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I am the CAFO, Muto. I will now explain the first quarter results for the fiscal year ending March 2021.
First, I will give an overview of the Terumo Group as a whole. In sales revenue, Cardiac and Vascular was impacted by COVID-19, but the impact on the General Hospital and Blood and Cell Technologies companies was very light, resulting in a 14% decrease in revenue for the Terumo Group and an 11% revenue decrease when excluding FX impact.
Group adjusted operating profit was greatly affected by the decrease in Cardiac and Vascular revenue because that company has high profitability.
In expenses, control of R&D spending that is important for mid- to long-term growth was only limited, and SG&A was reduced year-on-year due to COVID-19 restrictions on activities and due to our efforts to control nonurgent spending, leading to a 30% decline in adjusted operating profit and 31% in operating profit when excluding FX impact.
Profit for the year was 39% below the same quarter of the previous fiscal year. As the title suggests, the Cardiac and Vascular Company was affected by COVID-19, but there was only light impact on General Hospital and Blood and Cell Technologies, resulting in a lessening of the total COVID-19 impact on revenue and profit.
Next slide, please. This is the variance analysis of adjusted operating profit compared to the same quarter of the previous fiscal year. Gross profit decrement by sales decrease had a negative impact of JPY 9.1 billion primarily due to the loss of sales in the Cardiac and Vascular Company.
Gross margin decrease had a negative impact of JPY 2.8 billion due to the adverse effect on product mix resulting from decreased Cardiac and Vascular revenue.
Amid reduced demand in the first quarter, we took into consideration the unclear outlook, and rather than reducing our production volume, built up inventory for BCP purposes. As a result, our manufacturing costs slightly decreased, somewhat lessening the negative profitability impact.
Price erosion was lessened with the decrease in Cardiac and Vascular sales to start the year with a modest JPY 300 million negative impact. The Japan reimbursement price revision impact was JPY 1.1 billion, which was heavy compared to the previous fiscal year. This is because there was no price revision in the first half of the previous fiscal year due to the consumption tax increase that took effect then.
European MDR had an impact of JPY 400 million, while IT investment amortization expenses were JPY 300 million. These were not significantly different from the previous fiscal year, and work in both projects is proceeding as planned.
SG&A decrease had a positive year-on-year impact of JPY 3.4 billion, not only because of reduced travel and promotion expenses due to limited access to hospitals, cancellation of conferences and remote activities amid COVID-19, but also thanks to Terumo Group-wide efforts to thoroughly control nonurgent expenses.
On the other hand, R&D decrease had a positive year-on-year impact of JPY 400 million, because though we generally maintained our R&D investment in projects for mid- to long-term growth, we also controlled spending on some nonurgent projects.
FX negative impact was JPY 2 billion year-on-year due to yen appreciation against the euro, Chinese yuan and Latin American currencies.
Next slide, please. Next is revenue by region. In Japan, there was some COVID-19 impact on Cardiac and Vascular sales. But in General Hospital, which accounts for the largest proportion of Japan sales, there was also increased demand for some products due to COVID-19, making General Hospital sales stable, for a total Japan revenue decrease of 4% year-on-year.
Outside Japan, all regions saw double-digit negative revenue growth due to the decrease in Cardiac and Vascular sales.
In the United States, in particular, there was a significant decline in the number of procedures performed in the first quarter.
In China, there was some loss of revenue due to impact from the timing of orders from distributors in the neurovascular business. But when that is excluded, China showed the best recovery of any region.
Next slide, please. Next is revenue by business segment. Due to postponement of elective procedures, both for interventional procedures and outpatient procedures, Cardiac and Vascular Company had seen impact on its demand, but there began to be a recovery in revenue along with the recovery of procedure numbers in June at the end of the first quarter.
General Hospital saw decreased revenue for some products due to COVID-19 impact, but other products, including thermometers and disinfectant, saw increased demand. And the Alliance business continued its double-digit growth to stabilize the company as a whole.
Blood and Cell Technologies had postponement of apheresis therapies, but blood component collection system was a driver in the company as a whole, seeing stable growth. I will give more detail by company in the next slides.
Here is the Cardiac and Vascular Company. Revenue was impacted by COVID-19 in all businesses, resulting in 21% negative sales growth when excluding FX. TIS business was negatively impacted overall by decreased demand. The neurovascular business demand was greatly impacted because most aneurysm cases are elective procedures. CV was affected by some decreased demand, but ECMO and other instrument sales increased in Japan, lessening the severity of the decrease in sales.
The Vascular business experienced a decrease, both in surgical graft and stent grafts, leading to negative sales growth.
Profit also declined as a result of the decreased sales revenue. While there were instances in which demand declined in the first quarter, our efforts towards building inventory for BCP and stable supply purposes led to improved production costs, and this lessened some of the decreased profit impact.
Next slide, please. Next, the General Hospital Company. Sales revenue was affected by decreased demand and limitations on care involving certain General Hospital products and pharmaceuticals. In DM health care, demand expanded for thermometers and other health care products used in COVID-19 measures.
In the Alliance business, regions outside of Japan were drivers in maintaining double-digit growth as a whole. In profit, there was a slight impact from the lowered production level due to the lockdown in the Philippines, but the company controlled expenses to maintain the same profitability as the previous fiscal year.
Next slide, please. Next is Blood and Cell Technologies. In sales revenue, amid concerns about a lack of donors affecting the blood center business, the highly efficient blood component collection system drew attention. And further, blood centers moved to build inventory from a BCP perspective, leading to increased demand.
In that situation, new software was introduced for blood component collection system, Trima, and sales grew with its message of better efficiency.
There was also a contribution from increased demand for convalescent plasma to be used in COVID-19 treatment. This, too, helped drive the blood center business' overall double-digit growth, when excluding FX impact.
There was impact from the decrease in demand due to postponement of elective therapeutic apheresis. But as a whole, the Blood and Cell Technologies Company achieved sales revenue growth of 2%, and 7% growth when excluding FX impact.
Product mix improved due to a higher proportion of high profitability blood component collection system sales. In addition, strong cost control, especially in SG&A, led to a large increase in profit.
Next slide, please. Here are the topics for the first quarter. One topic for the Terumo Group was that we made a $2.4 million donation to support the WHO and others in the fight against COVID-19. In company topics, there were new product approvals and launches showing that Terumo is making steady progress for sustainable growth, even amid COVID-19.
Next slide, please. Here is the new product pipeline for this fiscal year. I won't go into the details, but product launches are currently on schedule. However, we will carefully watch to see if COVID-19 impact will affect any anticipated releases.
Next slide, please. Next is our FY '20 guidance. First, I will explain our guidance assumptions. Regarding sales, we anticipate that the first quarter was where sales bottomed out and that there will be a recovery thereafter. Many aspects of the COVID-19 second wave impact remain unclear. So we have not assumed those impacts in our FY '20 guidance.
We will continue to maintain certain controls on SG&A. However, as demand returns in the second half, it is anticipated that companies will become aggressive in competition to realize quicker recovery. We will compete proactively as we watch performance for the appropriate timing and amount to increase spending.
As a principle, we will not lower R&D activities levels and continue to invest in spending that contributes to mid- to long-term growth.
As I mentioned earlier, we built up our inventory for BCP purposes during the first quarter when the outlook was uncertain. From the second quarter onward, we will monitor the spread of COVID-19 and how each country responds to it and watch our own results, adjusting our production activity volume to gradually decrease inventory toward normal levels.
Next slide, please. Here is our FY '20 guidance. In sales revenue, we expect to see a recovery pattern back up to a 5% level decrease from the 10% level of the first quarter and then to a 2% decrease year-on-year, when excluding FX impact.
In adjusted operating profit, we hope to restore the year-on-year decrease from the 30% of the first quarter back up to minus 18% year-on-year by the end of this fiscal year.
Guidance FX rates are JPY 105 to the U.S. dollar and a slight yen appreciation against the euro from the current level to JPY 120. Our dividend guidance from the May earnings announcement is unchanged with a JPY 14 interim dividend and a JPY 14 year-end dividend.
Next slide, please. Next is our revenue guidance by company. Cardiac and Vascular experienced decreased demand due to postponed elective procedures in the first quarter. But we anticipate that it will recover in the second half and end up around minus 8% for the year and minus 5% when excluding FX impact.
In General Hospital, COVID-19-related limitations on some medical care will continue at a certain level, having a negative impact on general medical products and pharmaceuticals. On the other hand, we anticipate that the Alliance business will drive to cancel that out, leading to 1% sales growth.
In Blood and Cell Technologies, we anticipate that there will be a decrease in blood bag sales, but that the strong momentum of blood component collection systems will cancel out the negative impact for a 2% increase in sales, when excluding FX impact.
Next slide, please. This is the last slide. I will explain how we envision the quarterly sales trend based on last fiscal year's results. The first quarter saw a little over 10% decline in sales revenue. However, looking at monthly sales of Cardiac and Vascular, which was the most affected by the virus, while there was a mid-30% year-on-year decrease in April, sales recovered to a decline of only a little below 10% by June.
We anticipate a recovery pattern to start in the second quarter with approximately normal levels in the third quarter and then positive growth in the fourth quarter.
The fiscal year still poses uncertainty with the COVID-19 second wave. However, we will make proactive contributions towards its prevention and treatment as we seek to meet the needs of the new normal and steadily return to a growth pattern. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]