Sales of ophthalmic lenses grew by just over 10 percent on a constant-currency basis in Europe for Hoya Corporation during its first quarter, ended June 30, and this positive trend is going on. Company officials indicate that the German and Scandinavian markets continued to be tough, while France, Spain, Italy, the U.K. and the Netherlands were positive.
Business remains difficult in Eastern Europe, but company officials are optimistic following the start up a of a new prescription laboratory in Poland last May, which led the company to win some more customers in the region.
Also on a currency-neutral basis, Hoya's eyeglass lens business grew by nearly 20 percent in Asia in the latest quarter. The U.S. also saw growth. Shipments of eyeglass lenses in Japan increased, especially for major retail chain stores, but because of lower unit sales prices, domestic sales fell from the year-ago period:
Hoya is worried that the situation in Japan is happening elsewhere, too. Unit prices of eyeglass lenses could fall too far in Scandinavia, Spain and Australia, says the management in Japan. Unless price competition between major chains stops, unit prices will have dropped by 20-30 percent in one year in Sweden and about 20 percent in Spain. Unless products sell in considerable volumes, it is not possible to report good sales. From the perspective of the manufacturers, it seems that there has been an increase in markets where the competition weeds out the players.
The second and third quarters are expected to hover right around the level they are now for Hoya's eye care operations.
However, it's becoming harder for analysts and observers to compare the performance of Hoya in the ophthalmic sector with that of Essilor International and other big players. In fact, the Japanese conglomerate has changed around the segments in which it is breaking down its results following the guidelines of the national Ministry of Health, Labor and Welfare. It is grouping its former eye care segment together with medical devices and other products for similar markets under a new ?Lifecare? division, with the blessing of the Accounting Standards Board of Japan. Hoya's lifecare division now encompasses health-care related products, including eyeglasses and contact lenses, and medical related products, which includes medical endoscopes and intraocular lenses.
The appreciation of the yen is also making any comparison more blurred. During the first quarter ended June 30, the yen appreciated 5.7 percent against the dollar and 14.0 percent against the euro, and fell 0.4 percent against the Thai baht. The yen-euro change had a major impact on financial results. Exchange rates overall had negative effects for the groupù of ¥2.9 billion (€25.9m-$33.9m) on net sales, ¥452 million (€4.0m-$5.3m) on operating income, ¥570 million (€5.1m-$6.7m) on ordinary income and ¥429 million (€3.8m-$5.0m) on net income.
On a constant currency basis, the group's net sales rose by 14.3 percent. By segment, Information Technology's sales rose by 10.8 percent and those of the Lifecare division by 3.8 percent. In reported terms, Hoya's net sales were up by 11.2 percent to ¥105.6 billion (€944.3m-$1,233m), whileLifecare had an increase of 2.2 percent to ¥49.6 billion (€443.6m-$579.2m). In that category, sales in Japan were up by 6.4 percent, while sales abroad fell by 0.7 percent.
For the quarter, vision care in general made up 25.1 percent of Hoya's business. Health care took another 13.1 percent, and Pentax accounted for 25.7 percent.
The group's operating income more than doubled, up by 116.6 percent to ¥20.1 billion (€179.7m-$234.7m), or by 121.5 percent on a currency-neutral basis. Lifecare had a 14.0 percent increase in operating income, attributed to a better product mix and good retail sales of contact lenses and good sales of endoscopes. The operating margin of the Lifecare unit was 19.2 percent, up from 17.4 percent in 2009.
Hoya's net income skyrocketed by 446.0 percent to ¥21.0 billion (€187.8m-$245.2m). This huge leap was due to the recording of extraordinary gains from the sale of the media business to West Digital Corporation in the U.S.
Hoya's sales of contact lenses rose year-over-year with an increase in store traffic, combined with an increase in the number of stores following aggressive expansion initiatives. Hoya has 170 contact lens stores in Japan and seven in Shanghai, with steady double-digit growth.
The group's shipments of medical endoscope products showed from the year-ago period, as medical institutions cut spending in response to the fiscal problems in Europe and the sluggish economy in the U.S. Sales were down, hit hard by the appreciation of the yen.
In Hoya's intraocular lens segment, growth is steady at double digits. Asia is growing steadily, but those operations have just started up in North America, so the company sees a lot of work ahead of it there.
For the six months ended Sept. 30, Hoya is forecasting a 1.9 percent increase in net sales, a 38.2 percent jump in operating income, and a 129.5 percent rise in net income. For the second quarter alone, it is expecting a drop of 6.4 percent in net sales and 0.8 percent in operating income, but an 11.8 percent boost in net income.
The company noted that the first quarter saw strong recoveries in emerging countries, mainly in Asia and particularly in China. In Japan, although corporate activities improved, led by exporters, and consumer spending showed signs of a recovery, with the further appreciation of the yen in the quarter, the Japanese economy remained clouded by the uncertain global economic outlook.