Kao releases consolidated financial results for the three months ended March 31, 2023

As the world began to emerge from the threat of COVID-19, the global economy was also on a gradual recovery track. However, the business environment remained unclear as high costs persisted due
to inflation that began in 2022. 

According to retail sales and consumer purchasing survey data, the consumer products (household and personal care products and cosmetics) market in Japan, which is the Kao Group’s key market, grew during the period from January to March 2023 compared with the same period a year earlier. 

Amid these circumstances, the Kao Group started various initiatives based on the three management policies it announced in February 2023: change to a resilient business structure independent of market conditions; strengthen and expand strategic businesses globally; and generate profits from businesses that grow rapidly by anticipating change. 

Net sales increased 0.3% compared with the same period a year earlier to 347.8 billion yen. Currency translation accounted for a 4.1% increase and net sales decreased 3.8% on a like-for-like basis (breakdown of the decrease: 3.4% decrease by volume, 0.4% decrease by price). Operating income was 7.3 billion yen, a decrease of 15.7 billion yen compared with the same period a year earlier, and income before income taxes was 8.4 billion yen, a decrease of 17.2 billion yen. Net income was 5.4 billion yen, a decrease of 13.4 billion yen.  Results were nearly as planned in the Consumer Products Business, but fell short of the plan in the Chemical Business due to the impact of delayed market recovery and other factors.
 
Consumer Products Business

Sales increased 0.9% compared with the same period a year earlier to 265.3 billion yen. Currency translation accounted for a 3.2% increase and sales decreased 2.3% on a like-for-like basis (breakdown of the decrease: 3.7% decrease by volume, 1.4% increase by price).As the pandemic appeared to subside and economies around the world normalized, there was a gradual market recovery, but it lacked vigor. In particular, the market in China remained weak. In addition, raw material prices rose compared with the same period a year earlier. Amid these circumstances, the Kao Group implemented strategic price increases and concentrated investment in strategic brands as planned, and these initiatives began to show results. In Japan, sales decreased 1.9% to 163.1 billion yen.In Asia, sales decreased 5.3% to 55.6 billion yen. On a like-for-like basis, sales decreased 12.0%. In the Americas, sales increased 28.3% to 29.6 billion yen. On a like-for-like basis, sales increased 13.7%. In Europe, sales increased 13.4% to 16.9 billion yen. On a like-for-like basis, sales increased 6.0%. Operating income decreased 9.8 billion yen compared with the same period a year earlier to 3.4 billion yen due to the impact of rising raw material prices and other factors.
 
Health and Beauty Care Business
 
Sales increased 8.0% compared with the same period a year earlier to 86.9 billion yen. Currency translation accounted for a 5.2% increase and sales increased 2.8% on a like-for-like basis (breakdown of the increase: 1.3% increase by volume, 1.5% increase by price). Sales of skin care products increased. In Japan, growth in sales of UV care and other seasonal products exceeded market growth, and market share also increased. In the Americas, sales increased due to the resolution of the logistics disruptions that had occurred in the same period a year earlier. Sales of hair care products increased. In Japan, severe market competition continued. In products for hair salons in the Americas and Europe, sales of ORIBE, a brand for high-end hair salons in the United States, performed strongly mainly driven by e-commerce sales and sales of the Goldwell professional hair care brand remained steady. Sales of personal health products decreased due to market shrinkage as opportunities for going out increased. Operating income decreased 0.4 billion yen compared with the same period a year earlier to 5.8 billion yen.
 
Cosmetics Business
 
Sales decreased 8.0% compared with the same period a year earlier to 51.8 billion yen. Currency translation accounted for a 2.1% increase and sales decreased 10.1% on a like-for-like basis (breakdown of the decrease: 8.0% decrease by volume, 2.1% decrease by price). In Japan, the market recovered. Amid this recovery, the Kao Group’s “G11” global strategy brands, including the KANEBO prestige skin care and makeup and KATE makeup brands, performed well, but sales decreased due to structural reforms and other factors. In China, sales decreased substantially due to factors including reduced shipments ahead of the launch of new products for freeplus, a hypoallergenic brand containing Japanese and Chinese botanical extracts. In Europe, sales decreased, impacted by factors including a decrease in consumption due to inflation. Operating income was negative 4.5 billion yen, a decrease of 4.8 billion yen from the same period a year earlier.
 
Outlook
 
At present, an economic recovery is expected, with factors including market recovery in China and other countries, as well as inbound demand in Japan. Under these circumstances, the Kao Group will proactively implement strategic price increases, boost the ratio of high-value-added, highly profitable products in its product mix, and concentrate investment in strategic brands. Moreover, the Kao Group aims to achieve the figures announced in its forecast while increasing Economic Value Added (EVA*) through effective capital investment. Therefore, there is no change from the forecast of consolidated results announced on February 2, 2023.
 
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