Noevir : Annual Report 2023

Business Model

Pharmaceuticals &

Health Food

19.2%

¥11,985million

The Group develops, produces and sells such flagship items as the long-sellingNanten Nodo Ame cough drop brand, the Min Min Da Ha functional drink brand lineup and other OTC pharmaceuticals, including cold remedies and digestive aids, as well as nutritional supplements, health food and other products featuring high-quality natural ingredients.

Channels

• Face-to-faceSales
• Convenience Stores
• Drugstores
• GMS (General Merchandise Stores)
• Supermarkets
• Online Stores
• Contract Manufacturing

Pharmaceuticals &

Health Food

Other

3.8%

¥2,391million

The Other segment encompasses apparel and aircraft sales and leasing.

Channels

• Face-to-face Sales

Cosmetics

77.0%

¥48,175million

The Group develops, produces and sells a versatile collection of products under well-regarded brand names, including Noevir high-performance functional face-to-face channel skincare products; various popular products for the self-selection cosmetics market, including the Nameraka Honpo skincare brand and excel makeup brand; and the NOV hypoallergenic brand. The Group also undertakes the contract manufacturing of cosmetics.

Channels

• Face-to-faceSales
• Drugstores
• Specialty Goods Stores
• GMS (General Merchandise Stores)
• Supermarkets
• Online Stores
• Noevir's Own Retail Stores
• Convenience Stores
• Contract Manufacturing

Face-to-face

Channel

Cosmetics

LuxuryLine

Cosmetics principally represented by prestige products sold through face-to-face sales channels

• Approximately 2,000 NOEVIR Beauty Studios, along with Noevir's own retail stores, operate in regions nationwide
• These sales outlets engage in face-to-face sales employing consulting to both propose skincare products and provide facials
• Our high-end skincare products have garnered
  a solid reputation due to their superior anti-aging and skin-brightening functionalities

A Unique Approach to R&D and Robust Manufacturing Systems Capable of Achieving both High Quality and Environmental Friendliness

• Employing multiple research facilities run by Group companies, which handle cosmetics, pharmaceuticals and food, to expand the scope of research activities and to promote the ongoing development of unique products that fully leverage the Group's diverse R&D capabilities and assets
• Stepping up joint research with external business corporations as well as governmental and academic institutions
• Implementing thoroughgoing quality control while operating environment-friendly manufacturing systems

Self-selection

Cosmetics

StandardLine

Cosmetics principally represented by affordably priced products sold through general retailers

• Sold mainly through drugstores, specialty goods stores and general merchandise stores
• Boasting a robust sales structure backed by storefront promotional campaigns as well as advertising utilizing SNSs and other media
• Product planning capabilities that help create trendsetting items and unique offerings aimed at addressing specialized customer needs

Sales of face-to-face channel cosmetics and self-selection cosmetics in eight regions overseas: China, Taiwan, South Korea, Hong Kong, Singapore, Thailand, The United States, Canada

The Noevir Group is striving to best accommodate ever changing and increasingly diverse market needs. To this end, in addition to executing the following five policies, we have positioned net sales, operating income and return on equity (ROE) as key management indicators, thereby maximizing our corporate value and enhancing profitability.

Consolidated Earnings Forecasts for Fiscal 2024

Net Sales ¥63,000 million Operating income ¥11,200 million

Noevir Co., Ltd.

Noevir Holdings

Co., Ltd.

Transferred shares in Bonanza Co., Ltd. to Noevir Co., Ltd.

The Operating Environment and Fiscal 2023 Business Results

During fiscal 2023 (October 1, 2022 to September 30, 2023), economic trends remained uncertain, although some signs of gradual recovery were observed.

• Against this backdrop, the Noevir Group has striven to accommodate ever-diversifying customer needs in the aftermath of the COVID-19 pandemic, to this end taking an agile approach to management decision making. For example, we updated existing product lines while introducing new products with superior functionalities via the use of findings from cutting-edge R&D activities. In addition, we continued with stringent efforts to streamline selling, general & administrative (SG&A) expenses to achieve higher profitability.
• As a result, consolidated net sales came to ¥62,552 million, while operating income totaled ¥11,024 million. Net income attributable to owners of the parent stood at ¥7,673 million, with the operating income margin amounting to 17.6%.

Our Fiscal 2023 Initiatives

In fiscal 2023, our Cosmetics business saw increases in both revenues and profit compared with the previous fiscal year. In face-to-face channel cosmetics, although overall sales of skincare products decreased, sales were robust for Noevir HUKKULA SERUM, which was released in November 2022 and incorporates collagen, as were sales for existing Noevir SPECIALE skincare line. The popularity of these particular products was due to the growing trend toward taking

off one's mask when going outdoors, which, in turn, invigorated customer needs for products designed to make their skin appear beautiful. Also, the release of Noevir Dewdrop Glow Serum in May 2023 contributed to sales, as this beauty serum boasts superior functionalities that help enhance the skin's ability to retain moisture.

• In self-selection cosmetics, sales increased, buoyed by the robust performance of skincare products. Sales of the Nameraka Honpo brand line remained firm, thanks in part to the updating of the Moisture skincare line in the previous fiscal year and the inclusion of the Wrinkle Brightening series products into the Aging-CareLine of this brand lineup in August 2023. The release of updated versions of mainstay NOV III series skincare line products similarly contributed to sales. Meanwhile, demand for makeup products got on a recovery track due to the lifting of pandemic-related movement restrictions and resulting recovery in shopper traffic, supporting the ongoing robustness of sales of base makeup products sold under the Pore Putty brand. Having released new products of the excel makeup line, we also implemented sales promotion initiatives through SNSs and held a variety of collaborative events with partner companies from different sectors to expand new customer contact points.

  The Pharmaceuticals & Health Food segment saw increases in both revenues and profit, with strong showings of Min Min Da Ha (functional drinks) and nutritional supplements, as well as the release of new products, contributing to sales. The Other business segment, which ­encompasses apparel- and aircraft-related operations, recorded decreases in both revenues and profit. This was attributable to a decline in sales from aircraft-related operations.

Future Outlook

With regard to face-to-face channel cosmetics in the Cosmetics business, we will strive to enhance our sales capabilities, to this end focusing on providing customers with treatment and counseling services at physical shops and otherwise engaging in face-to-face sales activities. By doing so, we will expend contact points with customers. In self-selection cosmetics, we will ­continue with the timely provision of products equipped with superior market competitiveness and designed to accurately meet customer needs.

• Taking these factors into account, our consolidated performance forecasts for fiscal 2024 (from October 1, 2023 to September 30, 2024) comprise net sales of ¥63,000 million, operating income of ¥11,200 million and net income attributable to owners of the parent of ¥7,800
  million­ . Looking ahead, we will stay focused on securing profitability and strive to live up to our earnings forecasts via, for example, efficient cost management.

Concepts on Sustainability

Working toward the realization of high quality of life for all stakeholders, the Noevir Group is engaged in the creation of beauty and health. In addition, we are implementing proactive initiatives aimed at contributing to the realization of a sustainable society under five themes:

customers and business partners; shareholders; employees; society; and the environment.

For more details, please visit our corporate website.

https://www.noevirholdings.co.jp/english/csr/index.htm

Our Policy regarding Shareholder Returns

We have positioned the return of profit to our shareholders as an important management issue. Accordingly, our basic policy is to deliver a stable stream of dividends to our shareholders even as we secure internal reserves for supporting our endeavors to achieve medium- to long-term business development and strengthen our management structure. The above undertakings are backed by efforts to maximize corporate value and improve profitability. In line with this policy, we decided to raise year-end dividends for fiscal 2023 by ¥5 per share from the previous dividend forecast, thereby bringing full-year cash dividends to ¥220 per share. As a result, we achieved a 12th consecutive annual increase in dividends, with the dividend payout ratio amounting to 97.9%.

• Striving to contribute to health and beauty, the Noevir Group has long been helping people maintain and improve their quality of life through its business operations. Thanks to this dedication, the Group has won the trust of society. Looking ahead, we will continue to enhance

our corporate value while boosting our ability to quickly and flexibly accommodate market changes and diversifying needs.

Product Strategy

Our face-to-face channel cosmetics brand portfolio consists mainly of prestige skincare products, which boast strengths as anti-aging and skin brightening solutions and provide users with a superior skincare experience, as well as beauty serums and other functional cosmetics, the lineups of which are periodically expanded and renewed to reflect our latest R&D accomplishments.

  In fiscal 2023, we released two beauty serums: Noevir HUKKULA SERUM, which contributes to the firmness and elasticity of the skin through a unique combination of collagen and other ingredients developed through the application of our expertise in botany and dermatology, fields in which we have pursued R&D for many years, and NOEVIR Dewdrop Glow Serum, which enhances the skin's ability to retain moisture due to the incorporation of plant extracts identified through our proprietary research. In light of the growing trend toward taking off one's mask when going outdoors, we have also tackled product development aimed at responding to strong needs among customers for products designed to make their skin appear beautiful.

• Aiming to enrich our face-to-face channel cosmetics brands, we are fully leveraging our distinctive strengths in R&D, thereby maintaining a constant stream of new products with superior functionality.

Sales Strategy

The Noevir Group markets its face-to-face channel cosmetics brands mainly through face-to-face sales channels backed by beauty studios while also offering them through retail stores operated by Noevir Co., Ltd. These retail stores form a network that serves major cities across Japan, securing contact points with potential customers and enhancing brand recognition. In addition, the Group has enhanced its sales capabilities by introducing an in-house system that certifies those NOEVIR Beauty Studios that demonstrate service quality and techniques that meet strict standards. As of September 30, 2023, more than 2,000 salons have been certified.

  In fiscal 2023, we continued to employ face-to-face sales as our mainstay method for customer engagement. By doing so, we strove to achieve even higher customer satisfaction among existing customers while winning new customers through the provision of finely tuned counseling to meet individual needs. Furthermore, we leveraged our online platform to deliver beauty lessons and follow-up counseling for purchasers of our products. In these and other ways, we endeavored to ensure that the platform serves as a helpful tool for both our customers and sales representatives in the post-COVID-19 environment.

• In addition, we strive to accommodate diversifying consumer needs by enhancing the content of services offered via NOEVIR Style, an online shopping website aimed at winning loyal customers. We also provide NOEVIR Support, an online ordering system specializing in supporting our sales representatives.

Main Brands