CFO Message

We consider fiscal 2025 to have been a year of steady progress toward completing VISION2030, with revenue, operating income, and net income attributable to FUJIFILM Holdings all reaching record highs. Revenue rose 5.0% year on year to ¥3,357.0 billion, operating income increased 6.1% to ¥350.2 billion, and net income attributable to FUJIFILM Holdings grew 6.0% to ¥276.7 billion. Despite the impact of additional U.S. tariffs and soaring prices for silver and other raw materials, sales growth in the Bio CDMO, Semiconductor Materials, and Imaging businesses, among others, drove record highs in revenue for the fourth consecutive year, operating income for the fifth consecutive year, and net income attributable to FUJIFILM Holdings for the sixth consecutive year.

In the Healthcare segment, the operation of large-scale manufacturing facilities at our Denmark site contributed to performance in the Bio CDMO business, and the recovery in utilization of small and medium-sized manufacturing facilities at our Texas site, where we had adjusted operations in the previous fiscal year, also led to higher revenue. In North Carolina, we opened a new large-scale manufacturing plant and began operating eight 20,000-liter mammalian cell culture bioreactors. In February 2026, we opened a drug substance manufacturing building for antibody drugs and a process development laboratory at our U.K. site. Further strengthening our capacity to meet growing demand for contract manufacturing of antibody drugs was an important achievement for our future growth.

In the Electronics segment, the Semiconductor Materials business grew significantly, driven by expanding demand for semiconductors for AI. Sales of materials that support semiconductor miniaturization and multilayer wiring, including advanced photoresists; NTI developers; and CMP slurries for copper wiring, the latter two of which hold the top global market share, remained strong. In the back-end materials field, sales of liquid polyimide also increased, driven by growing demand for advanced packaging for AI semiconductors. In the Imaging segment, sales of digital cameras grew, and global demand for instax instant cameras remained solid.

At the same time, our challenges are also clear. Return on invested capital (ROIC) declined 0.4 percentage point year on year to 5.5%, as growth investments centered on the Healthcare segment preceded returns, and profitability improvement in the Bio CDMO business was delayed. What matters is steadily converting invested capital into earnings and raising capital efficiency across the Company.

For fiscal 2026, we forecast revenue to rise 6.0% year on year to ¥3,560.0 billion, operating income to increase 4.2% to ¥365.0 billion, and net income attributable to FUJIFILM Holdings to grow 1.2% to ¥280.0 billion-aiming for record highs in all three. Despite costs for strengthening our business structure, mainly in the Business Innovation segment, as well as the recent surge in prices for IT-related components, such as semiconductor memory and PCs/servers, and for aluminum and other raw materials, we will achieve a new record high in profit through pricing measures, alternative procurement, and other countermeasures, as well as the sale of non-core assets.

By segment, we are targeting year-on-year profit growth in every segment except Healthcare, where our forecasts factor in the current delay in the earnings ramp-up of Bio CDMO. In Bio CDMO, while business negotiations are progressing smoothly, mainly for commercial products, our challenges include accelerating the ramp-up of the new U.S. site for large-scale facilities, addressing regulatory requirements, and establishing a contract manufacturing system for early-stage projects at small and medium-sized facilities. We will further strengthen our contract manufacturing system and work to improve profitability.

Regarding the deteriorating situation in the Middle East, in a highly uncertain environment marked by soaring prices and tight supply and demand for energy and related raw materials and packaging materials, it is essential to identify changes in the external environment early and flexibly implement pricing measures, supply chain reviews, and cost controls. As CFO, I will steadily execute growth investments while rigorously addressing risks.

To further evolve our management with an emphasis on capital efficiency, we have positioned return on invested capital (ROIC) and the cash conversion cycle (CCC) as key management KPIs and are strengthening initiatives in each business.

We estimate our cost of shareholders’ equity at around 8%–9% and our weighted average cost of capital (WACC) at around 6%–7%. Against this backdrop, Company-wide ROIC came in at 5.5% in fiscal 2025, as mentioned earlier, and is projected at 5.6% in fiscal 2026, meaning that ROIC will remain slightly below WACC. With a fiscal 2030 ROIC target of 9% or higher, we will continue focusing on enhancing profitability, improving CCC, optimizing non-core assets, and allocating capital appropriately, including through share buybacks.

To improve profitability, we must first raise the utilization rates of Bio CDMO’s large-scale facilities. The new plant in North Carolina is a core investment for future earnings growth. While costs are currently running ahead of revenue during the start-up period, we will expand its profit contribution by steadily translating contract manufacturing based on long-term agreements into revenue. In Semiconductor Materials, we will maintain and improve high profitability by reliably capturing expanding demand for generative AI and growing sales of materials for advanced nodes and back-end materials.

Regarding CCC, we have continued working to increase working capital efficiency, such as improving accounts receivable turnover and optimizing supply chains. As a result, CCC, which stood at 116 days in fiscal 2023, was 106 days in fiscal 2025. Together with generating returns on large-scale capital investments, accumulating capital efficiency improvements through day-to-day operations at each site is essential to raising ROIC.

Under VISION2030, we continue to review our business portfolio while assessing market attractiveness and profitability, focusing on business renewal and transformation toward our goal of achieving an operating margin of 10% or higher across all businesses. Throughout the VISION2030 period, we have also pursued initiatives aimed at turning Value Reconstruction businesses into earnings contributors.

In Graphic Communications, which we have positioned as a Value Reconstruction business, we have taken steps to streamline our lineup of analog printing products and close an overseas ink factory. In fiscal 2026, we plan to increase spending on structural reforms compared with fiscal 2025 and further sharpen our strategic focus to capture business opportunities arising from the shift to digital printing. In Pharmaceuticals, also positioned as a Value Reconstruction business, we are shifting our focus from small-molecule drugs to biopharmaceuticals. At our Toyama site, we are newly preparing manufacturing facilities for biopharmaceuticals, such as antibody drugs and antibody-drug conjugates (ADCs), which are scheduled to begin operation in 2027.

In August 2026, we announced that we had begun considering strategic options for the Business Innovation segment, including a partial spin-off. Our businesses differ in their growth stages and expected investment returns. While we make proactive investments in high-growth areas, for the Business Innovation segment, which has a solid earnings base and strong cash generation capability, we aim to improve capital efficiency and corporate value across the Group by putting in place a management structure that enables it to flexibly execute its own growth strategy.

At the same time, we aim to earn appropriate valuations from the capital markets by enabling the segment to realize its growth scenario-based on its robust customer base and new solutions businesses-under a new management structure, while providing greater visibility into the growth potential and capital efficiency of each business.

Under VISION2030, we have prioritized the allocation of management resources to growth areas centered on the Healthcare and Electronics segments. The Bio CDMO and Semiconductor Materials businesses, in particular, are important growth drivers for enhancing our future corporate value. From fiscal 2026, our large-scale investments to date will enter the phase of reaping benefits. In the Bio CDMO business, we will accelerate revenue growth by ramping up operations at new large-scale facilities, and in the Semiconductor Materials business, we will expand sales against the backdrop of demand for generative AI and advanced semiconductors.

Capital expenditures in the Healthcare segment, centered on Bio CDMO, peaked in fiscal 2024, and we expect Company-wide capital expenditures in fiscal 2026 to decline around ¥180.0 billion year on year. In fiscal 2026, we will continue making growth investments of approximately ¥400.0 billion, focusing on Healthcare and Semiconductor Materials, but with cash generation contributions from Semiconductor Materials, Imaging, and other businesses, we expect Company-wide free cash flow (FCF) to turn positive.

At this turning point as we enter the FCF generation phase, we will clarify the priorities of our capital allocation going forward. Our approach of continuing to invest for the next growth stage while emphasizing capital efficiency will remain unchanged in our next medium-term management plan (Phase II of VISION2030), scheduled to be announced next spring. We will advance investments in growth areas while also considering shareholder returns and repayment of interest-bearing debt. At the same time, to enhance corporate value over the long term, we also must allocate funds in a balanced manner to human resources development and sustainability initiatives.

Regarding our capital structure, we will pursue optimal financial leverage while maintaining financial discipline under our balance sheet management framework. We place importance on keeping an interest-bearing debt/EBITDA ratio within 2x, and our policy is to maintain an international credit rating of single-A or higher. Even as we advance growth investments, we will not compromise our financial soundness. By expanding EBITDA and improving FCF, we will achieve both financial stability and flexibility.

Taking into account the increased certainty of achieving positive FCF in fiscal 2026, our recent share price in light of our medium- to long-term earnings growth, and other factors, we resolved in March 2026 to conduct a share buyback of up to ¥30.0 billion and completed the buyback in May. The buyback is part of our capital policy based on maintaining a balance between financial discipline and growth investments and aligns with our capital allocation policy. Going forward, we aim to achieve ROE of 10% or higher in fiscal 2030 by improving ROIC in each business and allocating capital appropriately, thereby achieving sustained improvements in PBR.

With respect to shareholder returns, our policy is to pay stable and sustained dividends, targeting a payout ratio of 30%. Following an annual dividend of ¥70.00 per share in fiscal 2025, we plan to raise the dividend by ¥5.00 to ¥75.00 per share in fiscal 2026, marking 17 consecutive years of dividend increases. We will also consider and execute share buybacks flexibly, taking into account cash flow, share price levels, and the status of growth investments. Such investments and shareholder returns are not mutually exclusive. I believe that my responsibility as CFO is to meet the expectations of the capital markets while achieving sustainable growth.

To reduce the cost of capital and enhance corporate value, we must not only improve financial indicators but also ensure that investors correctly understand our growth strategy and our response to risks. Under VISION2030, we have reorganized our business segments, enhanced disclosures to support investors’ decision-making, strengthened governance to support the achievement of our management plan, and made progress toward our non-financial targets. All of these initiatives are
aimed at strengthening trust with the capital markets and, ultimately, reducing our cost of capital.

Going forward, we will place even greater emphasis on sustainability initiatives, including risk management. Materiality (priority areas of sustainability), such as the environment, health, daily life, and work style, forms the foundation that supports our long-term competitiveness. We will appropriately allocate the profits we earn to reinvestment in our businesses and shareholder returns, as well as to sustainability initiatives, such as human resources development and workplace improvement. By taking an integrated approach to financial and non-financial aspects, we will strengthen the management foundation that supports sustainable growth.

Building on technologies cultivated in the photographic film business, we have transformed our business portfolio time and again, and that transformation continues today. By converting growth investments into earnings, raising capital efficiency, and reducing the cost of capital, we will keep this virtuous cycle turning and achieve VISION2030 while sustainably enhancing corporate value beyond 2030.

We have built a Group-wide governance framework to ensure the effective achievement of the management plan set out in VISION2030. Its foundation is our financial data–driven management approach, which utilizes “One-Data*,” our unique management information analysis system, to enable swift and appropriate decision-making and monitoring from both business and company perspectives. Going beyond visualizing the profitability and capital efficiency of our businesses based mainly on financial data, we are now also advancing integration with non-financial data. For example, by linking financial information and intellectual property information for each business and product, we are creating an environment that enables us to understand more concretely how our intellectual property strategy contributes to business value. By integrating non-financial data with financial data rather than evaluating non-financial data in isolation, we aim to facilitate more effective discussions based on its relationship with business profitability and growth potential.

Furthermore, we are digitalizing the approval process to ensure the effective and efficient implementation of the “Fujifilm Intercompany Approval Policy (FIA),” the Group-wide approval policy governing important business decisions. Under the previous manual process, applicants obtained approvals from the relevant decision-makers and reviewers within the Group by e-mail and other means, in accordance with individual company approval rules and the FIA. To digitalize and streamline this process, we introduced the “Fujifilm Approval System (FAST)” platform and now operate individual company approval rules and the FIA in a unified manner within FAST. We fully implemented both FAST and the FIA across our domestic Group companies in fiscal 2023. For our overseas Group companies, we fully applied the FIA in February 2025 and completed the introduction of FAST in June 2026. The integrated operation of the FIA and FAST enhances the transparency and efficiency of decision-making processes across the Group. Through these initiatives, we are further accelerating decision-making and strengthening Group governance.

At the same time, our sustainable growth depends on the power of each individual employee, so a high level of employee engagement is essential. Under VISION2030, we set “Sustainable engagement score of 80% or above” as a non-financial target and have included the achievement level of the engagement score in the KPI for medium-term performance-linked share-based remuneration. In fiscal 2025, our engagement score was 82%, up 1 percentage point from the previous fiscal year and remaining at a high level compared to other companies in Japan and overseas. We will continue working to enhance employee motivation and performance-through talent development, workplace environment improvements, and wage increases-to further strengthen engagement on an ongoing basis. Through these initiatives, we will increase the likelihood of realizing our management plan and enhance corporate value over the medium to long term.

* A management information analysis system for internal use within the Fujifilm Group. It shares Group companies’ enterprise resource planning (ERP) data in the cloud and visualizes KPIs such as profit and loss (P&L), cash conversion cycle (CCC), and purchasing expenditure for each business and company.

As of the end of June, 2026, our TSR had underperformed the TOPIX Index and the TOPIX Chemicals Index over the past three, five, and 10 years, and we recognize the need to further accelerate initiatives to enhance corporate value. We take this as an indication that there is still room for improvement relative to the capital markets’ expectations for our corporate value enhancement. The initiatives we are currently pursuing-monetizing growth investments, reforming our business portfolio, and improving ROIC-are all aimed at medium- to long-term value creation. By steadily implementing these initiatives and communicating our progress clearly through dialogue with the capital markets, we aim to improve our market valuation. To that end, we need to further advance the initiatives outlined above through VISION2030, which sets fiscal 2030 as its target for achieving long-term goals. We will continue transforming our business portfolio toward an optimal structure while creating new growth areas from short-, medium-, and long-term perspectives. At the same time, we will continue engaging in thoughtful dialogue about these initiatives with stakeholders, including shareholders and other investors, with the aim of deepening stakeholders’ understanding and raising their expectations for the Group.

Notes:
1. TSR: Total return on investment, including capital gains and dividends
2. Both indexes include dividends
3. Annualized figures are geometric averages
4. Prepared by the Company based on data from QUICK

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