Terumo Corporation / Earnings Calls / February 14, 2025

    Jin Hagimoto

    [Call Starts Abruptly] Thank you for your kind introduction. I’m Hagimoto, Terumo’s CFO. This presentation provides an overview of Terumo’s financial results for the third quarter of the fiscal year ending March 31, 2025. So, here are the highlights of this financial statement. In the third quarter, we achieved all-time highs for revenue, operating income, adjusted operating income and net income, both for the quarter and for the cumulative period up to the end of Q3. Revenue growth was 13% compared to the previous year, driven by the U.S. and continued global demand, growth with foreign exchange effects also contributing. Profit growth exceeded sales growth due in part to the effects of our pricing policy and ongoing efforts to improve profitability. Next slide, please. These are our P&L results. Revenues reached, as I have said at the outset, a record high of ¥772.2 billion in the cumulative period up to the end of Q3. In addition to continued demand growth in a generally favorable business environment, foreign exchange effects also contributed. So, operating income and adjusted operating income also grew significantly faster than sales growth, reaching record highs of ¥133.5 billion and ¥159.3 billion, respectively. Improvement in profit margins was achieved through steadily progressing pricing policies and profit improvement measures. On the other hand, we will continue to closely monitor changes in the macro environment, such as surging raw material prices and trends in U.S. tariff policies. In addition, a onetime cost of ¥3 billion was recorded in the third quarter. This includes costs associated with the portfolio review that has been underway since the start of the current fiscal year, but we will continue our efforts to review and optimize our business structure. So we are certainly going to take actions to achieve GS26. This is an analysis of changes in profit for the third quarter compared to the same period of the previous year. First, the increase in gross profit from higher sales and driven by TIS and blood center business. Gross margin effect benefited from the effects of profit improvement measures as well as onetime expenses recorded in the previous year. Turning to price, price decline due to China VBP were offset by the effects of price increases overseas. The reimbursement price revision this fiscal year in Japan is also having a positive effect. Increased SG&A expenses and R&D expenses is due to additional provisions for houses, for bonuses resulting from higher-than-expected sales. Foreign exchange effects saw ¥4.4 billion increase for flow and minus ¥2.5 billion decrease for stock. So, following the analysis of profit increase, decrease for the cumulative period up to the end of Q3. Overall, the increase in sales was largely due to continued growth in demand. The trend is similar to what I explained earlier as a factor affecting Q3, but the cardiovascular company, especially TIS, is making a growing contribution to sales. SG&A expenses increased in line with business expansion, but remained in line with plans for cumulative Q3 period. And the ratio to sales also improved. Foreign exchange effects saw a ¥10.4 billion increase in flows and a ¥3 billion increase as well. So, here, we can see revenue by region and steady progress is being made in all regions, particularly in the U.S. and Europe. The U.S., in particular, saw the highest growth rate among all regions with all companies posting double-digit growth even in local currency terms. And at the Cardiac and Vascular Company, TIS, which experienced supply problems with some access products in the same period of the previous year, this recovered while Neuro saw strong sales. Meanwhile, in the Blood and Cell Technologies, growth was driven by the Plasma Innovation business, which is included under blood center business. In Japan, meanwhile, growth was led by Medical Care Solutions. This was largely due to the effect of pricing measures in Hospital Care. In Europe, meanwhile, sales were strong as demand continued to grow across the Cardiac and Vascular Company, where growth was driven by Pharmaceuticals at TMCS and apheresis therapeutics in Blood and Cell Technologies. Turning to China, TIS rebounded from the price decline caused by VBP with an increase in volume, while Neuro also continued to grow substantially. In emerging markets such as Asia and the Middle East, the blood center business, which had been strong in the same period of the previous year saw a decline in sales. But Cardiac and Vascular sales were led by Neuro and Medical Care Solutions by Pharmaceuticals, which both grew by double digits on a local currency basis. Next slide, please. I will now review our business performance by company. First is the Cardiac and Vascular Company. Sales and revenue grew by 8% on a local currency basis and was strong globally, especially in the U.S. Neuro and Aortic led the way in terms of per-business growth. Neuro has continued to see strong growth in demand globally, most notably in the U.S. and China. Profits increased significantly due to higher revenues and the effects of profit improvement measures, as well as foreign exchange effects. Next slide, please. Turning to TMCS, Medical Care Solutions. Revenue was driven by Hospital Care Solutions and Pharmaceutical Solutions. Meanwhile, In Hospital Care Solutions, the main contributors were the effects of domestic pricing measures and strong sales of infusion sets. Demand in the U.S. is also increasing. In Pharmaceuticals, despite some delays in the CDMO business, progress was generally in line with plans. Overseas meanwhile, PLAJEX performed well in Europe, the U.S. and Asia. Profits increased due to the effects of pricing measures and steady progress in controlling SG&A expenses. Next slide, please. Finally, we have TBCT, Terumo Blood and Cell Technologies. Revenue was driven by the plasma innovation business, which is included under the blood center business. As of the end of January this year, Rika had been installed in approximately 70% of plasma collection centers and is steadily being rolled out. In the core blood center business, sales of whole blood collection systems and component blood collection-related products were strong in Europe and the U.S. Apheresis therapy also grew steadily with expanding demand for cell collection for cell and gene therapies, especially in the U.S. and Europe. Profits were boosted by higher sales in the core business and improved profitability accompanying the rollout of Rika. Nonetheless, the impairment loss on some equipment associated with the start-up of a new production line in the third quarter of the previous fiscal year also contributed to the insignificant increase in profit this fiscal year. This concludes the financial summary. Thank you for your time.

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