Lion Corporation (4912) Earnings Call Transcript & Summary

Thank you very much for your consistent support. I'm Fukuda of Lion Corporation. I'm very grateful that so many of you participate in our briefing today despite your busy schedule. There are two major topics today. First, sales and profit continued to increase in Q1 and the progress stayed in line with our full year plan. In the top priority Oral Healthcare business, shift to high value-added products and high growth were achieved and the integration of two companies in Vietnam and Australia into the portfolio improved margins. Second point is related to policy in Q2 onward. As you know, business environment has been drastically changing compared to the initial forecast due to the Middle East situation. On the other hand, we announced the policy this year, the shift to a highly profitable business portfolio and the strengthening of mobility through management processes transformation. And these are exactly to build the resilient business foundation under such environmental changes. We are currently considering and promoting additional measures to secure profit against the Middle East risks. And though the final impact level is still uncertain, we aim to achieve the initial full-year target, absorbing the expected risks at this point. Accordingly, the earnings and dividend forecast remains unchanged. Two key messages are: The progress in Q1 is steady, and we aim to achieve the initial target overcoming the impact of the Middle East situation assumed at this point. Today's contents consists of these three points, and let me start with the financial results for the first quarter. Consolidated net sales in the Q1 was JPY 99.2 billion, up 5.3% year-on-year. And year-on-year change at constant currency, excluding exchange rate fluctuation, was plus 1.7%. Core operating income was JPY 6 billion, up JPY 0.7 billion year-on-year or 13.8%. EBITDA margin was 11.1%, up 0.8 percentage points. Since the launch of the mid-term plan, second stage in the previous year, the basic trend of sales and profit increase and the improvement of margin has been continuing and the progress in line with the plan. Next, I will explain the breakdown of core operating income increase of JPY 0.7 billion year-on-year. Gross profit factors are on the left and SG&A factors on the right. Gross profit factors were plus JPY 3.7 billion and SG&A factors were minus JPY 3 billion. And the net impact was plus JPY 0.7 billion. Sales increase impact of JPY 3 billion in gross profit factors and changes in other expenses, minus JPY 2.1 billion in SG&A factors were larger than the usual Q1. These are due to the added profit and loss of the newly consolidated two companies as well as the acquisition-related expenses of PNB in Australia, which is booked in other expenses. Raw material costs were not affected by the Middle East in the first quarter, and the cost increase was limited to JPY 0.3 billion. Changes in competition-related expenses was cost increase of JPY 0.9 billion due to the increased expenses for growth in Japan, mainly for Oral Healthcare. Results by business segment. In Consumer Products, sales increased by 3.6%, but profit decreased by JPY 350 million. In addition to the increased advertising cost to enhance the growth of the key area, as mentioned earlier, there was a rebound from the controlled TV commercials in Q1 last year, and the results were almost in line with the plan. Skipping one line, Overseas business sales and profit increased, partly due to the consolidation of Vietnam and Australia businesses, margin improved 2 percentage points. In Industrial Products, sales declined due to the industrial REED, which is included in the REED brand transferred in the previous year as it is included in this segment, but profit was almost flat. Consumer Products business net sales by product category. In Oral Healthcare, mainstay brands were robust in toothpaste and toothbrushes and high-end Dent Health renewed last autumn also contributed. Sales of products sold through dental clinics continue to be strong, and they led to the strong growth of 9.8% in sales. In Fabric Care, sales of laundry detergent were firm, achieving 1.9% sales growth. In pharmaceutical, acne products were strong, achieving 4.9% growth in sales. On the other hand, in Beauty Care and Living Care, we controlled the sales promotion in the first quarter as the product renewal is scheduled in Q2. And sales in Living Care decreased partly due to the impact of transferred REED brand. Overseas business results by region. Southeast and South Asia and Oceania, which includes Australia, marked sales and profit increase based on the existing countries, but because of the addition of Vietnam and Australia, sales increased 18.8% and core operating income increased 58.6%, showing the prominent growth. On the other hand, in Northeast Asia centered on China, due to change in sales strategies and adjustment in distribution inventories in China, sales decreased, but we secured the increase in profit. Status of business in four key countries. In Thailand, sales increased due to FX impact, but they decreased on local currency base. Exports to Cambodia did not recover and local consumption is slightly sluggish. But Oral Healthcare, which is being strengthened, began to deliver positive results. In Malaysia, price optimization in laundry detergent achieved substantial improvement in profitability and growth investment in Personal Care focusing on Oral Healthcare contributed to sustained increase in sales and profit. In China, we continue the price improvement of White & White and optimization of distribution inventories, which was explained in February, progressed, and they led to substantial sales decrease in Q1. But the inventory reduction was mostly completed in Q1. We are fine-tuning strategies in China, and I'd like to explain it later. South Korea turned to sales growth trend. I'll explain key measures of this fiscal year, their progress in Q1 and the policy in Q2 onward. I'll talk about the response to the Middle East risks. First, let me confirm key themes and progress this year. Regarding a shift to a highly profitable business portfolio shown on the left, we continue the growth and shift to value-added products, focusing on Oral Healthcare in Japan and overseas. From last year to this year, we have been promoting the restructuring of business portfolio in challenge for growth businesses and the structural reform businesses. Currently, we are working on PMI of PNB in Australia and preparing for closing of transfers of chemical product business scheduled in June. Regarding the enhancement of agility through the transformation management process is shown on the right, our primary objective has been to improve agility in business operations. To this end, since January this year, we have implemented significant organizational changes and delegated greater authority throughout the organization. As I will explain later, we believe these changes have already begun to demonstrate the effectiveness in responding to the current situations in the Middle East. Let me now explain each initiative in a bit more detail. First, regarding our portfolio, Oral Healthcare, our top priority area. In Japan, from last year into this year, we have continued strengthening the periodontal disease segment, where the mix of premium-priced products is particularly high. Following last year's dental health initiative, this year, we are focusing on strengthening SYSTEMA Haguki Plus, which represents the volume zone within the premium price segment with the aim of improving the overall mix of value-added products. In addition, through the dental clinics channel, we launched new high value-added products last year and have been actively nurturing their growth. As shown here, we are already beginning to see encouraging results. Turning to overseas Oral Healthcare business. Revenue in China declined in the first quarter. However, we are now focused on rebuilding the business and returning it to a trajectory of profitable growth. In April, alongside the launch of new products under the mid- to premium-priced brands such as CLINICA, we implemented cross-brand campaigns and are working to improve promotional efficiency. We are also reviewing our channel mix strategy. Rather than pursuing indiscriminate expansion in off-line channels, we are concentrating distribution on key retail channels. At the same time, for online channels, we intend to strengthen our presence on emerging platforms once again. Although revenue declined in the first quarter, sales have already returned to a growth trend since April. In Thailand, we have updated key elements such as branding target customers, channels and promotional strategies, while also defining concrete product actions for the second quarter onward. At present, we are already beginning to see positive results from the renewal and repositioning of the local SALZ brand. In Vietnam, we will launch a high value-added brand called Dent in May. Rather than distributing through the mass market channels, this brand will be developed under the business model centered on recommendations from the healthcare professionals through clinics and pharmacies. Next, I would like to discuss the Beauty Care and the pharmaceutical businesses, which are positioned within our portfolio as challenge for growth businesses aimed primarily at driving overseas growth. As mentioned earlier in relation to all the healthcare, in Vietnam, we are also expanding into the sensitive skin care category. Originally, Merap Lion in Vietnam has operated under what we call professional recommendation model, and our intention is to broaden the product categories within this business model through the synergies with Lion. Therefore, rather than pursuing large-scale volume growth through mass market expansion in the short-term, we aim to steadily nurture these businesses while maintaining profitability. On the right-hand side is Australia, who joined us this fiscal year. The 100-day plan launched at the end of January has just been completed, and we believe PMI has progressed generally smoothly. Going forward, we will shift our focus towards strengthening the business and generating synergies. Within Australia, this includes reviewing promotional activities for the core Sukin business. Since the company also operates on OEM business, we are additionally examining ways to improve production capacity efficiency. Furthermore, from a synergy perspective, PNB originally aimed to expand its business across Asian markets, and we are currently considering how the Lion Group can support that expansion strategy. Naturally, we also intend to accelerate discussions regarding introducing these businesses and products into Japan. Next, I would like to discuss improvements to the profitability and structure of our domestic operations centered on the home care business, which we position within our portfolio as a structural reform business. This year as well, we will continue initiatives aimed at increasing product value-added content, reducing SKUs and improving promotional spending efficiency. In particular, for Home Care, we believe it is essential to increase the proportion of the products with the clear differentiation, including products utilizing our own proprietary and water-saving technologies. Regarding supply chain management, we are also promoting more advanced supply chain operations by incorporating AI-based demand forecasting models ahead of the actual supply-demand adjustment and the production planning processes. That said, we are currently anticipating cost increase and potential product supply disruptions stemming from the risks in the Middle East. Accordingly, we recognize the need to further accelerate, strengthen and supplement these initiatives, and I will explain the situation in more details on the next slide. Turning to the impact of the situation in the Middle East. We have already begun to see some effects from rising raw material costs and freight rates starting from the second quarter. At this stage, it is difficult to determine the ultimate scale or the duration of the impact. However, our current base case assumption is that crude oil prices, which we originally assumed at $70 per barrel at the beginning of the year, and they will remain at around the current level of about $100 per barrel. Under this assumption, we expect the cost increase impact on our raw materials will not subside within this year. And therefore, the entire company is implementing and evaluating countermeasures. These include revising sales plans by shifting the product mix toward items less affected by or consolidating or replacing products likely to face supply constraints and reviewing the product launch schedules and promotional timing. In conjunction with these measures, we are also revising our marketing plans, including raising effective in-store prices through the changes to promotional programs and trading terms; improving advertising efficiency; implementing additional cost reduction initiatives and expense controls. These efforts are being promoted company-wide from many different angles. In preparation for the possibility that conditions worsen further, we are also preparing additional price pass-through measures as well as further structural reforms should the situations become prolonged. As mentioned earlier, under the new organizational structure introduced in January, business units themselves are now responsible for evaluating decision making and executing countermeasures. This has enabled us to implement more proactive, flexible and autonomous initiatives than ever before, including scaling raw materials procurement routes, flexibly revising production plans and enforcing stricter cost management. By continuing to enhance our ability to respond to changes and increasing the speed of execution, we will strive to minimize the overall impact. Based on these circumstances, let me now turn to our full-year earnings forecast. We are making no changes to our consolidated earnings forecast from the guidance announced at the beginning of the year. We intend to respond swiftly and dynamically to changes in the business environment, including risk related to the middle situation and remain committed to achieving the earnings targets set at the start of the year. Please note that our assumptions regarding the FX rates and raw materials prices and the composition of profit increase and decrease factors have already changed significantly from our initial assumptions at the beginning of the year. However, given the extremely fluid nature of the environment going forward, we have intentionally decided not to revise these underlying assumptions at this time, and we appreciate your understanding. There have also been no changes to our shareholders' return policy from the announcement made at the beginning of the year. Based on our progressive dividend policy, we plan to further increase the dividends from last year with the dividend going up JPY 4, to JPY 34 per share, and the payout ratio is going to be 37.6%. This concludes my formal presentation, but I would like to make one final comment regarding our view of the current environment and this year's positioning. Last year, we launched in the second stage of our mid-term management plan, and this year marks its second year. In the current highly uncertain environment, we recognize that achieving our original earnings targets this year is extremely important in order to gain trust and confidence from you and the capital markets. While the outlook for the current cost environment remains uncertain, and there is certainly no room for optimism. We were able to deliver solid results in the first quarter and have also gained strong confidence in the effectiveness of our management reforms. Accordingly, we intend to respond with even greater flexibility and agility in order to achieve our targets. This concludes my presentation. I would like to thank you again for your kind attention.

Now we will take questions. First, Ms. Kuwahara, over to you.

I'm Kuwahara of JPMorgan Securities. Let me ask two questions briefly. First, how shall we see the sales increase and the profit decrease of Consumer Products business in Japan? In the previous fiscal year, you talked about the objective of this year, and it was growth in Japan. Net sales increased, but would you comment on how you view the situation by category? And is the return from the competition-related expenses improving clearly? Would you comment on this? This is my first question.

Regarding sales increase and the profit decrease in Japan, profit decreased JPY 350 million in Japan. We increased advertising cost by JPY 700 million. And then the profit decline was limited to JPY 350 million. So it does not mean that promotion didn't deliver sufficient results. In Q1 last year, we canceled some TV commercials of JPY 300 million to JPY 400 million. So in addition to this increase, we are strengthening forecast expenses, and we see the expected growth. We achieved sales and profit increase in Q2 onward as planned. So you don't have to worry.

Understood. Second question is about the Middle East. Thank you for your detailed explanation to that end. Please allow me to ask about the scale, though you are now in the consideration phase. In the previous management meeting, you said that with the crude oil price of around $80 to $90 per barrel, additional cost increase will be around JPY 1 billion or so. Then if the price goes up to $100 per barrel, will the cost increase simply be doubling? Or considering the procurement impact, do you need to prepare for more? With that in mind, do you make a plan? Can you give us any hint?

Quantitatively, we assume the impact would be around JPY 3 billion to JPY 4 billion. Impact of $10 difference was only for Japan business. But dependency on the Middle East varies by country in overseas business and their impact varies. So we need to scrutinize. We are considering countermeasures with the assumption of JPY 3 billion to JPY 4 billion impact by the sustained current crude oil prices at around $100. At this point, we think we'll be able to manage with this. Next, Ms. Miyasako, over to you.

I'm Miyasako of Mizuho Securities. First question is about consumer products in Japan. Sales of some product categories seem to be strong as was the case with Oral Healthcare. Compared to your forecast, how did they perform in Q1? I think the last-minute demand happened from March. So how did you see its impact? And when it subsided, can you sustain the strong momentum in April and May, in particular in Oral Healthcare? Would you comment on this?

In Q4 last year, as we took product initiatives, in this Q1, we see their contribution. In this year also, we will strengthen mid- to high-end products like Haguki Plus. So combining these efforts, we will strive to sustain growth, focusing on key products.

Then Oral Healthcare seemed to be strong, but is it not due to the last-minute demand? Right? No special demand spike was observed in March due to last-minute demand. I thought there were some temporary demand anticipating future price hike. But is that not the case?

It was not the material impact. Holding, so to speak, did not happen.

Well, then Oral Healthcare robustness is due to the success of new products and the sales through dental clinics. Is that right?

Yes.

Then is it sustainable?

Yes. As it is positioned as a top priority in the company. Growth rate itself may go up and down quarterly, but we believe the growth and margin improvement are sustainable.

I'd also like to ask about the Middle East. Do you think that you'll be able to counter JPY 3 billion to JPY 4 billion with countermeasures that you described? And we'll be able to achieve JPY 40 billion target next year? And on price revision, we will be able to have additional pass-through.

Currently, we are considering countermeasures targeting the impact of JPY 3 billion to JPY 4 billion. If these countermeasures work successfully, we think we will be able to counter. Regardless of the condition of the Strait of Hormuz, higher cost will continue next year onward. So by enhancing the structural reform in the next year onward, we will strive to achieve the mid-term plan target.

What's your thought on price pass-through? Additional one.

We are currently increasing effective selling prices by adjusting terms and condition for sales promotion cost, which is used in reducing prices. And we'd like to continue this in Q2 onward. We will increase the number of products to increase effective prices in the second half. And monitoring the situation, we may accelerate the initiatives. Mr. Miyazaki, over to you.

This is Miyazaki from Goldman Sachs. My first question is a follow-up question to Miyasako-san. I'd like to ask about the next year's target of JPY 40 billion. By taking the initiatives this year, do you foresee any upside next year? Are you exploring such a strategy? Or if the higher cost continues, do you aim to achieve JPY 40 billion? If I consider the time-lag, then can I expect to see the upside next year after achieving this year's target? Would you clarify your thought for this year and the next?

Partly, it's up to the crude oil prices, but we consider internally that the current cost environment of our raw materials will continue for upcoming 2 or 3 years. It means that if the cost environment improves next year, it is possible to see the upside. In short-term, we may need to curb the growth investment to secure profit. Then if cost environment improves, the initiatives which were originally planned for this year might be implemented next year. Through overall management, we'd like to achieve JPY 35 billion this year and JPY 40 billion next year.

Very clear. Second, I'd like to ask about Industrial Products. Due to business transfer, the business scale shrunk year-on-year. Compared to the pre-downsizing and considering the recent situation in the Middle East, can we assume that the downsizing has reduced the damage or impact? Also regarding the remaining business, is it still being affected to some extent by the situation in the Middle East? And are you considering countermeasures for this as well? Would you comment on the industrial product?

Industrial Products segment consists of two main areas: Industrial Detergent and Chemicals. Since Chemical business is scheduled to be transferred at the end of June, its operation are currently continuing. So this part is almost flat. On the other hand, the sales decline in industrial sector is due to the sale of REED brand last year. The industrial use REED kitchen paper, cooking paper. So underlying sales are up. So the business transfer neither gives merit nor demerit to sales.

After the end of June, considering the impact of the Middle East, I wonder if the impact would have been greater if you had kept the business. And regarding the remaining Industrial Detergent business, do you need to counter for this part as well? Would you comment on this?

Got you. Your question is about the future, right? The Chemical business will certainly be significantly affected. But on the other hand, compared to B2C business, cost pass-through is easier. So although the impact on this business is significant, but it can be offset easily by nature. I do not think there is any particular gain or loss along with the absence of this business as of the end of June.

What about the remaining business?

Regarding Industrial Detergent, the cost environment is tough. But since this business engages with food processing plant and hotels, it is easier to pass the cost to price compared to B2C business. So we'll be able to mitigate the impact through price control. Next, Mr. Hirozumi, over to you.

This is Hirozumi from Daiwa Securities. Let me ask 2 or 3 questions. First, JPY 3 billion to JPY 4 billion, is it additional one or not? Originally, you said JPY 1 billion of demerit per year. And are you saying additional JPY 3 billion to JPY 4 billion to it?

Yes. Initial JPY 1 billion was at the time of attack started in the Middle East. So it is additional one.

Got it. And you will counter this. I would like to ask about overseas business, existing and new parts. The growth of existing overseas business was somewhat disappointing, to be honest. Referring to Page 10, I was not fully satisfied with the sales of existing business, though you commented on many things. How should I see this? Is it unavoidable?

I think the past 3 months, it was unavoidable because our existing businesses in main markets, Thailand and China were weaker year-on-year. I think in Thailand, we need to strengthen domestic business again. In China, we had to reduce inventory. So I believe this March quarter weakness was unavoidable for the future recovery. As you said, April looks promising in China. Perhaps you can actually be looking forward to China going forward. We plan to rebuild our strategy to go back to a growth trajectory.

Then looking at the newly consolidated overseas business, profit was remarkable. And I was surprised, is it normal that profit is so good when you have new consolidation?

Existing business profit is also up with sales decrease. On local currency basis, sales are down, but profitability is up. As a margin of the two companies are higher than our entire business, by the addition of these companies, the profit was boosted.

Existing business also increased profit, though sales decreased, right?

Yes.

Is it because of the mix improvement as described, say, Oral Healthcare in Thailand was steady?

Yes. In China, sales declined significantly, but we secured profit. So in addition to securing profit in existing businesses, with the addition of two high-margin companies, we showed such a significant profit increase. Ms. Kawamoto, over to you.

First, my question is regarding cost increase due to the Middle East situation, as mentioned earlier, which is additional JPY 3 billion to JPY 4 billion. Now I'm referring to your materials for FY 2022. Back then, Dubai crude oil price was $97 per barrel. And your raw material costs were JPY 14 billion. I'd like you to explain what has changed since then from your perspective? Is it because of portfolio change or your relationship with suppliers? Why can you manage with just JPY 3 billion to JPY 4 billion in addition? There may be various reasons such as palm oil prices, which has not increased or the product mix being different. So would you explain this?

Yes, costs did rise significantly in 2022, but that increase was JPY 14 billion year-on-year. It is not the case that cost then declined by 2025. What we are saying is that on top of these already elevated cost levels, we are now facing an additional JPY 3 billion to JPY 4 billion cost increase possibility. So this is not a comparison between JPY 14 billion versus JPY 3 billion to JPY 4 billion, rather, compared with the level after the JPY 14 billion increase over those 2 years, we are expecting cost to further rise by JPY 3 billion to JPY 4 billion. Yes, this time, unlike a gradual increase in crude oil prices, the rise was triggered suddenly by geopolitical issues. As a result, suppliers and others have moved proactively ahead of the market. And therefore, the impact is emerging with a shorter time lag than under normal cost increase conditions.

I see. Then regarding how you intend to absorb these additional costs, when looking at the earnings factors you presented at the beginning of the year, should we understand from the first quarter progress that the offset would mainly come from changes in sales mix and price increases or from cost reductions? I would appreciate if you could give us some guidance in this regard. Also, how much cost increase do you expect next year? And how do you expect to offset that while achieving JPY 40 billion in profit?

As for our measures, first and most, we are shifting the sales mix toward products that are more profitable and less affected by the current environment. Normally, we will not make such revisions during the fiscal year. But this time, we are implementing rather drastic revisions to our plans. As a result, the timing of product promotions and launches is also changing. Through these efforts, we aim to prevent deterioration in overall gross profit margins. In addition, we are reducing promotional and advertising expenses as well as the various other expenses in order to control cost at broad. As for the next year, although the visibility remains limited, our current assumption is that the additional JPY 3 billion to JPY 4 billion cost burden this year will continue into next year. However, at this point, we are not assuming another incremental increase of tens of billions of yen on top of that level.

Does this JPY 3 billion to JPY 4 billion increase apply only to the second half? Or will costs begin rising additionally from the second quarter?

We believe the increase will begin from the second quarter onward. And therefore, we intend to implement these countermeasures in Q2 as well.

If I may, I have a brief second question. Regarding the newly consolidated companies in Vietnam, Australia, which performed well this quarter, could you provide some indication of how much they contributed in terms of top line growth and margins?

I believe they are included in the JPY 2.2 billion sales increase in the earnings, as you explained in the outset. Broadly speaking, the contributions from the newly consolidated companies are included throughout the entire bar charts. This is one of the points I just wanted to get your attention to. However, the areas where the impact is relatively large are the JPY 3 billion item and JPY 2.1 billion in SG&A item. Roughly speaking, about 2/3 of those amounts can be attributable to the two newly consolidated companies. Next, Mr. Ohana, please.

This is Ohana from Nomura Securities. First of all, apologies for returning again to the JPY 3 billion to JPY 4 billion raw materials cost increase question. When splitting that impact between domestic and overseas operations, how should we think about the breakdown? Also regarding the various countermeasures you mentioned, should we understand that domestic operations will mainly offset domestic impacts, while overseas operations offset overseas impacts independently? I would appreciate if you could share your basic thoughts here.

Yes. We believe roughly 60% to 70% of the impact, 60% or so range will affect domestic operations. So the 60% domestic and 40% overseas. This is due to the factors such as FX impact and the differences in raw materials procurement contracts across countries. So it may be fair for me to say that 60% impact on the Japanese market and 40% on the overseas markets. As for the countermeasures, it all depends on the case-by-case within each region, but we are also considering broader responses such as sourcing raw materials or intermediate products in one country and reallocating them across other regions depending on the situation.

Understood. One more question regarding overseas markets. You explained about China in some details, but even in countries where revenue growth remains positive, growth still appears somewhat soft. I wonder if the domestic consumption being weakened by the Middle East situation. Also in Thailand, I believe some competitors are significantly lowering the detergent prices. Should we assume that such impacts could continue and that business conditions in Thailand may remain challenging for some time to come?

Fundamentally, while the Middle East situation may also be a factor, we believe the domestic consumption conditions in Thailand themselves are not particularly strong and that the economic fundamentals are not necessarily good. On top of that, when the cost environments are changing like now, competitors sometimes adopt very aggressive or extreme strategies. And therefore, we may experience some short-term impact from such actions. However, we believe increasing the proportion of the Personal Care business within our portfolio will also improve our resilience against these types of conditions. So while this is more of a medium- to long-term approach, we intend to continue working on those initiatives. Does that answer your question?

Yes. What about the other countries? Malaysia, for example, is growing, but only modestly. Could you comment on the other countries as well?

Regarding Malaysia, we believe that we are growing faster than the underlying organic growth rate of the domestic market. Because we hold a strong market position in Detergents, it is relatively easier for us to implement price pass-through measures, and we believe performance has remained solid. In other countries, conditions differ depending on whether or not they maintain crude oil reserves. In countries without reserves, sudden disruptions to gasoline supply can temporarily affect economic activity and consumer behavior. So the situation varies country by country.

I see. So because Malaysia has domestic oil resources, although revenue growth was only 0.5%, should we interpret that as simply somewhat weaker only in the first quarter?

Yes. Malaysian also posted revenue growth last year, and we believe that underlying growth trend remains intact. In Malaysia, the government implemented demand stimulation measures last year. As a result, there was a reactionary effect this year, which led to somewhat lower growth rates. Next, Ms. Miyake, please.

This is Miyake from Morgan Stanley. I would like to ask once again about the sales in domestic consumer products business. The 10% growth rate in Oral Healthcare appears to be a very strong start compared with your full year plan of 4% to 5% growth. Although you mentioned there could be some ups and downs quarter-to-quarter, should we understand that the first quarter performance was generally tracking above the plan? Also, were there any special factors included such as initial shipments or one-time items? I would appreciate if you could share your insights in this regard, particularly from the viewpoint of the progress of the mid-term management plan. And if possible, I'd also like to ask you to actually share your thoughts in regard to other categories at the same time, please.

Yes. Since this is a comparison of the January through March period versus the same 3 months period last year. Oral Healthcare benefited from the fact that last year's new product initiatives, including dental health as well as the dental clinics channel initiatives were concentrated in the second half of the year. As a result, we had already planned for relatively strong growth in the fourth quarter and in the first half of the year. That again, you are right, actually, we had a rather strong first quarter performance above the original plan. Meanwhile, in categories such as the Beauty Care and Living Care, we had planned new product launches and product renewal initiatives beginning in April and onward this year. Therefore, ahead of those transitions, we intentionally did not significantly increase retail inventory or conduct major promotions during the first quarter. As a result, performance appeared somewhat weak. However, we do not believe the revenue decline reflects a competitive weakness.

Well understood. Related to the earlier discussion on the measures to offset raw materials cost increases, there has also been news that some new product launches were postponed. When thinking about the measures to build top line growth aside from the cost reductions, should we assume that suppressing promotional spending, which effectively functions as a price increase will have the greater impact? Or are there also the product-related initiatives that can still be strengthened even in this kind of environment?

Fundamentally speaking, to put it very bluntly, it boils down to the idea that we should sell more profitable products. Accordingly, we are reviewing the category and business area plans that were established at the beginning of the year as well as all related procurement and production plans. The biggest lever in our view is to adjust the business and the product mix in order to offset the impact. In addition, for products where costs inevitably rise, we intend to suppress promotional spending as much as possible in order to effectively reduce the cost burden. In other words, in order to achieve effective price pass-through, we believe those are going to be quite important activities. As we are running short of time, I will take the one final question. Mr. Ogaki, please.

This is Ogaki from Okasan Securities. I would first like to ask about Fabric Care within the Consumer Products business. On Page 8, you mentioned that Laundry Detergents performed steadily. Regarding this year's price increase, Fabric Softener was highlighted as one of the key focal areas. I wonder if you could comment on how Fabric Softener sales have been performing. Also, given the product renewals discussed on Page 16, could you share what you can regarding the current situation, please?

Thank you very much. For the Fabric Softener, going forward, we plan to implement product initiatives as well as price pass-through measures in the second half of the year. On the other hand, for Laundry Detergents, the Liquid Detergent category as a whole returned to revenue growth in the first quarter. Therefore, we view the performance as solid overall.

Understood. I have one more question, if I may, regarding the Pharmaceuticals business. You mentioned that Acne Medication performed well due to the inbound demand. However, I believe the number of Chinese visitors to Japan has been declining. Was there no impact from that? Also regarding antipyretic analgesics, you mentioned that the factory had resumed operations. How did that business perform? I appreciate if you could expand on those aspects.

First, regarding antipyretic analgesics, sales were slightly down this year. Again, since this is only a comparison of a 3-month period, we intend to focus upon strengthening the business again going forward. As for the acne medication and inbound demand, while the number of the Chinese visitors to Japan has indeed declined, we believe the inbound-related consumption overall has remained relatively solid, not necessarily limited only to the Chinese consumers, if I may say so. In particular, our acne treatment and brand PAIR, apparently gained attention on social media, and we understand that this contributed to a very strong sales during the quarter.

You mentioned that social media helped the performance this quarter. Should we, therefore, be somewhat cautious regarding the next quarter and beyond?

Yes. Overall, rather than relying heavily on the volatile inbound-driven sales, we believe it is more important to strengthen our core categories such as antipyretic analgesics and eye care products. As we are now running out of time, we will now conclude the Q&A session here. Thank you all for many questions. This concludes the earnings presentation of Lion Corporation. Thank you indeed for your precious time and participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]