Oki Electric Financial Results for the First Half of the Fiscal Year Ending March 31, 2005
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Oki Electric Financial Results for the First Half of the Fiscal Year ending March 31, 2005 October 28, 2004 Oki Electric Industry Co., Ltd. 1 Table of Contents 1. Financial Results of the Fiscal 2. Focusing Businesses Year ending March 2005 1) First Half Results 1) Three Focusing Businesses 1-1) Overview 1-1) Info-Telecom Systems 1-2) P/L 1-2) Semiconductors 1-3) B/S 1-3) Printers 2) Full Year Projections 2) Mid-term Business Target 3) Segment Information 4) Cash Flows 5) Acquisitions of Property, Plant & Equipment; R&D 6) Number of Employees * The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions. 2 Overview of First Half Results Business Environment Net sales (consolidated) (Billion yen) <Economy> + 38.4 B yen (13.6%) z Continued relatively steady recovery: Increase in enterprise capital investments and activities in digital home appliances 250.6 281.3 319.7 <Oki’s Business> (Compared with previous FY) Sep. 02 Sep. 03 Sep. 04 z Substantial sales growth from increase in system investments by financial institutions, Operating income (consolidated) expansion of IP-related investments by 1.5 telecom carriers, growth of color printer (3.9) (10.6) market, and favorable demands for + 5.4 B yen (profitable) semiconductors z Operating income restored profitability and Net income (consolidated) net income improved due to sales growth and business structural reforms (11.5) (10.5) (2.9) + 7.6 B yen 3 First Half Profit and Loss Outline z Profitable operating income due to substantial sales increase and business structural reform (Billion yen) Comparison of consolidated P/L Consolidated net sales (Billion yen) Sep. 03 Sep. 04 Variance Sep. 03 Sep. 04 Variance Info sys. 151.6 160.1 8.5 Net sales 281.3 319.7 38.4 Telecom 44.5 52.1 7.6 (Cost of sales ratio) (76.0%) (74.7%) (+1.3 %) Devices 60.0 76.6 16.6 Cost of sales 213.7 238.7 25.0 Others 25.2 30.9 5.7 SG&A 71.5 79.5 8.0 Consolidated operating income (Billion yen) Operating income (3.9) 1.5 5.4 Sep. 03 Sep. 04 Variance Info sys. 5.1 1.8 (3.3) Other income (4.3) (2.1) 2.2 Telecom (1.6) 0.3 1.9 Recurring income (8.2) (0.6) 7.6 Devices (2.1) 3.4 5.5 Extraordinary Others 0.5 1.4 0.9 0.9 1.0 0.1 Corp. & income eliminates (5.8) (5.4) 0.4 Extraordinary loss 7.4 5.1 (2.3) Average currency exchange rate Actual rate Plan Income before taxes (14.7) (4.7) 10.0 1H, FY 1H, FY FY Mar. 05 Income taxes (4.2) (1.8) 2.4 Mar. 04 Mar.05 USD 118.1 109.9 105 Net income (10.5) (2.9) 7.6 Euro 133.5 133.3 130 4 First Half Balance Sheet Outline (1) <Balance Sheet: Assets> (Times) Turnover ratio Sep. 03 Sep.04 Variance z Total assets decreased by 24.4 B yen from Total assets 0.91 1.07 0.16 improvement same period the previous year, due to Notes and accounts reduction of accounts receivables and 3.71 4.62 0.91 improvement inventories receivable z Major turnover ratios improved Inventory 3.45 4.45 1.00 improvement substantially (Billion yen) Variance with 622.9 609.0 609.6 584.6 Sep. 30, 2003 600 27.9 33.9 55.4 41.1 Cash and deposits +7.2 169.9 133.6 155.3 121.6 Notes and accounts receivable - 12.0 400 168.9 157.4 139.0 148.2 Inventories -20.7 27.7 33.4 33.9 30.1 Other current assets 200 + 0.5 136.4 131.9 119.7 128.5 Propety, plant and equipment -3.4 103.6 107.3 110.1 111.3 0 Investments and other assets + 4.0 Mar. 31, 03 Sep. 30, 03 Mar. 31, 04 Sep. 30, 04 5 First Half Balance Sheet Outline (2) <Balance Sheet: Liabilities and Shareholders’ Equity> (%) z Interest bearing debt decreased by 52.3 B Sep. 03 Sep.04 Variance yen from same period the previous year, Interest-bearing 53.5 46.8 6.7 improvement due to improvement in cash flows debt ratio Shareholders’ equity ratio 15.5 18.5 3.0 improvement (Billion yen) Variance with 622.9 609.0 609.6 584.6 Sep. 30, 2003 600 116.1 110.6 Notes and accounts payable +17.0 135.8 127.6 126.0 126.2 Short-term borrowings +13.6 400 129.8 139.8 25.6 33.4 31.1 Other current liabilities -4.6 28.8 209.4 199.5 161.7 200 133.7 Bond and Long-term debt - 65.8 46.8 44.5 44.6 40.7 Other fixed liabilities and minority + 2.2 101.3 94.7 110.5 107.9 interests 0 Shareholders' equity + 13.2 Mar. 31, 03 Sep. 30, 03 Mar. 31, 04 Sep. 30, 04 Bonds due within a year and commercial paper are included in long-term debt and short-term borrowings respectively. 6 Premises of Full Year Projections <Economy forecast> • While enterprise capital investment expands and consumer spending remains steady, economy outlook is unclear • Concerns include pricing pressure from fiercer competition and impact on economy from rising oil price <Market trend> • Info systems: Financial institutions shift from new banknotes-related investment to IT and network-related investment. Delay in large governmental projects • Telecom: Carriers investments shift to Broadband IP network. Tougher price competition • Device: Semiconductor market growth slows down. LSIs for telecom and digital appliances remain steady until December 2004 <Impact on profit by currency exchange rate> First half actual rate Second half projections Projected Actual rate Projected Sales in foreign Impact on profit by rate rate currency 1yen change* US dollar 105 yen/$ 109.9 yen/$ 105 yen/$ 400 million USD 100 million yen Euro 130 yen/E 133.3 yen/E 130 yen/E 350 million Euro 150 million yen <Full year projections> * After deducting purchase in foreign currency and exchange contract (Billion yen) Net sales Operating income Recurring income Net income Oct. 28 projections 710.0 29.0 21.0 10.0 July 28 projections 680.0 29.0 20.0 10.0 7 Causes of Changes in Operating Income Cause of 7.4 B yen increase from the previous year in operating income z Increase capital investment and R&D for future business development z Sales increase and procurement cost reduction offset causes of profit decline including price down, strong yen, and investments z Though bonuses increase as it links with performance, labor costs decrease by 3.0 B yen due to headcount reduction and decrease in retirement benefit through returning pension funds to the government Effect in exchange rate -2.0 Increase in Sales increase Miyagi earthquake impact +3.0 fixed cost Inventory decrease, etc. -5.6 -15.0 -8.0 +15.0 Operating income +20.0 -4.6 29.0 B yen Decrease in Reduction in Operating income sales price procurement cost Others 21.6 B yen Labor cost reduction +3.0 Depreciation -1.4 Project price down in R&D expenses -6.9 printers and LSIs Other fixed costs -2.7 FY Mar.04 FY Mar.05 8 Full Year Projection by Segments z Achieve increase in sales and income relative to the previous fiscal year <Full year projection> <First half results> Net sales (Comparison from last FY) (Billion yen) Net sales (Billion yen) 319.7 710.0 Others 310.0 654.2 680.0 Increase in sales from EMS 281.3 27.0 30.9 70.0 and affiliated companies 57.1 65.0 25.2 Electronic Devices 75.0 76.6 155.0 132.2 150.0 Sales expansion of focusing 60.0 products and market recovery 50.0 52.1 130.0 Last FY includes impact of 44.5 104.6 105.0 earthquakes Telecom Systems Increase in IP network related 151.6 158.0 160.1 360.3 360.0 355.0 system for carriers Information Systems Printer sales increase Oct. 28 Decrease in demand for new Sep. 03 July 28 FY end July 28 Oct. 28 projections Projections projections Projections banknotes Mar. 04 Overall sales decline Sep. 04 FY end Mar. 05 Incomes (Billion yen) Incomes 0.0 1.5 (Billion yen) Refer to previous page (2.9) 29.0 29.0 (3.9) 21.6 (6.0) 10.0 Operating income 10.0 1.3 Net income (10.5) 9 Full Year Projection: Info Systems z Demand related to new banknote mostly ends in the 1st half. Though sales decrease was partly offset by sales from financial IT solutions and color printers, operating income decreased on an year-on-year basis due to R&D increase <Full year projection> <First half results> (Billion yen) Net sales Net sales (Comparison from last FY) (Billion yen) 360.3 360.0 355.0 Financial system solutions 158.0 160.1 New banknote-related demand mostly 151.6 ends in 1H, causing ATM sales to 127.0 149.0 127.0 decrease. However, sales for back-office 64.5 63.9 operation concentration, information and 61.5 telecom converged systems, and bank counter terminals increase 95.0 88.0 86.5 Information solutions 30.6 30.5 31.0 Slight increase in sales due to price down by severe competition Delay in some large projects 124.8 138.0 140.0 59.5 63.0 65.2 Printers Sales increase in color NIP FY end July 28 Oct.