Interim report
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Consolidated Financial Results for the Fiscal Year Ended December 31, 2025 [IFRS] February 5, 2026 Company name: Kao Corporation Tokyo Stock Exchange in Japan Stock code: 4452 (URL: www.kao.com/global/en/investor-relations/library/results/) Representative: Yoshihiro Hasebe, President and CEO Contact person: Yoshimasa Minegishi, Vice President, Financial Controllers, Global Telephone: +81-3-3660-7111 Scheduled date of the Annual General Meeting of Shareholders: March 26, 2026 Scheduled commencement date for dividend payments: March 27, 2026 Scheduled date to file annual securities report: March 25, 2026 Preparation of supplementary material on financial results: Yes Financial results information meeting: Yes (for institutional investors and analysts) (Amounts less than one million yen are rounded) 1. Consolidated financial results for the fiscal year ended December 31, 2025 (from January 1, 2025 to December 31, 2025) (1) Consolidated operating results (Percentages indicate year-on-year changes) Net sales Operating income Income before income taxes Net income Fiscal year ended Millions of yen ％ Millions of yen ％ Millions of yen ％ Millions of yen ％ December 31, 2025 1,688,633 3.7 164,069 11.9 169,846 12.5 120,586 9.3 December 31, 2024 1,628,448 6.3 146,644 144.3 151,024 136.6 110,374 139.1 Net income attributable to owners of the parent Comprehensive income Basic earnings per share Diluted earnings per share Fiscal year ended Millions of yen ％ Millions of yen ％ Yen Yen December 31, 2025 120,081 11.4 148,786 (7.2) 260.30 － December 31, 2024 107,767 145.7 160,377 89.9 231.94 － Ratio of net income to equity attributable to owners of the parent Ratio of income before income taxes to total assets Ratio of operating income to net sales Fiscal year ended ％ ％ ％ December 31, 2025 11.3 9.1 9.7 December 31, 2024 10.5 8.3 9.0 (Reference) Share of profit in investments accounted for using the equity method For the fiscal year ended December 31, 2025 : 3,406 million yen For the fiscal year ended December 31, 2024 : 3,482 million yen (2) Consolidated financial position Total assets Total equity Equity attributable to owners of the parent Ratio of equity attributable to owners of the parent to total assets Equity attributable to owners of the parent per share As of Millions of yen Millions of yen Millions of yen ％ Yen December 31, 2025 1,875,054 1,094,700 1,064,077 56.7 2,352.49 December 31, 2024 1,867,237 1,098,835 1,066,776 57.1 2,296.69
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(3) Consolidated cash flows Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Cash and cash equivalents at the end of the year Fiscal year ended Millions of yen Millions of yen Millions of yen Millions of yen December 31, 2025 199,680 (69,767) (175,134) 323,282 December 31, 2024 201,585 (45,902) (104,578) 357,713 2. Dividends Annual cash dividends per share Total dividend payment amount Payout ratio (Consolidated) Ratio of dividends to equity attributable to owners of the parent (Consolidated) 1st quarter -end 2nd quarter -end 3rd quarter -end Fiscal year -end Total Yen Yen Yen Yen Yen Millions of yen % % Fiscal year ended December 31, 2024 － 76.00 － 76.00 152.00 70,803 65.5 6.9 Fiscal year ended December 31, 2025 － 77.00 － 77.00 154.00 70,794 59.2 6.6 Fiscal year ending December 31, 2026 (Forecast) － 78.00 － 39.00 － － Note: At a meeting of the Board of Directors held on February 5, 2026, Kao Corporation (the “Company”) resolved to conduct a share split at a ratio of two shares for each share of ordinary share, with June 30, 2026, as the record date and July 1, 2026, as the effective date. The forecast year-end dividend per share for the fiscal year ending December 31, 2026, shown above is presented on a post–share split basis. The forecast of total annual cash dividends per share for the fiscal year ending December 31, 2026, has not been presented as the implementation of the s hare split makes a simple aggregation of the second quarter-end dividend and the year-end dividend impracticable. If the share split were not taken into account, the forecast year-end dividend per share for the fiscal year ending December 31, 2026, would be 78.00 yen, and total annual cash dividends per share would be 156.00 yen. 3. Forecast of consolidated operating results for the fiscal year ending December 31, 2026 (from January 1, 2026 to December 31, 2026) (Percentages indicate year-on-year changes) Net Sales Operating income Income before income taxes Net income attributable to owners of the parent Basic earnings per share Fiscal year ending Millions of yen ％ Millions of yen ％ Millions of yen ％ Millions of yen ％ Yen December 31, 2026 1,750,000 3.6 182,000 10.9 185,000 8.9 130,000 8.3 143.70 Note: Basic earnings per share shown above are presented on a post-share split basis, as described in “2. Dividends.” If the share split were not taken into account, basic earnings per share would be 287.41 yen. (Remainder of page intentionally left blank.)
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4. Others (1) Significant changes in the scope of consolidation during the period: None Newly included: － companies (Company name) － Excluded: － companies (Company name) － (2) Changes in accounting policies and changes in accounting estimates 1) Changes in accounting policies required by IFRS ： None 2) Changes in accounting policies due to reasons other than 1) ： None 3) Changes in accounting estimates ： None (3) Number of issued shares (ordinary shares) 1) Total number of issued shares at the end of the period (including treasury shares) As of December 31, 2025 453,600,000 shares As of December 31, 2024 465,900,000 shares 2) Number of treasury shares at the end of the period As of December 31, 2025 1,281,444 shares As of December 31, 2024 1,415,333 shares 3) Average number of shares outstanding during the period Fiscal year ended December 31, 2025 461,315,152 shares Fiscal year ended December 31, 2024 464,625,236 shares Financial results reports are exempt from audit conducted by certified public accountants or an audit firm. Explanation regarding the appropriate use of forecast of operating results and other special items (Caution regarding forward-looking statements, etc.) Forward-looking statements such as earnings forecasts and other projections contained in this release are based on information available at the time of disclosure and assumptions that management believes to be reasonable, and do not constitute guarantees of future performance. Actual results may differ materially from expectations due to various factors. Please refer to page 2 to 15 "1. Summary of Operating Results and Financial Position" for the suppositions that form the assumptions for earnings forecasts and cautions concerning the use of earnings forecasts. (Remainder of page intentionally left blank.)
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Contents of Attachments 1. Summary of Operating Results and Financial Position ………………………………………… 2 (1) Summary of Operating Results ………………………………………………………………… 2 (2) Summary of Financial Position…………………………………………………………………… 13 (3) Basic Policies regarding Distribution of Profits and Dividends for the Fiscal Years Ended December 31, 2025 and Ending December 31, 2026 …………………………… 15 2. Basic Approach to Selection of Accounting Standards ……………………………………… 15 3. Consolidated Financial Statements and Notes ………………………………………………… 16 (1) Consolidated Statement of Financial Position ……………………………………………… 16 (2) Consolidated Statement of Income …………………………………………………………… 18 (3) Consolidated Statement of Comprehensive Income ……………………………………… 19 (4) Consolidated Statement of Changes in Equity …………………………………………… 20 (5) Consolidated Statement of Cash Flows ……………………………………………………… 22 (6) Notes to Consolidated Financial Statements ……………………………………………… 23 (7) Note regarding Assumption of Going Concern …………………………………………… 28 - 1 - Fiscal Year Ended December 31, 2025
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1. Summary of Operating Results and Financial Position (1) Summary of Operating Results Note: Changes and comparisons are all with the previous year unless otherwise noted. Like-for-like growth rates below exclude the effect of translation of local currencies into Japanese yen. Growth by volume includes changes due to differences in product mix. Operating Results for the Fiscal Year Ended December 31, 2025 1) Trends in Overall Results for the Fiscal Year Ended December 31, 2025 (Billions of yen, except operating margin and per share amounts) 2025 2024 Gr owth Net sales 1,688.6 1,628.4 3.7% Like-for-like: 3.7% Operating income 164.1 146.6 11.9% Operating margin (%) 9.7 9.0 － Income before income taxes 169.8 151.0 12.5% Net income 120.6 110.4 9.3% Net income attributable to owners of the parent 120.1 107.8 11.4% Basic earnings per share (Yen) 260.30 231.94 12.2% In the global economy during fiscal 2025, as conditions remained uncertain due to international supply chain disruptions and rising procurement costs following changes in tariff policies, as well as protracted geopolitical risks, mainly in Europe and the Middle East, lifestyle-related consumption remained resilient despite rising prices in all regions. In the Japanese economy, despite signs of wage growth, the impact of high prices has restrained consumer sentiment, and domestic demand trended toward a gradual recovery. According to retail sales and consumer purchasing survey data, the Kao Group’s key markets of household and personal care products and cosmetics in Japan grew compared with the previous fiscal year. In this operating environment, the Kao Group worked to build a foundation for expanding global sales while improving its earning power to achieve profitable growth and successfully carry out its Mid-term Plan 2027 (“K27”). Net sales increased 3.7% compared with the previous fiscal year to 1,688.6 billion yen. Currency translation accounted for a 0.0% increase and net sales increased 3.7% on a like-for-like basis (breakdown of the increase: 0.5% increase by volume, 3.2% increase by price). Operating income was 164.1 billion yen, an increase of 17.4 billion yen compared with the previous fiscal year, and the operating margin was 9.7%. Income before income taxes was 169.8 billion yen, an increase of 18.8 billion yen, and net income was 120.6 billion yen, an increase of 10.2 billion yen. Basic earnings per share were 260.30 yen, an increase of 28.36 yen, or 12.2%, from 231.94 yen in the previous fiscal year. Return on invested capital (ROIC), which the Kao Group uses as a management metric, was 9.7% and Economic Value Added (EVA*) increased 7.9 billion yen compared with the previous fiscal year to 41.1 - 2 - Fiscal Year Ended December 31, 2025
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billion yen as net operating profit after tax (NOPAT) increased substantially. * EVA is a registered trademark of Stern Stewart & Co. To improve capital efficiency and further enhance shareholder returns, Kao Corporation (the “Company”) resolved at a meeting of its Board of Directors held on August 6, 2025, to repurchase its own shares, and subsequently repurchased shares for a total of 80.0 billion yen. The Company retired 12,300,000 treasury shares on December 26, 2025. The main exchange rates used for translating the financial statement items (income and expenses) of foreign subsidiaries and associates were as shown below. First quarter Jan. – Mar. Second quarter Apr. – Jun. Third quarter Jul. – Sep. Fourth quarter Oct. – Dec. U.S. dollar 152.65 (148.22) 144.49 (155.72) 147.41 (149.44) 154.04 (152.30) Euro 160.48 (160.99) 163.73 (167.68) 172.30 (164.04) 179.33 (162.55) Chinese yuan 20.98 ( 20.63) 19.98 ( 21.51) 20.59 ( 20.84) 21.73 ( 21.19) Note: Figures in parentheses represent the exchange rates for the previous fiscal year. 2) Trends by Segment during the Fiscal Year Summary of Segment Information A summary of the changes to reportable segments implemented during the three months ended March 31, 2025, is as follows. (Reference: 3. Consolidated Financial Statements and Notes, (6) Notes to Consolidated Financial Statements, 1. Segment Information on page 23.) 1. The “Consumer Products Business,” “Hygiene and Living Care Business,” and “Health and Beauty Care Business” have been renamed the “Global Consumer Care Business,” “Hygiene Living Care Business,” and “Health Beauty Care Business,” respectively. 2. The Business Connected Business has been newly established within the Global Consumer Care Business. This business consists of commercial-use hygiene products (excluding Washing Systems, LLC), life care products, and other products. 3. Washing Systems, LLC has been included in the Chemical Business. 4. Net sales and operating income for the previous fiscal year have been reclassified and restated to reflect the reorganization of segments outlined in items 1 to 3 above. (Remainder of page intentionally left blank.) - 3 - Fiscal Year Ended December 31, 2025
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Consolidated Results by Segment (Remainder of page intentionally left blank.) (Billions of yen) Operating margin (%) (Billions of yen) Operating margin (%) Fabric and Home Care Products 375.7 389.1 3.6 3.4 68.4 18.2 74.1 19.1 5.7 Sanitary Products 168.6 160.2 (5.0) (4.0) 7.3 4.4 7.1 4.5 (0.2) 544.3 549.3 0.9 1.1 75.8 13.9 81.3 14.8 5.5 424.0 432.9 2.1 2.2 34.4 8.1 39.1 9.0 4.7 244.1 261.6 7.2 6.9 (3.7) (1.5) 10.4 4.0 14.1 40.5 39.2 (3.2) (3.2) 5.2 12.9 2.3 5.8 (3.0) 1,252.8 1,283.0 2.4 2.5 111.7 8.9 133.1 10.4 21.3 421.3 451.5 7.2 6.9 35.7 8.5 30.2 6.7 (5.5) 1,674.1 1,734.5 3.6 3.6 147.5 - 163.3 - 15.8 (45.7) (45.8) - - (0.8) - 0.8 - 1.6 1,628.4 1,688.6 3.7 3.7 146.6 9.0 164.1 9.7 17.4 Hygiene Living Care Business Elimination and Reconciliation Consolidated Fiscal year ended December 31 Net sales Health Beauty Care Business Cosmetics Business Total Chemical Business Business Connected Business Global Consumer Care Business Operating income Change (Billions of yen) 2024 (Billions of yen) 2025 (Billions of yen) Growth (%) Like-for- like (%) 2024 2025 - 4 - Fiscal Year Ended December 31, 2025
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Consolidated Net Sales Composition Notes: 1. Figures for the Global Consumer Care Business present sales to external customers and figures for the Chemical Business include sales to the Global Consumer Care Business in addition to external customers. Sales by geographic region are classified based on the location of the sales recognized. 2. The percentage of sales outside Japan to total net sales was 42.9% compared with 43.3% in the previous fiscal year. Starting from the three months ended March 31, 2025, this percentage is disclosed based on the location where the sales were recognized. Figures for the previous fiscal year were recalculated using the same method. (Billions of yen) Japan Asia Americas Europe Consolidated 2024 327.9 44.3 3.5 - 375.7 2025 346.0 40.1 3.0 - 389.1 Growth (%) 5.5 (9.5) (12.4) - 3.6 Like-for-like (%) 5.5 (11.3) (9.3) - 3.4 2024 76.5 92.1 - - 168.6 2025 71.6 88.6 - - 160.2 Growth (%) (6.3) (3.8) - - (5.0) Like-for-like (%) (6.3) (2.1) - - (4.0) 2024 404.4 136.4 3.5 - 544.3 2025 417.6 128.6 3.0 - 549.3 Growth (%) 3.3 (5.7) (12.4) - 0.9 Like-for-like (%) 3.3 (5.1) (9.3) - 1.1 2024 212.1 36.7 112.5 62.7 424.0 2025 225.0 36.5 109.1 62.3 432.9 Growth (%) 6.1 (0.6) (3.1) (0.6) 2.1 Like-for-like (%) 6.1 (0.1) (1.4) (3.4) 2.2 2024 166.5 39.1 7.9 30.6 244.1 2025 177.0 45.3 7.7 31.5 261.6 Growth (%) 6.3 15.8 (1.9) 2.9 7.2 Like-for-like (%) 6.3 16.2 (1.0) (0.0) 6.9 2024 40.2 0.2 - - 40.5 2025 38.8 0.4 - - 39.2 Growth (%) (3.5) 47.4 - - (3.2) Like-for-like (%) (3.5) 47.7 - - (3.2) 2024 823.2 212.5 123.9 93.3 1,252.8 2025 858.5 210.8 119.9 93.8 1,283.0 Growth (%) 4.3 (0.8) (3.2) 0.6 2.4 Like-for-like (%) 4.3 (0.2) (1.6) (2.3) 2.5 2024 138.4 105.0 83.6 94.4 421.3 2025 144.6 120.8 86.9 99.3 451.5 Growth (%) 4.5 15.1 3.9 5.2 7.2 Like-for-like (%) 4.5 14.2 6.7 2.3 6.9 2024 (38.6) (3.7) (0.1) (3.2) (45.7) 2025 (39.7) (3.2) (0.2) (2.7) (45.8) 2024 923.0 313.7 207.3 184.5 1,628.4 2025 963.4 328.3 206.5 190.4 1,688.6 Growth (%) 4.4 4.7 (0.4) 3.2 3.7 Like-for-like (%) 4.4 4.8 1.7 0.3 3.7 Elimination of intersegment Consolidated Fiscal year ended December 31 Fabric and Home Care Products Sanitary Products Hygiene Living Care Business Health Beauty Care Business Cosmetics Business Business Connected Business Global Consumer Care Business Chemical Business - 5 - Fiscal Year Ended December 31, 2025
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Analysis of Change in Net Sales Compared with the Previous Fiscal Year Note: Chemical Business sales include intersegment transactions. Global Consumer Care Business Sales increased 2.4% compared with the previous fiscal year to 1,283.0 billion yen. Currency translation accounted for a 0.0% decrease and sales increased 2.5% on a like-for-like basis (breakdown of the increase: 1.7% increase by volume, 0.8% increase by price). Globally, while an ongoing consumer orientation toward low prices was apparent, demand for products that offer practicality and high added value remained firm. Similarly, amid growing polarization in consumer behavior in Japan, the impact of rising prices continued, despite signs of a moderate upturn in personal consumption, which had been declining. Under these circumstances, the Kao Group continued working to build a foundation for expanding global sales while improving its earning power to achieve profitable growth by offering high-value-added products and increasing selling prices to reflect that added value, among other measures. As a result, sales in Japan increased 4.3% to 858.5 billion yen. In Asia, sales decreased 0.8% to 210.8 billion yen. On a like-for-like basis, sales decreased 0.2%. In the Americas, sales decreased 3.2% to 119.9 billion yen. On a like-for-like basis, sales decreased 1.6%. In Europe, sales increased 0.6% to 93.8 billion yen. On a like-for-like basis, sales decreased 2.3%. Operating income was 133.1 billion yen, an increase of 21.3 billion yen compared with the previous fiscal year, due to increased sales volume and improvement in earning power amid the impact of rising raw material prices. Note: The Kao Group’s Global Consumer Care Business consists of the Hygiene Living Care Business, the Health Beauty Care Business, the Cosmetics Business, and the Business Connected Business. By Volume (%) By Price (%) Fabric and Home Care Products 3.6 0.2 3.4 1.4 2.0 Sanitary Products (5.0) ( 1.0) (4.0) (3.0) (1.1) 0.9 (0.2) 1.1 0.1 1.0 2.1 (0.1) 2.2 2.0 0.2 7.2 0.3 6.9 5.9 1.0 (3.2) (0.0) (3.2) (4.6) 1.4 2.4 (0.0) 2.5 1.7 0.8 7.2 0.3 6.9 (3.2) 10.1 3.7 0.0 3.7 0.5 3.2 Global Consumer Care Business Chemical Business Total Change (%) Currency Translation (%) Like-for-Like (%) Hygiene Living Care Business Health Beauty Care Business Cosmetics Business Business Connected Business - 6 - Fiscal Year Ended December 31, 2025
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Hygiene Living Care Business Sales increased 0.9% compared with the previous fiscal year to 549.3 billion yen. Currency translation accounted for a 0.2% decrease and sales increased 1.1% on a like-for-like basis (breakdown of the increase: 0.1% increase by volume, 1.0% increase by price). However, if the impact of the transfer of the pet care business conducted in June 2024 is also excluded, sales increased 1.6% on a like-for-like basis. Sales of fabric and home care products increased 3.6% to 389.1 billion yen. Currency translation accounted for a 0.2% increase and sales increased 3.4% on a like-for-like basis (breakdown of the increase: 1.4% increase by volume, 2.0% increase by price). Sales of fabric care products increased. In Japan, improved products in the Attack Antibacterial EX series of laundry detergents, among other products, contributed to increased sales and market share expansion, due in part to market growth and the effect of price increases along with the promotion of high-value-added products. Fabric softeners performed as planned. Sales of home care products increased. In Japan, dishwashing detergents, kitchen cleaning products, and other products sold strongly, with steady performance by Quickle Wash Basin Cleaner, sales of which resumed in November 2025. Operating income for fabric and home care products increased 5.7 billion yen to 74.1 billion yen. Sales of sanitary products decreased 5.0% to 160.2 billion yen. Currency translation accounted for a 1.0% decrease and sales decreased 4.0% on a like-for-like basis (breakdown of the decrease: 3.0% decrease by volume, 1.1% decrease by price). However, if the impact of the transfer of the pet care business conducted in June 2024 is also excluded, sales decreased 2.4% on a like-for-like basis. Sales of Laurier sanitary napkins increased. In China, loyalty marketing initiatives proved effective, resulting in strong sales performance for Super Slim Guard and other products. Sales of Merries baby diapers decreased due to aggressive competition in Asia and other factors. Operating income for sanitary products was 7.1 billion yen, a decrease of 0.2 billion yen. However, excluding the impact of the transfer of the pet care business conducted in June 2024, operating income increased 4.1 billion yen. Operating income for the Hygiene Living Care Business was 81.3 billion yen, an increase of 5.5 billion yen from the previous fiscal year. However, if the impact of the transfer of the pet care business conducted in June 2024 is also excluded, operating income increased 9.8 billion yen. Health Beauty Care Business Sales increased 2.1% compared with the previous fiscal year to 432.9 billion yen. Currency translation accounted for a 0.1% decrease and sales increased 2.2% on a like-for-like basis (breakdown of the increase: 2.0% increase by volume, 0.2% increase by price). Sales of skin care products increased. In Japan, sales increased due to strong performance by UV care products and seasonal sheet-type products. In the Americas, sales decreased. Despite a ramped-up rollout of Bioré UV Aqua Rich and strong performance by new JERGENS products, sales were impacted by aggressive competition. - 7 - Fiscal Year Ended December 31, 2025
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Sales of hair care products increased substantially. In Japan, high premium hair care brands melt and THE ANSWER, which were launched in 2024, contributed significantly to increased sales. Sales of products for hair salons in the Americas and Europe decreased. Although the ORIBE brand for high-end hair salons sold strongly, primarily through e-commerce, the GOLDWELL brand was impacted by factors including worsening business sentiment in the United States and Europe. Sales of personal health products increased. Sales of PureOra Carbonic Acid Toothpaste remained strong in Japan and sales of improved MegRhythm eye masks grew in Japan and China. Operating income increased 4.7 billion yen compared with the previous fiscal year to 39.1 billion yen. However, excluding the impact of structural reform expenses at subsidiaries in the Americas and Europe in the previous fiscal year, operating income increased 1.3 billion yen. Cosmetics Business Sales increased 7.2% compared with the previous fiscal year to 261.6 billion yen. Currency translation accounted for a 0.3% increase and sales increased 6.9% on a like-for-like basis (breakdown of the increase: 5.9% increase by volume, 1.0% increase by price). Sales in Japan increased. Contributors to increased sales among the Kao Group’s six focus brands included Curél derma care and KANEBO prestige skin care and makeup, which continued to perform well, SOFINA skin care, which benefitted from the substantial contribution of SOFINA iP and other new products, and the SENSAI luxury brand, which captured inbound demand. Other brands also sold steadily. Sales in Asia increased substantially. In China, sales increased substantially, driven by expanded local production and enhanced competitiveness resulting from effective communication of product value, as well as the absence of the restrictions on shipments implemented by the Kao Group in the previous fiscal year to optimize distribution inventory. In Thailand, where the Kao Group is focusing its efforts, the progress of KANEBO and the KATE makeup brand exceeded the plan. In Europe, SENSAI sold strongly, and the Kao Group stepped up its rollout of Curél. Operating income was 10.4 billion yen, an increase of 14.1 billion yen compared with the previous fiscal year due to the substantial contribution to improved profits from concentrated investment in the six focus brands, enhanced earning power, and business streamlining. Business Connected Business Sales decreased 3.2% compared with the previous fiscal year to 39.2 billion yen. Currency translation accounted for a 0.0% decrease and sales decreased 3.2% on a like-for-like basis (breakdown of the decrease: 4.6% decrease by volume, 1.4% increase by price.) However, if the impact of the transfer of the beverage business conducted in August 2024 is also excluded, sales increased 1.5% on a like-for-like basis. Sales of commercial-us e hygiene products increased. Although growth of products for the medical and nursing sectors remained unchanged from the previous fiscal year due to the impact of price competition, demand continued to rise for kitchen cleaning agents and guest room amenities in the food service, lodging, and leisure sectors due to firm market conditions. - 8 - Fiscal Year Ended December 31, 2025
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Operating income decreased 3.0 billion yen compared with the previous fiscal year to 2.3 billion yen. However, excluding the impact of the transfer of the beverage business conducted in August 2024, operating income increased 3.4 billion yen. Chemical Business Sales increased 7.2% compared with the previous fiscal year to 451.5 billion yen. Currency translation accounted for a 0.3% increase and sales increased 6.9% on a like-for-like basis (breakdown of the increase: 3.2% decrease by volume, 10.1% increase by price). In oleo chemicals, although differences in demand emerged in each region, sales increased due to the substantial contribution from selling price adjustments implemented in response to rising prices for fat and oil raw materials. In performance chemicals, despite a slump in the automobile-related sector and other target markets, sales were on par with the previous fiscal year, due in part to the contribution from the effects of selling price adjustments. In information materials, sales grew as a result of steadily capturing ongoing firm demand in the semiconductor-related, hard disk, and other target sectors. Operating income decreased 5.5 billion yen compared with the previous fiscal year to 30.2 billion yen due to the impact of fluctuations in raw material prices, among other factors, in addition to a decline in demand in some target sectors. (Remainder of page intentionally left blank.) - 9 - Fiscal Year Ended December 31, 2025
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Forecast for the Fiscal Year Ending December 31, 2026 (Billions of yen, except operating margin and per share amounts) 2026 2025 Growth Net sales 1,750.0 1,688.6 3.6% Like-for-like: 3.2% Operating income 182.0 164.1 10.9% Operating margin (%) 10.4 9.7 － Income before income taxes 185.0 169.8 8.9% Net income attributable to owners of the parent 130.0 120.1 8.3% Basic earnings per share (Yen) 143.70 260.30 － Note: In this table and hereafter, like-for-like growth rates exclude changes due to the effect of currency translation of local currencies into Japanese yen. The forecast of basic earnings per share for the fiscal year ending December 31, 2026, is presented after taking a share split* into account. If the share split were not taken into account, basic earnings per share would be 287.41 yen. * At a meeting of the Board of Directors held on February 5, 2026, the Company resolved to conduct a share split at a ratio of two shares for each share of ordinary share, with June 30, 2026, as the record date and July 1, 2026, as the effective date. 1) Forecast of Overall Business Results for the Fiscal Year Ending December 31, 2026 In the global economy, the business environment is expected to remain uncertain due to the impact of currency translation and tariffs, ongoing geopolitical risks, and factors such as the difficulty in forecasting household purchasing power, consumer sentiment, and the demand outlook amid changing price trends in each country. Working toward the steady achievement of its Mid-term Plan 2027 (“K27”), the Kao Group will further strengthen its earning power from the perspective of return on invested capital (ROIC) and accelerate the deployment of its Global Sharp Top Strategy, expanding priority businesses and steadily addressing businesses facing challenges, with the aim of profitable growth. In light of these circumstances, the Kao Group forecasts the following business results for the fiscal year ending December 31, 2026. The Kao Group forecasts a 3.6% year-on-year increase in net sales to 1,750.0 billion yen (a 3.2% increase on a like-for-like basis), a 10.9% increase in operating income to 182.0 billion yen, an operating margin of 10.4%, an 8.9% increase in income before income taxes to 185.0 billion yen, an 8.3% increase in net income attributable to owners of the parent to 130.0 billion yen, and basic earnings per share of 143.70 yen. If the share split were not taken into account, basic earnings per share would be 287.41 yen. The Kao Group expects to improve ROIC from the 9.7% it achieved in fiscal 2025 to 10.5%. It intends to increase Economic Value Added (EVA) from the 41.1 billion yen it achieved in fiscal 2025 to 51.0 billion yen by making full use of its assets to manage invested capital more efficiently, together with an increase in net operating profit after tax (NOPAT). - 10 - Fiscal Year Ended December 31, 2025
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2) Forecast by Segment for the Fiscal Year Ending December 31, 2026 The Hygiene Living Care Business provides fabric care, home care, and sanitary products that support people’s daily lives and society and help make lifestyles more comfortable. By reducing the burden of housework, fabric and home care products create living spaces where everyone can live with peace of mind. In tune with each stage of life, sanitary products and services help people lead their daily lives in their own unique style and in comfort. This business will establish a more stable revenue structure by enhancing its brand power through high- added-value product offerings and increased customer loyalty, as well as by reforming costs and promoting co-creation with external parties from the perspective of ROIC. As a result of the above measures, the Kao Group forecasts that sales in this business will increase 1.1% year on year on a like-for-like basis to 557.0 billion yen. The Health Beauty Care Business provides skin care, hair care, and personal health products offering value unique to Kao with a comprehensive understanding of the entire human body, under the theme of contributing to health, beauty, cleanliness, and hygiene. This business will accelerate growth by promoting high-value-added products and by making concentrated investments in strategic brands. By transitioning to an organizational structure that integrates operations in Japan, Asia, the Americas, and Europe, the business will step up manufacturing to strengthen its global rollout and marketing innovations through digital transformation (DX), with the aim of expanding business globally. As a result of the above measures, the Kao Group forecasts that sales in this business will increase 6.3% year on year on a like-for-like basis to 461.5 billion yen. The Cosmetics Business contributes to a lifestyle and culture of joy and the realization of a society in which people around the world can shine by providing “hope” and “Kirei”* to consumers through solid science and abundant sensitivity attuned to each person’s beauty and individuality. * The Japanese word Kirei describes something that is clean, well-ordered, and beautiful all at once. For Kao, this concept of Kirei not only describes appearance, but also attitude—a desire to create beauty for oneself, for other people, and for the natural world around us. At Kao, Kirei is the value we want to bring to everyday life through our brands, products, technologies, solutions, and services—now and in the future. By fully leveraging its in-depth, wide-ranging fundamental research and proprietary technologies development capabilities, this business will roll out its six focus brands in each country, while enhancing profitability through a strategy of using its technological assets across categories and the full application of digital technologies to better ensure its sustainable growth. As a result of the above measures, the Kao Group forecasts that sales in this business will increase 3.9% year on year on a like-for-like basis to 271.5 billion yen. - 11 - Fiscal Year Ended December 31, 2025
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The Business Connected Business will work to improve the productivity of global business activities by utilizing the Kao Group’s marketing platform to foster lateral coordination among its businesses, sales, and related functions, primarily in the field of consumer care. It also works to strengthen external collaboration to create new businesses that meet market and consumer needs. Commercial-use hygiene products will support people’s cleanliness, safety, and comfort by providing products that utilize cleaning, antibacterial, disinfecting, deodorizing, and other technologies, as well as services that deploy Kao’s comprehensive capabilities, to meet the needs of business operators and users in the food service, lodging, leisure, and nursing-related sectors. As a result of the above measures, the Kao Group forecasts that sales in this business will increase 3.7% year on year on a like-for-like basis to 40.5 billion yen. The Chemical Business will work to resolve environmental and social issues through co-creation that brings together Kao’s diverse strengths with those of its customers and partners to generate new value for industry and positive social impact. The business will also contribute to decarbonization among customers, industry, and society, and the transition to a circular economy, by committing more deeply to sustainable materials and offering new eco-solutions, while pursuing a transformation into a high value- added enterprise based on its proprietary technologies for semiconductor chemicals, inkjet inks, asphalt additives, and other products. As a result of the above measures, the Kao Group forecasts that sales in this business will in crease 2.2% year on year on a like-for-like basis to 466.0 billion yen. 3) Underlying Assumptions of the Forecast for the Fiscal Year Ending December 31, 2026 The above forecast was made assuming translation rates of one U.S. dollar to 150 yen, one euro to 175 yen, and one Chinese yuan to 21.0 yen. Please note that there is potential for volatility in prices of natural fats and oils and petrochemicals. Assumptions for prices are based on information currently available to the Kao Group. (Remainder of page intentionally left blank.) - 12 - Fiscal Year Ended December 31, 2025
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(2) Summary of Financial Position 1) Summary of Assets, Liabilities, Equity and Cash Flows for the Fiscal Year Ended December 31, 2025 Note: Negative numbers are shown in parentheses. Consolidated Financial Position (Billions of yen, except per share amounts) December 31, 2024 December 31, 2025 Incr./(Dcr.) Total assets 1,867.2 1,875.1 7.8 Total liabilities 768.4 780.4 12.0 Total equity 1,098.8 1,094.7 (4.1) Ratio of equity attributable to owners of the parent to total assets 57.1% 56.7% － Equity attributable to owners of the parent per share (Yen) 2,296.69 2,352.49 55.80 Bonds and borrowings 131.1 131.7 0.6 Total assets increased 7.8 billion yen from December 31, 2024, to 1,875.1 billion yen as of December 31, 2025. The principal increases in assets were a 19.8 billion yen increase in property, plant and equipment and a 17.7 billion yen increase in inventories. The principal decrease in assets was a 34.4 billion yen decrease in cash and cash equivalents. Total liabilities increased 12.0 billion yen from December 31, 2024, to 780.4 billion yen. The principal increases in liabilities were a 12.1 billion yen increase in trade and other payables and a 10.8 billion yen increase in income tax payables. Total equity decreased 4.1 billion yen from December 31, 2024, to 1,094.7 billion yen. The principal increases in equity were net income totaling 120.6 billion yen and exchange differences on translation of foreign operations totaling 26.5 billion yen. The principal decreases in equity were purchases of treasury shares for a total of 80.0 billion yen pursuant to a resolution of the Board of Directors at a meeting held on August 6, 2025, and dividends totaling 72.7 billion yen. In addition, the Company retired 12,300,000 treasury shares on December 26, 2025. The ratio of equity attributable to owners of the parent to total assets was 56.7% compared with 57.1% at December 31, 2024. Return on equity (ROE) was 11.3%. Consolidated Cash Flows (Billions of yen) 2024 2025 Incr./(Dcr.) Net cash flows from operating activities 201.6 199.7 (1.9) Net cash flows from investing activities (45.9) (69.8) (23.9) Free cash flows 155.7 129.9 (25.8) Net cash flows from financing activities (104.6) (175.1) (70.6) Net cash flows from operating activities totaled 199.7 billion yen. The principal increases in net cash were income before income taxes of 169.8 billion yen and depreciation and amortization of 85.8 billion yen. The principal decreases in net cash were 31.0 billion yen in income taxes paid and a 10.1 billion yen increase in inventories. Net cash flows from investing activities totaled negative 69.8 billion yen. This mainly consisted of 61.2 - 13 - Fiscal Year Ended December 31, 2025
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billion yen for purchase of property, plant and equipment. Free cash flow, which is the total of net cash flows from operating activities and net cash flows from investing activities, was 129.9 billion yen. Net cash flows from financing activities totaled negative 175.1 billion yen. The Company emphasizes steady and continuous dividends and flexibly repurchases and retires treasury shares to improve capital efficiency from the perspective of EVA and ROIC. During fiscal 2025, this primarily consisted of purchases of treasury shares for a total of 80.0 billion yen pursuant to a resolution of the Board of Directors at a meeting held on August 6, 2025, 72.8 billion yen for dividends paid to owners of the parent and non- controlling interests, and 22.3 billion yen in repayments of lease liabilities. The balance of cash and cash equivalents at December 31, 2025 decreased 34.4 billion yen compared with December 31, 2024 to 323.3 billion yen, including the effect of exchange rate changes. 2) Forecast of Assets, Liabilities, Equity and Cash Flows for the Fiscal Year Ending December 31, 2026 Net cash flows from operating activities are forecast to be approximately 230.0 billion yen, due in part to an increase in income. Net cash flows from investing activities are forecast to be approximately 70.0 billion yen due to scheduled investments for further growth encompassing enhancement and rationalization of production capacity, greater distribution efficiency, and other purposes. In net cash flows from financing activities, the Kao Group expects to pay cash dividends, among other expenditures. As a result of the above, the balance of cash and cash equivalents as of December 31, 2026 is forecast to be approximately 370.0 billion yen, an increase of approximately 50.0 billion yen from a year earlier. (Remainder of page intentionally left blank.) - 14 - Fiscal Year Ended December 31, 2025
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(3) Basic Policies regarding Distribution of Profits and Dividends for the Fiscal Years Ended December 31, 2025 and Ending December 31, 2026 The Kao Group uses Economic Value Added (EVA) and return on invested capital (ROIC) as its principal management metrics and clearly determines the uses of its steadily generated cash flow as shown below from that viewpoint. Shareholder returns are one such use, and they are implemented after considering future demand for funds and the situation in financial markets. Use of cash flow: ■ Capital expenditures for future growth1 ■ Strategic investments2 including M&A (also including share repurchases) ■ Steady and continuous dividend increases 1. Investments that contribute to enhancing future competitiveness, such as investments for maintaining and strengthening the business foundation (including maintenance capital expenditures), capacity expansion, and DX. Includes expenditures for repayment of lease liabilities. 2. Measures aimed at strengthening and transforming the business portfolio as well as capturing discontinuous growth opportunities. In accordance with these policies, the Company plans to pay a year-end dividend for fiscal 2025 of 77.00 yen per share, an increase of 1 yen per share compared with the previous fiscal year. Consequently, annual cash dividends will increase 2 yen per share compared with the previous fiscal year, resulting in a total of 154 yen per share. The consolidated payout ratio will be 59.2%. For fiscal 2026, in accordance with its basic policies regarding distribution of profits, the Company plans to pay a second quarter-end dividend of 78 yen per share and a year-end dividend of 39 yen per share (on a post-share split basis3). On a pre-share split basis, total cash dividends for the year would be 156 yen per share (a 54.3% payout ratio), an increase of 2 yen per share compared with the previous fiscal year. As a result, the Company is aiming for its 37th consecutive fiscal year of increases in dividends. 3. The Company resolved at a meeting of its Board of Directors held on February 5, 2026, to conduct a share split at a ratio of two shares for each ordinary share, with June 30, 2026, as the record date and July 1, 2026, as the effective date. 2. Basic Approach to Selection of Accounting Standards Having decided that unifying accounting standards within the Kao Group will contribute to improving the quality of its business management, the Kao Group voluntarily adopted International Financial Reporting Standards (IFRS) from fiscal 2016. This enables management based on standardized procedures and information for each Group company and business, and the Kao Group intends to reinforce its management foundation in order to enhance its corporate value as a global company. The Kao Group also believes that the application of IFRS facilitates the international comparability of its financial statements in capital markets. - 15 - Fiscal Year Ended December 31, 2025
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3. Consolidated Financial Statements and Notes (1) Consolidated Statement of Financial Position Kao Corporation and Consolidated Subsidiaries As of December 31, 2025 (Millions of yen) 2024 2025 Change Assets Current assets Cash and cash equivalents 357,713 323,282 (34,431) Trade and other receivables 238,077 245,286 7,209 Inventories 274,628 292,366 17,738 Other financial assets 10,525 10,925 400 Income tax receivables 5,467 5,469 2 Other current assets 26,053 26,906 853 Subtotal 912,463 904,234 (8,229) Non-current assets held for sale 1,562 1,658 96 Total current assets 914,025 905,892 (8,133) Non-current assets Property, plant and equipment 423,251 443,080 19,829 Right-of-use assets 116,637 113,218 (3,419) Goodwill 228,413 231,071 2,658 Intangible assets 81,947 79,471 (2,476) Investments accounted for using the equity method 14,526 15,616 1,090 Other financial assets 28,132 29,639 1,507 Deferred tax assets 49,044 43,303 (5,741) Other non-current assets 11,262 13,764 2,502 Total non-current assets 953,212 969,162 15,950 Total assets 1,867,237 1,875,054 7,817 - 16 - Fiscal Year Ended December 31, 2025
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(Millions of yen) 2024 2025 Change Liabilities and equity Liabilities Current liabilities Trade and other payables 258,035 270,149 12,114 Bonds and borrowings 35,749 26,059 (9,690) Lease liabilities 20,146 20,878 732 Other financial liabilities 7,280 7,623 343 Income tax payables 20,984 31,824 10,840 Provisions 2,773 1,362 (1,411) Contract liabilities 43,878 43,342 (536) Other current liabilities 120,755 116,958 (3,797) Total current liabilities 509,600 518,195 8,595 Non-current liabilities Bonds and borrowings 95,310 105,599 10,289 Lease liabilities 94,123 90,606 (3,517) Other financial liabilities 6,370 6,543 173 Retirement benefit liabilities 39,460 36,686 (2,774) Provisions 8,223 6,934 (1,289) Deferred tax liabilities 9,754 10,829 1,075 Other non-current liabilities 5,562 4,962 (600) Total non-current liabilities 258,802 262,159 3,357 Total liabilities 768,402 780,354 11,952 Equity Share capital 85,424 85,424 － Capital surplus 106,256 106,398 142 Treasury shares (5,924) (5,125) 799 Other components of equity 132,239 160,759 28,520 Retained earnings 748,781 716,621 (32,160) Equity attributable to owners of the parent 1,066,776 1,064,077 (2,699) Non-controlling interests 32,059 30,623 (1,436) Total equity 1,098,835 1,094,700 (4,135) Total liabilities and equity 1,867,237 1,875,054 7,817 - 17 - Fiscal Year Ended December 31, 2025
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(2) Consolidated Statement of Income Kao Corporation and Consolidated Subsidiaries Fiscal year ended December 31, 2025 (Millions of yen) 2024 2025 Change Notes Net sales 1 1,628,448 1,688,633 60,185 Cost of sales (990,044) (1,020,464) (30,420) Gross profit 638,404 668,169 29,765 Selling, general and administrative expenses 2 (498,140) (505,133) (6,993) Other operating income 30,354 18,870 (11,484) Other operating expenses (23,974) (17,837) 6,137 Operating income 1 146,644 164,069 17,425 Financial income 4,988 6,198 1,210 Financial expenses (4,090) (3,827) 263 Share of profit in investments accounted for using the equity method 3,482 3,406 (76) Income before income taxes 151,024 169,846 18,822 Income taxes (40,650) (49,260) (8,610) Net income 110,374 120,586 10,212 Attributable to: Owners of the parent 107,767 120,081 12,314 Non-controlling interests 2,607 505 (2,102) Net income 110,374 120,586 10,212 Earnings per share Basic (Yen) 3 231.94 260.30 Diluted (Yen) 3 － － - 18 - Fiscal Year Ended December 31, 2025
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(3) Consolidated Statement of Comprehensive Income Kao Corporation and Consolidated Subsidiaries Fiscal year ended December 31, 2025 (Millions of yen) 2024 2025 Change Net income 110,374 120,586 10,212 Other comprehensive income Items that will not be reclassified to profit or loss: Net gain (loss) on revaluation of financial assets measured at fair value through other comprehensive income 1,334 1,287 (47) Remeasurements of defined benefit plans (936) (917) 19 Share of other comprehensive income of investments accounted for using the equity method 430 1,322 892 Total of items that will not be reclassified to profit or loss 828 1,692 864 Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations 48,601 26,522 (22,079) Share of other comprehensive income of investments accounted for using the equity method 574 (14) (588) Total of items that may be reclassified subsequently to profit or loss 49,175 26,508 (22,667) Other comprehensive income, net of taxes 50,003 28,200 (21,803) Comprehensive income 160,377 148,786 (11,591) Attributable to: Owners of the parent 155,475 147,930 (7,545) Non-controlling interests 4,902 856 (4,046) Comprehensive income 160,377 148,786 (11,591) - 19 - Fiscal Year Ended December 31, 2025
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(4) Consolidated Statement of Changes in Equity Kao Corporation and Consolidated Subsidiaries Fiscal year ended December 31, 2024 (Millions of yen) Equity attributable to owners of the parent Share capital Capital surplus Treasury shares Other components of equity Exchange differences on translation of foreign operations Net gain (loss) on derivatives designated as cash flow hedges Net gain (loss) on revaluation of financial assets measured at fair value through other com- prehensive income January 1, 2024 85,424 105,780 (3,267) 77,448 10 6,461 Net income － － － － － － Other comprehensive income － － － 46,873 (4) 1,780 Comprehensive income － － － 46,873 (4) 1,780 Disposal of treasury shares － (182) 189 － － － Purchase of treasury shares － － (2,846) － － － Share-based payment transactions － 653 － － － － Dividends － － － － － － Changes in the ownership interest in subsidiaries － 5 － － － － Transfer from other components of equity to retained earnings － － － － － (329) Total transactions with the owners － 476 (2,657) － － (329) December 31, 2024 85,424 106,256 (5,924) 124,321 6 7,912 Equity attributable to owners of the parent Non- controlling interests Total equity Other components of equity Retained earnings Total Remeasure- ments of defined benefit plans Total January 1, 2024 － 83,919 711,802 983,658 28,385 1,012,043 Net income － － 107,767 107,767 2,607 110,374 Other comprehensive income (941) 47,708 － 47,708 2,295 50,003 Comprehensive income (941) 47,708 107,767 155,475 4,902 160,377 Disposal of treasury shares － － (7) 0 － 0 Purchase of treasury shares － － － (2,846) － (2,846) Share-based payment transactions － － － 653 － 653 Dividends － － (70,169) (70,169) (1,207) (71,376) Changes in the ownership interest in subsidiaries － － － 5 (21) (16) Transfer from other components of equity to retained earnings 941 612 (612) － － － Total transactions with the owners 941 612 (70,788) (72,357) (1,228) (73,585) December 31, 2024 － 132,239 748,781 1,066,776 32,059 1,098,835 - 20 - Fiscal Year Ended December 31, 2025
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Fiscal year ended December 31, 2025 (Millions of yen) Equity attributable to owners of the parent Share capital Capital surplus Treasury shares Other components of equity Exchange differences on translation of foreign operations Net gain (loss) on derivatives designated as cash flow hedges Net gain (loss) on revaluation of financial assets measured at fair value through other com- prehensive income January 1, 2025 85,424 106,256 (5,924) 124,321 6 7,912 Net income － － － － － － Other comprehensive income － － － 26,182 (0) 2,610 Comprehensive income － － － 26,182 (0) 2,610 Disposal of treasury shares － (319) 80,817 － － － Purchase of treasury shares － (40) (80,018) － － － Share-based payment transactions － 633 － － － － Dividends － － － － － － Changes in the ownership interest in subsidiaries － (132) － － － － Transfer from other components of equity to retained earnings － － － － － (272) Total transactions with the owners － 142 799 － － (272) December 31, 2025 85,424 106,398 (5,125) 150,503 6 10,250 Equity attributable to owners of the parent Non- controlling interests Total equity Other components of equity Retained earnings Total Remeasure- ments of defined benefit plans Total January 1, 2025 － 132,239 748,781 1,066,776 32,059 1,098,835 Net income － － 120,081 120,081 505 120,586 Other comprehensive income (943) 27,849 － 27,849 351 28,200 Comprehensive income (943) 27,849 120,081 147,930 856 148,786 Disposal of treasury shares － － (80,497) 1 － 1 Purchase of treasury shares － － － (80,058) － (80,058) Share-based payment transactions － － － 633 － 633 Dividends － － (71,073) (71,073) (1,663) (72,736) Changes in the ownership interest in subsidiaries － － － (132) (629) (761) Transfer from other components of equity to retained earnings 943 671 (671) － － － Total transactions with the owners 943 671 (152,241) (150,629) (2,292) (152,921) December 31, 2025 － 160,759 716,621 1,064,077 30,623 1,094,700 - 21 - Fiscal Year Ended December 31, 2025
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(5) Consolidated Statement of Cash Flows Kao Corporation and Consolidated Subsidiaries Fiscal year ended December 31, 2025 (Millions of yen) 2024 2025 Cash flows from operating activities Income before income taxes 151,024 169,846 Depreciation and amortization 88,422 85,841 Gain on transfer of business (10,590) － Interest and dividend income (4,678) (3,508) Interest expense 2,729 2,714 Share of profit in investments accounted for using the equity method (3,482) (3,406) (Gains) losses on sale and disposal of property, plant and equipment, and intangible assets 2,361 3,257 (Increase) decrease in trade and other receivables 1,184 4,009 (Increase) decrease in inventories (1,414) (10,084) Increase (decrease) in trade and other payables 10,991 (1,395) Increase (decrease) in retirement benefit liabilities (1,793) (4,171) Increase (decrease) in provisions (12,293) (2,414) Other 2,603 (14,104) Subtotal 225,064 226,585 Interest received 4,428 3,286 Dividends received 2,343 3,469 Interest paid (2,622) (2,637) Income taxes paid (27,628) (31,023) Net cash flows from operating activities 201,585 199,680 Cash flows from investing activities Payments into time deposits (16,977) (13,573) Proceeds from withdrawal of time deposits 13,554 13,267 Purchase of property, plant and equipment (57,404) (61,214) Proceeds from sale of property, plant and equipment 9,827 1,557 Purchase of intangible assets (10,072) (9,631) Proceeds from transfer of business 11,783 － Other 3,387 (173) Net cash flows from investing activities (45,902) (69,767) Cash flows from financing activities Increase (decrease) in short-term borrowings (14,299) 90 Proceeds from long-term borrowings 10,000 10,562 Repayments of long-term borrowings (4,375) (10,023) Proceeds from issuance of bonds － 24,939 Redemption of bonds (12) (24,951) Repayments of lease liabilities (21,637) (22,281) Purchase of treasury shares (2,846) (80,053) Dividends paid to owners of the parent (70,246) (71,149) Dividends paid to non-controlling interests (1,227) (1,676) Other 64 (592) Net cash flows from financing activities (104,578) (175,134) Net increase (decrease) in cash and cash equivalents 51,105 (45,221) Cash and cash equivalents at the beginning of the year 291,663 357,713 Effect of exchange rate changes on cash and cash equivalents 14,945 10,790 Cash and cash equivalents at the end of the year 357,713 323,282 - 22 - Fiscal Year Ended December 31, 2025
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(6) Notes to Consolidated Financial Statements 1. Segment Information (1) Summary of Reportable Segments The Kao Group’s reportable segments are the components of the Kao Group for which discrete financial information is available and are regularly reviewed by the Board of Directors in deciding how to allocate resources and in assessing their performance. Net sales and operating income are the key measures used by the Board of Directors to evaluate the performance of each segment. The Kao Group is organized on the basis of five businesses: the four business areas that constitute the Global Consumer Care Business (the Hygiene Living Care Business, the Health Beauty Care Business, the Cosmetics Business, and the Business Connected Business) and the Chemical Business. In each business, the Kao Group plans comprehensive business strategies and carries out business activities on a global basis. Accordingly, the Kao Group has five reportable segments: the Hygiene Living Care Business, the Health Beauty Care Business, the Cosmetics Business, the Business Connected Business, and the Chemical Business. Due to a change in organization as of January 1, 2025, the Kao Group reclassified its five former reportable segments (the Hygiene and Living Care Business, the Health and Beauty Care Business, the Life Care Business, the Cosmetics Business, and the Chemical Business) into the above-noted five reportable segments (the Hygiene Living Care Business, the Health Beauty Care Business, the Cosmetics Business, the Business Connected Business, and the Chemical Business) from the three months ended March 31, 2025. Segment information for the same period a year earlier has been restated to reflect the reclassification. Information about major customers has been omitted as the revenue from each customer is less than 10% of the Group’s net sales. Major products by reportable segment are as follows: Reportable segments Major products Global Consumer Care Business Hygiene Living Care Business Fabric care products Laundry detergents, fabric treatments Home care products Kitchen cleaning products, house cleaning products, paper cleaning products Sanitary products Sanitary napkins, baby diapers Health Beauty Care Business Skin care products Soaps, facial cleansers, body cleansers, UV care products Hair care products Shampoos, conditioners, hair styling agents, hair coloring agents, men’s products Personal health products Bath additives, oral care products, thermo products Cosmetics Business Cosmetics Counseling cosmetics, self-selection cosmetics Business Connected Business Commercial-use hygiene products, life care products Commercial-use hygiene products, life care products Chemical Business Oleo chemicals Oleochemicals, fat and oil derivatives, surfactants and blending products, fragrances Performance chemicals Water-reducing admixture for concrete, casting sand binders, plastics additives, process chemicals for various industries Information materials Toners/Toner binders, inkjet ink colorants, ink, fine polishing agents and cleaner for hard disk, materials and process chemicals for semiconductor - 23 - Fiscal Year Ended December 31, 2025
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(2) Sales and Results of Reportable Segments Fiscal year ended December 31, 2024 (Millions of yen) Reportable segments Reconciliation1 Consolidated Global Consumer Care Business Hygiene Living Care Business Health Beauty Care Business Cosmetics Business Business Connected Business Subtotal Chemical Business Total Net sales Sales to customers 544,278 423,967 244,102 40,478 1,252,825 375,623 1,628,448 － 1,628,448 Intersegment sales and transfers2 － － － － － 45,678 45,678 (45,678) － Total net sales 544,278 423,967 244,102 40,478 1,252,825 421,301 1,674,126 (45,678) 1,628,448 Operating income (loss) 75,771 34,433 (3,664) 5,206 111,746 35,721 147,467 (823) 146,644 Financial income 4,988 Financial expenses (4,090) Share of profit in investments accounted for using the equity method 3,482 Income before income taxes 151,024 Other items Depreciation and amortization 30,309 19,633 13,297 2,336 65,575 20,774 86,349 2,073 88,422 Impairment losses 726 76 69 3 874 658 1,532 281 1,813 Capital expenditures3 28,394 18,632 15,132 1,682 63,840 28,631 92,471 1,059 93,530 Notes: 1. The operating income (loss) reconciliation of (823) million yen includes corporate expenses not allocated to reportable segments, as well as elimination of intersegment inventory transactions. 2. Intersegment sales and transfers are mainly calculated based on market price and manufacturing cost. 3. Capital expenditures include investments in property, plant and equipment, right-of-use assets and intangible assets. - 24 - Fiscal Year Ended December 31, 2025
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Fiscal year ended December 31, 2025 (Millions of yen) Reportable segments Reconciliation1 Consolidated Global Consumer Care Business Chemical Business Total Hygiene Living Care Business Health Beauty Care Business Cosmetics Business Business Connected Business Subtotal Net sales Sales to customers 549,333 432,882 261,563 39,174 1,282,952 405,681 1,688,633 － 1,688,633 Intersegment sales and transfers2 － － － － － 45,840 45,840 (45,840) － Total net sales 549,333 432,882 261,563 39,174 1,282,952 451,521 1,734,473 (45,840) 1,688,633 Operating income (loss) 81,273 39,136 10,411 2,254 133,074 30,188 163,262 807 164,069 Financial income 6,198 Financial expenses (3,827) Share of profit in investments accounted for using the equity method 3,406 Income before income taxes 169,846 Other items Depreciation and amortization 30,657 19,789 11,546 1,397 63,389 20,477 83,866 1,975 85,841 Impairment losses 126 12 20 0 158 143 301 － 301 Capital expenditures3 32,276 17,171 13,409 1,321 64,177 30,496 94,673 6,463 101,136 Notes: 1. The operating income (loss) reconciliation of 807 million yen includes corporate expenses not allocated to reportable segments, as well as elimination of intersegment inventory transactions. 2. Intersegment sales and transfers are mainly calculated based on market price and manufacturing cost. 3. Capital expenditures include investments in property, plant and equipment, right-of-use assets and intangible assets. - 25 - Fiscal Year Ended December 31, 2025
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(3) Geographical Information Sales to customers and non-current assets (excluding financial assets, deferred tax assets and retirement benefit assets) by region consist of the following: Sales to Customers (Millions of yen) 2024 2025 Japan 903,857 945,050 Asia 332,029 349,030 Americas 213,270 212,435 Europe 179,292 182,118 Total 1,628,448 1,688,633 Note: Sales are classified by country or region based on the location of customers. Non-current Assets (excluding Financial Assets, Deferred Tax Assets and Retirement Benefit Assets) (Millions of yen) 2024 2025 Japan 519,501 522,309 Asia 101,924 101,470 Americas 192,254 204,341 Europe 57,555 62,099 Total 871,234 890,219 2. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of the following: (Millions of yen) 2024 2025 Advertising 88,270 92,346 Sales promotion 54,327 58,905 Employee benefits 176,955 175,751 Depreciation 16,696 15,451 Amortization 11,637 11,737 Research and development 62,092 61,127 Other 88,163 89,816 Total 498,140 505,133 - 26 - Fiscal Year Ended December 31, 2025
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3. Earnings per Share The Basis for Calculating Basic Earnings per Share (Millions of yen, unless otherwise noted) 2024 2025 Net income attributable to owners of the parent 107,767 120,081 Amounts not attributable to ordinary shareholders of the parent － － Net income used to calculate basic earnings per share 107,767 120,081 Weighted average number of ordinary shares (Thousands of shares) 464,625 461,315 Basic earnings per share (Yen) 231.94 260.30 Note: Diluted earnings per share are not presented because there were no potential ordinary shares. 4. Significant Subsequent Events (Share split and Partial Amendment to the Articles of Incorporation in Connection with the Share split) At a meeting of the Board of Directors held on February 5, 2026, the Company resolved to conduct a share split and to partially amend its Articles of Incorporation in connection with the share split, as follows. 1. Purpose of the Share split The share split is intended to reduce the price per investment unit, making Kao shares more accessible to a wider range of investors — including individual investors who share our purpose, "To realize a Kirei World in which all life lives in harmony" — and thereby expand our investor base. 2. Overview of the Share split (1) Method of the share split Each share of the Company's ordinary share held by shareholders listed or recorded on the final shareholder register as of the record date of Tuesday, June 30, 2026, will be split into two shares. (2) Number of shares to be increased by the share split Total number of issued shares before the share split 453,600,000 shares Number of shares to be increased as a result of the share split 453,600,000 shares Total number of issued shares after the share split 907,200,000 shares Total number of authorized shares after the share split 2,000,000,000 shares (3) Schedule for the share split Public notice of record date (scheduled) Monday, June 15, 2026 Record date Tuesday, June 30, 2026 Effective date Wednesday, July 1, 2026 - 27 - Fiscal Year Ended December 31, 2025
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(4) Impact on Per-Share Information Per-share information, assuming that the share split had been implemented at the beginning of the previous fiscal year, is as follows. 2024 2025 Equity attributable to owners of the parent per share (Yen) 1,148.34 1,176.25 2024 2025 Basic earnings per share (Yen) 115.97 130.15 Diluted earnings per share (Yen) － － (5) Others (i) Dividends As the effective date of the share split is July 1, 2026, the 2nd quarte r-end dividend for the fiscal year ending December 31, 2026, with a record date of June 30, 2026, will be based on the number of shares held prior to the share split. (ii) Change in the amount of stated capital There will be no change in the amount of share capital as a result of this share split. 3. Partial Amendment to the Articles of Incorporation (1) Reason for the amendment Due to the share split described above, the Company will partially amend its Articles of Incorporation, the total number of authorized shares stipulated in Article 6, effective as of July 1, 2026, pursuant to Article 184, Paragraph 2 of the Companies Act. (2) Details of the amendment The details of the amendment are as follows: (Amended parts are underlined) Before the change After the change (Total Number of Shares Authorized To Be Issued by the Company) Article 6 The total number of Shares authorized to be issued by the Company shall be one (1) billion shares. (Total Number of Shares Authorized To Be Issued by the Company) Article 6 The total number of Shares authorized to be issued by the Company shall be two (2) billion shares. (7) Note regarding Assumption of Going Concern None applicable. - 28 - Fiscal Year Ended December 31, 2025