Summary and Report of
Fiscal Year Ended January 2017
and6th Medium-Term Business Plan
March 7, 2017

(Securities Code: 7956)
President & COO

Shigeru Yamashita© All rights reserved by PIGEON Corporation

Title, Contents

1-2

Results of Term Ended Jan. 2017

3 - 196th Medium-Term Business Plan

20 - 52

Forecasts for Term Ending Jan. 2018

53 - 59© All rights reserved by PIGEON Corporation

Results of Term Ended Jan. 2017

© All rights reserved by PIGEON Corporation

Financial Highlights (Consolidated)
Jan. 2016(millions of yen)Jan. 2017
Revised
Forecast
Forecast

Results%of
Forecast% ofRevised
Forecast

YoY
ChangeResults

YoY
ChangeNet sales

92,209109.6%

95,00093,50094,64099.6％

101.2％

102.6％

Operatingincome14,521113.6%

15,00015,00016,015106.8％

106.8％

110.3％

Ordinary
income15,080113.4%

15,30014,90016,462

107.6％

110.5％

109.2％Net Income
Attributable to
Owners of Parent

10,197120.7%

10,40010,40011,118106.9％

106.9％

109.0％Net assets

50,792

107.4%

51,66851,66853,736104.0％

104.0％

105.8％

Total assets

73,943102.2%

79,30079,30078,889

99.5％

99.5％

106.7％EPS (¥)

85.15

120.7%

86.84

86.84

92.84

106.9％

106.9％

109.2％BPS (¥)

413.88107.4%

419.86419.86437.43104.2％

104.2％

105.7％

ROA

20.6%

―

20.0％

19.5％

21.5%

―

―

―

ROE

21.3%

―

21.0％

21.0％

21.8%

―

―

―

※Our Group carried out a 3-for-1 stock split with respect to its common stock, effective as of May 1, 2015. The values given in the parentheses for dividend pershare above are reference values converted based on the number of shares after the stock split.
※ 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

4

Statements of Income (Consolidated)
Jan. 2016

Jan. 2017(millions of yen)

Results% of Total

Results% of Total

YoY
ChangeNet sales

92,209100.0%

94,640100.0%

102.6%

Cost of sales

48,86453.0%

49,95152.8%

102.2%

Gross profit
SG&A expenses
OperatingincomeNon-operating
income(expenses)

Ordinary
incomeExtraordinary
income (loss)
Net Income
Attributable to Noncontrolling Interests
Net Income
Attributable to
Owners of Parent© All rights reserved by PIGEON Corporation

43,34528,823

47.0%
31.3%

44,68828,673

47.2%
30.3%

103.1%
99.5%

Remarks■ Main changes in SG&A
expenses
Personal expenses:(¥117m)Market research expense:(¥494m)Sales Promotion
expenses:+ ¥167m

14,521

15.7%

16,01516.9%

110.3%

559

0.7%

447

0.5%

80.0% + ¥100m

15,08016.4%

16,46217.4%

109.2%(193)(0.2%)(228)(0.2%)

―

265

0.3%

224

0.2%

84.3%

10,197

11.1%

11,11811.8%

109.0%

Commission fee■ Main changes in
non-operating income(expenses)
Balance of financial
expenses:(¥75m)

5

Net Sales by Business Segment (Consolidated)
Jan. 2016(millions of yen)Jan. 2017
% of
Total

YoY
Change94,640100.0%

102.6%

47.2%

16,015

4,383

31,82333.6%

113.4%

47.0%

6,244

10.7%

148

7,393

7.8%

109.4%

10.6%

211

7.0%

28.3%

140

6,901

7.3%

106.2%

31.4%

504

25,234

27.4%

55.4%

5,579

23,051

24.4%

91.4%

55.6%

5,352

China
Business

31,688

34.4%

44.6%

8,586

30,533

32.3%

96.4%

44.6%

8,355

Elimination ofinternal trading
between segments(7,306)(7.9%)――(6,337)(6.7%)

―

―

―

Other

1,283

1.4%

15.4%

1,273

1.3%

99.2%

15.6%

Segment
ProfitResults % of Total

Gross
MarginConsolidated
net sales

92,209100.0%

47.0%

14,521

Domestic Babyand Mother
Care Business

28,053

30.4%

44.4%

Child Care
ServiceBusiness

6,757

7.3%

Health andElder Care
Business

6,499

Overseas
Business

152

Results

Gross
MarginSegment
Profit162※ Segment profit in the consolidated net sales has been adjusted (all non-allocable operating expenses) and posted as operating income in the consolidated statements of income.
※ The consolidated net sales 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(incl.Hong Kong)

Other Asian Countries

North America

EuropeNear and Middle East

Other Regions

Local currency basis: 116.3％(millions of yen)
2,382

Jan-17

6,569

27,98547,238

7,061
2,262

976

Local currency basis 102.5％

2,684

Jan-1628,291

7,326

49,579

7,671
2,400

0

10,00020,000※ [Currency rates] Jan. 2017: US$1 = ¥108.77© All rights reserved by PIGEON Corporation

30,000

1 yuan = ¥16.35;

40,0001,205

50,000Jan 2016:US$1 = ¥121.10, 1 yuan = ¥19.22

7

Key Priorities for FY 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-sized products including
baby strollers
 Further enhancing profitability by expanding sales of high value-added products
including renewed nursing bottles and nipples
 Child Care Service Business Reviewing growth strategies and business system to raise profitability
 Further strengthening crisis management measures as well as maintaining andimproving business quality through fostering and training human resources engaged inchild-rearing
 Health and Elder 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© All rights reserved by PIGEON Corporation

8

Key Priorities for FY 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 China market
・Maintaining and reinforcing the production system by opening a new factory in Turkey
・Expanding business in Europe and putting in place and reinforcing operating structure
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 capacity utilization of our new factory in India by
starting production for export
・ Reinforcing marketing activities in Asia with an initiative of 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 EC sales (by starting EC
sales of Japan-made products)
Increasing sales of disposable diapers by maintaining and further expanding the store-to-store
promotional campaign across the country© All rights reserved by PIGEON Corporation

9

Domestic Baby and Mother Care Business Status
 Large-sized products
 Released a limited design of “Runfee ef”, the single-tire baby stroller
 Released a new design of “PATTAN”, the city compact baby stroller New products
 Released the new version of “Mimi-Chibion®” ear thermometer andadded new flavors to “Gel Toothpaste”
 Released “Saratto Abura ga Ochiru Hajimete Apron”—a baby apron
that can easily remove oil stain, etc.
 Direct communications
 Seminars for heath care professionals: 14 events/1,684 participants Pregnancy information events: 18 events/1,022 participantsMarket Share (FY Jan/17)
78%

No.1

Nursingbottles

71%

68%

No.1

No.1

Breastpumps

Breast pads

Major new products releasedin Spring 2017

37%

35%

No.1

No.1

Baby
skincare(cleaners)

Runfee ef

Baby wipes

Petit Ice Cream for Babies“Moisture Cream” forpregnant women* According to POS Nationwide Drugstore Growth Estimates, INTAGE Inc. (monthly data).
* Value share for nursing bottles, breast pumps and breast pads. Quantity share for other products.
© All rights reserved by PIGEON Corporation

10

Child Care Service Business /Health and Elder Care Business Status
Child Care Service Business Pigeon Hearts New additions of facilities under management:- Launched two in-company child-care facilities→ Total of 188 facilities (including those of the National Hospital Organization)
Health and Elder Care Business Pigeon Tahira Reported strong sales of “Bottom Wipes,” “Body Wipes” and “Skincare” for nursing care－the main product categories
 Reported strong sales through retail channels
 Released in February a line of oral cavity nursing care products branded “Kaigo no
Koku Care” series
 Pigeon Manaka
 Started accepting applications for the practitioner training program for Certified Care
Workers“Kaigo no Koku Care” series© All rights reserved by PIGEON Corporation

A scene at childcare facilities
11

Overseas Business Status
 Pigeon brand India: Singapore:Started exporting the products made in India
Ranked No. 1 for pure recall in baby brandStrengthen branding through direct communication with consumers

 Lansinoh brand North America: Continued to command the top market share in nipple care cream,
breast pads and breast milk storage bags
Released a new product of Smart Pump
 Europe:
Expanded sales in three main countries
Started operations at the new factory in Turkey (in Jan. 2017)
 China:
Achieved sales exceeding 450 million yen (for the period from April 2016
to December 2016; 146% of the plan)
Market share (FY Jan/17)
72.1%

US

66.7%

Germany

70.9%

54.1%

No.1
31.9%

No.1

42.8%

39.6%

No.1
No.2
Nipple care Breast pads Breast milk
creamstroagebags© All rights reserved by PIGEON Corporation

20.8%

No.1

No.1
Manualbreast
pumps

No.2
No.2
Nipple care Breast pads Breast milk
creamstoragebags

Breastpumps<Lansinoh>
Smart Pump

* The percentages indicate the value share based on the research by Lansinoh.

<Singapore>
Seminar12

China Business Status
 Product sales
 Enjoyed strong consumer demand for the main products including nursing bottles andnipples Significantly increased sales of disposable diapers as a result of the in-store
promotional campaign (across China) (with a 116% YoY increase) Experienced strong sales growth through EC channels (with a 57% YoY increase) Branding and breastfeeding awareness programs
 Promoted to establish Pigeon Corners to further strengthen the branding activities
 Strengthened direct communication with consumers through online and offline
activities Continued to implement the breastfeeding awareness program conducted jointly with
the Ministry of Health of China primarily through establishing breastfeeding
consultation offices and holding seminars for health care professionals

In-store promotional campaign(across China)© All rights reserved by PIGEON Corporation

Pigeon’s EC sitein China

Workshop for health care
professionals at maternity andgeneral hospitals
13

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

Jan. 2017(millions of yen)

Results

Results

YoY Change(Amount)

YoY Change(%)

Cash and deposits

24,29730,052

5,754

123.7%

Notes and accounts
receivable

13,870

16,1032,232

116.1%

Inventories

8,859

7,603

(1,256)85.8%

Notes and accounts
payable

3,743

4,857

1,114

129.8%

Electronically recorded
obligations – operating

1,623

1,693

70

104.3%

Borrowings

6,308

5,699

(609)

90.3%

Net assets

50,79253,7362,944

105.8%

Total assets

73,94378,889(4,946)106.7%

Equity ratio

67.0%

66.4%

－

(0.6 pt)© All rights reserved by PIGEON Corporation

14

<Ref.>Cash Flow
（百万円）
14,810 (1,854)(6,223)
13,479 (3,332)(6,567)

(978)

(873)

24,29730,052

24,297

21,590Acquisition of PPE:¥(2,424m)(Jan2016 ¥(3,018m))
Income before income taxes: ¥16,234m(Jan2016 ¥14,887m)

Loan income/repayments: ¥(531)(Jan2016 ¥(1,705))
Payment of cash dividends: ¥(5,622)(Jan2016 ¥(4,789))

Jan. 2016

Jan. 2017

Balance at Operating

Investing

FinancingTranslation Balance atBalance at Operating

Investing

FinancingTranslation Balance at

Beginning

Activities

Activities

Activities

Adjustment

End

Beginning

Activities

Activities

Activities

Adjustment

End

21590

13479

(3332)(6567)

(873)

24297

24297

14810

(1854)(6223)

(978)

30052

© All rights reserved by PIGEON Corporation

15

<Ref.>Investment-Related Indicators (Consolidated)

Jan. 2016

Jan. 2017(millions of yen)Interim(Results)

Full Year(Results)

Interim(Results)

Full Year(Forecast)

Capital investment ※1

1,610

2,639

1,164

2,328

Depreciation(tangible fixed assets)

1,018

2,133

1,014

2,042

Research and development ※2

1,181

2,263

1,085

2,263

※1 Refers to purchase of tangible fixed assets.
※2 Refers to total R&D expenditures, including personnel-related.

© All rights reserved by PIGEON Corporation

16

PVA Tree: Consolidated Results in Jan. 2017
Consolidated

Net sales

Operating profit

Top: Jan. 2017 Plan
Mid: Jan. 2017 Results
Bottom: Jan. 2016 Results(\millions)

NOPAT
Plan 8,895
Results 9,497
LY 8,611

Plan 15,000
Results 16,015
LY 14,522

Plan 95,000
Results 94,640
LY 92,210

Cost of sales

Tax
2Q Plan 6,105

Plan 49,900
Results 49,952
LY 48,865

2Q Results 6,518
LY 2Q

PVA
Plan
Results
LY

5,983

6,584

5,756

5,910

Capital invested

Working capital

Trade receivables

SG&A expenses

Plan 58,247
Results 58,269
LY 57,102

Plan 17,149
Results 17,260
LY 17,364

Plan 14,419
Results 14,987
LY 13,871

Plan 30,100
Results 28,673
LY 28,823

Fixed asset

Inventory asset

Plan 26,857
Results 24,337
LY 25,029

Plan 8,456
Results 8,231
LY 8,859

Cash and otherasset and liability

Trade payables

Results 16,672

Results 5,959

WACC
common 5.0%

Plan 14,241
LY 14,708

Plan 5,725
LY 5,366

（参考）

研究開発費
見込 0
前期 0

発送費
見込 0
前期 0

※From Jan. 2017, B/S Factors for PVA calculation are averaged between beginning and year-end figures.
© All rights reserved by PIGEON Corporation

17

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

Cost of sales ratio
Operating profit ratio

ROIC before tax

ROIC
PVA
spreadPlan
Results
LY

Plan
Results
LY

15.3%

16.3%

Plan
Results
LY

25.8%

27.5%

Plan
Results
LY

15.8%

16.9%
15.7%

25.4%

Plan
Results
LY

52.8%
53.0%

SG&A expenses ratio
Plan
Results
LY

15.1%

52.5%

31.7%

30.3%
31.3%

Working capital ratio

10.3%
11.3%
10.1%

Capital invested t/otax rate
WACC
common5.0%

common40.7%

Plan
Results
LY

Plan
Results
LY

1.6

1.6
1.6

18.1%

18.2%
18.8%

Fixed asset ratio
Plan
Results
LY

28.3%

25.7%
27.1%

Cash and otherasset and liability ratio

Plan
Results
LY© All rights reserved by PIGEON Corporation

15.0%

17.6%

16.0%18

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

Working capital

Trade receivables

Plan 17,149

Plan 14,419

Results 17,260
LY 17,364

Results 14,987
LY 13,871

CCC
Plan
Results
LY

Receivable turnover period

75.4
74.4
81.0

Inventory asset
Plan 8,456

Results 8,231
LY 8,859

Trade payables
Plan 5,725

Results 5,959
LY 5,366

Plan
Results
LY

55.4
57.8
54.9

Inventory turnover period
Plan

61.8
60.1
66.2

Results
LY

Payables turnover periodPlan
Results
LY

41.9
43.5
40.1

※From Jan. 2017, B/S Factors for CCC calculation are averaged between beginning and year-end figures.
© All rights reserved by PIGEON Corporation

19

6th Medium-Term Business Plan(FY Jan. 2018 to FY Jan. 2020)© All rights reserved by PIGEON Corporation

Contents
1. Review of the 5th Medium-Term Business Plan
2. Our Vision

3. Positioning of the 6th Medium-Term Business Plan
4. Quantitative Target
5. Business Policy
6. Key Strategy
7. Business Strategy

8. Functional Strategy
9. Enhancing Corporate Value
10. Summary of the 6th Medium-Term Business Plan

© All rights reserved by PIGEON Corporation

21

1. Review of the 5th Medium-Term Business Plan: Financial Targets(millions of yen)

5th MTBP

Jan. 2017
Progress
Results
94,64094.6%

3-years
CAGR+6.9%

Net sales

100,000

Gross profit

44,20044,688101.1%+9.0%

Operating income

15,00016,015106.8%+15.6%

Ordinary income

15,00016,462109.8%+14.4%Net Income Attributable to
Owners of Parent

9,000

11,118123.5%+16.8%EPS (¥)

75.15

92.84

123.5%

Gross margin

44.2%

47.2%

+3.0ptOperating margin

15.0%

16.9%

+1.9ptOrdinary margin

15.0%

17.4%

+2.4ptNet Income Attributable to
Owners of Parent margin

9.0%

11.8%

+2.8ptROA

22.0%or more

21.5%

(0.5pt)ROE

21.0%or more

21.8%

+0.8ptROIC

15.0%or more

16.3％

+1.3pt※Our Group carried out a 3-for-1 stock split with respect to its 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 the number of shares after the stock split.
※ROA= Ordinary income ÷ Total assets; ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)※ROIC: Return On Invested Capital (NOPAT/Capital Invested, calculated with a tax rate of 40.7%,© All rights reserved by PIGEON Corporation
22
Capital Invested is averaged between beginning and year-end figures)

1. Review of the 5th Medium-Term Business Plan: By Segment
5th MTBP(millions of yen)Jan. 2017 Results

Sales% of Total

Gross
Margin100,000

100.0%

27,000Child Care Service
Business
Health and Elder Care
Business

Gross
MarginProgress
Sales

Gross
Margin

47.2%

94.6%

+3.0pt

33.6%

47.0%

117.9%+1.7pt

7,393

7.8%

10.6%

110.4%(2.1pt)

33.6%

6,901

7.3%

31.4%

86.3%

(2.2pt)

57.3%

49.1%

47,247

49.9%

56.3%

82.5%

+7.2pt―――23,051

24.4%

55.6%

―

―

(Currently defined
China Business)

―

―

―

30,533

32.3%

44.6%

―

―

(Elimination of internal
trading between
segments)―――(6,337)(6.7%)

―

―

―

1,000

1.0%

12.4%

1,273

1.3%

15.6%

127.4%+3.2ptSales% of Total

44.2%

94,640100.0%

27.0%

45.3%

31,823

6,700

6.7%

12.7%

8,000

8.0%

Previously definedOverseas Business

57,300(Currently definedOverseas Business)

Consolidated
Net Sales
Domestic Baby andMother Care Business

Other© All rights reserved by PIGEON Corporation

23

1. Review of the 5th Medium-Term Business Plan: By Region(millions of yen)

5th Medium-TermBusiness Plan

Jan. 2017

Progress
Status3-years
CAGR

Net Sales% of Total

Net Sales% of Total

57,30057.3%

47,247

49.9%

82.5%

7.0%

China
(incl. Hong Kong)

34,694

34.7%

27,985

29.6%

80.7%

7.7%

Other Asian Countries

9,181

9.2%

6,569

6.9%

71.6%

2.4%

North America

6,418

6.4%

7,061

7.5%

110.0%

9.2%

Near and Middle East

3,072

3.1%

2,382

2.5%

77.5%

4.0%

Other Regions

3,882

3.9%

3,239

3.4%

83.4%

10.3%

Overseas Business(Previously definedOverseas Business)© All rights reserved by PIGEON Corporation24

1. Pigeon Won the Grand Prixin the TSE’s “Corporate Value Improvement Awards”<Reasons we were selected for the Grand Prix>
Pigeon Corporation (hereinafter, “the Company”) was recognized for performing at remarkably highlevels “management for increasing corporate value” including its efforts for the improvement with thewhole organization as a united force with its unique management benchmark “PVA (Pigeon Value
Added = Operating income after estimated taxes – Capital cost)” as its important index which indicatesthe amount of corporate value created exceeding capital cost and actually achieved outstanding results.
1. The Company has set and announced investor-conscious high management goals.
2. The Company has established a mechanism of corporate management using its uniquemanagement benchmarks.
3. The Company’s corporate management mechanism aiming for enhancing corporate value haspermeated deeply through the whole organization.
4. The Company engages in releasing information proactively toward the achievement of its
constructive dialogues with investors.
© All rights reserved by PIGEON Corporation25

1. Pigeon Won “IR Special Award” and “Porter Prize”<IR Special Award: from Japan Investor Relations Association>
In recent years, the Company’s IR practices have been increasingly highly
valued.
The top management clearly articulates its mid to long-term growth strategy,
issues, and a roadmap to create corporate value. In particular, the Company
has a unique way to explain its specific strategy by using CCC (CashConversion Cycle) and ROIC (Return on Invested Capital), in addition to “PVA
(Pigeon Value Added)” which is its unique EVA (Enterprise Value Added).
Detailed data are disclosed after the Company’s earnings release, and local
information on its overseas operations such as in China is also proactively
disclosed, leading to a favorable evaluation by investors.

<Porter Prize>
Porter Prize was established to recognize Japanese companies that haveachieved and maintained superior profitability by implementing unique andexcellent strategies. Porter Prize Organizing Committee at Hitotsubashi
University Graduate School of International Corporate Strategy is serving as
the organizing body for the prize. Porter Prize was established in 2001 andthe name of the prize is derived from Professor Michel E. Porter of Harvard
University, a leading authority on strategy with a longstanding interest inJapanese corporations.

© All rights reserved by PIGEON Corporation

26

1. We are highly evaluated in terms of …

“ Uniqueness”
We have created our own distinctive “barriers,” orcompetitive advantages—a crucial foundation to
support high profitability.

© All rights reserved by PIGEON Corporation27

2. Our Vision
The Pigeon Way embodies our “heart and soul” and sets
the grounds for our actions to stream from this core.
Corporate Philosophy: “Love”

Credo: “Only love can beget love”

The goal Pigeon Groupaims to achieve© All rights reserved by PIGEON Corporation28

2. Our Vision

VisionTo be the baby productmanufacturer most trusted by
the world’s babies and families,
i.e. “Global Number One”

© All rights reserved by PIGEON Corporation29

3. Positioning of the 6th Medium-Term Business Plan:
Number of Births in the World
135 million babies are born
every year in the world.
135 million

43 million
(32%)

Other

92 million(68%)

Top 20Top 20 Countries With the Highest Number of Births(Unit: 10 thousand babies/year)
India
China
Nigeria
PakistanIndonesia
United States
Ethiopia
Bangladesh
BrazilCongo
Philippines
MexicoEgyptTanzania
RussiaUgandaVietnamIranTurkeyAfghanistan

2,447
1,708
683
450
428
401
371
357
295
277
245
229
203
186
165
162
151
147
130
126
0

© All rights reserved by PIGEON Corporation

1,000

2,000

3,000
* Research by Pigeon30

3. Positioning of the 6th Medium-Term Business Plan:
Details of the Top 20 Countries
Country

Mature Market United States

RussiaTurkeyMexicoIranGrowth Market Brazil($10K to $20K
China
per capita)
Egypt
Indonesia
Philippines“Next Wave” Nigeria($5K to $10K
India
per capita)
Vietnam
Pakistan
Bangladesh
Tanzania“10 Years Later”
Uganda(Less than $5K
Afghanistan
per capita)
Ethiopia
Congo($20K or more
per capita)

Total© All rights reserved by PIGEON Corporation# of births(10K/year)
401
165
130
229
147
295
1,708
203
428
245
683
2,447
151
450
357
186
162
126
371
277

GDP
Per capita
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

56,30023,70020,50018,50017,80015,80014,30011,50011,300
7,500
6,400
6,300
6,100
4,900
3,600
3,000
2,100
2,000
1,700
800

US=100%
100%
42%
36%
33%
32%
28%
25%
20%
20%
13%
11%
11%
11%
9%
6%
5%
4%
4%
3%
1%

Projected target for
Pigeon products(10K/year)
401
70
47
75
47
83
434
41
86
33
78
274
16
39
23
10
6
4
11
4

1,782

9,160
* Research by Pigeon31

3. Positioning of the 6th Medium-Term Business Plan:
Projected Market Size Illustrated
Mature Market Growth Market($20K or more
per capita)($10K to $20K
per capita)

US

China

“Next Wave”“10 Years Later”($5K to $10K
per capita)(Less than $5K
per capita)

Indonesia Nigeria

India

Pakistan

Relative size of each market
with US per capital GDP
being indexed as 100

Future market

Current market
-

10

20

30

40

50

60

70

80

90

100

There is still substantial room for growth not only in China but in other countries (million babies/year)* Research by Pigeon(There is indeed room for growth everywhere.)

We need to establish a structure that enables us to compete and win against global peers
to be the Global Number One in the current market and the future market© All rights reserved by PIGEON Corporation

32

3. Positioning of the 6th Medium-Term Business Plan

Building the foundation to be the Global
Number One baby product manufacturer

5th
Mid-Term
Business Plan

3rd & 4th
Mid-Term
Business Plan

10 years ago

6th
Mid-Term
Business Plan

To be the Global
Number One
baby productmanufacturer
In about 10 years

2008/1

2014/1

2017/1(in ¥100 millions of yen)

Results

Results

Results（Plan/Target)

Net sales

492

775

946

1,100

2,100

Gross margin

37.9%

44.5%

47.2％

50.0%

51.0%

Op. income

32

104

160

200

420

Op. margin

6.5%

13.4%

16.9%

18.2%

20.0%

PVA*

9

50

83

105

225

ROE

6.4%
346

19.7%
1,886

21.8%
3,723

Market cap.

* The tax rate of 30% is used when PVA is calculated.
© All rights reserved by PIGEON Corporation

2020/1

About 2026
(Projection)

Over 22%
Over 22%8,500*
5,000** The figures above are indicative only of ourroughly projected scale of corporate value.

33

4. Quantitative Targets (1) Financial Targets
3-years
CAGR(millions of yen)Jan/17 Result

Jan/18 Plan

Jan/19 Plan

Jan/20 Plan

Net sales

94,64099,800102,300

110,000+5.1%

Gross profit

44,68847,60050,80055,000+7.2%

Operating income

16,01517,00017,90020,000+7.7%

Ordinary income

16,462

17,00017,90020,000+6.7%

Net Income Attributable to
Owners of Parent

11,11811,80012,30013,800+7.5%

EPS (¥)

92.84

98.53

102.70115.23Gross margin

47.2%

47.7%

49.7%

50.0%

Operating margin

16.9%

17.0%

17.5%

18.2%

Ordinary margin

17.4%

17.0%

17.5%

18.2%

Net Income Attributable to
Owners of Parent margin

11.8%

11.8%

12.0%

12.5%

ROE
ROIC

© All rights reserved by PIGEON Corporation

Jan/17 Result

6th MTBP

21.8％

22.0％ or more
20.0％ or more

19.2％

※ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)※ROIC: Return On Invested Capital (NOPAT/Capital Invested, calculated with a tax rate of 30.0%,34
Capital Invested is averaged between beginning and year-end figures)4. Quantitative Targets (2) Sales & Operating Income by Segment
Jan/17 Result

Jan/18Plan

Jan/19
Plan

% of
Total

Gross
Margin

Sales

Sales

% of
Total

MarginConsolidated net sales

94,640 100.0%

47.2%

99,800 102,300 110,000 100.0%

50.0%

+5.1%

Domestic Baby and Mother Care Business

31,823

33.6%

47.0%

33,10034,94536,526

33.2%

47.6%

+4.7%

Child Care Service Business

7,393

7.8%

10.6%

7,200

2,970

3,000

2.7%

16.8%

－

Health and Elder Care Business

6,901

7.3%

31.4%

7,139

7,390

8,000

7.3%

34.6%

+5.0%

Overseas Business

23,051

24.4%

55.6%

24,55526,43628,951

26.3%

56.1%

+7.9%

China Business

30,533

32.3%

44.6%

33,14135,75039,011

35.5%

45.7%

+8.5%

Elimination of internal trading between segments(6,337)(6.7%)－(6,435)(6,469)(6,949)(6.3%)

－

－

1,273

1.3%

15.6%

1,098

1,277

1,460

1.3%

15.5%

+4.6%

(millions of yen)

Sales

Other
（Sales / ¥ 100 millions）
1,200

Domestic B&M
Overseas

Child-rearing
China

1,000

12
12

800

316

11

Health care
Other
12

Jan/20 Plan
Sales

3-years
Gross CAGR

14
10

12

331

357

230

245

264

69
73

71
72

73
29

80
30

305

390

263
219
600
203

233

400

252
64
67

67
65

67
67
244

280

318

331

349

365

244
Jan/14(Actual)Jan/15(Actual)Jan/16(Actual)Jan/17(Actual)Jan/18(Plan)

Jan/19(Plan)

Jan/20(Plan)

200

0© All rights reserved by PIGEON Corporation

289

35

4. Quantitative Targets (3) Sales by Overseas Region(millions of yen)Jan/17 Result
Sales% of Total

Jan/18Plan

Jan/19Plan

Jan/20 Plan

Sales

Sales

Sales

% of Total

3-years
CAGR

Overseas Business

47,24749.9%

51,261

55,71661,012

55.5%

+8.9%

China (incl. Hong Kong)

27,98529.6%

30,33632,72736,015

32.7%

+8.8%

Other Asian Countries

6,569

6.9%

6,348

6,863

7,534

6.8%

+4.7%

North America

7,061

7.5%

8,109

8,355

8,713

7.9%

+7.3%

Europe

2,262

2.4%

2,671

3,605

4,075

3.7%

+21.7%

Near and Middle East

2,382

2.5%

2,461

2,706

2,994

2.7%

+7.9%

976

1.0%

1,334

1,457

1,678

1.5%

+19.8%

Other Regions

600（Sales / ¥ 100 millions）

China(incl.Hong Kong)
Europe

500

400
300

73

North America
Other Regions
13
24
9
26
23
22
81
70
63
65

279

303

360

282

327

263

Jan/15(Actual)Jan/16(Actual)Jan/17(Actual)Jan/18(Plan)

Jan/19(Plan)

Jan/20(Plan)

9
7
21
16
54

22
20
63

Other Asian Countries
Near and Middle East
12
26
24
76

68

14
27
36

16
29
40
87

83
75
68

61
200
100
0
© All rights reserved by PIGEON Corporation

224

Jan/14(Actual)36

5. Business Policy: Slogan

Building our dreams
into the future
ー By creating a bridge towards
the Global Number One manufacturer of baby products ー© All rights reserved by PIGEON Corporation37

5. Business Policy: Basic Strategy
Social Value Enhancement

1) Based on the Pigeon Way, create and implement all kinds of measures toachieve the goal of becoming ‘an indispensable company’ for the society andmake our Vision “to be the baby product manufacturer most trusted by theworld’s babies and families, i.e. ‘Global Number One’” come true.
Economic Value Enhancement

2) A further increase in corporate value will be pursued through improvement in
profitability and efficiency of the business, and maximization of cash flows.
The organizational structure, management system and governance system
will also be put in place and reinforced to ensure sustainable growth from a
medium to long-term perspective.
3) During the three years of the sixth medium-term business plan, invest
management resources giving priority to the key products and carry out
strategic investments, laying solid foundations for the double-digit growth of
Pigeon Group in the future.

© All rights reserved by PIGEON Corporation

38

5. Business Policy: Links Between the Basic Strategy and 12 Tasks(1)(1)(2)(3)(1)(2)(3)(1)(2)(3)

ESG

Global sharing ofcorporatephilosophy &valuesWorld-classbrand power

Development
capabilities(1)(2)(3)(2)

Sustainable growth
Logical work
process(1)

Salaryincrease

World-class Business
Excellence
Nurture employees’ motivation, satisfaction,
confidence, sense of pride and belonging to
the company(1)(1)(3)(2)

Global humanresource
development

Diversity/
women inmanagement

Global SCM© All rights reserved by PIGEON Corporation

Businessmodel forsuccess(2)

Cash flow
management
（PVA）
(2)

Global cash
management* The numbers indicated as (1), (2) and (3) on this slide correspond to the numbers of the basic policy on the previous slide.

39

6. Key Strategy: Improving Operational Efficiency and Profitability2) A further increase in corporate value will be pursued through improvement in
profitability and efficiency of the business, and maximization of cash flows. The
organizational structure, management system and governance system will also
be put in place and reinforced to ensure sustainable growth from a medium-to
long-term perspective.

Further evolving into a highly profitable organization
with value-based management through: Improvement of Group’s gross margin,
 Reduction of logistic expenses, and CCC improvement.
© All rights reserved by PIGEON Corporation40

6. Key Strategy: Improving Operational Efficiency and Profitability(in 100 millions of yen)

1,200

1,000

Pursuing higher sales, better product mix,
and improved productivity and procurement
Net sales

Gross profit

51.0%

Gross margin

1,100

1,023

998

50.0% 50.0%

946
49.7%

800

49.0%

47.7%
600

47.2%

446

476

508

550

48.0%

400

47.0%

200

46.0%

0

45.0%

FY Jan/17© All rights reserved by PIGEON Corporation

FY Jan/18

FY Jan/19

FY Jan/20
41

6. Key Strategy: Strategy for Expanding Key Categories
Spreading the overwhelming strength of nursing bottles and nipples
over the entire spectrum of key categories

Disposable
Diapers(China)Large-sized
products(Japan)Pacifiers
Teething
toys

Cups

・Straw cups
・Training cups

Nursingbottles/
Nipples・Baby strollers
・Car seats, etc.

Existing
Flagships© All rights reserved by PIGEON Corporation

New
Flagships

RegionallyMarketed
Products

Breast-feeding Skincare
related products Toiletries
・Breast pumps
Detergents・Breast pads
・Milk bags, etc.

Electric
Products

・ Electricsterilizers
・ Baby bottle
warmers
・ Babymonitors, etc.

* The six key categories consist of theexisting three flagships and the three
new flagships.
42

6. Key Strategy: Strategy for Expanding Key Categories

Points each division should focus on when implementing
the strategy for the 6th Medium-Term Business Plan

 Product:

Products and services with AI, IoT,
and Smart Connected concepts in mind Place:

New distribution channels(including hospitals, or NICU* in particular;
EC and DME* channels in the US)

 Promotion: Direct communications with consumers
implemented in our own way© All rights reserved by PIGEON Corporation*NICU: Neonatal Intensive Care Unit
*DME: Durable Medical Equipment

43

7. Business Strategy: China Business
Sales target for the China Business30.5 billion yen (for FY Jan. 2017) ➡ 39.0 billion yen (for FY Jan. 2020)
Business Growth
Increase in market share of the six key categories
・ Nursing bottles/Nipples: Increasing sales by 39％(for the period from FY Jan/17 to FY Jan/20)
・ Launch new products (every year)
Increase in sales of baby disposable diapers
・ From 0.9 billion yen (for FY Jan/17) to 3.5 billion yen (for FY
Jan/20)Reinforcement of Business Foundations
Sales and distribution system
・ Further reinforcement of sales and logistics systems to accommodate the growth of EC
channels

Reinforcement of Communication with Consumers
Strengthening ties with maternity and general hospitals
・ Deepening relationship with targeted maternity and general hospitals(e.g. through conducting joint research with university hospitals)
Reinforcement of direct communication
・ Expanding the number of Pigeon fans by fully utilizing WeChat and
Weibo© All rights reserved by PIGEON Corporation

44

7. Business Strategy: Overseas Business
Sales target for the Overseas Business23.1 billion yen (for FY Jan. 2017) ➡ 29.0 billion yen (for FY Jan. 2020)
Business Growth
Increase in market share of the six key categories
・ Nursing bottles: Increase in the current market share of each country
by 15 percentage points
Growth of Lansinoh operations
・ Increase in sales from $99 million (for FY Jan/17) to $135 million (for FY Jan/20)
・ Strengthening sales through the DME channel in the United States

Branding
Developing partnership with NICU
・ Strengthening activities to develop partnership with NICU
in addition to the activities at maternity and general hospitals at each country

Markets to be CultivatedReinforcement in high growth markets
・ India, Indonesia, France (Benelux), and China(with the Lansinoh brand)
Increasing presence in new markets
・ Africa (Nigeria, Kenya, and various countries on the West Coast)© All rights reserved by PIGEON Corporation

45

7. Business Strategy: Domestic Baby and Mother Care Business
Sales target for the Domestic Baby and Mother Care Business31.8 billion yen (for FY Jan. 2017) ➡ 36.5 billion yen (for FY Jan. 2020)
Expansion of the Existing Business
Increase in market share of the six key categories
・ Increasing sales (excl. those of large-sized products) from$30.7 million (for FY Jan/17) to $33.0 million (for FY Jan/20)

Business Growth
Growth in the large-sized product category
・ Achieving growth by increasing shares of baby strollers, car seats, etc.
・ Market share target for the 6th MTBP period: 25％
・ Increasing the category sales from 1 billion yen (for FY Jan/17)
to 3.5 billion yen (for FY Jan/20)

Reinforcement of Communication with Consumers
Reconstruction and re-strengthening of activities at maternity
and general hospitals
・ Strengthening relationship with targeted maternity andgeneral hospitals by expanding seminars for healthcare
professionals (in terms of areas and number of times held
Strengthening direct communication
・ Expanding the number of Pigeon fans by fully utilizing
Pigeon.info (website)© All rights reserved by PIGEON Corporation46

7. Business Strategy:
Health and Elder Care Business/Child Care Service Business
Sales target for the Health and Elder Care Business6.9 billion yen (for FY Jan. 2017) ➡ 8.0 billion yen (for FY Jan. 2020)
Business Growth and Improvement in Profitability
・ Reinforcement of in-company sales system and logistics
system・ Developing and selling new products that empatheticallyincorporate insights of consumers and caretakers throughworking with collaborative partners outside the Group・ Reinforcement of promotion based on four themes that reflect
the benefits of consumers and caretakers

Sales target for the Child Care Service Business7.4 billion yen (for FY Jan. 2017) ➡ 3.0 billion yen (for FY Jan. 2020)
Improvement in the Quality of Operation
・ Implementing highly specialized child-rearing to reflect
the distinctive characteristics of children
・ Striving to find yet further ways to approach safe andsecure management system
・ Improving quality of child-rearing service by fosteringchild care staff© All rights reserved by PIGEON Corporation

47

8. Functional Strategy:
R&D/ Quality Control/ Production, Procurement and Logistics
Research and Development
・ Launch new and renewed products in the six key categories
・ Strengthen research and development of breast pumps establishingthem as a product of primary importance next to nursing bottles
・ Launch products with our distinctive value proposition in the large-sized
product category
・ Establish production and development system to respond to the growth
speed of the Group・ Develop new products for the hospital (particularly for the NICU) channels
・ Develop products and services conscious of A.I., IoT, and Smart Connected

Quality Control
・ Further intensifying the PPM*-related activities
・ Strengthening support to improve industrial engineeringand the yield rate

Production, Procurement and Logistics
・ Improvement in profitability primarily through higher in-houseproduction rate
・ Achieving the division of production and establishment of operation control system on a global
basis with an aim to efficiently utilize the intra-Group production bases home and abroad・ Accelerating product procurement and concentration of functions to purchase main raw
materials (by achieving the global SCM*)© All rights reserved by PIGEON Corporation※PPM: Pigeon Productive Management※SCM: Supply Chain Management48

8. Functional Strategy:
Global Personnel System/ Global Governance
Global Personnel System
Promotion of diversity
・ Recruiting and training of personnel with ability of working
on a global stage・ “Improvement of job satisfaction” and “Reform of Work Style”
Personnel system
・ Globalization of management by objectives

Global Governance
Promotion of Global IT system
・ Investing in and developing the IT system to improve efficiency of the Group-wide
performance management
Global Head Office・ Functional enhancement of the company as Global Head Office (GHO)→ Strengthening “the function that can envisage a future of the Group as a whole, ensure
management resources to realize it, allocate them from a total optimization viewpoint,
and evaluate the results for improvement”
・ Three functions of GHO: power to unify the Group, power to promote the business and power
to envisage the future.
© All rights reserved by PIGEON Corporation※MBO: Management By Objectives49

9. Enhancing Corporate Value: ESG
We are committed to contribute to the local community and environment as well as
the well-being of our stakeholders.
Item of Contribution
Climate Change
Resources

Environment
Pollution & Waste
Environmental
Opportunities

Specific Measures
・ Reducing CO2 emissions, and saving
electric power

・ Ensuring sustainable resources
・ Reducing waste and garbage, and,preventing pollution

・ Engaging in tree-planting activities
・ Implementing measures to reduce overtime

Human CapitalSocial

Product Liability

work; and introducing MBO evaluation
system, training programs and global
human resources development program

・ Ensuring product safety and quality
・ Implementing newborn tree-planting

Social Activities

Fair Business Practices
Corporate Governancecampaign, providing support to develop
children’s creativity, and donating
elementary school buildings and facilities

・ Establishing Pigeon Partners Line, andrespecting property rights

・ Strengthening governance system
・ Promoting employee diversity, developing

Governance© All rights reserved by PIGEON Corporation

Diversity & Inclusion

female managers, and supporting childrearing by employees, ensuring complianceand establishing Speak Up as awhistleblowing system

Going forward, we will
provide specificperformance measuresand results.
(Examples)<Female managers>
Performance measure:
Ratio of female managers
Results*: 19.1％<Child-rearing support>
Performance measure:
Utilization rate of “One Month
Together” (one-month paternity
leave) program
Results*: 100% for both maleand female employees* The results as of the end of FY 2016.
50

9. Enhancing Corporate Value: Capital Policy and Shareholder Return
・ Estimated increase in operating cash flow: Approx. 46 billion yen
・ Aggressively making investments for growth (incl. M&A)
Breakdown for investments (incl. M&A) (3-year total: Approx. 20 billion yen)Overseas business: Approx. 14.5 billion yen/Domestic business: Approx. 5.5 billion yen

・ Achieving the consolidated total shareholder return ratio of approx. 55% with a year-onyear increase in dividends for each fiscal year
・ ROE (Return on Equity):

22.0％ or more

ROIC (Return on Invested Capital): To be improved to achieve 20.0％ or more・ Increasing earnings per share through increased profitability
Trends in Cash Dividends Paid

（Yen）

Trends in ROE / Dividend Payout Ratio

60

Div. Payout Ratio
配当性向

ROE
60.0%

50

50.0%
40

40.0%
30

53

20

29
10

15

35

56

42

19

0

30.0%
20.0%
10.0%
0.0%

Jan/12 13/1期
Jan/13 14/1期
Jan/14 15/1期
Jan/15 16/1期
Jan/16 17/1期
Jan/17 18/1期
Jan/18
12/1期

Jan/12
12/1期

Jan/17
17/1期

Jan/18
18/1期(Actual) (Actual)(Plan)(実績)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績) (Forecast)(予定) (計画)(Actual)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績) (Actual)(実績)(Plan)(計画)

As the stock splits were implemented in the fiscal year ended
Jan. 31, 2014 (on August 1, 2013) and the fiscal year ended Jan.
31, 2016 (on May 1, 2015), the figures from FY Jan/12 to FY
Jan/18 are calculated on a post-split basis.

* ROE (Return on Equity) is calculated using the average of balances at the
beginning and end of the fiscal year as a denominator.
* ROIC (Return on Invested Capital) is calculated by dividing NOPAT by invested
capital, which is an average of the beginning and ending balances, at applicabletax rate of 30.0%).

© All rights reserved by PIGEON Corporation

Jan/13
13/1期

Jan/14
14/1期

Jan/15
15/1期

Jan/16
16/1期

51

10. Summary of the 6th Medium-Term Business Plan

Scale of Growth

Performance
Measures
Strengthening
Earnings Structure

FY 2016

FY 2019

Net sales¥94.6 billion¥110.0 billion

Gross profit¥44.7 billion¥55.0 billion

Operating income¥16.0 billion¥20.0 billion

Gross margin

47.2％

50.0％

Operating margin

16.9％

18.2％

¥8.3 billion/74 days ¥10.5 billion/64 days

PVA/CCC

Growth of the China Business

Achieving Growth
on a Global Scale

Business
Strategy

Functional
Strategy
Enhancing
Corporate
Value© All rights reserved by PIGEON Corporation

Growth of Lansinoh
Preparation for the future

Achieving Growth
Through Six Key
Categories &Regionally Marketed
Products¥30.5 billion¥39.0 billion$99 million$135 million
Strengthening efforts to tap into growthmarket and develop new markets

Sales of 6 categories in China
and other overseas markets¥42.2 billion¥56.0 billion

Large-sized products (Japan)¥1.0 billion¥3.5 billion

Disposable diapers (China)¥0.9 billion¥3.5 billion

Strengthening Business
Foundation

Taking on the challenge for improvement and innovation
to create new value and realize agility(R&D, Quality Control, Production/Procurement/Logistics)

Strengthening
Management Foundation

Improving “job satisfaction,” developing the global IT system, andstrengthening head office functions and delegating authority
Strengthening ESG-related initiatives

Realizing Value ofAll the Stakeholders

Achieving ROE of 22％ or more, a year-on-year increasein dividends every year, and total shareholder return ratioof approximately 55% or more52

Forecasts for Term Ending Jan. 2018

© All rights reserved by PIGEON Corporation

Jan. 2017 Results and Jan. 2018 Forecast (Consolidated)
Jan. 2017(millions of yen)

Results% of Total

Jan. 2018
YoY
ChangeForecast% of Total

YoY
ChangeNet sales

94,640100.0％

102.6%

99,800100.0%

105.5%

Operating income

16,01516.9％

110.3%

17,00017.0%

106.1%

Ordinary income

16,46217.4％

109.2%

17,00017.0%

103.3%Net Income
Attributable to
Owners of Parent

11,11811.8％

109.0%

11,80011.8%

106.1%Net assets

53,736―105.8%

58,830－109.5%

Total assets

78,889―106.7%

78,984－100.1%EPS (¥)

92.84―

109.0%

98.53－

106.1%BPS (¥)

437.43―105.7%

479.12－109.5%

ROE

21.8%

―

―

21.5%

－

－

ROIC*

19.2%

―

―

19.9%

－

－

*[Assumed rates] Jan. 2018: US$1 = ¥110.00; 1 yuan = ¥16.00[Actual rates] Jan. 2017: US$1 = ¥108.77; 1 yuan = ¥16.35*ROE = Net income ÷ Equity (in both cases, denominators are averaged between beginning and year-end figures)*ROIC: Return On Invested Capital (NOPAT/Capital Invested, calculated with a tax rate of 30%, Capital Invested is averaged between beginning and year-end figures)© All rights reserved by PIGEON Corporation

54

Results and Forecast by Segment (Consolidated)
Jan. 2017(millions of yen)

Results

Jan. 2018

% of
Total

Gross
MarginSegment
ProfitForecast

% of
Total

ChangeYoY

Gross
MarginSegment
ProfitConsolidated
net sales

94,640100.0%

47.2%

16,01599,800100.0%

105.5%

47.7%

17,000

Domestic Babyand Mother
Care Business

31,823

33.6%

47.0%

6,244

33,10033.2%

104.0%

47.9%

7,098

Child Care
ServiceBusiness

7,393

7.8%

10.6%

211

7,200

7.2%

97.4%

10.6%

193

Health andElder Care
Business

6,901

7.3%

31.4%

504

7,139

7.2%

103.4%

31.3%

480

Overseas
Business

23,051

24.4%

55.6%

5,352

24,55524.6%

106.5%

55.4%

5,429

China
Business

30,533

32.3%

44.6%

8,355

33,141

33.2%

108.5%

45.3%

8,896

Elimination ofinternal trading
between segments(6,337)(6.7%)――(6,435)(6.4%)

―

―

―

Other

1,273

1.3%

15.6%

162

1,098

1.1%

86.3%

12.1%

132

※ Segment profit in the consolidated net sales has been adjusted (all non-allocable operating expenses) and posted as operating income in the consolidated statements of income.
※ The consolidated net sales recorded has been posted as the sum resulted from eliminating intersegment transactions in the overseas and China Businesses.
© All rights reserved by PIGEON Corporation

55

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

Other Asian Countries

North America

Europe(millions of yen)

Local Currency Basis: 110.8％

2,461

Jan. 2018

6,348

30,336

8,109

51,261

2,671

1,334

Local Currency Basis: 113.5％

2,382

Jan. 201727,98547,2386,569 7,061
2,262 9760

10,000※ [Estimate rates] Jan. 2018: US$1 = ¥110.00© All rights reserved by PIGEON Corporation

20,00030,000

1 yuan = ¥16.00;

40,00050,000[Actual Rates] Jan 2017:US$1 = ¥108.77, 1 yuan = ¥16.35
56

Key Priorities for FY Jan. 2018
 Domestic Baby and Mother Care Business Strengthening six key product categories
・ Implementing comprehensive measures against competing products
to sustain the present high market share in the nursing bottle/nipple
category
・ Implementing measures and making necessary investments tosustain the present high market share in the breast pump category Implementing aggressive sales, marketing and investing activities toincrease the market share of the baby strollers and other large-sized
products (market share target: 16%)
 Getting more involved in promotional activities to achieve collaboration
with healthcare professionals

 Child Care Service Business Clarify the positioning of business and streamlining business operations leading to
improved profitability
 Secure quality of child-rearing service by improving employee’s compensation and by
securing and training child-rearing staff
 Further strengthening safety measures including reinforcement of crisis management
 Health and Elder Care Business Achieving growth by streamlining and strengthening the sales and distribution network
 Developing concepts and ideas of products to support the in-house care through working
with professionals at care facilities
 Improving profitability by more efficient business system© All rights reserved by PIGEON Corporation

57

Key Priorities for FY Jan. 2018
 Overseas and China Businesses (common issues) Reinforcement of six key product categories
・ Further increasing the market share of the nursing
bottles/nipples category
・ Implementing measures to expand the breast pump category<India> In-store display
 Overseas Business (except China)
 Aggressively expanding Lansinoh (particularly in the European market) with improved
profitability
 Expanding business in India and improving profitability primarily through improvementin capacity utilization rate Exploring feasibility of entering new markets including countries in Africa to achieve
growth for the next MTBP period and onwards

 China Business Sustaining the high growth rate by taking advantage ofthe expansion of purchasing population
 Rebuilding of sales/distribution system in response todevelopments in EC channel
 Ensuring growth of the disposable diaper categories<China> EC site
© All rights reserved by PIGEON Corporation

58

Shareholder Return and Investment-Related Indicators
Shareholder return indicator under our 6th Medium-Term Business Plan
We adopt a flexible approach (incl. through share buybacks) to increasing shareholder return with a target
to achieve a year-on-year increase in dividends and approximately 55% of the consolidated total
shareholder return ratio in each fiscal year.

FY Jan/2015
Dividends

Dividend per share(Yen)

Interim(Actual)Year-end(Actual)

45

60

（15）

Dividend payout
ratio
*

（20）

49.6%

FY Jan/2016
Interim(Actual)FY Jan/2017

Year-end(Actual)20

Interim(Actual)Year-end
Interim Year-end(Scheduled) (Estimate) (Estimate)25

22

FY Jan/2018

28(including(includingcommemorative commemorative
dividend of 3 yen) dividend of 3 yen)

49.3%

57.1%

28

28

56.8%

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 to its 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 the number of shares after the stock split.

<Reference> Investment-related indicators
FY Jan/2016
Interim(Actual)Amount of capital
expenditures (*)
Depreciation(PPE)

Full-year(Actual)FY Jan/2017
Interim(Actual)Full-year(Actual)FY Jan/2018
Full-year(Forecast)

1,610

2,639

1,164

2,328

3,045

1,018

2,133

1,014

2,042

2,986

* Cost of items of property, plant and equipment acquired (carrying amount)© All rights reserved by PIGEON Corporation

59

Appendix© All rights reserved by PIGEON Corporation

Enhancing Corporate Value: Our Definition of Corporate Value

Social Value

Economic Value

To be indispensable for thesociety and our consumers

Sum of present values of
future free cash flows

Provision of solutions
and new values

Corporate philosophy
shared by all employees and otherstakeholders

Free cash flows= NOPAT + Depreciation- Investments- Incremental working capital

Development capabilities andbrand power

Business models andcompetitive advantages
that are hard to copy

Competency of each employee

Marketing capabilities

Reduction of our environmental
impact and contribution to society
in the fields other than our own
business

KPIs (PVA, CCC, ROE, ROIC)
and actions for their improvement© All rights reserved by PIGEON Corporation

61

Enhancing Management Quality:
Twelve Tasks of 5th Medium-Term Business Plan
Globalinformation
systemGlobal sharing ofcorporatephilosophy &valuesWorld-classbrand power

Sustainable growth
Logical work
process

World-class Business
Excellence
Salaryincrease

Global humanresource
development© All rights reserved by PIGEON Corporation

Nurture employees’ motivation, satisfaction,
confidence, sense of pride and belonging to
the company

Diversity/
women inmanagement

Global SCM*

Development
capabilities

Businessmodel forsuccess

Cash flow
management（PVA）

Global cash
management*SCM: Supply Chain Management

62

Progress of 12 Tasks of the 5th MTBP (1)Global sharing ofcorporatephilosophy &values

BL: Target achieved• Pigeon Way Meetings held in Japan and abroad• Pigeon Way Newsletters issued (in Japanese and RD: Target unachieved withissues to be addressed
English).
• The corporate movie renewed and shared at the general employee meeting• GLOBAL PASSPORT distributed (in Japanese, English, Chinese, Thai, Turkish)

World-class brandpower• Pigeon Global Brand Style Guideline prepared, announced andimplemented.
• The corporate website updated. (* Awarded Excellent Company in Website
Richness Ranking: Listed company section)• Smile Lactation Research Institute launched and operated• Brand recall ratio ranked No.1 in Singapore

Development
capabilities

Business model for
success© All rights reserved by PIGEON Corporation• Nipples for baby bottles [nipples for weak sucking] won iF Design Award, one of
the world’s three major design awards• R&D environment put in place (renovation)• Organization strengthened with establishment of Design Group and preparation of
Global Design Guidance started and implemented• Research function reinforced, planning flow reorganized and standardization
promoted with establishment of Research Group• Appeal of globally marketed products (e.g. breast pumps) further strengthened• New products in Health & Elder Care Business• A successful business model created in the baby stroller segment characterized bydevelopment process with in-store promotion, PR and sales promotions in mind,
selection of new outsourcing suppliers, PR activities at introduction of the products
and increased sales staff. (gained a record high 13.5% market share as ofFebruary, 2016)• No new successful models created other than the baby stroller
63

Progress of 12 Tasks of the 5th MTBP (2)Cash flow
management(PVA)• PVA study sessions held and materials shared• PVA/CCC by Group company and by business segment announced inconsolidated monthly reports• PVA, ROIC and CCC for FY2016: ¥6,584 million, 16.3% and 74.4 days,
respectively (CCC as compared to 88.8 days for FY Jan/15 and 81.0 days for FY
Jan/16)• Progress management and further improvement of the Group-wide CCC target

Global cash
management• Visualization of cash positions by introducing the system (Currently more than 90%
of entire Group’s cash positions can be monitored.)• Cash flow control on a budget vs. actual basis now operational on the system
platform for Lansinoh, Korea, Thailand, Singapore, Malaysia and India

Global SCM• Cost reduction target for the 5th MTBP period successfully achieved• Profitability analyzed by allocating logistics cost to each business segment andproduct category• Stockouts significantly reduced as a result of holding expanded production andsales meetings with an aim to establish the optimal production and sales system• Logistics cost to sales ratio target successfully achieved• Shortening delivery lead time worldwide through the optimal alignment of
production bases

Diversity/
women inmanagement• Training courses for female employees and for promotion of diversity held
• Okoshi Juku, a female manager development program, held five times in total• Proportion of female officers and managers: 19.1% for FY Jan/2017 (as compared
to 16.7% for FY Jan/2015)• Utilization rate of one-month paternity leave (One Month Together): 100% for two
consecutive years© All rights reserved by PIGEON Corporation64

Progress of 12 Tasks of the 5th MTBP (3)Globalinformation
system

• Global Common Product category newly created (operational in FY Jan/2017)• Product codes/part codes for the Global Common Product category established(already covered 99%+ of all items)• Accurate and real-time collection and analysis of data from each business base

Logical work
process• Courses to develop the business skill set (skills include logical thinking,marketing, accounting and problem solving) made mandatory to employees intheir 20’s and 30’s
• Issues to be addressed over the training period, burden on the participants to thegroup training (particularly for those temporarily transferred to overseas
subsidiaries), and measurement of training effectivenessSalary increase• Ranked as a No. 1 pay raise company (in manufacturing segment) for two
consecutive years (FY Jan/15 and FY Jan/16) by Nikkei Sangyo Shimbun (Nikkei
Industrial Journal), and ranked No. 4 for FY Jan/17• Average overtime: 2.5 hours (FY Jan/17)• Targeted paid leave acquisition rate: 50% (30% for FY Jan/15, 44% for FY Jan/16
and 49% for FY Jan/17)

Global humanresource
development• Employees’ global communication skill strengthened (Over 60% of theemployees in his/her 20’s and 30’s now achieved 500 or higher score in TOEIC)• Global Leadership Program implemented twice• Introduction of global personnel system completed at Lansinoh and two othersubsidiaries in Singapore and Thailand• Education and training curriculum for employees Pigeon needs defined andcareer path developed© All rights reserved by PIGEON Corporation

65

Reference: Basis for Estimating our Discount Rate
Components to calculate our WACC of 5％
・ Market capitalization: 372,260 million yen (as of January 31, 2017)
・ Interest-bearing debt: 5,699 million yen
・ Interest rate: 0.3％
・ Tax rate: 30％
・ Risk-free rate: 0.063 (January 2017 average rate of the newly issued
10-year JGB)
・ Beta: 0.99 (based on TOPIX Indices available on December 6, 2016
for the preceding two years on a weekly basis)・ Market risk premium: 5.1％ (based on Ibbotson Associates’ data from1962 to 2015)＊Cost of equity: 5.1％

We have set the target ROIC of 20% or more (at the tax rate of 30%)
for the 6th Medium-term Business Plan.

© All rights reserved by PIGEON Corporation

66

Corporate Overview

Head 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.

© All rights reserved by PIGEON Corporation

67