Terumo Corp

Hello. I am the CFO, Muto. I will give an overview of our earnings results for the third quarter of the fiscal year ending March 31, 2023. First, the highlights of this earnings announcement. Revenue continued to exceed 200 billion yen as in Q2, for our highest ever result. When excluding FX Impact, all companies and regions saw increased revenue, including China, where there were COVID-19 concerns. Profit increased over 30% year-on-year, and expanded even further compared to Q2. We proactively raised prices at an expanded number of businesses and regions. We also continued activities from Q2 to rationalize our portfolio, completing the sale of the nutrition business that was part of Hospital Care Solutions. We recorded a profit of 3.9 billion yen from that sale. In light of factors including the results up to Q3, we will revise our earnings guidance. We will revise our revenue guidance upward, primarily to reflect FX impact. We will revise our profit guidance downward, to reflect unfavorable macro environmental factors and the starting costs of the new plasma innovation business. Next slide, please. Here are the P&L results. We recorded the highest ever revenue for a quarter, and exceeded 600 billion yen year-to-date as well. It was an 18% increase year-on-year. Q3 Standalone gross profit improved year-on-year. Operating profit was 37.5 billion yen, for a 31% year-on-year increase. This includes 3.9 billion yen in profit on the sale of the nutrition business. year-to-date adjusted operating profit return to profit growth next slide please here is the q3 variance analysis gross profit increment by revenue increase was 6.5 billion yen In addition to demand recovery, revenue grew thanks to positive impact from new products. Gross profitability on sales was minus 2.0 billion yen as the absolute amount of inflation impact increased. In price, price increases had an effective 1 billion yen, increasing further from Q2. In November, the medical care solutions company raised prices in Japan as well. Positive impact was achieved through efforts going beyond business segment and region. SG&A saw stronger expense controls from Q3. In FX, negative impact by stock was reduced by yen appreciation toward the end of the quarter. Next slide, please. Here is the year-to-date operating profit variance analysis. The same positive factors, I explained for Q3 standalone were present year-to-date as well. Price increase effect expanded to 1.7 billion yen. Next slide, please. Next is revenue by region. In Japan, year-to-date revenue pivoted to growth. Pharmaceutical solutions was strong in HCSA demand recovery, while TMCS, medical care solutions, was the main driver. In Europe, TBCT, blood and cell technologies, was strong, while CNV, cardiac and vascular, and TMCS were also steady, resulting in all companies growing their revenue when excluding FX. In the U.S., TA, neurovascular, and blood center solutions, all grew in double digits, while TIS grew in the high single digits, when excluding FX. In China, there was some COVID-19 impact, but TIS and neurovascular grew nearly in the double digits even when excluding FX, while TBCT was a driver growing in the double digits. In Asia and others, CMV and TBCT grew, with TIS and CV in particular maintaining strong double-digit growth even when excluding FX impact. Next slide, please. I will now explain the results by company. First, the cardiac and vascular company. Overall revenue continued to grow, at 6% when excluding FX. China, too, continued high single-digit growth. TIS grew revenue in PTCA guide wires, which added a new product, and in products including closure devices. Neurovascular showed growth through expansion of its China sales network. CV experienced delays in the recovery of number of surgical procedures in Japan, but nevertheless continued to maintain growth. In TA, the thoracic stent graft relay pro was strong, while receiving additional application and insurance reimbursement for aortic dissection by Japan regulators. In the U.S., the Thoraflex hybrid and other products grew sales as planned. In segment profit, factors including FX impact and cost control contributed for an increase in profit. Next slide, please. TMCS is the Terumo Medical Care Solutions Company. Q3 revenue exceeded 50 billion yen for an 11% increase here on year. In HCS, hospital care solutions, there were signs of demand recovery in Japan, while PS, pharmaceutical solutions, grew strongly as it added new products. Hospital care solutions also saw signs of demand recovery in Japan for devices and pharmaceuticals in the infusion space, while adhesion barrier expanded. A November 2022 medical device price increase we enacted was also a contributor. In life care solutions, self-measurement of blood glucose products had been experiencing increasingly harsh competition that led to reduced prices and declining revenue. However, Q3 standalone demand recovered year-on-year in thermometers and blood pressure monitors. Pharmaceutical Solutions added the new combination product developed jointly with Kyoki Rin, G-Lasta subcutaneous injection body pod, growing sales was planned. In segment profit, inflation impacts including rising electricity costs in Japan are expanding, although we did institute medical device price increases in Japan in November. FX impacts are continuing. Next slide, please. Next is TBCT, Blood and Cell Technologies Company. Revenue remained strong in Q3, with continued double-digit growth when excluding FX. The blood center business remained strong outside Japan, while component collection consumables and whole blood collection automation innovation grew in Europe, and the United States especially. There was an increase in number of patients using Afrasis, leading to continued sales expansion. Cell processing saw steady demand thanks to sustained growth in cell therapy. In segment profit, the worsening of macro-environmental factors are impacting the new plasma innovation business start. As the latest update regarding Plasma Innovation, that business has just received IDE approval for the Nomogram version 2. Next slide, please. Tarumo has announced a revision of its earnings guidance. In revenue, we are revising upward by 40 billion yen from the original guidance, to 815 billion yen, to reflect FX impact. Our Q4 assumptions are 130 yen to the US dollar and 140 yen to the Euro. In operating profit, we are revising downward by 10 billion yen from our original guidance to 122 billion yen. Our assumption at the start of the fiscal year that inflation impacts would lessen in the second half was not realized. In fact, impacts are expanding in ways including rising electricity prices in Japan. In addition, we reflected the status of the Plasma Innovation business start. Other items included in this, as well as the guidance revision by company, are included in the reference materials. Regarding our dividend guidance for the fiscal year, we will take a step in a new shareholder return direction to increase the dividend by 2 yen above original guidance, for an annual dividend amount of 40 yen. In December 2021, Terumo announced GS26. Before the second year of GS26, now we can see the light clear from COVID-19. This is a good timing to enhance our corporate value with management perspective. Today, I will explain the four initiatives newly set for enhancing corporate value. First is to make M&A more proactive. Historically, Terumo gained its growth momentum from both organic and M&A contributions. In addition to existing growth drivers, we will spread more wide perspective in M&A including vein, CDMO and diabetes as the new growth drivers. Second is to accelerate profitability improvement. We will continue and expand the price increase activities we started from the second half, regardless of business segment and region. In VC2, we will bring forward profitability improvements, with the production sites transitions to cost-competitive locations such as Costa Rica and Vietnam deployment of automation models, GBS implementation, and other elements. Third is to enhance our capital policy. We continue the steady increase of dividend and improvement of dividend payout ratio, as well as aim total shareholder return to 50% within 5 years with the acquisition of treasury shares in the right time frame. We also aim ROE to improve by blowback as well as raising financial leverage with applying debt refinancing. We will raise both profitability and capital efficiency, which will lead to enhancements of our corporate value. Last is regarding our promotion of sustainability management. We announced the establishment of sustainability committee as of April 1st. Today, we also announced the policy revision of executive performance evaluations for implementing ESG and CSV themes in GS26 responsibly. We will implement corporate governance to sustainability management as well. We look forward to reporting the progress and process of these initiatives regularly onward. This concludes my explanation of our earnings. Thank you.