Consolidated Financial Results for the Second Quarter Fiscal 2015 Ⅰ. Financial Results for 1H Fiscal 2015 Ⅱ. Financial Results Forecast for Fiscal 2015 Ⅲ. Information by Product Group Ⅳ. Supplementary Data SHARP CORPORATION October 30, 2015 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 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 © 2015 SHARP CORPORATION, all rights reserved. Ⅰ. Financial Results for 1H Fiscal 2015 1 Financial Results for 1H Fiscal 2015 • Net sales in the first half of fiscal 2015 were 1,279.6 billion yen, down 3.6% from the same period last year. • All products groups’ businesses are in progress as schedule at the fiscal top, except Display Devices. • Structural reforms are on progress steadily (Billions of Yen) FY2014 FY2015 1H Net Sales Operating Income (margin) Net Income Attributable to Sharp Corporation (margin) 1H Results Change (Y on Y) Difference (Y on Y) 1,327.6 1,279.6 -3.6% -47.9 29.2 -25.1 - -54.3 (2.2%) (-2.0%) 4.7 -83.6 - -88.3 (0.4%) (-6.5%) 2 ・ Here is the overview of the consolidated financial results for the first half of fiscal 2015. The figures are equivalent to those announced in the press release on October 26. ・ Net sales were down 3.6% to 1,279.6 billion yen. Operating loss was 25.1 billion yen. Net loss attributable to Sharp Corporation was 83.6 billion yen. ・ This downturn was mainly due to Display Devices, while other product groups’ businesses are progressing as scheduled. The structural reforms we executed are also making steady progress. Financial Results for 2Q Fiscal 2015 • Net sales in 2Q FY2015 were 661.3 billion yen, up 7.0% over the previous quarter. • Operating income was in the black, as all product groups except Display Devices were in the black. • Due to factors including continuous structural reforms, a net loss attributable to Sharp Corporation was recorded during this quarter. (Billions of Yen) FY2015 1Q Difference (Q on Q) Change (Q on Q) 2Q Net Sales 618.3 661.3 +7.0% +43.0 Operating Income -28.7 3.5 - +32.3 (-4.7%) (0.5%) -33.9 -49.6 - -15.6 (-5.5%) (-7.5%) (margin) Net Income Attributable to Sharp Corporation (margin) 3 ・ This is the overview of consolidated financial results for the second quarter. ・ Net sales showed steady improvement, increasing by 43.0 billion yen over the previous quarter to 661.3 billion yen. ・ Operating income rebounded from an operating loss in the first quarter, improving by 32.3 billion yen to 3.5 billion yen. This was due to all product groups except Display Devices being in the black. ・ The net loss attributable to Sharp Corporation was 49.6 billion yen, due to factors including the implementation of structural reforms. Other Income (Expenses) (Billions of Yen) FY2014 FY2015 1H 1Q 2Q Difference (Y on Y) 1H 29.2 -28.7 3.5 -25.1 -54.3 -15.5 -1.5 -48.5 -50.0 -34.5 Equity in earnings of affiliates +4.0 +1.7 +1.3 +3.0 -0.9 Gain on sales of investment securities Reversal of provision for loss on litigation +5.9 +1.7 +0.0 +1.8 -4.1 +19.2 +2.0 - +2.0 -17.1 - +6.2 +0.8 +7.1 +7.1 Interest expense -11.8 -5.5 -4.4 -9.9 +1.8 Impairment loss -2.4 -6.5 -4.6 -11.1 -8.6 Restructuring charges -5.7 - -35.3 -35.3 -29.5 -14.3 - - - +14.3 Pretax Income 13.6 -30.3 -44.9 -75.2 -88.9 Income Taxes, etc. -8.9 -3.6 -4.7 -8.3 +0.5 4.7 -33.9 -49.6 -83.6 -88.3 Operating Income Other Income (Expenses) Receipt of settlement package Settlement Net Income Attributable to Sharp Corporation 4 ・ Here we look at Other Income and Expenses. ・ A reversal of provision for loss on litigation (resulting from discontinuance on the TFT LCD cartel case) and a receipt of settlement package (resulting from the CRT cartel cases) were calculated as other income. ・ As other expenses, the followings were recorded. 1. Restructuring charges for - voluntary retirement program in the Medium-Term Management Plan - structured reforms in the Americas LCD TV business - revamping of the production structure of electronic device business 2. An impairment loss that included production equipment and the building of overseas subsidiaries Sales by Product Group (Billions of Yen) FY2014 1H FY2015 1Q 2Q FY2015 1H Results (5/14) Forecast difference Change (Y on Y) (5/14) 1H Forecast Digital Information Equipment 211.8 70.3 96.9 167.3 -21.0% -2.6 170.0 Communications 119.5 56.8 60.8 117.6 -1.6% -2.3 120.0 Health and Environmental Equipment 162.8 74.7 75.8 150.5 -7.5% -14.4 165.0 Consumer Electronics 494.2 201.9 233.6 435.5 -11.9% -19.4 455.0 Energy Solutions 142.9 36.8 41.8 78.7 -44.9% -1.2 80.0 Business Solutions 165.9 80.6 91.7 172.3 +3.8% +7.3 165.0 803.1 319.4 367.1 686.6 -14.5% -13.3 700.0 Electronic Components and Devices 149.7 131.7 111.5 243.2 +62.4% +43.2 200.0 Display Devices 460.9 187.8 203.3 391.1 -15.1% -88.8 480.0 610.7 319.6 314.8 634.4 +3.9% -45.5 680.0 1,413.8 639.0 682.0 1,321.0 -6.6% -58.9 1,380.0 -86.1 -20.7 -20.6 -41.3 - +38.6 -80.0 1,327.6 618.3 661.3 1,279.6 -3.6% -20.3 1,300.0 Product Business Device Business Subtotal Adjustments Total *Sales of each product group include internal sales between segments (Product Business / Device Business) ・ Here are sales by product group. 5 Sales by Product Group (Billions of Yen) 600 Left bar ：1H FY2015 Forecast (5/14) Right bar：1H FY2015 Results 500 400 300 200 100 0 Digital Information Equipment Communications Health and Environmental Equipment Energy Solutions Business Solutions Electronic Components and Devices Display Devices *Sales of each product group include internal sales between segments (Product Business / Device Business) 6 Operating Income by Product Group (Billions of Yen) FY2014 1H Digital Information Equipment Communications Health and Environmental Equipment Consumer Electronics Energy Solutions Business Solutions Product Business Electronic Components and Devices Display Devices Device Business Subtotal Adjustments Total FY2015 1Q 2Q FY2015 1H Results 0.3 (0.2%) 7.1 (6.0%) 7.7 (4.8%) 15.2 (3.1%) -0.2 (-0.2%) 15.9 (9.6%) -17.3 (-24.7%) 4.9 (8.7%) 0.7 (1.0%) -11.7 (-5.8%) -3.9 (-10.7%) 6.8 (8.4%) 2.3 (2.4%) 5.5 (9.1%) 1.8 (2.4%) 9.7 (4.2%) 1.3 (3.2%) 9.9 (10.8%) -15.0 (-9.0%) 10.5 (8.9%) 2.5 (1.7%) -1.9 (-0.5%) -2.6 (-3.4%) 16.7 (9.7%) 30.9 (3.9%) -2.4 (-1.6%) 20.8 (4.5%) 18.3 (3.0%) 49.2 (3.5%) -20.0 29.2 (2.2%) -8.8 (-2.8%) 2.8 (2.2%) -13.7 (-7.3%) -10.8 (-3.4%) -19.7 (-3.1%) -9.0 -28.7 (-4.7%) 20.9 (5.7%) 5.1 (4.7%) -12.7 (-6.3%) -7.5 (-2.4%) 13.3 (2.0%) -9.7 3.5 (0.5%) 12.1 (1.8%) 8.0 (3.3%) -26.4 (-6.8%) -18.4 (-2.9%) -6.3 (-0.5%) -18.8 -25.1 (-2.0%) (5/14) Forecast difference Change (Y on Y) - -6.0 +46.1% +6.5 -67.3% -3.4 - -2.9 - -3.6 +5.2% +1.7 -60.8% -4.8 - +5.0 - -34.4 - -29.4 - -34.3 - -0.8 -35.1 (5/14) 1H Forecast -9.0 (-5.3%) 4.0 (3.3%) 6.0 (3.6%) 1.0 (0.2%) 1.0 (1.3%) 15.0 (9.1%) 17.0 (2.4%) 3.0 (1.5%) 8.0 (1.7%) 11.0 (1.6%) 28.0 (2.0%) -18.0 10.0 (0.8%) *Figures within parentheses indicate operating margin. ・ This shows the operating income by product group. ・ We will explain the details of the sales and operating income of each product group accordingly. 7 Operating Income by Product Group Left bar ：1H FY2015 Forecast (5/14) Right bar：1H FY2015 Results (Billions of Yen) 20 10 0 -10 -20 -30 Digital Information Equipment Communications Health and Environmental Equipment Energy Solutions Business Solutions Electronic Components and Devices Display Devices 8 Consolidated Balance Sheets • The equity ratio decreased from 12.3% at the end of June 2015 to 9.4% at the end of September 2015. (Billions of Yen) FY2014 FY2015 FY2014 End of Mar. 2015 End of Jun. 2015 End of Sep. 2015 Cash, time deposits and restricted cash 258.4 214.2 175.0 Notes and accounts receivable 605.6 557.1 574.2 Inventories 338.3 344.2 294.2 96.7 97.7 106.4 1,299.1 1,213.4 1,149.8 Plant and Equipment 400.5 390.9 377.1 Investments and Other Assets 262.0 265.5 259.8 Deferred Assets 0.0 0.0 0.0 1,961.9 1,869.9 1,787.0 Other current assets End of Jun. 2015 End of Sep. 2015 Short-term borrowings 848.9 661.5 666.4 Notes and accounts payable 468.0 422.3 422.7 Other current liabilities 369.9 326.1 324.9 1,686.9 1,410.0 1,414.1 230.4 216.8 191.9 1,917.3 1,626.8 1,606.1 44.5 243.0 180.9 1,961.9 1,869.9 1,787.0 1.5% 12.3% 9.4% Current Liabilities Current Assets Total Assets FY2015 End of Mar. 2015 Long-term Liabilities Liabilities Net Assets Total Liabilities and Net Assets Equity Ratio 9 ・ This slide shows the consolidated balance sheets. ・ Net assets at the end of September 2015 decreased by 62.1 billion yen from the end of June 2015 to 180.9 billion yen, due to restructuring charges, an impairment loss, and other factors. The equity ratio decreased from 12.3% to 9.4% from the end of June 2015. Transition of Inventories • Inventory was 294.2 billion yen, down 50 billion yen compared to the end of June 2015, and the ratio vs. monthly sales decreased from 1.67 months to 1.38 months during the same period. (Months) (Billions of Yen) 600 1.80 1.67 Ratio vs. monthly sales 1.39 1.46 1.38 1.21 400 295.1 307.5 338.3 1.20 344.2 294.2 0.60 200 LCDs 0.00 0 End of Mar. 2014 End of Sep. 2014 End of Mar. 2015 End of Jun. 2015 End of Sept. 2015 10 ・ This slide shows transition of inventories. ・ Inventories at the end of September 2015 decreased by 50.0 billion yen from the end of June 2015 to 294.2 billion yen due to efforts in inventory reduction. The ratio vs. monthly sales decreased by 0.29 months, reaching an equivalent level to the same period of last year. ・ LCD inventories are gradually decreasing due to efforts to optimize stock levels. Transition of Interest-Bearing Debt • Interest-bearing debt at the end of September 2015 declined by 15.9 billion yen, in comparison to the end of June 2015. The ratio vs. monthly sales decreased from 3.76 months to 3.56 months. • Net interest-bearing debt* increased from 560.4 billion yen at end of June 2015 to 583.6 billion yen. (Months) (Billions of Yen) 1,127.1 1,000 931.8 1,174.4 988.0 982.4 Interest-bearing debt on the ratio vs. monthly sales 713.9 5.51 500 Left bar: Interest-bearing debt Right bar: Net interest-bearing debt 1,093.5 696.6 974.2 715.7 8.00 774.6 560.4 5.69 4.48 4.47 758.7 583.6 4.00 4.20 3.76 3.56 End of Jun. 2015 End of Sept. 2015 0 Net D/E ratio 0.00 End of Mar. 2012 End of Mar. 2013 End of Mar. 2014 End of Sept. 2014 End of Mar. 2015 1.5 7.9 3.7 3.1 23.7 2.4 3.5 *Net interest-bearing debt: interest-bearing debt – cash, time deposits, and restricted cash ・ This is the transition of interest-bearing debt. ・ Interest-bearing debt at the end of September 2015 was 758.7 billion yen, a decrease of 15.9 billion yen compared to the end of June 2015. The net interest-bearing debt increased by 23.2 billion yen to 583.6 billion yen. ・ In the second quarter, the net interest-bearing debt increased due to a decrease in cash and cash equivalents despite efforts to reduce inventories. ・ Through continuous optimization of inventories and a decrease in capital investment, we will pursue improvement to our cash flow. 11 Implementation Status of Medium-Term Management Plan Implementation of the three key strategies announced in the Medium-Term Management Plan is currently making steady progress. Medium-Term Management Plan Three Key Strategies Current Implementation Status Withdrew from TV production/sales; shifting to brand license business in the Americas Ⅰ Restructure business portfolio Review of the production structure of the electronic device business Fundamental restructuring of LCD business Voluntary retirement program (3,234 employees) Ⅱ Reduce fixed costs Concluding a contract for sales transfer of the head office Continue to cut remunerations/salaries and bonuses of board of directors and employees Transition to virtual company system from October 1, 2015 Ⅲ Reorganize and strengthen corporate/governance systems Revamp management structure and expand number of outside directors Fundamental restructuring of personnel system (flat & simple organization) 12 ・ As shown, here are the three key strategies of our recently announced Medium-Term Management Plan. We have been implementing them according to the planned schedule. ・ Newly initiated efforts include 1. review of the production structure of the Electronic Components and Devices businesses 2. fundamental structural reforms of the LCD business in response to rapid market changes. We will continue to take decisive action in these areas. Ⅱ. Financial Results Forecast for Fiscal 2015 13 Financial Results Forecast for Fiscal 2015 • Based on the first half results, the current situation, and future estimates, we announced a revised Fiscal year forecast on October 26, 2015. • Sharp Group intends to announce the forecast for net income (loss) attributable to Sharp Corporation once it becomes possible to make a reasonable estimate of the impact on consolidated financial statements of the materialization of structural reforms currently under consideration or in progress. (Billions of Yen) FY2015 1H Results Net Sales Operating Income (margin) 2H Forecast Fiscal Year Forecast Change (Y on Y) 1,279.6 1,420.3 2,700.0 -3.1% -25.1 35.1 10.0 - (-2.0%) (2.5%) (0.4%) 14 ・ This is the forecast for fiscal 2015. ・ We announced a revised fiscal year forecast on October 26, 2015 based on the first half results, the current situation, and future estimates. ・ The Sharp Group intends to announce the forecast for net income (loss) attributable to Sharp Corporation once it becomes possible to make a reasonable estimate of the impact on consolidated financial statements of the materialization of structural reforms currently under consideration or in progress. Sales Forecast by Product Group (Billions of Yen) FY2015 1H Results 2H Forecast FY2015 Fiscal Year Forecast Change (Y on Y) Forecast Difference (5/14) Fiscal Year Forecast (5/14) Digital Information Equipment 167.3 172.6 340.0 -18.6% -30.0 370.0 Communications 117.6 92.3 210.0 -15.9% -30.0 240.0 Health and Environmental Equipment 150.5 169.4 320.0 +1.6% -20.0 340.0 435.5 434.4 870.0 -11.4% -80.0 950.0 78.7 101.2 180.0 -33.5% 0.0 180.0 172.3 177.6 350.0 +1.9% 0.0 350.0 686.6 713.3 1,400.0 -12.3% -80.0 1,480.0 Electronic Components and Devices 243.2 286.7 530.0 +20.1% +50.0 480.0 Display Devices 391.1 478.8 870.0 -4.1% -130.0 1,000.0 634.4 765.5 1,400.0 +3.8% -80.0 1,480.0 1,321.0 1,478.9 2,800.0 -4.9% -160.0 2,960.0 -41.3 -58.6 -100.0 - +60.0 -160.0 1,279.6 1,420.3 2,700.0 -3.1% -100.0 2,800.0 Consumer Electronics Energy Solutions Business Solutions Product Business Device Business Subtotal Adjustments Total *Sales of each product group include internal sales between segments (Product Business / Device Business) ・ This shows the forecast sales by product group. ・ We have made a downward revision in the forecast for Consumer Electronics and Display Devices, and an upward revision for Electronic Components and Devices. 15 Sales Forecast by Product Group (Billions of Yen) 1,200 Left bar: FY2015 Forecast (5/14) Right bar: FY2015 Revised Forecast 1,000 800 600 400 200 0 Digital Information Equipment Communications Health and Environmental Equipment Energy Solutions Business Solutions Electronic Components and Devices Display Devices *Sales of each product group include internal sales between segments (Product Business / Device Business) 16 Operating Income Forecast by Product Group (Billions of Yen) FY2015 1H Results Digital Information Equipment Communications Health and Environmental Equipment Consumer Electronics Energy Solutions Business Solutions Product Business Electronic Components and Devices Display Devices Device Business Subtotal Adjustments Total -15.0 (-9.0%) 10.5 (8.9%) 2.5 (1.7%) -1.9 (-0.5%) -2.6 (-3.4%) 16.7 (9.7%) 12.1 (1.8%) 8.0 (3.3%) -26.4 (-6.8%) -18.4 (-2.9%) -6.3 (-0.5%) -18.8 -25.1 (-2.0%) 2H Forecast 2.0 (1.2%) 4.4 (4.9%) 11.4 (6.8%) 17.9 (4.1%) 5.6 (5.6%) 19.2 (10.8%) 42.8 (6.0%) 9.9 (3.5%) -3.5 (-0.7%) 6.4 (0.8%) 49.3 (3.3%) -14.1 35.1 (2.5%) FY2015 Fiscal Year Forecast -13.0 (-3.8%) 15.0 (7.1%) 14.0 (4.4%) 16.0 (1.8%) 3.0 (1.7%) 36.0 (10.3%) 55.0 (3.9%) 18.0 (3.4%) -30.0 (-3.4%) -12.0 (-0.9%) 43.0 (1.5%) -33.0 10.0 (0.4%) Forecast difference (5/14) Change (Y on Y) - -10.0 -4.8% +4.0 -12.1% 0.0 -16.2% -6.0 - -2.0 +15.0% +3.0 - -5.0 26.6 -fold +8.0 - -75.0 - -67.0 - -72.0 - +2.0 -70.0 Fiscal Year Forecast (5/14) -3.0 (-0.8%) 11.0 (4.6%) 14.0 (4.1%) 22.0 (2.3%) 5.0 (2.8%) 33.0 (9.4%) 60.0 (4.1%) 10.0 (2.1%) 45.0 (4.5%) 55.0 (3.7%) 115.0 (3.9%) -35.0 80.0 (2.9%) *Figures within parentheses indicate operating margin. ・ As you see here, we have revised the forecast for operating income by product group, considering first half results and sales forecast revisions, and by factoring in various risks and measures. ・ We will explain the details of the sales and operating income of each product group accordingly. 17 Operating Income Forecast by Product Group (Billions of Yen) 50 40 Left bar: FY2015 Forecast (5/14) Right bar: FY2015 Revised Forecast 30 20 10 0 -10 -20 -30 Digital Information Equipment Communications Health and Environmental Equipment Energy Solutions Business Solutions Electronic Components and Devices Display Devices 18 Analysis of Difference in Operating Income for Fiscal 2015 (May 14 Forecast vs. Revised Forecast) (Billions of Yen) 100 80 80.0 Sales decline -50.0 60 40 20 0 -20 -40 10.0 Fiscal 2015 Forecast (5/14) Selling price down -75.0 Variable cost reduction +35.0 Fixed cost reduction etc. +20.0 Revised Fiscal 2015 Forecast -60 19 • This graph shows the difference between the operating income forecast that was announced at the beginning of the fiscal year and the revised operating income forecast. • The discrepancies in earnings targets and results for the first half of the fiscal year were mainly due to the decline in sales of smartphone LCDs and the selling price fall from intensified competition in the Chinese market. These were far beyond our expectations. • In light of drastic changes in the business environment, we have made revisions to our forecasts. Our review covers all product groups, taking into consideration various risks, such as declines in sales and selling prices. • Much of the decline in Sharp’s profits is attributed to Display Devices. Hence, the revised figures factor in various risks accordingly. Ⅲ. Information by Product Group 20 • Next, we will explain the details by product group. Introduction to Virtual Company System and Vision ・Effective from October 1, 2015, Sharp has shifted to virtual company system accelerating the expansion speed of each businesses. Company Vision Consumer Electronics Innovation by fusions of technology in Japan and Asia as the main market Current Measures & Achievements • New products combining AI and IoT (RoBoHoN, “TOMODACHI KADEN “ friend appliance concept) • Market share expansion of the 4K TV in Japanese market • Creating Sharp one-of-a-kind new products (Healsio Hot Cook, S-style*, etc.) *new stylish air purifier product • Strengthen the foundation of solutions business (development of DC air conditioner, sales expansion of storage batteries) • Establishment of a new company to expand EPC business in Thailand • Strengthen the residential solar business in Japan (commercialize solar cell module that achieves 19% conversion efficiency—the industry‘s best in class) Energy Solutions Shift to local fit solution business Business Solutions Utilization of current product line-up and customer basis & Global solution business expansion with proactive investment increase • Steady expansion of current businesses (model change of full-color MFPs for first time in three years) • Strategic expansion of BIG PAD into the education market (sales to Ritsumeikan University) • Robotics business expansion as a key segment (security, concierge, commercial vacuum cleaners, etc.) Electric Components and Devices Shift to value-added segment centered by sensing business • Steady expansion of camera module business (up 92% over same period last year) • Improved competitiveness via shift to high-value-added fields –Initiate sales of Sharp’s color night-vision camera in high-potential fields –Release of line-up of new sensor products for detecting dust, PM2.5, and environmental factors Display Devices Gaining stable customers by utilizing the technology advantage and expansion of high-value-added panels • On road to increased sales in the PC field, tapping new major smartphone customers • Reduce fluctuating expenses by revamping procurement and by revamping system for design and product promotion to customers • Expansion of high-value-added panels (announcement of see-through display, curved FreeForm Display, joint development with U.S. company Kymeta of satellite antennas, etc.) 21 • On October 1, we started operation under a new virtual company system. • As the direction mentioned in our Medium-Term Management Plan, we are in the process of restructuring our business portfolio and making steady achievements. Consumer Electronics (Billions of Yen) FY2015 Change (Y on Y) 1H 2H Forecast FY2015 Change (Y on Y) Fiscal Year Forecast 5/14 Forecast Change (Y on Y) 1H 2H Fiscal Year 435.5 -11.9% 434.4 -11.0% 870.0 -11.4% 455.0 495.0 950.0 Digital Information Equipment 167.3 -21.0% 172.6 -16.1% 340.0 -18.6% 170.0 200.0 370.0 Communications 117.6 -1.6% 92.3 -29.1% 210.0 -15.9% 120.0 120.0 240.0 150.5 -7.5% 169.4 +11.3% 320.0 +1.6% 165.0 175.0 340.0 -1.9 (-0.5%) - 17.9 (4.1%) 4.7-fold 16.0 (1.8%) -16.2% 1.0 (0.2%) 21.0 (4.2%) 22.0 (2.3%) -15.0 - 2.0 - -13.0 - -9.0 6.0 -3.0 10.5 +46.1% 4.4 -47.5% 15.0 -4.8% 4.0 7.0 11.0 2.5 -67.3% 11.4 +40.3% 14.0 -12.1% 6.0 8.0 14.0 Sales Health and Environmental Equipment Operating Income (margin) Digital Information Equipment Communications Health and Environmental Equipment *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 11.9% decrease • Operating income: 17.2 billion yen decrease Current Measures & Achievements FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: Downturn by 80 billion yen • Operating income: Downturn by 6 billion yen • New products combining AI and IoT (RoBoHoN, “TOMODACHI KADEN “ friend appliance concept) • Market share expansion of the 4K TV in Japanese market *new stylish air purifier product • Creating Sharp one-of-a-kind new products (Healsio Hot Cook, S-style*, etc.) 22 • First, we will look at Consumer Electronics. This group was formed by integrating and reorganizing the Digital Information Equipment, Communications, and Health and Environmental Equipment divisions. • The purpose of establishing the Consumer Electronics Company is to make the most of Sharp’s unique strengths as a corporation engaged in the television, communications, and home appliances businesses. Furthermore, through user oriented perspectives, we aim for creative products through a fusion of the consumer electronics and communications segments. • As a start, in October this year, we launched a totally new consumer electronics that integrate AI and IoT. That is the robot smartphone, “RoBoHoN,” unveiled at CEATEC Japan. • We plan further product innovations, especially focusing on the Japanese and Asian markets. We also plan to find an optimal location for manufacturing operations in Asia and elsewhere. (Consumer Electronics) Digital Information Equipment (Billions of Yen) FY2015 1H Sales LCD TVs Operating Income (margin) Change (Y on Y) 2H Forecast FY2015 Change (Y on Y) Fiscal Year Forecast 5/14 Forecast Change (Y on Y) 1H 2H Fiscal Year 167.3 -21.0% 172.6 -16.1% 340.0 -18.6% 170.0 200.0 370.0 154.6 -18.2% 155.3 -14.1% 310.0 -8.1% 160.0 180.0 340.0 -15.0 - 2.0 - -13.0 - -9.0 6.0 -3.0 (-5.3%) (3.0%) (-0.8%) (-9.0%) (1.2%) (-3.8%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 21.0% decrease • Operating income: 15.3 billion yen decrease FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: Downturn by 30 billion yen • Operating Income: Downturn by 10 billion yen 23 • Here are the figures for Digital Information Equipment. • In Japan, sales of LCD TVs showed growth. Nevertheless, overall sales in all regions were down compared to the same period last year, owing to factors such as the deceleration in the Chinese economy. • Operating income turned out to be below our forecast of the fiscal year top, due to aggressive structural reforms including measures towards channel inventories in China. However, for the second quarter, we were able to return to profitability and were back in the black. • For the LCD TV business, we are continuing our expansion of high-value-added models, for example, by augmenting our 4K TV lineup. As a result, our share of the 4K TV market in Japan has grown considerably. We will deploy the high-value-added model strategy for overseas markets as well, focusing on Asia. • For the fiscal year forecast, we have revised both sales and operating loss. （Consumer Electronics） Digital Information Equipment FY2015 2H Analysis of Difference in Operating Income (1H Results and 2H Forecast） (Billions of Yen) 10 0 FY2015 1H Results 2.0 Fixed cost reduction etc. +9.0 -10 -15.0 -20 Sales increase +3.3 Selling price down -10.5 FY2015 2H Forecast Variable cost reduction +15.2 -30 24 • We have revised the operating income for the second half of the fiscal year, taking into account factors such as the prolonged stagnation of the Chinese economy and intensifying price competition. • We will strive for a profit improvement of 17.0 billion yen in comparison with results for the first half of the fiscal year, and form a stable earnings structure. These are to be achieved by increasing sales of LCD TVs in the Japanese market, by reducing costs through structural reforms, and through other efforts, while also considering selling price falls from intensifying price competition. （Consumer Electronics） Communications (Billions of Yen) FY2015 Change (Y on Y) 1H Sales Mobile phones Operating Income (margin) 2H Forecast FY2015 Change (Y on Y) Fiscal Year Forecast Change (Y on Y) 5/14 Forecast 1H 2H Fiscal Year 117.6 -1.6% 92.3 -29.1% 210.0 -15.9% 120.0 120.0 240.0 83.5 -2.8% 76.4 -29.0% 160.0 -17.4% 96.2 98.8 195.0 10.5 +46.1% 4.4 -47.5% 15.0 -4.8% 4.0 7.0 11.0 (3.3%) (5.8%) (4.6%) (8.9%) (4.9%) (7.1%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 1.6% decrease • Operating income: 46.1% increase FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: Downturn by 30 billion yen • Operating income: Upturn by 4 billion yen 25 • The first half of the fiscal year saw a decrease in sales due to the decline in mobile phone sales. Operating income, on the other hand, was up 46.1% due to efforts in cost reduction. We therefore secured an operating income margin of 8.9%. • In the mobile phone business, we plan to differentiate our products from market competitors by releasing models with enhanced design and specs. Some examples are models equipped with Sharp’s unique “Emopa” feature and models with higher-spec cameras and displays. We will also provide next-generation featured models to multiple carriers as well as expand our lineup of MVNO phones. • For the fiscal year sales forecast, we have revised it downward, taking into account the intensifying competition in the Japanese mobile phone market. Meanwhile, operating income has been revised upward, reflecting results for the first half of the fiscal year and the launch of new businesses. （Consumer Electronics） Health and Environmental Equipment (Billions of Yen) FY2015 Change (Y on Y) 1H Sales Operating Income (margin) 2H Forecast Change (Y on Y) FY2015 Fiscal Year Forecast Change (Y on Y) 5/14 Forecast 1H 2H Fiscal Year 150.5 -7.5% 169.4 +11.3% 320.0 +1.6% 165.0 175.0 340.0 2.5 -67.3% 11.4 +40.3% 14.0 -12.1% 6.0 8.0 14.0 (3.6%) (4.6%) (4.1%) (1.7%) (6.8%) (4.4%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 7.5% decrease • Operating income: 67.3% decrease FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: Downturn by 20 billion yen • Operating income: No change 26 • Next is Health and Environmental Equipment. • The first half of the fiscal year saw a decrease in sales due to sluggish sales of seasonal products in the Japanese market and a shrinking of demand for air purifiers in China. Also, worsening earnings from domestic sales—caused by a weak yen—led to decreased sales and profit. • We have revised the fiscal year sales forecast downward, reflecting results for the first half of the fiscal year. The operating income forecast remains as previously announced, taking into account a recovery in earnings in the second half. This recovery will be possible due to the launch of new category products such as the Healsio Hot Cook electric waterless cooker, by expanding sales of air purifiers and other PCI products, improvements in the product model mix, further cost reductions, and the effects of structural reforms. （Consumer Electronics） Health and Environmental Equipment (Billions of Yen) FY2015 2H Analysis of Difference in Operating Income （1H Results and 2H Forecast） 15 Fixed cost reduction etc. 11.4 +0.7 10 Selling price down Sales increase 5 -1.7 Variable cost reduction +4.7 +5.2 2.5 0 FY2015 1H Results FY2015 2H Forecast 27 • In comparing first-half operating income results to our forecast for second-half operating income, we are aiming for an increase in operating income of 9.0 billion yen compared to the first half of the fiscal year. As explained earlier, this will become achievable through the launch of new products, expanded sales of PCI products, and cost reductions. Energy Solutions (Billions of Yen) FY2015 Change 2H Forecast (Y on Y) 1H FY2015 Change (Y on Y) Fiscal Year Forecast 5/14 Forecast Change (Y on Y) 1H 2H Fiscal Year Sales 78.7 -44.9% 101.2 -20.8% 180.0 -33.5% 80.0 100.0 180.0 Operating Income -2.6 - 5.6 - 3.0 - 1.0 4.0 5.0 (1.3%) (4.0%) (2.8%) (margin) (-3.4%) (5.6%) (1.7%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 44.9% decrease • Operating income: 2.3 billion yen decrease Current Measures & Achievements FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: No change • Operating income: Downturn by 2 billion yen • Strengthen the foundation of solutions business (development of DC air conditioner, sales expansion of storage batteries) • Establishment of a new company to expand EPC business in Thailand • Strengthen the residential solar business in Japan (commercialize solar cell module that achieves 19% conversion efficiency—the industry‘s best in class) 28 • Sales were down due to factors such as reviews of the business portfolio and aggressive structural reforms. The latter includes the sell off of Sharp’s subsidiary (solar power generation developer) in the US during the previous fiscal year. • Operating income was in the red for the first half of the fiscal year, owing to a revaluation of the polysilicon price. In the second quarter, we returned to profitability as a positive effect of structural reforms including a review of the supply chain. • Against this backdrop, we are heading towards expansion of Energy Solutions in Japan by increasing sales of storage cells, by developing the DC air conditioner, and through other efforts. We will also work to expand Energy Solutions through further localization—for example, by establishing a new subsidiary in Thailand for developing the EPC business in Asia. • As for the fiscal year forecast, we have revised the figure for operating income. Business Solutions (Billions of Yen) FY2015 Change (Y on Y) 1H Sales Operating Income (margin) 2H Forecast FY2015 Change (Y on Y) Fiscal Year Forecast Change (Y on Y) 5/14 Forecast 1H 2H Fiscal Year 172.3 +3.8% 177.6 +0.2% 350.0 +1.9% 165.0 185.0 350.0 16.7 +5.2% 19.2 +25.2% 36.0 +15.0% 15.0 18.0 33.0 (9.1%) (9.7%) (9.4%) (9.7%) (10.8%) (10.3%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 3.8% increase • Operating income: 5.2% increase Current Measures & Achievements FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: No change • Operating income: Upturn by 3 billion yen • Steady expansion of current businesses (model change of full-color MFPs for first time in three years) • Strategic expansion of BIG PAD into the education market (sales to Ritsumeikan University) • Robotics business expansion as a key segment (security, concierge, commercial vacuum cleaners, etc.) 29 ・ For Business Solutions, sales increased by 3.8% over the same period last year due to enhanced sales of color MFPs overseas. ・ Operating income was up by 5.2% over the same period last year owing to factors including model mix improvements. We achieved an operating income margin of 9.7%. ・ We are embarking on several strategies; for example, sales ratio improvements of color MFPs, which underwent the first model change in three years, boosting solutions sales, and launching IT services. We are also executing new businesses, such as robotics, that are expected to drive our future growth. ・ Overall, we have upwardly revised the fiscal year forecast for operating income due to an improved outlook in the model mix resulting from the release of new models. Electronic Components and Devices (Billions of Yen) FY2015 Change (Y on Y) 1H Sales Operating Income (margin) 2H Forecast FY2015 Change (Y on Y) Fiscal Year Forecast Change (Y on Y) 5/14 Forecast 1H 2H Fiscal Year 243.2 +62.4% 286.7 -1.7% 530.0 +20.1% 200.0 280.0 480.0 8.0 - 9.9 3.2-fold 18.0 26.6-fold 3.0 7.0 10.0 (1.5%) (2.5%) (2.1%) (3.3%) (3.5%) (3.4%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 62.4% increase • Operating income: 10.4 billion yen increase Current Measures & Achievements FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: Upturn by 50 billion yen • Operating income: Upturn by 8 billion yen • Steady expansion of camera module business (up 92% over same period last year) • Improved competitiveness via shift to high-value-added fields –Initiate sales of Sharp’s color night-vision camera in high-potential fields –Release of line-up of new sensor products for detecting dust, PM2.5, and environmental factors 30 • Sales increased by 62.4% in comparison to the same period last year owing to the remarkable growth in camera modules for mobile devices. • Operating income was in the black, with an increase of 10.4 billion yen over the same period last year. This was due to sales expansion and to the effects of structural reforms and cost reductions. • Shifting our business focus to high-value-added areas, as announced in our Medium-Term Management Plan, we are gaining solid results the fields of in security, night-vision, and in-vehicle cameras, in dust detectors, and in PM2.5 detectors. This was achieved through design-in and aggressive sales expansion activities. • We will continue expanding our existing businesses and accelerating the shift from the device business to the solutions business, which is a growth area. By downsizing our assets, we will focus and consolidate our businesses segments, thus enhancing competitiveness. • As for fiscal year forecasts, we have upwardly revised both sales and operating income, in anticipation of positive sales of camera modules and increased sales of high-value-added modules. Display Devices (Billions of Yen) FY2015 1H Sales Operating Income (margin) Change (Y on Y) 2H Forecast FY2015 Change (Y on Y) Fiscal Year Forecast 5/14 Forecast Change (Y on Y) 1H 2H Fiscal Year 391.1 -15.1% 478.8 +7.3% 870.0 -4.1% 480.0 520.0 1,000.0 -26.4 - -3.5 - -30.0 - 8.0 37.0 45.0 (1.7%) (7.1%) (4.5%) (-6.8%) (-0.7%) (-3.4%) *Sales of each product group include internal sales between segments (Product Business / Device Business) FY2015 1H Results (Y on Y) • Sales: 15.1% decrease • Operating income: 47.3 billion yen decrease Current Measures & Achievements FY2015 Fiscal Year Forecast (Against May 14 Forecast) • Sales: Downturn by 130 billion yen • Operating income: Downturn by 75 billion yen • On road to increased sales in the PC field, tapping new major smartphone customers • Reduce fluctuating expenses by revamping procurement and by revamping system for design and product promotion to customers • Expansion of high-value-added panels (announcement of see-through display, curved Free-Form Display, joint development with U.S. company Kymeta of satellite antennas, etc.) 31 ・ Finally, let’s look at Display Devices. ・ Revenue and profit decreased significantly: sales of small- and medium-size LCDs for Chinese market smartphones declined, and intensifying competition led to price falls. ・ Although significant revenue and profit increases are expected in the second half of the fiscal year, we have downwardly revised the fiscal year forecast for sales and operating income considering the future market environment and various risk factors. Display Devices Factors in Discrepancy between Operating Income Target and Results in 1H FY2015 & Measures to Improve Earnings in 2H Inadequate product appeal and cost competitiveness Decrease in sales of Smartphone LCDs Factors in Discrepancy between Operating Income Targets and Results in 1H Measures to Improve Earnings in 2H • Changes in Chinese smartphone market – Delay in response towards the deceleration of growth and intensifying price competition • Break away from omnidirectional customer strategy – Rearrange customer portfolio by focusing resources on priority customers – Strengthen user support system centered on new local sales company in Shenzhen (dedicated support system for each priority customers) (Developed Number of Models : 1.8 times vs 1H) • Changes in target customers’ market position – Failed to foresee the trend shift to mid- to low-end • Shift to high-value-added areas centered on mid-size displays, such as those for notebook PCs and industrial appliances – Enhancing the line-up of high-resolution, narrow-bezel, low-powerconsumption models (Mid-size LCDs Sales : 1.6 times vs 1H) (Market share increase for Note PC / Tablets : 1H 14%→2H 25%) • Inability to stay cost competitive amid drastic decreases in selling price led to decrease in share • Delay in support system set up for the launch of in-cell touchscreen business • Implement thorough structural reforms related to costs across entire supply chain – Reduce material costs and processing costs through strategic development and procurement – Implement joint cost-reduction projects with priority users – Strengthen support system for in-cell customers in joint effort with manufacturers of touchscreen controllers (Number of In-cell display equipped models : 4 times vs 1H) 32 • Here are outlined the main factors in the discrepancy between our operating income targets and results, along with our measures for earning improvements. • The main factors of discrepancy in the first half of the fiscal year for Display Devices were the sales decline of smartphone LCDs, inadequate product appeal, and cost competitiveness. • Measures to improve earnings in the second half of the fiscal year include focusing resources on priority users segments and enhancing the user support system. We will also shift to high-value-added medium-size LCDs. In addition, we will execute structural reforms and cost innovations across the entire supply chain, as explained in our Medium-Term Management Plan. Display Devices FY2015 2H Analysis of Difference in Operating Income (1H Results and 2H Forecast) (Billions of Yen) 10 0 FY2015 2H Forecast FY2015 1H Results Fixed cost reduction etc. +6.3 -10 Sales increase +20.6 -20 Selling price down -25.3 -30 -3.5 Variable cost reduction +21.2 -26.4 33 • We foresee the tough business environment continuing in the second half of the fiscal year, as we anticipate a major decline in selling prices, intensifying competition, and other factors. By adopting the aforementioned measures, we aim to achieve an increase in operating income of 23.0 billion yen compared to the first half of the fiscal year. • Display Devices was the major factor in the discrepancy between the fiscal beginning forecast and the revised forecast of the fiscal year. We will strive to create a solid earnings structure by harnessing our technological advantages to establish a stable customer base and expand in sales of high-value-added LCDs. Ⅳ. Supplementary Data 34 • As supplementary data, we have prepared material on sales of main products, capital investment, depreciation, and other results. • Though Sharp has recovered in the second quarter compared to the first quarter, our financial results fell from our forecast at the beginning of the fiscal year. • We acknowledge that Sharp is still in a tough situation. Therefore, we will speed up the progress of our various structural reforms and take every possible action to achieve the revised fiscal year targets. • Thank you very much. Sales of Main Products (Billions of Yen) FY2014 1H LCD TVs Fiscal Year 2H FY2015 2H Fiscal Year Change Forecast Forecast (Y on Y) 1H 189.1 180.8 370.0 154.6 155.3 310.0 -16.2% 3.60 3.43 7.03 2.99 2.90 5.90 -16.2% 85.9 107.6 193.6 83.5 76.4 160.0 -17.4% 2.41 3.15 5.56 2.26 1.73 4.00 -28.1% Refrigerators 47.9 45.6 93.5 48.2 48.7 97.0 +3.7% Air Conditioners 42.1 21.3 63.5 36.0 27.9 64.0 +0.7% Copiers / Printers 73.4 78.5 152.0 78.2 81.7 160.0 +5.2% 103.5 235.5 339.1 198.9 231.0 430.0 +26.8% Unit (million units) Mobile Phones Unit (million units) CCD / CMOS Imagers 35 Sales of Main Products by Quarter (Billions of Yen) FY2014 1Q 2Q FY2015 3Q 4Q 1Q 2Q 85.7 103.3 104.3 76.5 64.1 90.5 1.73 1.86 1.74 1.68 1.41 1.58 49.6 36.2 64.1 43.5 44.1 39.4 1.23 1.17 1.79 1.35 1.01 1.25 Refrigerators 23.9 24.0 22.1 23.4 23.0 25.1 Air Conditioners 23.6 18.4 8.0 13.3 20.6 15.3 Copiers / Printers 34.3 39.1 38.2 40.3 37.2 40.9 CCD / CMOS Imagers 38.8 64.7 129.3 106.2 110.8 88.0 LCD TVs Unit (million units) Mobile Phones Unit (million units) 36 Capital Investment and Depreciation, etc. (Billions of Yen) FY2014 1H FY2015 2H 1H Fiscal Year 2H Forecast Fiscal Year Forecast Change (Y on Y) Capital Investment 31.2 31.3 62.6 20.9 39.0 60.0 -4.2% LCDs 12.9 19.0 31.9 8.9 19.0 28.0 -12.4% 49.9 52.6 102.6 33.7 46.2 80.0 -22.0% 65.8 75.1 141.0 68.6 71.3 140.0 -0.7% Depreciation and Amortization R&D Expenditures (Yen) Exchange Rate FY2015 FY2014 1H 2H 1H Fiscal Year 2H Forecast US Dollar 102.05 115.83 108.94 120.80 120.00 Euro 137.41 137.14 137.28 133.57 135.00 37 Capital Investment and Depreciation, etc. by Quarter (Billions of Yen) FY2014 1Q Capital Investment LCDs Depreciation and Amortization R&D Expenditures 2Q FY2015 3Q 1Q 4Q 2Q 14.5 16.6 9.3 22.0 9.7 11.1 5.7 7.1 4.3 14.7 3.8 5.1 24.4 25.5 26.5 26.0 18.0 15.7 34.4 31.4 38.1 37.0 36.3 32.3 (Yen) Exchange Rate FY2014 FY2015 1Q 2Q 3Q US Dollar 101.16 102.93 113.55 Euro 138.56 136.26 141.59 1Q 2Q 118.10 120.37 121.24 132.68 132.66 134.48 4Q 38 Overseas Sales by Region Top: Sales (Billions of yen) Bottom : Composition ratio (%) FY2014 1H 2H FY2015 Fiscal Year 1H 165.6 19.9% 155.2 15.8% 320.9 17.7% 160.0 18.0% 71.4 8.6% 71.0 7.2% 142.5 7.8% 69.9 7.8% China 487.8 58.6% 653.0 66.3% 1,140.8 62.8% 554.3 62.2% Other 107.7 12.9% 105.6 10.7% 213.4 11.7% 106.4 12.0% Total 832.7 100.0% 985.1 100.0% 1,817.8 100.0% 890.7 100.0% The Americas Europe 39