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Sales, profits slump at Hoya on strong yen and quake damage

01 Nov 2016

Glass and optics giant reports sharp real-terms decline in LCD photomask sales, but is set to benefit from future EUV boom.

Hoya, one of Japan’s largest glass and optics companies, has reported a sharp decrease in sales in its latest financial quarter, partly as a result of the strong yen, but with other factors including the Kumamoto earthquakes in April taking a toll.

At just under ¥115 billion in the three months that ended September 30, revenues dropped 12 per cent on the same period in 2015, with slowdowns in sales of photomasks and semiconductor wafers largely responsible.

Hoya is also suffering from the rapidly declining market for standalone digital cameras, which is being cannibalized by camera phones, although on the plus side CEO Hiroshi Suzuki was able to report a “double-digit” increase in sales of intraocular lenses used in cataract surgery.

Sector breakdown
Suzuki and his executives say that after adjusting for currency rate fluctuations, its semiconductor wafer mask blank business actually reported an increase in sales, alongside better profitability.

They pointed out that Hoya is closely involved in the development of an extreme ultraviolet (EUV) product ecosystem, with EUV-related sales doubling over the same period last year. That ramp up is set to continue, with the key time period coming in 2018 and 2019, as semiconductor manufacturers scale up production of next-generation devices.

At the moment, sales of EUV mask blanks are believed to represent around 10 per cent of overall mask revenues – but according to Hoya’s COO Eiichiro Ikeda that percentage should double by 2018 as the technology becomes more widely adopted.

Meanwhile sales of photomasks for LCD production fell by 20 per cent year-on-year, even after foreign currency adjustments. Hoya said that this was largely attributable to the Kumamoto earthquakes, which severely reduced capacity at its local production facility after damage was found to be much worse than initially thought.

Repairs to the facility are ongoing, with some production shifted to alternative sites in Taiwan and Korea, but with new mask writers now on order the company expects to start seeing a turnaround in fortunes in early 2017.

The earthquake has hit sales of other products - including Hoya’s lenses for digital cameras, which were also down 20 per cent year-on-year. Most of the contraction has been attributed to the shrinking market for standalone cameras and a shortage of image sensors that also impacted production volumes. Hoya is looking to compensate for the shrinking volumes by targeting surveillance cameras and emerging applications such as automotive vision.

Life sciences: stronger growth wanted
One bright spot for the company appeared to be the life sciences segment, where sales of intraocular lenses – used to replace damaged natural lenses in cataract surgery – were up strongly and helped cement Hoya’s domestic position in this growing sector.

The company is targeting Europe with the same products, although it says that production capacity issues have now started to create a bottleneck. A new plant is slated to begin operations in the first half of next year, in a bid to solve that problem.

Overall, CEO Suzuki reckons that, if currency effects and the earthquake impact are excluded, Hoya actually posted a slight year-on-year increase in revenues in the latest quarter. And although the life sciences sector did grow solidly, he said the company was looking to this market to drive Hoya’s overall growth – and that this demanded stronger performance than the relatively modest gains just reported.

Hoya’s pre-tax profits for the latest quarter came in at ¥31.6 billion, down 6 per cent on the ¥33.9 billion reported a year ago.

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