Olympus 2015 Annual Report Download - page 37

Analysis of Business Results, Financial Position, and Cash Flows
Analysis of Business Results
Company Overview
In the global economy during fiscal 2015, a gradual overall
recovery continued, but uncertain factors remained. The
U.S. economy showed signs of steady recovery on the
back of improvements in the job market. In Europe, mean-
while, the sovereign debt issue continued. In Asia and
other emerging markets, the speed of economic expansion
decelerated even further, as indicated by such factors as
economic slowdown in China. In Japan, economic recovery
continued with yen depreciation and other factors helping
to improve corporate earnings. However, the outlook
remains uncertain due to such factors as a decline in
consumer spending following the April 2014 consumption
tax hike.
In this operating environment, the Olympus Group
continued to advance the four basic strategies of the
medium-term vision (corporate strategic plan) launched in
fiscal 2013: “rebuilding of business portfolio / optimizing
allocation of management resources,” “review and reduction
of costs,” “restoration of financial health,” and “restructur-
ing of corporate governance.” Acting in accordance with
these strategies, the Olympus Group continued to steadily
implement initiatives, such as accelerating growth through
strategic investment in the Medical Business and developing
a new operating structure after approving plans to reorga nize
the Group’s organizational structure.
In the Medical Business, sales of new products in our
flagship gastrointestinal endoscope operations grew in
Japan and overseas. In addition, we made investments
targeting further growth in the surgical device field, which
primarily included strengthening sales forces in North
America. In the Scientific Solutions Business, we revised
our strategies to move away from those based on product
lineups to those oriented toward customer groups, and
continued to streamline our business through reforms such
as integrating business sites. In the Imaging Business, we
moved forward with our shift from compact digital cameras
to mirrorless cameras, and invested in the expansion of
BtoB operations. In fiscal 2015, R&D expenditures amount-
ed to ¥74,101 million and capital expenditures totaled
¥47,743 million.
In regard to foreign exchange, the yen depreciated
significantly against both the U.S. dollar and the euro in
comparison with the previous fiscal year. The average
exchange rate during fiscal 2015 was ¥109.93 against
theU.S. dollar (¥100.24 in the previous fiscal year) and
¥138.77 against the euro (¥134.37 in the previous fiscal
year). These rates increased net sales by ¥39,400 million
and operating income by ¥14,400 million year on year.
• Net Sales
Consolidated net sales increased 7.2% year on year, to
¥764,671 million, due largely to increased earnings in the
Medical Business and the Scientific Solutions Business.
0
1,000
800
600
400
200
713.3 764.7
2014/3 2015/3
(¥ Billion)
Medical
Business
＋66.1
Scientific
Solutions
Business
＋5.4
Imaging
Business
− 12.3
Others
− 7.8
• Operating Income
Operating income was up 23.9% year on year, to ¥90,962
million, as the higher earnings of the Medical Business and
the Scientific Solutions Business offset the operating loss
in the Imaging Business.
73.4
91.0
2014/3
Medical
Business
+12.2
Scientific
Solutions
Business
+1.9
Imaging
Business
− 4.7
Others
+6.5
Elimination or
corporate
+1.6
0
20
40
60
80
100
2015/3
(¥ Billion)
• Net Income (Loss)
Net loss amounted to ¥8,737 million, compared with a net
income of ¥13,627 million in the previous fiscal year, due
inpart to recording extraordinary losses of ¥63,848 million,
primarily loss related to the investigation under U.S. Anti-
kickback Act and the related Act.
Performance by Segment
• Medical Business
In the Medical Business, consolidated net sales totaled
¥558,348 million, up 13.4% year on year, and operating
income was ¥124,894 million, up 10.8%.
In the gastrointestinal endoscope field, strong sales
continued for mainstay gastrointestinal video endoscopy
systems EVIS EXERA III and EVIS LUCERA ELITE. In the
surgical device field, sales increases were once again
achieved for the VISERA ELITE surgical video endoscopy
system—designed to support endoscopic surgery—as well
as for videoscopes for use in clinical departments such as
general surgery and urology, our 3D laparoscopy surgical
system, and the THUNDERBEAT energy device. In the
endotherapy device field, sales were up in all product
areasdue to sales contributions from VisiGlide 2™, a new
disposable guidewire product for use in endoscopic diag-
nosis and treatment of biliary and pancreatic ducts, and
sales growth for QuickClip Pro, a disposable rotatable clip
fixing device to stop bleeding of polyps and lesions. Oper-
ating income in the Medical Business increased due to the
higher net sales.
• Scientic Solutions Business
In the Scientific Solutions Business, consolidated net sales
totaled ¥103,880 million, up 5.5% year on year, and oper-
ating income amounted to ¥6,837 million, up 38.5%.
In the life science field, sales were relatively unchanged
year on year as the temporary slowdown in the execution of
budgets by research institutions in Japan offset sales contri-
butions from FLUOVIEW FVMPE-RS, a new addition to our
series of laser scanning microscopes for use in cutting-edge
life science research. In the industrial field, meanwhile, sales
of various products were buoyed by stimulated capital ex-
penditures among corporations. For example, sales were
up for IPLEX RX and IPLEX RT—industrial videoscopes that
offer the highest levels of resolution in their series—as well
as for the OmniScan series of ultrasonic phased array flaw
detectors, which are used in non-destructive testing of
social infrastructure. As a result, the total for sales in both
fields increased year on year. Operating income in the Sci-
entific Solutions Business rose as aresult of the higher net
sales and progress in efforts to reduce costs through
means such as the integration of sales offices.
• Imaging Business
In the Imaging Business, consolidated net sales came to
¥83,825 million, down 12.8% year on year, while operating
loss amounted to ¥13,870 million, compared with ¥9,182
million in the previous fiscal year.
In the digital single-lens camera field, sales of the
OM-D series of mirrorless cameras were up in Europe.
Sales of interchangeable lenses, such as M.ZUIKO DIGITAL
ED 40–150mm F2.8 PRO, were also favorable. However,
overall sales in the Imaging Business declined because we
limited compact digital camera sales volumes in response
to the contraction of the market for these products. Oper-
ating loss increased in this business reflecting, among
others, a decrease in sales, write-downs on inventories as
a result of strict revaluation, and investment carried out to
expand BtoB operations.
• Others
In the Others Business, consolidated net sales amounted
to ¥18,618 million, down 29.4% year on year, and operating
income was ¥1,190 million, compared with an operating
loss of ¥5,356 million in the previous fiscal year. In order to
allocate management resources to our business domains in
a more concentrated manner, we reorganized our non-core
business domains, and withdrew from the biologics business
in the previous fiscal year. Although the aforementioned
initiatives contributed to a decline in net sales for the Others
Business, profitability was achieved on the operating
income level.
Fiscal 2016 Outlook
Looking ahead, although the moderate recovery trend in
the global economy driven by the United States continues,
the risk of economic downturn still remains due to such
factors as the slowing growth in China and other emerging
countries. In Japan, economic recovery is set to continue
on the back of improved corporate earnings, but there is
still cause for concern due to such issues as the decline in
consumer spending following the April 2014 consumption
tax hike, and it is clear that we cannot become complacent.
Given this environment, the Olympus Group will steadi-
ly advance its medium-term vision, which was formulated
in June 2012. Furthermore, the Group was reorganized in
April 2015 to give rise to a new organizational structure.
Under this structure, we will enhance our ability to respond
to the fast-changing business environment and promote
efficient resource allocation. We will also strengthen our
business foundation and accelerate growth in preparation
for the new five-year medium-term management plan,
which is scheduled to be drafted in fiscal 2016.
In the Medical Business, we will pursue further growth
by stepping up business expansion initiatives in each of the
business units established as part of the new organizational
structure; namely the GI (gastrointestinal) Business Unit,
GS (general surgery) Business Unit, Uro/Gyn (urology /
gynecology) Business Unit, ENT (ear, nose, and throat)
Business Unit, and Medical Service Business Unit. In the
Scientific Solutions Business, we will further improve busi-
ness organization efficiency through structural reforms,
build a system for strengthening points of contact through
customer group-oriented strategies, and explore new mar-
kets. In the Imaging Business, we will push forward with
structural reforms with breaking even as the top priority,
and will accelerate cost-cutting efforts while streamlining
operations by narrowing product lineups and limiting the
range of sales focus regions.
To integrate business functions under the new organi-
zational structure, cross-divisional functional organizations
have been established; namely, the Corporate Group, R&D
Group, Manufacturing Group, Sales Group, and Quality
and Regulatory Group. Resources related to functions will
be distributed to each business in an optimal manner. In
this way, we will build a structure that will allow manage-
ment resources to be utilized efficiently and enable the
Company to fully manifest its potential.
Furthermore, the Company will continue to enhance
corporate governance systems while fostering compliance
awareness to ensure sound management practices.
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OLYMPUS Annual Report 2015
70 OLYMPUS Annual Report 2015