November 6, 2019
Lion Corporation

Analyst Q&A (Summary)Nine Months Ended September 30, 2019
Business Performance
Ｑ: To what extent did the pre-tax hike demand surge in Japan affect net sales for thethird-quarter, and how did it compare with your expectations?
Ａ: Other factors, such as the introduction of new products, also played a role, so we cannot
give an exact figure, but of the ¥7.0 billion year-on-year increase in sales in the Consumer
Products business, we estimate that 70%–80% was due to the pre-tax hike demand surge.
The surge was slightly smaller than expected.
Ｑ: Have distribution inventories increased in response to the demand surge?
Ａ: We are not aware of an excess in distribution inventories. Shipments from Lion towholesalers and from wholesalers to retailers since the start of October have not seen
greater than expected decreases, either.
Ｑ: What do you expect in terms of recoil from the demand surge?
Ａ: The demand surge before the tax hike in 2014 amounted to approximately ¥13.0 billion(JGAAP). Together with the recoil afterward, on a six-month basis, the net effect on saleswas approximately a positive mid-¥2.0 to ¥3.0 billion range. We expect a similar net
positive this time.
Q: In the first nine months, how did core operating income compare to your plan? If thedemand surge was less than expected, was income, as well?
A: Core operating income for the first nine months reached approximately 75% of our forecast
for the full year. While the demand surge was a factor, we regard this progress as within
the range of our expectations.
Q: Even though the pre-tax hike demand surge was lower than expected and the businessenvironment in South Korea worsened, income was still on track toward the full-year plan.
What made up the difference?
A: Such decreases were absorbed by cost reduction measures and a review of our overallbalancing of expenses.
Q: What has caused the decrease in selling, general and administrative expenses, especiallymarketing expenses? Do you expect these reductions to last?
A: Overall selling, general and administrative expenses have been decreasing due to efforts
to increase cost efficiency. Advertising expenses decreased in the third quarter, from Julyto September, but point-of-sale promotional expenses were increased in light of thepre-tax hike demand surge, leading to an increase in promotional expenses deductedfrom net sales (a decrease in gross profit).
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Q: In the first nine months, approximately how much of net sales was attributable to overseasvisitors to Japan?
A: We estimate the figure for the first nine months at just below ¥4.0 billion. We expect it to bearound ¥5.0 billion for the full year.
Q: While sales attributable to overseas visitors continued to decline in the first nine months,sales of pharmaceutical products (in which sales to overseas visitors represent a large
portion of the total) saw a significantly narrower decline than in the first half and werelargely unchanged year-on-year in the third-quarter. I imagine the acquisition ofdermatologic agent brands FERZEA and Encron from Shiseido Pharmaceuticals had
some effect, but could you tell us more about why this was?
A: Net sales of pharmaceutical products in the first nine months decreased 9.7% year on year.
However, excluding the impact of the sale of the insecticide business at the end of lastyear, net sales decreased only 2.3%, and if just third quarter results are considered, netsales increased 6%. This was due to the pre-tax hike demand surge, the introduction ofnew products in eye drops, and the acquisition of the FERZEA and Encron brands inAugust.
Ｑ: The Consumer Products business seems to have a long way to go to in the fourth quarterto meet its annual target. How will you increase sales?
Ａ: To achieve the revised forecast of ¥223.5 billion for the Consumer Products businessannounced in August, we will need to realize year-on-year sales growth of 1.8% in thefourth quarter. Augmenting the lineup of strong selling new products introduced in the thirdquarter, we will introduce a number of new products in the fourth quarter, and we expect
their performance to be steady.
Ｑ: Has there been any change to the revised forecast for the year-on-year change in annual
core operating income published in August?
Ａ: Performance may vary slightly due to changes in the sales mix and fluctuations in raw
materials and competition-related expenses, but for the most part we do not expect any
major change.
Overseas Business
Ｑ: How were net sales in Lion’s four key overseas countries (Thailand, Malaysia, SouthKorea and China) on a local currency basis?
Ａ: We do not disclose concrete numbers by country. However, sales in Thailand saw a slightincrease in the first nine months. Sales in Malaysia saw growth in excess of GDP growthin the first half but then decreased year on year in the third quarter due to recoil from
special demand related to local tax reforms implemented last year, resulting in a smallyear-on-year decrease for the first nine months. South Korea, due in part to the worsening
business environment from July onward, sales saw a single-digit decrease across the firstnine months. In China, sales growth remains at over 20%.

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Ｑ: How much of the ¥2.3 billion year-on-year decrease in the third-quarter net sales in theOverseas segment was due to the results in South Korea?
Ａ: We do not disclose specific figures, but it is quite a large portion of the decrease.
Ｑ: Did third-quarter net sales in South Korea see a double-digit decline?
Ａ: Yes, the third quarter decline was well into the double digits. Our products were not thedirect targets of boycotts, but point-of-sale promotions and the introduction of newproducts were greatly affected.
Ｑ: When do you expect performance in South Korea to bottom out? Do you expect declines
to end in the fourth quarter, or will they continue into next year?
Ａ: While our information on the ground indicates that there are signs of improvement, thetiming of when performance will bottom out or when it will begin to recover is still in flux.
Ｑ: Was the impact of performance in South Korea a major factor in the decrease in profit in
the Overseas business in the third quarter? How do you regard the margins of theOverseas business?
Ａ: The third-quarter core operating income ratio in the Overseas business was 7.6%, down
0.6 of a percentage point year on year. This was due to decreases in sales in South Koreaand Malaysia. The ratio for the first nine months was 7.3%, an improvement of 0.8 of apercentage point. Due to such factors as cost reductions for home care products, sales
growth in China and growth in the percentage of sales accounted for by personal care, theprofit ratio of the segment as a whole continues to improve.

Disclaimer
The contents of this document comprise a summary of the views of the Company expressed during
the question and answer portion of a quarterly financial results conference call. This document does
not guarantee the accuracy or completeness of the information contained herein and is subject tochange without notice.
Furthermore, forecasts, results projections and other forward-looking statements are basedon certain assumptions judged by the Company to be reasonable in light of information available atthe time of preparation and do not constitute promises or guarantees.
Please be advised that a wide range of factors may cause actual results to differ
significantly from the forward-looking statements made herein.

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