Investor Relations | IR Events | Performance Briefing

[ 1st Quarter of fiscal 2011 Performance Briefing ]Passive Components Business

Mr. Shinichi Araya Director Senior Vice President

Mr. Shinichi Araya
Director
Senior Vice President

Let me continue by talking about the passive components business.

Passive Components Business

Passive components is a newly created reporting segment. It includes a widening range of fields such as consumer electronics, automobiles and industrial equipment. In this segment in the first quarter of fiscal 2011, capacitors recorded net sales of ¥37,985 million. This represented 36.1% of segment sales. This also represented a ¥9,173 million, or 31.8%, increase from the ¥28,812 million in sales recorded in the first quarter of fiscal 2010. Another component of the passive components segment, inductive devices, registered sales of ¥32,513 million, which accounted for 30.9% of segment sales. This was a ¥7,755 million, or 31.3%, increase from the ¥24,758 million recorded in the first quarter of the previous fiscal year. The third category in the passive components segment is "other passive components" and this includes high-frequency components, piezoelectric materials and certain other products. Fiscal 2011 first-quarter sales were ¥34,583 million, which accounted for 32.9% of total segment sales. This represented an increase of ¥7,930 million, or 29.8%, from the ¥26,653 million recorded in the first quarter of fiscal 2010. Together, these three categories generated total segment sales of ¥105,081 million, compared with ¥80,223 million in the corresponding quarter of fiscal 2010. This was an increase of ¥24,858 million, or 31%, year on year. As you can see from the slide, all three categories-capacitors, inductive devices and other passive components-recorded roughly the same growth rate of around 30%.

Looking at mainstay products, multilayer ceramic chip capacitors saw sales rise sharply, mainly on the back of automotive applications, an area where our products are very competitive. Aluminum electrolytic and film capacitors, which are now included in the capacitors category and are mainly products of the former EPCOS, saw sales rise chiefly for industrial equipment applications on the back of strong demand in Europe and demand for energy-related applications. Inductive devices saw sales increase in a wide range of fields such as automobiles, communications equipment, and IT home electronics equipment on the back of the development of new compact products and new energy supply-related products. In the other passive components category, high-frequency components, particularly SAW filters, posted higher sales mainly for communication equipment applications. In piezoelectric material products, circuit protection devices and sensors, we saw higher sales primarily of varistors and arrestors mainly in the automobile and industrial equipment fields.

Ceramic Capacitors Business Overview for 1Q FY2011

I'd like to look at the ceramic capacitors business. As I explained just now, the capacitors segment accounted for about one-third of sales in the passive components segment. I'd just like to summarize what we have said about ceramic capacitors.

Let's begin with improvements and progress with profitability in the first quarter of fiscal 2011. As we have mentioned before, over the course of the last 12 months we have taken steps to consolidate domestic manufacturing bases. This consolidation has rationalized our operations. Furthermore, improved productivity has reduced variable costs. This has involved detailed improvements to our processes. Thirdly, higher capacity utilization has yielded increased output. The consolidation of bases has helped us to optimize manufacturing capacity by raising capacity utilization. As a result, production increased in the first quarter of fiscal 2011. A fourth area we made improvements in was in the product mix. We increased products with high margins within our product mix with development centered on automotive components. This translated into improved earnings. As a whole, we achieved a significant improvement in our earnings power in ceramic capacitors in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010.

Ceramic Capacitors Business-Actions for the Remainder of FY2011

Now let me explain actions we plan to take for the remainder of fiscal 2011. The first initiative is a production location strategy. Over the past year we have focused on consolidating our domestic production bases. We have now extended these consolidation efforts to encompass overseas bases. One action will be to consolidate overseas packaging facilities. We plan to reduce the number of facilities from 8 to 4, mainly in Asia. We expect this consolidation process to be largely completed by the end of the second quarter. As a result, our main packaging facility will be in Chang An, China, which will begin full-scale production centered on back-end processes. A second strategy concerns production. We have talked about this many times before, but we are aiming to make improvements in processes by bringing new equipment, and we believe that this will yield higher output and lower costs. Part of this strategy entails reducing costs by increasing the ratio of materials produced in-house. Our third initiative is our products strategy. We have expanded its products line up for automobiles and other fields as I mentioned before and will continue this drive going forward. We have been a bit slow out of the blocks with next-generation high runner prodcuts, but we plan to expand our lineup of these products as well. In short, we are determined to strengthen our growth potential and improve our earnings power further.

That concludes my presentation. Thank you.

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