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Financial Results

FY2017 1Q Presentation

Date July 28, 2017
Presenter Haruhiko Akiyama, Director and Executive Officer, CFO

Presentation Materials


. FY2017 1Q Financial Results (11pages)[1,043KB]
. FY2017 Full Year Plan(5pages) [718KB]
. Appendix(3pages) [271KB]

Summary of the Presentation

1. Consolidated earnings for the first quarter of FY2017.

Net sales were 31,578 million yen, a year-on-year increase of 20.4% thanks to higher sales, particularly in Japan, the U.S.A., Asia, and Oceania. This increase in net sales resulted in operating income of 1,321 million yen (179.4% YoY) and ordinary income of 1,180 million yen (up 1,619 million yen YoY). As a result, net income attributable to owners of parent was 334 million yen (up 1,118 million yen YoY).

FY2017 1Q Financial Results

*1 According to change in Japanese Accounting Standards, the former Net Income is shown as "Profit attributable to owners of parent" on financial statements.

Financial Results by segment

[Positioning Company]
Growth in sales of IT construction systems and a recovery trend for IT agriculture resulted in net sales of 17,227 million yen (134% YoY) and operating income increased significantly to 1,684 million yen (226% YoY) thanks to increased revenues.

[Smart Infrastructure Business]
Sales growth attributable to the accelerating popularity of i-Construction in Japan and increased sales of our new total station resulted in net sales of 7,841 million yen (119% YoY) and operating income of 793 million yen (269% YoY).
* "i-Construction" is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, JAPAN.

[Eye Care Business]
While sales in Europe saw a temporary downturn, sales growth for 3D OCT and favorable sales in other regions, including India and other parts of Asia, resulted in net sales of 9,086 million yen (103% YoY). However, operating losses totaled 451 million yen (-912 million yen YoY) due to increased expenses related to R&D and other forward-looking investments as well as the impact of a temporary lull in sales in Europe.

2. FY2017 Consolidated Earnings Targets

Our earnings forecast for the cumulative consolidated first six months of FY2017 and the current consolidated period reflect the current condition of increased net sales relative to our earnings forecast released on April 28, 2017. We have revised our earnings forecast for the cumulative consolidated first six months to net sales of 62,000 million, up 2,000 million yen (3.3% against previous forecast), and our full-year to 133,000 million yen, up 2,000 million yen (1.5% against previous forecast). For income, as we expect the impact of increased sales during both the cumulative consolidated first six months and over the full year to be limited, our forecasts for operating income, ordinary income, net income (quarterly) attributable to owners of parent, and net income (quarterly) per share remain unchanged from the earnings forecast released on April 28, 2017.
We will continue to monitor transitions in performance and market trends, and make timely disclosure in the event of circumstances requiring the need for a review of our earnings forecasts.

FY2017 Full Year Plan
*1 According to change in Japanese Accounting Standards, the former Net Income is shown as "Profit attributable to owners of parent" on financial statements.
*2 Assumed exchange rate after July 2017 is ¥105/dollar and ¥115/euro.

Q&A

Provide us with a detailed breakdown (by region, sales format (OEM/aftermarket)) of the year-on-year 130% growth in IT agriculture.

As the IT agriculture-related company we acquired mainly operated as an OEM, as hoped our ratio of OEM increased. Both OEM and aftermarket are making significant contributions. OEM is seeing favorable sales to tractor manufacturing (1st Tier) AGCO and others. Also, sales to attachment manufacturers and parts manufacturers categorized as 2nd Tier and 3rd Tier are also strong. By region, we recorded a year-on-year increase in all regions.

Do you anticipate incurring expenses related to forward-looking investments in the Eye Care Business from 2Q onward?

From 2Q onward, we do anticipate incurring expenses related to investments in IoT-related businesses, including the development of a sales structure, R&D expenses, and expenses related to FDA approval. These points are included in our new full-year plan.

For the Eye Care Business, do you anticipate sales to Europe will recover from 2Q onward?

We are planning to new product releases and software version updates in the second half, thus anticipate earnings will recover in the second half.

Tell us about your sales growth projections for i-Construction by sales format (OEM/aftermarket) and future potential.

Last fiscal year we received orders from 1,700 construction sites. This fiscal year, as of 1Q, we are receiving orders at a rate 1.6 times greater than the previous fiscal year. On an annual basis, we are expecting high double-digit percentage growth compared to the previous fiscal year. The market is seeing an i-Construction boom and we expect this trend will continue for some time. Whether OEM or aftermarket, we view sales growth as a positive for us.

What impact will the alliance between Komatsu and Trimble have?

We welcome the initiative by both companies to link data. This will strengthen the i-Construction concept of linking data from the surveying, design, implementation, and examination processes, and lead to improved connectivity for construction sites. Creating an open platform and making it possible for mutual links with the data of construction machinery manufacturers beyond just Topcon and Komatsu is meaningful for the entire industry.

Tell us about the size of construction projects increasing due to the use of i-Construction and what impact these will have on profits.

Currently, applicable construction projects are construction projects directly overseen by the government and consists mainly of road construction. The majority of these projects are in the sub-JPY 1 billion range. Our industry-leading lineup of products, from IT construction to the total station, drones, laser scanners, and mobile mapping systems affords us a competitive advantage. Amid an overall decline in orders, we believe the number of project orders will increase further as we resolve issues such as labor shortages and cost reductions, and expand the scope of applicable projects from those directly overseen by the national government to include projects commissioned by local municipalities.

On a full-year basis, one would expect the operating income ratio for the Eye Care Business to be in the double digits so 6% figure for this year's forecast seems low. Excluding extraordinary factors such as forward-looking investments, can you confirm that there has been no change in the profit structure, particularly in European markets?

Excluding extraordinary factors, the Eye Care Business continues to maintain a high operating income ratio. During the previous fiscal year, competitiveness was negatively impacted by yen appreciation. This fiscal year, sales are seeing a temporary downturn as the market waits for the launch of new products. However, we do not view this as a decline in competitiveness.

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