Consolidated Financial Results for the Second Quarter Fiscal 2014 I. Financial Results for 1H Fiscal 2014 II. Financial Results Forecast for Fiscal 2014 III. Information by Product Group IV. Supplementary Data SHARP CORPORATION October 31, 2014 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) R l i h as trade d restrictions i i iin other h countries i Regulations such (5) The progress of collaborations and alliances with other companies (6) Litigation and other legal proceedings against Sharp (7) Rapid technological changes in products and services, etc. *Amounts less than 100 million yen shown in this presentation material have been rounded down. Copyright © 2014 SHARP CORPORATION, All Rights Reserved. I. Financial Results for 1H Fiscal 2014 1 Financial Results for 1H Fiscal 2014 ・ Sales and profits fell in 1Q FY2014 due to a backlash from the last-minute demand following consumption tax hike, as well as the effect of decreases in new home construction ・ Both sales and profits were lower than the initial forecast, but net income returned to profitability (Billions of Yen) FY2013 FY2014 Initial 1H Forecast (5/12) 1H Net sales O i Income I Operating (margin) Net Income (margin) 1H Results Change (Y on Y) Difference (Y on Y) Difference from Initial Forecast 1,342.0 1,450.0 1,327.6 -1.1% -14.3 -122.3 33 8 33.8 35 0 35.0 29 2 29.2 13 6% -13.6% 45 -4.5 57 -5.7 (2.5%) (2.4%) (2.2%) - +9.0 -0.2 -4.3 5.0 4.7 (-0.3%) (0.3%) (0.4%) 2 Consolidated financial results for the first half (April - September) recorded net sales of 1,327.6 billion yen, down 1.1% over the same period last year, and operating income of 29.2 billion yen, down 13.6%, and net income improved by 9.0 billion yen from a loss of 4.3 billion yen to 4.7 billion yen. Due ue to a bac backlash as from o the t e last-minute ast ute demand de a d following o ow g consumption co su pt o tax ta hikee as well as the effects of decreases in new home construction in Japan, sales of Digital Information Equipment and Energy Solutions were lower than the same period last year, which resulted in decreased net sales. Overall operating income showed a decline due to Electronic Devices being in the red and other causes. Both sales and profits were lower than the initial forecast, but net income returned to profitability. Financial Results for 2Q Fiscal 2014 ・ In 2Q FY2014, net income was in the black ・ Operating margin improved from 0.8% in 1Q to 3.5% (Billions of Yen) FY2014 1Q Net sales Operating Income (margin) Net Income (margin) 2Q 619.7 Change (Q on Q) Difference (Q on Q) Change (Y on Y) 707.9 +14.2% +88.2 -3.6% 4.6 24.5 5.3-fold +19.8 -20.3% (0 8%) (0.8%) (3 5%) (3.5%) - +8.3 -52.2% -1.7 6.5 (-0.3%) (0.9%) 3 In the second quarter (July - September), net income was in the black, and operating margin improved from 0.8% in the first quarter to 3.5%. Other Income (Expenses) ・Other income (expenses) improved ・Equity in earnings of affiliates and gain on sales of investment securities have offset expenses related to structural reform in Europe (Billions of Yen) FY2013 FY2014 1H 1Q 1H 2Q Difference 33.8 4.6 24.5 29.2 -4.5 -28.9 -6.0 -9.5 -15.5 +13.4 Equity in earnings of affiliates +0.0 +2.3 +1.6 +4.0 +4.0 Gain on sales of investment securities +1.6 +0.1 +5.7 +5.9 +4.3 +19.2 Operating Income Other Income (Expenses) - +19.2 - +19.2 Interest expense 89 -8.9 60 -6.0 57 -5.7 11 8 -11.8 28 -2.8 Impairment loss - -0.8 -1.6 -2.4 -2.4 Restructuring charges - - -5.7 -5.7 -5.7 Settlement - -14.3 - -14.3 -14.3 Income taxes, etc. -9.1 -0.4 -8.4 -8.9 +0.2 Net Income -4.3 -1.7 6.5 4.7 +9.0 Reversal of provision for loss on litigation 4 This slide shows other income (expenses). In the first half, interest expense increased and expenses related to structural reform on “audio visual,” “white goods,” and “”solar cells” were recorded, but other income (expenses) improved due mainly to equity in earnings of affiliates and gain on sales of investment securities. Consolidated Balance Sheets ・ Cash and time deposits decreased at end of Sep. 2014 due to bond redemption ・ The equity ratio increased from 8.9% at end of Mar. 2014 to 10.6% FY2013 End of Mar. 2014 FY2013 FY2014 End of Jun . 2014 End of Sep. 2014 Cash, C h time ti deposits d it and restricted cash 379.5 358.9 291.4 Notes and accounts receivable 568.8 517.1 614.9 Inventories 295.1 315.5 307.5 Other current assets 130.6 120.8 126.0 1,374.2 1,312.5 1,339.9 Plant and Equipment q p 519.7 510.6 512.4 Investments and Other Asset 287.5 289.2 286.5 0.1 0.1 0.0 2,181.6 2,112.5 2,139.0 Deferred Assets Total assets FY2014 End of Mar. 2014 End of Jun . 2014 Short-term borrowings 793.1 809.8 717.9 Notes and accounts payable 409.9 395.4 466.3 Other current liabilities 348.5 298.4 328.4 1,551.6 1,503.6 1,512.7 422.8 399.7 387.0 Liabilities 1,974.5 1,903.4 1,899.7 Net Assets 207.1 209.0 239.2 2,181.6 2,112.5 2,139.0 8.9% 9.4% 10.6% Current Liabilities Current Assets (Billions of Yen) Long-term Liabilities Total liabilities and net assets Equity Ratio End of Sep. 2014 5 This slide shows the consolidated balance sheets. At the end of September 2014, cash and time deposits decreased due to redemption of 100 billion yen straight bonds, and inventory decreased from the end of June. q y ratio improved p to In addition, net assets increased to 239.2 billion yyen and the equity 10.6%. Transition of Interest-bearing Debt ・ Interest-bearing debt at the end of Sept. 2014 totaled 988.0 billion yen, which was a decrease of 104.0 billion yen from the end of Jun. 2014, and ratio vs. monthly sales decreased from 5.29 months to 4.47 months ・ Net interest-bearing debt* decreased from 733.2 billion yen at the end of Jun. 2014 to 696.6 billion yen (Billions of Yen) 1,127.1 1,000 931.8 829.7 820.1 1 093 5 1,093.5 315.1 471.7 3.57 3.50 Net interestbearing debt 2.47 5.51 5.69 733.2 696.6 5.29 4.47 4.48 4.00 3.36 Interest-bearing debt on the ratio vs. monthly sales 0 Net D/E ratio 8.00 847.2 599.3 500 988.0 713.9 492.8 1 092 1 1,092.1 982.4 703.9 Interestbearing debt (Months) 1,174.4 0.00 End Mar. 2008 End Mar. 2009 End Mar. 2010 End Mar. 2011 End Mar. 2012 End Mar. 2013 End Mar. 2014 End Jun. 2014 End Sep. 2014 0.3 0.5 0.5 0.6 1.5 7.9 3.7 3.7 3.1 *Net interest-bearing debt: interest-bearing debt - cash, time deposits and restricted cash 6 This slide shows interest-bearing debt. Interest-bearing debt at the end of September totaled 988.0 billion yen, which was a decrease of 104.0 billion yen from the end of June. Net interest-bearing debt was 696.6 billion yen, which was a decrease of 36.5 billion yen from 733.2 billion yen at the end of June. Implementation of the Medium-Term Management Plan Structural reforms Structural reforms in the European "audio visual," "white goods," and "solar cells" businesses Financial structure improvements ・Redemption of 100 billion yen straight bonds ・Sale of held securities in accordance with dissolution of capital alliance (Pioneer Corporation Corporation, etc etc.)) ・Transfer of shares of a Sharp-affiliated company accounted for by the equity method (RenesasSP Drivers, Inc.) 7 This slide shows Implementation of the Medium-Term Management Plan. In addition to structural reforms in the European “audio visual,” “white goods,” and “solar cells” businesses, in September, we redeemed 100 billion yen in straight bonds. Also, initiatives designed to improve the financial condition, such as the sale of held securities were implemented. securities, implemented II. Financial Results Forecast for Fiscal 2014 8 Financial Results Forecast for Fiscal 2014 ・ Based on 1H results and 2H forecasts, the full year net sales estimate has been revised to 2.9 trillion yen ・ Based on improved profitability due to structural reforms and sales estimates for held assets, operating income and net income for this period have been left unchanged from the previous forecast (Billions of Yen) Change (Q on Q) 1H FY2014 FY2014 Revised Revised Change Change Full Year Change 2H (Y on Y) Forecast (Y on Y) Forecast (Y on Y) (8/1) Previous Full Year Forecast 1Q 2Q 619.7 707.9 +14.2% 1,327.6 -1.1% 1,572.3 -0.8% 2,900.0 -0.9% 3,000.0 Operating Income 44.6 6 24 5 55.3-fold 3 fold 24.5 29 2 29.2 13 6% -13.6% 70 7 70.7 5 3% -5.3% 100 0 100.0 7 9% -7.9% 100 0 100.0 Net Income -1.7 4.7 - 30.0 2.6-fold 30.0 Net sales 6.5 - 25.2 +59.0% 9 This slide shows the full year forecast for fiscal 2014. Based on the first half results and the second half forecast, the full year net sales estimate has been revised to 2.9 trillion yen. The operating income and net income for this period have been left unchanged from the initial forecast, based on profit improvement due to the promotion of structural reforms and sales estimates for held assets. III. Information by Product Group 10 Sales by Product Group (Billions of Yen) FY2014 1Q Change (Q on Q) 2Q 1H FY2014 Revised Full Year Forecast Change (Y on Y) (8/1)Previous Full Year Forecast Change (Y on Y) Digital Information Equipment 168.6 164.0 -2.7% 332.7 -0.6% 710.0 -3.2% 780.0 Health and Environmental Equipment 82.1 80.7 -1.7% 162.8 +1.8% 340.0 +4.0% 360.0 Energy Solutions 69.0 73.9 +7.1% 142.9 -15.0% 290.0 -33.9% 290.0 Business Solutions 79.2 85.2 +7.6% 164.5 +3.9% 340.0 +6.6% 340.0 Product Business 399.1 403.9 +1.2% 803.1 -2.2% 1,680.0 -7.6% 1,770.0 LCDs 206.9 253.9 +22.7% 460.9 -3.7% 1,000.0 +0.9% 1,000.0 Electronic Devices 58.9 90.8 +54.1% 149.7 +1.3% 420.0 +28.7% 430.0 Device Business 265.9 344.7 +29.7% 610.7 -2.5% 1,420.0 +7.8% 1,430.0 Sub Total 665.0 748.7 +12.6% 1,413.8 -2.3% 3,100.0 -1.1% 3,200.0 Adjustments -45.3 -40.8 - -86.1 - -200.0 - -200.0 Total 619.7 707.9 +14.2% 1,327.6 -1.1% 2,900.0 -0.9% 3,000.0 *Sales of each product group include internal sales between segments (Product Business / Device Business) 11 This slide shows sales by product group. Health and Environmental Equipment, Business Solutions, and Electronic Devices showed increased sales, while Digital Information Equipment, Energy Solutions, and LCDs showed decreased sales. Operating Income by Product Group (Billions of Yen) FY2014 ％ Digital Information Equipment Health and Environmental Equipment Energy Solutions Business Solutions Product Business LCDs Electronic Devices Device Business Sub Total Adjustments Total 1Q 2Q 2.6 ((1.6%)) 3.1 (3.9%) 0.1 (0.3%) 7.7 (9.8%) 13.7 (3.4%) 2.1 (1.0%) 35 -3.5 (-5.9%) -1.3 (-0.5%) 12.3 (1.9%) -7.6 4.6 (0.8%) 4.9 ((3.0%)) 4.5 (5.7%) -0.4 (-0.6%) 8.1 (9.6%) 17.2 (4.3%) 18.6 (7.4%) 10 1.0 (1.1%) 19.7 (5.7%) 36.9 (4.9%) -12.4 24.5 (3.5%) Change (Q on Q) 1H +87.9% +44.9% +5.8% +25.6% 8.9-fold 3.0-fold 5.3-fold 7.5 ((2.3%)) 7.7 (4.8%) -0.2 (-0.2%) 15.9 (9.7%) 30.9 (3.9%) 20.8 (4.5%) 24 -2.4 (-1.6%) 18.3 (3.0%) 49.2 (3.5%) -20.0 29.2 (2.2%) FY2014 Revised Full Year Forecast Change (Y on Y) 8.8-fold -19.8% -0.1% -14.9% 2.4-fold +31.8% -2.0% -13.6% 20.0 ((2.8%)) 19.0 (5.6%) 3.0 (1.0%) 30.0 (8.8%) 72.0 (4.3%) 55.0 (5.5%) 33.0 0 (0.7%) 58.0 (4.1%) 130.0 (4.2%) -30.0 100.0 (3.4%) Change (Y on Y) (8/1)Previous Full Year Forecast +55.8% 20.0 ((2.6%)) -9.6% 19.0 (5.3%) 3.0 (1.0%) 26.0 (7.6%) 68.0 (3.8%) 55.0 (5.5%) 77.0 0 (1.6%) 62.0 (4.3%) 130.0 (4.1%) -30.0 100.0 (3.3%) -90.7% -1.8% -25.6% +32.2% 8 1% -8.1% +29.3% -8.2% -7.9% *The percentage figures noted in brackets show operating margin 12 While operating income for Digital Information Equipment and LCDs increased, Health and Environmental Equipment and Business Solutions showed falls in profits and Energy Solutions and Electronic Devices were in the red. Based on current situations and outlook for the second half, forecasts of sales and operating income by product group have been revised. revised Digital Information Equipment <Total> (Billions of Yen) FY2014 1Q Change (Q on Q) 2Q Sales 168.6 164.0 -2.7% Operating Income (margin) 2.6 4.9 +87.9% (1.6%) (3.0%) 1H FY2014 Change (Y on Y) 332.7 -0.6% 7.5 8.8-fold (2.3%) Revised Full Year Forecast Change (Y on Y) 710.0 -3.2% 20.0 +55.8% (2.8%) (8/1) Previous Full Year Forecast 780.0 20.0 (2.6%) *Sales of each product group include internal sales between segments (Product Business / Device Business) [ 1H FY2014 Results ] ・ Launch of the high-value-added smartphones such as IGZO LCD models and EDGEST, which has a thin-bezel design, phone operators, profits,, g , through g 3 domestic mobile p p , and the effects of cost saving g efforts contributed to p and although sales were slightly lower than the same period last year, profits increased year on year. [ Onward Actions ] ・ Increase sales of large-size, high-resolution LCD TVs, and promote working with mobile phone operators to introduce new distinctive models. 13 Sales of Digital Information Equipment were 332.7 billion yen, down 0.6% from the same period last year. Launch of the high-value-added smartphones and the effects of cost saving efforts contributed to operating income reaching 7.5 billion yen, which was 8.8-fold over the same period last year year. The full year forecast for sales has been revised. Digital Information Equipment <LCD TVs, Mobile Phones> (Billions of Yen; Millions of Units) FY2014 1Q LCD TVs Mobile Phones Amt Change (Q on Q) 2Q 85.7 103.3 +20.5% 1H FY2014 Change (Y on Y) 189.1 -2.5% Revised Full Year Forecast 400.0 Change (Y on Y) (8/1) Previous Full Year Forecast -3.4% 440.0 Unit 1.73 1.86 +7.5% 3.60 -2.4% 7.60 -2.8% 8.20 Amt 49.6 36.2 -27.0% 85.9 -1.8% 200.0 -2.7% 220.0 Unit 1.23 1.17 -5.0% 2.41 -0.5% 5.60 +1.6% 6.30 [ 1H FY2014 Results ] LCD TVs: Though more units were sold in North America and China, both the overall number of units sold and amount were lower than the same period last year due to economic slowdown and political instability in Asia and the Middle East as well as the effect of domestic downturns in reaction to revisions to the consumption tax law. Mobile Phones: Numbers of units sold and amount both decreased in comparison to the same period last year due to increased competition with overseas smartphone manufacturers. [ Onward Actions ] LCD TVs: Utilize a strategy to focus on large-size and high-resolution LCD TVs such as 4K models and Quattron Pros, as well as develop specialized products tailored to regional characteristics, and promote structural reforms in Europe. Mobile Phones: in order to increase domestic share, increasing feature phone demand capture, and promoting sales of overseas models to US Sprint Corporation. 14 LCD TVs, the major product in this product group, were selling well in unit basis in North America and China. However, the overall number of units sold and amount were lower than the same period last year, due to economic slowdown and political instability in emerging countries and the Middle East as well as the effect of domestic downturns in reaction to revisions to the consumption tax law, which led to profit deterioration. In the second half, we will work vigorously to improve profitability by enhancing lineup of large-size and high-resolution models such as 4K TVs and Quattron Pros, and by promoting structural reforms in Europe. Both number of units sold and amount of mobile phones were lower than the same period last year, but launch of high-value-added models and cost saving efforts resulted in improvement in profit. Going forward, we will continue to work toward increasing domestic share by enhancing the lineup of products with IGZO LCDs that have high-resolution and low power consumption features. The full year forecasts for sales amounts and numbers of units of LCD TVs and mobile phones have been revised. Health and Environmental Equipment (Billions of Yen) FY2014 1Q Sales Operating Income (margin) Change (Q on Q) 2Q 82.1 80.7 -1.7% 3.1 4.5 +44.9% (3.9%) (5.7%) FY2014 Change (Y on Y) 1H 162.8 +1.8% 7.7 -19.8% (4.8%) Revised Full Year Forecast Change (Y on Y) 340.0 +4.0% 19.0 -9.6% (5.6%) （8/1） Previous Full Year Forecast 360.0 19.0 (5.3%) *Sales of each product group include internal sales between segments (Product Business / Device Business) [ 1H FY2014 Results ] ・In spite of a backlash from the last-minute demand following consumption tax hike and the effects of poor weather,, sales were higher than the same p period last yyear. g ・Profitability decreased due to profit deterioration of imported goods caused by yen depreciation. [ Onward Actions ] ・ Develop products that will create new demand and launch unique products. ・ Work to expand business by promoting products specialized for ASEAN and other emerging countries, and by strengthening and expanding the local production for local consumption and sales systems. 15 Sales of Health and Environmental Equipment were up 1.8% over the same period last year to 162.8 billion yen, and operating income was down 19.8% to 7.7 billion yen, due to profit deterioration of imported goods caused by yen depreciation. In spite of a backlash from the last-minute demand following consumption tax hike and the effects of poor weather over the summer in Japan, sales of washing machines and overseas air purifiers increased, leading to higher sales than the same period last year. We will continue to strengthen local production for local consumption initiatives to minimize the impact of the exchange rate while at the same time work to expand overseas business byy promoting p g products p specialized p for ASEAN and other emerging g g countries and by expanding sales systems. The full year forecast for sales has been revised. Energy Solutions (Billions of Yen) FY2014 1Q Sales Operating Income (margin) (Reference) Volume (Solar Cells) (MW) Change (Q on Q) 2Q 69.0 FY2014 1H 73.9 +7.1% 0.1 -0.4 - (0.3%) (-0.6%) Revised Full Year Forecast Change (Y on Y) 142.9 -15.0% -0.2 - (-0.2%) Change (Y on Y) 290.0 -33.9% 3.0 -90.7% (1.0%) (8/1) Previous Full Year Forecast 290.0 3.0 (1.0%) *Sales of each product group include internal sales between segments (Product Business / Device Business) 360 537 +49.5% 897 -0.7% 2,000 -4.7% 2,000 [ 1H FY2014 Results ] ・Earnings g deteriorated due to decreased sales byy overseas developer p business and the effects of decreased domestic sales caused by decreases in the number of new home constructions that were related to the increase in the consumption tax rate. ・Fell into the red due to write-down of project assets of the US solar project developer subsidiary. [ Onward Actions ] ・Domestic industrial use: Complete construction of projects that were already approved for the system interconnection as well as expand EPC/IPP/O&M business. ・Domestic residential use: Expand sales channels and strengthen sales of storage battery, HEMS, etc. ・Overseas business: Expand EPC business and strengthen sales of energy management systems that use storage battery. 16 Sales of Energy Solutions were 142.9 billion yen, a 15.0% decrease from the same period last year, due to decreases in overseas developer projects and decreases in domestic new home construction. The operating loss of 200 million yen was recorded due to the decrease in sales and write-down of project assets of the U.S. solar project developer subsidiary. We expect improved W i d profitability fi bili in i the h secondd hhalf lf due d to the h absence b off temporary expense and the effect of structural reforms in Europe. Furthermore, we will follow through on ordered construction projects that are projected to be completed by the end of the fiscal year to ensure profitability in the second half and the full year plan fulfillment. Th The ffull ll year fforecast remains i unchanged h d ffrom the h previous i fforecast. Business Solutions (Billions of Yen) FY2014 1Q Sales Operating Income (margin) Change (Q on Q) 2Q FY2014 Change (Y on Y) 1H Revised Full Year Forecast Change (Y on Y) (8/1) Previous Full Year Forecast 79.2 85.2 +7.6% 164.5 +3.9% 340.0 +6.6% 340.0 7.7 8.1 +5.8% 15.9 -0.1% 30.0 -1.8% 26.0 (9.8%) (9.6%) (9.7%) (8.8%) (7.6%) *Sales of each product group include internal sales between segments (Product Business / Device Business) [ 1H FY2014 Results ] ・Sales of MFPs increased overseas and information display sales firmed up in the domestic market. [ Onward Actions ] ・Expand sales of high-speed MFPs in developed countries and strengthen sales of color MFPs in emerging countries. ・Expand convenience store print services and improve the menu selections. ・Improve the lineup of digital signage, with the main focus on large-size models. ・Develop new customers using solution proposals that incorporate MFPs and displays. 17 Sales of Business Solutions were 164.5 billion yen, up 3.9% over the same period last year, but operating income remained nearly the same at 15.9 billion yen. We will strengthen the development of solution services centered on distinctive displays, which are our strong point, and MFPs to expand business. The full year forecast for operating income has been revised. LCDs (Billions of Yen) FY2014 1Q Sales Operating Income (margin) Change (Q on Q) 2Q 1H FY2014 Change (Y on Y) Revised Full Year Forecast Change (Y on Y) (8/1) Previous Full Year Forecast 206.9 253.9 +22.7% 460.9 -3.7% 1,000.0 +0.9% 1,000.0 2.1 18.6 8.9-fold 20.8 2.4-fold 55.0 +32.2% 55.0 (1.0%) (7.4%) (4.5%) (5.5%) (5.5%) *Sales of each product group include internal sales between segments (Product Business / Device Business) [ 1H FY2014 Results ] ・Sales of small- and medium-size LCDs for smartphones improved, mainly with major clients. ・The ratio of small- and medium-size LCDs at Kameyama No. 2 Plant reached 40% on average in 2Q FY2014. ・Secured significant increases in profit due to increases in the sales ratio of high-margin small- and medium-size LCDs and the promotion of cost saving measures. [ Onward Actions ] ・Propose high-resolution displays and unique touch panel solutions that match customer needs. ・Develop a wide variety of customers in the Chinese market, which is experiencing rapdid growth due to the appearance of new and rising set manufacturers. ・ 50%(avg.) of small- and medium-size LCDs production ratio at the Kameyama No. 2 Plant will contribute to increased sales and profit. 18 Sales of LCDs were 460.9 billion yen, a 3.7% decrease from the same period last year. While sales of small- and medium-size LCDs for smartphones and other applications increased, sales of large-size LCDs decreased. The operating income increased dramatically to 20.8 billion yen, 2.4-fold over the same pperiod last yyear, due to the efforts to increase the pproduction ratio of small- and medium-size LCDs at the Kameyama No. 2 Plant. We will attempt to develop a wide variety of clients in rapidly expanding Chinese market, where the new set manufacturers are growing, in order to reduce fluctuations in sales and profits, at the same time work to expand business by strengthening proposals for high-resolution LCDs, such as IGZO and CGS, and unique touch panel solutions that are tailored to customer needs. The full year forecast remains unchanged from the previous forecast. Sales of LCDs for Smartphones to Chinese Clients ・ Developing clients that are newly rising in the fast-growing Chinese smartphone market to expand sales and reduce the volatility 300000 Saales of LCDs for smartphones 150000 8 clients nese clients Chin 15 clients 0 1H 2H FY2013 Results 1H 2H Results FY2014 Forecast 19 This slide shows sales of LCDs for smartphones. Sales to Chinese clients are expanding smoothly. Sales Ratio by Resolution of LCDs for Smartphones ・ Measures to deal with highly increased demand for high-resolution smartphones ・ In FY2014 the highly profitable high resolution zone will become the largest sector (based on sales amount) 100% 50% FHD WQHD 0% 2H FY2013 Results 1H Results FY2014 Higgh-value-added / high reesolution zone Up to HD720 2H Forecast *Excluding Kameyama No.1 Plant This slide shows the sales ratio by definition of LCDs for smartphones. The sales ratio for high-value-added and high-resolution LCDs such as FHD and WQHD is on the rise in accordance with expanded sales to Chinese clients. 20 Expansion of Sales of IGZO LCDs ・ As the number of clients who use IGZO LCDs, sales will expand smoothly ・ Compared to 1H FY2013, IGZO LCD sales increased approx. 7-fold in 1H FY2014, and will increase nearly 10-fold in 2H FY2014. 10 27 clients Note PCs & monitors Smartphones & tablets IGZO LCD saless 22 clients 5 0 1H 2H FY2013 Results 1H 2H Results FY2014 Forecast *Number of clients and sales do not include internal transaction This slide shows the number of IGZO LCD clients and sales. As the number of clients who use IGZO LCDs is increasing, sales are smoothly expanding, mainly in smartphones and tablets. 21 Small- and Medium-size LCD Production Ratio at Kameyama No. 2 Plant ・ Small- and medium-size ratio increased to 40% in 2Q FY2014 and is currently 50% ・ Estimate an average of 50% in 2H FY2014 (based on number of input glass substrate) 100% 0% 1H 2H FY2013 Results 1Q 2Q FY2014 Results 2H Forecast Small- and m medium-size ratio 50% 22 This slide shows small- and medium-size LCD production ratio at the Kameyama No. 2 Plant. The ratio of small- and medium-size LCDs at this plant was average of 40% in July to September and is currently 50%. We expect the ratio of small- and medium-size LCDs to reach 50% in the second half, contributing to expanded sales and profit. profit Electronic Devices (Billions of Yen) FY2014 1Q Sales Operating Income (margin) Change (Q on Q) 2Q 58.9 1H 90.8 +54.1% -3.5 1.0 - (-5.9%) (1.1%) FY2014 Revised Full Year Forecast Change (Y on Y) 149.7 +1.3% -2.4 - (-1.6%) Change (Y on Y) 420.0 +28.7% 3.0 -8.1% (0.7%) (8/1) Previous Full Year Forecast 430.0 7.0 (1.6%) *Sales of each product group include internal sales between segments (Product Business / Device Business) [ 1H FY2014 Results ] ・Although sales of LEDs and ICs for major clients decreased, sales of camera modules for mobile devices strengthened and sales were in line with the same p period last yyear. g ・Although operating income returned to profitability in 2Q due to increased sales, deterioration of client and model mix continued. [ Onward Actions ] ・Attempt to improve profitability throuth the following initiatives: - Expand sales of high-value-added devices (high-color-rendering LEDs for small- and medium-size LCDs, touch panel solutions, proximity and luminance sensors, etc.) by strengthening cooperation with the display device section and improve the model mix. - Promote cost saving measures throughout the supply chain and reduce total costs. 23 Sales of Electronic Devices were 149.7 billion yen, a 1.3% increase over the same period last year, as sales of camera modules for mobile devices increased dramatically. The operating income was in the red at 2.4 billion yen due to deterioration in client and model mixes such as declines in sales of LEDs and ICs for major clients and the delay in entering into the camera module business for Chinese clients. Profitability in this product group has been falling since the fourth quarter of last fiscal year. We are aiming for a return to the black in the second half as a result of optimal positioning of personnel and other management resources aimed at expanding the fusion business that integrates displays and devices. We will also shift to the highvalue-added value added and growth area area, including high-color-rendering high color rendering LEDs and touch panel solutions, and promote structural reforms and other cost saving measures throughout the entire supply chain. The full year forecast for sales and operating income has been revised. IV. Supplementary Data 24 In closing, results for the first half indicate lower sales and operating income than the initial forecast, but the implementation of the various measures will lead to the fulfillment of the fiscal 2014 plan. Sales of Main Products (Billions of Yen) FY2013 1Q 2Q FY2014 3Q 4Q Full Year 1Q Full Year Change Change Forecast (Y on Y) (Y on Y) 2Q LCD TVs 80.3 113.7 118.8 100.9 413.8 85.7 103.3 -9.1% 400.0 -3.4% Unit (million units) 1.56 2.12 2.18 1.94 7.81 1.73 1.86 -12.3% 7.60 -2.8% 50.2 37.2 69.2 48.8 205.5 49.6 36.2 -2.7% 200.0 -2.7% 1.31 1.11 1.77 1.30 5.51 1.23 1.17 +5.7% 5.60 +1.6% Refrigerators 22.9 24.6 23.2 24.9 95.7 23.9 24.0 -2.4% 98.0 +2.4% Air Conditioners 26.1 16.4 10.9 15.4 68.9 23.6 18.4 +12.5% 69.0 +0.1% Copiers / Printers 36.4 29.8 31.6 36.5 134.4 34.3 39.1 +31.1% 147.0 +9.4% CCD / CMOS Imagers 34.8 49.6 84.2 49.3 218.1 38.8 64.7 +30.5% 310.0 +42.1% Mobile Phones Unit (million units) 25 Capital Investment, Depreciation and Amortization, etc. (Billions of Yen) FY2013 1Q Capital Investment 2Q 3Q FY2014 4Q Full Year 1Q Change (Y on Y) 2Q Full Year Forecast Change (Y on Y) 10.5 10.9 11.2 16.6 49.4 14.5 16.6 +52.1% 80.0 +61.8% 4.3 3.9 5.2 9.9 23.5 5.7 7.1 +79.6% 35.0 +48.7% Depreciation and Amortization 29.9 28.7 27.7 28.1 114.6 24.4 25.5 -11.3% 120.0 +4.7% R&D Expenditures 35.4 30.0 35.9 30.6 132.1 34.4 31.4 +4.6% 140.0 +6.0% LCDs Exchange Rate FY2013 FY2014 1Q 2Q 3Q 4Q Full Year U.S. Dollar ¥97.76 ¥97.96 ¥99.46 ¥101.78 ¥99.24 ¥101.16 ¥102.93 ¥106.00 Euro ¥127.46 ¥129.57 ¥135.20 ¥139.29 ¥132.88 ¥138.56 ¥136.26 ¥136.00 1Q 2Q 2 H Forecast 26 Sales by Product Group (Billions of Yen) FY2013 1Q 2Q FY2014 3Q 4Q Full Year 1Q 2Q Change (Q on Q) Change (Y on Y) Digital Information Equipment 158.9 175.6 216.9 181.8 733.3 168.6 164.0 -2.7% -6.6% Health and Environmental Equipment 82.3 77.5 82.1 84.9 326.8 82.1 80.7 -1.7% +4.0% Energy Solutions 84.3 83.9 108.5 162.1 439.0 69.0 73.9 +7.1% -11.9% Business Solutions 77.6 80.7 77.1 83.3 318.8 79.2 85.2 +7.6% +5.6% 403.3 417.9 484.7 512.2 1,818.1 399.1 403.9 +1.2% -3.3% LCDs 193.8 284.7 277.5 234.9 991.0 206.9 253.9 +22.7% -10.8% Electronic Devices 61.2 86.5 106.4 72.0 326.3 58.9 90.8 +54.1% +4.9% Device Business 255.0 371.3 384.0 307.0 1,317.4 265.9 344.7 +29.7% -7.1% Sub Total 658.3 789.2 868.7 819.2 3,135.6 665.0 748.7 +12.6% -5.1% Adjustments -50.4 -55.1 -53.4 -49.3 -208.4 -45.3 -40.8 - - 607.9 734.1 815.2 769.8 2,927.1 619.7 707.9 +14.2% -3.6% Product Business Total *Sales of each product group include internal sales between segments (Product Business / Device Business) 27 Operating Income by Product Group (Billions of Yen) FY2013 1Q Digital Information q p Equipment Health and Environmental Equipment Energy Solutions Business Solutions Product Business LCDs Electronic Devices Device Business Sub Total Adjustments Total 2Q 3Q FY2014 4Q Full Year 1Q 2Q Change (Q on Q) Change (Y on Y) -1.3 (-0.9%) (-0 9%) 6.4 (7.8%) 6.8 (8.1%) 7.5 (9.8%) 2.2 (1.3%) (1 3%) 3.2 (4.2%) 3.0 (3.7%) 8.3 (10.3%) 8.4 (3.9%) (3 9%) 5.6 (6.9%) 5.9 (5.5%) 6.1 (8.0%) 3.4 (1.9%) (1 9%) 5.6 (6.7%) 16.5 (10.2%) 8.4 (10.2%) 12.8 (1.8%) (1 8%) 21.0 (6.4%) 32.4 (7.4%) 30.5 (9.6%) 2.6 (1.6%) (1 6%) 3.1 (3.9%) 0.1 (0.3%) 7.7 (9.8%) 4.9 (3.0%) (3 0%) 4.5 (5.7%) -0.4 (-0.6%) 8.1 (9.6%) +87.9% 2.2-fold +44.9% +41.4% - - +5.8% -1.9% 19.4 (4.8%) -9.5 (-4.9%) 00.1 1 (0.2%) -9.3 (-3.7%) 10.0 (1.5%) -7.0 16.8 (4.0%) 18.1 (6.4%) 55.1 1 (5.9%) 23.3 (6.3%) 40.1 (5.1%) -9.3 26.2 (5.4%) 26.0 (9.4%) 44.2 2 (4.0%) 30.2 (7.9%) 56.4 (6.5%) -8.8 34.1 (6.7%) 6.9 (2.9%) 61 -6.1 (-8.6%) 0.7 (0.2%) 34.8 (4.3%) -7.8 96.8 (5.3%) 41.5 (4.2%) 33.2 2 (1.0%) 44.8 (3.4%) 141.6 (4.5%) -33.0 13.7 (3.4%) 2.1 (1.0%) 35 -3.5 (-5.9%) -1.3 (-0.5%) 12.3 (1.9%) -7.6 17.2 (4.3%) 18.6 (7.4%) 11.0 0 (1.1%) 19.7 (5.7%) 36.9 (4.9%) -12.4 +25.6% +2.1% 8.9-fold +2.8% - 79 8% -79.8% - -15.4% 3.0-fold -8.0% 3.0 (0.5%) 30.8 (4.2%) 47.6 (5.8%) 27.0 (3.5%) 108.5 (3.7%) 4.6 (0.8%) 24.5 (3.5%) - - 5.3-fold -20.3% *The percentage figures noted in brackets show operating margin 28 Sales by Product Group and Operating Income (by half year) (Billions of Yen) Net sales Operating Income FY2013 FY2014 Full Year 2H Full Year 1H 2H 334.6 398.7 733.3 332.7 377.2 710.0 159.8 167.0 326.8 162.8 177.1 340.0 Energy Solutions 168.2 270.7 439.0 142.9 147.0 290.0 Business Solutions 158.4 160.4 318.8 164.5 175.4 340.0 Product Business 821.2 996.9 1,818.1 803.1 876.8 1,680.0 LCDs 478.5 512.5 991.0 460.9 539.0 1,000.0 Electronic Devices 147.8 178.5 326.3 149.7 270.2 420.0 Device Business 626.4 691.0 1,317.4 610.7 809.2 1,420.0 1,447.6 1,687.9 3,135.6 1,413.8 1,686.1 3,100.0 Digital Information Equipment Health and Environmental Equipment Sub Total Adjustments Total -105.6 -102.8 -208.4 1H FY2013 Forecast Forecast -113.8 -200.0 1,342.0 1,585.1 2,927.1 1,327.6 1,572.3 -86.1 2,900.0 1H 2H FY2014 Full Year 2H 1H 0.8 11.9 12.8 7.5 12.4 (0.3%) (3.0%) (1.8%) (2.3%) (3.3%) 9.6 (6.0%) 9.8 (5.9%) 15.9 (10.1%) 36.3 (4.4%) 8.6 (1.8%) ( ) 5.2 (3.5%) 13.9 (2.2%) 50.2 (3.5%) -16.4 33.8 (2.5%) 11.3 (6.8%) 22.5 (8.3%) 14.6 (9.1%) 60.4 (6.1%) 32.9 (6.4%) ( ) -1.9 (-1.1%) 30.9 (4.5%) 91.3 (5.4%) -16.6 74.7 (4.7%) 21.0 (6.4%) 32.4 (7.4%) 30.5 (9.6%) 96.8 (5.3%) 41.5 (4.2%) ( ) 3.2 (1.0%) 44.8 (3.4%) 141.6 (4.5%) -33.0 108.5 (3.7%) Full Year Forecast Forecast 7.7 (4.8%) -0.2 (-0.2%) 15.9 (9.7%) 30.9 (3.9%) 20.8 (4.5%) ( ) -2.4 (-1.6%) 18.3 (3.0%) 49.2 (3.5%) -20.0 29.2 (2.2%) 11.2 (6.3%) 3.2 (2.2%) 14.0 (8.0%) 41.0 (4.7%) 34.1 (6.3%) ( ) 5.4 (2.0%) 39.6 (4.9%) 80.7 (4.8%) -9.9 70.7 (4.5%) 20.0 (2.8%) 19.0 (5.6%) 3.0 (1.0%) 30.0 (8.8%) 72.0 (4.3%) 55.0 (5.5%) ( ) 3.0 (0.7%) 58.0 (4.1%) 130.0 (4.2%) -30.0 100.0 (3.4%) *Sales of each product group include internal sales between segments (Product Business / Device Business) 29 *The percentage figures noted in brackets show operating margin Overseas Sales by Region (by half year) Top: Net sales (Billions of Yen) Bottom: Composition Ratio (%) FY2013 1H The Americas Europe China Other Total 2H FY2014 Full Year 1H Change (Y on Y) 204.2 264.2 468.4 165.6 -18.9% 25.6% 27.0% 26.4% 19.9% - 77.8 66.9 144.8 71.4 -8.3% 9.7% 6.8% 8.1% 8.6% - 382.5 542.8 925.3 487.8 +27.5% 48.0% 55.4% 52.1% 58.6% - 133.0 105.4 238.4 107.7 -19.0% 16.7% 10.8% 13.4% 12.9% - 797.6 979.4 1,777.0 832.7 +4.4% 100.0% 100.0% 100.0% 100.0% - 30