I am the CAFO, Muto. I will now explain the first-half results for the fiscal year ending March 2021.
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Among the information that Terumo discloses, the forward-looking statements including financial projections are based upon our assumptions using information available to us at t the time and are not intended to be guarantees of f future events or performance. Accordingly, it should be noted that actual results may differ from those forecasts or projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this presentation is partly derived from our own independent research. Information about products (including products currently in development) which is included in this material is not intended to constitute an advertisement or medical advice. Terumo Corporation Investor Relations Dept. E-mail: kouhou_terumo01@terumo.co.jp OTERUMO CORPORATION 2が22
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First, a summary of the overall results. Sales revenue of the Cardiac and Vascular Company was negatively affected by a drop in demand in the 1st quarter, but we saw a significant recovery in the 2nd quarter. Impact on the General Hospital and Blood and Cell Technologies companies remained minor, resulting in a recovery to minus 8% in sales for the Group as a whole—minus 6% when excluding FX impact. Adjusted Operating Profit was impacted by decreased sales revenue in the high-profitability Cardiac and Vascular Company, but we evaluated each expenditure and limited spending to urgent matters or those contributing to mid- to long-term growth, even while gradually restoring sales activities, leading to a 19% decline in adjusted operating profit and 24% in operating profit when excluding FX impact. Profit for the year was minus 30% year-on-year. We announced our annual guidance in August, but the recovery of the Cardiac and Vascular Company exceeded expectations in the 2nd quarter, so progress is ahead of schedule in restoring both sales revenue and profit. This is the variance analysis of adjusted operating profit, compared to the previous year. “GP Decrement by Sales Decrease” had a 9.8-billion-yen negative impact, largely due to decreased sales of the Cardiac and Vascular Company. However, a marked recovery in sales closed much more of the year-on- year gap of the 2nd quarter, compared to that of the 1st quarter. “Gross Margin” accounted for a 4.2-billion-yen negative impact. The Cardiac and Vascular Company sales decrease was improved in the 2nd quarter, but the mix remained poor for the full 1st Half. As some countries saw increases in COVID-19 or enacted lockdowns, we managed to maintain high production and inventory levels, which slightly pushed down manufacturing costs similarly to the 1st quarter. This had the effect of somewhat lessening negative impact on gross profitability. In Price, decreased Cardiac and Vascular sales moderated negative impact to 500 million yen. Reimbursement Price Revision negative impact was 2.1 billion yen, because the 1st half of the previous year did not have a price revision in conjunction with the increase in consumption tax rate. Work related to European MDR and IT Investment progressed as planned, resulting in 600 million and 500 million yen negative impacts, respectively, as progress led to increased spending year-on-year. SG&A decrease was due to lower promotional and travel costs, as limitations on access to hospitals and remote holding of academic conferences continued in the 2nd quarter. Further, we carefully evaluated each proposed expenditure for its urgency to control expenses on a pinpoint basis, resulting in a 4.5 billion yen positive year-on-year impact for the 1st Half. “R&D Decrease” resulted from reconfirming the level of priority for each project while largely maintaining R&D investment, yielding a 900-million- yen positive year-on-year impact. FX impact was the result of yen appreciation against emerging market currencies, for a 3.4-billion-yen negative year-on-year impact. Next is revenue by region. In addition to the 2nd-quarter recovery trend of the Cardiac and Vascular Company in Japan, the General Hospital Company, which accounts for the largest percentage of sales there, returned to the levels of the previous year, reducing the gap between year-on-year sales levels. In Europe and the United States, the Cardiac and Vascular Company saw a marked recovery, reducing the sales gap there. In China, when excluding the impact of distributor order timing in the neurovascular business, Q2 alone returned to the previous year level. In Asia and others, the recovery of demand in the Philippines and India is happening slowly. Next is revenue by company. In the 1st Half as a whole, the Cardiac and Vascular Company was negatively impacted by decreased demand due to the postponement of elective procedures using its products. However, looking at just the 2nd quarter, we can see a significant recovery in all segments. The General Hospital Company saw a decrease in demand for General Hospital Products overall, but double-digit growth in the Alliance Business and pain management products, and increased demand for infection prevention products. This enabled the company to maintain the same level as the previous year. The Blood and Cell Technologies Company was impacted by decreased demand for whole blood collection in Asia especially, and the postponement of therapeutic apheresis, but increased sales of component collection systems drove stable growth for the company as a whole. I will give more detail by company in the next slides.
Sales revenue was minus 13% for the 1st Half. On its own, the 2nd quarter alone recovered to just minus 2%. TIS and CV grew in the low single digits, Neurovascular was approximately the same as the previous year, and Cardiovascular saw positive growth, resulting in the company as a whole showing a recovery in the 2nd quarter alone as a backlog of postponed elective procedures in all businesses has begun to be cleared. Profit grew negatively due to decreased sales revenue, but the severe drop of highly profitable  TIS and Neurovascular businesses in the 1st quarter was replaced in the 2nd quarter by a notable recovery that reduced the year-on-year drop in profit while improving profitability.
Sales revenue was impacted in General Hospital and Pharmaceutical products by decreased demand caused by limitations on patient hospital visits. However, pain management products and the Alliance Business posted double-digit growth, while demand increased for thermometers, disinfectant, and other infection prevention products, resulting in an overall result on par with the previous year. In profit, there was impact from reduced production activity at the Philippines Factory due to lockdown, but careful expense control helped to minimize that impact. Next is Blood and Cell Technologies Company. In sales revenue, the blood center-oriented business experienced decreased demand for whole blood collection in Asia, but a 1st-quarter software update to raise efficiency in component collection systems continued to be well received in the 2nd quarter. Further, demand increased for convalescent plasma used in COVID-19-related treatment. These factors resulted in steady growth overall.  Because therapeutic apheresis is elective, many patients’ therapies have been postponed amid COVID-19 impact. As a whole, the Blood and Cell Technologies Company saw a 3% year- on-year increase in sales revenue, when excluding FX impact. Profit increased significantly due to improved mix as the ratio of high- margin component collection grew, and thanks to efforts to control SG&A and other expenditures.
As I mentioned at t the beginning, the Cardiac and Vascular Company recovery in the 2nd quarter exceeded expectations. As a result, the progress toward recovery of both sales revenue and profit are ahead of the guidance we announced in August. Therefore, we have decided to add the profit amount of the 1st Half that exceeded guidance into our full-year guidance, revising adjusted operating profit and operating profit upward by 5 billion yen, and Profit for the year upward by 3 billion yen. Also, regarding dividends, in light of the renewed spread of COVID-19 in some countries and the risks and lack of visibility of the 2nd Half, we have decided to maintain our dividend amount as announced in May. Now I will explain about our thinking regarding the 2nd Half outlook. First, sales revenue. As I mentioned earlier, Cardiac and Vascular Company-related elective procedures began to recover in the 2nd quarter, leading to a notable sales recovery. We estimate that there were significant effects as the backlog of these procedures was addressed. Looking at our latest numbers from October, we are not seeing a dropoff of elective procedures following the elimination of this backlog, which is something about which we had been concerned. Therefore, we anticipate that we will recover to the level of the previous year within this year. On the other hand, the risk remains of a renewed spread of COVID-19 in certain countries outside Japan. Because medical settings now have protocols and systems in place to handle COVID-19 impacts better than the first wave of infections that happened early this year, we do not expect the same degree of stoppage in healthcare even if there is another rise in infections. However, we cannot deny that limitations on patient visits could continue and that there is a possibility of slow recovery of new procedures. Therefore, regarding sales revenue, we revised our thinking to be that the recovery trend will continue into the 2nd Half, but that the recovery trajectory will level off more than initially anticipated, reaching the level of the previous year in the 4th quarter. Although 1st Half sales were stronger than guidance, we are taking into account the possibility of some weakness in the 2nd Half, and we will therefore maintain our existing annual guidance regarding sales. Having built up extra inventory in the 1st quarter for business continuity purposes, we will adjust our production volume in the 2nd Half to return inventory to appropriate normal levels. If there is more weakness in 2nd- Half sales than anticipated, there will be a strong need to adjust production more than scheduled, which will place pressure on gross profit. In expenses, we continue to expect that as access to hospitals is restored, sales activities will resume. However, in order to push back potential weakness of sales and downward pressure on gross profit, we will further review our SG&A and R&D spending to achieve our profit guidance for the 2nd Half. As a Terumo Group, we donated goods and funds through the Japan Red Cross to support relief efforts for “Heavy rains in July 2020” in Japan. Company topics include interventional oncology and peripheral intervention items for the Cardiac and Vascular Company; DM Healthcare and Alliance for General Hospital; and pathogen reduction systems for Blood and Cell Technologies, showing good progress on the mid- to long- term growth drivers. . ) New Product Pipeline This is the final slide, and shows our pipeline status for the fiscal year. I will omit the details, but new product launches are generally on schedule. We will continue to watch for any impact from COVID-19 on those schedules. The possibility of a renewed spread of COVID-19 remains in the 2nd Half. However, we will exercise vigilance in our management efforts in ways that include maintaining our pinpoint control of expenses, in order to work toward achieving our guidance. Thank you.

Adjusted Operating Profit: Adjustments
• Nonlife insurance income • Loss on disaster - Other one-time profits & losses oterumo corporation 18 /22 - Terumo | Lease depreciation (IFRS16) is not inoluded in FY19, 1H FY20 reculte and FY20 Guidance | Expand investment in production capacity and space, R&D as well as I I in FY20 l  Further promote R&D activities mainly for TIS, Neurovascular and TBCT | Capitalized R&D expenses are included in CAPEX FY18: 2.4 FY19: 1H FY20: 4.8 2.9 FY20 Guidance:  5.4 -TERUMO
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• Status of treasury shares: 4 M shares (at the end of Oct. 2020, treasury stock cost per share: 1,949 JPY, % against total number of issued shares: 0.7%) 22 /22 OTERUMO CORPORATION – Terumo