Investor Relations | IR Events | Performance Briefing

[ 1st Half of fiscal 2001 Performance Briefing ]Outline statement of the financial results

Mitsuaki Konno General Manager of the Finance & Accounting Dept.

Mitsuaki Konno
General Manager of the Finance & Accounting Dept.

Page 9 of our earnings release contains a breakdown of net sales. I would like to review the shares of our major product groups and sales growth rates.

Sales of electronic materials were 109.3 billion yen. Ferrite and magnet product sales increased 2% and accounted for 38% of total sales in this sector. Capacitor sales rose 56% and represented 62% of this sector. In electronic devices, sales totaled 75.0 billion yen. Inductive devices sales increased 12% and were 56% of total sector sales, high-frequency component sales rose 63% for a 22% share of sector sales, and others sales were up 9% for a 22% share. In recording devices, sales amounted to 91.7 billion yen. HDD head sales were down 8% and accounted for just under 90% of total sector sales. Sales of other heads were down 15% for a share of slightly over 10%. In the semiconductors & others sector, IC sales increased 31% and were 57% of total sector sales. Sales of other products were up 9% and were 43% of the total. In recording media and systems, audiotape sales fell 28% and were 17% of total segment sales. Videotape sales were down 13% for a 36% sales share, optical media sales were down 8% and accounted for 23% of segment sales, and sales of other products increased 7% and were 24% of segment sales.

Now I would like to break down sales by the markets we serve. In the electronic materials and components segment, sales totaled about 290 billion yen. Sales to members of the communications industry increased 56% and were almost 17% of total segment sales. Sales of components for PCs and other data-related equipment increased 1% and were 46% of total segment sales. Audio and visual product component sales rose 12% and were slightly more than 15% of the total. Automotive component sales were unchanged and accounted for 6% of segment sales. Sales to component makers rose 18% and were 6% of the total. Sales for home electronics and appliances increased 3% and were 3% of the total. All other industries account for 7% of segment sales. As Mr. Sawabe remarked, the communications industry does not represent a very high percentage of TDK's total sales. However, communications sales rose by about 50% over the first half of the previous fiscal year, rising to more than 14% of total sales. Recording-related products remained unchanged at 42% of total sales.

Please turn to page 10 of your materials, the consolidated statements of income. As you can see, non-operating items improved from a net expense of 2.2 billion yen to a contribution of 11.3 billion yen. This is a net improvement of 13.6 billion yen. The biggest factor was a gain due to the establishment of a trust to fund retirement benefit liabilities. We placed equities we held in this trust, and this resulted in a consolidated gain of 12.5 billion yen. We also recorded a gain of about 3.3 billion yen on the exchange of investment securities. This is the result of the exchange of shares held by our U.S. semiconductor subsidiary for the shares of another company that wanted to purchase these shares. The gain represents the difference between the book value and market value of the shares held by our subsidiary. There were several negative factors, too. There was a 4.3 billion yen expense for the amortization of intangible assets. This amount represents the lump-sum amortization of the in-process R&D portion of the goodwill TDK booked following the March 2000 acquisition of Headway Technologies. We also recorded a foreign exchange loss of 1.5 billion yen, about 3.1 billion yen less than the 4.6 billion yen loss we posted in the first half of the previous fiscal year. Collectively, these factors were mainly responsible for the 13.6 billion yen improvement in non-operating items. As a result, there was a large increase in income before income taxes.

Going on, please turn to page 11 of your materials, the consolidated balance sheets. I would like to point out items that changed significantly. First of all, total assets are 785.0 billion yen higher than one year earlier and about 10 billion yen higher than on March 31, 2000. Cash and cash equivalents, including marketable securities, were down by more than 20 billion yen. We used 15.3 billion yen of cash and cash equivalents as part of the funds required to establish a trust to fund pension benefit liabilities. This is the largest component of the drop in liquidity. We also used cash and cash equivalents to fund part of our capital expenditures. Based on construction in progress, our capital expenditures were 44.0 billion yen in the first half of this fiscal year while depreciation expenses were about 29.0 billion yen. Multilayer chip capacitors, high-frequency components and recording devices accounted for a large share of these expenditures. By region, almost 40% of expenditures were overseas and slightly over 60% were in Japan. In liabilities, our liabilities for retirement benefits dropped from 57.0 billion yen to 17.0 billion yen following the establishment of a trust to fund these liabilities.

Now please turn to page 24, which contains supplementary information. As you heard from Mr. Sawabe, we estimate the full-year capital expenditures will be about 95.0 billion yen and that depreciation for the year will be about 60.0 billion yen. R&D expenditures are expected to be about 37.0 billion yen for the year, representing 5.1% of consolidated net sales.

Finally, I would like to give you a breakdown of our estimated consolidated net sales of 720.0 billion yen. This estimate is based on projections of growth of 31% in electronic materials to 229.0 billion yen, 20% growth in electronic devices to 155.0 billion yen, a decline of 11% in sales of recording devices to 179.0 billion yen, an increase of more than 13% in semiconductors & others to 24.0 billion yen and a decline of more than 10% in recording media & systems to 133.0 billion yen.

This completes my remarks. Thank you for your attention.