7731.T7731.TJPX
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Takeshi Matsumoto: Good afternoon, everyone. My name is Matsumoto. I took on the role of CFO this past April. Thank you for joining us today. I will begin by reviewing our results for the fiscal year ended March 31, 2025 and then share our outlook for the current fiscal year. For FY 2025, Nikon recorded revenue of ¥715.2 billion, operating profit of ¥2.4 billion, and profit attributable to owners of the parent of ¥6.1 billion. We faced a decline in sales for semiconductor-related businesses within precision, equipment and components. The increase in sales from imaging products and healthcare and a weaker yen were not enough to offset this resulted in a slight drop in overall revenue. Adding to this, we recorded a ¥27.2 billion in one-time cost, which significantly reduced our profit. Details are available on Slide 28. Compared to our previous forecast, imaging product, precision equipment and digital manufacturing, all fell short of expectations, contributing to a notable shortfall in profits. Because of this, we will revise our annual dividend downward by ¥5 to ¥50 per share, keeping at the same level as the end of last year. The ¥30 billion share buyback was carried out as planned, using funds made available through balance sheet efficiencies. The repurchase shares were canceled at the end of the fiscal year. This chart shows the changes in operating profit by segment compared to our February 6 forecast. As you can see, imaging products, precision equipment, and digital manufacturing, saw major downside and one-time costs played a significant role. Slide 5 in the yellow box highlights key financial indicators for previous fiscal year. Operating cash flow was ¥48.2 billion, marking the second consecutive year of growth. However, free cash flow came to minus ¥21.7 billion due to outlays tied to our acquisition rate and relocation our head office. On Slide 6, we present segment results compared to both the previous year and our previous forecast. Let me walk through each one. Starting with Imaging Products Business, the global market for digital camera interchangeable lens type continued to expand, especially in China, with strong demand for our new wireless cameras, both bodies and lenses and tailwind from weaker yen, revenue increased by ¥15.6 billion to ¥295.3 billion. However, sluggish conditions in cinema industry resulted in operating losses at RED, a company we acquired, and our recognition of fixed asset impairment losses at MRMC also led to a decline in operating profit by ¥5.2 billion to ¥41.3 billion. Compared to our forecast, profits fell by ¥5.7 billion due to a shift in product mix leading to lower rent sales versus a plan in addition to the impact of one-time costs, Next, on Slide 8, Precision Equipment Business, sales of FPD lithography systems for high resolution panels, increased significantly. However, that was offset by a decline in new semiconductor lithography system sales. This brought overall revenue down by ¥17.4 billion to ¥201.9 billion. We also revised our future plans for semiconductor lithography business due to changes in customer investment plans and delays in market recovery. As a result, we recorded ¥14.1 billion in fixed asset impairment losses, inventory write-downs and restructuring costs. Operating profit was limited to ¥1.5 billion. Compared to forecast, profit was down by ¥7.5 billion due to one-time cost, despite higher service income. Now on Slide 9, Healthcare Business, sales in life science solutions declined due to sluggish markets in Europe, the U.S. and China, but strong growth in eye care solutions and contract cell development manufacturing, plus the weaker yen pushed the revenue and profit higher year-on-year. However, we still came in ¥1.3 billion below our forecast due to a mixed life sciences solutions sales and the disposal of old inventory. Next, Component Business, on Slide 10, we saw growth in X-ray and CT system for aerospace application, but declines in EUV-related components, optical parts and components and encoder dragged the same down. Revenue dropped ¥11.8 billion and operating profit fell by ¥8 billion. Compared to forecast, profit exceeded expectation by ¥2.1 billion, thanks to cost controls and lower restructuring costs in industrial solution business. Now, our last segment, Digital Manufacturing Business, the overall metal 3D printer market slightly contracted mainly for small to midsized system due to market condition. However, in our focus area of aerospace and business, demand for Nikon’s SLM solutions, large format system NXG series expanded. NXG sales, which continued over half of SLM’s revenue, grew by 33% year-on-year, with approximately 75% directed to space and defense sector. This contributed to an overall business revenue increase of ¥2.3 billion to ¥23.3 billion. On the profit side, however, our operating losses widened about ¥1.2 billion year-on-year to ¥15.2 billion due to increased costs from lower production volume of small to midsized system as well as upfront investments such as in our U.S. facility and R&D. This also resulted in ¥5.7 billion profit shortfall compared to our previous forecast and the reason for which I’ll explain later, together with our outlook for the current fiscal year on Slide 22. Let’s turn to the outlook now. For FY 2026, we are assuming ¥145 to the dollar and ¥135 to the euro. We expect revenue of ¥710 billion, operating profit of ¥36 billion, and profit attributable to owners of parent of ¥30 billion. Components and digital manufacturing should see growth, while stronger yen and weaker sales in semiconductor lithography business in precision equipment will likely keep total revenue flat. We anticipate a significant ¥33.6 billion increase in operating profit driven by improved profitability in some businesses, the absence of last year’s ¥27.2 billion in one-time costs, gains from the sales of idle assets for use, R&D spending and effects from restructuring. The dividend will be ¥50 per share same as last year. Details are on the next slide. Due to the uncertainties surrounding U.S. tariffs, they are not included in the forecast. We anticipate approximately ¥10 billion negative impact on operating profit. This is a current estimate and it will be incorporated into our full year forecast at the appropriate time, pending final negotiation with economic impact and effectiveness of our countermeasures. Now, let me talk about our shareholder return policy under the midterm management plan. Given the recent performance, we have revised our dividend projections. For FY 2025, we lowered the dividend from ¥55 to ¥50 per share. And for FY 2026, we have also adjusted the original target from ¥60 to ¥50 yen per share. We also completed a ¥30 billion share buyback last fiscal year, which brought our total shareholder return ratio to 765.8%. For the current fiscal year, we project a return ratio of 54.8% and over the full 4-year plan and the cumulative ratio should be around 111.3%, roughly 15% of total distributable resources on the plan will be allocated to shareholder returns. Please refer to Slide 15 for a summary of our key FY 2026 indicators alongside year-on-year comparisons. Slide 16 shows full year projection by segment also compared to last year. The others’ operating loss improved ¥13.1 billion year-on-year. This reflects the absence of last year’s one-time costs related to our head office relocation and footprint reorganization, along with expected gains from idle asset sales and lower R&D spending as noted below. Now, let’s go into the each segment forecast, starting with Imaging Products. We expect that interchangeable lens camera market to remain steady at around 6.7 million units. We anticipate a continued favorable market trend led by mid to high-end cameras for professionals and hobbyists. We are aiming to increase our unit sales, especially when in the volume zone, such as the Z5II launch April and Z5II released last November, which incorporate advanced technology from Z 9s. We are targeting sales of 950,000 camera bodies, up 100,000 from last year and 1.4 million users, up 90,000. Due to a slight drop in speed, revenue is expected to hold steady at ¥295 billion, with operating profit down by ¥1.3 billion to ¥40 billion and due in part by stronger yen. Moving on to Precision Equipment Business, we project revenue to decline by ¥16.9 million to ¥185 billion. FPD lithography systems are also expected to dip slightly from 38 to 35 units though demand for high-resolution panels remains solid. In semiconductor lithography, orders for our new i-line stepper 2205iL should increase from 28 to 34 years, but the sales of new ARF lithography systems and service income will decline due to slow market recovery. Operating profit, however, is forecast to increase by ¥10.5 billion to ¥12 billion overall helped by an improvement in product mix in FPD and improved profitability in semiconductor lithography due to the disappearance of last year’s one-time cost and optimization of service bases. Regarding the semiconductor lithography business, we will assess future customer investment trend proceed with streamlining production support structure and lower breakeven point, thereby establishing structure capable of generating stable profits from next fiscal year onwards. At the same time, we will promote the development of next generation equipment, such as digital lithography system for back-end processes and new ArF immersion lithography system, aiming for significant new recovery in earning around 2030. For healthcare business on Slide 19, we introduced profitability in life science solutions through increased sales of high value-added products. In eye care solutions, we are working to develop new sales channels of automat use channel in Europe and expand further into Asia and other regions. In contract cell development and manufacturing, we plan to make upfront investment to support growth, but existing project remains strong and will provide stable income. Total revenue is expected to fall ¥1.4 billion to ¥115 billion due to the yen depreciation, but operating profit is on forecast to rise by ¥1.8 billion to ¥8.5 billion. Thanks to cost optimization and higher life science solutions margins. Components business on Slide 20, we plan to expand our customer base for optical parts and optical components, and expect stronger sales in the second half and as market conditions recover. In metrology equipment, our video measuring system for electronics component and semiconductors and X-ray and CT system for aerospace are expected to perform well. Furthermore, we anticipate increased demand for FPD photomask substrates for high resolution panels. Altogether, we project revenue to grow by ¥4.9 billion to ¥79 billion, and profit by ¥2.9 billion to ¥10 billion due to revenue gains, improvement in profitability resulting from restructuring and the absence of one-time cost. Digital manufacturing business, we expect the overall metal 3D printer market to stay flat for small to mid-sized system, but anticipate continued growth in the large format segment. Nikon SLM solution set a record high in orders last year, with 19% growth, with 52% growth in large format equipment. The backlog at the end of March was ¥13.5 billion, up ¥3.5 billion year-on-year. For FY 2026, we need to expand further in aerospace and defense, raising revenue by ¥9.7 billion to ¥33 billion. We also improved profitability by optimizing business management through production optimization, tighter cost control and R&D prioritization. We remain on track to make SLM profitable this year. For the whole segment, we are now targeting profitability by FY 2028, a 1 year delay from our initial plan. Lastly, concerning the operating profit of the digital manufacturing business, I will detail the variance between the previous forecast and the prior year’s actual results, as well as the year-on-year changes in our current fiscal year outlook. Last year so far [ph], came many from delays in customer deliveries of the SLM’s large format system due to customer circumstances. Small to mid-sized system also saw delays and higher production costs. Nikon’s Bed system underperformed as well. The weakened and higher expenses further impact the results. This year, profit recovery will mostly come from higher sales of SLM’s large format system and a better product mix. For small to mid-sized system, we will cut cost by optimizing production, in addition to an increase in unit sales. We will also continue to remain in expenses across other parts of the business, aiming to reduce the segments operating losses to ¥8.5 billion. To sum up, last fiscal year saw a significant profit decline, which is impacted by lower semiconductor revenue in precision equipment and components and the recognition of ¥27.2 billion in one-time costs. For this current fiscal year outlook, overall revenue is expected to be the same level as last fiscal year. However, we are anticipating improved operating profit in all segments, excluding imaging products, which is sensitive to FX. We anticipate ¥36 billion in operating profit, a significant ¥33.6 billion increase, largely due to the absence of the one-time costs booked in the last year. Although this is a final year of our mid-term plan, we foresee a substantial show for compared to our operating profit target of ¥70 billion. We strongly recognize that improved profitability remains a challenge. We are committed to the company wide effort to recover our earnings. Our Chairman and CEO, Umatate will elaborate on the progress of mid-term plan, including this plan. Thank you.
Toshikazu Umatate: Good afternoon. My name is Umatate. I am the Chairman and CEO of Nikon. Thank you again for joining us today. This year marks the final year of our current mid-term management plan. Looking back the past 3 years, we made steady progress in strengthening our business strategies, in improving our management foundation. By business segment, while imaging outperformed due to the underperformance in industrial areas like semiconductor related coupled with delays in growth drivers, the numerical targets outlined at the bottom of this slide are expected to fall short of our plan, except revenue. Profitability improvement remains our work in progress, and we recognize that we have not yet fully met the expectation of our shareholders. Taking these points into account, we positioned FY 2025 as the year to build a foundation for where we want to be in 2030. We will focus on both recovering short-term performance and making investment for long-term growth. Please look at Slide 3. This slide provides a numerical overview of our progress, as shown on the left side. The first 2 years of the plan went very well. By FY 2023, we had already achieved the original FY 2025 revenue target of ¥700 billion, 2 years ahead of schedule. Our operating profit was also mostly on track. However, over the next 2 years, while imaging continued to perform well, our other segments suffered from upfront investment burdens and the semiconductor market downturn. As a result, operating profit for FY 2025 is now forecasted at ¥36 billion, well below our ¥70 billion goal. In response, we have implemented various restructuring and organization integrations. We have also prioritized how we allocate growth investments, limiting projects that take too long to scale, and focusing on three key areas professional video cameras, next generation lithography and metal additive processing. Now, let’s move to Slide 5. This graph plots the five business segments with revenue on the X axis and operating margin on the Y axis. The size of each bubble represents total operating profit. The dotted circles show our FY 2025 targets set during planning. The lighter circles reflect our latest forecast, and the darker circles show our FY 2030 goals. For the two main businesses, on the right, our strategy is to grow precision equipment through next gen lithography and customer diversification. For imaging products, we aim to stable profits by launching competitive professional video cameras and attracting new users, especially the younger generation. On the left hand side, we have our three strategic businesses. In healthcare and components which have relatively high margins, we aim to steadily grow earnings. For digital manufacturing, the goal is to beat industry growth and reduce losses quickly through metal additive processing. We need to create more value across all five businesses and reach ¥1 trillion in revenue and a 10% operating margin by FY 2030. Next, I will walk you through what each business we will focus on in the following two pages. For imaging products, we are prioritizing new user acquisition, especially among younger generations. We are also leveraging synergies with red [ph], our U.S. subsidiary to expand in the professional video camera market. In healthcare, we are working to strengthen our system microscopes and applications, while also scaling up our rapidly growing contract cell development and manufacturing business. Slide 7, in precision equipment, our FPD segment remains solid. For semiconductor lithography, we have streamlining support infrastructure for key clients, while also developing digital lithography for semiconductor back end processes and a new platform, ArF immersion lithography system. In components, we are increasing synergy from the integration of the former industrial metrology business and aiming for growth, particularly overseas. And in digital manufacturing, we will focus on expanding our presence in defense and aerospace by leveraging SLMs large format metal 3D printers. Slide 8 summarizes our efforts to strengthen Nikon’s management foundation. On the left, you will see our continued focus on human capital management and sustainability. On the right, we are investing in digital transformation, manufacturing, innovation and organizing of executive management for group companies. Slide 9 provides a summary of everything we have discussed today. Finally, this year marks Nikon’s 108th anniversary and 100th anniversary of our first microscope. Our microscope has helped visualize the invisible, supporting research in life sciences, medicine and advanced industry like semiconductors. Last year, in response to Japan’s demographic challenges, we have developed a microscope system designed to improve the success rate of artificial insemination in fertility treatments, the system we have shown here on this slide. In this way, Nikon is committed to contributing to society while also enhancing long-term corporate value for all stakeholders, including our shareholders. Thank you for your continued support and thank you again for your attention.