Sales and profits declined markedly in Hoya Corporation's Life Care segment, which includes vision care products, during the fourth quarter of its financial year, ended on March 31. The segment's pre-tax profit margin fell to 9.8 percent in the period from 15.5 percent in the same quarter a year ago, as its sales dropped by 12.1 percent to 45.3 billion yen (€454.1m-$570.2m). More specifically, sales of products related to health care, which comprises eyeglass lenses as well as contact lenses and intraocular devices, went down by 16.1 percent to ¥32.1 billion (€321.8m-$404.1m).
The quarterly results continued to be impacted by the consequences of last autumn's floods in Thailand, which led to the shutdown of Hoya's superlaboratory in Ayutthaya in October. Sales of eyeglass lenses were most affected in Japan and Europe. Instead, sales of intraocular lenses and contact lenses grew by about 10 percent in the quarter, and sales of endoscopes, which belong to the same business segment, grew markedly.
Hiroshi Suzuki indicated to financial analysts that the Ayutthaya plant should return to its original capacity in the latter part of September. One of its three building started operations last month, after receiving its equipment. However, he admitted that it was still uncertain if customers will return after capacity is restored to the original level. He repeated that they will probably not return without a reasonable incentive, and predicted that it may take one year for sales to recover.
Across the group, sales declined by 13.2 percent to ¥87.5 billion (€877.2m-$1,101.5m), but the pre-tax margin increased to 20.2 percent from 12.7 percent in the same period a year ago, and the company ended up with a 38.5 percent higher net profit of ¥12.1 billion (€121.3m-$152.3m). This was partly due to the fact that manufacturers of hard disk drives with production facilities in Thailand recovered from the disaster, enabling Hoya to ship more of its own glass disk substrates to them.
Sales from continuing operation, excluding the Pentax imaging system business sold to Ricoh last October, dropped by 4.4 percent to ¥87.5 billion (€877.2m-$1,101.5m). While sales in Japan dropped by 8.9 percent to ¥32.7 billion (€327.8m-$411.6m), sales in Europe fell by 31.5 percent to ¥11.4 billion (€114.2m-$143.5m). Increases were recorded in other parts of the world.
If the various losses related to the Thai disaster are taken out, Hoya would have seen a 5.0 percent increase in revenues from continuing operations to ¥4,590 million (€46.0m-$57.8m) and a 61.5 percent boost in pre-tax profit to ¥7,990 million (€80.1m-$100.6m).
The appreciation of the Japanese yen also had an adverse effect on the group's quarterly results. If there had been no floods and the yen had remained stable, Hoya's continuing operations would have recorded increases in quarterly revenues and pre-tax profits of 6.6 percent and 61.7 percent, respectively. For the Life Care segment of the group, sales would have risen by 6.9 percent and pre-tax profits by 44.2 percent.
For the full financial year ended March 31, Hoya reported a 10.9 percent decline in total sales to ¥376.9 billion (€3,788.4m-$4,744.6m). The net profit fell by 28.4 percent to ¥42.7 billion (€428.1m-$537.5m).
The management told financial analysts that the shutdown of its eyeglass lens facilities is expected to result in a loss of sales of ¥8.6 billion (€86.2m-$108.3m) and a drop in pre-tax profits of ¥7 billion (€70.2m-$88.1m). In addition, Hoya suffered an estimated loss of about one billion yen (€10.0m-$12.6m) in fixed assets and other items from the disaster, but Hoya and its subsidiaries should get at least some of this money back from the insurance companies. The company has already received insurance proceeds of ¥351 million (€4.4m-$3.5m).
Suzuki disclosed that Hoya is paying ¥8 billion (€80.2m-$100.7m) to raise its stake in its Brazilian vision care operations from 25 to 100 percent (see previous issue). He also indicated that further investments may take place this year if discussions about the takeover of Seiko Epson's eyeglass business are concluded.