Terumo Corporation (TYO:4543)
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Apr 28, 2026, 10:25 AM JST
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Earnings Call: Q3 2022

Feb 10, 2022

Naoki Muto
CFO and Executive Officer, Terumo

I am the CFO, Muto. I will now explain the Third Quarter Results for the Fiscal Year Ending March 2022. First, the highlights from the quarter. Q3 standalone revenue grew 8% from the previous year. Year-to-date revenue also grew 17%. The Cardiac and Vascular Company entered a COVID-19 recovery pattern, growing 12% from the previous year. With strong demand, Blood and Cell Technologies Company grew the next most. Adjusted operating profit slowed slightly in the third quarter amid continued production adjustment to normalize inventory down from COVID safety stock levels, as well as impact from higher freight and raw materials costs caused by global supply chain disruption. Year-to-date profit grew 21% from the previous year. In light of these third quarter results, we will revise the annual guidance for revenue only upward by JPY 12 billion.

Although we anticipate a temporary Q4 decrease in healthcare demand due to COVID-19 Omicron variant impact, we decided to account for Q3 exceeding expectations and exchange rate positive with the upward revision. However, despite normalization of factory capacity utilization, issues including cost increases from supply chain disruption and rising wages in the U.S. will continue into the fourth quarter. Although we intensify our expense control onward, we determined that an upward revision of profit guidance could not be made. Next slide, please. Here are the P&L results. The third row shows year-to-date revenue of JPY 523.5 billion, for a 17% year-on-year increase. Adjusted operating profit was JPY 107.2 billion, for a 21% year-on-year increase and 20.5% profitability on revenue. The second row from right shows Q3 standalone numbers.

Revenue was JPY 178.8 billion, for an 8% year-on-year increase. Adjusted operating profit was JPY 28.6 billion, for an 11% year-on-year decrease and 18.5% profitability on revenue. The next slide shows a waterfall chart illustrating these numbers. Next slide, please. This is the year-to-date adjusted operating profit variance analysis compared to the previous year. Revenue increases from each company helped to raise gross profit. Further, in gross profitability on revenue, cost increases due to third quarter shipping and raw materials inflation was downward factors. However, the positive effect of product mix improvement in TIS and other businesses exceeded downward impacts to total a positive JPY 300 million.

Impacts from price erosion, production adjustment, SG&A, and EU regulatory changes were higher than the COVID-affected previous year but are the result of sales activities and normalization and indicate progress happening as planned. The steady progress of R&D and other costs, such as start-up costs for the source plasma business, is a little slow due to COVID-19. FX impact was a positive JPY 7.1 billion. The impact on stock is minor. Next slide, please. This is the adjusted operating profit variance analysis for third quarter standalone compared to the previous year. Gross profitability on revenue was impacted by cost inflation as well as a temporarily lower production level, resulting in JPY -3.6 billion year-on-year. SG&A increased significantly compared to the COVID-affected previous year. However, this indicates that activities are normalizing and progressing as planned. EU regulatory compliance costs were progressing in line with its progress.

R&D costs reflect some delays due to COVID-19, but research and development is firmly progressing. FX had a positive impact of JPY 2.5 billion. Next slide, please. Next is revenue by region. Japan was -4% in the third quarter. Year-to-date, it grew 5% year-on-year and the same 5% compared to FY 2019. Cardiac and Vascular Company grew 9% compared to Q2 with a gradual recovery in demand, but was -2% compared with the previous year when there was a temporary restoration of demand during COVID-19 pandemic. Similarly, compared to the previous year in which there was high demand for COVID-19 related products such as infection prevention and thermometers in General Hospital Company, as well as Blood and Cell Technologies Company saw corresponding negative growth as that demand decreased. EU grew 11% in the third quarter and 19% year-to-date.

The Cardiac and Vascular Company was strong, growing 17% year-over-year and 9% compared to the second quarter. In addition to the strong TIS and neurovascular businesses, CV and TA grew significantly. On the other hand, Blood and Cell Technologies saw negative growth in the third quarter after seeing demand concentrated in the second quarter. However, the overall trend is strong for the company. The Americas grew 13% in the third quarter and 23% year-to-date. Cardiac and Vascular Company grew 15% thanks to strong TIS, neurovascular, and TA. Quarter-over-quarter growth from Q2 was 4%. With their businesses steady, General Hospital and Blood and Cell Technologies maintained strong growth in the high single digits. China grew 10% in the third quarter and 34% year-to-date. The Cardiac and Vascular Company grew 7% in the third quarter and 35% year-to-date.

Compared to the second quarter, Access within the TIS business grew 3% as the number of procedures maintained its solid trend. In addition, blood component collection in the Blood and Cell Technologies Company is growing strongly, driving the company as a whole. In other Asian countries, the recovery from COVID-19 gained momentum, resulting in 27% growth in Q3 and 22% year-to-date. Next slide, please. I will now explain results by company, starting with Cardiac and Vascular. Revenue grew 12% in the third quarter and 23% year-to-date. It was 6% growth quarter-on-quarter. TIS revenue has increased JPY 34.2 billion year-to-date, driving overall growth. Access led within TIS. However, a backorder in vascular closure devices occurred due to delays in materials procurement caused by supply chain disruption, as well as temporarily reduced production level amid rising COVID-19 infections.

Production delays were resolved by the end of January, and we are working to fully eliminate the backorder situation. In neurovascular, the number of brain aneurysm procedures increased in the EU and U.S., and aspiration catheter for stroke sales was in particular growing well. Some products are seeing stiffer competition, but our broad portfolio is serving tremendous demand. In CV as well, there was strong instrument demand along with the recovery in surgical procedures, driving growth especially in the U.S. and EU. Like other businesses, TA enjoyed a growth tailwind from recovery in the number of procedures, but also made progress expanding its portfolio and regional sales activities to accelerate growth and approach 30% from the second to the third quarter.

In profit, the price erosion and production adjustment we anticipated at the outset of the year combined with inflation, but these negative factors were approximately offset by product mix improvement due to revenue increase. As a result, adjusted operating profitability was 22% and 25% year-to-date in line with our guidance. Lower production level has also bottomed out and entered a recovery trend recently. Next slide, please. Next, the General Hospital Company. Revenue growth was -1% in the third quarter and +8% year-to-date. It was -3% quarter-on-quarter. In General Hospital products, increased supply of vaccine syringes and enormous demand for syringe pumps and infusion pumps drove that business's overall results. In the second-largest market following Japan, Asia, revenue saw growth above 20% both in Q3 standalone and year-to-date amid high healthcare demand due to COVID-19.

The recovery of IV solutions and other pharmaceuticals is gradual, but AdSpray within that business recovered along with the number of procedures and thanks to progress in marketing activities to grow 20% year-over-year and over 10% from the second quarter. Healthcare saw a return to normal for products such as thermometers and blood pressure monitors that saw higher demand amid COVID-19. This resulted in negative year-over-year growth, but with DM steady, year-to-date growth is positive. Alliance remains strong, with 16% year-to-date growth. In profit, Q3 saw multiple negative impacts coincide, including inflation, a return to normal and demand for thermometers after COVID-19 increases, and Chinese yuan appreciation. Year-to-date adjusted operating profitability was 14%, staying in line with our guidance. Next slide, please. Next is Blood and Cell Technologies Company. Revenue grew 10% in the third quarter and 11% year-to-date.

It was 7% growth quarter-on-quarter. In the Blood Center Solutions business, there was a strong increase in demand for blood component collection in the U.S. and EU, in addition to recovery in whole blood, as well as component collection demand increase in China and other Asian countries. These factors combined to result in growth above 10% against the previous year comparable with high COVID-19 treatment demand. Apheresis saw more procedures as instrument demand increased, while cell therapy technologies demand also recovered. Both businesses thereby maintained double-digit growth, and the overall business grew in the double digits in Q3 year-on-year. In profit, it was caused by a recovery in whole blood collection demand led product mix to normal level and inflation. Q3 adjusted operating profitability was 17%, which was negative growth year-on-year. Year-to-date, the figure was 19% or an 8% increase.

Production level is recovering in Vietnam and other sites. Next slide, please. As I mentioned in the highlights at the beginning, we will revise our annual guidance. We will revise the annual guidance for revenue upward by JPY 12 billion- JPY 697 billion. There are no other revisions to our guidance. Next slide, please. Lastly, the main topics for the third quarter. First, we announced our five year growth strategy, GS26, in December. With this year as a foundation, we will strive toward even greater growth. In support of these, we already see the next-generation Ultimaster launch, Relay Pro regional expansion, development of diabetes business partnerships, innovation in Blood and Cell Technologies, and many other efforts progressing in each company. This concludes my overview of this earnings results. Thank you.

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