7731.T FY2025 Q3 Earnings Call Transcript
Date: 2025-02-07
Source: Financial Modeling Prep

Yasuhiro Ohmura: This is Ohmura, Deputy CFO. Thank you for your precious time despite your busy schedule, to attend our financial results conference, today. I would like to explain our third quarter financial results and the full year-end forecast for the fiscal year ending March 31, 2025. The top half of the presentation shows the key points for Q1 to Q3 cumulative results and the bottom half for the third quarter alone. For the cumulative results from Q1 to Q3, the nine months from April to December, showed a decrease both in revenue and operating profit compared to the previous year. This was due to the impact of decrease in sales of semiconductor-related business in the Precision Equipment business and the Components business as well as the recognition of one-time costs of approximately ¥5 billion due to the relocation of the headquarters. The bottom half of the presentation, the third quarter alone, October through December results also showed a decrease both in revenue and operating profit compared to previous year, just like the cumulative results. This was due to the decline in sales in the semiconductor-related businesses, the impact of the absence of sales of G10.5 FPD lithography system recognized in the previous year and the one-time costs of approximately ¥2.1 billion including restructuring costs for the Industrial Solutions business and the impairment losses on idle assets due to reorganizing basis. Slide 4 now shows the cumulative results from Q1 to Q3. As for cash flow, although the operating cash flow for the third quarter was nearly ¥40 billion, there were large expenditures in the investment cash flow related to the acquisition of RED and the relocation of headquarters resulting in the negative free cash flow. Slide 5 shows the cumulative results from Q1 to Q3 by segment. In the yellow box, the top row of each segment shows revenue and the bottom row shows the operating profit. I will now explain details segment-by-segment. First, the Imaging Products Business, revenue increased by ¥13.7 million year-on-year to ¥235.6 billion and operating profit increased by ¥900 million to ¥43.8 billion. Sales increased, thanks to the launch of new products Z6III and Z50II, leveraging the cutting-edge technology of Z9. Sales of Digital Camera-Interchangeable Lens type increased by 30,000 units year-on-year to 670,000 units and Interchangeable Lenses increased by 40,000 units to 1.02 million units. The operating profit margin was maintained at 19%, the same level as the previous year. The Imaging Products Business continues to be a major pillar of Nikon's overall earnings, thanks to our strategy focus on mid to high end models for professionals and hobbyists. Next, the Precision Equipment Business, revenue was down by ¥29.6 billion year-on-year to ¥124.9 billion and operating profit was down by ¥11.7 billion to a loss of ¥600 million. The unit of sales of new Semiconductor Lithography Systems was 6 units, down 16 units from the previous year. On the other hand, sales of FPD Lithography Systems for high-resolution panels increased by 15 units from the previous year to 26 units. The Precision Equipment Business as a whole saw a decline in both revenue and operating profit as the increase in FPD revenue could not offset the decrease in Semiconductor revenue. In the third quarter alone, the completion of installation of some Semiconductor Lithography Systems that had already been delivered were postponed to the fourth quarter, resulting in a fall short of the plan. Slide 8, the Healthcare Business. In Life Science Solutions, sales decreased due to the market stagnation in Europe, the United States and China, but the Eye Care Solutions went up mainly in Europe and the United States and the overall revenue increased ¥4.7 billion year-on-year to ¥81.5 billion. On the other hand, operating profit decreased ¥800 million yen year-on-year to ¥2.1 billion due to the impact of the decrease of revenue in Life Science Solutions and the increase of upfront investments such as R&D expenses. In the third quarter alone, temporary logistics disruptions caused some supply delays, resulting in the postponement of sales of some products to the fourth quarter. Slide 9 shows the Components Business. Revenue was down by ¥10.3 billion to ¥49 billion due to a decline in sales of EUV related components and in quarters caused by delayed market recovery. Operating profit was down by ¥7.1 billion year-on-year to ¥3.6 billion due to the impact of the decline in revenue as well as the restructuring costs in the Industrial Solutions Business. Digital Manufacturing Business, Slide 10. Revenue increased by ¥4.3 billion year-on-year to ¥18.2 billion, thanks to the strong sales of SLM Solution’s large format metal 3D printer, namely the NXG series. Operating profit saw a reduction and deficit of ¥1.7 billion due to increased sales at SLM Solutions and the disappearance of one-time costs incurred in the previous year. Next, I will explain the full year-end business forecast. Regarding the full year-end forecast, we have revised down revenue by ¥5 billion and operating profit by ¥3 billion, respectively, reflecting the decline in the sales of related products due to the delayed market recovery in the Components Business. However, due to the improved financial income and loss in the third quarter, we will maintain a profit attributable to owners of parents at ¥16 billion. We also maintain the annual dividend at ¥55. We are currently acquiring ¥30 billion worth of share buyback and as of the end of January, we have already acquired ¥19.3 billion. The assumed exchange rates for the fourth quarter remain unchanged at ¥145 to the U.S. dollar and ¥155 to the euro. Please refer to Slide 13, a table showing the main numbers of our full year performance forecast including year-on-year and the previous forecast comparisons. The outline has already been explained. Slide 14 shows a list of full year-end forecasts by segment along with year-on-year and the previous forecast comparisons. I will explain the details segment-by-segment. First, the Imaging Product Business, please look at the bottom left of the document. We have revised up the Digital Camera related market scale from our November forecast, taking into account the trends up to the third quarter. Specifically, we expect the Digital Camera Interchangeable Lens type to increase by 300,000 units from our previous forecast to 6.4 million units and Interchangeable Lenses to increase by 400,000 units to 10 million units. The camera market continues to expand through the third quarter, mainly in China. However, there are concerns about excess inventory, especially in China. So, we will maintain our sales volume at 850,000 Interchangeable Lens Cameras and 1.35 million Interchangeable Lenses. We also maintain our previous forecast of revenue of ¥305 billion and operating profit of ¥47 billion. Slide 16 is the Precision Equipment Business. Please look at the bottom left of the document. There is no change in the sales volume of both FPD Lithography Systems and Semiconductor Lithography Systems from the previous forecast. All systems for which sales are scheduled to be recognized in the fourth quarter have already been delivered to customer factories and installation is scheduled to be completed by the end of this fiscal year. We also maintain our previous full year forecast of ¥195 billion in revenue and ¥9 billion in operating profit. On Slide 17, I will briefly explain the new platform ArF immersion lithography system series for semiconductors that we are currently developing in the Precision Equipment Business. This new platform is designed to be compatible with other companies' ArF immersion lithography systems that are widely used by semiconductor manufacturers with consideration for the convenience of our semiconductor manufacturers' customers. We are working with a major semiconductor manufacturer to jointly develop a prototype of the next generation series that combines high productivity, maintainability, and reliability so that we can deliver it in the fiscal year 2028. From 2028 onwards, we aim to significantly increase our share in the ArF immersion lithography systems market which is expected to continue to expand as 3D will be further adopted in DRAM and logic segments as well. Please now turn to Slide 18. I will now explain the Healthcare Business. In the Healthcare Business, both revenue and operating profit remain unchanged from the previous forecast in November. In the Life Science Solutions, although there are concerns about the impact of high interest rates in the United States and economic downturn in China, there are signs of recovery in the order environment, particularly in Europe and the United States, and we aim to achieve our full year plan. In Eye Care Solutions, demand from optometrist and the major change in the West is strong. We expect to incur the one-time cost of ¥2 billion in the Eye Care Solution this fiscal year. In Contract Cell Manufacturing, as we explained at the November financial results conference, revenue is expanding steadily and expected to contribute further to revenue and profit from next fiscal year onwards. Slide 19 shows the forecast for the Components Business. Due to the delayed recovery in the semiconductor and factory and automation markets, the recovery of demand for our related products, EU-related components, optical parts, optical components, and encoders is expected to be further delayed. In light of this, we have lowered our revenue forecast by ¥5 billion from the November forecast to ¥73 billion. We have also lowered our operating profit forecast by ¥3 billion to ¥5 billion. As planned, we expect to incur related expenses of ¥2.5 billion for the restructuring in the Industrial Solutions Business, a former Industrial Metrology business, and we aim to improve operating profit from the next fiscal year onwards. Slide 20 shows the Digital Manufacturing Business. There are no changes to the previous outlook for both revenue and operating profit. Due to the increase in demand from aerospace and defense industries, orders and sales are progressing smoothly, mainly for SLM Solution’s large-format metal 3D printers, the NXE series. SLM Solutions orders in the third quarter reached an all-time high on a quarterly basis, and we can expect sales to expand in the fourth quarter and the next fiscal year. This fiscal year, we aim for SLM Solutions to achieve a full-year profit on EBITDA basis. There is no change to our policy of aiming for an operating profit for SLM Solutions alone next fiscal year and a profit for the entire Digital Manufacturing Business in the fiscal year following that, ending March 2027. That's all for now, but now allow me to wrap up with the major points. In the third quarter, cumulative operating profit was ¥8.1 billion, mainly due to a decrease in sales in the semiconductor-related businesses of the Precision Equipment Business and the Components Business. The full-year operating profit forecast has been revised down by ¥3 yen to ¥19 billion due to a decline in sales in the Components Business, mainly related to the semiconductor-related business. We are currently formulating the budget for the next fiscal year, which is the final year of the four-year Medium Term Management Plan, but there will be no more one-time costs associated with the relocation of headquarters and restructuring. We expect the semiconductor-related business in the Precision Equipment Business and the Components Business to recover in the second half of the next fiscal year, but order environment is still unclear. In the FPD Lithography Systems Business, we expect the profit to improve, thanks to the expansion of high-resolution systems. In addition, we will begin a full-scale development of a new platform equipment series with the aim of significantly increasing our share in the market for ArF immersion lithography system for semiconductors, which is expected to continue to expand. Imaging Products Business remains strong and we will strive to expand sales of mirrorless in cameras, including the launch of new products in the next fiscal year. In the Healthcare Business and the Digital Manufacturing Business, which are expected to grow as orders are currently strong and we expect profits to increase in the next fiscal year. We appreciate our shareholders and investors for your continued understanding and support. Thank you for your kind attention.
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