Hello, everyone. I am Chikashi Takeda, CFO of Olympus Corporation. Thank you very much for taking time out of your tight schedule to participate in this conference. I would like to provide a review of our consolidated financial results for the first quarter of fiscal 2023, as well as full-year forecast for fiscal 2023. Slide three. Here, you can see the highlights. Revenue increased by 12% on a consolidated basis. We achieved double-digit growth for both ESD and TSD, and the medical business set a record high in the first quarter. Operating profit hit record highs in terms of both amount and rate for our first quarter. EPS was JPY 20, up 34% year-on-year. We took measures to minimize some risks that had been identified at the start of the fiscal year and managed to keep them within expectations while capturing growth. Moving on to our full-year forecasts.
Having revised our foreign exchange assumptions, we have revised revenue and all profit levels upward from the May forecasts. We expect revenue to achieve JPY 1,019 billion, up 5% from the previous forecast, with medical reaching a record high. We expect to achieve the target adjusted operating margin of over 20% set out in our corporate strategy. Profit is also expected to reach a record high at JPY 172 billion, with EPS of JPY 135, up 50% year-on-year. These factors assume business operations while controlling various risks associated with changes to the business environment. Consolidated financial results and business review for the first quarter. Slide five, please. This is an overview of our consolidated financial results. Consolidated revenue amounted to JPY 214.1 billion, up 12% year-over-year, with record revenue for medical in the first quarter. We achieved double-digit growth for both ESD and TSD.
Despite a significant drop in sales in China due to the Shanghai lockdown and delays in shipments due to shortages of parts such as semiconductors, revenue increased significantly against the backdrop of sales growth in regions other than China and contributions from new products. Gross profit was JPY 137.2 billion. The gross profit margin was slightly below the previous year. The cost of sales ratio increased due to the change in regional sales mix caused by a significant drop in sales in China due to the Shanghai lockdown, as well as rising material costs, et cetera. SG&A expenses were JPY 108.9 billion, with SG&A ratio deteriorating 0.9 points.
Expenses increased in both amount and ratio, due in part to an increase in expenses associated with sales growth in medical and strengthening of our operation infrastructure, such as the QARA function, coupled with increase in personal cost for a strengthening of operational infrastructure associated with the reorganization of SSD. In other income and expenses, a gain of JPY 12.5 billion was posted. Other expenses included approximately JPY 2.4 billion as expenses for the reorganization of SSD. Other income included approximately JPY 16.4 billion as a gain on the sales of land in Tokyo. Operating profit amounted to JPY 40.8 billion, an increase of JPY 13.2 billion, or a 48% increase year-over-year, with operating margin improving 4.7 points to 19.1%. Please note that the adjusted operating margin, excluding other income expenses, which is a milestone in our corporate strategy, was 13.2%.
Under the severe business environment, given the COVID-related lockdown in Shanghai, excuse me, profit was JPY 24 billion, increase of JPY 6.2 billion year-over-year. EPS stood at JPY 20, up 34%. Under the severe business environment given the COVID-related lockdown in Shanghai, global supply shortages of semiconductors and other components, as well as war in Ukraine, we worked to minimize these impacts by having each employee fulfill their roles on a global scale in order to meet the expectations of all our stakeholders, especially patients and medical professionals. Despite the tough market environment, this was factored in at the start of the fiscal year, and the first quarter progress was largely in line with the expectations. Next, I would like to explain the full year forecast for fiscal 2023. This will be slide 12.
I explained in May that some negative factors due to the changes in the external environment have been factored into the full year forecast. Having taken these factors into account, our financial results in the first quarter proceeded in line with the plan. We think we don't need to change the outlook for the remaining three quarters. However, having revised our Forex assumptions, we have revised our full year forecast upward for fiscal 2023. The forecast assumptions for the forecast are JPY 134 to the dollar and JPY 140 to the euro. For more details on forex sensitivity, please refer to page 27 in appendix. We expect revenue to achieve JPY 1,019 billion, up JPY 51 billion from the previous forecast. We also revised operating profit upward by JPY 25 billion.
We expect adjusted operating margin to reach approximately 22% by continuously promoting cost optimization, while at the same time implementing strategic investments for the future.
Operating profit is expected to achieve record highs for both amount and ratio. Profit is also expected to reach a record high of JPY 172 billion, with EPS of JPY 135, up 50% year-over-year. Regarding dividends for fiscal 2023, we plan to pay a dividend of JPY 16 per share, unchanged from the announcement in May. We will continue to manage business operations while keeping a close eye on some risks anticipated in May, including supply shortages of semiconductors and the components, the aftermath of the Shanghai lockdown, and the war in Ukraine. That's all from me. Next, COO Nacho Abia will continue his presentation.
Thank you, Chikashi. This is Nacho Abia, Chief Operating Officer of Olympus Corporation. Today, I would like to provide you some information about our Therapeutic Solutions Division business current and future growth drivers. Can you move to the next slide, please? Following our established strategy, Therapeutic Solutions business, or TSD, aims to grow by focusing on targeted diseases in targeted clinical areas where Olympus can help elevate the standard of care. The most relevant targeted diseases we are focused on are in the area of GI endotherapy, namely colorectal cancer, pancreatic tubular diseases, and gastric cancer. In urology, benign prostatic hyperplasia, stone management, and bladder cancer, and in lung cancer in the respiratory area. Next slide, please. GI endotherapy business competes in a total addressable market of JPY 300 billion-JPY 350 billion, growing at a 5%-7% CAGR.
This is a market where Olympus continues to leverage the strong market position across the gastroenterology suite and looks to introduce new offerings that improve the standard of care and drive future growth. We are in a very strong position as the number second in the endotherapy market, and we will continue building on our number one position in the GI endoscopy market. Today, I would like to highlight two examples from business success. The first establishes a strong foundation for current predictable growth, while the second highlights a very high growth rate opportunity. First one, in the ERCP market, which has a single-digit growth rate. Olympus is highly differentiated with two products in this space, guidewires and sphincterotomes. These products provide significant revenue for Olympus and are both growing faster than the market, with high single-digit growth rates.
Second, Endoscopic Submucosal Dissection, ESD procedure, is another exciting opportunity growing at double-digit rate. Olympus is number one in this segment, highlighted by its DualKnife J, where we have been growing at double-digit rate. Finally, Olympus is also preparing to drive significant additional future growth in future with, for example, its recently introduced ENDOCAPSULE, which is off to a great start, and a single-use cholangioscope, which is under development. In summary, in GI endotherapy, we are well-positioned for growth due to its market-leading product across the various GI clinical procedures. Next slide, please. In urology business, Olympus competes in a market of approximately which is growing at 5%. For discussion purposes, we can think of urology in two areas of anatomical. Okay. Sorry. Some issue. I think translation is listening to English channel. Sorry.
For discussion purposes, we can think of urology having two areas of anatomical focus, upper tract and lower tract. Stone management is a condition of the upper tract and represents a market opportunity of JPY 180 billion, growing at about 4% annually. Olympus has a broad portfolio for ureteroscopes and lithotripsy generators for stone management. These products together provide a solid revenue foundation with a steady single-digit growth. Additionally, in the last years, we have been enjoying high growth in stone management with our new SOLTIVE laser lithotripsy systems and lithotripsy consumables, which are growing at double-digit rates. We are also preparing the market for its future single-use ureteroscope, which will drive additional future growth. Moving to the lower urology tract, there are two clinical conditions, BPH and bladder cancer, which together comprise JPY 125 billion market, which is growing at a 10% annual rate.
Here again, Olympus has been present for many years and generates a strong revenue stream from cystoscopy and resection consumables. High growth in this area comes from Olympus' latest plasma bladder resection system, and they are accompanied by bipolar electrodes. For future growth, Olympus is developing the market for its iTind minimally invasive BPH treatment, which is showing very encouraging clinical feedback. Next slide, please. Finally, our respiratory business is also well-positioned to deliver strong growth due to the value it brings to the pulmonary lab and the high growth area of lung cancer diagnosis and staging. Olympus is the global leader in the reusable bronchoscopy market, with a market-leading portfolio of bronchoscopes and devices to diagnose and treat pulmonary diseases. This portfolio, along with the new EVIS X1 bronchoscopy platform, continues to drive sales growth.
Our products also hold a premium position in the growing field of lung cancer staging and diagnosis. Lung cancer is the leading cancer cause of cancer deaths in the world today. Olympus has been a pioneer and leader in staging and diagnosis since 2004, when it introduced the world's first endobronchial ultrasound bronchoscope and associated transbronchial needle aspiration needles for their example of suspending cancerous tissue. EBUS bronchoscope and EBUS TBNA together are growing at double-digit rates. Looking forward, future growth, Olympus continues developing the market with its thoracic electromagnetic navigation platform from our Veran Medical Technologies acquisition, as well as its broader portfolio of single-use bronchoscopes. We feel confident that our leadership in the pulmonary lab and the growing field of lung cancer diagnosis and staging provides a significant market opportunity and underpins current and future growth.
I hope this information has been helpful to clarify a bit better our potential in the Therapeutic Solutions Division area. Thank you, and this concludes my presentation.
We'll now move to the Q&A session. Before that, I would like to go over the questions that we received in advance, especially the frequently asked questions. The full year forecasts have been unchanged. What was the impact, or has it been revised upward only based on a foreign exchange assumption change? What was the result for 1Q? There were many risk factors, I believe, in Q1. Can you comment on that, is the question.
Thank you. Can you hear me? Takeda would like to respond.
I think 70%-80% of the answer was contained in my presentation, but let me repeat. First, against our internal budget. Basically, in line with our budget, that was the result for Q1. Shanghai lockdown, and semiconductor and other materials supply shortage, and the situation in Ukraine, Russia. These risks had been assumed from the very beginning of the fiscal year, and these had impact on revenue. 1% or 2% impact on revenue growth, was what we assumed from the very beginning. With that assumption, the results were in line with our expectation for Q1. Going forward, we don't want to write it down, and that's why we wanted to wait until this Q&A session. What are the lost opportunities? I think is another area that you might be interested in.
Our internal analysis indicate the following at the high level. In terms of revenue, over JPY 10 billion plus, maybe JPY 15 billion, as much as JPY 15 billion, or at least over JPY 10 billion additional gross profit impact. That's what the calculation shows. Doesn't mean that the result of this analysis would be the additional revenue that we could have achieved. No, that's not what we mean, but that is the size of the impact that we had in mind, more or less. That's all.
Let's go into the Q&A session, taking questions from the participants.
The first quarter results, and you have revised your full-year outlook. In terms of the margins, in terms of the trend of the margins, the reason I ask is that the first quarter, the ESD margin was 21%, and the post-COVID from second quarter, third quarter cumulative is up a 36% margin. I think basically you have to reach 36% margin to reach the level. The TSD, I think this quarter was 18%, again, to be able to achieve the revised outcome. The second quarter, third quarter, fourth quarter, in average 24% margin would be necessary to be achieved. In terms of the margin improvement, specifically, I think basically you're seeking that in the ESD business.
It means that the reason why you are anticipating a more higher margin from the second quarter onwards, whether it's the product mix or through your Transform Olympus initiatives, what are the things that you can do to improve the margin?
I would like to respond. First of all, largely speaking, in all of the businesses, the China business, specifically, we had the Shanghai lockdown the first quarter. There was a substantial decline in our revenue. On top of that, in China, I think specifically for the ESD business
Within the region, the profit contribution was high coming from China. First of all, if you look at the overall situation for the second quarter onwards, there will be a Shanghai lockdown impact. Basically, we are going to catch up on that lockdown, and basically the China contribution to the profit is going to improve. That will be the one major assumption that we are factoring into our outlook. Looking at it in more detail, excluding the Forex impact, that is, for ESD, the next nine months, year-over-year, basically the growth rate will be the same as the first quarter. At least, that is the minimum level of the growth that we are anticipating. In terms of cost, it will be the same level as last year. I think that we will be able to reach that. SG&A for the ESD business.
The spending of our expenses for the first quarter was at a high level, so we want to control that for the following nine months. That will be our assumptions. The TSD business, the first quarter sales growth year-over-year was 2.3%, close to 2.3%, or maybe close to 3%. I think in the following nine months, we can double the growth. That is due to the recovery of China. On top of that, our growth driver for the urology area will be accelerated. In terms of the region, it will be Europe, the U.S., and Japan. For the non-China businesses, our market is going to grow. That is the big picture that we have. In terms of COGS, again, this will be the same level against the previous year. For the China contribution, it is going to rise, and I think that will drive the profitability.
SG&A, in terms of the consumption or the progress compared to a normal year, the first quarter was basically about the same level. I think as long as we use SG&A like the previous years, I think that will be okay. Going to SSD, it is a bit behind, but, well, I think we should focus on the revenue. We had the Shanghai lockdown, and there has been challenge in terms of the procurement of the parts and material. We have not been able to ship our products. On the other hand, in terms of the backlog of our orders compared to last year, it is double. The order backlog is double compared to the previous year. We will be able to get our hands on the materials and components from now on.
Based on the improvement of the environment, the backlog will turn into sales, and then basically we will see orders and then ship our products as normal, meaning that with the remaining nine months, we will be able to catch up for the SSD business.
Thank you. One follow-up. I want to hear more detail about China. China for April, May, June, what type of momentum was there? Specifically, maybe April to May was stagnant, but in June, how much catch-up were you able to achieve in June? The recovery in June, was it stronger than expected? Can you explain? If you look at the full-year forecast, your 2022 China capital spending. In terms of the hospital's spending, I think basically you are saying that it is going to be positive, meaning that your customers will have the budget to spend. Is that assumption unchanged?
If you have any updated insight about this, I would like to ask about that. Thank you.
Some I will answer, and after that, Nacho, I would like to turn to Nacho to follow up or maybe correct me. First of all, in terms of the numbers, I would like to respond to that. First of all, April, basically, in terms of the shipment, it was zero. That is the situation. Going to May, it will be about 50%-60% utilization has recovered. Going to June, maybe year-over-year, double-digit growth is being seen. After the lockdown has been lifted, in line with that, the revenue has been trending in line with the lifting of the lockdown.
That is all from me, and then I would like to turn to.
Take the second question from [Shimadi-san] on the expectation of the spend of the hospitals in China, how we are now seeing the situation there.
Thank you, Chikashi. Just to complement a bit your explanation, which I think is accurate. What happened in April and May in Shanghai, and the lockdown in Shanghai, not only impacted, obviously, the business in the Shanghai provinces, I mean, the incoming orders, but also impacted the rest of the country. For these two months, product demonstration was literally almost impossible to do because of the non-possibility to ship products from Shanghai warehouses to the customers, which delayed in all over the country the tender processing. We are going to need a little bit of inertia in order to recover all those tenders. What I can say is that after April and May, almost having no sales due to the external factors that we could not control. In June, we have a very strong recovery month already.
We show a significant additional sales over our original plan. The expectation is that over the coming months, those tenders will reactivate. We are seeing a strong GI endoscope activity in China, and although it's not easy to predict exactly what is the number that we can achieve there, definitely we see some significant growth in China in the months to come. That probably will begin materializing in big numbers starting from September this month, where the tenders will reactivate. We are positive about the situation in China. We are contacting customers there, and they expect as well their business to come to market. That's what I can add to Chikashi's explanation. Thank you.
Thank you, Nacho. Can I just double-check that you are not really seeing any signs of budget cut by Chinese hospitals at this moment?
The situation in Chinese hospitals in the last two years or three years with COVID situation has been a little bit strange with its ups and downs. I think that we were expecting some recovery on the budget these months, and the direct impact on hospital budgets of the lockdowns in April and May is still difficult to predict. What we see is that some reactivations of tenders, and at least for the GI business, we see that there's a lot of activity in the market. We are confident that this area will recover strongly.
Thank you so much.
The first quarter, China is a concern. I would defer that to other questioners about China, that is. ESD segments, Japan, Europe, usually, excluding the foreign exchange impacts, presented big growth in revenue, and I think that's where the focus is, usually. I think EVIS X1 was an impact, but can you explain what the reason was for this big growth in revenue other than EVIS X1? What was the beneficial factors that contributed to growth in revenue?
Okay, let me first answer that, and Nacho, if you have anything to add, please do so. First, Europe and Japan, EVIS X1 effect, yes, was felt. In Japan, at the end of last fiscal year, the semiconductor shortage issue affected the business, so order backlog was increasing. Since April, they resulted in shipments. That was another factor that contributed to the growth in revenue.
In Europe, in addition to EVIS X1, yes, EVIS X1 is part of the picture, but in U.K., NHS had the budget that was executed that benefited us. Especially for GI, ESD segment benefited from this as an additional revenue source to increase the revenue results in Europe overall. Also in Russia, at the end of last fiscal year, shipments were held. For those orders, we were able to ship during this first quarter, which was another contributing factor.
Nacho, anything you want to add or?
Not much to add. I think that we're seeing very solid business in Japan, in the U.S., and in Europe. In Europe and U.S., there is regional factor. One is the NHS in U.K. continue with a strong purchases plan. As you say, the other is that overall in Europe, EVIS X1 is really driving the growth, the same in Japan. We are seeing very strong businesses there. In the United States, even still we have not launched the new EVIS X1. The loyalty of our customers to our products and the appreciation to our products is still very visible. We are having a very strong Q1 market, also provoked by the last, again, two years COVID situation that provoked strange purchase behaviors. I think altogether, the GI business continue being very strong in all geographies with obviously the exceptions of China because of the lockdown situation.
TSD, specifically urology and respiratory and endotherapy, are showing very nice growth in all geographies, across all geographies in general. I think that this is the situation we are seeing in Q1 and what we expect to continue in Q2. Thank you.
I see. Thank you. I have a follow-up question. Looking at the current situation in Japan, semiconductor has been secured already, and therefore the shipments would return to normal level. Is that a correct understanding as far as Olympus is concerned? Also, when you secure a semiconductor, did you have to pay a premium for that, which might result in increased COGS going forward? Should we not be concerned about that?
Thank you. I would like to answer that. First, did we secure all the semiconductors necessary? Well, compared to what we were anticipating initially, how should I put it? The risk had been lessened. To a large extent, we have been able to secure the necessary supply. That was for Q1. Having said that, how should I put it? Long lead time for orders are not being allowed now.
Up to this point in time, we made lots of efforts to secure the semiconductor supply, up to this point, that is. We are expecting this to continue, that the supply will be secured. For the long lead time orders, we have not been receiving the commitment from the suppliers. In that sense, it's uncertain. Compared to our original anticipation, we did better in Q1. Based on that experience in Q1, although there are uncertainties, at least compared to three months ago, things are looking better, is the way I see it. Price. For the last three months, from the so-called spot market, if we are to purchase from the spot market, we knew that the price is going to be exorbitant. That's what the media have been reporting. To secure the amount, we started to source from the spot market.
In Q1, maybe JPY 1 billion to JPY 1.5 billion COGS deterioration resulted from that. Going forward, basically, on your question of whether you should be concerned or not, we did factor that in in the full year guidance. In that sense, you don't have to be additionally concerned. That will be my answer. Having said that, markets change always. Internally, fixing the budget and saying that you can operate based on that is what we're doing. At the same time, in actually spending, expending fees, consider all possibilities, and on certain items, you are going to need the approval from the Executive Officer. Cost containment measures programs have been implemented. If the prices go beyond the assumption, to prepare for that, we already have those cost containment programs running.
Of course, there's no telling how the markets would turn out, so we cannot be 100% certain. At this current point in time.
We are factoring in some increase in the semiconductor prices. That's already incorporated in our guidance, and we do have the backup plan as well.
I see. Thank you. That's all. Thank you very much.
Europe is the strength, I can understand that. One concern is the U.S. TSD is not as good as expected. I think for the full year, I think, basically, I see a double digit, but it's about 1% in the first quarter. I think you have solid in plasma, you have the growth, but why is it the first 1% growth in the first quarter? I would like to know the background. Takeda-san talked about ESD in terms of the margin is lower, but maybe the SG&A spending is higher. Why? I would like to know about that. Can you continue that in the second half? That's my question.
I think overall, TSD have been, obviously, in the global has been impacted by general, mostly the impact in China. This has impacted the overall business. The situation in the U.S. has been mostly driven by some situation regarding supply chain, not semiconductor link, but link to other parts or link to other packaging issues that we have been experiencing that we have provoked some delays. We've been dealing with those situations diligently and step by step. We are recovering those business. I think this has had some sort of impact in Q1, and we will continue working on that in order to recover from Q2. From a procedure point of view, we are seeing good activity. There is nothing to worry on that sense. I think once the supply chain will stabilize, I think we will see normal rates of growth in TSD.
Thank you.
Going to your second part of the question about SG&A. I think this is a kind of some of the multiple items like outsourcing is increasing. Let's say QARA response or expenses, personnel cost has increased somewhat. That is the sales commission. Japan, well, the previous year, there has been some reserves that we have given for the previous year. I think it is true that SG&A is a bit higher in the first quarter. In the following nine months, rather than specifically doing something in some areas, I think it's a kind of in totality, we want to optimize the SG&A in the following nine months.
Can I just ask a question about the TSD business? Thank you, first of all, for talking about the TSD business in general, because once EVIS X1 launches in the U.S. this year, I think there's probably not going to be much to talk about on the ESD side for a while. It really helps to talk about this. Thank you. My question is about the ERCP. You're saying the ERCP market grows only in about low single digits. Olympus is growing high single digits. I believe the size of this business in your portfolio is probably around JPY 20 billion, if you could correct that. You pointed out guidewires and sphincterotomes as areas of strength. I believe the VisiGlide made by Terumo, the guidewire, has been a differentiation factor versus the competitor's offering. There's nothing to argue about there.
What is different about your sphincterotome and why is this portfolio growing faster than peers? Can you replicate the success with other ERCP devices such as baskets and most importantly, biliary stents? My understanding is that ERCP is an area with a lot of entrenched competition, so it's somewhat slower growing than I had thought. If you could provide some insight into this. That's my last question. Thank you.
Yeah. Thank you for your question, which is very detailed. I'm not sure if I would be able to answer to the level of the detail you are expecting. What I could say is that our position in the therapy in general is much stronger. The more complicated the procedure is, the better our products perform and the better our market share is. That's why in ERCP and ESD, we are doing better than the market, and we have indications that we are gaining market share, even obviously this is not accurately easy to measure, right? It's really difficult to assess about the technical, why some products are better than others in a market which is that tight. In many cases, it depends as well on the taste of our customers.
This is when we are indicated that in our guidewires and the sphincterotomes are being very well accepted, and they are considered by our customers that they are doing a good job there. Indeed, VisiGlide is one of our most successful products as well and is doing well. I think overall, the portfolio is growing. There is two reason for that. One is, which obviously we believe that our products are at the very least at the same level of our competitors, if not superiors. Also I think that over the last years, not only recently, we've been very active in the market from a commercial standpoint. Growing the number of interactions with customers, so we can show our products to them and make sure that they understand the benefits.
Also, we've been growing our portfolio and making sure that we're having a more complete portfolio for ERCP. I think these are all together the factors that are making us believe that the situation in ERCP is positive for us and will continue being positive for us. I hope that this answers, somehow, your question. Thank you very much.
Thank you very much.
My first question. Well, actually, I think you did respond partially. You said that you were able to minimize various risks. I think that was one of the major messages. When I look at page 21, the variance analysis, the cost increase, the material cost, how was it? You said JPY 1.5 billion. I think that's just for semiconductors. Can you explain what other materials were, and to minimize the risk, what measures proved to be effective? You did mention some, but could you elaborate, please?
Thank you. JPY 1 billion-JPY 1.5 billion, semiconductor and other materials included. Maybe I was not clear on that, but other materials are included as well. That would be my first answer to your first question.
Regarding the mitigation plans, for example, regarding the cost increase, sales price increase is what we do as part of what we do, regarding the securing of the materials, we just made very steady efforts, which proved to be effective. One is that conventionally, this is something that we really need to reinforce within Olympus. Previously, we were not approaching vendors and suppliers as a single global entity. We did not do that much, but we reinforced that approach, and we also conducted the top management negotiations, contacts, and allocation of what we do with what we have secured. We have refined that consideration as well. Those are some of the specific measures that we took. Regarding Russia, the customers, patients, and healthcare providers, the question is how can we deliver our products to them?
To access the Russian market, our European team looked at several options, and identified the transportation route that will get our products to our customers. That's just one example, but one specific example of the mitigation measures. That's a very random example of what we did.
Thank you. A follow-up question, different subject. Looking at China, Q2 onward, what is your view? Demand, you said, is recovering compared to Q1, but if we are to look at ESD and TSD separately, what is the demand for the capital products purchase and orders in China? In TSD, maybe it's declining. ESD, some of the products are seeing decline. What about the situation right now, June, July, the orders in China?
The situation in China, as I mentioned in previous question, is that for April and May, situation has slowed down in terms of demonstrations, and the tendering process has been delayed. When it's about orders not related to tenders, we see that there is a strong recovery on procedure, which is driving already incoming orders. At the same time, we see that there is more activity in tenders that will have not yet materialized, but we hope will materialize starting from September, October this month. We are forecasting a good Q2, but most importantly, we are forecasting a strong Q3. That's the current situation at this point with the information we have. Thank you. Mostly because of the tenders that today we are being discussed with our customers.
As I say, I think the tendering process was delayed because of the lockdown, and we expect some of the tenders to materialize in Q3 this year. There has been certain delay in all the tendering processes in China due to the lockdown.
I see. Thank you.
This is about the SSD business, but the first quarter's performance was bad. This bad performance, will this have an impact in the plan to sell this business, or does that impact the business plan of this business?
In terms of the outlook, the SSD business, the first quarter, because of the information that we have shared, it was quite weak. In terms of the order backlog, it has been going up. We will turn that into sales step by step, we want to reach the full year outlook. That is a plan for SSD. In terms of the future after the spin-off and in terms of the sales of this business, there is no impact. You will be able to achieve the full year plan, basically the buyer will be okay with that.
In terms of the sales process, there is no information that I can communicate with you on a timely manner. I would like to communicate the information when necessary.
Understood. Thank you.
Just one question I understand about the upward revision. Upward revision at this point in time is really good news. The fact that you implemented that, especially JPY 51.5 billion revenue and profit JPY 2.5 billion. Semiconductor okay, Ukraine not as serious as anticipated, China is recovering. Are those the reasons why you are revising upward at this point in time? Do I understand correctly that foreign exchange assumptions would account for this amount of upward revision?
Let me take that question. Basically, the May announcement of the guidance. The underlying plan at that time remains unchanged. This upward revision is almost entirely in relation to the foreign exchange rate assumptions.
I hope that answers your question.
Yeah, clear.
China, renminbi JPY 20 . It's not just foreign exchange, but the volume as well. June, July, Q3, are you assuming the volume would be on par with your plan?
We can't really discuss on a monthly basis, on a full year basis, on the overall basis, we do have as such for China on a local currency basis. We're translating that to the functional currency of the yen using the latest foreign exchange rate.
Very clear. Thank you very much.
This is about the China ESD TSD business. This is a confirmation of what you said. For the third quarter, it's going to become strong. Meaning that the second quarter, because due to the impact of the lockdown, a delay of the tenders, there'll be some impact.
Is that the right way to look at this China business?
Yeah. Just to clarify that point, I think that we are seeing a recovery versus Q1. In Q2, it was something that demand in April, May, that is catching up in June, July. I think we are seeing recovery, and we are doing better than our anticipated business plan in these months. The point of Q3 is that we expect some tenders. The tender business is the one that we expect to recover in Q3. We are working hard in order to gain those tenders that we believe will boost our results in Q3. That's the situation. We are already seeing some recovery in Q2. We expect the recovery to continue very strong during Q3. That's the point. Thank you.
Thank you very much. One quick follow-up. Last year, I think basically in May, there was this policy that China said that government should be done for national manufacturers. Buy China policy. June YoY has recovered. You said that, but maybe June was a low hurdle to clear considering what happened in June last year for the Buy China campaign.
We've been commenting on this China policy in the past. I think that our policy in China is to continue working with our customers and making sure that they appreciate the products and the technology that our products deliver. This is what we've been trying to do, and we will continue working with our customers in that regard. The implementation of so-called Buy China policy or others, I think it's something that is an external factor that we have to include in our discussion with our customers. We believe that most importantly, as long as they appreciate the technology differentiation of our products, I think our business will continue growing in China.
Of course, we will continue working not only with customers but with the Chinese government in order to make sure that Olympus does an appropriate contribution to the well-being of the Chinese patients, through our products, through education, through the different programs we have. This is the way we face the situation China overall. Thank you.
Thank you. The first quarter of last year, June was weaker compared to this year. Is that a question that you will not be able to answer?
The IR division will respond afterwards.
Thank you. Understood