II. Interim Performance


1. Overview

(1) Fiscal 2000 Interim Performance
Shiseido's consolidated net sales for the six months ended September 30, 1999, were largely unchanged from the corresponding period of the previous year. Domestic sales were up 0.7% as sales of our mainstay cosmetics products bottomed out and firmed.
Overseas sales jumped 12.1% in local currency terms, but the yen's appreciation during the term caused overseas sales in yen terms to decline 3.9%.
Income from operations climbed 34.5%. In addition to firming domestic sales of cosmetics, this gain stemmed from enhanced profitability of all divisions as we promoted companywide "cost-best activities," reformed the profit structure of our domestic sales subsidiary, and achieved efficiencies of scale in our toiletries business thanks to our "megabrand" strategy.
Consolidated interim net income jumped 284.6%, due primarily to the absence of an extraordinary loss in the previous interim period caused by a large devaluation of securities.

Consolidated Net Sales

(Millions of yen)

First Half
of Fiscal
2000

Percent
of
Net Sales

First Half
of Fiscal
1999

Percent
of
Net Sales

Increase/Decrease over
First Half of Fiscal 1999

Amount

% change

Cosmetics
Toiletries
Others

229,561
46,911
30,537

74.8%
15.3%
9.9%

227,423
48,778
31,094

74.0%
15.9%
10.1%

2,138
-1,866
-557

+0.9%
-3.8%
-1.8%

Net Sales

307,011

100.0%

307,296

100.0%

-285

-0.1%

Domestic
  Sales

257,850

84.0%

256,160

83.4%

1,690

+0.7%

Overseas
  Sales

49,160

16.0%

51,136

16.6%

-1,976

-3.9%


First Half
of Fiscal
2000

Percent
of
Net Sales

First Half
of Fiscal
1999

Percent
of
Net Sales

Increase/Decrease over
First Half of Fiscal 1999

Amount

% change

Income from
  Operations

23,521

7.7%

17,494

5.7%

6,026

+34.5%

Ordinary
  Income

24,649

8.0%

19,085

6.2%

5,564

+29.2%

Net Income

9,896

3.2%

2,573

0.8%

7,323

+284.6%

Consolidated
  Income/
Nonconsolidated
  Income

0.98 times

0.34 times


Nonconsolidated Net Sales

(Millions of yen)

First Half
of Fiscal
2000

Percent
of
Net Sales

First Half
of Fiscal
1999

Percent
of
Net Sales

Increase/Decrease over
First Half of Fiscal 1999

Amount

% change

Cosmetics
Toiletries
Others

100,182
42,225
9,230

66.1%
27.8%
6.1%

141,355
44,430
10,251

72.1%
22.7%
5.2%

-41,172
-2,204
-1,020

-29.1%
-5.0%
-10.0%

Net Sales

151,638

100.0%

196,036

100.0%

-44,398

-22.6%


First Half
of Fiscal
2000

Percent
of
Net Sales

First Half
of Fiscal
1999

Percent
of
Net Sales

Increase/Decrease over
First Half of Fiscal 1999

Amount

% change

Income from
  Operations

15,528

10.2%

15,140

7.7%

388

+2.6%

Ordinary
  Income

19,890

13.1%

20,236

10.3%

-346

-1.7%

Net Income

10,114

6.7%

7,510

3.8%

2,604

+34.7%


Note: A revision in transaction prices with the Company's cosmetics sales subsidiary caused sales to decline. Without the revision, sales would have grown 1%. In addition, in accordance with a partial revision in regulations covering interim financial statements, the position of the enterprise tax has been adjusted retroactively for the previous interim period. As a result of the change, fiscal 1999 interim income from operations and ordinary income each increased by 890 million yen.

(2) Consolidated Cash Flows
In the term under review, Shiseido made capital investments aimed at strengthening its foundation for future growth. Investments in property, plant, and equipment were primarily funded by cash flows from operating activities. Such investments were allocated mainly toward a second cosmetics production facility in France, expansion of a research facility, and construction of a new Ginza building.

Consolidated Cash Flows (Summary)

(Billions of yen)

Cash and Cash Equivalents at Beginning of Term 73.26
Net Cash Provided by Operating Activities
Net Cash Used for Investing Activities
(Investments in Fixed Assets)
Net Cash Used for Financing Activities
Conversion Differential for Cash
and Cash Equivalents
Net Decrease in Cash and Cash Equivalents
16.69 *1
-18.47
(-16.13) *2
-1.98

-0.52
-4.28
Cash and Cash Equivalents at End of Term 68.98
*1 Income before Income Taxes: 25.45 billion yen
Depreciation Expense: 12.89 billion yen
*2 Investments in Fixed Assets (Billions of yen)
Acquisition of Property, Plant, and Equipment
Increase in Intangibles
Deferred Charges
13.37
1.49
1.27


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