Interim Consolidated Financial Results for Fiscal 2000

Transcription

1 (Reference) No. 033 October 10, 2000 Interim Consolidated Financial Results for Fiscal 2000 Name: Hogy Medical Co., Ltd. Listing: First Section, Tokyo Stock Exchange Stock code number: 3593 Address: 12-4, Yushima 1-chome, Bunkyo-ku, Tokyo , Japan Phone: Contact: Nobuyuki Nakagawa Director and Executive Officer, Administration Division Meeting of Board of Directors for Interim Consolidated Financial Results: October 10, Interim financial results for fiscal 2000 (April 1, 2000 September 30, 2000) (1) Results of operations Net sales Operating income Ordinary income (% change from previous year) (% change) (% change) Fiscal 2000 interim 10, % 2, % 2, % Fiscal 1999 interim 10, % 2, % 2, % Fiscal 1999 full year 21,107 4,920 4,835 Net income Net income Net income per share (% change) per share (Yen) (fully diluted) (Yen) Fiscal 2000 interim 1, % Fiscal 1999 interim 1, % Fiscal 1999 full year 2, Notes: 1. Gain/loss on investments based on equity method: million (fiscal 1999 Interim: million; fiscal 1999 full year: million) 2. Gain/loss on derivative transactions: million 3. Changes in accounting method: Not applicable 4. Percentage figures shown in the net sales, operating income, ordinary income, and net income columns indicate year-on-year changes for those items. (2) Financial position (term-end) Total assets Shareholders equity Equity ratio Equity per share (Yen) Fiscal 2000 interim 40,944 33, % 2, Fiscal 1999 interim 40,255 32, , Fiscal 1999 full year 41,609 33, ,074.07

2 (3) Cash flows operating activities investing activities financing activities Cash and cash equivalents at end of year Fiscal 2000 interim 1,179 0,995 2,544 6,930 Fiscal 1999 interim Fiscal 1999 full year 4,265 2,166 1,101 9,272 (4) Included in scope of consolidation or applicable under equity method Consolidated subsidiaries: 1 Nonconsolidated subsidiaries: 0 Affiliates: 0 (5) Changes in scope of consolidation or equity method Consolidated subsidiaries Newly included: 0 Newly exempted: 0 Affiliates (based on equity method) Newly included: 0 Newly exempted: 0 2. Forecast for fiscal 2000 (April 1, 2000 March 31, 2001) Net sales Operating income Net income Fiscal ,156 5,693 3,256 Note: Forecast net income per share:

3 1. Hogy Medical Group The Hogy Medical Group consists of Hogy Medical (the Company ) and its consolidated subsidiary, P.T. Hogy Indonesia. Main Group businesses are the manufacture and sale of various items for medical use, namely consumables, implements, machinery and equipment, documentation paper, and nonwoven fabric materials. The Company entrusts part of its nonwoven fabric materials and consumables manufacturing operations to P.T. Hogy Indonesia. The Group s structure and interrelationships are shown below. Domestic Hogy Medical Co., Ltd. (manufacture, sale) Raw materials, semifinished products Finished products, semifinished products Overseas Subsidiary Manufacturing company P.T. Hogy Indonesia Domestic users 2. Management Policies Hogy Medical is committed to fostering medical progress and promoting the health and happiness of people through its business activities, thus contributing to social prosperity. Through its campaign to combat the spread of in-hospital infections, the Company places top priority on assuring the safety of patients and medical facility personnel. We also offer a line of products that enable medical institutions to enhance their streamlining and energy-saving efforts. In the first half of fiscal 2000 the six-month period ended September 30, 2000 we continued implementing our policy of placing importance on customers and shareholders. We accord high emphasis to product life cycles, acknowledging that even the most superior products cannot sustain long-term growth. With this in mind, we have implemented a strategy of getting next-generation growth products on track while sales of mainstay items are expanding. We believe this strategy will enable us to achieve continued revenue and profit growth. To this end, we are concentrating our management resources on new product development, and one of our medium-term goals is to raise the share of new products to more than 30% of net sales. We focus on earnings per share (EPS) and return on equity (ROE) as suitable performance indicators. In the near future, we hope to achieve EPS of 200 and ROE of 10%. To attain these targets, we are working hard to get our three product categories into growth mode. The first is our mainstay Sontara Kit line of next-generation nonwoven fabrics. These are now just entering a growth period, and we predict the potential market to be several times the market for conventional nonwoven fabrics. We plan to nurture this line into a major business for the Company. The second category is steel implements (such as scissors and tweezers). These are essential hospital tools, and we are confident that demand will grow steadily. Our current priority is to reinforce our range of offerings. By providing an extensive product line and selling at reasonable prices, as well as by creating a swift delivery system, we plan to steadily expand our market share, although this will require some time. Patient-care products constitute our third product category. Our range encompasses around 5,400 products, many of which can be used for treatment at home. Given the extent of the anticipated market, we are working earnestly to create a strong presence. In October 2000, we plan to begin e-commerce transactions, which will enable us to deal directly with individual consumers. This represents a new marketing channel for the Company. 3

4 As explained earlier, our subsidiary is positioned as a manufacturing arm of the Company. As such, the Company s growth is tied closely to improving the performance of that subsidiary. The management policies of the subsidiary naturally reflect those of the parent company. Since it is an Indonesian company, however, it is using its own methods to streamline and raise operating efficiency, in addition to receiving input from the parent company. Since its foundation, Hogy Medical has adhered to its corporate motto of ensuring harmonious coexistence with customers, shareholders, employees, and other corporations. To this end, we have actively and consistently rewarded our shareholders for their patronage. In the interim term under review, we decided to retain ample funds to sustain liquidity in the face if the dramatically changing business climate. As a result, we maintained interim cash dividends at per share, the same level as the previous interim period. Retained funds play a crucial role in the development of the growth-oriented product lines described earlier, and are also an important source of capital for upgrading production equipment. Progress in these areas will translate into higher profits, which in turn will benefit our shareholders. By resolution of the Annual Meeting of Shareholders held on June 25, 1999, the Company reformed its Board of Directors, reducing the number of directors to four. The Board now functions as a strategic decisionmaking and business supervisory body and is set up to make swift and responsible decisions. We also introduced an executive director system. By clearly defining the separate functions of the Board strategic decision-making and business supervision, as well as enforcement the Company has created a system that allows swift responses to changing business conditions. In addition, we raised the number of standing auditors from two to three. We now believe we have an ample corporate governance framework. In the interim period under review, the Company offered its second round of stock options to all employees. In this way, we are demonstrating our shareholder priority policy and creating a system conducive to improved performances in the future. With respect to our subsidiary, from the beginning that company has pursued policies tailored to its region. It has four directors (including a nonpermanent director from the parent company) consisting of one Japanese person and two Indonesians. Financial data and other required materials are fully reported to the parent company to ensure that audits can be carried out at short notice. 3. Performance (1) Interim results In the interim term under review, the U.S. economy continued to expand and E.U. economies showed overall growth. Asian nations also maintained a steady pace. Despite sluggish personal consumption, there is widespread agreement that the Japanese economy is on a recovery path, evidenced by improved corporate earnings. This mood is reflected the Economic Planning Agency s statement that self-sustaining recovery is continuing. The medical industry experienced no major upheavals during the term, thanks to drastic reforms taken previously. However, there is no change in the government s policy of suppressing medical treatment prices, and the trend of decentralization and specialization among hospitals continues as part of a crucial effort to raise management efficiency. We are entering an era in which consolidation will be unavoidable. As mentioned earlier, our Indonesian subsidiary serves as the manufacturing arm of Hogy Medical. Sales of products from the subsidiary to the parent company are minimal. Reflecting our campaign to combat the spread of in-hospital infections, we handle a range of products that are essential for medical institutions. As a result, sales growth is relatively unaffected by economic conditions. In the interim term under review, revenues were somewhat below expectations, due to delays in receiving approvals for treatment-specific kit products until August and September. Nonetheless, net sales increased 3.9% compared with the previous year s interim period. 4

5 The cost-to-sales ratio was better than predicted, thanks to lower prices for products and materials purchased in U.S. dollars as a result of the yen s appreciation. Improved production efficiency, including at our subsidiary, also helped suppress the cost of sales. (Transactions between the parent company and its subsidiary are conducted mainly in U.S. dollars.) In general, costs were kept within budgeted levels, although prices of samples increased as the Company strengthened its marketing of new products. Interim consolidated net sales amounted to 10,792 million, up 3.9% from the preceding interim period. Operating income grew 18.0%, to 2,885 million; ordinary income climbed 19.3%, to 2,905 million; and net income increased 16.3%, to 1,671 million. (2) Outlook Despite the expected benefits of government-induced economic stimulus measures, the outlook for the remainder of fiscal 2000 defies confident prediction. While heading toward self-sustaining recovery, the economy is beset by a number of concerning factors. These include such external factors as the recent decline in the euro and rising crude oil prices, as well as ongoing weakness in personal consumption and widespread fears that corporate earnings will falter. In the medical industry, hospital management conditions remain severe, leading to predictions of consolidation among institutions in the future. Severe competition, where survival itself is at stake, is expected to continue. Since Hogy Medical sells products that are regarded as essential for hospitals to function, the Company s performance is not easily affected by economic conditions. Nevertheless, we expect competition among corporations in the industry to intensify even further, creating tough challenges. Having said that, we have obtained approvals for treatment-specific kit products, despite the delays involved, and we are augmenting our offerings for market introduction in the latter half of fiscal Sales of other new products are increasing with each passing month. For this reason, we forecast a 6% net sales gain for the second half of the year. The cost of sales should stay on the low side, based on expectations of a continued strong yen, but many unpredictable factors remain, so any change will be slight. We also anticipate that production conditions will remain favorable at our subsidiary. Meanwhile, selling, general, and administrative expenses (SG&A) are estimated to proceed according to initial budget projections. For the year, we forecast consolidated net sales of 22,156 million, up 5.0%; operating income of 5,639 million, up 14.6%; ordinary income of 5,693 million, up 17.8%; and net income of 3,256 million, up 16.4%. 5