Message from the CFO

The information on this content is as of August 2023.

Nikon will promote both growth investments and shareholder returns. Muneaki Tokunari Director and Executive Vice President

Looking Back at FY2022

Both revenue and profit grew in the fiscal year 2022, which was the first year of the new Medium-Term Management Plan. Revenue increased 88.5 billion yen year on year to 628.1 billion yen, operating profit increased 5.0 billion yen year on year to 54.9 billion yen, profit attributable to owners of parent increased 2.3 billion yen year on year to 44.9 billion yen, and ROE reached the mid-7% range for the second consecutive year.
As for the two main business segments, the Imaging Products Business provided a stable revenue source with an operating profit margin in the upper 10% range. Within the Precision Equipment Business, the progressive diversification of customers for our mainstay product line, ArF lithography systems, in the semiconductor equipment industry, has contributed to a consistent and reliable earning performance.
In the three strategic businesses, the Components Business recorded growth, with EUV-related components as the main driver, and posted an operating margin of nearly 30%. The Healthcare Business also generated excellent results, such as by achieving the Medium-Term Management Plan's operating profit target of 10 billion yen three years ahead of schedule. Furthermore, the Digital Manufacturing Business acquired SLM Solutions Group AG (currently Nikon SLM Solutions AG, hereinafter “SLM”), one of the world's leading companies specializing in metal 3D printers. This business is expected to remain unprofitable for the time being, but our policy is to cultivate it as a pillar of earnings for the future.
For these reasons, I consider FY2022 to have been a satisfactory beginning to the Medium-Term Management Plan.


Outlook for FY2023 (based on May 2023 announcement)

In May 2023, we forecasted higher revenue and lower profit for FY2023 in the form of revenue of 665.0 billion yen, operating profit of 43.0 billion yen, and profit attributable to owners of parent of 35.0 billion yen.
The increase in revenue is expected to be driven both by strength in the main businesses and by a full year of contribution to sales from SLM.
On the other hand, the main factors behind the forecast decline in profit are a definite and significant decline in profits for FPD lithography systems in the Precision Equipment Business, and the launch of the newly established Digital Manufacturing Business, which will initially be loss-making. When formulating the Medium-Term Management Plan, we assumed that factors associated with the FPD business cycle would lead to FY2023 marking the bottom in terms of earnings, and we believe that a rebound in FPD lithography systems in FY2024 will lead to a recovery in performance for the Company as a whole.


Capital Allocation: Growth Investments and Shareholder Returns

Nikon's capital allocation policy is to use capital primarily for growth. Specifically, we seek to maintain the equity ratio in the high-50% range, while earmarking around 90% of allocable funds of 700.0-800.0 billion yen to strategic investments, R&D, and capex.
In the diagram below, the areas shaded in yellow represent funds that were actually allocated in FY2022. For example, in terms of strategic investments, which are shown in the upper right, we allocated about 88.0 billion yen to the acquisition of SLM.


At the same time, we will enhance shareholder returns. Our shareholder return policy is to increase the dividend with the aim of achieving a dividend of 60 yen in the final year of the Medium-Term Management Plan. In FY2022, we raised the year-end dividend by 5 yen, and in FY2023, we intend to maintain that level and pay an annual dividend of 50 yen.
In addition, it is also our policy to implement opportunistic share buybacks of at least 30.0 billion yen during the period of the Medium-Term Management Plan.


Officer Compensation System and Sustainability Strategy Linked to Improvements in Corporate Value

Nikon's officer compensation system was designed with an awareness of the link to corporate value, and more than half of officer compensation varies in line with Company performance. The specific mechanism is that officer compensation moves in accordance with ROE and operating profit, and share-based compensation PSUs are linked to KPIs related to sustainability strategy.
Nikon has placed the concept of “Creating social value through core technologies” at the center of its sustainability strategy, and through our core business we hope to contribute to a more sustainable society and environment. We are also working to reduce greenhouse gas emissions, and actively engaging with diversity, equity and inclusion initiatives. These measures have been rated highly by external evaluation agencies.


By solidly executing the Medium-Term Management Plan in this way, we will link improvements in non-financial value to increases in financial value, and also promote both growth investments and enhance shareholder returns, in order to obtain market recognition.