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[ 2nd Quarter of fiscal 2013 Performance Briefing ]Consolidated 2Q Results of FY March, 2013

Mr. Takakazu Momozuka Corporate Officer,General Manager of Finance & Accounting Department

Mr. Takakazu Momozuka
Corporate Officer,
General Manager
Finance & Accounting Department

Consolidated 2Q Results of FY March, 2013

I would like to announce the Consolidated 2Q Results of FY March 2013. Net sales, 207 billion yen, a decline of 1.4% in comparison to the previous quarter; operating income, 11.2 billion yen, an increase of 31.8%; income from continuing operations before income taxes, 9.5 billion yen, an increase of 22.9%; net income, 5.3 billion yen, an increase of 22.3% or 1 billion yen in comparison to the previous quarter; and for the impact from the exchange rate, net sales have been lowered about 1.1 billion yen and operating income has been lowered about 0.2 billion yen.

Segment Information (FY2012 2Q vs. FY2013 2Q, FY2013 1Q vs.FY2013 2Q)

For the segment information for the second quarter, because of PC sales, deterioration of the market environment, and people withholding purchases due to the launching of Windows 8, PC and HDD sales have been sluggish. HDD manufacturers have been conducting manufacturing adjustments. Year over year and quarter over quarter, the production level has been lower than those previous periods. In terms of smartphone and PC production, it is over the previous year but lower than our initial forecast. The automotive market on the other hand was more or less steady.
In terms of stricter reform costs for the second quarter, passive components were 1 billion, magnetic application products were 0.8 billion, in total 1.8 billion being booked. In terms of the insurance income, magnetic appliances products were 4.5 billion, applied film products were 0.7 billion, in total 5.2 billion being booked under operating income.
Next is the sales and operating income situation for each segment. For passive component sales for the second quarter, compared to the 91.5 billion yen booked in the first quarter, has declined 1% by 0.9 billion yen totaling in 90.6 billion yen. Capacitor sales for the second quarter decreased 7% by 2.2 billion yen from first quarter’s 31.4 billion yen, totaling in 29.2 billion yen. Because we have suppressed order-taking, ceramic capacitor sales have declined, along with electrolytic capacitors, film capacitors, and the industrial equipment market. For inductor device sales for the second quarter, new products were introduced which resulted in an increase in sales from first quarter’s 28.2 billion yen to 29.6 billion yen in the second quarter. Other passive components basically remained flat going from 31.8 to 31.7 billion yen. High-frequency products for smartphones’ production and delivery have been delayed which resulted in sluggish sales but piezoelectric material components and sensor products for printers and smartphones have been doing well.
For the operating income for passive components, a -2.9 billion yen loss was generated in the first quarter, slightly improving with only a -2.5 billion yen loss in the second quarter. In terms of the structural reform costs, 0.2 billion yen in the first quarter and 1 billion yen in the second quarter, if we excluded those costs, the loss from last year would have been reduced further by 1.2 billion yen.
Magnetic application products, compared to 88.2 billion yen 1Q sales, a 5.4% decline by 4.8 billion yen, resulting in 83.4 billion yen 2Q sales. Recording devices, compared to 59.9 billion yen 1Q sales, a 6.9% decline by 4.1 billion yen, resulting in 55.8 billion yen 2Q sales. Other magnetic application product sales, compared to 28.3 billion yen 1Q sales, a 2.2% decline by 0.6 billion yen, resulting in 27.6 billion yen 2Q sales. Power supply sales in the industrial equipment market was the same level, but in terms of the sales of magnets, it has declined. Due to the price decline of rare earth and price fluctuations, we have also seen a decline in the automotive market as well. Magnetic application products went from 14.6 billion yen in the first quarter to 13.2 billion yen in the second quarter. The restructuring costs of 800 million yen and the insurance income of 4.5 billion yen have been included. For film application products, net sales increased 19.4% from 23.2 billion yen in the first quarter to 27.7 billion yen in the second quarter. Sales of secondary batteries have been below expectations but sales for smartphones and tablets have been going well. For film application products, because of the increase in secondary batteries, improvement in profitability, and because of the insurance income of 700 million yen, operating income has increased to 5.0 billion yen from first quarter’s 2.1 billion yen. For corporate and eliminations, operating income went from -4.2 billion yen in the first quarter to -4.1 billion yen in the second quarter.

Breakdown of Operating Income Changes

This is the Breakdown of Operating Income Changes of 2.7 billion yen. There has been a decrease in negative impact from the earthquake having resulted in an increase of 0.6 billion yen; changes in sales resulted in a decrease of -2.9 billion yen; sales price reduction resulted in a decrease of -4.8 billion yen; exchange fluctuation have resulted in a decrease of -0.2 billion yen; SG&A expenses resulted in an increase of 1.2 billion yen, this includes the restructuring costs of the first quarter; rationalization cost reduction have resulted in an increase of 3.3 billion yen; restructuring has resulted in an increase of 2.7 billion yen; income from insurance due to the flooding in Thailand resulted in an increase of 5.2 billion yen.

Projections for FY March 2013 Image of change in sales

The Projections for FY March 2013 looking at the third and fourth quarter for passive components, 3Q projections are an increase by 8-10% and 4Q projections are an increase by 3-5%, resulting from sales of high-frequency components and inductive devices being increased. For magnetic application products, 3Q projections are a decline by 1-2% and 4Q projections are a decline by 2-3%. For film application products, 3Q projections are an increase by 16-18% and 4Q projections being flat, resulting from sales of secondary batteries being increased. In total, 3Q projections are an increase by about 5% from last quarter’s 207 billion yen and 4Q projections being flat.

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