Mid-term Business Plan 2014global.topcon.com/invest/library/meeting/mid_plan/mt2014/pdf/mid... · Middle East Latin America Company Positioning Company Key Business ・ Surveying/GIS

©2012 Topcon Corporation

Mid-Term Business Plan 2014

For the new expansion

June 1, 2012

TOPCON CORPORATION

President: Norio Uchida

From

Reform to

Enhancement


Contents

Ⅰ

Business Expansion Strategies by Segment

Mid-Term Business Plan: Background - Mid-Term Plan and The Business Structure Reform Project -

Ⅱ

Ⅲ

Ⅳ

Group Vision for the Mid-Term Business Plan

Appendix

1


Ⅰ Mid-Term Business Plan: Background

－Mid-Term Plan and The Business Structure Reform Project －

2


0

20

40

60

80

100

120

FY2007 FY2008 FY2009 FY2010 FY2011(11)

(6)

0

6

11

Net Sales

OperatingIncome

Recapping Our Performance

Lehman Shock

The Great East Japan Earthquake

Thai Flood

Downturn of the US and European Market

Yen’s Appreciation

3

Net Sales (billion yen) Operating Income (billion yen)


Our Challenges

Remodeling our business structure to be profitable under new business environment Our Actions

Counter action for Yen’s appreciation

Fixed cost Reduction COGS Reduction

Foreign Exchange Trend Loss of Operating Income of 8.6 billion yen by Yen Appreciation in FY2011 against FY2007

70Yen

90Yen

110Yen

130Yen

150Yen

170Yen

07B 08B 09B 10B 11B 12B

Euro

Dollar

CY2007 2007 CY2008 CY2009 CY2010 CY2011 CY2012

Selection and Concentration

Downsizing Finetech Business

4


Workforce Reduction

COGS Reduction

Total

Mid-Term Plan 2013 Plan (FY2011-FY2013)

FY2011 Result （A）

FY2012 Plan （B）

Total (FY2011-FY2012) （A+B）

2.5 4.9

7.5 7.2

12.1

2.3

3.4

5.7

2.6

3.8

6.4 10.0

Accelerated the Reform Project in FY2011: Voluntary Retirement program, Downsizing Finetech Business Unit Enhance VA/CD activity, Promote Overseas procurement and Overseas production

Qualitative change in business structure (Establish profitable business structure under yen’s appreciation)

(Unit: billion yen)

We are going to achieve our 3-year cost cutting goal in 2 years

5


＊including part time employees and temporary staff

FY2009 Actual

FY2010 Actual

FY2011 Actual

231

205 reduced

439 reduced

Original Plan

2,116

2,529 2,324

1,885

Cumulative Total 644 reduced

FY2009～2011

(unit: employees)

231

Reduced 25% of domestic group employees over 2 years

＊including resigned employees on March 31 2012

6


Net Sales Operating Income

(Unit: billion yen)

Positioning Eye Care

Sales and operating income are recovering

7

Net Sales (billion yen) Operating Income (billion yen) Net Sales (billion yen) Operating Income (billion yen)

44.0

47.5

51.0

54.5

58.0

FY2007 FY2008 FY2009 FY2010 FY2011(6.0)

(3.0)

0.0

3.0

6.0

26.0

29.5

33.0

36.5

40.0

FY2007 FY2008 FY2009 FY2010 FY20110.0

1.5

3.0

4.5

6.0


[Consolidated] Net Sales (billion yen) SG&A to Sales Ratio (%)

0

20

40

60

80

100

120

FY2007 FY2008 FY2009 FY2010 FY201134

35

36

37

38

39

40

41

42

Sales

SG&A to SalesRatio

SG&A to Sales Ratio is improving

8


From

Reform to

Enhancement

The Focus of TOPCON’s Mid-Term Plan 2014

Our focus shifts from Reform to Enhancement

9

We have a new foundation for new business expansion


Ⅱ Group Vision for the Mid-Term Business Plan

10

Strategy 1. Organizational Change Strategy 2. Continuing Reform Strategy 3. Shifting to the Enhancement

©2012 Topcon Corporation 11

Strategy 1. Organizational Change 〈Business reorganization for Focus and Speed〉

2 Business Units

3 In-house Companies

※TPS= Topcon Positioning Systems; California, USA

Re-position TPS as an Independent In-house Company

Core Concept of Business reorganization


Strategy 1. Organizational Change 〈Clarify target domains and markets〉

Speed up decision making

Smart Infrastructure Company expands core businesses in emerging countries

Positioning Company (TPS) focuses on new business development through GPS technology in developed counties

★・・・Head of the Organization

Eye Care Business Unit

Major Businesses ・Surveying/GIS ・3D Measurement Focus Markets ・Emerging Countries

Major Businesses ・Machine Control ・Precision Agriculture Focus Markets ・Developed Countries

★福澤弘 ★澤口茂之 ★レイモンド・オコーナー

Topcon Positioning Systems （TPS）

★内田憲男

★平野聡

Positioning Business Unit

TOPCON TOPCON

Eye Care Company

Smart Infrastructure Company

Positioning Company (TPS)

★ Hiroshi Fukuzawa ★ Satoshi Hirano

★ Raymond O’Connor

★ Hiroshi Fukuzawa ★ Shigeyuki Sawaguchi ★ Raymond O’Connor

Corporate Strategy Div.

★ Satoshi Hirano

※ Corporate Strategy Division leads cross-functional management


Strategy 1. Organizational Change 〈Business growth plan on new in-house companies〉

Net Sales (billion yen)

13

32.029.0

25.019.7

43.041.0

37.0

33.0

0

100

200

300

400

500

600

700

800

900

FY2011 FY2012 FY2013 FY2014

52.7

70.0 75.0

Mid-term 2013

Mid-term 2013

Mid-term 2013

51.0

Mid-term 2014

Mid-term 2014

Mid-term 2014

Mid-term 2014

56.0

62.0 62.0 Positioning Company


Mid-tem Plan 2013 0


Strategy 2. Continuing Reform

５places ３places

Action No.1

Integration of Plant Location

14

The Number of Domestic Plant


Strategy 2. Continuing Reform

Deploy Global Management System (ERP)

□ Get accurate information in real-time Speed up Decision making □ Improve asset efficiency

Action No.2

15


235 Reduces

2,529 2,324

1,885

205 Reduces

1,650

(unit: employees)

＊including part time employees and temporary staff

FY2009 Actual

FY2010 Actual

FY2011 Actual

FY2014 Plan

(including resigned employees on March 31)

Mid-term Plan 2014

Strategy 2. Continuing Reform 〈Continue 35% reduction of domestic group employees vs FY2009〉

16

439 Reduces


Build a Competitive Cost Structure vs Peers

SG&A to Sales Ratio (Unit: %)

Strategy 2. Continuing Reform 〈SG&A to Sales Ratio will return to all time best in 10 years〉

SG&A to Sales Ratio （％）

31%

32%

34%

36%

30

31

32

33

34

35

36

37

FY2011 FY2012 FY2013 FY2014

17

Competitors’ SG&A to Sales Ratio （FY2011） ■ A-co ： 40.9％ ■ B-co ： 32.8％ ■ C-co ： 41.0％


Strategy 3. Shifting to the Enhancement

FY2009 ～ FY2011 （Result）

FY2012 ～ FY2014 （Forecast）

Disruptive Innovation 2 models 7 models

World’s No.1 8 models 23 models

World’s First 4 models 10 models

Reduction of COGS 5 models 12 models

Products for emerging Markets 2 models 4 models

Enhancement of Sales Capability 1 model 2 models

Total 22 models 58 models

Accelerate product development <Group wide> Action No.1


Company New Business Field Growth Rate

FY2010 → FY2011 FY2011 → FY2014

Smart Infrastructure 3D measurement - 280%

Positioning Machine Control 120% 130%

Precision Agriculture 160% 190%

Eye Care Treatment Device ･IT 120% 170%

Strengthen new businesses

Strategy 3. Shifting to the Enhancement

Action No.2

19


Exchange Rate: Planned

Exchange Rate from FY2012 to2014: Planned

FY2012 FY2013 FY2014

US$ 80 yen 80 yen 80 yen

EUR 110 yen 105 yen 105 yen

20


Financial Targets (Consolidated)

Mid-Term Plan 2014 (million yen)

[Consolidated] FY2011 FY2012 FY2013 FY2014 Net Sales 98,834 108,000 120,000 130,000 Operating Income （OP ratio）

2,080 (2.1%)

8,000 (7.4%)

12,500 (10.4%)

16,500 (12.7%)

Ordinary Income 467 6,800 11,000 15,000

Net Income (loss) (3,686) 3,000 6,000 8,000

ROE (10.6%) 8.8% 16.8% 20.1%

ROIC 1.6% 6.8% 11.1% 15.3% Dividends per Share (yen) 4 6 12 18

Dividend Payout Ratio -% 19% 19% 21%

※ Target Dividend Payout Ratio: TOPCON targets 20% as the consolidated dividend payout ratio

21


Financial Targets (by In-house Company) Mid-Term Plan 2014 (million yen)

[Consolidated] FY2011 FY2012 FY2013 FY2014 FY2011-FY2014

CAGR

Net Sales

Smart Infrastructure Company 19,656 25,000 29,000 32,000 18%

Positioning Company 33,000 37,000 41,000 43,000 9%

Eye Care Company 32,598 35,000 38,000 40,000 7%

Others 13,579 11,000 12,000 15,000 3%

Total 98,834 108,000 120,000 130,000 10%

Operating Income (Operating

Income Ratio）


975 (5.0%)

2,500 (10.0%)

3,000 (10.3%)

4,000 (12.5%) 60%

Positioning Company 508 (1.5%)

2,500 (6.8%)

4,500 (11.0%)

5,000 (11.6%) 114%

Eye Care Company 1,766 (5.4%)

3,000 (8.6%)

4,500 (11.8%)

6,000 (15.0%) 50%

Others (1,168) (-8.6%)

0 (0%)

500 (4.2%)

1,500 (10.0%)

Total 2,080 (2.1%)

8,000 (7.4%)

12,500 (10.4%)

16,500 (12.7%) 99%

22


Analysis of Operating Income (Consolidated)

FY2011 Actual Results

FY2014 Mid-Term Plan

(Unit: billion yen)

23

5.07.0

(9.0)

10.0

(3.0)

5.0

(0.6)

5.1

16.5

Investment forDevelopment

and SalesExpansion

ExchangeFluctuation

Effect ofWorkforceReduction

FY2011Results

FY2014Mid-Term Plan

Sales PriceDown

COGSReduction

SalesIncrease

by ExistingBusinesses

Sales Increaseby New

Business

(1.8)(1.2)

Impact ofthe

earthquake

FY2011Operating

Income2.1

FBU



2 In-house Companies Organized by Business

24

Ⅲ Business Growth Strategy


Transform into In-house Organization

25

Now After

80


Key Business ・Surveying /GIS ・3D Measurement ・IT Construction (MC) ・Precision Agriculture

Target Market ・Developed Countries, Emerging Countries

★Satoshi Hirano

Western EuropeNorth AmericaJapanOther AsiaEastern EuropeAfricaMiddle EastLatin America


Positioning Company

Key Business ・Surveying/GIS ・3D Measurement

Target Market ・Emerging Countries (mainly)

Key Business ・IT Construction (MC) ・Precision Agriculture

Target Market ・Developed Countries (mainly)

★Shigeyuki Sawaguchi ★Raymond O’Connor

Source: Davis Langdon (World Construction 2011) & our estimate, and TOPCON’s estimation

¥440 Trillion

Developed 65%

Emerging 35% Developed

50% Emerging

50%

World’s Construction Spending - by region 2020 2010

¥600 Trillion

32％

23％

14％ 19％ 33％ 10％ 15％

25％



26


-Targeting Emerging Countries with Japanese Craftsmanship-


・Rapid Growth of Infrastructure Improvement in Emerging Countries

Business Policy <Smart Infrastructure Company>

Road

Building

Airport

Seaport

Source: JETRO, National Development and Reform Commission (China) etc

Major Construction Projects in the World China: Traffic Network/ Western Region Construction, ¥80 Trillion India: Road/Railway Construction, ¥15 Trillion Saudi Arabia: Housing Construction, ¥2.3 Trillion Brazil: Housing/Traffic Network Construction, ¥14 Trillion


Surveying 〈Focusing on Emerging Countries〉

28

2010年度 2011年度 2014年度

Matured in Developed countries, rapid growth in emerging countries (e.g. China ¥80 Trillion, India ¥15 Trillion for Construction projects)

Emerging Chinese manufacturers’ products

130%

Surveying Strategies

① Strengthen the cost competitiveness with high-quality Japanese craftsmanship Disruptive technology for revolutionize Total Stations

② Effective use of sales network as a leading provider in the world

Utilize the world’s first TSshield (cloud service)

③ Achieve market share more than 30% in Emerging Countries Early completion of dealer network formulation in Emerging Countries

High

Profitability Low

Matured Growing Market

Surveying

Surveying

FY2011 FY2014 Market

FY2010 FY2011 FY2014


2010年度 2011年度 2014年度

Developed countries: Shift from mature conventional surveying to mobile 3D measurement

Emerging countries: Utilize in rapid infrastructure improvement projects

① Launch world’s No.1 products by integration of GPS and imaging, our core competency

② Utilized in base mapping of ITS (Intelligent Transport System) e.g. Base mapping for Google’s autonomous car

High

Profitability Low


FY2011 FY2014 3D

Meas. 3D

Meas.

Strategies

Market

280%

Mobile 3D Measurement

FY2010 FY2011 FY2014

Mobile 3D Measurement <Integration of GPS and Imaging Technology>


FY2011 Actual Result

FY2014 Mid-term Plan

3D Measurement

Surveying

Others

Breakdown of Sales Growth

Operating Income Ratio 5.0％ Operating Income Ratio 12.5％


Strengthen the cost competitiveness with high-quality Japanese craftsmanship

Launch world’s No.1 products by integration of technology

¥19.7 billion

¥32.0 billion


Positioning Company

31


-Achieve the Rapid Growth in the New Business with GPS-


Machine Control 〈Revolutionizing the Construction and Earth works Industry〉

32

2010年度 2011年度 2014年度

① Launch world’s No.1 products to generalize the technology

② Increase sales to major machine equipment manufacturers

FY2011 FY2014

MC

MC

130%

Machine Control

120%

Strategies

High

Profitability Low


Developed countries: Generalizing machine control for higher productivity and more laborsaving in job site

Growing OEM market

Market

FY2010 FY2011 FY2014


2010年度 2011年度 2014年度

Precision Agriculture 〈Make Agricultural Production more Efficient〉

FY2011 FY2014

PA

PA

190%

Precision Agriculture

160%

① Gain the market share by introducing world’s No.1 products ② Take advantage of scale through business alliances

Strategies

High

Profitability Low


Estimated Precision Ag Market

$100 $150

$850

$1,500

2000 2005 2010 2015

(USD1M)

Rapidly expanding IT systems and efficiency as a solution for food shortage due to increasing population in Emerging countries

Market

FY2010 FY2011 FY2014


FY2011 Result

FY2014 Mid-term Plan

MC/IT Construction

Precision Agriculture

Others

Operating Income Ratio 1.5％ Operating Income Ratio 11.6％

Positioning Company

Launch world’s No.1 products


¥33.0 billion

¥43.0 billion

Launch world’s No.1 products


Number of New Products ・Smart Infrastructure ・Positioning

FY2009 - FY2011 (Result)

FY2012 - FY2014 (Forecast)

Smart Infrastructure Company Positioning Company

Disruptive Innovation 2 models 3 models 3 models

World’s No.1 7 models 10 models 8 models

World First 2 models 2 models 6 models

Reduction of COGS 2 models 2 models 3 models

Products for emerging Markets 2 models 1 model 3 models

Total 15 models 18 models 23 models


Ⅲ Business Growth Strategy Eye Care Company

36

～Creating a stable profit World wide ～


Global Population Aging Increasing Three Major Eye Disorders

65 67 72

131 134 145

85 87 93

050

100150200250300350400

2010 2011 ・・・ 2014

37

単位：百万人

Diabetic Retinopathy AMD Glaucoma

OCT ★★★ ★★★ ★★★

Laser ★★★ ★ ★★ Examination/ Diagnostic ★★★ ★★★ ★★★

Ophthalmic IT ★★★ ★★★ ★★★

Business Direction - Background

Glaucoma AMD Diabetic Retinopathy

Unit： Million people

Applicable Product Group

*applicability/frequency in use: often ★★★ ⇒ ★ merely


Become an Eye Care Total Solutions Provider by Expanding into Preventive and Treatment Markets!

Business Policy

Diagnosis Treatment

Expansion of Business Field

Preventive Medicine /

Physical Checkup

Examination

Current Business Field


Aiming to be a market leader with Latest Technology in OCT

39

FY2011 FY2014 ＯＣＴ

ＯＣＴ OCT market has been continuously expanding from the large hospitals to private clinics.

Increasing demand for retinal imaging devices for preventive medicine and physical checkup in major nations.

High

Profitability

Low Mature Growth Market

Preventive Medicine / Physical Checkup / Examination 【Retinal Imaging Device】〈Gain market share with Low-Cost devices 〉

① Covering high-end market by launching the world latest technology OCT with high-resolution / high-penetration ② Developing and launching the low-cost retinal imaging devices for private clinic, optometrist and preventive medicine / physical checkup market

+ No.1 Retinal Camera Position

Researcher

Hospital

Private clinic Optometrist

Physical checkup Screening

Market

Main strategy

2010年度 2011年度・・・ 2014年度

150% 120%

OCT

FY2010 FY2011 FY2014


Refraction

Moderate growth in developed countries

Growth of emerging countries lead market expansion

① Reducing cost with common platform design, overseas procurement and manufacturing in China (40%CD by manufacturing in China) ② Gaining market share by launching products for emerging countries

Market

Main strategy

Common Platform

China

40

Refraction

High

Profitability


Strengthen cost-competitiveness and maintain profitability by reducing product cost

Examination/Diagnostic 【Existing Core products】〈40%CD by manufacturing in China〉

2010年度 2011年度・・・ 2014年度

110% Examination/Diagnostic

FY2010 FY2011 FY2014

FY2011 FY2014


Increasing demand for less invasive treatment Increasing demand for precise treatment based on imaging data

① Developing new product with No.1 pattern laser technology and new technology ② Collaborate retinal imaging device to treatment

Maximizing Synergy Effect between No.1 Pattern Laser Technology and Diagnostic Devices

41

Treatment Device 【Retinal Pattern Laser】〈Linking Diagnostic to Treatment〉

Market

Main strategy

High

Profitability


Pattern Laser

2010年度 2011年度・・・ 2014年度

120% 170%

Treatment Device

FY2010 FY2011 FY2014

FY2011 FY2014


Providing total solution from Examination/Diagnosis devices

Total Solution Provider 【Ophthalmic IT】〈Unified Data Management〉

to integration of data, and Diagnosis support



Examination/ Diagnostic

Treatment

Preventive/ Checkup

Others

¥40.0 billion

¥32.6 billion

Operating Income Ratio 5.4％

FY2011 Actual Result

Mid-term Plan FY2014

Operating Income Ratio 15.0％

IT


Number of New Products 〈Eye Care〉

FY2009 ～ FY2011 （Actual）

FY2012 ～ FY2014 （Plan）

Disruptive Innovation 0 model 1 model

World No.1 1 model 5 models

World 1st 2 models 2 models

Reduction of COGS 3 models 7 models

Enhancement of Sales Capability 1 model 2 models

Total 7 models 17 models


Assessment from Eye Care Business Market

Questionnaire severance by French Healthcare Research company (Ｉ) , Countries：Japan, U.S.A., Germany, Spain, Brazil, India, China Panels：Ophthalmologists, Optometrists / eyeglasses shops Total:700 responses Scoring : Five grades method

Assessment in Eye Care market, 2012

45

Item TOPCON Ranking

Level of recognition 4.30pt No.1 Innovativeness/Uniqueness 4.06pt No.2

Easy of use 4.15pt No.1 Product Quality 4.21pt No.2

Value of product vs. Price 3.71pt No.1 Level of sales reps.

Knowledge 3.93pt No.2 Sales reps. overall

Experience 3.89pt No.1 Service overall Experience 3.76pt No.1

Presence at trade show 4.09pt No.2 Level of intention to

purchase the product 3.89pt No.1

Topcon is overall No.1

Aim to be No.1 in all items



Ⅳ Appendix

47


Resource Allocation Plan

Mid-Term Plan 2014 (billion yen)

[Consolidated] FY2011 FY2012 FY2013 FY2014

CAPEX 3.4 3.4 3.0 3.0

(Depreciation) 3.1 4.0 4.0 4.0

R&D （R&D to Sales Ratio）

8.7 (8.8%)

9.7 (9%)

10.8 (9%)

11.7 (9%)

Investment 0.6 3.0 3.0 5.0

48


Consolidated Cash Flows Cash flows （billion yen） D/E Ratio （％）

Free Cash Flow

D/E Ratio

2013/3 2014/3 2012/3

15

5

0

100

0

200

180.2%

(5)

10

2015/3

157.1% 136.5%

5.3 4.0

7.9 98.3%

(3.6)

Mid-term Plan 2014

49


Mid-Term Action Plan

39％ 50％

35％ 15％

33％ 50％

20％

51％

New Field Sales Ratio Emerging Country Sales Ratio

Overseas Production Ratio New Product Sales Ratio

FY2011 FY2014 FY2011 FY2014

FY2011 FY2014 FY2011 FY2014

- Launch new products - Expand Sales channels

- Develop products for emerging countries - Enhance price competitiveness

- Expand China production - Launch world’s first & World’s No.1 products - Expand VA products

50


Cautionary Note regarding Forward-Looking Statements

These materials contain forward-looking statements, including projections of future operating performance. Such statements are based on management’s best judgment, given the materials available to them at the time these statements are made.

However, please be aware that actual performance may differ from projected

figures owing to unexpected changes in the economic environment in which we operate, as well as to market fluctuations.

Inquiries: IR Affairs Corporate Communication Dept. TOPCON CORPORATION Tel: +81-3-3558-2532 E-mail: [email protected] URL: http: //global.topcon.com/invest/

Documents

Mid-term Business Plan 2014global.topcon.com/invest/library/meeting/mid_plan/mt2014/pdf/mid... · Middle East Latin America Company Positioning Company Key Business ・ Surveying/GIS