Yukio Saeki (hereinafter, Saeki): I am Saeki, a corporate director at TOKYO ELECTRON DEVICE LIMITED, and I will be presenting the financial results for the fiscal year ended March 31, 2024.

First, this is a summary of the financial results for the fiscal year ended March 31, 2024. Compared to the same period of the previous year, net sales increased by 1.1%, ordinary income increased by 11.6%, and net income attributable to owners of parent increased by 13.8%, achieving higher sales and income. All of them are record highs, and we have set a new record for our financial results.

Besides achieving our VISION 2025 targets for the second consecutive year, we also achieved the forecast ordinary income ratio and ROE for the fiscal year ended March 31, 2025—which was updated last year—one year ahead of schedule.

As mentioned at the start, we achieved higher sales and income compared to the previous fiscal year. Although we fell slightly short of the forecast net sales for the fiscal year ended March 31, 2024, we achieved the forecasts for income. Net sales amounted to 242,888 million yen , gross profit was 37,168 million yen, ordinary income was 13,922 million yen, and net income was 9,986 million yen.

As stated on the slide, net sales increased slightly year on year. Meanwhile, gross profit is larger when compared to the increase in net sales. This was due to effects from the improvement in profit ratio through product mix and such.

Regarding the change in net sales, Against the net sales of 240.4 billion yen in the fiscal year ended March 31, 2023, there was an increase of 3.7 billion yen in the Computer Networks (CN) Business, and a slight decrease in both the distribution area of the Electronic Components (EC) Business and the Private Brand (PB) Business. As a result, net sales amounted to 242.9 billion yen in the fiscal year ended March 31, 2024.

As for sales and income by segment, in the CN Business, we achieved net sales of 32,978 million yen and a segment income of 3,463 million yen. Besides good performance of stock businesses—including security-related and maintenance and monitoring services—and network-related products, income ratio also improved due to handling of foreign exchange rates, resulting in higher sales and income.

In the EC Business, we achieved net sales of 209,909 million yen and a segment income of 10,459 million yen. Despite expansion of commercial rights, sales decreased due to stagnation of Chinese market and the shift to direct manufacturer-to-consumer sales by semiconductor manufacturers. As a result, net sales decreased slightly, and profit remained at the same level.

As for segment information, regarding the CN business, when looking at product categories, there was steady performance in categories such as security-related products for the cloud and maintenance services for network and storage equipment. The sales component ratios increased year on year.

As for sales component ratios by field, sales to enterprises, data centers, and cloud business operators were strong, and the position of sales to enterprises is growing.

When looking at product categories in the EC Business, the sales component ratio of processors and memory ICs increased substantially due to expansion of commercial rights. Meanwhile, the ratio for analog ICs decreased due to the shift to direct manufacturer-to-consumer sales. As for boards, electronic components, etc., sales also decreased for products related to base stations and semiconductor production equipment.

Looking at the sales component ratios by application, the ratio for industrial equipment decreased substantially due to lower demand for industrial equipment and decreased sales of analog ICs due to the shift to direct manufacturer-to-consumer sales. Meanwhile, the position of automotive equipment applications is growing due to steady demand as well as greater sales of processors and memory ICs due to expansion of commercial rights and such.

As for consolidated overseas subsidiaries, net sales denominated in yen amounted to 51,442 million yen, a decrease of 916 million yen compared to FY2023.

Net sales denominated in foreign currencies amount to 355 million dollars, with a rate of change that is significantly larger compared to net sales in yen. This is due to the average exchange rate being around 9 yen weaker in FY2024 compared to FY2023. As a result, the decrease in net sales was slightly mitigated when denominated in yen as compared to when denominated in foreign currencies.

Looking at the PB Business, the net sales of 14,251 million yen was a slight decrease compared to the previous fiscal year.

For Tokyo Electron Device, net sales increased due to contributions from the sales of wafer inspection systems as well as steady sales from design and manufacturing services for medical equipment.

Meanwhile, Tokyo Electron Device Nagasaki saw slow sales for semiconductor production equipment, and sales of inspection systems were also weak for FAST, leading to a decrease in overall net sales.

Regarding our balance sheet, total assets stood at 162,567 million yen as of March 31, 2024, an increase of approximately 19,000 million yen compared to the end of the previous fiscal year. The main reasons for this change were an increase in inventories as well as an increase in non-current assets arising from an increase in goodwill, intangible non-current assets, and such due to business acquisition.

For liabilities and net assets, interest bearing liabilities increased due to increased inventories, and net assets increased due an increase in net income.

This is the statement of cash flows. There was positive operating cash flow of 301 million yen. Meanwhile, there was negative investment cash flow of 2,695 million yen due to reasons including expenditure for business acquisitions and the acquisition of non-current assets and such.

Borrowings were increased to cover the shortfall. This resulted in a positive financial cash flow of 2,529 million yen and a balance of cash standing at 6,757 million yen at the end of the fiscal year.

This slide shows the changes in orders received. As shown, orders received in the fourth quarter amounted to 49,430 million yen. In the CN Business, the IT investment situation was steady, and the business continues to receive large orders of around 10,000 million yen.

Regarding the EC Business, starting from the third quarter of FY2023, there was a decrease in long-terms orders that had previously been received, and the amount has dropped slightly. However, when looking at both the CN and EC Businesses, orders received have continued to be around 50,000 million yen each quarter for slightly more than a year. Therefore, it can be seen from this slide that this is not a monotonous state of decrease.

Atsushi Tokushige (hereinafter, Tokushige): I am Tokushige. Thank you for taking time from your busy schedules to attend Tokyo Electron Device’s financial briefing today. I will be presenting the forecast of our financial results as well as our new medium-term management plan, VISION 2030.

For the fiscal year ending March 31, 2025, we expect to exceed the targets set in VISION 2025 for the third consecutive year, but the financial results will fall short of FY2024. The main background is that, as conveyed in the interim financial briefing for FY2024, there was a delay of roughly half a year before entering the adjustment phase, which we had assumed would start from the first half of FY2024.

Therefore, more time than expected is required for us to consume inventories in the supply chain. In particular, the prolongation of stagnant market conditions in China widely affects the industrial equipment sector, which is the core of our customers. This becomes a factor behind lower net sales.

Furthermore, there is the impact of lower net sales arising from reasons such as a shift to direct manufacturer-to-consumer sales by some semiconductor manufacturers. We expect the biggest impact to appear in the first half of FY2025. At the same time, we expect contributions to our financial results from new customer commercial rights to reach full scale in the second half of FY2025.

From the above factors, our forecast for this fiscal year is that we will bottom out in the first half of FY2025, and shift to a recovery trend in the fourth quarter.

This slide consolidates the explanation just given in terms of time. Regarding the assumptions of our business plan, full-scale adjustment started in the second half of FY2024, a delay of half a year from our initial assumptions. The business environment related to semiconductors and industrial equipment is sluggish, and we expect this situation to continue until the first half of FY2025.

Furthermore, since the second half of FY2024, some manufacturers shifted full-scale to direct manufacturer-to-consumer sales. The downward pressure on financial results from this shift is expected to have the biggest impact in the first half of FY2025.

The acquisition of new customer commercial rights in FY2024 significantly contributed to improvement of our financial results. Another acquisition of large commercial rights is also expected to contribute to our financial results from the second half of FY2025.

For the CN Business, the market is trending steadily centered on security-related products in particular. We expect higher net sales related to security to contribute in terms of income and supplement decreases in sales of certain IT equipment.

As for exchange rate trends, we expect the yen to trend weaker in FY2025 compared to FY2024.

This is the forecast of our financial results for this fiscal year based on the aforementioned assumptions. Net sales are expected to decrease by approximately 12,900 million yen year-on-year to 230,000 million yen. By segment, the CN Business is expected to decrease by 1% year-on-year to approximately 32,700 million yen, and the EC Business is expected to decrease by 6% year-on-year to approximately 197,400 million yen.

We plan for ordinary income to be 12,700 million yen, a year-on-year decrease of approximately 1,220 million yen, and net income to be 8,700 million yen, a year-on-year decrease of approximately 1,290 million yen.

This slide shows the changes in net sales for each business. We expect lower sales by approximately 0.3 billion yen for the CN Business, and lower sales by approximately 14.5 billion yen for distribution in the EC Business. Meanwhile, the PB Business will see higher sales by approximately 1.9 billion yen.

We will continue to promote promising businesses that accelerate profit growth in each segment with a focus on strengthening manufacturer functions and service businesses.

In the CN Business, we will start handling new products and expand our stock business. In the EC Business, we plan to expand the handling of products, promote the solutions business, and strengthen the cloud AI and edge AI business. In particular, there are many inquiries about Azure OpenAI Service and growing interest in Microsoft Azure. We will provide solutions in combination with other services promoting the use of AI.

In the PB Business, we will strengthen the wafer inspection system business, strengthen Tokyo Electron Device Nagasaki’s manufacturing line, and strengthen vision automation systems. We will actively promote the items stated here with a view of medium- to long-term growth.

We are focusing on the wafer inspection system business as one of the promising businesses, and we see FY2025 as a milestone toward future growth. As announced some time ago, we acquired the silicon wafer inspection system business from Nippon Electro-Sensory Devices Corporation in FY2024. This fiscal year is an important year in which we embark on full-scale delivery of systems under the organization after completing business integration.

In the compound semiconductor wafer inspection system business that we have been commercializing on our own under the RAYSENS brand, we are expanding sales to the Asian region—for which high growth can be expected—and developing products that can handle silicon carbide (SiC) and gallium nitride (GaN), and making steady progress.

In FY2026 and beyond, we will further strengthen product development and marketing to expand the business.

Regarding dividends, the figures shown for dividends per share reflect the share split conducted at a ratio of three shares for one share on October 1, 2023.

We set 40% as a gauge for our dividend payout ratio to balance stable and continuous profit returns with research and development and capital investments.

Due to our good financial results for FY2024, the year-end dividend was 74 yen, an increase of 4 yen from the previous forecast of 70 yen. Together with the interim dividend of 61 yen, the full-year dividend was 135 yen, setting a new record high for the fourth consecutive year.

For FY2025, we plan for an interim dividend of 52 yen and a year-end dividend of 65 yen for a full-year dividend of 117 yen, with the dividend payout ratio at 40.4%.

These are our initiatives to strengthen Group management. To strengthen corporate governance in an ongoing manner, we introduced a Corporate Officer system and created the new title of Chief Executive Officer (CEO) starting from June 2024.

Through the introduction of this new system, we will strive to improve the Group’s corporate value by further strengthening the Board of Directors’ oversight function, making swift decisions, and agilely executing business.

We will also be merging our Yokohama Headquarters and Shinjuku Office and relocating our headquarters to Shibuya Sakura Stage in October 2024. We will improve its function as a communication center that serves to enhance quality internal and external communications, accelerate the fusion of our CN, EC, and PB Businesses, and seek greater synergy.

From here, I will be presenting an overview of the medium-term management plan VISION 2030. For details, please refer to the materials for the new medium-term management plan VISION 2030 announced recently.

The mission of VISION 2030 is to address social issues through leading-edge technology, primarily semiconductors and IT, and to contribute to the sustainable development of society by offering solutions to those issues that have value beyond expectations.

Our Group will keep addressing social issues that continue to arise from a viewpoint developed as a technology trading company. By offering solutions that have value beyond the expectations of customers, we will promote the social implementation of leading-edge technologies and contribute to the realization of the Super Smart Society.

The new vision designated in VISION 2030 is to be a company that solves latent social issues with the capabilities of a manufacturer and a technology trading company.

Based on the vision in the current medium-term management plan VISION 2025, which is to become a manufacturer with technology trading company function, we have focused on strengthening our capabilities as a manufacturer that solves issues.

In the next five years under the new medium-term management plan VISION 2030, we expect there will be even more issues—such as those represented by AI—that involve all kinds of markets and can only be addressed by fully utilizing both functions as a manufacturer and as a technology trading company.

Our Group updated the vision to let our stakeholders widely recognize that we are solving such issues by pursuing both functions as a manufacturer and as a technology trading company.

Please note that our strong determination to achieve sustainable profitability improvement by strengthening functions as a manufacturer remains unchanged.

Regarding our companywide policy for VISION 2030, the first policy is to solve latent social issues (customer issues) with our capabilities as a manufacturer and a technology trading company.

Specifically, all business units will work on the development of in-house products and services and create Group synergies to propose solutions to problems with value that exceeds expectations.

As a technology trading company, we will acquire new distributor agreements and customer commercial rights to strengthen marketing to address latent issues. We will also actively utilize M&A to quickly establish a business foundation that enables problem-solving.

The second policy is to promote actions that will contribute to sustainable profit growth.

Specifically, we will actively invest in the development of in-house products and services that allow differentiation. We will also promote the transition from a flow-type to a stock-type or recuring service business. In addition, we will undertake research and development, human resources recruitment, employee training, and such as investment to increase medium- to long-term profit.

This slide consolidates our management policy for each business. We will follow these policies to promote initiatives toward improving profitability.

This is the basic policy of our financial model. We will aim for sustainable profit growth through profit and revenue growth, by having the rate of profit growth outpace the rate of revenue growth. There is no change in our thinking that supporting sustainable growth through increasing profits and profit and revenue growth will lead to shareholder returns. Going forward, we will continue to pursue profit growth.

VISION 2030’s management indicators are net sales between 300 to 350 billion yen, an ordinary income ratio of at least 8%, and ROE of at least 20%.

As for the ratio of each business, the CN Business will make up 15% of total sales with a target ordinary income ratio of 12%. The EC Business will make up 75% of total sales with a target ordinary income ratio of 7%, and the PB Business will make up 10% of total sales with a target ordinary income ratio of 10%.

Regarding the review and outlook of the medium-term management plan, VISION 2020 was a six-year plan that started in FY2016. We built a business that was an engine for growth, with the goals of achieving stable profit growth through our core businesses—the EC and CN Businesses—and establishing high value-added businesses utilizing the existing business foundation.

VISION 2025 is a four-year plan that started in FY2022 and ends in this fiscal year. The vision is to become a manufacturer with technology trading company functions, and we are promoting the launch of growth businesses by evolving our functions as a technology trading company and strengthening our functions as a manufacturer.

This will be followed by the new medium-term management plan VISION 2030, in which we will aim to accelerate profit growth using the results of our efforts so far and through new initiatives.

The key items of our capital policy are shown in this slide.

First, as investment for sustainable growth, we will undertake aggressive investment for technology development and business expansion. This includes M&A. Furthermore, we will also invest in internal and external digital transformation (DX) to strengthen competitiveness and actively invest in human resource development.

Regarding shareholder return, as long-term high returns due to profit growth, we will seek to achieve sustainable profit growth and improve enterprise value. We will also carry out shareholder returns according to financial results, and we will set 40% as the gauge for our dividend payout ratio.

As for financial soundness, as financial structure strengthening and appropriate financial leverage, we will seek to achieve an equity ratio of 40% or more, ROE of 20% or more, and maintain appropriate inventory levels.

The sustainability initiatives in VISION 2030 are shown in this slide. We will aim for the sustainable development of a more prosperous society and the enhancement of the Group’s corporate value. This concludes my presentation. Thank you.