Unicharm Corporation

Second-quarter consolidated sales were JPY464.2 billion, down 4.8%, and core operating income was JPY57 billion, down 22%. Management said interim income attributable to owners rose mainly because of JPY5.3 billion of insurance income in India and related tax loss carryforward benefits. By geography, Japan posted net sales up 4.1% and core operating income up 2.9%; Asia posted net sales down 14.5% and core operating income down 69.4%; and the rest of the world posted net sales up 2.3%, core operating income up 12.7%, and core operating margin of 14.6%. For the full year, management revised guidance downward, citing slower-than-expected Asia recovery, China feminine care rumor-related impact, faster baby care market shrinkage, and trading down across Asia; they said the revised second-half plan is consolidated sales of JPY509.8 billion, up 1.7%, and operating income of JPY63 billion, down 3.7% versus the prior-year period. They also said the numbers do not factor in any compensation from the system trouble yet.

Takahisa Takahara framed the quarter as a mix of temporary setbacks and deliberate investment for future growth. He said the China feminine care rumor impact was transitory, that market share has bottomed and is rising, and that the company is investing ahead of revenue in online and e-commerce channels across China and Asia. He sounded confident that recovery is already visible in places like Vietnam and that the effects of the investments should become clearer from the third quarter onward.

Kazuya Kondo explained that the year-over-year decline in core operating income came from a JPY12.9 billion drop in gross profit and a JPY3.2 billion increase in SG&A. SG&A rose on logistics, sales promotion, DX-related spending, labor, R&D, system costs, and depreciation, with logistics up JPY900 million, sales promotion up JPY900 million, labor up JPY1.1 billion, R&D up JPY0.6 billion, system-related expense up JPY320 million, and depreciation up JPY900 million. He also said JPY5.3 billion of Indian insurance income and deferred tax loss usage reduced the apparent drop below operating income, and that the tax rate is currently around 26% versus a normal 27% to 28%. On capital returns, management raised the dividend payout target to 35% from 30%, expects an annual dividend of JPY18 per share, and plans an additional JPY10 billion of treasury stock buybacks on top of JPY12 billion already acquired in FY2025.

Analysts pressed management on whether the Asia recovery was real or just a temporary inventory and promotional effect, especially in China and Indonesia. Takahara replied that the best indicators are retailer deliveries and market share, which he said have bottomed and started to improve, while stressing that the China feminine care issue was reputational and transitory rather than structural. On the revised second-half outlook, management said the JPY63 billion operating income target is conservative and reflects a reset of Asia after one-time costs and delayed recovery, not a permanent weakening. Questions also focused on taxes and the gap between core operating income and net income; Kondo said the difference is driven by the JPY5.3 billion insurance gain in India and the associated tax benefit, and that next year tax rates should normalize.