[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: Reference

Financial Results for the Fiscal Year Ended March 31, 2020: Reference
Analysis of Business Performance and Financial Position
Analysis of Business Performance
1. Overview of Financial Results for the Fiscal Year Ended March 31, 2020
(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 third yearof this growth strategy, Terumo’s consolidated business results were as follows.
(million yen)
Growth (%)

Growth excluding
impact of forex
translations (%)

FYE3/2019

FYE3/2020

Revenue599,481

628,897

4.9

7.9

Gross profit

326,497

343,9325.3

9.4

Adjusted operating profit

122,128

124,998

2.3

8.8

Operating profit

106,637

110,611

3.7

10.8

Profit before tax

102,709106,466

3.7－

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

79,28785,037

7.3－

79,47085,211

7.2－(million yen)
Growth (%)

Growth excluding
impact of forex
translations (%)

Regional revenue

FYE3/2019

FYE3/2020

Japan

188,468

196,339

4.2

4.2

Europe120,368

121,128

0.6

6.6

Americas175,646

191,388

9.0

12.2

Asia, etc.

114,998

120,040

4.4

8.7

Overseas total

411,013432,557

5.2

9.6

Total

599,481

628,897

4.9

7.9

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: ReferenceRevenue
Revenue totaled 628.9 billion yen, a growth of 4.9% in comparison with the previous fiscal year.
In Japan, overall revenue increased year on year. Revenue trended briskly in the pain management business andthe alliance business with other pharmaceutical companies, of the General Hospital Company, and in the TIS
business (intervention devices) and the neurovascular business of the Cardiac and Vascular Company.
Revenue overseas climbed in comparison with a year earlier. Although operations mainly in China were impacted
by the COVID-19 pandemic in the fourth quarter, the TIS business grew steadily and the neurovascular businessposted strong revenue.

Gross profit
Gross profit amounted to 343.9 billion yen, an increase of 5.3% compared with the previous fiscal year, reflecting
an increase in revenue.

Adjusted operating profit
Adjusted operating profit came to 125 billion yen, up 2.3% year on year, due to a rise in gross profit, which offset
higher costs including selling, general and administrative 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 an earnings managementindicator.
We are additionally disclosing adjusted operating profit as an indicator but it is not defined by IFRS, which is theaccounting standard the group has 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 sustainablegrowth 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 110.6 billion yen, an increase of 3.7% year on year, owing to the rise in adjusted
operating profit.

Profit before tax
Profit before tax was 106.5 billion yen, an increase of 3.7% versus a year earlier owing to the increase inoperating income.

Profit for the year attributable to owners of the parent
Profit for the year attributable to owners of the parent totaled 85.2 billion yen, up 7.2% year on year due to the[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: Reference

positive impacts from changes in profit mix by region with differing tax rates.
Revenue results by company are as follows:
Furthermore, the segment which was previously stated as “Blood Management Company” has been changed to“Blood and Cell Technologies Company” from the fiscal year ended March 31, 2020. This change in name does
not affect the segment information. The name of reportable segment for the fiscal year ended March 31, 2019 has
also been stated as “Blood and Cell Technologies Company”.
(million yen)
FYE3/2019

FYE3/2020

Growth (%)

Growthexcluding
impact of forex
translations (%)

Revenue

328,500

350,550

6.7

10.4(Japan)47,84650,924

6.4

6.4(Overseas)

280,653

299,626

6.8

11.1

Revenue

165,766

170,963

3.1

3.9(Japan)127,864

132,880

3.9

3.9(Overseas)

37,90238,0830.5

3.7

Revenue

104,984

107,156

2.1

6.2(Japan)12,54012,309

(1.8)

(1.8)

(Overseas)

92,444

94,8472.6

7.3

Segment

Cardiac andVascular Company

General HospitalCompany

Blood and CellTechnologies
Company

Cardiac and Vascular Company
In Japan, revenue trended briskly in the imaging domain of the TIS business (intervention devices) and for
products for the treatment of acute ischemic stroke in the neurovascular business. Overseas, despite a slowdown
seen in the TIS business mainly in China attributed to the impacts of the COVID-19 pandemic in the fourthquarter, sales were propelled by WEB, a new type of cerebral aneurysm embolization device in the neurovascularbusiness. Accordingly, revenue in the Cardiac and Vascular Company totaled 350.6 billion yen, a growth of 6.7%
year on year.

General Hospital Company
The hospital systems business saw brisk sales of AdSpray, a spray type adhesion barrier and Fentanyl injection,
the narcotic analgesic. There was special demand for thermometers and hand sanitizer driven by the impacts of theCOVID-19 pandemic in the fourth quarter. In addition, there was an expansion in B2B business withpharmaceutical companies in the alliance business. Reflecting these, revenue in the General Hospital Company
was 171 billion yen, an increase of 3.1% versus the previous year.

Blood and Cell Technologies Company

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: Reference

Forex rates in Europe and emerging markets had a negative impact on earnings, but revenue was strong, globally
driven by the introduction of new software for blood component collection systems. Consequently, revenue in theBlood and Cell Technologies Company totaled 107.2 billion yen, a rise of 2.1% year on year.

(2) Overview of Consolidated Financial Statements
Total assets stood at 1,241.4 billion yen, an increase of 120.6 billion yen. This was mainly owing to an increase in
cash and cash equivalents of 43.9 billion yen caused by short-term borrowings in preparation for the impacts of
the COVID-19 pandemic and to secure funds for investments in growth, as well as an increase in property, plantand equipment of 62.4 billion yen from the application of IFRS 16 Leases, capital expenditures to increase
production, construction of a new building by Terumo Yamaguchi Corporation.
Total liabilities came to 486.5 billion yen, an increase of 63.8 billion yen. This was primarily attributable to anincrease in bonds and borrowings of 21.1 billion yen and an increase in other financial liabilities of 30.6 billion
yen from the application of IFRS 16 Leases.
Total equity was 754.9 billion yen, an increase of 56.8 billion yen. This mainly reflects an increase from posting
profit for the fiscal year under review of 85 billion yen and an increase from allocating treasury stock for theconversion of convertible bond-type bonds with subscription rights to shares of 17.7 billion yen, compared to adecrease of 20.5 billion yen due to the payment of dividends from surplus.

(3) Cash flow trends in the fiscal year ended March 31, 2020
(million yen)
FYE3/2019

FYE3/2020

ChangeCash flows from operating activities

93,571

117,479

23,908Cash flows from investing activities(74,792)(84,714)(9,922)

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

14,01081,550122,982

166,898

43,916

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: Reference

Cash flows from operating activities
Net cash provided by operating activities was 117.5 billion yen. The main factors for this were profit before tax of
106.5 billion yen, depreciation and amortization of 52.4 billion yen, corporate and other taxes paid of 24.8 billion
yen, and increase in inventories of 17.3 billion yen.

Cash flows from investing activities
Net cash used in investment activities was 84.7 billion yen. This primarily reflects expenditures of 62.3 billion yen
for the acquisition of property, plant and equipment associated with capital expenditures to increase production,including construction of a new building by Terumo Yamaguchi Corporation, and expenditures of 21.2 billion yen
for the acquisition of intangible assets associated with investment for a new IT system and the acquisition ofexclusive distribution rights.

Cash flows from financing activities
Net cash provided by financing activities was 14.0 billion yen. The main factors for this were proceeds fromshort-term loans of 40.0 billion yen and dividend payments of 20.5 billion yen.
(Reference) Cash flow indicators
FYE3/2018

FYE3/2019

FYE3/2020

Equity ratio (%)

50.9

62.3

60.8Market cap-based equity ratio (%)

182.9

224.0

225.4

2.1

2.2

2.3

101.4

83.8

122.8

Interest-bearing debt to cash flow ratio (annual)Interest coverage ratio (x)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 ended March 31, 2019. Therefore, numerical figures for the fiscal
year ended March 31, 2018 reflect the finalized provisional accounting treatment.

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: 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 a 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.
In the fiscal year ended March 31, 2020, the third year of this strategy, in addition to revisions to drug prices anddesignated insured medial materials in conjunction with the consumption tax hike in Japan and costs forcompliance with the European Union Medical Device Regulation which will be newly introduced, the Company’s
profits surpassed the initial forecast, despite the impacts of the COVID-19 pandemic in certain regions during thefourth quarter. In the fiscal year ending March 31, 2021, in order to achieve sustainable growth, the Company will
work on acceleration of its global strategy, expansion of the product pipeline, reinforcement and optimization ofoperations supporting growth, including the production system, and evolution of business model, seeking toresolve issues faced by customers in their activities.
As it is difficult to reasonably calculate the impact of the spread of COVID-19, the consolidated forecast offinancial results for the Year Ending March 2021 has yet to be determined at present. The Cardiac and VascularCompany is expected to see a relatively large decrease in demand temporarily due to postponement of non-urgent
procedures and other factors. In addition, careful attention is needed because the level of decline and time needed
for a recovery will differ depending on the business domain and region. However, the Company views impacts on
the General Hospital Company and Blood and Cell Technologies Company as limited in nature because of themany products related to healthcare infrastructure and products for chronic illnesses. Looking ahead, theCompany will disclose its earnings forecast immediately once it is possible.

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2020: Reference(5) Basic policy for profit distribution, dividend payouts in the fiscal year ended March 31, 2020 and payout
plan for the fiscal year ending March 31, 2021
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, 2020, the company plans to pay cash dividends per share of 28 yen.
Consequently, the fiscal year-end dividend is 14 yen per share, and the interim dividend, which has already been
paid, was 14 yen per share.
In the fiscal year ending March 31, 2021, in light of the impacts of the COVID-19 pandemic, the Company
intends to leave its annual cash dividend per share at 28 yen (interim dividend of 14 yen).
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, 2020: Reference

2. Basic stance on the selection of accounting standards
We have adopted International Financial Reporting Standards (IFRS) and applied 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.