[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Financial Results for the Fiscal Year Ended March 31, 2019: Reference
Analysis of Business Performance and Financial Position
Analysis of Business Performance
1. Overview of Financial Results for the Fiscal Year Ended March 31, 2019(1) Overview of Consolidated Business Results
In December 2016 the Terumo Group devised a Mid- to Long-term Growth Strategy with a five-year horizon. The
Mid- to Long-term Vision is to become a “Global Corporation with Unique Excellence.” The Company aims tobecome recognized by medical professionals worldwide as a top brand and a trusted manufacturer. To this end,
the Company’s management is focused on earning a high level of trust globally for our total quality (whichincludes the total quality of products, supply, and services). In the fiscal year under review, which is the second
year of this growth strategy, Terumo’s consolidated business results were as follows.
(million yen)
Growth (%)

Growth excluding
impact of forex
translations (%)

FYE3/2018

FYE3/2019

Revenue

587,775

599,4812.0

3.0

Gross profit

319,333

326,497

2.2

3.9

Adjusted operating profit

124,929

122,128

(2.2)

0.7

Operating profit

108,552

106,637

(1.8)

1.7

Profit before tax

106,630

102,709(3.7)-

Profit for the year
Profit for the year attributableto owners of the parent

91,201

79,287(13.1)-

91,29579,470(13.0)-(million yen)
Growth excluding
impact of forex
translations (%)

Regional revenue

FYE3/2018

FYE3/2019

Growth (%)

Japan

188,856

188,468

(0.2)

(0.2)

Europe118,216

120,368

1.8

3.6

Americas171,636

175,646

2.3

3.3

Asia etc.

109,065114,998

5.4

7.5

Overseas total

398,919

411,013

3.0

4.5

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Total

587,775

599,481

2.0

3.0Revenue
Revenue totaled 599.5 billion yen, a growth of 2.0% in comparison with the previous fiscal year.
In Japan, overall revenue declined year on year. Revenue trended briskly in General Hospital Company owing inpart to demand in the surgical product domain, and in the alliance business with other pharmaceutical companies.
Nonetheless, in Cardiac and Vascular Company, there was negative impact from NHI reimbursement pricerevisions and shipping delays of certain products at Ashitaka factory, which occurred in the first half but wereresolved in the second half.
Meanwhile, overseas revenue grew in comparison with the year earlier. Shipping delays at Ashitaka factory wereresolved and performance was driven by brisk revenue in the neurovascular business in Cardiac and VascularCompany and the alliance business in General Hospital Company.
Gross profit
Gross profit amounted to 326.5 billion yen, a rise of 2.2% compared with the previous fiscal year, driven byincrease in revenue.
Adjusted operating profit
Adjusted operating profit came to 122.1 billion yen, down 2.2% year on year, due to a rise in selling, general andadministrative expenses, and in particular R&D expenses.
Adjusted operating profit factors out amortization expense for intangible assets obtained during acquisitions andone-off income and expenses from operating profit. In addition, adjusted operating profit is consistent withsegment profit. We are disclosing adjusted operating profit as we are using it as the group’s earnings management
indicator.
We are additionally disclosing adjusted operating profit as an indicator but it is not defined by IFRS, which is theaccounting standard we have adopted. Adjusted operating profit is also being used as an indicator for corporate
management to grasp earnings performance in each business as a part of our goal to achieve sustainable growth in
the mid to long term. We believe this is also effective data for individuals using our financial statements to assess
the Terumo Group’s earnings.
Operating profit
Operating profit came to 106.6 billion yen, a decline of 1.8% year on year. This was due to decline in adjusted
operating profit.
Profit before tax

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Profit before income tax was 102.7 billion yen, decrease 3.7% over the previous year owing to increase of 3.3
billion yen in forex translation losses.
Profit for the year attributable to owners of the parent
Profit for the year attributable to owners of the parent totaled 79.5 billion yen, down 13.0% year on year. This isdue to decline in profit before tax and also the one-off decline in the corporate tax, owing mainly to therevaluation of deferred tax assets and liabilities due to the tax reform in the United States.
Revenue results by company are as follows:(million yen)
FYE3/2018

FYE3/2019

Growth (%)

Growthexcluding
impact of forex
translations (%)

Revenue

324,001

328,500

1.4

2.4(Japan)53,98547,846(11.4)(11.4)(Overseas)

270,015

280,653

3.9

5.1

Revenue

158,848

165,766

4.4

4.7(Japan)122,720

127,864

4.2

4.2(Overseas)

36,12737,902

4.9

6.3

Revenue

104,697

104,984

0.3

2.4(Japan)11,933

12,5405.1

5.1(Overseas)

92,76392,444(0.3)

2.1Segment

Cardiac &Vascular Company

General HospitalCompanyBloodManagementCompany

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Cardiac and Vascular Company
In the Cardiac and Vascular Company, there was negative impact from NHI reimbursement price revisions inJapan and shipping delays of certain products at Ashitaka factory, but revenue was brisk in the neurovascularbusiness. Accordingly, revenue in Cardiac and Vascular Company totaled 328.5 billion yen, growth of 1.4% year
on year.
General Hospital Company
In Japan, in the hospital systems business, revenue was brisk for infusion solutions and for AdSpray, a spray typeadhesion barrier, along with Acelio in the pain management domain and needleless infusion systems. In addition,
there was an expansion in the alliance business globally with pharmaceutical companies. Reflecting these, revenue
in General Hospital Company was 165.8 billion yen, increase of 4.4% versus the previous year.
Blood Management Company
Revenue declined from therapeutic apheresis systems owing to the special demand in the United States in theprevious year, but revenue for blood centers was strong in Europe. Consequently, revenue in the BloodManagement Company totaled 105.0 billion yen, rise of 0.3% year on year.
(2) Overview of Consolidated Balance Sheets
Total assets stood at 1,120.8 billion yen, increase of 39.7 billion yen. This was mainly owing to increase inproperty, plant and equipment of 22.8 billion yen and increase in goodwill and intangible assets of 24.5 billion
yen, from corporate acquisitions (Essen Technology [Beijing] Co., Ltd.) and investment for production capacityand new IT system.
Liabilities came to 422.7 billion yen, decrease of 107.9 billion yen. This was primarily attributable to decline inbonds and borrowings of 111.1 billion yen due to the conversion of convertible bonds.
Equity was 698.1 billion yen, increase of 147.7 billion yen versus the year earlier.
(3) Cash flow trends in the fiscal year ended March 31, 2019(million yen)
FYE3/2018

FYE3/2019

ChangeCash flows from operating activities

114,562

93,571(20,991)

Cash flows from investing activities(44,105)(74,792)(30,687)

Cash flows from financing activities
Cash and cash equivalents as of the end of thefiscal year under review(4,132)(67,540)(63,408)

167,832

122,982(44,850)

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Cash flows from operating activities
Net cash provided by operating activities was 93.6 billion yen. During the fiscal year under review, profit before
tax was 102.7 billion yen and depreciation and amortization was 44.0 billion yen. In addition, income taxes paidcame to 30.2 billion yen.
Cash flows from investing activities
Net cash used in investment activities was 74.8 billion yen. This primarily reflects the 39.3 billion yen used toacquire property, plant and equipment, 15.0 billion yen to acquire intangible assets, and 20.3 billion yen to acquire
subsidiaries such as Essen Technology (Beijing) Co., Ltd.
Cash flows from financing activities
Net cash used in financing activities was 67.5 billion yen. The main factors were 19.6 billion yen for dividend
payment, and 47.8 billion yen for the repayment of long-term borrowings.
(Reference) Cash flow indicators
FYE3/2017

FYE3/2018

FYE3/2019

Equity ratio (%)

48.1

50.9

62.3

Market cap-based equity ratio (%)

133.1

182.9

224.0

Interest-bearing debt to cash flow ratio (annual)

2.9

2.1

2.2

Interest coverage ratio (x)

62.9

101.4

83.8

Note: Equity ratio: Shareholders’ equity/Total assets
Market cap-based equity ratio = Total market capitalization/Total assets
Interest-bearing debt to cash flow ratio = interest-bearing debt/cash flow
Interest coverage ratio = cash flow/total interest payments*All of the above is calculated on a consolidated basis*Market capitalization = fiscal year-end share price multiplied by the total number of shares outstanding
excluding treasury stock*The cash flow above is the cash flow provided by operating activities as stated in the consolidated statements ofcash flows. The interest-bearing debt includes all liabilities posted in the consolidated statement of financial
position on which the company pays interest. Also the figure for interest expenses in the consolidated statementsof cash flows was employed as the amount for interest payments.
*The provisional accounting treatment related to business combinations carried out for the fiscal year ended
March 31, 2018 was finalized in the fiscal year ending March 31, 2019. Therefore, numerical figures for the fiscal
year ended March 31, 2018 reflect the provisional accounting treatment.

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference(4) Mid- to Long-term Outlook
The medical device market is expected to expand going forward mainly due to a rise in chronic illnesses intandem with an increase in the number of seniors. Meanwhile, as a rise in medical spending squeezes government
coffers, there will be growing shift to healthcare that emphasizes value and efficiency. In addition, the industry
overseas will continue to undergo reorganization, owing mainly to acquisitions, resulting in companies ofenormous scale, more concentration, and a growing oligopoly.
Amid this business environment, we are implementing its Mid- to Long-term Growth Strategy. The fiscal year
ended March 31, 2018 was the first year of this strategy. We were off to a smooth start in the first fiscal year
towards our goal to achieve the Mid- to Long-term Growth Strategy, with the results contributed by the businesses
acquired in the previous fiscal year. In the second year, the fiscal year ended March 31, 2019, in the first half there
were shipping delays of certain products at Ashitaka factory, but in the second half the delays were fully resolved,and revenue rose across all companies.
In the fiscal year ending March 31, 2020, the third year of this strategy, in Japan, we expect to see revisions todrug prices and designated insured medial materials following the planned hike in the consumption tax set for
October, and incur costs for compliance with the European Union Medical Device Regulation which will be
newly introduced. We also expect increase in depreciation expenses owing to the increase in capital investments
and IT investments for business growth. To absorb this impact and return to the growth trajectory outlined in theMid- to Long-term Growth Strategy, and to achieve sustainable growth, we plan to “strengthen global operations”
including the production system, “accelerate strategic development” to fortify creative innovation capabilities, and“leverage comprehensive group strengths” by enhanced utilization of human resources across our businesses andregions.
The following are our forecast for the fiscal year ending March 31, 2020.

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Forecast of Consolidated Financial Results(million yen)
FYE3/2019

FYE3/2020

ActualForecast

ChangeChange (%)

Revenue599,481635,000

35,5185.9

Adjusted operating
profit122,128

124,000

1,871

1.5

Adjusted operating
margin

20.4%

19.5%

－－

Operating profit

106,637

109,000

2,362

2.2

Operating margin

17.8%

17.2%

－－

Profit for the year
attributable to ownersof the parent

79,47081,0001,529

1.9Actual exchange rate for the fiscal year ended March 31, 2019: ¥111/USD, ¥128/EUR
Exchange rate assumption for the fiscal year ending March 31, 2020: ¥108/USD, ¥123/EUR(5) Basic policy for profit distribution, dividend payout plan for the fiscal year ended March 31, 2019 andthe fiscal year ending March 31, 2020
As a measure to secure high profit margins and sustainable growth, Terumo Group adequately and actively
reinvests profits to constantly enhance its corporate value. This is consistent with the group’s pledge to distributeprofits to shareholders and maximize the value of its investments.
As for the distribution of profits to shareholders, Terumo will continually aim to steadily increase its dividend
payouts to shareholders and has set a mid- to long-term dividend payout ratio target of 30%.
In the fiscal year ended March 31, 2019, the company plans to pay cash dividends per share of 54 yen.
Consequently, the fiscal year-end dividend is 27 yen per share, and the interim dividend, which has already been
paid, was 27 yen per share.
In the fiscal year ending March 31, 2020, Terumo plans annual cash dividends per share of 28 yen (interimdividend of 14 yen).
Terumo Corporation executed the two-for-one stock split on its common shares effective April 1, 2019. The
forecast of cash dividends per share has reflected this stock split. The annual cash dividend prior to this share split
is 56 yen per share, comprising an interim dividend of 28 yen per share and year-end dividend of 28 yen per share.

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

Cautionary note:
Forward-looking statements, including earnings forecasts, contained in Terumo’s disclosure materials are basedon currently available information and assumptions believed to be reasonable by management. This is not apromise or guarantee by Terumo that it will achieve these goals. Please note that the actual results or outcomes
could differ due to a number of factors. Key elements that are likely to have an impact on actual earnings
performance include economic conditions surrounding the company’s business environment, volatility in foreignexchange rates, and competition.

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2019: Reference

2. Basic stance on the selection of accounting standards
We are adopting the International Financial Reporting Standards (IFRS) and applying them to the financial resultsfrom the fiscal year ended March 31, 2018. The goal is to strengthen our corporate governance and improve theprecision of our management by enhancing the comparability of financial data internationally in capital markets
and by standardizing our rules globally.