Shiseido Company, Limited (SSDOY) Q4 2024 Earnings Call Transcript

2025-02-11 16:34:05 ET

Shiseido Company, Limited (SSDOY)

Q4 2024 Results Conference Call

February 10, 2025 03:30 AM ET

Company Participants

Kentaro Fujiwara - President and COO

Ayako Hirofuji - Chief Financial Officer

Conference Call Participants

Akiko Kuwahara - JPMorgan Securities

Wakako Sato - Morgan Stanley MUFG Securities

Mitsuko Miyasako - Mizuho Securities

Hisae Kawamoto - Jefferies

Katsuro Hirozumi - Daiwa Securities

Takashi Miyazaki - Goldman Sachs

Presentation

Kentaro Fujiwara

Today, I will first explain the key points of the results for 2024 and the outlook for 2025. And then CFO, Hirofuji, will explain the details of the results, and I will then explain the main issues to be addressed in 2025. First, Page 3. Key points of the financial results for 2024. Core operating profit for the full year was JPY 36.4 billion compared to the revised forecast of JPY 35 billion announced in November last year.

The fact that we were able to achieve the profit target announced in November despite the difficult environment is a result of the efforts of the entire company working together. What is particularly noteworthy is the performance in Japan, where we are promoting structural reforms with the aim of achieving over JPY 20 billion in 2024 and JPY 50 billion in 2025. The actual results for this period was JPY 28.1 billion, significantly exceeding the target. In Japan and Europe, the virtuous cycle of growth and improved profitability through selection and concentration is steadily producing results. Going forward, we will expand the structural reform globally, working to improve the balance of profit in each region and establish a global earnings base.

Regarding dividends, which we said in November last year that we would closely monitor and examine the situation after repeated discussion from the perspective of maximizing long-term total shareholder returns, we have decided to reduce the year-end dividend from the planned JPY 30 per share to JPY 10 per share, the details explained in the slide later. Consolidated sales, excluding the impact of foreign exchange and business transfers in real terms, increased 4% year-on-year in the fourth quarter and decreased 1% year-on-year for the full year. In Japan and Europe, we continue to see strong growth centered on our core brands. In China and Travel Retail, consumer spending remained sluggish, but the revenue decline was in line with expectations. In the Americas, sales declined due to the delayed recovery of Drunk Elephant.

We secured a core operating profit of JPY 36.4 billion, but due to structural reform expenses and provisions for financial expenses, net income attributable to owners of the parent company was deficit of JPY 10.8 billion. I will explain this in more detail. Regarding nonrecurring items, we recorded JPY 28.8 billion in expenses for structural reforms, which was largely in line with our plan. On the other hand, the provision for this item was not included in our forecast as of November. We transferred 3 brands, including bareMinerals in 2021.

And as a result of careful examination of the seller's note, which deferred a portion of the transfer price, we recorded a provision for this item, taking into account the possibility of recovery. This is a one-off factor and does not involve any actual cash. We will continue to focus on recovering the full amount. For details, please refer to Appendix 15 of this document. Next, I will explain the full year forecast for 2025 on Page 4.

Net sales are expected to be JPY 995 billion and the real growth rate, excluding the impact of foreign exchange fluctuations, is expected to increase by 4%, which is unchanged from the assumptions in the action plan announced at the end of November. Core operating income is expected to be JPY 36.5 billion based on the belief that previous year's level must be achieved, but we will aim for further increase. In addition, because of the figure for 2024, including one-off positive factors, the increase in profit will actually exceed JPY 10 billion. Additional information is provided on Page 14 of the supplementary materials, so please refer to it. Regarding the first half and second half balance of sales....

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