Milbon Co., Ltd.
FY2016 Third Quarter (December 21, 2015 – September 20, 2016)

Financial Results Presentation Materials

September 30, 2016
Copyright © 2016 Milbon. All rights reserved.

Table of Contents
P3

Consolidated Operating Results

P4-11

Consolidated Sales by Product Category

P12

Consolidated Statement of Earnings

P13

Consolidated Trends in Capital Expenditures and R&D Expenses

P14

Trends in Market Related Data, Trends in FPs

P15-18 Outlook of Milbon Group

Copyright © 2016 Milbon. All rights reserved.

1

Fiscal Year 2016 (57th term)
Operating Results for the Third Quarter2

Consolidated Operating Results (FY2016 9 months)
Sales growth in East Asia and Japan has continued to drive Group sales
since the first half of the term
(Unit: million yen)Amount
FY20159 months

FY20169 months

YoYcomparison(%)

Increase/
Decrease

Net sales

19,97821,424

1,445

107.2

Gross profit

13,943

14,761

817

105.9

SG&A expenses

10,156

10,916759

107.5

Operating income

3,787

3,845

57

101.5

Ordinary income

3,594

3,495(98)97.2

Net income

2,331

2,370

38

101.7

Copyright © 2016 Milbon. All rights reserved.

3

Consolidated Sales by Product Category [Hair Care Product] (1)Sales expanded steadily, mainly in new leave-in treatment products(FY2016 9 months)(Unit: million yen)

FY2015 9 months

FY2016 9 months

11,618

Increase/Decrease

12,760YoY comparison (%)

1,142

109.8

• We have launched new products that match the needs of two demographic stages: the turning point for women in their 20s, who areregarded as “awakening to the notion of beauty,” and women in their 50s, “embarking on a quest for beauty.” We are developing
activities to support the creation of various stages of beauty for women by a single designer, while revealing specific examples such as“communication that captures the demographic turning points” and “from design proposals to proposals for the future.”• “Elujuda Sun Treatment,” which is effective in providing protection against UV rays, has been added to the Elujuda line, which has been
popular since its launch. Helped by summertime seasonal factors, the product’s abilities to both protect hair against damaging UV rays
and provide texture care were well-received, leading to strong sales.

Core Products
New - DEESSE’SElujuda Sun Treatment

New - PLARMIA Volumizer
Leave-in treatment foam that makes women’s
hair stand from the roots and creates asilhouette with natural volume they can run
their fingers through.
(Unit: million yen)

Leave-in treatment that moisturizes while
protecting hair from UV rays.
(Unit: million yen)

FY target

Results

Prog. rate

700

631

90.2%

Copyright © 2016 Milbon. All rights reserved.

Mar. 31 Debut

4FY target

Results

Prog. rate

250

291

116.8%

Mar. 1 Debut

Consolidated Sales by Product Category [Hair Care Product] (2)New - Jemile FranHair Care Series Melty Butter
Leave-in treatment retains the memory of the blowdried style from the night before until the nextmorning and allows for quick styling in the morning.
This product helps working women during theirbusy mornings.
(Unit: million yen)

FY target

Results

Prog. rate

350

259

74.1%

Copyright © 2016 Milbon. All rights reserved.

Jan. 28 Debut

5

Aujua (1)Sales grew mainly in the line-ups that meet the growing needs for aging care

Number of salons
FY2015 year-end

2,399 salons

A tailor-made hair care program that nurtures beauty of each and everyone

FY2016 Q3-end

2,692 salons

Sales (FY2016 9 months)
FY2015 9 months

Brand concept

A hair care brand that nurtures thebeauty of Japanese women’s hair,born from the climate, culture andhair characteristics of Japan

What is Aujua?

A hair care series that responds tohair concerns by creating andevolving a program just for one
individual. This is Aujua.

Copyright © 2016 Milbon. All rights reserved.

112.2%(Unit: million yen)

FY2016 9 months

2,998

Comparison
with FY2015
year-end

3,426

YoYcomparison

Trends in sales & number of salons(Million yen)

114.3%

Product range
A wide-ranging line-upthat suits the hair textureof individual customers
・4 series(Number of salons)

6,000

3,000

5,000

2,500

4,000

2,000

3,000

1,500

2,000

1,000

1,000

500
00

Aging care series
Hair care series
Scalp care series
Climatic care series

販売高Sales・15 lines ・96 items

6

取引件数
Number of salonsAujua (2)New Product
Aging Care Series
EQUIAL LINE
For women concerned about unmanageable
hair tips and roots as aging advances. Workson hair’s double-layer structure, creating abeautiful silhouette.
(Unit: million yen)

FY target

Results

Prog. rate

400242

60.6%

Copyright © 2016 Milbon. All rights reserved.

Jan. 29 Debut

7

A Global Hair Care Brand, “milbon”
Sales seminars for distributors concluded, and approaching salons shifts into high gear

Brand concept
A system hair care brand that cultivates the “unique beauty” ofeach individual, with 360°shiny hair

What is “milbon”?
We conducted an in-depth analysis of the inner structure of
the hair of women from 20 countries around the world, using
our proprietary CT scanning technology, and discovered SSVs
(Sticked-Shaped Voids). SSVs are hollow, tubular gaps thatform in damaged hair. Accordingly, we developed a hair careline containing ingredients capable of repairing such hollowed
out hair and increasing the density within each strand of hair.
“milbon” is a system hair care product for developing shiny,
beautiful hair from the core.

Number of salons*
As of September 20, 2016・・・・・・959 salons

Sales (FY2016 9 months)*
FY2016 9 months・・・・・・・・・・172 million yen*Figures are for Japan only.

Copyright © 2016 Milbon. All rights reserved.

8360° BEAUTIFUL HAIR
Launched consecutively in 12 countries
around the world, from June 1

Consolidated Sales by Product Category [Hair Coloring Product]
Sales boosted by well-received gray-hair coloring products launched last year

(FY2016 9 months)
FY2015 9 months(Unit: million yen)

FY2016 9 months

7,129

Increase/Decrease

7,529

YoY comparison (%)

399105.6• The “ORDEVE MODE LINE,” a new color line to match Fall/Winter 2016 trends, has been launched. Its clear, cold shades that do not havea hard look and express an air of the casual mode were well-received, and sales have grown steadily.
• We have added new colors to “ORDEVE CRYSTAL,” a gray-hair coloring product launched in FY2015, to increase the variety of cold
shades, along with non-alkaline colors to protect color and hair by controlling damage from repeated hair coloring. We are further
strengthening support activities to increase the value of gray-hair coloring at salons.

Core Products
ORDEVE CRYSTAL

New - ORDEVE’s additional color
MODE LINEA hybrid color for dying long hair for mature women,with a beautiful finish from the roots to the tips.
ORDEVE CRYSTAL has the brightness of fashioncolors, and it dyes both black and gray hairs evenly
for a long-lasting finish.
(Unit: million yen)

FY target

Results

Prog. rate

1,980

1,33667.5%

Copyright © 2016 Milbon. All rights reserved.

Navy color with striking cold shades expressing
a sense of modish trendiness.
(Unit: million yen)

FY2015Debut

9FY target

Results

Prog. rate

220146

66.8%

Sep. 1 Debut

Villa Lodola (1)Villa Lodola Color, which was launched last year, continues todrive sales and the number of salons

Number of salons
FY2015 year-end

4,014 salons

FY2016 Q3-end

5,300 salons

Sales (FY2016 9 months)
FY2015 9 months

132.0%(Unit: million yen)

FY2016 9 months

324

Comparison
with FY2015
year-end

572

YoYcomparison

Trends in sales & number of salons

176.2%

Brand concept
Nurtured in the soil of Italy, these gifts from nature bring out theauthentic beauty of your hair and scalp.

What is Villa Lodola?
Based on the concept of “Beauty, the Organic Way,” Villa Lodola is atrue organic brand that thoroughly cares about the naturalenvironment not only for the product itself but also in its container,production phase and promotional tools. All of the products are
certified by ICEA, an Italian authority.
Villa Lodola supports organic choices, with hair care products
nurtured in the soil of Italy, bringing out true beauty.

Copyright © 2016 Milbon. All rights reserved.

(Number of salons)(Million yen)

10600

6,000

500

5,000

400

4,000

300

3,000

200

2,000

100

1,000

002012

2013

2014
Sales
販売高

2015

2016目標target

取引件数
Number of salonsVilla Lodola (2)Core Product
Villa Lodola ColorWith 92% natural ingredients, the product’sformulation utilizes the power of plants. It
brings comfort of an organic product acrossall aspects, including during application, thefinish and continued use.
(Unit: million yen)

FY targetResults

Prog. rate315373100.4%

Copyright © 2016 Milbon. All rights reserved.

FY2015 Debut

11

Consolidated Statement of Earnings (FY2016 9 months)(Unit: million yen)

(Unit: million yen)Amount
FY20159 months<Breakdown of net sales by product category>

FY20169 months

Increase/Decrease

YoYcomparison
(%)

Sales

19,97821,424

1,445

107.2

Cost of sales

6,035

6,663

628

110.4

FY20159 months

FY20169 months% totalsales

YoYchange

YoY
compari-son (%)

11,61812,760

59.6

1,142

109.8

Hair coloringproducts

7,129

7,529

35.1

399

105.6

Permanent wave
products

1,076

972

4.5(103)

90.4

154

161

0.8

6

104.4

Hair careproducts

Others<Major factors for the increase/decrease>
Gross profit

13,943

14,761

817

105.9

SG&A
expenses

10,156

10,916759

107.5

Operatingincome

3,787

3,845

57

101.5

Ordinary
income3,594

3,495(98)97.2

Net income

2,331

Copyright © 2016 Milbon. All rights reserved.

2,37038*1 SG&A expenses: Salary hikes from increases in thenumber of personnel and promotions*2 Ordinary income: Posting of foreign exchange losses
due to the yen’s appreciation*1

Supplemental Info. – Return to shareholders<Dividends>(Unit: yen)

*2

FY2014101.7

12FY2015FY2016 planEnd of 2Q

34

3538

End of FY

34

39

40

Total

68

7478

Consolidated Trends in Capital Expenditures and R&D Expenses(Unit: million yen)

FY2012FY2013

FY2014FY2015FY2016
Jan.–Sep.

FY2016
PlanCapital
expenditures

840

1,6801,028

2,779

3,363

4,329

Depreciation andamortization

947

878

1,004

1,033

712

1,113

Amount

873

969

1,168

1,214

870

1,215% to sales

4.0%

4.1%

4.6%

4.4%

4.1%

4.2%

Category

R&D exp.

FY2016 CAPEX Main Items (Plan)• Expansion of Yumegaoka Plant• Development of new sales management system (to be introduced in 2017)• Opening of Okayama Sales Office• Relocation of Fukuoka Branch• Opening of Kumamoto Sales Office

Copyright © 2016 Milbon. All rights reserved.

13

Trends in Market Related Data, Trends in Fieldpersons (FPs)
Market trends (Japan)(Unit: Number of salons: salons / Number of hair dressers: people / Number of beauty customers: thousand people)

2011

2012

2013

2014

Number of salons

228,429

231,134

234,089

237,525――

Number of hairdressers

471,161479,509487,636496,697――

Number of beauty
customers

39,076

39,64038,4682016

2015

37,84737,395

Remarks

37,140(As of Apr. 1)

Ministry of Health, Labour and Welfare, Report on
Public Health Administration and Services
Number of beauty salon facilities / number ofemployees (year-end)
Statistics Bureau, Ministry of Internal Affairs andCommunications:
Population statistics as of October 1st of each year
Population statistics for females aged 15 to 64

Fieldpersons trends (by country)*Number of FPs / As of the beginning of the fiscal year (December 21)

2012

2013

2014

2015

2016

JAPAN

200

210

216237

Milbon Co., Ltd.

102104

104

100

USA

10121212

MILBON USA, INC.

35364053

CHINA

13161718

Milbon Trading(Shanghai) Co., Ltd.

14172536

KOREA

13171719

Milbon Korea Co., Ltd.

34416475

3666815471216101

655047THAILAND
Milbon (Thailand) Co., Ltd.

OthersCopyright © 2016 Milbon. All rights reserved.

-14249Upper column: Number of FPs (persons)Lower column: Sales per FP (million yen)9

* 25 FPs completed training on September
20, 2016.
8 FPs will start training on October 3,
2016.

18

20
619

(The above 33 FPs are not included in theleft chart.)

Outlook of Milbon Group (1)East Asia, including Japan, continues to drive growth
Number ofemployees
Number ofFPsJapan
Milbon Co., Ltd.

USA589245
14MILBON USA, INC.

11CHINA

24Milbon Trading(Shanghai) Co., Ltd.

18

KOREA

33

Milbon Korea Co., Ltd.

23

THAILAND72

Milbon (Thailand) Co.,
Ltd.

Others*921
21

Sales (million yen)

YoYcomparison
(%)

Start
operations

FY20159 months

FY20169 months

17,455

18,593

106.8

1960

--

472

444

94.0

2004

1 dollar =118.29114.95

460

542

117.9

2009

1 yuan =
19.32

17.56

1,046

1,193

114.0

2009

1 won =
0.108

0.099

66

61

91.2

2013

1 baht =
3.60

3.26

477

590

123.6

---

* Taiwan, Hong-Kong, Vietnam, Malaysia, Turkey, Indonesia, the Philippines and others
Copyright © 2016 Milbon. All rights reserved.

Forex rates

15FY2015

FY2016

Outlook of Milbon Group (2)JAPAN (Milbon Co., Ltd.)New products targeting two generations of women in their 20s, “awakening to the notion of beauty,” and in their 50s,
“embarking on a quest for beauty,” were launched. By proposing activities linking hair color with hair care, sales ofproducts in both categories have steadily increased.
With demand growing for gray-hair coloring due to demographic shifts, gray-hair coloring products ORDEVE CRYSTAL
and Villa Lodola Color in particular were well-received in the market and have driven growth in the hair coloring category.
Sales seminars for distributors on the global hair care brand “milbon,” launched in June, have almost finished, andapproaching salons has moved into high gear. As a result, we expect the pace of increase in the number of contracted
salons to accelerate.

USA (MILBON USA, Inc.)
Joint activities with distributors in the East Coast region, where we have been promoting sales activities through thedistributor, are progressing steadily, and sales to distributors have grown. However, salon sales have fallen owing to theimpact of closures and consolidation of the high-end salons in Manhattan area, where our activities are focused, due to thetiming of renewals of rents, whose costs are soaring.
Proposals that link Plarmia salon treatment with sales of take-home products have been accepted. In the meantime,
there has been stagnation among product groups where the link between salon treatment and sales of take-homeproducts is weak or brand promotion capabilities are poor. We commenced sales of the global hair care brand “milbon” inJune. The concept of the “salon take-home product business,” with a consistent brand package and name, is being
accepted. The product is expected to perform well in the future.

Copyright © 2016 Milbon. All rights reserved.

16

Outlook of Milbon Group (3)CHINA (Milbon Trading (Shanghai) Co., Ltd.)
Women born in the 80s and 90s, who tend to have high levels of beauty awareness, have significant needs, demanding
hair designs that suit them. Their demands for hair color and hair treatment are especially high. We have responded bystrengthening educational activities at salons and addressing the personal needs with seasonal color proposals and theintroduction of a new color that dyes hair to have the ever-popular color of foreign models’ hair, which have been wellreceived.
Top management in China’s leading cities, where we are currently pushing ahead with expansion, recognizes that
customer satisfaction and human-resource development are important issues for salon management. Milbon’s uniquemarketing activities allow us to differentiate our brand from other companies, and the reception has been very positive.
Development of local staff is becoming a major driving force.
We will establish an office with a studio in Southwest China (Chengdu, Sichuan Province) in November 2016 tostrengthen our marketing activities. We are planning to expand into new areas, based on further reinforcement ofmarketing activities in existing areas.

KOREA (Milbon Korea Co., Ltd.)The regular addition of new colors for ORDEVE hair coloring product allows us to propose new colors to salon
customers who are always looking for something new. This unique attraction, not found at other companies, drives overallsales for ORDEVE.
We are carrying out development focused on our hair care products with the aim of transitioning to the “Comprehensive
Milbon brand,” as positive recognition of the “Milbon of hair color products” expands. Plarmia has been smoothly
introduced through activities such as the “quick and cool summer campaign.” This offered proposals for quick and easycare from the scalp to the tips of the hair, arousing responses from salons.
Aujua is now being test marketed, and we are seeing results from the product from building extremely good
relationships with salons through visits and educational activities in close coordination with each salon. We aim to reinforce
the activity by adding a member to the Aujua team with a view to the full-fledged marketing activities scheduled fromOctober.
Copyright © 2016 Milbon. All rights reserved.

17

Outlook of Milbon Group (4)
THAILAND (Milbon (Thailand) Co., Ltd.)[Sales division]
As our transaction amount with major salons has begun to increase and our brand recognition in the industry is rising
gradually, sales are steadily improving in every quarter.
We have repeatedly held hair-coloring seminars, which have received positive responses, and sales of hair coloringproducts are growing. With regard to permanent wave products, digital perm seminars given by Japanese hair dressers
have been well-received, and the Liscio Atenje brand of straight perm products has grown significantly.

[Production division]
Production volume of hair coloring products is growing with a view to introducing new hair colors in each country. The
production launch of the global hair care brand “milbon” has led to a rise in the production ratio of hair care products.
Shipping destinations currently comprise 10 countries. Shipments have steadily grown, exceeding the planned amountby 16.5%.
The improvement of the cost of sales ratio is also progressing steadily, as efforts are being made to raise the efficiencyof the production facilities and increase production volume, in addition to procuring raw materials locally and reducing
expenses.

Copyright © 2016 Milbon. All rights reserved.

18

Statements concerning the future such as the earnings forecasts given in thisdocument are based on information currently in the possession of the Company andon assumptions that the Company considers reasonable.