Fancl : Consolidated Financial Statements for the Third Quarter of the Fiscal Year Ending March 31, 2022

Consolidated Financial Statements for the

Third Quarter of the Fiscal Year

Ending March 31, 2022

April 1, 2021 to December 31, 2021

This document has been translated from the original Japanese as a guide for non-Japanese investors. It contains forward-looking statements based on a number of assumptions and beliefs made by management in light of information currently available. Actual financial results may differ materially depending on a number of factors, including changing economic conditions, legislative and regulatory developments, delay in new product launches, and pricing and product initiatives of competitors.

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(Millions of yen, rounded down)

SUMMARY OF FINANCIAL STATEMENTS (consolidated)

Results for the Nine-Month Period of the Fiscal Year Ending March 31, 2022

FANCL CORPORATION

January 28, 2022

Stock exchange listings: Tokyo 1st section, code number 4921

https://www.fancl.jp/en/Contact:Yuhei Komine

Deputy Executive Officer, General Manager, Corporate Planning Office

Telephone: [phone]

CEO, President, Representative Director: Kazuyuki Shimada

Scheduled date for submission of third quarter hokokusho (securities report): February 10, 2022

Scheduled date for distribution of dividends: --

Availability of supplementary explanatory material for the third quarter results: Available

Presentation meeting for the third quarter results: Scheduled (for institutional investors and analysts)

1) Consolidated results for the nine-month period (April 1, 2021 to December 31, 2021) of the fiscal year ending March 31, 2022

(1) Consolidated Operating Results

		Nine months ended			Nine months ended
		December 31, 2021		December 31, 2020
					% change			% change
..........................................................Net sales		78,916			(8.3)		86,095		(12.8)
.............................................Operating income		8,426			(3.0)		8,686		(30.4)
...............................................Ordinary income		8,888			0.5		8,844		(29.9)
Net income attributable to owners of the		6,492			5.4
parent company..............................................					6,159		(28.9)
Earnings per share (¥)......................................		53.80			--		51.06		--
........................Earnings per share (diluted) (¥)		53.58			--		50.85		--

Notes: 1. The percentages shown above are a comparison with the same period in the previous fiscal year.

1. Comprehensive income: Nine months ended December 31, 2021: ¥6,633 million (8.8%) Nine months ended December 31, 2020: ¥6,096 million (-29.4%)
2. From the beginning of the first quarter period, the Company has adopted the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020), etc. As a result, net sales are ¥6,824 million lower, and operating income and ordinary income are each ¥203 million higher. If the figures for the fiscal year ended March 2021 were estimated on the same basis, net sales would be 0.3% lower year-on-year.

(2) Consolidated Financial Position					(Millions of yen, rounded down)
		As of December 31, 2021			As of March 31, 2021
.....................................................Total assets		97,580			97,533
.......................................................Net assets		73,143			71,215
..............Shareholders' equity/total assets (%)		74.3			72.3
Shareholders' equity: As of December 31, 2021: ¥72,503 million
As of March 31, 2021: ¥70,544 million
2) Dividends per share
			FY ended			FY ending
			March 31, 2021			March 31, 2022
Interim period ..................................................		17.00			17.00
Year-end .........................................................	17.00			17.00 (forecast)
.............................................................Annual		34.00			34.00 (forecast)
Notes: 1. Changes to dividend forecasts during the period under review: None
3) Consolidated forecasts for the fiscal year ending March 31, 2022 (April 1, 2021 to March 31, 2022)
						Millions of yen
				FY Ending
			March 31, 2022
						Change %
Net sales
106,500	(7.3)
...........................................................Operating income	12,000	3.7
Ordinary income
12,200	3.5
Profit (loss) attributable to owners of parent
8,100	1.0
Net income per share (¥)
67.12	--

Notes: 1. Percentage figures for sales, operating income, etc. represent changes compared to the previous fiscal year.

1. Changes to the Consolidated forecasts during the period under review: No
2. As the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29), etc. has been adopted from the beginning of the first quarter of the fiscal year ending March 31, 2022, the above consolidated forecast reflects the application of this accounting standard. If the same standard is applied to the fiscal year ended March 31, 2021, net sales would be 1.3% higher year on year. There is no change in the operating income, ordinary income and net income forecasts before and after the application of the new accounting standard.

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1. Other

1. Transfer of important subsidiaries during the period: None

Note: Indicates transfers of specified subsidiaries resulting in changes in the scope of consolidation during the period under review.

1. Use of simplified accounting methods or special accounting procedures: None
2. Changes in accounting policy, changes in accounting estimates, and restatements:
3. 1. Changes following revisions to accounting standards: Yes
   2. Other changes: None
   3. Changes in accounting estimates: None
   4. Restatements: None
4. Number of outstanding shares (common stock)

1. Number of shares outstanding (including treasury shares)
2. Number of treasury shares
3. Average number of shares during the nine-month period

December 31, 2021	130,353,200 shares	March 31, 2021	130,353,200 shares
December 31, 2021	9,677,443 shares	March 31, 2021	9,690,356 shares
Nine months to	120,672,368 shares	Nine months to	120,631,856 shares
December 31, 2021	December 31, 2020

Note: The number of treasury shares at the end of the period includes shares held by the Officer Compensation BIP (Board Incentive Plan) Trust Account (211,500 shares as of December 31, 2021). Furthermore, the treasury shares held by the Officer Compensation BIP Trust Account are included in the treasury stock deducted in the calculation of the average number of shares outstanding during the period.

*This quarterly financial report is not subject to audit procedures by a certified public accountant or auditor.

* Appropriate use of financial forecasts:

(Cautionary note regarding forward-looking statements)

Forecasts, etc., recorded in this document include forward-looking statements that are based on management's estimates, assumptions and projections at the time of publication. A number of factors could cause actual results to differ materially from expectations. For further detail, please see Page 7: 1. Operating Results, Section 3, Forecasts for the fiscal year ending March 31, 2022.

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Contents

1. Operating Results
(1)	Summary of business performance…………………………………………………….……………	5
(2)	Summary of consolidated financial position…………………………………………………………	7
(3)	Forecasts for the fiscal year ending March 31, 2022…………………………….…………………	7

2. Consolidated Financial Statements

1. Consolidated balance sheets………….…………………………………………………………….. 8
2. Consolidated statement of income and Consolidated statement of comprehensive income…. 10 Consolidated statement of income…………………………………..………………………………. 10 Consolidated statement of comprehensive income……………..…………………………………. 11
3. Notes to the consolidated financial statements…………………………………………………….. 12
   Items related to going concern……………………………………………………………………….. 12

Note on significant change in shareholders' equity………………………………….……………..	12
Changes in accounting policy………………………………….…………….. ………………………	12
Additional information………………………………….…………….. ………………………………	12
Segment information…………………………………………………………………………………..	13

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1. Operating Results

(1) Summary of business performance (consolidated)

(All comparisons are with the nine-month period of the previous fiscal year, unless stated otherwise.)

During the nine-month period under review, consolidated sales decreased 8.3% to ¥78,916 million, operating income decreased 3.0% to ¥8,426 million, ordinary income increased 0.5% to ¥8,888 million, and net income attributable to owners of the parent company increased 5.4% to ¥6,492 million.

From the beginning of the first quarter period, the Company adopted the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020), etc. (hereafter "Accounting Standard for Revenue Recognition"). As a result, sales are ¥6,824 million lower, and operating income and ordinary income are each ¥203 million higher.

To provide a more realistic analysis of the operating results, the results of the same period of the previous fiscal year have been reclassified to reflect the adoption of this new accounting standard (hereafter "after reclassification").

During the nine-month period under review, although sales in the core cosmetics and nutritional supplements businesses increased, overall sales declined 0.3% to ¥78,916 million due to a decline in sales in other businesses resulting from factors including the absence of sales of non-woven masks that were sold in the previous comparable period. Operating income decreased 3.0% to ¥8,426 million due to an increase in depreciation expenses following the launch of operations at the Kansai Logistics Center and the effect of the recording of personnel expenses associated with store closures as an extraordinary loss in the same period of the previous fiscal year, which outweighed an increase in gross profit resulting from an improvement in the cost of sales ratio. Ordinary income increased 0.5% to ¥8,888 million, and net income attributable to owners of the parent company increased 5.4% to ¥6,492 million.

Segment results are as follows:

1. Cosmetics Business Sales
   Sales from the Cosmetics business increased 1.4% to ¥44,611 million.

(Millions of yen, rounded down)

	Nine months ended	Nine months ended
	December 31, 2021	December 31, 2020
			(After reclassification)	Change (%)
	Amount in	Percent of	Amount in	Percent of
	¥ million	total	¥ million	total
FANCL Cosmetics	32,436	72.7	32,704	74.4	(0.8)
ATTENIR Cosmetics	10,583	23.7	9,132	20.8	15.9
boscia	794	1.8	1,628	3.7	(51.2)
Others	797	1.8	509	1.1	56.4
Totals	44,611	100.0	43,975	100.0	1.4
	Nine months ended	Nine months ended
	December 31, 2021	December 31, 2020
			(After reclassification)	Change (%)
	Amount in	Percent of	Amount in	Percent of
	¥ million	total	¥ million	total
Online and catalogue sales	23,045	51.7	23,698	53.9	(2.8)
Direct store sales	10,121	22.7	9,488	21.6	6.7
Wholesales and others	6,391	14.3	5,742	13.0	11.3
Overseas sales	5,053	11.3	5,045	11.5	0.1
Totals	44,611	100.0	43,975	100.0	1.4

Sales of FANCL Cosmetics decreased 0.8% to ¥32,436 million due to factors including a slowdown in sales of makeup and special care products, which outweighed a strong trend in sales of MILD CLEANSING OIL, which was subject to renewal.

Sales of ATTENIR Cosmetics increased 15.9% to ¥10,583 million, due to contributions from Dress snow basic skin care which launched in April, and cross-bordere-commerce sales to China.

Sales of boscia decreased 51.2% to ¥794 million due to sluggish wholesale sales to real stores.

Results by sales channels were: online and catalogue sales decreased 2.8% to ¥23,045 million, direct store sales increased 6.7% to ¥10,121 million, wholesale sales through other sales channels increased 11.3% to ¥6,391 million, and overseas sales increased 0.1% to ¥5,053 million.

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