the average of the beginning and ending balances©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

66,40023,10016,300136.14

CAGR

6.8%

8.2%

10.3%

12.0%

52.7%
18.3%
12.9%

39

Note: See the page# 55 to 57 about the change in Reportable Segments effective from Yr 2020

Quantitative Targets: Net Sales by Business Segment(millions of yen)

Consolidated
Japan
China

Singapore
LansinohInter-segment
transactions

Dec. 19 Actual(12-monthadjusted basis)

103,513
48,42137,306
13,60013,207

Sales overseas
Sales in Japan(9,022)2019

44%

Dec. 20
Budget109,000
48,60040,50014,40014,350(8,850)Dec. 21
Budget116,900
50,10044,60015,70015,600(9,100)56%* Currency rates for 7th MTBP: US$1 = ¥109.00, CNY 1 = ¥16.00 ←©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Dec. 22
Budget126,000
52,10049,10017,60017,400(10,200)

Dec. 22 Budget
Gross Margin

52.7%
42.0%
56.2%
38.0%
58.6%

2022

39%

Net sales
CAGR

6.8%
2.5%
9.6%
9.0%
9.6%

4.2%

61%

Dec/19: US$1 = ¥109.02, CNY 1 = ¥15.77

40

Quantitative Targets: Op. Income by Business Segment(millions of yen)

Consolidated

Dec. 19 Actual(12-month adjusted basis)

17,213
4,311
12,687
2,210
1,741

Japan
China

Singapore
LansinohDec. 20
Budget18,1004,316
13,4852,145
1,944■Op Income trend by segment in 3 years (millions of yen)Dec. 21
Budget20,2004,599
14,722
2,429
2,167

Dec. 22
Budget23,1004,474
16,8982,945
2,537

Operating Income
CAGR

10.3%
1.2%
10.0%
10.0%
13.4%

Yr 2022
Yr 201905,000©Pigeon Corporation All Rights Reserved. │ Strictly ConfidentialJapan

10,000China

15,000Singapore

20,000Lansinoh

25,00030,00041Quantitative Targets: Sales by Region (Overseas)(millions of yen)Overseas total

Dec. 20
BudgetDec. 19 Actual(12-month adjusted basis)

China (incl. Hong Kong)

57,82463,30735,184
8,578

Other Asia
Europe

7,831
2,969

Other

958

Middle East

69,171

38,177
9,601

41,660
10,632

8,384
3,959

2,304

North America

Dec. 21
Budget

8,952
4,402

2,379

2,612

808

■Net sales trend by region in 3 years (millions of yen)912

Dec. 22
Budget

76,680Net sales
CAGR

9.9％

45,91011,874

9.3%
11.5%

3,075

10.1%

9,750
5,050

1,021

7.6%
19.4%
2.1%

Yr 2022
Yr 20190China (Incl. HK)

20,000

Other Asia

40,000

North America* Currency rates for 7th MTBP: US$1 = ¥109.00, CNY 1 = ¥16.00 ←©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Europe60,000

Middle East

80,000

OthersDec/19: US$1 = ¥109.02, CNY 1 = ¥15.77

42

Capital Policy and Shareholder Return
•
•

•

•

Estimated increase in operating CF: Approx. 56.0 billion yen in 3 years
Aggressively making investments for continued growth (incl. M&A)
Breakdown for investments (incl. M&A) (3-year total: Approx. JPY 25.0 bill.)
Overseas business: Approx. 16.0 billion yen
Domestic business: Approx. 9.0 billion yen
Achieving the consolidated total shareholder return ratio of approx. 55%
with a year-on-year increase in dividends for each fiscal year
Aiming to achieve:
ROE (Return on Equity):
ROIC (Return on Invested Capital):

20.0% or more
19.0％ or more

80
70
60
50
40
30
20

(yen per share)

Jan/15(Actual)Return on Equity (shareholders’ equity + accumulated other comprehensive income), calculated withequity being the average of the beginning and ending balances*ROIC: Return on Invested Capital (NOPAT/Invested capital, calculated with a tax rate of 30.0% and invested
capital being the average of the beginning and ending balances©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

68

70

72

Jan/16(Actual)Jan/17(Actual)Jan/18(Actual)Jan/19(Actual)Dec/19(Scheduled)

Dec/20(Plan)

Trends on ROE & Dividend Payout Ratio
ROE

Dividend payout ratio

40.0%

0.0%
*ROE:

66
53

42

35

80.0%

Dividend Trends

Jan/15(Actual)Jan/16(Actual)Jan/17(Actual)Jan/18(Actual)Jan/19(Actual)Dec/19(Actual)Dec/20(Plan)

43

Long-term Vision (in some 10 years’ time)

Op marginROE：20.0％：22.0％ or more

200.0billion yen
Net Sales:©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

44Long-term Vision (in some 10 years’ time)

200.0billion yen
Net Sales:

China

Singapore©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Japan

Lansinoh45

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,
and involve know and unknown risks, uncertainties and other factors, which may
affect the statements made in this material.

Pigeon Corporation

Head Office
4-4, Nihonbashi-Hisamatsucho, Chuo-ku, Tokyo
103-8480, Japan©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

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

46

Appendix

・Review of the 6th Medium-Term Business Plan
・Plan of 7th Medium-Term Business Plan

12 Tasks of 6th MTBP
ESG
Globalinformation
systemSalary increase
Global humanresource
development©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

Global sharing ofcorporatephilosophy & value

World-classbrand power

Sustainable growth

World-class Business
Excellence

Nurture employees’ motivation, satisfaction,
confidence, sense of pride and belonging to
the company
Diversity/
women inmanagement

GlobalSCM

Development
capabilities
Business model
for success
Cash flow
management (PVA)

Global cash
management50Review of 12 Tasks of the 6th MTBP
ESG

Global sharing ofcorporatephilosophy & value

World-classbrand power

Development
capabilities• Set Pigeon’s own ESG policy and disclosed it on our website and Integrated Report• Increased the use of green power generated by solar panels installed at a total of three factories in
China and India• Implemented the “Pigeon Rubella Zero Action” to encourage rubella antibody test and vaccination(Japan)• Enhanced the global sharing of the corporate philosophy through internal contents, including
global internal newsletters and a video series “My Pigeon Way Story”• Held the Pigeon Way training program in Indonesia to deepen the employees’ understanding• Formulated and systematized the new core brand concept• Held the “Global CS (Customer Satisfaction) Meeting” with an aim to improving the quality ofcustomer service on a global basis• Held a series of seminars on breastfeeding instructions for healthcare professionals (20 times ayear in Japan)• Launched a breast pump produced at the Lansihoh factory in China• Launched a highly designed breast pump “Go Mini”• Launched a pacifier for low birth weight babies “Preemie Care” that enables babies to keepsucking on in any posture• Reviewed the development process and started the delegation from Japan to other BUs©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

51

Review of 12 Tasks of the 6th MTBP
Businessmodel forsuccess
Cash flow
management(PVA)• Expanded the Indonesia business• Achieved growth of new sales channels including Lansihoh’s DME channels and the Chinese
market• Explored new sales channels in the Chinese market: hospitals, WeChat Mall, postnatal carecenters, etc.
• Launched two e-commerce shops in Japan so as to capture the growing demand• Experienced a deterioration in the cash conversion cycle (CCC) due to excess inventory in Japan(74.4 days in FY Jan. 2017 → 88.7 days in FY Dec. 2019)• Recorded an improvement in PVA (¥6,584 million in FY Jan. 2017 → ¥8,525 million in FY Dec.
2019)
• Achieved a cost reduction for nonwoven products due to enhanced yield (China)

Global cash
management• Built US-dollar pooling structures in the US and Singapore and started the cash
management, centered on the Head Office

Global SCM• Maintained appropriate inventory levels of nursing bottles and nipples in China• Improved the productivity at the Thailand factory by increasing the number of cavities ofbottle molding machines©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

52

Review of 12 Tasks of the 6th MTBP
Diversity/
women inmanagement• Provided a mindset training program for female employees★ Received Forbes Japan WOMEN AWARD 2018
• Implemented the Telework Program* All of the above are initiatives taken by Pigeon Corporation

Global humanresource
development• Implemented the Global Trainee Program
Objective: Early find and develop global talent capable of playing an active role anywhereinternationally* All of the above are initiatives taken by Pigeon Corporation

Salaryincrease
Globalinformation
system• Achieved an improvement in the paid leave acquisition rate: 69.5% (49% in the final year of• the 5th MTBP)• Recorded a rise in the average annual salary: ¥8.53 million for the 12 months' period (¥7.84
million in the final year of the 5th MTBP)* All of the above are achievements made by Pigeon Corporation• Launched the ERP system at seven group companies in Japan• Operated the EPR systems by linking them among three group companies in China©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

53Long-term Vision (in some 10 years’ time): PVA Projection
Billions of yen)

250
25.0
200
20.0
150
15.0
100
10.0
50
5.0
0
0

5th MTBP

5.2

2013

2015

8.3

6th MTBP

2017

7th MTBP

2021

2023

2025

* From Jan. 2017, B/S Factors for PVA calculation are averaged between beginning and year-end figures.
* Assumed tax rate: 30％; WACC: 5%©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

21.5

11.7

8.5

2019

In some 10 years’ time

2027

2029

(Illustrative)54

Change in Reportable Segments: Details

Due to the organizational change that took effect on December 16, 2019,
we changed the reportable segment structure from six segments
applicable for the 63rd term ended December 2019 to four segments
applicable for the 64th term ending December 2020 and onwards.
Reportable segments applicable for the 63rd term
• Domestic Baby & Mother Care Business• Child Care Service Business• Health & Elder Care Business• China Business• Singapore Business• Lansinoh Business

Reportable segments applicable for the 64th term and onwards• Japan Business• China Business• Singapore Business• Lansinoh BusinessIn addition, while a manufacturing and sales business to externalcustomers engaged by manufacturing subsidiaries in Japan is included in
the Other Businesses segment for the 63rd term, it will be consolidated
into the Japan Business from the 64th term.

©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

BeforeDomestic
Baby & Mother
Health & Elder
Care
Child Care
Service

China

Singapore
Lansinoh
Other

After

Japan

China

Singapore
Lansinoh* Effective from the 64th term, the Child Care
Service Business Division and the Health & Elder
Care Business Division will be consolidated into
the Related Business Division.

55

Change in Reportable Segments: Comparison
Before change: Dec. 2019(millions of yen)

Net sales

Gross margin

Segment profit

Domestic
Baby &
Mother Care

30,813
48.8％

4,697

Child Care
Service

3,492

12.6％

49

Health & ElderCare

Net sales

Gross margin

Segment profit

Japan

China

44,56037,3504,084

12,685

40.1%©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

54.0%

China

6,546

36,824386

12,48331.3％

After change: Dec. 2020 and onwards(millions of yen)

＊The figures are 63rd term actual (11 months for Japan)

Singapore

13,588

37.3%

1,965

55.3％

Singapore

11,482
45.2％

2,007

Lansinoh

13,213
58.3％

Elimination ofinter-segment
transactions

Other

Consolidated(3,700) 1,343 100,017
9.1％

1,784

72

50.8％

17,072＊The figures are 63rd term actual (11 months for Japan)

Lansinoh

13,214

58.3%

1,823

Elimination ofinter-segment transactions(8,696)——

Consolidated

100,01750.8%

17,072* Net sales and segment profit of the three overseas business segments have been changed
because the change in the reportable segment structure resulted in reclassifying some intragroup transactions from intra-segment to inter-segment transactions.

56

Change in Reportable Segments: New Disclosure Format(millions of yen)Dec. 2019 Actual(12-Month Adjusted for Japan)

ActualConsolidated

103,513China Business

37,306

Japan BusinessSingapore Business
Lansinoh Business

48,421
13,60013,207GrossmarginSegment
profit

46.8% 40.0%

4,311% of total

100.0% 50.6%

Budget% of total

YoY (%)

Gross
marginSegment
profit48,60044.6%

100.4%

41.4%

4,316

13.2%

105.9%

17,213109,000

36.0% 54.2%

12,68740,50012.8% 58.2%

1,741

13.1% 37.8%

2,210

Dec. 2020

14,40014,350100.0% 105.3%
37.2%
13.2%

108.6%
108.7%

Elimination of intersegment
transactions(9,022)

Domestic Baby &Mother Care

33,205

32.1% 49.0%

5,063

34,507

31.7％ 103.5％

Health & Elder Care

7,094

6.9% 31.5%

413

7,340

6.7％ 103.5％(8.7)%--(8,850)(8.1)%

-

51.9%

55.8%

13,485

59.0%

1,944

37.7%
-

* Ref.) Breakdown of the Japan Business (Figures prepared by the Business Strategy Dept. for the purpose of comparing with those under the previous segment structure)Child Care Service

3,816©Pigeon Corporation All Rights Reserved. │ Strictly Confidential

3.7% 13.0%

78

3,633

3.3％

95.2％

18,100

2,145

-

48.7％

5,152

32.4％

402

15.6％

150
57