The outlook for the global economy during the six months ended September 30, 2024 is uncertain due to the prolonged inflation, a slowdown in the Chinese economy, and Russia’s invasion of Ukraine. In the life sciences industry to which our group belongs, research budgets have been reduced due to the impact of high prices and persistently high interest rates, R&D activities have declined, and the market recovery has been delayed. Under these circumstances, in the Long-Term Management Plan 2026 for the six-year period ending March 31, 2026, and the Medium-Term Management Plan 2026 for the three-year period ending March 31, 2026, we have promoted the development of biotechnology-based biologics development technologies through Reagents / Instruments business and CDMO business and have promoted initiatives aimed at becoming a global platform provider responsible for the infrastructure of the life science industry. For the six months ended September 30, 2024, sales of Reagents, Instruments and Gene Therapy increased ¥19,785 million (up 3.4% year-on-year). Cost of sales increased to ¥7,313 million (up 26.7% year-on-year) due to a decrease in sales of test-related product which have relatively high profit margin, and changes in the sales mix, and other reasons. As a result, gross profit decreased to ¥12,445 million (down 6.7% year-on-year). Selling, general and administrative (SG&A) expenses were ¥12,028 million (up 0.8% year-on year), and operating profit was ¥417 million (down 70.4% year-on-year). As a result of the decrease in operating profit, ordinary profit was ¥549 million (down 65.6%), semi-annual net income before income taxes and minority interests was 427 million (down 73.1%), and semi-annual net income attributable to owners of the parent was ¥513 million (down 52.7%). From the first quarter of the current fiscal year, due to a review of management classification, net sales of products related to mRNA manufacturing (for research use), which were previously included in “Reagent,” have been added to “Gene Therapy.” As a result, net sales for the first quarter of the previous fiscal year has been reclassified as “Gene Therapy.”
Although net sales were lower than the previous financial forecast announced on May 10, 2024, operating income was higher than that.
In particular, we expect an operating loss in the third quarter due to the fact that the sales of the CDMO business are biased toward - 3 - the fourth quarter. However, with regard to the consolidated financial forecast for the full year ending March 31, 2025, we do not change the consolidated financial forecast announced on May 10, 2024, and expect an increase in both sales and profits compared with the previous fiscal year.
Our basic policy is to return profits to shareholders based on a comprehensive consideration of our operating results and financial position, and we consider the return of profits to shareholders to be an important management issue, while ensuring that we retain sufficient internal reserves in order to actively carry out research and development activities. Specifically, we plan to pay dividends of retained earnings to 35% of the expected net income in the consolidated financial statements without taking into consideration the extraordinary gains or losses. From the perspective of improving capital efficiency, we decided to pay a year-end dividend of ¥17.00 per share for the year ended March 31, 2024, as announced on May 10, 2024.
We will reduce the dividend from the previous fiscal year, but we would like to ask for the continued understanding and support of our shareholders.
November 2024
Koichi Nakao
President
