Earnings Call: Q4 2025

May 15, 2025

Summary

FY24 revenue was JPY 1,127.9bn, with operating and net losses of JPY 64bn and JPY 47.5bn. FY25 guidance targets JPY 48bn operating profit and JPY 24bn net profit, while excluding estimated tariff impacts.

Yes, hello everyone. Thank you for attending our financial results briefing session today. I will now quickly explain the financial results for the full year of FY 2024 and the forecast for FY 2025. On page five, this is a summary of FY 2024. Full-year results are shown on this slide. Revenue was JPY 1,127.9 billion, a slight decrease from the previous year on a real basis excluding the effect of exchange rates. Gross profit has decreased as a result of reflecting the remarks from the audit firm related to the calculation of elimination of unrealized gain and the consolidation adjustment. I will explain a little more about this on the next page. SG&A expenses were reduced by 2% in real terms, mainly due to the effects of global structural reforms. These factors resulted in a business contribution profit of JPY 31.9 billion. As for operating profit and profit attributable to owners of the company, one-time expenses and losses associated with the completion of management reforms and impairment losses resulting from impairment tests to review future business plans were recorded. As a result, operating loss and net loss decreased to JPY 64 billion and JPY 47.5 billion, respectively. Free cash flow improved significantly in Q4, mainly due to cash inflows from the sale of Ambry Genetics. Due to the impact of the elimination of unrealized gain in the consolidation adjustment from the forecast announced on April 24, the company has revised downward its business contribution profit and operating profit by approximately JPY 11 billion and profit attributable to owners of the company by approximately JPY 9.5 billion. We will pay no dividend for FY 2024 as forecasted at the beginning of the fiscal year. Moving on to page six. The audit firm pointed out that regarding the calculation of unrealized gain elimination in the consolidation adjustment in the audit of the FY 2024 financial statements, JPY 11.4 billion was recorded as cost of sales. The impact amount by each unit will be as stated. This was completed in the current fiscal year and will have no impact in FY 2025 or beyond. Page seven shows the factors for the increase or decrease in operating profit from FY 2023 to FY 2024, along with the figures. Please confirm the details of this page later. Page eight shows the contents of profit by business segment. The following table shows changes from the previous year for each unit. Please confirm the figures here later as well. We will continue on page 10, which is the forecast for FY 2025. The forecast for FY 2025 remains unchanged from the April 24 midterm plan progress explanation. Assuming exchange rates are JPY 145 to the US dollar and JPY 150 to the euro, we assume sales of JPY 1,050 billion, business contribution profit of JPY 52.5 billion, and business contribution margin of 5%. In addition to the benefits of the management reforms implemented in FY 2024, we expect organic profit growth in the business. We do not expect any major one-time factors to occur in FY 2025, and we forecast operating profit of JPY 48 billion and profit attributable to owners of the company of JPY 24 billion. This will enable us to meet the ROE target of 5% set in the medium-term business plan. The impact of the US reciprocal tariffs has not been factored into the above figures. On April 24, the impact was estimated at approximately JPY 16 billion. The recent negotiations between the U.S. and China and other factors may reduce the amount of impact. However, there is no change in our intention to absorb the impact, as we have already implemented what we can, such as reviewing our go-to-market strategy, additional cost reductions, and further shifting production to countries with low tariff rates. The annual dividend forecast for FY 2025 is JPY 10 per share. Page 11. This section contains forecasts by business segment, so please check the figures. The following pages summarize the key points of our FY 2024 results and FY 2025 forecast by business segment. First, we will discuss industry business. In FY 2024, sales of sensing declined due to the impact of restrained capital investment by major display customers, and performance materials also declined. In FY 2025, however, we will continue to expand sales of light source color as recovery for displays and grow automotive appearance and HSI and sensing, and expand sales of new resin film SANUQI and new material film SAZMA for large-size TVs and performance materials. Strong inkjet components are expected to sustain momentum, and sales of optical components for semiconductor production equipment, on which we are focusing, are also expected to increase due to strengthened production systems. Overall, we expect an increase of JPY 10.7 billion in revenues for the industry as a whole. In addition to the effect of increased sales, the effect of structural reforms will also contribute to the forecast of JPY 7 billion increase in business contribution profit. Professional Print is explained on the next page. In FY 2024, non-hard sales increased in both production print and industrial print, and the effects of structural reforms also contributed, but business contribution profit declined by JPY 0.8 billion due to the impact of elimination of unrealized gain. For FY 2025, we expect net revenue to decline by approximately JPY 41 billion due to conservative foreign exchange assumptions and the impact of the transfer of the overseas MPM service business and marketing services. However, with the introduction of new production print products, we will maintain our number 1 market share in the high-end, high-speed printing press segment and aim to regain the number 1 market share in the medium-speed printing press segment. Industrial printing is expected to achieve profitable business as soon as possible through UV inkjet press, and new product launches, and is expected to see an increase in business contribution profit. Page 14 will be about Digital Workplace. In FY 2024, hardware sales were weak in Europe, the U.S., and China, but non-hard demand remained firm, and the effect of yen depreciation led to an increase in revenue. Business contribution profit increased by JPY 3.1 billion due to the effect of exchange rates, production cost reductions, and the effect of structural reforms. In FY 2025, we expect a decrease in revenue due to the assumed impact of foreign exchange rates and the expected decrease in office hardware and non-hard sales. However, we expect an increase in business contribution profit of approximately JPY 3 billion due to improved earnings at DW-DX, the effects of structural reforms and stronger profitability. Page 15 will be about Imaging Solutions. In FY 2024, Imaging IoT Solutions narrowed its loss by reducing SG&A expenses, and Visual Solutions remained profitable. In healthcare, sales decreased due to a decline in the Japanese market for digital radiography called DR and a decline in analog X-ray film sales in China. The decline in gross profit due to these lower revenues and the negative impact of elimination of unrealized gain resulted in a JPY 1.9 billion decline in business contribution profit. For FY 2025, although we are taking a cautious view of sales, we expect to expand the dynamic digital radiography, which is our only global offering in healthcare, and to grow medical IT in India, Asia, and other regions. In addition, profitability will be greatly improved through the effects of structural reforms and increased business efficiency. In Imaging IoT, we expect cost reductions due to the transfer of MOBOTIX and other factors, and we forecast that the overall business contribution profit of Imaging Solutions will break even with an increase of JPY 10.3 billion. Page 16 shows the status of the balance sheet. In particular, this explanation is from the perspective of reinforcement of our financial structure. In FY 2024, total assets were reduced by JPY 162.6 billion in real terms due to the reduction of interest-bearing debt, which was achieved by utilizing the cash inflow from the transfer of precision medicine business. Goodwill at the end of FY 2024 was JPY 126.3 billion. As stated in the breakdown, it has goodwill related to Konica and Minolta integration goodwill and business technologies business. Unless the business environment suddenly changes, we assume that it is extremely unlikely that a large impairment loss will occur at this time. Thus, we believe we are making progress toward improving the stability and soundness of our financial structure. Inventories and cash flow. Inventory turnover was 3.4 months, below the previous year's level. Free cash flow has improved significantly due to the transfer of precision medicine business. Page 18 is about capital allocation. This is the forecast for FY 2025 and the cumulative total for the three-year period of the medium-term business plan. Cash inflows are expected to be equivalent to the planned figures in the mid-term business plan due to operating cash flow and business transfers. Cash outflows will be prioritized to reduce interest-bearing debt, which is expected to be reduced by approximately JPY 200 billion over the three-year period. The annual dividend of JPY 10 per share for FY 2025 is planned to be paid out as an interim dividend of JPY 5 per share. In FY 2025, the final year of this medium-term business plan, we intend to take a proactive and opportunistic approach to achieve sustainable growth in FY 2026 and beyond by steadily reducing interest-bearing debt and strengthening our financial base while expanding earnings as Turn Around 2025. That is all for my explanation. Thank you very much for your attention. Mr. Hodo, the Chairman of the Board, will continue his explanation. Thank you for your continued support.