Earnings Volatility Due to Concentration in and Delays to Large Projects

「The bulk sale of medical equipment associated with hospital construction, relocation, restructuring and integration, which is one of our distinguishing features, involves substantial amounts and can also result in sales being concentrated in particular periods, causing monthly sales to be uneven. Sales also tend to be concentrated in March and September each year due to the fiscal years of customer hospitals and other institutions. As a result, the quarterly performance of the Group does not necessarily track its full-year performance.」

「During the interim consolidated accounting period, there were no new occurrences of major risks that management recognizes could materially affect the financial position, operating results or cash flows of the consolidated companies among the matters concerning business conditions and financial matters described in this interim report, nor any material changes to the “Business and Other Risks” described in the annual securities report for the previous fiscal year.」

「The bulk sale of medical equipment associated with hospital construction, relocation, restructuring and integration, which is one of our distinguishing features, involves substantial amounts and can also result in sales being concentrated in particular periods, causing monthly sales to be uneven.」

「During the cumulative second quarter of the current consolidated fiscal year, there were no material changes in the occurrence of major risks that management recognizes could materially affect the financial position, operating performance or cash flows of the consolidated companies, among the matters concerning the business and accounting conditions described in the quarterly report, or in the business and other risks described in the annual securities report for the previous fiscal year.」

「During the cumulative first quarter of the current consolidated fiscal year, there were no material changes in the occurrence of major risks that management recognizes could materially affect the financial position, operating performance or cash flows of the consolidated companies, among the matters concerning the business and accounting conditions described in the quarterly report, or in the business and other risks described in the annual securities report for the previous fiscal year.」

「In the previous fiscal year, the company recorded multiple projects worth ¥2 billion or more, including projects strategically secured. In contrast, only one project worth ¥2 billion or more was recorded in the current fiscal year, resulting in lower revenue and, consequently, lower gross profit.」

「In the cumulative third quarter of the previous consolidated fiscal year, the company recorded multiple projects worth ¥2 billion or more, including projects strategically secured. In contrast, although sales activities remained strong and generally progressed as planned in the cumulative third quarter of the current consolidated fiscal year, no projects worth ¥2 billion or more were recorded, resulting in a significant year-on-year decline in revenue.」

「In the second-quarter cumulative period of the previous consolidated fiscal year, delivery deadlines, including for strategically won large projects, were concentrated in December 2021. In contrast, in the second-quarter cumulative period of the current consolidated fiscal year, the number of large bulk medical equipment sales projects will increase from April 2023 onward, the following third quarter. Although business activity remained strong, sales were substantially lower year on year.」

「Whereas delivery deadlines in the first-quarter cumulative period of the previous year, including for strategically won large projects, were concentrated in December, full-year business activity in the fiscal year under review has not declined. However, because delivery deadlines for bulk medical equipment sales projects will increase from March 2023 onward, sales were substantially lower than in the same period of the previous year.」

「Although sales were heavily weighted toward the first-quarter cumulative period of the consolidated fiscal year, sales for the third-quarter cumulative period were secured broadly in line with plan, resulting in higher sales than in the same period of the previous year.」

「Although sales were heavily weighted toward the first-quarter cumulative period of the consolidated fiscal year, sales for the second-quarter cumulative period were secured broadly in line with plan, resulting in higher sales than in the same period of the previous year. Operating profit decreased by ¥56.506 million year on year because the Company won several large projects exceeding ¥2 billion with slightly lower gross margins this fiscal year, which reduced the overall profit margin.」

「In the fiscal year under review, sales tend to be weighted toward the first half because delivery deadlines for bulk medical equipment sales projects are concentrated in the first half. This concentration was particularly pronounced in the first quarter, and additional orders for ongoing projects and the bringing forward of projects initially expected from the second quarter onward also contributed to substantial year-on-year increases in sales and profit.」

「The bulk sale of medical equipment associated with hospital construction, relocation, restructuring and integration, which is one of our distinguishing features, can result in sales being concentrated in months when large projects are recorded because the amounts are substantial and sales are concentrated. Sales also tend to be concentrated in March and September each year due to the fiscal years of customer hospitals and other institutions.」

「The core Medical Total Solution business has an earnings structure that is particularly heavily weighted toward the first half in the current period. Accordingly, in the third and fourth quarters of the consolidated fiscal year in the second half, selling, general and administrative expenses, including personnel expenses, place a heavy burden relative to revenue, and profits tend to be negative.」

「The main reason for the current period's earnings structure being weighted toward the first half is that the timing of revenue recognition for most major projects is concentrated in the cumulative second quarter of the consolidated fiscal year.」

「At present, the company believes that the impact of COVID-19 on current-period operating performance in this business is minor. The recent order environment has not changed significantly, and project progress has generally been in line with expectations. Although major projects, including bulk medical device sales projects, remain in a gap period, orders for replacement projects and spot new projects have progressed smoothly. In addition, efforts to secure earnings, including stronger in-depth sales activities for ongoing projects, have produced certain results, such as securing gross profit margins above initial expectations.」

「At present, the company believes that the impact of COVID-19 on current-period operating performance in this business is minor. The order environment has not changed significantly, and the progress of each project has generally been in line with expectations. However, particularly in the current period, few projects are scheduled to generate revenue in the third quarter, while revenue recognition for major projects, including bulk medical device sales projects, is heavily concentrated in the fourth quarter. As a result, the company recorded an operating loss for the cumulative third quarter.」

「During the cumulative first quarter of the current consolidated fiscal year, there were no newly emerging business or other risks. There were also no material changes to the business and other risks described in the annual securities report for the previous fiscal year.」

「If delays, changes or cancellations occur in the schedules of major projects, the number and order value of major projects in each fiscal year may fluctuate, potentially affecting operating performance.」