Consolidated Financial Results for the Year Ended March 31, 2016 Ⅰ. Financial Results for Fiscal 2015 I f ti by b Segment S t Ⅱ Information Ⅱ. g Alliance with Hon Hai Group p Ⅲ. Strategic Ⅳ. Supplementary Data SHARP CORPORATION May 12, 2016 Forward-Looking Forward Looking Statements This presentation material contains certain statements describing the future plans, strategies and performance of Sharp Corporation and its consolidated subsidiaries (hereinafter “Sharp”). These statements are not based on historical or present fact, but rather assumptions and estimates based on information currently available. These future plans, strategies and performances are subject to known and unknown risks, uncertainties and other factors. Sharp’s actual performance, business activities and financial position may differ materially from the assumptions and estimates provided on account of the risks, uncertainties and other factors. Sharp is under no obligation to update these forward-looking statements in light of new information, future events or any other factors. The risks, uncertainties and other factors that could affect actual results include, but are not limited to: (1) The economic situation in which Sharp operates; (2) Sudden, rapid fluctuations in demand for Sharp’s products and services, as well as intense price competition; (3) Changes in exchange rates (particularly between the yen and the U.S. dollar, the euro, and other currencies); (4) Regulations such as trade restrictions in other countries; ((5)) The p progress g of collaborations and alliances with other companies; p ; (6) Litigation and other legal proceedings against Sharp; (7) Rapid technological changes in products and services, etc. *Amounts less than 100 million y yen shown in this presentation p material have been rounded down. Copyright © 2016 SHARP CORPORATION, all rights reserved. Ⅰ. Financial Results for Fiscal 2015 1 Financial Results for Fiscal 2015 • Fiscal 2015 net sales were 2,461.5 billion yen, down 11.7% against the previous year. (Billions of Yen) FY2014 Fiscal Year FY2015 1H 3Q 4Q 2H Fiscal Year Changes (Y on Y) 2,786.2 1,279.6 663.3 518.5 1,181.9 2,461.5 -11.7% -48.0 -25.1 -3.8 -132.9 -136.8 -161.9 - (margin) ((-1 1.7%) 7%) ((-2 2.0%) 0%) ((-0 0.6%) 6%) ((-25 25.6%) 6%) ((-11 11.6%) 6%) ((-6 6.6%) 6%) Profit Attributable to Owners of Parent -222.3 -83.6 -24.7 -147.6 -172.3 -255.9 (margin) (-8 0%) (-8.0%) (-6 5%) (-6.5%) (-3 7%) (-3.7%) (-28 5%) (-28.5%) (-14 6%) (-14.6%) (-10 4%) (-10.4%) Net Sales Operating Income - 2 ・ First, let’s look at the consolidated financial results for fiscal 2015. N t sales Net l and d operating ti lloss were almost l t th the same as th the revised i db business i fforecastt we announced on March 30. ・ Net sales were 2,461.5 billion yen, a year-on-year decrease of 11.7%. Operating loss was 161.9 billion yen, and loss attributable to owners of parent was 255 9 billi 255.9 billion yen. years We believe the strategic alliance ・ We have posted a loss for two consecutive years. with the Hon Hai Group will enable us to establish a strong business partnership and a solid financial foundation, through which we are aiming for stable business continuity. ・ We plan to announce our business forecasts for fiscal 2016 once the capital injection from the Hon Hai Group is completed. This is because it is difficult at this time to make concrete assessments of the synergetic effect that will arise as a result of this strategic alliance. Other Income (Expenses) (Billions of Yen) FY2014 FY2015 Fi Fiscal l Year Y Operating Income Other Income (Expenses) Equity in earnings of affiliates 1H 3Q 4Q 2H Fi Fiscal l Year Y Changes (Y on Y) -48.0 -25.1 -3.8 -132.9 -136.8 -161.9 -113.9 -140.7 -50.0 -14.2 -4.7 -19.0 -69.1 +71.6 +5.5 +3.0 -0.1 -1.3 -1.5 +1.4 -4.0 Gain on sales of noncurrent assets Gain on sales of investment securities Reversal of provision for loss on litigation +11.1 +0.3 +0.4 +15.1 +15.6 +15.9 +4.8 +22.9 +1.8 -0.0 +0.1 +0.1 +1.9 -21.0 +19.2 +2.0 - - - +2.0 -17.1 Interest expense -23.1 -9.9 -4.5 -4.1 -8.7 -18.7 +4.4 - +7.1 7.1 +1.3 1.3 -0.0 0.0 +1.3 1.3 +8.4 8.4 +8.4 8.4 -104.0 -11.1 -2.7 -10.8 -13.6 -24.7 +79.2 Restructuring charges -21.2 -35.3 -1.4 -1.4 -2.8 -38.1 -16.9 Settlement -14.3 - - - - - +14.3 -188.8 -75.2 -18.1 -137.7 -155.8 -231.1 -42.2 -33.5 -8.3 -6.5 -9.9 -16.4 -24.8 +8.6 -222.3 -83.6 -24.7 -147.6 -172.3 -255.9 -33.6 Receipt of settlement package Impairment loss Pretax Income Income Taxes, etc. Profit Attributable to Owners of Parent 3 ・ Fiscal 2015 saw an improvement in other income expenses. ・ Expenses related to structural reforms and impairment loss were calculated as other expenses. Variance Between Fiscal 2015 Actual Results and Forecast At Third Quarter Financial Announcement (Billions of Yen) FY2015 Forecast （Feb.4） Net Sales Operating Income (margin) FY2015 Actual results Actual results vs Forecast 2 700 0 2,700.0 2 461 5 2,461.5 -238.4 238 4 10.0 -161.9 -171.9 (0.4%) (-6.6%) (Before calculation vs of costs for Forecast restructuring and structural reforms) Costs for restructuring g and structural reforms in 4Q • CE marketing measure costs,, etc. -35.8 • Further variance between polysilicon appraisal value and long term contract price long-term -7.7 • Valuation estimate change of inventory -47.0 • Others Oh Inventory write-down etc. -30.5 2 461 5 2,461.5 -238.4 238 4 -40.7 -50.7 4 ・ The difference between the forecast and result in operating income was largely due to expenses related l t d tto improving i i th the earnings i structure t t and d enacting ti structural t t l reforms. f Sales by Segment (Billions of Yen) FY2014 Fiscal Year Consumer Electronics FY2015 FY2015 1H 3Q 4Q 2H Fiscal Year vs Forecast （Feb.4） Fiscal Year Forecast （Feb.4） Change (Y on Y) 982.7 435.5 204.2 170.8 375.1 810.7 -59.2 -17.5% 870.0 270.8 78.7 34.5 43.5 78.1 156.8 -13.1 -42.1% 170.0 343.3 172.3 88.8 93.9 182.8 355.1 -4.8 +3.5% 360.0 Electronic Components and Devices 466.6 251.2 146.4 92.3 238.7 490.0 -39.9 +5.0% 530.0 Display Devices 907.1 391.2 226.2 154.1 380.3 771.5 -98.4 -14.9% 870.0 2,970.7 1,329.0 700.3 554.9 1,255.2 2,584.3 -215.6 -13.0% 2,800.0 -184.5 -49.3 -36.9 -36.3 -73.3 -122.7 - - -100.0 2,786.2 1,279.6 663.3 518.5 1,181.9 2,461.5 - -11.7% 2,700.0 Energy Solutions Business Solutions Subtotal Adjustments Total *Sales include internal sales between segments. 5 Sales by Segment (Billions of Yen) 1,200 Left bar : FY2014 Right g bar: FY2015 1,000 800 600 400 200 0 Consumer Electronics Energy Solutions Business Solutions Electronic Components and Devices Display Devices *Sales include internal sales between segments. 6 Operating Income by Segment (Billions of Yen) FY2014 Fiscal Year Consumer Electronics 1H 3Q 4Q FY2015 FY2015 2H Fiscal Year Forecast （Feb.4） Fiscal Year vs Forecast （Feb.4） Change g (Y on Y) 19.0 (1.9%) -1.9 (-0.5%) 7.5 (3.7%) -27.4 (-16.0%) -19.8 (-5.3%) -21.8 (-2.7%) -41.8 - 20.0 (2.3%) Energy Solutions -62.6 (-23.1%) -2.6 (-3.4%) -5.0 (-14.7%) -10.7 (-24.6%) -15.7 (-20.2%) -18.4 (-11.7%) -11.4 - -7.0 (-4.1%) Business Solutions 31.3 (9.1%) (9 1%) 16.7 (9.7%) (9 7%) 7.1 (8.0%) (8 0%) 11.9 (12.7%) (12 7%) 19.0 (10.4%) (10 4%) 35.8 (10.1%) (10 1%) -2.1 +14.4% 38.0 (10.6%) (10 6%) Electronic Components and Devices 0.6 (0.1%) 8.0 (3.2%) 1.9 (1.4%) -8.5 (-9.2%) -6.5 (-2.7%) 1.4 (0.3%) -16.5 2.2-fold 18.0 (3.4%) Display Devices 0.5 (0.1%) -26.4 (-6.8%) -10.7 (-4.7%) -91.9 (-59.6%) -102.6 (-27.0%) -129.1 (-16.7%) -99.1 - -30.0 (-3.4%) -11.0 ((-0.4%) 0 4%) -37.0 -6.3 ((-0.5%) 0 5%) -18.8 0.8 (0.1%) (0 1%) -4.7 -126.6 ((-22.8%) 22 8%) -6.2 -125.7 ((-10.0%) 10 0%) -11.0 -132.1 ((-5.1%) 5 1%) -29.8 -171.1 - - - 39.0 (1.4%) (1 4%) -29.0 -48.0 ((-1.7%) 1.7%) -25.1 ((-2.0%) 2.0%) -3.8 ((-0.6%) 0.6%) -132.9 ((-25.6%) 25.6%) -136.8 ((-11.6%) 11.6%) -161.9 ((-6.6%) 6.6%) - - Subtotal Adjustments Total 10.0 (0.4%) *Figures within parentheses indicate operating margin. 7 Operating Income by Segment (Billions of Yen) 40 20 Left bar : FY2014 Right bar: FY2015 0 -20 -40 -60 -80 -100 -120 -140 Consumer Electronics Energy Solutions Business Solutions Electronic Components and Devices Display Devices 8 Consolidated Balance Sheets • Cash, Cash time deposits, deposits and restricted cash increased from 234.5 234 5 billion yen at the end of December 2015 to 275.3 billion yen. • The equity ratio decreased from 8.6% at the end December 2015 to -2.7%. (Billions of Yen) FY2014 FY2015 FY2014 End of Mar. 2015 End of Dec. 2015 End of Mar. 2016 Cash, time deposits, and restricted cash 258.4 234.5 275.3 Notes and accounts receivable 605.6 469.3 430.0 Inventories 338.3 299.0 184.3 96.7 97.9 76.2 1,299.1 1,100.8 965.9 Other current assets End of Dec. 2015 End of Mar. 2016 Short-term b borrowings i 848 9 848.9 664 6 664.6 638 7 638.7 Notes and accounts payable 468.0 404.6 312.6 Other current liabilities 369 9 369.9 310 2 310.2 423 4 423.4 1,686.9 1,379.6 1,374.8 230 4 230.4 191 4 191.4 227 0 227.0 1,917.3 1,571.0 1,601.8 44.5 160.2 -31.2 Net Assets 1,961.9 1,731.3 1,570.6 Equity Ratio 1.5% 8.6% -2.7% Current Liabilities Current Assets Plant and Equipment 400.5 368.4 Investments and Other Assets 262.0 261.9 Deferred Assets 0.0 0.0 1,961.9 1,731.3 Total Assets 351.2 253.4 FY2015 End of Mar. 2015 Long term Long-term Liabilities Liabilities 0.0 Net Assets 1,570.6 Total Liabilities and Assumed increase in value of net assets resulting from strategic alliance with Hon Hai ・ Common shares ・ Class C shares + Increase in value of net assets 288.8 99.9 388 8 388.8 9 ・ Due to factors such as expenses related to improving the earnings structure and enacting ti structural t t l reforms, f we posted t d negative ti nett assets t off 31.2 31 2 billion billi yen att th the end of fiscal 2015, a 191.4 billion yen decrease compared to the end of the third quarter in December 2015. Th equity The it ratio, ti which hi h was 8 8.6% 6% att th the end d off th the thi third d quarter, t ffellll tto negative ti 2 2.7%. 7% 2015 fluctuations in interest and exchange rates caused a ・ At the end of fiscal 2015, decrease in remeasurements of defined benefit plans and foreign currency translation adjustments and led to a capital deficit. But the strategic alliance with the Hon Hai Group will not only provide us with a capital injection that will include growth investment capital; it will also enable us to establish a strong business partnership. p will enable us to aim for stable business continuity. y These developments Transition of Inventories • Inventory was 184 184.3 3 billion yen yen, down 114 114.7 7 billion yen compared to the end of December 2015 2015, and the ratio vs. monthly sales decreased from 1.39 months to 0.90 months. (Months) (Billi (Billions off Yen) Y ) 600 1.80 1.67 Ratio vs. monthly sales 1 46 1.46 1.38 1.39 1.21 400 338 3 338.3 344 2 344.2 295.1 0 90 0.90 294.2 299.0 184.3 200 LCDs 0 End of Mar. 201 2014 End of Mar. 201 2015 End of Jun. 201 2015 End of Sep. 201 2015 1.20 End of Dec. 201 2015 0.60 0.00 End of Mar. 2016 10 ・ Inventory at the end of fiscal 2015 was 184.3 billion yen, down 114.7 billion yen from th third the thi d quarter. t The ratio of inventory to monthly sales was 0.90 months, down 0.49 months. Transition of Interest-Bearing Debt ・ Interest-bearing debt at the end of March 2016 declined by 25.4 25 4 billion yen in comparison to the end of December 2015. The ratio vs. monthly sales increased from 3.50 months to 3.56 months. ・ Net interest-bearing debt* decreased from 521.9 billion yen at the end of December 2015 to 455.6 billion yen (Months) (Billi (Billions off Yen) Y ) 1,174.4 974 2 974.2 982 4 982.4 1,000 Left bar: Interest-bearing debt Right bar: Net interest-bearing debt 1,093.5 Interest-bearing debt on the ratio vs. monthly sales 715.7 713.9 8 774.6 560.4 5.69 758.7 583.6 500 4.20 4.48 756.4 731.0 521.9 3 76 3.76 3 56 3.56 End of Jun. 2015 End of Sep. 2015 End of Dec. 2015 2.4 3.5 3.5 4 455.6 3 56 3.56 3.50 0 0 End of Mar. 2013 Net D/E ratio 7.9 End of Mar. 2014 3.7 End of Mar. 2015 23.7 End of Mar. 2016 - *Net interest-bearing debt: interest-bearing debt – cash, time deposits, and restricted cash 11 ・ Interest-bearing debt at the end of fiscal 2015 was 731.0 billion yen, down 25.4 billion yen from f the th third thi d quarter. t Net interest-bearing debt was 455.6 billion yen, down 66.3 billion yen. ・ We will pursue improvement in our cash flow through continuous optimization of inventory and effective capital investment. Ⅱ Information by Segment Ⅱ. 12 Consumer Electronics (Billions of Yen) FY2015 1H Sales Operating Income (margin) 3Q 4Q 2H Fiscal Year Changes (Y on Y) 435.5 204.2 170.8 375.1 810.7 -17.5% -1.9 7.5 -27.4 -19.8 -21.8 - ( 0 5%) (-0.5%) (3 7%) (3.7%) ( 16 0%) (-16.0%) ( 5 3%) (-5.3%) ( 2 7%) (-2.7%) *Sales include internal sales between segments FY2015 Results (Y on Y) • Sales: 17.5% decrease • Operating income: 40.9 billion yen decrease Measures & A hi Achievements t FY2015 Results (vs Feb.4) • Sales: Downturn by 59.2 billion yen • Operating income: Downturn by 41.8 billion yen • Creating new products and expanding the market of AIoT-equipped products such as communication robots, LCD TVs, and cooking appliances (e.g., RoBoHoN, AQUOS Cocoro Vision y , etc.)) Player, • Advancing and expanding the lineup of locally fit products for emerging countries, centered on home appliances (mosquito-catching air purifier, etc.) 13 ・ Despite healthy sales in Japan of 4K TVs and the Healsio series of cooking appliances, li iincluding l di th the H Healsio l i H Hott C Cook k electric l t i waterless t l cooker k llaunched h d iin November, overall sales were down 17.5% year-on-year to 810.7 billion yen. This decline was due to the European and North American LCD TV business shifting to a b d lilicensing brand i b business i and d tto poor sales l iin Chi China off LCD TV TVs and dh home appliances. Operating O ti income i was in i th the red dd due tto ffactors t such h as allocating ll ti costs t ffor LCD TV sales measures, which was part of our effort towards structural improvement. ・ We are on track to bringing forth new products that are equipped with AIoT technology, such as the RoBoHoN robot smartphone and the AQUOS Cocoro Vision Player. y Other new products p include home appliances pp tailored to meet the specific p needs of customers in newly emerging countries, such as a Plasmacluster air purifier with mosquito-catching function. We will keep up our efforts in developing new products and services that enable a new connection between people and consumer electronics and that bring added value and convenience to customers,, while making g use of cloud services. Energy Solutions (Billions of Yen) FY2015 1H 3Q 4Q 2H Fiscal Year Changes (Y on Y) Sales 78.7 34.5 43.5 78.1 156.8 -42.1% Operating Income -2.6 -5.0 -10.7 -15.7 -18.4 - ((-3 3.4%) 4%) ((-14 14.7%) 7%) ((-24 24.6%) 6%) ((-20 20.2%) 2%) ((-11 11.7%) 7%) (margin) *Sales include internal sales between segments FY2015 Results (Y on Y) • Sales: 42.1% decrease • Operating income: 44.2 billion yen increase Measures & Achievements FY2015 Results (vs Feb.4) • Sales: Downturn by 13.1 billion yen • Operating income: Downturn by 11.4 billion yen • Strengthening links to cloud computing services for HEMS systems and energy-saving appliances that utilize solar energy and storage batteries gg expansion p of EPC and IPP business centered on Fukushima recovery yp projects j • Aggressive • Moving ahead with solutions businesses that respond to regional market needs 14 ・ Sales were down 42.1% year-on-year to 156.8 billion yen. Contributing factors included lower demand in the residential and industrial sectors in Japan. ・ Operating income was in the red owing to a number of factors, such as reduced sales and a further variance between the appraisal value and the long-term contract price of polysilicon. Furthermore, as an improvement to the earnings structure, we recorded a valuation reserve for inventory purchase commitments of 7.7 billion yen. ・ We are strengthening the development of services that are based on solar energy and storage batteries and that connect HEMS and energy-efficient consumer electronics l t i with ith cloud l d systems. t W We h have already l d released l d a new cloud l d storage t battery system for residential use. We are also actively involved in the EPC business and the IPP business centered on areas in Fukushima Prefecture that are undergoing recovery from the 2011 disaster. Our efforts also include the energy solution business in overseas markets. We will continue our shift to a solutions-based business that can meet the diverse needs of each region. Business Solutions (Billions of Yen) FY2015 1H Sales Operating Income (margin) 3Q 4Q 2H Fiscal Year Changes (Y on Y) 172.3 88.8 93.9 182.8 355.1 +3.5% 16.7 7.1 11.9 19.0 35.8 +14.4% (9 7%) (9.7%) (8 0%) (8.0%) (12 7%) (12.7%) (10 4%) (10.4%) (10 1%) (10.1%) *Sales include internal sales between segments FY2015 Results (Y on Y) • Sales: 3.5% increase • Operating income: 4.5 billion yen increase Measures & Achievements FY2015 Results (vs Feb.4) • Sales: Downturn by 4.8 billion yen • Operating income: Downturn by 2.1 billion yen • Expanding sales channels and releasing new products to increase and stabilize the profit base in the MFP business • Enhancing the solutions business with a focus on MFPs and displays • Improving and expanding new businesses such as robotics, where market growth is expected 15 ・ Sales were up 3.5% year-on-year to 355.1 billion yen. Operating income was up 14 4% year-on-year to 35.8 14.4% 3 8 billi billion yen. B Business i S Solutions l i remain i a stable bl earnings i source. ・ Our intention is to expand the solutions business centered on MFPs and displays and also to strengthen the robotics business. We will keep on focusing f on global expansion off the solutions business by actively making use of existing products and our customer base and by making vigorous investments. Electronic Components and Devices (Billions of Yen) FY2015 1H Sales Operating Income ( (margin) i ) 3Q 4Q 2H Fiscal Year Changes (Y on Y) 251.2 146.4 92.3 238.7 490.0 +5.0% 8.0 1.9 -8.5 -6.5 1.4 2.2-fold ((3.2%)) ((1.4%)) ((-9.2%)) ((-2.7%)) ((0.3%)) *Sales include internal sales between segments FY2015 Results (Y on Y) • Sales: 5.0% increase • Operating income: 2.2-fold Measures & Achievements A hi t FY2015 Results (vs Feb.4) • Sales: Downturn by 39.9 billion yen • Operating income: Downturn by 16.5 billion yen • Expanding business for camera modules used in smartphones, automotive systems, and other applications g to value-added fields using gp proprietary p y technologies g and expanding p g featured devices: • Shifting color night-vision camera and a lineup of new sensor products for detecting dust, PM2.5, and environmental factors 16 ・ Sales were up 5.0% year-on-year to 490.0 billion yen. As for operating income, we were able bl tto secure a surplus l off 1 1.4 4 billi billion yen b by ttaking ki a conservative ti approach h tto inventory valuation at the end of the fiscal year. ・ We are strengthening the camera module business as well as shifting our business focus towards value-added areas, such as color night-vision cameras and various new sensor devices devices. We will continue to expand the solutions business centered on customizability and sensor technologies. technologies Display Devices (Billions of Yen) FY2015 1H 3Q 4Q 2H Fiscal Year Changes (Y on Y) Sales 391.2 226.2 154.1 380.3 771.5 -14.9% Operating Income -26.4 -10.7 -91.9 -102.6 -129.1 - ((-6.8%)) ((-4.7%)) ((-59.6%)) ((-27.0%)) ((-16.7%)) ( (margin) i ) *Sales include internal sales between segments FY2015 Results (Y on Y) • Sales: 14.9% decrease • Operating income: 129.7 billion yen decrease Measures & A hi Achievements t FY2015 Results (vs Feb.4) • Sales: Downturn by 98.4 billion yen • Operating income: Downturn by 99.1 billion yen • Expanding business for medium-size displays used in PCs, tablets, automotive systems, and others to stabilize profits • Creating new, new high high-value-added value added applications centered on Free Free-Form Form Displays • Developing technology of OLED displays utilizing IGZO and LTPS technologies 17 ・ Sales were down 14.9% year-on-year to 771.5 billion yen. This was due to a decrease i sales in l and d prices i off Chinese Chi market k smartphone h panels l and d TV panels l ffor the. h A decrease in sales to a major smartphone client in the fourth quarter was also a g factor. contributing ・ We recorded an operating loss of 129.1 billion yen. This was the result of a decline in sales, continuous utilization adjustments at certain plants, and a conservative approach to inventory valuation at the end of the fiscal year that took market conditions into consideration. p g up p the p pace of expanding p g business in medium-size ・ We are currentlyy speeding displays for products such as PCs, tablets, automotive devices, and others. We are also actively pursuing the development of high-value-added applications for FreeForm Displays p y and developing p g technology gy for OLED displays p y utilizing g IGZO and LTPS technologies. We will continue expanding business for high-value-added panels that utilize our unique technologies. Display Devices Current portfolio Future portfolio p PCs Smartphones (4K) High High Latent demand Smartphones (FHD/HD) (IPS・FHD) Tablets (for leading companies) Auto Automotive IA Smartphones (for leading companies) PC IWB/ signage A t Automotive ti (for leading companies) IA Smartphones (for leading companies) PCs PCs (Beyond FHD) (Beyond FHD) TVs TVs Lo ow Lo ow Low New displays Non-display (IPS・FHD) Tablets IWB/ signage Growth h Growth h Smartphones p (FHD/HD) Smartphones (4K) Profitability High Circle size corresponds p to amount of sales Low Profitability High 18 ・ We are aiming to stabilize earnings by revamping our earnings structure through b i business expansion i iin th the medium-size di i LCD sector. t specific, we will shrink the proportion of sales coming from highly volatile ・ To be specific volume-market smartphones and commodity LCD TVs, and we will shift our focus towards medium-size LCD applications such as automotive and industrial applications which are stable markets applications, markets. We will also explore new businesses businesses. For smartphones, we will proceed with cost reductions in LCDs and focus on selling standard models. Ⅲ Strategic Alliance with Hon Hai Group Ⅲ. 19 Strategic Alliance Between Sharp and Hon Hai Following approval at General Meeting of Shareholders Aim for Closing by end of June Sharp • Innovative technology development capability • “Sharp” point of view • Long established brands Industry-first innovations that change g p people’s p lifestyles y Creation of extensive synergy Open doors to new world ld off IoT I T with ith competitive products and services Hon Hai Group • World’s largest production capacity • Global customer base • Innovative technology development capability Worldwide market expansion of high-quality g q yp products by y Hon Hai’s globally renowned customers 20 ・ Sharp and Hon Hai are proceeding with a strategic alliance that includes a capital alliance. lli parties we can generate wide wide-ranging ranging synergy synergy, ・ By fusing the strengths of the two parties, create competitive products and services, and pioneer a new world of IoT. Following ll i approvall att th the generall shareholders’ h h ld ’ meeting, ti we aim i tto fifinalize li th the capital it l ・F injection by the end of June 2016. ・ Hereby I Takahashi would like to announce that I will resign from the president and CEO of Sharp Corporation at the timing of this strategic alliance closing with the capital injection. As the new president, Mr. Tai Jeng Wu will be appointed. The new president, president Tai and the eight directors will become responsible for the management of Sharp. We will promote the strategic alliance with Hon Hai Group, and strive to raise our corporate value. Three Structural Reforms Aimed at Maximizing Alliance Effect and Enabling Early Return to Profitability １ Optimize O ti i managementt resources with a view to making the most of the alliance Bases • Relocate headquarters to the Sakai base • Transfer part of the Tokyo Shibaura office to the Makuhari Building g • Consolidate overseas bases by utilizing Hon Hai Group bases Personnel • Optimize the workforce on a global basis (including affiliated companies) ２ Establish E t bli h a responsible ibl business organization that can accelerate recovery Businesses • Reorganize the Consumer Electronics Compan Company in order to expand the “IoT” and “Health and Environment” businesses (5 → 6 companies) • Clarify the responsibilities of each business unit in terms of earnings Headquarters • Thoroughly streamline the organization by transferring functions and operations to business units • Make visible headquarters’ allocated costs ３ Establish E t bli h a personnell system that fairly remunerates achievements Basic treatment • Promptly terminate salary reductions d ti (5% and d 2% reductions for managers and general employees, respectively) after closing • Restore bonuses by making an early return to profitability Rewarding compensation system • Introduce a stock option program Treatment matching area of duties • Introduce a role-ranking system for general employees • Introduce a manager-demotion system 21 ・ We will embark on three structural reforms aimed at maximizing the effect generated from this strategic alliance and at facilitating an early return to profitability. ・ Firstly, we will optimize management resources with a view to making the most of the alliance. Sharp’s headquarters will be relocated to the Sakai base, some of the duties of the Tokyo Shibaura office will be transferred to the Makuhari Building g in Chiba,, and overseas bases will be reorganized by utilizing Hon Hai Group bases. We will also optimize the workforce on a global basis. Secondly we will establish a responsible business organization that can accelerate ・ Secondly, recovery. Business-wise, we will reorganize the Consumer Electronics Company into two organizations: o ga at o s tthe e AV/Communications/Cloud /Co u cat o s/C oud Business us ess a and d tthe e Health ea t a and d Environment o e t Business. We will also clarify the responsibilities of each business unit in terms of earnings. As for the headquarters, q , we will thoroughly g y streamline the organization g and improve p the transparency of various costs. ・ Thirdly, we will establish a personnel system that fairly remunerates achievements. After closing, we will promptly terminate salary reductions. We will also aim to restore bonuses by making an early return to profitability. And we will introduce a stock option program to reward successful results. In addition,, we will introduce a role-ranking g system y for g general employees p y to enable treatment that matches each person’s duties. We will also introduce a demotion system for managers. Ⅳ Supplementary Data Ⅳ. 22 ・ Lastly, we have provided, as a supplement, Sales and Operating Income by Segment, Sales of Main Products, and other data. ・ Sharp is still in a severe financial situation, but we are committed to turning our business around by accelerating our various efforts towards structural reform. Thank you for your attention. Sales and Operating Income by Segment (Billions of Yen) FY2015 Sales Fiscal Year FY2015 Operating Income Change (Y on Y) 2H 435.5 375.1 810.7 -17.5% Consumer Electronics -1.9 -19.8 -21.8 (-0.5%) (-5.3%) (-2.7%) Energy Solutions 78 7 78.7 78 1 78.1 156 8 156.8 -42.1% 42 1% Energy gy Solutions -2.6 2.6 -15.7 15.7 -18.4 18.4 (-3.4%) (-20.2%) (-11.7%) Business Solutions 172.3 182.8 355.1 +3.5% Business Solutions Electronic Components and Devices 251.2 238.7 490.0 +5.0% Electronic Components and Devices Display Devices 391.2 380.3 771.5 -14.9% 1,329.0 , 1,255.2 , 2,584.3 , -13.0% Consumer Electronics Subtotal Adjustments Total -122.7 - 1,279.6 1,181.9 2,461.5 -11.7% -49.3 -73.3 1H Fiscal Year 1H Display Devices Subtotal Adjustments Total 2H 16.7 19.0 (9.7%) (10.4%) Change (Y on Y) - 35.8 +14.4% (10.1%) 1.4 2.2-fold 8.0 -6.5 (3.2%) (-2.7%) (0.3%) -26.4 -102.6 -129.1 - (-6.8%) (-27.0%) (-16.7%) -125.7 -132.1 ( 0 5%) (-10.0%) (-0.5%) ( 10 0%) -6.3 ( 5 1%) (-5.1%) -18.8 -11.0 -25.1 25 1 - -29.8 - -136.8 136 8 -161.9 161 9 - (-2.0%) (-11.6%) (-6.6%) *Figures within parentheses indicate operating margin. 23 Quarterly Sales and Operating Income by Segment (Billions of Yen) FY2015 Sales FY2015 Operating Income 1Q 2Q 3Q 4Q 201.9 233.6 204.2 170.8 Energy S l ti Solutions 36.8 41.8 34.5 43.5 Energy S l ti Solutions (-10.7%) Business Solutions 80.6 91.7 88.8 93.9 Business Solutions 6.8 9.9 (8.4%) (10.8%) Electronic Components and Devices 136.6 114.6 146.4 92.3 Electronic Components and Devices Di l Display Devices 187.8 203.3 226.2 154.1 Subtotal 643.9 685.1 700.3 554.9 Subtotal Adjustments -25.6 -23.7 -36.9 -36.3 Adjustments Total 618 3 618.3 661 3 661.3 663 3 663.3 518 5 518.5 T t l Total Consumer Electronics 1Q Consumer Electronics Display Devices 2Q -11.7 9.7 (-5.8%) (4.2%) -3.9 1.3 3Q 4Q 7.5 -27.4 (3.7%) (-16.0%) -5.0 -10.7 (3.2%) (-14.7%) (-24.6%) 7.1 11.9 (8.0%) (12.7%) 2.8 5.1 1.9 -8.5 (2.1%) (4.5%) (1.4%) (-9.2%) -10.7 -91.9 -13.7 -12.7 (-7.3%) (-6.3%) -19.7 13.3 (-3 1%) (-3.1%) (2 0%) (2.0%) -9.0 -9.7 -28.7 28.7 3.5 (-4.7%) (0.5%) (-4.7%) (-59.6%) 0.8 -126.6 (0 1%) (-22.8%) (0.1%) (-22 8%) -4.7 -6.2 -3.8 3.8 -132.9 132.9 (-0.6%) (-25.6%) *Figures within parentheses indicate operating margin. 24 Sales of Main Products (Billions of Yen) FY2014 1H FY2015 Fiscal Year 2H 1H Fiscal Year 2H Change g (Y on Y) 189.1 180.8 370.0 154.6 129.5 284.2 -23.2% 3 60 3.60 3 43 3.43 7 03 7.03 2 99 2.99 2 83 2.83 5 82 5.82 -17.1% 17 1% 85.9 107.6 193.6 83.5 62.8 146.3 -24.4% 2 41 2.41 3 15 3.15 5 56 5.56 2 26 2.26 1 44 1.44 3 71 3.71 -33.3% 33 3% Refrigerators 47.9 45.6 93.5 48.2 42.5 90.8 -2.9% Air Conditioners 42.1 21.3 63.5 36.0 21.6 57.6 -9.2% Copiers / Printers 73.4 78.5 152.0 78.2 58.8 137.0 -9.9% Camera Modules 73.1 157.8 230.9 123.3 118.7 242.1 +4.8% LCD TVs Unit (million units) Mobile Phones U it (million Unit ( illi units) it ) 25 Sales of Main Products by Quarter (Billions of Yen) FY2014 1Q FY2015 2Q 3Q 85.7 103.3 104.3 76.5 64.1 90.5 81.8 47.7 1 73 1.73 1 86 1.86 1 74 1.74 1 68 1.68 1 41 1.41 1 58 1.58 1 72 1.72 1 10 1.10 49.6 36.2 64.1 43.5 44.1 39.4 27.4 35.3 1.23 1.17 1.79 1.35 1.01 1.25 0.54 0.89 Refrigerators 23.9 24.0 22.1 23.4 23.0 25.1 21.1 21.4 Air Conditioners 23.6 18.4 8.0 13.3 20.6 15.3 8.2 13.4 Copiers p / Printers 34.3 39.1 38.2 40.3 37.2 40.9 25.0 33.7 Camera Modules 27.3 45.7 88.7 69.0 76.0 47.2 75.1 43.6 LCD TVs U it (million Unit ( illi units) it ) Mobile Phones Unit (million units) 4Q 1Q 2Q 3Q 4Q 26 Capital Investment and Depreciation, etc. (Billions of Yen) FY2014 1H FY2015 Fiscal Year 2H 1H Fiscal Year 2H Change (Y on Y) Capital Investment 31.2 31.3 62.6 20.9 24.3 45.2 LCDs 12.9 19.0 31.9 8.9 13.9 22.8 49.9 52.6 102.6 33.7 34.2 68.0 -33.7% 65.8 75.1 141.0 68.6 61.4 130.1 -7.7% Depreciation and Amortization R&D Expenditures -27.8% (Yen) Exchange FY2014 FY2015 Rate 1H Fiscal Year 2H 1H Fiscal Year 2H US Dollar 102 05 102.05 115 83 115.83 108 94 108.94 120 80 120.80 117 50 117.50 119 15 119.15 Euro 137.41 137.14 137.28 133.57 128.59 131.08 27 Capital Investment and Depreciation, etc. by Quarter (Billions of Yen) FY2014 1Q Capital Investment 3Q 4Q 1Q 2Q 3Q 4Q 14.5 16.6 9.3 22.0 9.7 11.1 8.2 16.0 5.7 7.1 4.3 14.7 3.8 5.1 4.9 8.9 24.4 25.5 26.5 26.0 18.0 15.7 17.0 17.2 34.4 31.4 38.1 37.0 36.3 32.3 33.5 27.9 LCDs Depreciation and Amortization R&D Expenditures 2Q FY2015 (Yen) Exchange FY2014 FY2015 Rate 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q US Dollar 101.16 102.93 113.55 118.10 120.37 121.24 120.51 114.49 Euro 138.56 136.26 141.59 132.68 132.66 134.48 131.46 125.71 28 Overseas Sales by Region Top: Sales (Billions of yen) Bottom: Composition ratio (%) FY2014 1H 2H 165.6 19.9% 155.2 15.8% 71.4 71 4 8.6% China FY2015 Fiscal Year Fiscal Year Change (Y on Y) 1H 2H 320.9 17.7% 160.0 18.0% 120.9 14.8% 281.0 16.4% -12.4% 71.0 71 0 7.2% 142.5 142 5 7.8% 69.9 69 9 7.8% 66.6 66 6 8.1% 136.5 136 5 8.0% -4.2% 4 2% 487.8 58.6% 653.0 66.3% 1,140.8 62.8% 554.3 62.2% 530.9 64.7% 1,085.3 63.4% -4.9% Other 107.7 12 9% 12.9% 105.6 10 7% 10.7% 213.4 11 7% 11.7% 106.4 12 0% 12.0% 101.7 12 4% 12.4% 208.1 12 2% 12.2% -2.5% Total 832.7 100.0% 985.1 100.0% 1,817.8 100.0% 890.7 100.0% 820.3 100.0% 1,711.0 100.0% -5.9% The Americas Europe 29