Management’s Discussion and Analysis

Market Environment

During fiscal 2017 (January 1, 2017–December 31, 2017), the Japanese economy as a whole gradually recovered, backed by a recovery in personal consumption amid continued improvement in employment and corporate profits.

The market in the Lion Group’s main business domain, the domestic toiletries industry, was steady, as unit prices continued to rise and sales volumes decreased.

In overseas markets, the personal care market (combined oral care, beauty care, pharmaceuticals, and functional foods) continues to expand with the growing middle class in major Asian countries and greater demand for a higher quality of life among consumers.

Consolidated Results

The Lion Group advanced initiatives under its medium-term management plan, Vision 2020 Part-2 (V-2 Plan).” The V-2 Plan positions strengthening profitability as the Company’s highest priority goal and centers on four strategies: (1) Qualitative Growth of Domestic Businesses; (2) Quantitative Expansion of Overseas Businesses; (3) Development of New Business Value; and (4) Enhancement of Organizational Learning Capabilities.

In its domestic operations, Lion introduced such new high-value-added products as toothpastes, toothbrushes, mouthwashes, antiperspirants, and fabric softeners and worked to cultivate markets for these products through aggressive marketing. In its overseas operations, the Group sought to cultivate markets for its key brands as part of efforts to expand its business, focusing mainly on the personal care field, including oral care and beauty care products.

Consequently, consolidated results for the period under review are as follows:
Net sales amounted to ¥410,484 million, a year-on-year increase of 3.8% (or an increase of 2.5% in terms of real net sales, which exclude the influence of exchange rate conversions). The Company recorded operating income of ¥27,206 million, up 11.0% compared with the previous fiscal year, and ordinary income of ¥29,126 million, up 10.8% year on year. Profit attributable to owners of parent stood at ¥19,827 million, up 24.3% million compared with the previous fiscal year. As a result, Lion achieved record high levels of net sales and operating income for a fourth consecutive fiscal year, and ordinary income for a fifth consecutive fiscal year. Return on equity (ROE) was 12.2% (compared with 11.2% in the previous fiscal year), with earnings per share (EPS) of ¥68.23 (compared with ¥55.13). Both net sales and earnings reached the target levels for the V-2 Plan.

V-2 Targets and Fiscal 2017 Results (Japanese GAAP)
  Millions of yen
V-2 Target 2017 2014
Net sales 400,000 410,484 367,396
Operating income 20,000 27,206 12,406
Operating income margin ratio 5.00% 6.60% 3.40%
ROE 10% or above 12.20% 6.20%
BEP 90% and less 87.80% 93.30%
Net Sales and Cost of Sales Ratio
SG&A Expenses to Net Sales
Operating Income and Operating Margin

Performance by Segment

The Lion Group comprises the corporate headquarters, segments centered on the products and services that are the foundation for the Company, and regional segments. Its three reportable segments are Consumer Products Business, Industrial Products Business, and Overseas Business.

SG&A Expenses Breakdown
  2017 2016 2015
Amount
(Millions of yen)
% of
net sales
Amount
(Millions of yen)
% of
net sales
Amount
(Millions of yen)
% of
net sales
Selling, general and administrative expenses 212,068 51.7 209,110 52.9 199,848 52.8
Sales commission expenses 9,012 2.2 8,623 2.2 8,198 2.2
Promotion expenses 90,797 22.1 90,107 22.8 87,380 23.1
Provision for promotion expenses 2,928 0.7 2,060 0.5 1,618 0.4
Advertising expenses 29,968 7.3 30,976 7.8 26,222 6.9
Transportation and warehousing expenses 18,653 4.5 17,829 4.5 17,011 4.5
Salaries and allowances 15,034 3.7 14,721 3.7 14,721 3.9
Research and development expenses 10,474 2.6 10,084 2.5 9,808 2.6
Other 35,199 8.6 34,707 8.8 34,888 9.2

Factors Accounting for Changes in Operating Income

Conditions by Reportable Segment

Profitability in Japan increased during 2017 as a result of higher unit sales prices from high-value-added items and improvement in the business mix. Overseas, Lion pursued measures for quantitative growth by introducing high-value-added products in the personal care field and strengthening sales through e-commerce channels.

Consumer Products Business

The Consumer Products Business segment is divided into the Oral Care Products, Beauty Care Products, Fabric Care Products, Living Care Products, Pharmaceutical Products, and Other Products businesses. Segment net sales increased 1.3% compared with the previous fiscal year. Segment income increased 19.7% due to an expansion in sales of high-value-added products despite rising raw material costs.

Net Sales and Segment Income
  Millions of yen
2017 Ratio to
net sales
2016 Ratio to
net sales
Increase/
decrease
Change
Net sales 290,893   287,028   3,865 1.3%
Segment income 18,934 6.5% 15,817 5.5% 3,117 19.7%
Note: Net sales include internal net sales within and among segments, which amounted to ¥26,077 million in 2017 and ¥25,722 million in 2016.
Net Sales by Products Segment
  Millions of yen
2017 2016 Increase/
decrease
Change
Oral Care Products 68,277 63,596 4,680 7.4%
Beauty Care Products 24,548 22,333 2,215 9.9%
Fabric Care Products 79,547 80,240 (692) (0.9%)
Living Care Products 20,789 20,763 26 0.1%
Pharmaceutical Products 39,022 40,958 (1,936) (4.7%)
Other Products 58,708 59,135 427 0.7%
Oral Care Products



In toothpastes, new NONIO Toothpaste, which is designed to prevent bad breath, received favorable consumer reviews. And CLINICA marketed the new concept “preventive dentistry from age zero”, and marked a steady increase in sales. CLINICA Kid’s Gel Toothpaste launched a new flavor and it went strong. Overall, toothpaste sales increased year on year.

In toothbrushes, sales of CLINICA Kid’s Toothbrushes, designed to meet children’s needs at each growth stage in order to help with everything from establishing good brushing habits to properly caring for permanent teeth, rose threefold from the previous fiscal year. Sales were also steady for the Between Zeitaku Care Toothbrushes, with a new compact version added to the lineup. Overall, toothbrush sales increased year on year.

In mouthwashes, sales of SYSTEMA Haguki (the Gums) Plus Dental Rinse reported steady growth. In addition, new NONIO Mouthwash, which kills the bacteria that causes bad breath and suppresses further growth to provide a long-lasting effect to prevent bad breath, received favorable consumer reviews. Overall, mouthwash sales increased considerably year on year.

During 2018, Lion will continue to proactively invest in the mainstay brands of CLINICA, SYSTEMA, Dent Health, and NONIO, in order to further enhance the Company’s market position.

Beauty Care Products



In hand soaps, sales of KireiKirei Medicated Foaming Hand Soap were firm, and overall sales increased year on year. In body washes, overall sales increased significantly from the previous fiscal year on positive sales of the hadakara Body Soap series due to an expanded lineup with new products that both moisturize and leave a smooth feel on the skin. In antiperspirants and deodorants, Lion helped to invigorate the market for directly applied products with the launch of new Ban Sweat-Blocking Stick Premium Label, a solid-type antiperspirant that goes on smoothly and dry and effectively controls underarm sweat.

During 2018, Lion will continue to develop the KireiKirei, hadakara, and Ban brands. We will further expand the market for KireiKirei by promoting regular hand washing, and drive growth for hadakara by strengthening marketing. Further, in the Ban line, we will launch a new directly applied type antiperspirant for men utilizing technology from the Sweat-Blocking series, aiming to enhance our position in the antiperspirant market.

Fabric Care Products


In fabric softeners, Kaori to Deodorant no SOFLAN (SOFLAN with Fragrance and Deodorant) Premium Deodorizer Plus, which effectively eliminates sweat and body odor from clothing, received favorable consumer reviews. Overall sales were up year on year. In laundry detergents, sales of TOP HYGIA, a super-concentrated liquid laundry detergent featuring a newly developed and even more effective ‘premium antibacterial formula’, were strong. However, sales of powder detergents fell year on year, reflecting continued market shrink, and overall sales were down year on year.

During 2018, Lion will continue to launch high-value-added products like TOP SUPER NANOX, and strengthen its communication and promotions, in order to stimulate the market.

Living Care Products


Lion offers new high-value-added products in dishwashing detergents, household cleaners, and food preparation products, in order to lessen the housework burden.

In dishwashing detergents, sales of the CHARMY Magica series rose steadily with the addition of the Quick Dry + (“Plus”) type to help dishes dry quickly after washing. In household cleaners, sales were positive for the bathroom fungicide LOOK Bathroom Antimold Fogger. In food preparation products, we added food storage bags REED Freshness Keeping Storage Bags for Freezer and Fridge to the product lineup. As a result, overall sales were down slightly from the previous fiscal year.

During 2018, Lion will continue to cultivate high-value-added products, and increase earnings capacity with the addition of LOOK Plus Clean Reset Total Drain Cleaner for Kitchens in household cleaners, and REED Petit Pressure Cooking Bags in food preparation products.

Pharmaceutical Products

In antipyretic analgesics, sales of BUFFERIN PREMIUM were strong, and overall sales rose from the previous year, while overall sales were down from the previous year due to intensifying competition in eye drops.

During 2018, Lion will thoroughly strengthen the four core brands (BUFFERIN, Smile, Stoppa, and Sucrate) to achieve sustainable growth, and will develop a new category.

Other Products


In direct-to-consumer sales products, sales of Nice rim essence Lactoferrin were steady, but overall sales edged down year on year.

During 2018, Lion will strengthen its business foundation by cultivating existing products centered on functional foods and aging care, while also working to strengthen sales outside Japan and establish new business models.

In pet supplies, sales of Nioi wo Toru Suna (Deodorizing Cat Litter) were firm, and those of oral care products were strong. Overall sales were up year on year.

During 2018, Lion will raise its position for cat litter, cultivate products to be the second and the third sales pillars, and create a foundation for growth. We will also implement far-reaching cost reductions to strengthen the earnings base.

Industrial Products Business

The Industrial Products Business segment includes the Automotive, Electrical and Electronics, and Detergents for Institutional Use Products fields. These businesses handle products that include anti-sticking agents for tires, electro-conductive carbon for secondary batteries, and detergents for institutional and kitchen use.

Segment net sales increased 2.6% compared with the previous fiscal year. Segment income decreased 9.5%.

Net Sales and Segment Income
  Millions of yen
2017 Ratio to
net sales
2016 Ratio to
net sales
Increase/
decrease
Change
Net sales 55,763   54,330   1,433 2.6%
Segment income 2,316 4.2% 2,560 4.7% (243) (9.5%)
Note: Net sales include internal net sales within and among segments, which amounted to ¥22,441 million in 2017 and ¥22,934 million in 2016.

Sales rose in the Automotive field on an increase in Japan for anti-sticking agents for tires due to the recovery in automobile production, and in the Electrical and Electronics field on an increase in electro-conductive compounds for semiconductor carrier materials on a positive performance in the electronic components industry. In the Detergents for Institutional Use Products field, sales rose overall on steady growth in hand soap for kitchens and alcohol sanitizers. Lion also launched sales of vegetable washing systems that use microbubble ozone technology, aimed at food processing plants.

During 2018, in the Automotive and Electrical and Electronics fields, Lion Specialty Chemicals will work to build collaborative frameworks with external companies, expand and advance its businesses, and improve profitability. We will also develop global niche leading products and businesses, and establish a business foundation for the future. In the Detergents for Institutional Use Products field, Lion Hygiene will develop new business models for foods factories aimed at establishing the industry default standard.

Overseas Business

The Overseas Business segment comprises business operations located in Southeast Asia, including Thailand and Malaysia, and Northeast Asia, including South Korea and China. Segment net sales increased 8.3% year on year (or in terms of real net sales, which exclude the influence of exchange rate conversions, increased 3.4%).

Segment income decreased 3.3% year on year, due in part to rising raw material costs and an increase in competition-related expenses aimed at improving market position.

Net Sales and Segment Income
  Millions of yen
2017 Ratio to
net sales
2016 Ratio to
net sales
Increase/
decrease
Change
Net sales 120,091   110,933   9,157 8.3%
Segment income 4,413 3.7% 4,566 4.1% (152) (3.3%)
Note: Net sales include internal net sales within and among segments, which amounted to ¥11,842 million in 2017 and ¥11,648 million in 2016.
Major Countries

*Sales growth rate is compared with the previous year on a local currency basis.

(Thailand) Sales Growth Rate: 105%

The Thailand business includes the oral care, beauty care, fabric care, and living care sectors.

In oral care, sales rose steadily with the launch of new products including SALZ toothpaste Herbal Pink Salt and SYSTEMA Anti-Bac toothbrush, strengthening the product lineup. In beauty care, sales of Shokubutsu Monogatari body wash were favorable on expanded promotions. Exports to nearby countries were also firm, and overall sales on a local currency basis rose from the previous fiscal year.

During 2018, Lion will aim to create categories with leading market shares in the personal care sector (combined oral and beauty care).

(Malaysia) Sales Growth Rate: 108%

In oral care, sales rose steadily for the new SYSTEMA toothbrush. In fabric care, Lion maintained its leading market share (in-company survey) through proactive introduction of new and updated products for major brands such as TOP. Overall, sales on a local currency basis rose from the previous fiscal year.

During 2018, Lion will further enhance profitability in its mainstay fabric care field, while at the same time expand the personal care field to strengthen the business foundation and raise profitability.

(South Korea) Sales Growth Rate: 108%

The South Korea business comprises the oral care, beauty care, fabric care, living care, pharmaceuticals, and functional foods sectors.

Sales continued to expand for BEAT liquid laundry detergent, Ai-Kekute hand soap, and Kyusoku Jikan foot sheets, enhancing market competitiveness. Profitability in the Korea business increased overall as a result of measures with high-margin sales channels, improved efficiency in sales promotions and cost reductions, and lower raw material prices. Furthermore, the local subsidiary changed its name to Lion Corporation (Korea), and has become a wholly owned subsidiary.

During 2018, Lion will strengthen support for BEAT liquid laundry detergent, develop the new business areas of pharmaceuticals and functional foods, and strengthen online business.

(China) Sales Growth Rate: 109%

In the growing e-commerce business, sales were positive in the oral care field, as well as for such products as hand soaps and laundry detergents. Sales were favorable for CLINICA ENAMEL PEARL whitening toothpaste imported from Japan, due to the continued communication centered on the message of “meihao” (beautiful). The Company’s e-commerce sales in China increased 15% from the previous fiscal year to account for around 54% of sales, and contributing to the expansion of the China business overall.

During 2018, Lion will further bolster the oral care sector as the foundation of its business by expanding sales through ongoing strengthening of existing products and introduction of new products, as well as narrowing its focus areas and sales channels, and developing the sales structure. We will also seek further expansion for the growing e-commerce business, broadening the China business and increasing profitability.

Counties and Regions excluding Major Countries
(Taiwan)

Lion shifted its business focus from detergents to personal care, and implemented successful marketing investments tailored to the local market, achieving positive results in the oral care field.

During 2018, Lion will continue to expand business in healthcare products, and enhance profitability.

(Hong Kong)

In beauty care, Lion launched the new Shokubutsu Botanic Touch body wash. In fabric care, sales of Soflan Aroma Rich fabric softener were positive.

During 2018, Lion will continue to strengthen development of high-value-added products, and enhance profitability.

(Singapore)

In oral care, sales of the SYSTEMA series were positive. In fabric care, sales were favorable for TOP NANOX super-concentrated liquid laundry detergent.

During 2018, Lion will solidify its market position in each category, expand market share, and increase sales in high-margin categories.

(Indonesia)

In beauty care, sales increased considerably on the popularity of the newly launched Serasoft complete hair therapy shampoo and expanded lineup of deodorants. In living care, effective promotional activities for the dishwashing detergent mama resulted in a sharp rise in sales year on year.

During 2018, Lion will introduce high-value-added products to meet the needs of the growing middle class, and seek to maintain business growth and enhance profitability.

Other

Net Sales and Segment Income
  Millions of yen
2017 Ratio to
net sales
2016 Ratio to
net sales
Increase/
decrease
Change
Net sales 30,565   26,867   3,698 13.8%
Segment income 1,336 4.4% 915 3.4% 421 46.1%
Note: Net sales include internal net sales within and among segments, which amounted to ¥26,469 million in 2017 and ¥23,247 million in 2016.

Financial Status

  2017 2016 Increase/
decrease
Total assets (millions of yen) 331,751 298,510 33,241
Net assets (millions of yen) 187,015 157,879 29,136
Shareholders’ equity to total assets*1 (%) 53.2 50.0 3.2
Net assets per share*2 (yen) 607.61 513.76 93.85
*1 Shareholders’ equity to total assets = (Net assets – Subscription rights to shares and non-controlling interests) / Total assets
*2 Subscription rights and non-controlling interests were excluded from calculation of net assets per share.
Total Assets
Current Ratio
Capital Expenditures and Depreciation and Amortization

Total assets rose ¥33,241 million compared with the previous consolidated fiscal year-end, to ¥331,751 million.

Total liabilities increased ¥4,105 million, to ¥144,736 million, mainly due to increases in provision for sales promotion expenses and deferred tax liabilities, offsetting decreases in short-term loans payable and net defined benefit liability. Current liabilities increased ¥3,785 million, to ¥127,225 million, with the liquidity rate at 159.9%.

Total consolidated shareholders’ equity rose ¥15,461 million, to ¥162,104 million, due mainly to an increase in retained earnings. Shareholders’ equity to total assets stood at 53.2%.

Cash Flows

Consolidated Cash Flows
  Millions of yen
2017 2016 Increase/
decrease
Net cash provided by (used in) operating activities 28,562 32,269 (3,707)
Net cash provided by (used in) investment activities (8,750) (7,845) (904)
Net cash provided by (used in) financing activities (6,754) (7,437) 682
Effect of exchange rate change on cash and cash equivalents 603 (526) 1,130
Net increase (decrease) in cash and cash equivalents 13,661 16,461 (2,799)
Cash and cash equivalents at end of period 91,401 77,739 13,661

Net cash provided by operating activities totaled ¥28,562 million, due mainly to income before income taxes.

Net cash used in investment activities totaled ¥8,750 million, due in part to the purchase of property, plant and equipment.

Net cash used in financing activities totaled ¥6,754 million. Major components of this outflow included cash dividends paid.

As a result of the above, cash and cash equivalents as of December 31, 2017 increased ¥13,661 million compared with the consolidated fiscal year ended December 31, 2016, to ¥91,401 million.

Outlook for Fiscal 2018

From the first quarter of fiscal 2018, Lion will begin applying the International Financial Reporting Standards (IFRS). Therefore, changes between values for fiscal 2017 and fiscal 2018 are calculated using estimates of the fiscal 2017 results recalculated according to IFRS.

  Millions of yen
2018
(IFRS)
2017 *1
(IFRS)
Increase/
decrease
Change
Net sales 355,000 342,703 12,296 3.6%
Core operating income *2 29,000 28,807 192 0.7%
Operating income 33,000 30,479 2,520 8.3%
Profit attributable to owners of parent 25,000 20,883 4,116 19.7%
EPS (yen) 86.03 71.87 14.16 19.7%
Notes:
1. 2017 IFRS results are estimates and have not been audited.
2. Core operating income: An earnings indicator the Company uses to measure regular business performance by subtracting selling, general and administrative expenses from gross revenues.

During fiscal 2018 (the year ending December 31, 2018), although gradual continued recovery is forecast for the Japanese economy, the outlook going forward is expected to remain unclear, reflecting shifts in raw material prices and currency exchange rates, geopolitical risks, and other factors.

In the domestic toiletries industry, the Lion Group’s main business domain, despite anticipated expansion in the market for high-value-added products, competition is expected to remain fierce. And although the market is expected to expand in Asia, where the Group is currently expanding its businesses, Lion forecasts an increasingly harsh environment.

Amid these circumstances, the Lion Group will continue to aim to improve corporate value as it steadily implements strategies outlined in the three-year LIVE Plan starting from 2018 under the new vision of “Becoming an advanced daily healthcare company.”

In the Consumer Products Business segment, the Lion Group will cultivate markets for high-value-added products in its mainstay businesses, working to improve its market position and strengthen profitability while planning to enter growing categories, such as products for dentures. The Group will also work to expand production capacity, especially for the oral care field, and make its production system more efficient.

In the Industrial Products Business segment, Lion will focus management resources on key areas, such as automotive and electrical/electronic products, to reinforce its business foundation. Furthermore, Lion will continue efforts to acquire new customers, particularly to cultivate new customers in its vegetable washing system business.

With regard to the Overseas Business segment, the Lion Group will continue its aggressive marketing activities, primarily in the area of personal care, seeking to expand its business and strengthen its e-commerce business. In addition, the Group will establish a new venture in the plant-derived surfactant business in Malaysia as it works to expand its business globally.

As a result of the above, consolidated results forecasts for fiscal 2018 are as follows: net sales of ¥355,000 million (up 3.6% year on year), core operating income of ¥29,000 million (up 0.7% year on year), operating income of ¥33,000 million (up 8.3% year on year), and profit attributable to owners of parent of ¥25,000 million (up 19.7% year on year).

(Preconditions for the Estimated Figures in Outlook for Fiscal 2018)

Lion adopted the following foreign exchange rates in the calculation of the aforementioned estimated figures:
¥112 = US$1.00
¥3.5 = 1.00 baht

The forecast of fiscal 2017 consolidated cash flows is as follows:

In cash flows from operating activities, Lion projects income before income taxes of approximately ¥35,000 million. Depreciation is estimated to total about ¥9,000 million.

In cash flows from investment activities, Lion plans to undertake capital expenditures of around ¥19,000 million during fiscal 2018.

The cash flows from financing activities are expected to yield an outflow of about ¥6,000 million, mainly due to cash dividends paid and the repayment of loans payable.

Based on these projections, Lion estimates that cash and cash equivalents at the end of fiscal 2018 will be up approximately ¥19,000 million year on year.

Basic Policy on the Distribution of Earnings and Cash Dividends

Lion considers returning profits to shareholders on a continuous and stable basis by increasing its consolidated earnings capacity to be one of its most-important management issues. To this end, the Company strives to ensure the payment of continuous and stable cash dividends, aiming for a consolidated payout ratio of 30%, and bases the acquisition of treasury stock on comprehensive reviews to ensure that it maintains levels of internal reserves required to secure medium- and long-term growth. Lion allocates internal reserves to research and development, capital investment in production facilities, and the acquisition of external resources, aiming to reinforce the Company’s growth potential and to develop a sustainable business foundation.

Taking into consideration the Company’s cash dividend payment record, as well as its dividend payout ratio target, Lion’s Board of Directors resolved to pay an interim dividend of ¥7 per share and a year-end dividend of ¥10 per share for fiscal 2017.

With regard to dividends to be paid in fiscal 2018, in accordance with its basic policy on the distribution of earnings and cash dividends, Lion plans to pay an interim dividend of ¥10 per share and a year-end dividend of ¥10 per share, for a total annual dividend of ¥20 per share.

Business Risks

The Lion Group’s management performance and financial status may be adversely affected by various risks as business activities are pursued in the future. Of these risks, the following items, in particular, may have a material impact on the decisions of investors.

Note that forward-looking statements are based on decisions made at the time of the issuance of this report, and that business risks may not be limited to the items listed below.

(1) Product quality and value

The Lion Group plans, develops, produces, and sells products under management based on international quality standards while strictly following related laws and regulations, such as the Pharmaceutical and Medical Device Act, to provide worry-free, safe, convenient, and environmentally conscious products to consumers. In addition, we use consumers’ opinions received through our Consumer Service Office to improve our products and packaging as well as respective displays and text.

In the event of an unforeseen and serious problem with product quality, however, the affected product and all products made by the Lion Group may lose their perceived value. This may adversely affect the Lion Group’s management performance and financial status.

(2) Changes in raw material prices

The Lion Group’s products use petrochemical and vegetable oils and fats as basic materials. Since these materials are easily affected by international market prices, we have measures in place to reduce costs and diversify the range of materials used. However, an increase in raw material prices may adversely affect the Lion Group’s management performance and financial status.

(3) Exchange rate fluctuations

The Lion Group translates into yen the financial statements of overseas subsidiaries when preparing consolidated financial statements. For items denominated in foreign currency, their yen values may be affected by prevailing foreign exchange rates when translated into yen. The Lion Group has taken steps to minimize the risk of an increase in raw material costs by hedging against exchange rate fluctuations. However, short-, medium-, and long-term changes in foreign exchange rates may adversely affect the Lion Group’s management performance and financial status.

(4) Major lawsuits

As of December 31, 2017, Lion is not involved in any lawsuits that may have significant impact on its business. However, if the Lion Group were to be sued and found liable for significant damages, these could adversely affect the Lion Group’s management performance and financial status.

(5) Earthquakes and other natural disasters

In the product manufacturing process, the Lion Group has put in place safety measures against earthquakes and other natural disasters. In the event of a major disaster, however, our production equipment may be damaged, or a suspension of raw materials procurement or distribution activities may cause business activities to cease, adversely affecting the Lion Group’s management performance and financial status.

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