Message from the CEO: President & CEO  Hiroshi Suzuki

Report on Results for the Fiscal Year Ended March 31, 2016

Revenues of the HOYA Group for fiscal 2016 (ended March 31, 2016) amounted to ¥505,714 million, an increase of 3.2% from the previous fiscal year. Profit before tax was ¥119,099 million, an increase of 0.7% year on year, and profit amounted to ¥93,317 million, an increase of 0.4% over the previous fiscal year.

In the Life Care field, stable growth is continuing overall, mainly eyeglass lenses, contact lenses, and intraocular lenses, and both revenues and profits expanded. In the Information Technology field, sales declined from the previous year because of shrinkage in the glass substrates for hard disk drives (HDD), lenses for digital cameras, and other businesses. On the other hand, due to expansion in each product in sales of high-value-added products and success in reducing fixed costs, the segment secured an increase in profit.

HOYA is placing a priority on its rapidly expanding Life Care segment and is proactively making forward-looking investments to capture such accelerating growth. Looking ahead, we will realize the results of our investments and boost gains in our principal businesses, spanning eyeglass lenses, contact lenses, endoscopes, intraocular lenses, and artificial bones. And in our Information Technology segment’s glass substrate for HDDs and digital camera businesses, we consolidated manufacturing operations as a platform designed to circumvent the effects of a continuing downtrend in the overall market and to thereby squarely assure profitability.

Performance in Fiscal 2016(Millions of yen)
  FY2015 FY2016 Growth Rate
Consolidated Sales 489,961 505,714 +3.2%
Consolidated Profit before Tax 118,249 119,099 +0.7%
Profit from Ordinary Operating Activities 110,282 118,912 +7.8%
* “Profit from Ordinary Operating Activities” excludes financial income/costs, share of profit (loss) of associates, foreign exchange gains or losses, and other non-recurring gains or losses from profit before tax.

Conversion of HOYA’s Business Portfolio

There has been no change in our policy of having growth in the Life Care field drive the growth of the HOYA Group as a whole. Within the Life Care field, HOYA’s global market shares in eyeglass lenses and endoscopes are only in the middle of the 10%-to-20% range and HOYA’s share of intraocular lenses is only in the single-digit range. We will redouble our efforts to achieve stronger growth in regions and customer segments where we have not penetrated significantly in the past. For example, in the eyeglass lenses business, our market share in the United States is lower than in other overseas regions, but we are working to strengthen sales systems there and conduct marketing activities that are carefully tailored to customers’ needs. As a result, sales in the U.S. market expanded substantially during the fiscal year.

On the other hand, in the Information Technology field, I believe the markets are on a declining trend. However, the mission of this business is generating stable profits and remains unchanged. If businesses within the segment can expect growth in the future, then we will invest in them. In the mask blanks for semiconductors business, we think the next-generation photolithographic technology, extreme ultraviolet (EUV), will present promising business opportunities. In the optics business also, we think that products for use in surveillance cameras and car-mouted cameras are going to be main applications in the future.

By growing the Life Care field, without doubt, the conversion in portfolios to Life Care will undergo substantial transition. In today’s fast-changing world, for HOYA to continue to develop well into the future, from the perspective of dispersing risk, we think it will be necessary to take initiatives in a diverse range of businesses. If we look at other companies around the world, there are examples of companies in Asia and elsewhere that have been aware of their business portfolio and have gone through substantial change. To aim for continued growth through dynamic portfolio management, we must have a diverse business portfolio internally, and our view is that it is important to have management capabilities to manage this portfolio appropriately.

It is vital for management to make decisions not only from a corporate perspective, but also to see matters from the customer’s point of view. The way we assess the value we provide is based on earning a profit from the value our customers attach to our solutions.

Composition of Sales by Business in FY2009 vs FY2016

Cash Allocation and M&A

Of the uses of the cash HOYA generates, growth investments in growth markets and domains have a high priority. During the fiscal year under review, HOYA took initiatives to expand production capacity in eyeglass lenses and intraocular lenses where future growth in demand is expected. In the eyeglass lenses, endoscopes, intraocular lenses, and other areas, HOYA invested aggressively in product development and in sales and marketing to develop additional markets, and in the contact lens business, HOYA opened 24 new stores. In the Information Technology business, cash was allocated mainly to the development of cutting-edge technology development and capital investments for high-value-added products.

We think that M&A should play a complementary role in attaining growth. M&A targets are in the Life Care field, but, among possible M&A candidates, important conditions are that the business to be acquired is expandable globally and that the companies should be in niche businesses where their competitiveness can be forecast to some degree. Our stance on M&A opportunities is to assess how much cash the business will generate in the future, to determine whether there are synergies with our existing businesses, and then to proceed with the deal when we are confident we can secure the required return. In addition, as we make investments for growth on the one hand, and, on the other, when funds remain, we want to pay returns to shareholders with appropriate timing.

Governance as the Base for Creating Corporate Value

Board of Directors (As of June 21, 2016)
Independent
Directors
Attendance at
Directors’ Meetings
Itaru Koeda 10 of 10 (100%)
Yukako Uchinaga 10 of 10 (100%)
Mitsudo Urano
9 of 10 (90%)
Takeo Takasu 10 of 10 (100%)
Shuzo Kaihori* 8 of 8 (100%)
Internal Director  
Hiroshi Suzuki 10 of 10 (100%)
Independent Directors 5 Internal Director 1
* Newly elected at the General Meeting of Shareholders held on June 19, 2015

The objective of a corporation is to create corporate value in the medium-to-long term and continue to operate core businesses. To accomplish this, the corporation must generate profits as it expands, and we think that corporate governance is the base for this to happen. The role of the directors, as the representatives of the shareholders, is to ensure that the corporation is managed to maximize profit for the shareholders. We think that how to create structures that enable the directors to accomplish this is the issue of corporate governance.

Members of HOYA’s Board of Directors, with the exception of myself, are all outside directors. When the Executive Officers manage the Company in ways that damage the interests of the shareholders, my view is that the work of the Board should be to put a stop to it and exclude decision making that does not respect the interests of the shareholders. To make this happen, we have settled on the current governance framework to achieve more-effective oversight functions.

Hiroshi Suzuki
President & CEO