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Financial Results

FY2017 Presentation

Date April 27, 2018
Presenter Satoshi Hirano, President & CEO

Presentation Materials

. FY2017 Financial Results (10pages)[1,231KB]
. FY2018 Full Year Plan(23pages) [3,340KB]
. Appendix(3pages) [380KB]



Summary of the Presentation

1. FY2017 Financial Results

Significant sales and profits

Net sales were 145,558 million yen thanks to increased sales mainly in Japan, Europe and the U.S.A., Asia, and the Oceania region (up 13.4% YoY). The increase in net sales resulted in operating income of 12,073 million yen (up 26.4% YoY) and ordinary income of 10,674 million yen (up 40.0% YoY). As a result, profit attributable to owners of parent was 6,028 million yen (up 37.2% YoY).

FY2017 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]
Sales of IT Construction and IT Agriculture grew firmly in each region, resulting in net sales of 74,945 million yen (up 23.7% YoY) and operating income of 8,018 million yen (up 43.3% YoY).

[Smart Infrastructure Business]
Mainly thanks to increased sales of i-Construction and IT Agriculture in Japan, net sales were 36,626 million yen (up 10.7% YoY) and operating income was 5,102 million yen (up 29.5% YoY).
* "i-Construction" is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, JAPAN.

[Eye Care Business]
Mainly thanks to increased sales of 3D OCT (Optical Coherence Tomography) devices in the U.S.A., net sales were 46,515 million yen (up 7.8% YoY) but operating income was 2,038 million yen (down 21.6% YoY) due to increased expenses related to seed investments and the impact of stagnant sales in the European region.

2. FY2018 Full Year Plan

Looking at our forecast for FY2018, although there is a lack of clarity regarding the economic impact of protectionist policies or financial strategies adopted by the US government, the global economy is seeing construction market growth and stabilization on grain markets. Furthermore, Japan is experiencing growth on favorable exports and internal demand. Overall, global economy appears to be on a trend of firm growth.
As our consolidated earnings forecast for FY2018, we are forecasting net sales of 150,000 million yen (up 3.1% YoY), operating income of 15,000 million yen (up 24.2% YoY), ordinary income of 13,000 million yen (up 21.8% YoY), and profit attributable to owners of parent of 7,000 million yen (up 16.1% YoY). Furthermore, our assumptions related to full-year performance are major currency rates of 105 yen/1 USD and 130 yen/1 euro.

FY2018 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.


Considering you recorded double-digit growth in FY2017, what factors are limiting FY2018 growth rate to single-digit growth?

One factor is that our currency assumption for FY2018 is 105 yen, which is 5 yen in yen appreciation compared to the previous fiscal year. The positioning business growth rate in FY2018 is 105% but excluding the impact of currency this would be double-digit growth. Similarly for other segments, we are reflecting the impact of currency markets.

Please provide a breakdown of your income forecast comparing FY2017 and FY2018.

The 3 billion yen increase in income breaks down as sales growth/mix: 6 billion yen; fixed costs & COGS Reduction: -1.5 billion yen; currency impact: -1.5 billion yen.

Is the system for which IDx received FDA approval more or less an exclusive agreement with Topcon? Is there a possibility that they use competitor devices?

There is no guarantee that IDx won't use competitor products in the future but the contract with IDx came about because the speed of our customer response was critical to theme. We view this as more or less an exclusive agreement. IDx chose our NW400 for its ease of operation and the reasonable price. Critical points were the fact that the device can be used easily by internists not familiar with device operation and the device enables the discovery of early onset diabetes, something that was difficult with previous devices. The diabetes detection rate for this system is 87%. Some view this as low but the reality is that humans also make diagnosis errors and there is no medicine that works 100% on all patients. From that perspective, the rate of 87% is definitely not low and this system will surely contribute to greater efficiency in the medical workplace. We believe this is why the FDA agreed with the pricing and approved the device.

The Eye Care Business has continued to have a low operating income ratio for a year now. Is the market environment in Europe declining?

Although not on the level of growth seen in the U.S.A., OCT sales were firm in Europe. Existing business areas, mainly examination/diagnostic, are experiencing a minor lull, we have high expectations for European expansion by KIDE, a company in the preventative and prognostic care domain we acquired and that is expected to grow moving forward.

What positive points and issues concerning the Eye Care Business are you [General Manager Ohue] focused on?

I appreciate the commercial viability of the Eye Care Business. The OCT is an incredibly appealing product. This is particularly evident in the U.S.A. but, compared to our competitors Zeiss and Heidelberg, Topcon has strong sales channels in the optometrist market. I accepted the position of General Manager of the Eye Care Business because I view this as a prime chance to develop a solutions business that combines those strengths with AI. As for issues, our existing sales network centers on hardware so we need to build new sales channels for the solutions business. THS(Topcon Healthcare Solutions / NJ, U.S.A.)will take a leading role in measures related to addressing this issue.

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