Message from the president

While pressure from global inflation persisted in Japan, capital investment and R&D spending by companies provided some support for moderate economic growth as a whole. International economic conditions, however, were far from stable, as uncertainty continued to grow due to U.S. tariff policy, shifts in industrial strategy across nations, and intensifying geopolitical risks. It is within this complex context that the Group posted higher revenue but lower profit than last year for FY2025. Revenue growth was driven primarily by recovering demand in the industrial instruments market. Strategic acquisitions aimed at expanding the technical capabilities of the Group as part of a strategy for sustained future growth also contributed to revenue. Together, these factors led to a stronger business portfolio and higher revenue for the Group.

n the same period, profits declined. The primary cause was not a drop in profitability, but rather aggressive investment aimed at increasing long-term competitiveness. Specifically, this was the result of planned strategic investments that included costs associated with integrating acquired companies, constructing new factories, building new production lines, and more. These efforts are essential for the Group to establish a foundation for medium- to long-term growth and represent the groundwork for future revenue growth.

Looking ahead, prolonged post-pandemic inventory adjustments of Group products by customers in the medical market are nearing completion, and revenue from the medical market is expected to recover through 2026. Numerous development projects pursued with a range of customers over the past several years are also expected to contribute significantly to revenue from the next fiscal year onward. The Group will also reaccelerate its growth trajectory through increased revenue in the semiconductor market and expansion into new application areas.

Making the laser business profitable is a critical priority for the Group, and aggressive efforts are underway to improve earnings across the entire business, including NKT Photonics, which we have acquired. The Group’s laser technology business is expected to see market growth in such areas as semiconductors, ophthalmic medicine, security, and quantum technology. The Group will work to maximize synergies with existing operations in the semiconductor market and elsewhere to strengthen our competitive position. By providing innovative laser solutions, we aim to increase the Group’s global presence and drive earnings.

The Group will manage its business with a medium- to long-term perspective, responding flexibly to market changes as well as pursuing innovation and maximum value for customers to achieve sustained growth. The past two years of underperformance have been a significant learning experience for the Group and will serve as an important guide for business strategy going forward. We will continue to embrace change and take on new challenges to further boost our competitiveness in the global market.

Society, the environment, and humanity all continue to face innumerable challenges. Our Group is committed to fostering strong relationships with our customers, understanding their challenges and needs, and helping address these issues through our photonics technology. The profits we generate by providing high-value-added products as a solution provider are reinvested to further contribute to society, the environment, and humanity, creating a continuous cycle. This is what we call our Added Value Creation Cycle.

The Group’s competitive strength comes from its ability to consistently and continuously create value. To sustain and strengthen this ability, the Group is guided by three core perspectives: technology-driven, customer-driven, and market-driven. These are not slogans, but operating principles that underpin everything we do. Our technology- and customer-driven approaches have always been our strengths, and they will remain the foundation for growth. Refining our expertise not only in light-based technologies but in manufacturing and a wide range of other disciplines, then delivering solutions that address real customer challenges, is both the Group’s mission and our responsibility to society. High-precision optical devices for medical diagnostics, for example, do more than just boost customer competitiveness; they improve convenience for society as a whole. Innovation of this kind is made possible by decades of R&D investment and the trust the Group has built with its customers.

Where we see the greatest room for growth is in our market-driven perspective. To capture market shifts accurately and anticipate emerging needs, the Group must strengthen how it collects, analyzes, and acts on market intelligence. Globally, the pace of innovation is accelerating, and the competitive landscape has grown more complex. Product lifecycles have shortened, and customer expectations are becoming more sophisticated and more demanding. To meet these conditions, the Group is building a framework for sharper market intelligence and faster, more flexible decision-making in product development and business expansion. In practice, this means rolling out a company-wide ERP system and using digital technology to bolster data analytics, enable AI-powered market forecasting, and incorporate customer feedback in real time.

Building this Added Value Creation Cycle will allow the Group to carve out a distinctive position in the market and sustain a long-term competitive edge.

Light holds unlimited possibilities. Since its foundation, the Group has conducted R&D in photonics with a single conviction: that light can serve society, the environment, and humanity. While laser fusion power generation has gained attention in recent years as a focus of Japanese governmental policy, the Group has been working to make this a reality for over 30 years. Laser fusion is a transformative technology capable of delivering clean, safe energy, freeing the world from fossil fuel dependence and dramatically reducing the toll of energy production on the environment. Solving the energy challenge is inseparable from building a sustainable future for humanity, an effort the Group contributes to through our photonics technology.

To unlock the full potential of photonics, the Group takes an integrated approach from basic research to applied development. Partnerships with universities and research institutions, international joint research, and open innovation with industry are accelerating the pace of progress.

Photonics has the power to enrich human life and help preserve the global environment. The Group will continue to put that power to work for society as we continue being a company that pioneers the future. Looking ahead, the Group will work to bring photonics to fields as wide-ranging as energy, advanced medicine, telecommunications, and innovation in manufacturing to help build a more sustainable future.

Sustainable growth demands both environmental consideration and investment in people.

The Group is proactively adopting renewable energy and energy-saving technology in an effort to create a carbon neutral society and has been certified as a carbon neutral business by the City of Hamamatsu. The Group is also working to streamline manufacturing processes and reduce waste to lower our environmental impact. These efforts extend across the supply chain, as the Group promotes sustainable procurement through collaboration with our business partners. Together, we are working to increase corporate value while fulfilling our responsibility to society. The Group also maintains a high level of transparency in our environmental disclosure, meeting international standards to build stronger stakeholder trust. Environmentally friendly product development and a clear roadmap for achieving carbon neutrality have progressed steadily.

For human capital investment, guided by the belief that people are our greatest asset to support the growth of the Group, we are working to build an environment where every employee can realize their full potential. Cultivating highly specialized talent, promoting diversity, and enabling flexible work styles will foster a corporate culture that generates innovation. In FY2025, the Group introduced a unified training program for design work and established a Global Human Resources Department to develop talent equipped to work in global markets. The Group is also proactively hiring and promoting women and foreign nationals, bringing greater diversity to the organization and fresh perspectives along with it. This means not only sending Japanese talent abroad but welcoming talent from around the world to Japan.

Environmental consideration and human capital investment are essential pillars of the Group’s medium- to long-term business strategy. The Group will continue to pursue maximum corporate value with environmental responsibility and investment in people at its core.

The Group considers strengthening corporate governance one of its top management priorities and is continuously working to improve the effectiveness of the Board of Directors.

Many Board members come from engineering backgrounds with strengths in technology and development, bringing a high level of expertise in product strategy and R&D. In terms of the skill matrix, however, there is a need for complementary expertise in areas such as finance, legal affairs, and risk management. To address this, we select Outside Directors and Audit & Supervisory Board Members (Outside) with diverse specializations, including law and finance, to achieve a well-balanced Board composition.

The Board emphasizes discussions of substance over formal reporting and approval, raising the quality of its decision-making. Expert opinions and advice from Outside Directors and Audit & Supervisory Board Members (Outside) are actively incorporated, and strategies and policies are adjusted as needed to ensure sound, transparent management.

The separately established Board of Executive Officers also serves as a forum for multifaceted discussion on management issues.

Regular evaluations of Board effectiveness are conducted, and improvement measures based on the results are implemented to continuously strengthen the governance framework. The Group will ensure transparency, independence, and diversity to achieve sound governance that drives sustained improvement in corporate value.

Over the past two years, the Group has experienced a temporary downturn in performance. Earnings came under pressure as external factors such as uncertainty in the global economy, shifts in the market environment, and supply chain disruption converged. The Group’s position in its industry and the fundamentals of its business, however, remain unchanged. The Group delivers high-value-added solutions built on photonics and maintains competitiveness in global markets. Even during this period of weaker performance, we have been steadily laying the groundwork for the next phase of growth.

The Group will continue to contribute to society through innovation and value creation. We are committed to sharing our medium- to long-term vision and remaining a company that delivers sustainable growth. We will continue to embrace change, take on new challenges, and move forward with confidence toward the next stage of growth as a company that pioneers the future, and we ask for your continued support.