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Presentations & Events

FY2004

- ended March 2005 (For 166th Fiscal Period)

Presentation for FY2004 Results

For Fiscal Year ended March, 2005   - April 28, 2005

Outline of the presentation

1. Consolidated Business Results in FY2004

Net Sales 5,836.1 billion yen (+5% YoY)
Operating income 154.8 billion yen (-19.8 billion yen YoY)
Income before taxes, minority interest and equity in earnings of affiliates 110.6 billion yen (-34.4 billion yen YoY)
Net income 46.0 billion yen (+17.2 billion yen YoY)
  • Toshiba's consolidated sales in FY2004 were 5,836.1 billion yen (US$54,543 million), 256.6 billion yen higher than in the previous fiscal year. Digital Products, Electronic Devices, Social Infrastructure and Home Appliances all recorded year-on-year sales increases through operations based on their growth strategies, achieving the Group strategy of combining high growth with steady profitability.
  • Consolidated operating income decreased by 19.8 billion yen from the same period a year earlier to 154.8 billion yen (US$1,447 million). Digital Products improved its operating income significantly, while Electronic Devices, Social Infrastructure and Home Appliances saw decreases. However, if an extraordinary gain from the transfer of Toshiba's employee pension fund to the government in the previous year is excluded, and if a one-time cost for environmental measures accounted for in this fiscal year is also excluded, consolidated operating income for Toshiba as a whole and for the Social Infrastructure segment would show increases.
  • Income before income taxes, minority interest and equity in earnings of affiliates was 110.6 billion yen (US$1,033 million), a 34.4 billion yen decrease from FY2003. Net income increased by 17.2 billion yen from the previous year to 46.0 billion yen (US$430 million).

2. Revised Business Forecast for the Full Year of FY2005

Net Sales 6,000.0 billion yen (+3% YoY)
Operating income 170.0 billion yen (+15.2 billion yen YoY)
Income before taxes, minority interest and equity in earnings of affiliates 130.0 billion yen (+18.8 billion yen YoY)
Net income 55.0 billion yen (+9.0 billion yen YoY)

(Note)Equity in earnings of affiliates will be included in income before income taxes and minority interest from FY2005; it was previously excluded. The impact of the adjustment to reflect equity in earnings of affiliates is 0.6 billion yen for FY2004 and 5.0 billion yen for FY2005.

Q & A Session

Q1. Toshiba plans further growth for PC business in FY2005. Please tell us the market situation and Toshiba's strategy.
Our strategy is the continuous introduction to market of differentiated PCs integrating cutting edge technologies. Recently we introduced new "Thin & Light" PCs that combine 20mm thickness with long lasting operation. We also have the AV-PC Qosmio series integrating AV functions such as TV, DVD player and recorder, audio, etc. These reputations have won a very good reputation. In FY2004, the portable PC market was very good in the U.S. and Europe and will remain so in FY2005. The morale of the PC Division is high. New PCs are continually coming to the market. We are going to maintain profit with sales growth.
Q2. Please let us know the situation of AV business.
we plan a 10.0b yen improvement in FY2005 in terms of operating profit (loss). However it will be difficult to move into the black.
Q3. Please let us know the situation regarding the format integration for the next generation DVD.
It is now under the discussion and we have nothing to disclose here.
Q4. Please tell us the current market condition for Semiconductors.
We assume tough conditions in the overall Semiconductor market in FY2005; +1% on a US dollar base and -2% on a yen base. However we have some competitive products, such as NAND flash memory and System LSI for broadband applications. Therefore we believe we can outperform the Semiconductor's overall market growth.
Q5. Please tell us the sales revenue and operating profit of Semiconductor in FY2005 by the 1st half and the 2st half.
The sales revenue forecast in FY2005 is 1,040 billion yen, with 55% forecast for the latter half. The new 300mm fab at Yokkaichi Operations will start production in July '05 with a 2,500-wafer capacity. The capacity will increased to 10,000 wafers in Sept. '05 and 21,500 wafers in Dec. '05. Therefore sales revenue in the latter half will increase, and so will operating income.
Q6. How much Semiconductor revenue growth do you expect in the March to June quarter of 2005?
Almost stable.
Q7. Please tell us the capacity utilization ratio for the semiconductor operations.
Himeji Operations: full operation for discretes
Kitakyushu Operations: around 95% for bipolar ICs, full operation for discretes
Oita Operations (System LSI):
  -150mm lines producing analogue devices and MOS devices: less than 100%
  -200mm lines using advanced process technology: full operation
Yokkaichi Operations (memories): full operation
Q8. Why will the operating profit of Semiconductor in FY2005 decrease compared with FY2004 in spite of growing sales revenue?
Due to a higher depreciation burden and price erosion.
Q9. Please tell us the current price situation of NAND flash memory and the forecast year-on-year price reduction.
We could meet only 80% of customers order due to the stronger demand for mobile audio players and card-type flash in the March quarter. Therefore the current prices are stable and will fall a couple of percentage points in the June quarter. However we assume year-on-year price erosion of over 30% in FY2005, which will further stimulate demand.
Q10. Please tell us NAND flash's bit growth in FY2005.
We assume 2.2 to 2.5 times.
Q11. What is the production volume of NAND flash memory?
It was 39 million units per month equivalent to 512Mb in Mar. '05. The shift is to higher capacity products: Gb, 2Gb or even 4Gb.
Q12. Please tell us the situation in the foundry business for Xilinx.
It is proceeding as planned.
Q13. Please tell us the situation of the CELL chip.
We will continue R&D activities for CELL in FY2005 and some R&D costs will be incurred.
Q14. What impact will SED have on revenue and operating income in FY2005?
There will not a great amount of revenue from the SED business. We need to continue R&D activity and Electronic Devices Segment has to bear the R&D burden.
Q15. Why will FY2005 operating profit in the display business be lower than in FY2004?
We assume severe market conditions in FY2005 due to newcomers in the small- and medium- sized TFT market and some price erosion.
Q16. Toshiba explained that the operating profit of Social Infrastructure Segment in FY2004 was worsened by one-off expenses associated with the detoxification of PCB. Why didn't you incorporate the expenses at the time of the 3rd quarter closing announcement in Jan. '05?
At that time, we had not decided how to handle the issue and did not know how much it would cost. Now we have decided how to handle it and were able to estimate the cost reasonably.
Q17. Why will the operating profit of Industrial Power System business increase significantly in FY2005 compared with FY2004?
In FY2004, we incorporated a one-off cost associated with overseas power plants. We assume that kind of cost will not emerge in FY2005.
Q18. What is your dividend policy?
We would like to realize 10.00 yen per share as soon as possible. However it would be difficult to do so in FY2005 with net income of only 55.0 billion yen.
Q19. Please tell us your capital expenditure on the Semiconductor business in FY2005.
We plan 151.0 billion yen.
Q20. Depreciation increases by 45 billion yen in FY2005. Please give us the breakdown by segment.
Almost all the increase comes from the Electronic Devices Segment; mainly the Semiconductor business.
Q21. How much restructuring cost is incorporated in FY2005?
It's around 10.0 billion yen. We see only 3.0 billion yen to be allocated to the specific items at the moment.
Q22. How much is the free cash flow in FY2005?
It will be reduced to 25 billion yen unfortunately due to the higher capital expenditure outlays.

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