Performance Briefing First Half of Fiscal Year March, 2015 TDK Corporation October 31, 2014 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -1- ◆Consolidated Results for First Half of FY March 2015 Takakazu Momozuka, Corporate Officer ◆Consolidated Full Year Projections for FY March 2015 Takehiro Kamigama, President and CEO Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -2- Consolidated Results for First Half of FY March 2015 Takakazu Momozuka Corporate Officer Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -3- Key points concerning earnings for First Half of FY March 2015 ◆ 502.3 billion yen, first half sales, was the highest ever. Operating income was 27.9 billion yen, increased by 64% year on year. ◆Passive components achieved record first-half earnings (doubled year on year). There were strong sales to the automobile market and Chinese and North American smartphone customers. ◆First half operating income of film application products was same as previous fiscal year despite a slow start in 1Q. Rechargeable batteries saw strong sales to the US smartphone customer from 2Q. Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -4- Consolidated Results for First Half of FY March 2015 (Yen billions） FY March 2014 Results through 2Q FY March 2015 Results through 2Q (2013.4.1-2013.9.30) (2014.4.1-2014.9.30) Net Sales Operating Income Change Yen billions % 483.8 502.3 18.5 3.8 17.0 27.9 10.9 64.1 3.5% Operating Income Margin 5.6% +2.1pt - Income from Continuing Operations before Income Taxes 18.1 27.4 9.3 51.4 Income from continuing Operations 10.8 19.6 8.8 81.5 Loss from discontinued operations -3.8 - Net income attributable to noncontrolling interests 0.6 1.4 0.8 133.3 Net Income 6.4 18.1 11.7 182.8 50.90 144.17 98.88 130.04 103.02 138.96 Earning Per Share (JPY) US$ (JPY) EURO (JPY) Ex-rate impact to Net sales & Operating Income - - - - Depreciated by 4.2% Depreciated by 6.9% Net sales：Increased by about 16.9 billion Yen Operating income：Increased by about 3.2 billion Yen Note: The figures related to the data tape business and the blu-ray business, which became discontinued operations in the year ended March 31, 2014, are restated. Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -5- First Half Results - Passive Components Segment Net Sales (Yen billions) 255.8 Net Sales 255.8 billion yen (up 8.2% year on year) Operating Income 17.6 billion yen (up 95.6% year on year) 236.4 ◆ Ceramic Capacitors ・Sales increased year on year, particularly to the steady automobile market. ・Profit margins also improved due to increased productivity. 14/3 15/3 Operating Income (OP margin) (Yen billions) 17.6 6.9% 9.0 3.8% 14/3 ◆ 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 smartphone market. ・Profitability of the business improved year on year due to increased productivity and improved product portfolio ◆ Piezoelectric Material Products ・Both revenues and profits increased year on year mainly due to strong sales of components for automobiles and VCMs for camera modules 15/3 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -6- First Half Results - Magnetic Application Segment Net Sales (Yen billions) 179.1 177.5 Net Sales 177.5 billion yen (down 0.9% year on year) Operating income 15.3 billion yen (up 23.4% year on year) ◆ Recording Devices (HDD Heads) ・Although the volume shipped declined, profits were almost the same as that of previous year due to increased productivity and an improved product portfolio. 14/3 15/3 Operating Income (OP margin) (Yen billions) ◆Magnets ・Expenses relating to the consolidation of production sites for ferrite magnets, which took place in the same period of the previous year, were no longer incurred. As a result of these factors, losses narrowed compared with the same period of the previous year. 15.3 12.4 8.6% 6.9% 14/3 ◆Power Supplies ・Sales to the industrial equipment market of products such as semiconductor production equipment, FA equipment and measuring equipment were steady, while the business got back into the black. 15/3 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -7- First Half Results - Film Application Segment Net Sales (Yen billions) 59.2 59.7 Net sales 59.7 billion yen (up 0.8% year on year) Operating income 5.5 billion yen (up 1.9% year on year) ◆Energy Devices (Rechargeable Batteries) 14/3 15/3 Operating Income (OP margin) (Yen billions) 5.4 9.1% 14/3 5.5 ・Despite slow sales in 1Q due to a major North American customer making production adjustments ahead of a new model launch, 2Q sales to North American customer recovered sharply and sales to Chinese customers also expanded. 9.2% 15/3 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 -8- Breakdown of Operating Income Changes (First Half) First Half of FY March 2014 17.0 billion yen Operating Income + 10.9 billion yen First Half of FY March 2015 27.9 billion yen (Yen billions) Changes in sales +19.9 Sales price Reduction -21.4 Rationalization, cost reduction +13.4 Benefits from Restructuring +1.5 SG&A expenses increase -5.7 27.9 Exchange fluctuation (US$=Yen 103.02) 17.0 Copyright© 2014 TDK Corporation. All rights reserved. +3.2 First Half of Fiscal Year March, 2015 October 31, 2014 -9- Consolidated Results for 2Q of FY March 2015 (Yen billions） FY March 2014 2Q Results Net Sales Operating Income FY March 2015 2Q Results Change Yen billions % 249.4 264.8 15.4 6.2 12.5 18.3 5.8 46.4 5.0% Operating Income Margin 6.9% +1.9pt - Income from Continuing Operations before Income Taxes 12.9 17.0 4.1 31.8 Income from continuing Operations 9.3 13.3 4.0 43.0 Loss from discontinued operations -3.3 - Net income attributable to noncontrolling interests -0.1 0.9 1.0 - 6.0 12.4 6.4 106.7 47.95 98.43 99.02 131.11 103.86 137.77 Net Income Earning Per Share (JPY) US$ (JPY) EURO (JPY) Ex-rate impact to Net sales & Operating Income - - - - Depreciated by 4.9% Depreciated by 5.1% Net sales：Increased by about 11.1billion Yen Operating income：Increased by about 2.2billion Yen Note: The figures related to the data tape business and the blu-ray business, which became discontinued operations in the year ended March 31, 2014, are restated. Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 10 - Quarterly Results by Segment (Yen billions) YoY Change (C)-(A) QoQ Change (C)-(B) 2Q of FY March 2014 (A) 1Q of FY March 2015 (B) 2Q of FY March 2015 (C) 35.1 35.5 48.8 36.5 36.7 50.2 37.3 38.8 56.2 2.2 6.3 0.8 2.2 3.3 9.3 2.1 5.7 7.4 15.2 6.0 12.0 119.4 123.4 132.4 13.0 10.9 9.0 7.3 66.3 26.6 59.1 28.0 63.7 26.7 (2.6) 0.1 -3.9 0.4 4.6 (1.3) 7.8 -4.6 92.9 32.7 4.4 249.4 87.1 22.5 4.5 237.5 90.4 37.2 4.8 264.8 (2.5) 4.5 -2.7 13.8 3.3 14.7 3.8 65.3 0.4 9.1 0.3 6.7 15.4 6.2 27.3 11.5 6.2 7.8 3.3 -0.8 16.5 -4.0 7.8 7.1 0.3 -0.4 14.8 -5.2 9.8 8.2 5.2 0.1 23.3 -5.0 3.6 58.1 2.0 25.6 0.4 5.1 1.1 15.5 1.9 0.9 57.6 - 4.9 0.5 - 6.8 (1.0) 41.2 - 8.5 0.2 57.4 - 12.5 9.6 18.3 5.8 46.4 8.7 90.6 5.0% 4.0% 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$/Yen rate EURO/Yen Copyright© 2014 TDK Corporation. All rights reserved. 99.02 131.11 102.17 140.17 Yen billions 6.9% +1.9pt % Yen billions - +2.9pt % - 103.86 137.77 First Half of Fiscal Year March, 2015 October 31, 2014 - 11 - Sales Results by Priority Markets TDK Total (Yen billions) 600 483.8 502.3 +3.8% Automotive (Yen billions) 500 400 300 200 100 80 60 40 20 0 81.0 +14.3% First Half of FY March 2014 100 0 Automotive Industrial & Others First Half of FY March 2015 ICT* Consumer Products 300 First Half of FY March 2015 ICT (Yen billions) First Half of FY March 2014 92.6 271.7 Flat 271.3 200 100 *Includes HDD Heads and HDD Suspensions 0 Automotive： Strong sales of passive components ICT： Strong sales of passive components Weak sales of HDD heads Industrial & Others： Increase in sales of power supplies to the industrial equipment market Copyright© 2014 TDK Corporation. All rights reserved. First Half of FY March 2014 First Half of FY March 2015 (Yen billions) 150 100 Industrial & Others 96.2 +6.4% 102.4 50 0 First Half of Fiscal Year March, 2015 First Half of FY March 2014 First Half of FY March 2015 October 31, 2014 - 12 - Recording Device Business ●HDD market in FY March 2015 *TDK’s estimation About 535 million units (end of April) About 552 million units (end of July) About 560 million units (Current estimation, increase by 8 million units from the previous estimation) ●Shipment index Recording Device Sales (Left, including HDD Head (HGA) and HDD Suspention) HDD Head Shipment Index (Right) (Yen billions) 60.2 66.3 69.0 111 116 (shipment index) 61.2 60 40 100 98 59.1 95 62.9 Projections 106 104 20 0 $/¥ 1Q 2Q 3Q 4Q 1Q 2Q 3Q 98.74 99.02 100.38 102.97 102.17 103.86 105.00 FY March 2014 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 120 110 100 90 80 70 60 50 FY March 2015 October 31, 2014 - 13 - Consolidated Full Year Projections for FY March 2015 Takehiro Kamigama President and CEO Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 14 - Market trend in the second half Priority Markets ICT Market Trend Chinese smartphone production to shift from an adjustment phase in 2Q to recovery in 3Q. Strong North American smartphone production to peak in 3Q, with a yearon-year increase also projected for 4Q. HDD market expected to continue outperforming initial projections in the second half Automobile Strong market performance expected to continue in the second half, mainly by North American and European customers First-half car sales in Japan down year on year, second half performance expected to be level or slightly up year-on-year xEV* sales growth slowing in the main markets of Japan and North America Industrial Equipment Machine tool- and robot-related markets expected to maintain strong performance in the second half The arrow symbol “→” denotes changes from first-half trend ＊xEV : EV, HEV, PHEV Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 15 - Second half trend of main products Segments Passive Components Products Second Half Trend Inductive devices Increase in sales of metal inductors (thin-film, multilayer) High-frequency components Increase in sales of high-frequency coil (multilayer) Increase in sales of discrete products Piezoelectric Increase in sales of VCMs (high resolution, high-performance material product products), OIS enquires to increase Magnetic Application Products Film Application Products HDD heads Increase in shipments (2Q→3Q) Magnets Decrease in sales of VCM and magnet for HDD Power supplies Decline in customer demand for EV power supplies Rechargeable batteries Demand for North American and Chinese customers to peak in 3Q, with a year-on-year increase also projected for 4Q. Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 16 - Projections for 3Q of FY March 2015 -Image of change in sales (Yen billions) Passive Components 123.4 (2Q→3Q) +3%～+4% 132.4 1Q 2Q 3Q Foreign Exchange rate US$/JPY Euro/JPY Copyright© 2014 TDK Corporation. All rights reserved. 1Q results 102.17 140.17 2Q results 103.86 137.77 First Half of Fiscal Year March, 2015 3Q assumptions 105.00 135.00 October 31, 2014 - 17 - Projections for 3Q of FY March 2015 -Image of change in sales (Yen billions) Magnetic application products 87.1 90.4 1Q 2Q (2Q→3Q) +1%～+2% 3Q Foreign Exchange rate US$/JPY Euro/JPY Copyright© 2014 TDK Corporation. All rights reserved. 1Q results 102.17 140.17 2Q results 103.86 137.77 First Half of Fiscal Year March, 2015 3Q assumptions 105.00 135.00 October 31, 2014 - 18 - Projections for 3Q of FY March 2015 -Image of change in sales (Yen billions) Film application products (2Q→3Q) +20%+α 37.2 22.5 1Q 2Q 3Q Foreign Exchange rate US$/JPY Euro/JPY Copyright© 2014 TDK Corporation. All rights reserved. 1Q results 102.17 140.17 2Q results 103.86 137.77 First Half of Fiscal Year March, 2015 3Q assumptions 105.00 135.00 October 31, 2014 - 19 - Projections for 3Q of FY March 2015 -Image of change in sales (Yen billions) Total 264.8 237.5 1Q 2Q (2Q→3Q) +5%～+6% 3Q Foreign Exchange rate US$/JPY Euro/JPY Copyright© 2014 TDK Corporation. All rights reserved. 1Q results 102.17 140.17 2Q results 103.86 137.77 First Half of Fiscal Year March, 2015 3Q assumptions 105.00 135.00 October 31, 2014 - 20 - FY March 2015 Full Year / Dividend Projections Upward revision from initial announcement figures (April 28) (Yen billions） FY March 2014 Full Year Results Net Sales Operating Income Operating Income Margin Income from continuing operations before income Net Income Earning Per Share (JPY) FY March 2015 Full Year Projections (announced Apr. 28) Y o Y Change % Yen billions 984.5 1,050.0 1,050.0 65.5 6.7% 36.6 57.0 63.0 26.4 72.1% 3.7% 5.4% 6.0% +2.3pt - 39.8 56.0 62.0 22.2 55.8% 16.3 34.0 37.0 20.7 127.0% 129.47 270.23 293.98 - - - - 1st half :30 2nd half :40 Annual: 70 1st half :40 2nd half :40 Annual: 80 US$ Yen 100.26 Yen 100.00 EURO Yen 134.42 Yen 135.00 Dividends (JPY) FY March 2015 Full Year Projections (Revised) Ex-rate 1st half :40 2nd half :40 Annual: 80 Yen 105.00 (Second half) Yen 135.00 (Second half) - Capital Expenditure Depreciation and amortization Research and development 68.6 80.0 90.0 21.4 31.2% 82.9 83.0 83.0 0.1 0.1% 63.4 68.0 68.0 4.6 7.3% Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 21 - Sales and operating income trend Significant improvement in passive components business. Company-wide profitability is improving through a more balanced earning structure. Sales : Yen billions Operating income : Yen billions 300 Operating Income(Right) 30 Sales(Left) 250 25 200 20 150 15 100 10 50 5 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q -50 4Q -5 FY March 2012 FY March 2013 Copyright© 2014 TDK Corporation. All rights reserved. FY March 2014 First Half of Fiscal Year March, 2015 FY March 2015 October 31, 2014 - 22 - Supplementary Data Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 23 - Quarterly sales and operating income by segment FY March 2015 FY March 2014 Yen billions 1Q 2Q 3Q 4Q Total 1Q 2Q Net Sales Operating Income Ex-rate Capacitors 33.7 35.1 34.7 36.1 Inductive Devices 35.0 35.5 34.9 34.9 Other Passive Components 48.3 48.8 47.5 47.1 117.0 119.4 117.1 118.1 Recording Devices 60.2 66.3 69.0 61.2 Other Magnetic Application Products 26.0 26.6 26.8 28.3 Magnetic Application Products 86.2 92.9 95.7 89.5 Film Application Products 26.5 32.7 41.0 29.1 Other 4.7 4.4 4.3 5.8 Total 234.4 249.4 258.2 242.5 Passive Components 2.8 6.2 6.1 0.3 Magnetic Application Products 4.6 7.8 10.3 5.4 Film Application Products 2.1 3.3 6.8 1.1 (0.8) (0.8) (0.8) (0.8) 8.7 16.5 22.4 6.1 Corporate and Eliminations (4.3) (4.0) (4.4) (4.5) Total 4.5 12.5 17.9 1.7 98.74 99.02 100.38 102.97 100.23 102.17 103.86 128.96 131.11 136.56 141.12 134.42 140.17 137.77 Passive Components Other Sub-total ￥/USD ￥/EURO Copyright© 2014 TDK Corporation. All rights reserved. 139.6 140.3 191.7 471.7 256.7 107.7 364.3 129.3 19.3 984.5 15.4 28.1 13.4 (3.2) 53.7 (17.1) 36.6 First Half of Fiscal Year March, 2015 36.5 37.3 36.7 38.8 50.2 56.2 123.4 132.4 59.1 63.7 28.0 26.7 87.1 90.4 22.5 37.2 4.5 4.8 237.5 264.8 7.8 9.8 7.1 8.2 0.3 5.2 (0.4) 0.1 14.8 23.3 (5.2) (5.0) 9.6 18.3 3Q 4Q October 31, 2014 Total - 24 - FY March 2015 Projections -Capex, Depreciation, R&D- Capital expenditure Depreciation R&D (Yen billions) 120 100 99.7 90.0 85.6 80 80.0 79.9 77.4 82.9 83.0 83.0 68.6 63.4 60 52.6 53.5 3/12 3/13 68.0 68.0 40 20 0 3/12 3/13 3/14 3/15 3/15 Previous Projections Current Projections 3/12 3/13 3/14 3/15 3/15 Previous Projections Current Projections 3/14 3/15 3/15 Previous Projections Current Projections 3/12 : FY March 2012 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 25 - Financial Position （Yen billions） March End, 2014 June End, 2014 Sep End, 2014 Change from June End, 2014 1,239.6 1,241.3 1,312.3 71.0 Total Liability 587.3 605.2 620.2 15.0 Stockholders's Equity 635.3 618.2 673.7 55.5 (comprehensive income) -87.1 -96.8 -51.9 44.9 Stockholders's Equity ratio 51.3% 49.8% 51.3% +1.5pt Cash and Cash equivalents (*1) 259.5 257.5 258.3 0.8 Interest-bearing Debt (*2) 267.0 281.8 267.3 (14.5) -7.5 -24.3 -9.0 Total Asset Net Cash (*3) 15.3 *1: Cash and Cash equivalents + Short-term investments *2: Short-term debt + Current installments of long-term debt + Long-term debt, excluding current installments *3: Cash and Cash equivalents - Interest-bearing Debt Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 26 - Cash Flows YoY Change FY March 2014 Results through 2Q FY March 2015 Results through 2Q Effect of exchange rate chagens on cash and cash equivalents 57.3 -23.0 34.3 -21.4 8.8 43.9 -45.0 -1.1 -18.9 13.4 (13.4) (22.0) (35.4) 2.5 4.6 Cash and Cash Equivalents 235.4 244.2 8.8 FY March 2014 Results through 2Q FY March 2015 Results through 2Q 29.3 41.1 42.8 39.2 (Yen billions） Operating Cash Flow Investing Cash Flow Free Cash Flow Financing Cash Flow （Yen billions） Capital Expenditures Depreciation and amortization Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 YoY Change 13.5 (1.9) October 31, 2014 - 27 - Annual Sales by applications (FY March 2011 – FY March 2014) FY11/3 : FY March 2011 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 28 - Passive Components Business Annual sales by applications (FY March 2011 – FY March 2014) FY11/3 : FY March 2011 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 29 - Quarterly sales by applications (1Q of FY March 2014 –2Q of FY March 2015) Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 30 - Passive Components Business quarterly sales by applications (1Q of FY March 2014 –2Q of FY March 2015) Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 31 - 2005/3 : FY March 2005 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 32 - 2005/3 : FY March 2005 Copyright© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 33 - 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© 2014 TDK Corporation. All rights reserved. First Half of Fiscal Year March, 2015 October 31, 2014 - 34 - 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