CMIC Holdings Co Ltd
TSE:2309
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Thank you for joining the call amidst your busy schedule today. My name is Wataru Mochizuki, and I'm CFO of CMIC Holdings. Today, I'd like to speak about the financial results for the third quarter, referring to the slides posted on our website at 3:30 today.
Please take a look at this table for our business segment and group companies as of the end of June 2020. Our group consists of total 26 companies that include CMIC Holdings, a holding company; 23 consolidated subsidiaries, including 12 overseas affiliates; and 2 equity method affiliated companies.
In the third quarter, CMIC Holdings Company established CMIC Bio Company, a fully owned subsidiary that offers contract development and manufacturing organization services for biopharmaceutical drug substance. CMIC Bio started its operations in July.
Here is a summary for the third quarter of the fiscal year ending September 30, 2020. To achieve sustainable growth and corporate value improvement in the healthcare and pharmaceutical at this time of change, CMIC's midterm business plan, starting in the fiscal year 2019, includes focused activity items such as acceleration of PVC model, expansion of globalization and creation of Healthcare business. We are implementing various group-wide measures to execute such activities to achieve the midterm plan.
In the present term, we are experiencing activity restrictions including self-limited visits to medical institutions, and subsequent delay in adverse event collection as well as cancellation of academic conferences. We are focusing on sales activities to win new business. The outbreak of COVID-19 is rapidly changing the medical and economic environment and people's way of working. CMIC will enhance digitalization and utilize our talents in the healthcare arena to prepare ourselves for the post-corona era.
Next, I will explain our focus activities in each business unit. In the CRO business, we are pursuing initiatives in fields where clinical trials are expected to become more efficient in the post-corona era, such as virtual clinical trials and the utilization of real-world data. In CDMO business, we're promoting order-taking activities in the U.S. and for the new parenteral drug manufacturing building in Ashikaga. In the CSO business, the group continues to train MRs and expand services in the medical affairs field. In the Healthcare business, we are promoting the harmo business, the electronic prescription record service for over 1 million users, through partnership and collaboration with PHARUMO Inc. and [ Pocket Pharmacy. ] In the IPM business, we are steadily responding to an increase in cases for overseas pharmaceutical companies entering the Japanese market.
This is a summary of consolidated income statement. Sales in the third quarter of fiscal year 2020 was JPY 56.736 billion, grew JPY 1.881 billion year-on-year. On the other hand, operating income was JPY 3.137 billion, down JPY 890 million year-on-year. Ordinary income was JPY 3.486 billion, down JPY 157 million year-on-year. Current profit attributable to owners of parent for the third quarter of the current fiscal year was JPY 2.373 billion, up JPY 464 million year-on-year. Earnings per share was JPY 131.26.
Moving on to breakdown of nonoperating income and expenses, extraordinary income and losses, income taxes. For nonoperating income, we recorded JPY 590 million of share of profit of entities accounted for using equity method and other. For nonoperating expenses, we recorded JPY 170 million of interest expenses and other. For extraordinary income, we recorded JPY 46 million as gain on sales of share of subsidiaries and other. And as for extraordinary losses, we recorded JPY 75 million as loss on retirement of noncurrent assets. JPY 877 million was recorded as total income taxes and JPY 205 million as profit attributable to noncontrolling interests.
This table shows sales and operating income by segment. Overall, sales in the first half of fiscal year 2020 was driven by the CDMO and CSO business growth. However, operating income was below last year's figure, mainly due to decrease in profits of CRO business.
This table shows orders received and backlog. While we see decline in orders received due to the impact of COVID-19, CDMO business grew, thanks to the contribution by CMIC CMO Nishine, which became a CMIC Group company in June 2019. For CDMO business, only firm orders are included in the orders received in backlog, and the annual order plans proposed by customers are excluded.
This shows the trend in consolidated sales and operating income during the third quarter. We achieved increase in overall sales, but operating income decreased for the third quarter and operating margin was 5.5%.
This shows a trend in CRO sales and operating income. Sales were below the same period last year due to the impact of delay in receiving orders and cancellation/postponement of existing projects, resulting from the effect of the downsizing of development projects and the increase in complexity.
Operating income was also below the same period last year, impacted by reduced operation rates. Sales for this term was JPY 25.605 billion, operating income was JPY 4.288 billion, and operating margin was 16.7%.
This shows a trend in CDMO sales and operating income. Sales and operating income exceeded the same period last year, thanks to increased contract volume in Japan and the sales contribution by CMIC CMO Nishine Company despite the reduction of contract volume following the inventory adjustment by CCU customers in the United States. Sales of CDMO business increased by 28.2% to JPY 15.199 billion, and operating income was JPY 15 million.
This shows a trend in CSO sales and operating income. Sales and operating income exceeded the same period last year, thanks to the steady progress in MR dispatch projects acquired in the previous period and the operation rates maintained at the high level. CSO sales increased by 12.4% to JPY 6.516 billion, operating income was JPY 768 million, and operating margin was 11.8%.
This shows the trend in Healthcare sales and operating income. Sales were below the corresponding period last year despite growth in healthcare services, due to reduction in work volume for some BPO/Staffing Services. Operating income was below the same period last year, impacted by reduced sales of Staffing Services and prior investment cost to create new healthcare business models. Healthcare sales were JPY 7.463 billion, operating income was JPY 586 million, and operating margin was 7.9%.
This shows the trend of IPM sales and operating income. IPM business provides new business solutions to pharmaceutical companies that combine value chains and marketing authorization licenses, intellectual properties possessed by our group. In the third quarter of this fiscal year, we are selling orphan drugs, including products developed in-house. Further, we are strengthening business foundation through provision of IPM platform, such as supporting foreign companies entering the Japanese market with strategic options.
Those sales were below the corresponding period last year due to reduction in sales volume of some products. Operating surplus was recorded due to the effect of cost reduction and commission income. IPM sales was JPY 2.564 billion, operating income was JPY 121 million.
Next, I'd like to explain our consolidated balance sheet. Total assets at the end of the third quarter of the current fiscal year increased by JPY 5.888 billion year-on-year to JPY 86.068 billion. This is mainly due to an increase in cash and deposits, inventories and tangible fixed asset of CDMO business.
Capital investment for the third quarter of the financial period is JPY 6.910 billion, depreciation is JPY 3.050 billion, and amortization of goodwill is JPY 154 million. Total liabilities increased by JPY 3.749 billion year-on-year to JPY 50.935 billion. Most of the above is attributable to increase in borrowings from financial institutions anticipating the impact of COVID-19. Total net assets increased by JPY 2.138 billion year-on-year to JPY 35.133 billion. This is mainly due to an increase in retained earnings.
Next, I will explain the full year earnings forecast for fiscal year ending September 2020. Since it was quite difficult to reasonably calculate our future business performance due to the impact of COVID-19 including delay, postponement and cancellation of many pharmaceutical drug development projects, CMIC Group's future outlook was previously undetermined. Following the recent partial resumption of new drug development projects, we calculated and revised its forecast as provided above, based on all available information gathered at this point.
Our fiscal year 2020 performance forecast for sales is expected to be JPY 75 billion, operating income is expected to be JPY 2.3 billion, ordinary income is expected to be JPY 2.6 billion and profit attributable to owners of parent is expected to be JPY 1.35 billion.
This shows the sales and operating income forecast by segment for fiscal year ending September 2020. We expect both sales and operating income figures to fall for CRO business, our core business. In the current term, development projects were postponed and canceled due to the impact of COVID-19 pandemic. However, following the recent partial resumption of new drug development projects, we expect the sales figures to gradually recover toward the end of this fiscal year.
Operating income growth is expected to be limited due to the time lag to reflect the COVID-19 related cost and expected cost for the recovery of business activities. Sales are expected to increase, but operating income is expected to decrease for CDMO business. Since contract manufacturing volume in the United States continues to fall toward the end of the fiscal year, we [ expected ] to record losses.
Both sales and operating income are expected to increase for CSO business due to the execution of MR dispatching services that were won in the previous term. Both sales and operating income are expected to fall for our Healthcare business. Similar to CRO business, we expect to see the time lag to reflect the COVID-19 related costs for SMO business and expected cost for the new business including the electronic prescription network service, harmo.
Sales are expected to decrease, but operating income are expected to increase for IPM business. Sales volume continues to drop for some orphan drugs toward the end of this fiscal year. Though we also withdrew the dividend forecast announced on November 7, 2019 and made it undetermined in the second quarter, we expect the dividend to be JPY 17 based on the full year earnings forecast. We paid an interim dividend of JPY 5 per share as announced at the beginning of the fiscal year. As a result, the total dividend of the current fiscal year is JPY 22 per share.
This is all for today's conference call on the third quarter financial results.