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Presentations & Events

FY2012

- ending March 2013

Medium-term Strategies for Future Growth (FY2012-2014)

- May 17, 2012

Q & A

Q1. Please explain the ideas about Toshiba Group's basic strategies of "transforming business structure" and "restructuring of businesses"?
We have been working to transform Toshiba Group into a top-level diversified electric/electronic manufacturer with strong global competitive power. One key part of our basic management strategy is to press ahead with the "restructuring of businesses." Using FY2008 as a reference point, over a period of three years starting from FY2009, we have achieved a reduction in fixed costs of about ¥1,500 billion, and with regard to variable costs, we have also significantly reduced procurement and logistics costs. As a result, operating income, income before taxes and net income were all brought back to the levels attained prior to the financial crisis. At present, while continuing the restructuring of certain of our businesses, we are accelerating the transformation of our business structure by such means as focusing on growth businesses and developing new business areas, and by shifting our business portfolio to emphasize Business to Business (B to B), we aim to strengthen our profit-making base. In FY2011, we transferred our LCD business to Japan Display Inc., and as a future growth business, we acquired the Swiss company Landis+Gyr AG, the global leading player in the Smart Meter industry. We have reinforced our global Smart Community business infrastructure through global alliances.
Based on the results of our efforts to build a strong profit-making business structure, which we have been implementing over the past three years, we are now moving ahead along the path of growth.
Going forward, we will continue to work to globally achieve sustained growth with improved profitability through our basic management strategies of focusing on accelerating the growth of new and growing businesses and establishing new profit bases. In FY2014 we aim to achieve net sales of ¥7.8 trillion and operating income of ¥450 billion.
Q2. In what ways will you go about transforming Toshiba's business structure?
Toshiba Group aims to become an even stronger global contender by unleashing our powers of imagination to anticipate, ahead of others, and capitalize on the coming trends in the world business environment. Toward this end, we are shifting our business portfolio further toward B to B. Concretely, the purpose is to help solve some of the key issues that present society is faced with, such as the securing of highly efficient and stable electric power, enhancing medical services in emerging economies and for the elderly everywhere, and managing Big Data and data security. Then, we will expand these businesses by means of Total Energy Innovation and Total Storage Innovation. In realizing these objectives, in addition to strengthening such focus businesses as "integrated storage solutions," "Smart Community," "renewable energy," "power electronics and electric vehicles," "healthcare" and "fused digital products and services." we will also strengthen "home solutions" to promote energy saving and cut electricity costs through visualization and greater efficiency and "retail solutions" by providing applications/systems for Big Data. In order to offer these wide ranges of solutions to such business challenges, in addition to pursuing technology development, it is important to carry out timely M&A investments and establish new business alliances.
For this purpose, we are prepared to respond in a timely fashion to the rapidly changing business environment by making a flexibly shifting frame within R&D investment, facility investments, and investment and loan plans in the three years from FY2012 to FY2014. Also, we are thinking of utilizing a portion of our accumulated capital from the continued improvement of earnings as funds to drive future growth. All together, this shifting funds frame, which can be utilized flexibly and expeditiously, will be at the level of ¥700 billion among our total planned investment and R&D expenditure of approximately ¥3 trillion during the three years.
In addition, we will further speed up the pace of innovation by nurturing the buds for next-generation business development and creating exciting new values through the introduction of World's First and expansion of World's No. 1 products and services in the global market.
Q3. What are your ideas about Total Energy Innovation?
With the need to assure a stable supply of energy and electric power and the necessity to prevent global warming by controlling the amount of CO2 emissions becoming increasingly urgent issues, offering the best mix of energy, including renewable energy, has become essential.
Among renewable sources of energy, hydro power generation and geothermal power generation can play an essential supporting role as a source of electricity, and it is also important from the viewpoint of energy security. Toshiba has the world's top-level technology in the field of hydro power generation with our pumped-storage power generation system, and we have a record of so far delivering 2,000 units of hydro power generation equipment with a combined power generation capacity of 54GW to more than 40 countries around the world. With regard to geothermal power generation, we received seven orders in FY2011, and as a world-leading geothermal company, we are firmly holding the No. 1 global market share. In addition to supplying about the equivalent of 25% of the world's geothermal power generation capacity facilities, we are pressing forward with technological innovations, such as developing a higher-efficiency geothermal power generation system. With regard to photovoltaic power generation, we hold the No. 1 mega solar share in the Japanese market. We are also offering the world's highest efficiency (22.6%) 240W module for housing and are steadily increasing our share of the market in Japan. We have recently strengthened the wind power generation business by expanding our collaborative partnership with Unison Co., Ltd., a leading wind power generation equipment manufacturer in South Korea.
On the other hand, with regard to thermal power generation and nuclear power generation, I believe their importance as a core source of electric power will not change. However, compared with other power generation methods, thermal power generation will involve more CO2 emissions, and it is also necessary to take into account the increase in power generation costs along with the increase in the price of fossil fuels. Toshiba has been strengthening its sales activities for its advanced supercritical steam turbine generator power generation systems, which have a lower amount of CO2 emissions, and we have received successive orders from South Korea (in May 2011) for its Samcheok ultra supercritical coal-fired thermal power station and from India (February 2012) for its Kudgi ultra supercritical coal-fired thermal power station. In addition, with regard to combined-cycle power generation systems, we are going ahead with business expansion in this field in cooperation with General Electric and have achieved the world's highest level of power generation efficiency: 62%.
The nuclear power generation business has seen continued demand because nuclear energy plants provide an essential source of electric power from the viewpoint of energy security as well as based on the need to globally reduce CO2 emissions. Westinghouse, our subsidiary, is currently constructing in China four of the world's most advanced pressurized-water reactors, the AP1000®, and full construction has begun as well for four of the six orders we have received for AP1000® reactors in the U.S.
Q4. With regard to your strategy for Total Storage Innovation, what is its relationship with NAND flash memory?
With regard to the NAND flash memory business, we are aggressively implementing measures to establish a robust profit base through shifting our product mix and timely miniaturization that goes in line with market trends, making facility investment and developing next-generation post-NAND technology. There is a trend toward demand increase mainly in applications for smartphones and SSD (solid state drives, using NAND flash memory), and market expansion is expected in the mid-to long-term. At the Yokkaichi Operations, which is our NAND flash memory mass production base, the first phase of construction of Fab No. 5 was completed and it began shipments from August of 2011.
In addition, in order to achieve further synergy effects of NAND flash memory in the storage devices business, in July 2011, we reorganized our storage product businesses by merging our Semiconductor Company and Storage Products Company into a new unified in-house company Toshiba Semiconductor & Storage Products Co., thus integrating the development of NAND devices together with Toshiba's storage products such as hard disk drives (HDD) and SSD.
We leveraged the restructuring of the HDD industry to strengthen our business domain. In addition to the HDD business for servers, which we acquired from Fujitsu Ltd. in 2009, we also obtained a part of the 3.5-inch HDD business of Western Digital Co. in the U.S. in May of 2012; thus Toshiba became the only company capable of supplying HDD, SSD and NAND flash memory solutions.
With the coming of the era of Big Data, it has become crucial to offer optimum storage system solutions that can address diverse data processing requirements with customer-specific applications, and global demand for integrated, highly advanced storage system solutions is rapidly expanding. As the only one company with a full line-up of storage products, Toshiba is determined to meet these market requirements by not only allowing customers to select storage devices in accordance with their application needs, but also by providing storage system solutions that make full use of the varied characteristics of HDD, SDD and NAND flash memory.
All these storage systems are core technologies to support data centers and their cloud-based services. With regard to cloud computing, we are expanding our business range through collaboration with alliance partners, such as with IBM and Hewlett-Packard. Through these various means, we will realize our objective of Total Storage Innovation. Going forward, we will accelerate development of applications using the cloud environment, such as healthcare solutions, retail solutions and digital products and contents solutions. In the area of healthcare solutions, we are expanding diagnosis and treatment coverage through IT technology. One example is that we are providing outside storage services for medical data using Amazon's web services. We strengthened our retail solutions capability by becoming the global No. 1 POS (point-of-sales) system company when Toshiba TEC, our Group company, acquired IBM's retail store solution (RSS) business.
Q5. How do you view the relationship between financial robustness and your strategies for future growth?
The shareholders' equity ratio was 15% at the end of FY2011; however, our target for the end of FY2014 is 22%. Our debt-to-equity ratio at the end of FY2011 became 142%; but this was a temporary phenomenon due to the fact that we were carrying out aggressive investments aimed at future growth, such as acquisition of Landis+Gyr. We are targeting a return to a level lower than 108% for the end of FY2012, and by the end of FY2014, we are planning to achieve a debt-to-equity ratio of 53%. We will further accelerate growth by strategically utilizing a portion of our capital funds, ¥700 billion of shiftable funds and our improved assets, to make bold new facility investments in growing businesses and for M&A, while maintaining a good balance between financial robustness and the pursuit of growth strategies.

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