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 | | President: Sadayoshi Fujishige |
| Japan's economy experienced a recovery in the interim period ended June 30, 2006, supported by an increase in private-sector capital expenditures on the back of improvements in corporate earnings, as well as a modest recovery in consumer spending. The industry environment remained severe, however, in the Lion Group's core domestic household consumer products business, adversely affected by persistently rising material costs resulting from higher crude oil prices, and a continuing drop off in retail prices caused by fierce market competition. Against this backdrop, Lion Corporation recorded consolidated net sales of ¥163,295 million for a 2.1% year-on-year increase. Concentrated efforts to further develop core brands and actively introduce new products in overseas markets, particularly in the ASEAN region, led to growth in overseas sales. This offset decreased sales of home, pharmaceutical and chemical products in Japan. Lion made aggressive promotional investment to nurture brands in Japan and overseas markets. Combined with higher material costs, these factors caused lower earnings, with interim net income finishing at ¥1,770 million, a decrease of 33.4% compared with the corresponding period of the previous year. We are working to ensure that we attain the goals of enhancing growth potential and improving profitability as set forth in our new medium-term management plan, the Value Innovation Plan Part II 09 (VIP II 09). In order to achieve these goals, Lion is stepping up the "attack" theme of its management posture for 2006. Lion has taken steps to reorganize the sales and research structures of the domestic Home Products business in order to bolster development and cultivation abilities in the area of new, high-value-added products. In Pharmaceutical Products, Lion has newly entered the field of functional food products, a ¥700 billion market, and is endeavoring to cultivate its new "KENBISOUKEN" brand. At the same time, we are focusing on quickly establishing the two new business fields acquired at the end of fiscal 2004 (the new OTC drugs business and a home products business in South Korea) as earnings pillars. Aiming for total cost reductions of ¥10 billion over the five years starting from fiscal 2005, we will continue to implement fundamental reforms to the profit structure. Lion Corporation is actively engaged in CSR activities, particularly in activities to contribute to environmental preservation. This is because the household consumer products manufactured and sold by Lion are firmly established as elements of daily life, and are therefore intimately linked with the world ecosystem. In VIP II 09, we have positioned reduction of greenhouse gas emissions, efficient and recycling-oriented use of resources, development of eco-friendly products and other environmental protection activities as main pillars of our ECO LION activities. We are reinforcing our efforts in these areas. In March 2006, Lion released new "Top" laundry detergent, a product that raises the ratio of plant-based materials to cleaning ingredients to over 70% and successfully cuts CO2 emissions to the atmosphere by 47% in comparison with "Hi Top" laundry detergent in 1990. In addition, Lion participates in the Team Minus 6% project to prevent global warming, a movement promoted by the Japanese government. Furthermore, we are collaborating actively in various initiatives to revitalize water-circulation systems. We will push vigorously ahead with efforts to increase corporate value by promoting steady implementation of VIP II 09 and extending our CSR activities. I would like to extend my sincere appreciation to each and every one of our investors while asking for your continued support.
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