II. Interim Performance


2. Fiscal 2000 Outlook

(1) Overall Performance Outlook
We believe that the market environment surrounding the Company will remain severe. In response, we will unite the Shiseido Group to pursue greater cost efficiency through "cost-best activities" and strive to secure ample profitability and growth.
Through the remainder of fiscal 2000, we will continue to promote two core strategies: (1) Our "Global Multibrand Strategy" and (2) Increased profitability and structural reform of our cosmetics business. We will also implement business- and company-specific ROA management, which we commenced in the second half of fiscal 2000.
By pursuing business operations based on these strategies, we forecast a 2% increase in net sales, a 7% rise in income from operations, and a 45% gain in net income in fiscal 2000.
We also plan to declare a 2.00 yen per share fiscal year-end commemorative dividend, resulting in total year-end dividends of 9.00 yen per share and full-year dividends of 16.00 yen per share.

Consolidated Net Sales

(Billions of yen)

Fiscal 2000
(Estimate)

Fiscal 1999
(Results)

Increase /Decrease over Fiscal
1999

Amount

% change

Cosmetics
Toiletries
Others

450.0
100.0
65.0

444.5
98.9
60.9

5.5
1.1
4.1

+1%
+1%
+7%

Net Sales

615.0

604.3

10.7

+2%

Overseas Sales

95.0

93.6

1.4

+2%

Share in
  Net Sales

15.4%

15.5%

-



Consolidated Income

(Billions of yen)

Fiscal 2000
(Estimate)

Percent
of
Net Sales

Fiscal 1999
(Results)

Percent
of
Net Sales

Increase/Decrease over
Fiscal 1999

Amount

% change

Income from
  Operations

38.0

6.2%

35.4

5.9%

2.6

+7%

Ordinary
  Income

40.0

6.5%

33.9

5.6%

6.1

+18%

Net Income

15.0

2.4%

10.3

1.7%

4.7

+45%

Consolidated
  Net Income/
Nonconsolidated
  Net Income

1.00 times

-

0.79 times

-


Nonconsolidated Net Sales

(Billions of yen)

Fiscal 2000
(Estimate)

Fiscal 1999
(Results)

Increase /Decrease over Fiscal
1999

Amount

% change

Cosmetics
Toiletries
Others

190.0
90.0
20.0

251.0
90.4
21.7

-61.0
-0.4
-1.7

-24%
0%
-8%

Net Sales

300.0

363.1

-63.1

-17%

Note: Transaction prices with the Company's cosmetics sales subsidiary have been revised. If the old prices were reflected in the above table, the increase over fiscal 1999 would be 4% for cosmetics sales and 1% for net sales.

Nonconsolidated Income

(Billions of yen)

Fiscal 2000
(Estimate)

Percent
of
Net Sales

Fiscal 1999
(Results)

Percent
of
Net Sales

Increase/Decrease over
Fiscal 1999

Amount

% change

Income from
  Operations

24.0

8.0%

23.9

6.6%

0.1

0%

Ordinary
  Income

31.0

10.3%

28.9

7.9%

2.1

+7%

Net Income

15.0

5.0%

13.0

3.6%

2.0

+15%


Per Share Information and Financial Ratios

 

Fiscal 2000
(Estimate)

Fiscal 1999
(Results)

Increase/Decrease
over Fiscal 1999

Return on Equity (%):
  Consolidated
  Nonconsolidated

3.6%
3.9%

2.5%
3.5%

1.1%
0.4%

Net Income per Share (Yen):
  Consolidated
  Nonconsolidated

35.92
35.92

24.55
30.92

11.37
5.00

Payout Ratio (Nonconsolidated)

44.5%

45.1%

-0.6%

Dividends per Share (Yen):
  Interim
  Year-End

7.00
9.00

7.00
7.00

-
2.00

(2) Outlook by Major Business Category

(a) Cosmetics
In the future, we will continue implementing our "Global Multibrand Strategy." Specific actions will include launching Shiseido Energizing Fragrance (overseas in October 1999; domestically in November) and SHISEIDO The Skincare (domestically and overseas in January 2000) as global strategic Shiseido brand products. We will also position Clé de Peau BEAUTÉ, a high-end brand, as the highest prestige brand above any other Shiseido brand, and launch it on the global market. In addition, we successively establish non-Shiseido brands, namely Ipsa and Ettusais, in Asian markets.
We predict that once our new restructured organization becomes fully functional, our cosmetics business will be rejuvenated as a result.
In the latter half of fiscal 2000, our overseas business will face some difficulties, such as further appreciation of the yen and the aftermath of the earthquake in Taiwan, a major market for the Company. Nevertheless, we believe that our actions to stimulate growth will enable us to generate year-on-year revenue gains. Looking at profitability, we estimate that income from cosmetics operations for fiscal 2000 will grow due to ongoing efforts to improve cost efficiencies mainly at our domestic cosmetics sales subsidiary.

(b) Toiletries
In our toiletries business, sales from our business alliance with Johnson & Johnson, as well as from the Care Garden series and other new businesses, will contribute to sales in the latter half of fiscal 2000. Moreover, since our actions to minimize distribution inventories are almost complete, we expect a slight increase in overall revenues in this category.
Although profit will be affected by future-oriented investments in new businesses, we will further reinforce our efforts to enhance efficiency in promotional expenditures and reduce costs. As a result, we anticipate an increase in income from toiletries operations in fiscal 2000.

(c) Others
In the latter half of fiscal 2000, we predict a recovery in sales and profits from our domestic salon business, where the synergistic benefits of acquisitions have taken time to appear. In each of our other businesses, such as Shiseido Shoppers Club, health and beauty foods, and pharmaceuticals, we will further reinforce expenditure efficiency. For the category overall, we predict that these efforts will result in increased net sales and improved profitability for the year.

(d) Overseas Sales
During the remainder of the fiscal year, we will concentrate on a number of strategic measures, including introducing the top-of-the-line Clé de Peau BEAUTÉ range of cosmetics, reinforcing our line of fragrances, and developing non-Shiseido brand lines. At the macroeconomic level, we predict that recovery of Asian economies will gather momentum. Despite some causes for concern, such as the strong yen and the aftermath of the earthquake in Taiwan, we are confident of securing a modest increase in overseas sales for fiscal 2000, with Asian markets taking the lead.

(e) Economic Indicators Expected to Significantly Impact Operations
Our predictions are based on the following assumptions:
For the current fiscal year, we predict positive, albeit modest, growth in real GDP. Based on Ministry of International Trade and Industry of Japan statistics for cosmetics shipments, we believe that demand for cosmetics will remain at previous-year levels. Our forecasts for the year ahead are based on exchange rate of 105 yen per U.S. dollar, 17 yen per French franc, and 3.3 yen per new Taiwan dollar, compared with our initial predictions of 120 yen per U.S. dollar, 22 yen per French franc, and 4 yen per new Taiwan dollar.
Since these preconditions form the basis for our fiscal 2000 forecasts, there is ample possibility that major changes in the economic environment will affect the performance trends of the Company. For Shiseido, fiscal 2000 will be the year in which we strengthen our foothold for the 21st century. For this reason, we will harness all our resources to achieve our plans, without being swayed by such external factors.


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