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CEO Message

Michitaka Sawada
President and Chief Executive Officer

The Kao Group aims to become a "company with a global presence" as it works for both "profitable growth" and "contributions to the sustainability of the world."

I would like to thank you, our shareholders, for your longstanding, exceptional understanding and support of the Kao Group's business and corporate activities.

During the six months ended June 30, 2017, according to retail store sales data, the household and personal care products market in Japan, a key market for the Kao Group, shrank 1% on a value basis compared with the same period a year earlier. However, according to data on consumer purchasing that includes the e-commerce channel, the market grew 3%. Consumer purchase prices increased 1%. The cosmetics market in Japan including the e-commerce channel was flat, excluding inbound demand (demand from visitors to Japan).

Under these conditions, the Kao Group's sales and profits were strong. Sales of skin care products, sanitary products in Japan and Asia and the Chemical Business increased substantially. Profits also increased substantially due to more effective deployment of expenses and other factors in addition to the effect of increased sales in the Human Health Care Business.

Our interim cash dividend per share was 54 yen, an increase of 8 yen compared with the same period a year earlier.

Fiscal 2017 is important as the first year of the previously announced Kao Group Mid-term Plan "K20," and we made a good start in the first half of the year. In the second half, we expect a severe competitive environment, but the Kao Group will steadily implement the strategies of "K20" one by one as it works to achieve its eighth consecutive year of increases in sales and profits, and the fiscal 2017 forecast.

K20 Goals: Three Commitments

  1. Commitment to fostering a distinctive corporate image
  2. Commitment to profitable growth
    ・Continue to set new record highs for profits
    ・Aim for like-for-like1 net sales CAGR2 of +5% and an operating margin of 15%
    ・Three 100-billion-yen brands (Merries baby diapers, Attack laundry detergents, Bioré skin care products)
  3. Commitment to returns to stakeholders

Notes:

  1. Excluding the effect of currency translation, and adjusted to reflect adoption of IFRS 15 and revision of sales system.
  2. CAGR: Compound annual growth rate

It is becoming difficult to foresee all aspects - including the speed, magnitude and direction - of the various changes that are taking place worldwide. To deal with this situation, the Kao Group is conducting reforms under the slogan "Transforming Ourselves to Drive Change." In doing so, we aim to achieve "K20" and realize our goal of becoming a highly profitable global consumer goods company that exceeds 2.5 trillion yen in net sales, a 17% operating margin and a 20% ROE by 2030.

Furthermore, we at the Kao Group will work in unison, devoting ourselves to realizing our ambitious mission to "strive for the wholehearted satisfaction and enrichment of the lives of people globally and to contribute to the sustainability of the world" as set forth in the Kao Way, our corporate philosophy, as well as our corporate message, "enriching lives, in harmony with nature."

I request your continuing understanding and support of the Kao Group's business and corporate activities.

August 2017

President and Chief Executive Officer
Kao Corporation

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