Screen Holdings Co U/Adr

Good afternoon, everyone. Now we'd like to start Screen Holdings Financial Results Briefing on Second Quarter Fiscal Year ending in March 2025. Now, let me introduce you the speakers from our side. Toshio Hiroe, Representative Director, President, and CEO. This is Hiroe. Thank you very much for your kind cooperation and support. And Yoichi Kondo, Representative Director and CFO. I'm Kondo. And we also have two officers attending this meeting. Masato Goto, Senior Corporate Strategy Officer. And Akihiko Miyagawa, Senior Financial Strategy Officer. Now, we'd like to invite CFO Kondo to give us a summary of consolidated business results and forecast.

Thank you very much. I would like to present you summary first half earnings of fiscal year ending March 2025. First half summary. Both sales and profits increased year on year. We hit the record highs for first half in terms of both net sales and OP income and margins. We revised the full-year earnings forecast upward driven by SBE, GA, and FD. We revised the annual dividend forecast upward from 233 yen to 247 yen per share, with the interim dividend increase to 120 yen per share. SBE, both sales and profits increased year-on-year, and net sales and operating income margin hit the record high for the first half. we expect a solid performance for the second half. GA and FT, first half earnings actually exceeded the forecast. The cash flow, in comparison with the first quarter, second quarter operating cash flow increased significantly. Next page. This is the first half net sale, 277.3 billion. OP income, 58.2%. Composition Group Sales by Destination So Japan, 14 percent, Taiwan, 19 percent, China, 40 percent, Korea, 3 percent, other Asia, 3 percent, North America, 14 percent, Europe, 7 percent. That is a commission group sales by this nation, 40 percent is recorded by China, so it remains very high. Group sales by segment is shown in the next slide. SBE 81.6%, GA 9%, FT 6.5%, and BE 2.1%. And FT was doing pretty well according to these results. This is earnings by segment. SBE, SNP sale, $206.8 billion. OP income, $29.9 billion. OP margin, 25.6%. GA, $12.8 billion. 1.2 billion of OPE income, OPE margin 9.4%, FPE net sales 9.3 billion, OPE income 0.3 billion, OPE margin 3.8%, PE net sales 3 billion, OPE income 0.1, OPE margin 5.9%. Earnings by segment. Then on QOQ first, as to SPE, Sales and profit increased. Sales to logic and post-sales actually increased. Sales to Taiwan and North America actually grew. XGA, sales profits went up. Recurrent business was very good. FT, sales and profits increased. Initially, we focused on deficit, but in actuality, we had the profitability. PE, sales and profit decreased. Post-sales remained solid. However, the equity sales was slow. SBE, both sales and profits increased. Sales to Foundry Memory increased. Sales to China Taiwan also increased. GAA, sales increased thanks to strong recovery business. Meanwhile, profits remained almost flat due to higher fixed costs. FT, both sales and profits increased. Sales to LCD and OLED both increased. PE, both sales and profits decreased. We expect recovery in equipment demand in next year. balance sheet on a consolidated basis. The asset, 668.1 billion, and cash deposit increased, and we now accumulated profit. The equity ratio is 59.1%, and the turnover is 30 days or so, and actually Northern Accounts Payable is under-degraded. Now, cash flow, we saw the recovery of cash flow and we now see that that's 65.6 million over cash flow and reduction of the variables not on the same level of year on year level however we could see pretty good recovery and this is operating income zones and the 2024 first half at 38.5 billion and 2025 plus 23 and profitability plus 3.5 and fixed cost minus 8 and exchange rate plus 1.4 therefore results are 58.2 billion so we consider this is very important to control fixed cost and always SPE and MPE are very good in terms of sales and in-care capacity it is increased and also profitability was increasing due to the SBE. And that's all from myself. Thank you very much. Thank you very much. Next, President Hiroi, we'll talk about business environment and outlook. Mr. Hiroi, could you please go ahead? Thank you. This is Hiroi speaking. I would like to talk about business environment and outlook. First of all, business environment. As to SBE, AI-related semiconductor is expected to drive growth, that is the current situation, and growth is expected in server, smartphone, and PC demands. On a monetary basis, growth is prominent, especially for server, and related investments are active. Current DM prices are declining slightly. However, investment in mutualization still continues on the customer's side. Next, as far as GA is concerned, POD-related investment continues to progress steadily, mainly in Europe and U.S., especially included business. So, thanks to improved utilization ratio of equipment on the client side, recurring business is very robust. Display demand is turning up as we expected. In this term, sales and orders expected to come mainly from OLED during this fiscal year, like a large-scale OLED and medium and small-sized OLED. As for PE, for recovery in package-related investments, it's too slow. It will take time. So we consider that recovery have to wait until next fiscal year. Let's talk about business outlook. So the fiscal year ended March 20, 2025, second half. Full year forecast has been revised upward. Sales and profits are going to increase year on year. And net sales, OP income, net income, all are going to hit record high for the first consecutive fiscal year as a result of upward revision of the forecast as to interim dividend 120 yen per share that's our decision to make so it's an 11 year from the july forecast and 127 yen per share is the upwardly revised year end dividend Therefore, as a result, total annual dividend is projected to be record high, 247 yen. I would like to talk more about SPE business overview. Market trends and outlook is the next topic. So let's talk about WFE outlook. As for CI 2024, mid-single digit growth is projected. So nothing has been changed since July meeting. FY 2025, stronger growth is expected. So I think the situation will be a little better. As to foundry and logic, investment in leading-edge nodes is accelerating. However, partially some reassessments are anticipated. As memory business, Memory is driving the WMD growth this year. It is expected to be the growth driver in CY25 as well. We consider memory will grow more next year. Now, investment trends by application. As to Foundry, investment in leading edge nodes, including advanced packaging, is now steadily growing. Next, about logic. Investment is continuing at a certain level, although there are some reassessment and review in scale was made. As to memory, investment focused on D1 for HBM. As to non-investment, it's progressing with a growing server volume and increasing demand from hyperscalers. Hyperscalers actually driving the growth. As to image devices, Investment remained rather low-key this year. We expect an increase in CY 2025. PowerDevice and others is expected to recover in CY 2025 due to the improvement in supply-demand balance. Based at Garuka Chinese market, China, investment continued at a certain level. That's how we project. But gradually, it shifted to the factory launch phase. Not a huge investment. The plant has started to have the factory launch phase, therefore the investment will decline some part. Now composition with goodness by application and post-sales. By application, Onto Q, foundry is on the decline, logic going on, and so actually logic is supplementing the loss by foundry. In second quarter, second quarter year-on-year comparison said logic is increasing greatly. As to post sales, first quarter, second quarter, we see the actual percentage on the increase. So, from July forecast, there is an upward revision because of this situation.

This shows the competition of recovery cells by application, a destination, sorry. And when you see the queue on the key in first quarter, second quarter, the proportion of China has declined. And against that, North America, Taiwan, and Europe have increased. This is the situation we have. And when we compare the second quarter to the previous second quarter, this increase was Taiwan and also North America. And this slide shows you the composition of equipment sales by application. And the first half year-on-year comparison shows the increase of DRAM and logic. So the recovery of DRAM can be seen in the trend. And when we compare the actual from the first half to the forecast in the second half, the share of the cells to flush is projected to rise. So in the second half of the year, we can expect the investment into flush. and the previous fiscal year performance and the expectation for this fiscal year. As you see on the right side, the sales to logic, D1 and flush are expected to rise. And the total volume is expected to increase. And this is the composition of sales by destination. So in the same way, when we compare the first half year on year comparison, there's an increase with Taiwan and also China. And the actual from the first half and second half expectation, the sales to China is expected to decline. But compared to the July forecast, when we see the current situation, immediate situation, We can say that in the second half, share of sales to China is to some position I focused. And well, we see the increase in the sales to Japan and South Korea. And the previous year's full year performance and this year, we expect the big increase was Taiwan. And China sales ratio is projected to decline, but the absolute sales volume will grow. So this is a forecast for this fiscal year. And about GA. Recurring business is very robust. So in the first half, the sales of the post-sales ratio reached 54%. And merely with ink, we have a very strong recurring business. And in the second half, we will go back to the normal level of 50%. But we have the possibility that this strong situation with the current business may continue. So we'll pay this close attention to the trend. And in order to improve the operating profit margin, we are trying to enhance this post sales. Next is about FT. Display demand is now turning up. So in the second half, mainly with OLED, we can expect the sales order, sales and order to increase. And in the first half, we could turn into black. So for the full year focused, we made an upward revision. So in order to make the profit for the full year, we're trying to make the better of our effort. And this is about PE. We are struggling with PE business. Post sales itself is strong, but package-related investment to circuit board will pick up next year and beyond. So there's a kind of delay in the recovery of that investment. That is the impression we now have. But now we have the inquiry in Japan. So dealing with these inquiries, we'd like to increase the order received. And on this page, you can find the business forecast, which was upwardly devised this time. So the sales is 577 billion yen, so that is the increase of 14% over the previous year. And operating income is 113.5 billion yen, that is the increase by 20%. And that income is 80 billion yen, that is increase of the 13.5%. So we expect the increase of sales and profit. And about SPE, in the second half, which was announced in October, so please pay attention to October forecast, that is 244 billion yen, and that's 58.5 billion yen in OP income, 24.0% OP immersion. We scrutinized this forecast into the second half. That's what we promised with you in the previous occasion. and begin the improvement of the profit in the first half, and also with some visibilities we now have, we came up with these figures. So we missed the upward revision for the second half forecast, and also resulting in the full year focused upward revision. And as for the GA, compared to the July forecast, there's almost no change, but there's a increase with the operating income that is because of the situation we now explain to you. And FT, I mentioned earlier that we turn into black in the first half. And given that in the second half, we're going to have the 2 billion yen of the operating income. And PE, the market condition is still severe. So we made the downward elevation of 500 million yen. and it is difficult to increase the profit sales with this division and others at the very bottom. From the October forecast, we have the figure of the 5.5 billion. That is the increase because the development investment in the first half is now sliding into the second half. The purpose of which is the investment for the advanced package and SVE-related investment. So we'd like to carry out these investments in a very proactive manner. And this is already expenses, capex and depreciation. And from the beginning of the year, we haven't changed them. Mitra management plan, we said that we're going to scrutinize our investment for the future growth. And this process is going on. So the investment into development and also acquiring the production property, we have been discussing them. And now we have some visibility about it. So when they are materialized, let me come back with another report to you. And next stage is analysis of operating income growth. So comparing to the previous year's performance, we have the focus for this fiscal year. So sales and capacity utilization will have 36.5 billion yen increase, and profitability will bring 2.5 billion yen increase, and fixed costs, we expect a negative 19.5 billion yen and so another 0.5 from the exchange rates total 130.5 billion yen is the focus for this full year and as you can find at the bottom as for the sales and capacity utilization they are mainly come from the spe and ft mostly they are from sbe and as for the profitability improvement it will come from the sbe and increase in fixed costs will come from SBE, Holdings, New Businesses, and GA. But most of this will be with SBE. So the labor cost, depreciation, amortization, all of the expenses increase, and we would like to make the gross investment without any increases of these costs. And this is about the dividend. As I mentioned earlier, You can see the comparison to July. So in October announcement, we have 120 yen per share dividend. And year end dividend payment will be 127 yen. So the total annual dividend will be 247 yen. So this is the national forecast, but the record high figure. And in order to achieve this, we'd like to continue to make effort. And this is the page about the ESC-related initiatives. But please go through these. And let me introduce you one topic out of these. That is about the transfer of shares of subsidiary in SBE business. As was announced on October 16th, there was a transfer of shares of subsidiary, Laser Systems and Solutions of Europe in France. The shares of this company is transferred to Sumitomo Heavy Industries. The contract was concluded October 10th. And amount of transfer is not disclosed. And this is already incorporated into the financial forecast, as I mentioned. I mentioned earlier. And this company, Laser Systems and Solutions, produces the annealing equipment for the laser equipment. And Sumitomo Heavy Industries' laser annealing equipment has a synergy with this company's product. So we decided that this would result in a win-win relationship and decided to transfer the shares to Sumitomo Heavy Industries. And we have the technology of flash lamp anneal. So we would like to make efforts so that our flash anneal anneal will be adapted by the layers as much as possible. That's all from me. Thank you very much for your attention. So President Hiroi, thank you very much for the presentation. Now it's ready to go into the Q&A session.