Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

Summary of Financial Results Conference Call for Q1 FY Dec. 2023

[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.
[Date]

Thursday, May 11, 2023

[Speakers]

2 speakers
Yasuo Kanatsuka
Sho Hiratsuka

16:40 - 17:30 (JST)Manager, Business Strategy Department

Associate Manager, Business Strategy Department

1 / 10Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

The Company ended the first quarter with an increase in sales and operating income on aconsolidated basis. Both sales and gross profit grew in the high single digits, driven by the China
business and Lansinoh business, and with a tailwind from foreign exchange effects.
Net sales were 23.6 billion yen, an increase of 8.7% over the previous year, or about 1.9 billion yen.
Gross profit was 11.49 billion yen, up 9.7% from the previous year, or about 1.0 billion yen.
Operating income was 3.4 billion yen, up 13.7% or approximately 0.4 billion yen from the previousyear, as the increase in SG&A expenses was offset by the gross profit from increased sales. The
operating income margin also improved by 0.6 percentage points year on year.
However, with regard to ordinary income, due to the impact of the previous period's difference inforeign exchange gains/losses and other factors, ordinary income decreased by 3.7 billion yen, orapproximately 4.5% from the previous period, and net income for the quarter ended at 24.3 billion
yen, a decrease of approximately 7%, or 0.17 billion yen year on year.

2 / 10Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

Consolidated operating income in the first quarter was up year on year due to the increase in grossprofit with higher revenues however promotional expenses and travel and transportation expenses
associated with the reopening from Covid-19 were increased. Against the company’s forecast, aportion of sales promotion and other expenses were underspent in Q1 and those expenses arescheduled to be used in the second quarter.

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In terms of sales by business segment in the first quarter, all businesses achieved year-on-yearincreases. Regarding gross profit, China, Singapore, and Lansinoh businesses posted increases.
As for gross profit margins, the Japan and Singapore business were impacted by higher
procurement prices and other factors. As for segment profit, with the exception of the Japanbusiness, all businesses increased from the previous year.

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Summary by Business.
Japan Business. In the baby care business, sales of consumables such as baby food, beverages,and wet tissues increased from the previous year. On the other hand, however, sales of nursing
bottles and nipples were lower than the previous year in reaction to the itinal shipment of newmodels in the Q1 last year. Baby skincare sales also suffered a reactionary decline due to therenewal of the Basic Series in the Q1 of last year, but on the other hand, the Momo-no-ha (Peachleaves) Series saw increased demand, and overall skincare sales ended the year at almost thesame level as the previous year.
New products include ME. by Pigeon, which has been on sale since the end of this February. Thisline includes a total of five products, including a massage oil for caring for perineal before and afterchildbirth. This series is based on the same concept as the Lansinoh prenatal and postpartum careproducts.
In addition, starting from this February, we have implemented price revisions in our Japan businessfor baby-related products, including nursing bottles and nipples, and for some health and elder careproducts.

5 / 10Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

China Business. Sales in mainland China ended the year with an increase of 0.6% over theprevious year. Distribution of new models of nursing bottles penetrated throughout the country, andreplacement demand for nipples also shifted completely to the new models. And gross profit margin
also improved by 1.7 percentage points from the previous year, thanks to higher sales of nursing
bottles, nipples and skincare. In addition, South Korea is off to a good start as planned, with a 33%
increase in Q1 sales over the previous year due to the renewal of the domestic distribution system
this year.

6 / 10Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

Singapore Business. Net sales grew by double digits from the previous year, partly due to theimpact of foreign exchange rates.
In terms of products, the ratio of sales of wide-neck nursing bottles also grew year-on-year due tothe strengthening of branding and SKU expansion, which will be the focus of the 8th Mid-TermBusiness Plan. While gross profit increased 7% y-o-y due to increased sales, the gross profit
margin deteriorated by 2.4 percentage points y-o-y due to decreased sales at factories and soaring
raw material prices.
Lansinoh Business. The Lansinoh Group ended the year with sales up 12% over the previous year,and North America also ended the year with sales up 12% year-on-year. In Europe, sales inBenelux and Germany grew from the previous quarter; UK ended at the same level as the previousquarter.
Sales of prenatal and postpartum care products are growing, especially in North America, and theLansinoh Group as a whole achieved double-digit growth in sales compared to the previous year.
The gross profit of the Lansinoh business grew significantly from the previous fiscal year due to theimpact of increased sales. The change in the product mix also contributed to a 0.7 percentage point
improvement in the gross profit margin.

7 / 10Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

From page 8 of the supplemental material onward, sales by region for the Pigeon and Lansinohbrands and EC ratios for major markets will be shown, so we will not explain them.

Q&As*Questions and answers are listed by business category.
[Group Consolidated]
Q. What was the impact of foreign exchange rates on consolidated results in the Q1?
A. In the Q1, there was a positive impact of approximately 0.6 billion yen on consolidated net sales,
0.4 billion yen on gross profit, and 60 million yen on ordinary income compared to the previousyear's exchange rate.

Q. What was the impact of the sharp rise in raw material prices at the end of Q1? Is there anychange from the company's full-year forecast?
A. As of the end of Q1, we estimate that the impact of raw material price hikes, including the effectof exchange rates, was about 0.3 billion yen for the entire group compared to the previous year. We
expect the full-year impact of the cost hike to be slightly more than 1 billion yen, and we see the Q1
impact is within the our expected range.

Q. How did consolidated sales and profit progress against company’s forecast?
A. Both net sales and operating income in Q1 were above the company’s forecast. Net sales ofJapan, China, and Lansinoh businesses was slightly better than expected, the Singapore businessmade weaker progress than our forecast. For example, in mainland China, the company had
assumed that the re-expansion of Covid-19 would have a large impact, but in fact the market
environment improved slightly from around March. Also, although the company did not anticipate
any inbound demand from Japan, there were positive factors such as growth in overseas demand
from cross-border e-commerce.
Operating income also exceeded expectations in Q1, but this was mainly due to some of the SG&Aexpenses (mid-single-digit billion yen) planned for Q1 being unused and carried over to Q2.

8 / 10Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

Q. Do you plan to spend all carried over SG&A expenses from in Q2?
A. For example, there were unused portions of SG&A expenses in Japan, China, Singapore, andthe Lansinoh business in Q1 due to delays in the timing of promotional activities. Since these
unused portion of SG&A expenses (mid-single-digit billion yen for the entire group) will be
implemented in Q2, we expect that SG&A expenses in Q2 alone will be much higher than our initial
forecast.

[Japan Business]
Q. Is there a recovery in inbound demand?
A. Our pre-Covid inbound demand was mainly from mainland Chinese tourists, and as of the end ofQ1, we did not feel any recovery in inbound demand at all. On the other hand, we understand thatoverseas demand, centered on Momo-no-ha skincare, including cross-border e-commerce demand,has been growing compared to the previous quarter.

[China Business]
Q. How do you see 6% of sellout decrease y-o-y?
A. Considering the impact of the re-spread of Covid-19 from the elimination of the zero covid policy
at the end of last year to the beginning of this year, the Q1 results were within our expectations. Bychannel, EC sales grew 3% y-o-y, while offline sales declined 21% y-o-y. The offline channel had
been on a downward trend since the Covid-19 pandemic, but in Q1 last year, a local lockdown
began in mid-March in mainland China, and customers temporarily purchased more items at offline
stores to compensate for delivery delays on the EC side. As a result, offline store sellouts grew byplus 7% in Q1 2022 compared to the same period in 2021, making offline particularly hard in Q1
this year.

[Singapore Business]
Q. What is the background of underperform of sell-in in India and Malaysia y-o-y?
A. Conditions differ from market to market, but the overall trend in Southeast Asia and India in 2022
was that sell-in was ahead of sell-out due to brisk purchasing activity on the distribution side in
anticipation of a recovery in Covid-19. However, recently there have been changes in the externalenvironment, such as rising inflation, and in addition to concerns about the impact on personal
consumption, there have been moves on the part of some distributors to reduce inventories, and as9 / 10

Pigeon Corporation_Dec. 2023_Q1_Financial Results Briefing Summary

a result, sell-in in major countries in Q1 was lower than in the previous year. On the other hand,sell-outs are growing y-o-y, and we will continue to focus on increasing sell-outs to recover ourbusiness performance.
[END]

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