Kao (4452) Q4 2023 earnings summary

Executive summary

• FY2023 net sales were ¥1,532.6B, down 1.2% reported and 3.8% like-for-like; core operating income rose 4.2% to ¥114.7B, while reported operating income fell 45.5% to ¥60.0B after reform expenses.

• Net income attributable to owners was ¥43.9B, down 49.0%; core net income attributable to owners was ¥86.0B, with basic core EPS of ¥184.95.

Financial highlights

• Gross profit increased to ¥560.4B from ¥548.3B, while SG&A expenses rose to ¥466.8B from ¥440.9B.

• FY2023 like-for-like sales decline comprised a 3.6% volume decline and 0.1% price decline; currency translation added 2.6%.

• Q4 net sales declined 3.9% reported and 6.2% like-for-like; core operating income increased ¥10.8B to ¥43.9B, while operating income fell ¥23.8B to ¥9.3B.

• Operating cash flow was ¥202.5B, investing cash flow was negative ¥109.3B, and free cash flow was ¥93.2B.

Outlook and guidance

• FY2024 forecast: net sales ¥1,580B, up 3.1% reported and 3.6% like-for-like; operating income ¥130B, 8.2% margin, and parent net income ¥98B.

• FY2024 guidance includes EBITDA of ¥216.5B, basic core EPS of ¥210.81 and dividends of ¥152/share; ROIC target is 8.6% and EVA target ¥24.0B.

• FY2024 core operating income bridge includes ¥11B from strategic price increases, ¥15B from CP volume and ¥10B from lower raw-material prices; SG&A is a ¥17B headwind.

• FY2024 segment sales guidance, like-for-like: Hygiene and Living Care ¥516B (-0.7%); Health and Beauty Care ¥422B (+8.1%); Cosmetics ¥254B (+7.1%); Chemical ¥375B (+2.6%).