Investor Relations | IR Events | Performance Briefing

[ Financial Results for Fiscal 2011 Performance Briefing ]Consolidated Full Year Results of FY March,2011
Consolidated Full Year Projections of FY March, 2012

Mr. Takehiro Kamigama President & CEO

Mr. Takehiro Kamigama
President & CEO

Good afternoon. I’m Takehiro Kamigama, President & CEO of TDK. Thank you for taking the time to attend today’s presentation in large numbers. I would like to summarize our consolidated performance for the fiscal year ended March 31, 2011.

Fiscal 2011 Consolidated Results

In fiscal 2011, we recorded net sales of ¥875.7 billion, operating income of ¥63.8 billion, income before income taxes of ¥60.1 billion, and net income of ¥45.3 billion. Earnings per share was ¥350.90. The average exchange rate for the U.S. dollar was ¥85.73 and for the euro was ¥113.12. These exchange rates lowered net sales by approximately ¥57.4 billion and operating income by approximately ¥18.0 billion.

Highlights of Fiscal 2011 Results

Next, let me talk briefly about the main features of our full-year performance. First, Japan’s massive natural disaster negatively impacted our net sales by approximately ¥1.1 billion and operating income by approximately ¥1.8 billion. These figures are the impact in March 2011 only. The reason our sales weren’t that affected was because we had sufficient inventory on hand. The main reason for the impact on earnings was losses caused by a fall in capacity utilization at our plants. We expect to see a slightly larger negative impact on sales in April 2011. In the aftermath of the disaster, there was a noticeably quick reduction in production in the auto market. Although it is hard to get a clear picture, suppliers to finished product manufacturers seemed to have enjoyed strong orders in March and April, but orders have now slowed. We should get a clearer picture of the state of supply chains as a whole in May. I will discuss the present situation and our response going forward later in my presentation.

Looking at trends in the electronic products market, performance differed by the type of product. Production of smartphones and tablet devices increased markedly, while production of products for use in automobiles and industrial equipment grew solidly. Meanwhile, flat-screen TVs, notebook PCs and HDDs saw continued production cutbacks.

In this market environment, TDK’s passive components segment posted net sales growth of 18.2% year on year. Inductive devices in particular recorded increased demand for use in a wide range of finished products. And high-frequency components saw sharp growth for use mainly in smartphones, while aluminum electrolytic capacitors and film capacitors recorded higher sales mainly for use in fields such as renewable energy and industrial equipment. Ceramic capacitors posted higher sales mainly for use in automobiles. Magnetic application product net sales declined approximately 4% year on year. Behind this decline was an approximate 8% drop year on year in recording device sales due to production cutbacks in the HDD market and the impact of the yen’s appreciation. Power supplies recorded higher sales, centered on industrial equipment applications. The other segment recorded a 26.2% year-on-year rise in sales, on higher rechargeable battery sales, particularly for use in tablet devices.

Around two years ago, I said that TDK would focus on three growth fields: communications, including smartphones; car electronics, including hybrid and electric vehicles; and other fields, including renewable energy and industrial equipment. Well, as you can see from the graphs on this slide, our efforts produced results in fiscal 2011. Sales in the communications field jumped 27%. In car electronics, our sales rose 15%. And in the renewable energy and industrial equipment fields, sales climbed 27%. Higher sales of aluminum electrolytic capacitors and film capacitors made a considerable contribution. On the other hand, in the IT home electronics field, our sales declined 7% year on year, with sales lower for PC, notebook PC and HDD applications in particular.

Looking at the composition of our sales by field, IT home electronics accounted for 58% of total sales in the fiscal year ended March 2009. In the year ended March 2011, this sales share dropped to 44%, with sales in fields other than IT home electronics climbing from 42% to 56% of total net sales.

Fiscal 2012 Full-Year Consolidated Results and Dividend Projections

Next, I’d like to talk about our projections for consolidated operating results and dividends for fiscal 2012. As things stand today, the outlook is still unclear due to the impact of the natural disaster, including resulting electricity supply and customer supply chain problems, as I discussed earlier. For that reason, I an unfortunately unable to announce any projections. However, we will announce forecasts as soon as we are able to do so. We should be able to come up with forecasts before the end of the first quarter. Incidentally, regarding the dividend applicable to fiscal 2011, we paid an interim dividend of ¥40. And we plan to pay a year-end dividend of ¥40. That means the planned dividend applicable to fiscal 2011 is ¥80.

Measures in Response to the Great East Japan Earthquake Going Forward

You are no doubt interested in measures we are planning to address issues arising from the recent natural disaster. So, let me briefly cover our response and countermeasures, particularly with respect to electricity supply.

At present, we have 25 business sites located in the Tohoku Electric Power and Tokyo Electric Power Company service areas. All business sites have now resumed production. With the exception of one site, all sites are operating at close to full capacity, and have returned to around the same level of operations as before the natural disaster. The one plant I just mentioned is also expected to return to full operations from next month.

Regarding TDK’s supply chains, we are experiencing no problems. However, supplies will probably be tight for components in our power supplies business until May. As of today, we expect supplies in our power supplies business to return to normal from June as well.

Power supply is another issue. As you know, there are concerns about power shortages during the summer months in Japan. Obviously how to respond to these expected shortages and ensure stable production is an issue for us to address. We believe that we can cover half of the expected shortage by changing our production framework, or implementing energy-conservation measures. This relates to business sites in the service areas of Tohoku Electric Power and Tokyo Electric Power Company. Plants that cannot secure sufficient electricity supplies are moving quickly to add their own power-generating capacity as a backup measure. So we think we have the situation pretty much covered. We think we will be prepared to deal one way or another with calls for a 25% cut in electricity use from July. Looking ahead, we will review our procurement strategy and also step up efforts to rebuild our risk management system.

Future Strategy (Focused Areas and Products)

The last topic I would like to talk about today is our future strategy for products and fields that were are focusing on. Starting with the communications field, and smartphones in particular, we hope to expand sales of thin-film devices and inductors for high-frequency applications. We will also focus on modules with ICs embedded in substrates. These modules consist of ICs embedded in substrates on top of which are placed passive components. We are already fielding a large number of inquiries for these products, and are extremely busy shipping samples to customers. In the car electronics field, we want to grow sales of DC-DC converters, chargers, film capacitors and sensors. In the IT home electronics area, we are close to being able to mass produce 500GB/P HDD head products for 2.5-inch HDDs. Given this situation, we are keen to launch sales as early as possible. We also aim to expand sales of rechargeable batteries as well as optical transmitter and receiver modules for PCs. The latter are optical application products that conform to Intel’s Light Peak standards. Next, in the areas of renewable energy and the environment, we intend to strengthen sales activities to Japanese clients in particular. We hope to expand sales of aluminum electrolytic capacitors and film capacitors as well as components used for ESD protection in LED lighting and countering static electricity.

That concludes my presentation. Thank you.