Milbon Co., Ltd.
FY2017 Second Quarter (December 21, 2016 – June 20, 2017)

Financial Results Presentation Materials

June 28, 2017
Copyright © 2017 Milbon. All rights reserved.

Table of Contents
P3

Consolidated Operating Results

P4-9

Consolidated Sales by Product Category

P10

Consolidated Statement of Earnings

P11

Consolidated Trends in Capital Expenditures and R&D Expenses

P12Trends in Market Related Data, Trends in FPs

P13

Outlook of Milbon GroupP14-15 Outlook of Overseas Subsidiaries
P16-23 FY2017 (58th term) and Medium-term Management Plan

Copyright © 2017Milbon. All rights reserved.

1

Fiscal Year 2017 (58th term)
Operating Results for the Second Quarter

Masahiro Murai, Managing Director2Consolidated Operating Results (FY2017 6 months)
While sales are recovering steadily, profits declined due to plant extension work
(Unit: million yen)Amount
FY20166 months

FY2017
6 months

Increase/
Decrease ratio(%)

Increase/
Decrease

Net sales

14,218

14,956738

5.2

Gross profit

9,787

10,069281

2.9

SG&A expenses

7,364

7,736

372

5.1

Operating income

2,423

2,333(90)(3.7)

Ordinary income

2,188

2,147(41)(1.9)

Profit attributable toowners of parent

1,464

1,508

43

3.0

Copyright © 2017 Milbon. All rights reserved.

3Consolidated Sales by Product Category [Hair Care Product]
Sales increased slightly despite the introduction of new products under professional brands(FY2017 6 months)(Unit: million yen)

FY2016 6 months

FY2017 6 months Increase/Decrease Increase/Decrease ratio (%)

8,511

Hair Care Product

8,680

169

2.0

• Sales have been steady for the premium brands Aujua and “milbon.” Sales of professional brands, which have seen theintroduction of new products also in the period under review, were not as expected.

NewElujuda
Mellow Serum/Limber Serum

PLARMIA
Enriched

Leave-in treatment for developing hair one
can lightly run fingers through and is easily
managed from the roots.

Shampoo and treatment that provide the feelingof elasticity demanded by women in their 50s
who are no longer satisfied with simple
moisturizing.
(Unit: million yen)

(Unit: million yen)
FY target

Results

Prog. rate

600

235

39.2％
％

Copyright © 2017 Milbon. All rights reserved.

Mar. 30 Debut

4FY target

Results

Prog. rate

50014930.0％％

Mar. 1 Debut

A Premium Brand, Aujua
Sales increased amid the challenging market environment

Number of Aujua salons
FY2016 year-end

2,779 salons

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

FY2017 Q2-end

2,963 salons

Sales (FY2017 6 months)
FY2016 6 months

Increase/
Decrease ratio(%)(Unit: million yen)

FY2017 6 months

2,187

6.6
Increase/
Decrease ratio
(%)

2,309

5.6

Brand concept

Product range

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

A wide-ranging line-upthat suits the hair textureof individual customers・4 series

What is Aujua?

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

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

Trends in sales & number of salons(Million yen)

3,500

5,000

3,000
2,500

4,000

2,000
3,000
1,500
2,000

1,000

1,000

500

00

Sales
販売高

・15 lines ・96 items

Copyright © 2017 Milbon. All rights reserved.

(Number of salons)

6,000

5

Number of salons
取引件数

A Premium Brand, “milbon”
Rolled out overseas in 7 countries

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
FY2017 Q2-end・・・・・・・・・・・・・・・3,101 salons

Sales
FY2017 6 months・・・・・・・・・・644 million yen

Copyright © 2017 Milbon. All rights reserved.

6360° BEAUTIFUL HAIR
Launched in FY2016—rolled out
consecutively in 12 countries worldwide

Consolidated Sales by Product Category [Hair Coloring Product]
New products aimed at the young demographic were well received,driving sales of hair color products(FY2017 6 months)(Unit: million yen)
FY2016 6 months

FY2017 6 months

Increase/Decrease

Increase/Decrease ratio (%)

4,944

5,462517

10.5

Hair Coloring Product• We introduced a new brand, “ORDEVE Addicthy,” to respond to the desires of women who want to continue to display freedom in their
hair color design. Sales have significantly exceeded annual targets, thanks to a positive reception for its ability to easily express color
by eliminating red tones.

NewORDEVE
Addicthy

ORDEVE’s additional color
FEMININITY LINEErases red-tinged brown with high saturation
blue. With clear and transparent color
expression, it lets customers freely realize
individual hair color designs.
(Unit: million yen)

Expresses stylish femininity to suit eachindividual through “transparent pink” withadjustable saturation.
(Unit: million yen)

FY target

Results

Prog. rate

755

921

122.1%

Copyright © 2017 Milbon. All rights reserved.

Feb. 1 Debut

7

FY target

Results

Prog. rate

400

158

39.7%

Feb. 1 Debut

A Premium Organic Brand, Villa Lodola (1)Villa Lodola Color continues to be well received and to drive sales

Number of Villa Lodola salons
FY2016 year-end

5,632 salons

FY2017 Q2-end

6,236 salons

Sales (FY2017 6 months)
FY2016 6 months

10.7(Unit: million yen)

FY2017 6 months

363

Increase/
Decrease ratio
(%)

444

Increase/
Decrease ratio(%)

Trends in sales & number of salons(Million yen)

12,0001,000

10,000

800

8,000

600

6,000

400

4,000

200

2,000

22.3

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 © 2017 Milbon. All rights reserved.

(Number of salons)

1,200002012

2013

2014
Sales
販売高82015

2016target
2017目標Number of salons
取引件数

A Premium Organic Brand, Villa Lodola (2)Core Product
Villa Lodola ColorWith 92% natural ingredients, the product’s
formulation 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 target

Results

Prog. rate

516

316

61.2%

Copyright © 2017 Milbon. All rights reserved.

FY2015 Debut

9Consolidated Statement of Earnings (FY2017 6 months)<Breakdown of net sales by product category>(Unit: million yen)

(Unit: million yen)

FY20166 months

FY2017
6 months

Increase/
Decrease

Increase/
Decrease ratio(%)

58.0

169

2.0

5,462

36.5

517

10.5

664

709

4.8

456.8

98

104

0.7

66.3

FY2017
6 months

Hair careproducts

8,511

8,680

Hair
coloring
products

4,944

Permanentwave
products
OthersAmountIncrease/
Decreaseratio (%)

Increase/
Decrease

FY20166 months% total
sales

Sales

14,218

14,956738

5.2

Cost ofsales

4,430

4,887

456

10.3 *1

Gross profit

9,787

10,069

281

2.9

SG&A
expenses

7,364

7,736

3725.1

Operatingincome2,423

2,333(90)(3.7)*1 Cost of sales: Increase in depreciation and amortization
associated with start of operations at new Yumegaoka
Plant, etc.
*2 SG&A expenses:• Higher personnel expenses due to an increase inpersonnel and salary hikes.
• Increase in sales promotion costs associated withcreation of sales promotion tools, etc.

Ordinary
income2,188

2,147(41)(1.9)

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

Profitattributableto owners ofparent

1,464<Major factors for the increase/decrease>*2

FY2015

1,508

Copyright © 2017 Milbon. All rights reserved.

433.0

10FY2016

FY2017 planEnd of 2Q

353840End of FY

3940

42Total

747882

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

FY2013

FY2014FY2015FY2016FY2017
Jan.–Jun.

FY2017Plan*)※）

1,680

1,028

2,779

4,262

469

1,760

878

1,004

1,033

1,077

550

1,240

Amount

969

1,168

1,214

1,232

645

1,372

% to sales

4.1%

4.6%

4.4%

4.2%

4.3%

4.2%

Category
Capitalexpenditures
Depreciation andamortization
R&D exp.

FY2017 CAPEX Main Items• Development expenses for sales management system• Establishment of a new domestic base (Shizuoka Sales Office)• Interior, equipment, etc., due to relocation of domestic bases(Fukuoka Branch, Okayama Sales Office, Yokohama Sales Office)*) Figures reflect the revision of operating forecasts announced on February 24.
Copyright © 2017 Milbon. All rights reserved.

11

Trends in Market Related Data, Trends in Fieldpersons (FPs)
Market trends (Japan)
2012

2013

2014

2015

Number of salons(salons)

231,134

234,089

237,525240,299――

Number of hair
dressers (people)

479,509487,636496,697504,698――

37,02336,980

Number of beautycustomers(thousand people)

39,076

38,46837,847

2016

37,395

2017

Remarks(As of Jan. 1)

Ministry of Health, Labour and Welfare, Report on Public
Health Administration and Services
Number of beauty salon facilities / number of employees(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))20132014

2015

2016

2017

JAPAN
Milbon Co., Ltd.

210216237249104104100

102USAMILBON USA, INC.

121212936405363

CHINA
Milbon Trading (Shanghai)Co., Ltd

1617181817253640

KOREA
Milbon Korea Co., Ltd.

1717192041647580

THAILAND
Milbon (Thailand) Co., Ltd36666815

14712161963464247Others*)

258

1219

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

8 FPs assigned on March 21, 201725 FPs joined in April 2017, and arecurrently in training(The above 33 FPs are not included in theleft chart.)

23924*) Taiwan, Hong Kong, Vietnam, Malaysia, Turkey, Indonesia, the Philippines, Singapore and others
Copyright © 2017 Milbon. All rights reserved.

12Outlook of Milbon Group
Overseas continues to drive growth

Sales (million yen)
FY20166 months

Japan
Milbon Co., LtdUSA
MILBON USA, INC

FY2017
6 months

Increase/
Decreaseratio (%)

Forex rates
Startoperations

FY2016

12,33012,847

4.2

1960285276

(3.1)

2004

KOREAMilbon Korea Co., Ltd.

THAILAND
Milbon (Thailand) Co., Ltd.

Others*)-118.41111.591 yuan =
370

431

16.5

2009
18.24

16.27

1 won =
788

886

12.3

2009
0.1012

0.09591 baht =
39403

53

34.9

460

14.2*) Taiwan, Hong Kong, Vietnam, Malaysia, Turkey, Indonesia, the Philippines, Singapore and others
Copyright © 2017 Milbon. All rights reserved.

1 dollar =CHINA
Milbon Trading(Shanghai) Co., Ltd.

FY2017132013

-

3.33

3.14

--

Outlook of Overseas Subsidiaries (1)USA (MILBON USA, Inc.)
In-salon training for “milbon,” launched last year, is progressing smoothly, and our hair care series is spreading steadily.
In addition, we launched the “milbon” styling series which includes volume control products in its line-up, must-have itemsin the US market. They have been well received in the market and sales are expected to grow going forward.

CHINA (Milbon Trading (Shanghai) Co., Ltd.)The strengthening of relationships with salons is progressing smoothly due to marketing activities centered on training.
In addition, meeting the market needs of our target customers in their 30s and 20s, we conducted policy briefings in theShanghai, Beijing, and Chengdu areas, which were well received.
In hair color products, ORDEVE proposals were effective through introducing new colors and holding color specialist
seminars, and sales were steady.

KOREA (Milbon Korea Co., Ltd.)In the hair color product category, ORDEVE (fashion color) continued to perform well, partly due to our unique andappealing additional color proposals, and together with ORDEVE beauté (gray-hair coloring product) drove overall sales.
In hair care products, the market reception has been positive for Aujua, which we began full-scale sales of in the period
under review, and sales were steady as its new introduction into 10 salons was confirmed in the second quarter.

Copyright © 2017 Milbon. All rights reserved.

14

Outlook of Overseas Subsidiaries (2)THAILAND (Milbon (Thailand) Co., Ltd.)[Sales division]
Hair color and perm products for business use performed well and sales increased by 43.0% year on year. This was
likely due mainly to gradually increasing brand awareness in the market as a result of the ongoing implementation of smallscale seminars on style design that involve our products.
The finish texture and feel of “milbon,” launched in the period under review, has been highly rated and, despite a slow
rate of increase in the number of salons due to the holding of introductory seminars, performance looks promising going
forward.

[Production division]
Production amounts were substantially higher than planned and, as the local procurement rate for both materials andraw materials exceeded 50%, the manufacturing cost ratio has improved more than expected.

Copyright © 2017 Milbon. All rights reserved.

15

Milbon GroupFY2017 (58th term) andMedium-term Management Plan

Ryuji Sato, President and CEO
Copyright © 2017 Milbon. All rights reserved.

16

FY2017 Domestic Environment - Medium-term Management Plan
■ Domestic market
1. From the market environment to the second quarter

2. Progress of brand product line-ups(1) Hair Care Product(2) Hair Coloring Product Aujua ORDEVE Addicthy

 “milbon”

 ORDEVE Villa Lodola

 ORDEVE Crystal
 ORDEVE beauté

Copyright © 2017 Milbon. All rights reserved.

17

Domestic Market Initiatives for FY2017■ Exclusive advertisingat Stations

Sony Building, Ginza

Tokyo Metro’s Ginza Station▼Umeda area

Hankyu Umeda grand staircase

Copyright © 2017 Milbon. All rights reserved.

▲Ginza area

Hankyu Umeda moving walkway vicinity

18

Domestic Market Initiatives for FY2017■ Publication of Web magazine Find Your Beauty MAGAZINE (http://www.milbon.co.jp/fyb-magazine/)

We want all women to enjoy their hair more and live beautifully
A web magazine targeted to women to stimulate more interest in their hair and want to visit salons more

[TOPICS]
1. Creating a new hair culture together with hair dressers
2. Answering questions many women normally have on their hair troubles and maintenance
3. Providing various information such as hair dresser stories and street hair snaps, and event
reports which offer glimpses into the daily lives of hair models and hair trends

Copyright © 2017 Milbon. All rights reserved.

19

Medium-term Management Plan Themes and Initiatives
Current status of business strategy initiatives
1. Space is necessary for enhancing the structure and increasing
the personnel of the Central Research Institute (Research andDevelopment Division)Specialize the “Head Office & Central Research Institute” as the“Central Research Institute”(Basic research, skin care products, hair color products for European and US markets, etc.)

2. Investing in human resources for the full-scale roll out of thecosmetic products business(Fieldpersons = field salespersons + field educators + (tentative name) beauty educators)

Copyright © 2017 Milbon. All rights reserved.

20

Medium-term Management Plan Themes and Initiatives
Forward investment incosmetic products business and business strategy

1. Preparation for full-scale roll out of the cosmetic products
business (human resource training structure)
2. Promotion of overseas business (Asia + European and US
hair color products)
3. Promotion of corporate and product branding
4. Further enhancement of Tokyo metropolitan area

Opportunity to relocate the head office function to Tokyo

Copyright © 2017 Milbon. All rights reserved.

21

Revision of Medium-term Management Plan FY2019 Performance Targets
1 billion yen increase in SG&A expenses due to forward investment with an eye tothe next Medium-term Management Plan
(Unit:million yen)
（単位：百万円）

2019年度目標
FY2019 targets(beforethe revision)（修正前）
構成比Composition
Amount金額
ratio (%)(%)
Net sales
売上高

FY2019 targets
2019年度目標(afterthe revision)
（修正後）
構成比
Composition
Amount金額
ratio (%)(%)

Increase/
増減額
Decrease

35,00035,000

100.0
100.0

35,00035,000100.0
100.000

Domestic
国内

28,50028,50081.4
81.4

28,50028,50081.4
81.400Overseas
海外

6,500
6,500

18.6
18.6

6,500
6,500

18.6
18.600Gross profit
売上総利益24,50024,50070.0
70.0

24,50024,50070.0
70.000

SG&A expenses
販管費

17,50050.0
50.0

18,50018,500

52.9
52.9

1,000
1,000

Operating income
営業利益

7,000

20.0
20.0

6,0006,000

17.1
17.1

△ (1000)
1,000

Ordinary income
経常利益

6,630

18.9
18.9

5,600
5,600

16.0
16.0

△ (1,030)
1,030

Profit attributable to4,130
4,130

11.8
11.8

3,850
3,850

11.0
11.0

△(280)
280

当期純利益
owners of parent■ No change in return to shareholders regarding policy of dividend payout ratio of 40%
However, the actual dividend amount will be decided in a stable manner regardless of policy
Copyright © 2017 Milbon. All rights reserved.

22

FY2017 Overseas Business Initiatives■ Overseas markets:
Overseas bases in 16 locations and 13 countries
1.

East Asia region (Milbon Trading (Shanghai) Co., Ltd., Milbon Korea Co.,
Ltd., Taiwan, Hong-Kong)

2.

Southeast Asia region (Milbon (Thailand) Co., Ltd., Malaysia, Vietnam,Indonesia, the Philippines, Singapore)
Thailand Plant

3.

North America region (MILBON USA, INC.)

4.

Europe region (Turkey, Germany)

Copyright © 2017 Milbon. All rights reserved.

23

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.