Q2 2025 Nikon Corp Earnings Call
Taking time to join us today.
I'll explain the progress over a medium term management plan.
Please look at slide three the current medium term Madison plan spans a period of four years and we now have one and a half years to go.
A sitting at the bottom of the slide our performance in areas other than the imaging products businesses behind those expectations in terms of earnings.
The recovery in demand for semiconductor related business has been slower than expected and the situation remains difficult, but we will work on measures to restore profitability, including so hope efforts from the second half of the year onwards on the other hand since I took office as President in April I have also start.
Distinction the management base with the aim of achieving our vision 2030, and we have already seen some results in our growth strategy today a report on these among others.
First I will explain the progress in each of the five business segments using slide four.
For the figure shown on the left I will rely on the presentation from Deputy CFO will mirror later and I'll talk about the main business topics on the right.
In imaging products business, we completed in April the acquisition of Red.
A specialist manufacturer of cinema cameras, which will form the core of our future video strategy.
In the components business. We have also begun restructuring of the former industrial metrology business, we expect to incur a one time expenses of around $2 5 billion yen in the second half, but from next fiscal year English, we expect to see an improvement in operating profit of around.
Mitch 1 billion range.
Slide five summarizes the progress we have made in building the management base for future growth.
Among these in manufacturing shown second from the bottom a new headquarters building and innovation Center, which launched.
Which consolidate R&D functions and enable diverse work styles, a new building at <unk> plant, which was built to expand production capacity in the components business was completed in August.
Please move to slide six.
This slide shows the progress of the five growth drivers required to enhance future corporate value of vehicle set out in the medium term management blah rigs.
Regarding the contract so manufacturing or C. D M O for the health care business. The number of show therapies moving from clinical trials to commercialization has increased and this has grown to become a business was close to 1 billion in operating profit for additional school year, we plan to grow it even further to make it.
Into one of the future pillars of earnings.
And the precision equipment business, we have started developing digital photography system for advanced packaging, which is expected to expand in line with the development of AI and we plan to fully enter the backend of the process.
Deputy CFO O'meara will explain these in more detail later.
Please turn to slide seven.
In the basic policy management that is conscious of cost of capital and stock price that we announced in May 2023, we clarified our policy of dividends of <unk> 16 per share in the final you over the medium term management plan and additional share buyback of $30 billion or more doing its period.
Based on this policy on October 31st we announced that we would be buying back and cancel shares worth up to 30 billion yen, which is eight 7% of the total number of shares issued Furthermore, in order to ensure that this share buyback will not affect gross investments such as R&D.
And the capital investments, we plan to use the proceeds from the sale of cross shareholdings to fund this.
As I said, we are currently challenged with our performance, but we will still be promote the policy as set out in our medium term management plan, such as improving our management base and developing growth drivers with the aim of becoming a company that supports a society where humans and.
Machines co create seamlessly.
Expected to arrive in 2030.
We ask you our shareholders and investors for continued understanding and support.
Speaker Change: I M yesterday, Shadow AUM, and our deputy CFO I'll explain the first half financial results and the full year forecast.
Speaker Change: So that's the key points of the first half financial results revenue was $332 7 billion yen operating profit was $5 8 billion yen and the profit attributable to owners of the parent was $2 9 billion yen compared to the first half of the previous year revenue increased by 1.5 billion yen, although sales of semiconductors.
Speaker Change: Doug a few systems and E V related components decreased.
Speaker Change: Sales of digital cameras and F. B D Dittography systems increased and together with weaker yen. The total revenue increased absolute profit. In addition to the decreased revenue from semiconductor lithography systems and E V related components, one off expenses for relocation of the head office pushed down profit.
Speaker Change: They are to the previous will guess announced in August in addition to the downside due to the postponement of sales of semiconductor related part of profit attributable to owners of parent was significantly behind affected by exchange rate fluctuations, which caused the valuation of foreign currency denominated assets to fall due do.
Speaker Change: Mark's conversion, leading to increased forex losses, and losses from valuation of investment securities.
Speaker Change: Slide 10 shows the main consolidated figures for the first half that I, just explained and can prices through the year before the results in August for guests the free cash flow, which is deeply negative in the previous year has improved this is because despite the costs related to the acquisition of Red and a new head off.
Speaker Change: This operating cash flow turn significantly positive mainly due to increased advanced payments received.
Slide 11 shows consolidated revenue and profit and loss for the three months from July to September.
Speaker Change: Operating cash flow for the second quarter was positive for the fourth consecutive quarter and free cash flow was also positive at 7.8 billion yen.
Speaker Change: Slide 12 shows the results by segment for the first half in the yellow boxes. The top row shows revenue and the bottom of those shoes operating profit for each segment I'll explain the details for each segment.
First on the imaging products business revenue increased by $14 1 billion yen year on year 251.7 billion yen and operating profit increased by $3 6 billion yen to 28.8 billion yen.
Speaker Change: Due to strong sales of mirror less cameras G. Eight N Z F as well as the launch of the new <unk> six three so as volume of digital cameras interchangeable lens site increased by 20000 units year on year to 410000 and interchangeable lenses increased by 40000 to 600.
Speaker Change: 50000 units the operating profit margin was 19% up year on year, partly due to the weaker yen compared to the previous world Guessing August operating profit was higher due to the weaker yen improvements in the product mix and postponement of some expenses.
Speaker Change: Slide 14 shows the precision equipment business revenue decreased by 14 5 billion yen year on year to 81.5 billion yen and operating profit decreased by $2 3 billion yen 2.9 billion yen in F. P. D Histography systems due to the recovery in the panel market capital investment.
In high resolution policy increased and sales volume increased significantly from four units in the previous year to 16 on the other hand sales volume of new semiconductor lithography systems fell significantly from 11 units in the previous year to fall due to the impact of customers cutting back on investments and some installations being.
Speaker Change: Postponed to the second half overall, the precision equipment business dropped in both revenue and profit as to increase sales in F. B D. Discography systems was unable to offset the decline in sales of semiconductor lithography systems. Their previous lewisville guests was missed because the completion of installation of some systems.
Speaker Change: Already delivered I've seen postponed to the second half.
Slide 15 shows the healthcare business.
Speaker Change: Revenue increased by $3 9 billion in E O and yet to $55 1 billion in the second quarter sales of eye care solutions grew particularly in Europe and revenue increased in the first half even when excluding the effects of the weaker yen operating profit on the other hand decreased by $1 4 billion.
Speaker Change: In year on year to $1 3 billion yen due to an increase in upfront investments such as R&D expenses.
Speaker Change: Slide 16 shows the components business due to the impact of the delayed recovery in the semiconductor and factory automation markets shows of EU V related components, and kudos decreased and boost revenue and profit decreased year on year.
Speaker Change: In addition, due to the delay in the market recovery the business environment in the second quarter remained challenging and demand did not recover.
Speaker Change: The previous forecast in August was missed due to postpone sales of E beam related components and reduced sales of and kudos.
Speaker Change: Slide 17 shows additional manufacturing business sales increased significantly by 42% year on year due to strong sales of <unk> Suisse.
Speaker Change: Large format by those three D printers from SLM solutions. In addition to the increased revenue at <unk>.
Speaker Change: Solutions the disappearance of one time costs of restructuring recorded in the previous year as well as the cost reductions also contributed to reduction in the operating loss.
Speaker Change: Next I will explain our full year forecast.
Speaker Change: We have revised down our revenue forecast by 25 billion to several hundred and 25 billion yen due to the postponement of customer investment, which has shifted sales of related products in the semiconductor lithography and components business into the next fiscal year or later.
Speaker Change: Operating profit has been revised downward by 13 billion yen to 22 billion with the imaging product business revised upward by 2 billion yen, while precision equipment healthcare and components businesses being revised downward by $6 billion 2 billion and 9 billion yen.
Speaker Change: Activity.
Speaker Change: The focus for profit attributable to owners of parent has been revised downward by 14 billion yen to 16 billion, yet, but with regard to shareholder returns the interim dividend will be twenty-five yen per share and the annual dividend will be increased by five yen 255 per share.
Speaker Change: As previously forecasted in addition, that's present Oakland already said earlier, we will perform a share buyback up to a maximum of 30 billion yen exchange rates for the second half are unchanged from the previous forecast at 145 yen to the dollar and 155 yen to the euro.
Speaker Change: Slide 20 shows the changes in the operating profit for guests from the announcement in August the main factor behind the downward revision was a $12 5 billion yen decrease in revenue due to postpone sells in the precision equipment and components businesses. In addition, there was a total of $3 5 billion one time costs.
Speaker Change: So the restructuring of the former industrial metrology business, which is included in the components business and for the health care business.
Please refer to slide 21, the main figures for the full year forecast are shown in the table, including year on year and previously guests comparisons.
Speaker Change: The overview has already been explained.
Speaker Change: Slide 22 shows a list of full year forecast by segment, including year on year and previous will guests comparisons.
Speaker Change: I'll explain the details for each segment.
Speaker Change: First the imaging products business. The full guests will revenue remains unchanged from August three.
Speaker Change: 305 billion yen.
Speaker Change: Planned to launch Z 52. This months following disease six three in June leveraging the cutting edge functions of the night.
Speaker Change: We will continue to strengthen our mirror less camera product lineup, we have raised our operating profit forecast by 2 billion from August.
Based on the first half results.
Speaker Change: Compared to the previous year, we expect to see an increase in operating profit of <unk> 5 billion yen to 47 billion due to an increase in profit from the expansion of the strong mirror less camera business offsetting an expected increase in it expenses such as acquisition related costs for Red, which we acquired in <unk>.
Speaker Change: <unk> and R&D costs.
Slide 24 shows the full guests with a precision equipment business. Please look at the bottom left due to the delay in the market recovery some customers postponed their investments, resulting in the postponement of delivery and sales volume of semiconductor lithography systems is expected to decrease by seven units to 28 in <unk>.
Speaker Change: <unk> that says volume of F. P. Destocking of fee systems is expected to be 38 units.
Speaker Change: Installation of one unit will be delayed until the next fiscal year.
Speaker Change: These changes in sales volume, we have lowered our revenue forecast by 20 billion from August to 195 billion yen.
Speaker Change: <unk> to the previous year, while we expect a significant decrease in sales of F. D. D. Subtleties systems for high resolution panels. This will not be enough to offset the decrease in sales of air or if you're talking a few systems and the revenue of the entire decision of the government business will decrease operating profit has been revised down by 6 billion.
Speaker Change: From the full guessing August two 9 billion yen due to declined revenue. Please.
Speaker Change: Please refer to slide 25, I'd like to briefly discuss the digital photography system for advanced semiconductor packaging obligations that we announced last month.
Speaker Change: So some of these systems will respond to the increasing sophistication and diversification of semiconductors due to the progress of that he planned to launch disbursed in fiscal year 'twenty, two and six targeting the large scale chip led market for data centers, where the miniaturization of wiring patents.
Speaker Change: And the increase in package size are progressing by combining the digital photography, <expletive> Mucci high resolution to Lucy for semiconductor lithography systems that we have developed to date and high productivity of their multi projection <unk> technology for F. B D. Some of these systems.
Speaker Change: Please turn to slide 26, I will now explain the health care business.
Speaker Change: In life Science solutions, we are concerned about the impact on the revenues of persistently high interest rates in the U S and the economic downturn in China, but we aim to achieve a full guest by developing the private system market and strengthening our drug discovery support services in eye care solutions.
Speaker Change: Expect to see year on year revenue growth due to demand from optometrists and the major change in Europe and the U S. Operating profit is expected to be 2 billion lower than the August forecast due to lower than expected sales in life science solutions caused by the delay in the market recovery and additional 1 billion yen in.
Speaker Change: One time expenses related to I guess solutions.
Speaker Change: We knew from contract manufacturing is expected to increase year on year due to expanded orders.
Speaker Change: The third pillar of the healthcare business. It has entered the stage of sustained profit contribution.
Please refer to slide 27, I'll give a brief introduction to our contract manufacturing business.
Speaker Change: So innovation a wholly owned subsidiary started its business in 2015 through a strategic alliance with <unk>, the world's largest contract manufacturer and has grown into Japan's largest regenerative medicine C. D. M O N.
Speaker Change: In the area of contract manufacturing of cell therapies utilizing living cells you already have around 10 projects underway are the and commercialization all clinical trials with revenue is civil billions of yen and operating profit close to 1 billion yen.
Speaker Change: And we expect further increases in both revenue and profit in the next fiscal year.
Speaker Change: Slide 28 shows the components business, although there are signs of a bottoming out in some areas of the semiconductor and factory automation markets. We do not expect to see the kind of recovery and demand that we had initially projected due to the customers postponing their investments.
Speaker Change: In the semiconductor related field. So so the UV related components have been delayed and it says a video imaging systems used in backend processes have decreased and Suez and kudos for factory automation are expected to decrease in light of this we have lowered our revenue forecast by 7 billion from August 278 billion yen.
Speaker Change: On the other hand sales of large X-ray systems for the aerospace industry are progressing steadily and we also city winning orders for semiconductor related optical components by adding customers.
Speaker Change: Operating profit has been revised down by 9 billion from August two 8 billion yen due to the impact of the decrease in revenue and recognition of $2 5 billion yen in restructuring related expenses in the former industrial metrology business, which is now included in the components business.
Speaker Change: The industrial solutions business unit newly established this fiscal year.
Speaker Change: Decided to implement restructurings of the former industrial metrology business that has been integrated into the business unit such as the transfer of the three D laser scanner business and head count reduction in order to optimize the organization by reviewing the strategies by product and by region.
Speaker Change: We will implement the necessary matches during this fiscal year and expect to see an improvement in operating profit from the next fiscal year onwards.
Speaker Change: Slide 29 shows the digital manufacturing business, both revenue and operating profit remain unchanged from the previous with guests in August.
Speaker Change: Due to increased demand in the aerospace and defense industries orders and sales are progressing steadily centered on the NXT series of large form of metals three D printers from SLM solutions.
Speaker Change: This fiscal year, we aim to turn S. M solutions profitable on a standalone full year EBITDA basis, there's no change to our policy of amey for operating level profitability on an SLM solution Standalone basis in the next fiscal year and to turn profitable for the entire digital much more certain business in March 'twenty two.
Speaker Change: Seven.
Speaker Change: Concludes my explanation in summary, the first half saw results fall short of expectations due to postponement in semiconductor lithography systems in EV related components full year for guests that's been revised down by 25 billion to 725 billion in revenue and by 13 beer.
Speaker Change: And yet 222 billion yen in operating profit.
Speaker Change: It is still difficult to predict the investment trends of semiconductor related customers or the recovery of demand for related products. We will continue to minimize the impact of market deterioration by making timely and appropriate resourcing investments through close communication with customers and we will also strive not too.
Speaker Change: Is the timing of the market recovery. In addition, we will implement necessary measures such as restructuring of the former industrial metrology business quickly.
Speaker Change: And aim to further expand glues drivers through efficient R&D investments, leading to a recovery in business performance from the next fiscal year onwards.
We'd like to ask for your continued understanding and support.
Speaker Change: From shareholders and investors. Thank you for your attention.
