Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Summary of Results Briefing for the Q1 of the Fiscal Year Ending 31 December, 2022
[Points of Attention]
This Summary is a reference for those who would like to review the session or event of the results
briefing held by Pigeon Corporation.
Please note this is not the entire text of the conference but a summary based on our judgment.
Forward-looking statements in these materials are based on management's assumptions andbeliefs in light of the information currently available to it and involve known and unknown risks,uncertainties and other factors. Such risks, uncertainties and other factors may affect theCompany's performance.
In the event of discrepancy between the English version and the Japanese version of thesummaries, the Japanese-language version shall prevail.

Event Summary
Date:

Thursday, May 12, 2022 4:00 PM – 5:30 PM (JST)

Number of Speakers:

2
Yasuo Kanatsuka, Manager, Business Strategy Department
Sho Hiratsuka, Associate Manager, Business Strategy Department

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

PIGEON: First, we would like to inform you about the status of COVID-19 in Mainland China. As you
all know, Shanghai is now under the massive lockdown since late March as part of the zero-COVID
policy.
On the other hand, for areas outside of Shanghai, localized lockdowns and movement restrictions
have been in place since mid-March, and our business activities in Q1 have been affected by theserestrictions.
In China, we had been making progress almost in line with internal plans until the end of February,
but due to the lockdowns that began in mid-March, 10% to 15% of our March sales forecast could
not be shipped.
As for the areas where the lockdowns took place, localized lockdowns of 14 to 60 days were imposedon regions like the North China area, Northeast area, then Shaanxi, Fujian, and Yunnan Provinces,
as well as the city of Tianjin.
There was an impact on logistics retailers and then consumers in each region. First of all, there wereintermittent shipping delays due to the closure of key warehouses of our distributors for several days.
Many of the department stores and chain baby stores in the lockdown areas were temporarily closed.
Then e-commerce retailers saw an increase in returns of goods and cancellations from customers
due to delays in deliveries, as they couldn’t replenish goods in regional warehouses.
As for the impact on our China bases, first of all, our distributors were closed for several days, whichintermittently halted our shipments.
Regarding the factories, our Changzhou factory was shut down for six days due to the lockdown inthe city of Changzhou. In addition, the Shanghai factory was operating normally in March, and wewere building up inventories end of March in preparation for the lockdown.
These local lockdowns affected the Q1 results, and local lockdowns are still occurring intermittently.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

This is about the Shanghai lockdown.
In addition to the local lockdowns I just mentioned, Shanghai has also been locked down since April.
This has had a greater impact on our sales and production facilities than in Q1.
First of all, as for the overall logistics situation, distribution from Shanghai to other provinces has beensuspended since late March in principle, and our distributors and e-commerce retailers’ warehousesin Shanghai have been closed. The offline shops are also temporarily closed. In principle, distribution
from outside Shanghai to Shanghai has also been suspended.
In addition, the lack of incoming shipments from Shanghai has resulted in shortages at retailers’
regional warehouses.
As for the impact on our company, our sales company in Shanghai suspended almost all productshipments during April. The Shanghai factory was temporally closed until late April, but has partiallyresumed operations since late April after obtaining a product manufacturing license.
In terms of shipments, we took some measures, such as obtaining traffic permits and other approvals,
and resuming shipments of some products from the Shanghai factory via the Changzhou factory
outside of Shanghai.
The Changzhou factory was in normal operation in April but shipments were not being made asscheduled due to the block down at the shipping destinations.
As of the end of April, our China group was operating at approximately 20% to 30% of normal capacity,and this Shanghai lockdown is still in place as of May. Therefore, the impact on business performanceis currently being estimated.
As you are all aware of the seriousness of the Shanghai lockdown, our first priority is to ensure thesafety of our employees and the stability of their lives in China, and we are taking various measures
to resume business activities.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Please move onto page four. This shows the consolidated results for Q1.
In Q1, sales were driven by overseas markets, and sales growth was also driven by a new model ofnursing bottles. In addition, sales increased partly due to foreign exchange effects and other factors.
The sales amount showed a YoY increase of 1.7%, or approximately JPY350 million.
Gross profit increased 3%, or about JPY300 million, YoY, mainly due to improved profitability owing
to new products.
Operating income increased 4.7%, or approximately JPY130 million, YoY, as the increase in sales
and the rise in gross profit more than offset an increase in SG&A expenses.
Net income attributable to owners of parent increased by 30.3%, or JPY600 million, YoY.
As for the sharp rise in raw material prices, although the depreciation of the yen was greater thaninitially assumed with respect to the Q1 results, the surge in raw material prices ended up within ourexpectations.
As for the foreign exchange effects, both the yuan and the US dollar appreciated against the yen,having a positive impact of JPY1.04 billion on net sales, JPY680 million on gross profit, and JPY420
million on ordinary income YoY. Here are the consolidated results.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

The income statement by business segment.
Net sales increased YoY in all business segments except the Japan business. Net sales in the Japanbusiness were down 9% YoY.
As for overseas, the China business showed a 2% YoY rise in sales, the Singapore business was up
6.9%, and the Lansinoh business was up 13.9%. As for the breakdown of the Japan business, shownin the lower part of the slide, the Baby Care business was down 1% YoY, the Child Care Services
business was down 5.9%, and the Health & Elder Care business was down 26.8%. Sales in the Baby
Care business were almost flat YoY.
I will explain the financial results by business segment in the business summary section on pages
seven and eight.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

This is a factor analysis for the YoY changes in consolidated operating income.
In Q1, in addition to the increase in gross profit due to the higher sales, sales of the new nursing
bottle model in China and Japan also contributed to the overall increase of about JPY130 million.
As for the details of SG&A expenses, personnel expenses increased by JPY180 million YoY, whilesales promotion and other expenses decreased by about JPY70 million. As a result, operating income
for Q1 was JPY2.99 billion, a YoY increase of JPY130 million.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Now, for the next page. This is a summary of the business results by segment.
First of all, the Japan business. The Baby Care business finished the quarter on par with the prioryear period. While nursing bottles grew due to the switch to the new model, consumables werestruggling.
Baby Care sales were down 1% YoY, almost flat. Sales via major channels, such as specialty baby
stores and drugstores, grew YoY partly due to the effect of the new products. On the other hand, ecommerce and others struggled. By product category, nursing bottles and breast pumps performedwell.
Sales of nursing bottles were up 51% YoY, due to the contribution from the new model. On the otherhand, in the skincare business, sales of the standard series, which was renewed in February, werestrong, but sales of the Peach Leaves series, which has a high profit margin, were weak.
In addition, consumable products, such as wet wipes and nursing pads, were struggling due toincreasing demand for low-priced products from consumers.
The gross profit margin in the Baby Care business was down 1.7 percentage points YoY. This wasdue to a combination of factors, including the impact of the yen’s depreciation and the product mix inthe skincare category.
Finally, in the Health & Elder Care business, sales were almost in line with expectations, down
JPY400 million YoY due to a review of the product portfolio. Although sales decreased, the profit
margin improved from a year earlier.
Next is the China business. In China, our business activity was affected by COVID-19, whose impact
began to appear in mid-March. Sales in Mainland were down 14% YoY.
On the other hand, the sell-out result was up 2% YoY. E-commerce sales were almost flat, but offline
sales increased 7% YoY. The e-commerce ratio in Q1 was 61%.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Sales of nursing bottles were progressing as planned, both in e-commerce and offline, with the switch
to the new model. However, sales decreased slightly due to the impact of the lockdowns since March.
The gross profit margin improved by 1 point YoY due to contributions from the new nursing bottles
and skincare products.
In addition, we have been planning to start selling Pigeon brand products in North America in ourChina business since this year, and we finally started selling our products through a major North
American e-commerce site in March. These were the results in Japan and China.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

This shows the Singapore business.
Sales of major countries covered by the Singapore business performed well. They got off to a goodstart toward full recovery from COVID-19. Looking at the major countries, sales in India increased by
48% YoY, in Malaysia by 22%, and in Indonesia by 27%.
Sales of core products, nursing bottles, breast pumps, skincare, and oral care products increased
strongly with double-digit YoY growth. Shipments of Natural Botanical, a new skincare series that has
been on sale since last summer, were also strong. We have now begun to expand the series inSingapore, Indonesia, Malaysia, Vietnam, the Middle East, and others.
Gross profit in the Singapore business increased 21% YoY due to an increase in sales at the sales
company, an improved utilization at the factories, and the impact of foreign exchange rates. The grossprofit margin also improved by 4.9 points.
Lansinoh business. Sales in the Lansinoh business continued to be strong. On the other hand,logistics costs were higher than expected, which put pressure on profits.
Lansinoh Group sales in local currency were up 6% YoY. Sales in North America were up 8%, andboth online and offline sales were strong.
In Europe, sales were strong in Benelux, the UK, and Turkey. In Germany, demand was increasing,but a shortage of some products resulted in a YoY fall in sales.
In terms of products, mainstay nipple creams and breast pumps showed YoY growth. In addition,pre- and postpartum care products, which have been on sale since H2 of last year, were progressing
better than planned.
The gross profit margin was pressured by the procurement and logistics costs that have continued tosoar since H2 of the previous year. This is a factor in the cost of goods sold, and the soaring costs
caused the gross profit margin to deteriorate by more than 4 percentage points YoY.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Also, the logistics costs in SG&A are rising faster than initially expected, and these are puttingpressure on operating income.

As for the forecasts for Q2 and beyond, in China, our business operations have been affected by thelockdown in Shanghai since April. As the timing of the lifting of this lockdown is still uncertain, there
is a great deal of uncertainty at this time.
We are still estimating the amount of impact on our business performance, and will promptly makean announcement when needed. Thank you.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Question & Answer

Q&As are summarized by Business segment.

[Consolidated]
Q. How did Q1 consolidated results compare with the internal plan?
A. Consolidated net sales and gross profit were 1-2% below the internal plan. The results were almost
in line with our expectations.

Q. How much was the impact in Chinese yuan out of total FX impact of Q1 consolidatedresults?
A. The impact of CNY was 700 million yen out of the 1.04 billion yen increase in net sales by FX
impact. And 270 million yen out of the 420 million yen increase in ordinary income YoY.

Q. What is the reputation of the new model of the Nursing bottles among consumers?
A. In Japan, we began selling the new "Bonyu-Jikkan" nursing bottles in this February. In line withthis renewal, we raised the price of the new model in Japan by more than 10% compared to the oldmodel, but sales in stores have been favorable. The new model has been well received by consumers,
with its market share increasing from 85% to 86%. In China, since its launch in September last year,
the response from consumers has been positive, and sales in stores have been strong.
Q. Are you considering raising product prices in overseas markets as soaring raw material
prices, logistics disruptions, and rapid inflation worldwide?
A. In some overseas markets under China, Singapore and Lansinoh segments, we are consideringand implementing price increases for some products starting this fiscal year. Each business is closely
monitoring market conditions to determine the products subject to price increases and the range ofprice increase.

[Japan Business]
Q. In the baby care business, what was the reason for the 1.7 pts decrease in gross profit
margin YoY despite strong sales growth of Nursing bottles (+51% YoY)?
A. While the increase in sales of Nursing bottles contributed some for profit improvement, the grossmargin of the Baby Care business declined due to several factors that worsened the cost ratio, suchas the low capacity utilization rate of Japan factories due to sales decrease of consumables, soaring
material prices due to the rapid depreciation of the yen, and advanced a depreciation of the Fuji
factory following the relocation of the factory.
Q. What do you expect the growth rate of Nursing bottle sales to be from Q2 onward?
A. In the Q1, sales grew by an extremely large 51% YoY due to the initial shipments of new models.
We expect sales growth to even out in the Q2 and beyond.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

[China Business]
Q. How did Q1 performance in mainland China compare with your internal forecast?
A. On a local currency basis, Q1 sales in mainland China were below our internal forecast however
they were almost in line with it through February. The local lockdown that began in mid-Marchprevented us from shipping a portion of our March sales forecast, resulting in lower-than-expected
results.
Q. Please tell us about the impact of the Shanghai lockdown on business performance.
A. It is very difficult to estimate the amount of impact as the Shanghai lockdown is still in effect, andthe timing and method of re-open (whether it will be re-opened all at once or gradually) have yet tobe determined. However, there is the 618 shopping event in Q2, and in past years, May is the time
when shipments would increase for the 618, but that has not happened this year at this point.
Although it is unclear to what extent this year's 618 shopping event will be exciting, we believe thatits impact on our business performance will not be small. On the other hand, there may be somerebound demand if EC retailers plan new sales events in the second half of the year or later, which
they have not done in previous years, to make up for the sales loss during Covid-19 lockdown.
Q. Is it possible to temporarily import Nursing bottles from Pigeon's Thai factory during theShanghai lockdown?
A. Physically, yes. However, the lockdown has closed major ports, including the Shanghai, and inprinciple, logistics to and from Shanghai have also been suspended for overland shipments. At thispoint, we believe that the priority is to seek procurement and shipments within China while closely
monitoring the situation of lockdown in each area.
Q. Would you record any extraordinary losses for the Chinese business expenses incurred
during the Shanghai lockdown?
A. For the Q1, we have not included the factory costs in non-operating expenses or extraordinary
losses, etc. For the Q2 and beyond, we will consider appropriate accounting treatment in light of the
impact of the lockdown.
Q. Are there any changes in the competitive environment? How have competitors fared during
the lockdown?
A. Some brands that do not have sales companies, factories, and warehouses in the Shanghai area
may not have been as affected by the lockdown as we were, but all brands were affected to someextent by the local lockdown (e.g., inability to ship to customers due to closure of EC retailwarehouses). Although the lockdown has caused product supply delays in mainland China in Q1, we
see no decline in the market share of our Nursing bottles and no significant change in the competitiveenvironment.

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Pigeon Corporation Summary of Results Briefing for the Q1 of the FY December 2022

Q. What is the background behind the YoY growth in sell-out in the Q1 while sell-in in the Q1
was below the previous quarter?
A. Sell-in sales were below YoY level due to the impact of the lockdown. On the other hand, sell-out
grew especially in offline sales. This is because closure of EC retailer's warehouse made shipments
stopped, but for the offline channel, many stores were able to continue sales due to the success ofour distributors and retailers' sales network spread across the entire country.
Q. Please tell us about the sales by region in mainland China.
A. It is very difficult to accurately calculate sales by region since the percentage of sales through EC
is now over 60%. We cover almost all of China nationwide, but our main areas are first and second
tier cities in the coastal and inland regions, including Shanghai. And we have been focusing on sales
in third and fourth tier cities since about two or three years ago.

[Singapore Business]
Q. What are the reasons for the strong performance in major countries?
A. Although sales in Southeast Asia and India had been struggling for the past two years due to theCovid-19, the number of cases has recently calmed down. This year sales have been strong
especially for core products such as Nursing bottles, Skincare, and Oral care products.

[END]

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