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Good evening, everybody. This is Terumo's CEO, Shinjiro Sato. Today, I want to give a management perspective on the production and operation strategy that will support achievement of GS26. Since it is the key to realizing sustainable growth, I hope you will keep it in mind in understanding Terumo.
Let's take a quick look at Terumo history. Terumo production strategy has evolved along with the times. Terumo first grew as a Japanese manufacturer with production centered in Japan. The basis for producing blood and hospital products for Fujinomiya and Kofu with cardiac and vascular products in Ashitaka. Through the '70s and '80s, we experienced some failures to build factories overseas. With the lessons learned from that, Terumo production strategy thereafter became very oriented toward mitigating risk.
From the '90s onward, we transferred labor-intensive production lines to China and other countries in Asia. The Hangzhou factory is one example, as are the Vietnam factories and the Philippines factory. The next big turning point was our acquisition of companies outside Japan. This led to Terumo having production sites outside Japan. As a result, Terumo now has over 32 production sites located around the world.
Today's theme is how we will globally optimize and leverage these towards sustainable growth. In GS26, Terumo commits to achieving profitable growth. The growth rate is in the high single digits, but quantitatively, it is double-digit growth to double in 5 years. In particular, we expect continued high growth from cardiac and vascular interventional products, meaning that enhancing our global production is of the utmost urgency.
Regionally, we will grow faster outside Japan with the U.S. and China especially important drivers, therefore, securing the capability to supply these 2 giant markets becomes the second most important task. Another is that in GS26, we will shift our business model to capture new growth. The Medical Care Solutions CDMO business to serve pharmaceutical companies and plasma innovation of the Blood and Cell Technologies Company are 2 examples of this. These require us to meet the enormous demand of our partners. And to do this, infrastructure investment is the key to success.
Another pillar of GS26 is earnings improvement, improving gross profit margin by reducing production cost is one large pillar. We will go beyond on selecting sites based only on production location to also take into account procurement and transport costs. Further, we will enact programs that automate and take labor saving measures for the labor-intensive processes unique to medical devices.
Today, I will explain 4 specific measures that we will take to make GS26 a success in achieving profitable growth. First, expand our supply capability to bring cost competitiveness in the United States market, which has the largest growth potential in GS26. At the center of this solution is the shift to production in Costa Rica. Second, enhance our production in for the China market, which has the second largest growth potential in GS26. Third, optimize the global production of the TIS business, which drives the growth and profitability of the entire Terumo Group. Fourth, make aggressive infrastructure investment to secure the B2B businesses that will serve as new growth drivers.
First, regarding Costa Rica as a supply site for the Americas. The most advantageous aspect of Costa Rica is that it is a manufacturing cluster of the U.S. medical device industry. Other advantages include its minimal time difference with the United States. The fact that English is used and understood, and its accessibility by a relatively short flight. In addition, its abundant hydro and electric resources making significantly low impact environmentally, which is a big advantage in our goal to reach carbon neutrality. Further, with access to ports on both the Atlantic and Pacific Oceans, shipment becomes possible not only to the East and West Coast of the United States, but to Japan and Europe as well.
Terumo first entered Costa Rica with the production site of the neurovascular business in 2011. It was an enormous turning point for Terumo. This is because until then, Asian regions were the main place for Terumo production outside Japan. If our paradigm had remained limited to managing sites from Japan, Costa Rica would not have been an option as a location not accessible by direct flight from Japan.
Thanks to MicroVention being a U.S. company, Costa Rica was an option. Since then, Costa Rica has played an important role as a production site, supporting the rapid growth and earnings improvement of MicroVention. It is now a production site with over 2,000 associates, and we recently opened a technical center. They are capable of performing some development activities as well.
Following on this success, fellow U.S. headquartered subsidiaries, TBCT and TCV are also in the process of transferring some production capacity to Costa Rica. The first step is to transfer labor-intensive processes, but the shift will accelerate with each success. Terumo Group as a whole now has over 3,000 associates in Costa Rica, which enables efficiencies in areas like procurement and management through collaboration. This slide shows the financial impact of the Costa Rica transfer. The timing varies for each achievement, having been the first there, MicroVention has already completed some activities while TBCT and TCV still have future potential. There is no doubt that within the GS26 period, we will see definite financial benefits.
Next, regarding the China production strategy. We have high expectations for growth in China market within the GS26 growth strategy. Even with anticipated economic slowing, healthcare in China has a strong foundation of demand and we'll see steady growth. Previously, we have supplied China through imports from either Japan or the U.S. However, with the national strategy in recent years of VBP, volume-based procurement, and the policy of favoring domestic manufacturers, Terumo has undertaken a policy shift. In addition, as geopolitical risks have emerged, producing in China has now become a viable option for all Terumo companies.
Terumo Group currently has 2 production sites in China. One is the Hangzhou factory, which Terumo has gradually developed from scratch since the '90s. It is currently focused on making general hospital products for the Japan market, but we are looking into shifting it toward producing a variety of products for the China market. Its greatest strength is the many experienced excellent local associates there who make future strategic moves possible.
The other production site in China is Essen, a manufacturer located in the Beijing area. Several years ago, Terumo acquired Essen as a local China manufacturer of DES products. Its profitability temporarily dipped with VBP, that provided an impetus to improve cost competitiveness and expand share. This has rapidly raised its competitiveness. Here too, we will expand beyond the current products manufactured to include balloons, guidewires, microcatheters and other therapeutic devices for the China market. The site also has development functionality tailored to the China market, and we intend to broaden the strategic ways that we use it to produce locally.
Third is the global optimization of TIS as a whole. Through the period of GS26, TIS will remain a pillar of Terumo Group's growth and earnings. How well we can produce competitively here will determine the success of GS26. Previously, the Ashitaka factory in Japan supported most TIS production, including development. However, the shipping delay that occurred in FY '18 exposed the danger of excessive dependency on the Ashitaka factory since then Terumo Group has made efforts to rebuild and optimize the TIS global production network.
With the diversity of products in the medical device industry, it was most common to optimize each factory separately. With TIS, we have changed that thinking and conducted an optimization project to unify the entire group. The results have been striking. The excessive concentration in Ashitaka factory has been corrected with judicious dispersal of functions across Vietnam, Yamaguchi, the U.S. East Coast, and clinical supply, Puerto Rico progressing. This has in turn freed up Ashitaka to work on new production themes.
In concert with this optimization project, we are working group wanting to also improve SCM and risk management, reducing business risk at an overall level in raising efficiency. By managing these diverse themes with consistent, integrated and meticulous project management, we are seeing disciplined execution and definite results. We plan to realize at least JPY 7 billion to JPY 8 billion in cumulative improvement throughout the course of GS26 as well as visible gross profit improvement for the TIS business.
Fourth is aggressive infrastructure investment in the new growth drivers that will shift our business model. Terumo has historically had a business model centered on hospitals purchasing our individual devices or instruments. However, the current expansion of biopharmaceuticals and omnicide therapies is accelerating a move toward demand from pharmaceutical manufacturers for access and delivery solution.
One example of this is the Pharmaceutical Solutions business, which is the CDMO business model. One feature of this business is that it is equipment-intensive and requires rational upfront investment based on contracts with partners. In FY '21, the CDMO business had already reached JPY 30 billion in sales. And in GS26, it is planned to grow further in the double digits, requiring continued proactive infrastructure investment.
Another growth driver is the BCT Plasma innovation business. This business required a large initial infrastructure investment because it consists of providing our partner, which has global demand for its products, with a comprehensive source plasma collection solution. If the business comes to serve more regions or new partner collaborations, it will need to grow further, making the ability to expand production efficiently and grow fast key.
In conclusion, GS26 is not simply about growth, the year in which we could expand production by simply copying our existing factory lines is over. We will expand production from a global perspective in a balanced way and it is vital that we achieve this in a way that brings earnings improvement. Through wellness, it is requisite that we also reduce our impact on the environment. Achievement of the other GS26 strategic goal shown here also depends on the production and operations strategy. This is the importance of production and operations front aiming for both quantity and quality.
Through national analysis and certain execution and by investing needed resources and money, we will strive to achieve the best results in GS26. We hope you will watch the evolution of Terumo production and operations along with us.
I am the CAFO, Muto. I will now explain the second quarter results for the fiscal year ending March 2023. First, the highlights of this earnings announcement. Revenue returned to a growth pattern with all 3 companies growing positively year-on-year. The group achieved quarterly revenue exceeding JPY 200 billion for the first time for its highest ever result. The recovery of both number of procedures and healthcare demand was steady and all regions outside Japan grew year-on-year even when excluding FX impact.
In addition, the Plasma Innovation began sales in this quarter. In profit, although impact from inflation caused cost increases, it was exceeded by increased revenue to result in double-digit 11% gross profit growth. We continue to align our portfolio. As part of this, we sold the Autologous Biologics business, a part of cell therapy technologies in Blood and Cell Technologies Company and booked JPY 3.5 billion as impairment of the goodwill from that business. Finally, the turnaround in this quarter to increase adjusted operating profit year-on-year is a very good sign.
Next slide, please. Here are the P&L results. Revenue exceeded JPY 400 billion year-to-date. This was a 17% increase from the same quarter of the previous year. Positive impact by FX was JPY 41 billion. Positive growth was 5% when excluding FX. In Q2 stand-alone, revenue grew 19% year-on-year to reach JPY 206 billion. Positive impact by FX was JPY 24 billion. Gross profit was impacted by macro environmental changes, it continued the trend from the first quarter to reach the highest ever result for a quarter, JPY 100 billion.
Operating profit was JPY 25.5 billion, which includes the impairment that I just mentioned. This resulted in a temporarily low level, but we will book the capital again by sale of nutrition business in second half, then no impact remains in the full financial year. Adjusted operating profit for the stand-alone second quarter turned around to grow positively, which in turn lessened the year-to-date profit decrease.
Next slide, please. Here is the second quarter stand-alone variance analysis. Gross profit increment by sales increase was JPY 5.1 billion, the same amount as in the first quarter. Gross margin was the same amount as the first quarter and no inflation impact remained. Mix improvement continued steadily. In price, the price increase effects was JPY 500 million, expanding from the first quarter. In SG&A, R&D increase, we invested where necessary, while maintaining control and staying within plan, thanks to prioritizing expenses in company.
Region and HQ in FX, it continued positive impact by yen depreciation from Q1. As the result, the turnaround in this quarter to increased adjusted operating profit year-on-year.
Next slide, please. Here is the year-to-date operating profit variance analysis. I will explain the discrepancy almost 5% decrease from 19.1% in the last year to 13.9% in this year. Please be accepted to explain the breakdown by percent, although the graph shows the amount. In gross margin, factors including accelerated product mix improvement in C&V Company and TBCT and no more production adjustment helped to stem the impact of expanding inflation such as material cost, electricity and gas costs as well as startup cost of Plasma Innovation. While SG&A, R&D increase was 1% Y-o-Y, we controlled 1% comparing with the expenditure before COVID-19.
FX impact was positive in sales amount, but sales percent declined 1%. The reason why U.S. dollar sensitivity makes positive in sales, but neutral in profit. Finally, 1% coming from the impairment total becomes 5% decrease of profit.
Next slide, please. Next is revenue by region. In Japan in a stand-alone second quarter, the seventh wave of COVID resulted in decreased revenue at all 3 companies. However, new products RelayPro, AZUR, Nagomi, et cetera, grew. In the EU, both first half and Q2 stand-alone revenue saw a steady 5% increase when excluding FX. Q2 was just below Q1, but this was due to seasonal factors and the overall trend remained unchanged. In the Americas, it was high growth, thanks to FX. First half revenue grew 7% when excluding FX. The number of procedures is recovering and this shows that we are returning to a growth trajectory.
The TIS business of the Cardiac and Vascular Company grew 2% compared to the first quarter, even when taking seasonal factors into account. In China, first half revenue grew 8% when excluding FX. There was no impact from the subsequent lockdown. Asia and others were the fastest growing, with 14% in first half, 13% Q2 stand-alone revenue growth. Drivers included expansion in the number of procedures for the Cardiac and Vascular Company and increased demand for the Blood and Cell Technologies Company, Blood Center business.
Next slide, please. I will now explain the results by company. First, the Cardiac and Vascular company, overall revenue was JPY 230 billion year-to-date or 21% year-on-year growth or 6% when excluding FX. This was a slight decrease from Q1, but that was due to seasonal factors in places, including the EU and China. Number of procedures recovered more slowly in Japan, where COVID impact occurred but was better than Q1 in the U.S. Also each successive month of Q2 showed improvement. The EU, China and Asia were steady, returning approximately to planned levels.
In TIS, China and Asia saw a double-digit growth when excluding FX, while the EU and U.S. grew steadily in the single digits for an overall 7% growth outside Japan. New product pipeline, including coronary artery microcatheter and guidewire as well as oncology and peripheral intervention drove high growth. Neurovascular maintained double-digit growth in the EU and U.S. even when excluding FX. WEB for aneurysm expanded further in North America, all new product impact grew similarly with FRED. The revenue decrease from Q1 was due to seasonal factors and the overall trend remained unchanged.
CV was steady and only impacted by seasonal factors. Here too, the overall trend remained unchanged. TA saw strong results from the new thoracic stent graft product, RelayPro. It became the fastest-growing new product in the first half. The Thoraflex Hybrid product also grew in the EU and U.S. Profitability temporarily dipped with upfront investments in future sales expansion, including the neurovascular business shift to direct sales in Korea.
Next slide, please. TMCS is the Terumo Medical Care Solutions Company. Its overall revenue was just above JPY 90 billion or minus 1% growth when excluding FX. However, Q2 stand-alone revenue increased 3% over Q1 showing signs of recovery. Hospital Care Solutions was 2% growth in first half. We saw our revenue decrease due to seventh wave COVID impact in Japan, but regions outside Japan covered us. Revenue decreased a little when excluding FX.
Life Care Solutions revenue was impacted by the return to normal of demand for products, including thermometers and blood pressure monitors, which saw extraordinary demand in the previous year. Another impact was the intensification of competition in products for self-measurement of blood glucose, which pushed prices down. Pharmaceutical Solutions had a strong Q2 with risk sales of pharmaceutical containers outside Japan for 15% year-to-date growth. Segment profit declined by electricity and gas cost inflation in Q2 stand-alone in addition to material cost inflation as well as Chinese yen appreciation.
Next slide, please. Next is Blood and Cell Technologies Company. First half revenue increased 27%. Q2 stand-alone increased 32% as well as double digits growth when FX excluding. In the Blood Center business continuing from Q1, global demand for transfusions recovered. In the EU and U.S., whole blood automation innovation also contributed to the revenue increase. Component collection grew in the EU, U.S. and China. In addition, Plasma Innovation sales began in Q2. Therapeutic Solutions saw steady demand in line with an increased number of cell therapy treatments. Excluding FX, it grew 9%. As the need for cell therapy expands, there is steady demand for cell processing instruments. Also, this subsegment includes Autologous Biologics, whose sale I explained in the P&L slides. The sale was completed in October. In profit, it was decreased due to upfront investment in Plasma Innovation and inflation as well. However, thanks to extreme sales growth in core business, it was increased Q-on-Q base.
Next slide, please. For profitability improvement, we started further price increasing. We boost the control of expenditure in both production and sales promoting expenses. In middle and long term, we implement the measures following that CEO Sato spoke today. The one is cost saving of logistics. Freight company and air selection as well as reforming global logistics network. Secondary for material cost inflation, we improve global procurement network. The third, for wage increase, we are speeding up the shift to production optimization with continuing stable production in the factories. This is important for minimizing the FX impact. Finally, in HQ function, we started GBS in EU and U.S. to make global process scandalization and process effective as the one of value creation through collaboration called VC2 actions.
Speak about our guidance because sales trend is strong and FX is favorable, we will achieve the target of profitability even though business environment is tough. Finally, we did not change the guidance because we need to see the impact by inflation and FX impact longer.
Regarding our dividend guidance for this fiscal year, taking into account the first half results, we will raise the interim and year-end dividends by JPY 2 each for a full year increase of JPY 4 to JPY 38 total. The interim dividend increase was already decided and announced.
Lastly, I will introduce the progress of this fiscal year's pipeline for our main products and the major topics. In Q2, the second item, FRED X, further expanded sales in the United States. The third item, RelayPro sold well and acquired approval for the aortic dissection indication, which raises expectations for further sales expansion. One major topic is that Terumo announced its purpose on July 8 taking into view the next 10 years, the Terumo-purpose expresses in specific terms the direction that Terumo intends to go upon considering what contributions it can make to global healthcare to meet the expectations of society. In addition, the company topics all indicate an achievement of important milestones and key themes of GS26. We look forward to further developments. This concludes my explanation of our earnings.
Thank you.