Nihon Kohden Q1 FY2027: Overseas growth can't offset Japan decline, swings to loss

Revenue fell 5.2% to ¥47.4 billion, swinging to an operating loss of ¥983 million from a ¥1.4 billion profit a year earlier. Ordinary loss was ¥339 million (vs. ¥473 million profit) and net loss attributable to shareholders ¥756 million (vs. ¥137 million profit), as a sharp domestic decline pushed the company into the red. Domestic sales dropped 15.0% to ¥26.08 billion, driven largely by the end of Abbott product distribution; on an underlying basis, sales were roughly flat. Overseas revenue grew 10.3% to ¥21.325 billion, powered by Europe (+32.1%) and Asia/Other (+10.1%). On the profit side, alongside the domestic revenue shortfall, higher SG&A costs from wage hikes pushed the company to an operating loss. However, a ¥599 million foreign exchange gain narrowed the ordinary loss to ¥339 million. The company points to digital health and task-shifting trends as tailwinds for an expected second-half recovery.

Reported segments are Japan, North America, and Other Regions, based on location of the entity, with external revenue and segment profit/loss disclosed.

Japan segment revenue fell 15.4% YoY to ¥26,147 million, and segment profit plunged 84.2% to ¥243 million. In-house products for acute-care and small-to-medium hospitals were firm, but distributed Abbott products dropped and procured goods were restrained. The university/national/public hospital market held steady year-on-year, while the clinic market declined. By product category, measurement devices and patient monitors were strong, but therapeutic equipment underperformed.

North America segment revenue grew 11.2% in yen terms to ¥13,107 million, but the segment swung to a loss of ¥292 million (vs. a ¥348 million profit a year earlier). On a local-currency basis, revenue declined, with AEDs, patient monitors, and neurology equipment sluggish. Ventilators continued sharp growth, but cost increases weighed on profit.

Other Regions segment revenue rose 11.1% to ¥8,150 million, and segment profit turned positive at ¥46 million (vs. a ¥131 million loss). Europe saw strong growth from existing markets like the Netherlands and Germany, plus large deals in Greece and Poland. Asia/Other posted double-digit growth, led by the Middle East/Africa and India. Latin America had a pullback in Guatemala and Paraguay, but Mexico surged to offset.

Note: Segment profit is before goodwill amortization and other adjustments. The total operating loss of ¥983 million includes an adjustment of ¥980 million.

Total assets at quarter-end stood at ¥246,158 million, down ¥10,380 million from the previous fiscal year-end, mainly due to collection of notes and accounts receivable. Cash and securities totaled approximately ¥51.3 billion. Total liabilities were ¥68,867 million (down ¥7,847 million), reflecting decreases in payables and bonus provisions. Net assets declined ¥2,533 million to ¥177,291 million, as dividend payments reduced retained earnings. The equity ratio rose to 72.0% (from 70.1%), underscoring a robust financial base.

Operating cash flow was an inflow of ¥8,141 million (up ¥2,229 million YoY), significantly helped by the reduction in receivables. Investing activities used ¥328 million, mostly for capital expenditures. Financing activities consumed ¥3,193 million, primarily for dividends. As a result, cash and cash equivalents increased ¥4,993 million from the prior year-end to ¥50.63 billion.

For shareholder returns, the company forecasts an annual dividend of ¥33.00 per share for FY2027, up ¥1 from the prior year. In June 2026, it canceled 3 million shares (¥5,074 million) to enhance per-share value and improve capital efficiency.

Key risks facing Nihon Kohden include:

• Geopolitical and supply chain risks: Tensions in the Middle East could raise crude oil prices and disrupt component procurement, impacting costs and stable supply.
• Domestic hospital business environment: Rising prices and wages are squeezing healthcare providers' finances, potentially dampening capital spending appetite. Supplementary budgets and reimbursement revisions may have limited effect.
• Overseas market uncertainties: Proposed U.S. public health insurance budget cuts, China's economic slowdown, and fiscal tightening in Southeast Asian nations could weigh on overseas sales.
• Foreign exchange: A sharp yen appreciation would erode overseas revenue and profit.
• Abbott product exit aftermath: While the drag on domestic sales will fade, delayed ramp-up of replacement products could lead to market share loss.
• Medical device market competition: Accelerating digital health, telemedicine, and AI/ICT adoption is intensifying technology competition with global and domestic rivals.

The company is pursuing product competitiveness, North American growth, and company-wide profitability under its BEACON 2030 Phase II mid-term plan, but addressing these risks remains urgent.

Full-year consolidated forecasts for FY2027 remain unchanged from the May 14, 2026 announcement. The company projects revenue of ¥232,500 million (down 1.1% YoY), operating profit of ¥23,500 million (up 25.4%), ordinary profit of ¥23,500 million (up 4.2%), and net profit attributable to shareholders of ¥15,000 million (up 3.4%).

Assumptions include a gradual recovery in domestic hospital capital spending from late Q1 to the second half, supported by supplementary budget execution and the June reimbursement revision. Overseas, while mindful of Middle East risks, the company expects a North and Latin American sales recovery and steady European demand. Although the Abbott exit will cause first-half operating profit to fall below the year-ago level, company-wide profitability reform projects are to bring the full-year plan back on track.