Kao releases consolidated financial results for the six months ended June 30, 2023

Although the world has been returning to conditions prior to the COVID-19 pandemic, the business environment remained unclear due to geopolitical risk in Europe, a slowdown in the previously growing market of China, and persisting high costs due to inflation.

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 June 2023 compared with the same period a year earlier.

Net sales increased 0.6% compared with the same period a Click year earlier to 738.5 billion yen. Currency translation accounted for a 2.9% increase and net sales decreased 2.3% on a like-for-like basis (breakdown of the decrease: 2.0% decrease by volume, 0.3% decrease by price). Operating income was 25.9 billion yen, a decrease of 27.8 billion yen compared with the same period a year earlier, due to recording 8.6 billion yen in structural reform expenses, and core operating income was 34.5 billion yen, a decrease of 19.2 billion yen. Income before income taxes was 28.6 billion yen, a decrease of 31.8 billion yen. Net income was 17.7 billion yen, a decrease of 22.0 billion yen. Results exceeded the Kao Group’s plan in the Consumer Products
Business but fell short in the Chemical Business due to the impact of delayed market recovery and other factors.
 
Consumer Products Business

Sales increased 3.6% compared with the same period a year hereearlier to 576.9 billion yen. Currency translation accounted for a 2.2% increase and sales increased 1.4% on a like-for-like basis (breakdown of the increase: 0.6% decrease by volume, 2.0% increase by price). As the COVID-19 pandemic continued toward its conclusion, markets to view the full report. worldwide steadily recovered, but there was a market slowdown in China, which had previously been driving growth. In addition, although raw material prices appeared to be settling down somewhat after a temporary surge, they remained at a high level. Amid these circumstances, the Kao Group implemented strategic price increases and invested in new and improved products as planned, and these initiatives showed results.
 
In Japan, sales increased 2.4% to 368.1 billion yen. In Asia, sales increased 0.2% to 113.4 billion yen. On a like-for-like basis, sales decreased 4.4%. In the Americas, sales increased 14.4% to 60.9 billion yen. On a like-for-like basis, sales increased 5.3%. In Europe, sales increased 11.4% to 34.6 billion yen. On a like-for-like basis, sales increased 4.0%. Operating income decreased 19.1 billion yen compared with the same period a year earlier to 14.3 billion yen due to factors including the impact of recording 8.6 billion yen in structural reform expenses, which included an impairment loss, although the implementation of strategic price increases compensated for rising raw material prices. Core operating income decreased 10.5 billion yen to 22.8 billion yen.
 
Health and Beauty Care Business

Sales increased 6.8% compared with the same period a year earlier to 188.8 billion yen. Currency translation accounted for a 3.7% increase and sales increased 3.1% on a like-for-like basis (breakdown of the increase: 1.2% increase by volume, 1.9% increase by price). Sales of skin care products increased. In Japan, UV care and other seasonal products and a new makeup remover contributed to sales, which 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 were basically unchanged. In Japan, new Essential brand products performed steadily amid severe market competition. In products for hair salons in the Americas and Europe, sales of
the ORIBE brand for high-end hair salons in the United States were strong, mainly driven by e-commerce sales.
 
Cosmetics Business

Sales decreased 0.2% compared with the same period a year earlier to 115.8 billion yen. Currency  translation accounted for a 1.4% increase and sales decreased 1.6% on a like-for-like basis (breakdown of the decrease: 0.2% decrease by volume, 1.4% decrease by price). Amid market recovery in Japan, sales remained strong, with continuing double-digit growth for the Kao Group’s “G11” global strategy brands, including the KANEBO prestige skin care and makeup and KATE makeup brands. In China, sales decreased. Sell-out for freeplus, a hypoallergenic brand containing Japanese and Chinese botanical extracts, remained strong after its rebranding, but it was not enough to compensate for the first-quarter decline in sales. In Europe, sales decreased amid a decline in consumption due to inflation.
 
Operating income was negative 2.5 billion yen, a decrease of 4.7 billion yen from the same period a year earlier. Core operating income decreased 4.2 billion yen to negative 2.0 billion yen.
 
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