business outline and management strategy
TRANSCRIPT
February ２００９
Lion Corporation
Business Outlineand
Management Strategy
Business Outline
－3－
Consolidated: 5,774Non-consolidated: 2,480
As of December 31,2008
The manufacture and sale of toothpastes, toothbrushes, soaps, hair- and skin-careproducts, detergents, cooking-related products, pharmaceuticals, and chemicals.Also, exports to overseas affiliates.
Company Overview
Foundation
EstablishmentCapital
Employees
Domestic OfficesConsolidated SubsidiariesOverseasAffiliates
Operations
Sales
October, 1891
September, 1918
34.4 billions of yen15 locations （Include headquarters）
22 companies
8 countries/regions
Consolidated: 338.2 billions of yenNon-Consolidated: 266.4 billions of yen
Net sales３３８.２
billions of yen（FY2008）
Household products¥163.5 billion（48.4％）
Health care products¥136.3 billion（40.3％）
Pharmaceutical products division ¥45.9 billion（13.6％）
Beauty care products division¥35.4 billion（10.5％）
Oral care products division¥54.9 billion（16.2％）
Other Businesses¥6.8 billion（2.0％）Chemical products
¥31.4 billion(9.3％）
Living careproduct division¥46.9 billion（13.9％）
Fabric care productdivision ¥116.5 billion （34.5％）
－4－
Oral care 16％
Consolidated net sales 338.2 billions of yen
（FY2008）
Lion Businesses : Health Care ProductsOral care
Beauty care Pharmaceutical
Sales of Health Care Products 136.3 billions of yen
（FY2008）
Beauty care 10％
Pharmaceutical 14％
Health Care 40%
－5－
Consolidated net sales 338.2 billions of yen
（FY2008）
Household 48%
Sales of Household Products 163.5 billions of yen
（FY2008）
Fabric care 34%
Living care 14%
Living care
Fabric care
Lion Businesses : Household Products
－6－
Oleo Chemicals（ ）Natural fat and oil derivatives
Glycerin Carotene Fatty Esters
Surfactants（ ）Raw materials for detergents and cosmetics
CarbonElectro-conductive carbon
Electro-conductive compoundsChemicals forpulp and paper Industrial cleaners
Chemicals for civil engineeringand construction
・LCD panel cleaners・Hard disc substrate cleaners
・Concrete superplastisizer・Curing compounds for concrete
Deinking agents for recycled paper
Consolidated net sales 338.2 billions of yen
（FY2008）
Lion Businesses : Chemical Products
Chemical products 9%
Sales of Chemical Products 31.4 billions of yen
（FY2008）
MESMES
－7－
South Korea
ThailandSingapore
Indonesia*
Taiwan
China
Malaysia*
Hong Kong
Lion Businesses : Overseas BusinessOverseas consolidated net sales
47.9 billions of yen (FY2008）
*Equity-method affiliates
－8－
Aim to be a leading company in environmental friendliness
Aim to revitalize a corporate culture of tenacity,
creativity and learning
<< Three Visions >><< Three Visions >>
Aim to be the leading company in the new comfortable lifestyle
support industry
Lion’s Three Visions
－9－
Healthy Habit ProposalsProvided by Lion merchandise,
services and information
Eat wellCommunicate betterExercise regularlySleep wellFind time to relaxBe youthfulBoost your immunity
Eat wellCommunicate betterExercise regularlySleep wellFind time to relaxBe youthfulBoost your immunity
Our approach to new lifestyle value:Integrate Company resources to
build new market concepts
New Comfortable LifestyleSupport Industry
Functional FoodsFunctional Foods
● Enrich daily life● Boost lifestyle quality
Healthy happy living
Selfmaintenance
ToiletriesToiletries
OTC drugsOTC drugs
New Comfortable Lifestyle Support Industry
－10－
Extend “Healthy life expectancy”
9.058.967.97.557.464.9Indonesia
10.362.472.78.357.766.0Thailand
7.565.272.76.563.169.6China
9.964.874.78.061.669.6Malaysia
8.670.879.47.064.871.8South Korea
7.677.785.36.172.378.4Japan
GapHealthy life expectancy Life expectancy GapHealthy life
expectancy Life expectancy
FemaleMale
＜Life expectancy and Healthy life expectancy in Asia＞
（Source : WHO The World Health Report 2004）
（unit: years）
－11－
54
8
17
14
12
70.1%
75.1%
76.9%77.8%
79.1%
81.0%
60%
65%
70%
75%
80%
85%
20s 30s 40s 50s 60s 70s-
-
5
10
15
20
Average of amount of assets
Savings hoiding ratio
\millon
age
Source : 2008 The Central Council for Financial Services Information
Status of financial assets possession in 2008(Two-or-more-person households)
Underpinning for future growth
average¥11.5mil.
Personal financial assets reached ¥1.5 quadrillion in Japan
－12－
Japan’s Import/Export Structure
Fossil fuel ¥20.3 trillion
Foodstuff ¥ 6.0 trillion
Total ¥26.3 trillion
Automobiles ¥17.7 trillionElectronic parts ¥ 5.2 trillionIron & Steel ¥ 4.0 trillion
Total ¥26.9 trillion
Import Export
Shift to Healthy Comfortable Lifestyle Industry
－13－
Proactive Approach to Environment
Protect water environmentsProtect water environments
Switch to plant resourcesSwitch to plant resources
Develop products that meet the “Lion Eco Standards” Criteria
Develop products that meet the “Lion Eco Standards” Criteria
Business Challenge in Fiscal 2008
－15－
Financial Highlight Net Sales and Profits
--¥(44.0)¥(8.83)¥11.23¥20.06EPS
5.025.0(43.9)(23.8)30.454.2Net Income
1.0 75.0(24.8)(25.0)76.0101.0OrdinaryIncome
2.7 80.0(7.1)(6.2)82.789.0Operating Income
(2.6)3,385.0(1.0)(34.8)3,382.33,417.1Net Sales
Year on YearChange
(%)
Year on YearChange
Change(%)
Forecast(Revised on
Dec.25,2008)FY2008FY2007
（unit: ¥100 million）
－16－
ⅰ Main Brand Strategyⅱ Offering New Valueⅲ Proactive Approach to
Environmentⅳ Manufacturing Process
Innovationⅴ Medium- and Long-term
Growth Strategy
Business Challenge in Fiscal 2008
Quality Improvement
－17－
Maximizing Brand Value
Creating ¥10 Billion Brand and Strengthening No.1 Brands
－18－
Main Brand Strategy
Strengthen ¥10 Billion Brands
Soflan
Blue Dia
TopDentor Systema
Bufferin
Clinica
CharmyKireikirei
Japan
－19－
Main Brand Strategy and New Value Provision
2005 2006 2007 2008
\10 bi l l ion brands othe rs
３4％３4％
５４％５４％
Sales Composition Ratio of ¥10 Billion Brands
Increase sales composition ratio of main brandsIncrease sales composition ratio of main brands
－20－
Launched major new products among main brands in expanding markets
Introduced new market-creating products/brands to develop new markets
Japan
BATHTOLOGY / In-bath skincare series
Lactoferrin / Supplement
MEDISH / Gum
Kaori to Deodorant no Soflan ('Soflanwith Fragrance and Deodorant') / Fabric softener
Reed / Cooking-aid products
Kaori Tsuzuku (Long-Lasting Fragrance) Top / Laundry detergent
Dentor Systema / Oral care series
New Distribution
Acron Laundry detergents
21% Contribution Ratio of New Products
Main Brand Strategy and New Value Provision
－21－
Thailand 2007 2008・GDP growing ratio 4.8% →5.1%
Economic environment & Review of main subsidiaries
-Fiscal 2008 net sales increased 9%-Operating income decreased due to continuous
upswing in raw material prices-Doubled laundry detergent production capacity
South Korea 2007 2008・ GDP growing ratio 5.0%→ 2.8%
-Fiscal 2008 net sales increased 3%
-Operating income decreased due to an ongoingsurge in raw materials princes
-Fiscal 2008 net sales increased 3%
-Operating income decreased due to an ongoingsurge in raw materials princes
Overseas
Main Brand Strategy and Offering new Value
Dentor Systema
F&F
ChamgreenChamsoot
Beat
Shokubutsu-Monogatari
－22－
LION Top Eco Project
Selection in the Global SRI Indicator “FTSE4Good Global Index”
Participation in “Eco First Program”
Created by FTSE International Limited (“FTSE”), FTSE4Good is a stock price index comprised of companies that achieve a certain level in their CSR (corporate socialresponsibility) activities. Incorporation in this indicator shows that the company is
highly trusted by society and has been evaluated as meeting globally recognized corporate responsibility criteria.
The Eco First Company is a company that commit to pursue environmental protection activities and approved. Undertaken in response to calls from the Minister of the Environment, the Eco First Company must further promote environmental protection activities as the leading (“top-runner”) company in each industry with the goal of realizing the Kyoto Protocol’s goals regarding global warming.
LION Top Eco Project is conducting various activities to protect air and water environments. In this project, Lion implements initiatives to reduce CO2 in the atmosphere by developing environmental friendly laundry detergents and provide financial support to “Japan Clean Water Foundation” by donating a portion of proceeds from the sale of Top laundry detergent.
Proactive Approach to Environment
－23－
Bolster Profitability
- Improve profits due to the acquisition ofthe Bufferin trademark rights in 2007
Cost reductions, the acquisition of trademark rights to Bufferinand other factors have absorbed raw material price increases→The cost to sales ratio maintained at last year’s level
Cost to sales ratio
46.6
50.1
46.6
40
45
50
55
2006 2007 2008
(%)
-Shorten manufacturing cycleShift from monthly administration to ten-dayadministration to reduce inventory days
-Implement direct shipment from factories toretailers
Process Innovations
－24－
MES (plant-based detergent) Business
LION ECO CHEMICALS SDN.BHD.(Malaysia)
Features of MES1) High biodegradability2) High detergency in hard water3) Carbon neutral
Dec.2008：Completion of factoryMar.2009：Completion of process of producing powder
Promote sales of MES (Methyl ester sulfonate)
Management Strategies in FY2009
－26－
101
103
103
FY2007
101
97
98
The second half
of November
The first half of
NovemberJan-Oct
100
100
100
100
101
101
FY2008
1009999Unit price
101103103No. of units
101102102Amount
FY2008FY2006FY2005
Market trend of the total of 45 home product markets in which Lion participates
(percentage change over the year-ago period.)
Business Environment in Fiscal 2008 Background
Environment of Home Products Market
（Source: Lion survey)
－27－
FactorsBehind
Growth ofNo. of units
Increase of populationIncrease in the number of householdsIncrease in the number of retail storesChanging from family use to individual useIncrease of the refill product sales ratio
Influence of these factors are weakening
Raise unit prices of productsby introducing of High-value-added products
Market Environment
－28－
Labor force66.0
million people
Annual incomeless than ¥ 2 million
22.3 million people 33.7％
Annual incomeless than ¥ 2 million
22.3 million people 33.7％
Composition ratio of occupied personby income bracket(2007)
Working poorNon-regular employee
13.4 million people20.3％
Disposable income of Workers’ household
FY2000 ¥429 thousand/monthFY2007 ¥402 thousand/month
Decreased by 6.8%Source : 2007 Family Income and Expenditure Survey
Market Environment
Source : 2007 Employment Status Survey
－29－
High-value-addedproducts
General-purposeproducts
Polarization in consumption patterns
Market Environment
－30－
High level periodontal disease prevention 9% → 17%
Scented and deodorant types 47% → 65%
Dishwashing detergents for dishwashers 13% → 16%
Compact liquid types 16% → 35%
Toothpastes
Fabricsofteners
Laundrydetergents
Dishwashingdetergents
Market share in category 2005 - 2008
（Source: Lion survey）
Growing categories
Market Environment
－31－
Market Environment＜Growing Categories＞
Common Concepts
Health Comfort Environment
－32－
Aim to become the leading company in
new comfortable lifestyle support industry
Aim to become the leading company
In environmental responsivenessPromote the invigoration of
corporate culture
Three Visions
Key Words
Health Comfort Environment
－33－
Growth Strategy Promotion
Brand Value Maximization
-1） Strengthen ¥10 billion brands
-2） Bolster No.1 brands
-3） Emphasize investment in brands that create new demand
－34－
Introduce strong new products in growing categories
Strengthen ¥10 Billion and No.1 Brands
New products in 2009
New products in 2008
－35－
Introduce strong new products in growing categories Aggressively develop new demands
New products in 2008
New products in 2009
Strengthen ¥10 Billion and No.1 Brands
－36－
Overseas Business Growth Strategies
Thailand-Release powder detergents blendedwith MES
-Bolster the oral care Systema series-40th anniversary of business operations
1)Organize Thai-version Foundation for Dental Health2)Establish Lion Award
South Korea-Introduce high-value-added product rangein oral care
-Promote cost reductions for heavy dutylaundry detergents and other household product series
AsiaStrategies: To be No.1 in heavy duty laundry detergents
and oral care products1.Introduce heavy duty powder laundry detergents that utilize MES 2.Expand the share of liquid detergents3.Develop Systema and Shokubutsu-Monotari as global brands4.Promote cost reduction measures
－37－
87%128%85%Chemical
82%-82%Other
101%107%99%Total
102%107%101%Household
102%105%102%Health Care
TOTALOVERSEASJAPAN
Fiscal 2009 Consolidated Financial Forecast
（Y o Y）
Expected rate of growth by business segments and geographical segments
－38－
-Improved composition of laundry detergents-Shorten manufacturing cycle
Shift from monthly administration to 10-day administration to reduce inventory days
-Implement direct shipment from factories toretailers
¥3.0 billion in cost reductions
Cost increase factors-Stagnation of domestic consumption-Increase in brand cultivation costs
¥3.5 billion drop in row material prices
+¥0.7 billion
+¥3.0 billionIncreased in salaries and general expenses
+¥2.8 billion
+ ¥6.5 billion
¥(5.8)billion
Fiscal 2009 Consolidated Financial Forecast
Factors for Changes in Operating Income
－39－
Fiscal 2009 Consolidated Financial Forecast
(unit: ¥100 million)
64.519.550.01.5
30.40.9
Net Income% of Sales
18.413.990.02.6
76.02.2
Ordinary Income% of Sales
8.77.290.02.6
82.72.4
Operating Income% of Sales
0.517.63,400.03,382.3Net Sales
Change(％)ChangeFY2009FY2008
－40－
Cash Dividend to Shareholders
Payout ratio － 54.7% 47.2% 53.2% 93.0% 54.1% (Plan)
(Non-consolidated)
FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 (Plan)
Dividend per share (annual)
（yen）
(PLAN)
4 4 5 5 5
4 55 5 5
5
5
101010109
8
0
2
4
6
8
10
12
FY2004 FY2005 FY2006 FY2007 FY2008 FY2009
Interim Dividend
Year-end Dividend
Reference Materials
－42－
14 11
2415
40
26
39 83
0
50
100
150
Cost reduction Cost increase
2008
2007
2006
2005
135
117
(Due to rising material costs)
Market Environment Cumulative cost reduction and cost increase (2005–2008)
(¥100 million)
－43－
Cost of Sales (Consolidated)
46.61,575.246.61,592.0Cost of sales
% of Sales¥100 million% of Sales¥100 million
Fiscal 2008Fiscal 2007
Trend for the cost of sales ratio
46.646.6
50.148.2
48.349.8 49.2
40
45
50
55
2002 2003 2004 2005 2006 2007 2008
（%）
(YEAR)
－44－
1.5
(2.6)
(3.6)
(9.6)
(2.8)
0.9
7.2
(0.7)
% ofsales
Other
R&D expenses
Salaries
Advertising expenses
Freight and storage expenses
Sales promotion expenses
Sales incentive expenses
4.1
(2.2)
(5.2)
(21.0)
(4.7)
6.0
11.3
(11.7)
¥100million
Change
5.0168.54.6157.1
20.1680.919.7674.8
4.8163.44.9168.1
287.1
85.2
140.7
198.3
1,724.3
¥100million
FY2008
5.96.4219.3
4.24.3146.0
8.58.3283.0
2.52.687.4
51.050.81,736.1Selling, general andadministrative expenses
% ofsales
% ofsales
¥100million
FY2007
Selling, General and Administrative Expenses (Consolidated)
－45－
Significant Extraordinary Gains or Losses consolidated)
¥2,373 million ¥2,768 million Total
Loss on disposal of property, plant and equipment ¥263 millionLoss on devaluation of investment securities
¥2,032 million
Loss on disposal of property, plant and equipment ¥273millionLoss on devaluation of investment securities
¥372 millionVoluntary product recall expenses
¥1,950 million
Extra-ordinary losses
¥859 million ¥2,228 million Total
Reversal of allowance for doubtful accounts¥859 million
Gain on disposal of property, plant and equipment ¥1,082 millionReversal of allowance for doubtful accounts
¥904 million Extra-ordinary
gains
FY 2008FY 2007
－46－
31
52
3240 36
45 47 45
62
10762
51
4469
352
201
232
49
110
0
20
40
60
80
100
120
140
160
180
200
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
400
250
58
110101
89
96106
143
117
392
130124
60
66
Capital Expenditures and Depreciation Expenses (consolidated)
Note: Both capital expenditures and depreciation expenses include amounts for intangible assets.
（¥100 million）
Plan
Capital expenditures
Depreciation expenses
H2H1
Plan
－47－
Statements of Income (Consolidated)
(43.9)110.8(31.1)(28.9)(36.3)
(14.2)
(61.4)(24.8)
58.8(44.6)
(7.1)(0.7)(1.0)(1.1)(1.0)
Change(%)Change
(23.8)30.454.2Net income
1.12.21.0Minority interests in earnings ofconsolidated subsidiaries
(6.1)13.419.6Adjustment of income taxes
(5.9)14.720.7Income taxes
(34.7)60.895.6Net income before income taxes
Voluntary product recall expenses inFY2007Devaluation loss on investment securities in FY2008
(3.9)23.727.6Extraordinary loss
Gain on disposal of noncurrent assets(13.6)8.522.2Extraordinary income
(25.0)76.0101.0Ordinary income
Increase in interest expense7.620.512.9Non-operating expenses
Decrease in equity earnings of Non-consolidated subsidiaries and affiliates(11.1)13.724.9Non-operating income
(6.2)82.789.0Operating Income
(11.7)1,724.31,736.1Selling, general and administrativeexpenses
(18.0)1,807.11,825.1Gross profit
(16.7)1,575.21,592.0Cost of sales
(34.8)3,382.33,417.1Net sales
FY 2008FY 2007
(unit: ¥100 million)
－48－
Consolidated Cash Flow
(65.5)(1.2)64.3Increase (decrease) in cash and cash equivalents
(8.7)(8.1)0.6Translation gain related to cash and cash equivalents
(1.2)330.9332.1Cash and cash equivalents at end of period
64.3332.1267.8Cash and cash equivalents at beginning of period
(325.3)(26.8)298.4Cash flows from financing activities
277.0(117.9)(395.0)Cash flows from investing activities
(8.4)151.8160.3Cash flows from operating activities
ChangeFY2008FY2007
(unit: ¥100 million)
－49－
Consolidated Balance Sheets (Selected) I
Loss on devaluation of investment securities
in FY 2008(58.0)192.5250.5Investment securities
(117.0)2,674.32,791.4Total assets3.0103.9100.9Deferred tax assets
Acquired trademark rights(44.9)326.9371.9Intangible assets
(8.7)634.7643.4Property, plant and equipment
(66.9)1,454.31,521.2Fixed assets(15.1)263.2278.3Inventories
(9.2)－9.2Short-term investments
(33.3)584.5617.8Trade notes and accounts
receivable
6.7333.1326.4Cash and time deposits
(50.1)1,220.01,270.1Current assets
CommentsChangeFY2008FY2007(unit: ¥100 million)
－50－
Consolidated Balance Sheets (Selected) II
71.583.011.5Current portion of Long-term debts
(12.7)26.138.9Minority interest in consolidated subsidiaries
(117.0)2,674.32,791.4Total liabilities and net assets
(1.4)(158.6)(157.2)Treasury stock(24.6)10.635.2Unrealized holding gain on other securities
3.1496.5493.4Retained earnings －344.3344.3Common stock
(12.3)216.5228.9Accrued employee retirement benefits
(83.4)390.5473.9Long-term debts
(97.6)657.5755.2Long-term liabilities(1.5)349.7351.2Other payables and accrued
expenses
7.462.154.6Short-term loans payable
24.1469.1444.9Trade notes and accounts payable
50.21,011.0960.8Current liabilities CommentsChangeFY2008FY2007(unit: ¥100 million)
－51－
Statements of Income (Non-consolidated)
(42.8)(25.2)
―
(37.0)―
(35.2)(69.0)
(1.0)
2.1
2.0(2.9)(0.2)
Change(%)
(21.7)(6.0)
―
(27.8)8.0
(35.8)(35.2)
(0.5)
29.5
29.0(35.5)
(6.5)
¥100 million
Change
44.11,175.745.31,211.2Cost of sales55.91,489.054.71,460.0Gross profit
54.01,439.052.81,409.4Selling, general and administrative
expenses
29.017.8
0.447.3
(18.5)65.915.850.0
2,664.7
¥100 million
FY 2008
1.91.950.5Operating income0.61.951.1Non-operating income, net
0.70.923.9Adjustment of income taxes1.11.950.8Net income
0.00.00.4Income taxes1.82.875.1Net income before income taxes－－(26.5)Extraordinary income, net
2.53.8101.7Ordinary income
100.0100.02,671.3Net sales
% of sales% of sales¥100 million
FY 2007
(unit: ¥100 million)
－52－
Consolidated to Non-consolidated Ratios
1.051.07Net Income
1.150.99Ordinary Income
1.651.76Operating Income
1.271.28Net Sales
FY2008FY2007
<Consolidated toNon-consolidated
Ratios>
53
The forecasts and projected operating results contained in thisreport are based on information available at the time ofpreparation, and thus involve inherent risks and uncertainties.Accordingly, readers are cautioned that actual results may differmaterially from those projected as a result of a variety of factors.
Note: Figures are rounded to the digits that are displayed.
54