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Financial Overview for the 2nd Quarter of Fiscal Year Ending March 31, 2013
Yutaka KobayashiPresident & Chief Operating OfficerKobayashi Pharmaceutical Co., Ltd.
November 6, 2012
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Today's Topics
1. Financial Results for the 2nd Quarter of Fiscal Year Ending March 31, 2013 and Financial Forecasts for Fiscal Year Ending March 31, 2013
2. Kobayashi Pharmaceutical Group’s CSR Activities
3. Efforts to Promote the Health Care Business
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Financial Results for the 2nd Quarter of Fiscal Year Ending March 31, 2013 and
Financial Forecasts for Fiscal Year Ending March 31, 2013
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Highlights of Consolidated Financial Results for the First Six Months of Fiscal Year Ending March 31, 2013
Q2 of FY ended March 2012
Q2 of FY ending March 2013
Increase (Decrease)
Amount Margin Amount Margin Amount Percentage
Net sales Million yen
64,023%
-
Million yen
58,253%
-
Million yen
(5,770)%
(9.0)
Gross profit 37,956 59.3 34,699 59.6 (3,257) (8.6)
Operating income 10,710 16.7 8,237 14.1 (2,473) (23.1)
Ordinary income 10,961 17.1 8,830 15.2 (2,130) (19.4)Net income 6,150 9.6 7,120 12.2 969 15.8EPS (yen) 150.19 - 173.88 - 23.69 15.8
Dividend per share (yen) 35 - 39 - 4 11.4
Net sales decreased due to the transfer of shares in Kobayashi Medical and poor sales of summer-season products. Operating income declined due to an increase in investments in marketing, such as fostering businesses with growth potential and brands. Interim dividend per share grew by 4.0 yen.
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Changes in Consolidated Results
582640
0
200
400
600
800
Q2 of FYended March
2009
Q2 of FYended March
2010
Q2 of FYended March
2011
Q2 of FYended March
2012
Q2 of FYending March
2013
107
82
16.7
14.1
0
30
60
90
120
150
Q2 of FY endedMarch 2009
Q2 of FY endedMarch 2010
Q2 of FY endedMarch 2011
Q2 of FY endedMarch 2012
Q2 of FY endingMarch 2013
0
3
6
9
12
15
18Operating incomeOperating margin
Net sales decreased by 9% due to the transfer of shares in Kobayashi Medical and poor sales of products for easing the heat.
Net sales Operating income(100 million yen) (100 million yen) (%)
Down 9.0%
Down 23.1%
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Changes in Consolidated Results(Excluding the effects of the transfer of shares in Kobayashi Medical)
582
609
0
200
400
600
800
Q2 of FYended March
2009
Q2 of FYended March
2010
Q2 of FYended March
2011
Q2 of FYended March
2012
Q2 of FYending March
2013
105 82
16.7
14.1
0
30
60
90
120
150
Q2 of FY endedMarch 2009
Q2 of FY endedMarch 2010
Q2 of FY endedMarch 2011
Q2 of FY endedMarch 2012
Q2 of FY endingMarch 2013
0
3
6
9
12
15
18Operating income
Operating margin
* Kobayashi Medical's net sales and operating income for the period June to September 2011 in Q2 of FY ended March 2012 are excluded.
Net sales Operating income(100 million yen) (100 million yen) (%)
Down 4.4%
Down 21.6%
* 3,100 million yen
* 200 million yen
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82
2.55.52
107
220 7.5
0.5
0
20
40
60
80
100
120
Factors for a decrease in operating income
Factors for an increase in operating income
Effects of the transfer of shares in Kobayashi
Medical
GP SG&A expenses
Analysis on Increase (Decrease) in Operating Income
(100 million yen)
Operating income
for Q2 of FY ended
March 2012
Decline in sales and change in
product mix
Cost reduction
efforts
Rise in raw material prices
Loss on disposal of inventories
etc.
Sales promotion & advertising expenses
Other sales promotion expenses
Operating income
for Q2 of FY ending
March 2013
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Consumer Products Business
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Changes in Net Sales and Operating Income
523548
0
200
400
600
Q2 of FYended March
2009
Q2 of FYended March
2010
Q2 of FYended March
2011
Q2 of FYended March
2012
Q2 of FYending March
2013
105
80
19.2
15.4
0
30
60
90
120
150
Q2 of FY endedMarch 2009
Q2 of FY endedMarch 2010
Q2 of FY endedMarch 2011
Q2 of FY endedMarch 2012
Q2 of FY endingMarch 2013
0
5
10
15
20Operating incomeOperating margin
Net sales Operating income(100 million yen) (100 million yen) (%)
Net sales and operating income decreased due to poor sales of products for easing the heat and an increase in investment such as adverting expenses. Sales of new products released in autumn 2012 and overseas business grew steadily.
Down 4.6%
Down 23.4%
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Sales by Product Category
35
39
22
157
72
80
116
39
46
23
162
79
79
118
0 20 40 60 80 100 120 140 160 180
Body warmers
Food products
Household sundries
Deodorizing airfresheners
Sanitary products
Oral hygiene products
Pharmaceutical products
Q2 of FY ended March2012Q2 of FY ending March2013
Up 1.3%
Down 6.2%
Down 3.1%
(100 million yen)
Sales of sanitary products declined due to poor sales of products for easing the heat. Recent data showed sales of deodorizing air fresheners at the store front were on a rising trend.
Down 1.7%
Down 8.9%
Down 14.9%
Down 8.7%
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0
200
400
600
800
1,000
1,200
1,400
April May June July August September 0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Sales in 2011 Sales in 2012
Average temperature in 2011
Average temperature in 2012
<Change in sales of products for easing the effects of heat>
Source: Shipments of products for easing the effects of heat including Netsusama Series, Shirt Cool, Necchu Taisaku Series
Sales of reusable products, such as Gel Mat, were sluggish, because temperature did not increase greatly in June and July, a business opportunity for summer-season goods.
(℃)(Million yen)
Poor Sales of Products for Easing the Effects of Heat
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Shoshugen Kaoru Stick (new items released in April and September 2012):The Company achieved product sales totaling 550 million yen.
Remake in autumn 2011 Released in April 2012 Released in September 2012
Color Select Hibiya Kadan series Fruit Select
Collaborated with Hibiya Kadan Added products with citrus scent Added products with Colored oil and stylish containers
The product gained favorable reception from customers because of its high quality oil and stylish container design.
The Company conducted a sales campaign in collaboration with Hibiya Kadan to boost store front sales.
Update on Sales of New Products and Main Brands
<Conducted a store front sales campaign>
・ August 29, 2012 to October 31, 2012
・ The Company collaborated with Hibiya Kadanand presented specially-prepared flowers to customers
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Expanding production capacity and formulating new sales strategycentering on body warmers
The U.S.
China
Topics on Overseas Business
■ The Company announced the construction of its second plant in Hefei, Anhui Province.Enhancing local production capacity (scheduled to be completed in September 2013)
■ The Company started marketing affordable body warmers.Expanding sales at urban districts on the outskirts of large cities in inland areas (Products were shipped from August 8, 2012)
■ The Company acquired Grabber, Inc., a body warmer manufacturer, in January 2012. Aiming to generate synergy effects through cross-licensing with HeatMax, Inc.
■ HeatMax, Inc. constructed a new plant.Becoming a production base to promote the North American business (completed in August 2012)
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Focusing on Lowering Returns Rate and Loss on Disposal
11
18
2.5
2.5
0
10
20
30
40
50
FY ended March2007
FY ended March2008
FY ended March2009
FY ended March2010
FY ended March2011
FY ended March2012
Q2 of FY endingMarch 2013Q
0
1
2
3
4
5Loss on disposalReturns rate
(%)(100 million yen)
The Company will continue to strictly control returns, inventories and disposal of goods.
9
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Mail Order Business
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Changes in Net Sales and Operating Income (Loss)
49 49
0
20
40
60
Q2 of FYended March
2009
Q2 of FYended March
2010
Q2 of FYended March
2011
Q2 of FYended March
2012
Q2 of FYending March
2013
-1.2-0.5
1.5
-5
0
5
Q2 of FY endedMarch 2011
Q2 of FY endedMarch 2012
Q2 of FY endingMarch 2013
Net sales Operating income (100 million yen) (100 million yen)
To acquire new customers, the Company will further enhance advertising through the Internet.Although sales of skin care products grew steadily, the Company struggled to increase sales of nutritional supplements. The Company will focus on development of nutritional supplements.
Down 0.8%
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Medical Devices Business
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Changes in Net Sales and Operating Income (Loss)
18
53
0
10
20
30
40
50
60
70
Q2 of FYended March
2009
Q2 of FYended March
2010
Q2 of FYended March
2011
Q2 of FYended March
2012
Q2 of FYending March
2013
-0.4
0.2
-4
-2
0
2
Q2 of FYended March
2009
Q2 of FYended March
2010
Q2 of FYended March
2011
Q2 of FYended March
2012
Q2 of FYending March
2013
Net sales Operating income(100 million yen) (100 million yen)
Down 65.9%
Kobayashi Medical Co., Ltd. was changed to an equity method affiliate from June 2012 after the Company transferred its shares in Kobayashi Medical Co., Ltd.
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Highlight of Forecast of Consolidated Financial Results
Q2 of FY ended March 2012
Q2 of FY ending March 2013
Increase (Decrease)
Amount Margin Amount Margin Amount Percentage
Net sales Million yen
131,166%
-
Million yen
132,000%
-
Million yen
833%
0.6Gross profit 76,531 58.3 78,100 59.2 1,568 2.0
Operating income 19,298 14.7 20,000 15.2 701 3.6Ordinary income 20,092 15.3 20,900 15.8 807 4.0
Net income 11,726 78.9 12,500 9.5 773 6.6EPS (yen) 286.36 - 305.26 - 18.90 6.6
Dividend per share (yen) 78 - 78 - 0 0.0
In the second half of FY ending March 2013, the Company will focus on expanding sales of new products released in autumn 2012 and deodorizing air fresheners and promoting overseas business including the U.S. The Company will have a lineup of many promising new products to be released in spring 2013.
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Kobayashi Pharmaceutical Group's CSR Activities
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・ Donate funds collected through the store front campaign to 12 elementary schools in Japan
・ Renovate the floor of toilets, donate Western-style toilets and offer education on defecation
・ Plan to donate toilets to 100 schools by 2019, the 100th anniversary of the Company’s foundation
“Toilet Pikapika keikaku” Sales Promotion Campaign
Reconstruction Assistance Activities
Details of CSR Activities in Current Fiscal Year
■ Loans to Support Small and Medium Enterprises (application period: October 1, 2012 to March 29, 2013)・ Offer special loans to small and medium enterprises in the disaster-stricken areas in cooperation with
Ishinomaki Credit Association with the purpose of supporting achievement of economic self-sufficiency in the disaster-stricken areas
・ A single company could receive an interest-free and unsecured loan of up to 10 million yen for up to 10 years
■ Offer Earthquake Special Scholarships・ Offer "Earthquake Special Scholarships" to support high school students who have financial difficulty
in going to university due to the Great East Japan Earthquake・ A student could receive a scholarship of up to 5 million yen (annual tuition fee of 1.2 million yen for up
to 4 years)
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Efforts to Promote the Health Care Business
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52 53
55 54 54 53 51 51 48 47
494947464645
0
50
100
FY endedMarch 2005
FY endedMarch 2006
FY endedMarch 2007
FY endedMarch 2008
FY endedMarch 2009
FY endedMarch 2010
FY endedMarch 2011
FY endedMarch 2012
(%)
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Deodorizing air fresheners
Sanitary products
Household sundries
Daily necessities
Pharmaceutical products
Oral hygiene products
Food products
Health care products
■ Changes in Share of Health Care Products and Daily Necessities
The share of health care products has increased gradually, because the Company aims to strengthen the health care business.
Mail order
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Change from symptomatic therapy to causal therapy
Tailor-made medicine involves diagnosis and treatment best suited to individual patients with different disease backgrounds, such as environment and genetic constitution.
Headache
Hypertension
Stiff shoulders
Eyestrain
Menopausal disorder
Menoxenia
Stiff shoulders
Hot flash
Mental depression
Easing headache symptoms doesn’t cure a disease, unless the cause of the
disease is treated. Diagnose and treat various symptoms as “menopausal
disorder”
■ Rising Attention to Tailor-made Medicine
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Aging society
Kobayashi Pharmaceutical will contribute to the improvement of people's QOL in the "primary care domain."
Provide advice on new healthcare in the daily life
Healthy lifeDisease prevention
Treatment at a hospital
<Social background>
<Domains to which Kobayashi Pharmaceutical Can Contribute>
An increase in the number of people who have concerns about health
Expansion of the ethical drug market Swelling medical expenses
Rising attention to Tailor-made Medicine
Prevention of disease progress
Improvement of worsening situation
■ Domains to which Kobayashi Pharmaceutical Can Contribute
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Something New (creation of new demands)[Naicitol 85] [Eyebon] [Shoyou] [Inochi no Haha A] [Chikunain] [Attonon]
Something Different (differentiation)
[Naicitol G]
[W Vitamin] [Medical]
[Firming gums] [Hemodia] [White] [Chikunain tablet]
The existing market is getting smaller. Kobayashi Pharmaceutical creates new markets and differentiates from copycat products by offering new benefits.
■ Kobayashi Pharmaceutical's Principle of New Product Development
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■ Health Care Division's Policy
1. Upgrade existing products: releasing new products under the same brand name・ Thoroughly pursue "Something Different" to strengthen existing
brands・ Aim to ensure stable procurement of crude drug materials to expand
the sales of Kampo herbal medicine2. Step up new product development efforts: completely
new products・ Focus on coming up with innovative ideas to raise the new product
contribution rate・ Pursue "Something New" to create new markets
3. Upgrade quality・ Thoroughly seek to create "quality products that continue to be
chosen" so that customers can use them with a sense of security and reliability
・ Accumulate evidence to improve quality
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Differentiated from competitors’ products by releasing an “advanced” eye wash solution containing 9 kinds of active ingredients
Improve visibility at the store front by unifying the product’s logo and characteristic letters pattern
<Renewing the package>
Before renewal
<Releasing "advanced" eye wash solution>
■ Eyebon
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Among the “Inochi no Haha” series products that sold well, the Company renewed “Inochi no Haha White” that might obtain more customers as a “drug to improve various symptoms of menoxenia.” After the renewal, sales of “Inochi no HahaWhite” grew steadily.
<Raised awareness of symptoms through TV commercials> <"Inochi no Haha" made pouches
available for trial use> <Held seminars>
・ To obtain new customers, the Company ran TV commercials while making "Inochi no Haha" pouches available for trial use.
・ The Company stepped up PR activities to raise awareness of premenstrual syndrome (PMS).
+
Sales increased.
■ Inochi no Haha
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Aim to achieve own procurement of Kampo herbal extracts
■ Establishment of Kampo Technology Development Department
[Founding] April 2012
[Objectives] Seek independent procurement of crude drug materials
[Update on the progress of efforts]
・ Conducting a survey to ensure stable supply
・ Establishing technology to derive good quality herbal extracts
・ Preparing facilities to test manufacture products
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■ Changes in new product contribution rate
Due to efforts to strengthen development in both quantity and quality of ideas, the number of new items increased. Consequently, the new product contribution rate of health care products rose to 6.7% in FY ended
March 2012, while the new product contribution rate of the entire company remained at 5.1%.
0
5
10
15
20
25
30
35
FY ended March 2007 FY ended March 2008 FY ended March 2009 FY ended March 2010 FY ended March 2011 FY ended March 2012
(Items)
0
5
10
15
20
25
30
35
(%)Number of items (entire company) Number of items (health care products)Contribution rate in the f irst year (entire company) Contribution rate in the f irst year (health care products)Contribution rate in the f irst 4 years (entire company) Contribution rate in the f irst 4 years (health care products)
Entire company: Contribution rate in the first 4 years 15.3%Health care products: Contribution rate in the first 4 years 15.4%
Step Up New Product Development Efforts
Entire company: Contribution rate in the first year 5.1%Health care products: Contribution rate in the first year 6.7%
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薬粧品事業部
Organize an expert team dedicated to development and improve development skills
→ Aim to stably increase the new product contribution rate
内用剤・食品G
Oral Care Group
外用剤G
Health Care Division
■ Establishment of New Product Development Group
[Founding] April 2010
[Objectives]・ Promote new product development
to cope with diversified needs・ Develop new products beyond
existing categories・ Create new development themes
Marketing Department
Internal Preparation/Food Product Group
External Preparation Group
New Product Development Group
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Gather information on trends through academic meetings and medical settings
New Product Development
Group
Conduct survey on the lifestyle of consumers by setting particular themes Research on efficacy and effects of prescribed medications
Existing Groups
Internal Preparation/Food
Product GroupExternal Preparation
GroupOral Care Group
Conduct regional trial sales jointly with New Product Development Group
Examine renewal of existing brands and addition of product lineups
Draw out advertisement and sales strategies
Bring up new products through regional trial sales in cooperation with each group
<Regional trial sales> <Market products nationwide>
■ Roles of New Product Development Group
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Specification quality: Offer reliable performance in basic design
Perceptual quality: Offer quality that can be felt when used by customers
Competitive quality: Offer performance that is far superior to competing products
Thoroughly seek to create quality products that continue to be used by customers with a sense of security and reliability and which outperform competitors’ products in the market
<Place emphasis on visual evidence>
Accumulate “visual evidence,” such as presentations at academic meetings, (Seeing is believing) to improve performance and quality of products
Upgrade Quality
■ Three Qualities
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Quality is the life of a companyUnder the credo that quality is the life of a company, all employees devote themselves to improve the quality of products and services and provide people and society with comfort.
1. Quality from a customer-centered standpoint
2. Pursue quality that gives customers a real feeling of satisfaction
3. Offer safe and secure products and information
4. Corporate activities that respond to customers’ trust
The entire Kobayashi Group is striving to enhance quality of products and services.
■ The Company's Overall Efforts to Improve Quality of Products and Services
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The Base of Our Development
“You Make a Wish and We Make it Happen”
We continue to provide advice on new healthcare while thinking about customers’ health and beauty and
“Wishes” in everyday life.
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