FY18Q2
F i n a n c i a l
R e s u l t s
Oct 31, 2018@Station Conference Tokyo

7741.T[ADR:HOCPY
H O YAUS]C O R P O R AT I O N[With Memo]
Please be aware that this memo isposted for reference and is not averbatim record of all statements
made at the meeting.
© 2018 HOYA CORPORATION All Rights Reserved

11. Financial Results [Ryo Hirooka, CFO]
2. IT Business Overview
3. Life Care Business Overview
4. Summary
5. Q&A© 2018 HOYA CORPORATION All Rights Reserved

22

Financial Overview(¥bn)

Q2 FY17Q2 FY18

YoY

YoY(%)

Sales

135.8

142.0+6.2+5%

Pretax Profit

32.9

38.4+5.5+17%

Net Profit

26.8

31.2+4.5+17%

cf. Profit fromordinary operating
activities*

33.5

38.2+4.7+14%*Herein after “Operating Profit”

Achieved record-high quarterly sales, pretax profit and net profit.
© 2018 HOYA CORPORATION All Rights Reserved33

Constant Currency Basis (CCB)
PreviousRate (A)Current
Rate (B)FX Impact

YoY

YoY(%)

Sales

142.7

142.0-0.7+6.9+5%

PretaxProfit

38.0

38.4+0.4+5.2 +16%Net Profit

30.9

31.2+0.4+4.1 +15%

Average Rates(A)Q2 FY17(B)Q2 FY18Variance

US$EUROBAHT¥111.17¥131.28¥3.34¥111.88¥130.54¥3.40-0.6%+0.6%+1.8%(¥bn)© 2018 HOYA CORPORATION All Rights Reserved

44Notes RE: Non-Operating Items
Comprehensive Income Statement
Q2 FY17(¥bn)

Total Revenue
Expenditure
Pretax Profit
12136.4103.6
32.9

Q2 FY18

143.8
105.4
38.4

YoY+7.4+1.8+5.5

12Total Revenue increased in excess of sales. This was
mainly due to increase in other income (¥0.8bn) from thesale of a business division.
Essentially zero losses on valuation of assets
denominated in foreign currencies last year; foreignexchange loss of ¥0.8bn this year.

© 2018 HOYA CORPORATION All Rights Reserved

55Life Care Earnings
Q2 FY17Q2 FY18

YoY

YoY(%)

Sales*

88.1

91.9+3.8+4%

Pretax Profit

14.5

17.0+2.5+17%

cf.Operating Profit

15.4

18.7+3.3+21%(¥bn)

cf.OP Margin

17.5%

20.3% +2.8pt*External Sales© 2018 HOYA CORPORATION All Rights Reserved

6Having grown for some time, Life Care segment profit ratio is now at 20%.
However, we cannot say that sales growth is fully acceptable. This is due in part to growthinvestments delayed in comparison to initial plan.

6Life Care Earnings (CCB)
PreviousRate

Current
Rate

FX
ImpactRealYoY

RealYoY(%)

Sales*

92.7

91.9-0.8+4.7+5%

Pretax Profit

16.7

17.0+0.3+2.2 +15%

cf.Operating Profit

18.6

18.7+0.1+3.2 +21%(¥bn)

*External Sales© 2018 HOYA CORPORATION All Rights Reserved77

IT Earnings
Q2 FY17Q2 FY18YoY

YoY(%)

Sales*

46.8

49.0+2.2+5%

Pretax profit

19.4

21.7+2.2+12%

cf.Operating Profit

19.220.9+1.7+9%

41.0%

42.7%+1.7pt(¥bn)

cf.OP Margin*External Sales© 2018 HOYA CORPORATION All Rights Reserved88IT Earnings (CCB)Q2
FY17Q2FY18FX
Impact

Real
YoY

Real
YoY(%)

Sales*

48.8

49.0+0.1+2.0+4%

Pretax profit

21.6

21.7+0.1+2.2 +11%

cf.Operating Profit

20.9

20.9+0.1+1.6(¥bn)+9%*External Sales© 2018 HOYA CORPORATION All Rights Reserved99Earnings by Sub-Segment
Healthcare Sales
Eyeglass Lenses / Contact Lenses(¥bn)

Q2 FY17Q2 FY18

YoY

YoY(%)

67.1

70.6+3.5+5%

Sales*

Constant Currency Basis(¥bn)

Previous Rate

Current Rate

Real YoY

Real YoY(%)

71.4

70.6+4.3+6%

Sales**External Sales© 2018 HOYA CORPORATION All Rights Reserved1010

Earnings by Sub-Segment
Medical Sales
Endoscopes / IOLs(¥bn)

Q2 FY17Q2 FY18

YoY

YoY(%)

21.0

21.3+0.3+1%

Sales*

Constant Currency Basis(¥bn)

Previous Rate

Current Rate

Real YoY

Real YoY(%)

21.3

21.3+0.4+2%

Sales**External Sales© 2018 HOYA CORPORATION All Rights Reserved1111

Earnings by Sub-Segment
Electronics
Masks & Blanks / HDD Substrates(¥bn)

Q2 FY17Q2 FY18

YoY

YoY(%)

35.2

38.1+2.9+8%

Sales*

Constant Currency Basis(¥bn)

Previous Rate

Current Rate

Real YoY

Real YoY(%)

37.9

38.1+2.7+8%

Sales**External Sales© 2018 HOYA CORPORATION All Rights Reserved1212

Earnings by Sub-Segment
Imaging
Camera Lenses, Etc.

(¥bn)

Q2 FY17Q2 FY18

YoY

YoY(%)

11.6

10.9-0.7-6%

Sales*

Constant Currency Basis(¥bn)

Previous Rate

Current
Rate

Real YoY

Real YoY(%)

10.9

10.9-0.7-6%

Sales**External Sales© 2018 HOYA CORPORATION All Rights Reserved1313

Balance Sheet
Q1 FY18(¥bn)

Q2 FY18

QoQ

Non-current Assets

230.5

237.8

+7.4

Current Assets
Capital

431.7
547.3

479.4
591.8

+47.7
+44.5

Non-current Liabilities

15.8

16.0+0.2

Current Liabilities
Total

99.0
662.1

109.4
717.2

+10.3
+55.1

11Cash and cash equivalents increased by ¥26.1bn.
Other short-term financial assets increased by ¥11.6bn.

© 2018 HOYA CORPORATION All Rights Reserved

1414Cash Flow
Q2 FY17(¥bn)

Q2 FY18YoY

Operating CF

39.7

39.5

Investing CF-60.9-3.4 +57.5

1Financing CF-53.9-9.7 +44.2

2

Cash & Cash Equivalents
at the end of the term

231.6

245.8 +14.2

12-0.2

Investing CF outlays decreased significantly, as there
were no large-scale M&A of the type recorded in the yearago quarter.
While we recorded a redemption of bonds (¥35bn) lastyear, Financing CF outlays decreased significantly, since
there were no similar transactions this quarter.

© 2018 HOYA CORPORATION All Rights Reserved1515

1. Financial Results
2. IT Business Overview [Eiichiro Ikeda, COO/CTO]
3. Life Care Business Overview
4. Summary
5. Q&A© 2018 HOYA CORPORATION All Rights Reserved

1616

IT Snapshot
YoY Sales Growth (CCB)+1%

HDD Substrates

+16%

-6%

Masks & Blanks(LSI/FPD)

Imaging+4%© 2018 HOYA CORPORATION All Rights Reserved

1717

Overview by ProductThis Quarter
Both EUV and DUV (optical) showed strong growth.
EUV grew to account for 21% of blanks sales.

Going Forward
LSI Blanks

Expect continued growth in EUV blanks. Prepare for new
EUV production line scheduled to start operations in 2020.

This Quarter
Captured strong R&D demand mainly for Gen-six
products used for smartphones.

Going Forward
FPD/LSI Masks

Demand of under Gen-eight products continue to bestrong and HOYA will steadily capture this opportunity.

© 2018 HOYA CORPORATION All Rights Reserved

18Blanks for Semiconductors
By class, sales of low-end products have decreased, while sales of cutting-edge products,
including EUV, have grown significantly.
Although there appears to be a rising negative sentiment toward the semiconductor market,
blanks, many of which are product components and used for development, are relatively
stable, largely unaffected by the impact of the finished goods market.
Further, the strong investment sentiment of semiconductor manufacturers with respect toEUV has not changed. The number of devices shipped by EUV exposure device manufacturers
is increasing steadily in the number of devices in operation in the market is rising, presentinga significant growth opportunity.

18

Overview by ProductThis Quarter

HDD
Substrates
HDD Substrates

2.5” sales declined due to further SSD penetration.
Expansion of 3.5” substrates resulted in overall growth(3.5” now accounts for 18%).
Going Forward
Continue to expand 3.5” sales. Target to start new fab in2020.

This Quarter

Imaging
ImagingCompact camera lens sales declined due to market
contraction. Security camera lenses also declined due toproduction adjustment factors resulting in overall decline.

Going Forward
Continue to expand lens sales for new applications.

© 2018 HOYA CORPORATION All Rights Reserved

19Glass Substrates for Hard Disk Drives
While sales of 2.5-inch products decreased in the 10% range, 3.5-inch products more thanmade up the difference, resulting in growth.
HDDs using HOYA glass substrates have been in operation at data centers for severalmonths. We have noted no problems with failure rates or other issues, lowering the hurdle tosecuring more customers.
Imaging-Related Products
Sales of in-vehicle cameras and lenses for 3-D scanners rose compared to the same period inthe prior fiscal year. Going forward, we must pursue growth through new applications, rather
than relying too much on surveillance cameras.

191. Financial Results
2. IT Business Overview
3. Life Care Business Overview [Hiroshi Suzuki, CEO]4. Summary
5. Q&A© 2018 HOYA CORPORATION All Rights Reserved2020Life Care Snapshot
YoY Sales Growth (CCB)+2%+6%+6%

Endoscopes

Like-for-like +4％

Eyeglass Lenses

Contact Lenses+5%© 2018 HOYA CORPORATION All Rights Reserved+6%-3%

OtherIOLs

Like-for-like +4％2121

Overview by ProductThis Quarter
Double digit growth in US driven by a major deal signed in
Q1. Integration with Performance Optics almost completed,profitability expanding significantly.

Going Forward
Eyeglass Lenses

Accelerate growth in US by generating sales synergies withPerformance Optics.

This Quarter
Stable growth in same-store sales.
No. of stores at quarter-end: 278（New 2/Closed 0）

Going Forward

Contact Lenses

Accelerate store roll-outs in 2H.

© 2018 HOYA CORPORATION All Rights Reserved

22

Eyeglass Lenses
Sales of eyeglass lenses group in the double digits in the Americas, while remaining flat inEurope.
APAC growth rates were in the single digits due to internal factors, including production
capacity issues. We project further capacity-related challenges in the future, and plan to add
capacity in Vietnam.
Sales in Japan fell by several percentage points. Our share of the market is around 50%. We
are concerned that the market as a whole will once again experience price declines if wesuccumb to price competition.
Having built a solid structure for profitability, we plan to resume investment to acceleratesales growth.

22Overview by ProductThis Quarter

Intraocular LensIOLs

Inventory optimization at Chinese distributor resulted insales decline.

Going Forward
Bolster indirect sales channels. Facilitate post-merger
integration with Mid Labs and Fritz Ruck.

This Quarter
Reinforcing our organizational structure resulted instrong sales in the Americas and Europe.

Going Forward
Endoscopes

Launch new products covering high-end to low-end,targeting emerging markets.

© 2018 HOYA CORPORATION All Rights Reserved

23

Intraocular Lenses
In Japan, we have reached a plateau as sales promotions to general hospitals have run theircourse.
Inventory volume has a key rate among our sales agents in China, and we are holding off onshipments until inventory levels decline.
Meanwhile, direct sales in Europe grew at a strong 20%-plus rate.
We plan to acquire Mid Labs and Fritz Ruck for a combined 19.2 billion yen. These companies
own devices that emulsify and extract cloudiness on the lens of the eye in treating cataracts
and devices that cut lesions from the retina. These devices could offer tremendous
synergies with our IOLs.
Endoscopes
Growth in the Americas and Europe was about 6% and 2%, respectively. Overall growth was2%, in line with market growth.
While we are already selling new products, we expect these products to begin contributing tosales in the fourth quarter.
Artificial Bones
Sales of related products are progressing favorably. The fourth quarter represents a strong
seasonality for sales, and we expect higher performance in the future.

23

1. Financial Results
2. IT Business Overview
3. Life Care Business Overview
4. Summary [Hiroshi Suzuki, CEO]
5. Q&A© 2018 HOYA CORPORATION All Rights Reserved2424

SummaryFocus

IOL: Acquire Mid Labs/Fritz Ruck(by end of 2018)
Around ¥19 bnCashMM

Cash

Explore M&A opportunities for further
growth acceleration.

-Achieve stable growth fromblanks and HDD substrates.

M- Life Care

-Accelerate growth bygenerating M&A synergies
in eyeglass lens business.

Cash Allocation

Cash

EUV blanks production line (2020-)
Around ¥25bn-Maximize profitability.

Cash

New 3.5” substrate fab (2020-)
Around ¥25bn-Stabilize 20％ profit margin.

-ITM-Return to shareholders via share buyback etc.
© 2018 HOYA CORPORATION All Rights Reserved

Excess Cash

25Dividends
We have declared an increase in interim dividends from 30 yen to 45 yen for the following
reasons:(1) Balance between interim and year-end dividends (cf. FY17 interim dividend of 30 yen andyear-end dividend of 45 yen)
(2) Balance between investor preferences. In our discussions with investors, some expressed
preference for share buybacks, while certain number of others expressed preference fordividends.
(3) Dividend payout ratio has start to fall due to profit growth
Share Buybacks
As in the past, our policy is to return all free cash flows to shareholders. We intend toperform share buybacks after considering plans for capital, share prices, and other factors ina comprehensive matter.

25

1. Financial Results
2. IT Business Overview
3. Life Care Business Overview
4. Summary
5. Q&A© 2018 HOYA CORPORATION All Rights Reserved

26

26

Q&A -1
Q

Glass Substrates for Hard Disk Drives
What is the potential for winning new customers for 3.5-inch glasssubstrates?

A

HAMR, MAMR, and other recording density improvements in the HDD
industry are emerging to increase data capacity. However, this ismeaningless if density increases are no more than simply adding moresubstrates. The present environment is such that adding substrates
offers the greater potential. Given these circumstances, the appeal of our
3.5-inch glass substrates is rising among all HDD manufacturers.
By the first half of the next fiscal year, we expect the potential for
winning new customers will become clearer.

QBlanks for Semiconductors
Has there been a change in the competitive environment for thisbusiness?
Our share of cutting-edge products, including EUV (which shows
promising growth) is quite high; in the future we believe our share of theoverall market will grow.

A© 2018 HOYA CORPORATION All Rights Reserved27

27

Q&A -2
Q

Glass Substrates for Hard Disk Drives
Is there a risk that flash memory will take the place of hard disk drives indata centers?

A

Data centers are divided into hot, warm, and cold in terms of accessfrequency (hot having the most access; cold having the least).
Hot data centers with frequent access will replace HDD with flash
memory; however, cold (near line) data centers will use HDD for the time
being, reflecting considerations of price and capacity/volume.
Accordingly, we are not concerned about the impact on our business.

QOverallWhat is the impact of the U.S.-China trade frictions on lenses forsurveillance cameras? Also, what is the impact on the HDD glass
substrate business?

A

Trade frictions are having an impact on the end customers of our lenses
for surveillance cameras (Chinese manufacturers) and our sales havedeclined. We believe another factor is the inventory adjustments among
our end customers in response to the sustained period of rapid growth.
HDD for surveillance cameras have also been affected; however, we are
not involved in products for this purpose, so we have not felt an impact.

© 2018 HOYA CORPORATION All Rights Reserved

28

28

Q&A -3
Q

M&A
With the stock market is in a phase of adjustment, we see valuations
beginning to decline. Will HOYA become more active in M&A?

A

Many of our targets are managed under private equity whose valuations
are not yet affected directly by the stock market.
Accordingly, we will continue to do careful due diligence according to ourown standards.

QOverall Profit Ratios
Is there room for future profit ratio growth in your Life Care andInformation Technology businesses?

A

We will transition to accelerated sales growth in our Life Care segment
while maintaining a profit ratio of 20%. At the same time, we are aiming
for a high level of stability in our Information Technology segment.

© 2018 HOYA CORPORATION All Rights Reserved29

29

Q&A -4
Q

Glass Substrates for Hard Disk Drives
Rumors say that investment in large-scale data centers is slowing down.
Have you felt the impact?

AOur current target is the scenario where we replace the current
aluminum substrates for HDDs used in data centers with our glass
substrates. Even assuming a slowdown in new data center construction,
we have felt little, if any, impact.

© 2018 HOYA CORPORATION All Rights Reserved

3030

Appendix© 2018 HOYA CORPORATION All Rights Reserved

3131

Life Care QoQ Earnings
cf. Operating Profit / MarginSales

19.7% 19.5% 20.3%

82.8

88.1

90.1 91.9

91.3 91.9(¥bn)

(¥bn)

17.8%
17.0% 17.5%

16.1
14.1 15.4

Q1

Q2

Q3

Q4

FY17*External Sales© 2018 HOYA CORPORATION All Rights Reserved

Q1Q2

FY18Q1Q2Q3

FY1718.1 17.8 18.7

Q4Q1Q2

FY183232

IT QoQ Earnings
Sales

cf. Operating Profit / Margin(¥bn)

(bn)

38.0%

41.0% 39.9%

49.0
43.6 46.8 45.5 42.6 46.6

16.6

19.2 18.2

Q1

Q1

Q2

Q2

Q3

Q4

FY17*External Sales© 2018 HOYA CORPORATION All Rights Reserved

Q1

Q2

FY18Q3

FY1737.7%

16.1

Q440.3%18.8

Q142.7%20.9

Q2

FY183333

Notes✓ Accounting standard: IFRS✓ The fiscal year ending March 2019 is referred to as “FY18” throughout thisdocument.
✓ Figures less than ¥1 billion are rounded down. Accordingly, some discrepancies
may occur among totals. Ratios are calculated using actual numbers.
✓ Profit from ordinary operating activities is calculated as reference
information for investors; calculated by deducting finance income/costs,
share of profits(loss) of associates, foreign exchange gain/loss and othertemporary gain/loss from pretax profit.
✓ We have omitted a detailed breakdown of financial statements.
Please refer to the tanshin or the quarterly report for detailed numbers.
http://www.hoya.co.jp/english/investor/library.html© 2018 HOYA CORPORATION All Rights Reserved

3434

Disclaimer

This report is provided solely for the information of professional investors andanalysts who are expected to make their own evaluation of the company. This
report contains forward-looking statements that are based on management’s
assumptions and beliefs in light of the information currently available to it andtherefore you should not place undue reliance on them. These forward-looking
statements involve known and unknown risks, uncertainties and other factorsthat may cause our actual results, performance or achievements to differ
materially from that anticipated in these statements. These factors include
changes in economic conditions, trends in our major markets, currency exchange
rates, etc. We accept no liability whatsoever for any direct or consequential loss
arising from any use of this report.

© 2018 HOYA CORPORATION All Rights Reserved3535