Performance Briefing 1Q of Fiscal Year March, 2015 TDK Corporation July 31, 2014 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 -1- ◆Consolidated Results for 1Q of FY March 2015 Takakazu Momozuka, Corporate Officer ◆Recording Device Business Atsuo Kobayashi, Executive Vice President ◆High Frequency Components Business Hiroyuki Uemura, Executive Vice President Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 -2- Consolidated Results for 1Q of FY March 2015 Takakazu Momozuka Corporate Officer Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 -3- Key points concerning earnings for 1Q of FY March 2015 ◆Operating income doubled year on year. ◆Earnings from passive components improved by a large margin. Quarterly operating income from this segment was the highest ever, and exceeded that from magnetic application products. Sales to the automobile and Chinese smartphone markets were strong. ◆Sales to the automobile market were 19.3% of total sales. (15% increase year on year) (Yen billions) 50 40 39.9 41.2 42.2 47.5 45.8 30 19.3% 20 10 0 1Q 2Q 3Q FY March 2014 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 4Q 1Q FY March 2015 July 31, 2014 -4- Consolidated Results for 1Q of FY March 2015 (Yen billions） Net Sales Operating Income FY March 2014 1Q Results FY March 2015 1Q Results Change Yen billions % 234.4 237.5 3.1 1.3 4.5 9.6 5.1 113.3 1.9% Operating Income Margin 4.0% +2.1pt - Income from Continuing Operations before Income Taxes 5.2 10.4 5.2 100.0 Income from continuing Operations 1.5 6.3 4.8 320.0 Loss from discontinued operations -0.4 - - - Net income attributable to noncontrolling interests 0.7 0.5 (0.2) -28.6 Net Income 0.4 5.8 5.4 2.96 45.73 98.74 128.96 102.17 140.17 Earning Per Share (JPY) US$ (JPY) EURO (JPY) Ex-rate impact to Net sales & Operating Income - - Depreciated by 3.5% Depreciated by 8.7% Net sales：Increased by about 5.8 billion Yen Operating income：Increased by about 1.0 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. 1Q of Fiscal Year March, 2015 July 31, 2014 -5- 1Q Results - Passive Components Segment Net Sales 123.4 billion yen (up 5.5% year on year) Operating Income 7.8 billion yen (2.8 times increase year on year) Net Sales (Yen billions) 117.0 14/3 123.4 15/3 Operating Income (OP margin) (Yen billions) 7.8 6.3% 2.8 2.4% 14/3 ◆Ceramic Capacitors ・Sales increased year on year, particularly to the automobile market, which accounts for around half of total sales. ・Profit margins also improved due to higher sales of new products and increased productivity. ◆Inductive Devices ・Sales to the automobile market, which accounts for around 40% of total sales, increased year on year. ・Earnings increased due to an improved product portfolio. ◆High-frequency Components ・Sales of competitive discrete products were firm. (SAW, TC-SAW, BAW, Multi-layer filters) ・Profitability of the business as a whole improved year year. ◆Piezoelectric Material Products ・Both revenues and profits increased year on year mainly due to strong sales of VCMs for camera modules and components for automobiles. 15/3 SAW : Surface Acoustic Wave, BAW : Bulk Acoustic Wave, TC-SAW：Temperature compensated SAW Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 -6- 1Q Results - Magnetic Application Segment Net Sales (Yen billions) 86.2 87.1 Net Sales 87.1 billion yen (up 1.0% year on year) Operating income 7.1 billion yen (up 54.3% year on year) ◆Recording Devices (HDD Heads) ・Although the volume shipped declined, profits increased year on year due to increased productivity and an improved product portfolio. 14/3 15/3 Operating Income (OP margin) (Yen billions) 7.1 ◆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, while capacity utilization improved. As a result of these factors, losses narrowed by a large margin compared with the same period of the previous year. (Earnings also improved from the 4Q onwards.) 4.6 8.2% 5.3% 14/3 15/3 ◆Power Supplies ・Sales to the industrial equipment market of products such as semiconductor production equipment, FA equipment and measuring equipment increased by around 20% year on year, while the business got back into the black. Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 -7- 1Q Results - Film Application Segment Net Sales (Yen billions) 26.5 22.5 Net sales 22.5 billion yen (down 15.1% year on year) Operating income 0.3 billion yen (down 85.7% year on year) ◆Energy Devices (Rechargeable Batteries) 14/3 (Yen billions) 15/3 Operating Income (OP margin) ・Both revenues and profits declined due to production adjustment made prior to the launch of new models for primary customer. 2.1 7.9% 0.3 1.3% 14/3 15/3 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 -8- 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$/Yen rate EURO/Yen Copyright© 2014 TDK Corporation. All rights reserved. YoY Change (C)-(A) QoQ Change (C)-(B) 1Q of FY March 2014 (A) 4Q of FY March 2014 (B) 1Q of FY March 2015 (C) 33.7 35.0 48.3 36.1 34.9 47.1 36.5 36.7 50.2 2.8 8.3 0.4 1.1 1.7 4.9 1.8 5.2 1.9 3.9 3.1 6.6 117.0 118.1 123.4 6.4 5.5 5.3 4.5 60.2 26.0 61.2 28.3 59.1 28.0 86.2 26.5 4.7 234.4 89.5 29.1 5.8 242.5 87.1 22.5 4.5 237.5 2.8 4.6 2.1 (0.8) 8.7 (4.2) 0.3 5.4 1.1 (0.8) 6.1 (4.5) 4.5 1.7 1.9% 0.7% 98.74 128.96 102.97 141.12 1Q of Fiscal Year March, 2015 7.8 7.1 0.3 (0.4) 14.8 (5.2) Yen billions % Yen billions (1.1) 2.0 0.9 (4.0) (0.2) 3.1 -1.8 7.7 1.0 -15.1 -4.3 1.3 (2.1) (0.3) (2.4) (6.6) (1.3) (5.0) 5.0 178.6 7.5 % -3.4 -1.1 -2.7 -22.7 -22.4 -2.1 - 2.5 54.3 1.7 31.5 (1.8) -85.7 (0.8) -72.7 0.4 0.4 6.1 70.1 8.7 142.6 (1.0) - (0.7) 5.1 113.3 7.9 464.7 9.6 - +3.3pt 4.0% +2.1pt 102.17 140.17 July 31, 2014 -9- Breakdown of Operating Income Changes 1Q of FY March 2014 4.5 billion yen Operating Income +5.1 billion yen 1Q of FY March 2015 9.6 billion yen (Yen billions) Changes in sales +7.9 Sales price Reduction -8.8 Rationalization, cost reduction +6.3 Benefits from Restructuring +0.8 SG&A expenses increase -2.1 9.6 Exchange fluctuation 4.5 Copyright© 2014 TDK Corporation. All rights reserved. (US$=Yen 102.17) +1.0 1Q of Fiscal Year March, 2015 July 31, 2014 - 10 - Sales Results by Priority Markets TDK Total (Yen billions) 234.4 250 +1.3% Automotive (Yen billions) 237.5 60 39.9 200 40 150 20 100 0 50 FY March 2014 1Q FY March 2014 1Q Automotive ICT* FY March 2015 1Q Industrial & Others Consumer Products *Includes HDD Heads and HDD Suspensions Automotive： Strong sales of passive components ICT： Weak sales of batteries for smartphones Industrial & Others： Increase in sales of power supplies and passive components Copyright© 2014 TDK Corporation. All rights reserved. 150 45.8 FY March 2015 1Q ICT (Yen billions) 0 +14.9% 129.3 123.3 -4.7% 100 50 0 (Yen billions) 60 FY March 2014 1Q FY March 2015 1Q Industrial & Others 48.0 40 50.9 +6.0% 20 0 1Q of Fiscal Year March, 2015 FY March 2014 1Q FY March 2015 1Q July 31, 2014 - 11 - Projections for 2Q of FY March 2015 -Image of change in sales Segment 1Q of FY March 2015 2Q Projections (Q on Q Change) Main factor and premise of projections Increase in sales of various products for the ICT market (especially communications equipment market) and the automobile market Passive Components 123.4 +7%～+8% Magnetic Application Products 87.1 ±0% Film Application Products 22.5 Other 4.5 Total 237.5 +40%+α Due to maturation of HDD market Increase in sales of rechargeable batteries for the ICT market (sales growth driven by higher demand for new product to be launched by our primary customer) +7%～+9% Forex assumptions $/Yen EURO/Yen 102.17 140.17 Copyright© 2014 TDK Corporation. All rights reserved. 100.00 135.00 1Q of Fiscal Year March, 2015 July 31, 2014 - 12 - FY March 2015 Full Year / Dividend Projections TDK keeps initial projections (announced on April 28) unchanged. FY March 2014 Full Year Results (Yen billions） Net Sales Operating Income Operating Income Margin Income from continuing operations before income Net Income Earning Per Share (JPY) Dividends (JPY) Ex-rate FY March 2015 Full Year Projections Y o Y Change % Yen billions 984.5 1,050.0 65.5 6.7% 36.6 57.0 20.4 55.7% 3.7% 5.4% +1.7pt - 39.8 56.0 16.2 40.7% 16.3 34.0 17.7 108.6% 129.47 270.23 - - - - 1st half :30 (results) 2nd half :40 (projections) Annual: 70 (projections) 1st half :40 2nd half :40 Annual: 80 US$ Yen 100.26 Yen 100.00 - EURO Yen 134.42 Yen 135.00 - Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 13 - Recording Device Business Atsuo Kobayashi Executive Vice President Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 14 - Recording Device Business ●HDD market FY March 2014 : About 552 million units (TDK’s estimation on April 28） FY March 2015 : About 535 million units (TDK’s previous forecast on April 28) FY March 2015 : About 552 million units (TDK’s current forecast, increase by 17M units from the previous forecast) ●Shipment index Recording Device Sales (Left, including HDD Head (HGA) and HDD Suspention) HDD Head Shipment Index (Right) (Yen billions) 60 60.2 66.3 111 40 69.0 (shipment index) 61.2 59.1 98 95 1Q 116 100 Index Projections 99 20 0 $/¥ 1Q 2Q 3Q 4Q 98.74 99.02 100.38 102.97 FY March 2014 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 102.17 120 110 100 90 80 70 60 50 2Q 100.00 FY March 2015 July 31, 2014 - 15 - Recording Device Business Medium to long term HDD market The world’s only dedicated HDD head manufacturer. We possess R&D and manufacturing capabilities that enable us to continuously bring the most advanced products in the industry (the highest areal densities in the world) to market. Changes in applications within the market Decrease in demand from PC ・Increase in devices such as tablets (which use SSDs) Increase in demand from data centers ・Data volume is increasing worldwide. ・Cloud services are proliferating. ・Increasing power consumption by data centers is also an issue. Changes in the number of heads per HDD ・The recording capacity of HDDs for data centers, demand for which is on the rise, will need to continue to be expanded in the future. The number of heads per HDD will also increase in conjunction with this. ・Enterprise, near-line, etc. data center markets continuously adopt the most advanced products. ⇒TDK can contribute to these markets. ・Introduction of new products Launch new products one after another! Thermal Assisted Magnetic Recording Head Next-generation Reading Head Micro-DSA (Image) 1～4 heads per HDD 6～14 heads per HDD HDDs for data centers use more heads. Copyright© 2014 TDK Corporation. All rights reserved. Generate stable earnings from the recording device business as a whole even over the medium to long term 1Q of Fiscal Year March, 2015 July 31, 2014 - 16 - High Frequency Components Business Hiroyuki Uemura Executive Vice President Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 17 - High Frequency Components Target Markets Market environment Activities ・Launch of TD-LTE ⇒ Rapid increase in production of 4G devices ・Increase in number of components due to the transition from three-mode to five-mode technology ・Slumping production of high-end models (mainly smartphones) and tablet devices ・Production adjustments prior to the launch of new models ⇒ New models will be launched from 2Q Tapping the benefits of reference designs, stepping up of activities to encourage replacements. Sharp increase in orders for discrete products. (SAW, TC-SAW, BAW, Multilayer filter) New approvals obtained for module products Increasing share for existing module products Production trends at primary customer from 2Q onwards a key factor Expansion in sales to secondary customers Commencement of acceptance of new orders for module products Stepping up of efforts to expand sales for PA modules Expansion in sales of discrete and module products from 2Q onwards SAW : Surface Acoustic Wave, BAW : Bulk Acoustic Wave, TC-SAW：Temperature compensated SAW Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 18 - High Frequency Components Business strategy ◆ Expand reference share by redoubling qualification efforts targeting IC manufacturers ◆ Expand our share of the market for competitive discrete products by further strengthening our lineup of such products ◆ Expand our share of the module market by developing and launching small-package products ◆ Continue to improve productivity Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 19 - Supplementary Data Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 20 - Quarterly sales and operating income by segment FY March 2015 FY March 2014 Yen billions Net Sales Capacitors 1Q 33.7 2Q 35.1 3Q 34.7 4Q 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 4.7 4.4 4.3 5.8 234.4 249.4 258.2 242.5 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 (4.3) (4.0) (4.4) (4.5) Passive Components Other Total Operating Income Other Sub-total Corporate and Eliminations Total Ex-rate ￥/USD ￥/EURO 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 1Q 36.5 3Q 4Q Total 50.2 123.4 59.1 28.0 87.1 22.5 4.5 237.5 7.8 7.1 0.3 (0.4) 14.8 (5.2) 12.5 17.9 98.74 99.02 100.38 102.97 100.23 102.17 128.96 131.11 136.56 141.12 134.42 140.17 1Q of Fiscal Year March, 2015 2Q 36.7 4.5 Copyright© 2014 TDK Corporation. All rights reserved. 1.7 Total 9.6 July 31, 2014 - 21 - FY March 2015 Projections -Capex, Depreciation, R&DCapital expenditure (Yen billions) Depreciation R&D 120 99.7 100 80 85.6 78.6 80.0 68.6 77.3 79.9 77.4 82.9 83.0 60 52.6 52.6 53.5 11/3 12/3 13/3 63.4 68.0 40 20 0 11/3 12/3 13/3 14/3 15/3 Projections 11/3 12/3 13/3 14/3 15/3 Projections 14/3 15/3 Projections 11/3 : FY March 2011 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 22 - Financial Position and Cash Flows （JPY billion） March End, 2014 June End, 2014 (FYI) June End, 2013 Change 1,239.6 1,241.3 1.7 1,224.0 Total Liability 587.3 605.2 17.9 615.0 Stockholders's Equity 635.3 618.2 (17.1) 588.7 (comprehensive income) (87.1) (96.8) (9.7) (127.0) Stockholders's Equity ratio 51.3% 49.8% -1.5pt 48.1% Cash and Cash equivalents 259.5 257.5 (2.0) 244.8 Interest-bearing Debt 267.0 281.8 14.8 304.4 (24.3) (16.8) (59.6) Total Asset (7.5) Net Cash （Yen billions） 1Q of FY March 2014 1Q of FY March 2015 Change Capital Expenditures 14.4 20.4 6.0 Depreciation and amortization 20.7 19.7 (1.0) Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 23 - Cash Flows (Yen billions） FY March 2014 1Q Results Operating Cash Flow Investing Cash Flow Free Cash Flow Financing Cash Flow Effect of exchange rate chagens on cash and cash equivalents Cash and Cash Equivalents Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 FY March 2015 1Q Results 22.8 (16.0) 6.8 2.7 10.0 18.7 (18.5) 0.2 1.7 (3.4) 233.1 249.3 July 31, 2014 - 24 - Annual Sales by applications (FY March 2011 – FY March 2014) FY11/3 : FY March 2011 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 25 - 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. 1Q of Fiscal Year March, 2015 July 31, 2014 - 26 - Quarterly sales by applications (1Q of FY March 2014 –1Q of FY March 2015) Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 27 - Passive Components Business quarterly sales by applications (1Q of FY March 2014 –1Q of FY March 2015) Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 28 - 2005/3 : FY March 2005 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 29 - 2005/3 : FY March 2005 Copyright© 2014 TDK Corporation. All rights reserved. 1Q of Fiscal Year March, 2015 July 31, 2014 - 30 - 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. 1Q of Fiscal Year March, 2015 July 31, 2014 - 31 - Text data including Q&A of performance briefing will be uploaded on following site http://www.global.tdk.com/ir/ir_events/conference/2015/1q_1.htm