Kao Corporation

First-quarter net sales were ¥389.9 billion, up 6.6% year over year, or up 6% excluding currency effects. Operating income was ¥31.2 billion, with operating margin improving to 8.0%; gross margin rose to 38.0% from 37.4% a year ago. Net income attributable to owners of the parent was ¥22.8 billion, up 38.7% year over year, and EPS was ¥49.19, up 38.9%. The company said first-quarter operating income exceeded ¥30 billion for the first time in four years, and ROIC improved by 1.5 points year over year. For full-year fiscal 2025, management maintained its forecast, including operating income of ¥160 billion, and said tariff effects on operating income are expected to be limited to ¥2 billion at maximum, with mitigations aiming for ¥1.5 billion or less in GC and ¥500 million or less in chemicals. Management also said the ¥10 billion impact from raw material prices for the year remains the plan and expects it to be offset, while continuing to target a ¥15 billion price adjustment and other cost actions.

Masakazu Negoro framed fiscal 2025 as a foundation-building year for global growth toward K27, with a focus on steadily improving profitability in stable businesses and reinvesting into growth areas. He said the company made “strong progress” in Q1, with sales growth and margin expansion, and emphasized that the transformation of the cosmetics business and global UV care growth are beginning to bear fruit. His tone was constructive but disciplined, acknowledging new tariff risks while stressing that the company can manage them.

The financial commentary highlighted that operating income improved materially because higher earning power absorbed raw material inflation and the cosmetics turnaround added profit. Management detailed that the GC business contributed ¥4.5 billion from improved earning power, another ¥1 billion from growth strategy volume, and ¥2 billion from ongoing structural reforms; companywide gross margin improved by 0.5 points to 38%. For the full year, management reiterated ¥160 billion operating income, expects more than ¥14 billion of earnings-power improvement, and plans to offset ¥10 billion of raw-material pressure through a ¥15 billion price adjustment and other cost-of-sales improvements. Tariff exposure is being managed through local sourcing, USMCA utilization, supply-chain changes, and selective pricing actions.

There was no live analyst Q&A in the transcript, but management addressed the main investor concerns proactively: tariff exposure, raw-material inflation, and the pace of the cosmetics recovery. On tariffs, it said the full-year operating-income hit should be no more than ¥2 billion, with the GC and chemicals businesses taking most of the mitigation actions. On the recovery side, it pointed to six focus brands at 125% of prior-year sales, direct e-commerce at 142%, China sellout at 101%, and a planned September briefing on the cosmetics business.