Terumo Corp

Good afternoon, everyone.

Thank you very much for joining us at FI25, the period ending March 31st, Earnings Calls for Terrible. Thank you very much for your time. Today, we will talk about the overview of the financial from CFO Hagimoto. and we will have a Q&A session after the presentation reapplied to finish it in about 45 minutes. In webinar, we have some English translation services available. You can listen in either Japanese or English, whichever you want. If you need to, you need to click the global button at the bottom and change your language. The shared slides are only in Japanese. English version is also available for documentation at our website. If we have problem in streaming, we will let you know with an email. And, Before our presentation today, I'd like to just have some information. There's a disclaimer. These are the forecasting projections of the future. In some of the comments will be projection. Comes with risks or uncertainties for the future projection. The actual result could be not exactly aligned with our forecast or projection. With that, I'd like to invite Hajimoto-san to do the presentation or financial announcements yes i am good day and haigimoto cfo thank you for joining our earning call today let me walk you through uh today with the agimoto uh me otaka who's responsible for uh you know uh uh is uh for the ir would be joining us from april We have an IR office, an FB&A, and also policies are set up by a financial team. We actually have these new teams being set up for the business management. Miyoshi is responsible for CNV, which is pushing forward with more technologies. Otaka-san and I will be responsible for communicating about those financial results. Thank you in advance for your support. With that, I'd like to make presentations on the financial results for FY25-21. This is the highlights of closure first quarter. We continue to benefit from people's business environment, achieving record high quarterly revenue of $260 billion for Q1. In particular, demand in the U.S. remains strong. Total revenue grew by 6%, excluding foreign exchange. In fact, we are progressing well against our full-year guidance, which we announced in May. Raising profits, adjusted raising profits for the year, all reached record high for a single quarter. In addition to increasing revenue, profits are also growing at a pace that exceeds revenue growth due to pricing measures and appropriate cost control being implemented globally, and we are steadily improving profitability toward our operating profit target for G26. Next slide, please. This is P&L and a free cash flow result. Revenue was driven by CMD and TBCT companies. Despite negative currency impacts, we achieved 260 billion yen in revenue, surpassing last year's Q1, which are temporary demand strikes. And for operating profit, too, grew significantly faster than revenue, reaching a record 55.9 billion yen. This was supported by improved gross margin from pricing strategies, effective cost management, as well as favorable currency and runtime gains. And free cash flow was 10.5 billion yen, a decrease of 4.2 billion yen year-on-year. This was mainly due to an increase in inventories as a result of business expansion and an impact on tariffs, but we will continue to maximize free cash flow through appropriate inventory management. Next slide, please. And this is about opening profit areas analysis, and GP incremental increment by sales increase was led by TIS and global blood solutions, progressing as planned against foliar targets. Growth margin and price is the next point. C&D pricing strategy contributed a lot to profit increase. Especially price increases in the US and delayed BPP in China exceeded our expectations. Profitability improvement measures also steadily delivered the result. S&D and expenses have increased as expected, along with business expansion. R&D expenses are flat. It was a flat year due to timing differences with no change to full-year forecast. Foreign exchange impact were negative on flow basis, but positive on stock basis, contributing to profit growth. Next slide, please. This is revenue by revenue, revenue by region. In America, double-digit growth in local currency with all companies contributing strongly, driving global sales. So, it was very driven the global sales very much. In Europe, strong performance of Plasix drove pharmaceutical segments growth. CBCT saw temporary revenue decline due to delayed order in some regions with recovery although expected going forward. in japan cmdb especially euro achieved double the growth driving the entire uh the performance cmcs i on the other hand expressed them probably revenue declined due to certain business transfer and supply chain in china euro saw significant growth thanks to the successful expansion of sales channel through bbp cis partially offset BPP-driven price decline with volume increases. Asia, CNV achieved revenue growth. Pharmaceuticals and global blood solutions saw temporary decline due to delay in some bidding timelines. Next slide, please.

I will now explain the results by the company. First is the cardiovascular company. Revenue grew 7% on a local currency basis, driven by strong performance in the US. TIS and Neuro led the growth. Aortic segment saw temporary decline due to supply issues with its surgical graft product line, but it is now resolved. On the other hand, hybrid products expanded steadily, improving profitability. Operating margin improved by 5 points to 29%. Various initiatives such as pricing strategies, profitability improvement measures, and the review of unprofitable regions have contributed. Forex was positive on the stock, resulting in higher-than-expected profit growth. Next slide, please. TMCS, medical care solutions, revenue declined temporarily due to business divestitures in the hospital care and supply issues for some products. Pricing strategies since April are progressing well. In pharmaceuticals, domestic CDMO deliveries were delayed, causing Q1 sales decline, while Plagex performed strongly overseas, resulting in revenue growth. Profits benefited from the pricing measures and foreign exchange rates with increase in the profits on an actual exchange rate basis. However, lower sales and production delays in pharmaceuticals were negative factors. Profit decreased on the local currency basis. Sales and profits were affected by one-time factors, but we expect to achieve the planned increase in the sales and profits for the full fiscal year. Next slide, please. TBCT bought in the cell technologies. Revenue grew significantly in the plasma innovation under the global blood solutions. Ricoh deployment to existing customers is complete, with further revenue growth expected as operations optimize. Core business is progressing as expected. Global therapy innovation saw increased demand for cell collection and cell and gene therapy, especially in the U.S., along with replacement demand for certain devices. The profit increased by improved profitability from higher sales in Africa. Next slide, please. Last slide. I will now give an outlook for this fiscal year. regarding tariff impacts. The estimated full-year impact is around ¥10 billion revised down from the previous estimate of ¥17 billion due to changes in tariff rates, mainly on imports from Japan. The impact included in Q1 is extremely limited thanks to local inventory, and most of the impact is expected to materialize in the second half of the fiscal year. On the other hand, our fundamentals remain solid, and even excluding forex effects, Q1 results exceeded the plan that forms the basis of our full-year forecast. Demand is expanding, especially in the US and China, and it is expected to continue. company-wide pricing measures are having a greater than expected effect and we plan to pass on the tariff impact into prices to mitigate that impact and of course the situations may not allow us to pass the entire amount during this fiscal year but we mitigate it the tariff impact as much as possible considering our strong fundamentals We maintain guidance for the current fiscal year and work to achieve it. Thank you very much for your attention.

I'd like to start to take questions. Please use the hand raise function on Zoom should you want to ask a question. If you want to cancel the question, you can click one more time for the hand. I'd like to take more questions from many more people, so please limit your questions to two questions at most. Together with Hagimoto-san, Otaka-san will also join AQ&A. Good afternoon, everyone. My name is Otaka who will be leading the corporate strategy and planning section. Very nice to meet you. With that, we'd like to start taking your question. We would like to go to SMBC Tokumoto-san from SMBC Nikko Securities. Please go ahead and ask. Yes, this is Tokumoto. Thank you very much. Hello. Hello. So the actual was quite strong. But I'd like to talk about C&A and the gross margin. There were some maybe special events because the gross margin was 56%, which was quite good, positive. But compared with your expectation conventionally, how much is the variance from the expectation? And I see on the AA is just likely smaller than last year. Maybe there's a timing issue on R&D. But in the Q1, I mean, cost control was quite strongly being implemented. Isn't there any risk or do you think there is a risk, no risk for H&G going up in Q2? Can you talk about H&A growth margin on the first quarter? Thank you very much for your question. Let me talk about growth margin. 53.3% versus last year. was last year. This quarter is 56%. Fundamental was performing quite well. That was one driver. And a VC score continued. That gave us more productivity gain, efficiency. That was the reason. But the other one is foreign exchange. As we have highlighted in one of the slides, we have a stock of the internal inventory that actually contributed for about 2 billion yen or so. So, that is also have some impact to our gross margin. So, that is compared with the annual projection at the beginning of the year. We believe that this had some upside from our expectation, but it's quite strong on Q1. But to your question, Q2, or in second half, there are going to be some impacts from tariffs, as we may expect. S&J, to the other question, this one is talking about variable cost. And this is growing together in line, in tandem with the top-line sales. But S&J is being controlled throughout the year, through and through. And especially in the upcoming quarters, we are not expecting surprising big substantial increase in S&J. So we don't expect that. Okay, understood. Thank you very much. I have a second question in your projection moving forward. You mentioned about the impact potentially from tariffs. The impact was minimized than previously being expected, right? And CMV, you are planning to have a price transfer, you know, passing the prices over to customers. Now, GPU and looking at the group procurement, there were some price changes last year, too. And so those additional incremental initiative for prices, why are you confident this is going to go well? in a quarter basis, how much is going to be really being delivered? I mean, the passing prices from the U.S. tariffs, can you talk about your perspective on that? Yes, last time we talked about 17.5 billion yen, but it came down to 10 billion. We adjusted that. So do you know why, right? Tariffs from Japan... In the last time, the first 90 days like 10%, after that 25%, that was assumption in which we have calculated with, but now it is up to 15% from Japan, and that drove down to 10 billion yen in terms of impact on tax. And you also asked about that 10 billion yen, how is that going to impact throughout the year? We do have inventories in the U.S. footprint. We do still have some inventories, right? In the first half, in terms of inventories, you know, so the impact from the tariff will be limited. 2 billion yen in Q2, 4 billion yen each for Q2 and Q4. That's our assumption. In total, that will be impact of 10 billion yen throughout the entire year. But let me also talk about price, as you asked, especially for CNV, cardiovascular segment. We, from last year, by the way, this is not only limited to types. The team has been passing the increase, increase, increases, increases. from last year and some of which was implemented in the quarter one. And there's going to be some renewable contracting which will be asking for increasing prices as the timing of renewal comes. So at this point in time, it's not necessarily it's a completely new contract agreeing because of time. No, it's not. Because CNB has been doing that in their normal operation. I think I just wanted to highlight that because it's important. Let me also talk about the other companies as well. We are like wants to maximize the passing that tariff back to the price points. as long as they make sense. So the situation of the category or looking at the competitors' moves are going to be assessed while deciding on price increase. No, thank you very much. It was very clear. Thank you very much. I'd like to ask Macquarie Capitalist Tony Nguyen. Could you ask your question, please?

Hello, can you hear me? Yes, we can hear you well. Okay, perfect. Yeah, thank you for taking my questions. So the first question is on the La Canve auto-injector pen. So a couple of days ago, your customer mentioned this product being prepared for launch. We believe the USDA should approve the Lecambi alder injector by the end of this month, right? Could you give us some color about what preparation you are making for this pan? On slide number eight, you mentioned there is a temporary delay in some products. I just want to make sure that – I just want to understand whether that's a Lecambi.

So thank you very much for your question. So what we are doing for the preparation on our side is really to make sure that we can provide as a supplier for the materials and the CDMO business. It's more about making sure we can ramp up the productions, make sure that all the logistics arrangements are put in place, and those are sort of the key activities that we are taking on for the launch of the KEMBI. In terms of the delayed products, it is not the Rekembe product that you've mentioned. It's really more about the other products that we have been shifting that did shift from a calendar point of view when we compare to year-on-year basis.

Okay, very good. Another question relates to slide number seven, the cardiovascular business. So on this slide, you had volume growth as well as price increases for thermal intervention systems. which is the biggest growth driver. You had both volume growth as well as price increases. Could you help me understand what are the relative contribution from volume versus price?

So I think it's the impact of the price is quite smaller. Excuse me, it's the other way around. So what we are considering is that about two thirds of the impact of the growth is coming from the volume increase. One third is the result of the pricing increase that we have seen is sort of the rough differentiation of the price and the volume increase.

Do you think such a price increase would be sustainable?

So we've actually had this built into our contract. So the price increase compared to the last fiscal year is, we would assume, is already kind of... quite positive that we can achieve this. The volume is where we would probably see some ups and downs going forward, but like I mentioned before, we do feel that the increase, especially in the TIS business in the U.S., is going to be very strong.

Okay, this will be my last one. So just below the TIS, right, you see pteromon neural. So in China, the sales channel expanded with VVP, resulting in a significant increase, right? So typically in China, when you have VVP, the sales declines dramatically. So can you explain what happened here?

So in terms of the neutral products in China, when VBP was introduced for this area, we actually had a lower market share compared to the current situation. So what took place is that since VBP also determines not just price but also the volume commitment, we were able to take advantage of that volume commitment and increase our prices in China for the neutral products.

Understood. Okay. That's all from me for now. I'll get back into the queue. Thank you.

Thank you very much for the questions. Let's move on to Steve Shoken. Mr. Yamaguchi, please.

This is Yamaguchi from the city. Can you hear me? Yes, I can hear you very well. Please, go ahead. Uh, you talked about a week on your presentation, all of which was, uh, was being delivered to the hostels. Consumables are all being started to be delivered, if I understood. And it's helped the profitability, but other businesses are also doing well. So it's kind of not clear in terms of Rika how much contribution is done for the profit. Can you talk a little more about what was the upside on profitability from Rika? How much is coming from Rika? Thank you very much. As you have pointed out, yes, all the centers, we deliver to all the centers. The revenue and the volumes are all going up and the production volumes are also starting to increase. so the efficiency for production and the yields are all getting better therefore that or driving our practicality so for TV city business so it's making a good contribution to the TV city business as a whole yeah but you From the outside in, it's not clear, but you guys can see it from inside, right? Can you share how much is that contribution? There's no number that I can disclose to you. But, of course, internally, Ricca versus other businesses are, yes, managed and tracked separately. But Ricca's contribution is for sure making a good contribution to the profit. And you talked about the other question is you talked about prices a few times. So, you know, in the past, you've done it in the hospital business, and that was a clear win. And now CMV is doing that. So what is the – from outside the end, can you talk about that so that we can also understand when the pricing impact is happening? Oh, can I clarify your question? So how much pricing is – yeah, from – So from when to when? In Hasbro, I think the impact was started, you know, there was a clear distinction between first half impact and second half impact. Can you just do something similar for CNV? Oh, okay. For CNV, our initial We had this initial plan for price impact. I would say the result is bigger than that, coming also from North America, and the B of Lease has been delayed. That's also a positive. In Q1, for CB, about 2 billion yen was the impact, upside, upside, better than the expectation, was 2 billion from price in Q1. But BVP is going to be expanding its scope, as we predict. And in North America, some of the prices went up in Q4 last year. So $2 billion as an impact will gradually taper down, gradually. So that's how we see it. Last year in Q4, the price started to went up in Q4. So Q1, you know, year on year, it's going to be, there's going to be some upside year on year. And the BBP, China delays, is working for positive right now. Yes, that's right. That's right. Thank you. That's all for me. Thank you very much. I'd like to now ask Kotagi-san from Miso Security to ask you a question, please.

Thank you. My name is Kotani Mizuho. Can you hear me? I would appreciate for a little more of the quantitation, page 5, the GP up because of the sales revenue up. But the sales, let's say, the 8 billion yen may be a reasonable amount, but it appears to be a bit small. You include Eureka, so the consumables sales is putting up, and... You used to be the total GP and the total sales. What about the gross margin? Can you give us a bit more of the breakdown? Okay, thank you very much. Well, the sales increase has been up and the gross margin has been up. Well, last year, there was a temporary factor kicking in. namely, before VBP introduction, people rushed by, and CNB was pretty good in situation. So last year, Q1, excluding Forex, 10% growth was achieved. That was good. So that was a bit temporary, and compared against that, the current Q1 appears to be less strong in terms of the simple calculation, but in terms of what we're shooting for this year, If you look at the growth margin and the business growth, we're pretty much in line with the plan. It's progressing well. And 4.2 billion yen, the growth margin, price-wise, the impact has been 4 billion. And the remainder is from the remaining factors. So Q1, 2 billion yen was expected, but as I explained, North America price up has been producing more effects, and the VBP has been delayed. So these two have been positive. Hence, 2 billion yen more than we expected. And regarding the gross margin of price, the productivity has been up and the vc square has been producing a positive effect so these are the additional positive factors and if you look at the plasma innovation rika the more sales that we achieve There's been mixed effects. That's why you see slight negative factors, negative numbers. So they're kind of offsetting each other. If you look at the VVP, the impact was expected to be about 4 billion yen. But for Q1, there was little impact or the impact due to VVP was minimal. Yeah, VBP is spreading. So last year, second half, it started the expansion. And that's why we see slight negative numbers. But 4 billion yen, out of the 4 billion yen, in Q1, there's been minimal impact, but it's expanding. Okay, let me ask you another question. I hate to ask you questions, but the Olympus, There is so much attention going to Olympus. And my prevention at Costa Rica, September 2022, you received the FDA warning letter. Well, it's been quite a while, but catheter, washing, and the supplier, the components, let's say you've the supplier corrective action reports need to be produced, and that was delayed, I suppose, so that's a detailed report, if I understood right. And microvention, Costa Rica last year had another inspection, so it's been quite a while, and 483 is yet to come, and then... Am I right to understand the warning letter is getting into the past that you have been resolving the situation, the problem? Yes, right. Well, last year, there was the follow-on inspection, and we had no additional requests from the authorities. So when it comes to the additional requests, we don't quite expect any. Okay, that's reassuring. Thank you very much. Thank you very much. So let's move on to the next. Morgan Stanley, and Mr. Hayashi, your question, please.

Hello, and I'm Mr. Hayashi from Morgan Stanley Securities. I hope you can hear me. Yes, I do. So I'm supposed to ask only two questions, right? So first question, at this point in time, so March 2026, your projection, you didn't make any changes of the final show years. annual, you know, project forecast. Can you give me a little more nuances why you didn't change, revise it for the full year? Now, you talked about tariffs. You could potentially project less of the profitability because of the potential impact on tariffs. But in Q1, the impact, positive income price was bigger than expected. So even if there might be some impact on tariffs, Price can go up, give more upside. Therefore, is that the reason why you didn't change the forecast for full year? That was my personal perception. But is that the reason, if you can imagine, is this wrong to imagine that that's the reason for not changing it? Well, the impact for the TAIF is going to be $10 billion. That's a negative impact for $10 billion. That's like our current projection. But as you said, there's an upside for Q1. And if you look at that, as Ota-san, my colleague at ZEDS, just this North American price impact will continue at least for Q3, if you think about it through and through. So, 10 billion yen, if it's upside, if downside is only about 10 billion, then we should be able to offset that. And for that, we will also pass down those impacts, healthy impacts to the price as much as possible. So there might be some negative impact, but the Q1 has upside, and we also can expect more upside for pricing. Therefore, we don't necessarily have to change the full year forecast. Therefore, we stay put this time. Okay. All right. Thank you. Makes sense. Thank you very much. My second question is, in first quarter, there's expenses of the organization restructuring, if I understand correctly. But operating profit, when you put the plan for operating profit, there's an adjusted operating profit and a regular operating profit. Adjustment was starting out to be zero at the very beginning. but there is an organizational change cost from Q1, and also there is a guarantee from the farmers kind of offsetting it. But the organizational restructuring cost for Q2 and forward, do you think that will continue to occur in about the same size? And clinical medical production complete in third quarter, In third quarter, are you expecting special laws, one-time laws? Are you expecting any of the special laws, expecting that or not? Well, thank you for your question. We are always looking at, you know, looking at the businesses. and they need to be flexible. We need to account for potential change of reorganization cost. But that impact is most of them or majority of it is coming from curriculum as you pointed out. So we are not expecting this to be continued, at least not at that size. So reorganization expenses are only happening and it will all close in Q2, end of Q2? Well, what we are expecting is majority will be complete by the end of Q1. Majority. Oh, okay. Thank you. Thank you. That's all for my question. Thank you very much. I'd like to now turn to Yoshihara-san from UBS Securities for your question, please.

Thank you very much. My name is Yoshihara, UBS Securities. Thank you for the question. Let me ask you the first question. The profitability rate in this slide is AOP. Well, it really can be either after or before the adjustment. And... You were talking about the positive impact due to Forex. And if I remember, if I understood it correctly, even with that, I think the number has been higher than the past numbers. And I wonder if that kind of a high level will be sustainable. And before the tariff kicked in, so much was produced. and the profitability rate has been very high and the situation may not continue on in q2 and forward and wait for a tariff will kick in a lot in the second half of the year but including it as such impact the q1 a margin at this kind of a high level would be sustainable or not Thank you very much for your question regarding C and V. AOP, 24 and plus 5, there's been a 5% point up. And as you mentioned, Forex has been favorable centering around the stock. So 2.2 point impact has been there so far. And excluding that kind of positive impact, it is still positive. And it's partly because of the price up and profitability management and production efficiency improvement. So these have been producing positive results. And regarding sustainable or not, Q1 tariff impact has been almost zero. So Q2 and the second half, the tariff impact should begin. So throughout the year, 25% is our forecast, and we consider it should be achievable. Okay, let me confirm something. Tariff impact, you forecast the tariff impact and Ashitaka has been producing lots of products and it's been profitable because of that? No, it is not priced in. Okay, here's the second question. TIS interventional system. And the U.S. has been performing very nicely. And last year, Q3 2025, well, there was some production trouble last year. So that was at a high level. And as of May, you didn't say there should be huge growth, but the numbers you are showing now are better than that. So what's going on? What kind of a background? For example, you have been trying to increase the market share or the market as a whole has been performing well. Of course, the unit price may be a factor, and, of course, the volume increase may be another factor. So can you give us the kind of breakdowns? Thank you very much for your question. Well, as I went through during the presentation, price has been one factor, and the increased volume has been another, contributing to increased sales and profit. And if you look at the axis of profits in oncology, the peripheral in many areas, the sales revenue has been up. And the number of the cases covered are almost as high as pre-COVID-19. So, number of patients has been up, and the volume has been up, contributing to the great results. So, you're not increasing the market share? Well, the products have been very powerful. So, in North America, our products are highly rated. I put it that way. So, of course, the market share has been seeing some contribution from those factors. Okay. Thank you very much. That's it. Thank you very much. So let's now move on to Macaulay Capital. Mr. Tony Ren, your question, please.

Hi there. Maybe just a quick follow-up question on slide number 15 here. On slide number 15, you have the second last row, you have lost compensation from a pharmaceutical company, 3.2 billion. Just wanted to get some color on that one. Is that related to the German company? plant that you acquired from WUSHI or is that related to the biosimilar product?

So thank you for your question. So this is not related to any of the newly acquired Urushi plant. This actually relates to the impact that we booked in Q4 when we canceled the project for some of the activities with the pharmaceutical companies. So this is, we've continued the negotiations with the pharmaceutical companies. So there is some compensation for the right or for the impairment that we have booked in Q4. So it's relatively more of a relationship towards the Q4 activity in last year that we've come to an agreement with the pharmaceutical company in this quarter.

So you will pay them 3.2 billion?

No, it's the other way around. So we booked the impairment in Q4 last year, so they are compensating for that impact that we put in Q4.

Okay, understood. So they are paying you. Okay, great. Thank you.

Thank you very much.

Is there any other questions? Seems like there is no question. We'd like to close our Q&A. And this closes FI2026. The first quarter for 2022 March period will be over right now. Thank you very much for your attendance.