Terumo Corporation

Hello. I am the CFO, Muto.

I will give an overview of our Earnings Results for the Third Quarter of the Fiscal Year Ending March 31, 2024. Here are the highlights of this earnings report.

Q3 exhibited highest ever results across all past quarters in both revenue and operating profit. For Q3 YTD revenue operating profit were highest ever for the period, maintained strong sales performance globally, with double-digit growth in revenue, operating profit, profit for the year, 6% YoY when excluding FX.

Q3 YTD operating profit grew 9% when excluding FX, positive impact from our price increases and profitability improvement measures as well as ease of inflation resulted in strong progress towards the annual guidelines. So we have upwardly revised our annual guidance due to continuing positive impacts from yen depreciation on our business performances.

Both our revenue and profit set new records for being highest ever. Next slide, please.

Here are the P&L results. Revenue was driven by the TIS and Vascular Graft businesses of the Cardiac and Vascular Company and by the blood center business of the Blood and Cell Technologies Company, all of which grew in the double digits.

Operating profit saw the expected effects of price revisions and group-wide cost reductions as we continue to strengthen the North America sales force to expand therapeutic devices there. Continuing from Q2, the gross profitability and adjusted operating profitability of the three months of Q3 were improved year-on-year.

I will explain this in detail on the next slide. Next is the profit variance analysis comparing the three months of Q3 against the same quarter of the previous year.

In gross margin, a onetime expense was the impairment booked for the stoppage of use in some production equipment belonging to Blood and Cell Technologies. However, the easing of inflation impact and expected positive effects of cost reduction and business mix improvement canceled this out.

In price, the effects of the expanded price policy revision of the second half began to appear. SG&A increase continuing from the first half advanced as planned as we strengthened our sales force in North America toward expanding therapeutic devices, such as neurovascular products and stent grafts.

With these Q3 results, Q3 YTD profit variance items are each progressing as planned. The next slide explains this.

Here is the Q3 YTD adjusted operating profit variance analysis. G/P increment by sales increase progressed better than expected.

Thanks to strong performance by Cardiac and Vascular, and Blood and Cell Technologies. Due to the Q3 circumstances I just explained, gross margin turned positive after having been negative in the first half.

SG&A increase factors were the same that I just explained. The FX breakdown is ¥6.6 billion positive inflow and ¥2.6 billion negative in stock.

Next slide, please. The variance analysis chart on the left of the slide is the annual guidance for the profit variance that we announced in May 2023.

The gross margin results from Q1 to Q3 and outlook for Q4 are shown on the upper right bar graph of the slide. Continuing the upward trend of improvement for each quarter, Q4 is anticipated to reach an even larger positive number due to the previous fiscal year, including the impact of one-time expenses.

The breakdown of each item is shown on the lower portion. The three items shown are inflation, profitability improvement, and mix improvement and others.

Plasma innovation business booked one-time expenses in Q3, but it was exceeded by the positive factors of easing of inflation impact, freight cost reduction by global tender and reduced production costs resulting in overall progress as planned. Next slide, please.

Here is the revenue by region. In the main markets of United States and Europe, therapeutic devices including neurovascular products and stent grafts continue to be strong.

In addition, emerging markets including Asia countries and the Middle East drove the growth rate. In Japan, negative factors including the reduced sales of the sort of nutrition business and return to normal of thermometer demand continued, but cardiac and vascular and blood and cell technologies drove the group as a whole above the previous year.

In China, access products of the TIS business became subject to volume-based procurement, resulting in Q3 impact from distributors holding off on buying. The application of new prices has been postponed and is expected to happen in March or later.

In Asia, tenders in which the Blood and Cell Technologies company participated occurred in the first half and Q3 instead of Q4, causing a drastic increase in revenue. Next slide, please, we will try to explain by company.

I will now explain the results by company. First, Cardiac and Vascular.

Revenue grew 8% when excluding foreign exchange, the vascular graft and neurovascular businesses and Americas and Europe regions led strong global performance in profit, expanded cost reduction effects combined with increased sales to results in growth. And next part with Medical Care Solutions.

The TMCs is Terumo Medical Care Solutions company in revenue, although we have seen and continuous negative impacts by the return to normal of infection prevention products demand, Hospital Care Solutions business maintained revenue increase owing to price actions carried out as a counter measures inflation impact. Pharmaceutical Solutions sales were also as planned and as a whole TMCs resulted in an almost flat growth through the same period of the last fiscal year, profit increased in the double digits due to easing inflation and pricing revision on effects.

And next part is TBCT. So in revenue, the blood center business received orders in Asia and the U.S.

that were expected in Q4 in the first half and Q3 instead, resulting in maintaining a higher growth rate than expected in profit. There were one-time expenses in Q3 that I explained earlier.

However, the positive impacts of increased sales and profitability improved led to Q3 year-to-date progress that was faster in both amount and margin than the annual guidances. Next slide please.

There reflect the positive effects impact up to Q3, we have revised our annual guidance upward. Both the sales and profit of Cardiac and Vascular and Blood and Cell Technologies have been revised upward due to strong sales expansion.

In Medical Care Solutions, sales were revised downward due to the return to normal of demand for infection prevention products, but profit was revised upward to reflect the positive impact of easing of inflation and global tenders for freight cost. And next slide, please.

This is the last slide. This guidance revision is primarily to reflect FX impact, but also takes into account individual quarterly and company-specific factors.

On this slide, gray bars represent the new guidance based on actual rates from Q1 to Q3 as well as on revised guidance rate in Q4. Colored bars indicate new guidance based on the old guidance rate.

This will allow a discrete analysis of impacts on guidance by FX and by other factors, excluding FX. I hope you find this useful.

In Q3, we showed solid progress in profitability improvement. In Q4 as well, we plan to keep showing positive effects as planned and achieve our guidance.

This concludes my explanation. Thank you very much for your attention.