Scope of consolidation
As of March 31, 2021, the HOYA Group consisted of HOYA CORPORATION, 143 consolidated subsidiaries (7 of which are domestic and 136 overseas) and 18 affiliates (5 of which are domestic and the other 13 overseas).
The HOYA Group has adopted a business management structure where the Life Care and Information Technology business segments control subsidiaries around the world based on their respective responsibilities. Regional headquarters in the Americas, Europe and Asia support business operations by strengthening relationships with countries and areas in the respective regions, such as by providing legal support and conducting internal audits. The HOYA Group has its Financial Head Quarters (FHQ) at its Europe Regional Headquarters (Netherlands).
Adoption of the International Financial Reporting Standards
Beginning with the fiscal year ended March 31, 2011 , the HOYA Group prepares its consolidated financial statements and other documents in compliance with the International Financial Reporting Standards (IFRS) pursuant to paragraph (1), Article 120 of the Ordinance on Company Accounting. With respect to reportable segments presented in the overview of operation by business category, the HOYA Group divides its business into three reportable segments, based on IFRS. These segments are Life Care, Information Technology, and Other Businesses.
The Life Care segment deals in health care related products such as eyeglass lenses and contact lenses, as well as medical related products such as intraocular lenses and medical endoscopes. The Information Technology segment handles electronics related products used for the production of semiconductors, flat panel displays (FPDs) and hard disk drives (HDDs), and imaging related products such as digital camera lenses. The Other Businesses segment provides mainly speech synthesis software and information system services.
Review of Performance in the Fiscal Year Ended March 31, 2021 (Fiscal 2020)
Sales for the consolidated fiscal year under review amounted to 547,921 million yen, a 5.0% decrease year on year.
Profit before income tax increased compared to the preceding consolidated fiscal year by 8.1% to 159,218 million yen, and profit for the year increased by 9.3% to 125,221 million yen. The profit before tax ratio was 29.1%, an increase of 3.6 percentage points from 25.5% in the preceding consolidated fiscal year.
Sales in the Life Care segment decreased by 8.9% compared to the preceding consolidated fiscal year to 341,801 million yen. Segment profit increased by 2.1% to 63,544 million yen.
Sales of eyeglass lenses are recovering, despite national and regional variation. However, sales decreased over the consolidated fiscal year due to the impact on the Company’s sales caused by the restrictions on economic activity implemented in various countries with the aim of curbing the spread of COVID-19 during the first half of the fiscal year, such as temporary closures of eyeglass stores, which are our customers, and restrictions on going outside.
Sales of contact lenses are recovering, but sales decreased due to the temporary closures and reduced business hours implemented at our “Eyecity” retail stores due to COVID-19.
Sales of medical endoscopes are recovering overall, but sales decreased as a result of COVID-19 in the domestic and overseas markets due to a significant impact on our sales activities, limited investment due to changes in the business environment of hospitals and other factors.
Sales of intraocular lenses for cataracts are recovering, particularly in the overseas market, but sales decreased over the consolidated fiscal year due to the impact of COVID-19 on the domestic and overseas markets during the first quarter of the fiscal year reducing the number of cataract surgeries being performed, which led to decreased sales for the Company.
Sales in the Information Technology segment increased by 2.2% compared to the preceding consolidated fiscal year to 200,965 million yen, and segment profit increased by 7.7% to 94,905 million yen.
Sales of mask blanks for semiconductors increased substantially compared to the preceding consolidated fiscal year as a result of our having captured demand for active R&D and embarking on mass production of leading-edge products including mask blanks for EUV (Extreme Ultraviolet) lithography.
With regard to photomasks for FPD, rising prices in the TV panel market price caused by people staying home led to a trend in our customers prioritizing mass-production activities. As a result, photomask demand for research and development decreased, which caused lower sales.
Regarding glass substrates for hard disks, we achieved a large increase in sales of 3.5-inch substrates, which are poised for substantial growth going forward, due to continued demand for such substrates for use in nearline server applications at data center end users. Sales of 2.5-inch substrates decreased amid an accelerating shift to SSDs (solid state drives) from HDDs (hard disk drives) and lower sales caused by factors such as supply chain disruption caused by COVID-19 in the first quarter of the fiscal year. As a result, overall sales in the business segment slightly decreased year on year.
With regard to lenses for cameras, smartphones continued to erode the compact digital camera and interchangeable lens markets. Although now recovering, sales of lenses for cameras decreased due to COVID-19, because of reduced operation at customer production sites, temporary closures of retail stores, and lower demand for and sales of camera products caused by fewer opportunities to take photos due to restrictions on going outside.
(For further information on market conditions by product, please refer to the Review of Operations section.)
Total assets at March 31, 2021 increased by 42,282 million yen from the end of the preceding consolidated fiscal year to 853,290 million yen.
Non-current assets increased by 8,869 million yen to 298,705 million yen. This is primarily due to increases of 12,655 million yen in property, plant and equipment–net, and 6,030 million yen in long-term financial assets despite decreases of 6,394 million yen in goodwill, and 2,686 million yen in intangible assets.
Current assets increased by 33,413 million yen to reach 554,584 million yen. This is primarily due to increases of 16,915 million yen in cash and cash equivalents, 13,911 million yen in trade and other receivables, and 2,593 million yen in other short-term financial assets.
Total equity increased by 43,147 million yen to 672,412 million yen. This is primarily due to increases of 34,216 million yen in retained earnings, and 26,265 million yen in accumulated other comprehensive income despite an increase of 15,597 million yen in treasury shares.
Equity attributable to owners of the Company increased by 42,959 million yen to 688,000 million yen.
Liabilities decreased by 865 million yen to 180,878 million yen.
The ratio of equity attributable to owners of the Company to total assets at March 31, 2021 increased by 1.1 percentage points from the end of the preceding consolidated fiscal year and reached to 80.6%, which was 79.5% in the preceding consolidated fiscal year.
Cash and cash equivalents at the end of the fiscal year under review increased by 16,915 million yen (including the effect of changes in exchange rates of 10,566 million yen) from the end of the previous fiscal year to 334,897 million yen.
Net cash provided by operating activities decreased by 11,553 million yen from the previous fiscal year to 151,812 million yen.
This was attributable to the increase in cash mainly due to profit before tax of 159,218 million yen (an increase of 11,950 million yen in inflow from the previous fiscal year), depreciation and amortization of 36,336 million yen (an increase of 1,963 million yen in inflow) and impairment losses of 8,166 million yen (an increase of 7,866 million yen in inflow), and on the other hand, the decrease in cash mainly due to an increase of 9,788 million yen in trade and other accounts receivable (a decrease of 13,975 million yen in inflow), a decrease of 6,352 million yen in trade and other accounts payable (an increase of 11,504 million yen in outflow) and corporate income tax paid of 34,875 million yen (an increase of 11,706 million yen in outflow).
Net cash used in investing activities increased by 17,594 million yen from the previous fiscal year to 29,790 million yen. This was mainly attributable to purchase of property, plant and equipment of 31,246 million yen (a decrease of 13,931 million yen in outflow from the previous fiscal year).
Net cash used in financing activities decreased by 30,205 million yen from the previous fiscal year to 115,673 million yen. This was mainly attributable to payments for purchase of treasury shares of 76,675 million yen (an increase of 32,392 million yen in outflow from the previous fiscal year) and dividends paid of 33,720 million yen (a decrease of 322 million yen in outflow).
Capital Expenditures/Depreciation and Amortization
The total capital expenditures of all operations of the HOYA Group amounted to 40,093 million yen during the consolidated fiscal year under review, a decrease of 14,055 million yen over the preceding consolidated fiscal year.
In the consolidated fiscal year under review, investment in the Life Care business amounted to 12,644 million yen and investment in the Information Technology business amounted to 27,053 million yen, which account for 31.5% and 67.5%, respectively, of the total capital expenditures by the Group.
The investment was covered by internally generated funds.
During the consolidated fiscal year under review, in the Life Care business, the HOYA Group mainly invested in increasing production of eyeglass lenses, etc.
In the Information Technology business, we made investments mainly in production facilities at our Singapore plant that manufactures mask blanks for semiconductors for EUV lithography and production facilities for the launch of our new Laos plant that manufactures glass substrates for hard disks used in data centers.
Depreciation and amortization (including impairment losses) for the fiscal year under review were 44,502 million yen, 28.3% higher than in the previous fiscal year.
Policy Concerning Decisions on Appropriation of Retained Earnings, etc.
The HOYA Group aims to maximize its corporate value by developing businesses globally and changing the business portfolio to conform to the changing times and environments.
With respect to capital policy, our basic policy is to adopt decisions that strike the optimum balance between enhancing internal reserves for the future growth of the HOYA Group and returning profits to shareholders, while pursuing the optimum capital structure for the HOYA Group that includes financial soundness and capital efficiency.
In addition, by promoting management that gives priority to capital efficiency by realizing maximum profitability from the assets entrusted to us by the shareholders, and taking further steps toward management that gives priority to SVA (Shareholder Value Added), which is measured as the profit generated by the HOYA Group minus the cost of capital, i.e., the profit expected by shareholders, we aim for “Maximization of Corporate Value.”
With respect to internal reserves for future growth, resources will be preferentially appropriated to investment in the growing businesses for market share expansion, entry into untapped markets, and nurturing and obtaining new technologies. In addition to growth of existing businesses, we will also proactively pursue possibilities including mergers and acquisitions to further enrich our business portfolio. As for the Information Technology segment, which has been positioned as a steady earnings business, we will continue to make capital investment that further reinforces the technological abilities that become the source of competitiveness, and development investment that will contribute to developing next-generation technologies and new products.
With respect to returning profit to shareholders, our policy is to proactively return profit to shareholders through using excess cash for dividends and the share repurchases while giving comprehensive consideration to the operating performance in the consolidated fiscal year under review, level of internal reserves, and the medium to long term demand for funds and capital structure, among other factors.
The annual dividend, including the interim dividend of 45 yen per share that was already paid, was 90 yen per share. The consolidated dividend payout ratio was 26.8%.
As for share buyback, the total amount of treasury shares acquired corresponding to the portion that had been approved by resolution at the meeting of the Board of Directors during the fiscal year under review was 80 billion yen. (Share buyback period was from October 2020 to April 2021.)