Performance Briefing First Half of Fiscal Year March, 2016 TDK Corporation October 30, 2015 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -1- ◆Consolidated Results for First Half of FY March 2016 Tetsuji Yamanishi, Corporate Officer ◆Consolidated Full Year Projections for FY March 2016 Takehiro Kamigama, President and CEO Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -2- Consolidated Results for First Half of FY March 2016 Tetsuji Yamanishi Corporate Officer Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -3- Key points concerning earnings for First Half of FY March 2016 ◆ 587.6 billion yen, first half sales, was the highest ever. Operating income was 45.6 billion yen, increased by 63% year on year. ◆ Both sales and operating income of passive components achieved record first-half earnings. (Operating income increased by 88% year on year.) There were strong sales to the automobile market and smartphone customers. ◆ Both sales and operating income from magnetic application products declined year on year, reflecting sluggish HDD head and magnet sales. ◆ Film application products saw strong sales of rechargeable batteries for smartphones, and both sales and operating income increased significantly year on year. Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -4- Consolidated Results for First Half of FY March 2016 (Yen billions） FY March 2015 Results through 2Q FY March 2016 Results through 2Q (2014.4.1-2014.9.30) (2015.4.1-2015.9.30) 502.3 587.6 85.3 17.0 27.9 45.6 17.7 63.4 Net Sales Operating Income 5.6% Operating Income Margin 7.8% Change Yen billions % +2.2pt - Income before Income Taxes 27.4 44.1 16.7 60.9 Net Income 18.1 31.5 13.4 74.0 Earning Per Share (JPY) 144.17 249.69 US$ (JPY) EURO (JPY) 103.02 138.96 121.80 135.11 Ex-rate impact to Net sales & Operating Income Copyright© 2015 TDK Corporation. All rights reserved. - - Depreciated by 18.2% Appreciated by 2.8% Net sales：Increased by about 78.8 billion Yen Operating income：Increased by about 14.2 billion Yen First Half of Fiscal Year March, 2016 October 30, 2015 -5- First Half Results - Passive Components Segment Net Sales (Yen billions) 298.0 251.8 15/3 ◆Ceramic Capacitors ・Sales increased year on year, particularly to the steady automobile market. ・Profit margins also improved due to increased productivity. 16/3 Operating Income (OP margin) (Yen billions) 32.4 17.2 10.9% ◆Inductive Devices ・Sales to a brisk ICT market (particularly for communications equipment) and a steady automotive market increased year on year. ・Earnings increased due to an improved product portfolio. ◆High-frequency Components ・Sales of discrete products were strong, mainly due to buoyant demand from the Chinese and the North American smartphone markets. ・ Profit margins also improved significantly year on year due to increased productivity and improved product portfolio. ◆Piezoelectric Material Products ・Both net sales and operating income increased year on year due to strong sales of OIS for camera modules. 6.8% 15/3 Net Sales 298.0 billion yen (up 18.3% year on year) Operating Income 32.4 billion yen (up 88.4% year on year) 16/3 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -6- First Half Results - Magnetic Application Segment Net Sales Net Sales 164.6 billion yen (down 5.6% year on year) Operating income 8.2 billion yen (down 47.8% year on year) (Yen billions) 174.4 164.6 ◆Recording Devices (HDD Heads) ・The HDD market slowed due to a globally lackluster demand for PCs. ・Shipment volume of HDD heads also declined year on year. 15/3 16/3 Operating Income (OP margin) (Yen billions) 15.7 ◆Magnets ・Sales for use in HDDs were sluggish. Profits declined year on year as a consequence of capacity utilization falling and one-time expenses. ◆Power Supplies ・Sales to the industrial equipment market of products such as FA equipment and measuring equipment remained strong. 9.0% 8.2 5.0% 15/3 16/3 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -7- First Half Results - Film Application Segment Net Sales (Yen billions) 107.3 Net sales 107.3 billion yen (up 79.7% year on year) Operating income 16.4 billion yen (up 198.2% year on year) 59.7 ◆Energy Devices (Rechargeable Batteries) ・Sales to major customers in China, South Korea and North America increased. ・Both sales and profits increased substantially year on year. 15/3 16/3 Operating Income (OP margin) (Yen billions) 16.4 15.3% 5.5 9.2% 15/3 16/3 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 -8- Breakdown of Operating Income Changes First Half of FY March 2015 27.9 billion yen Operating Income + 17.7 billion yen First Half of FY March 2016 45.6 billion yen (Yen billions) Changes in sales +18.4 Rationalization, cost reduction +19.2 Sales price Reduction -29.5 Benefits from Restructuring +1.4 SG&A expenses increase -6.0 45.6 Exchange fluctuation (US$=Yen 121.80) 27.9 Copyright© 2015 TDK Corporation. All rights reserved. +14.2 First Half of Fiscal Year March, 2016 October 30, 2015 -9- Consolidated Results for 2Q of FY March 2016 (Yen billions) Change FY March 2015 2Q Results FY March 2016 2Q Results 264.8 308.1 43.3 16.4 18.3 27.4 9.1 49.7 Net Sales Operating Income 6.9% Operating Income Margin 8.9% Yen billions % +2.0pt - Ex-rate Income before Income Taxes 17.0 25.1 8.1 47.6 Net Income 12.4 18.4 6.0 48.4 Earning Per Share (JPY) 98.43 145.72 103.86 137.77 122.31 136.06 US$ /JPY EURO /JPY Ex-rate impact to Net sales & Operating Income Copyright© 2015 TDK Corporation. All rights reserved. - - Depreciated by 17.8% Appreciated by 1.2% Net sales：Increased by about 39.5 billion Yen Operating income：Increased by about 8.1 billion Yen First Half of Fiscal Year March, 2016 October 30, 2015 - 10 - Quarterly Results by Segment (Yen billions) Capacitors Inductive Devices Other Passive Components Net Sales Passive Components Recording Devices Other Magnetic Application Products Magnetic Application Products Film Application Products Other Total Passive Components Operating Income Magnetic Application Products Film Application Products Other Sub total Corporate and Eliminations Total Operating Income margin Ex- US$/JPY rate EURO/JPY Copyright© 2015 TDK Corporation. All rights reserved. 2Q of FY March 2015 (A) 1Q of FY March 2016 (B) 2Q of FY March 2016 (C) 37.3 37.1 55.5 39.1 37.9 70.8 39.5 38.6 72.1 129.9 147.8 150.2 63.7 25.5 54.6 24.8 60.7 24.6 89.2 37.2 8.5 264.8 79.4 43.2 9.2 279.6 85.3 64.1 8.6 308.1 YoY Change (C)-(A) Yen billions QoQ Change (C)-(B) % 5.9 0.4 1.0 1.5 4.0 0.7 1.8 16.6 29.9 1.3 1.8 20.3 15.6 2.4 1.6 (3.0) (0.9) (3.9) 26.9 0.1 43.3 -4.7 -3.5 -4.4 72.3 1.2 16.4 6.1 (0.2) 5.9 20.9 (0.6) 28.5 11.2 -0.8 7.4 48.4 -6.5 10.2 2.4 16.0 15.0 3.8 4.7 0.4 23.9 (5.8) 8.0 85.1 17.4 4.5 (4.0) -47.1 6.4 123.1 11.6 0.0 0.0 0.2 33.7 10.4 44.6 (6.3) (1.3) 18.3 18.1 27.4 6.9% 6.5% 121.29 134.15 % 2.2 9.4 8.5 5.2 0.2 23.3 (5.0) 103.86 137.77 Yen billions 9.1 8.9% +2.0pt 0.7 18.4 6.9 146.8 (0.2) -50.0 9.8 41.0 (0.5) 49.7 9.3 51.4 - +2.4pt - 122.31 136.06 First Half of Fiscal Year March, 2016 October 30, 2015 - 11 - Consolidated Full Year Projections for FY March 2016 Takehiro Kamigama President and CEO Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 12 - Market trend in the second half The arrow symbol “→” denotes changes from first-half trend Priority Markets ICT Market Trend North American smartphone production to peak in 3Q and projected to remain on par year on year in 4Q. Chinese and South Korean smartphone production to increase slightly from 2Q to 3Q. Automobile Industrial Equipment HDD market to become more sluggish than previously expected. (TAM assumption : previously 490 million, currently 463 million). Firm sales centered on the North American and European markets expected in the second half, despite year-on-year declines in the Japanese and Chinese markets. xEV* production to increase in the second half, driven by Japanese makers launching new models. Demand of renewable energy market to increase with large-scale projects planned in different countries. The Japanese industrial equipment market to decelerate due to restrained capital investment. ＊xEV : EV, HEV, PHEV Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 13 - Projections for 3Q of FY March 2016 -Image of change in sales Segment 2Q of FY March 2016 3Q Projections (Q on Q Change) Passive Components 150.2 ±0% Magnetic Application Products 85.3 -4%～-6% Film Application Products 64.1 +7%～+9% Other 8.6 Total 308.1 ±0% Forex assumptions US$/Yen EURO/Yen Copyright© 2015 TDK Corporation. All rights reserved. 122.31 136.06 First Half of Fiscal Year March, 2016 115.00 130.00 October 30, 2015 - 14 - FY March 2016 Full Year / Dividend Projections TDK keeps initial projections (announced on April 28) unchanged. FY March 2015 Full Year Results FY March 2016 Full Year Projections (Yen billions） Net sales % Yen billions 1,082.6 1,180.0 97.4 9.0% 72.5 95.0 22.5 31.0% 6.7% 8.1% +1.4pt - 49.4 65.0 15.6 31.6% 392.78 515.92 - - - - Operating income Operating income margin Net income Earning per share (JPY) YoY Change 1st half : 40 2nd half : 50 Annual: 90 1st half : 60 2nd half : 60 Annual : 120 US$/JPY 109.84 115.00 - EURO/JPY 138.88 130.00 - Dividends (JPY) Ex-rate Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 15 - Supplementary Data Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 16 - Quarterly sales and operating income by segment FY March 2015 (Yen billions) Capacitors Inductive Devices Other Passive Components Net Sales Passive Components Recording Devices Other Magnetic Application Products Magnetic Application Products Film Application Products Other Total Passive Components Operating Income Magnetic Application Products Film Application Products Other Sub-total Corporate and Eliminations Total Ex-rate US$/JPY EURO/JPY FY March 2016 1Q 36.5 35.7 49.7 2Q 37.3 37.1 55.5 3Q 37.5 38.1 67.6 4Q 37.6 36.4 62.8 121.9 129.9 143.2 136.9 59.1 26.2 63.7 25.5 75.1 25.3 62.6 25.9 85.2 22.5 7.8 237.5 89.2 37.2 8.5 264.8 100.4 47.4 9.4 300.4 88.5 44.1 10.3 279.9 7.8 7.3 0.3 (0.5) 14.8 (5.2) 9.4 8.5 5.2 0.2 23.3 (5.0) 11.4 7.7 9.6 0.2 29.0 (3.8) 8.0 6.3 9.4 0.6 24.3 (5.0) 9.6 18.3 25.2 19.4 103.86 137.77 114.25 142.79 119.21 134.74 102.17 140.17 Copyright© 2015 TDK Corporation. All rights reserved. Total 149.0 147.3 235.8 532.0 260.5 102.8 363.3 151.3 35.9 1,082.6 36.6 29.7 24.6 0.6 91.4 (18.9) 72.5 109.84 138.88 First Half of Fiscal Year March, 2016 1Q 39.1 37.9 70.8 2Q 39.5 38.6 72.1 147.8 150.2 54.6 24.8 60.7 24.6 79.4 43.2 9.2 279.6 85.3 64.1 8.6 308.1 15.0 3.8 4.7 0.4 23.9 (5.8) 17.4 4.5 11.6 0.2 33.7 (6.3) 18.1 27.4 121.29 134.15 122.31 136.06 3Q 4Q October 30, 2015 Total - 17 - FY March 2016 Projections and Forex sensitivity Expenses (Yen billions) Capital expenditure 100 R&D 130.0 140 120 Depreciation 102.5 99.7 85.6 80 79.9 68.6 77.4 82.9 90.0 80.2 60 52.6 53.5 12/3 13/3 63.4 70.6 77.0 40 20 0 12/3 13/3 14/3 15/3 16/3 Projections 12/3 133/3 14/3 15/3 16/3 Projections 14/3 15/3 16/3 Projections Forex Sensitivity (impact by 1 (one) yen change) ●US$ : Sales 5.0 billion yen, Operating Income 1.4 billion yen 12/3: FY March 2012 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 18 - Financial Position (Yen billions） March End, 2015 June End, 2015 September End, 2015 Change from June End, 2015 1,404.3 1,467.8 1,445.1 Total Liability 646.3 683.9 701.5 17.6 Stockholders's Equity 738.9 763.9 735.7 (28.2) 12.1 (15.8) (27.9) Total Asset (comprehensive income) (5.9) (22.7) Stockholders's Equity ratio 52.6% 52.0% 50.9% -1.1pt Cash and Cash equivalents 286.5 302.3 269.2 (33.1) Interest-bearing Debt (*1) 268.3 287.0 300.2 13.2 18.2 15.3 (31.0) (46.3) Net Cash (*2) *1: Short-term debt + Current installments of long-term debt + Long-term debt, excluding current installments *2: Cash and Cash equivalents - Interest-bearing Debt Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 19 - Cash Flows FY March 2015 Results through 2Q FY March 2016 Results through 2Q Operating Cash Flow 43.9 60.9 17.0 Investing Cash Flow (45.0) (67.4) (22.4) (1.1) (6.5) (5.4) Financing Cash Flow (18.9) (3.4) 15.5 Effect of exchange rate chagens on cash and cash equivalents 13.4 (2.2) (15.6) (Yen billions) Free Cash Flow Cash and Cash Equivalents （Yen billions） Capital Expenditures Depreciation and amortization Copyright© 2015 TDK Corporation. All rights reserved. 244.2 253.0 FY March 2015 Results through 2Q FY March 2016 Results through 2Q 42.8 39.2 72.5 41.6 First Half of Fiscal Year March, 2016 YoY Change 8.8 YoY Change 29.7 2.4 October 30, 2015 - 20 - Quarterly sales by applications (1Q of FY March 2015 –2Q of FY March 2016) Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 21 - Passive Components Business quarterly sales by applications (1Q of FY March 2015 –2Q of FY March 2016) Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 22 - 2005/3 : FY March 2005 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 23 - 2005/3 : FY March 2005 Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 24 - Cautionary Statements with Respect to Forward-Looking Statements This material contains forward-looking statements, including projections, plans, policies, management strategies, targets, schedules, understandings, and evaluations about TDK, or its group companies (TDK Group). These forward-looking statements are based on the current forecasts, estimates, assumptions, plans, beliefs, and evaluations of the TDK Group in light of the information currently available to it, and contain known and unknown risks, uncertainties, and other factors. The TDK Group therefore wishes to caution readers that, being subject to risks, uncertainties, and other factors, the TDK Group’s actual results, performance, achievements, or financial position could be materially different from any future results, performance, achievements, or financial position expressed or implied by these forward-looking statements, and the TDK Group undertakes no obligation to publicly update or revise any forwardlooking statements after the issue of this material except as provided for in laws and ordinances. The electronics markets in which the TDK Group operates are highly susceptible to rapid changes, risks, uncertainties, and other factors that can have significant effects on the TDK Group including, but not limited to, shifts in technology, fluctuations in demand, prices, interest and foreign exchange rates, and changes in economic environments, conditions of competition, laws and regulations. Also, since the purpose of these materials is only to give readers a general outline of business performance, many numerical values are shown in units of a billion yen. Because original values, which are managed in units of a million yen, are rounded off, the totals, differences, etc. shown in these materials may appear inaccurate. If detailed figures are necessary, please refer to our financial statements and supplementary materials. Copyright© 2015 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2016 October 30, 2015 - 25 - Text data including Q&A of performance briefing will be uploaded on following site http://www.global.tdk.com/ir/ir_events/conference/2015/2q_1.htm