Nikon Corp

I am Omura Deputy CFO. I would like to thank you for your precious time despite your busy schedule to attend our financial results briefing today. Today, I would like to report on the first quarter results and the forecast for the full year for FY March 2025. First, allow me to explain the first quarter results. Revenue was 163.8 billion yen. Operating profit was 2.9 billion yen. Profit attributable to owners or parents was 2.7 million yen, while revenue grew, but profit was almost the same as last year. First, revenue increased by 5.7 million yen. In the imaging products business, sales of mirrorless cameras, in the precision equipment business, sales of FPD lithography systems, and in the digital manufacturing business, sales of large format metal 3D printers grew respectively. And in addition, thanks to the effect of the weak Japanese yen, revenue increased year-on-year. On the other hand, operating profit side, though the imaging product business enjoyed a growth in profit, all the segments other than the imaging product business got off to a slow start, resulting in a slight decrease year-on-year. The yellow box on slide 4 shows the main consolidated numbers for the first quarter, and to its right, the year-on-year comparisons. As for free cash flow, as shown in the text in the bottom, operating cash flow was 17.5 billion yen, achieving positive cash flow three quarters in a row. But free cash flow became negative due to the expenses caused by acquisitions of red and image in the product business and other factors. It became negative 8 billion yen. Slide 5 shows the performance by segment for the first quarter. In the yellow box, the top row of each segment shows revenue, and the bottom row shows operating profit. On the year-on-year basis, the imaging products business, the precision equipment business, and the digital manufacturing business grew in profits, but the healthcare business and the components business declined in profit. Now allow me to move on to the first quarter results for each business segment. First, the imaging products business, revenue was 83.7 million yen up, 9.3 billion yen year-on-year. Operating profit was 17.8 billion yen, up 2.5 billion yen year-on-year. Partly due to the weaker Japanese yen, we landed on a large increase both in revenue and profit. The operating profit margin maintained above 20% level. Mirabilison cameras Z8 and ZF1 strong in sales following on from the last year. In addition, With the launch of the new Z6 III, sales of digital camera interchangeable lens type increased by 10,000 units year-on-year to 230,000 units, and interchangeable lenses increased by 40,000 to 370,000 units. The acquisition of RED, a U.S. professional cinema camera manufacturer, as a consolidated subsidiary was completed in April this year. In the short term, there will be an increase in acquisition-related expenses and outward expenses, but we aim to jointly develop unique and distinctive products and expand our business in the professional digital cinema market, which is expected to expand going forward. Slide 7 is the precision equipment business. Revenue was 33.1 billion yen, down 4.2 billion yen year on year. Operating profit was negative 2.1 billion yen. As for the FBD lithography in the systems, capital investment for high-definition panels increased due to the recovery of the panel market, and the number of units sold increased from 2 units last year to 7 units. On the other hand, For the semiconductor lithography systems, due to the situations of the customers, the installation will be completed in the second quarter or after, so we are not able to book revenue of new systems in the first quarter. With this decline in the sales of new semiconductor systems, revenue was down year on year. But, thanks to the growth in the FPD lithography systems and elimination of the one-time cost incurred in the previous fiscal year, the size of the loss became smaller. The healthcare business was up 1 billion yen in revenue year on year, but the sales were sluggish mainly in the US and Europe due to the stagnant market conditions such as investment restraints caused by high interest rates and excluding the effect of the weak Japanese yen, the revenue actually declined. Operating profit was down by 2.4 billion yen year-on-year, resulting in a deficit of 600 million yen due to the decrease in the gross profit caused by the impact of the declined revenue excluding FX impact, as well as the increased upfront investment and the booking of one-time costs. Slide 9 shows the component business. Revenue and operating profit were down year-on-year due to the semiconductor market situations, as well as the delayed recovery of the factory automation market. EUV-related components got off to a sluggish start in the first quarter due to the impact of delayed sales caused by the customer circumstances. Slide 10 shows the digital manufacturing business. Revenue grew thanks to the firm sales of SLM Solutions' large-format metal 3D printers NXG series. We were able to increase its revenue and reduce the size of the loss as we had planned. Next, I would like to explain our forecast for the current fiscal year. The top of the slide shows our forecast for the first half of the year, and the bottom shows our forecast for the full year. With the results of the first quarter, we revised down our forecast for the first half, but we have not changed our forecast for operating profit and profit attributable to owners or parents for the full year. Please first look at the top half of the slide. We have revised down, respectively, revenue by 4 billion yen, operating profit by 4 billion yen, and profit attributable to owners or parents by 3 billion yen. Imagine Products, revising upward revenue by 5 billion yen and operating profit by 1 billion yen in order to reflect the strong Q1 results. Christian Equipment, revising downward revenue by 5 billion yen and operating profit by 2 billion yen due to the postponed installation completion of some semiconductor lithography systems to the second half of the year. In the healthcare business, excluding the effect of the increased revenue due to the weak yen, the first quarter was below the plan, and some sales have been postponed to the second half, so we are revising down our revenue forecast by 2 billion yen and operating profit by 2 billion yen. In the components business, we are revising downward revenue by 2 billion yen and operating profit by 1 billion yen to reflect the postponed sales of some products to the second half. Next, a forecast for the full year. Reflecting the revised up revenue for the imaging products, we have revised for the company upward 5 billion yen to 750 billion yen. As for the operating profit, in the imaging products business, it is now revised up by 1 billion yen while revised down 1 billion yen in the healthcare business. So now the overall operating profit for the company has become 35 billion yen unchanged from the last forecast. Profit attributable to owners or parents has remained the same from the previous forecast at 30 billion yen. As for the exchange rate, for the second quarter onwards, it is 145 yen to the US dollar and 155 yen to Europe, no change from the previous forecast. Now please refer to slide 13. This shows the financial highlights for our full year forecast. Please look at the far right end, change from the previous forecast. As has been already explained, we have revised upward only revenue by 5 billion yen. Profit items and annual dividends have not changed from the previous forecast. Slide 14 shows our full-year forecast in comparison with the previous forecast we made back in May. The first half and the second half are shown separately. Operating profit and housing rewards downward by 4 billion yen for the first half and upward by 4 billion yen for the second half, resulting in the full-year forecast remaining unchanged. Now please go to slide 15. This shows our full-year forecast by segment together with the last fiscal year as well as the previous forecast. As shown in the far right end, in terms of the change from the previous forecast, we revised operating profit in upward 1 billion yen in the imaging products business and revised downward the same amount 1 billion yen in the healthcare business. The yellow box on the slide 16 shows the forecast for the first and second half of the year by segment. We have revised our forecast in order to reflect the sluggish sales in the first quarter of the semiconductor lithography systems in the precision equipment business, as well as some of the products in the healthcare business and components business. There are also the postponed sales of some products from the first half to the second half. We have reviewed and updated both the first half and second half forecast. Operating profit for the precision equipment business is expected to be 4 billion yen in the first half and 11 billion yen in the second half. For the healthcare business, 1.5 billion yen in the first half and 8.5 billion yen in the second half. For the components business, 4 billion yen in the first half and 13 billion yen in the second half, with profits concentrated in the second half of all these businesses. Next, allow me to explain our full-year forecast by segment. First, the imaging products business. In light of the solid performance in the first quarter, we have raised our revenue forecast to 305 billion yen, 5 billion yen higher than our May forecast. We have received a lot more pre-orders than we had expected for our new product, Z6 III. Compared to the previous year, we will increase the number of mirrorless cameras and interchangeable lenses, centering around Z6 III, and will expand our revenue opportunities. Operating profit has also been raised by 1 billion yen from the previous forecast. The strong mirrorless camera business is expected to contribute more to revenue than last year, partly driven by the weekend. However, the business as a whole is expected to see a decline in profit year-on-year due to the factors such as acquisition of RED and the increased R&D expenses. Slide 18 shows our forecast for the precision equipment business. Compared to the previous forecast, the completion of installation of some semiconductor lithography systems will be postponed from the first half to the second half due to customer situations such as delays in factory construction, but there will be no change for the full year basis. Compared to the previous year, we will offset the decrease in sales of ARF lithography systems with increased sales of the G8 FPD lithography systems for high-resolution panels and will secure the same level of revenue from the previous year. Open profit for the entire business is also expected to be 15 billion yen, the same as the last year, as the impact of decrease in the semiconductor lithography systems will be offset by the solid FPD lithography systems sales and improved service revenue. Next, please refer to slide 19. Here now I will explain the healthcare business. Revenue in the first quarter was below the plan if we are to exclude FX effect. Furthermore, business negotiations are prolonging, pushing out some revenue opportunities from the first half to the second half. Reflecting this, we have revised the first half forecast downward by 2 billion yen and the second half forecast upward by 2 billion yen, and have left the full-year forecast unchanged from the previous forecast. In life science solutions, there are concerns that interest rates will remain high in Europe and the United States. Even after the second quarter, the customers' investment will be restrained due to the impact of government budgets. However, we aim to achieve our revenue plan by developing the private sector market and strengthening drug discovery support services. In IKEA solutions, we expect revenue to increase year-on-year due to sales expansion in the Asian region. In terms of operating profit, we have revised the first half forecast downward by 2 billion yen based on the revised revenue while revising the second half forecast upward by 1 billion yen resulting in a downward revision of 1 billion yen for the full year from the previous forecast. Slide 20 is the component business. We are maintaining our main forecast of 85 billion yen in revenue and 17 billion yen in operating profit. However, due to the delayed market recovery and others, sales of some products such as EUV-related components and encoders may shift to the second half from the first half of the year. So as shown earlier, we have revised our forecast both for the first half and the second half of the year. Slide 21 is the digital manufacturing business. There are no changes in this business segment from the previous forecast both in revenue and operating profit. Driven by an increased demand for aerospace and defense industries, orders for SLM Solutions' large-format metal 3D printer NXG series and its sales are expected to go rather smoothly as planned. In the current fiscal year, we aim to achieve a full year profit on an EBITDA basis for SLM solutions standalone. There is no change in our policy to make SLM solutions alone profitable next fiscal year and to make the entire digital management business profitable in the fiscal year following that fiscal year ending March 31, 2027. That's all for my part. But if I may now like to summarize the first quarter in the current fiscal year, company-wide revenue exceeded the previous year, but operating profit and the profit attributable to owners or parents got off to a sluggish start, just like the previous year. By segment, the imaging products business, partly thanks to the weak yen, got off to a rather good start going about the plan, but the healthcare and components businesses got off to a poor start down the plan due in part to the postponed sales for some products. As for the second quarter onwards, the imaging products business continued to perform well, but we believe that the precision equipment business, the healthcare business, and the components business may be affected by the timing of market recovery. We will aim to achieve our targets of 35 billion yen in operating profit and 30 billion yen in profit attributable to owners or parents while firmly and carefully managing risks. We appreciate your continued understanding and support of shareholders and investors. I would like to thank you for your kind attention.