Good afternoon, everyone. Thank you for taking time out of your busy schedule today to attend Terumo Corporation's financial results briefing for the fourth quarter of the fiscal year ending March 31st, 2024. Today, Jin Hagimoto, CFO of Terumo Corporation, will give an overview of the financial results, followed by a presentation by Hikaru Samejima, President and CEO, on the future of Terumo, our vision, and a path to it. This will be followed by a Q&A session. The presentation is scheduled for 60 minutes. If you are not present at the venue and would like to ask a question during the Q&A session, please call into the conference call. There will be no question reception on the live webcast. Furthermore, if you experience video or audio difficulty during the live streaming, please use the screen switching button at the bottom of the screen first.
So, in the case of technical difficulty, you will be notified via email. So, before we begin the briefing, we would like to say a few words. In this presentation, we may make forward-looking statements based on our current expectations. All such statements are subject to risks and uncertainties. We wish to caution that actual results may differ in materiality from those discussed in forward-looking statements. So, now, our Hagimoto will begin with an overview of the financial results. Hagimoto-san, please.
I'm Hagimoto, Terumo's CFO. I will try to present an overview of the year-end financial result for the fiscal year ending March 31st, 2024. These are the highlights of this year's financial statement. In FY2023, sales revenue, operating income, and net income all reached record highs. Revenue growth was +7%, excluding exchange rate effects, driven by growth in the U.S. and Europe. Operating income growth outpaced sales growth, increasing by +14% when excluding exchange rate effects. Net income surpassed JPY 100 billion for the first time to reach JPY 106.4 billion. For FY2024, we expect continued growth globally, with revenue growth of 7%, excluding exchange rate effects. Operating income is expected to increase by +16%, excluding exchange rate effects, due to the expansion of highly profitable businesses. Next slide, please. These are our P&L results.
Sales revenue for the full year exceeded JPY 920 billion, a record high. Cardiac and Vascular, TIS, Neuro and Vascular, as well as the B lood and Cell Technologies Blood Center business, led with double-digit growth. Operating income also reached a record high of JPY 140.1 billion. The increase in SG&A expenses, due to an increase in employee headcount to expand therapeutic device sales in North America, was more than offset by the steady progress of profit improvement measures and the revision of the pricing policy. Current profit reached a record high of JPY 106.4 billion. Gross margin, operating income margin, and adjusted operating income margin for the full year all improved from the previous year. Next slide, please. This is an analysis of the year-on-year change for the three-month of fourth quarter.
First, the gross margin effect was due to the absence of one-time expenses in the current quarter that were recorded in the same quarter of the previous year, as well as the continued easing of inflation and the effects of cost-cutting measures that continued in Q3, implying the effect of the pricing policy review, which was expanded in the second half of the year in Beijing VBP. The increase in SG&A expenses is mainly due to the increase in employee headcount to expand sales of therapeutic devices, such as neuro and stent grafts in North America. Next slide, please. This is an analysis of change in profit for the full year. Gross profit growth due to higher sales exceeded our expectations as a result of strong performance in Cardiac and Vascular and Blood and Cell Technologies.
The gross profit margin effect was in line with the original plan due to the progress of profit improvement measures and the effect of product mix improvement, as well as easing for inflation. Turning to increase SG&A expenses, we have increased employee headcount to expand sales of therapeutic devices in North America, which has led to sales growth. The breakdown on foreign exchange effects was +10.2%, JPY 2 billion in flow, and -JPY 5.2 billion in stock. Next slide, please. This is revenue by region. Overseas, sales drove growth, particularly in the Americas and Europe. In the Americas, sales grew 8%, excluding exchange rate effects due to strong sales of therapeutic devices, such as neuro and vascular-related products, and double-digit growth in the blood center business.
In Japan, despite negative factors such as a decrease in sales due to the divestiture of nutrition business and a drop in demand for thermometers, sales were higher than in the previous year, driven by sales in the field of Cardiac and Vascular and Blood and Cell Technologies. In Europe, growth was plus 8%, excluding exchange rate effects as a result of continued strong sales of therapeutic devices, such as neuro and stent grafts. In China, while there was some impact from restrained purchasing by distributors as access products were subject to concerted purchasing, TIS maintained double-digit growth even when excluding exchange rate effects as new prices were not beginning to apply until FY2024. Emerging economies, such as Asia and the Middle East, led the way in terms of growth.
Growth continues in all companies, particularly in the cardiac and vascular companies, TIS and cardiovascular business, and in Blood and Cell Technologies, Blood Center business, and apheresis therapies. Next slide, please. I will next review business performance by company, first in the cardiac and vascular company. Excluding exchange rate effects, net sales grew 9%, exceeding the full-year forecast. Its vascular and neuro business performed well globally, particularly in the Americas and Europe. Although there have been supply issues with some access products, as well as the neuro business's cerebral infarction device, we are steadily recovering market share. Vascular also continues to expand sales of hybrid products and stent grafts. Profits increased due to higher revenues and progress with profit improvement measures. Next slide, please.
So, next. Next is TMCS, Terumo Medical Care Solutions. Negative factors such as a decrease in sales due to the sale of the nutrition business and a low in demand for thermometers were offset by the effects of revised pricing policies and the easing of inflation, resulting in an increase in sales and a significant increase in profit. Pharmaceutical Solutions is also progressing according to plan, and the profit margin for TMCS as a whole improved by 2 percentage points. Next slide, please. Next is TBCT, Blood and Cell Technologies. Excluding exchange rate fluctuations, net sales increased by 8% due to the strong performance of existing businesses, especially the blood centers business. Profit increased significantly as the effects of the revised pricing policy and the transfer of production to Costa Rica offset the one-time intangible asset impairment charge recorded in Q4.
The profit margin also improved by 2 percentage points. Both sales revenue and profit exceeded full-year forecast. Next slide, please. Next is the forecast for FY2024. Revenue growth is expected to continue across the company, particularly in Blood and Cell Technologies, with the forecast of +7% across the company, excluding the exchange rate effects. Operating income is expected to grow +16%, excluding exchange rate effects, significantly outpacing sales growth. We aim to improve our operating margin by 1.6 percentage points to 16.8% by focusing on company-wide measures to improve profitability while steadily increasing the number of each company's high-profit growth drivers. We will continue our efforts to improve capital efficiency. Next slide, please. These are factors affecting profit in the FY2024 forecast.
Under increase in gross profit due to sales growth, we expect an increase in sales at all companies, led by the Cardiac and Vascular Company. Gross margin effects include the effect of cost reduction measures and business mix improvement, as well as the impact of inflation. Among cost reduction measures, we will continue to optimize and improve the efficiency of our production system, and we will promote projects to further improve efficiency at the Ashitaka plant, which serves as the backbone of TIS. Although we are making some conservative assumptions, such as high raw material prices and high electricity costs, inflation is expected to be almost flat for the full year versus FY2023.
In terms of prices, we have conservatively factored in the impact of lower sales and profits from centralized purchasing in China, but we expect this to be offset by further revisions to pricing policies in existing businesses, in addition to the positive impact of price increases implemented in FY23, the effect of which will be felt in FY24. SG&A expenses are expected to increase at a healthy rate in line with business expansion. At the same time, we will review head office expenses by promoting a company-wide cross-functional cost optimization project to support functions. Next slide, please. So, these are the assumptions we are making for the FY24 forecast by company. In Cardiac and Vascular, the impact of the decrease in sales and profit due to centralized purchasing in China and the official price revision in Japan has already been factored into the planned figures.
However, this negative impact will be covered by all businesses, and sales are expected to grow for the company as a whole. Profits are expected to grow faster than sales growth due to continued profit improvement measures and the effects of product mix improvements. For TMCS, while we expect raw material prices increases, we will bounce back from these as a result of price revisions and a double-digit growth in the Pharmaceutical Solutions business. It is expected to achieve 6%+ sales growth and further improvement in profit margins. The first CDMO project and Alzheimer's drug, both of which are slated for this fiscal year, are expected to have limited impact on FY2024 results. TBCT's losses in the Plasma Innovation business will narrow due to the accelerated rollout of RIKA. For the core business, we expect stable growth continuing on from FY2023.
As a result, the company as a whole expects to improve its profit margin by two percentage points. Next slide, please. So, now, this is the last slide for myself. The company executed a 2-for-1 stock split of its common stock in April 2019 and again in April 2024. The graphs and figures on this page reflect these stock splits. Our dividend policy will remain unchanged, and stable dividend increases will be implemented. The annual dividend for FY23 is expected to be JPY 22 per share, with a payout ratio of 30.8%. For FY24, we expect to increase the dividend by JPY 4 to JPY 26 per share, achieving a payout ratio of 31.6%. Together with ongoing annual dividend increases, we aim to achieve the total return ratio of 50%. This concludes my explanation. Thank you very much for your kind attention.
Let us continue to Samejima's presentation. Samejima, the floor is yours.
My name is Samejima, and I have been appointed President and CEO as of April 1 this year. CFO Hagimoto has just presented our results for FY2023 and outlook for FY2024. I would now like to take a longer-term perspective and talk about Terumo's future, our vision, and the path to it. Our mission is to contribute to the evolution of medicine and to improve patients' quality of life by solving medical issues. Terumo's main mission is to create solutions that are close to GEMBA, such as promoting minimally invasive vascular treatment and personalized solutions to provide optimal treatment, as well as improving the efficiency of medical care through digital transformation.
Our efforts to solve medical issues are at the very essence of Terumo's business, and we will continue to take on the challenge of creating social value through our business activities and, by extension, maximizing Terumo's corporate value. However, I feel a healthy sense of urgency as the social environment surrounding healthcare undergoes rapid transformation, namely transformations such as of aging society's coexistence with chronic diseases, the increasing burden of medical expenses and insurance premiums, and straining financial resources for medical care, shortages of medical personnel, healthcare inequality, and compatibility between increasingly sophisticated medical care and economic efficiency, such as the expansion of biopharmaceuticals and the evolution of genomic medicine. The problems we face are increasingly complex and serious, and unfortunately, there is a limit to the number of problems that can be solved by simply providing a product.
The development and manufacture of top-quality medical devices backed by reliable technology is Terumo's non-negotiable strength. But when I ask myself again about Terumo's reason for being, I realize that my greatest fear is that we will not be able to realize our corporate philosophy of contributing to society through healthcare. And so, once and for all, Terumo will leap over the boundary of being a medical device manufacturer. We will not be abandoning our commitment to manufacturing, but we will be abandoning our commitment to being a medical device manufacturer. Terumo offers not only products or services, but also innovative and comprehensive solutions to medical issues. To this end, without innovation, we have nothing to say. This year, Terumo has created a new post of Director of Innovation. This is an expression of how much we value innovation and our commitment to it.
In order to respond to diversifying needs with a sense of speed, we will be promoting open innovation with a focus on internal development and utilize all resources, including collaboration with startup companies. Our innovation means not only developing devices for existing markets, but also creating and employing new ideas to create new markets, value, and solutions. Hence, efforts are already beginning to bear fruit. With the recently announced capital alliances with Medmain, the development of delivery technology to increase the value of pharmaceuticals in the CDMO field, and the provision of hospital management consulting service being developed in the United States under the name Terumo Health Outcomes, we will further expand our business beyond the framework of individual medical devices going forward. Now, Terumo is required to make changes that are not simply a continuation of the past.
In order to continuously create valuable medical solutions, we are ready to make startling next moves that will surprise everyone. Looking back on the past, Terumo has been able to reap the seeds of opportunities when they arise and has achieved this continuous growth. For example, in vascular treatment, which we first entered in the 1980s, from the mid-1990s onward, we saw great potential in less invasive TRI, which is the vascular catheterized through the transradial artery, and began developing TRI-related products. As you all know, we have now established ourselves as the undisputed number one company in the vascular access field. It was not until the 2000s that the company began to compete in earnest in cross-border M&A. So, this has drastically changed the business and geographic structure of Terumo, laying the foundation for today's Terumo, and creating a corporate structure that is resilient to macro-environmental changes.
In terms of scale of business and company size, we have made steady progress. So, now, how do we realize the next discontinuous transformation? There is no discontinuous growth without continuous growth. So, our approach will be GS26 multiplied by Bold Plus Alpha. First, I would like to talk about GS26. GS26 is a five-year management strategy that aims for continuous growth based on the technology experience and know-how we already possess. Our basic policy will remain unchanged, and we will steadily implement the winning strategies we have drawn up, such as continuing profit improvement measures, focusing on highly profitable businesses and products, and streamlining, strengthening internal development. So, in order to achieve this continuous growth, on top of this, we believe that it is essential to add Bold Plus Alpha. In other words, to optimize our portfolio.
By doing so, we aim to achieve dramatic growth that cannot be attained in the world envisioned in GS26. The risk resilience over a unique business portfolio was also demonstrated during the COVID-19 pandemic. Nevertheless, we do not believe our current portfolio composition is in the perfect state of affairs. We will explore company-wide synergy effects and explore directions to take to increase corporate value from both growth and revenue perspectives, while taking into account our responsibility to supply healthcare infrastructure as a leading company in the industry. We are committed to reexamining and decisively optimizing our business portfolio, including drastic structure reforms. Terumo has used effective mergers and acquisitions as a driving force for growth, while building on the stable profitability of its core product lineup, which has undergone continuous improvement and refinement.
I have been directly involved in many large cross-border deals, such as the acquisition of Vascutek, an artificial blood vessel company, MicroVention, a vascular treatment company, and the Angio-Seal hemostatic device business, as we aim to Bold Plus Alpha with our sights on a vision of the future beyond GS26. We will commit to M&A through to execution. Looking at our financial position, we have a very high level of financial soundness, and there is still more than enough room to leverage our financial resources. Supposing we were to come across the right deal, we would be well within striking distance of acquisition on a substantial scale, even, for example, the largest deal in Terumo's history. We are undoubtedly, and we will plant the seeds for more drastic next growth according to the precise strategy. GS26 sets three financial goals.
Under the GS26 multiplied by Bold Plus Alpha measure, Terumo will also be conscious of capital efficiencies, such as ROIC and ROE, and will focus on profitability. The pursuit of profit is essential for the sustainability of Terumo itself, as well as for the creation of sustainable social value through the resolution of medical issues. This is something on which we will never compromise. Improving profitability is one of the key issues. In FY2024, we will aim to achieve our highest operating income for the fourth consecutive year. Alongside reiterating our commitment to the 20% operating margin set out in GS26, we are aiming to break through this with Bold Plus Alpha. At the same time, we will strive for sales growth to maximize corporate value.
As mentioned in the FY2024 guidance we just announced, we expect to be on the verge of our first revenue of JPY 1 trillion this fiscal year. But for us, this is only a waypoint. Terumo aims higher. While internal development is expected to generate several hundred billion yen of growth through GS26 in the future, more than 100 projects are already running for beyond GS26 as well. In addition, although we decided to raise prices last year, we do not consider this to be the end of our price adjustment policy. We aim to maximize corporate value by thinking outside the box and executing from a zero-based approach to improve our ability to generate cash. Finally, I would like to talk about Terumo's view on shareholder returns.
In the last fiscal year, we changed the index for shareholder return from the conventional dividend payout ratio to total return ratio and set the target level at 50%. However, the top priority of cash allocation is ultimately growth investment. This is because expansion of the company's intrinsic value is Terumo's concept of true shareholder returns. We will manage our company while conscious of the resulting total shareholder return. So, what more is needed to improve our intrinsic corporate value? Our goal is not just to chase numbers. Terumo's goal can only be achieved if the quality, safety, and stable supply of the medical solution it provides are ensured.
By establishing a thorough quality control system for our product and solutions, as well as increasing the transparency of the system, we deliver an environment in which healthcare professionals can focus on their medical care and treatment with peace of mind. There's one more thing we must not forget. Even if you have a great business and growth strategy that is not enough to increase corporate value, it is the people who execute the strategy and make it happen. That is why Terumo will spare no expense in investing in human resources. It will make every effort to develop human resources as part of its management strategy while promoting D&I seriously. We will do our utmost to be a unique global company that contributes to healthcare, and we will put all our efforts into enhancing the value of Terumo itself. We will achieve high levels of shareholder returns.
So, please expect much from Terumo going forward. Thank you very much for your kind attention.
We now move on to the question and answer session. Please let us know by raising your hand if you are attending at the venue, if you are asking a question. Please wait for your turn. Now, we would like to make sure to have as many questions as possible. So, please limit your questions to up to two. Samejima, Hagimoto, and Miyoshi are the ones participating in the Q&A session. Now, we accept your questions. Now, Citigroup, Mr. Yamaguchi-san, please ask your question.
Yes, I'm Yamaguchi from Citi. Yes, Mr. Yamaguchi, we can hear you. Thank you. Yes, thank you very much. My first question is about the performance and result assumptions about the blood. You are expecting to grow the revenue as well as the profit.
RIKA is one of the reasons you are increasing those profits and the revenues. We believe that the collaboration is going well. But for RIKA, how many centers are going to replace this fiscal year? And also, how much is the possibility you are expecting to acquire other customers than the current centers? This is my first question.
Yes, thank you very much. So, for RIKA, I'm Miyoshi. I'm going to answer the questions related to RIKA. For RIKA, as Hagimoto explained, for the performance and results for this fiscal year, we already included that for the results. For the number of the centers, as of February, about 30 centers have been already replaced with RIKA devices. And currently, it's increased to 60 centers. So, we are making a very good replacement pace.
For this fiscal year, especially for the second half, we are going to expand it. As we mentioned in February, for the rollout from February, it will take 12 or 15 months to run for this replacement and rollout. Beyond 2026, CSL is the ones we are going to make sure to have the full rollout. Then we will look at other customers. That is our plan before beyond 2026.
Okay, thank you very much. My second question is related to the president's presentation. More than ever, M&A is the ones that you are highly conscious about. What you have to understand, there will be the partner if you are going to do it, but with the basic ideas at this moment. Trying to utilize the technology that is outside of the companies that will help you to grow your business.
So, you have such an opportunity at this moment. Is that what you are thinking? Because M&A is quite an in-depth comment. So, that's what I would like to have more elaboration on this.
May I?
Yes.
As for the M&A, there are three axes I'm thinking about. Needless to say, our mission is for the evolution and improvement of the medical care, as well as the patient Q&L. And the second point is that our strength and also whether we can differentiate utilizing those technologies. And the last point is to improve our corporate value, contributing to the growth as well as the revenue. So, those are what I would like to look at and where those will be crossed. And for the specific areas at the arena, we will try to thoroughly review.
But as you mentioned, considering the current Terumo's business scale and tuck-in type of the business, so maybe try to include our business is one way. And/or try to look at the bold type of things, which is the related areas of our business. We can also consider to expand.
Okay, thank you very much. That's all from me.
Thank you very much. So, next from Mizuho Securities, Mr. Kotani, please.
Thank you very much. My name is Kotani from Mizuho Securities. Thank you very much for your explanations. I have two questions. The first part of my question is that on slide 12, so in 2024. So, regarding the price, I would like you to elaborate on this, plus 75. So, that is the huge amount. So, I would say that there are plus and minuses. So, JPY 7.5 billion.
So, then in the first half that occurred back in October, so in the latter half, so the second half, so whether China's VBP have been conservatively factored in. So, that's also if you can explain to us in detail. That is the first part of my question.
So, thank you very much, Mr. Kotani. So, on slide 12, regarding the profit variance and the figures, numbers, so Hagimoto-san will like to respond.
Thank you very much for your question. So, as you have asked the question, so domestic. So, in the second half, the price policy has been formulated. That is a continuation. So, an increase in sales, contributing to betterment of the profit in the first half. Of course, China's VBP as well have been factored into this. So, that might be negatively impacting slightly.
So, when it comes to the pricing policy, not only limited to domestic, this will be applicable to the global arena as well to set forth an appropriate pricing policy. So, for 2024 as well, this appropriate pricing policy is here to stay. And as a result of that, it's reflective of the figures shown here.
Thank you very much. So, when it comes to VBP in China, I am inclined to hear more about this, about JPY 2 billion-JPY 3 billion or so. Is it going to be a larger number factored in?
Well, for the specific amount, I would not be able to disclose that to that depth. But slightly above the number that you have just mentioned, that is our assumption.
I f that's the case, then that may be a cost pass-through to other factors factored into this.
Yes.
Is it safe to say so?
That is correct.
The second part of my question is directed to Mr. Samejima. So, discontinuous growth, that terminology stuck out. So, of course, President Samejima, Vascutek on slide five, what you have shown us, I'm not such catheter types. I know that you have had the opportunity to look at this. So, when it comes to MicroVention for these intracranial ones, a bolt-on type was my impression. So, just to ask you to add the flavor to this. So, not so much though with the product, but are you shifting towards a solution more so than the product? So, not only getting to the product development, you are extending to software comprehensive solution type of the company. Are you shifting gear? So, I would like you to elaborate more in detail about the directionality for Terumo.
When it comes to M&A, it does not necessarily mean that such a company would be in scope. That would be at our table to be considered. So, not to be in the extensive line. So, we will not be inclined and very much limited to the medical devices. So, there may be a combination of the medical devices and diagnosis or the pharma as well, medicine as well, or tapping into the digital and to make it much more efficient and also to contribute to improvement of the patient's QOL. So, we would like to capture that comprehensively. So, we are more so looking beyond those horizons.
Thank you very much for clarification.
So. Thank you. BofA Securities, Mr. Watanabe.
Thank you very much for the presentation. I'm Watanabe. I have one question related to numbers and one question related to M&A.
First of all, for the numbers for your plan, for the SG&A, expected to increase JPY 14 billion this fiscal year. Recently, well, actually, it is related to a new product. And also, considering the environment, JPY 14 billion. Would it be enough? I think it's much less than it should be. So, because it could be even more. So, is it really enough for you? And I think VC Square's impact is also reflected here. So, the increase is JPY 14 billion for the net. So, I would like to know the breakdowns of that.
Okay, so for this one, Hagimoto is going to respond to that question.
Yes, for FY2024, SG&A increase. As you commented, labor cost is increasing. And that is also a part of it. Compared with FY2023, we had the tentative costs such as lawsuit case and also some tentative expenses are also included.
So, that's why compared with that, the growth for 2024 is smaller compared with the growth in 2023. So, other headquarters or corporate expenses, as I mentioned earlier, as a corporate or headquarters, how it should be optimizing the expenses or cost will be reviewed so that we can control the increase at the minimum level. That is a part of VC Square activities. So, that is the base to come up with this, the increase for the SG&A.
Okay, thank you very much. If it's possible, for the VC Square, it should be separated or not, but in terms of the numbers. So, when you started and when you close, ending,
for the corporate expenses, it's very difficult just to focus on only the corporate expenses or costs. But for the last year, it was around JPY 3 billion.
Overall, so not only the SG&A, but production and the manufacturing efficiency are also included for this reduction for the SG&A for FY2023 through VC Square. FY2024, though, that value, almost the same value or maybe even more than that, is what we are expecting to reduce the cost.
Okay, thank you very much. I understand it. So, the next question is related to the organization and M&A. Director in charge of innovation was a new position you created this time. But on the bottom, for after 2028, there was not much real deal, I believe. What are the changes from the past? Could you elaborate on this area? Maybe you were missing something before. But once you assign the new director for the responsible innovation, what will be added and what is responsible for that new position? And I understand that the result won't happen overnight.
But what is a timeline we can see the changes or you are expected to deliver the result by that new position?
Okay. Now, we had the company and corporate, and we had the person director in charge of it. The director in charge of each company or corporate, this is what you are specifically in charge of. It was not clearly defined. But this time, the director is in charge of innovation. Then actually, not only R&D, but DX promotion office and IP and clinical development, also the venture investment functions. And all those functions are under that one specific person. So, even in the past, actually, there's not much collaboration horizontally. But so, that's one of the reasons we are not able to deliver the result that we expected. But now, the one person comprehensively in charge of everything so that we can promote faster.
As for the R&D, it takes a long time until we see the results. Therefore, the quick win is something we have to see how we can create. But basically, beyond GS26 is the areas we would like to flourish. That's what I'm thinking.
Okay, thank you very much.
Okay, so from Nomura Securities, Mr. Mori, please.
Thank you very much. My name is Mori from Nomura Securities. I have two questions. So, first question pertains to M&A policy. So, as I listened to Mr. Samejima, solution type is more so a directive for domestic business, for MCS type of the business. And for overseas, looking at the medtech industry, the fundamentals of M&A pertains to its technology and the profit contribution. That has to be spearheaded by technology, shockwave, this meta as well. You need to deliver a very good product.
The way of the M&A for global and Japan seems to vary, meaning MCS and BCT. For Terumo Japan, I'm thinking that it may be split into two directions. M&A, so Japan and international is very different.
Thank you very much for your question. Well, it's not necessarily true that when it comes to Japan and the delineation between international, so we do not perceive it that way. Regarding M&A, as you have pointed out, so against the existing business, so-called tuck-in or bolt-on, that kind of perception resides. It may need to do with the timeframe and the horizon. In the short term, there's an inclination to that kind of perception.
But in a long tail horizon, maybe traditional type of the conventional type of the medical devices and not so much so, such acquisition may be coming into our scope in all likelihood.
Thank you very much. Second part of my question pertains to numbers. MCS number in the slide. Pharmaceuticals, as I'm looking, you're looking at this. MCS overall, increasing profitability. Is it has to do with a price pass-through or pharmaceutical product expectation, which one is higher in terms of expectations?
Hagimoto-san will like to respond.
Well, coming back to this, as a pharmaceutical, double-digit growth is expected. Therefore, in comparison, that is higher. We have a good visibility for higher growth. The amount-wise as well, figures.
Thank you very much. That is all from myself.
Thank you.
T hank you very much. Next person, UBS Securities, Ms. Yoshihara. Yoshihara, I'm sorry.
I'm Yoshihara from the UBS Securities firm. Thank you very much. I have one question to the president. As you explained earlier about the portfolio optimization, you were in Terumo TMCS right before taking this position. So, how you are going to utilize, leverage this will be the key for your future business. And also, in the presentation today, beyond GS26, especially this is very important. And you served as a president of the company, and now you are taking the current position. So, what is the idea about this?
Yes, for the Medical Care Solutions, TMCS, for the midterm and the cost improvement was what they're working on at this moment. Last fiscal year, we started to see the fruit. And this year, the profitability is even more improved.
I think that TMCS is very important in the positioning based on Terumo's comprehensive portfolio because there is a core competence such as drug delivery technology and also ME, medical equipment and development and manufacturing technologies. For just limited to Japan, we have the overwhelming footprint. So, and the strong access to the hospital and outside of the hospital, so has a very big ripple effect for the entire company. This could be limited to the domestic market, but we have the very high share with multiple products. Therefore, as it may be related to Mr. Mori's question earlier, but in Japan, and the home ground could be utilized with this company so that not just focusing on the tied up with the conventional medical devices, but we have the even expansive and the business opportunity. So, that's what we are also going to think about.
Okay, thank you very much. Additional question. For now, 15% is the numbers you are showing at this moment. But considering there are some unexpected things such as the inflations, but you are still reflecting that as well.
Yes, in GS26, MCS profitability 15% is what we would like to make sure to achieve. And not only 15%, but as a next step, we would like to even make it even bigger, better results.
Okay, thank you very much.
Thank you very much. Now we would like to welcome Mr. Hayashi, Morgan Stanley MUFG Securities, please.
Hello, my name is Hayashi, Morgan Stanley. I have two questions. First part of my question pertains to the plasma collection and the numbers, relevant questions. Your competitor, Haemonetics. And by listening to their most recent remarks, for CSL, their profit sales $70 million decreasing, declining.
That is their plan. So, that means that that will be contributing for the betterment of the sales for Terumo is what I'm thinking. So, your BCT and about JPY 10 billion or so for TBCT is just my hypothesis that can you tell me if my understanding is correct that is factored into the sales increase in revenue. And that would be contributing factor to TBCT, so such organic business and increased revenue profit and plus JPY 10 billion CSL profit, few billions yen contribution. So, to me, I was able to hypothesize, can you, I would like to confirm with you whether my hypothesis is not way far off.
So, then I would like to explain the response to your question. Mr. Hayashi, as you have pointed out, Haemonetics, so they have recently disclosed that part of their business contributing to us.
In terms of transition, which I have briefly touched upon, the CSL business in the transit, transition, that is going to be contributing on our end, as Hagimoto-san said. Then, Mr. Hayashi, your gut feeling, you are very much aligned, very much approximated to our figures.
Also, that has been thoroughly incorporated into our guidance as well in terms of our profit. We have the advanced development. Of course, we had the prior investment as well. That is the transition and the cost pass-through. We will be able to minimize the, you know, underperforming areas.
In terms of the dividend payout ratio, I know that Mr. Samejima, CEO, have said from his voice, tone of his voice, this is my, you know, gut feeling.
So, you know, investing to the growth and the core business is more so important than the dividend payout ratio. To me, I had the impression from your tone of voice. So, 50% of the comprehensive dividend payout ratio is set forth. But if you are going to have M&A and you may be doing the share buybacks going forward to try to drive the M&A activities. So, if you can touch upon those areas, that will be helpful.
Thank you very much for your question. So, well, as Mr. Samejima said, so cash allocation is positioned as a high priority for the growth investment. And of course, 50% of the comprehensive payout ratio, we have set forth that as. And in consideration of all of the cash generated from all of the businesses, we would like to achieve the assumption.
So, investing in a growth strategy, that is certainly going to be at the top of our priority as our company's policy.
Thank you. So, this is a scenario-based question. So, this large-scale M&A is coming in the near future, in a couple of years. That was my impression. Large-scale M&A, even if you do so. So, the dividend payout ratio comprehensively, 50%, it is going to be, it is here to stay.
Well, the size or the overall size of the overarching M&A and how magnitude the size cannot be explained today. But based on the size, whether 50% can be attainable based on our cash position as well, whether, you know, if we are too inclined toward 50%, we should not be having apprehension toward the M&A activity. That is our stance.
Thank you very much.
Thank you. SMBC Nikko Securities. Mr. Tokumoto,
yes, I'm Tokumoto from Nikko Securities firm. Thank you very much. Yes, my first question is about the optimum pricing initiative that's mentioned earlier. As a directions, I think that was right. But for this year, you were expecting the, should we expect it to be the additional or increment? And I think the overseas market is also included for those price initiatives. So, what are the areas and how much the impact you are expecting maybe compared with the ones you increased the price for the last year's first half? Could you explain that?
Yes, that will be explained by Hagimoto.
Yes, for your questions about the pricing initiatives. We have some business transactions related to this, so we cannot say where we are going to increase how much. But we will continue to work on this.
And then we are not. It doesn't mean we are not going to increase the price if we did it last year. But every and all the arena that we are providing the products, we are still reviewing the possibilities and opportunity to increase the price regardless of Japan or overseas. So, this is a company-wide challenges we are facing at this moment.
Okay, thank you very much. I understand. My second question is. The board plus alpha was a keyword in the presentation. And you are going to optimize the portfolio. And you also mentioned it is under review at this moment. But roughly, with the president, if for the 100, it's 100, it's 100%. So, what is the score you can give against 100 points? And you transfer, yes, sell out some of the business last year.
And you also mentioned you are going to add some more. So, you are reviewing the portfolio at this moment. And do you think you have any plan to sell out any of the business of the product? That is my second question.
Yes. And there, I cannot give the score at this moment based on the 100%. But there are three axes, as you mentioned, about the M&A. And based on these three axes, what are the more, the areas that we have more opportunities will be what we review. And also from those three axes and perspectives. And whether the Terumo is best owner or maybe we really have to have the full leverage. So, those are the two perspectives we are reviewing the current portfolio at this moment.
And based on the results of that review, and if it's needed, we are going to have the drastic and the business transformation, including the organization reform.
Okay, thank you very much.
Thank you very much. So, from Jefferies, Mr. Yamakita, please.
So, this is Yamakita from Jefferies Securities. So, regarding BCT business, I have a question. First, I would like to confirm. So, RIKA. So, can you explain more in detail about RIKA's projection? Until when? CSL and the deal. And how can you elaborate on the visibility of the CSL's business, please?
We had difficulty not being able to capture your voice. You are breaking up.
So, for CSL Blood Center, until when? So, can you tell us about the deals until when the CSL Center's deal continues? Our apologies.
We are having technical issues and we will not be able to comprehend your question.
So, for your question, IR department, we would like to personally respond back to your question. Our apologies to you today. Our apologies. We would like to respond back to you.
Thank you very much. Mitsubishi UFJ Trust and Mr. Hyogo.
I'm the fund manager of Mitsubishi UFJ Trust and Banking. I'm Hyogo. I have two questions. The first question is related to M&A. For the financial discipline, I would like you to explain about the financial discipline. Already, there are some goodwill and fixed assets and it's quite a large value. And what is the extent you are going to accept or for the, and some may be looking at the intangible fixed asset value or maybe with the rating they try to control. So, with what is your, what are you focusing on and what you are going to consider M&A?
Yes, thank you very much for this one. Hagimoto is going to answer.
Yes, for this one, for not only the acquisition, but internal investment is, if that is a positioning internally, we set up the frame or the limit. So, with the beta or risk-free rate, it's assumed then we assume which one we should use internally. And based on that, we are going to make judgment for the investment at this moment.
Yes, maybe the way I asked was not right. So, overall, the balance sheet, looking at the entire balance sheet, there are several M&As. Then that means the balance sheet could be probably expanded. So, how you are going to control? And if everything is accepted, you will have the bigger debt. And the intangible fixed asset is also quite large. So, maybe difficult to have the total payout or return for the shareholders.
So, how you are controlling is what I wanted to ask you.
Yes, I understand. So, the balance sheet scale expansion would not be easily done. So, that is a great assumption. However, though, including goodwill, for the, we have to make sure that we are going to have the loss, net loss. And it's very important to look at the future. So, we are where we are making the judgment for the investment. We have to look at the risk for the net loss, how much it would be. And that's where we take it into consideration for the judgment.
Okay, I understand. Okay, so that's what we will try to discuss in the future. My second question is related to present slide. And you, I think you skipped the slide eight and slide nine on the profitability is low and the gross leverage is low.
Why you are in such a situation? I would like to hear Mr. Samejima's ideas, especially for the OI and SG&A had been the challenge in Terumo for a long time. That's the impression I have. So, why this situation is continuing? And if you, I would like to know your ideas. It could be your personal opinion. And I also would like to know how you would like to address it.
Yes. So, this is the related to the reviewing the portfolio. Three companies and eight business is the portfolio, our portfolio. And for profitability and the OI, is it the best or not? It's what we have to look at. We will try to steer it so that we can achieve GS26 and we will try to achieve beyond GS26.
Okay, thank you very much. And lastly, I have a request.
For Terumo's case, compared with the same industry, the comparison with pharma companies, management members and buy-side investors and the communications are actually not so easy. I think the access is very difficult. So, since you and you have the new management team, so have the constructive communication with shareholders or investors is what we would like you to have, including M&A and corporate value. Probably the capital market sell-side won't complete. So, the investors need to understand it. Therefore, I understand you are very busy, but I would appreciate if you can set up that kind of opportunities, maybe in a different format. What do you think?
Yes, today, this is my first one. So, in the past, I'm not sure how the company was running that before.
But if that is the situation, as you explain, maybe for the, I will talk to Miyoshi of IR and to see what we can do. And we will try to consider that. Okay, from that point, yes, for the, we are also expecting the change in the quality as well.
Thank you.
Thank you. There are some people still raising hands, but we will try to close question and session, answer sessions. The questions we were not able to respond today, please contact IR person individually. Now we will try to close and the fourth quarter for the FY 2023 and the financial result and the explanation. Thank you very much.