Nihon Kohden : Three-year Business Plan (Presentation) (May 13, 2024)

Three-year Business Plan

May 15, 2024

Copyright NIHON KOHDEN CORPORATION All right reserved

Three‐year Business Plan

2024‐2026

1

Three-year Business Plan

1. Long-termVision
2. Review of Previous Three-year Business Plan
3. BEACON 2030 Phase II
4. • Business Environment and Key Measures
   • Growth
   • Profitability
   • Capital Efficiency
   • Sustainability
   • Management Targets
   • Capital Allocation

Copyright NIHON KOHDEN CORPORATION All right reserved

Three‐year Business Plan

2024‐2026

2

Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
Three-year Business Plan

Long-term Vision and Three-year Business Plan

We contribute to the world by fighting disease and improving health with advanced technology, and create a fulfilling life for our employees.

Create a better future for people and healthcare by

Managementsolving global medical issues

Philosophy

Long-term

Vision

Three-year

Business Plan

Core Values

Targets for	Operating	15%	Overseas	45%
FY2029	Margin	Sales Ratio

Apr. 2027 - Mar. 2030 PhaseⅢ: Realize BEACON 2030

Apr. 2024 - Mar. 2027 PhaseⅡ: Invest for growth

Apr. 2021 - Mar. 2024 PhaseⅠ : Strengthen foundation

Core values are shared by Nihon Kohden staff worldwide, helping to connect them and contributing to the promotion of our Management Philosophy, Long-term Vision, and Three-year Business Plan.

Integrity / Humbleness / Diversity / Initiative / Customer Centric / Goal Oriented / Creativity

Three‐year Business Plan

2024‐2026

3

Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
Three-year Business Plan

Three Transformation for BEACON 2030

• Promote overseas business strategies emphasizing high growth and improved profitability
• Develop sophisticated value propositions and cultivate new businesses areas in domestic business
• Create new business models by utilizing our global business foundation

2

• Create a business model that helps solve medical issues
• Realize a value creation model that creates value from data, by utilizing our core strength in Human Machine Interface* technology

3

• Establish an organizational and governance system in line with our corporate strategy
• Establish a development, production and sales system based on Global Supply Chain Management
• Strengthen global business deployment capabilities by establishing a Center of Excellence

• Human machine interface is the user interface that connects human and machine. For Nihon Kohden, this refers to sensor technology, signal processing technology, and data analysis technology.

Three‐year Business Plan

2024‐2026

4

Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
Three-year Business Plan

Three Phase of BEACON 2030

Ⅰ

• Improve the profitability of existing businesses by increasing productivity through optimization of globally expanded resources
• Cultivate new business areas and business models

Changes after setting the Long-term Vision

• Inventories of finished goods and parts increased due to supply chain disruptions.
• COGS and SG&A expenses increased due to inflation.
• R&D of new products delayed due to compliance with laws and regulations related to medical equipment.

Ⅱ

• Implement the reform of the profit structure and make investments in growth areas
• Establish new business models and collaborate with existing businesses to strengthen our comprehensive capabilities in problem-solving

Ⅲ

• Achieve profitability of new business models and realize a business platform that can create sustainable value
• Establish a position as a solution provider that helps solve global medical issues

Three‐year Business Plan

2024‐2026

5

Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
Three-year Business Plan

Management Index for BEACON 2030

Operating Income Margin	Overseas Sales Ratio
15％	45％

Three‐year Business Plan

2024‐2026

6

Three-year Business Plan

1. Long-termVision
2. Review of Previous Three-year Business Plan
3. BEACON 2030 Phase II
4. • Business Environment and Key Measures
   • Growth
   • Profitability
   • Capital Efficiency
   • Sustainability
   • Management Targets
   • Capital Allocation

Copyright NIHON KOHDEN CORPORATION All right reserved

Three‐year Business Plan

2024‐2026

7

Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
	Three-year Business Plan

Review of Previous Three-year Business Plan

Net Sales

Domestic Sales

Overseas Sales

(Overseas Sales Ratio)

Consumables and

Services Sales Ratio

Gross Profit Margin

Operating Income

(Operating Income Margin)

Income Attributable to

Owners of Parent

ROE

FY2023 Targets

¥102 to the U.S. dollar, ¥124 to the euro

¥197.0 bil

¥134.0 bil

¥63.0 bil

(32.0%)

48% or more

50% or more

¥20.0 bil

(10.2%)

¥13.8 bil

10%

FY2023 Revised Forecast

¥139 to the U.S. dollar, ¥151 to the euro

¥221.5 bil

¥142.0 bil ¥79.5 bil

(35.9%)

47.9%

50.8%

¥22.2 bil

(10.0%)

¥15.5 bil

FY2023 Results

¥143.9 to the U.S. dollar, ¥156.8 to the euro

¥221.9 bil

¥142.3 bil ¥79.6 bil

(35.9%)

47.9%

50.2%

¥19.5 bil

(8.8%)

¥17.0 bil

9.8%

5-year

CAGR

+4.7%

+1.5%

+12.0%

+6.0%

Three‐year Business Plan

2024‐2026

8

Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
	Three-year Business Plan

Review of Previous Three-year Business Plan

Sales					(¥100 million)
Domestic	Actual sales		Actual sales	Currency effect	FY2023
in the	Actual sales	and impact of	2,219
sales	Americas	in Asia &	change in
+83	-19	in Europe	Other	fiscal term of
		-9	-48	Defibtech
				+242

Target

1,970

[Difference in domestic sales]

• Expansion of consumables and services business
• Price optimization
• Creation of customer value propositions

[Difference in overseas sales]

[Americas] In North America, a large order of patient monitors was postponed to FY2024 and the cycle from order to delivery and installation has become longer. [Europe] Impact of export restrictions to Russia.

[Asia & Other] Move to prefer domestically produced products in China and Indonesia. Impact of the anti-corruption campaign in China.

Operating Income

Target

200

Actual increase in sales, favorable product mix, price optimization

+30

Increase in COGS	Increase in	Currency effect
due to higher	SG&A	+48
prices of	-37
components and
devaluation of	Impact from
inventories	strengthening of
-46	human resources,
	wage increase, and inflation

FY2023

195

Three‐year Business Plan

2024‐2026

9

	Long-term Vision BEACON 2030	Review of Previous	Three-year Business Plan BEACON 2030 Phase II
		Three-year Business Plan
Review of Previous Three-year Business Plan
Domestic	 Promoted customer value propositions and expanded consumables and services business.
Sales	 Favorable product mix due to restraining sales of locally purchased products.
	▲ North America: Sales fell short of expectations as a large order of patient monitors was postponed
Overseas	to FY2024. This was also because the cycle from order to delivery and installation has become
longer mainly due to the deterioration of hospitals' financial situation.
Sales
▲ Rest of World: Sales fell short of expectations mainly due to the impact of the anti-corruption
	campaign in China.
Sales of	 Sales of consumables showed strong growth as the number of testing and surgical procedures
increased. In Japan, the Company's efforts to raise selling prices also contributed to increased sales.
Consumables
 Expanded our maintenance service programs especially for ventilators, of which the installation
and Services	base had expanded due to the COVID-19 pandemic.
Gross Profit	 Increase in COGS due to higher prices of components was offset by raising selling prices.
Margin	▲ Devaluation of inventories increased mainly in the factory and North America.
Operating	▲ SG&A ratio increased due to the strengthening of human resources, wage increase, and inflation.
Income Margin	This was also because actual overseas sales fell short of the target.
ROE	▲ Increase in inventories of finished goods and parts resulted in a longer cash conversion cycle.
 Adopted NPV and IRR* as investment decision criteria and set target of IRR at 10%, which exceeds our
	6% cost of capital.		* NPV: Net Present Value, IRR: Internal Rate of Return.

Three‐year Business Plan

2024‐2026

10