Financial Results for the First Quarter of Fiscal Year Ending March 31, 2007
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Financial Results for the First Quarter of Fiscal Year ending March 31, 2007 July 27, 2006 Oki Electric Industry Co., Ltd. 1 Table of Contents 1. 1st Quarter of FY ending March 2007 1.1 Financial Results Outline 1.2 Profit and Loss 1.3 Segment Information 2. Target for 1st Half of FY ending March 2007 3. Measures in Major Businesses The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions. 2 Q1 Results and H1 Projections Q1 results and H1 projections are as planned Q1 H1 projections/measures Sales and income decreased on a year-on- year as planned As planned Larger sales and income in Q2 and H2 Overall Financial: Increase in security-available and overseas Financial: Recovery in ATM, heavy sales of ATMs, Recovery in bank branch terminals, Preparation counter terminals in H2 (heavy in Q1 last for privatization of postal services year) Telecom: Optical network and NGN will expand after Telecom: Reduction in legacy networks H2 Public: Forwarded plans in public sectors Public: Larger sales in H2, preparation for ITS Systems Enterprises: Forwarded plans Info-Telecom Enterprise: Enhance indirect sales and overseas sales In-house venture: Steady business In-house venture: Steady biz. expansion Logic: LCD panel inventory adjustment Logic: Add values, enhance SOS and wireless Memory: Continued price down pressure Memory: Reduce cost, higher-density ductors Foundry: Favorable in high voltage process Foundry: Active deployment focusing on profit Semicon- Color NIP: Reduced cost, shift to mid and high end, Color NIP: Increase in unit, decrease in expand sales in Japan market, no threat from Dell consumables compared to original plan SIDM: Introduce low-end new products, expand sales SIDM: Steady increase Printers in BRIC markets 3 Q1 Financial Results Outline Results were as planned, while sales and income decreased on year-on- year basis Comparison to previous Q1 ¾ Net sales: Decreased by 5.9 B yen to 130.4 B yen due to reduced investment for fixed-line systems by telecom carriers, and impact from LCD panel inventory adjustment ¾ Operating income: Decreased by 5.1 B yen to 9.0 B yen due to decreased sales(金額単位:億円) and worsened product mix Q1, FY Mar. 06 Q1, FY Mar. 07 Net sales 136.3 130.4 Operating income (3.9) (9.0) Recurring income (4.5) (10.5) Net income (4.0) (7.4) Net income per share (6.54) yen (12.04) yen Total assets 595.4 * 617.9 Shareholders’ equity 118.0 * 121.0 Shareholders’ equity per share 192.90 yen 197.90 yen Interest-bearing debt 279.0 296.0 * For easier comparison, the amount is calculated based on the previous method before the change of the corporate law 4 Q1 Financial Results Outline (Billion yen) Q1, FY Q1, FY Mar. 06 Mar. 07 Cost of sales ratio worsened by 1.6 points due to price down Net sales 136.3 130.4 and increase in fixed costs (Cost of sales ratio) (76.8%) (78.4%) Cost of sales 104.7 102.2 Increase in SG&A due to increase in personnel costs, SG&A 35.5 37.2 advertisement expenses, and promotion expenses Operating income (3.9) (9.0) Other income/expense Other income (0.6) (1.5) decreased due to worsened Recurring income (4.5) (10.5) currency exchange and decreased dividend received Extraordinary income 0.1 0.3 <Currency exchange ratio> Extraordinary loss 0.6 0.4 FY end. Mar. 2007 H1 Q1 Q2 Income before taxes (5.0) (10.6) Internal actual projections Income taxes (1.0) (3.2) USD 115.0 114.5 115.0 Net income (4.0) (7.4) Euro 140.0 143.8 140.0 5 Segment Information: Consolidated basis Net sales (Billion yen) Though decreased on a year-on- year basis, results were as planned 136.3 130.4 7.3 8.2 Others Net sales: Decreased by 5.9 B yen 31.8 38.3 Printers on a year-on-year basis 35.8 Printer sales increased, particularly in 33.2 Semiconductors color NIP Sales for the financial market and 61.4 50.7 Info-Telecom sales for telecom carriers decreased Q1, FY Mar. 06 Q1, FY Mar. 07 Operating income: Decreased by Income 5.1 B yen on a year-on-year basis Reasons include: Sales decrease in Info-Telecom (3.9) (4.0) Active investment in printer sales (7.4) (9.0) Unit increase in low-end printers Operating Income Net Income 6 Segment Information: Info-Telecom Systems Net sales (Billion yen) Net sales 61.4 Financial market: Decreased by 5.5 B yen 3.9 Recovery trend in ATM 8.9 50.7 3.9 6.3 Others Though sales of counter terminals was large in Q1 last year, this year it will be 9.8 Enterprises 22.8 5.5 Public sector heavy in H2 12.7 Telecom Telecom carriers: Decreased by 10.1 B yen carriers Decline in carriers’ investments on fixed- 21.9 16.4 Financial market network equipment Q1, FY Mar. 06 Q1, FY Mar. 07 Although sales in both Financial and Telecom carriers decreased, the results Income remain as planned Operating income: Decreased by (1.6) 3.2 B yen Sales decrease in Financial and Telecom (4.8) carriers reduced marginal profits 7 Segment Information: Semiconductors Net sales (Billion yen) Net sales 35.8 33.2 Foundry, Logic: Decreased by 3.5 B yen 3.8 Others 0.5 5.4 Optical Major reasons include decrease in 8.9 0.6 components driver sales due to inventory 8.1 System adjustment by LCD panel vendors memories Foundry: Increased by 1.6 B yen 22.6 19.1 Logic Due to active business deployment riding on the strength of high voltage process Q1, FY Mar. 06 Q1, FY Mar. 07 Income Operating income: Increased by 0.4 B yen Impact of price drops (0.3) Improvement in profitability for drivers (0.7) and P2ROM, and currency exchange 8 Segment Information: Printers Net sales (Billion yen) Net sales 38.3 Color NIP: Increased by 3.6 B yen 31.8 Increase in unit shipment and sales Mono NIP, 17.7 SIDM, others for consumables 14.8 Mono NIP, SIDM, etc.: Increased by 2.9 B yen Color NIP 17.0 20.6 Sales increase in SIDM and office machines including facsimiles Q1, FY Mar. 06 Q1, FY Mar. 07 Income Operating income: Decreased by 2.4 B yen 0.1 Active investment on sales Worsened cost to sales ratio in printer due to volume increase in low-end (2.3) 9 Table of Contents 1. 1st Quarter of FY ending March 2007 1.1 Financial Results Outline 1.2 Profit and Loss 1.3 Segment Information 2. Target for 1st Half of FY ending March 2007 3. Measures in Major Businesses The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions. 10 Target for H1, FY ending March 2007 Net sales: 300.0 B yen Unchanged from the previous announcement on April 27 Sales by segment also remains the same as previously announced Operating income/loss: 12.0 B yen of loss Unchanged from the previous announcement on April 27 Info-telecom: Plan to increase by 2.0 B yen Printers: Plan to decrease by 2.0 B yen Net sales Operating income H1, FY Mar. 2007 <Ref.> H1, FY Mar. 2007 <Ref.> July 27 Apr. 27 H1, FY July 27 Apr. 27 H1, FY plan plan Mar. 2006 plan plan Mar. 2006 Info-Telecom Systems 136.0 136.0 155.3 (6.0) (8.0) (1.6) Semiconductors 72.0 72.0 77.6 0 0 0.2 Printers 76.0 76.0 71.0 (2.0) 0 1.5 Others 16.0 16.0 15.2 1.0 10 1.1 Corp. & elimination - - - (5.0) (5.0) (5.4) Total 300.0 300.0 319.1 (12.0) (12.0) (4.2) 11 Table of Contents 1. 1st Quarter of FY ending March 2007 1.1 Financial Results Outline 1.2 Profit and Loss 1.3 Segment Information 2. Target for 1st Half of FY ending March 2007 3. Measures in Major Businesses The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions. 12 Management Target in FY Mar. 2008 Target of net sales and operating income by segment FY Mar. 2006 (Results) FY Mar. 2007 (Plan) FY Mar. 2008 (Target) Operating Operating Operating (Billion yen) Net sales income Net sales income Net sales income Financial market 100.1 121.0 130.0 Telecom carriers 98.2 79.0 87.0 Public sectors 54.0 66.0 68.0 Enterprises 67.2 70.0 75.0 Others 18.5 24.0 20.0 Info-Telecom Systems 338.0 10.9 360.0 12.5 380.0 20.0 Semiconductors 150.7 3.0 154.0 5.5 160.0 10.0 Printers 160.5 4.1 172.0 5.0 190.0 10.0 Others 31.3 (7.4) 34.0 (8.0) 30.0 (10.0) Total 680.5 10.5 720.0 15.0 760.0 30.0 13 Financial System Business Main Measures Enhance profitability in base financial business (ATM, bank branch systems, cash management systems) ¾ Increase in sales by full-scales expansion of security-available ATMs and renewal in ATMs for convenience stores ¾ Expand sales of cash management equipment to postal service and overseas market (Korea, etc.) Expand new financial business (e-financial systems, networks) ¾ Horizontal deployment of Oki’s strong track record solutions in the Internet banking market to new Internet banks ¾ Expand service and software businesses, including bank branch video surveillance and ATM operation full-consignment Prepare business development targeting privatization of postal services ¾ Established a division dedicated for postal service solutions ¾ Cultivate biz opportunities for counter terminals, cash management equipment, next-gen branch terminals, security (cash management, video surveillance), and service consignment Expand ATM business for the China market ¾ Shift to China localized business, targeting to gain 30% share in the FY Mar.