Earth Corporation 4985

アース製薬

Recent Updates

2021-11-09

Share buyback and purchase of own shares by off-auction own share repurchase trading (ToSTNet-3)

2021-11-08

Q3 FY12/21 flash update

2021-10-01

1H FY12/21 report update

Get in touch

2-12-1 Kanda-Tsukasamachi, Chiyoda-ku, Tokyo

https://corp.earth.jp/jp/index.html

03-5207-7451

Summary

Earth Corporation manufactures and sells household insecticides, oral hygiene products, and bath salts. It boasted the top share of the domestic markets for insecticides and bath salts.

Household Products

Key dates

2016-10-05

Coverage initiation

Full Report

2021-11-09

Q3 FY12/21 flash update

2021-11-08

1H FY12/21 flash update

2021-08-06

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Executive summary

Core businesses

Earth Corporation manufactures and sells household insecticides, oral hygiene products, and bath salts. It boasted the top share of the domestic markets for household insecticide products (55.0% in 2020; company estimates) and bath salts.

In the Household Products segment, household insecticides are the biggest earnings driver. Despite being a late entrant, Earth Corporation has emerged as the industry leader for the following two reasons. First, the company introduced original products such as Gokiburi Hoy Hoy (cockroach trap) and Earth No-Mat (liquid mosquito killer) that expanded the market previously comprised of anti-mosquito incense coils and aerosol sprays. Second, the company bet early on drugstore sales routes—an emerging industry at the time—and thus differentiating from major competitors who up until the 1980s had mainly used resellers that focused on mass retailers such as general merchandise stores. The company increased salespeople and strengthened direct tie-ups with sales outlets, thereby boosting product exposure.

The Japanese household insecticide market faces headwinds from a projected decline in the Japanese population and the number of households and adverse effects from unusual weather patterns including heavy rainfall and intense heat. However, there are also tailwinds such as the emergence of exotic pests amid globalization, the geographical spread of pests stemming from climate change, and creation of demand through introduction of new products.

The company aims to cultivate household products as a second earnings pillar, and to that end made Bathclin Corporation, Hakugen Earth Co., Ltd., and Earth Corporation Vietnam (formerly A My Gia Joint Stock Company) consolidated subsidiaries.

In the General Sanitary Management segment, the company provides quality control consulting services, such as contamination prevention at food production plants, thus establishing a business model that differs from the Household Products business.

Trends and outlook

In FY12/20, the company reported sales of JPY196.0bn (+3.4% YoY), operating profit of JPY11.4bn (+191.5% YoY), recurring profit of JPY11.7bn (+169.6% YoY), and net income attributable to owners of the parent of JPY3.5bn (+183.8% YoY). The gains reflect changes in consumer lifestyles and buying habits as more people stayed close at home and opened windows to increase fresh air ventilation in the wake of the COVID-19 pandemic, and warmer weather that led to increased demand for insecticides. The company decided to pay a dividend of JPY115.0 per share, up from JPY100.0 per share in FY12/19.

The company forecast for FY12/21 (revised upward on July 28, 2021) calls for sales of JPY201.5bn (+2.8% YoY), operating profit of JPY12.0bn (+5.1% YoY), recurring profit of JPY12.4bn (+6.3% YoY), and net income attributable to owners of the parent of JPY7.7bn (+117.1% YoY). The revised forecast reflects factors attributable to changes in lifestyles brought about by the pandemic. Demand remained high for household insecticide products, a major source of earnings for the company, while sales of bath salts and other household goods that add comfort to everyday life were higher than initially projected in Q2 FY12/21. As a result, gross profit exceeded initial expectations, while the company was successful in keeping SG&A expenses within the forecast range, including efforts to improve operational efficiency of advertising and sales promotion expenses. Accordingly, the company expects 1H sales and profits to exceed initial forecasts. The company also revised its full-year forecast upward in light of developments through Q2, and taking into consideration likely trends in shipments and returns of household insecticide products associated with weather conditions in 2H FY12/21. The dividend forecast of JPY115 per share remains unchanged from the figure announced on February 10, 2021.For FY12/21, the company forecasts sales of JPY200.0bn (+2.0% YoY), operating profit of JPY11.0bn (-3.6% YoY), recurring profit of JPY11.5bn (-1.4% YoY), and net income attributable to owners of the parent of JPY7.0bn (+97.3% YoY). The company forecasts a 2.0% YoY increase in sales as it expects household insecticide and other product sales to continue benefiting from the changes in consumer behavior and buying habits in the wake of the pandemic. The forecast 3.6% YoY decrease in operation profit is based on increases in projected expenses. It expects to pay an annual dividend of JPY115.0 per share, unchanged versus FY12/20.

The next three-year (FY12/21–FY12/23) medium-term business plan is as follows. Following FY12/20 sales of JPY196.0bn, operating profit of JPY11.4bn, recurring profit of JPY11.7bn, net income attributable to owners of the parent of JPY3.5bn, and ROE of 7.4%, the company is targeting FY12/23 sales of JPY213.0bn, operating profit of JPY14.0–16.0bn, net income attributable to owners of the parent of JPY10.0bn, and ROE of 13.0%.

Strategic plans call for 1) expanding its earnings base in Asia, including the use of M&A; 2) active promotion of ESG and open innovation initiatives, including measures aimed at reducing product returns and greater use of sustainable raw materials; and 3) generation of additional cost savings by rethinking its entire value chain.

Strengths and weaknesses

Strengths: innovative product ideas, a sales strategy of approaching retailers directly, and its long-term relationships with drugstore chains with strong sales capabilities. Weaknesses: high seasonality of mainstay household insecticide products, demand for which is affected by seasonal weather patterns; relatively low profitability of household products; and late and slow overseas expansion due to the legacy of a domestic focus.

Key financial data

Income statement		FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		125,499	135,737	145,858	159,739	168,505	179,738	181,104	189,527	196,045	201,500
	YoY	13.1%	8.2%	7.5%	9.5%	5.5%	6.7%	0.8%	4.7%	3.4%	2.8%
Gross profit		46,731	50,758	54,707	58,498	63,634	68,102	67,376	70,418	78,951
	Gross profit margin	37.2%	37.4%	37.5%	36.6%	37.8%	37.9%	37.2%	37.2%	40.3%
SG&A expenses		42,605	45,311	49,864	54,481	58,085	63,645	66,340	66,501	67,535
	YoY	17.8%	6.4%	10.0%	9.3%	6.6%	9.6%	4.2%	0.2%	1.6%
	SG&A ratio	33.9%	33.4%	34.2%	34.1%	34.5%	35.4%	36.6%	35.1%	34.4%
	R&D expenses	1,847	2,037	2,227	2,328	2,682	2,695	2,900	2,663	2,673
	YoY	19.9%	10.3%	9.3%	4.5%	15.2%	0.5%	7.6%	-8.2%	0.4%
	R&D ratio	1.5%	1.5%	1.5%	1.5%	1.6%	1.5%	1.6%	1.4%	1.4%
Operating profit		4,125	5,446	4,843	4,016	5,549	4,456	1,036	3,916	11,416	12,000
	YoY	-32.5%	32.0%	-11.1%	-17.1%	38.2%	-19.7%	-76.8%	278.0%	191.5%	5.1%
	Operating profit margin	3.3%	4.0%	3.3%	2.5%	3.3%	2.5%	0.6%	2.1%	5.8%	6.0%
Recurring profit		4,689	6,469	6,020	4,260	5,991	4,987	1,382	4,326	11,661	12,400
	YoY	-29.4%	38.0%	-6.9%	-29.2%	40.6%	-16.8%	-72.3%	213.0%	169.6%	6.3%
	Recurring profit margin	3.7%	4.8%	4.1%	2.7%	3.6%	2.8%	0.8%	2.3%	5.9%	6.2%
Net income attributable to owners of the parent		1,721	2,986	1,705	1,165	3,364	2,205	-142	1,250	3,547	7,700
	YoY	-48.2%	73.5%	-42.9%	-31.7%	188.8%	-34.5%	-	-	183.8%	117.1%
	Net margin	1.4%	2.2%	1.2%	0.7%	2.0%	1.2%	-0.1%	0.7%	1.8%	3.8%
Per-share data (adjusted for splits; JPY)
Shares issued (year-end; '000)		20,200	20,200	20,200	20,200	20,200	20,200	20,220	20,238	22,058
EPS (JPY)		85.22	147.86	84.47	57.69	166.60	109.20	-7.06	61.80	170.65	348.97
EPS (fully diluted; JPY)		-	-	-	-	-	-	-	-	-
Dividend per share (JPY)		95.00	105.00	110.00	110.00	115.00	115.00	115.00	100.00	115.00	115.00
Book value per share (JPY)		2,048.28	2,151.52	2,192.88	2,151.82	2,154.95	2,225.30	1,989.93	1,978.86	2,507.62
Balance sheet (JPYmn)
Current assets		48,268	49,431	56,255	55,701	57,884	57,123	54,460	54,710	70,747
	Cash and cash equivalents	12,123	13,127	12,626	11,391	11,979	10,453	6,044	7,312	23,716
	Accounts receivable	14,801	15,817	17,242	17,400	19,429	20,661	21,969	22,610	22,746
	Inventories	18,208	16,863	22,227	23,215	23,158	22,628	23,782	22,506	22,178
	Other current assets	3,136	3,624	4,160	3,695	3,318	3,381	2,665	2,282	2,107
Fixed assets, deferred assets		36,796	36,365	45,343	48,747	49,482	61,044	54,119	52,715	49,122
	Tangible fixed assets	16,754	17,727	23,879	26,761	28,431	29,643	29,215	28,220	28,030
	Intangible assets	16,182	14,596	14,450	12,703	12,132	19,256	16,180	13,143	6,268
	Other assets	3,860	4,042	7,014	9,283	8,919	12,144	8,723	11,351	14,823
Total assets		85,064	85,796	101,598	104,448	107,366	118,167	108,579	107,425	119,869
Current liabilities		31,791	32,270	41,309	43,749	47,165	53,024	55,061	56,997	54,884
	Accounts payable	19,161	18,661	24,394	24,640	25,925	27,960	27,684	26,778	31,714
	Short-term debt	3,271	2,738	4,446	7,117	7,664	11,900	15,954	17,166	3,070
	Other current liabilities	9,359	10,871	12,469	11,992	13,576	13,164	11,423	13,053	20,100
Fixed liabilities		7,230	5,119	10,708	11,707	11,008	14,614	9,146	6,105	5,161
	Long-term debt	4,167	2,826	7,006	8,030	7,838	10,354	6,809	3,550	2,218
	Other	3,063	2,293	3,702	3,677	3,170	4,260	2,337	2,555	2,943
Net assets		46,043	48,406	49,580	48,991	49,192	50,529	44,372	44,322	59,823
	Capital stock	3,377	3,377	3,377	3,377	3,377	3,377	3,432	3,478	9,829
	Capital surplus	3,168	3,168	3,168	3,168	3,168	2,923	3,463	3,509	9,859
	Retained earnings	34,724	35,792	35,377	34,441	35,566	35,449	32,984	31,798	33,322
	Treasury stock	-10	-11	-11	-12	-13	-14	-15	-16	-17
	Accumulated other comprehensive income	106	1,124	2,374	2,482	1,420	3,204	361	1,267	2,304
	Share subscription rights	-	-	-	-	-	-	-	-	-
	Non-controlling interests	4,675	4,954	5,293	5,533	5,672	5,588	4,145	4,285	4,524
Total liabilities and equity		85,064	85,795	101,598	104,448	107,366	118,167	108,580	107,425	119,870
Cash flow statement (JPYmn)
Cash flows from operating activities		3,317	7,026	6,380	3,791	8,089	9,175	369	10,022	24,590
Cash flows from investing activities		-15,677	-1,419	-10,422	-5,969	-5,501	-13,995	-1,515	-3,990	-3,168
Cash flows from financing activities		2,039	4,058	3,489	1,180	-2,216	3,262	-3,203	-4,768	-4,938
Financial ratios
Interest-bearing debt		7,438	5,564	11,452	15,147	15,502	22,254	22,763	20,716	5,288
Net cash		4,685	7,563	1,174	-3,756	-3,523	-11,801	-16,719	-13,404	18,428
ROA (RP-based)		6.0%	7.6%	6.4%	4.1%	5.7%	4.4%	1.2%	4.0%	10.3%
ROE		4.2%	7.0%	3.9%	2.7%	7.7%	5.0%	-0.3%	3.1%	7.4%
Current ratio		152%	153%	136%	127%	123%	108%	99%	96%	129%
Fixed ratio		80%	75%	91%	100%	101%	121%	122%	119%	82%
Equity ratio		48.6%	50.6%	43.6%	41.6%	40.5%	38.0%	37.0%	37.3%	46.1%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: Accounts receivable are adjusted for deduction of allowance for doubtful accounts.

Performance by segment			FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)			Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales			110,974	125,499	135,737	145,858	159,739	168,505	179,738	181,104	189,527	196,045
	Household Products Business		97,759	111,098	122,582	133,125	145,010	154,404	164,616	165,572	173,022	179,374
		Household Insecticide Products	46,535	45,899	49,857	53,174	52,673	54,850	59,588	56,719	59,394	65,990
		Oral Care, Bath Powder and Other Household Products	45,575	59,075	65,251	72,225	84,010	90,647	96,771	100,922	105,369	104,164
		Pet-related Products and Others	5,648	6,123	7,473	7,726	8,326	8,905	8,256	7,930	8,258	9,220
	General Sanitary Management		17,396	17,862	18,338	19,129	20,914	21,935	23,519	24,421	25,571	26,420
	Sum of reportable segments		115,155	128,960	140,920	152,254	165,924	176,339	188,135	189,994	198,593	205,794
	Adjustments		-4,181	-3,461	-5,183	-6,396	-6,184	-7,834	-8,398	-8,890	-9,066	-9,749
YoY			7.2%	13.1%	8.2%	7.5%	9.5%	5.5%	6.7%	0.8%	4.7%	3.4%
	Household Products Business		8.6%	13.6%	10.3%	8.6%	8.9%	6.5%	6.6%	0.6%	4.5%	3.7%
		Household Insecticide Products	7.4%	-1.4%	8.6%	6.7%	-0.9%	4.1%	8.6%	-4.8%	4.7%	11.1%
		Oral Care, Bath Powder and Other Household Products	9.5%	29.6%	10.5%	10.7%	16.3%	7.9%	6.8%	4.3%	4.4%	-1.1%
		Pet-related Products and Others	11.2%	8.4%	22.0%	3.4%	7.8%	7.0%	-7.3%	-3.9%	4.1%	11.6%
	General Sanitary Management		4.2%	2.7%	2.7%	4.3%	9.3%	4.9%	7.2%	3.8%	4.7%	3.3%
% of sales			100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
	Household Products Business		84.9%	86.1%	87.0%	87.4%	87.4%	87.6%	87.5%	87.1%	87.1%	87.2%
		Household Insecticide Products	40.4%	35.6%	35.4%	34.9%	31.7%	31.1%	31.7%	29.9%	29.9%	32.1%
		Oral Care, Bath Powder and Other Household Products	39.6%	45.8%	46.3%	47.4%	50.6%	51.4%	51.4%	53.1%	53.1%	50.6%
		Pet-related Products and Others	4.9%	4.7%	5.3%	5.1%	5.0%	5.0%	4.4%	4.2%	4.2%	4.5%
	General Sanitary Management		15.1%	13.9%	13.0%	12.6%	12.6%	12.4%	12.5%	12.9%	12.9%	12.8%
Operating profit			6,112	4,125	5,446	4,843	4,016	5,549	4,455	1,036	3,916	11,416
	Household Products Business		4,771	2,455	3,937	3,841	2,173	4,058	3,291	-507	2,373	9,980
	General Sanitary Management		1,433	1,454	1,475	1,529	1,547	1,275	1,349	1,374	1,366	1,419
	Sum of reportable segments		6,204	3,909	5,412	5,370	3,720	5,333	4,641	866	3,739	11,399
	Adjustments		-92	215	33	-527	295	216	-185	170	175	16
YoY			5.0%	-32.5%	32.0%	-11.1%	-17.1%	38.2%	-19.7%	-76.7%	278.0%	191.5%
	Household Products Business		11.6%	-48.5%	60.4%	-2.4%	-43.4%	86.7%	-18.9%	-	-	320.6%
	General Sanitary Management		0.2%	1.5%	1.4%	3.7%	1.2%	-17.6%	5.8%	1.9%	-0.6%	3.9%
OPM (unadjusted)			5.5%	3.3%	4.0%	3.3%	2.5%	3.3%	2.5%	0.6%	2.1%	5.8%
	Household Products Business		4.9%	2.2%	3.2%	2.9%	1.5%	2.6%	2.0%	-0.3%	1.4%	5.6%
	General Sanitary Management		8.2%	8.1%	8.0%	8.0%	7.4%	5.8%	5.7%	5.6%	5.3%	5.4%
% of operating profit (unadjusted)			100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.1%	100.0%	100.0%
	Household Products Business		76.9%	62.8%	72.7%	71.5%	58.4%	76.1%	70.9%	-58.5%	63.5%	87.6%
	General Sanitary Management		23.1%	37.2%	27.3%	28.5%	41.6%	23.9%	29.1%	158.7%	36.5%	12.4%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

Recent updates

Share buyback and purchase of own shares by off-auction own share repurchase trading (ToSTNet-3)

2021-11-09

On November 8, 2021, Earth Corporation announced a share buyback and purchase of own shares by off-auction own share repurchase trading (ToSTNet-3).

At a board of directors' meeting held on November 8, 2021, Earth Corporation resolved to repurchase its own shares and decided details of the purchase method.

At 8:45 a.m. on November 9, 2021, the company was to commission repurchase of its shares via ToSTNeT-3 (the Tokyo Stock Exchange off-auction own share repurchase trading system) at the November 8, 2021 closing price (including final special indicative price) of JPY6,900. No changes to trading systems or times were expected. The specified purchase order was to occur only at the specified time.

Type of shares to be repurchased: Common stock of Earth Corporation
Total number of shares to be repurchased: Up to 10,000 (0.04% of outstanding shares, excluding treasury stock)
Total purchase price of shares: Up to JPY69,000,000
Announcement of purchase result: The result of the purchase was to be announced after the trading time of 8:45 a.m. on November 9, 2021.

Trends and outlook

Quarterly trends and results

Cumulative		FY12/19				FY12/20				FY12/21
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3
Sales		43,574	104,031	152,800	189,527	45,441	110,634	158,247	196,045	49,278	115,821	165,167
	YoY	6.1%	2.9%	4.9%	4.7%	4.3%	6.3%	3.6%	3.4%	8.4%	4.7%	4.4%
Gross profit		17,152	41,580	58,586	70,418	19,194	47,777	65,886	78,951	21,780	51,603	70,631
	Gross profit margin	39.4%	40.0%	38.3%	37.2%	42.2%	43.2%	41.6%	40.3%	44.2%	44.6%	42.8%
SG&A expenses		15,660	34,178	49,751	66,501	14,034	31,753	47,929	67,535	13,729	33,036	50,278
	YoY	2.8%	0.1%	-1.6%	0.2%	-10.4%	-7.1%	-3.7%	1.6%	-2.2%	4.0%	4.9%
	SG&A ratio	35.9%	32.9%	32.6%	35.1%	30.9%	28.7%	30.3%	34.4%	27.9%	28.5%	30.4%
Operating profit		1,491	7,402	8,834	3,916	5,159	16,024	17,957	11,416	8,050	18,566	20,353
	YoY	24.5%	14.0%	48.4%	278.0%	246.0%	116.5%	103.3%	191.5%	56.0%	15.9%	13.3%
	Operating profit margin	3.4%	7.1%	5.8%	2.1%	11.4%	14.5%	11.3%	5.8%	16.3%	16.0%	12.3%
Recurring profit		1,578	7,538	9,037	4,326	5,143	16,138	18,093	11,661	8,206	18,907	20,815
	YoY	29.1%	12.6%	44.6%	213.0%	225.9%	114.1%	100.2%	169.6%	59.6%	17.2%	15.0%
	Recurring profit margin	3.6%	7.2%	5.9%	2.3%	11.3%	14.6%	11.4%	5.9%	16.7%	16.3%	12.6%
Net income attributable to owners of the parent		774	4,650	5,468	1,250	3,387	10,949	11,977	3,547	5,575	12,759	13,838
	YoY	53.3%	15.0%	75.1%	-	337.6%	135.5%	119.0%	183.8%	64.6%	16.5%	15.5%
	Net margin	1.8%	4.5%	3.6%	0.7%	7.5%	9.9%	7.6%	1.8%	11.3%	11.0%	8.4%
Quarterly		FY12/19				FY12/20				FY12/21			FY12/21
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	% of Est.	FY Est.
Sales		43,574	60,457	48,769	36,727	45,441	65,193	47,613	37,798	49,278	66,543	49,346	82.0%	201,500
	YoY	6.1%	0.8%	9.5%	3.5%	4.3%	7.8%	-2.4%	2.9%	8.4%	2.1%	3.6%		2.8%
Gross profit		17,152	24,428	17,006	11,832	19,194	28,583	18,109	13,065	21,780	29,823	19,028
	Gross profit margin	39.4%	40.4%	34.9%	32.2%	42.2%	43.8%	38.0%	34.6%	44.2%	44.8%	38.6%
SG&A expenses		15,660	18,518	15,573	16,750	14,034	17,719	16,176	19,606	13,729	19,307	17,242
	YoY	2.8%	-2.1%	-5.2%	6.3%	-10.4%	-4.3%	3.9%	17.1%	-2.2%	9.0%	6.6%
	SG&A ratio	35.9%	30.6%	31.9%	45.6%	30.9%	27.2%	34.0%	51.9%	27.9%	29.0%	34.9%
Operating profit		1,491	5,911	1,432	-4,918	5,159	10,865	1,933	-6,541	8,050	10,516	1,787	169.6%	12,000
	YoY	24.5%	11.6%	-	-	246.0%	83.8%	35.0%	-	56.0%	-3.2%	-7.6%		5.1%
	Operating profit margin	3.4%	9.8%	2.9%	-	11.4%	16.7%	4.1%	-	16.3%	15.8%	3.6%		6.0%
Recurring profit		1,578	5,960	1,499	-4,711	5,143	10,995	1,955	-6,432	8,206	10,701	1,908	167.9%	12,400
	YoY	29.1%	8.9%	-	-	225.9%	84.5%	30.4%	-	59.6%	-2.7%	-2.4%		6.3%
	Recurring profit margin	3.6%	9.9%	3.1%	-	11.3%	16.9%	4.1%	-	16.7%	16.1%	3.9%		6.2%
Net income attributable to owners of the parent		774	3,876	818	-4,218	3,387	7,562	1,028	-8,430	5,575	7,184	1,079	179.7%	7,700
	YoY	53.3%	9.5%	-	-	337.6%	95.1%	25.7%	-	64.6%	-5.0%	5.0%		117.1%
	Net margin	1.8%	6.4%	1.7%	-	7.5%	11.6%	2.2%	-	11.3%	10.8%	2.2%		3.8%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

By segment (cumulative)			FY12/19				FY12/20				FY12/21			FY12/21
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	% of Est.	FY Est.
Sales			43,574	104,031	152,800	189,527	45,441	110,634	158,247	196,045	49,278	115,821	165,167	82.0%	201,500
	Household Products Business		40,312	96,926	140,839	173,022	41,476	102,668	145,785	179,374	46,354	109,224	153,816
		Household Insecticide Products	15,746	43,944	57,954	59,394	16,315	48,937	63,808	65,990	19,114	51,569	67,072
		Oral Care, Bath Powder and Other Household Products	22,772	48,606	76,407	105,369	23,100	49,002	74,920	104,164	24,921	52,587	79,368
		Pet-related Products and Others	1,793	4,375	6,477	8,258	2,061	4,729	7,055	9,220	2,318	5,067	7,375
	General Sanitary Management		5,982	12,531	19,230	25,571	6,250	13,075	19,877	26,420	6,334	13,546	20,650
	Sum of reportable segments		46,294	109,457	160,069	198,593	47,726	115,743	165,662	205,794	52,688	122,770	174,466	-	-
	Adjustments		-2,720	-5,426	-7,269	-9,066	-2,285	-5,109	-7,415	-9,749	-3,410	-6,949	-9,299	-	-
YoY			6.1%	2.9%	4.9%	4.7%	4.3%	6.3%	3.6%	3.4%	8.4%	4.7%	4.4%		2.8%
	Household Products Business		6.6%	3.1%	4.8%	4.5%	2.9%	5.9%	3.5%	3.7%	11.8%	6.4%	5.5%
		Household Insecticide Products	5.7%	0.2%	2.2%	4.7%	3.6%	11.4%	10.1%	11.1%	17.2%	5.4%	5.1%
		Oral Care, Bath Powder and Other Household Products	7.6%	6.2%	7.1%	4.4%	1.4%	0.8%	-1.9%	-1.1%	7.9%	7.3%	5.9%
		Pet-related Products and Others	1.5%	0.3%	1.8%	4.1%	14.9%	8.1%	8.9%	11.6%	12.5%	7.1%	4.5%
	General Sanitary Management		7.1%	5.2%	5.2%	4.7%	4.5%	4.3%	3.4%	3.3%	1.3%	3.6%	3.9%
Operating profit			1,491	7,402	8,834	3,916	5,159	16,024	17,957	11,416	8,050	18,566	20,353	169.6%	12,000
	Household Products Business		1,284	6,672	7,482	2,373	4,773	15,144	16,574	9,980	7,968	17,870	19,151
	General Sanitary Management		320	697	1,123	1,366	387	844	1,289	1,419	332	898	1,237
	Sum of reportable segments		1,604	7,369	8,605	3,739	5,160	15,988	17,863	11,399	8,300	18,768	20,388	-	-
	Adjustments		-113	33	229	177	-1	36	94	17	-250	-202	-35	-	-
YoY			24.5%	14.0%	48.4%	278.0%	246.0%	116.5%	103.3%	191.5%	56.0%	15.9%	13.3%	-
	Household Products Business		29.3%	15.0%	55.8%	-	271.7%	127.0%	121.5%	320.6%	66.9%	18.0%	15.5%
	General Sanitary Management		-0.3%	1.9%	3.8%	-0.6%	20.9%	21.1%	14.8%	3.9%	-14.2%	6.4%	-4.0%
OPM (unadjusted)			3.4%	7.1%	5.8%	2.1%	11.4%	14.5%	11.3%	5.8%	16.3%	16.0%	12.3%	-
	Household Products Business		3.2%	6.9%	5.3%	1.4%	11.5%	14.8%	11.4%	5.6%	17.2%	16.4%	12.5%
	General Sanitary Management		5.3%	5.6%	5.8%	5.3%	6.2%	6.5%	6.5%	5.4%	5.2%	6.6%	6.0%
By segment			FY12/19				FY12/20				FY12/21
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
Sales			43,574	60,457	48,769	36,727	45,441	65,193	47,613	37,798	49,278	66,543	49,346
	Household Products Business		40,312	56,614	43,913	32,183	41,476	61,192	43,117	33,589	46,354	62,870	44,592
		Household Insecticide Products	15,746	28,198	14,010	1,440	16,315	32,622	14,871	2,182	19,114	32,455	15,503
		Oral Care, Bath Powder and Other Household Products	22,772	25,834	27,801	28,962	23,100	25,902	25,918	29,244	24,921	27,666	26,781
		Pet-related Products and Others	1,793	2,582	2,102	1,781	2,061	2,668	2,326	2,165	2,318	2,749	2,308
	General Sanitary Management		5,982	6,549	6,699	6,341	6,250	6,825	6,802	6,543	6,334	7,212	7,104
	Sum of reportable segments		46,294	63,163	50,612	38,524	47,726	68,017	49,919	40,132	52,688	70,082	51,696
	Adjustments		-2,720	-2,706	-1,843	-1,797	-2,285	-2,824	-2,306	-2,334	-3,410	-3,539	-2,350
YoY			6.1%	0.8%	9.5%	3.5%	4.3%	7.8%	-2.4%	2.9%	8.4%	2.1%	3.6%
	Household Products Business		6.6%	0.8%	8.5%	3.4%	2.9%	8.1%	-1.8%	4.4%	11.8%	2.7%	3.4%
		Household Insecticide Products	5.7%	-2.6%	9.0%	8,370.6%	3.6%	15.7%	6.1%	51.5%	17.2%	-0.5%	4.2%
		Oral Care, Bath Powder and Other Household Products	7.6%	5.0%	8.6%	-2.0%	1.4%	0.3%	-6.8%	1.0%	7.9%	6.8%	3.3%
		Pet-related Products and Others	1.5%	-0.4%	4.9%	13.7%	14.9%	3.3%	10.7%	21.6%	12.5%	3.0%	-0.8%
	General Sanitary Management		7.1%	3.5%	5.3%	3.2%	4.5%	4.2%	1.5%	3.2%	1.3%	5.7%	4.4%
Operating profit			1,491	5,911	1,432	-4,918	5,159	10,865	1,933	-6,541	8,050	10,516	1,787
	Household Products Business		1,284	5,388	810	-5,109	4,773	10,371	1,430	-6,594	7,968	9,902	1,281
	General Sanitary Management		320	377	426	243	387	457	445	130	332	566	339
	Sum of reportable segments		1,604	5,765	1,236	-4,866	5,160	10,828	1,875	-6,464	8,300	10,468	1,620
	Adjustments		-113	146	196	-52	-1	37	58	-77	-250	48	167
YoY			24.5%	11.6%	-	-	246.0%	83.8%	35.0%	-	56.0%	-3.2%	-7.6%
	Household Products Business		29.3%	12.1%	-	-	271.7%	92.5%	76.5%	-	66.9%	-4.5%	-10.4%
	General Sanitary Management		-0.3%	3.9%	7.0%	-16.8%	20.9%	21.2%	4.5%	-46.5%	-14.2%	23.9%	-23.8%
OPM (unadjusted)			3.4%	9.8%	2.9%	-13.4%	11.4%	16.7%	4.1%	-17.3%	16.3%	15.8%	3.6%
	Household Products Business		3.2%	9.5%	1.8%	-15.9%	11.5%	16.9%	3.3%	-19.6%	17.2%	15.7%	2.9%
	General Sanitary Management		5.3%	5.8%	6.4%	3.8%	6.2%	6.7%	6.5%	2.0%	5.2%	7.8%	4.8%
Oral Care, Bath Powder and Other Household Products			FY12/19				FY12/20				FY12/21			FY12/21
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	% of Est.	FY Est.
Sales			22,771	48,606	76,407	105,369	23,098	49,002	74,920	104,164	24,921	52,587	79,368
	Oral Care Products		9,417	20,327	32,543	44,370	10,255	20,852	32,264	45,222	10,142	21,549	33,587
	Bath Powder		4,742	9,461	15,301	24,086	4,838	10,305	16,517	26,334	6,824	13,124	19,686
	Other Household Products		8,612	18,818	28,562	36,912	8,005	17,844	26,138	32,606	7,953	17,913	26,094
YoY			7.6%	6.2%	7.1%	4.4%	1.4%	0.8%	-1.9%	-1.1%	7.9%	7.3%	5.9%
	Oral Care Products		7.1%	5.8%	8.9%	5.3%	8.9%	2.6%	-0.9%	1.9%	-1.1%	3.3%	4.1%
	Bath Powder		7.5%	7.4%	3.0%	1.3%	2.0%	8.9%	7.9%	9.3%	41.1%	27.4%	19.2%
	Other Household Products		8.3%	6.1%	7.3%	5.5%	-7.0%	-5.2%	-8.5%	-11.7%	-0.6%	0.4%	-0.2%
Oral Care, Bath Powder, and Other Household Products			FY12/19				FY12/20				FY12/21
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
Sales			22,771	25,835	27,801	28,962	23,098	25,904	25,918	29,244	24,921	27,666	26,781
	Oral Care Products		9,417	10,910	12,216	11,827	10,255	10,597	11,412	12,958	10,142	11,407	12,038
	Bath Powder		4,742	4,719	5,840	8,785	4,838	5,467	6,212	9,817	6,824	6,300	6,562
	Other Household Products		8,612	10,206	9,744	8,350	8,005	9,839	8,294	6,468	7,953	9,960	8,181
YoY			7.6%	5.0%	8.6%	-2.0%	1.4%	0.3%	-6.8%	1.0%	7.9%	6.8%	3.3%
	Oral Care Products		7.1%	4.6%	14.5%	-3.5%	8.9%	-2.9%	-6.6%	9.6%	-1.1%	7.6%	5.5%
	Bath Powder		7.5%	7.3%	-3.4%	-1.6%	2.0%	15.9%	6.4%	11.7%	41.1%	15.2%	5.6%
	Other Household Products		8.3%	4.4%	9.5%	-0.1%	-7.0%	-3.6%	-14.9%	-22.5%	-0.6%	1.2%	-1.4%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: From FY12/17, the company changed part of its sales classifications of the Household Products segment. Figures for FY12/16 onward reflect the new classifications.
Note: The company changed the name of the Insecticides product category to Household Insecticide Products in Q3 FY12/17. Figures prior to Q3 FY12/17 reflect the new category name.

Q3 FY12/21 results (out November 8, 2021)

Overview

Cumulative Q3 FY12/21 results: Sales were JPY165.2bn (+4.4% YoY), operating profit was JPY20.4bn (+13.3% YoY), recurring profit was JPY20.8bn (+15.0% YoY), and net income attributable to owners of the parent was JPY13.4bn (+15.5% YoY).

Progress versus forecast

Cumulative Q3 progress versus the full-year FY12/21 forecast (in parentheses: Cumulative Q3 FY12/20 progress versus full-year FY12/20 results) put sales at 82.0% (80.7%), operating profit at 169.6% (157.3%), recurring profit at 167.9% (155.2%), and net income attributable to owners of the parent at 179.7% (337.7%). The company left its full-year forecast unchanged.

Sales

Sales were JPY165.2bn (+4.4% YoY). By segment, Household Products recorded sales of JPY153.8bn (+5.5% YoY), while General Sanitary Management saw sales of JPY20.7bn (+3.9% YoY). In Household Products, ongoing COVID-19 related demand and the launch of new products contributed to the increase in sales. In General Sanitary Management, sales grew with an increase in the contract count.
Sales remained brisk in Japan, mainly of household insecticides and bath salts. Overseas business conditions were severe, including lockdowns to prevent the spread of COVID-19 in ASEAN countries.

Operating profit

Operating profit was JPY20.4bn (+13.3% YoY). By segment, Household Products posted operating profit of JPY19.2bn (+15.5% YoY), and General Sanitary Management JPY1.2bn (-4.0% YoY). GPM increased 1.2pp YoY to 42.8%, on the back of an improved sales mix as sales of high-margin products increased. The SG&A-to-sales ratio rose 0.1pp YoY to 30.4%, helped by higher sales and appropriate control of marketing expenses, resulting in lower-than-expected SG&A expenses. Consequently, OPM increased 1.0pp YoY to 12.3%. Cumulative Q3 operating profit came in JPY3.2bn ahead of the company forecast of JPY17.2bn thanks to the gross profit overshoot (JPY1.1bn) and positive effect of SG&A expense cuts (JPY2.0bn).

Household Products segment

Sales were JPY153.8bn (+5.5% YoY), and segment profit (operating profit) was JPY19.2bn (+15.5% YoY).

The company made efforts to develop new clients by launching new products, enhance product value through product renewals, and revitalize the market with initiatives aimed at improving communications with customers, including advertising and creating of appealing retail spaces. Efforts were also made to improve profitability through reducing manufacturing and selling costs.

Sales increased due to strong growth in new household insecticides launched in spring 2021, along with contributions from sales of bath salts, which experienced market expansion in light of changes in consumer demand triggered by the pandemic. Gross profit increased due to higher sales and improvement in the CoGS ratio resulting from changes in the sales mix. Operating profit also increased with efficient management of marketing expenses within the planned scope.

Household Insecticide Products

Sales were JPY67.1bn (+5.1% YoY). In Japan, the pandemic continued to trigger ventilation recommendations and lifestyle changes, such as more time spent at home, but lower temperatures from August 2021 onward led to weaker performance of the household insecticide market compared with strong year-ago figures. As a result, the company expects product returns to exceed its forecast and is currently analyzing the impact of this on operating profit (partly factored into the revised company forecast announced on July 28, 2021).

In this context, sales of Earth Insect Repellent Net EX and Kobae ga Hoy Hoy (to counter fruit flies). New products such as Osu Dake Earth Red Smokeless Push also helped to boost sales YoY. Overseas sales were robust, especially in Thailand.

Oral Care, Bath Powder and Other Household Products

Sales were JPY79.4bn (+5.9% YoY).

Oral hygiene product sales were JPY33.6bn (+4.1% YoY). Sales rose due to a contribution from Mondahmin Premium Care Sensitive mouthwash and continued strong sales of Shumitect toothpaste for sensitive teeth.

Bath salts sales were JPY19.7bn (+19.2% YoY). Sales of the tablet type Onpo, granule-type Kikiyu bath salts, and individual packet-type Iiyu Tabidachi bath salts remained strong, as the market expanded on the back of pandemic-induced changes in customer needs (at end-September 2021, the market grew 10% YoY and 24% versus pre-pandemic end-September 2019).

Sales of other household products were JPY26.1bn (-0.2% YoY). Sales of the Rakuhapi series of cleaning products remained brisk, but overall sales fell marginally because of falloff from the temporary boost in demand and YoY sales decline of drying and refrigerating agents because of the drop in temperatures from August 2021 onward.

Pet-related Products and Others

Sales were JPY7.4bn (+4.5% YoY). Sales of upgraded existing products and aggressive sales promotion efforts contributed to sales growth in pet-related products, towels, and cleaning products.

General Sanitary Management segment

In the General Sanitary Management segment, sales were JPY20.7bn (+3.9% YoY) and segment profit (operating profit) was JPY1.2bn (-4.0% YoY). With consumers increasingly concerned about safety issues and factories finding it harder to secure workers as the labor force shrinks, there is increased demand for contract sanitary management services. As a result, the company is seeing greater need for its high quality sanitary management services at the food-related and packaging plants that are its main customers.

Faced with this operating environment, the company actively made investments with an aim to developing an internal system that can quickly respond to customer needs, including recruitment and development of human resources and development of software to improve operational efficiency. The company also maintained and expanded its contracts through the provision of differentiated quality assurance services. In particular, the company enhanced initiatives targeting pharmaceutical and regenerative medicine industries and its food safety management inspection and consulting business.

Company forecast for FY12/21

Earnings			FY12/19			FY12/20			FY12/21
(JPYmn)			1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales			104,031	85,496	189,527	110,634	85,411	196,045	115,821	85,679	201,500
	YoY		2.9%	6.8%	4.7%	6.3%	-0.1%	3.4%	4.7%	0.3%	2.8%
Operating profit			7,402	-3,486	3,916	16,024	-4,608	11,416	18,566	-6,566	12,000
	YoY		14.0%	-	278.0%	116.5%	-	191.5%	15.9%	-	5.1%
	Operating profit margin		7.1%	-	2.1%	14.5%	-	5.8%	16.0%	-	6.0%
Recurring profit			7,538	-3,212	4,326	16,138	-4,477	11,661	18,907	-6,507	12,400
	YoY		12.6%	-	213.0%	114.1%	-	169.6%	17.2%	-	6.3%
	Recurring profit margin		7.2%	-	2.3%	14.6%	-	5.9%	16.3%	-	6.2%
Net income attributable to owners of the parent			4,650	-3,400	1,250	10,949	-7,402	3,547	12,759	-5,059	7,700
	YoY		14.9%	-	-	135.4%	-	183.8%	16.4%	-	117.1%
	Net margin		4.5%	-	0.7%	9.9%	-	1.8%	11.0%	-	3.8%
Segments			FY12/19			FY12/20			FY12/21
(JPYmn)			1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales			104,031	85,496	189,527	110,634	85,411	196,045	115,821	85,679	201,500
	Household Products Business		96,926	76,096	173,022	102,668	76,706	179,374	109,224
		Household Insecticide Products	43,944	15,450	59,394	48,937	17,053	65,990	51,569
		Oral Care, Bath Powder and Other Household Products	48,606	56,763	105,369	49,002	55,162	104,164	52,587
		Pet-related Products and Others	4,375	3,883	8,258	4,729	4,491	9,220	5,067
	General Sanitary Management		12,531	13,040	25,571	13,075	13,345	26,420	13,546
	Sum of reportable segments		109,457	89,136	198,593	115,743	90,051	205,794	122,770
	Adjustments		-5,426	-3,640	-9,066	-5,109	-4,640	-9,749	-6,949
YoY			2.9%	6.8%	4.7%	6.3%	-0.1%	3.4%	4.7%		2.8%
	Household Products Business		3.1%	6.3%	4.5%	5.9%	0.8%	3.7%	6.4%
		Household Insecticide Products	0.2%	20.1%	4.7%	11.4%	10.4%	11.1%	5.4%
		Oral Care, Bath Powder and Other Household Products	6.2%	2.9%	4.4%	0.8%	-2.8%	-1.1%	7.3%
		Pet-related Products and Others	0.3%	8.8%	4.1%	8.1%	15.7%	11.6%	7.1%
	General Sanitary Management		5.2%	4.2%	4.7%	4.3%	2.3%	3.3%	3.6%
Operating profit			7,402	-3,486	3,916	16,024	-4,608	11,416	18,566	-6,566	12,000
	Household Products Business		6,672	-4,299	2,373	15,144	-5,164	9,980	17,870
	General Sanitary Management		697	669	1,366	844	575	1,419	898
	Sum of reportable segments		7,369	-4,987	2,382	15,988	-4,589	11,399	18,768
	Adjustments		33	144	177	36	-19	17	-202
YoY			14.0%	-	278.0%	116.5%	-	191.5%	15.9%		5.1%
	Household Products Business		15.0%	-	-	127.0%	-	-	18.0%
	General Sanitary Management		1.9%	-3.0%	-0.6%	21.1%	-	-	6.4%
OPM (unadjusted)			7.1%	-	2.1%	14.5%	-	5.8%	16.0%		6.0%
	Household Products Business		6.9%	-	1.4%	14.8%	-	5.6%	16.4%
	General Sanitary Management		5.6%	5.1%	5.3%	6.5%	-	5.4%	6.6%
Oral Care, Bath Powder, and Other Household Products			FY12/19			FY12/20			FY12/21
(JPYmn)			1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales			48,606	56,763	105,369	49,002		104,164	52,587
	Oral Care Products		20,327	23,176	43,503	20,852			21,549
	Bath Powder		9,461	14,564	24,025	10,305			13,124
	Other Household Products		18,818	18,154	36,972	17,844			17,913
YoY			6.2%	2.9%	4.4%	0.8%			7.3%
	Oral Care Products		5.8%	1.1%	3.2%	2.6%			3.3%
	Bath Powder		7.4%	-2.7%	1.0%	8.9%			27.4%
	Other Household Products		6.1%	5.2%	5.7%	-5.2%			0.4%

Company forecast for FY12/21

*Revised company forecast for 1H consolidated results for FY12/21 (announced on July 28, 2021)
Sales: JPY115.8bn (previous forecast: JPY113.6bn)
Operating profit: JPY18.6bn (JPY16.1bn)
Recurring profit: JPY18.9bn (JPY16.3bn)
Net income: JPY12.8bn (JPY11.0bn)

Revised company forecast for full-year results for FY12/21
Sales: JPY201.5bn (previous forecast: JPY200.0bn)
Operating profit: JPY12.0bn (JPY11.0bn)
Recurring profit: JPY12.4bn (JPY11.5bn)
Net income: JPY7.7bn (JPY7.0bn)
EPS: JPY348.97 (JPY317.43)

Reasons for revision
The revised 1H forecast reflects factors attributable to changes in lifestyles brought about by the COVID-19 pandemic. Demand remained high for household insecticide products, a major source of earnings for the company, while sales of bath salts and other household goods that add comfort to everyday life were higher than initially projected in Q2 FY12/21. As a result, gross profit exceeded initial expectations, while the company was successful in keeping SG&A expenses within the forecast range, including efforts to improve operational efficiency of advertising and sales promotion expenses. Accordingly, the company expects 1H sales and profits to exceed initial forecasts.

The company also revised its full-year forecast upward in light of developments through Q2, and taking into consideration likely trends in shipments and returns of household insecticide products associated with weather conditions in 2H FY12/21.

The dividend forecast of JPY115 per share remains unchanged from the figure announced on February 10, 2021.

In FY12/21, the company assumes that the COVID-19 pandemic will bring about major changes in consumer lifestyles and that elevated demand for the company’s products will continue. It also expects to continue benefiting from the changes in consumer behavior and buying habits in the wake of the pandemic, such as the growing practice of increased open-air ventilation of homes and the increase in time spent at home, and expects sales of household insecticides and other products to remain strong. It expects to pay an annual dividend of JPY115.0 per share. The company expects to post record-high sales and profit.

Within the group, the company expects relatively large profit growth from subsidiaries such as Hakugen Earth, overseas subsidiaries, and the subsidiary operating the General Sanitary Management business. The strategy for achieving this involves boosting its market share by launching new products while providing a stable supply.

Although the updated company forecast does not disclose revenue forecasts by segment, the majority of the upward revision of JPY1.5bn in sales and JPY1.0bn in operating profit is from Household Products.

Profit structure improvements

The company expects gross profit for FY12/21 of JPY83.6bn (+5.8% YoY). GPM is forecast to rise by 1.2pp YoY to 41.5% in FY12/21 by improving the product portfolio through the reduction of low-margin SKUs and the launch of high-margin products. In terms of marketing expenses, the company will clarify and thoroughly manage sales promotion and advertising expenses, and develop a system for taking appropriate action in real time. Marketing expenses for FY03/21 are forecast to increase 6.7% YoY to JPY25.6bn (sales promotion expenses: JPY16.9bn, +6.3% YoY; advertising expenses: JPY8.7bn, +6.1% YoY).

Breakdown of company forecast by segment

Household Products segment

The company forecast by segment has not been disclosed in the new plan. In the initial FY12/21 forecast, the company projected sales of JPY183.3bn (+2.2% YoY) and operating profit of JPY9.5bn (-4.9% YoY).

At Household Insecticide Products, the company sees domestic sales continuing to benefit from the changes in the market and the resulting increase in demand in the wake of the pandemic.
The assumed product return rate is 5.5% (falling steadily from 12.3% in FY12/15 to 4.8% in FY12/20). 1H results were solid, and as of August 2020, in-store sales have been strong and are expected to exceed forecasts. Reducing product returns and their disposal will also help reduce the burden on the environment.
Overseas, it is looking for earnings to improve from more cost-effective marketing in Thailand.

Initiatives to reduce domestic returns of household insecticide products

Securing shelf space throughout the year: Launching sales promotions early and continued them through to the end of the season. Expanding shelf space for staple products throughout the year (requires a certain level of inventory to be maintained)
Changing the sales program for distributors. Offering rebates for reduced returns (negotiate with stores and distributors to hold inventory and pay rebates in exchange)
Designating items to curb product returns and expanding the program: The company is working to bring the return rate to zero centered on the staple items sold year-round

At Oral Care, Bath Powder and Other Household Products, the company sees sales growth being driven mainly by oral care products, bath salts, and deodorizing air fresheners.

The company also plans to continue efforts aimed at reducing manufacturing and marketing expenses, reducing product returns, and controlling other spending.

General Sanitary Management segment

The company forecast by segment has not been disclosed in the new plan. The initial FY12/21 company forecasts predicted sales of JPY26.7bn (+1.1% YoY) and operating profit of JPY1.4bn (+0.7% YoY). The company is looking to maintain steady growth in earnings by expanding its annual service contract base amid growing market demand. In the case of food plants, foreign object detection and food poisoning prevention measures are always essential, but the company also expects to see growing demand for its contract sanitation management services as a result of the widespread difficulties factories are having finding and keeping labor.

Response to changing customer needs

In response to changes in customer needs brought about by the COVID-19 pandemic, the company plans to implement measures to boost its market share regardless of the market environment.

Launch the largest number of new products in the industry

The company aims to launch the largest number of new products in the industry, including 110 SKUs of new products for the spring season. It plans to generate approximately JPY3.5bn in new product sales.

Addressing lost sales opportunities

The company will build supply capacity to fully prepare for rapid increases in demand, while also developing a flexible production system equipped to handle accelerated production. It will also begin stockpiling product inventory in the fall to be able to respond to surges in demand. Additionally, the company will expand inventories of raw materials for products, carrying higher levels of inventory for materials with longer lead times to ensure smooth production. Finally, it plans to expand its production lines.

Overseas sales

Overseas sales		FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales		2,690	3,430	4,710	5,290	5,780	6,720	9,190	9,980	11,860	12,730
	Thailand and neighboring countries	1,540	2,190	2,710	3,280	3,070	3,510	4,240	3,580	3,780	4,110
	China	310	470	680	870	970	1,520	2,030	2,180	2,740	2,830
	Vietnam	-	-	-	-	-	-	1,250	2,650	2,930	2,840
	Other	850	780	1,330	1,150	1,750	1,700	1,680	1,580	2,420	2,960
YoY		1.5%	27.5%	37.3%	12.3%	9.3%	16.3%	36.8%	8.6%	18.8%	7.3%
	Thailand and neighboring countries	0.0%	42.2%	23.7%	21.0%	-6.4%	14.3%	20.8%	-15.6%	5.6%	8.7%
	China	29.2%	51.6%	44.7%	27.9%	11.5%	56.7%	33.6%	7.4%	25.7%	3.3%
	Vietnam	-	-	-	-	-	-	-	112.0%	10.6%	-3.1%
	Other	-3.4%	-8.2%	70.5%	-13.5%	52.2%	-2.9%	-1.2%	-6.0%	53.2%	22.3%
% of sales		100.4%	100.3%	100.2%	100.2%	100.2%	100.1%	100.1%	100.1%	100.1%	100.1%
	Thailand and neighboring countries	57.2%	63.8%	57.5%	62.0%	53.1%	52.2%	46.1%	35.9%	31.9%	32.3%
	China	11.5%	13.7%	14.4%	16.4%	16.8%	22.6%	22.1%	21.8%	23.1%	22.2%
	Vietnam	-	-	-	-	-	-	13.6%	26.6%	24.7%	22.3%
	Other	31.6%	22.7%	28.2%	21.7%	30.3%	25.3%	18.3%	15.8%	20.4%	23.3%
Overseas sales ratio		2.4%	2.7%	3.5%	3.6%	3.6%	4.0%	5.1%	5.5%	6.3%	6.5%

Source: Shared Research, based on company data

The company has made it clear that it will focus on Asia, and especially ASEAN and China when it comes to its overseas operations, one of the focuses of the medium-term business plan (see the Medium-term Business Plan section for details).

Dividend payment plans

The company plans to pay a dividend of JPY115.0 per share for FY12/21.

This represents a dividend on equity (DOE) ratio of 4.4%, down 0.7pp from FY12/20.

Shareholder returns

Earth Corporation aims to make investments necessary for sustained growth while maintaining balanced shareholder returns. It also intends to sustain stable dividends.

The company plans to make capital investment of around JPY3.0bn (for investment in ICT infrastructure and human resources)

It aims to maintain a dividend on equity (DOE) ratio of between 4.0% and 5.0%.

Financial position

The previously mentioned equity financing together with reductions in product inventory levels and debt repayments have helped the company strengthen its financial position, pushing total net assets up to JPY59.8bn at end-December 2020 versus JPY44.3bn at end-December 2019, and bringing its shareholders equity ratio up to 46.1%, up 8.8pp from end-December 2019.

Management strategies

Medium-term business plan

Earth Group philosophy

Vision: Make the Earth a pleasant home.

Business philosophy: Act to live in harmony with the Earth.

Value provided by Household Products: Educate about infectious diseases and risk reduction, promote maintenance of physical and mental health, create a comfortable living environment

Value provided by General Sanitary Management: Provide original and innovative general environmental and hygiene services and safe, secure products by leveraging our expertise

Medium-term business plan (revised February 2021)

Earth Corporation had established the next three-year (FY12/21–FY12/23) medium-term business plan, called "Act For Smile -COMPASS 2023." The company upwardly revised its management targets of the plan in February 2021. Following FY12/20 sales of JPY196.0bn, operating profit of JPY11.4bn, recurring profit of JPY11.7bn, net income attributable to owners of the parent of JPY3.5bn, and ROE of 7.4%, the company targets FY12/23 sales of JPY213.0bn, operating profit of JPY14.0–16.0bn, net income attributable to owners of the parent of JPY10.0bn, ROE of 13.0% or above, and DOE of 4.0% or above. The final year targets were upwardly revised from the previous targets calling for sales of JPY200.0bn, operating profit of JPY7.5bn, net income attributable to owners of the parent of JPY5.0bn, and ROE of 11.0%.

Outline of Medium-term business plan

Under the medium-term plan (2021–2023), the company aims to promote standards and infrastructure reforms as part of its structural reform with strategies focused on 1) expanding its earnings base in Asia, 2) promoting ESG and open innovation, and 3) creating cost synergies.

1) Expand earnings base in Asia: Gain market share and support in countries of operation and develop new business areas.

2) Promote ESG and open innovation: Take on the challenge of solving issues that contribute to the achievement of SDGs. Achieve open innovation through collaboration with external organizations.

3) Create cost synergies: Rationalize and increase efficiency of operations through joint implementation of multiple measures. Realize synergies and value-added throughout the value chain.

Profitability and capital efficiency KPIs

Marginal operating profit: Evaluate earnings from sales activities based on marginal operating profit (gross profit – [sales promotion expenses + logistics expenses]).

Contribution margin: Evaluate the profitability of businesses and categories by measuring contribution margin (operating profit + indirect costs).

Cost of capital: Use cost of capital as an indicator for investment decisions.

Earth Corporation seeks to use operating profit as the company's most important management indicator while aiming to manage the cost of capital. It promotes platforms of Redefining Revenue Management Standards, Systemic Reform, and ICT Infrastructure Reform and Digital Transformation (DX).

Redefining standards

Lower hurdles to investment, business appraisal, and launching products
Organize non-core, unprofitable businesses, and assets including factories and restructured businesses
Set targets for non-financial indicators from an ESG perspective

Systemic reform

Improve labor productivity by promoting work style reform
Review management of factors like costs and foreign exchange, as well as comply with the accounting standard for revenue recognition

ICT infrastructure reform and digital transformation (DX)

Reform of communication infrastructure as well as core systems such as supply chain management and accounting
Promote integration of the Group's ICT infrastructure
Standardize business processes, aggressively promote digital transformation

Expand earnings base in Asia

The company plans to boost market share in each country by developing and introducing products that meet local needs. It will further improve its earnings structure by positioning overseas expansion as one of the drivers of profit growth. Additionally, the company will consider M&A opportunities to expand its business.

Overseas strategies in ASEAN countries

Thailand: The company will work on improving its earnings structure, carrying out cost-effective marketing, improving inventory efficiency, and boosting profitability by promoting in-house production. Focus categories include household insecticides, air fresheners, and mouthwash products. It aims to achieve sales of JPY4.9bn in FY12/23, compared to sales of JPY4.1bn in FY12/20.

Vietnam: The company will strengthen sales in the southern region centered on Ho Chi Minh City. It plans to expand the number of products distributed, build an OEM production system that leverages geographical advantages, and supply products and materials to Japan. The focus will be on the household insecticide category. It aims to achieve sales of JPY4.3bn in FY12/23, compared to sales of JPY2.8bn in FY12/20.

China and exports/cross-border e-commerce

China: The company will leverage its strengths as a limited liability investment company, centralize management of production and sales, facilitate access to financing within China, invest management resources in developing e-commerce channels, and carry out sales promotions using carefully selected products. It aims to achieve sales of JPY3.2bn in FY12/23, compared to sales of JPY2.6bn in FY12/20.

Exports and cross-border e-commerce: The company will strengthen sales mainly in Saudi Arabia and Taiwan, while launching products tailored to the needs of each country. For cross-border e-commerce, the company will focus on Black Cap and mothball products. It aims to achieve sales of JPY4.0bn in FY12/23, compared to sales of JPY3.0bn in FY12/20.

Promote ESG and open innovation

The company will take on the challenge of solving issues that contribute to the achievement of SDGs. It will also achieve open innovation through collaboration with external organizations.

Environment: The company will reduce losses related to returns and disposals, and explore the use of sustainable materials.
Social: The company participated in WELCO Lab*. It will promote work style reforms and aim to be recognized as an outstanding company in health and productivity management.
Governance: The company will promote diversity and build a group governance system that creates synergies.

*WELCO Lab: An initiative by Japanese companies aiming to solve problems in the field of global health. It was established in October 2020 with the support of the Bill & Melinda Gates Foundation.

MA-T

Promoting and enhancing the value of MA-T

The Japan MA-T Industrial Association was established to promote and enhance the value of MA-T (Matching Transformation System), an innovative oxidation control technology developed in Japan, as well as to promote open innovation. This includes potentially promoting open innovation in collaboration with the creative strategy council by the government and academic societies.

The MA-T System uses oxidation control technology to control the strength of molecular activity, and can be applied in a wide range of fields. When molecular activity is weakened, disinfectants, deodorants, and agricultural chemicals can be produced. When molecular activity is strengthened, oxidation reactions (small molecules) and surface oxidation (macromolecules) can be carried out.

The company plans to develop new solutions for the prevention of infectious diseases by 2030 through applying MA-T technology created via open innovation. This will involve setting up a procurement business for the United Nations and public organizations to help contain the spread of viruses, microorganisms, multi-drug resistant bacteria, etc. Beyond Japan, the project will target the Southeast Asian region with its population of 220 million people in low- and middle-income countries such as Thailand, Vietnam, and Myanmar. The goal is to provide inexpensive, simple, and practical solutions.

MA-T System

MA-T is a sterilizing and deodorizing system developed jointly by dotAqua, Inc. and ACENET Inc., who discovered an on-demand chlorite ion aqueous solution. The system was analyzed and proven effective by Osaka University. A basic patent application was filed in 2015, and products that have adopted the MA-T System are utilized in many hotels, hospitals, and public transportation systems and their restrooms throughout Japan.

According to Earth Corporation, the aqueous solution used for the MA-T System produces the active constituent of aqueous radicals in water only in the presence of bacteria or viruses, and only in the amount needed to break them down. Since it is more than 99.9% water, it is safer than standard chlorine-based and concentrated alcohol products, and can be safely used for tableware, cooking utensils, and items that come in contact with the mouth. It's not flammable, so it can be used safely in the kitchen while cooking, and will not corrode metal, discolor plastics, or irritate the hands.

Business model

Organizations must be part of the Japan MA-T Industrial Association to utilize the MA-T System, and Earth Corporation is the sole supplier. According to the company, the system was slow to catch on despite its benefits, but they recognized it's potential and became a partner in its promotion. More than 70 companies have joined the Japan MA-T Industrial Association since its launch. The company is collaborating with organizations participating in the association to conduct research on new ways of applying the MA-T System. The company's profits will grow as the system is utilized in various fields and its value becomes more widely known.

Growth investment

The company will make free cash flow-conscious investments and achieve returns that exceed cost of capital over a three year investment period.

Use of funds

Investment to expand earnings base in Asia: The company plans to invest JPY7.0bn, mainly for product development and marketing. This also includes funds reserved for future M&A.

ESG and open innovation investment: The company plans to invest JPY6.0bn, mainly for MA-T related investments.

Investment in ICT infrastructure and digital transformation (DX): The company plans to invest JPY4.0bn, primarily to renew core systems. It also plans to promote digital asset management.

New capital investment (excluding maintenance capex): The company plans to invest JPY3.0bn to expand facilities in core categories.

Overseas expansion

Earth Corporation’s top long-term goal is expanding overseas.

Overseas sales and overseas sales ratio

Overseas sales		FY12/11	FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales		2,690	3,430	4,710	5,290	5,780	6,720	9,190	9,980	11,860	12,730
	Thailand and neighboring countries	1,540	2,190	2,710	3,280	3,070	3,510	4,240	3,580	3,780	4,110
	China	310	470	680	870	970	1,520	2,030	2,180	2,740	2,830
	Vietnam	-	-	-	-	-	-	1,250	2,650	2,930	2,840
	Other	850	780	1,330	1,150	1,750	1,700	1,680	1,580	2,420	2,960
YoY		1.5%	27.5%	37.3%	12.3%	9.3%	16.3%	36.8%	8.6%	18.8%	7.3%
	Thailand and neighboring countries	0.0%	42.2%	23.7%	21.0%	-6.4%	14.3%	20.8%	-15.6%	5.6%	8.7%
	China	29.2%	51.6%	44.7%	27.9%	11.5%	56.7%	33.6%	7.4%	25.7%	3.3%
	Vietnam	-	-	-	-	-	-	-	112.0%	10.6%	-3.1%
	Other	-3.4%	-8.2%	70.5%	-13.5%	52.2%	-2.9%	-1.2%	-6.0%	53.2%	22.3%
% of sales		100.4%	100.3%	100.2%	100.2%	100.2%	100.1%	100.1%	100.1%	100.1%	100.1%
	Thailand and neighboring countries	57.2%	63.8%	57.5%	62.0%	53.1%	52.2%	46.1%	35.9%	31.9%	32.3%
	China	11.5%	13.7%	14.4%	16.4%	16.8%	22.6%	22.1%	21.8%	23.1%	22.2%
	Vietnam	-	-	-	-	-	-	13.6%	26.6%	24.7%	22.3%
	Other	31.6%	22.7%	28.2%	21.7%	30.3%	25.3%	18.3%	15.8%	20.4%	23.3%
Overseas sales ratio		2.4%	2.7%	3.5%	3.6%	3.6%	4.0%	5.1%	5.5%	6.3%	6.5%

Source: Shared Research based on company data
Note: Rounded down to the nearest multiple of JPY10mn.

Core overseas markets: Thailand, Vietnam, China

Earth Corporation plans to expand into Asia, particularly Thailand, Vietnam, and China—where it has production bases. In May 2017, the company acquired Earth Corporation Vietnam (formerly A My Gia Joint Stock Company). Of the JPY12.7bn in overseas sales in FY12/20 (6.5% of overall sales), Thailand and neighboring countries accounted for 32.3%, China 22.2%, Vietnam 22.3%, and other countries 23.3%.

Thailand

The group holds only about 10% share of the Thai household insecticide market (according to the company’s survey). Major overseas companies dominate the market with the primary products being cost-competitive anti-mosquito incense coils and aerosols. As a follow-up to mosquito coils and aerosols, the company aims to develop locally competitive and marketable non-insecticide products such as oral care products and air fresheners. The shakeup of the company’s distributor network in 2019 worked to good effect, strengthening its distribution capabilities within the country and providing a significant boost to sales.

Vietnam

In May 2017, the company acquired all outstanding shares of Vietnam-based Earth Corporation Vietnam (ECV), making it a wholly owned subsidiary. Founded in 2003, ECV manufactures and markets various household-use products in Vietnam. Most of its sales come from household detergents, but ECV also manufactures and sells deodorizing air fresheners and household insecticides. Its popular “Gift” brand household detergent and “Ami” brand air fresheners have carved out prominent positions in the Vietnamese market. With the acquisition of ECV, Earth Corporation is looking to take advantage of the brand strength and marketing capabilities that ECV has built up over the years, fine-tune its marketing approach, and establish a larger market presence.

China

The company’s subsidiaries in China play an important role as manufacturing hubs for goods that are sold in Japan, and also sell some of these same products in China, especially Gokiburi Hoy Hoy cockroach traps and Earth Red no-flame fumigators. The business was expanded in 2014 to include the Hakugen Earth mask and dehumidifier. The e-commerce channel is expanding sharply in China and the company aims to tailor sales promotion and product development to this sales channel.

M&A strategy

Maximizing group synergies with Bathclin and Hakugen Earth

Earth Corporation acquired and consolidated Bathclin and Hakugen Earth, and these two subsidiaries have been cooperating to make material procurement more efficient, optimize production, share expertise, and streamline distribution.

Performance of Bathclin and Hakugen Earth

		FY12/12	FY12/13	FY12/14	FY12/15	FY12/16	FY12/17	FY12/18	FY12/19	FY12/20
		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Bathclin
	Sales	10,238	13,366	14,005	13,594	13,610	13,926	14,222	14,241	15,174
	Operating profit	738	1,202	1,419	996	1,003	1,107	888	924	945
	Operating profit margin	7.2%	9.0%	10.1%	7.3%	7.4%	7.9%	6.2%	6.5%	6.2%
Hakugen Earth
	Sales			3,211	14,430	15,672	15,939	15,795	16,590	18,610
	Operating profit			-1,593	-1,043	83	217	263	283	797
	Operating profit margin			-49.6%	-7.2%	0.5%	1.4%	1.7%	1.7%	4.3%
Goodwill amortization		1,312	1,707	1,765	1,908	1,908	1,908	1,908	1,908	1,908

Source: Shared Research based on company data

Bathclin: History and overview

October 2006: Household business of Tsumura & Co. (TSE1: 4540) spun off into Tsumura Lifescience Co., Ltd.

August 2008: With support from Wise Partners, Inc., became independent from the Tsumura Group.

February 2012: Earth Corporation acquired 100% of the company’s shares for JPY19.2bn. Goodwill totaled JPY16.9bn (10-year amortization).

Bathclin’s main brands are Bathclin and Kikiyu (bath salts).

Hakugen Earth: History and overview

May 2014: Hakugen Co., Ltd., applied for civil rehabilitation. Total liabilities were around JPY25.5bn.

July 2014: Through a sponsor tender offer, Earth Corporation concluded a business transfer agreement with Hakugen.

August 2014: Earth Corporation established Hakugen Earth Co., Ltd. as a wholly owned subsidiary.

September 2014: Hakugen Earth acquired businesses from Hakugen for JPY7.7bn. Goodwill totaled JPY1.5bn (amortization was completed in August 2021).

Hakugen Earth’s main brands are the insect repellant Mrs. Lloyd and Kaiteki Guard Pro, a face mask for household use.

Financial strategy

Company issues No. 2 Series warrants

On July 28, 2020, the company issued No. 2 Series moving strike warrants via a private placement.

The warrants are exercisable between July 29, 2020 and July 28, 2023.

The company issued a total of 18,000 warrants at a price of JPY3,700 per warrant, bringing the proceeds from the warrant issue to JPY66,600,000.

With each warrant giving the holder the right to buy 100 common shares of Earth Corporation at the specified strike price, the warrant issue if fully exercised would mean the issuance of 1,800,000 new shares (representing potential dilution of 8.89%, as of July 7, 2020).

The warrants have a so-called moving strike price, with no upper limit but a fixed minimum strike price of JPY5,649 per share. Even if all of the warrants were exercised at the minimum strike price, the total number of common shares issued upon exercise of the warrants would be 1,800,000.

Assuming all of the warrants are exercised at the initial strike price of JPY8,070, total proceeds from the issuance will be JPY14,582,600,000 (net of expenses).

On and after July 29, 2020, the exercise price shall be set at a price equal to 92% of the closing price of common stock on the trading day immediately prior to the day on which the notification requesting the exercise of warrants is received. In cases where the adjusted exercise price calculated in this manner is lower than the minimum exercise price, the adjusted exercise price shall be set at the minimum exercise price of JPY5,649 per share.

Earth Corporation may, at its own discretion, place limits on the number of warrants that may be exercised during a specified period of time and may also, at its own discretion, specify periods during which the warrants cannot be exercised.

Background to financing through warrant issue

The company’s decision to raise new equity capital via a warrant issue was motivated by its desire to maintain the liquidity to fund growth initiatives at a time when the economic outlook has been clouded by the COVID-19 pandemic.

Under the terms of the new warrant issue, the maximum number of new common shares issued as a result of exercise of the current warrant issue is capped at 1,800,000 shares.

Possible dilution notwithstanding, the company has kept its target for ROE in FY12/20 at 6.4%.

Impact on company’s financial position

As of the end-March 2020, the company had total borrowings of JPY26.0bn for a debt-to-equity ratio of over 2.0x.

Under its medium-term business plan, the company is looking to bring its debt-to-equity ratio down to 1.0x.

Planned use of proceeds
(The company plans to use the roughly JPY14.5bn in proceeds for capital investments and repayment of outstanding debt during the timeframe running from August 2020 to July 2023)

Some JPY5.5bn for product development and marketing to help expand the company’s earnings base in Asia

JPY3.0bn for ESG/innovation investments to support its expansion into new business areas (including infection prevention products/services)

JPY1.5bn for investments in ICT infrastructure

JPY4.5bn for repayment of outstanding debt and further improvement of the company’s financial position

Business

Description

Earth Corporation’s core business is the manufacture and sale of household insecticide products, oral hygiene products, bath salts, deodorizing air fresheners, home garden supplies, and pet-related products. The Household Products segment accounted for 87.2% of sales in FY12/20. The company boasts the top share of the Japanese market for household insecticide products (55.0% share in 2020 by company estimates) and bath salts. Within the Household Products segment, household insecticide products are the biggest contributor to earnings.

The General Sanitary Management segment accounted for 12.8% of sales in FY12/20. Most of segment sales come from its Total Health Care business, which offers consulting services to food production plants on preventing foreign substances and other contaminants. This segment also includes a Pest Control business and Building Maintenance business.

Earth Corporation’s largest shareholder is Otsuka Pharmaceutical Co., Ltd., one of the group companies of Otsuka Holdings Co., Ltd. (TSE1: 4578, holds a 24.4% stake in Earth Corporation as of end-December 2020).

FY12/20 Consolidated sales composition

Source: Shared Research based on company data

FY12/20 Consolidated operating profit composition

Source: Shared Research based on company data

Expanding through M&A

Earth Corporation is a long-established company with now more than 125 years having passed since its founding in 1892. It found itself in deep trouble in the late-1960s but was able to make it through this crisis thanks to financial backing of Otsuka Pharmaceutical and the rest of the Otsuka Group, who came to the rescue with new capital.

Earth Corporation has stepped up M&A. In 2001 it took over the Vapona*¹ brand of pest control products from Shell Chemical (now Shell Chemicals Japan Ltd.) and now sells products utilizing this brand.

*¹Vapona is one of the brands of household insecticide products sold by Earth Corporation. Earth Corporation acquired the Vapona brand from Shell Chemical (now Shell Chemicals Japan) when it agreed to take over Shell Chemical’s entire Japanese pest control business. Vapona is an insecticide strip that is coated with dichlorvos, a widely used insecticide that gradually permeates the surrounding air and drives out and keeps out not only flies but also mosquitoes and cockroaches. Shell Chemical sold its pesticide business owing to concerns about the sales of products containing organic phosphate.

Earth Corporation has also undertaken a number of mergers and acquisitions during the past ten years, including the February 2012 acquisition of Bathclin Corporation, a former competitor in the market for bath additives.

In November 2012, consolidated subsidiary Earth Biochemical Co., Ltd. acquired Nikke Pet Care Co., Ltd.*2 (now Earth Pet Co., Ltd.), a subsidiary of Nikke Group (TSE1: 3201).

In 2014, the company established Hakugen Earth Co., Ltd. to take over some of the businesses run by Hakugen Co., Ltd. In July 2016, Earth Corporation entered into a capital and business alliance agreement with Taiko Pharmaceutical Co., Ltd. (TSE1: 4574)*3.

In November 2016, Earth Corporation acquired Johnson Trading Co., Ltd.*4, which has a pet-related products business, making it a subsidiary that has since become part of Earth Pet.

In March 2017, Earth Corporation entered into a capital and business alliance with Protoleaf, Inc., acquiring a 34.1% stake in the company, and formed a business alliance with Hyponex Japan Co., Ltd., both for the purpose of creating a new market in home gardening products.

*2 Nikke Pet Care Co., Ltd. M&A: In October 2014, Earth Biochemical merged with Nikke Pet Care and then dissolved it. After running the pet food business it had acquired, Earth Biochemical then merged with Johnson Trading to form Earth Pet.
*3 Business and capital alliance with Taiko Pharmaceutical Co., Ltd.: Earth Corporation acquired a stake in Taiko Pharmaceutical through a private placement of newly issued shares, acquiring 5.8% stake in Taiko Pharmaceutical (5.66% as of the end of FY03/17). Taiko Pharmaceutical is a pharmaceutical manufacturer known especially for its two main product lines, Seirogan and Seirogan TOI A digestive aids and Cleverin anti-viral and anti-bacterial hand gels (main active ingredient chlorine dioxide).
*4 Merger with Johnson Trading Co., Ltd., making it a subsidiary: In July 2017, Earth Biochemical spun off its environmental business, health & beauty business, and all other businesses except for its pet business as well as its Tokushima manufacturing plant to newly established Earth Pharmaceuticals. Earth Biochemical then merged with Johnson Trading. As this left Earth Biochemical with only its pet business, it changed its company name to Earth Pet.

In September 2017, Earth Pet Co., Ltd. established Pet Food Kitchen Co., Ltd., and took over the pet food business from Dog Food Kitchen Co., Ltd. the following month (making it a consolidated subsidiary from FY12/19).

Earth Corporation engaged in M&A of a non-Japanese company. In May 2017, the company acquired all outstanding shares of Vietnam-based Earth Corporation Vietnam (ECV)*5, a manufacturer and seller of household products in Vietnam, making it a wholly owned subsidiary.

*5 Founded in 2003, ECV manufactures and markets various household-use products in Vietnam. Most of its sales come from household detergents, but ECV also manufactures and sells deodorizing air fresheners and insecticides. Its popular “Gift” brand household detergent and “Ami” brand air fresheners have carved out prominent positions in the Vietnamese market.

M&A policy

When accessing potential M&A targets, Earth Corporation looks for companies that will help increase the group’s enterprise value by merging the target company’s good practices that will open up new sales channels.

Long-term earnings trends

In FY12/20, consolidated sales grew to JPY196.0bn on increased market share and acquisitions. The consolidated recurring profit margin, however, after reaching a peak at 6.4% in FY12/07, stagnated at 5.9% in FY12/20. This was due to goodwill amortization from acquisitions, a shift in the product mix stemming from the rise in the proportion of company-wide sales accounted for by Oral Care, Bath Powder and Other Household Products, intensifying competition, and an increase in the sales promotion expense ratio due to product development. Amid these changes, the company strives to improve profitability by reforming its cost structure.

Consolidated sales

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

Recurring profit before goodwill amortization

Earth Corporation 4985

Executive summary

Core businesses

Trends and outlook

Strengths and weaknesses

Key financial data

Recent updates

Share buyback and purchase of own shares by off-auction own share repurchase trading (ToSTNet-3)

Trends and outlook

Quarterly trends and results

Q3 FY12/21 results (out November 8, 2021)

Overview

Progress versus forecast

Sales

Operating profit

Household Products segment

Household Insecticide Products

Oral Care, Bath Powder and Other Household Products

Pet-related Products and Others

General Sanitary Management segment

Company forecast for FY12/21

Company forecast for FY12/21

Profit structure improvements

Breakdown of company forecast by segment

Household Products segment

General Sanitary Management segment

Response to changing customer needs

Launch the largest number of new products in the industry

Addressing lost sales opportunities

Overseas sales

Dividend payment plans

Shareholder returns

Financial position

Management strategies

Medium-term business plan

Earth Group philosophy

Vision: Make the Earth a pleasant home.

Business philosophy: Act to live in harmony with the Earth.

Medium-term business plan (revised February 2021)

Outline of Medium-term business plan

Profitability and capital efficiency KPIs

Redefining standards

Systemic reform

ICT infrastructure reform and digital transformation (DX)

Expand earnings base in Asia

Overseas strategies in ASEAN countries

China and exports/cross-border e-commerce

Promote ESG and open innovation

MA-T

Promoting and enhancing the value of MA-T

MA-T System

Business model

Growth investment

Use of funds

Overseas expansion

Core overseas markets: Thailand, Vietnam, China

Thailand

Vietnam

China

M&A strategy

Maximizing group synergies with Bathclin and Hakugen Earth

Bathclin: History and overview

Hakugen Earth: History and overview

Financial strategy

Company issues No. 2 Series warrants

Background to financing through warrant issue

Impact on company’s financial position

Planned use of proceeds(The company plans to use the roughly JPY14.5bn in proceeds for capital investments and repayment of outstanding debt during the timeframe running from August 2020 to July 2023)

Business

Description

Expanding through M&A

M&A policy

Long-term earnings trends

Planned use of proceeds
(The company plans to use the roughly JPY14.5bn in proceeds for capital investments and repayment of outstanding debt during the timeframe running from August 2020 to July 2023)