Vision & Strategy

The Three-year Business Plan, BEACON 2030 Phase I, covering FY2021 to FY2023, was the first stage in realizing Nihon Kohden’s Long-term Vision. The Company focused on strengthening its business foundation to improve the profitability of its existing businesses and cultivated new business areas and business models. In Japan, the Company promoted creating customer value propositions that contributed to improving medical safety, patient outcomes, and operating efficiency, as healthcare systems to respond to emerging infectious diseases were established and work style reforms for medical staff were implemented. Internationally, while the shortage of nurses and inflation of prices continued to have a negative impact, the Company focused on proposing medical equipment which contributed to easing medical staff workloads and enhancing its business foundation in the U.S. and emerging markets. The Company launched a series of its first new high-valueadded products such as a fully automatic AED, a resuscitation monitor for neonates, syringe pump control software for assisting with total intravenous anesthesia, and a mid-range ventilator developed by Nihon Kohden OrangeMed, LLC in the U.S. Internationally, Nihon Kohden strengthened its business structure. The Company acquired AMP3D, LLC in the U.S. and Software Team Srl in Italy. The Company also reorganized its U.S. subsidiaries into a holding company structure.
As a result, in FY2023 ended March 2024, which was the final year of BEACON 2030 Phase I, domestic sales increased favorably. Overseas sales fell short of the Company’s target on a comparable basis excluding the impact of foreign exchange rates, due to changes in the market environment mainly in the U.S. and China, which the Company has focused on. In addition to actual overseas sales fell short of its target, operating income margin fell short of its target because of increases in the cost of goods sold due to an increase in devaluation of inventories, as well as increased SG&A expenses due to the strengthening of human resources, wage increase, and inflation. Thus, improvement of profitability remains an issue. Additionally, the increased inventories of finished goods and parts to respond to the shortage of semiconductors led to a longer cash conversion cycle, while the Company promoted supply chain management reforms and continued to supply products globally.

Faced with a rapidly changing global situation and a difficult business environment, in BEACON 2030 Phase II, covering FY2024 to FY2026,  Nihon Kohden will implement the reform of the profit structure, make investments in growth areas, and establish collaborations between new business models and existing businesses, based on the results and issues of the previous Three-year Business Plan.

Exchange rate assumptions: 140 yen to the U.S. dollars, 150 yen to the euro

The total operating cash flow is expected to be ¥80 billion or more over three years. The total amount of R&D costs and capital investments are also planned to be about ¥23.5 billion and ¥25 billion, respectively. The Company will undertake R&D investments in its core business, patient monitors, as well as ventilators and digital health solutions. The Company will make capital investments to construct a new plant in Tsurugashima City, Saitama Prefecture, as well as promoting corporate digital transformation including introduction of PLM/MES systems and generative AI, and advancing supply chain management. The Company will also seek M&A opportunities in the area of synergies with existing businesses, especially for digital health solutions.

Nihon Kohden will make investments for future business expansion and enhance shareholder returns as well as securing a sound financial foundation. The Company has revised the indicators and targets for shareholder returns from a consolidated dividend payout ratio of 30% or more to a consolidated total return ratio of 35% or more. The priority for distribution of profits is i) investment necessary for future business expansion used in R&D investments, capital investments, M&A or alliances, and development of human resources, and ii) shareholder returns. In terms of shareholder returns, the Company will increase dividends in a stable manner in line with growth in business performance. Share buybacks are conducted in a flexible manner, taking into account comprehensively the Company’s future business deployment, investment plans, retained earnings, and stock price level. The Company plans shareholder returns of ¥28 billion or more over three years and will consider additional shareholder returns depending on the progress of its future investment plans.