TSE symbol 6789
The financial results briefing for the third quarter of the fiscal year ending December 31, 2022 was held online on November 10, 2022.
Speaker: Kazuhiro Ogawa, Managing Executive Officer
This is a summary of the question-and-answer session at the financial results briefing.
This contains forward-looking statements concerning the financial forecasts, plans, strategies of the Company, which are not historical facts. They are based on management's assumptions made in accordance with information available at the time of the briefing (as of Nobemver 10, 2022) and are subject to risks and uncertainties. Actual results may differ materially from these forecasts.
Q：You made an upward revision to the financial results forecast in the second quarter and revised it downward in the third quarter. Have there been any significant changes?
A：Inflation accelerated from July to September, and market environments have been drastically changing chiefly in the US and Europe. In addition, it is still difficult to predict when Russia’s invasion of Ukraine will come to an end. The appetite for capital investment has declined accordingly, and both sales and profit for the third quarter (July to September) fell below our expectations. As we expect that this situation will continue in the fourth quarter, we have made a downward revision to the previous forecast.
Q：While you revised the full year financial results forecast, you have set high targets for the fourth quarter. Could you tell us how you will achieve the full year plan?
A：Now that we have better prospects on parts procurement necessary for this year’s production and have in place a system to supply new printer products, we expect that these products will contribute to sales. We have also launched a new dental product in September which we expect will push up sales. In addition, the price pass-through to some products, which we started in the third quarter, will be reflected in net sales primarily from the fourth quarter. Through these measures, we aim to achieve our full year plan.
Q：You have announced that the final year target of the Mid-term Plan will be 54.0 billion yen. Do you plan to revise the financial target for the next fiscal year?
A：Currently, we are drafting our business plan for 2023. Although there are variable factors in the external environment such as foreign exchange rates, parts procurement and soaring energy costs, we will formulate the business plan while paying due attention to market analyses, customer trends and other factors.
Q：It is forecast that operating profit for the fourth quarter (October to December) will be 1.0 billion yen higher compared to the third quarter. Please tell us the reason for this increase.
A：We expect that operating profit will increase by 1.0 billion yen because of the price pass-through of 0.6 billion yen and the boosting effect of the weak yen.
Q：Is the surge in parts costs accelerating?
A：We have a sense that parts costs have remained high from the second quarter to the third quarter. In terms of procurement, the lead time for some parts is now as long as six to twelve months as we had to make advance orders for some parts. We are proceeding with procurement while consulting with our suppliers, in order to minimize the impact on our performance.
Q：Please tell us why you have decided to purchase treasury stock?
A：We intend to improve shareholder returns and capital efficiency. We also consider that the Company’s low valuation is a management issue. In consideration of these factors, we have decided to purchase treasury stock.
Q：Why did dental sales decline in the third quarter and what’s the outlook for the fourth quarter?
A：One of the reasons for the sales decline is the acceleration of the economic slowdown, including inflation, in the US and Europe in the third quarter and a declining appetite for capital investment as a result. Another reason is the termination of COVID-19 tax reductions in some regions. We will strive to recover dental sales in the fourth quarter by capitalizing on our new dental milling machine launched in September and by continuously capturing the growing demand in emerging markets.