Lion Corp

TSE:4912

Earnings Call Transcript 2023-Q2

[Masayuki Takemori, executive]

Thank you very much for joining our briefing for the first half of FY 2023 of Lion Corporation, and thank you very much for your consistent warm support for our [ IR ] activity. These are the 3 key points in my presentation. So let me explain following this order.

First, I will explain the consolidated financial results for the first half of 2023. This is a consolidated performance overview. Sales and or profit surpassed the plan for April to June period and the cumulative figure for the first half achieved the forecast announced in February this year. Our profits are core operating income, operating profit and the profit for the period attributable to owners of the parent.

Sales were mainly driven by the overseas segment. Thailand in South and Southeast Asia and China in Northeast Asia showed a significant growth year-on-year. Core operating income met the initial forecast, offsetting the rising raw material prices with the increasing wholesale prices and streamlining of sales promotion and others.

Operating profit and the profit for the period attributable to owners of the parent decreased year-on-year due to the recoil from the gain on the transfer of land recorded in January 2022. But as mentioned before, they met the forecast. This slide shows the trends of the consumer product market, which are relevant to us in Japan.

Overall market went down in the first quarter year-on-year, but it recovered from April and the market in January to June was flat year-on-year. Next, Overseas market trends. Laundry detergent showed a year-on-year increase. But in Thailand, due to the price increase, sales value increased, but in [ rate ], they were down year-on-year. Toothbrushes were up year-on-year in Thailand and Malaysia. Hand soaps market continued to be down year-on-year. But compared to 2019 before pandemic, it still went up.

I will explain the consolidated financial results from here. Net sales were JPY 192.8 billion, up 4.2% or JPY 7.6 billion year-on-year. Excluding the exchange rate fluctuation impact, year-on-year change at constant currency was up 2.2%. Core operating income was JPY 6.3 billion, down JPY 2.7 billion year-on-year but it was above the forecast by JPY 0.8 billion due to the overseas sales growth and the streamlined sales promotion. Operating profit in the previous year includes a gain on the transfer of land owned by the consolidated subsidiary. In the first quarter results meeting in May, I said that the recovery is expected from the third quarter, but it happened earlier than the forecast. To be specific, core operating income grew by double digit by JPY 0.86 billion. And operating profit also increased by double digit by JPY 0.74 billion.

Next slide shows the year-on-year change in core operating income. Increased factors shown in yellow part was JPY 5.4 billion in total. Impact of raw material prices, mainly in Japan, shown in the middle was JPY 2.5 billion, but it is in line with the forecast announced in the first quarter results meeting in May. Against this, we're seeing changes in sales, product mix and others. Changes in sales were JPY 1.9 billion of gross profit increase and price increases, decreasing rate of promotional expenses deducted from net sales and changes in segment mix was JPY 2 billion.

And the total was plus JPY 3.9 billion. Total cost reduction was JPY 1.5 billion, mainly by cost cut. Decreased factor was JPY 8.1 billion in total. Impact of raw material prices was JPY 2.5 billion, as mentioned, and other expenses increased, including the relocation of cost of head office and amortization cost for new core system. The investment for the future growth. As a result, core operating income decreased JPY 2.7 billion year-on-year.

To summarize, the impact of raw material prices was in line with the forecast revised in the first quarter, but the gross profit increased due to the sales growth mainly overseas and increase in wholesale prices contributed to the results better than our forecast. As a result, as mentioned before, core operating income was up by JPY 0.86 billion compared to the forecast.

I will explain the impact of raw material price increases and our response. Please refer to the chart on the left. The bar shows the impact of raw material price increases on profit. Higher bars shows a negative impact and the lower bars showed the positive impact on profit. Negative impact by raw material price increase on profit peaked out in the fourth quarter of 2022, and it has been declining. And we expect that it will turn to a positive impact year-on-year in the second half of this year. We have responded through various measures, including launching and nurturing high-value added products raising wholesale prices for some products and streamlined sales promotion. The effect of price pass-through in the first half 2023 was approximately JPY 4 billion.

Let me show you the breakdown. Against the raw material cost increase of JPY 2.5 billion, price pass-through was JPY 4 billion. The JPY 4 billion has two major components the revision of the wholesale price of about 260 SKUs, mainly in B2B led to the JPY 2.7 billion and discount control, JPY 1.3 billion. And in total, it was JPY 4 billion. This is a situation in the first half. Now let me comment on the period of raw material price surge 2021 and '22. The cumulative raw material price increase was about JPY 13 billion, and to counter this, the price increase and the discount control was about JPY 11 billion, and we were able to mostly offset. We continue to improve the profit, monitoring the raw material market and the daily products market condition.

Results by segment. In net sales, upper line shows the net sales and the lower line shows the sales to external customers. Sales in consumer products increased year-on-year, up 2.6%. But due to the rising raw material price, segment profit decreased. I'll explain the sales by product category on the next slide.

In Industrial Products, sales and profit increased as the demand for [indiscernible] agent for tire and carbon for rechargeable battery continued in the chemical product field. Overseas business sales and profit also increased. Let me add some comments on the overseas sales ratio. In FY 2022, the overseas business was 30% of the total sales. As of the end of the second half FY '23, it was 33%, marking the steady expansion of the overseas business. Consumer product business net sales by product category. In the first quarter, oral care sales were down year-on-year, and fabric care sales were flat, but both increased sales with the launch of high value added new products.

Please turn to fabric care on the right, 3.2%. Total sales of fabric care increased 3.2% year-on-year. As its total full year sales in FY 2022 was 99% below 100%. We are starting to see the turnaround.

In Pharmaceutical the antipyretic analgesic was down year-on-year. But due to the recovery in inbound demand, sales of [indiscernible] [ cooling gel ] and acne related medicine increased and the sales went up. On the other hand, in Beauty Care, hand soap market was down year-on-year. And in Living Care, household cleaners were struggling, and their sales were down year-on-year. This is a bit in-depth information about the SOFLAN Airis launched in April. As a gray line in the left chart shows the market of fabric softener has been sluggish in the first half, staying negative year-on-year. However, since April with the launch of Airis, in-store fabric softener sales vary of Lion, shown by green line increased to up 8% year-on-year, and it contributed to increased average market price as shown in the right chart.

Unfortunately, net sales and market share are short of initial targets, but we may come back with the marketing activities to appeal the function and the benefits of Airis as well as the enhanced in-store trial measures. Currently, the repeat ratio of Airis is almost comparable to the major product in the market. Trial measures have been enhanced from July and the product turnover per store increased 1.3x compared to the period of pretrial and by accelerating these measures will stage a recovery.

Overseas business results by region. Sales and profit increased in both Southeast and South Asia and Northeast Asia. In Southeast and South Asia, sales increased 9% driven by Thailand and at constant currency, excluding exchange rate fluctuation, it was up 1.2% and the core operating income increased substantially by 145.6%. In Northeast Asia, sales increased by 25.2%, mainly driven by China. And at constant currency, excluding the exchange rate fluctuation, it was 20.7% up and the core operating income increased 38.5%, key message here is that profit growth rate is bigger than the sales growth, showing the sound growth.

This slide shows the status of business in key countries in overseas business. In Thailand, net sales at constant currency, excluding exchange rate fluctuation, increased 4.1%. [ Amid ] the continued fierce price competition in ordinary detergent. We control the promotion discount and the sales of body washes increased.

In Malaysia, sales of mainstay laundry detergent struggled, reflecting price competition [ amid ] the softening raw material prices, but profit increased due to streamlining of sales promotions. In China, both online and off-line sales marked prominent year-on-year growth. In off-line channels, locally produced white and white continues to drive growth following last year. In South Korea, the hand soap market remained down year-on-year and sales struggled, but sales of laundry detergent was strong, and the total sales were up year-on-year. For your reference, Personal Care net sales year-on-year change and its share of total sales are shown below. We said that in order to improve the overseas business portfolio, we expand the Personal Care business. And with the prominent growth of China, which centers on oral care, the mix of Personal Care in overseas business increased 4 percentage points year-on-year to more than 50%. This is the testament of healthy growth of overseas business.

From here, I will explain the key initiatives for the second half of fiscal 2023. To achieve the full year target in the midterm business plan, key initiatives for the second half FY 2023 are 3 points: launching new high-value-added products accelerating growth in China, and preparing for business in newly entered countries. I will explain each point.

First, we are launching a new high value-added product. As announced in July, we will launch a new laundry detergent product, NANOX-1 on September 20. NANOX-1 is characterized by its ability to both clean and deodorized and prevent color change of clauses, both of which were not possible with conventional detergents. NANOX-1 proposes a new positive laundry habit that allows you to enjoy your favorite clothes clean for a longer time and reduces the burden on the environment.

The purpose of this strategy is to add new features, which were just impossible with the conventional detergents. So we could realize high value-added products in the liquid laundry detergents category. As a specific measure to realize this, we will create two price ranges within the same brand. First, the two products, standard and for odors will become the standard line. The prices are being set so that we could drive those customers who are currently using regular liquid detergents into this genre.

As for PRO, we set up the price so that the customers who are currently using concentrated liquid detergents will be encouraged to make a shift to this product category where they can truly appreciate the perfect laundry experience, by setting two price ranges within the same brand. They can smoothly be guided to a higher ranked product. By offering a better normal experience, we'd like to further advance the high value-added experience in the liquid laundry detergents category, which accounts for almost 80% in the laundry detergents market.

Next, I would like to expand on our policy to accelerate our growth in China. I will go one by one online and off-line channels. First, online side, we are now working with the new distributor that we changed last year to reinforce one-to-one marketing. Here, we intend to better utilize the data we have accumulated in the online space by building a better relationship with our customers, we would like to make them into loyal customers. In the online market, TikTok and other emerging platforms are becoming more influential. And we'll like to expand our initiatives while leveraging those platforms.

Next, on the offline side. Here, by leveraging the brand power we have created in the online space, we intend to expand our areas and expand locally produced products. We will aim for further growth. Besides the major coastal cities we focus so far, we intend to expand our new footprint and explore so far into the surrounding cities as well as the inland areas -- by doing so, we'd like to reinforce our contacts with a lot more consumers in addition to the locally produced White & White toothpaste, which has enjoyed strong sales, we will make further efforts to try to reflect the local people's preference with CLINICA and other brands. Here, I would like to further utilize our R&D group efforts so that we can be accepted by wider and broader consumers. [ Lion ] so far expanded our business in real stores by utilizing our brands, which have been built first on online channels.

But going forward, since the end of the last year, we expanded our in-store sales, creating our brand power -- and going forward, we would like to utilize our brands more on the online side as well. We will accelerate our growth opportunities by better utilizing both channels. Lastly, allow me to explain our preparation for the business in Bangladesh, where last year, we established a new joint venture company. And in Vietnam, we invested this year.

First, in Bangladesh, we are addressing the social issues of cleanliness and hygiene by creating a new habit to seize nascent demand across business fields and achieve volume growth. In the second half of this year, we will take over our partners' laundry detergent business, which will enable us to further advance our business foundation. We entered into Vietnam by investing into a local company. We like to create [indiscernible] by combining our products, our marketing power, together with their business model and brands. We will expand our presence by promoting preventive habits. Here, we will launch new products planned in the second half, utilizing the existing brands of the company we invested that will help create preventive habits.

Lion will support doing marketing activities, and it will give us a good footprint for our business activities in Vietnam. As you see here, we'd like to fully utilize our track records, we have accumulated in the Asian countries so that we can advance our business in those new countries centering around our efforts to create habit for healthy life. On top of them, though it is not a new entry, as we announced on July 31. We intend to expand our business scope in China. We decided to enter a new business area of industrial detergents business by creating a joint venture company between an affiliate of [indiscernible] Group and our consolidated affiliate Lion hygiene.

I have so far touched upon our initiatives for the second half. And we believe it is critical for us to generate dynamism for our critical foundation for those transformation we will carry out. Here now, we have described what kind of transformation we are carrying out. We need to motivate our people, employees and our fellow colleagues within our group, and we need to further elevate the productivity for the entire group.

First, transformation for the personnel system. We are now changing our system to a job-based personnel allocation system focused on the specific duties and roles. This has first been applied to the management. Next year and onward, we plan to extend this to the entire company, so that we can change our organization where our employees can grow on their own and be successful.

Next, will make a transition to autonomous and co-creative work-styles. Here now, we are going to change the traditional work style in the past where employees come to the office and worked at the designated place. We are now switching to a new environment where employees would choose their own work styles and locations. As one example of this initiative is we used to have 4 separate locations. And now we integrated them and started our new headquarters in April. Instead of having the traditional meeting rooms, we now have this collaboration area where our people can enjoy free and frank communication. We have divided the space on each floor, which would be conducive for creating innovation and improving productivity.

Lastly, productivity now reforms for the group administrative work. We launched Lion Expert Business Co. Limited on July 1 this year. With this as a core, we plan to consolidate and strengthen the common functions for the group as well as to develop experts. We believe by having those measures affecting each other, not in a silo, we can become a strong company who can stay ahead of our competitors. We will continue to develop our environment, which can help our fellow workers, the company's important assets and resources, truly enjoyed working and create dynamism.

Lastly, with the first half 2023 finished. Here I would like to briefly comment as present at this half year point of our midterm management plan, Vision2030 1st stage.

Last year -- right after we started the first stage. We had a big change due to the [ Ukraine invasion ], which raised the raw materials price significantly. We had rapid depreciation of the Japanese Yen -- the consumer segment was dampened due to the large increase in the infrastructure cost. We have gone through a very challenging business environment over the past 1.5 years. Under such circumstances, Lion as shown on the right-hand side has been engaged in a series of efforts with a sense of speed to make a shift to high value-added products as well as exploring new services centering around [ oral ] health care. And as I have already mentioned earlier, we raised the wholesale prices of some products as well as the efforts to improve efficiency of special sales promotion and advertisement. Lion for its entire group has made efforts to improve its growth and profitability.

Thanks to those efforts last year and first half of this year. We were able to achieve both sales and profit as we have promised in the outset of the current fiscal year. Yes, we were able to grow our profit slightly. That said, though, we still have some more to go in terms of our efforts to respond to the environmental change. I believe we still have a lot of room for further growth and improvement. As I have been telling you for some time, what I am aiming at is to be got my company who can stay ahead? I would like to further accelerate on our strategy based on positive and forward-looking habits. I will lead the company for its transformation journey with a sense of speed to become a strong Lion.

Next, I will explain our consolidated financial forecast for fiscal year 2023. This shows consolidated financial forecast for FY '23. It has not changed from the forecast announced at the start of the year. Net sales continue to grow. Core operating income is expected to grow in the second half onward. There is no change from the factors for the change for the full year core operating income, which we revised on May 9. But we are now revising our assumptions for the foreign exchange and raw material prices. While the Yen becoming cheaper than we had expected. But the [ Naphtha ] and other raw materials prices have been lower than we had assumed. So we believe the impact on our profit as a whole will not change.

Now the last page. Our shareholder returns. There is no change here either. As for dividend, based on our basic dividend policy, return profits to shareholders on a continuous and stable basis. The full year dividend is JPY 26, up JPY 1 from the previous year. We plan to increase the annual dividend for 8 consecutive years. Lion has already adopted ROIC as an indicator to promote efficiency-oriented management. We will strive to increase the corporate value by continuously raising ROIC through company-wide portfolio improvement and by expanding the spread over the cost of capital throughout the promotion of flexible capital policies and other measures. This concludes my explanation. I would like to thank you for your kind attention.

[Operator]

[Operator Instructions] Mr. Hirozumi please.

[Katsuro Hirozumi, analyst]

This is Hirozumi of Daiwa Securities. One question per person, right? Let me ask a bit tricky question. I'd like to know the sustainability by segment based on the second quarter results. Core operating loss in Japan, though small was a surprise and the prominent profit growth in overseas business was also a surprise. So please let us know how we should interpret the core operating loss in Japan and the sustainability of the overseas business profit growth? I would appreciate if you comment on the next fiscal year as well. Thank you.

[Masayuki Takemori, executive]

Let me start with the domestic business. As for the top line, as shown here, we observed the year-on-year changes. And your question was about the core operating income. Since this is due to the cost increase head office relocation and amortization of the new SAP expenses, they will not structurally recur to the fall. This is about the domestic business. As for the overseas business, as mentioned, profit growth is more prominent than the sales growth with the Personal Care business mix expansion through sound growth. As for your question about its sustainability in the next year onwards, though we cannot be optimistic, we believe is sustainable.

[Katsuro Hirozumi, analyst]

About Japan, as people may ask later. In overseas business, in the first half, core operating income ratio was 5.5%, and the second quarter was 5.9% or almost 6%.

Going forward, to what extent is that going to grow?

[Masayuki Takemori, executive]

Basically, we are going to expand business and volume. And as for profitability, we will sustain the current level as a baseline and increase the value. This is the basic approach of the overseas business. Then do you mean to sustain margin and increase sales and profit is the right? Yes, you can take that way.

[Katsuro Hirozumi, analyst]

One more question. With the continued raw material price decline, do you expect to see the continued improvement in margin in overseas business, though you said to maintain the margin? For that specific question to Suzuki, who is in charge will respond?

[Hitoshi Suzuki, executive]

This is Suzuki. When the overseas raw material price goes down going forward, probably discount promotion might be more aggressive, including the competitors. But on the other side, we intend to increase the overall profitability by various measures, including the shift to the high-priced products besides lowering raw material cost, -- so closely monitoring the competitors approach for promotion by discount. We'd like to explore the best response to grow further.

[Operator]

Next, Ms. Kawamoto, please.

[Hisae Kawamoto, analyst]

This is Kawamoto of UBS Securities. Do you hear me? Thank you. Did you say that the impact of the wholesale price increase and the discount control was JPY 4 billion in the first half.

[Masayuki Takemori, executive]

Yes, exactly.

[Hisae Kawamoto, analyst]

I'd like to know the breakdown including Japan and overseas or by product category or a number of SKUs or its sustainability and your plan for the second half. And it is said that the price hike impact is weakening overseas. So is it possible to increase the wholesale price further in the second half and next year? How do you think about the impact on volume?

[Masayuki Takemori, executive]

For overall picture, let me comment and the more detailed commentary will be made by Fukuda for overseas in Japan. As for the breakdown of JPY 4 billion, wholesale price increase, including those in Japan and overseas was JPY 2.7 billion. Discount control was JPY 1.3 billion, so JPY 2.7 billion and JPY 1.3 billion makes JPY 4 billion. Wholesale price increase was approximately for 260 SKUs, mainly there in B2B -- with a group company of Lion Hygiene for industrial kitchen hygiene products and Lion pet for oral care-related products, covering 260 SKUs. And this represents about 10% of the total SKUs. This is the overview. As for the mix of Japan and overseas, Fukuda will respond.

[Kengo Fukuda, executive]

This is Fukuda. As Takemori explained, Out of JPY 4 billion, wholesale price increase was JPY 2.7 billion. And the discount control was JPY 1.3 billion. As for the measures in the first half, they were mostly conducted in Japan. Did that answer your question?

[Hisae Kawamoto, analyst]

Yes. Then in the second half, how do you incorporate in the plan?

[Kengo Fukuda, executive]

It's going to be around JPY 1 billion. We may adjust according to the cost fluctuation. But as Kawamoto-san said, it is said that the price increase impact is now weakening overseas. We do not expect much in the second half.

[Hisae Kawamoto, analyst]

May I confirm that this JPY 1 billion is comparable to JPY 4 billion in the first half. Yes. JPY 1 billion in the second half. And if you add it the full year impact will be JPY 5 billion. I see then basically, price increase did not affect the volume. Am I right?

[Kengo Fukuda, executive]

No, of course, when we raised the wholesale price, that affected the volume. And you can take that is absorbed in the sales changes.

[Hisae Kawamoto, analyst]

Understood. Thank you.

[Kengo Fukuda, executive]

Thank you very much.

[Operator]

Next, Ms. Miyasako, please.

[Mitsuko Miyasako, analyst]

This is Miyasako of Jefferies. I'd like to ask about the sales in Consumer Products. I think sales progressed considerably in the second quarter compared to the first quarter. Let me know which area progressed more and whether it was due to the market environment or your own effort. And you need to grow very strongly in the second half. So please let us know how we should see this?

[Unknown Executive]

Consumer product business by category is shown here. High value-added new products were launched in Oral Care and Fabric Care. Where Airis was launched and mostly developed as we planned. And in these two product category sales were firm, and that contributed to the total sales of consumer products business. In the second half, especially in Fabric Care, we launched the new product of NANOX-1, as mentioned before. And with the additional drive for Airis, we'd like to achieve the target.

[Mitsuko Miyasako, analyst]

When I compare the first and the second quarter, the sales in the second quarter progressed, notably -- was it due to the market environment? Was the market stronger than you had expected. What is your take?

[Unknown Executive]

We have benefited by both market and new product. As you know, market gradually improved in April to June period compared to January to March period. So market improvement is one thing. And in such environment, high value-added new products showed a strong presence. So there were two factors in the second quarter.

[Mitsuko Miyasako, analyst]

Do you think that market recovery will continue in the second half as well?

[Unknown Executive]

Well, some markets will recover and others may be slower. For example, fabric softener and mouth wash are slow. So situation varies by market. But generally speaking, I think the market will recover firmly in the second half.

[Mitsuko Miyasako, analyst]

I see -- in Fabric Care, although Airis performance was slightly short of the plan. The segment was strong, and I wondered why -- would you comment on this? This is the last question.

[Unknown Executive]

Airis couldn't achieve the target. But in FY 2022, the segment sales were down year-on-year, and the business was struggling, lagging behind the competitors. In that background, though Airis was short of the target, it had a certain impact in the first and second quarter.

[Operator]

Next, Ms. Kuwahara, please.

[クワハラ, analyst]

This is Kuwahara of JPMorgan Securities. Do you hear me? I have one question. In Consumer Products, in April to June period, core operating income was loss of JPY 0.3 billion. How should I view this -- was it in line with the expectation, including seasonality. From the first to second quarter, sales improved, but why did you incur losses? Going forward, how do you think about the target core operating income ratio. How and in what timeframe are you going to achieve that? I think you are monitoring with ROIC and others. So can you grow with the market recovery or as shown here, do you consider exiting from the unprofitable businesses -- what's your take -- thank you?

[Unknown Executive]

Since it relates to numbers, now I would like to have Mr. Fukuda to respond.

[Kengo Fukuda, executive]

Yes, this is Fukuda. As a summary of the situation, I would like to state the conclusion first, that domestic sales of general consumer goods were in the red in the April through the June period. However, this was still better than we had expected at the beginning of this year. This is the situation we are facing now. In fact, the decline in earnings in the April through June period compared to January through March period was due to the fact that the prices of raw materials for general consumer goods in Japan was still on an upward trend. In addition, promotional costs have incurred for new products such as Airis and other newly launched products.

In addition, we have also in other costs incurred, including wage increases and various expenses for activities at our new office. Since COVID has moved to the fifth class, sales activities and overseas business trips have become more active since the end of the Golden Week holidays. And expenses have also increased compared to the previous year. So please understand that the deficit was smaller than expected as for the future going forward. Maybe our president Takemori may comment later, but we do not think that this level of performance is sufficient. So we are determined to further enhance [ profitability ] through portfolio management this year and next.

[Masayuki Takemori, executive]

As Mr. Fukuda mentioned, location for the future in Japan is how to increase profitability. Towards this end, we will not only develop and nurture high value-added products, as I mentioned earlier. But I would also like to review our portfolio and which products and SKUs are having low profitability.

[クワハラ, analyst]

Thank you. One more point. President Takemori was emphasizing marketing costs are going to vary depending on the actual situations if I'm not wrong. I would like to inquire the status of its execution, whether or not you are actually having such a system do you make such an effort further going forward? I appreciate if you could further expand on this, maybe from qualitatively, what kind of progress you're making as of now?

[Unknown Executive]

Yes, my answer to the question is we are making progress. But I have to say vis-a-vis my own target. We still have room for improvement -- competitive portfolio where to invest, where to withdraw. Yes, I would like to further make progress in this regard. I need to study and make a judgment and how we can grow [indiscernible] the best shortcut.

[クワハラ, analyst]

Understood. Thank you indeed.

[Masayuki Takemori, executive]

Next, I would like to have Mr. Sato.

[Wakako Sato, analyst]

This is Sato from Mitsubishi. Can you hear me? Well, I may be sounding a bit harsh, but your operating profit was better than the forecast. But I am wondering if you are not necessarily growing according to your strategy and its components. Maybe you are helped by the inbound travelers who purchase a cooling shipment for [ feed ] and antipyretic analgesics in our Pharmaceutical segment in the first half, which was better than you had expected. But going forward in the second half, you may be faced with a much higher hurdle. I have a concern if you're not necessarily generating profit according to our strategy. Your subsidiaries overseas are not wholly owned by you and its volume is quite large. So they may be taken a huge amount from you in end -- so now I would like to inquire here if you're truly growing according to our strategy, and your profit is above your plan by JPY 8 million. I wonder if you could give us a breakdown between Japan and overseas? -- was it driven by the better-than-expected pharmaceutical business, thanks to the inbound business, I appreciate if you could expand on these areas?

[Unknown Executive]

Yes, happy to answer. If I look at the overall picture, the profit growth is in line with our strategy or not. I believe that's what you're asking here. We believe that growth is in good alignment with our strategy to be more specifically. We wanted to increase the share of the personal care outside Japan. We want to increase its value overseas. For Japan, we want to secure profitability. Well, we are not having a profit score, but looking at the progress we are making overseas as well as the profit and value. I would say we are growing based upon the strategy we defined in terms of Japan versus certain overseas.

Next, just looking at Japan. Yes, -- you may be right. As for the antipyretic analgesics being driven by the inbound business and others. Well, -- in this second half, we have Airis, but fabric is recovering. And with this, I don't think we are not having a big gap in regard to our strategy as of now. Well, we are still at a level where we can still make corrections. So as for the Japan business, in the second half, new products are expected. And as we told you about the cost adjustment for competition.

So by doing so, we plan to increase our strategic value. So as I mentioned in the outset, if you're asking us this JPY [ 8 million ] was generated out of the big gap in terms of strategy, I believe this JPY 8 million is a good element of our strategy.

[Wakako Sato, analyst]

What was the breakdown for the growth between Japan and overseas?

[Unknown Executive]

For that allow me to respond. It's about 50 to 50. The growth for Japan accounts for industrial products accounting for about 50%.

[Wakako Sato, analyst]

Understood. Looking at the overall situation, the raw materials increased in price by JPY 13 billion. And you hit it back, if I may [ quote you] with the increased price of JPY 11 billion as well as the higher added value initiatives. But may I remind you that your operating profit 2 years ago was Core operating income was JPY 40 million, and it is now JPY 6.3 billion. How you can explain this, even if you're taking into account in headquarters costs and depreciation of the plants, are you truly on the strategic cost JPY 14 billion 2 years ago versus JPY 6.4 billion now? I'm not actually convinced?

[Unknown Executive]

If I may now like to respond to your question first. Well, I would say -- it's not just the rising price of raw materials, but distribution costs went up and the personnel costs, both at home and abroad went up. So it is against such a backdrop, depreciation has gone up. So if you ask me that things are going as we had expected, I have to say no. Well, this is my personal view. So having said that, going forward, we need to more focus on, particularly profitability through our initiatives. In the current midterm management plan, the focus has been placed on growth. So we need to further raise our profitability. That's what I believe.

[Wakako Sato, analyst]

I see. Even in the oil prices, raw materials and pricing come down, you believe you need to further work on the high added value and the price increase efforts, right?

[Unknown Executive]

Absolutely.

[Wakako Sato, analyst]

Understood. Thank you.

[Operator]

Next, I would like to have Mr. Ohana.

[Yuji Ohana, analyst]

This is Ohana with Nomura Securities. Allow me to ask about the price increase aspects you touched upon earlier?

Price increases for the first half is JPY 4 billion and JPY 1 billion in the second half. I would like to know the fact that while you're having a smaller price increase in the second half when you are actually having a higher growth rate in the profit?

That said, particularly a [indiscernible] are showing the numbers for price pass-through, particularly in Japan in their financial results. But [indiscernible] is not increasing your price not much. Is this because the market share situation or since you are going to launch some of higher-priced products like NANOX-1. So -- is it rather difficult for you to raise your price that much? I appreciate if you could elaborate on this aspect?

[Unknown Executive]

Yes. Allow me to respond to your question on the price hike. Price increase effort started fully since the second quarter last year. So it made a kind of full circle. Therefore, between the first half and the second half, the first half makes a big contribution. And coming to a full circle, the second half is going to have less impact. Our view is that to compare with the first half, the second half is going to be relatively small. With such a -- with such a background repeating the same point, working on the existing products, but we would like to increase the share of NANOX-1 and others with higher values.

[Yuji Ohana, analyst]

I see. I believe you have raised the price of [ paste ] and B2B products since the last year. But your competitors are in aggressive in raising the price for detergents and other consumer goods. So I'm wondering if it is rather difficult for you to do so or you do not do so intentionally. How should I interpret this situation?

[Unknown Executive]

As for the domestic situations [ Ohana-san ], it may be related with our positioning in the competition. So particularly for the domestic situations, instead of increasing the price at the wholesale level, we'll rather like to increase our sales promotion efficiency. For example, the general toothpaste or a low-price toothpaste [indiscernible] would like to control special sales and others to deal with the situation. Then its results here in Japan would be limited to about JPY 1 billion. Yes, exactly.

[Yuji Ohana, analyst]

Understood. Then my last question on the graph and in the second half of the profit. For the full year, it is JPY 7.5 billion and JPY 3.5 billion in the first half. But though the number in the second half is higher in the growth rate. But in terms of its effect or in the Yen term, it is actually low. How should I interpret this?

[Unknown Executive]

Here now, allow me to respond. If you make a simple calculation of subtracting from the full year forecast, what you said is going to be right. But may I remind you that the net sales in the first half is more than our official forecast. So it is not in the case, sales number would come down. Though we still have some uncertainties in the second half. But as of now, we assume -- in the second half, the raw materials price would come down, including Japan. With the cost of growth coming down, some people may take it optimistically, but we need to think about the price increase and the impact on total profit. So I would like to try to achieve in our entire plan I hope you're with me -- are you negating here that the profit may go up a little further. Yes, we hope that will be the case.

[Operator]

Next, I'd like to have Yamanaka-san, please.

[山中 志真, analyst]

This is Yamanaka from SMBC Nikko Securities. I would like to know the actual Yen value in net sales coming from the inbound side. You mentioned earlier that in the consider the field and PAIR Acne Cream were good. I wonder if you could give us more details for the sales numbers. information as for those inbound visitors from which countries? That's all for me.

[Unknown Executive]

Yes, as for the sales from the inbound side in the first half, this is not an estimate, but it is at the level of JPY 2.8 billion or it is 1.8x year-on-year.

[山中 志真, analyst]

Which countries?

[Unknown Executive]

Well, -- we simply do not know in details. But I believe it is those foreign travelers, [indiscernible] and news and others who have purchased our products and it turn out to be JPY 2.8 billion or grew 1.8x. What's going to happen to this trend in the second half is a really good question. But a lot more people from China will come to Japan. I think we can take it rather positively. But may I remind you that this time, we are rather consultative as for its impact on business results, try not to expect too much. And we are assuming for the similar amount, I hope this has answered your question.

[山中 志真, analyst]

If I may, last year, the inbound was JPY 3.7 billion last year. And am I right, you're assuming the similar scale for the full year basis?

[Unknown Executive]

Yes, that should be fine in terms of the scale.

[山中 志真, analyst]

Just 1 more thing. JPY 1 billion in the first quarter and JPY 1.8 billion in the second quarter. It seems that it is growing on a quarter-to-quarter basis. Is this because you believe there will be more Chinese people coming back to Japan in the second half, which will help you further grow?

[Unknown Executive]

Well, I have to say it is going to be hard to say things may change and it all depends on the situations in the world. But so we should be not too much optimistic. But in case we had such situation, then I would say we will probably get closer to what we have just said.

Thank you for your questions. We have just come to the closing time. We have received many questions from you. Thank you indeed. With this, I would like to conclude Lion Corporation financial briefing for the second quarter FY 2023.

I would like to thank you indeed for your participation very much.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]