Terumo Corp

I'm Hagimoto, Thermos CFO. I would like to present an overview of the year and financial result for the fiscal year ending March 31, 2024. These are the highlights of this year's financial statement in FY23. Sales revenue, operating income, and net income all reached record highs. Revenue growth was plus 7%, excluding exchange rate effects driven by growth in the U.S. and Europe. Operating income growth outpaced sales growth, increasing by plus 14% when excluding exchange rate effects. Net income surpassed 100 billion yen for the first time to reach 106.4 billion yen. For FY24, we expect continued growth globally, with revenue growth of 7%, excluding exchange rate effects. Operating income is expected to increase by plus 16%, excluding exchange rate effects due to the expansion of highly profitable businesses. Next slide, please. These are our P&L results. Sales revenue for the full year exceeded 920 billion Japanese yen, a record high. Cardiac and vascular, TIS, neuro and vascular, as well as the blood and cell technologies, blood center business, led with double-digit growth. Operating income also reached a record high of 140.1 billion Japanese yen. The increase in SG&A expenses due to an increase in employee headcount to expand therapeutic device sales in North America was more than offset by the steady progress of profit improvement measures and the revision of the pricing policy. Current profit reached a record high of 106.4 billion yen. Gross margin, operating income margin and adjusted operating income margin for the full year all improved from the previous year. Next slide, please. This is an analysis of the year-on-year change for the three-month fourth quarter. First, the gross margin effect was due to the absence of one-time expenses in the current quarter that were recorded in the same quarter of the previous year. as well as the continued easing of immigration and the effects of cost-cutting measures that continued in Q3. In pricing, the effect of the pricing policy review, which was expanded in the second half of the year, is being flat. The increase in SG&A expenses is mainly due to the increase in employee headcount to expand sales of therapeutic devices such as neuro-understand graphs in North America. Next slide, please. This is an analysis of change in profit for the full year. Gross profit growth due to higher sales exceeded our expectations as a result of strong performance in cardiac and vascular and blood and cell technologies. The gross profit margin effect was in line with the original plan due to the progress of profit improvement measures and the effect of product mix improvement as well as easing inflation. Turning to increased SG&A expenses, we have increased employee headcount to expand sales of therapeutic devices in North America, which has led to sales growth. The breakdown on foreign exchange effects was plus 10.2%, 2 billion yen in flow and minus 5.2 billion yen in stock. Next slide, please. This is revenue by region. Overseas sales drove growth, particularly in the Americas and Europe. In the Americas, cells grow 8%, excluding exchange rate effects due to strong cell therapeutic devices such as neuro- and vascular-related products and double-digit growth in the blood center business. In Japan, despite negative factors such as a decrease in cells due to the divestiture of nutrition business and the drop in demand for thermometers, cells were higher than in the previous year, driven by cells in the field of cardiac and vascular and blood and cell technologies. In Europe, growth was plus 8% excluding exchange rate effects as a result of continuous strong sales of therapeutic devices such as neural and stent grafts. In China, while there was some impact from restrained purchasing by distributors as an access product, we're subject to concerted purchasing tiers maintained double-digit growth even when excluding exchange rate effects as a new place places. will not begin to apply until FY24. Emerging economies such as Asia and the Middle East led the way in terms of growth. Growth continues in all companies, particularly in the cardiac and vascular companies, EIS and cardiovascular business, and in blood and cell technologies, blood center business, and pharmacy therapies. Next slide, please. I will next review business performance by company, first in the cardiac and vascular company. Excluding exchange rate effects, net sales grew 9%, exceeding the four-year forecast. Its vascular and neural business performed well globally, particularly in the Americas and Europe. Although there have been supply issues with some access products as well as the neural business's cerebral inflection device, we are steadily recovering market share. Vascular also continues to expand sales of hybrid products and stent grafts. Profits increased due to higher revenues and progress with profit improvement measures. Next slide, please.

So next is TMCS, Tedumo Medical Care Solutions. Negative factors such as a decrease in sales due to the sale of the nutrition business and a low in demand for thermometers were offset by the effects of revised pricing policies and the easing of inflation resulting in an increase in sales and a significant increase in profit. Pharmaceutical solutions is also progressing according to plan and the profit margin for TMCS as a whole improved by 2 percentage point. Next slide, please. Next is TBCT, blood and cell technologies. Excluding exchange rate fluctuations, net sales increased by 8% due to the strong performance of existing businesses, especially the blood centers business. Profit increased significantly as the effects of the revised pricing policy and the transfer of production to Costa Rica offset the one-time intangible asset impairment charge recorded in Q4. The profit margin also improved by two percentage points. Both sales revenue and profit exceeded four-year forecast. Next slide, please. Next is a forecast for FY24. Revenue growth is expected to continue across the company, particularly in blood and cell technologies, with a forecast of plus 7% across the company, excluding the exchange rate effects. Operating income is expected to grow plus 16%, excluding exchange rate effects, significantly outpacing sales growth. We aim to improve our operating margin by 1.6 percentage points. to 16.8% by focusing on company-wide measures to improve profitability while steadily increasing the number of each company's high-profit growth drivers. We will continue our efforts to improve capital efficiency. Next slide, please. These are factors affecting profit in the FI24 forecast. Under increase in gross profit due to sales growth, we expect an increase in sales at all companies led by the cardiac vascular company. Gross margin effects. includes the effect of cost reduction measures and business mix improvement, as well as the impact of inflation. Among cost reduction measures, we will continue to optimize and improve the efficiency of our production system, and we will promote projects. to further improve efficiency at the Ashitaka plant, which serves as the backbone of TIS. Although we are making some conservative assumptions such as high raw material prices and high electricity costs, inflation is expected to be almost flat for the full year versus FY2023. Thank you very much. the effect of which will be felt in FY24. Exchange expenses are expected to increase at a healthy rate in line with business expansion. At the same time, we will review head office expenses by promoting a company-wide cross-functional cost optimization project to support functions. Next slide, please. So these are the assumptions we are making for the FY24 forecast by company. Cardiac and vascular, the impact of the decrease in sales and profit due to intensive purchasing in China and the official price revision in Japan has already been factored into the planned figures. However, this negative impact will be covered by all businesses and sales are expected to grow for the company as a whole. Profits are expected to grow faster than sales growth due to continued profit improvement measures and the effects of product mix improvements. For TMCS, while we expect raw material prices increases, we will bounce back from These, as a result of price revisions and a double-digit growth in the pharmaceutical solutions business, are expected to achieve 6% plus sales growth and further improvement in profit margins. The first CDMO project in Alzheimer's drug, both of which are slated for this fiscal year, are expected to have limited impact on FY24 results. TBCT's losses in the plasma innovation business will narrow due to the accelerated rollout of RECA. For the core business, we expect stable growth continuing on from FY23. As a result, the company as a whole expects to improve its profit margin by two percentage points. Next slide, please. So now this is the last slide for myself. The company executed a two-for-one stock split of its common stock in April 2019 and again in April 2024. The graphs and figures on this page reflect these stock splits. our dividend policy will remain unchanged and stable dividend increases will be implemented. The annual dividend for FY23 is expected to be 22 yen per share with a payout ratio of 30.8%. For FY24, we expect to increase the dividend by 4 yen to 26 yen per share, achieving a payout ratio of 31.6%. Together with ongoing annual dividend increases, we aim to achieve the total return ratio of 50%. This concludes my explanation. Thank you very much for your kind attention.

My name is Samejima, and I have been appointed President and CEO as of February 1st this year. CFO Hagimoto has just presented our results for FY23 and Outlook for FY24. I would now like to take a longer-term perspective and talk about Terima's future, our vision, and the path to it. Our mission is to contribute to the evolution of medicine and to improve patients' quality of life by solving medical issues. Terumot's main mission is to create solutions that are close to GEMBA, such as promoting minimally invasive vascular treatment and personalized solutions to provide optimal treatment, as well as improving the efficiency of medical care through digital transformation. Our efforts to solve medical issues are the very essence of Thermos business, and we will continue to take on the challenge of creating social value through our business activities and, by extension, maximizing Thermos corporate value. However, I feel a healthy sense of urgency as the social environment surrounding health care undergoes rapid transformation, namely transformations such as our aging society's coexistence with chronic diseases. The increasing burden of medical expenses and insurance premiums and straining financial resources for medical care, shortages of medical personal health care equality, and compatibility between increasingly sophisticated medical care and economic efficiency, such as the expansion of biopharmaceuticals, and the evolution of genomic medicine. The problems we face are increasingly complex and serious, and unfortunately, there is a limit to the number of problems that can be solved by simply providing a product. The development and manufacture of top-quality medical devices backed by reliable technology is termed as non-negotiable strength, but when I ask myself again about term's reason, For being, I realized that my greatest fear is that we will not be able to realize our corporate philosophy of contributing to society through healthcare. And so once and for all, Teramo will leap over the boundary of being a medical device manufacturer. We will not be abandoning our commitment to manufacturing, but we will be abandoning our commitment to being a medical device manufacturer. Term offers not only products or services, but also innovative and comprehensive solutions to medical issues. To this end, without innovation, we have nothing to say. This year, Teramo has created a new post of Director of Innovation. This is an expression of how much we value innovation and our commitment to it. In order to respond to diversifying needs with a sense of speed, we will be promoting open innovation with the focus of internal development and utilize all resources, including collaboration with startup companies. Our innovation means not only developing devices for existing markets, but also creating and employing new ideas to create new markets, value, and solutions. Hence, efforts are already beginning to bear fruit. With the recently announced capital alliances with Medcom, the development of Thank you very much. Now, Terumo is required to make changes that are not simply continuation of past. In order to continuously create valuable medical solutions, we are ready to make startling next moves that will surprise everyone. Looking back on the past, thermal has been able to reap the seeds, opportunities when they arise, and has achieved this continuous growth. For example, in vascular treatment, which we first entered in the 1980s, from the mid-1990s onward, we saw great potential in less invasive TRI, which is the vascular catheterized through the trans-radial artery and began developing TRI-related products. As you all know, we have now established ourselves as the undisputed number one company in the vascular access field. It was not until the 2000s that the company began to compete in earnest in cross-border M&As.

So this has drastically changed the business and geographic structure of Terumo, laying the foundation for today's Terumo, and creating a corporate structure that is resilient to macro-environmental changes. In terms of scale business and company size, we have made steady progress. So now, how do we realize the next discontinuous transformation? There is no discontinuous growth without continuous growth. So our approach will be GS26 multiplied by bold plus alpha. First, I would like to talk about GS26. GS26 is a five-year management strategy that aims for continuous growth based on the technology, experience, and know-how we already possess. Our basic policy will remain unchanged, and we will steadily implement the winning strategies we have drawn up, such as continuing profit improvement measures, focusing on highly profitable businesses and products, and streamlining, strengthening internal development. So in order to achieve this continuous growth, on top of this, we believe that it is essential to add bold plus alpha. In other words, to optimize our portfolio. By doing so, we aim to achieve dramatic growth that cannot be attained in the world envisioned in JS2 and 6. The risk resilience over a unique business portfolio was also demonstrated during the COVID-19 pandemic. Nevertheless, we do not believe our current portfolio composition to the perfect state of affairs. We will explore company-wide synergy effects and explore directions to take to increase corporate value from both growth and revenue perspective as well, taking into account our responsibility to supply healthcare infrastructure as a leading company in the industry. We are committed to reexamining and decisively optimizing our business portfolio, including drastic structure reforms. Terumo has used effective mergers and acquisitions as a driving force for growth while building on the stable profitability of its core product lineup, which has undergone continuous improvement and refinement. I've been directly involved in many large cross-border deals such as acquisition of Blast Q-Tech, an artificial blood vessel company, microvention, a vascular treatment company, and the Angiocele hemostatic device business, as we aim to bold plus alpha with our sites. On a vision of the future beyond GS26, we will commit to MNA through to execution. Looking at our financial position, we have a very high level of financial soundness, and there is still more than enough room to leverage our financial resources. Supposing we were to come across the right deal, we would be well within striking distance of acquisition on a substantial scale, even, for example, the largest deal in terramous history. We are undaunted, and we will plant the seeds for more drastic next growth according to the precise strategy. GS26 sets three financial goals. Under the GS26 multiplied by bold plus alpha measure, Terumo will also be conscious of capital efficiency, such as ROIC and RE, and will focus on profitability. The pursuit of profit is essential for the sustainability of Terumo itself, as well as for the creation of sustainable social values through the resolution of medical issues, and this is something on which we will never compromise. Improving profitability is one of the key issues, and in the FI24, we will aim to achieve our highest operating income for the fourth consecutive year. Alongside reiterating our commitment to the 20% operating margin set out in GS26, we are aimed to break through this with Boll Plus Alpha. At the same time, we will strive for sales growth to maximize corporate value. As mentioned in the FI24 guidance we just announced, We expect to be on the verge of our first revenue of 1 trillion yen this fiscal year. But for us, this is only a waypoint. Terumo aims higher. Well, internal development is expected to generate several hundred billion yen of growth through GS26 in the future. More than 100 projects are already running for Beyond GS26 as well. In addition, although we decided to raise prices last year, we do not consider this to be the end of our price adjustment policy. We aim to maximize corporate value by thinking outside the box and executing from a zero-based approach. to improve her ability to generate cash. Finally, I would like to talk about Terumo's view on shareholder returns. In the last fiscal year, we changed the index for shareholder return from the conventional dividend payout ratio to total return ratio and set the target level at 50%. However, the top priority of cash allocation is ultimately gross investment. This is because expansion of the company's intrinsic value is Terumo's concept of true shareholder returns. We will manage our company while conscious of the resulting total shareholder return. So what more is needed to improve our intrinsic corporate value? Our goal is not just to chase numbers. Terimo's goal can only be achieved if the quality, safety, and stable supply of the medical solution it provides are ensured. By establishing a thorough quality control system for our product and solutions, as well as increasing the transparency of that system, we deliver an environment in which healthcare professionals can focus on their medical care and treatment with peace of mind. There's one more thing we must not forget. Even if you have a great business and growth strategy, that is not enough to increase. Thank you. promoting DE&I seriously. We will do our utmost to be a unique global company that contributes to healthcare, and we will put all our efforts into enhancing the value of Terumo itself, and we will achieve high levels of shareholder returns. So please expect much from Terumo going forward. Thank you very much for your kind attention.