Press Release

2
2005
Financial Results for the 2nd Quarter
ended 30 June 2005
SUMIDA CORPORATION
3-3-6 Nihonbashi Ningyocho
Chuo-ku, Tokyo
103-8589
Japan
1
CEO’s Message for the Second Quarter of Fiscal 2005
At midnight of 1st July 2005, SUMIDA CORPORATION simultaneously issued a press
release in Tokyo and Switzerland, announcing its intention to acquire a leading global
company, Saia-Burgess Electronics Holding AG (hereafter referred as “SB”). SB is a
well-known automotive components manufacturer in Switzerland. With sales turnover of
JPY 48.7 billion and EBITDA ratio exceeding 10%, its business scale is similar to our
company.
There are two big reasons behind this acquisition. Firstly, by creating this amicable
partnership, SUMIDA hopes to develop and strengthen what it deems as its future core
business, the automotive business, in the European market where we have relatively less
presence currently. Secondly, SUMIDA also feels that it will be able to help SB to expand
its market share for its products in the Asian region. As a result, both companies would benefit
from these synergies. We know that this is a challenging and time-consuming acquisition
but we are confident that with the understanding from the management of SB, a harmonious
relationship would benefit all the stakeholders, including shareholders, employees, customers
and local communities, of both companies.
Manufacturers all over the world are getting severer on selecting suppliers. I foresee that a lot
of components suppliers will be weeded out and the so-called winners and losers will be
clearly separated in the near future. Sumida aims to be part of the winners circle. With that
in perspective, Sumida established 1B7 (1 billion dollar company with EBITDA maintained at
10% or above) as our mid term business goal. If the above-mentioned acquisition goes
smoothly in a favorable direction, it would mean an early achievement of our mid-term goal.
This matter aside, in the 2nd quarter of 2005, we achieved sales of JPY 9.7 billion, a 5.7%
increase compared to last year. Operating profit however, was down 28.1% at JPY 704
million. Sales in automotive related products grew while sales in our legacy businesses such
as power solution and signal dragged, affected by the little progress of the entire market and
the shift of the importance to the share expansion strategy before market recovery.
Lastly, in June, Sumida has received a notice of tax assessment based on the tax haven
adjustment from Tokyo Regional Tax Bureau. As a global company, Sumida has long been
actively working on its overseas business activities and placing heavy importance on its
Corporate Social Responsibilities; with each regional operation paying local taxes and
providing scholarships in an effort to contribute to local communities. It is regrettable in any
case that we should receive such a notice. Sumida disagrees with this assessment and will
file an appeal to the tax tribunal.
Shigeyuki Yawata
Sumida Group CEO
2
Consolidated Financial Highlights for the 2nd Quarter ended 30 JUNE 2005
1. Consolidated Results of Operations
(Million yen, %)
Period
6-month period
(January - June)
2nd Quarter
2005
% of
Total
2004
% of
Total
9,700
100.0
9,179
100.0
Operating income
704
7.3
979
10.7
(28.1)
1,412
7.4
Ordinary income
513
5.3
917
10.0
(44.1)
1,123
Income before income taxes
610
6.3
904
9.8
(32.5)
Net income
318
3.3
645
7.0
16.55
---
40.87
14.25
---
39.81
Category
Net sales
%
Change
% of
Total
2005
5.7 19,124
% of
Total
2004
100.0 17,367
%
Change
100.0
10.1
1,743
10.0
(19.0)
5.9
1,542
8.9
(27.2)
1,151
6.0
1,529
8.8
(24.7)
(50.7)
692
3.6
1,120
6.4
(38.2)
---
---
36.04
---
71.50
---
---
---
---
31.48
---
69.42
---
---
Net income
per common share (yen)
Net income:
(Basic)
Net income:
(Fully diluted)
2. Consolidated Financial Conditions
(Million yen)
2nd Quarter
Period
Category
2005
2004
Increase/Decrease
42,439
31,759
10,680
6,653
6,574
79
Total shareholders’ equity
22,337
20,666
1,671
Total numbers of stock issued
(thousand shares)
19,241
15,836
3,405
1,160.90
1,305.03
(144.13)
52.7
65.1
---
Total assets
Paid in capital
Shareholders’ equity per share (yen)
Shareholders’ equity ratio (%)
3
3. Consolidated Statements of Cash Flows
(Million yen)
Period
2nd Quarter
Category
2005
2004
6-month period (January - June)
Change
2005
2004
Change
Cash flows from operating activities
1,051
425
626
1,711
779
932
Cash flows from investing activities
(2,901)
(401)
(2,500)
(3,723)
(1,121)
(2,602)
Cash flows from financing activities
(661)
(54)
(607)
6,410
166
6,244
Cash and cash equivalents, end of period
9,500
4,355
5,145
9,500
4,355
5,145
Estimation of 3rd Quarter 2005
Period
2004 3Q
(Actual)
2005 3Q
Category
(Estimation)
% Change
10,200
9,518
7.2
Operating income (million yen)
820
1,036
(20.8)
Ordinary income (million yen)
720
934
(22.9)
Net income (million yen)
460
631
(27.1)
23.91
36.20
---
Net sales (million yen)
Net income per share (yen)
Consolidated Quarterly Business Results
(Million yen)
2005
Period
Category
2004
2003
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
9,700
9,424
9,361
9,518
9,179
8,188
8,140
8,033
7,162
7,202
Operating income
704
708
832
1,036
979
764
813
709
571
301
Ordinary income
513
610
652
934
917
625
559
607
488
306
610
541
220
876
904
625
95
472
440
(934)
318
374
56
631
645
475
374
402
481
(942)
Net sales
Income
taxes
before
Net income
income
4
Consolidated Yearly Business Results
(Million yen)
2004
2003
2002
2001
2000
36,246
30,537
34,796
31,558
33,575
Operating income
3,611
2,394
2,171
1,112
3,318
Ordinary income
3,128
1,960
2,116
82
2,967
Income before income taxes
2,625
73
1,653
(1,779)
2,632
Net income
1,807
315
1,118
(1,037)
1,973
Shareholders’ equity
20,511
18,809
18,910
19,534
18,581
Total assets
34,170
29,941
30,666
32,340
32,000
104.25
21.21
83.64
(78.11)
163.43
1,175.67
1,220.14
1,408.72
1,471.29
1,539.48
Net sales
Per share（yen）
EPS
Shareholders’ equity
5
Consolidated Balance Sheets
（Unit : thousand yen）
Period
2Q 2005
2Q 2004
%
Account
Dec 2004
%
%
ASSETS
Current assets
Ⅰ
1. Cash and cash equivalents
2. Trade receivables
3. Inventories
4. Deferred tax assets
5. Others
6. Allowance for doubtful accounts
Total current assets
Ⅱ
9,499,701
9,420,659
4,136,347
1,399,789
1,579,529
(37,754)
4,354,904
8,071,853
3,893,926
905,465
764,828
(234,855)
25,998,271
61.3
17,756,121
4,900,291
9,085,372
4,048,675
1,432,466
845,971
(29,984)
55.9
20,282,791
59.4
Fixed assets
( 1 ) Tangible fixed assets
1. Buildings
2. Machinery and equipment
3. Furniture and fixture
4. Land
5. Construction in progress
6. Accumulated depreciation
Total tangible fixed assets
6,187,710
10,662,446
2,557,027
1,756,638
871,769
(11,152,239)
6,283,401
9,541,082
2,767,900
1,253,387
196,054
(10,306,812)
10,883,351
25.6
9,735,012
6,221,547
9,514,102
2,641,264
1,253,616
322,325
(10,267,933)
30.7
9,684,921
28.3
( 2 ) Intangible fixed assets
1. Goodwill
2. Leasehold rights
3. Software
4. Others
Total intangible fixed assets
788,940
460,486
134,580
5,245
--525,142
119,657
20,720
1,389,251
3.3
665,519
Total investments and other assets
Total fixed assets
1,799,265
1,384,772
983,684
4,167,721
16,440,323
TOTAL ASSETS
42,438,594
839,460
496,827
148,518
3,721
2.1
1,488,526
4.4
9.8
38.7
236,574
2,346,761
1,019,254
3,602,589
14,003,120
11.3
44.1
194,570
1,536,667
983,004
2,714,241
13,887,688
7.9
40.6
100.0
31,759,241
100.0
34,170,479
100.0
( 3 ) Investments and other assets
1. Investments in securities
2. Deferred tax assets
3. Others
6
（Unit : thousand yen）
Period
2Q 2005
2Q 2004
Dec 2004
%
Account
%
%
LIABILITIES
Ⅰ
Current liabilities
1. Trade payables
3,709,720
3,003,719
2. Short-term borrowings
4,402,108
4,015,808
5,524,508
3. Bond
1,200,000
---
1,200,000
4. Others
2,052,397
1,878,146
2,509,914
Total current liabilities
Ⅱ
11,364,225
26.8
8,897,673
3,571,556
28.0
12,805,978
37.5
Fixed liabilities
1. Straight bond
---
1,200,000
---
8,000,000
---
---
3. Long-term loans
105,796
657,904
370,800
4. Deferred tax liabilities
369,336
202,853
212,059
5. Others
209,309
134,858
2. Convertible bond
Total fixed liabilities
221,463
8,684,441
20.4
2,195,615
6.9
804,322
2.3
20,048,666
47.2
11,093,288
34.9
13,610,300
39.8
53,021
0.1
---
---
49,196
0.2
Ⅰ Paid in capital
6,652,563
15.7
6,574,222
20.7
6,604,072
19.3
Ⅱ Capital reserve
6,464,674
15.2
6,386,331
20.1
6,416,181
18.8
11,077,523
26.1
10,197,221
32.1
10,646,801
31.2
Total liabilities
MINORITY INTEREST
SHAREHOLDERS’ EQUITY
Ⅲ Retained earnings
Ⅳ Unrealized gains/losses on securities
at market valuation
Ⅴ Cumulative translation adjustments
Ⅵ Treasury stock
Total shareholders’ equity
TOTAL LIABILITIES, MINORITY
INTEREST AND SHAREHOLDERS’
EQUITY
241,498
0.6
99,207
0.3
67,762
0.2
(2,038,064)
(4.8)
(2,564,984)
(8.0)
(3,183,290)
(9.3)
(61,287)
(0.1)
(26,044)
(0.1)
(40,543)
(0.2)
22,336,907
52.7
20,665,953
65.1
20,510,983
60.0
42,438,594
100.0
31,759,241
100.0
34,170,479
100.0
7
Consolidated Statements of Income
Amount
% of
Sales
Amount
% of
Sales
(Unit : thousand yen)
6-month Period (January - June)
2005
2004
% of
% of
Amount
Amount
Sales
Sales
Ⅰ Net sales
9,699,983
100.0
9,178,944
100.0
19,124,191
100.0
17,366,772
100.0
Ⅱ Cost of sales
7,115,498
73.4
6,595,592
71.9
14,137,094
73.9
12,505,071
72.0
2,584,485
26.6
2,583,352
28.1
4,987,097
26.1
4,861,701
28.0
1,880,899
19.3
1,604,646
17.4
3,575,125
18.7
3,118,823
18.0
703,586
7.3
978,706
10.7
1,411,972
7.4
1,742,878
10.0
2nd Quarter
Period
2005
Account
Gross profit on sales
Ⅲ Selling, general & administrative
Operating income
2004
Ⅳ Non-operating income (expenses)
Interest and dividends received
12,164
7,092
22,472
13,728
Interest paid
(9,892)
(11,160)
(20,048)
(23,477)
(24,471)
15,105
(18,660)
(31,253)
(109,196)
(64,165)
(230,856)
(118,330)
(59,629)
(8,319)
(42,139)
(41,676)
Exchange gain (losses)
Investment loss on equity method
Other non-operating income
(expenses)
Non-operating income (expenses)
Ordinary income
(191,024)
(2.0)
(61,447)
(0.7)
512,562
5.3
917,259
10.0
(289,231)
1,122,741
(1.5)
5.9
(201,008)
1,541,870
(1.1)
8.9
Ⅴ Extraordinary income (losses)
Gain on sales of fixed assets
Gain on warrant deposits received
Loss on disposal of fixed assets
Loss on factory removal
Other
(losses)
extraordinary
42,428
196
---
102,595
(14,026)
(348)
--income
Extraordinary income (losses)
2,040
---
102,595
(14,880)
(116,379)
68,763
42,728
180
(348)
---
(116,379)
162
(1,150)
97,165
1.0
(13,756)
(0.2)
28,010
0.1
Income before income taxes
609,727
6.3
903,503
9.8
1,150,751
6.0
1,528,628
8.8
Income taxes
286,793
3.0
258,473
2.8
454,510
2.4
408,664
2.4
4,648
0.0
---
---
3,825
0.0
---
---
318,286
3.3
645,030
7.0
692,416
3.6
1,119,964
6.4
Income on minority shareholders
Net income
8
(13,242)
(0.1)
Consolidated Statements of Cash Flows
2nd Quarter
Period
Account
I.
(Unit : thousand yen)
6-month Period
(January - June)
2005
2004
2005
2004
Cash flows from operating activities
Net income
318,286
645,030
692,416
1,119,964
Depreciation and amortization
385,702
381,570
749,726
734,997
Gain on sales of fixed assets
(42,428)
(196)
(42,728)
348
14,880
(2,040)
Loss on disposal of fixed assets
14,026
Changes in account receivable
167,696
(960,734)
64,116
(1,117,674)
Changes in inventories
(19,403)
(493,677)
115,132
(706,891)
(277,924)
483,823
(103,638)
428,320
Changes in account payable
Others
348
505,580
368,480
221,527
322,441
1,051,535
424,644
1,711,431
779,465
(1,192,999)
(391,495)
(1,673,851)
(695,557)
Cash flows from operating activities
II. Cash flows from investing activities
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Acquisition of new subsidiary
Investment in related company
Investment in securities
300
60,301
(292,161)
---
(292,161)
--(1,311,905)
Purchase of intangible assets
(2,084)
Others
Cash flows from investing activities
59,424
(161,291)
---
(308,790)
---
(1,311,905)
(9,649)
---
(35,571)
(161,291)
2,549
--(415,950)
--(12,088)
---
(2,901,016)
(400,844)
(3,723,268)
(1,121,046)
Changes in short-term borrowings
(500,000)
(155,000)
(1,000,000)
Changes in long-term borrowings
(183,202)
(284,202)
(387,404)
(488,404)
(261,606)
(154,157)
Ⅲ. Cash flows from financing activities
Cash dividends paid
318
Proceeds from bond issuance
(17,324)
-----
Revenue from issuance of stocks
27,224
Others
12,208
(1,065)
(660,776)
(53,928)
91,155
Cash flows from financing activities
Ⅳ. Effect of exchange rate changes on cash and cash
equivalents
386,339
---
7,982,676
---
96,924
812,224
(20,744)
(3,219)
6,409,846
166,444
150,290
201,401
47,474
120,162
4,599,410
Ⅴ. Net increase (decrease) in cash and cash equivalents
(2,419,102)
Ⅵ. Cash and cash equivalents at beginning of year
11,918,803
4,223,344
4,900,291
4,471,169
---
11,398
---
11,398
9,499,701
4,354,904
9,499,701
4,354,904
Ⅶ. Increase in cash and cash equivalents on new
subsidiary
Ⅷ. Cash and cash equivalents at end of period
9
(127,663)
Overview of Consolidated Business Results for the Second Quarter of 2005
In the Second Quarter of 2005, the economic stagnancy in Europe, the tight monetary control in the
U.S. as well as the attempts of China to toning down inbound investments had been lasting in step
with the continual price rises of crude oil.
Demand of electronic equipments was on the downside as the inventory-building in the latter half of
2004 coinciding with the Silicon Cycle after the Athens Olympics. Set manufacturers carried out
relatively slight adjustment to production and appeared to defer mass production of new products.
Hopefully, the market is expected to restore in the second half of this year in consideration of no
explicit sign of decline in the consumer spending over on information-oriented investments following
the completion of inventory adjustment.
Shipment for audiovisual equipments like analog products including radios and stereos, and digital
home appliances like DVD recorders and digital cameras is weakened despite the growth of liquid
crystal display (LCD) TV domestic and abroad. Shipment for personal computer increased 10.3% to
50 million sets in the 1st quarter and 14.8% to 49 million sets in the 2nd quarter of 2005 compared with
the same terms last year and is estimated to go on with a double-digit growth. Shipment volume for
cellular phones is expected to increase 13.0 % in 2005 to 750 million pieces compared with a year
earlier attributable to the desire for replacements in the U.S. and Europe as well as demand from the
budding markets such as East Europe, Middle East, Africa and South America. Furthermore, new car
sales are moving greatly forward not only in developed countries but also steadily over the ASEAN
Pacific and other regions. Overall demand for automotive electronic parts and peripherals increased
constantly as a result of the evolution of digitalization.
To correspond with such circumstances, Sumida Group has achieved thoroughly the
management-by-product concept since 2004. Legacy handles parts that called for our core competency
in wire-winding skill while Inverter deals with inverters used for flat panel like notebook-sized PC,
LCD monitor and liquid crystal TV. Automotive manages electronic parts used for automotive whereas
other includes GDT (Gas Discharge Tube) with sales and production at JENSEN, and chip inductors
and condensers with sales and production at STELCO.
The regime that each Company President
delegated with absolute authority is held fully accountable for its respective field always makes its
contribution even more focused and dedicated.
Overall sales of the Second Quarter of 2005 were up 5.7% from the same term last year to ¥9,700
million. The substantial increase in sales of Inverter and Automotive just came to make amends for
the decline in sales of Power Solution and Signal primarily for digital home appliances, reduction in
Other including sales from Jensen and Stelco as well as from the retreat of the magnetics division
and OEM production of optical pickups
Operating profit fell 28.1% year-on-year to ¥704 million was explained by the drastic surge in labor
cost due to the intake of large scale of new workers for Legacy making provision for future expansion,
pricing strategy for notebook-sized PC for Inverter as well as the increase of selling and administrative
cost resulted from the expanded sales despite the better off operating profit from Automotive.
Ordinary profit dropped 44.1% to ¥513 million down to the surge of investment loss from the equity
method and other non-operating exchange loss. Net profit declined by 50.7% to ¥318 million.
10
Sales by Company
(Million yen, %）
2nd Quarter
Period
% of
Total
2005
Category
6-month period
% of
Total
2004
%
Change
% of
Total
2005
(January - June)
% of
Total
2004
%
Change
638
6.6
846
9.2
(24.6)
1,245
6.5
1,725
9.9
(27.8)
Power Inductor
2,867
29.6
2,732
29.8
4.9
5,570
29.1
4,982
28.7
11.8
926
9.5
1,012
11.0
(8.5)
1,776
9.3
1,900
11.0
(6.5)
4,431
45.7
4,590
50.0
(3.5)
8,591
44.9
8,607
49.6
(0.2)
Inverter
2,651
27.3
2,069
22.5
28.1
5,470
28.6
3,777
21.7
44.8
Automotive
1,949
20.1
1,404
15.3
38.8
3,816
20.0
2,738
15.8
39.4
669
6.9
1,116
12.2
(40.1)
1,247
6.5
2,245
12.9
(44.5)
9,700
100.0
9,179
100.0
5.7
19,124
100.0
17,367
100.0
10.1
Legacy
Power Solution
Signal
Sub-total
Others
Total
Sales by Product Categories
(Million yen, %）
2nd Quarter
Period
Category
AV Coils
2005
% of
Total
% of
Total
2004
%
Change
6-month period
(January - June)
% of
Total
% of
Total
2005
2004
%
Change
8.4
824
9.0
(1.8)
1,758
9.2
1,551
8.9
13.3
5,036
51.9
4,599
50.1
9.5
9,990
52.3
8,524
49.1
17.2
Other Coils
745
7.7
646
7.1
15.3
1,362
7.1
1,106
6.4
23.1
Automotive
2,437
25.1
2,050
22.3
18.9
4,740
24.8
4,026
23.2
17.7
TOTAL
9,027
93.1
8,119
88.5
11.2
17,850
93.4
15,207
87.6
17.4
68
0.7
645
7.0
(89.5)
124
0.6
1,334
7.7
(90.7)
Magnetics
122
1.2
415
4.5
(70.6)
244
1.3
826
4.7
(70.5)
New business
483
5.0
-
-
-
906
4.7
-
-
-
9,700
100.0
9,179
100.0
5.7
19,124
100.0
17,367
100.0
10.1
Coil Business
809
IT Communications
Coils
Optoelectronics
TOTAL
11
Sales by Region
(Million yen, %）
2nd Quarter
Period
% of
Total
% of
Total
%
Change
6-month period
(January - June)
% of
Total
% of
Total
%
Change
Area
2005
Japan
2,294
23.6
2,254
24.6
1.8
4,613
24.1
4,532
26.1
1.8
HK / China
1,716
17.7
1,929
21.0
(11.0)
3,356
17.6
3,524
20.3
(4.8)
707
7.3
772
8.4
(8.4)
1,413
7.4
1,400
8.1
0.9
2,321
23.9
1,853
20.2
25.3
4,655
24.3
3,441
19.8
35.3
631
6.5
1,111
12.1
(43.2)
1,253
6.6
2,103
12.1
(40.4)
EU
2,031
21.0
1,260
13.7
61.2
3,834
20.0
2,367
13.6
62.0
TOTAL
9,700
100.0
9,179
100.0
5.7
19,124
100.0
17,367
100.0
10.1
ASEAN
Taiwan / Korea
NAFTA
2004
2005
2004
Business Segment Information
* Note:
In explanation of business results in the 2nd quarter of 2005, the year-on-year increase/decrease is
expressed in Japanese Yen and also in the local currency. When any single local currency is
applicable, figures in such single local currency are adopted, and when multiple local currencies
are applicable, figures converted into the U.S. dollar are adopted.
Sumida group's business is composed of the Legacy business, Inverter business, Automotive business
and Other business.
1. Legacy business
In consequence of the decline in Power Solution and Signal in the background of production
adjustment toward the digital home appliances, sales in our legacy business decreased 3.5% to
¥4,431 million compared with the same term last year (or down 0.6% from the same term last year
in the local currency). The increasing sales of Power Inductor, being the main pillar, of Legacy
failed to offset the erosion. Operating profit recorded a 9.7% year-on-year decrease to ¥2,052
million owing in part to the increase labor force dragged out from the 1st quarter for incoming
business expansion and in part to the strategic price reduction to gain market share.
a) Power Solution
Sales of power solution were ¥638 million, down 24.6% from the same term last year (or
down 22.3% from the same term last year in the local currency).
In terms of area, sales increased barely in Hong Kong & China but decreased all in the U.S.,
Japan, Singapore, Europe and Taiwan. For sales by product used, residential equipments
such as hot water supply vessel and door phone though increased, the digital home appliances
such as digital cameras and DVD players, and the PC peripheral devices and phone set
oriented products declined.
b) Power Inductor
Sales of power inductors amounted to ¥2,867 million, up 4.9% from the same term last year
(or up 8.1% from the same term last year in the local currency).
In terms of area, sales expanded in Japan, Europe, Hong Kong & China and Singapore except
for the U.S. and Taiwan.
For sales by product used, digital cameras and cellular phones
12
rose whereas PC & PC peripheral devices, AV equipments, and automotive related products
declined.
c) Signal
Sales of signal totaled ¥926 million, down 8.5% (or down 5.8% from the same term last year
in the local currency).
In terms of area, sales improved in Hong Kong & China and Europe but reduced in the U.S.,
Japan, Singapore and Taiwan. For sales by product used, POS and FA related equipments
improved while information processing equipments, AV equipments and car tuners for
automotive equipment decreased.
2. Inverter business
Sales of inverter jumped to ¥2,651 million, up 28.1% from the year-before figure (or up 32.0%
from the previous term in the local currency).
In terms of area, sales leaped greatly forward in Hong Kong & China，Taiwan and steadily in
Europe despite reduction in Japan and Singapore. For sales by product used, notebook-sized PC
was sustainable; LCD monitors and liquid crystal TV grew rapidly despite the decrease of the
recreational and automotive equipments. Operating profit recorded a 17.4% down year-on-year
to ¥365 million on account of the strategic sales with relatively lower margin despite reduction of
production costs like raw materials and wages coupled with growing volume.
3. Automotive business
Sales in automotive business reached ¥1,949 million, increased 38.8% from the same term last
year (up 43.0% from the same term last year in the local currency).
In terms of area, sales showed stable expansion in the U.S. and brisk increase in both Japan and
Europe.
For sales by product used, car air conditioners turned into one of the leading products
in addition to ABS and keyless entry coils as the main sources of income. Injection coils for the
direct-injection engine also played gradually a very part in sales contribution.
Operating profit
marked a 29.9% year-on-year growth to ¥520 million credited to volume development including
acquisition of new product orders at strategic sales prices with great growing potential along with
improved productivity.
4. Other business
Sales in other business reduced to ¥669 million, shrank 40.1% from the same term last year (down
38.4% from the same term last year in the local currency).
Jensen has started sales since the 2nd quarter of last year and STELCO which Sumida acquired in
last December did not come about to contribute as much to offset the worn-out sales caused by the
production withdrawal of the optical pickups and the electromagnetics product. Operating profit
fell 10.3% to ¥129 million from the year-before figure on account of the corroded revenue from
the removal of Magnetics division and OEM supply section of optical pickup.
Consolidated Business Results for First Half of 2005
Overall sales of the first half of 2005 were up 10.1% from the same term last year to ¥19,124 million.
The sales expansion of Inverter and Automotive businesses pushed the total revenue up despite the
decline sales of Legacy led mainly by the reduction of Power Solution and Signal, decreased sales
from Jensen and Stelco as well as the removal of Magnetics division and OEM supply section of
optical pickups.
Operating profit was ¥1,412 million, lower by 19.0% compared with the same term last year.
The
profit driven by the rise in sales for Inverter and Automotive businesses was inadequate to offset the
considerable increase in labor cost, production overhead and selling and administrative expenses
mounted with the sales expansion. Ordinary income slid 27.2% year-on-year to ¥1,123 million
13
stemmed rather from the increase of investment loss from the equity method.
¥692 million, dropped 38.2% from the year-before figure.
Net income totaled
The Future Management Environment and Business Development Policy
The discussion below is future management environment and our business development policy for
each of business segments. The following descriptions include Sumida group's forecasts of future
prospects, which Sumida group judged from an independent standpoint and adopted as management
guidelines. In reality, however, actual results may sometimes deviate largely from such forecasts
owing to various factors such as change of economic environment in each country of the world,
outbreak of any unforeseen event, etc. Thus readers are requested to refrain from relying fully on these
forecasts.
Sumida Group is about to welcome a new stage toward the incoming coil orders.
The monthly volume of orders received for coils (orders received during the current month and
scheduled to sell during the current month), after a breakthrough of 100 million pieces in May of 2004,
hit average 109 million pieces per month in the 3rd quarter, remained high at 105 million pieces per
month in the 4th quarter of 2004. It sustained at 106 million pieces per month in the 1st quarter and
113 million pieces per month on average in the 2nd quarter of 2005. The volume in this June reached
119 million pieces per month marching toward another record high of 120 million pieces.
(million units)
Order, Product & Sales Quantity of Coils
120
110
100
90
80
70
60
50
40
30
1/99
4
7
10
1/00
4
7
10
1/01
4
7
10
1/02
Order Quantity
4
7
10
1/03
Product Quantity
4
7
10
1/04
4
7
10
1/05
4
Sales Quantity
Shipment volume of personal computers in the globe rose 10.3% to 50 million sets in the 1st quarter
and 14.8% to 49 million sets in the 2nd quarter of 2005 compared with the same terms of last year.
Apart from the robust growth of notebook-sized PC, demand for low-price desktop PC has showed
signal of recovery. Countries like Asia, the Middle East and Africa except Japan have all experienced
an agreeable growth. Shipment volume of digital cameras worldwide is expected to increase 10.7%
from approximately 70 million sets in 2004 to 77 million sets in 2005.
Manufacturers have been all
set to react from time to time to the revival in the face of the protracting inventory adjustment.
Sales of cellular phones increased to 181 million pieces in the 1st quarter of 2005, up 17.5% exceeding
the last record high of 154 million pieces in the 1st quarter of last year. Shipment volume is expected
to increase 13.0 % year-on-year to 750 million pieces in 2005 in proportion to the desire for
replacements in the U.S. and Europe as well as demand from the budding markets such as East Europe,
Middle East, Africa and South America.
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Demand for liquid-crystal display (LCD) TV is estimated to reach 15 million sets in 2005 from 8
million sets in 2004. The diffusion rate of LCD and PDP TV in Japan accelerates and has surpassed
the industrial benchmark of 10% to 11.5% of the household. The penetration is anticipated to further
expand. With the target to discontinue analog broadcast by January of 2009 in the U.S., the demand
from the relatively wealthy stratum is predicted to first prosper.
The number of new cars registration dropped 1.9% in the 1st quarter to 1,186 K units but rose 8.7% to
893 K units in the 2nd quarter of 2005 in Japan from the same terms of last year. Correspondingly, it
fell 2.4% to 3,817 K units but up 1.7% to 3,991 K units in Europe, and increased 0.1% to 3,998 K
units and 3.5% to 4,757 K units in the U.S.
New car sales are expected to develop at high level in
the U.S. and Europe, stably in Japan, ASEAN Pacific and other areas.
Amid such business environment, Sumida group devotes to correspond widely to customer needs and
is promoting its business activities by focusing on prospective growing fields.
1.
Legacy business
For power solution, sales declined in the first half of 2005 due to production adjustment mainly on
the digital products. Sumida is committed to its product competitiveness through material-cost
cutting and productivity improvement and is well equipped to seize extra market shares for digital
camera, DVC, DVD player, printer for line filter and switching transformer as soon as the market
resumes. It is also our direction to reinforce new developments apart from home appliances in
automotive-mounted products with emerging demand and focus to explore and fortify the sales
system in Taiwan and Korea.
For power inductor, we seek to develop parts in new miniature designs with multi and power
conserving traits to build the customer base. Accordingly, we would be in full force to push sales
on cellular phones, digital cameras, HDD, notebook-sized computers, automotive-mounted parts,
game devices, printers and MP3 of which the demand is projected to boom especially for cellular
phones and game devices.
Relating to production, Legacy aims to launch the semi-automation
of production by introduction to or development of cost effective and efficient automatic machines
at the site in company with the cost strategy on materials.
For signal, the business intends to bolster sales of modem, ADSL telecommunication, and
automotive-related products including antenna coils for keyless entry system in addition to toner
sensors.
2. Inverter business
The Inverter business deals with the inverter transformers and inverter units used for of
notebook-sized PC, LCD monitors, liquid-crystal display (LCD) TV and recreational devices, and
aims to capture more market shares especially for notebook-sized PC and LCD monitors which we
have been handling for quite some time.
To stay the foothold in the growing LCD TV market,
we are moving faster than others to turn our focus with extensive sales activities to 32-inch type of
LCD TV which is likely to be the mainstay of the incoming sales.
With respect to production, the economic effect from the procurement strategy since the latter half
of last year has come forward. The profitability is expected to improve on account of the
ongoing material-cost cut driven by procurement capability, vertical integration where some
materials are made in-house and product design from which the number of parts required in a unit
has been greatly reduced.
3. Automotive business
Automotive-mounted electronic parts and devices have deserved increasing importance as the key
technology of which influences the evolution of the automotive. The digitalization, networking
and clean energy system for cars pushes up the general demand for its electronic parts.
For ABS coils, delivery to the 4th new customer has begun in 2004 and mass production for the 5th
new customer has been programmed to set off in 2005. 4V coils for switching between cooling
and heating and coils for keyless entry in addition to ABS coils have come to form the principal
sales whereas car air conditioners have been expanding quickly. Following the full-fledged
15
production of injection coils for the direct injection engine in this year, we have started making
efforts in driving sales of coils for immobilizer, navigation system, direct-injection engine, EPS
(electronic power steering) and air bag in the worldwide market.
With respect to production, in addition to the productivity improvement, the business dedicates
efforts to strengthen the procurement capability to lower the pressure of raw material for mass
production.
4. Other business
Consumer spending is expected to resume around this summer through the end of 2005 though the
new car sales in Europe were rather lethargic.
The rating of the electronic parts at STELCO in
Germany is regarded high for automotive. It is a direction of Sumida to expand sales through its
entire network. Products from Europe, apart from sales via its own system, would be distributed
through Asian network whereas products from Asia would be promoted through European network.
JENSEN in Sweden sells mainly GDT used for projector in Europe and has steadily delivered
samples for automotive. However, it usually takes time for automotive customers to grant
approval on suppliers so that we expect the automotive related sales to be reflected in the year of
2006. Besides, the business has also started making efforts to explore customers in Japan and
Korea.
Forecast of Business Results in the Third Quarter of 2005
Sumida group is publishing the forecast of business results by compiling commitments submitted from
each of our divisions covering the following quarter. Under the unstable and sudden changing
economic environment, it is difficult for us to forecast business results for the full term correctly as
there might arise a substantial deviation of the actual figures from the figures forecasted at the
beginning of the term according to circumstances. Thus, it is our policy to disclose the contents of our
forecast covering the coming quarter only as it is our foremost consideration to provide appropriate
and correct information to our investors.
The following is our forecast at this point of business results in the third quarter of 2005.
Actual figures of consolidated business
results in the third quarter of 2004
(from Jul 1 to Sept 30, 2004)
Sales
¥9,518M
Recurring profit
934M
Current term net income
631M
Forecast of consolidated business results
in
the third quarter of 2005
(from Jul 1 to Sept 30, 2005)
Sales
¥10,200M
Recurring profit
720M
Current term net income
460M
(Exchange rate is premised at ¥107.5 per U.S. $1)
16