First Quarter Business Results for Fiscal 2023

August 4, 2023

Director, and CFO

Muneki Handa

1

agenda

01

First Quarter Business Results for FY 2023

2

Here is the content for today's presentation.

I will give an overview of the business results for the first quarter of fiscal 2023, discuss the initiatives and the progress we are making in our domestic business, and talk about the initiatives and the progress we are making in the China business.

2

Roadmap for the Realization of the TSUMURA VISION "Cho-WA" 2031

Prescription Kampo

Products

1st stage

FY2022-2024

-Germination-

Standardization of Kampo

treatments

Personalized Kampo

treatments

Personalized Kampo

2nd stage

FY2025-2027

-Growth-

Over 50% physicians write 10 or more Kampo prescriptions

3rd stage

FY2028-2031

-Flowering-

50% of physicians write basic

prescriptions in all treatment areas

R&D

Formulation

platform

Chinese

Crude drug

operations

platform

Research

platform

Smart factory

Sales

Labor

productivity

Production

Crude drugs

treatments

Research

Scientific study of pre-

symptomatic diseases

Traditional Chinese

Market

medical products business

entry

Crude drugs, drug pieces and

Sales

Yakushokudogen products

expansion

Traditional Chinese Medicine

Establishment

Research Center

Expand scope of

automation

Sales per MR (Yen/MR)

Physical labor productivity

Personnel expenses per crude drug arranging volume

Development

Build

foundations

Establish brands

Function expansion

Shift to oversight/management

Social

implementation

Establish brands

Lead industry development

Evidence-building for traditional

Chinese medical products

Realize smart factories

Double productivity

(vs. FY2021)

3

This is a roadmap for the realization of the TSUMURA VISION "Cho-WA" 2031, which was announced in May 2022.

The first stage of the medium-term management plan, which will run through fiscal 2024, is positioned as the stage for conducting upfront investments and building a foundation as a step toward realizing the

TSUMURA VISION.

3

1Q Business Results for FY 2023

【Million yen】

1Q

1Q

YoY

1H plan

Progress

FY 2022

FY 2023

Rate

results

results

Amount

Change

（vs. 1H plan）

Ratio to total sales

Sales

34,417

37,036

+2,618

+7.6%

74,000

50.0％

50.1％

Domestic business

31,562

32,988

+1,426

+4.5%

65,900

50.0％

China business

2,855

4,047

+1,191

+41.7%

8,100

Domestic business：

Operating profit

6,353

4,684

(1,668)

(26.3)%

9,500

49.3％

Prescription Kampo

(26.9)％

47.3％

Products

Domestic business

6,404

4,684

(1,719)

9,900

86.0%

China business

(50)

0

+51

－

(400)

－

China business：

Ordinary profit

8,665

5,989

(2,676)

(30.9)%

9,800

61.1％

Crude Drug Platform 10.9%

Profit

6,632

4,332

(2,300)

(34.7)%

6,800

63.7％

Domestic business：

attributable to owners of

OTC Kampo etc. 2.3%

parent

PL translation rate (CNY)

18.32

19.36

+1.04

－

－

－

Domestic business：

Other prescription

pharmaceuticals 0.8%

*Forex rate at the time overseas subsidiaries' PLs were incorporated; differs from the import rate for raw material crude drugs

4

This is an overview of the business results in the first quarter of fiscal 2023.

Sales totaled ¥37.0 billion, a growth of 7.6% year-on-year.

The progress rate for sales versus our plan for the first half was 50.0%. Sales broke down to ¥32.9 billion in sales in the domestic business and ¥4.0 billion in sales in the China business.

The sales breakdown is as shown in the pie graph on the right.

Operating profit was ¥4.6 billion, a decrease of 26.3% versus the same period, a year earlier. The progress rate for operating profit in contrast with our plan for the first half was 49.3%.

Ordinary profit was ¥5.9 billion, a decline of 30.9% year-on-year. The progress rate for ordinary profit in contrast with our plan for the first half was 61.1%.

Meanwhile, profit attributable to owners of parent came to ¥4.3 billion, a reduction of 34.7% year-on-year. The progress rate for profit attributable to owners of parent in contrast with our plan for the first half was 63.7%.

4

Key Points in Performance

・Net sales rose reflecting growth in the domestic and China businesses

・Profit declined chiefly due to impact from unrealized gains, a rise in the cost of procuring crude drugs, and impact from a depreciation in the yen's value

Net sales

37,036

million yen

YoY

＋7.6％

Progress rate

50.0％

(vs. 1H plan)

◼

Domestic business

Total sales for the 129 prescription Kampo products: 31,838 million yen, up 5.2% year-on-year

Total sales of the OTC Kampo formulations and other healthcare products: 837 million yen, down 7.2% year-on-year

◼

China business

Raw material crude drugs, drug pieces, Yakushokudogen products, etc. : 4,047 million yen, rose 41.7% year-on-year

Operating profit

4,684

million yen

YoY

(26.3)％

Progress rate

49.3％

(vs. 1H plan)

Operating profit margin

12.6

％

YoY

(5.9)pt

  • Cost-to-salesratio: 54.9%, +7.1pt YoY: In the same period of the previous year, unrealized gains contracted due to the lockdown of Shanghai; Unrealized gain is expected to rise in FY2023 owing to an increase in inventory; In addition, there is impact from crude drug procurement costs and devaluation of the yen
  • SG&A ratio: 32.4%, (1.3)pt YoY: Sales growth offset growth investments, mainly in the DX transformation for Kampo value chain

Ordinary profit

5,989

million yen

YoY

(30.9)％

Progress rate

61.1％

(vs. 1H plan)

  • Foreign exchange gain primarily related to loans to overseas subsidiaries: 929 million yen, down 1,070

million yen year-on-year*Foreign exchange gain not posted in plan

Profit attributable to

4,332

million yen

YoY

(34.7)％

Progress rate

63.7％

owners of parent

(vs. 1H plan)

5

This slide depicts the key points of our performance.

In the domestic business, sales of the 129 prescription Kampo products came to ¥31.8 billion, a growth of 5.2% versus the same period, a year earlier.

Under restricted shipment conditions, sales grew reflecting information provision activities owing to e-promotions, which were partially restricted, and owing to continued prescriptions of formulations in the domain of cardiovascular diseases, and related to symptoms such as anxiety, insomnia and dizziness.

Sales of OTC Kampo products were ¥800 million, a decrease of 7.2% year-on-year, reflecting impact from an ongoing shortage of formulations related to common cold-related symptoms. From July, we launched operations for a new manufacturing line to strengthen our production capacity for OTC Kampo products. We expect to gradually unwind our product shortage. Sales in the China business totaled ¥4.0 billion, a rise of 41.7% in comparison with the same period, a year earlier. This reflect an increase in sales of raw material crude drugs in the crude drug platform business.

The cost-to-sales ratio was 54.9%, an improvement of 7.1pt year-on-year.

As factors triggering changes in performance, we posted an increase in unrealized gains, a rise in the procurement cost for crude drugs, a depreciation in the yen's value versus major currencies, and furthermore there was impact from soaring energy and raw material expenses. I will explain this in detail later on.

The SG&A ratio was 32.4%, a decline of 1.3pt year-on-year.

The increase in sales absorbed the rise in outlays due to growth investments, mainly for the digital transformation of the Kampo value chain.

Operating profit totaled ¥4.6 billion, a decline of 26.3% versus the same period, a year earlier.

Under non-operating income, we posted a foreign exchange gain of ¥900 million, related to loans to overseas subsidiaries. Accordingly, ordinary profit came to ¥5.9 billion, putting the achievement rate for ordinary profit slightly higher than where we planned to be at the end of the first quarter in our first half plan.

Extrapolating from the above, profit attributable to owners of parent totaled ¥4.3 billion, a fall of 34.7% year-on-year.

5

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Tsumura & Co. published this content on 10 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 August 2023 08:57:04 UTC.