I Would Like to Present FUJIFILM Holdings' Financial Results for The
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I would like to present FUJIFILM Holdings’ financial results for the first half of the fiscal year ending March 2020. 1 Let me explain the main points of the first half of the fiscal year ending March 2020. In the first half of the fiscal year ending March 2020, operating income increased year- on-year by 9.7%. On a constant-currency basis, it increased largely by 19.3%. Compared with the plan, the performance is almost in line, recovering a negative impact from exchange rate by business operations. Though the total revenue decreased due to Chinese business affected by the economic slowdown, decline in the sales of the imaging business and export to the U.S. and Europe in the document business, healthcare expanded driven by the medical systems, bio CDMO and regenerative medicine business. The operating income increased in healthcare and in the document business with improvements of profitability and positive impacts from structural reforms, though it decreased in the Imaging Solutions and Materials. In addition, we completed to make Fuji Xerox a wholly owned subsidiary on November 8th, whose earnings will be included in our consolidated financial statement from November. Consequently, we revised upward our consolidated financial forecast for net income attributable to FUJIFILM Holdings for the fiscal year ending March 2020 by ¥7.0 billion, achieving the ROE target of 8% one year ahead of the schedule. 2 Let’s move on to detailed performance information for the first half of the fiscal year ending March 2020. Consolidated revenue totaled ¥1,132.1 billion, down 3.5% from the previous fiscal year. Operating income totaled ¥92.0 billion, up 9.7% from the previous fiscal year . Income before income taxes came to ¥97.5 billion, down 1.3% from the previous fiscal year due to such factors as large gains on equity securities in the previous fiscal year. Net income attributable to FUJIFILM Holdings totaled ¥61.1 billion, down 6.6% from the previous fiscal year. 3 Let’s move on to segment specific information. The Imaging Solutions segment recorded revenue of ¥154.1 billion, down 12.4% year-on-year, due to such factors as decreased sales of photographic paper, instant photo systems and digital cameras. Operating income totaled ¥10.1 billion, down 53.0% from the previous fiscal year. The Healthcare & Material Solutions segment recorded revenue of ¥492.7 billion, down 1.3% year-on-year, due to such factors as a decline in the demand for printing plates in the graphic systems business. Operating income totaled ¥45.0 billion, up 20.0% from the previous fiscal year due to improved profitability in the healthcare business. Within the Healthcare & Material Solutions segment, the healthcare business recorded revenue of ¥230.4 billion, up 3.1% year-on-year, due to a growth in the medical systems, bio CDMO and regenerative medicine business. Operating income totaled ¥11.1 billion, 4.6 times that of the previous fiscal year. The Document Solutions segment recorded revenue of ¥485.3 billion, down 2.5% year-on-year, mainly due to a decrease in export to the U.S. and Europe. Operating income totaled ¥54.9 billion, up 26.9% year-on-year with improved profitability and positive impacts from structural reforms. 4 First, I would like to present the results of our Imaging Solutions segment. In the photo imaging business, revenue decreased due to such factors as declined sales of photographic paper, and instant photo systems caused by inventory adjustments at some U.S. retailers and a drop-off period before new products’ launches in Q1. We are aiming to expand sales mainly with the instax mini LiPlay, launched in June 2019 and instax mini Link, a printer for smartphones with unique functions, excellent operability and portability, launched in October 2019. In the electronic imaging business, revenue decreased from the previous fiscal year due to a decline in the sales of entry-level mirrorless digital cameras under severe market conditions. We will strengthen the sales of FUJIFILM GFX100, a mirrorless digital camera equipped with a large format sensor with the world’s highest 102 million pixels resolution, FUJIFILM X-A7 launched in October 2019, and FUJIFILM X-Pro3 to be launched in November, which is the flagship model for the X series of compact and lightweight mirrorless digital cameras that deliver outstanding image quality with Fujifilm's proprietary color reproduction technology. In the optical device business, revenue decreased, reflecting a declined demand for various industrial use lenses such as on-vehicle lenses due to the economic slowdown in China. Fujifilm is enhancing a line-up of new products for business growth, such as FUJIFILM PROJECTOR Z5000, which combined optical technologies of FUJINON Lenses, and the Premista series of zoom lenses for cinema cameras compatible with large format sensors. In the Imaging Solutions segment, though revenue decreased compared to the previous fiscal year and operating income also decreased compared to the previous fiscal year due to such factors as a decline in revenue and effect of exchange rate, we will further enhance the sales by providing products with competitive advantages utilizing our unique technologies, and by running effective promotions to achieve a performance target. 5 Next is our Healthcare & Material Solutions segment. In the healthcare business field, the medical systems business enjoyed brisk sales in such business areas as medical IT and endoscopes. In the bio CDMO business, the contract process development and manufacturing business for biopharmaceuticals increased through expansion of facilities. In the regenerative medicine business, sales increased due to the consolidation of FUJIFILM Irvine Scientific, a leading company in cell culture media, in June 2018. As for the highly functional materials business field, in the display materials business, although overall revenue decreased mainly due to a decline in the demand for WV film, the sales of new products related to OLED showed strong growth. In the electronic materials business, though the sales of advanced peripheral materials related to photolithography were affected by market conditions, revenue remained at the same level as the previous fiscal year with solid sales of products such as color resist for image sensors. In the recording media business, revenue increased due to strong sales of magnetic tapes for high volume data storage, including newly launched FUJIFILM LTO Ultrium8 Data Cartridge. In the graphic systems business, sales decreased due to a decline in the demand for printing plates. Fujifilm aims to expand business by continuously developing and providing innovative products to the rapidly digitalized commercial printing market, such as Jet Press750S, inkjet digital press. In the Healthcare & Material Solutions segment, though overall revenue decreased, sales increased in the medical systems, bio CDMO and regenerative medicine business. Operating income increased primarily by improvements of profitability in healthcare. 6 Lastly, I would like to talk about the Document Solutions segment. First, as for the office products field within the office products and printers business, although the export to the U.S. and Europe decreased, sales were strong for flagship color multifunction devices that realize robust security environment, and color multifunction devices for small offices, in Japan and in Asia Pacific region including China respectively. In the production services business, sales remained strong in each region for the Iridesse™ Production Press, an on-demand production color printer. Together with the 11000 Inkjet Press, a high-speed roll color inkjet printer for commercial printing with image quality comparable to that of offset printing launched in February 2019 in Japan, we aim to further expand the digitalization of commercial printing. In the solutions and services business, revenue increased due to such factors as expanded sales of one-stop services that support the design, introduction, maintenance and management of IT environments in offices in Japan and an acquisition of a large BPO (Business Process Outsourcing) contract in Australia. Fuji Xerox aims for further growth in the service field by continuously providing services that support customers in improvements of work efficiency and productivity. Though revenue in the Document Solutions segment declined due to such factors as a decline in export to the U.S. and Europe, operating income increased by such factors as improvements in profitability and positive impacts from structural reforms. We will continue our efforts to expand growth areas such as the solutions and services business and the production services business, while enhancing profitability by accomplishing structural reforms. 7 Next, let’s look at our balance sheet. Assets as of the end of September 2019 totaled ¥3,480.8 billion, increased by ¥66.1 billion from the end of March 2019, mainly due to an increase in property, plant and equipment. Liabilities increased by ¥65.2 billion to ¥1,235.0 billion, and shareholders’ equity decreased by ¥1.1 billion to total ¥2,035.9 billion. The current ratio was 246.5%, remained at the same level as the end of the previous fiscal year. Our debt-equity ratio increased by 3.3 percentage points to 60.7%, and our shareholders’ equity ratio decreased by 1.2 percentage points to 58.5%. 8 Next, with regards to our cash-flow, net cash provided by operating activities totaled ¥157.6 billion, increased by ¥72.3 billion year-on-year due to a decrease in notes and accounts receivable and other factors. Net cash used in investing activities amounted to ¥163.5 billion, mainly due to such factors as acquisitions. As a result, free cash flow without acquisitions of businesses and others was ¥104.4 billion, increased by ¥65.3 billion year-on-year. 9 Let me talk about the progress in structural reforms at Fuji Xerox. 10 One-time expenses including structural reform costs in the first half of the fiscal year ending March 2020 totaled ¥4.5 billion, while a positive impact from the structural reforms was ¥12.1 billion, proceeding as planned.