Kao (4452) Q3 2024 earnings summary

Executive summary

• Structural reforms and capital efficiency measures drove profit recovery, improved core brand competitiveness, and increased ROIC by 4.9 points year-over-year to 8.4% for the nine months ended September 30, 2024.

• Net sales rose 5.7% year-over-year to ¥1,190.0 billion, with like-for-like growth of 2.1% driven by both volume and price increases.

• Operating income increased 42.8% to ¥101.1 billion, with operating margin improving to 8.5% and net income attributable to owners up 41.5% to ¥71.0 billion.

• Expansion into premium hair care in Japan and global rollout of high-value-added products are key strategic focuses.

• The business environment remained uncertain due to global geopolitical risks, inflation, and a slowdown in China, but domestic demand in Japan showed resilience.

Financial highlights

• Gross margin improved by 2.3 points to 38.6% year-over-year, with gross profit up ¥51.4 billion to ¥459.3 billion.

• Operating income rose 42.8% to ¥101.1 billion; operating margin recovered to 8.5%.

• Net income attributable to owners was ¥71.0 billion, up 41.5% year-over-year; basic EPS increased 41.5% to ¥152.85.

• EBITDA rose 42.3% to ¥167.5 billion.

• Net cash flows from operating activities increased to ¥131.9 billion.

Outlook and guidance

• Full-year 2024 net sales forecast at ¥1,600.0 billion (+4.4% YoY), operating income ¥140.0 billion (+133.2%), and net income attributable to owners at ¥104.0 billion (+137.1%).

• Operating income for FY24 is forecast at ¥140.0 billion, with structural reform effects expected to contribute ¥28.0 billion.

• Dividend forecast raised to ¥152 per share for FY2024.

• Raw material and logistics costs expected to rise, offset by price adjustments and cost reduction initiatives.

• Continued investment in marketing and strategic brands expected amid ongoing uncertainty in China and global markets.