[ 3rd Quarter of fiscal 2013 Performance Briefing ]Consolidated Results 3Q of FY March 2013
Mr. Takakazu Momozuka
Corporate Officer,
General Manager
Finance & Accounting Department
For the Consolidated 3Q Results of FY March 2013, net sales were 215.4 billion yen, a change of 24.1 billion yen, or 12.6% from last year; operating income was 5.1 billion yen, down 2.3 billion yen, or 31.3% down; and income from continuing operations before income taxes were 2.9 billion yen, down by 0.7 billion yen, or 18.9% down. As for net income, there were corporate taxes, or deferred tax assets, and so on, so we had 12 billion yen of corporate taxes, this causing a deficit. But we were able to have a plus 400 million yen result. The exchange rate was 81.17 yen to the dollar and 105.28 to the euro, and so this increased the net sales by 8.7 billion yen and operating income was increased by 1.3 billion yen as a result of the FX factor.
Next, in terms of the Breakdown of Operating Income Changes, we are down by approximately 2.3 billion yen. As for the product mix, there was a 500 million yen positive factor as a result of the improved product mix, and there was about a 5.9 billion yen impact. As for the lower yen, we have an exchange fluctuation, a positive factor of 1.3 billion yen; and rationalization, cost reduction was a 2.8 billion yen positive factor. As for the rare earth material price fluctuations, there was a negative impact of approximately 3.7 billion yen. As for the SG&A expenses increases, there was a negative impact of approximately 1.4 billion yen; also from 3Q the previous year there was 300 million yen, but there was an additional 100 million yen that was required. There were restructuring effects, and in 3Q there was approximately a 3.8 billion yen impact. There was also the Thai flood’s impact last year, which was not here this fiscal year, so there was a positive impact of 3.9 billion yen. There was also a decrease in gain of land sales of 4.0 billion yen. Also, insurance gained from the Thai flood amounted to 400 million yen.
In 3Q, there were 400 million yen in expenses that occurred. This was mainly for the restructuring of the passive components business. Throughout the year, there were restructuring expenses. There were approximately 5 billion yen that were anticipated for this period, but this was increased by 1 billion yen, so there was a 6 billion yen impact in this area.
Next, by segment, I would like to talk about the net sales and operating income. First of all, for passive components in 3Q it was 90.6 billion yen, but it was increased by 2.5 billion yen to make it 93.1 billion yen. In regards to the net sales of capacitors in 3Q, it has gone down by 2.6 billion yen, from 8.9%, to 26.6 billion yen. As for ceramic capacitors, there has been the sales situation that has gone down; and for the consumer market and for the dealer market, there has been a decrease in the business; and in addition to that, for aluminum capacitors, the net for industrial sales had gone down. These are the major factors that were at play.
Next is in regard to inductive devices, and it was 29.6 billion yen in 2Q, but there was an increase by 1 billion yen, or 3.4%, to make it 30.6 billion. There was the smartphone as well as the communication market, tablet and PC sales that increased, but for consumer equipment, the sales decreased. Finally, as for the other passive products, it was 31.7 billion yen in 2Q, but there was an increase by 4.3 billion yen, or 13.6%, to make it 36 billion yen. There was a decrease in digital appliances, but there was more business in the high frequency components, and the smartphone camera modules’ voice coil motors have shown positive developments in sales. For passive components, in 2Q it was negative 2.5 billion yen, but this was reduced by 700 million yen to make it an operating loss of 1.8 billion yen. Out of this, there was the EPCOS goodwill expense of 1 billion yen, and from 2Q there was an increase by 200 million yen. As for the benefits of the restructuring, the ceramic capacitors’ losses are being reduced. For high frequency components as well, this is lower than anticipated, but we are continuing to see improvements in this area.
Next, for the magnetic application products for 3Q, the net sales compared to 2Q net sales of 83.4 billion yen increased by 800 million yen, or 1%, to make it 84.2 billion yen. For recording devices, the HDD head volumes’ shipments were higher than anticipated initially. And so from the 2Q results of 55.8 billion yen, this increased by 4.4 billion yen, or 7.9%, to 60.2 billion yen. Meanwhile, for the magnet, there was the rare earth price changes causing the sales price to go down; and also, there was the stagnation in the HDD market so it was quite lower than initially anticipated, so that for the other applied products, instead of the 27.6 billion that we saw in 2Q, we saw a reduction by 3.6 billion yen, or 13%, down to 24 billion yen. As for the magnetic application products, in 2Q it was 13.2 billion yen. But this has gone down by 5.7 billion yen, or 43.2%, to make it 7.5 billion yen. For the recording device profits, it was initially higher than anticipated, but in 2Q there were the Thai Flood’s insurance revenue that included 4.5 billion yen, and also for the magnetic application products, because of the profit and loss situation due to the rare earth fluctuations causing the sales prices to go down compared to 2Q, the profits have gone down considerably.
Next are the film application products, in 2Q it was 27.7 billion yen, but this increased by 5.3 billion yen, or 19.1%, to 33 billion yen. This is because of the secondary battery sales to smartphones increased. And for the film application products operating income in 2Q was 5 billion, but we have seen a decrease by 1.4 billion, or 28%, to make it 3.6 billion yen for 3Q. And secondary battery profits are moving according to our anticipations, but there was a 700 million yen impact of the revenue from the insurance that impacted things.
As for the corporate and eliminations, there was a decrease by 400 million yen from 2Q to make it -3.7 billion yen in 3Q.
As for the outlook for the entire year, we had mentioned an operating income of 41 billion yen, but there was been a reduction by 22 billion yen for the operating income and I would like to talk about the major factors for why.
First of all, in regards to the exchange rate, there was been a depreciation of the yen, more than we expected. So we believe that there will be a 5.1 billion yen increased FX impact. And for the passive, for high frequency, and the inductive devices, the sales situation is mainly for the communication market, but this is lower than anticipated. Furthermore, for HDD, there was been a stagnation. For the primary heads and the magnets, the sales are lower than anticipated. Because of that impact, we have this kind of result. Furthermore, in conjunction with this, for the new products, there has been some cost elements that have not been achieved. Therefore, the volumes have gone down, and there is a further impact of approximately 18.4 billion yen. Furthermore, in regard to the orders coming down, inventory adjustments have to be carried out. And so there is going to be loss from lower capacity utilization of approximately 5.2 billion yen. As for the magnets, there is the rare earth market price changes that have a negative impact of approximately 2.5 billion yen. As for the restructuring costs for the passive business, there is approximately 1 billion yen of additional expenses required overseas.
Next, for the sales projections for 4Q of FY ending March 2013, I would like to talk about the various factors. In regard to the exchange rate, it is 85 yen to the dollar and 115 yen to the euro that we have assumed. For the passive components, it was 93.1 billion in 3Q, but for 4Q, we anticipate that there will be a 2-4% increase. There is the foreign exchange rate factor that will cause increases but will otherwise remain flat. For the magnetic application products, in 3Q it was 84.2 billion, but in 4Q an 8-10% reduction is anticipated. Mainly, this will be for the HDD heads and the magnet sales that will decrease. Next are the film application products. In 3Q it was 33 billion yen. In 4Q, we believe that there will be a decrease by 17-19%. This will mainly be because of the decrease in sales of secondary batteries. As a result, the total 215.4 billion yen in 3Q, but we believe that this will decrease by 5% in 4Q. That concludes my explanation, thank you very much.
