Interview with the CEO

Staying true to its values,
HOYA is pursuing fresh approaches
for medium- to long-term growth.

Eiichiro Ikeda
Director, Representative Executive Officer, President & CEO

It’s now just over a year since your appointment as CEO. Looking back on your efforts over the past year, what kinds of results have you achieved and what were the reactions?
Conversely, please tell us about challenges you foresee going forward and any new observations.

My first year as CEO was a challenging one. We suffered short-term declines in several divisions in the Information Technology business, for example. But the Life Care business trended favorably and we achieved record sales and profit levels, thanks to cost management, which we’ll get into later. It was also a year of organizational improvement and sowing seeds, to lead to growth in the medium to long term.

When I was appointed Representative Executive Officer, President & CEO in March 2022, I took a closer look at our social responsibilities and the value we offer. As a result, I decided that we need to focus on the following three business domains.

■Eye Health
As the demographic profile ages and people spend more time peering at the screens of their digital devices, visual acuity and eye health have emerged as social issues. HOYA is committed to supporting the vision of people around the world. We’re doing this by driving continuous technological innovation in existing products, such as eyeglass lenses, contact lenses, and intraocular lenses (IOLs) for cataract surgery, and by expanding our presence in the ophthalmological space through merger and acquisition (M&A).

■Medtech & Life Science
Another feature of the aging of modern societies is that demand is increasing for ways of extending healthy lifespan and providing low-impact medical care. By providing medical products such as medical endoscopes, artificial bones, minimally invasive surgical instruments, and chromatographic media, HOYA supports health and quality of life for people around the world.

■Information Technology
There’s no way to cut ourselves off from technology today. The internet, big data, generative AI, automation, and so on are everywhere. HOYA provides powerful backup for technological development by supplying glass substrates for hard disk drives, photomasks, mask blanks, camera lenses, and other precision optical products.

The HOYA Group has more than 10 independently operated divisions. In the past, these divisions did not cooperate with each other much. To encourage the development of new technologies and markets through development activities across divisions, HOYA established a series of virtual companies, organized around the three business domains I just outlined. Under this arrangement, we’re now advancing development of products that individual divisions could not create on their own, such as glass material for augmented-reality headsets. We’re also exploring new businesses through M&A. Previously, our M&A activities have been confined to the Life Care field, but we’re now expanding the scope to include information technology. However, unlike M&A in Life Care, where the framework for M&A is well established, in Information Technology it took longer than we expected to establish systems for exploring and analyzing opportunities and making deals. We’re now working on effective solutions for these issues so we can build a business portfolio capable of long-term growth.

The Life Care business is flourishing overall, but some products in the Information Technology business are affected by inventory adjustments in the supply chain. What’s the secret to providing firm support for profitability in such an environment?

Our Information Technology business is affected by a number of challenges. The trend toward working and studying at home has hindered large-scale investment in technology, while supply chains, which had swollen as a result of business continuity plans (BCPs), are in the process of inventory rightsizing. In fiscal 2022, these trends negatively impacted sales of some products, mainly glass substrates for hard disk drives and blanks for semiconductor fabrication. This mood of uncertainty is continuing in the current fiscal year (ending March 31, 2024).

So, given these circumstances, supporting high profitability in the Information Technology business will require nimble cost management based on two principles that flow from HOYA’s roots: all aspects of business must be measured in numbers, and the most important of those numbers is profitability. For example, in the third quarter of fiscal 2022 (October 1 to December 31, 2022: Q3 fiscal 2022), profit from sales of glass substrates for hard disk drives was almost 70% lower than in the same period of the previous fiscal year (YoY). In an ordinary company, such a plunge in revenue could easily result in negative earnings. But in HOYA’s case, we were able to minimize the drop in profitability by shutting down operations completely at multiple plants and slashing costs to the bone to the fullest extent possible. There isn’t one “magic-wand” solution for all problems. Instead, it’s important to stay firmly committed to protecting earnings, sense shifts in the wind early, and move immediately into cost-cutting mode.

Tell us about your approach to returning value to shareholders, including through share buybacks.
Also, do you have a message about key policies going forward and matters you want people to focus on most?

In terms of cash allocation, we’re prioritizing investment and M&A for medium- to long-term growth, as I mentioned earlier. In fact, we’re in the process of compiling the long list of candidate companies and assets for M&A in the fields of ophthalmology and semiconductor fabrication, where we foresee secular growth.

As for return to shareholders, our policy is unchanged. In principle, we return 100% of excess cash to shareholders in the form of share buybacks and cash dividends. In fiscal 2022 we made no major investments, so we were able to return a total of over 190 billion yen to shareholders?our highest figure ever, and a level that exceeded our free cash flow. We are planning M&A activities in the near future, however, so we are holding onto over 400 billion yen in cash and deposits for that purpose.

In fiscal 2023, we expect the Life Care business to continue its brisk performance while the Information Technology business persists in an adjustment phase. Accordingly, we will continue to focus on flexible and nimble cost management.

Finally, we aim to further bolster corporate value by grappling with environmental, social, and governance (ESG) materialities*. We are moving forward with solutions to social issues in three fields: Eye Health, Medtech & Life Science, and Information Technology. Also, HOYA is boosting employee engagement and slashing emissions of greenhouse gases (particularly CO2). I ask for everyone’s continued support in this endeavor.

* For details on measures related to ESG materialities, please refer to the message from the CSO, Tomoko Nakagawa.