Toppan Holdings Inc

I'm Kurobe, the chief financial officer. Thank you very much for joining us today for fiscal 25 first quarter results briefing, despite your very busy schedule. Now let me proceed with the explanation of the financial results. Please turn to page two. This is the Q1 consolidated results. Net sales was 397.5 billion yen, 1.3% down year over year. Excluding the impact of acquisition costs and other items, non-GAAP operating profit increased by 15.3% to 16.1 billion yen. Non-GAAP profit attributable to the owner of the parent, excluding special gains such as from the sale of securities, increased by 16.8% to 9.3 billion yen, resulting in overall performance largely in line with the forecast. Key points are shown on the right side. Information and communication and living and industry reported increased revenue and profit, while electronics reported a decreased revenue and profit. I'll provide details of segment performance later. Please note that starting this fiscal year, we have changed the foreign exchange rate processing method from closing rate to the average rate for the period. We have retroactively adjusted the prior year figures. Unless otherwise stated, the prior year figures in the following pages reflect these adjustments. Please turn to page 3. I will now explain the changes in operating profit versus prior year. FX impact of 1.7 billion yen and infrastructure development costs of 0.3 billion yen affected the numbers negatively. In growth business, Erhard Cross contributed 0.1 billion yen. Business SX and overseas living and industry contributed 3.3 billion yen. The semiconductors had a negative impact of 1.4 billion yen. Regarding existing businesses, the structural reforms implemented last fiscal year had positive impact of 2.1 billion yen. As a result, GAAP operating profit was 13.5 billion yen, and non-GAAP operating profit adjusted for the impact of goodwill-related acquisitions was 16.1 billion yen. Next, I would like to explain the status of each segment. Please refer to page 4. Please note that the changes in operating profit for the sub-segments discussed hereafter do not reflect changes in foreign exchange processing methods. Information and communications segment reported net sales of 210.2 billion yen, up 2.3%, and non-GAAP operating profit of 6.8 billion yen, up 53.8% year-on-year. Overall, we achieved a forecast with an increase in profit driven by growth of new business and the impact of structural reforms in existing businesses. Going into subsegments, digital business sales increased due to growth in overseas secure government ID business, consolidation of HID, and addition of new marketing DX projects. However, while profit was up for overseas secure, it was down for domestic secure business due to the absence of one-time projects from the previous year and a decline of digital textbooks resulting in an overall decrease in profit. BPO sales and profit were both down despite sales and growth in financial sector due to lingering impact of large-scale projects from the previous year. Secure media saw increased revenue and profit thanks to rising demand for IC cards and the strong performance in overseas finance printing. Communication media saw a decrease in sales due to market contraction. Profits increased thanks to the effects of structural reforms. Next page summarizes Erhard Cross first quarter results for reference. Overall sales increased driven by growth in marketing DX and secure business, while profit increased only slightly due to lower profit in hybrid BPO. Q1 results were largely in line with the forecast. We will continue to focus on expanding sales to recover upfront costs and achieve our full year forecast. Moving on to the living and industry segment. Please turn to page 6. Sales in the living and industry segment remained nearly flat year over year at 136.2 billion yen, while non-GAAP operating profit increased by 25.1% to 10 billion yen. Overall, the segment saw significant profit growth primarily overseas, driven by expanded demand for SX packaging and the impact of structural reforms. In the sub-segments, demand for packaging expanded both in Japan and overseas due to increased demand for SX packaging and demand for barrier films expanded in response to stricter recycling regulations in Europe. Profits also increased by double digits driven by growth in high value added SX packaging. Deco material sales was flat. While residential demand in Europe has not fully recovered, we captured domestic demand for renovation and overseas demand for decorative sheets for furniture. Profit increased both domestically and overseas, with contributions from overseas structural reform. Moving on to electronic segment, please turn to page 7. Sales in the electronic segment dropped significantly by 18.2% year-over-year to 56.6 billion yen due to structural reforms in the TFT business. Non-GAAP operating profit decreased 27.2% to 9.1 billion yen, but overall results were in line with our forecast. This includes approximately 1.6 billion yen negative impact of foreign exchange. In the sub-segments, semiconductors saw a decrease in both sales and profit. FCBGA profitability declined due to changes in product mix and stronger yen. Certification for AI accelerators was delayed in some cases, and sales of high-end products were sluggish. On the other hand, we captured strong consumer demand, which resulted in the changes in product mix. We are accelerating efforts to obtain mass production approval for related products and prepare to launch a new line in order to capture the growing demand for AI servers in the second half of this year. Photomask performance was strong, driven by demand for leading edge in Asia and Europe. Display sales was down due to structural reforms in the TFT business, and profits declined due to inventory adjustments for anti-reflection films for large screen TVs. Please turn to page 8. I will now explain the main points of a Q1 income statement. Gross profit margin improved by 1 percentage point year-over-year to 24%, driven by growth in high-value-added products such as SX packages and the impact of structural reforms. SG&A ratio rose by 0.4 percentage points, mainly due to continued high levels of payrolls and freight costs. Non-operating income decreased from ¥5.3 billion to ¥1.4 billion year-over-year. The main factors include increased interest expenses due to higher borrowings and smaller foreign exchange gains. Please turn to page 9. This is the forecast for the current fiscal year that was presented at our May earnings call. No revisions have been made at this time. Exchange rate assumptions of ¥140 per dollar remains unchanged. Prior full-year results shown on this slide have not yet reflected the new FX processing method. The new method will be reflected in the mid-year earnings call. We will continue to advance the transformation of our business portfolio through the expansion of growth business and structural reforms in existing businesses aiming to achieve our forecast and meet your expectations. We kindly ask for your continued support.