Summary of Consolidated Financial Results for the First Three Months of the Fiscal Year Ending March 31, 2021(PDF?433KB)

On August 5, 2020 Sysmex reported that (Press release, Sysmex, AUG 5, 2020, View Source [SID1234563232])

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1. Results for the First Three Months of the Fiscal Year Ending March 31, 2021

2. Dividend

3. Financial Forecast for the Year Ending March 31, 2021
Our consolidated financial forecast for the fiscal year ending March 31, 2021 is undetermined. Although we are currently investigating the impact of the global novel coronavirus (COVID-19) pandemic on customers’ capital expenditure and demand trends, rationally calculating a financial forecast is problematic at present. We will promptly disclose our financial forecast once calculation becomes possible.

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: No
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):
209,310,432 shares as of Jun. 30, 2020; 209,266,432 shares as of Mar. 31, 2020
2) Number of treasury stock at the end of each fiscal period:
446,708 shares as of Jun. 30, 2020; 446,680 shares as of Mar. 31, 2020
3) Average number of outstanding stock for each period (cumulative):
208,839,381 shares for the three months ended Jun. 30, 2020
208,723,462 shares for the three months ended Jun. 30, 2019

Note: Quarterly summaries of financial results are excluded from quarterly reviews.
* Explanation regarding the appropriate use of financial forecast and other information
1. Our consolidated financial forecast for the fiscal year ending March 31, 2021 is undetermined.
Although we are currently investigating the impact of the global novel coronavirus (COVID-19) pandemic on customers’ capital expenditure and demand trends, rationally calculating a financial forecast is problematic at present. We will promptly disclose our financial forecast once calculation becomes possible. For details, please refer to "3) Consolidated financial forecast" within "1. Qualitative information on quarterly financial results" on page 5 of the attachment to this
document.

3. Supplementary financial materials (in Japanese and English) will be posted on the Sysmex websit on Wednesday, August 5, 2020.

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 three months of the fiscal year ending March 31, 2021, in Japan concerns about the spread and prolonged impact of the COVID-19 pandemic are leading to a growing sense of uncertainty about the future, including rapid economic deceleration. Overseas, although economic activity has resumed in China, the COVID-19 pandemic continues to spread. The scale of the global economy is expected to shrink as a result.

On the healthcare front, Japan’s medical and healthcare field is expected to remain robust due to an aging society and increasingly diverse health and medical needs. 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. However, with the number of COVID-19 cases rising globally, considerations about healthcare systems and public health capable of responding to pandemics like we are currently experiencing are exerting pressure and are likely to cause a major transformation of the healthcare environment itself. Sysmex is also likely to be affected by slowing demand in the short term, with healthcare institutions conducting fewer tests as individual countries introduce measures to prevent
non-essential and non-urgent travel.

Under these conditions, Sysmex launched the CN-6500/CN-3500 automated blood coagulation analyzers in the Japanese market to enhance the workflow efficiency of hemostasis testing. These products offer the same high levels of productivity, reliability, operability, and service as the CN6000/CN-3000 automated blood coagulation analyzers. In addition, they incorporate into a single unit the chemiluminescence enzyme immunoassay (CLEIA) measurement principles used in our HISCL-5000/HISCL-800 automated immunoassay systems. As a result, our new blood
coagulation analyzers allow for flexible measurements in response to a broad range of test orders in the fields of thrombosis and hemostasis, such as molecular markers for blood coagulation measured with CLEIA, in addition to the blood coagulation and platelet aggregation parameters that can be measured by CN-6000/CN-3000 automated blood coagulation analyzers, realizing an efficient testing workflow in a way that caters to needs in healthcare settings. Going forward, we will continue seeking to provide new value by promoting R&D on reagents related to hemostasis and
immunochemistry using CLEIA.

To help the city of Kobe prepare for an increase in infections by strengthening a PCR testing system for COVID-19, the City of Kobe, Sysmex, and SRL, Inc. (a subsidiary of Miraca Holdings Inc. [now H.U. Group Holdings, Inc.]) have configured and begun operating a new PCR testing system at the Sysmex BMA Laboratory, a clinical testing center in the Kobe Biomedical Innovation Cluster. In this initiative, Sysmex will take control of PCR tests. SRL will be in charge of supporting the creation of a testing system, collecting samples and reporting results. We plan to reinforce the PCR testin
implementation system, as necessary. Through this initiative, the three entities aim to reduce the physical and emotional burden of the COVID-19 threat on local residents.

Sysmex also established four antibody measurement technologies that enable detection of the circulating IgG antibody and IgM antibody. These antibodies react specifically to the nucleocapsid protein1 and spike protein2 in SARS-CoV-2, the virus that causes COVID-19. We have begun offering lab assay services using this testing technology for research into the past history of COVID-19 and research and consideration of the clinical significance of the SARS-CoV-2 defense function, as well as in a host of epidemiological studies. Furthermore, we have begun providing a lab assay service for
research on cytokines,3 which have been suggested as a useful indicator in monitoring the risk of increasing severity and treatment effects for SARS-CoV-2. Targeting research institutions, universities, medical institutions and pharmaceutical companies with this assay service, we will provide data that can be used to confirm testing methods suitable to such clinical applications as determining the risk of increasing severity and treatment effect, as well as data that can be used for vaccines, antiviral drugs and other drug discovery research. We aim to contribute to advances in research in amassing broad-ranging clinical evidence, including for epidemiological research, as well
as in drug discovery, to help in the diagnosis and treatment of COVID-19.

1 Nucleocapsid protein (N antigen):
A protein that constitutes the core structure of a virus, significantly affecting virus characteristics.
2 Spike protein (S antigen):
Protein that forms countless protrusions around the virus to bind with cell receptors and generate infection.
3 Cytokine:
This is a general name for proteins secreted by cells and used in intercellular communication.

In Japan, sales of reagents rose in the hematology field, but sales of instruments were down, particularly in the hematology field and in other fields related to laboratory information systems mainly due to the spread of the COVID-19 pandemic. As a result, sales in Japan fell 7.5% year on year, to ¥9,380 million.

Overseas, sales of instruments grew in the urinalysis and life science fields, while reagent sales dropped, centered on the hematology, urinalysis and immunochemistry fields mainly due to the spread of the COVID-19 pandemic. Consequently, overseas sales decreased 12.4% year on year, to ¥51,130 million. The overseas sales ratio fell 0.7 percentage point, to 84.5%.

SG&A expenses fell in all regions mainly due to activity restrictions due to the spread of the COVID-19 pandemic. SG&A expenses were down 8.6% year on year, to ¥18,928 million.

As a result, during the first three months of the fiscal year ending March 31, 2021, the Group recorded consolidated net sales of ¥60,511 million, down 11.7% year on year. Operating profit declined 38.3%, to ¥6,957 million; profit before tax decreased 32.9%, to ¥6,481 million; and profit attributable to owners of the parent fell 33.0%, to ¥4,487 million.

Performance by segment
(1) Japan
In Japan, sales of reagents increased in the hematology field. However, instrument sales declined in the hematology field and in other fields related to laboratory information systems mainly due to the spread of the COVID-19 pandemic. And reagent sales also declined in the immunochemistry field. As a result, segment sale were down 4.1% year on year, to ¥10,513 million.

On the profit front, segment profit (operating profit) fell 10.1%, to ¥6,194 million. The decrease was attributable to lower gross profit, stemming from lower sales and a deteriorating cost of sales ratio, despite lower SG&A and R&D expenses.

(2) Americas
In North America, instrument sales were up in the hemostasis field. However, sales in the region were down due to lower sales of instruments, reagents and maintenance services in the hematology field mainly due to the spread of the COVID-19 pandemic. In Central and South

America, reagent sales fell, mainly in the urinalysis field, but instrument and reagent sales in the hematology field rose, pushing up sales in the region. As a result, overall sales in the Americas were down 12.0% year on year, to ¥12,895 million.

On the profit front, the Americas generated a segment loss (operating loss) of ¥404 million (compared with segment profit of ¥449 million in the first three months of the preceding fiscal year). Profit was affected by lower gross profit, stemming from lower sales and deterioration in the cost of sales ratio, although SG&A expenses fell

(3) EMEA
Sales in the EMEA region declined 6.9% year on year, to ¥18,231 million. Instrument sales rose in the life science field and in other fields in relation to transport systems, but reagent sales were down in the hematology and urinalysis fields mainly due to the spread of the COVID-19 pandemic.

On the profit front, lower sales and deterioration in the cost of sales ratio caused gross profit to decline, while SG&A expenses fell. As a result, segment profit (operating profit) was ¥1,663 million, up 5.9% year on year.

(4) China
In China, sales fell 21.8% year on year, to ¥13,809 million. Instrument sales increased, mainly in the urinalysis and immunochemistry fields, but sales of instruments and reagents were down in the hematology field, as were sales of reagents in the urinalysis and immunochemistry fields mainly due to the spread of the COVID-19 pandemic.

On the profit front, segment profit (operating profit) dropped 84.4%, to ¥287 million as the result of lower gross profit due to falling sales and deterioration of the cost of sales ratio, despite lower SG&A expenses.

(5) Asia Pacific
Instrument sales were up in the hematology field, but regent sales decreased in the hematology and urinalysis fields mainly due to the spread of the COVID-19 pandemic. As a result, sales in the Asia Pacific region decreased 10.7% year on year, to ¥5,062 million.

On the profit front, SG&A expenses decreased, but falling gross profit due to lower sales and deterioration in the cost of sales ratio led to segment profit (operating profit) of ¥284 million, down 53.1% year on year.

2) Financial conditions analysis

(1) Financial conditions
As of June 30, 2020, total assets amounted to ¥368,826 million, down ¥20,465 million from March 31, 2020. As main factors, cash and cash equivalents were down ¥7,857 million, and trade and other receivables (current assets) fell ¥13,906 million, while inventories rose ¥5,128 million.

Meanwhile, total liabilities as of June 30, 2020 were ¥92,523 million, down ¥18,420 million. Principal decreases included trade and other payables, which were down ¥8,075 million; income taxes payable, down ¥3,339 million; accrued bonuses, down ¥2,971 million; and contract liabilities, down ¥2,087 million.

Total equity came to ¥276,302 million, down ¥2,044 million from March 31, 2020. Among principal reasons, retained earnings fell ¥3,030 million, while other components of equity increased ¥517 million. Equity attributable to owners of the parent to total assets rose 3.4 percentage points, from 71.3% on March 31, 2020 to 74.7% on June 30, 2020.

(2) Cash flows
As of June 30, 2020, cash and cash equivalents amounted to ¥48,734 million, down ¥7,857 million from March 31, 2020.
Cash flows from various activities during the first three months of the fiscal year are described in more detail below.

(Cash flows from operating activities)
Net cash provided by operating activities was ¥9,904 million (up ¥2,168 million). As principal factors, profit before tax provided ¥6,481 million (down ¥3,179 million), depreciation and amortization provided ¥6,198 million (up ¥436 million), a decrease in trade receivables provided

¥13,916 million (up ¥9,327 million), an increase in inventories used ¥4,461 million (up ¥823 million), a decrease in trade payables used ¥4,148 million (up ¥2,020 million), and a decrease in consumption taxes receivable provided ¥3,366 million (up ¥424 million).

(Cash flows from investing activities)
Net cash used in investing activities was ¥8,619 million (up ¥8,053 million). Among major factors, purchases of property plant and equipment used ¥1,915 million (down ¥1,342 million), purchases of intangible assets used ¥4,625 million (up ¥2,251 million), payments resulting in an increase in long-term prepaid expenses used ¥1,170 million (up ¥790 million), and proceeds from withdrawal of time deposits decrease ¥7,187 million year on year.

(Cash flows from financing activities)
Net cash used in financing activities was ¥9,085 million (up ¥206 million). This was mainly due to dividends paid of ¥7,517 million (up ¥4 million) and repayment of lease liabilities, which used ¥1,704 million (up ¥263 million).

3) Consolidated financial forecast
Although the COVID-19 pandemic continues to spread around the world, there are signs that economic activity is gradually returning in some countries. Even so, the outlook remains opaque, due to concerns that a second wave could occur and that the impact could be prolonged. Sysmex’s business segment is in the field of healthcare, and over the long term demand in this field is expected to remain high. In the first quarter under review (April to June 2020), demand was down temporarily as the number of hospital tests for items other than COVID-19 decreased, but testing numbers are trending upward. However, the speed of demand recovery differs by country.

Against this backdrop, the degree to which the global COVID-19 pandemic will affect customers’ capital investment and demand trends remains under consideration. As a result, the rational calculation of performance forecasts is problematic at this stage, so our consolidated financial forecast for the fiscal year ending March 31, 2021 remains undetermined. We will promptly discloseour performance forecast once calculation becomes possible.

6) Notes to the condensed quarterly consolidated financial statements
1. Notes related to the going concern assumption
Not applicable
2. Segment information
1) Overview of reportable segments

The Group’s reportable segments are the constituent business units of the Group for which separate financial data are available and that are examined on a regular basis for the purpose of enabling the Managing Board to allocate managerial resources and evaluate results of operations.

The Group is primarily engaged in the manufacture and sale of diagnostic instruments and reagents. These businesses are conducted in Japan by the Company, and in th Americas, EMEA, China and the Asia Pacific by regional headquarters established in those regions. These companies formulate overarching strategies tailored to regional characteristics and conduct business activities accordingly. Regional headquarters and other domestic and overseas subsidiaries are independent management units that handle production and sales for each region.

Accordingly, the Group has five reportable segments comprising geographical segments based on manufacturing and sales systems. These are "Japan," the "Americas," "EMEA," "China," and the "Asia Pacific."

2) Segment profit and operating results
Profit and operating results from continuing operations by reportable segment of the Group are as follows;
Intersegment sales are determined based on market prices or costs of goods manufactured.
Accounting policies of reporting segments are consistent with the Group’s accounting policies indicated in the consolidated financial statements for the previous fiscal year.

1. Segment profit (loss) adjustments of negative ¥78 million include negative ¥132 million for the unrealized gains on inventories and ¥79 million for the unrealized gains on non-current assets.
2. Segment profit (loss) is adjusted to coincide with operating profit in the condensed quarterly consolidated statement of income.

1. Segment profit (loss) adjustments of negative ¥1,068 million include negative ¥1,097 million for the unrealized gains on inventories and ¥110 million for the unrealized gains on non-current assets.
2. Segment profit (loss) is adjusted to coincide with operating profit in the condensed quarterly consolidated statement of income