FY18Q1
F i n a n c i a l
R e s u l t s
Aug 3, 2018@Station Conference Tokyo

7741.T[ADR:HOCPY
H O YAUS]C O R P O R AT I O N© 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 Reserved22Financial Overview(¥bn)

Q1 FY17Q1 FY18

YoY

YoY(%)

Revenue

127.2

138.9

+11.7

+9%

Pretax Profit

30.5

35.2

+4.7

+15%

Net Profit

25.2

28.5

+3.3

+13%

cf. Profit fromordinary operating
activities*

29.7

35.3

+5.6

+19%

*Herein after “Operating Profit”

Achieved record-high quarterly revenue and operating profit.
© 2018 HOYA CORPORATION All Rights Reserved

33

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

YoY

YoY(%)

Revenue

138.9

138.9

+0.0

+11.7

+9%

PretaxProfit

34.9

35.2

+0.3

+4.3 +14%

Net Profit

28.2

28.5

+0.3

+3.0 +12%

Average Rates(A)Q1 FY17(B)Q1 FY18

Variance

US$
EURO
BAHT

¥111.42¥124.26¥3.25¥109.53¥129.01
¥3.39

+1.7%
-3.8%
-4.3%

(¥bn)

© 2018 HOYA CORPORATION All Rights Reserved

4

The impact of foreign currency exchange this quarter was minimal.

4Notes RE: Non-Operating Items

Comprehensive Income Statement
Q1 FY17(¥bn)

IncomeExpenditure
Pretax Profit

128.3
97.8
30.5

Q1 FY18

139.9
104.7
35.2

YoY

+11.6
+6.9
+4.7

No remarks this quarter.

© 2018 HOYA CORPORATION All Rights Reserved

55Life Care Earnings
Q1 FY17Q1 FY18

YoY

YoY(%)

Revenue*

82.8

91.3

+8.5

+10%

Pretax Profit

14.1

17.4

+3.3

+24%

cf.Operating Profit

14.1

17.8

+3.8

+27%

(¥bn)

cf.OP Margin

17.0%

19.5% +2.5pt*External revenue© 2018 HOYA CORPORATION All Rights Reserved

66Life Care Earnings (CCB)
Previous
Rate

Current
Rate

FX
ImpactRevenue*

91.0

91.3

+0.3

+8.2 +10%

Pretax Profit

17.0

17.4

+0.4

+2.9 +21%

cf.Operating Profit

17.6

17.8

+0.2

+3.5 +25%

(¥bn)

Real
YoY

Real
YoY(%)*External revenue© 2018 HOYA CORPORATION All Rights Reserved

7

Foreign currency factors were small in scale, and there were no notable special factors
related to foreign currency during the period.
Growth was 4% after excluding the impact of M&A.

7

IT Earnings
Q1 FY17Q1 FY18

YoY

YoY(%)

Revenue*

43.6

46.6

+3.0

+7%

Pretax profit

16.7

19.0

+2.4

+14%

cf.Operating Profit

16.6

18.8

+2.2

+13%

38.0%

40.3%

+2.3pt(¥bn)

cf.OP Margin*External revenue© 2018 HOYA CORPORATION All Rights Reserved88IT Earnings (CCB)
Q1
FY17

Q1
FY18

FX
Impact

Real
YoY

Real
YoY(%)

Revenue*

46.9

46.6

-0.3

+3.3

+8%

Pretax profit

19.1

19.0

-0.1

+2.4 +15%

cf.Operating Profit

18.8

18.8

-0.1

+2.3 +14%(¥bn)*External revenue© 2018 HOYA CORPORATION All Rights Reserved

99Earnings by Sub-Segment
Healthcare Revenue
Eyeglass Lenses / Contact Lenses(¥bn)

Q1 FY17Q1 FY18

YoY

YoY(%)

62.1

69.6

+7.6

+12%

Revenue*Constant Currency Basis(¥bn)

Previous Rate

Current Rate

Real YoY

Real YoY(%)

69.5

69.6

+7.4

+12%

Revenue**External revenue© 2018 HOYA CORPORATION All Rights Reserved

10

In real terms, eyeglass lens revenues grew slightly more than 3% after excluding the impactof our acquisition of Performance Optics.

10

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

Q1 FY17Q1 FY18

YoY

YoY(%)

20.7

21.7

+0.9

+5%

Revenue*Constant Currency Basis(¥bn)

Previous Rate

Current Rate

Real YoY

Real YoY(%)

21.4

21.7

+0.7

+3%

Revenue**External revenue© 2018 HOYA CORPORATION All Rights Reserved

11

11

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

Q1 FY17Q1 FY18

YoY

YoY(%)

33.5

35.4

+1.9

+6%

Revenue*Constant Currency Basis(¥bn)

Previous Rate

Current Rate

Real YoY

Real YoY(%)

35.8

35.4

+2.3

+7%

Revenue**External revenue© 2018 HOYA CORPORATION All Rights Reserved

12

12Earnings by Sub-Segment
Imaging
Camera Lenses, Etc.

(¥bn)

Q1 FY17Q1 FY18

YoY

YoY(%)

10.0

11.1

+1.1

+11%

Revenue*Constant Currency Basis(¥bn)

Previous Rate

Current
Rate

Real YoY

Real YoY(%)

11.1

11.1

+1.1

+11%

Revenue**External revenue© 2018 HOYA CORPORATION All Rights Reserved

1313Balance Sheet
Q4 FY17(¥bn)

Q1 FY18

QoQ

Non-current Assets

204.5

230.5

+26.0

Current Assets
Capital

446.2
530.7

431.7
547.3

-14.5
+16.6

Non-current Liabilities

15.7

15.8

+0.1

Current Liabilities
Total

104.3
650.6

99.0
662.1

-5.2
+11.5

1

1

Net cash decreased due to investment in Toshiba Memory (¥27bn)
and dividends (¥16.5bn). Current assets decreased ¥14.5bn.

© 2018 HOYA CORPORATION All Rights Reserved

14

14

Cash Flow
Q1 FY17(¥bn)

Q1 FY18

YoY

Operating CF

24.8

25.8

Investing CF-4.5-32.2 -27.6

Financing CF

-17.1

-16.9

Cash & Cash Equivalents
at the end of the term

304.2

226.2 -78.0

1

+1.0
1

+0.1

Net cash used in investing activities increased by ¥27.6bn due toinvestment in Toshiba Memory.

© 2018 HOYA CORPORATION All Rights Reserved

15

Net cash used in financing activities included ¥16.5 billion in dividend payments at the end of
the period.

15

FY18 Q2 Forecast(¥bn)

Q2 FY17Q2 FY18

YoY

YoY(%)

Revenue
PretaxProfitNet Profit

135.8

139.1

+3.3

+3%

32.9

33.8

+0.9

+3%

26.8

27.5

+0.7

+3%

© 2018 HOYA CORPORATION All Rights Reserved

16

16

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

1717

IT Snapshot
YoY Revenue Growth (CCB)

+2%

+12%

HDD Substrates

Masks & Blanks(LSI/FPD)+11%

Imaging+8%© 2018 HOYA CORPORATION All Rights Reserved

18

18

Overview by ProductThis Quarter
EUV and high-end products showed strong growth.
EUV grew to account for 20% of blanks revenues.

Going Forward
LSI Blanks

Expect continued growth in EUV blanks, driven by active
R&D by chip makers aiming to commercialize EUV.

This Quarter
Robust sales to Chinese and Taiwanese clients.
Photomasks for semiconductors were also strong.

Going Forward
FPD/LSI Masks

Active R&D related to high-res panels for LCDs and OLEDs.
HOYA will capture this opportunity by leveraging ourcapability in high-res products.

© 2018 HOYA CORPORATION All Rights Reserved

19

Blanks for Semiconductors
According to statements by EUV stepper makers, four devices are expected to be shipped
during CQ2, with one additional new order. In 2018, a total of 18 exposure devices are
expected to be shipped, and the company is planning a fabrication of additional 30 devices in
2019.
Given these conditions, we expect EUV to continue to grow.
Looking ahead to mass production, in addition to the Nagasaka site (Yamanashi Prefecture),
which has been conducting R&D, we plan to install a production line in Singapore to handle
EUV mass production.
Our 7nm optical format blanks sales progressed satisfactorily, also demonstrating theirsuperiority to the competition.
FPD mask
Development demand is strong for a more diverse range of panels, thanks to new all-screen
smartphones, as well as screens featuring notches and holes. We intend to capture a solid
portion of this demand.
While demand for high-definition masks is rising, meeting this demand throughmanufacturing equipment alone is a challenge. A movement to pursue process-related highdefinition for masks and resist, etc., is in motion, showing increasing value within the mask
production industry.

19

Overview by ProductThis Quarter

HDD
Substrates
HDD Substrates

Over-supply of NAND affected 2.5” sales. Overall sales
grew thanks to the expansion of 3.5” substrates used indata centers (3.5” now accounts for 16%).
Going Forward

Expect to offset the decline of 2.5” sales through 3.5”
sales, mainly driven by hyperscale datacenters.

This Quarter

Imaging
Imaging

Decline of compact camera lens sales was more thanoffset by sales of security camera lenses and filters for
SLRs.

Going Forward
Continue to expand lens sales for new applications.

© 2018 HOYA CORPORATION All Rights Reserved

20

Glass Substrates for Hard Disk Drives
While 2.5-Inch products fell more than 10%, 3.5-inch products for data centers have madeup the difference, leading to sales growth.
We have received certification from hyper-scale data center operators across the board. We
have not seen any issues with error rates for HDD already up and running, even though thisis our first time for glass substrates in this application.
We forecast future demand, and have started considering building a new plant.
Imaging-Related Products
While compact digital has decreased more than 20%, sales of surveillance cameras andvehicle applications have more than compensated, resulting in growth overall.
We have started supplying lenses for 3D scanners used in facial recognition and otherapplications to smartphone manufacturers in China. Plastic lenses have a low tolerance forthe heat produced by lasers; we have received inquiries about our glass lenses.

20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 Reserved21

21Life Care Snapshot
YoY Revenue Growth (CCB)

+1%
+15%

+5%

Endoscopes

Like-for-like +3％+2%
Eyeglass Lenses

Contact Lenses Other

+10%
IOLs

+10% Like-for-like +4％© 2018 HOYA CORPORATION All Rights Reserved

22

22Overview by ProductThis Quarter
Situation in Europe and Japan recovering (flat YoY). Strong
growth in US. Profit margins improved consistently, driven
by increased sales and improved product mix.

Going Forward
Eyeglass Lenses

Accelerate post merger integration with Performance
Optics, which we acquired in August 2017.

This Quarter
Stable growth in same-store sales.
No. of stores at quarter-end: 276（New 1/Closed 1）

Going Forward

Contact Lenses

Accelerate store roll-outs.

© 2018 HOYA CORPORATION All Rights Reserved

23

Eyeglass Lenses
Sales of eyeglass lenses grew more than 10% in the U.S., were flat in Europe and Japan,
grew 5% in Asia, and more than 10% in South America.
In Europe, market conditions have been unfavorable, as price competition among retailers
pressures lens manufacturers.
Contact Lenses
We see advancing contraction in the market due to a decline in the younger consumer
segment; however, we have noted a growing trend among the 40-years-and-above
customer segment in wearing contact lenses for presbyopia.

23

Overview by ProductThis Quarter

Intraocular LensBacked by increased capacity from the new factory(launched July 2017), we achieved further sales traction
in growth markets, including APAC and Europe.

Going Forward
IOLs

Expand geographically through direct and indirect
distribution.

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

24

Intraocular Lenses
Our new plant is coming online even sooner than we projected. We forecast double-digit
growth for the next while.
Endoscopes
During the second half, we plan to launch low-priced and middle-grade products, aiming for
longer high-growth rates than at present.

24

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 Reserved

25

25

Summary & Future Outlook
Priority（cf. Q3 FY17 Material）
Accelerate growth

Trending between 2% and
4%. Reinforcing internal
structure to accelerate
growth.

Improve profitability

Margins close to 20% range.
Target stable achievement of20%.

Revitalize matured
businesses

Substrates for datacenters
and EUV blanks ramping up.
Increase CAPEX.

Maximize profitability

Returned to 40% margin
range this quarter. Target
stable achievement of 40%.

Life Care
Business

Information
Technology
Business

Progress to Date
& Plans© 2018 HOYA CORPORATION All Rights Reserved

26Life Care
The Life Care segment has largely achieved its target profit ratio of 20%.
In the future, we plan to make growth investments to prevent falling below this level.
Information Technology
We increased the scope of investment in EUV blanks and 3.5-inch HDD substrates. We see
the potential for capital investment in the IT business between ¥50 billion and ¥60 billion for
the upcoming 18 months.
We believe this is a sound use of cash. Meanwhile, we intend to maintain our policy of
considering share repurchases if share prices fall.

26

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

27

27

Q&A -1
Q

Glass Substrates for Hard Disk Drives
Forecast for future decreases in 2.5-inch glass substrates and increases
in 3.5-inch glass substrates

A

Sales of 2.5-inch products will continue to fall at approximately 10%;
however, 3.5-inch products should make up for this decline, and we aim forslight growth overall for this fiscal year.
During Q1, the average number of 2.5-inch substrates used per HDD
declined, having a negative impact on sales. The adoption of SSDs fornotebook PCs will only accelerate in the future, and we are keeping a close
eye on the impact on our financial results.

Q
A

Life Care Overall
Positive profitability factors on Q1 financial performance and future
profitability
Q1 Performance: Increased profitability for eyeglass lenses was the major
factor. In the main, progress in integrating with our acquired companies
and better productivity contributed to improved profitability.
Profitability Outlook: We are aiming for an average of 20% for this fiscal
year. Next year, we hope to see greater profitability through better plantutilization rates, etc., driven by increased sales.

© 2018 HOYA CORPORATION All Rights Reserved

28

28

Q&A -2Q

Company-Wide
Impact of U.S.-China trade friction on HOYAANo direct impact.
To eliminate potential trade friction impact in the future, we areconsidering a completely compartmentalized local manufacturing-to-sales
model (local production, local consumption) in the U.S., China, and otherregions.
Eyeglass Lenses
Are we seeing synergies between HOYA and Performance Optics, a U.S.based lens maker we acquired last year?

QA

One objective of our acquisition of Performance Optics was to increase
sales through U.S. chain stores. We are seeing greater synergies slowly
but surely, increasing our sales to chain store customers.

Q

Blanks for Semiconductors
What do you expect for the scale and timing of the new EUV production
line in Singapore?

A

We will increase capacity to handle all demand from semiconductor
manufacturers. We are preparing now to begin production in early 2020.

© 2018 HOYA CORPORATION All Rights Reserved

29

29

Q&A -3Q

Eyeglass Lenses
You mentioned price reductions among retailers in Europe. What has
been the impact on your business?

A

Price competition has been fierce among chain stores in the major
European countries of Germany, England, France, and Spain in particular.
The chain stores have absorbed the (high unit price) independents,
creating a structure for greater price reductions. This is a structure thattends to cause price competition among the four major lensmanufacturers, as well. We are keeping things at a distance for the time
being to prevent further advancement of price declines.

Q

Contact Lenses
It appears that the pace of new store openings has slowed. What are
your future plans?
In the current conditions, will it be possible to grow at 5% over thesecond half of the year and beyond as well?

A

We will continue opening stores in line with our plan.
We do see potential for 5% growth over the second half of the year andbeyond.

© 2018 HOYA CORPORATION All Rights Reserved

30

30

Q&A -4
Q

Capital Investment
You mentioned increasing capital investment to between ¥50 billion and¥60 billion. What is the detailed breakdown?

A

Our capital investment baseline is around ¥15 billion. We expect to put
the rest of our investments toward new plants for EUV and 3.5-inch
products. However, we are a company that makes opportunistic
investments on a quarterly basis, so there is a high likelihood that thesenumbers may change.

Q

Glass Substrates for Hard Disk Drives
Are you converting your 2.5-inch substrate production lines for 3.5-inch
substrates? You mentioned plans for new plants. Can you make use ofplants already built in the Philippines?
We are modifying our 2.5-inch substrate production lines to 3.5-inch
substrate lines for production in stages.
In addition to rising demand among data centers for 3.5-inch substrates,
2.5-inch products require twice the space of 2.5-inch products, decreasing
production volume from the same line. This combination of factors means
we must build new plants. Further, the plants in the Philippines that used
to make HDD substrates have been purposed for other production.
Accordingly, we have no plans to use them for HDD substrates.

A© 2018 HOYA CORPORATION All Rights Reserved

31

31

Q&A -5
Q

Blanks for Semiconductors/HDD Glass Substrates
What ratio of blanks sales do you project will come from EUV-related
products?
Also, what do you forecast for 3.5-inch substrate sales as a percentage of
total HDD glass substrates?

A

For EUV exposure devices, of the several tens of layers used by EUV,
some will remain as multi-layer, which isn’t likely to grow into a major
portion of sales.
At present, next-generation technologies (HAMR/MAMR) to increase therecording density of 3.5-inch substrates have yet to be implemented
practically. A greater number of thinner layers is the main focus forincreasing recording density for now. Given these circumstances, we
expect 3.5-inch products to make up a significant portion of glass
substrate sales.

© 2018 HOYA CORPORATION All Rights Reserved

32

32

Q&A -6Q

Eyeglass Lenses, Contact Lenses
Resignations of Business Division CEOsA

With resignaions in management, Mr. Suzuki will now have the added
responsibility to head our eyeglass lens business, while Mr. Ikeda will takeon the eye care business as an additional role. We are searching to findreplacements as quickly as possible.

Q

Capital Investment
Do you have plans for major capital investments in Life Care?

A

At present, we do not plan to make a large-scale increase in capital
investments for our Life Care business.
We are considering expanding production capacity in the U.S. foreyeglass lenses.
We are always looking at a variety of M&A candidates, but we have nocomments at this time.

© 2018 HOYA CORPORATION All Rights Reserved33

33

Appendix© 2018 HOYA CORPORATION All Rights Reserved3434Life Care QoQ Earnings
Revenuecf. Operating Profit / Margin

82.8

Q1

88.1

Q2

90.1

Q3

FY17

91.9

Q4

91.3

Q1
FY18

19.7% 19.5%

(¥bn)

(¥bn)

17.0% 17.5% 17.8%

14.1

15.4

16.1

Q1

Q2

Q3

FY17

18.1

17.8

Q4

Q1
FY18

*External revenue© 2018 HOYA CORPORATION All Rights Reserved3535IT QoQ Earnings
Revenuecf. Operating Profit / Margin

43.6

46.8

Q1

Q2

45.5

Q3

FY17
*External revenue© 2018 HOYA CORPORATION All Rights Reserved

42.6

Q4

46.6

(¥bn)

(bn)

38.0%

16.6

Q1
FY18

Q1

41.0% 39.9%

19.2

18.2

Q2

Q3

FY17

37.7%

16.1

Q4

40.3%

18.8

Q1
FY18
36

36

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

3737

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 Reserved

3838