Oki Electric Financial Results for the First Half of the Fiscal Year Ending March 31, 2004
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Oki Electric Financial Results for the First Half of the Fiscal Year ending March 31, 2004 Oct. 29, 2003 Oki Electric Industry Co., Ltd. http://www.oki.com/ Table of Contents 1. Financial Results for the 1st Half • Overview of the Financial Results • Effect of the Earthquakes • Consolidated Profit and Loss (1st Half/ 2nd Quarter) • Consolidated Balance Sheet 2. Projections for the Fiscal Year ending Mar. 31, 2004 3. Progress of Business Reform – Growth Phase 4. Challenge for the Next Fiscal Year 2 Consolidated Financial Results for 1st Half of FY ending Mar. 2004 Achieve profitability in the operating income level for Q2 as planned Increase in sales and profit for the 1st half, relative to previous 1st half Decrease in sales and profit in electronic devices segment from earthquakes in Tohoku region and from delay in optical market recovery Decrease from electronic devices is recovered by info. systems and telecom systems. Final results improve from projections announced on July 30 Steady progress in Business Structural Reform Plan (Business reform, resource shift to focused businesses, etc.) (billion yen) Amounts are rounded at nearest 100 million 1H, FY 1H, FY Previous Variance announcement Mar. 04 Mar. 03 (July 30, 2003) Net sales 281.3 250.6 30.7 265.0 Operating income (3.9) (10.6) 6.7 (6.0) Recurring income (8.2) (15.8) 7.6 (11.0) Net income (10.5) (11.5) 1.0 (10.5) Shareholders’ equity 94.7 101.3* (6.6) - * Mar. 31, 2003 3 Effect of the Earthquakes Due to two earthquakes hitting Tohoku region, Miyagi Oki, a semiconductor subsidiary, was forced to suspend its production operations for a total of 20 days Decrease in sales and profit/ Partial damage on wafers in process and manufacturing facilities [Background] 5/26 Sanriku-Minami Earthquake occurs Earthquake effect on PL (Magnitude 7.0) (billion yen) 6/06 Oki files for a total of 1.2 billion yen of Full earthquake damage 1H 2H Year 600M yen loss from damage in facilities and inventories 600M yen operation loss Net sales (4.0) (1.0) (5.0) 7/26 Northern Miyagi Earthquake occurs (Magnitude 6.2) Operating (2.5) (0.5) (3.0) 7/30 Oki files for the two earthquake income damage Extraordinary Extraordinary loss of 3 billion yen (3.1) - (3.1) st loss Revises net loss for 1 half of FY end. Mar. 2004 from 8.5 billion yen to 10.5 billion yen. 4 Outline of Consolidated Profit and Loss for the 1st Half of FY ending Mar. 2004 1H P/L (billion yen) Consolidated net sales (billion yen) 1H, FY 1H, FY Variance 1H, FY 1H, FY Variance Mar. 04 Mar. 03 Mar.04 Mar.03 Net sales 281.3 250.6 30.7 Info. Sys. 151.6 134.4 17.2 (ratio) (76.0%) (77.6%) (+ 1.6%) Telecom 44.5 37.8 6.7 Cost of sales 213.7 194.4 19.3 Devices 60.0 58.5 1.5 SG&A 71.5 66.8 4.7 Others 25.2 19.9 5.3 Operating income (3.9) (10.6) 6.7 Consolidated operating income(billion yen) Other income (4.3) (5.2) 0.9 1H, FY 1H, FY Variance Recurring income (8.2) (15.8) 7.6 Mar.04 Mar.03 Extraordinary Info. Sys. 5.1 3.5 1.6 income 0.9 0.8 0.1 Telecom (1.6) (7.1) 5.5 Extraordinary loss 7.4*1 3.5*2 3.9 Devices (2.1) (1.7) (0.4) Income before taxes (14.7) (18.5) 3.8 Others 0.5 (0.2) 0.7 Corporate and (5.8) (5.1) (0.7) Income taxes (4.2) (7.0) 2.8 eliminates Net income *1: 3.1 B yen of disaster loss and 1.6 B yen of special (10.5) (11.5) 1.0 retirement payments *2: 2.5 B yen of restructuring loss and 0.5 yen of write-down losses 5 2nd Quarter Profit and Loss for FY ending Mar. 2004 Q2 P/L (billion yen) Consolidated net sales (billion yen) Q2 Q2 Q2, FY Q2, FY Variance FY end. FY end. Variance Mar.04 Mar.03 Mar.04 Mar.03 Info. Sys. 94.0 83.8 10.2 Net sales 169.5 153.6 15.9 Telecom 27.9 24.0 3.9 (ratio) (73.2%) (74.5%) (+1.3%) Devices 32.8 33.0 (0.2) Cost of sales 124.0 114.4 9.6 Others 14.8 12.8 2.0 SG&A 36.3 34.7 1.6 Operating income 9.2 4.5 4.7 Consolidated operating income (billion yen) Q2, FY Q2, FY Other income (3.3) (1.8) (1.5) Variance Mar.04 Mar.03 Recurring income 5.9 2.7 3.2 Info. Sys. 7.7 7.3 0.4 Extraordinary income 0.9 0.5 (0.4) Telecom 1.2 (3.9) 5.1 Extraordinary Devices 2.7 3.3 (0.6) loss 5.9*1 2.2*2 3.7 Others 0.7 0.5 0.2 Income before taxes 0.9 1.0 (0.1) Corporate and (3.1) (2.7) (0.4) Income taxes 0.4 0.1 0.3 eliminates *1: 3.1 B yen of disaster loss and 1.6 B yen of special Net income 0.5 0.9 (0.4) retirement payments *2: 1.5 B yen of restructuring loss and 0.5 yen of write-down losses 6 Balance Sheet for 1st Half of FY ending Mar. 2004 : Assets Though inventory increased due to 2H production Turnover ratio 1H, 1H, preparation, turnover ratio improves relative to Mar. 03 Mar. 04 1H of last fiscal year Total assets 0.8 0.9 Notes and accounts 3.7 3.7 Cash and deposits increase as cash flows improve receivable Unrealized profit for listed stocks increase by 9.2 Inventory 3.2 3.5 Property, plant and 3.2 4.2 billion yen (from 2.5 to 11.7B yen) equipment 750 [Assets] 651.6 622.9 Variance with 42.5 607.9 609.0 Mar. 31, 2003 24.4 27.9 33.9 Cash and deposits + 6.0 146.8 500 121.0 169.9 133.6 Notes and accounts -36.3 148.2 163.5 receivable 157.4 168.9 Inventories +11.5 31.9 29.1 250 27.7 33.4 Other current assets + 5.7 163.8 147.8 136.4 131.9 Propety, plant and -4.5 equipment 118.4 122.1 103.6 107.3 Investements and 0 + 3.7 (billion yen) other assets Mar.31, 2002 Sep. 30, 2002 Mar.31, 2003 Sep. 30, 2003 7 Balance Sheet for 1st Half of FY ending Mar. 2004: Liabilities and Shareholders’ Equity Interest bearing debt decreases by 9.8 End of End of billion yen from Mar. 31, 2003 Mar. 03 Sept. 03 Interest bearing debt ratio improves 0.4% Balance of interest-bearing 335.5 325.7 to 53.5% debt (billion yen) Interest-bearing debt ratio (%) 53.9 53.5 ROE (%) 16.0 15.5 750 [ Liabilities and shareholders’ equity] 651.6 607.9 622.9 609.0 Variance with Mar. 31, 2003 120.2 94.6 116.1 110.6 Notes and accounts -5.5 500 payable 134.3 135.5 126.0 126.2 Short-term borrowings +0.2 28.8 25.4 25.6 33.4 Other current liabilities +7.8 250 221.5 214.1 209.4 199.5 Long-term debt -9.9 37.7 41.3 44.5 44.6 Other fixed liabilities +0.1 109.1 97.0 101.3 94.7 0 (billion yen) Total asset -6.6 Mar. 31, 2002 Sep. 30, 2002 Mar. 31, 2003 Sep. 30, 2003 8 1. Financial Results for the 1st Half 2. Projections for the Fiscal Year ending Mar. 31, 2004 • Business Environment and Foreign Currency Exchange Forecast • Projections for the Fiscal Year ending Mar. 31, 2004 (Net Sales, Operating Income, Net Income) • Causes of Increase in Operating Income • Sales and Operating Income by Segment • Cash Flows • Acquisitions of Property, Plant and Equipment; R&D 3. Progress of Business Reform – Growth Phase 4. Challenge for the Next Fiscal Year 9 Business Environment and Foreign Currency Exchange Forecast [Economic outlook] With the improvement in business performance in enterprise, private sector is likely to increase capital investment from 2H of the fiscal year Though Europe and America show signs of recovery, concern of ongoing rising of the yen [Market trend] Info. Systems Recovery in IT investment/ Increase in demand for ATM replacements and remodeling due to issue of new banknotes Telecom. Sys. Increase in IP telephony demand from carriers and enterprises as “050” service begins Electronic Devices Steady semiconductor market from beginning of the year/ Rise in consumer and communication related LSIs/ Slump in optical market [Forecast on foreign currency exchange rate and its effect] (M: million) 1H results 2H projections Projection Actual rate Sales in Projection Sales in * Effect on rate foreign rate foreign profit/loss in currency currency 1 yen change USD 120 yen/$ 118.2 yen/$ 350M 110 yen/$ 400M 100M yen Euro 125 yen/E 133.6 yen/E 240M 125 yen/E 300M 100M yen * After deduction of purchase in foreign currency and exchange contract 10 Full Year Projections for the Fiscal Year ending Mar. 31, 2004 Net sales increase by 59.5 billion yen, operating income improves by 18.6 billion yen relative to the previous fiscal year Net sales increase by 15.0 billion yen from original plan/ Operating income remains as projected due to earthquake effects, increase in cost competition and ongoing rise of the yen (billion yen) 800 740.3 645.0 46.2 604.6 585.5 55.0 600 181.9 40.4 50.2 Others 113.6 130.0 119.2 144.8 100.0 Electronic Devices 400 103.2 85.7 Teleom Systems 200 367.4 347.4 330.4 360.0 Info.