Tsumura : Third Quarter Business Results for Fiscal Year 2021(with script)

Third Quarter Business Results for Fiscal 2021

February 7, 2022

Director, and CFO

Muneki Handa

1

Third Quarter Business Results for FY 2021

						（ Million yen ）
		FY 2020	FY 2021	YoY	FY 2021
		3Q	3Q	Amount	Change	plan
Net sales	88,444	98,382	+9,938	+11.2%	127,500
	Domestic	84,579	91,317	+6,737	+8.0%	117,800
	Overseas	3,864	7,065	+3,200	+82.8%	9,700
Operating	17,235	18,829			21,100
profit	+1,593	+9.2%
(Operating profit	(19.5％)	(19.1％)	(16.5％)
margin)
Ordinary	17,811	21,074	+3,262	+18.3%	23,400
profit
Profit	13,226	15,389	+2,162	+16.4%	16,600
attributable
to owners of parent

* The 2020 results have been rearranged to the amount after applying the PPA adjustment and new accounting revenue recognition standards.

Ratio to total sales

Prescription Kampo

Products

88.7%

Other prescription pharmaceuticals 0.4%

Healthcare 2.9%

External sales by consolidated subsidiaries 8.0%

2

■Third Quarter Business Results for Fiscal 2021 Overview

Page 2 shows a summary of third quarter business results in FY 2021. As you can see, net sales and profit rose year-on-year.

Net sales totaled ¥98,382 million, a growth of 11.2% year-on-year. Operating profit reached ¥18,829 million, an increase of 9.2% year-on-year. Ordinary profit came to ¥21,074 million, a rise of 18.3% year-on-year.

Quarterly net profit amounted to ¥15,389 million, an improvement of 16.4% year-on-year.

The operating profit margin was 19.1%, a decline of 0.4pts year-on-year.

2

Key Points in Performance

Sales and profits increased due to growth in domestic and overseas sales.

Net sales

98,382 million yen

YoY

＋11.2％

• Domestic sales totaled 91,317 million yen, increased 8.0% year-on-year.
• Sales of the 129 prescription Kampo products totaled 87,293 million yen, increased 7.6% year-on-year.
• Sales of healthcare products including OTC Kampo medicines totaled 2,876 million yen ,increased 12.0% year-on-year.
• Overseas sales totaled 7,065 million yen, increased 82.8 % year-on-year.

Operating profit	18,829	million yen	YoY	＋9.1％
Operating	19.1	％	YoY	(0.4)pt
profit margin

• The cost-to-sales ratio was 48.8%, a climb of 1.3pts year-on-year, mainly impact of increased depreciation burden due to operation of Ibaraki 3rd SD building, and external sales in China.
• The SG&A ratio totaled 32.1%, a decline of 1.3pt year-on-year, mainly impact of improvement due to sales growth.

Ordinary profit

21,074

million yen

YoY

＋18.3％

• The impact of the 3Q foreign exchange gain: 1,421 million yen
  Previous 3Q foreign exchange loss: 167 million yen, mainly affected by foreign exchange gains and losses.

Profit attributable to owners	15,389	million yen	YoY	＋16.4％
of parent
				3

■Key Points in Performance

Page 3 depicts key points in performance.

Net sales totaled ¥98,382. This breaks down to domestic sales of ¥91,317 million and overseas sales of ¥7,065 million.

Sales of the 129 prescription Kampo products rose 7.6% year-on-year.

Sales in healthcare, which includes OTC medicines, rose 23.8% year-on-year owing to brisk store and online sales.

The cost-to-sales ratio was 48.8%, a climb of 1.7pts year-on-year. This mainly reflects an increase in depreciation expense in Japan in tandem with the No. 3 SD line operations at the Ibaraki Plant, and impact from external sales in China.

The SG&A ratio was 32.1%, an improvement of 1.3pts year-on-year, in line with the growth in sales.

Ordinary profit increased 18.3% year-on-year, but this was mainly attributable to a gain of foreign exchange.

3

Factors Triggering Changes in Operating Profit (YoY)

（ Million yen ）		（ Million yen ）
Changes in sales : ＋5,253 Breakdown
	Domestic	＋3,561
	Overseas	＋1,692

	（1,619）
+5,253	（2,040）
	18,829
17,235

3Q FY 2020	Profit impact due	Profit impact due	Profit impact	3Q FY 2021
Operating profit	to changes in	to changes in	from changes in	Operating profit
	sales	cost-to-sales	SG&A expenses

Changes in cost-to-sales :
(1,619) Breakdown
Sales composition		＋215
（Domestic）
Crude drug cost（Domestic）		＋234
Processing cost etc		(1,110)
（Domestic）
Outside sales in China		(958)
（Overseas）
Changes in SG&A expenses:
(2,040) Breakdown
Sales-related expense		(618)
R&D expense		(306)
Salary allowance		(170)
Other		(946)	4

■Factors Triggering Changes in Operating Profit (YoY)

Page 4 features factors triggering changes in operating profit. I will only go over the key points.

Operating profit was ¥18,829 million, a rise of ¥1,593 million year-on-year. Impact owing to sales growth was approximately ¥5.2 billion. A breakdown of domestic and overseas factors are shown on this slide.

Impact reflecting a rise in cost of sales was around a negative ¥1.6 billion.

In Japan, a change in sales mix had a positive impact of ¥210 million, and there was also a positive impact of ¥230 million owing to a decline in crude- drug related cost.

Meanwhile, operating profit was negatively impacted by ¥1.11 billion due to an increase in processing expense, and also negatively impacted by ¥950 million due to an increase in external sales in China.

That being said, the rise in processing expense is mainly attributable to an increase in depreciation expense and labor expense in tandem with the No. 3 SD line operations at the Ibaraki Plant.

The impact from an increase in expense was a negative impact of approximately ¥2.0 billion. This negative impact was primarily due to a rise in sales promotion expense in tandem with sales growth, and an increase in R&D expense.

Note that in the statement of income used for comparison, the figures are PPA adjusted. Operating profit in 3Q FY 2020 declined ¥320 million due to PPA adjustments.

4

Financial Condition/Cash Flow Position

（ Million yen ）

（ Hundred million yen ）

	FY 2020	FY 2021	Change
	(March 2021)	3Q
Total assets	319,063	338,432	19,368
Current assets	204,273	221,541	17,268
Non-current assets	114,789	116,890	2,100
Total liabilities	85,894	88,946	3,052
Current liabilities	48,380	41,986	△6,394
Non-current liabilities	37,513	46,960	9,446
Total net assets	233,169	249,485	16,316
Equity ratio	68.3％	68.7%	0.4pt
	FY 2020	FY 2021	Change
	(March 2021)	3Q
Inventories	80,755	87,217	6,462
Merchandise and	13,939	8,005	△5,934
finished goods
Work in process	13,396	14,140	743
Raw materials and	53,419	65,072	11,652
supplies

+178	△75
	△51
	＋22	670
596

at equivalents cash and Cash period of beginning

activities Operating

activities Investing

activities Financing

rate exchange of Impact translations

cash and Cash of end at equivalents period

5

■Financial Condition & Cash Flow Position

Page 5 covers our financial condition and cash flow position. I will only go over the main points here as well.

Current assets grew ¥17.2 billion, primarily attributable to an increase in accounts receivable of ¥5.4 billion and inventory assets of ¥6.4 billion.

The breakdown of inventory assets comprises a rise of ¥11.6 billion in raw materials and supplies, of which there was an impact of ¥3.4 billion due to foreign exchange translations.

Total liabilities rose ¥3.0 billion. Between current and non-current liabilities, the portion of long-term borrowings scheduled to be paid back within a year declined ¥9.3 billion, in tandem with the reshuffling of debt. Meanwhile, long-term borrowings rose by the same amount. In current liabilities, accounts payable increased ¥2.9 billion, mainly reflecting an increase in purchasing in the China business.

Our equity ratio improved 0.4 points to 68.7%.

The waterfall chart on the right reflects our cash flow performance.

5