Results Briefing for theSix Months ended July 31, 2014

September 3, 2014

(Securities code: 7956)
President & COO

Shigeru Yamashita© All rights reserved by PIGEON Corporation

Contents

 Title, Contents

1– 2

 Business Results at July 31, 2014

3 – 15

 Jan. 2015 Full-Year Performance Forecasts

16 – 20© All rights reserved by PIGEON Corporation

2

Business Results at July 31, 2014

© All rights reserved by PIGEON Corporation

3

Financial Highlights (Consolidated)Jul. 2013(¥ millions)

Results

Jul. 2014

YoY Change

Results

YoY Change

Net sales

36,621117.3%

39,229107.1%

Operating income

4,814

149.3%

5,985

124.3%

Ordinary income

5,161

158.0%

5,957

115.4%Net income

3,121

163.3%

4,074

130.5%Net assets

36,078123.7%

39,951110.7%

Total assets

53,349117.1%

63,295118.6%EPS (¥)

77.98

163.4%

102.00130.8%BPS (¥)

820.97112.7%

978.90119.2%© All rights reserved by PIGEON Corporation

4

Statements of Income (Consolidated)(¥ millions)Jul. 2013
Results

Jul. 2014% of Total

Results% of Total YoY Change

Remarks

Net sales

36,621100.0%

39,229100.0%

107.1%

Cost of sales

20,45755.9%

21,52754.9%

105.2%

45.1%■Main changes in
109.5% SG&A expenses:

Gross profit

16,16444.1%

17,702

SG&A expenses

11,35031.0%

11,716

29.8%

OperatingincomeNon-operating
income andexpenses

4,814

13.1%

5,985

15.3%

347

0.9%

(27)

(0.1%)

Personnel expenses+ ¥193 m
Sales
Promotion
expenses
103.2%+ ¥168 m
Land and house rents+ ¥84 mAdvertisingexpenses¥(289 m)124.3%-■Main changes in
non-operating income (expenses):Foreign exchange gains ¥(293 m)

Ordinary income

5,161

14.1%

5,957

15.2%115.4%

Extraordinary
Income and Loss(12)0.0%(21)(0.1%)-Less: Minority Interest in
Net Income ofConsolidated Subsidiaries

860.3%

830.2%

96.5%

3,121

8.5%

4,074

10.4%

130.5%Net income© All rights reserved by PIGEON Corporation

5

Net Sales by Business Segment (Consolidated)(¥ millions)Jul. 2013

Jul. 2014

Amount% ofTotal

Gross Segment
AmountMargin Profit

Consolidated
Net Sales

36,621100.0%

44.1%

4,814

Domestic Babyand Mother
Care Business

12,476

34.1%

45.9%

Child-rearing
Support Services

3,289

9.0%

Health Care andNursing Care
Business3,449

Overseas
Business% ofTotal

YoY
Gross Segment
Change Margin Profit

39,229100.0%

107.1%

45.1%

5,985

1,628

12,391

31.6%

99.3%

45.5%

2,029

11.4%

80

3,364

8.6%

102.3%

11.6%

96

9.4%

31.1%

202

3,521

9.0%

102.1%

29.1%

212

9,438

25.8%

53.4%

1,975

10,52226.8%

111.5%

54.8%

2,261

China
Business

9,081

24.8%

41.8%

2,618

10,95127.9%

120.6%

43.1%

3,303

Other

550

1.5%

14.4%

63654

1.7%

118.8%

16.3%

86※ 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.

© All rights reserved by PIGEON Corporation

6

Overseas Business Sales by Region
China

Other Asian countries

North America

Near and Middle East

Other regions

Local currency basis: 109.8%(¥ millions)

1,031
10,926

Jul-1419.273

2,931

2,968

1,416

Local currency basis: 106.7%
967
9,265

Jul-13

2,950

16,8302,567
1,079

0

5,000

10,00015,00020,000※ [Currency rates] July 2014: US$1 = ¥102.45; 1 yuan = ¥16.64; July 2013: US$1 = ¥95.72; 1 yuan = ¥15.49© All rights reserved by PIGEON Corporation

7

Key Priorities for Year to Jan. 2015
● Domestic Baby and Mother Care Business・Steady growth and expansion of large merchandise business by launching new products
・Enhancement of our approach to maternity classes
・Improvement of profitability of the existing business by managing selling, general and administrative expenses in aneffective and efficient manner● Child-rearing Support Services
・Further improvement in child-rearing quality and improvement of business profitability● Health Care and Nursing Care Business- Strengthening of marketing activities based on the facilities’ routes, maintenance of the functionality of sales andmarketing- Increase in operating profits by establishing an efficient business operation system (reduction in selling, general andadministrative expenses)● Overseas Business
Europe and America: secure success in nursing bottles and nipples business and continuous growthin sales of existing products- Market expansion: activities paving the way for advancement into the Brazilian market● China Business- Steady growth of new businesses (baby diapers, baby food)- Further strengthening of brand penetration and promotion activities in hospitals- Establishment of a structure for the production cost containment and stable supply system© All rights reserved by PIGEON Corporation

8

Domestic Baby and Mother Care Business / Child-rearing Support Services Status
Domestic Baby and Mother Care Business[Baby and Mother Care]

Electric Breast pump “First Class”, “Baby Skin Care Series”, etc.
[Large merchandise business] Baby stroller “Mahalo laule’a”, etc.
17 maternity events with about 870 participants held
[Direct communication]“Breast feeding Seminar” for pregnant women, “Working Women Meetings
for Pregnancy Training” for those who are preparing for pregnancy, etc.

Child-rearing Support Services[New additions ofTwo child-care facilities in-company establishments → Total 185 facilities
facilities managed] facilities (including those of the National Hospital Organization)[Preschool educationThe mathematical experience program called “Math Program” hasfacilities] been receiving favorable feedback since its launch in April
100%
80%
60%
40%
20%
0%

Market Share by Product (Jul. 2014)

Main new products to be launched during thisautumn (2nd half of 2014)

Baby yogurt drink“Puchiguruto”※Source: POS Nationwide Drugstore Growth Estimates, INTAGE Inc. (monthly data)© All rights reserved by PIGEON Corporation

Home-madesnack series
9Health Care and Nursing Care Business Status
Health Care and Nursing Care Business● Unification of sales teams to Pigeon Tahira for the strengthening of oursales force and increased efficiency

Habinurse

Held the Press conference of “Absorbent sheets against
urine and loose feces leakage” which is new products
to be launched from the second half of 2014

New Products in the first half of 2014
“KARURU” underwear with urine leakage
absorption features.
Pigeon Manaka Users of the Day Service Center “SANSAN”
have increased smoothly

RecoupRecoup “KARURU”© All rights reserved by PIGEON Corporation

Press conference of Habinurse “Absorbent sheets
against urine and loose feces leakage"

Pigeon Manaka's Day Service“SANSAN” Center's staff
10Overseas Business Status
Overseas BusinessEuropeand America

 Increased market share for our top products in North America (Nipple Care Cream, Breast pads) Increase of new store count in Europe and expansion of our product range to the existing stores
 Nursing bottles: Introducing the nursing bottle “NaturalWave” in the American and Europeanmarkets

New markets

 India: Strengthening of the distribution system and branding, and production of nursing bottles andnipples scheduled to be introduced progressively to local factory starting from January 2015
 Rusia: Academic presentations on acknowledged value of Pigeon's nursing bottles and nipples by
local doctors
 Brazil: New subsidiary established to support our operations debut in the Brazilian marketOther Businesses We held the Pigeon Global Partners Conference 2014 in Hawaii(attended by our distributors’ representatives from 14 countries and regions)North America: ‘Lansinoh’ Corner/
Nursing Bottle “Natural Wave”© All rights reserved by PIGEON Corporation

India: Plans of Scheduled
Factory Completion

Pigeon Global Partners
Conference in Hawaii
11

China Business Status
China Business

Steady increase of sales in our main products, including nursing bottles andnipples, wipes, baby skin care products, etc.
Baby Diapers Business: Ongoing measures to reinforce its over-the-counter sales
Further strengthening of our branding activities and application of Pigeon Net
Members plan.
Our awareness program related to caring for breastfed infants conducted jointlywith our Sanitation department is continually being implemented

量販店
18%
百貨店
12%
[分類名][パーセンテージ]

Sales proportion (% of total) by Pigeon Shanghai
sales channel (as of June 31, 2014)

Children’s Day celebration Eventin maternities (collaborators)

Seminars for healthcare professionals

Pigeon Net Members
Planning Offline Events

Pigeon Corner© All rights reserved by PIGEON Corporation

12Reference: Consolidated Balance Sheet (Highlights)
Jan. 2014

Jul. 2014(¥ millions)
AmountAmountYoY Change(Amount)

YoY Change(%)

Cash and deposits

13,102

15,940+2,838121.7%

Notes and accounts
receivable

12,56914,255+1,686113.4%

Inventories

8,052

8,493+440

105.5%

Notes and accounts
payable

4,518

4,561

+42

100.9%

Borrowings

3,411

8,512

+5,100249.5%Net assets

39,981

39,951

(29)

99.9%

Total assets

57,95563,295+5,340109.2%

Equity ratio

67.5%

61.7%

-(5.8 pt)

■ Cash and deposits■ Notes and accounts receivable - trade© All rights reserved by PIGEON Corporation

Increase due to business expansion

13

Reference: Cash Flow(¥ millions)
2,414(458)15,9402,596 (1,713)
1,810(2,360)13,102

10,574(1,731)
792

9,086
Acquisition of PPE:¥(1,607 m)(Jul. 2013: ¥(2,310 m))
Income before income taxes:¥5,936 m(Jul. 2013: ¥5,149 m)
Decrease (increase)in trade receivables:¥(2,134 m)(Jul. 2013: ¥(1,397 m))

Loan income/repayments:¥5,148 m(Jul. 2013: ¥(254 m))
Payment of cash dividends: ¥(2,198 m)(Jul. 2013: ¥(1,418 m))'１4/1期 （57期2Q）'１5/1期 （58期2Q）

期首残高

営業活動

投資活動

財務活動

換算差額

期末残高

期首残高

営業活動

投資活動

財務活動

換算差額

10,5741,810▲( 2,360)▲(1,731 )

792

9,086

13,1022,596▲ 1,713)

2,414▲( 458) 15,940© All rights reserved by PIGEON Corporation

期末残高

14

Reference: Investment-Related Indicators (Consolidated)(¥ millions)Jan. 2014
Interim(Results)

Jan. 2015

Full Year(Results)

Interim(Results)

Full Year(Forecast)

Capital investment ※1

2,092

3,091

1,672

4,045

Depreciation(tangible fixed assets)

733

1,663

780

2,087

Research and development ※2820

1,730938

2,002※1 Refers to purchase of tangible fixed assets※2 Refers to total R&D expenditures, including personnel-related© All rights reserved by PIGEON Corporation

15

Jan. 2015 Full Year Business Forecasts© All rights reserved by PIGEON Corporation

16

Jan. 2014 Results and Jan. 2015 Forecast (Consolidated)
Jan. 2014(¥ millions)

Amount% of Total

Jan. 2015
YoY
ChangeAmount% of Total

YoY
ChangeNet sales

77,465100.0%

119.0%

84,500100.0%

109.1%

Operating income

10,36513.4%

146.3%

11,60013.7%

111.9%

Ordinary income

11,002

14.2%148.9%

11,80014.0%

107.3%Net income

6,985

9.0%

152.7%

7,300

8.6%

104.5%Net assets

39,981-123.5%

41,738-104.4%

Total assets

57,955-

119.4%

65,342-112.7%EPS (¥)

174.53-152.7%

182.38-104.5%BPS (¥)

977.50-123.5%

1018.37-104.2%

ROA

20.7%

--

19.1%

--

ROE

19.7%

-

-

18.3%

--

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

17Sales Forecast by Business Segment (Consolidated)(¥ millions)Jan. 2014 (Results)
Gross Segment
AmountMargin Profit% ofTotal

YoY
Change44.5%

10,36584,500100.0%

109.1%

44.3%

11,600

31.6%

45.8%

3,411

24,50029.0%

100.2%

45.4%

3,653

6,599

8.5%

11.5%

176

6,300

7.5%

95.5%

11.7%

188

6,721

8.7%

29.8%

212

7,100

8.4%

105.6%

30.7%

284

Overseas
Business

38,540

49.7%

52.6%

10,17245,60054.0%

118.3%

51.3%

11,910Other
Businesses

1,151

1.5%

20.5%

204

1,000

1.2%

86.8%

11.5%93

Consolidated
net sales
Domestic
Baby andMother CareBusinessChild-rearing
SupportServices
Health Careand Nursing
Care BusinessAmount% ofTotal

77,465100.0%

24,451

Jan. 2015 (Forecast)Gross Segment
Margin Profit※ 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.
※ Assumed exchange rates of Overseas Business: US$1 = ¥100.00 ; 1 yuan = ¥16.50© All rights reserved by PIGEON Corporation

18

Full Fiscal Year Overseas Business Sales by Region
China

Other Asian countries

North America

Near and Middle East

Other regions

Local currency basis: 117.5%(¥ millions)
2,547

Jan-15(Forecast)

27,3197,014

45,561

5,694
2,985

Local currency basis: 102.7%
2,118
Jan-14(Results)

22,417

6,125

38,492

5,418

2,412

0

10,00020,00030,00040,00050,000※ [Average exchange rates] Jan. 2015: US$1 = ¥100.00; 1 yuan = ¥16.50; Jan. 2014: US$1 = ¥97.72; 1 yuan = ¥15.91© All rights reserved by PIGEON Corporation

19

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. 2012
Cash Dividends

Dividend per share(¥)

Payout ratio

Jan. 2013

Jan. 2014

Jan. 2015

InterimYear-EndInterimYear-EndInterimYear-EndInterim(Results)(Results)(Results)(Results)(Results)(Results)(Scheduled) (Forecast)

44(22)

44(22)

44(22)

71(35.5)

66(33)55

55.3%

50.3%

Year-End4550.4%4549.3%※ Our Group carried out a 2-for-1 stock split with respect to its common stock, effective as of August 1, 2013.
The values given in the parentheses for dividend per share above are reference values converted based on the number of shares
after the stock split.

© All rights reserved by PIGEON Corporation

20

Our Future Prospects
PIGEON CORPORATIONHead office
4-4, Nihonbashi-Hisamatsucho, Chuo-ku, Tokyo
103-8480, Japan
Tel: +81-3-3661-4200+81-3-3661-4188 (Investor Relations)
Fax: +81-3-3661-4320
E-mail address
InvestorRelations＠pigeon.com
URL http://www.pigeon.co.jp/
http://english.pigeon.co.jp/

In this document, statements other than historical facts related to plans, forecasts, and strategies
are based on information available at the time of writing.
The Corporation cannot provide guarantees or commitments for these forward-lookingstatements.
Due to various factors, actual results may differ significantly from those anticipated in thisdocument.

© All rights reserved by PIGEON Corporation21