Results for fiscal year 2012 (ended March 2013） NIHON DEMPA KOGYO CO., LTD. 【Note】 Statements made in this presentation with respect to our current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about our future performance. These statements are based on management’s assumptions and beliefs in light of information currently available to it. We caution that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on the belief that it is our obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Risks and uncertainties that might affect us include, but are not limited to; fluctuation of currency exchange rates, overall supply and customer demand in the industry, product development and production capacities, performance of affiliated companies, and other risks and uncertainties. 1 Contents 1．Results for FY2012 2．Forecast for FY2013 2 Summary of FY2012 results (Million yen) Net sales FY2011 FY2012 Annual Annual 50,804 50,623 Change ▲ 181 Operating income 2,081 112 ▲ 1,969 Income/(loss▲) before tax 1,615 ▲ 159 ▲ 1,774 Net income/(loss▲) 1,759 ▲ 412 ▲ 2,171 Total comprehensive income 1,863 1,316 ▲ 547 ＜Main factors for incurring loss＞ ・Demand for smartphones grew less than initially expected ・ASP fell due to intensifying competition in the consumer market ・Product yield rate at a specific product dropped ・Inventory write-down increased ・Deferred tax assets decreased 3 Quarterly results (1) Net sales reduction at the mobile communications and AV/OA market (2) Decrease in product yield at a specific product (3) Increase of inventory write-down, resulted in increase of loss in 4Q Net sales (Million yen) Income (Million yen) 13,823 13,075 12,685 12,840 12,652 12,171 12,125 12,056 Operating income Income before tax 756 575 597 552 407 321 284 280 204 1Q 2Q 3Q FY2011 4Q 1Q 2Q 3Q FY2012 ４Q 1Q 354 366 166 2Q 3Q FY2011 4Q 1Q 2Q 3Q ４Q ▲ 67 ▲ 179 FY2012 ▲ 455 ▲ 512 4 Sales trend of main applications ◆Mobile communications : Demand for smartphones grew less than expected ◆Fixed radio communications : Demand for communications infrastructure, such as domestic mobile phone base station, is on a gradual recovery trend ◆AV/OA : Demand for flat panel TV or PC, etc, decreased ◆Automotive electronics : Demand decreased in 3Q due to the effect from boycott against Japanese cars in China, but demand recovered in 4Q (¥mil.) 5,000 Mobile (¥mil.) 5,000 Fixed radio (¥mil.) 5,000 AV/OA (¥mil.) 5,000 4,000 4,000 4,000 4,000 3,000 3,000 3,000 3,000 2,000 2,000 2,000 2,000 1,000 1,000 1,000 1,000 0 0 0 1Q2Q 3Q4Q1Q2Q3Q4Q FY2011 FY2012 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2011 FY2012 Automotive 0 1Q 2Q3Q4Q 1Q2Q3Q 4Q FY2011 FY2012 1Q 2Q3Q4Q 1Q2Q3Q 4Q FY2011 FY2012 5 Business challenges ■ Reinforce earning power with a lower break-even point ● Fixed cost ➢Capital investment：Reduce by 50% compared to the previous year ➢Research and development：Prioritize investments (Small-type new products) ● Variable cost ➢Improve product yield rate: Accelerate design improvement and optimize manufacturing processes ➢Costs reduction: Optimize blank production site and accelerate localization of material procurement ■ Promote growth strategy for sustainable growth ● Consumer market (Mobile communications, AV/OA, Automobile) ➢ Replace current products with new products made using new materials and new manufacturing methods ● Industrial market (Base station/Optical communications, Public system, Medical) ➢Raise current market share and target new and high-specification applications by strengthening core crystal technology 6 Business portfolio target Industrial Space/ Aviation/ Defense Medical/ Food/ Base station/ Optical Environment, Public communications/ etc System Broadcast Commodity Consumer market (Mobile communications, AV/OA, Automobile Expansion of business field Current business field Crystal Units Optical Products Crystal Oscillators （High Accuracy） Ultrasonic Devises Synthesizers Sensors 7 [Consumer market] Miniaturization of crystal units Crystal units size trend （QIAJ results and NDK estimate） Others About 40% are small types of below 2520 ◆Size of crystal oscillators often used in the consumer market is changing from 8045/5032 to 3225 ◆Demand for smaller size has been rapidly increasing due to increase in small and high performing devices The size of crystal units are expected to change rapidly from 3225/2520 to 2016/1612 (Estimate) 8 [Consumer market] Small size new products Replace current products with new products made using new materials and new manufacturing methods Low-level accuracy ±100ppm Mid-level accuracy ±50ppm High-level accuracy ±20ppm 3225 size 2016 size HDD,SSD USB NFC current product current product Note PC, LCD-TV, DSC, Digital broadcasting tuner current product Smartphone, Tablet, WLAN/BT, Car Audio current product 1612 size New products current product current product current product current product 9 [Base station market] From ”Macro” to “Small” Trend of installations of base station by size Unit：million units （ABI Research） ◆In the past Mainly ”Macro cell” “Small cell” coverage is increasing ・ Eliminate blind zone ・ Facilitate smooth connection ◆Femto cell (Indoor) 100~200m ◆Pico cell 250~500m (Indoor) (Outdoor) 0.5~1.5km ◆Micro cell (Outdoor) １~3km ※Small：Total of Femto, Pico and Micro 10 [Base station market] TCXO vs OCXO OCXO (Oven-Controlled TCXO (Temperature Compensated Crystal Oscillators) Reduce frequency volatility by maintaining the temperature at a certain level using oven Crystal Oscillators) Compensate temperature characteristic by circuit ＜Relation of temperature and frequency volatility of TCXO＞ 250 3 Crystal unit before compensation 150 △f/f(ppb) 100 50 0 -50 -100 -150 TCXO after compensation -200 -250 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 Temp.(℃) 2 Highly stable 1.5 △f/f(ppb) 200 ＜Relation of temperature and frequency volatility of OCXO＞ 1 0.5 0 -0.5 1 -1.5 -2 3 -50 -40 -30 -20 -10 0 Advantage： ①Low power consumption (1/10 of OCXO) ②Quick start-up after turning the switch on Disadvantage: Less accuracy than highly stable OCXO 10 20 30 40 50 60 70 80 90 Temp.(℃) Advantage： High stability Disadvantage： High power consumption and slow start-up 11 [Base station market] Needs for high accuracy oscillators “OCXO” has been used as clock generator for base station, Macro cell Small cell Frequency accuracy ”Higher accuracy” is required High accuracy equivalent to OCXO + ”Low power consumption” + “Wide temperature range”, + ”Quick start-up”, and + ”Small size” are required 0.01ppb Super high accuracy OCXO 0.1ppb 1ppb 10ppb High accuracy TCXO OCXO 100ppb TCXO 1000ppb (1ppm) 0.01W 0.1W 1W Power consumption (W) 10W 100W 12 Macro cell [Base station market] High accuracy oscillators Macro cell 0.5ppb／1600ｍW 37×28mm Micro cell/ Pico cell Small cell Developed in FY2012 Developed in FY2012 14×9mm 50ppb*／70mW Femto cell Developed in FY2011 7×5mm Under development Super high accuracy OCXO at a world-class level 0.05ppb Under development 14×9mm 25ppb*／70mW Developed in FY2012 5×3mm 100ppb**／30mW 100ppb**／12mW Only 1 second difference in 640 years High accuracy TCXO at a world-class level Accuracy equivalent to OCXO is realized with TCXO Ultra compact & high accuracy TCXO at a world-class level 【 Reference 】For smart phones 2.0×1.6mm 500ppb *Frequency temperature characteristics in the wide temperature range from -40°C to +85°C <Reference> Normal temperature range is from -10°C to +70°C **Hold over frequency stability: including temperature stability, supply voltage change and aging of 24 hours 13 [Sensor Market] Biosensor FY2004〜 QCM FY2009〜 FY2012〜 FY2015〜 NAPiCOS series are sold as physical and chemical appliance equipment ◎Sold to: ・Universities ・Companies’ R&D NAPiCOS system NAPiCOS Auto QCM twin sensor Biosensors for industrial use are under development (Medical, Foods) Commerciali -zation Promote commercialization of simplified measuring, sensitive and low-cost biosensor in collaboration with pharmaceutical and food companies 14 [Sensor Market] Sensor modules Developed product in FY2012 Crystal physical sensor Examples This sensor detects gravity, acceleration, inclination, and displacement at micro level using frequency ＋＋＋＋ ＋＋＋ ＜Comparison with silicon MEMS sensor＞ ・100 times high sensitivity ・1600 times external shock resistance Measurement of earthquakes, detection of resources, etc. Developed product in FY2012 Millimeter wave gunn-diodes oscillator Examples Millimeter wave sensor is resistant to weather conditions, such as rain or fog and suitable to capture movements of objects ＜Comparison with other sensors＞ Types of sensor Visible image sensor Infrared image sensor Infrared laser sensor Millimeter wave sensor Resistance to environment × △ △ ○ Action capture △ △ ○ ○ Trespass detection, respiration detection for nursing beds in hospitals, etc. 15 Capital investment & R&D expenses 【 Capital investment 】 ¥2.3 billion expected for FY2013（Full use of existing facilities） 【 R&D expenses 】 ¥2.4 billion expected for FY2013（Mainly for new products) R&D expenses (Million yen) Capital investment & Depreciation (Million yen) Capital investment 5,699 Depreciation 4,247 3,067 3,937 3,247 2,760 R&D expenses R&D expenses ratio against sales 3,040 3,425 3,700 2,241 2,420 4.3% 4.4% 2,686 2,593 5.3% 5.1% 2,400 4.7% 2,300 FY2009 FY2010 FY2011 FY2012 FY2013 FY2009 FY2010 FY2011 FY2012 FY2013 actual actual actual actual forecast actual actual actual actual forecast 16 Summary of cash flow (Million yen) FY2012 FY2013 Results Forecast ▲ 159 1,100 3,425 3,700 400 0 3,666 4,800 ▲ 5,699 ▲ 2,300 637 0 Ⅱ. Investing activities ▲ 5,062 ▲ 2,300 Free cash flow ▲ 1,396 2,500 5,055 ▲ 5,011 Cash dividends paid ▲ 391 ▲ 392 Others ▲ 864 0 Ⅲ. Financing activities 3,800 ▲ 5,403 Net decrease(▲)/increase in cash and cash equivalents 2,404 ▲ 2,903 Cash and cash equivalents at beginning of year 8,796 11,812 611 0 11,812 8,909 Income/(loss▲) before income taxes Depreciation and amortization Change in working capital Ⅰ. Operating activities Purchase of property, plant and equipment Others Net decrease(▲)/increase in long-term debt Net effect of currency translation Cash and cash equivalents at end of year Cash Flow forecast of FY2013 4,800 Operating CF① 2,500 Free CF ①+② Investing CF② ▲ 2,300 Financing CF ▲ 5,403 17 Forecast for the year FY2013 FY2012 Net sales Operating income Income/(loss▲) before tax Net income/(loss▲） Ratio of income before tax Exchange rate (against the U.S. dollar) (Million Yen） FY2013 Actual 50,623 112 ▲ 159 ▲ 412 ▲ 0.3% Forecast 51,000 1,500 1,100 1,000 2.2% ¥83.23 ¥95.00 ＜Reference＞ Influence on net sales (Annual) ¥1 fluctuation⇒ approx.¥210 million Influence on operating income (Annual) ¥1 fluctuation⇒ approx.¥50 million 18 Finally To Sustainable growth track 3 STEP 2 STEP 1 STEP Shift to growth track ● Business portfolio with earning power ● Solid financial base Promote growth strategy ● Input new products into target market ● Develop new markets and new customers Change earning structure ● Reduce break-even point ● Eliminate loss making products Change earning structure and accelerate new product development Return to profit and promote growth strategy 19 We are grateful for your continuous support. IR information contact NIHON DEMPA KOGYO CO., LTD. Treasury and Accounting Division Mail: [email protected] 20