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Financial Results

FY2018 1Q Presentation

Date July 31, 2018
Presenter Haruhiko Akiyama, Director and Executive Officer, CFO

Presentation Materials

1Q Highlights (1pages)[118KB]
. FY2018 1Q Financial Results (14pages)[1,471KB]
. FY2018 Full Year Plan(4pages) [438KB]
. Topic(2pages) [166KB]
. Appendix(5pages) [649KB]

Summary of the Presentation

1. Consolidated earnings for the first quarter of FY2018.

Significant increase in earnings

Net sales were 33,406 million yen, up 5.8% year on year, mainly on higher sales in the USA and Europe. This increase in net sales resulted in operating income of 1,905 million yen (up 44.3% YoY) and ordinary income of 1,601 million yen (up 35.7% YoY). As a result, income attributable to owners of parent were 492 million yen (up 47.0% YoY).

FY2018 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]
Net sales were 18,430 million yen (up 7.0% YoY), mainly on significant sales growth for IT Agriculture products. Operating income was 1,823 million yen (up 8.3% YoY).

[Smart Infrastructure Business]
Net sales were 8,182 million yen (up 4.3% YoY), mainly on sales growth in Japan. Operating income was 877 million yen (up 10.6% YoY).

[Eye Care Business]
Net sales were 10,047 million yen (up 10.6% YoY), mainly on sales growth in Japan and the US. Operating income was 246 million yen (up 698 million yen YoY).

2. FY2018 Consolidated Earnings Targets

There is no change in our earnings forecasts for the cumulative consolidated second quarter or the cumulative consolidated fiscal year previously released on April 27, 2018.
We will pay close attention to future transitions in earnings and market trends, and provide timely disclosure in the event of any changes that require a revision of our earnings forecasts.

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.
*2 Assumed exchange rate after July 2018 is ¥105/dollar and ¥130/euro.


Please provide specific details on growth rates for IT Construction and IT Agriculture in the Positioning Company. The IT agriculture growth rate for the previous fiscal year was 30% but what about this fiscal year?

IT Construction is largely unchanged from the previous year. This is in party due to earnings being particularly favorable during the previous fiscal year. Looking solely at the three months of 1Q, earnings were largely unchanged due to the timing of orders received. This includes cases of the accounting for some orders being carried over. However, looking at trends over the past 12 months, we are achieving double-digit growth with little deviation from the trends seen during the previous fiscal year.
IT Agriculture has been on a recovery trend since the previous fiscal year but 1Q did not see performance reach full recovery levels. At present, grain prices are very stable, earnings at AG equipment tractor manufacturers are favorable, and Topcon's IT Agriculture performance was very favorable. As a result, the growth rate for 1Q was over 20%.

Please discuss the level of growth for Smart Infrastructure Business i-Construction-related sales.

Similar to Positioning Company IT Construction, 1Q growth was largely unchanged year on year. As indicated by the opening of our training center (Presentation Materials P.12), the i-Construction market is still in its early stages and we expect strong demand to continue during this fiscal year.

The Positioning Company and Smart Infrastructure Business 1Q growth rates have slowed down compared to the previous fiscal year, so is the forecast in your full-year plan. Although progressing according to company plans, is there any change in momentum?

It appears that way when looking solely at this three-month but the business is not losing momentum.

1Q fixed costs increased by 800 million yen. I want to confirm there is no change in our initial full-year forecast for increased fixed costs?

There is no change in our initial forecast of 2.0 to 3.0 billion yen for the full year. We are forecasting fixed cost increases for the Positioning Company and Eye Care Business, and 1Q progress is on par with plans (forecasting approximately 1.5 billion yen total for Fixed cost and Cost reduction).

Is the Eye Care Business bottoming out in Europe due to market factors, factors attributable to your company, or both? Also, will this recovery continue moving forward?

Last fiscal year, investments by major clients (including optical chainstore) in the UK and Northern Europe caused a temporary constraint due to client-side issues. During 1Q this fiscal year, those constraints were relieved and we saw a resurgence in orders. Compared to the previous fiscal year, we do not expect sales to Europe to decrease further. We are beginning to see positive elements, including the launch of new businesses such as screening for optical chainstores.

What percentage of sales is represented by screening business? How much benefit have you seen compared to the previous fiscal year?

We do not disclose specific sales figures. However, this is a new market so future growth potential is significant.

Smart Infrastructure Business outside sales are declining. It appears that the ratio of Positioning Company-related products increased due to inter-segment sales but was there any growth in outside sales?

Sales of our mainstay product Total Stations are growing in Europe, the US, and in emerging markets thanks to global infrastructure demand. We are seeing income contributions thanks in part due to Cost reduction resulting from release of "Common Platform" based Total Stations. There is no change in trends.

External hiring was used to appoint a new leader for the Eye Care Business and you recently tapped outside personnel again. Has your approach to hiring changed? Do you expect this trend to continue moving forward?

The Eye Care Business was originally a hardware business but is now transforming into an IoT-related business. We want to promote growth through the aggressive hiring of outside human resources with experience in software and the solutions business.

* "i-Construction" is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, JAPAN.

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