Hoya Corp

Recording in progress. Please refer to our website for English materials. We are writing an interpretation of the earnings call. Please select English from the interpretation button on the bottom of the screen.

Since it is time, we'd like to start Hoya Corporation's fiscal year 2021 or March 2022's third quarter earnings presentation. You can use the simultaneous interpretation service. If you listen to Japanese, please select the Japanese button. If you wish to listen to the English translation, please select the English button. The participants from our corporation today is CTO Mr. Ikeda Eichiro and Mr. Hirooka Ryo, CFO. CEO Mr. Hiroshi Suzuki is absent. As for the agenda of today, Mr. Ikeda and I myself will touch upon the succession of the CEO and then Mr. Hirooka will explain the third quarter results as well as the outline of the major businesses. And we will take questions and answers and we'll end at the 45 past three. And those who are participating via PCs, please look at the materials shown on the screen. Then we'd like to talk about the CEO succession, which has already been announced on the 22nd of December. You may know about the details, but let us explain once again. Mr. Hiroshi Suzuki has assumed CEO in the year 2004. For more than 20 years, he has been leading the growth of our company. But now he is in his 60s and he says that he wants to spend more time with his family. And about one year ago, he approached the nomination committee and agreed to step down when the business stabilizes from the COVID impact. The nomination committee, which has been discussing the succession plan for some time, began selecting specific candidates. Our company... is a company with nomination committee and other committees which separates executive functions and supervision, and this has been led by the nomination committee. And Mr. Suzuki, and as a result of the discussion, Mr. Ikeda, who has proven a track record and is well-versed in technological development, which is a source of growth, has been selected. Mr. Ikeda will make a self-introduction regarding his background. Mr. Ikeda, the floor is yours. As the next CEO, I have been appointed as the next CEO by the nomination committee. My name is Ikeda. And this shows the career in Hoya. I entered the company in 1992, April, and My background is a chemistry engineer. And I first was in the memory disk division, not the substrate, but the magnetic record media division was where I was as a process engineer. And within the media business, In 2010, I became the head of this division, and in 2010, September, I next became the head of Hoya Optical Lens, represented by GMO. And then in 2013, I became the CEO, Executive Officer and COO in charge of information technology, and then When I was engaged in memory disk, I became the head. But at that time, we sold the business to Western Digital and completed the business. After that, when I was in the optical lens business, the business was not profitable. However, after I assumed the position, I was able to turn around the profitability of the business. You may know that in 2011, the IT profitability has shown great improvement. And I believe that I was able to contribute from the optical business. And when I became the CEO of IT, from around 2010, IT business was positioned as a cash cow in its business. And given that backdrop, until 2013, sales was not growing much, but we were more focused on profitability. And after I assumed the position in 2013, I proceeded with selection and concentration and focused on putting the limited resource to a growing business. And as you know, in 2013, we showed a very good improvement in profitability. And at the same time, profitability improved as being a cash cow of the company. And the driver at that time was the 3.5-inch hard disk substrate. for near lines and mask plants for UV, which is driving the growth of Hoya today. After that, as an executive officer, I had assumed dual responsibility. As you can see, in 2018, for the first time, I became responsible for Hoya Eye Care for two years, which was the first time I was engaged in life care business. And also Pentac Business, Endoscope Business Development Head was one of my responsibilities. Through these experiences, not only as an executive officer, but in the actual business, I was able to cover a wide portfolio of Hoya's business at the Genba side as well. And right now, however, I am just a CTO, a dedicated CTO, and was selected the next CEO. That is the background. That is all from myself. Thank you very much. Next, from Mr. Hirooka, he will talk about the third quarter results. I am Hirooka. Hirooka. Then I would like to talk about the results of the third quarter earnings. First, the highlight of the results. There are four points. One is that we were able to achieve the record high revenue as well as operating profit. That was a record high on a quarterly basis. And secondly, the life care business is above the third quarter of two years ago, pre-COVID. In the previous quarter, we explained that we are about to recover to the pre-COVID. However, in the third quarter, we are now exceeding the pre-COVID level. So that is the situation of our life care business. And thirdly, we have to continue this trend from the first half. Information technology business continues to contribute to the sales and profit of the company. If you look at each business, all businesses have achieved double-digit growth. And third-quarter substrates maintains momentum as well. And lastly, in We will launch a share buyback program that has been resolved at the board meeting up to 60 billion yen. Next page, please. These are the figures for the overall company. Revenue, 71.3 billion yen compared to last year. That is plus 17%. On a currency-neutral basis, it is plus 11%. Pre-tax profit is 51.9 billion. That is 13% year-on-year. On a constant currency basis, plus 9%. Net profit, I would like to skip the net profit and go on to operating profit. This is a reference number. This is 53.5 billion yen, 16% up from last year. And in the far right, you see a quarter-on-quarter number, figures compared to the second quarter, or increase or decrease compared to the last quarter. Revenue plus 5% and operating profit plus 9% quarter-on-quarter. So this second quarter was a record high, but this time we were able to exceed that. both in terms of revenue as well as operating profit. As for pre-tax profit, that is minus 4%. It is below the second quarter, as you can see at the note. The forex loss in the second quarter of forex gain was 3 billion yen. Whereas in the second quarter, however, in the third quarter, Forex loss is 1.9 billion. So in net, 4.9 billion yen of Forex loss has resulted in this result of the pre-tax profit. So although there was a record high operating profit, pre-tax profit was, compared to the second quarter, is a slight negative. Next page, please. So I would like to compare each segment first. As for life care segment, revenue and profit, excuse me, revenue was 105.5 billion. That is up 12% compared to the previous year. And forex neutral, plus 7%. As for profit, profit are also increasing. I talked about the EP COVID number. but it's a plus 7% compared to pre-COVID still. In third quarter of 2019, contact lens retail sales, there was a backlash from the increase in consumption tax for contact lenses and taking that into or exclude that impact, the revenue growth would be 7%. Next page, please. I would like to cover each product in the life care segment. First, as for medical, sales was at 29.1 billion compared to last year, plus at 3.7 billion. What you see here is inclusive of a currency. If you're on ear of each business, in comparison to 2019, is the currency neutral or basis? First, as for endoscopes, compared to last year, it was plus 9%, and compared to fiscal year 19, it was minus 1%. And in this segment, this is the only segment below 2019, but if you look at the market, it's very good. We have still been able to take orders. There are a lot of orders being received. And as I explained in the first half, as well as written here, the semiconductor procurement used for a processor is what we are struggling with. And because of that, we make and ship and make and ship. The market, as well as our order basis, the sales is brisk. However, shipment is limited because of the reason that I explained. So in the third quarter, we are still in a recovery phase when it comes to revenues. However, in the third quarter, more than we had expected, procurement was possible, growing cells. We would like to continue to... Well, things are still uncertain. However, because we have been able to take orders, we would like to ship as we manufacture our products. Next, IOL, interocular lenses. Compared to last year, we grew 6%. And compared to fiscal 2019, third quarter, we were able to exceed plus 12%. If you look at the market, Japan, it says, has started to recover. It is starting to recover. However, have not recovered back to the pre-COVID level. After the state of emergency has been released, well, there are more recoveries if you look at individual countries. But hospitals are still careful. So there is a moderate recovery, if you would, when it comes to surgery. Intraocular lenses in the Japanese market is rather high. The Japanese market, the Japanese share is rather high. So However, Europe is growing and is contributing to the overall growth. All in all, this business has grown more than the fiscal year 2019 level. Next, as for healthcare-related business sales, it was 76.4 billion yen compared to last year. It was a plus 7.3 billion eyeglass lenses grew plus 5% compared to 19 plus 8%. Again, on an actual basis, has been above the pre-COVID level, especially what MyoSmart is gaining momentum, which is growing in China especially, and also in Europe. Well, Although the situation COVID differs, the market has exceeded the previous year for the first time. So although there are still some uncertainties in Japan,

Recording in progress

It's been like this for a month now, and the sales have been back to the same level since 2013. It's been like this for a month now, and the sales have been back to the same level since 2013. It's been like this for a month now, and the sales have been back to the same level since 2013. It's been like this for a month now, and the sales have been back to the same level since 2013. It's been like this for a month now, and the sales have been back to the same level since 2013. Next slide, please. Moving on to the information and communication segment. The total sales of 64.3 billion yen, which is 26% higher than last year. Kawase Neutral also has a 19% increase. In terms of profits, the profits from normal business activities are also 3.11 billion yen, which is 24% higher than last year. Overall, information communication is better than last year's third quarter, and it is slightly better than the second quarter. Next slide, please. Next, I would like to explain the product list. First of all, it is related to the video, but the sales are 1.8 billion yen, which is 28 billion yen more than last year. It is 27% more than the actual base of Kawase Neutral, and the paper machine is also a trend, but the sales have continued to rise mainly due to the demand for cameras. That demand continues. In 2020, due to the impact of COVID-19, the market for cameras has shrunk and is not coming back. We have re-examined the structure of the cost structure. In that sense, the demand has increased even more than we expected, and the sales have also increased, but it has also contributed to the profit. However, there is a problem with the seasonality, and Q3 is the peak, and this year Q4 will be bad for the industry. Also, I would like to continue to focus on how far the demand for cameras continues. In the short term, I will also listen to the story of the semiconductor industry of the digital camera industry, so including that, I would like to introduce a system that allows us to continue to make profits even if the sales are low, without looking at it too much at the moment when the sales have increased this much. Also, I would like to introduce a system that allows us to continue to make profits We will continue to look for opportunities in the new field. Next is Electronics-related products. The sales are 5.35 billion yen, which is 1.3 billion yen more than last year. Masked Flux, compared to last year, is actually 14% higher, and LSI and FPD have increased by more than two digits. As for FPD, last year's third quarter, it was a pretty bad quarter, but there was a rebound from there. As a whole, the market is not always growing more than 10%, but last year's market base grew more than two digits and is now on the verge of recovery. In particular, the Chinese market is also affected, but we are also in a situation where orders are firmly received from Chinese customers. As for the demand, we are working on a new high-definition mask printing system, so we want to continue to take the high-value products, mainly from China, and contribute to the demand. As for ELISA, the EUV has continued to be low, and it has increased by about 30% compared to last year. As you can see here, the demand for customers is increasing day by day. There are two reasons for this. The first reason is that the manufacturing is improving in the current facilities. and increase throughput. We also want to gradually increase the number of machines in the next year, so we want to meet the demand of customers in that way. Finally, we have the HTD board. The actual performance is 23% higher than last year, which is very good. Compared to last year, the 3.5-inch board is 50% higher than last year, and the 3.5-inch board is also the highest in the quarter-to-quarter. The 2.5% is what we expected, but it has slightly decreased. The price has been growing, and it hasn't decreased much compared to last year, so the price is a little happy. As for the third quarter, it's not that it's going to get worse, but as a trend, it's going to decrease, so it's within our expected range. Now, the 3.5-inch market is increasing by 2.5 inches, so in the future, the 2.5-inch market will decrease, and the 3.5-inch market will continue to grow, and the overall growth will continue to increase in the medium and long term. Next slide please. BS and cash flow, we have written the relationship here, but one point is that the cash flow is 4,160 billion yen, which is a little more than that. We have a lot of foreign currency, and we have more than 70% of it in foreign currency, so when it comes to yen, it looks a little bigger, but there are some places like that, and we think that we would like to do 600 billion yen in self-serve foreign currency this time. Finally, I think there will be a question in Q&A, so I would like to talk about cash allocation and how to think about it in the future. The CEO will change on March 1st, but I don't intend to change the way I think about cash allocation at all in the future. I think that we would like to have some money for growth, including internal investment in the company. On the other hand, we will return it once it becomes available, even if the CEO returns it. Next slide, please. Lastly, I would like to talk about business expectations. Since we are increasing the numbers, the annual sales are expected to be 6,550 billion yen, 2,050 billion yen in total, and 2,630 billion yen in total. Well, there are three points in this figure. The first one is the exchange rate. The dollar is 115 yen and the euro is 130 yen. Recently, I've been going around the world, but I don't think it's a half-baked number, but I'm estimating it to be 115 yen or 130 yen. The second point is that there is seasonality in information communication. Compared to the results of Q3, the sales of the entire group are lower. This is because people who have been following the past trends As you all know, information communication, or Q4, is the weakest. In terms of HDD substrates, the number of factory operations decreases in relation to our production bases. Therefore, Q3 is the highest, and Q4 is the weakest. The same applies to the optics industry. This is especially true for the camera industry. For example, Black Friday and Christmas, Q2 and Q3 are the most important ones for us, and Q4 and Q3 are the most important ones for us. We have been repeating the same pattern for a long time. As for the overall information communication, the number of customers in China is about the same, so it is expected that the number of customers will decrease in the second half of the year. Therefore, in terms of information communication, Q4 is very weak in terms of the market. Lastly, PENTAX, although the order has been received, the processor is not available due to the semiconductor issue. As I said earlier, we were able to release the third version, but we did not go as far as to say that it is in the process of being resolved, so this is a bit tough. We will do our best to get it. しっかり作ったらですね 作れば出荷ができるというような状況ではあるのですが ここはちょっと固めに見ているというような状況です Also, I don't understand the situation of the omicron that is not included in the extreme. Of course, I don't consider anything at all, but I don't include such an extreme risk of omicron. So that's a little bit, especially in Japan. One of the concerns is that it is not included here. If the peak is over, the sales will return, and the sales of the reaction will return, so there is a problem with the timing, but I don't think the demand will disappear. That's all for the results of the numbers.

Thank you very much. Let's move on to the next question. Please speak in Japanese if you have chosen to speak in Japanese to prevent confusion in the voice channel. If you have chosen to speak in English, please speak in English. If you have any questions, please press the Zoom mute button. If you are participating by phone, please press the start button and the number 9. When you have a question, please tell us your company name and name. If you can't answer the question via Zoom, please enter the question from the Q&A section at the bottom of the screen. We have limited time, so please answer up to two questions. Thank you. YOSHI-HASHI-HASHI

Thank you very much.

Hirooka-san, is it okay if I ask you a question? Yes, please.

Well, as I said earlier, we haven't been able to implement Omicron as much as we could. That doesn't mean that there is no effect, but as a whole, as well as in each class, we haven't been able to implement it as much as we could, and we've been repeating the same thing over and over again that once the restrictions are lifted, we'll be back. In that sense, We were affected by the pandemic two years ago, so it's hard to compare. But we want to achieve the same results as Q3. We are looking forward to the next year. This business is making a lot of money. As I said before, PENTAX is a part of semiconductor supply, so we are worried about how far we can go, but overall, we are aiming to reach the level of market growth like before the COVID-19 pandemic. Thank you very much.

The second point is about EUV blanks, but I feel that the tone of Shinetsu-san is gradually increasing, and the Intel company that is holding AGC is accelerating its investment.

Thank you. ただですね、前回の決算表のときにも申しましたけれども、我々のお客さんのところで、我々が進めている先端の認定作業ですね、現在ですと2nanoになるんですけれども、そういった認定作業において、 他社さんと比べられている、それから我々に何か課題があって、 他社の方にそれが振られているといったような状況には現状はございません。 ですので、そうは申しましても、 競合さんも技術力はありますし、 過去の我々のオプティカルでの過去のトラックレコードもありますので、 Thank you very much. That's all.

Thank you, Mr. Yoshida. We have one more question from the Q&A box, so I will read it out. There are two questions about UV blanks. The first one is about the advanced research development that is represented by 2nano and 1.4nano. What kind of benefits does it bring to the beekeepers? Especially from the perspective of ASP and market share, what kind of wind is this? That is the first question. The second question is, is there any update on the high NA EUV? This is a question from Warren.

Yes, this is also from IKEDA. First of all, the first point is that the concentration of 2nano and 1.4nano is getting more and more diluted, and it is expected that there will be requirements for different products such as blanks. The most easy-to-understand point is that the level of blood vessels, the amount of blood vessels, and so on, will become more severe. In this way, we will be able to conduct a more severe examination from a more severe point of view than the level of the previous quality assurance, and that will be the added value of the new product. With that added value, それらの製品に対する売価を上げることができるということになりますので、既存品はどうしても価格が下げるだけいくという、お客さんからのプレッシャーもありますし、ある程度そういったことに応えていかなきゃいけないという側面がありますが、それと同時に先端品が進んでいくことによって、そこでより付加価値をつけて、それらの売価を上げていくと、全体としてのASPを、 おとさずにあるいは上げることができるということになりますので そういったセンターのところが進んでいくことは 我々にとっては非常にこのASPだとかの観点ではプラスに働きます それからハイエネに関してはですね ASMLさんに我々もブランクスを提供しつつ 開発を進めておりますが 我れわれのブランクスに対する要求というのは 特に波長が変わるわけでもありませんので それほどこれまでと全然全く違ったものが 必要ということではないというふうに考えています しかしながら工学的な特性が変わりますので マックの厚さだとか 工学的な特性 ハイエネの特性をマックスに出すような 構造にする必要があると思いますので そういった開発は必要になり Just like with 2nano and 1.4nano, we are thinking of improving the SP by adding additional value to it.

That's all. Thank you very much. Next, Mr. Mori.

I'm Mori from Mizuho Shoken. Thank you very much. The impact of the four-quarter Omicron is not so much, but due to the demand for contact lenses, especially when school vacations start to come, I'm concerned that the contact will become dull.

How should we see the impact here? I will answer from Ikena. As you can see, contact lens business is in progress in Japan. In Japan, many regions have been introduced with the anti-inflammatory law, and it is possible to think that it will change people's behavior to some extent. However, if you look at the past two years, The number of contact lenses used for about a week before the COVID-19 pandemic and after the COVID-19 pandemic are clearly different. Even after the COVID-19 pandemic, when an emergency declaration was issued, it was further decreased. However, compared to before the COVID-19 pandemic, the number of contact lenses used has decreased, but the number of contact lenses used has not decreased. ありがとうございます。 もう一点だけ、内視鏡のディスポーズアプリについてですけれども、 アップデートを教えてください。以上です。 Yes, it's a disposable device. Last time, I told you that this is actually made in Bulgaria. To be honest, it took more time than planned to set up in the factory in Bulgaria. We haven't had any experience in Bulgaria so far. I don't think it's so much about the location, but because of the coronavirus, Thank you very much. Thank you very much.

This is no good. Thank you. Can you hear me? Yes, I can hear you. Thank you. It's a hard disk, but do you have any updates this time? Especially for the sound system, there are quite a few C gates. 18, 25, I think it's going to be quite popular in the future. What is the impact of this industry? What is the impact of this industry?

Yes, I will answer from Ikeda. First of all, I think you already know about the update. 18TB is now available in the world. 18TB is a 9-core model. It will change to 20TB in the future, but in that 20TB, it will be a 10-core model. Therefore, the number of sub-cells in the drive battery will increase when 20TB comes out. That's why it's a positive environment for us. Moving on to the future, WD and Toshiba are working on the development of MAMA. The reason for the increase in the density of records achieved by MAMA やっぱりある程度リミットがあると言いますか 限界があるということは皆さん認識しておりますので やっぱりその先には ちょっと切れてますか

Excuse me, the radio is not working. Can you hear me? Yes, we can hear you. Only Mr. Ikeda is on. I'm sorry. We'll check it. Yes, I'm sorry. I'm logging in again, so I'm very sorry.

I'm sorry, I'm very sorry. Mr. Arashida, can you hear me? Yes, I can hear you. I'm sorry, I'm talking about my mother. I'm sorry. Yes, please. I'm sorry, I'm very sorry about the network problem. My mother has some limitations in improving her record density, so I've been pulling my mother all the time. That's it. As for whether we will continue to contribute to the improvement of record capacity in the future, it is a bit of a question. After all, I think that there is a common understanding that there is a hammer at the end. In that case, if you have a hammer, you will need a glass board, so it is no different from supplying a glass board for development with any customer. In other words, as you pointed out earlier, the timing of the change is a little flustered, with a feeling that it will be a little forward or backward, and it is quite difficult to say when it is at this stage, but since this HDD is in the trend of increasing memory capacity, Thank you. I have a follow-up question.

Now, of course, glass is now PMA and Hama, but MAMA is basically aluminum. MAMA is glass-to-glass, right?

つまり一部ちょっと早めにガラス投入して ママの部屋と一緒にやっていく可能性がありますか 以上です こちらも池田より回答いたします やっぱり先にガラスが使われるということになった際に そこからいきなり100%ガラスにするというのも お客さんからするとリスクがありますので Thank you very much.

Thank you very much. I'm sorry that the radio is not working at the moment. I'm sorry about that. We're running out of time, so that's all for today. I'd like to end this presentation. I'm sorry for the inconvenience. Thank you very much for coming today.

Thank you very much.