Results Briefing for
The Six Months Ended July 31, 2016
September 9, 2016

(Securities code: 7956)

President & COO

Shigeru Yamashita

Contents

Title, Contents

1-2

Business Results at July 31, 2016

3 - 16

Jan. 2017 Full-Year Performance Forecasts

17 - 20

Approach to Enhance Corporate Value

21 - 33

Business Results at July 31, 2016

Financial Highlights (Consolidated)Jul. 2015(¥ millions)

AmountJul. 2016

YoY Change

AmountYoY Change

Net sales

46,522118.6%

46,302

99.5%

Operating income

7,733

129.2%

7,777

100.6%

Ordinary income

7,873

132.2%

7,671

97.4%

Net Income Attributableto Owners of Parent

5,282

129.7%

5,545

105.0%Net assets

50,758127.0%

48,87096.3%

Total assets

76,282120.5%

71,494

93.7%

EPS (¥)

44.11

129.7%

46.30

105.0%BPS (¥)

414.15126.9%

398.71

96.3%

ROA

21.2%

―

21.1％

―

ROE

22.1%

―

22.8％

―

※ ROA= Ordinary income ÷ Total assets; ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)

Statements of Income (Consolidated)(¥ millions)

Net sales
Cost of sales

Jul. 2015

Jul. 2016

Results% of Total

Results% of Total YoY Change

Remarks

46,522100.0%

46,302100.0%

99.5% ■Main changes in SG&A

24,72053.1%

24,74353.4%

100.1% Personal expenses :expenses¥(17m)

Gross profit

21,801

46.9%

21,55946.6%

98.9% Delivery expenses :SG&A expenses

14,06730.3%

13,781

29.8%

98.0%

Operating income

7,733

16.6%

7,777

16.8%

100.6%

Non-operating
income (expenses)

139

0.3%

(106)

―

―

Ordinary income

7,873

16.9%

7,671

16.6%

97.4%

Extraordinary
income (loss)
Net Income
Attributable to Noncontrolling Interests
Net Income
Attributable to Ownersof Parent

2

0.0%

52

0.1%

96

0.2%

110

0.2%

¥(94m)
Outsourcing fees :¥(45m)
Sales Promotion
expenses :¥(37m)■Main changes inincome2400.8% non-operating(expenses)

114.4% Exchange gain and loss :¥(91m)

5,282

11.4%

5,545

12.0%

105.0%

Net Sales by Business Segment (Consolidated)Jul. 2015(¥ millions)Jul. 2016
Segment
ProfitConsolidated
net sales

46,522100.0%

46.9%

7,733

46,302100.0%

99.5%

46.6%

7,777

Domestic Babyand Mother
Care Business

14,216

30.6%

44.5%

2,296

16,36535.3%

115.1%

46.3%

3,212

Child-rearing
SupportServices

3,374

7.3%

11.0%

70

3,652

7.9%

108.2%

10.4%

80

Health Careand Nursing
Care Business

3,466

7.5%

28.4%

127

3,537

7.6%

102.1%

31.7%

298

Overseas
Business

11,980

25.8%

55.2%

2,625

11,079

23.9%

92.5%

56.3%

2,584

China
Business

16,600

35.7%

44.5%

4,798

13,741

29.7%

82.8%

43.7%

3,779

Elimination ofinternal trading
between segments(3,749)(8.1%)――(2,722)(5.9%)

―

―

―

633

1.4%

15.2%

647

1.4%

102.3%

15.7%

Other

73

Gross
MarginSegment
ProfitGross
MarginAmount

% of
Total

YoY
ChangeAmount % of Total※ Segment profit in the consolidated amount has been adjusted (all non-allocable operating expenses) and posted as operating income in the consolidated statements of income.
※ The consolidated amount recorded has been posted as the sum resulted from eliminating intersegment transactions in the overseas and China businesses.

84

Overseas Business Sales by Region
China(incl.Hong Kong)

Other Asian Countries

North America

EuropeNear and Middle East

Other Regions(¥ millions)

Local currency basis: 94.3％

1,356

Jul-16

12,4453,215 3,478

22,0971,140

460

Local currency basis: 101.5％

1,099

Jul-15

14,963

3,488 3,689
1,077

0

5,000

10,000※ [Currency rates] Jan. 2017: US$1 = ¥111.69 1 yuan = ¥17.05;

15,00020,00024,813494
25,000Jan 2016:US$1 = ¥120.30, 1 yuan = ¥19.33

Key Priorities for Year to Jan. 2017
 Domestic Baby and Mother Care Business Expanding business and enhancing market share (with a value share target of 20%)through aggressive sales and marketing activities for large merchandise, such as baby
strollers Further enhancing profitability by expanding sales through renewal of nursing bottles,
nipples and other high value-added products
 Child-rearing Support Services
 Reviewing growth strategies and business system to raise profitability
 Further strengthening crisis management measures as well as maintaining andimproving business quality through fostering and education of human resources
engaged in child-rearing
 Health Care and Nursing Care Business Achieving sales expansion and business growth by strengthening joint efforts with oursales agents
 Improving profitability by increasing the efficiency of our business operation system

8

Key Priorities for Year to Jan. 2017
 Overseas Business (except China)Achieving sales expansion centered on five key categories (i.e., nursing bottles and nipples, breast
pumps, skin care products, breast pads, and pacifiers)
Improving profitability by promoting in-house production and making the relevant investment in facilities
Lansinoh・Expanding sales of the Group's core products―nursing bottles and nipples
・Establishing local subsidiaries and full-scale entry into the Chinese market
・Maintaining and reinforcing the production system by opening a new factory in Turkey
・Expanding business, and putting in place and reinforcing operating structure in Europe
Asia
・Continuing and reinforcing branding activities and business expansion of operations in India(turning into profitability on a single fiscal-year basis)・Strengthening profitability through increased utilization of our new factory in India by starting
production for export
・ Reinforcing marketing activities in Asia with a focus on Pigeon Singapore

 China Business

Sustaining the growth trend (with a target of an 11% year-on-year increase on a local currency basis)and further increasing profitability
Reinforcing strategies and (sales promotion) measures to meet the boom in electronic commerce sales(by starting EC sales of made-in-Japan products)
Increasing sales of disposable diapers by maintaining and further expanding the store-to-store
promotional campaign across the countryDomestic Baby and Mother Care Business Status
 Large merchandiseTwo new colors of the “Runfee ef” baby stroller added to the lineup New products“Hajimete no Kantan Ohashi” (meaning “My First and Easy-to-use
Chop Sticks”), “Pure” laundry detergent series, “Bonyu Jikkan”
nursing bottles with renewed design, etc.

 Direct communications
Pregnancy information events: 12 events/700 participants
Seminars for heath care professionals: 7 events/820 participantsMarket share (1st Half of Jan. 2017)
81%

77%

Major new products to be releasedin fall 2016 (2nd half of Jan. 2017)

70%

No. 1
36%

No. 1

No. 1
Baby
skincare(cleaners)

No. 1

30%

No. 1
NursingbottlesBaby wipes

Breastpumps

Breast pads

* According to POS Nationwide Drugstore Growth Estimates, INTAGE
Inc. (monthly data).
* Value share for nursing bottles, breast pumps and breast pads.
Quantity share for the other products.

“Saratto Abura ga Ochiru Hajimete Apron”(Baby apron that can easily remove
oil stain)“Mini-Chibion”(Ear thermometer)

10Child-rearing Support Services /Health Care and Nursing Care Business Status
Child-rearing Support Services
 Pigeon Hearts
 [New additions of facilities under management]
Two in-company child-care facilities→ Total 188 facilities (including those of the National Hospital Organization)
Health Care and Nursing Care Business Pigeon Tahira Reported strong sales of “bottom wipes” and “skincare” for nursing care－the main
product categories.
 Reported strong sales through retail channels.
 Pigeon Manaka
 Started home delivery service of disposable diaper commissioned by the city of Tochigi
in June 2016

“Bottom wipes” for nursing care

Opening ceremony of child-care facilities(at two corporate client sites）
11

Overseas Business Status
 Europe and America
 North America: Europe:

Continued to command the top market share in nipple care cream, breast pads,
breast milk storage bags and manual breast pumps.
Also maintained the top share in Germany.
Construction of a new factory in Turkey is progressing on schedule (to be operational
in January 2017).

 Asia: India:

Will start exporting the products made by the India factory in September 2016.
 Singapore:
Implemented measures to strengthen the brand power in its territory.
 Lansinoh China: Marked a strong start (with 54% more than the plan)

Market share (1st Half of Jan. 2017)

Lansinoh China
Started a trial use at 133 hospitals

Germany

United States
73.6%

34.0%
67.9%

No. 1

54.1%

No. 1
No. 1

23.4%

20.1%
13.3%

34.3%

9.2%

No. 1

Nipple care Breast pads Breast milk
creamstoragebags

Manualbreastpumps

Breastfeeding Market Share* Lasinoh search ： value share
12China Business Status
 Product Sales

Recorded strong sales of nursing bottles and nipples.
Significantly increased sales of disposable diapers thanks to the store-to-store promotional campaign
across the country (with an 80% year-on-year increase)
Strengthened efforts to promote sales through electronic commerce (scheduled to start on a full scalein the 2nd half) Branding and Breastfeeding Awareness ProgramsStrengthened deployment of the newly designed Pigeon Corners to further strengthen the branding
activities.
Continued to implement the awareness program related to caring for breastfed infants jointly
conducted with the Ministry of Health of China.
⇒ Established breastfeeding consultation offices, presented at academic conferences, andorganized child-rearing seminars

Stores involved in the store-tostore promotional campaign

Presentation atacademic conferences

Child-rearing seminars at maternity
homes and general hospitals

<Ref.>Consolidated Balance Sheet (Highlights)
Jan. 2016

Jul. 2016(¥ millions)

AmountAmountYoY Change(Amount)

YoY Change(%)

Cash and deposits

24,29724,003

(294)

98.8%

Notes and accounts
receivable

13,87015,242

1,371

109.9%

Inventories

8,859

7,660

(1,198)86.5%

Notes and accounts
payable

3,743

4,462

718

119.2%

Electronically recorded
obligations – operating

1,623

2,194

571

135.2%

Borrowings

6,308

5,617

(691)

89.0%

Net assets

50,792

48,870(1,922)

96.2%

Total assets

73,94371,494(2,449)96.7%

Equity ratio

67.0%

66.8%

-

(0.2pt)<Ref.>Cash Flow

6,110
5,363

（940）

(¥ millions)（3,235）（2,217）（2,229）（2,252）

24,297266

24,00322,75021,590Acquisition of PPE ： ¥(1,361m)(Jul.2015 : ¥(2,062m)

Income before income taxes ：¥7,724m(Jul.2015 : ¥7,876m)
Decrease (increase)in trade receivables¥(3,246m)（ Jul.2015 : ¥ (948m))

Loan income/repayments:(Jul.2015:￥(541m)¥205m)

Payment of cash dividends :¥(2,630m)(Jul.2015: ¥(2,394m))

Jul. 2015

Jul. 2016

Balance atBiginnig

Operating
Activities

Investing
Activities

Financing
Activities

Translation
Adjustment

Balance atEnd

Balance atBiginnig

Operating
Activities

Investing
Activities

Financing
Activities

Translation
Adjustment

Balance atEnd

21,5905,363(2,217)(2,252)266

22,75024,297

6,110

(940)

(3,235)(2,229)24,003

<Ref.>Investment-Related Indicators (Consolidated)

Jan. 2016

Jan. 2017(¥ millions)Interim(Results)

Full Year(Results)

Interim(Results)

Full Year(Forecast)

Capital investment ※1

1,610

2,639

1,164

3,165

Depreciation(tangible fixed assets)

1,018

2,133

1,014

2,115

Research and development

1,181

2,263

1,085

2,200

※2
※1 Refers to purchase of tangible fixed assets.

※2 Refers to total R&D expenditures, including personnel-related.

Jan. 2017 Full-Year Performance Forecasts

Jan. 2016 Results and Jan. 2017 Forecast (Consolidated)
Jan. 2016(¥ millions)

AmountJan. 2017 (Change of Forecast)% of Total

YoY
ChangeForecast% of Total

YoY
ChangeNet sales

92,209100.0％

109.6%

93,500100.0%

101.4%

Operating income

14,521

15.7％

113.6%

15,00016.0%

103.3%

Ordinary income

15,08016.4％

113.4%

14,900

15.9%

98.8%

Net Income Attributableto Owners of Parent

10,19711.1％

120.7%

10,40011.1%

102.0%Net assets

50,792―

107.4%

51,668－101.7%

Total assets

73,943―102.2%

79,300－107.2%EPS (¥)

85.15―

120.7%

86.84－

102.0%BPS (¥)

413.88―107.4%

419.86－101.4%

ROA

20.6%

―

―

19.5％

－

－

ROE

21.3%

―

―

21.0％

－

－

※ [Assumed rates] Jan. 2017: US$1 = ¥106.18; 1 yuan = ¥16.11[Actual rates] Jan. 2016: US$1 = ¥121.10; 1 yuan = ¥19.22※ ROA= Ordinary income ÷ Total assets; ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)

Results and Forecast by Segment (Consolidated)
Jan. 2016 (Results)(¥ millions)

AmountJan. 2017 (Change of Forecast)

% of
Total

Gross
MarginSegment
ProfitAmount% of
Total

ChangeYoY

Gross
MarginSegment
ProfitConsolidated
net sales

92,209100.0%

47.0%

14,521

93,500100.0%

101.4%

46.7%

15,000

Domestic
Baby andMother Care
Business

28,053

30.4%

44.4%

4,383

31,60033.8%

112.6%

45.3%

5,522

Child-rearing
SupportServices

6,757

7.3%

10.7%

148

7,330

7.8%

108.5%

10.7%

211

Health Careand Nursing
Care
Business

6,499

7.0%

28.3%

140

7,020

7.5%

108.0%

30.6%

407

Overseas
Business

25,234

27.4%

55.4%

5,579

22,280

23.8%

88.3%

56.2%

5,064

China
Business

31,688

34.4%

44.6%

8,586

29,980

32.1%

94.6%

46.0%

8,669

Elimination ofinternal trading
betweensegments(7,306)(7.9%)――(5,910)(6.3%)

―

―

―

Other

1,283

1.4%

15.4%

1,200

1.3%

93.5%

12.4%

152

114

※ Segment profit in the consolidated amount has been adjusted (all non-allocable operating expenses) and posted as operating income in the consolidated statements of income.
※ The consolidated amount recorded has been posted as the sum resulted from eliminating intersegment transactions in the overseas and China businesses.

Shareholder Return and Investment-Related Indicators[Shareholder return indicator under our 5th Medium-Term Business Plan]
Adopt flexible approach to upgrading shareholder return (incl. through share buybacks), aiming at
a goal of increasing dividends compared with the previous term and of the total shareholder return
ratio by approximately 45 to 50% in each business term.
Jan. 2014

Cash
Dividends
Dividend pershare （￥）Jan. 2016

Jan. 2017

InterimYear-EndInterimYear-EndInterimYear-EndInterimYear-End(Results)(Results)(Results)(Results)(Results)(Results)(Plan)(Forecast)

66

55

45

60

20

22

（11）

Payout ratio*

Jan. 2015（18.3）

（15）

50.4%

（20）

49.6%

25

25

(Including
Commemorative
dividend: 3)(Including
Commemorative
dividend: 3)

49.3%

57.6%

Our Group carried out a 2-for-1 stock split with respect to its common stock, effective as of August 1, 2013. It also carried out a 3-for-1 stock split with respect toits 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 thenumber of shares after the stock split.

Reference: Investment-Related Indicators
Jan. 2015(¥ millions)Jan. 2016

Jan. 2017

InterimYear-EndInterimYear-EndInterimYear-End(Results)(Results)(Results)(Results)(Results)(Forecast)

Capital expenditures ※

1,672

3,204

1,610

2,639

1,164

3,165

Depreciation(tangible fixed assets)

780

1,705

1,018

2,133

1,014

2,115

※ Refers to the amount accounted for purchasing of tangible fixed assets.

Approach to Enhance Corporate Value12 Tasks to Achieve “World-Class Business Excellence”
Globalinformation
systemGlobal sharingof corporate
philosophy &valuesWorld-classbrand power

Sustainable growth
Logical work
process

Salaryincrease

Globalhuman
resource
development

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

Diversity/
women inmanagement

Global SCM

TechnologicalcompetitivenessBusinessmodel forsuccess

Cash flow
management（PVA）

Global cash
management

Sharing corporate philosophy & values globally
The Pigeon Way embodies our “heart” and “soul” and sets thegrounds for our actions which will stream from this core.

[Vision]To be the baby product manufacturer
most trusted by the world’s babies andfamilies, i.e. “Global Number One”

[Action Principles]• Agility• Keep sight of customers• Global collaboration among
competent individuals• Leadership and logical working
style• Willingness to change

Corporate Philosophy: “Love”[Mission]
We will bring joy, happiness andinspiration to babies and families aroundthe world by providing them with products
and services that embody love.

[Values]• Integrity• Communication, Consent, Trust• Passion

Credo: “Only love can beget love”
23

Sharing corporate philosophy & values globally
We hold the Pigeon Way meetings all over the world.

India
ThailandSingapore

ChinaSharing corporate philosophy & values globally
We post on our website the actual stories on how the Pigeon Way is embodied.

(Translation)
Every single employee of the PigeonGroup is engaged in their job bearing
the Pigeon Way in mind all the time.
While we are making an effort toshare their achievements within theGroup, let us introduce to you some ofthe stories about their passion for thejob, or “My Pigeon Way Story.”

URL://www.pigeon.co.jp/pigeonway/ 25

World-Class Brand Power[Definition of brand]
Brand is a tool for consumer communication; in a sense,
it signifies the heart-to-heart connection between thecompany and consumers.
For consumers, brand means a “promise” made by the
manufacturer.
For Pigeon, a provider of products/services, brand isevidence of the trust that consumers feel towards thecompany, which is gained through a constant and clear
presentation of the company’s philosophy, not betraying
consumers.
26

World-Class Brand Power
Seminars on Breastfeeding

Singapore

Indonesia

Malaysia

Pigeon Corner

Middle East

Indonesia

India

RussiaBreastfeedingroom

Seminars atmaternity homes &general hospitals

VietnamMiddle East
27

PVA Tree: Consolidated Results in Jul. 2016
Consolidated

Net sales

Operating profit

Top: Jan. 2017 2Q Plan
Mid: Jan. 2017 2Q Results
Bottom: Jan. 2016 2Q Results(\millions)NOPAT
2Q Plan 3,973

2Q Plan 6,700

2Q Results 7,778
LY 2Q

2Q Results 4,612
LY 2Q

2Q Plan 45,600

4,586

2Q Results 46,303

7,734

LY 2Q

Cost of sales

Tax
2Q Plan 2,727

2Q Plan 24,000

2Q Results 3,165
LY 2Q

PVA
2Q Plan
2Q Results
LY 2Q

2,645

3,217

3,111

Capital invested
2Q Plan 53,117

2Q Results 55,795
LY 2Q

59,014(Reference)
Capital invested 2Q
2Q Plan 26,558

2Q Results 27,897
LY 2Q

2Q Plan 17,247

2Q Results 16,805
LY 2Q

common 5.0%

18,965

LY 2Q

Trade receivables
2Q Plan 14,908

2Q Results 14,556
LY 2Q

16,389Fixed asset

Inventory asset

2Q Plan 24,550

2Q Plan 8,370

2Q Results 23,933
LY 2Q

29,507WACC

2Q Results 24,744

3,148Working capital

25,972

Cash and otherasset and liability

2Q Plan 11,319

2Q Results 15,056
LY 2Q

14,077

46,522

2Q Results 8,260
LY 2Q

9,279

Trade payables
2Q Plan 6,032

2Q Results 6,011
LY 2Q※For PVA calculation, B/S Factors are averaged between beginning and year-end figures, and adjusted into 1/2.

6,703

24,721

SG&A expenses
2Q Plan 14,900

2Q Results 13,781
LY 2Q

14,068

（参考）

研究開発費
見込 0
前期 0

発送費
見込 0
前期 0

PVA (Ratio): Consolidated Results in Jul. 2016
Consolidated
Top: Jan. 2017 2Q Plan
Mid: Jan. 2017 2Q Results
Bottom: Jan. 2016 2Q Results

Cost of sales ratio
Operating profit ratio

ROIC before tax

ROIC
PVA
spread2Q Plan
2Q Results
LY 2Q

2Q Plan
2Q Results
LY 2Q

15.0%

16.5%

2Q Plan
2Q Results
LY 2Q

25.2%

27.9%

2Q Plan
2Q Results
LY 2Q

14.7%

16.8%
16.6%

26.2%

2Q Plan
2Q Results
LY 2Q

53.1%

SG&A expenses ratio
2Q Plan
2Q Results
LY 2Q

15.5%

52.6%

53.4%

32.7%

29.8%
30.2%

Working capital ratio

10.0%
11.5%
10.5%

Capital invested t/otax rate
WACC
common5.0%

common40.7%

2Q Plan
2Q Results
LY 2Q

2Q Plan
2Q Results
LY 2Q

1.7

1.7
1.6

18.9%

18.1%
20.4%

Fixed asset ratio
2Q Plan
2Q Results
LY 2Q

26.9%

25.8%
27.9%

Cash and otherasset and liability ratio

2Q Plan
2Q Results
LY 2Q

12.4%

16.3%
15.1%

CCC Tree: Consolidated Results in Jul. 2016
Consolidated
Top: Jan. 2017 2Q Plan
Mid: Jan. 2017 2Q Results
Bottom: Jan. 2016 2Q Results(\millions)

Working capital
2Q Plan 17,247

2Q Results 16,805
LY 2Q

18,965CCC

Trade receivables
2Q Plan 14,908

2Q Results 14,556
LY 2Q

16,3892Q Plan
2Q Results
LY 2Q

Receivable turnover period

77.4
74.0
83.3

2Q Plan
2Q Results
LY 2Q

59.7
57.4
64.3

Inventory asset

Inventory turnover period

2Q Plan 8,370

2Q Plan

2Q Results 8,260
LY 2Q

9,279

Trade payables
2Q Plan 6,032

2Q Results 6,011
LY 2Q

6,703

※For CCC calculation, B/S Factors are averaged between beginning and year-end figures, and adjusted into 1/2.

63.6
60.9
68.5

2Q Results
LY 2Q

Payables turnover period
2Q Plan
2Q Results
LY 2Q

45.9
44.3
49.5

Pursuing Diversity
Because we are Pigeon, a company that should take this issue earnestly, we are implementing
the following three initiatives for advancement of women.
 Work-at-home program Flexible time system to facilitate childcare

Utilization rate ofone-monthpaternity leave forthe previous year:
100%

Support
System Nursing care leaves
 Financial supports
 Support to facilitate married women to get

pregnant (by offering “lifestyle” leave) Measures against children waiting for places

in day care centers

Mindset ofSuperiors &Peers Succession plan (Plan to develop a

successor to each manager) Training to know how to manage

diversity
 Counselling for childcare withattendance of his/her superior
 Encouraging men to participate inchildcare

Women’s
Feeling

Spouse’s
Cooperation

 Career training for female employees who will have a life

event
 Career training for female employees with children Lectures on diversity
 Operation of Okoshi School for developing female managers
 Attending manager development programs provided byexternal organizations
 Mentor-mentee system

Pursuing Diversity

Females
hired as new employees

Females
in a managerial position

42.6％

20.0％

Ratio of females hired as
new employees to total
new employees hired
for the last ten years

Females in a managerial
position include managers up to
managing officers.

Global human resource development[Introduction of the target management
system on a global basis]
We have newly introduced a behavioral
aspect as an assessment platform basedon an (individual) performance target andthe action principles of the Pigeon Way.

[Global Leadership Program]
We had participation from employees in the UnitedStates, the United Kington, Turkey, India, Singapore,
Thailand, China, South Korea and Japan.

33

Corporate Overview
PIGEON CORPORATIONHead 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.