On November 6, 2019 Sysmex reported (Press release, Sysmex, NOV 6, 2019, View Source [SID1234550554])
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2. Dividend
3. Financial Forecast for the Year Ending March 31, 2020
4. Other Information
(1) Changes in significant consolidated subsidiaries (which resulted in changes in scope of consolidation): No
(2) Changes in accounting policies and accounting estimates 1) Changes in accounting policies required by IFRS: Yes 2) Other changes in accounting policies: No 3) Changes in accounting estimates: No
(3) Number of outstanding stock (common stock)
1) Number of outstanding stock at the end of each fiscal period (including treasury stock): 209,193,432 shares as of Sep. 30, 2019; 209,154,432 shares as of Mar. 31, 2019 2) Number of treasury stock at the end of each fiscal period: 446,444 shares as of Sep. 30, 2019; 446,168 shares as of Mar. 31, 2019 3) Average number of outstanding stock for each period (cumulative): 208,731,410 shares for the three months ended Sep. 30, 2019 208,580,388 shares for the three months ended Sep. 30, 2018 Note: Quarterly summaries of financial results are excluded from quarterly reviews. * Explanation regarding the appropriate use of financial forecast and other information
1. The forecasts and future projections contained herein have been prepared on the basis of rational decisions given the information available as of the date of announcement of this document. These forecasts do not represent a commitment by the Company, and actual performance may differ substantially from forecasts for a variety of reasons. Please refer to "3) Consolidated financial forecast" within "1. Qualitative information on quarterly financial results" on page 4 of the attachment to this document for cautionary statements concerning the conditions and performance forecasts that serve as the basis for these forecasts. 2. Supplementary financial materials (in Japanese and English) will be posted on the Sysmex website on Wednesday, November 6, 2019. －
1 － Content of Supplementary Materials 1. Qualitative information on quarterly financial results 2 1) Operating performance analysis 2 2) Financial conditions analysis 4 3) Consolidated financial forecast 4 2. Condensed quarterly consolidated financial statements and notes 5 1) Condensed quarterly consolidated statement of financial position 5
2) Condensed quarterly consolidated statement of income 7 3) Condensed quarterly consolidated statement of other comprehensive income 8 4) Condensed quarterly consolidated statement of changes in equity 9 5) Condensed quarterly consolidated statement of cash flows 10 6) Notes to the condensed quarterly consolidated financial statements 11 1. Notes related to the going concern assumption 11
2. Changes in accounting policies 11 3. Segment information 11 － 2 －
1. Qualitative information on quarterly financial results 1) Operating performance analysis Future-related information contained in the text below is based on the judgement as of the end of the fiscal period under review. During the first six months of the fiscal year ending March 31, 2020, the Japanese economy was affected in the manufacturing sector by worsening earnings due to trade friction and other uncertainties in the international situation, and yen appreciation, as well as a downturn in business confidence. However, the employment and income environments continued their modest recovery, and corporate investment remained firm as companies upgraded obsolete equipment and made streamlining and labor-saving investments against the backdrop of a labor shortage. Overseas, the economic outlook was characterized by a growing sense of caution, due to prolonged US–China trade friction, the United Kingdom’s exit from the European Union and rising geopolitical tension in the Middle East. On the healthcare front, in Japan the medical and healthcare field faces growing demand due to an aging society and increasingly diverse health and medical needs. The Japanese government is including the medical and healthcare industry in its growth strategies, which is expected to continue invigorating healthcare-related industries going forward. Looking overseas, the populations of developed countries are aging, while economic growth in emerging markets is causing healthcare demand to increase and prompting higher levels of healthcare quality and service enhancements. These trends are promoting efficient healthcare, with structural changes brought about by artificial intelligence, information and communications technology, and other breaking technologies. Against this backdrop, Sysmex obtained Japanese manufacturing and marketing approval for the OncoBEAM1 RAS CRC Kit, an RAS gene2 mutation testing kit. This product is the first in vitro diagnostic reagent in Japan to be used for RAS gene mutation testing for colorectal cancer using liquid biopsy. Minimally invasive and simpler than conventional physical biopsies of tumor tissue, the new testing method provides detection results on a par with the use of tumor tissue. As a result, this testing method reduces the physical and mental burden on patients, expands testing opportunities, and contributes to the early-stage determination of treatment methods. In addition, Sysmex launched its PS-10 sample preparation system in the North American market in August 2019. This system is for the clinical flow cytometry (FCM) testing market, which uses flow cytometry to perform detailed analyses of leukemia and malignant lymphoma diagnoses. By automating complicated sample preparation work for clinical laboratories, the PS-10 results in providing workflows which are more efficient and aids in standardizing clinical flow cytometry testing. In preparation for a global rollout, we will obtain necessary regulatory approval for flow cytometers as analyzers in various countries around the world. Since 2013, Sysmex and Tasuku Honjo, a general and distinguished professor at the Kyoto University Institute for Advanced Studies, have been conducting joint R&D on a fully automated measurement method for soluble immune checkpoint molecules (sPD-1, sPD-L1 and sCTLA-4) using the HI-1000, an automated, highly sensitive immunoassay system for research applications. In September 2019, Sysmex began providing assay services for research using this measurement method. The measurement method can be used in cancer immunotherapy and as a new method for diagnosing autoimmune diseases, and has the potential to help realize personalized medicine. Going forward, we will promote R&D with a view toward commercialization, contributing to advances in healthcare.
1 OncoBEAM: The name of Sysmex’s technology to detect minute gene mutations circulating in the blood with a high degree of sensitivity using BEAMing technology, which was developed at Johns Hopkins University.
2 RAS gene: As the likelihood is high that patients with RAS gene (KRAS/NRAS gene) mutations will not benefit (prolongation of life, tumor reduction) from the administration of anti-EGFR drugs, companion diagnostics may be performed to treat the gene mutation first. In Japan, instrument sales increased, mainly in the hematology and life science fields. As a result, sales in Japan rose 8.4% year on year, to ¥22,691 million. In overseas markets, reagent sales were down, chiefly in the hemostasis field, but reagent sales rose, centered on the hematology, urinalysis and immunochemistry fields. Consequently, overseas sales for the Sysmex Group rose 4.4% year on year, to ¥120,298 million. The overseas sales ratio fell 0.5 percentage point, to 84.1%. As a result, during the first six months of the fiscal year ending March 31, 2020, the Group recorded consolidated net sales of ¥142,990 million, up 5.0% year on year. Operating profit fell 2.5%, to ¥27,803 million; profit before tax decreased 5.1%, to ¥25,075 million; and profit attributable to owners of the parent fell 9.7%, to ¥17,593 million. Performance by segment
(1) Japan In Japan, sales increased 11.3% year on year, to ¥24,800 million, benefiting from such factors as higher instrument sales, principally in the hematology field. On the profit front, higher sales pushed up gross profit, but segment profit (operating profit) rose 2.1%, to ¥17,907 million, owing to higher SG&A and R&D expenses.
(2) Americas Instrument sales were down, mainly in the hemostasis field, but sales of reagents and maintenance services grew in the hematology field, pushing up sales 3.5% year on year, to ¥30,264 million. On the profit front, increased sales boosted gross profit. Nevertheless, segment profit (operating profit) declined 37.6% year on year, to ¥951 million, as a result of rising SG&A expenses.
(3) EMEA Sales in the EMEA region expanded 3.1% year on year, to ¥38,146 million, helped by higher reagent sales, mainly in the hematology and urinalysis fields. On the profit front, higher sales and a decrease in SG&A expenses led to higher gross profit and pushed segment profit (operating profit) up 21.7% year on year, to ¥3,812 million.
(4) China In China, reagent sales decreased, mainly in the hemostasis field, and instrument sales fell in the hematology field. However, instrument sales in the hemostasis field grew, as did reagent sales in the hematology field. As a result, sales increased 3.3% year on year, to ¥37,370 million. On the profit front, SG&A expenses decreased, but a worsening cost of sales ratio caused gross profit to decline. Consequently, segment profit (operating profit) dropped 25.2%, to ¥4,146 million. － 4 －
(5) Asia Pacific Instrument sales were down, mainly in the hemostasis and hematology fields, but reagent sales in the hematology field increased, leading to an 8.1% year on year rise in sales in the Asia Pacific region, to ¥12,408 million. On the profit front, despite worsening cost of sales ratio and higher SG&A expenses, higher sales led to a rise in gross profit and pushed segment profit (operating profit) up 10.0% year on year, to ¥1,610 million. 2)
Financial conditions analysis
(1) Financial conditions As of September 30, 2019, total assets amounted to ¥364,028 million, up ¥17,252 million from March 31, 2019. As principal factors, trade and other receivables (current assets) decreased ¥6,943 million, and other short-term financial assets fell ¥6,892 million, but property, plant and equipment increased ¥19,854 million, cash and cash equivalents expanded ¥5,923 million, and inventories grew ¥4,459 million. Meanwhile, total liabilities as of September 30, 2019, were ¥95,970 million, up ¥14,377 from their level on March 31, 2019. Principal factors included a ¥3,054 million decrease in trade and other payables and a ¥1,863 decline in accrued bonuses, but lease liabilities (current) rose ¥5,422 million, and lease liabilities (non-current) increased ¥16,826 million. Total equity came to ¥268,057 million, up ¥2,875 million from March 31, 2019. Among principal reasons, retained earnings rose ¥10,080 million, while other components of equity declined ¥7,217 million. Equity attributable to owners of the parent to total assets fell 2.8 percentage points, from 76.3% on March 31, 2019 to 73.5% on September 30, 2019.
(2) Cash flows As of September 30, 2019, cash and cash equivalents amounted to ¥56,985 million, up ¥5,923 million from March 31, 2019. Cash flows from various activities during the first six months of the fiscal year are described in more detail below. (Cash flows from operating activities) Net cash provided by operating activities was ¥26,908 million, up ¥7,481 million from the first six months of the previous fiscal year. As principal factors, profit before tax provided ¥25,075 million (¥1,335 million less than in the corresponding period of the preceding year), depreciation and amortization provided ¥11,510 million (¥3,889 million more than in the corresponding period of the preceding year), an increase in inventories used ¥5,851 million (up ¥3,980 million), a decrease in trade payables used ¥1,068 million (decrease of ¥1,851 million), and a decrease in consumption taxes receivable and others provided ¥2,058 million (increased ¥1,802 million). (Cash flows from investing activities) Net cash used in investing activities was ¥9,057 million (decrease of ¥13,671 million).
Among major factors, purchase of property, plant and equipment used ¥7,458 million (decrease of ¥1,967 million), purchase of intangible assets used ¥6,113 million (up ¥2,050 million), purchase of investments in equity instruments used ¥1,508 million (up ¥500 million), and proceeds from withdrawal of time deposits provided ¥7,221 million (up ¥7,221 million). (Cash flows from financing activities) Net cash used in financing activities was ¥10,195 million (up ¥2,942 million). This was mainly due to dividends paid of ¥7,513 million (up ¥6 million), and repayment of lease liabilities, which used ¥2,801 million. 3) Consolidated financial forecast For the Company’s consolidated financial forecast for the full fiscal year, please refer to the Announcement Regarding Differences between Actual and Forecast Figures for the Six Months Ended September 30, 2019, and Revision of Full-Year Financial Forecasts, announced today (November 6, 2019).the First Six Months of the Fiscal Year Ending March 31, 2020