Tokyo, October 21, 2008 – Kyowa Hakko Kirin Co., Ltd. (Kyowa Hakko Kirin)(TOKYO:4151) today announced revised forecasts for the interim and full year period of the fiscal year ending March 31, 2009.
While the consolidated full year net sales forecast is unchanged, operating income for the full year is expected to be 12.3% lower than previously forecast, mainly due to lower than expected sales of certain pharmaceutical products and the worldwide slowdown in economic growth. Full year net income is expected to be 39.3% lower than previously forecast, largely as a result of one-time tax expenses related to the planned disposal of a subsidiary and expenses related to the integration with Kirin Pharma.
Reasons for revised forecasts
Interim period
As announced separately today, Kyowa Hakko Kirin has signed an agreement to sell the shares held in its consolidated subsidiary Kyowa Hakko Food Specialties Co., Ltd. As a result, in accordance with tax effect accounting rules we are required to recognize the tax effect of the one-time difference (the difference between the amount of the investment in the consolidated balance sheets and the book value of the investment in the non-consolidated balance sheets) in respect of this investment in our consolidated financial statements. As this is expected to result in a corporate tax adjustment (and deferred tax liability) of approximately ¥5.6 billion in the interim financial statements, our net income forecast for the interim period has been revised downward.
Regarding segmental performance, the Bio-Chemicals and Chemicals segments are performing ahead of expectations, and the Food segment is progressing broadly in line with expectations. However, in the Pharmaceuticals segment we expect performance to be below our initial expectations due to lower than expected sales of anemia treatments NESP and ESPO, and REGPARA, a treatment for secondary hyperthyroidism during dialysis therapy. In addition, in-licensing and other expenses of approximately ¥3 billion have been incurred.
As a result, for the group overall, net sales for the interim period are expected to be above forecast, while operating income and recurring income are expected to be slightly below initial forecasts.
Full year
Regarding full year forecasts, in the Pharmaceuticals segment we forecast a similar trend to that seen for the interim period. Also, the environment for the Chemicals and other segments is expected to worsen due to the worldwide slowdown in economic growth and other factors. As a result, we expect profit for each business segment to be below initial expectations and so we have revised down our forecasts for operating income and recurring income.
As regards net income, the planned transfer of shares of Kyowa Hakko Food Specialties Co., Ltd. in March 2009 is expected to result in an extraordinary profit on disposal of approximately ¥4.5 billion. However, after the application of tax effect accounting rules, net income for the fiscal year is expected to be negatively affected by approximately ¥3 billion. In addition, we are forecasting increased extraordinary losses from factors such as the integration of sales outlets with those of Kirin Pharma and from the integration of facilities as we reorganize R&D. As a result we have reduced our forecast net income for the full year.