Milbon Co., Ltd.
FY2017 First Quarter (December 21, 2016 – March 20, 2017)

Financial Results Presentation Materials

March 31, 2017
Copyright © 2017 Milbon. All rights reserved.

Table of Contents
P2

Consolidated Operating Results

P3

Consolidated Sales by Product Category

P9

Consolidated Statement of Earnings

P10

Consolidated Trends in Capital Expenditures and R&D Expenses

P11

Trends in Market Related Data, Trends in FPs

P12

Outlook of Milbon GroupP13

Outlook of Overseas Subsidiaries

Copyright © 2017 Milbon. All rights reserved.

1

Consolidated Operating Results (FY2017 3 months)
Sales increased, but profits declined due to a temporary rise in the cost of sales ratio associatedwith extension work on the Yumegaoka Plant(Unit: million yen)Amount
FY20163 months

FY20173 months

YoYcomparison(%)

Increase/Decrease

Net sales

6,708

6,898

189

102.8

Gross profit

4,562

4,544(18)99.6

SG&A expenses

3,637

3,757

119

103.3

Operating income

924786(138)85.1

Ordinary income

813717(96)88.2

Net income

546

538(8)

98.5

Copyright © 2017 Milbon. All rights reserved.

2

Consolidated Sales by Product Category [Hair Care Product]
Sales remained flat despite the introduction of new products under professional brands(FY2017 3 months)
FY2016 3 months(Unit: million yen)

FY2017 3 months

3,918

Increase/Decrease

3,924

YoY comparison (%)

6100.2• In professional brands that recognize generational perspectives, we introduced “Jemile Fran Salon Treatment” as a way to create
opportunities for women in their 20s to be made aware of a new salon treatment. We also added the “PLARMIA Enriched Series” toaddress issues experienced by women in their 50s who feel uncomfortable with their hair. However, sales in the hair care productcategory did not grow as expected, because proposal activities were concentrated on new hair coloring products..

NewJemile Fran
Salon Treatment

PLARMIA
Enriched

A salon treatment that provides thoroughcare extending to the inner part of the hair ina salon service, combined with once-a-weekcare at home to maintain the effect.
(Unit: million yen)

Shampoo and treatment that provide the feelingof elasticity demanded by women in their 50s
who are no longer satisfied with simple
moisturizing.
(Unit: million yen)

FY target

Results

Prog. rate

5008817.6%

Copyright © 2017 Milbon. All rights reserved.

Feb. 1 Debut

3FY target

Results

Prog. rate

500

8917.8%Mar. 1 Debut

A Premium Brand, Aujua
Higher sales maintained amid the challenging market environment

Number of Aujua salons
FY2016 year-end

2,779 salons

A tailor-made hair care program that nurtures beauty of each and everyone

FY2017 Q1-end

2,869 salons

Sales*) (FY2017 3 months)
FY2016 3 months

FY2017 3 months

1,019Brand concept

A hair care brand that nurtures thebeauty of Japanese women’s hair,born from the climate, culture andhair characteristics of Japan

What is Aujua?

A hair care series that responds tohair concerns by creating andevolving a program just for one
individual. This is Aujua.

1,038

Comparison
with FY2016
year-end

103.2%(Unit: million yen)

Trends in sales & number of salons

YoYcomparison(Million yen)

101.8%

3,500

5,000

3,000
2,500

4,000

Product range

2,000

3,000

A wide-ranging line-upthat suits the hair textureof individual customers
・4 series

1,500

2,000

1,000

1,000

500
00Aging care seriesHair care series
Scalp care series
Climatic care series

販売高Sales・15 lines ・96 items*) Figures are on a non-consolidated basis.

Copyright © 2017 Milbon. All rights reserved.

(Number of salons)

6,000

4

取引件数
Number of salons

A Premium Brand, “milbon”
Rolled out overseas in 5 countries

Brand concept
A system hair care brand that cultivates the “unique beauty” ofeach individual, with 360°shiny hair

What is “milbon”?
We conducted an in-depth analysis of the inner structure of
the hair of women from 20 countries around the world, using
our proprietary CT scanning technology, and discovered SSVs
(Sticked-Shaped Voids). SSVs are hollow, tubular gaps thatform in damaged hair. Accordingly, we developed a hair careline containing ingredients capable of repairing such hollowed
out hair and increasing the density within each strand of hair.
“milbon” is a system hair care product for developing shiny,
beautiful hair from the core.

Number of salons
FY2017 Q1-end・・・・・・・・・・・・・・・2,540 salons

Sales*)FY2017 3 months・・・・・・・・・・255 million yen*) Figures are on a non-consolidated basis.

Copyright © 2017 Milbon. All rights reserved.

5360° BEAUTIFUL HAIR
Launched in FY2016—rolled out
consecutively in 12 countries worldwide

Consolidated Sales by Product Category [Hair Coloring Product]
New products aimed at the young demographic were well received,
driving sales of hair color products(FY2017 3 months)(Unit: million yen)

FY2016 3 months

FY2017 3 months

2,441

Increase/Decrease

2,667

YoY comparison (%)

225

109.2

• We introduced a new brand, “ORDEVE Addicthy,” to respond to the desires of women who want to continue to display freedom in theircolor design. It is performing well, thanks to a positive reception for its ability to easily express color by eliminating red tones.

NewORDEVE
Addicthy

ORDEVE’s additional color
FEMININITY LINEErases red-tinged brown with high saturation
blue. With clear and transparent color
expression, it lets customers freely realize
individual hair color designs.
(Unit: million yen)

FY target

Results

Prog. rate

755

414

54.9%

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Expresses stylish femininity to suit eachindividual through “transparent pink” withadjustable saturation.
(Unit: million yen)Feb. 1 Debut

6FY target

Results

Prog. rate

40011027.7%

Feb. 1 Debut

A Premium Organic Brand, Villa Lodola (1)Villa Lodola Color continues to be well received and to drive sales

Number of Villa Lodola salons
FY2016 year-end

5,632 salons

FY2017 Q1-end

5,909 salons

Sales (FY2017 3 months)
FY2016 3 months

104.9%(Unit: million yen)

FY2017 3 months

161

Comparison
with FY2016
year-end

202

YoYcomparison(Million yen)

124.8%

Brand concept
Nurtured in the soil of Italy, these gifts from nature bring out theauthentic beauty of your hair and scalp.

What is Villa Lodola?
Based on the concept of “Beauty, the Organic Way,” Villa Lodola is atrue organic brand that thoroughly cares about the naturalenvironment not only for the product itself but also in its container,
production phase and promotional tools. All of the products are
certified by ICEA, an Italian authority.
Villa Lodola supports organic choices, with hair care products
nurtured in the soil of Italy, bringing out true beauty.

Copyright © 2017 Milbon. All rights reserved.

Trends in sales & number of salons(Number of salons)

1,200

12,0001,000

10,000

800

8,000

600

6,000

400

4,000

200

2,000002012

2013

2014
Sales
販売高

72015

2016target
2017目標Number of salons
取引件数

A Premium Organic Brand, Villa Lodola (2)Core Product
Villa Lodola ColorWith 92% natural ingredients, the product’s
formulation utilizes the power of plants. It
brings comfort of an organic product acrossall aspects, including during application, thefinish and continued use.
(Unit: million yen)

FY target

Results

Prog. rate

516

143

27.8%

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FY2015 Debut

8Consolidated Statement of Earnings (FY2017 3 months)<Breakdown of net sales by product category>(Unit: million yen)

(Unit: million yen)Amount
FY20163 months

Sales

Cost of sales

6,708
2,145

FY20173 months

6,898
2,354

Increase/
Decrease

YoYcomparison
(%)

189

102.8

208

109.7 *1

Gross profit

4,562

4,544(18)

99.6

SG&A
expenses

3,637

3,757

119

103.3 *2

Operatingincome924

786(138)

85.1

Ordinary
income813

717(96)88.2

Net income

546

538(8)

98.5

Copyright © 2017 Milbon. All rights reserved.

% totalsales

YoY
comparison (%)

FY20163 months

FY20173 months

YoYchangeHair careproducts

3,918

3,924

56.9

6100.2

Hair coloringproducts

2,441

2,667

38.6

225

109.2

Permanent wave
products

307

260

3.8(47)

84.7

Others

41

46

0.7

4111.9<Major factors for the increase/decrease>*1 Cost of sales: Increase in depreciation and amortization
associated with start of operations at new Yumegaoka
Plant, etc.
*2 SG&A expenses:• Higher personnel expenses due to an increase inpersonnel and salary hikes.
• Increase in sales promotion costs associated withcreation of sales promotion tools, etc.

Supplemental Info. – Return to shareholders(Unit: yen)
<Dividends>
FY2015

9FY2016

FY2017 planEnd of 2Q

353840End of FY

3940

42

Total

74

7882

Consolidated Trends in Capital Expenditures and R&D Expenses(Unit: million yen)

FY2013

FY2014FY2015FY2016FY2017
Jan.–Mar.

FY2017
Plan*)

1,680

1,028

2,779

4,262

268

1,760

878

1,004

1,033

1,077

266

1,240

Amount969

1,168

1,214

1,232

310

1,372% to sales

4.1%

4.6%

4.4%4.2%

4.5%

4.2%

Category
Capitalexpenditures
Depreciation andamortization
R&D exp.

FY2017 CAPEX Main Items• Development expenses for sales management system• Establishment of a new domestic base (Shizuoka Sales Office)• Interior, equipment, etc., due to relocation of domestic bases(Fukuoka Branch, Okayama Sales Office, Yokohama Sales Office)*) Figures reflect the revision of operating forecasts announced on February 24.
Copyright © 2017 Milbon. All rights reserved.

10Trends in Market Related Data, Trends in Fieldpersons (FPs)
Market trends (Japan)
2011

2012

2013

2014

2015

Number of salons(salons)

228,429

231,134

234,089

237,525

240,299―

Number of hair
dressers (people)

471,161479,509487,636496,697504,698―

37,39537,023

Number of beauty
customers(thousand people)

39,076

39,64038,46837,847

2016

Remarks(As of Oct. 1)

Ministry of Health, Labour and Welfare, Report on Public
Health Administration and Services
Number of beauty salon facilities / number of employees(year-end)
Statistics Bureau, Ministry of Internal Affairs andCommunications:
Population statistics as of October 1st of each year
Population statistics for females aged 15 to 64

Fieldpersons trends (by country)(Number of FPs / As of the beginning of the fiscal year (December 21))201320142015

2016

2017

JAPAN
Milbon Co., Ltd.

210216237249104104100102

USA
MILBON USA, INC.

121212936405363

CHINA
Milbon Trading (Shanghai)Co., Ltd

1617181817253640

KOREA
Milbon Korea Co., Ltd.

1717192041

64

7580

THAILAND
Milbon (Thailand) Co., Ltd3666681514712161963464247Others*)

258

1219Upper column: Number of FPs (persons)Lower column: Sales per FP (million yen)
8 FPs expected to be assigned on March21, 201726 FPs expected to join in April 2017
(The above 34 FPs are not included in theleft chart.)

23924*) Taiwan, Hong Kong, Vietnam, Malaysia, Turkey, Indonesia, the Philippines, Singapore and others
Copyright © 2017 Milbon. All rights reserved.

11Outlook of Milbon Group
Overseas continues to drive growth

Number ofemployees*1)

Sales (million yen)
FY20163 months

Number ofFPs*1)

JapanMilbon Co., LtdUSA595256
16

MILBON USA, INC13CHINA

28

Milbon Trading(Shanghai) Co., Ltd.

20

KOREA

32

Milbon Korea Co., Ltd.

23

THAILAND

67

Milbon (Thailand) Co.,Ltd.

8Others*2)

2724

FY20173 months

YoY
comparison(%)

Startoperations

Forex rates
FY2016FY2017

5,739

5,856

102.0

1960

--147

145

99.0

2004

1 dollar =121.46109.56

154

169

109.3

2009

1 yuan =
18.93

16.17

408

427

104.7

2009

1 won =
0.1043

0.0939

1825

141.0

2013

1 baht =
3.37

3.29

240

273

113.8---*1) Number of employees and FPs are as of the end of the period under review.
*2) Taiwan, Hong Kong, Vietnam, Malaysia, Turkey, Indonesia, the Philippines, Singapore and others
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12Outlook of Overseas Subsidiaries (1)USA (MILBON USA, Inc.)
Efforts to promote the switchover to the premium brand “milbon,” launched in June 2016, have been progressing
smoothly. Total sales amount for “milbon” and switchover target products grew by 26.6% year on year on a local currency
basis.
In Manhattan, a direct sales area, we carried out activities targeting high-end salons and expanded our in-store sharethrough training at salons that introduced “milbon.”In addition, sales have grown steadily at distributor TruBeauty as a result of enhancements to the system, including
increasing personnel with knowledge of products and beauty technologies.

CHINA (Milbon Trading (Shanghai) Co., Ltd.)We have deepened our relationships with top salons in direct sales areas such as Shanghai through the efforts offieldpersons, and the number of new customer salons is increasing. Furthermore, in distributor areas, educational activities
by fieldpersons are taking root among distributor staff and leading to results.
By product, ORDEVE (fashion color) is performing well partly due to the introduction of additional colors. In hair careproducts, sales have been steady for Linkage-μ (mu) (salon treatment).

KOREA (Milbon Korea Co., Ltd.)
Aging care brand Plarmia saw steady sales due to the launch of a new product, Volumizer .
In the period under review, we began full-scale sales of Aujua, which was test-marketed the previous year. Reception
has been positive at salons where it has been introduced, and new contracts were concluded with 10 salons in the period
under review. Going forward, we plan to make new contracts with 10 salons every three months.
We also held an education-type event, “DA Korea,” which was a big success, attracting 120 designer entrant teams aswell as 1,212 audience members.

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13

Outlook of Overseas Subsidiaries (2)THAILAND (Milbon (Thailand) Co., Ltd.)[Sales division]
Although the launch of premium brand “milbon” was delayed due to the demise of King Bhumibol Adulyadej of Thailand,we are starting to see positive effects as a result of focusing our activities on a single distributor. In addition, our brandimage is improving as the number of A Class contracting salons grows, and cultivation for hair color products is
progressing steadily through seminars at distributor studios.

[Production division]
The manufacturing cost ratio has improved more than planned due to greater speed in the hair color production line anda higher local procurement rate for raw materials. In addition, production volume increased by 29% year on year on a local
currency basis.

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14

Statements concerning the future such as the earnings forecasts given in thisdocument are based on information currently in the possession of the Company andon assumptions that the Company considers reasonable.