Financial Review

Management's Discussion and Analysis

Market Environment

During fiscal 2014, domestic markets were influenced by the consumption tax hike. Lion's activities in the markets in the rest of Asia met with a positive response.

In fiscal 2014, as the effects of the increase in Japan's consumption tax rate move through the economy, the trends toward improvement in personal consumption and corporate profitability paused in the second half of the fiscal year, but, overall, the economy remained on a moderate recovery trend as the government implemented fiscal policies and the Bank of Japan continued its monetary-easing measures.

In the domestic market for daily necessities, which is the principal market for the business activities of the Lion Group, there were recognizable signs of a bottoming out of price declines. However, in the midst of the surge in demand prior to the consumption tax rate increase and the subsequent reactionary decline in demand, competition at the store level continued to be intense.

Review of the Domestic Market for Daily Necessities in Fiscal 2014

Graph: Trends in Home Products Market (YOY)*
Note: INTAGE Inc. SRI surveys. Figures for the change in unit sales, sales amount, and unit prices are the accumulated totals from January through December of the respective years, compared with the corresponding figures of the previous year. Data for 2010 cover 44 household goods markets, data for 2011 and 2012 cover 42 such markets, and data for 2013 and 2014 cover 40 markets.

In the domestic market for daily necessities, Lion has a presence in 40 of the market segments. The average unit prices in these markets increased 2% in fiscal 2014 over the previous year*1. On the other hand, unit sales remained at the same level, or 100% of the level of the prior year*2. The sales amount rose 2% over the previous year*3, in part because of an increase in the average prices.

Review of the Domestic Market for Pharmaceuticals in Fiscal 2014

In the over-the-counter (OTC) pharmaceutical market, Lion has a presence in eight of the market segments. In recent years, the unit sales and unit prices had been on a decline, but in fiscal 2014, the average unit prices rose 2% at an annual rate*4. The unit sales decreased to 99% of the previous year*5, but the sales amount stood at 100% of the level in the previous year*6, in part because of the increase in average prices.

In overseas markets, although the market environment underwent severe change because of political unrest in Thailand, Hong Kong, and elsewhere and due to the slowing of economic growth in China, the markets for daily necessities expanded because of the growing awareness among consumers of hygiene matters and the rising need for high-value-added products along with the expansion in the middle-income classes. As a result, the potential for growth in the nine countries and regions where Lion has a presence is thought to be extremely high.

2015 GDP Growth Forecasts for Countries and Regions in which Lion Has Operations
  Thailand Singapore Malaysia Indonesia Philippines South Korea China Hong Kong Taiwan
Growth rate
(vs. 2014)
4.0 2.9 5.2 5.3 6.0 3.3 6.9 3.2 3.6

Source: Mitsubishi Research Institute forecast (As of February 2015)

*1 INTAGE Inc. SRI survey of 40 household goods markets. Accumulated average unit prices from January through December 2014, compared with the previous year

*2 INTAGE Inc. SRI survey of 40 household goods markets. Accumulated unit sales from January through December 2014, compared with the previous year

*3 INTAGE Inc. SRI survey of 40 household goods markets. Accumulated sales amount from January through December 2014, compared with the previous year

*4 INTAGE Inc. SDI survey of 8 pharmaceutical product markets. Accumulated average unit prices from January through December 2014, compared with the previous year

*5 INTAGE Inc. SDI survey of 8 pharmaceutical product markets. Accumulated unit sales from January through December 2014, compared with the previous year

*6 INTAGE Inc. SDI survey of 8 pharmaceutical product markets. Accumulated sales amount from January through December 2014, compared with the previous year.

Consolidated Performance

In fiscal 2014, Lion reported record levels of income for the second consecutive year. Return on equity and earnings per share both rose above the levels of the previous fiscal year.

Graph: Net Sales and Cost of Sales Ration
Graph: SG&A Expenses to Net Sales
Graph: Operating Income and Operating Margin

Amid the market conditions described, the Group entered the final year of its three-year medium-term plan, "V-1 Plan (Vision 2020 Part 1)," and made further progress toward attaining the objectives of its Management Vision "Vision 2020." Lion continued to focus on the four strategic themes: Qualitative Growth of Domestic Businesses, Quantitative Expansion of Overseas Businesses, Development of New Business Value, and Enhancement of Organizational Learning Capabilities.

In its business activities in Japan, in fiscal 2014, Lion worked aggressively to capture sales from the surge in demand that preceded the increase in the consumption tax rate. In addition, Lion launched new, high-value-added products to expand sales of products for which consumers exercise discretion, including toothpaste, antiperspirants, antipyretic analgesics, fabric softeners, and other products, and focused on developing the market positions of these products. Lion also worked to increase profitability by reducing costs from an overall perspective, including manufacturing costs as well as distribution and other costs. Also in the direct-to-consumer business field, which Lion has positioned as part of activities aimed at "development of new business value," Along with expanding sales of mainstay products and working to secure new customers, Lion introduced new products that increase the quality of life and worked to expand the business scale of these activities. However, sales in this field were adversely impacted by the increase in the consumption tax rate and the increase in raw material prices.

In its Overseas Business activities, Lion conducted aggressive marketing activities in its principal businesses of oral care and laundry detergents, and endeavored to increase the value of its key brands as well as expand the scale of its business activities. In these areas, Lion targeted the growing middle-income consumer classes and took initiatives to improve its product portfolio by increasing the percentage of high margin products. In addition, in China, Lion completed and began operations at a new manufacturing facility for oral care products, in line with plans to increase capacity under the "V-1 Plan."

As a consequence of these activities and developments, the Group's consolidated net sales in fiscal 2014 were ¥367,396 million, an increase of 4.4% from the previous year (or 3.1% after the exclusion of the effects of foreign currency movements). This was higher than Lion's previously announced forecast for the fiscal year. Operating income amounted to ¥12,406 million, an increase of 14.7%. This increase in profitability was due to gains in sales reported mainly in the Industrial Products Business and Overseas Business segments, the positive impact of improvements in the product mix for Consumer Products Business in the domestic market, Industrial Products business, and other factors. Ordinary income was ¥14,059 million, an increase of 14.3% from the prior fiscal year, the highest level in Lion's history. Net income amounted to ¥7,368 million, an increase year on year of 20.8%. As a result, ROE, defined as the ratio of net income to shareholders' equity, was 6.2%, compared with 5.4% in the previous year. Earnings per share were ¥27.47, versus ¥22.72 for the prior year.

SG&A Expenses Breakdown
  2014 2013 2012
of yen)
% of
net sales
of yen)
% of
net sales
of yen)
% of
net sales
Selling, general and administrative expenses 194,312 52.9 187,849 53.4 182,572 54.5
Sales commission expenses 8,290 2.3 11,960 3.4 16,673 5.0
Sales promotion expenses 86,430 23.5 78,384 22.3 71,229 21.3
Advertising expenses 24,517 6.7 24,273 6.9 24,724 7.4
Freight and storage expenses 16,723 4.6 15,979 4.5 15,810 4.7
Salaries and allowances 14,241 3.9 13,665 3.9 12,999 3.9
R&D expenses 9,439 2.6 9,618 2.7 8,989 2.7
Other 34,669 9.4 33,966 9.6 32,146 9.6

Chart: Factors Impacting Operating Income in Fiscal 2014

* Competition expenses are comprised of sales incentive, sales promotion, and advertising expenses.

Operating Review by Segment

The Lion Group's business activities are divided into three reporting segments.

The Group's business segments are classified by product and service based on operating divisions and subsidiaries, and by geographical area. Its three reporting segments are Consumer Products, Industrial Products, and Overseas.

Reporting segments are as follows:

Consumer Products Business

Lion manufactures, sells, and trades in daily necessities, OTC pharmaceuticals, functional food products, and other products mainly in Japan. Principal products include toothpaste, toothbrushes, hand soaps, antipyretic analgesics, eyedrops, tonics and nutrients, insecticides, laundry detergents, dishwashing detergents, fabric softeners, household cleaners, bleaches, and pet supplies.

Industrial Products Business

The Group manufactures, sells, and trades in chemical intermediate materials in Japan and overseas, products for institutional and other industrial uses, and other items. Principal products include activators derived from oil and fats, electro-conductive carbon, detergents for institutional use, and other items.

Overseas Business

The Group's overseas subsidiaries and affiliates are primarily engaged in manufacturing, selling, and trading in daily necessities.


The Group's subsidiaries in Japan are primarily engaged in activities related to businesses of the Group. Principal products and services include construction, management of real estate, transportation and storage, human resources services, and other activities.

Operating Review by Reporting Segment

In fiscal 2014, in Japan, Lion reported increases in sales in both the Consumer Products Business and Industrial Products Business as well as major increases in segment income. Overseas, Lion reported growth, but owing to investments in new businesses for future growth, income declined.

Consumer Products Business

Lion's activities are classified into Oral Care business, Beauty Care business, Fabric Care business, Living Care business, Pharmaceutical business, and Other.

Total sales in the Consumer Products Business segment in fiscal 2014 were ¥274,427 million, 3.5% above the level of the previous fiscal year. To place maximum priority on strengthening profitability in the medium-to-long term, Lion launched new high-value-added products in fields where consumers exercise discretion and worked to strengthen their position in the market. Through these and other initiatives, Lion worked to drive increases in average product prices.

As a result, Lion reported improvements in its product mix, as a consequence of growth in sales of high-value-added products in the Oral Care and Pharmaceutical businesses, and operating income of this segment rose 16.8% over the previous year.

  Millions of Yen
FY2014 % of
FY2013 % of
Amount %
Net sales 274,427 265,207 9,219 3.5
Operating income 8,516 3.1 7,289 2.7 1,227 16.8
Net Sales by Business
  Millions of Yen
FY2014 FY2013 Change
Amount %
Oral Care business 55,344 51,628 3,715 7.2
Beauty Care business 20,468 19,044 1,424 7.5
Fabric Care business 83,540 80,951 2,588 3.2
Living Care business 20,179 21,620 (1,441) (6.7)
Pharmaceutical business 38,156 36,776 1,379 3.8
Other 56,738 55,185 1,552 2.8
Lion's Major Toiletry Products Fields and 2013 Market Positions in Japan
Billions of Yen
Market Size in Japan
Lion’s Market
Toothpastes 81 1
Toothbrushes 45 1
Hand soaps 21 1
Laundry detergents 136 3
Fabric softeners 84 3
Dishwashing detergents 46 3

Source: 2014 INTAGE Inc., each category, Data from January through December 2014, on the basis of sales amount

Note: Figures for market size presented above are based on retail sales data and do not include sales of gift packages

Oral Care Business

In fiscal 2014, Lion continued to concentrate on promoting high-value-added products. In specific terms, Lion rebranded its mainstay CLINICA lineup of oral care products with the theme of encouraging preventive dentistry, and positioned it as a brand that will enable consumers to engage in "self-care," which dental health specialists recommend. At the same time, Lion strengthened its SYSTEMA series of oral care products, which enables consumers to take proper care of the periodontal pocket surrounding the teeth.

In the toothpaste field, sales of Lion's CLINICA ADVANTAGE Toothpaste with an improved high adhesion fluoride formula were favorable. Lion also newly launched SYSTEMA Haguki (the gums) Plus Toothpaste that revitalizes weakened gum cells and helps prevent gum disease (inflamed gums and periodontal infection). As a consequence, overall sales of toothpastes rose above the level of the previous year.

In the toothbrush field, sales in the mainstay SYSTEMA series were steady, and sales of the CLINICA ADVANTAGE Toothbrush were favorable, and overall sales of toothbrushes were significantly higher than in the previous year.

In the mouthwash field, Lion's new product CLINICA ADVANTAGE Dental Rinse, with its long-acting anti-bacterial formula that helps prevent cavities, was highly appraised by consumers, and overall sales in this field rose substantially over the previous fiscal year.

In addition, sales of CLINICA ADVANTAGE Dental Floss Y-Type, which easily gets into the spaces between molars and features high-strength floss that is resistant to breakage, also met with a favorable response from consumers.

Beauty Care Business

In the Beauty Care business, Lion offers hand soaps, antiperspirants, and other products that are aimed at opening up new markets by providing consumers with new hygiene routines for their daily lives.

In the hand soap business, Lion is promoting a shift toward high-value-added foaming types that have higher prices than conventional liquid types. In fiscal 2014, sales of KireiKirei Medicated Foaming Hand Soap, which is easier for small children to use because of its foaming properties, were extremely favorable and contributed to profitability while also significantly boosting overall hand soap sales.

In the antiperspirant business, in February 2014, Lion introduced Ban Sweat-Blocking Roll-On, an antiperspirant and deodorant featuring a nano ion sweat-blocking effect that controls underarm sweat, which causes sweat stains and odor. Although the market was influenced by unseasonable weather during the summer, sales of this product were quite robust, and, during the five months after its introduction (February to June), sales were 240% above the planned level and served to give a major boost to overall antiperspirant sales.

Fabric Care Business

In the laundry detergent business, which is one of Lion's principal markets in Japan, Lion is promoting a shift from powdered detergents, where price competition is intense, to high-value-added super-concentrated liquid detergents. Along with the rising awareness of hygiene matters among consumers, demand has risen for laundry detergents that remove substances and bacteria that are invisible to the human eye but cause odors. To respond to this demand, Lion has introduced an improved version of its TOP NANOX that uses a double enzyme formula to achieve "new nano-washing" that breaks down keratin and enhances detergency action to remove odor-causing grime. In addition, Lion has introduced an improved version of its TOP HYGIA, which, in addition to its previous properties of "enhancing the antibacterial properties of laundry through washing" and "helping to prevent the transfer of bacteria and mold to and between items being laundered," now has new enzyme ingredients that can even dissolve and remove washtub biofilm. Although sales of these two products have continued to be firm, sales of powdered detergents have declined along with the shrinkage in the size of the market. As a result, overall sales in the laundry detergent business were level with the previous fiscal year.

In the fabric softener business, Kaori to Deodorant no SOFLAN (SOFLAN with Fragrance and Deodorant) Aroma Natural series, with Lion's original "nano-deodorizing ingredient," is long-lasting and allows users to enjoy the pure fragrances of its aroma oil ingredients. As a consequence, this product series has accurately met the tastes of users of softener products, and sales continue to be favorable. The success of this series has increased softener sales substantially above the previous fiscal year.

Living Care Business

In the kitchen detergents market, the number of households nationwide in Japan with automatic dishwashers has exceeded 30% of the total (according to the Survey of Consumption Trends, issued by the Cabinet Office), and sales of Lion's CHARMY Crysta series are favorable. On the other hand, sales of the CHARMY Awa no Chikara (Power of Suds) dishwashing detergent were lackluster, and overall sales of kitchen detergents were below the level of the previous year.

Lion's LOOK brand of household cleaners for use in the bath, toilet, and elsewhere is opening up new market segments for preparations that help make pleasant living environments a reality by proposing new cleaning routines. Lion's LOOK Bath Antimold Fogger, which was launched in September 2012, impedes the growth of black mold in the bath. Over the period of approximately two years since its launch, the accumulated total of unit sales has exceeded 10 million. In recent years, the market for mold removal preparations had been shrinking, but, in fiscal 2014, it rose a firm 2%* over the previous year. In the fall, Lion added a new product in this series, LOOK Bath Antimold Fogger Soap Fragrance. The outlook is for this product to continue to significantly revitalize the market for mold removal products. On the other hand, sales of LOOK Mame-Pika Antibacterial Toilet Cleaner, which enables users to use toilet paper to quickly and easily wipe the toilet seat, toilet bowl exterior, and the surrounding area, weakened. Therefore, total sales of household cleaner products were below the previous year.

In the cooking-aid products business, Lion launched REED Healthy-Cooking Paper originally in 1970 and is still making product improvements to meet the needs of the times and proposing new ways of using these cooking-aid products. In 2014, Lion introduced REED Healthy Kitchen Paper Smart Type, which is more compact, can be removed one sheet at a time, and is an ideal size for low-waste cooking in small amounts. As a resulted, overall sales of the cooking-aid products were slightly above the previous year.

* INTAGE Inc. SRI survey of the mold-removal markets. Accumulated sales amount from January through December 2014, compared with the previous year

Pharmaceutical Business

Lion supplies products for eight markets within the OTC pharmaceutical market. In recent years, the unit sales and average unit prices in the OTC market have continued to decline gradually, but in fiscal 2014 average unit prices increased and the sales amount was level with the previous year. However, Lion's view is that, along with the demographic aging of the population and increases in medical care costs, the OTC market will expand going forward. In addition, consumer needs are shifting from the treatment of diseases to prevention, and, as more and more people seek to prevent diseases in their daily lives, forecasts are that this shift will be reflected in a transition in consumer lifestyles toward purchasing OTC preparations and the recovery of OTC pharmaceutical market is expected.

In the antipyretic analgesic business, new product BUFFERIN PREMIUM was launched in 2014 to meet the need for preparations that act quickly and effectively in treating headaches while being gentle on the stomach. Working women who want analgesics that are not only "effective" and "fast" but also "easy on the stomach" have a special need for these functions in a preparation, and BUFFERIN PREMIUM has successfully developed new market demand. Sales of BUFFERIN PREMIUM were favorable and raised overall sales of Lion's antipyretic analgesics significantly over the prior year. In addition, this preparation drove expansion in the OTC antipyretic analgesics, which had been level through the end of the previous year.

In the eyedrop business, in fiscal 2014, sales of both Smile 40 Premium in the high-priced range and Smile 40EX GOLD MILD in the medium-priced range were favorable. Smile 40 Premium is effective for alleviating eye fatigue, eye mucous, and other conditions due to aging and prolonged use of the eyes that cause blurry vision and Smile 40EX GOLD MILD gives users a mild sensation of refreshment. As a result, overall sales of eyedrops were markedly above the previous year, and, because of the improvement in the product mix in the medium- to high-priced range, they also contributed to profitability.

In the topical anti-inflammatory analgesic business, Lion offers HALIX HOGRELA Cool and Hot, an analgesic that comes as an adhesive poultice that relieves the pain of shoulder stiffness that troubles many by treating it at the source, deep in the tissue, and stimulates blood flow. In 2014, Lion introduced HALIX HOGRELA Roll-On Type, which is portable and easy to carry outside the home. For women who put up with stiff and painful shoulders on a regular basis because of long hours spent using PCs, Lion has proposed a new practice of taking this pain reliever with them. As a result, sales of this roll-on type were quite favorable, thus raising overall sales of topical anti-inflammatory analgesics markedly.


In the direct-to-consumer business, Lion launched a new functional food product, Gussumin Koubo No Chikara, which contains sake yeast to support high quality and relaxation and was favorably received by consumers. On the other hand, existing direct-to-consumer products experienced a decline in regular purchasers following the increase in Japan's consumption tax rate, and sales of mainstay product Nice rim essence Lactoferrin showed little growth in new customers as Lion optimized the allocation of its promotional expenses in the face of this weaker demand and higher raw material prices and other costs. As a result, overall sales in this business were below the level of the previous fiscal year.

In the pet supplies business, sales of oral care products were firm, and sales of Nioi wo Toru Suna (Deodorizing Cat Litter) were steady. Overall sales of this business exceeded the level of the previous fiscal year.

Industrial Products Business
  Millions of Yen
FY2014 % of
FY2013 % of
Amount %
Net sales 59,793 51,630 8,162 15.8
Operating income 1,759 2.9 778 1.5 980 126.0

This business handles activators derived from oil and fats, electro-conductive carbon, detergents for institutional use, and other products.

In the electro-conductive carbon field, sales of KETCHENBLACK for use in lithium-ion batteries and other secondary batteries held firm during fiscal 2014, and overall sales of electro-conductive carbon products were above the previous year.

In the field of chemicals for construction and civil engineering use, sales of ground stabilization products were favorable, and sales of chemicals for construction and civil engineering use were substantially above the previous fiscal year.

In the field of detergents for institutional use, sales of hand soaps were steady, and sales of alcohol for kitchen disinfectant use were favorable. Overall sales of detergents for institutional use rose markedly over the previous fiscal year. In the services business related to hygiene management, Lion worked to develop new customers and broaden its customer base among hospitals and senior care facilities, which are expected to be an important market along with the aging of society.

As a consequence of these activities, industrial product sales rose 15.8% over the previous fiscal year, to ¥59,793 million. Operating income in this segment increased 126.0% on the back of an increase in sales of high-value-added electro-conductive carbon and related products, and favorable results in the institutional detergents business.

Overseas Business
  Millions of Yen
FY2014 % of
FY2013 % of
Amount %
Net sales 86,202 76,865 9,336 12.1
Operating income 1,147 1.3 1,435 1.9 (287) (20.0)

Lion is actively introducing new products in the nine countries and regions where it has a presence, which include Thailand, South Korea, China, and the Philippines, where it made a full-scale entry in fiscal 2013. In fiscal 2014, mainly in the countries of Southeast Asia, Lion is targeting the middle-income classes, and sales of oral care and beauty care products expanded.

In Thailand, sales of Systema brand toothbrushes and Shokubutsu Monogatari Body Soap were favorable. Overall sales were above the previous fiscal year, and, even converted to yen terms, sales exceeded the prior year.

In South Korea, sales of KireiKirei Hand Soap were favorable, but sales of Cham Green dishwashing detergent were lackluster, and overall sales were below the previous year. However, after conversion to yen terms, sales were significantly above the previous year because of the effects of foreign currency conversion.

In China, sales of oral care products were favorable. Consumers were especially attracted to Systema toothbrushes and newly introduced Systema toothpastes. In addition, sales of products imported from Japan also increased, and network sales expanded, reflecting the growing confidence that customers place in Lion. As a result, overall sales in China were markedly above the previous fiscal year in both local currency terms and after conversion to yen.

As a consequence of the previously mentioned developments, total sales in the Overseas Business segment rose 12.1% (6.0% in real terms, after exclusion of the effects of conversion into foreign currencies), to ¥86,202 million. Overseas sales accounted for 22.3% of consolidated net sales. Segment operating income decreased 20.0%. This decline was due in part to the effect of investments for future growth in PEERLESS LION (in the Philippines) and Lion Eco Chemicals Sdn. Bhd. (in Malaysia). Other related factors included the fact that there is room for improvement in profit margins in markets where Lion has a presence. Going forward, management issues to address will be generating additional income at an early date from the investments it has made for future growth and improving its business portfolio in these overseas markets, focusing on the high-value-added oral care and beauty care fields.

  Millions of Yen
FY2014 % of
FY2013 % of
Amount %
Net sales 28,682 28,723 (40) (0.1)
Operating income 597 2.1 1,016 3.5 (418) (41.2)

Financial Position

Total assets increased in fiscal 2014, while cash flow decreased.

Consolidated Financial Status
  Millions of Yen
FY2014 FY2013 Change
Total assets (millions of yen) 283,352 282,098 1,254
Total net assets (millions of yen) 127,434 124,232 3,201
Shareholders’ equity to total assets*1 (%) 42.6 42.0 0.6
Net assets per share*2 (yen) 449.94 441.59 8.35

*1 Shareholders' equity to total assets = (Net assets Subscription rights to shares and Minority interests)/Total assets

*2 Subscription rights and minority interests were excluded from calculation of net assets per share.

Graph: Total Assets

Total consolidated assets at the end of the fiscal year amounted to ¥283,352 million, an increase of ¥1,254 million over the prior year.

Total consolidated liabilities at the end of the fiscal year were ¥155,918 million, or ¥1,947 million lower than at the end of the previous fiscal year. This was attributable to a decline in notes and accounts payable-trade and a decrease in the current portion of long-term loans payable. Current liabilities amounted to ¥115,537 million, representing a decrease of ¥16,119 million from the previous fiscal year-end, and the current ratio at year-end was 126.5%.

Total consolidated shareholders' equity rose ¥4,612 million, to ¥115,201 million. Net assets were ¥127,434 million, which was ¥3,201 million higher than at the end of the previous fiscal year.

Graph: Current Ratio
Graph: Capital Expenditures and Depreciation and Amortization

Cash Flows

Consolidated Cash Flows
  Millions of Yen
FY2014 FY2013 Change
Net cash provided by (used in) operating activities 11,738 22,910 (11,171)
Net cash provided by (used in) investing activities (16,838) (12,819) (4,018)
Net cash provided by (used in) financing activities (6,520) (2,772) (3,748)
Effect of exchange rate changes on cash and cash equivalents 829 709 120
Net increase (decrease) in cash and cash equivalents (10,791) 8,027 (18,818)
Cash and cash equivalents at end of the period 38,150 48,941 (10,791)

Net cash provided by operating activities totaled ¥11,738 million, mainly influenced by income before income taxes.

Net cash used in investing activities amounted to ¥16,838 million, mainly influenced by purchases of property, plant and equipment.

Net cash used in financing activities was ¥6,520 million. Principal cash outflows were for cash dividends paid and repayments of long-term loans payable.

As a consequence, cash and cash equivalents at the end of the fiscal year were ¥38,150 million, representing a decrease compared with the previous fiscal year-end of ¥10,791 million.

Outlook for Fiscal 2015

As the first year of Lion's "V-2 Plan," during fiscal 2015, Lion will aim to increase sales and income mainly by continuing to shift its product portfolio in Japan and overseas toward high-value-added items.

  Millions of Yen
FY2015 FY2014 Change
Amount %
Net sales 375,000 367,396 7,603 2.1
Operating income 13,500 12,406 1,093 8.8
Net income 7,500 7,368 131 1.8

Although the Japanese economy is forecast to continue on a moderate recovery trend, the outlook will continue to be uncertain because of trends in personal consumption, the international financial situation, geopolitical risks, and other factors.

The Lion Group is forecasting that the business environment will become more severe as conditions in the markets for daily necessities where Lion conducts its principal business activities will be influenced by the delay in recovery of personal consumption and intense competition at the retail store level.

Amid this business environment, under its new three-year management plan "V-2 Plan (Vision 2020, Part 2)," which commenced in fiscal 2015, the Group will steadily implement the basic strategies of this plan and undertake initiatives toward substantially further business structural reforms with the objectives of setting new records for income (operating income and ordinary income) and increasing corporate value.

In domestic business operations, Lion will continue to give highest priority to "Improving Profitability in Consumer Product Businesses." To this end, Lion will launch new high-value-added products in businesses, such as toothpaste, antiperspirants, and kitchen detergents where consumers exercise discretion in their choice of products, and raise the profile of these products in the market. For example, in the kitchen detergent market, through the introduction of epoch-making products, such as CHARMY Magica dishwashing detergent, which can thoroughly clean grease from dishes through dissolving it at the nano-level, Lion is working to ensure growth and improvement in profitability. In addition, in the direct-to-consumer business, Lion is strengthening its business base in this field by conducting aggressive marketing activities focusing on functional food products and moving forward with activities to increase the efficiency of its production systems.

In the Industrial Products Business, Lion is striving to increase the profitability and growth of its chemical products business. In addition, Lion is proceeding with structural reforms in its chemicals business through the realignment of three Group companies.

In Overseas Business activities, Lion will continue to strengthen its marketing activities focusing on oral care products and laundry detergents and work to improve its product mix with the aim of seizing business opportunities in the expanding middle-income classes. In addition, Lion is working to improve profitability by growing its business activities in the Philippines, where it began full-scale operations in fiscal 2013, and putting its increased capacity in Malaysia for the production of surfactant methyl ester sulfonate (MES) on track.

Another issue Lion is addressing is strengthening its mutually supporting intraregional supply network in northeast Asia. This will involve developing an optimal production system and accelerating the speed of product development through the maximization of Group synergies.

As a consequence of the business initiatives previously mentioned, in 2015, Lion is forecasting consolidated net sales of ¥375.0 billion (2.1% growth over the previous year), operating income of ¥13.5 billion (8.8% growth), ordinary income of ¥15.0 billion (6.7% growth), and net income of ¥7.5 billion (1.8% growth).

The outlook for cash flows in fiscal 2015 is as follows.

Among cash flows from operating activities, Lion is forecasting ¥13.0 billion in income before income taxes and depreciation and amortization of ¥11.0 billion.

Among cash flows used in investing activities, capital expenditures are forecast to amount to ¥11.0 billion.

Cash flows used in financing activities are expected to amount to ¥3.0 billion, including cash outflows for cash dividends paid and the repayment of loans payable.

As a result of the above cash flow movements, the balance of cash and cash equivalents at the end of the fiscal year is forecast to be approximately ¥10.0 billion higher compared with the end of the previous fiscal year.

Note: The following were the principal exchange rates used in calculating performance forecasts for 2015: US$1=¥118 and one baht=¥3.5. The forecasts for performance are as of February 10, 2015.

Basic Policy on the Distribution of Earnings and Cash Dividends

The Group considers the return of profits to shareholders, on a continuing and stable basis, as its consolidated earnings capacity rises, to be its most-important management issue. As it continues to pay stable dividends, the Group will give comprehensive consideration to, and is considering making purchases of its own shares from the market, while at the same time giving due attention to the accumulation of retained earnings to finance medium- to long-term growth. Retained earnings will also be allocated to research and development as well as to investment in production facilities and the acquisition of external resources with the objectives of strengthening corporate growth and preparing a sustainable business base for future expansion.

After taking into consideration Lion's record of cash dividend payments, as well as its dividend payout ratio, for fiscal 2014, Lion's Board of Directors resolved to pay an interim dividend of ¥5 per share (paid on September 5, 2014) and a year-end dividend of ¥5 per share (paid on March 4, 2015).

For dividends in fiscal 2015, under its basic dividend policy, Lion plans to pay interim and year-end dividends of ¥5 per share, thus bringing the total dividends for the full year to ¥10 per share.

Business Risk Information

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

Please note that forward-looking statements are based on judgments made by the Lion Group as of February 10, 2015. Business risks are not limited to the items listed below.

1. Perceptions of product quality and value

The Lion Group plans, develops, produces, and sells products following management practices that are based on international quality standards while strictly following related laws and regulations, such as Japan's Pharmaceutical Affairs Law, to provide worry-free, safe, convenient, and environmentally conscious products to consumers. In addition, after products have been launched, the Company makes full use of consumers' opinions received through its Customer Service Office to improve its products, packaging, labeling, and other aspects of its products.

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 position.

2. Changes in raw materials prices

The Lion Group's products use petrochemical and vegetable oils and fats as basic materials. Since the prices of these materials are easily affected by international market trends, the Company has established measures to reduce costs and diversify the range of materials used. However, increases in raw materials prices may adversely affect the Lion Group's management performance and financial position.

3. Exchange rate fluctuations

The Lion Group translates into yen the figures in the financial statements of overseas subsidiaries when preparing its consolidated financial statements. The value of items denominated in foreign currencies may, therefore, be affected by foreign exchange rates when they are converted to yen. The Lion Group takes steps to minimize the risk of increases in raw materials 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 position.

4. Major lawsuits

In fiscal 2014, Lion was not involved in any lawsuits that might have a significant impact on its business. However, if the Lion Group is found to be liable to pay significant damages in a future lawsuit, this may adversely affect the Lion Group's management performance and financial position.

5. Earthquakes and other natural disasters

In its manufacturing facilities, the Lion Group implements safety measures against earthquakes and other natural disasters. In the event of a major disaster, however, if the Group's production activities are interrupted because of damage to facilities and/or issues related to raw materials procurement and logistics, this may adversely affect the Lion Group's management performance and financial position.

Detailed financial information on Lion Corporation can be accessed below.