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• Q & A Session Archives FY2011
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FAQ:Q & A Session Archives FY2011

FY2011 Q3 Results Announcement - January 31, 2012

Q1. Please tell us the key points in the consolidated results for the first nine months and the third quarter.

In the first nine months of FY2011, consolidated net sales decreased due to a sharp yen appreciation, sluggish markets, particularly in Europe and the United States, the impact of the earthquake in Japan and the flooding in Thailand, resulting in net sales of 4,353.9 billion yen, 315.7 billion yen lower on a year-on-year basis. In terms of operating income, the Social Infrastructure segment maintained the same level of results as in the same period last year, and the Home Appliances segment managed to increase profit. However, the Digital Products and Electronic Devices segments recorded lower operating income. This resulted in overall operating income of 90.8 billion yen, 51.5 billion yen lower on a year-on-year basis. In the third quarter, overall net sales and operating income were both lower on a year-on-year basis. However, the Social Infrastructure segment recorded higher sales and higher operating income, and the Electronic Devices segment also recorded higher operating income.

Q2. What are the reasons for revision of the full year projections for FY2011?

Businesses of Toshiba Group have been influenced greatly by changes in the business environment, including the progress of sharp yen appreciation, the impact of the flooding in Thailand and deterioration in markets due to financial uncertainty in some European countries. As a result, the full-year forecast for net sales has been revised to 6,200 billion yen (198.5 billion yen lower than for the year prior period) and operating income has been revised to 200 billion yen (40.3 billion yen less than for the year prior period). A change in the corporation tax law requires us to bear a lump-sum tax expense increase of 36.5 billion yen and, after factoring this in, the forecast for net income has been revised to 65.0 billion yen (72.8 billion yen lower than for the year prior period). Digital Products, such as TVs, are expected to record lower sales and lower income than in the same period last year. On the other hand, Social Infrastructure is expected to see higher sales and higher income on a year-on-year basis and to secure a high profit level. The Home Appliances segment is also expected to record higher operating income.

Q3. The results from the first nine months for the semiconductor business saw lower sales and operating income than for the same period last year. What are the reasons for that and how is the outlook?

In terms of net sales in the semiconductor business, the Memory business recorded lower sales due to the impact of the yen appreciation and lower prices. System LSI and Discretes also saw lower sales than for the same period last year, mainly as a result of lower demand. In respect of operating income, the semiconductor business as a whole recorded lower results on a year-on-year basis, since the Memory business suffered from the impact of lower prices and yen appreciation, while the System LSI and Discrete businesses experienced lower demand. For the full year, we forecast net sales of 980 billion yen and operating income of 50 billion yen. In FY2012 and beyond, we will aim to secure an even higher level of profitability.

Q4. How were the Social Infrastructure segment results for the first nine months and what are your forecasts for the full year?

In terms of sales, Thermal & Hydro Power Systems continued to see a healthy performance and sales were raised by the acquisition of Landis+Gyr AG, leading to the segment as a whole recording increased sales. In terms of operating income, Thermal and Hydro Power Systems performed well, with the acquisition of Landis+Gyr AG having a positive impact, and the IT Solutions and Medical Systems businesses saw increased profit. However, due to reduced profit in Transmission and Distribution Systems, the segment as a whole secured the same level of operating income as for the same period last year. For the full year, we forecast higher sales and higher operating income on a year-on-year basis, with net sales of 2,470 billion yen and operating income of 140 billion yen.

Q5. How did the Digital Products segment and the Home Appliances segment perform?

The Digital Products segment saw lower overall sales, reflecting the impact of yen appreciation, sluggish sales of PCs in Europe and the United States and price erosion and lower demand for LCD TVs in Japan and other markets. Operating income was higher in PCs, but the impacts of price erosion and lower demand for LCD TVs, mainly in Japan on completion of the transition to digital terrestrial broadcasting, brought the segment into the red. On the other hand, white goods saw lower demand from October and was affected by the flooding in Thailand, but LED Lighting saw increased sales, stimulated by a rise in demand for energy efficient products that consume less power, with the result that overall sales remained at the same level as for the previous year. Despite the impact of the flooding in Thailand, the home appliance segment saw higher operating income on a year-on-year basis, owing to increased sales in LED Lighting and the results of business restructuring.

Q6. Please tell us about the impact of the Great East Japan Earthquake and the flooding in Thailand.

In the results for the first nine months, the combined impacts of the earthquake and the flooding in Thailand had a negative impact on operating income of approximately 25 billion yen. Reconstruction efforts in the areas damaged by the earthquake are now generating demand and contributing to our full year results. The flooding in Thailand damaged production sites for the Home Appliances and the semiconductor and storage devices businesses, however, alternative production has already started at production sites outside Thailand and some of the Thai manufacturing sites have now resumed operations. We will continue to make efforts to minimize the impact of this event.

Q7. What can you tell us about the year-end dividend payment for FY2011?

We paid an interim dividend of 4 yen per share. The year-end dividend has not yet been decided. Once we are at the point where we secure a suitable level of non-consolidated net income, we will give thorough consideration to paying a suitable dividend in light of future investment plans and our financial position.

FY2011 Q2 Results Announcement - October 31, 2011

Q1. Please tell us the key points of the FY2011 first half business results.

We recorded net sales of 2,912.5 billion yen which was 168.6 billion yen lower than that for the corresponding period in the previous fiscal year. This was primarily due to the adverse effects of the sharp increase in the value of the Japanese yen and, to some extent, the impact from the Great East Japan Earthquake. Operating income for the period as a whole was also affected and was 24.6 billion yen lower than that of the same period last year, however four major business segments remained in the black and returned a total of 80.2 billion yen profit.

In the second quarter of the fiscal year (July to September) we achieved higher operating income than in the same period last year. On an individual segment basis, Digital Products, Electronic Devices and Home Appliances all increased profit, while Social Infrastructure also continued to perform solidly, with the result that all of our business segments were in the black. Net income (loss) attributable to shareholders of the Company was also maintained at the same level as for the same period last year.

Q2. Please tell us about the overall forecast for the FY2011 business results.

The overall forecast for the FY2011 business results remains unchanged (net sales of 7 trillion yen, operating income of 300 billion yen). Whilst there are certain risk factors that remain unclear such as the strong yen, EU sovereign risk and the flooding in Thailand, we are working to reinforce our risk response capabilities in order to minimize the impacts of such events. At the same time, by making progress with the implementation of restructuring of businesses and transformation of the business structure, which were announced in the presentation of management policies, we aim to achieve our annual target. Further, we have adjusted our exchange rate assumptions for the second half of FY2011 to 80 yen to the dollar and 110 yen to the euro.

Q3. Could you please tell us about the FY2011 first half business results in the semiconductor business?

Although the demand for NAND flash memories remained firm, sales fell due to the impact of the yen appreciation and the System LSI business also suffered due to a temporary decrease in demand. As a result, net sales were 13% lower on a year-on-year basis and fell to 502.4 billion yen. In terms of operating income, the System LSI business was negatively impacted by the earthquake and, as a result, operating income from the semiconductor business as a whole decreased by 27.5 billion yen against the corresponding period of the previous fiscal year, to 29.7 billion yen. However, NAND flash memories maintained solid level of profitability, despite the effects of yen appreciation.

Q4. Could you please tell us about the FY2011 first half business results in the Social Infrastructure segment?

In terms of sales, Thermal & Hydro Power Systems continued a healthy performance and sales were raised by the consolidation of Landis + Gyr AG, but the impact of sharp yen appreciation resulted in the same level of overall sales as the previous year. In terms of operating income, Thermal and Hydro Power Systems performed well, and the IT Solutions business saw increased profit. However, due to reduced profit in the Transmission and Distribution Systems, the segment as a whole recorded operating income slightly lower on a year-on-year basis.

Q5. How did the Digital Products segment and Home Appliances segment perform?

PC business in the Digital Products segment saw healthy sales in Japan, but the impact of yen appreciation and sluggish sales in Europe and the US resulted in lower sales. In terms of operating income, the PC business surpassed the target on the execution of proactive cost reductions and lower parts and materials costs.
On the other hand, while sales of LCD TVs in emerging markets expanded healthily, price declines in Japan, as well as lower demand in the US and Europe, led to lower sales and lower income. In the Home Appliances segment, favorable conditions in LED lighting and Air-conditioners, reflecting higher demand for goods that consume less electricity, led to the segment as a whole recording increased sales and higher income.

Q6. Free cash flow is minus 218.1 billion yen, which is 199.6 billion yen lower on a year-on-year basis. Why is that?

This is because strategic investments to enhance global competitiveness (to the value of approximately 150 billion yen), such as the acquisition of Landis + Gyr AG, were higher than in the same period of the previous year and working capital was weakened.

FY2011 Q1 Results Announcement - July 28, 2011

Q1. Please tell us the key points of the FY2011 1Q results.

We recognized net sales of 1,326.1 billion yen for 1Q FY 2011 which was 125.3 billion yen lower than that for the corresponding period in the previous fiscal year due primarily to the adverse effects of the yen's appreciation and, to some extent, the impact from the Great East Japan Earthquake. In respect of specific segments, the Home Appliances segment performed particularly well due to increased demand for energy saving electrical appliances. Operating income was also affected by the yen's appreciation and the impact from the earthquake and was 29.7 billion yen lower than that of the same period last year, but remained in the black at a total of 4.1 billion yen. In addition, we made efforts to minimize the impact of the earthquake as well as to improve non-operating income (loss), and as a result, we were able to maintain net income attributable to shareholders of the Company in the black at the same level as that for the corresponding period in the previous fiscal year.

Q2. Please describe the impact that the earthquake had on FY2011 1Q results.

The impact of the earthquake caused a component shortage on production, damage to a manufacturing facility that halted production and a loss of sales to customers affected by the earthquake. The overall impact was an approximately 90 billion yen decrease in net sales and a roughly 25 billion yen decrease in operating income. In respect of the impact of the earthquake going forward, we believe that the impact on the component shortage on production will actually be smaller than initially expected.

Q3. Please tell us about the overall forecast for the FY2011 results.

After considering the results of the FY2011 1Q results, we decided not to make any changes to the forecast for the first half of FY2011 (i.e., net sales of 3.1 trillion yen and operating income of 90 billion yen). Going forward, we will continue to take measures in order to adapt to changes in the external environment. In respect of the forecast for the full year results (net sales of 7 trillion yen and operating income of 300 billion yen), we will continue to implement strategies in order to achieve our targets. Further, our exchange rate assumption for FY2011 full year forecast is 85 yen to the dollar and 115 yen to the euro.

Q4. Could you please tell us about the FY2011 1Q results in the semiconductor business?

Although the demand for NAND flash memories remained firm, sales fell due to the impact of the yen's appreciation and also due to damage from the earthquake to a subsidiary company in the System LSI business. As a result, sales were 18% lower on a year-on-year basis and fell to 227.6 billion yen. In terms of operating income, NAND flash memories maintained a steady level of profit despite the effects of the yen's appreciation and price drops, but the System LSI business was affected by the earthquake. As a result, operating income of the semiconductor business decreased by 20.6 billion yen from the corresponding period of the previous fiscal year to 1.6 billion yen.

Q5. Could you please tell us about the circumstances of the FY2011 1Q results in the Social Infrastructure segment?

In terms of sales, Thermal and Hydro Power Systems business and Transportation Systems business continued healthy performances and recorded increased sales, and the Medical Systems business also performed at approximately the same level as in the same period last year. However, the impact of the yen's appreciation and other factors led the segment as a whole to report lower sales. In terms of operating income, the Power Systems business performed well (mainly Thermal and Hydro Power Systems) and the Medical Systems business saw increased profit; however, due to the yen's appreciation and other factors, the segment as a whole recorded an operating loss similar to that of the corresponding period in the previous fiscal year.

Q6. How did the Digital Products segment and the Home Appliances segment perform?

In the Digital Products segment, the PC business in particular saw higher operating income than planned as a result of a growth in domestic sales and cost cutting measures. On the other hand, LCD TVs were impacted by the yen's appreciation which, in addition to the increasing uncertainty in Europe and the US, and the end of the eco-point campaign here in Japan, led to lower sales. However, going forward we will further accelerate our sales expansion in emerging markets. In the Home Appliances business, white goods, including room air conditioners, LED lighting and industrial air conditioning all performed well resulting in increased sales and increased operating income for the segment as a whole.

FY2011 Management Strategies Announcement - May 24, 2011

Q1. NAND flash memory is one of main businesses Toshiba is focusing on. What are your thoughts about the future of this business?

Our NAND flash memory business, which has a global top-level market share, achieved a record high operating income of ¥108.7 billion in FY2010.
   At present, the storage market is progressing toward an era of “information explosion” in which the volume of data being processed will increase exponentially, and the memory market is also expected to greatly expand in the future. Accordingly, we are strengthening our advanced process generation memory products that are market leaders and are accelerating the development of future generations of post-NAND products. In parallel, we will make efficient investments to support the growth of this business that are in line with market trends.
   Looking toward future growth, Toshiba, ahead of other companies, made sample shipments in April 2011 of the world’s smallest and highest density 2-bit-per-cell 64-gigabit chips using 19nm process technology, the finest level yet achieved. We began to mass-produce advanced process generation NAND flash memories at the newly constructed Fab No. 5 at our Yokkaichi Operations in July 2011, and shipments started in August. We are continuing to press forward with further shrinking chip size, and at the same time, we are in the process of basic development of post-NAND memory chips such as BiCS (bit-cost-scalable) and next-next generation 3D memories. We have recently agreed with Hynix Semiconductor Inc. to jointly develop Magnetoresistance Random Access Memory (MRAM), a next-generation memory device which, when used together with NAND flash devices, can provide optimum storage solutions for future mobile devices. Furthermore, we will strive to expand our storage business by developing new high-performance application products that have high-added value. We will enhance the competitiveness of our SSD (solid state drive) storage devices by introducing a series of innovative new enterprise SSDs for servers. We will advance our capabilities in the storage business through integrated development and marketing of SSDs and HDDs. To further maximize synergies in these businesses, we merged our Semiconductor Company and Storage Products Company into a new in-house company in July 2011. By means of all these efforts, we are aiming to achieve net sales of ¥1.1 trillion in NAND flash memories in FY2015.

Q2. You are determined to make Smart Community-related businesses a new profit base. How do you expect this new business to develop in the coming years?

We will nurture Smart Community-related businesses into a new profit base by vertically integrating our power generation, power transmission, power distribution and Smart Grid businesses in which Toshiba already has a wealth of accumulated experience. For the creation of a Smart Community that offers a total solution for making the urban environment and social infrastructure “smarter and greener,” including energy, water and transportation systems, it is necessary to have such technologies as those for Smart Meters that are key devices for Smart Grids and communication technologies that collect and control data. For this purpose, we recently acquired Landis + Gyr AG, a company that has the leading global position in energy management solutions for utilities. Innovation Network Corporation of Japan, a public-private partnership funded by the Japanese government and private corporations, has become a strategic partner by taking a 40% equity stake in that company. Landis + Gyr has developed its AMI (Advanced Metering Infrastructure) business that is essential for Smart Grids in more than 30 countries around the world and is proud of its world’s No. 1 share in Smart Meters. By utilizing the extensive customer network that this company has developed, we will accelerate the global development of Smart Communities. In addition, by utilizing the abundant social infrastructure business applications Toshiba possesses, we will also promote development into new application fields. Furthermore, I think that for the Smart Community to function organically the integration of our strength in power control technologies with data processing and computing cloud services is essential, and we will go forward with our strategic policy of establishing alliances with leading-edge IT partners. For example, in June, we announced plans to work together with Hewlett-Packard on integrating Smart Community technologies and exploring global business projects in this field.
   By creating comprehensive energy-management systems and maximizing the synergistic effects of integrating technologies, products and services to create new business opportunities, we will further accelerate the global development of Smart Community-related businesses and become a leading global company in this business field. By aggressively promoting our Smart Community business strategies, we are aiming for net sales of ¥900 billion in FY2015.

Q3. With regard to Toshiba’s energy-related businesses you are following a strategic policy of strengthening Toshiba’s renewable energy businesses. What is your vision about the future of Toshiba’s energy-related businesses?

With regard to renewable energy, which we have long been concentrating on, our strategic policy is to further accelerate our capabilities and market position in this business field. In addition to providing renewable energy in power generation fields in which Toshiba already possesses an extensive record of experience such as our solar photovoltaic systems with their world-leading efficiency, our top share in mega-solar power generation in Japan, hydroelectric power, in which we have the world’s leading high-head, adjustable-speed pumped-storage technology, and geothermal power generation equipment, in which we have the world’s top market share, we will expand into new energy fields such as solar power and wind power. In the future, by means of our global business development strategies, including the establishment of strategic business alliances, we will further expand and actively move more extensively into wider areas in the renewable energy market. For example, with regard to wind power, we have entered into a strategic business alliance based on our taking a stake in Unison Co., Ltd., a long-established innovative Korean wind power equipment manufacturer. This alliance will help us expand into this business through the co-development and marketing of high-efficiency wind power generators.
   I believe that the importance to society of mainstay power generation systems such as thermal power will not change, and we will continue to work to accelerate the global development of these systems. We have a long record of experience in the thermal power field, both in Japan and overseas, starting with achieving eight consecutive years in the No. 1 position in the share of orders received for steam turbine generators from the North American market. Furthermore, in order to expand this business, we will collaborate with The Babcock & Wilcox Company, which is proud of having the top market share for boilers in North America, and we will work to increase the number of package-supply BTG (boiler, turbine and generator) orders we receive in such countries as India. In combined-cycle power generation as well, together with the U.S. company General Electric, we will supply the world’s leading high-efficiency thermal plants to the global market.
   Furthermore, as worldwide energy demand is still continuing to grow, our nuclear energy business has a target of receiving orders for 39 units by FY2015 and we have set a goal of achieving net sales of ¥1 trillion. However, depending on our customers’ situations and each country’s energy policy trends, there is a possibility that the achievement of this goal may come a couple of years later. We are planning to carry out measures to enhance safety at existing nuclear plants in accordance with the safety standards that will be revised based on the results of analyses currently being conducted by each-related organization. At the same time, we are also developing next-generation nuclear reactors that will be extremely safe.

Q4. With regard to the Digital Products and Home Appliances business segments, going forward, how will you achieve robust growth and higher profitability?

By offering new enhanced fusion products and services, maximizing synergies through integrating technologies, sharing sales networks and developing products that match regional needs, we are aiming to achieve stronger growth and higher profitability in these segments.
   In the Digital Products business segment, in addition to strong sales of both notebook PCs, which have continuously held the No. 1 market share in Japan, and LCD TVs, which greatly increased in sales mainly in Japan and the ASEAN region, as a result of the continuous strengthening of the profit structure of this segment, particularly through the reduction in fixed costs, this segment continued to be in the black. The boundaries of products such as TVs, PCs and mobile devices are disappearing, and the integration of technologies, components, and products and services that cross over the borders of each category is very desirable.
   To respond to these changes in the business environment, in April 2011, we integrated our visual products and PC businesses by incorporating them into a new in-house company organized on a regional basis with respective business units for Japan, Europe/U.S., emerging economies and China. We will carry out speedy and timely business strategies by developing regionally-matched products, strengthening regional area sales and marketing organizations through maximizing organizational synergies, and delivering to the market innovative products such as battery–backup “Power TVs” as we strive to further improve the profitability of these businesses in the future. We intend to accelerate and streamline our businesses in emerging economy markets through these regionally based organizations and closer collaboration between the Digital Products and Home Appliances business segments.

Q5. Toshiba’s financial structure has been strengthened. How do you view the relationship between financial soundness and pursuing growth strategies for the future?

Our free cash flow at the end of FY2010 continued at a high level of ¥159.4 billion and the strengthening of our financial base was reflected by the improvement of our debt-to-equity ratio (D/E ratio) to 125%.
   While striving to further strengthen Toshiba Group’s financial base in the coming years, we will aggressively move forward with allocating strategic resources to the businesses we have selected to focus upon so as to achieve stronger growth and higher profitability. With regard to the reserves that stem from the improvement of our D/E ratio, by the end of FY2013 (March 2014), we will secure the funds to accelerate growth by further improving our D/E ratio to 50%, among other measures. I am thinking of utilizing these capital funds for facility investments and M&A in new and growth businesses, as compelling future business opportunities arise. During the next three years, we are planning to invest a total of ¥1,450 billion in capital expenditures and investment & loans, and we will allocate ¥1,100 billion for R&D expenditures. Our strengthened financial structure will enable to us to use a portion of our capital funds to make additional bold future investments. We will further accelerate growth by strategically utilizing ¥700 billion of shiftable funds and our improved assets to make appropriate new investments. In addition, we are targeting a return on investment (ROI) of 20% by the end of FY2013, double that of FY2010.
   With regard to return to shareholders, we seek to continuously increase the annual dividend in line with a consolidated dividend payout ratio of about 30%.

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