Kao (4452) Q4 2024 earnings summary

Executive summary

• Achieved strong profit recovery in 2024, surpassing targets due to structural reforms, higher value-added products, and improved brand loyalty, with operating income up 27.8% to JPY 146.6 billion and net sales up 6.3% to JPY 1.6284 trillion.

• ROIC improved to 9.2% (from 4.1% in FY2023), with significant progress toward K27 targets and increased probability of achievement.

• Optimization of cosmetics inventory in China was completed, with expected profit contribution in FY2025.

• Entering a new stage in 2025, focusing on reformed earning power as a core engine for global growth, with the cosmetics business expected to contribute more.

• The business environment remains uncertain due to global geopolitical risks, inflation, and economic slowdowns, particularly in China.

Financial highlights

• Net sales rose 6.3% year-over-year to JPY 1.6284 trillion; excluding Forex, sales grew 3.3%.

• Gross margin improved by 1.9 percentage points to 39.2%; operating margin at 9.0%.

• Operating income increased by JPY 31.9 billion to JPY 146.6 billion; net income attributable to owners was JPY 107.8 billion, up 25.3% year-over-year; EPS rose 25.4% to JPY 231.94.

• EBITDA surged to JPY 235.1 billion (+57.1% year-over-year).

• Annual dividend increased for the 35th consecutive year to JPY 152 per share.

Outlook and guidance

• 2025 forecast: net sales of JPY 1.67 trillion (2.6–3.1% growth), operating income of JPY 160 billion (up JPY 13.4 billion), net income of JPY 116 billion, and EPS of JPY 249.74 (7.7% growth).

• Dividend planned to increase to JPY 154 per share.

• Expecting JPY 13 billion effect from earning power reforms and JPY 7 billion profit increase in cosmetics from China inventory resolution.

• Cost reductions and productivity improvements to drive income increase.

• Main exchange rates for forecasts: USD/JPY 150, EUR/JPY 163, CNY/JPY 21.