Nikon Corp

This is Omura, Deputy CFO. Thank you for your precious time despite your busy schedule to attend our financial results conference today. I would like to explain our third quarter financial results and the full end forecast for the fiscal year ending March 31, 2025. The top half of the presentation shows the key points for Q1 to Q3 cumulative results and the bottom half for the third quarter alone. For the cumulative results from Q1 to Q3, the nine months from April to December showed a decrease both in revenue and opening profit compared to the previous year. This was due to the impact of a decrease in sales of semiconductor-related business in the precision equipment business and the components business, as well as the recognition of one-time cost of approximately 5 billion yen due to the relocation of the headquarters. the bottom half of the presentation the third quarter alone october through december results also showed a decrease both in revenue and operating profit compared to previous year just like the cumulative results this was due to the decline in sales in the semiconductor related businesses the impact of the absence of sales of G10.5FBD lithography system recognized in the previous year, and the one-time cost of approximately 2.1 billion yen, including restriction costs for the industrial solutions business and impairment losses on idle assets due to reorganizing basis. Slide 4 shows the cumulative results from Q1 to Q3. As for cash flow, although the operating cash flow for the third quarter was nearly 40 billion yen, There were large expenditures in the investment cash flow related to the acquisition of RED and the relocation of headquarters, resulting in the negative free cash flow. Slide 5 shows the cumulative results from Q1 to Q3 by segment. In the yellow box, the top row of each segment shows revenue, and the bottom row shows operating profit. I will now explain details segment by segment. First, the imaging products business, revenue increased by 13.7 billion yen year-on-year to 235.6 billion yen, and operating profit increased by 900 million yen to 43.8 billion yen. Sales increased thanks to the launch of new products Z63 and Z52, leveraging the cutting-edge technology of Z9. Sales of digital camera interchangeable lens type increased by 30,000 units year-on-year to 670,000 units, and interchangeable lenses increased by 40,000 units to 1.02 million units. The operating profit margin was maintained at 19%, the same level as the previous year. The imaging products business continues to be a major pillar of Nikon's overall earnings thanks to our strategy focus on mid- to high-end models for professionals and hobbyists. Next, the precision equipment business. Revenue was down by ¥29.6 billion year-on-year to ¥124.9 billion, and operating profit was down by ¥11.7 billion to a loss of ¥600 million. The unit or sales of new semiconductor lithography systems were 6 units, down 16 units from the previous year. On the other hand, sales of FBD lithography systems for high-resolution panels increased by 15 units from the previous year to 26 units. The precision equipment business as a whole saw a decline in both revenue and operating profit, as the increase in FBD revenue could not offset the decrease in semiconductor revenue. in the third quarter alone the completion of installation of some semiconductor lithography systems that had already been delivered were postponed to the fourth quarter resulting in a fall short of the plan 8. The healthcare business. In life science solutions, sales decreased due to the market stagnation in Europe, the United States, and China, but the eye care solutions went up mainly in Europe and the United States, and the overall revenue increased 4.7 billion yen year-on-year to 81.5 billion yen. On the other hand, operating profit decreased 800 million yen year-on-year to 2.1 billion yen due to the impact of the decrease of revenue in life science solutions and the increase of upfront investments such as R&D expenses. In the third quarter alone, temporary logistics disruptions caused some supply delays, resulting in the postponement of sales of some products to the fourth quarter. Slide 9 shows the components business. Revenue was down by ¥10.3 billion to ¥49 billion due to a decline in sales of EUV-related components and in quarters caused by delayed market recovery. Operating profit was down by ¥7.1 billion to ¥3.6 billion due to the impact of the decline in revenue as well as the restructuring costs in the industrial solutions business. Digital manufacturing business Revenue increased by 4.3 billion yen year-on-year to 18.2 billion yen thanks to the strong sales of SLM Solutions' large-format metal 3D printer, namely the NXG series. Operating profit saw a reduction in the deficit of 1.7 billion yen due to increased sales at SLM Solutions and the disappearance of one-time costs incurred in the previous year. Next, I will explain the full year-end business forecast. Regarding the full-end forecast, we have revised down revenue by 5 billion yen and operating profit by 3 billion yen, respectively, reflecting the decline in sales of related products due to the delayed market recovery in the components business. However, due to the improved financial income and loss in the third quarter, we will maintain a profit attributable to owners or parents at 16 billion yen. We also maintain the annual dividend at 55 yen. We are currently acquiring 30 billion yen worth of share buyback, and as of the end of January, we have already acquired 19.3 billion yen. The assumed exchange rates for the fourth quarter remain unchanged at 145 yen to the U.S. dollar and 155 yen to the euro. Please refer to slide 13, a table showing the main numbers of our full-year performance forecasts, including year-on-year and previous forecast comparisons. The outline has already been explained. Slide 14 shows a list of full-year forecasts by segment, along with year-on-year and previous forecast comparisons. I will explain the details segment by segment. First, the imaging product business. Please look at the bottom left of the document. We have revised up the digital camera-related market scale from our November forecast, taking into account the trends up to the third quarter. Specifically, we expect a digital camera interchangeable lens type to increase by 300,000 units from our previous forecast to 6.4 million units and interchangeable lenses to increase by 400,000 units to 10 million units. The camera market continued to expand through the third quarter, mainly in China. However, there were concerns about excess inventory, especially in China. So, we will maintain our sales volume at 850,000 interchangeable lens cameras and 1.35 million interchangeable lenses. We also maintain our previous forecast of revenue of 305 billion yen and operating profit of 47 billion yen. Slide 16 is the precision equipment business. Please look at the bottom left of the document. There is no change in the sales volume of both FAD lithography systems and semiconductor lithography systems from the previous forecast. All systems for which sales are scheduled to be recognized in the fourth quarter have already been delivered to customer factories, and installation is scheduled to be completed by the end of this fiscal year. We also maintain our previous full year forecast of 195 billion yen in revenue and 9 billion yen in operating profit. On slide 17, I will briefly explain the new platform ARF Emulsion Lithography System Series for semiconductors that we are currently developing in the precision equipment business. This new platform is designed to be compatible with other companies' ALF immersion lithography systems that are widely used by semiconductor manufacturers. With consideration for the convenience of our semiconductor manufacturer customers, we are working with major semiconductor manufacturers to jointly develop a prototype of the next-generation series that combines high productivity, maintainability, and reliability so that we can deliver it in the fiscal year 2028. From 2028 onwards, we aim to significantly increase our share in the ARF emotional lithography systems market, which is expected to continue to expand as 3D will be further adopted in DRAM and logic segments as well. Please now turn to slide 18. I will now explain the healthcare business. In the healthcare business, both revenue and operating profit remain unchanged from the previous forecast in November. In the life science solutions, although there are concerns about the impact of high interest rates in the United States and economic downturn in China, there are signs of recovery in the order environment, particularly in Europe and the United States, and we aim to achieve our full-year plan. In IKEA solutions, demand from after matrix and major change in the West is strong. We expect to incur the one-time cost of 2 billion yen in the IKEA solution this fiscal year. In contract and sale manufacturing, as we explained at the November Financial Results Conference, revenue is expanding steadily and we expect it to contribute further to revenue and profit from next fiscal year onwards. Slide 19 shows the forecast for the components business. Due to the delayed recovery in the semiconductor and factory automation markets, The recovery of demand for our related products, EUV-related components, optical parts, optical components, and encoders is expected to be further delayed. In light of this, we have lowered our revenue forecast by 5 billion yen from the November forecast to 73 billion yen. We have also lowered our operating profit forecast by 3 billion yen to 5 billion yen. As planned, we expect to incur related expenses of 2.5 billion yen for the restructuring and industrial solutions business, a former industrial meteorology business, and we aim to improve operating profit from the next fiscal year onward. Slide 20 shows the digital manufacturing business. There are no changes to the previous outlook for both revenue and operating profit. Due to the increase in demand from aerospace and defense industries, orders and sales are progressing smoothly, mainly for SLM Solutions' large-format metal 3D printers, the NXT series. SLM Solutions' orders in the third quarter reached an all-time high on a quarterly basis, and we can expect sales to expand in the fourth quarter and the next fiscal year. This fiscal year, we aim for SLM solutions to achieve a full year-end profit on EBITDA basis. There is no change to our policy of aiming for an operating profit for SLM solutions alone next fiscal year and a profit for the entire digital manufacturing business in the fiscal year following that, ending March 2027. That's all for now, but now allow me to wrap up with the major points. In the third quarter, cumulative operating profit was 8.1 billion yen, mainly due to decrease in sales in the semiconductor-related businesses of the precision equipment business and the components business. The full-end operating profit forecast has been revised down by 3 billion yen to 19 billion yen. due to a decline in sales in the components business, mainly related to the semiconductor-related business. We are currently formulating the budget for the next fiscal year, which is the final year of the four-year medium-term management plan, but there will be no more one-time costs associated with the relocation of headquarters and restructuring. We expect the semiconductor-related business and the precision equipment business and the components business to recover in the second half of next fiscal year, but order environment is still unclear. In the FPD lithography systems business, we expect the profit to improve thanks to the expansion of high-resolution systems. In addition, we will begin a full-scale development of a new platform equipment series with the aim of significantly increasing our share in the market for ARF immersion lithography in the system for semiconductors, which is expected to continue to expand. imaging products business remains strong and will strive to expand sales of mirrorless cameras, including the launch of new products in the next fiscal year. In the healthcare business and the digital manufacturing business, which are expected to grow as orders are currently strong and expect profits to increase in the next fiscal year, we appreciate our shareholders and investors for your continued understanding and support. Thank you for your kind attention.