Hoya Corp. wants to make new acquisition in the Life Care segment, which comprises eyeglasses and other products, and which booked a sales increase of 25.4 percent to ¥62,664 million yen (€442.0m-$607.4m) in its second quarter ended Sept. 30 as compared to the same period a year ago. The turnover included ¥2.2 billion (€15.5m-$21.3m) worth of lenses generated by the eyewear division of Seiko Epson Corp., which was transferred to Hoya during the quarter.
Company officials noted that the profitability of Seiko's business is still low, but said it will be improved by optimizing the production line. Hoya bought Seiko's lens development and manufacturing business last February. On June 1, it acquired an initial stake of 30 percent in Seiko Optical Products Co. (SOP), a wholly owned subsidiary of Seiko that handles the sale of eyeglass-related products, at a price of ¥1,439 million (€10.1m-$13.9m).
An agreement between the two companies calls for an increase in Hoya's stake in SOP to 50 percent in a second stage. Hoya said that the value of both companies will be enhanced by expanding sales of Seiko branded lenses through Hoya's global manufacturing and sales network. No details could be obtained about the future sales structure in Europe, where Seiko has a big and profitable business, or the rest of the world.
Hoya's recent sales growth has been supported by the depreciation of the yen. In terms of local currencies, Hoya's Life Care segment grew by 10.4 percent and its sales of eyeglass lenses rose by around 25 percent in the latest quarter, explaining in part the sales decline previously reported by Essilor in the same quarter (see the previous issue of EWI). Hoya's eyeglass business recovered from the effects of the October 2011 floods in Thailand, which paralyzed its local super laboratory for many months. They grew strongly in Europe and Japan. Overall, they reached a higher level than before the flooding, but they did not reach the same level of profitability.
As previously reported, Hoya has been making price concessions to start working again with some major retail chains, and they probably had an impact on profits. Nevertheless, the pre-tax profit of the Life Care division went up by 18.8 percent from a year ago on a comparable basis. However, adding various extraordinary factors, including that the segment's profits had been boosted last year by insurance proceeds related to the floods, the division's pre-tax profit declined by 14.4 percent to ¥10,947 million (€77.2m-$106.1m). The pre-tax profit margin thus declined to 17.5 percent of sales from a ratio of 25.6 percent in the year-earlier period. The operating margin on the normal business activities improved to 18.5 percent from 16.1 percent.
Within the Life Care segment, total sales of health care products inflated by 29.0 percent to ¥10,497 million (€74.0m-$101.7m), up by 16.1 percent in constant currencies. Among the health care products sold by Hoya, sales of contact lenses through the company's own stores in Japan rose by 5 percent in the quarter, in spite of an apparent contraction in the national market. The company opened six new Eyecity stores in the quarter. Six more are planned for the second half of its financial year.
As a group, Hoya suffered a 12.0 percent drop in net income to ¥12,729 million (€89.8m-$123.4m) on 9.8 percent higher revenues of ¥102,236 million (€721.1m-$990.9m) during its second quarter. Higher profits were recorded in eyeglass lenses and endoscopes. Group sales were down by 2.2 percent on a currency-neutral basis. Excluding extraordinary factors, the group booked a double-digit increase in profits.
For the first six months of Hoya's financial year, Life Care revenues grew by 26.8 percent to ¥123,423 million (€870.5m-$1,196.2m), representing 61 percent of the group's total turnover, and the operating margin on normal activities increased to 17.3 percent from 15.5 percent. The group made a net profit of ¥25,107 million (€177.1m-$243.3m) on sales of ¥202,661 million (€1,429.4m-$1,964.2m) and generated net cash of ¥41,355 million (€291.7m-$400.8m) during the six-month period. Much of the cash came from Hoya's Information Technology division, which had the highest profit margins.
Hiroshi Suzuki, president and chief executive of Hoya, said it prefers to reinvest its cash in mergers and acquisitions in the Life Care sector rather than dividends. “Our management capacity, human resources and our financial strength will enhance the presence of Hoya in the Life Care field by utilizing cash generated in the Information Technology segment,” he declared.
Coincidentally with the release of its financial results, Hoya announced the acquisition of a majority stake in Wassenburg Medical Devices by its Pentax Medical division, which is part of its Life Care segment. Wassenburg, which specializes in equipment to wash and dry the scopes of endoscopes, will contribute annual revenues of around €30 million and major synergies with Hoya's endoscope business. The company had been trading mainly with Johnson & Johnson until three years ago.