Hoya ready to spend on acquisitions in 2005

Japan“s Hoya Corp. looks to spend up to JPY 120 billion (USD 1.1 billion) on two large acquisitions in 2005 to boost its electro-optics and eyeglasses businesses, said president Hiroshi Suzuki on 20 …

Japan“s Hoya Corp. looks to spend up to JPY 120 billion (USD 1.1 billion) on two large acquisitions in 2005 to boost its electro-optics and eyeglasses businesses, said president Hiroshi Suzuki on 20 June 2005. Having accumulated USD 1 billion in cash reserves from strong earnings growth, the optical glass maker is actively seeking merger-and-acquisition opportunities, said Suzuki. “There are some deals that we wanted to do last year but haven“t been able to complete. I really want to do them this year,” Suzuki said at Hoya“s headquarters in Tokyo. “There is the possibility for deals in our eyeglasses business and also electro-optics,” he said. “They would likely be on the scale of JPY 50 to 60 billion each.” The electro-optics division accounts for the majority of Hoya“s profits and includes mask blanks and photomasks as well as substrates for glass memory disks used in hard disk drives. Hoya is also one of the world“s top makers of eyeglass lenses. In the electro-optics division, Hoya may consider buying a producer of magnetic materials for the glass memory disk substrates which it makes, said analysts. Magnetic materials makers include Showa Denko KK and Fuji Electric Holdings Co., while some hard-drive makers like Hitachi Ltd. handle the coating in-house. Suzuki also unveiled plans to invest JPY 2 billion to 3 billion to raise output for glass substrates by 10 to 15% by the end of October 2005 in order to meet strong demand for disks used in notebook PCs. Hoya said late 2005 that it planned to build a glass disk factory in Vietnam, aiming to bring it on line in December 2005. “Supply will probably get tight before we get the Vietnam plant up and running,” Suzuki said, predicting 25% annual sales growth for notebook PCs. “We plan to incrementally boost capacity at plants in Thailand and the Philippines.” In contrast to disks for use in notebooks, demand for one-inch disks was decreasing because of the launch of the Apple iPod Shuffle and other portable music players that use flash memory instead of hard drives, Suzuki said. Reflecting strong demand for glass disks and LCD photomasks, Hoya should be able to report double-digit sales growth in the current business year, following a jump of 13.5% to JPY 308.17 billion in the year ended 31 March 2005 Suzuki said. Analysts expect the company to post a 7% rise in revenues to JPY 329.5 billion, a figure Suzuki said was “conservative”. The company does not give official earnings estimates. Suzuki did not give a specific target for profit growth, saying only that Hoya“s operating profit margin should improve on the previous year when it fell about 4% to 24.6% because of heavy start-up costs for new plants. While posting a record profit for the full year ended 31 March 2005, Hoya“s operating profit fell 2% year-on-year in the January-March 4Q as sales of glass aspherical lenses used in digital cameras slumped. Suzuki said demand had started to recover and would probably strengthen through June or July 2005 when digital camera companies usually launch new products. Higher unit sales of lenses used in camera-equipped mobile phones were another positive, he said. “Demand for lenses hit bottom in February and is gradually improving,” Suzuki said. “But it is still relatively weak.”