nihonkohden

Mid-term Business Plan


Based on its management philosophy that "we contribute to the world by fighting disease and improving health with advanced technology, and create a fulfilling life for our employees", Nihon Kohden has established and aimed at realizing a long-term vision for 2020, The CHANGE 2020 -The Global Leader of Medical Solutions-.
TRANSFORM 2020 starting from FY2017 is the last stage of Nihon Kohden’s long-term vision. Nihon Kohden will consistently implement six key strategies in line with the basic policies to achieve the TRANSFORM 2020 targets. The Company will also strive to realize the envisioned corporate status.

Management Philosophy

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

Long-term Vision (April 2010 to March 2020)

In 2010, Nihon Kohden established a long-term vision, The CHANGE 2020 -The Global Leader of Medical Solutions-, for the next ten years to 2020. The envisioned corporate status for 2020 is to (1) lead the world in the development of revolutionary breakthrough technology, (2) achieve the highest level of quality in the world, and (3) attain the top share of applicable global markets.

Mid-term Business Plan, TRANSFORM 2020 (April 2017 to March 2020)

TRANSFORM 2020 is the last stage of Nihon Kohden’s long-term vision. The Comapny aims to transform its operations to achieve a highly profitable structure. In order to improve its profitability, the Company will further enhance its core Human Machine Interface* technologies and continue to create and provide three types of customer value: Innovation, Quality, and Clinical Value, that help to resolve the issues in medical practice.
*Humane Machine Interface is the user interface that connects human and machine. For Nihon Kohden, HMI indicates sensor technology, signal processing technology, and data analysis technology.

1. Basic policies

(1) Create high customer value
  • Nihon Kohden will focus on developing and selling in-house products with high customer value by leveraging its core technologies.
  • The Company will increase the competitive advantage of consumables such as sensors and enhance services that contribute to medical safety and efficiency in order to expand sales of consumables and services.
  • Nihon Kohden will establish a global sales and services network that draws on high levels of expertise to improve customer satisfaction.

(2) Improve productivity within the organization
  • Nihon Kohden will implement production reforms at its mother factory, Tomioka Production Center and establish a global supply chain appropriate for the Group in order to improve productivity and ensure the timely supply of products to countries around the world.
  • The Company will improve development efficiency by utilizing the R&D and testing environment at its Advanced Technology Center as well as strengthening the support from process management, quality management, and production technology.
  • The Company will reform its operating procedures and utilize information technology to improve the productivity of each employee.

2. Six key strategies

(1) Strengthen business expansion by region
Nihon Kohden will reinforce its business expansion in Japan, developed countries, and emerging markets to achieve sustainable growth in Japan and strong growth internationally.
  • Japan: Establish the business foundation for future growth to meet medical needs in an aging society
  • Strengthen its business structure in the U.S. which is the world’s largest market and a center of leading-edge medical care
  • Conduct strategic business expansion to meet medical needs in high growth emerging markets
(2) Achieve further growth in core businesses
Nihon Kohden will aim to achieve further growth in its core businesses such as Patient Monitoring Business, Diagnostic Equipment Business,  Treatment Equipment Business, IT Solutions Business, and Consumables and Services Business by continuous innovation and rapid response to changes in the market environment.

(3) Develop new businesses
Nihon Kohden will develop new businesses to meet new market needs in accordance with changes in the market environment and the progress of technological innovation, with the aim of creating future core businesses.
  • Create new customer value and new businesses by utilizing its technological resources such as sensor technology, signal processing technology, and data analysis technology
  • Create new businesses that meet new medical needs in an aging society
(4) Strengthen technological development capabilities
Nihon Kohden will further reinforce its technological development capabilities which are the basis for developing revolutionary breakthrough technologies, achieving the highest level of quality, and delivering high clinical value.
  • Further reinforce its core technologies which are the source of its competitive advantage
  • Introduce revolutionary technologies more rapidly through collaboration with industry-government-academia partnerships
(5) Pursue the highest level of quality in the world
Nihon Kohden will ensure the top quality in every activity of every division across the entire Nihon Kohden Group to ensure the satisfaction of customers around the world.

(6) Consolidate corporate fundamentals
To grow as a global company, Nihon Kohden will establish a global business management structure and promote CSR activities in three priority areas: Healthcare, Environment, and Corporate Activities.


[Reference] Investment plan for growth
The total amount of capital investments and R&D costs are planned to be about ¥16.0 billion and ¥23.0 billion respectively over three years.

3. Human resource development and corporate culture reform

To realize its management philosophy, Nihon Kohden will introduce a new personnel system and human resource development programs to foster human resources who act autonomously and will cultivate an open and energetic corporate culture.

4. Basic policy on distribution of profits and dividends

Nihon Kohden recognizes that returning profits to shareholders is one of management’s most important tasks. The basic policy on distribution of profits and dividends is to maintain stable and continuous dividend payments while retaining necessary reserves for future business expansion. Retained earnings are used in R&D investments, capital investments, M&A and development of human resources. The Company regards cash dividends as the basis of shareholder return and sets a target consolidated dividend payout ratio of 30% or more. Share buybacks are considered in a flexible manner, taking into account comprehensively the Company’s future business developments, investment plans, retained earnings, and stock price level.

The Progress of TRANSFORM 2020

Review of the 2nd year: FY2018

In FY2018 which was the second year of this plan, in Japan, Nihon Kohden put more sales resources into the Tokyo metropolitan area in April 2018, following the absorption of 11 domestic sales subsidiaries in April 2017 in order to respond to market changes such as the government’s healthcare reforms. The Company expanded its products and services which match each market; the acute care hospital market, the clinic market, and the PAD market. As the Company could attract replacement demand for IT systems and expand its consumables and services, domestic sales increased, but less than its target. This was due to the decrease in sales of locally purchased products in accordance with the Company's initiative to expand sales of in-house products. Internationally, in the U.S., our patient monitoring systems were introduced in the U.S. top hospitals and Nihon Kohden's presence was enhanced in the patient monitoring market. Sales of EEG were also recovered by reorganizing the sales structure. Sales in China showed strong growth and sales in the Southeast Asia recovered. Because sales in Europe and Africa were weak, the Company missed its overseas sales target. However, the Company was able to achieve its operating income target due to sales increases, gross profitability improvement, and lower SG&A expenses than expected. 
 
Consolidated ROE increased to 9.9% from 8.6% in the previous fiscal year. Both operating income and ordinary income increased, and net income margin improved because income taxes decreased compared to the previous fiscal year in which income taxes increased due to the tax reform in the U.S. In order to improve ROE, the Company will focus on increasing sales and profits by implementing its TRANSFORM 2020 plan. The Company will also improve efficiency of assets by measures such as reduction of inventories.
(Billions of yen)
  FY2017
Actual
FY2018
Original forecast Actual YoY  Compared to forecast
Sales 174.2 180.0 178.7 2.6% -0.7%
   - Domestic 128.1 130.7 130.2 1.6% -0.4%
   - Overseas 46.1 49.3 48.5 5.4% -1.5%
Gross profit
(Gross profit margin)
82.7
(47.5%)
86.8
(48.2%)
85.9
(48.1%)
3.9% -0.9%
Operating income
(Operating income margin)
14.5
(8.3%)
15.0
(8.3%)
15.0
(8.4%)
3.6% 0.3%
 ROE 8.6%    9.9%    


Measures in the final year: FY2019

In FY2019, which is the final year of this plan, Nihon Kohden will continue to execute the six key strategies. The Company forecasts increases in both sales and income, but it will miss the target of its mid-term business plan, TRANSFORM 2020. This is due to delays in the introduction of new products and to expenses involved in the establishment of the Eastern Japan Logistics Center and relocation of domestic offices. Such investments were not expected when the plan was set up.
Nihon Kohden continues to contribute to achieving a sustainable society and enhancing the corporate value of the Company through addressing the challenges of medical care through technological development.
(Billions of yen)
  Forecast in FY2019 Target in FY2019 
Sales 186.0 190.0 
   - Domestic 133.0 135.0 
   - Overseas 53.0 55.0 
Operating income 16.0 20.0 
Income attributable to owners of parent 10.7 13.7 
 ROE 12.0% 


Breakdown of overseas sales by region
(Billions of yen)
  Forecast in FY2019  Target in FY2019
Americas 25.5 27.3 
Europe 8.9 8.2 
Asia 16.0 16.5 
Other 2.6 3.0 

<Exchange rate assumptions>
Forecast in FY2019 :
¥108 to the U.S. dollar, ¥125 to the euro
Target in FY2019    :¥110 to the U.S. dollar, ¥115 to the euro

Press release and Presentation

Disclaimer

The contents of this document are based on the Company’s best judgments at the time it was prepared and do not constitute a guarantee or promise that the Company will achieve its numerical targets or implement the measures described therein.