|
| SANYO Mid-Term Financial Results
for Fiscal Year 2006 |
|
 |
 |
 |
|
Tokyo, Nov. 24, 2006 --- SANYO Electric Co., Ltd. announced its
mid-term results ended Sept. 30, 2006, on a consolidated and non-consolidated
basis.
|
| 1. Consolidated results (Unaudited) |
(Unit: Millions of Yen) |
|
For the mid-term
ended
Sep.30, 2006 |
Change from
the previous
term |
For the mid-term
ended
Sep.30, 2005 |
For the FY 2005
ended
Mar.31, 2006 |
Net sales |
1,095,539 |
-7.1 % |
1,179,391 |
2,397,026 |
Operating income
(loss) |
15,841
(1.4 %) |
- |
(28,369)
(-2.4 %) |
(17,154)
(-0.7 % ) |
Income (loss)
before income
taxes and minority
interest |
7,031
(0.6 %) |
- |
(114,785)
(-9.7 %) |
(165,696)
(-6.9 % ) |
Net Income(Loss) |
(3,618)
(-0.3 %) |
- |
(142,525)
-12.1 % |
(205,661)
(-8.6% ) |
Net income (loss)
per share |
(34.90 Yen) |
|
(76.85 Yen) |
(194.96 Yen) |
1. SANYO’s consolidated financial statements are based on U.S.
GAAP accounting standard
2. Operating profit and segment based information is prepared using
Japan’s standard.
3. The number of consolidated subsidiaries 223, and affiliates 70.
4. As regards operations discontinued in the closing of accounts for
FY 2006, based on the U.S. GAAP accounting standards, SANYO have reflected
those reclassifications in the consolidated financial statements for
Mid-term FY 2005.
5. Percentage figures inside ( ) refer to the percentage to net sales.
|
| 2. Non-Consolidated results (Unaudited) |
(Unit: Millions of Yen) |
|
For the mid-term
ended Sep.30,
2006 |
Change from
the previous
term |
For the mid-term
ended Sep.30,
2005 |
For the FY 2005
ended
Mar.31, 2006 |
Net sales |
593,713 |
-8.2 % |
646,479 |
1,353,445 |
| Operating income
(loss) |
(11,661)
(-2.0 %) |
- |
(30,205)
(-4.7 %) |
(40,072)
(-3.0%) |
Ordinary profit
(loss) |
(8,899)
(-1.5 %) |
- |
(31,653)
(-4.9 %) |
(48,275)
(-3.6% ) |
Net income (loss) |
(14,571)
(-2.5 %) |
- |
(255,322)
(-39.5%) |
(360,991)
(-26.7 %) |
Net income (loss)
per share |
(2.37 Yen) |
|
(137.66 Yen) |
(174.73 Yen) |
1. Figures inside ( ) refer to the percentage to
net sales. |
| 3. Consolidated Sales by Business Group Category (Unaudited) |
(Unit: Millions of Yen) |
| Product
category |
Mid-Term
From April 1, 2006
To Sept. 30, 2006 |
Mid-Term
From April 1, 2005
To Sept. 30, 2005 |
For the year ended
Mar.31, 2006 |
| Amount |
Ratio
to total |
Change |
Amount |
Ratio
to total |
Amount |
Ratio
to total |
| Consumer |
493,540 |
45.0% |
-12.3 |
562,824 |
47.7% |
1,146,765 |
47.8% |
| Commercial |
133,885 |
12.2% |
12.2% |
117,658 |
10.0% |
234,962 |
9.8% |
| Component |
442,360 |
40.4% |
-1.7 |
450,059 |
38.2% |
911,750 |
38.0% |
| Others |
25,754 |
2.4% |
-47.3 |
48,850 |
4.1% |
103,549 |
4.4% |
| Total |
1,095,539 |
100.0% |
-7.1 |
1,179,391 |
100.0% |
2,397,026 |
100.0% |
Break
-down |
Domestic
sales |
481,261 |
43.9% |
-16.2 |
573,967 |
48.7% |
1,162,390 |
48.5% |
Overseas
sales |
614,278 |
56.1% |
1.5 |
605,424 |
51.3% |
1,234,636 |
51.5% |
|
| 4. Consolidated Statements of Income (Unaudited) |
(Unit: Millions of Yen) |
| Items |
Mid-term FY 2006
From April 1, 2006
to September 30, 2006 |
Mid-term FY 2005
From April 1, 2005
to September 30, 2005 |
For the FY 2005
ended
March 31, 2006 |
Amount |
Ratio to
net sales |
Change
(%) |
Amount |
Ratio to
net sales |
Amount |
Ratio to
net sales |
Net sales
Operating revenue
Sales and operating
revenue
Cost of sales
Selling, general and
administrative expenses
Operating income
Other income
[Interest and Dividends]
[Other]
Other expenses
[Interest]
[Other]
Income (Loss) before
income taxes for
continuing operations
Income taxes |
1,095,539
45,922
1,141,461
941,851
183,769
|
100.0%
4.2%
104.2%
86.0%
16.8%
|
-7.1
29.5
-6.0
-10.4
-4.3
|
1,179,391
35,451
1,214,842
1,051,149
192,062
|
100.0%
3.0%
103.0%
89.1%
16.3%
|
2,397,026
87,279
2,484,305
2,102,734
398,725
|
100.0%
3.6%
103.6%
87.7%
16.6%
|
15,841
25,923
[3,637]
[22,286]
34,733
[10,038]
[24,695]
|
1.4%
2.4%
3.2%
|
-
-3.0
-69.3
|
-28,369
26,716
[3,686]
[23,030]
113,132
[8,544]
[104,588]
|
-2.4%
2.3%
9.6%
|
(17,154)
66,840
[7,170]
[59,670]
215,382
[18,412]
[196,970]
|
-0.7%
2.8%
9.0%
|
|
7,031
10,263
|
0.6%
0.9%
|
-
-59.0
|
(114,785)
25,020
|
-9.7%
2.2%
|
(165,696)
38,309
|
-6.9%
1.6%
|
Income (Loss) before
minority interests for
continuing operations
Minority interests |
(3,232)
386
|
-0.3%
0.0%
|
-
-
|
(139,805)
(3,445)
|
-11.9%
-0.3%
|
(204,005)
(3,675)
|
-8.5%
-0.1%
|
Net income (loss) for
continuing operations
Discontinued
operations
Income (loss) from
discontinued operations
Income taxes |
(3,618)
-
- |
-0.3%
-
- |
-
-
- |
(136,360)
(3,982)
2,183 |
-11.6%
-0.3%
0.2% |
(200,330)
(1,882)
3,449 |
-8.4%
-0.1
0.1 |
Net income (loss) for
discontinued operations |
- |
- |
- |
(6,165) |
-0.5% |
(5,331) |
-0.2 |
| Net income (loss) |
(3,618) |
-0.3% |
- |
(142,525) |
-12.1% |
(205,661) |
-8.6% |
|
| 5. Consolidated Balance Sheet (Unaudited) |
(Unit: Millions of Yen) |
| Items |
As of
June 30, 2006 |
As of
March 31, 2006 |
Increase
(Decrease) |
(Assets)
Current assets
Cash
Time deposits
Restricted cash
Valuable securities
Receivables:
Notes and accounts
Finance receivables
Affiliates and unconsolidated subsidiaries
Allowance for doubtful accounts
Inventories
Deferred income taxes
Other
Current assets total
Investment and advances:
Affiliates and unconsolidated subsidiaries
Other
Total
Property, plant & equipment:
Building
Machinery and equipment
Accumulated depreciation
Land
Construction in progress
Total
Deferred income taxes
Other assets |
148,199
191,972
192,000
498
455,343
22,695
(5,847)
375,049
10,734
63,619
1,454,262
52,111
88,193
140,304
418,133
909,886
(957,324)
94,865
13,668
479,228
10,802
53,083
|
196,784
100,716
264,800
1,109
461,613
19,182
(10,509)
317,894
8,287
60,441
1,420,317
48,000
112,988
160,988
409,581
919,154
(941,303)
101,664
11,590
500,686
10,935
61,911
|
(48,585)
91,256
(72,800)
(611)
(6,270)
3,513
4,662
57,155
2,447
3,178
(33,945)
4,111
(24,795)
(20,684)
8,552
(9,268)
(16,021)
(6,799)
2,078
(21,458)
(133)
(8,828)
|
Total Assets |
2,137,679 |
2,154,837 |
(17,158) |
(Liabilities)
Current liabilities
Short-term borrowings
Current portion of long term debt
Notes and accounts payable:
Trade
Affiliates and unconsolidated subsidiaries
Construction
Accrued income tax
Employees’ savings deposits
Other
Total current liabilities
Corporate
bond and long-term debt
Accrued pension and severance costs
Deferred income taxes
Total liabilities
Minority interests
in
Consolidated subsidiaries
(Stockholders’
equity)
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total
Treasury stock
Total stockholders’ equity |
249,380
143,602
448,135
11,611
18,771
9,391
13,562
246,058
1,140,510
399,867
188,465
6,891
1,735,733
15,804
293,361
753,466
(534,199)
(119,032)
393,596
(7,454)
386,142
|
264,441
74,297
402,638
20,392
13,334
11,638
13,647
245,856
1,046,243
500,434
186,969
-
1,733,646
18,299
261,328
721,828
(466,951)
(105,885)
410,320
(7,428)
402,892
|
(15,061)
69,305
45,497
(8,781)
5,437
(2,247)
(85)
202
94,267
(100,567)
1,496
6,891
2,087
(2,495)
32,033
31,638
(67,248)
(13,147)
(16,724)
(26)
(16,750)
|
Total liabilities,
minority interests and stockholders’
equity |
2,137,679 |
2,154,837 |
(17,158) |
|
| 6. Consolidated Statement of Cash Flows (Unaudited) |
(Unit: Millions of Yen) |
|
| Items |
For the 1H
period ended
Sep.30, 2006 |
For the 1H
period ended
Sep.30, 2005 |
FY 2005
ended March 31,
2006 |
1. Cash flows from operating activities
Net income (loss)
Adjustments for cash flows
Depreciation and amortization
(Increase) decrease in receivables
Loss from fixed assets
(Increase) decrease in inventories
Increase (decrease) in notes & accounts
payable
Other, net |
(3,618)
36,995
3,914
542
(52,319)
42,444
(17,229)
|
(142,525)
66,748
57,438
51,352
12,415
(78,786)
(6,485)
|
(205,661)
129,712
107,702
21,281
78,552
(105,520)
(26,730)
|
| Net cash provided by operating activities |
10,729 |
(39,843) |
(664) |
2. Cash flows from investing activities
Decrease in marketable securities and
investment securities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Other, net |
7,315
(35,930)
26,784
869
|
42,569
(54,381)
1,770
448
|
96,924
(84,564)
46,760
(23,119)
|
| Net cash (used) in investing activities |
(962) |
(9,594) |
36,001 |
3. Cash flows from financing activities
Increase (decrease) in short term borrowing
Decrease in long term debt
Proceeds from issuance of new shares
Deposit in restricted cash
Withdrawal from restricted cash
Dividends paid
Other, net |
(17,223)
(23,757)
-
-
72,800
(376)
(31)
|
13,720
(36,380)
-
-
-
(556)
(35)
|
(20,432)
(84,115)
299,238
(300,000)
35,200
(1,606)
1,735
|
Net cash provided (used) in financing
activities |
31,413 |
(23,251) |
(69,980) |
4. Effect of exchange rate changes on
cash & cash equivalents |
1,491 |
3,548 |
8,182 |
5. Net (decrease) increase in cash & cash
equivalents |
42,671 |
(69,140) |
(26,461) |
6. Cash & cash equivalents of newly
consolidated subsidiaries
7. Cash & cash equivalents at beginning
8. Cash & cash equivalents at end |
-
297,500
340,171 |
16,295
294,982
242,137 |
28,979
294,982
297,500 |
|
| 7. Consolidated Segment Information |
(Unit: Millions of Yen) |
| Items |
For the 1H period
ended Sep.30, 2006 |
For the 1H period
ended Sep.30, 2005 |
FY 2005
ended March 31, 2006 |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
Net sales & operating
revenue |
Consumer |
501,778 |
43.1% |
566,642 |
45.6% |
1,154,395 |
45.5% |
| Commercial |
132,283 |
11.4% |
120,024 |
9.7% |
236,272 |
9.3% |
| Component |
455,929 |
39.2% |
466,673 |
37.6% |
948,448 |
37.4% |
| Others |
73,538 |
6.3% |
88,951 |
7.1% |
198,937 |
7.8% |
| Sub-total |
1,163,528 |
100.0% |
1,242,290 |
100.0% |
2,538,052 |
100% |
Corporate &
eliminations |
(22,067) |
- |
(27,448) |
- |
(53,747) |
- |
Total |
1,141,461 |
- |
1,214,842 |
- |
2,484,305 |
- |
|
Operating
income
(loss) |
Consumer |
(3,914) |
-11.7% |
(12,054) |
- |
(9,889) |
-62.3% |
| Commercial |
7,193 |
21.5% |
1,994 |
- |
7,471 |
47.1% |
| Component |
28,793 |
86.0% |
(6,168) |
- |
11,632 |
73.3% |
| Others |
1,402 |
4.2% |
2,584 |
- |
6,655 |
41.9% |
| Sub-total |
33,474 |
100.0% |
(13,644) |
- |
15,869 |
100% |
Corporate &
eliminations |
(17,633) |
- |
(14,725) |
- |
(33,023) |
- |
Total |
15,841 |
- |
(28,369) |
- |
(17,154) |
- |
|
(Notes)
1. Contents of Business Segment
| Consumer: |
TVs, VCRs, DVD Players, LCD Projectors, Audio Equipment, Digital
Cameras and Telephones, Refrigerators, Air Conditioners, Washing
Machines
and Microwave Ovens. |
| Commercial: |
Showcases, Package-Type Air Conditioners and Absorption Chiller
/ Heaters. |
| Component: |
Semiconductors and Electronic Components, Primary batteries,
Rechargeable
batteries and Solar batteries. |
| Others: |
Distribution and Maintenance. |
| 2. |
Basic R&D expenses and corporate office expenses and eliminations"
as unallocated expenses. |
| 3. |
In FY 2006, SANYO classified some discontinued operations
and have reflected those
changes in the consolidated financial statements for 1Q FY 2005. |
|
| 8. Segment by Geographical Location |
(Unit: Millions of Yen) |
| Items |
Mid-term FY 2006
(From April 1, 2006
to September 30,
2006) |
Mid-term FY 2005
(From April 1, 2005
to September 30,
2005) |
FY 2005
(From April 1, 2005
to March 31, 2006) |
| Amount |
Ratio
(%) |
Amount |
Ratio
(%) |
Amount |
Ratio
(%) |
Net sales &
operating
revenue |
Japan |
969,820 |
54.6 |
1,050,778 |
57.1 |
2,155,061 |
57.5 |
| Asia |
540,800 |
30.5 |
525,814 |
28.6 |
1,068,916 |
28.5 |
| North America |
183,747 |
10.3 |
182,030 |
9.9 |
356,316 |
9.5 |
| Others |
81,334 |
4.6 |
80,254 |
4.4 |
170,848 |
4.5 |
| Total |
1,775,701 |
100.0 |
1,838,876 |
100.0 |
3,751,141 |
100.0 |
Corporate and
Eliminations |
(634,240) |
- |
(624,034) |
- |
(1,266,836) |
- |
Consolidated total |
1,141,461 |
- |
1,214,842 |
- |
2,484,305 |
- |
Operating
income (loss) |
Japan |
19,512 |
58.9 |
(16,478) |
- |
11,586 |
73.8 |
| Asia |
6,030 |
18.2 |
(1,256) |
- |
1,544 |
9.8 |
| North America |
7,805 |
23.5 |
2,773 |
- |
7,339 |
46.8 |
| Others |
(192) |
-0.6 |
(1,087) |
- |
(4,775) |
(30.4) |
| Total |
33,155 |
100.0 |
(16,048) |
- |
15,694 |
100.0 |
Corporate and
Eliminations |
(17,314) |
- |
(12,321) |
- |
(32,848) |
- |
Consolidated total |
15,841 |
- |
(28,369) |
- |
(17,154) |
|
|
| 9. Segment by Geographical Location |
(Unit: Millions of Yen) |
| Items |
Mid-term FY 2006
(From April 1, 2006
September 30, 2006) |
Mid-term FY 2005
(From April 1, 2005 to
September 30, 2005) |
FY 2005
(From April 1, 2005 to
March 31, 2006) |
Amount |
Ratio
(%) |
Amount |
Ratio
(%) |
Amount |
Ratio
(%) |
| Asia |
313,931 |
27.5 |
299,413 |
24.6 |
621,273 |
25.0 |
| North America |
183,125 |
16.0 |
184,994 |
15.2 |
364,225 |
14.7 |
| Others |
119,755 |
10.5 |
122,258 |
10.1 |
253,488 |
10.2 |
Net sales &
operating revenue |
616,811 |
54.0 |
606,665 |
49.9 |
1,238,986 |
49.9 |
Overseas net sales &
operating revenue |
1,141,461 |
100.0 |
1,214,842 |
100.0 |
2,484,305 |
100.0 |
|
| Business Performance & Financial
Position |
|
 |
|
|
|
1. Overall Conditions at First Half
This fiscal half, the global economy has changed to generally a bullish
market, and the influence of this is being magnified primarily in
various countries, such as China, America, and the rest of Asia. However,
for the electronics industry, due to sharp rises in the prices of
crude oil and raw materials and price competition, prices are continuing
to fall and the relentless effects on the business environment have
continued.
Under these business conditions, SANYO is going forward in its efforts
based on the “Think GAIA” vision to continue the “SANYO
Evolution Project” – its three year transformation plan
– and aims to become an “Advanced Environment and Energy
Maker.” Already, SANYO has taken proactive measures in shifting
management resources to three core businesses namely, ‘Power
Solutions,’ ‘HVAC/R and Commercial Equipment,’ and
‘Personal Mobile Equipment.’
Regarding this first half and transformation in businesses such as
the semiconductor and television business, SANYO aims to transform
the business model so the business can thrive independently in the
market. The following measures have been implemented:
Semiconductor Business
The semiconductor business was able to conform to environmental changes,
and in order tobuild a system that can effectively procure funds from
the capital market, SANYO spun off its
semiconductor business establishing SANYO Semiconductor Co., Ltd.
in July.
Television Business
On October 1st, the television business moved
its main company functions to North America, a center of SANYO’s
television business market. Additionally, it created a Global Management
system. Taiwan’s Quanta Computer and SANYO established SANYO
Visual Technology Co., Ltd. and progress is being made focusing on
the joint procurement of materials and parts, and SANYO started sales
of LCD televisions that use Quanta’s panels.
Meanwhile, concerning the negotiations for establishing a new company
which were moving forward with Finland Nokia in the CDMA cellular
phone business, it was decided that for both companies it was appropriate
to seek other options individually. Both companies continue to enjoy
a positive relationship with each other after deciding to go separate
ways and are responding to the expectations of the market and customers.
Along with the above listed business transformation details, regarding
financial affairs, by attempting to conduct cost reduction, continuing
consolidation of property, and working for a reduction of interest-bearing
debt, SANYO is making efforts to create a healthy financial structure.
As for the embodiment of the “Think GAIA” vision, SANYO
has already begun full-blown
international sales of the extremely popular ‘eneloop’
rechargeable battery (a low self-discharge rechargeable battery).
Additionally, SANYO has begun sales of domestic and commercial use
air purifying systems that equip the “virus washer” function
which uses SANYO’s skills with electrolyzed water, removing
viruses from the air and draws out and maximizes water’s power.
SANYO has also begun sales of an Ultra-short Focus LCD Projector that
enables high-quality presentations to be held on a large screen even
in small meeting rooms or small classrooms.
By type: the showcase and large-scale air conditioner markets are
bullish, and the solar cell and electronic component products have
seen increased sales. The digital cameras and cellular phones, which
experienced difficulty in dealing with the effects and changes of
the business, as well as home-use air conditioners, which suffered
the effects of unseasonable weather, have seen a sharp reduction in
sales.
Consolidated Results
Mid-term net sales were 1,095.5 billion yen, a decrease of 7.1%
over the same period last year.Of this, sales in Japan were 481.2
billion yen, a decrease of 16.2% over the same period last year. Overseas
net sales increased 1.5% to 614.3 billion yen over the same period
last year.
Looking at the performance in the various segments, the Consumer segment
recorded sales of 493.5 billion yen, a decrease of 12.3% compared
with the same period of the previous year. This results from the effects
of price decrease overseas on cellular phones and intense competition
in the OEM market for digital cameras. Products such as new-function-equipped
navigation products and the highly popular LCD televisions marketed
towards North America have seen increased sales.
White goods such as SANYO’s new ‘AQUA’ washing machine
with its ‘air wash’ function that disinfects and deodorizes
clothes with the power of ozone (air) were highly popular. Due to
unseasonable weather, however, air conditioners have seen a drop in
sales, making white goods’ sales lower.
Commercial segment sales amounted to 133.9 billion yen, an increase
of 13.8% compared with the same period of the previous year. Showcases,
which are one the lowest selling items in the industry overall, saw
an increase through gaining new customers as well as existing customers
remodeling.
Sales of biomedical products in Japan decreased, however, sales overseas
focusing on places like Europe and North America increased. Also,
through changes from traditional to electronic filing in medical systems,
sales of medical systems continued to increase.
Component segment sales decreased 1.7% over the same period last year
to 442.4 billion yen.
Sales of rechargeable batteries overall decreased slightly, but based
on consumer needs, SANYO’s ‘eneloop’ – a Nickel-metal
Hydride rechargeable battery with low self-discharge – was launched
for full-blown sales in North America, Europe, and Asia.
SANYO continued sales of photovoltaic modules centering on the high-demand
German market in Europe, and the sale of HIT solar cells increased.
Electronic components increased overall due to rising demand in personal
computers, condensers for cellular phones and motors. However, business
reorganization due to the establishment of SANYO Epson Imaging Devices
Co., Ltd. sharply decreased LCD panel sales.
Other segment sales decreased 47.3% over the same period last year
to 25.8 billion yen. This is due to the removal of SANYO Homes Co.,
Ltd. as a consolidated subsidiary.
In terms of profit, due to fierce market competition and lowering
prices, consumer segment products such as cellular phones and digital
cameras’ sales reduced dramatically, however, through cost reductions
and favorable changes to cost to sales ratio, operating income of
15.8 billion yen were recorded. Losses on impairments of long-term
assets were 3.9 billion yen, investment loss on equity method was
4.1 billion yen, leaving a total of 7.0 billion yen. This left a net
loss of 3.6 billion yen for the half after corporate income tax.
Consolidated financial position
(Assets)
Total assets at mid-term decreased 17.2 billion yen to 2,137.7 billion
yen. This is primarily due to a decrease in cash, time deposits, restricted
cash, investments, advances and property, plant and equipment at a
cost of 72.3 billion yen, even though inventory increased 57.2 billion
yen compared to the end of fiscal year 2005.
(Liabilities and Stockholder’s Equity)
Total liabilities at mid-term increased 2.1 billion yen to 1,735.7
billion yen, from the end of fiscal year 2005. This is primarily due
to accounts payable debt and long-term deferred income tax including
such debt as notes and accounts payable increasing 49.0 billion yen
compared to the end of fiscal 2005, even though short-term borrowings,
current portion of long-term debt and company bonds, and long-term
debt decreased 46.3 billion yen compared to the end of fiscal year
2005.
Total Stockholders’ equity decreased 16.8 billion yen to 386.1
billion yen from a net loss for
the period of 3.6 billion yen and accumulated other comprehensive
loss which was an
additional decrease of 13.1 billion yen from the end of fiscal 2005.
(Cash Flows)
Regarding statement of cash flows, net cash provided by operating
activities was 10.7 billion yen; net cash used in investing activities
was 1.0 billion yen. Net cash provided by financing activities was
31.4 billion yen. Taking into account exchange rate fluctuations,
cash and cash equivalents at the end of the mid-term increased by
42.7 billion yen, compared to the end of fiscal year 2005, to 340.2
billion yen.
Non-consolidated Results
Mid-term non-consolidated net sales were 593.7 billion yen, a decrease
of 8.2% over the same
period last year. Of this, sales in Japan were 378.1 billion yen,
a decrease of 6.9% over the same period last year. Overseas net sales
decreased 10.3% to 215.5 billion yen over the same period last year.
In terms of profit, due to lower sales in consumer segment products
such as cellular phones and digital cameras’, and component
segment products such as semiconductor, losses of 11.6 billion yen
were recorded, and current losses of 8.8 billion yen were recorded
for the mid-term. Due to such losses related to the appraised loss
on stock of affiliated companies of 8.3 billion yen, and impairment
loss on fixed assets to the amount of 2.6 billion yen, the net loss
before tax for the mid-term was 13.3 billion yen, and net loss was
14.5 billion yen.
Therefore, unfortunately no dividend will be paid out this term.
2. Forecast of consolidated results for FY 2006 (April
1, 2006 to March 31, 2007)
Henceforth, although it is reasonable to think the electronics industry
will continue to experience a harsh business conditions, the marketplace
for products that protect the environment is showing an expansion
due to people’s growing awareness of global environmental problems
thanks to ever-stricter environmental regulations in places such as
Europe and the United States.
Consequently, SANYO will implement the following measures in order
to accelerate the
transformation into a “Leading Provider of Environment &
Energy-Related Products”.
(1) Strengthening HVAC/R and Commercial Segments
For SANYO, a company willing to take on the challenge of global environmental
problems, strengthening the HVAC/R and Commercial Segments and the
power solutions business is absolutely imperative. The industrial
equipment segment for products such as showcase and commercial air
conditioners will strengthen business in overseas markets, especially
in the remarkably progressing Chinese market. The photovoltaic module
business will proactively expand the business by starting programs
such as the “Next Generation Program for HIT Solar Cells”
which will triple current sales by 2010. In addition, SANYO will integrate
the commercial and consumer businesses in such areas as product development,
manufacturing, and sales, and provide products and services only SANYO
can provide.
(2) Facility Reforms (Manufacturing sites in Japan)
As manufacturing sites have been spread throughout many locations
in Japan and through the transfer of product manufacturing overseas
and discontinuing product lines, SANYO has noticed slight weaknesses
in manufacturing skills and power.
Therefore, in order to produce “Think GAIA” products,
SANYO will strengthen manufacturing power and make progress on “Facility
Reforms” to reduce costs. Specifically, after making clear the
capabilities of each manufacturing location in Japan, SANYO will adjust
accordingly.
(3) Global Management
SANYO will strive to effectively utilize all of the SANYO’s
management resources (human, asset and financial resources) maximize
efficiency across the world.
Specifically, management personnel will surpass the barriers of business
group and in order to limit the fragmentation of production and sales
offices, SANYO will endeavor to both reduce costs and make business
operations effective by further eliminating and consolidating operations,
even those abroad.
As regards the home-use refrigeration business that was selected as
a business to be restructured, SANYO partnered in the fields of manufacturing
and sales with Haier Group China, the world’s leading company
within this category and plans to increase cost competitiveness by
extending a manufacturing license agreement with the same company.
Furthermore, SANYO signed a basic agreement for establishing a joint
venture for development, design and product control, and by using
a new business model employing the strengths of both parties, will
create a more competitive business.
Additionally, as regards the cellular phone and digital camera businesses,
which is forecast to incur considerably reduced earnings and sales
in the second half because of inadequately addressing sizeable developments
in the business climate, SANYO will implement a hard-hitting measure
for profitability, by drastically reducing fixed costs in order to
adequately respond to the changing climate, and then rebuild the business.
Henceforth, It is our intention to push forward undaunted quickening
the pace as a unified company, in order to trigger growth at the earliest
possible date in the last stage of structural transformation, and
the results of performance recovery will inevitably indicate the success
of the structural transformation.
Please see below for the forecast for the consolidated and non-consolidated
results for the
fiscal year ending in March 2007:
| Forecast for consolidated results |
| Net sales |
2,200 billion yen |
91.8% (Compared to previous year) |
| Operating income (loss) |
35 billion yen |
Previous year: (17.2 billion yen) |
| Income before taxes (loss) |
(25 billion yen) |
Previous year: (165.7 billion yen) |
| Net income (loss) |
(50 billion yen) |
Previous year: (205.7 billion yen) |
| Forecast for non-consolidated results |
| Net sales |
1,190 billion yen |
87.9% (Compared to previous year) |
| Operating income (loss) |
(19 billion yen) |
Previous year: (40 billion yen) |
| Income before taxes (loss) |
(21 billion yen) |
Previous year: (48.2 billion yen) |
| Net income (loss) |
(65 billion yen) |
Previous year: (360.9 billion yen) |
*The above mentioned forecast of results is
based upon assumptions deemed reasonable at the time of preparation,
actual results may differ significantly form forecasts. Actual results
may be influenced but not limited to the following, changes in political
and economic regions, increased material costs and fluctuations in
the foreign exchange markets.
3.Business
and Other Risks
As part of its efforts to improve risk management, SANYO selects and
evaluates various managerial risks, in addition to creating a structure
for formulating solutions to prevent or minimize the damage caused
by such risks. The risks that have the potential to affect SANYO’s
business performance, stock price and financial situation etc. are
listed below.
The items in this document that relate to the future are based on
the decisions made as of this mid-term (September 30, 2006).
| (1) |
Managerial risks (Product quality, product development, consumer
relations, environment,
intellectual property, communication, sales, production, business
strategy, trading partners,
Mid-term Management Plan) |
| |
-SANYO’s products are designed and manufactured based
on upon the laws and regulations of each region and official
standards. However, the possibility that any of the products
would not have a defect or of a recall of products in the future
cannot be ruled out. Moreover, SANYO has insurance to cover
product-liability including recall insurance. However, it does
not guarantee sufficient coverage in the case of a liability
claim in the future. A large scale recall or product-liability
lawsuit could put to question the company’s credibility
and the guaranty costs involved could have a negative effect
on the company’s performance.
-Technological developments in the various business fields SANYO
is involved in are proceeding at a great speed and the needs
of the market are also changing rapidly. There is a trend of
current products and services becoming quickly obsolete and
losing their marketability. SANYO is making sustained efforts
in providing cutting-edge and attractive products and services.
However, in the case of development of latest technologies,
new products and services not reaching the market in the most
suitable way,
there is a possibility of SANYO losing its competitive edge,
resulting in the worsening of the company’s performance
and financial situation.
-SANYO strives to acquire and safeguard its intellectual property
rights however, there is
a possibility that it cannot fully prevent the use of its intellectual
property rights by a third party to manufacture and sell products
similar to its own etc. In addition, SANYO has acquired the
license for the manufacture and sale of some of its products.
In the future however, it may not be able to acquire certain
necessary licenses or the terms of the license may become more
stringent. Furthermore, SANYO pays close attention to the intellectual
property rights of third parties at the time of product development
but there is still a possibility of being litigated by a third
party for encroachment of intellectual property rights.
-In recent years, litigation on compensation for invention by
employees and relating attribution has increased. SANYO also
sets rules as regards inventions by employees, and remunerates
the inventor accordingly, however there still is a possibility
that litigation based upon inventions by employees and the payment
of compensation may occur.
-With regards to environmental pollution, in addition to regular
environmental auditing, SANYO undertakes surveys on soil and
groundwater pollution etc. However, changes in the law or exposure
of contaminants from the past may affect the company’s
credibility in the future and worsen the performance.
-SANYO selects its trading partners after a comprehensive credibility
review. However, there is a possibility of not being able to
continue business with them due to the emergence of contingency
liabilities. In such cases, there is a chance that losses be
incurred through temporary halt in supply of products and components
or bad debts etc.
-The procurement system for manufacturing is growing increasingly
borderless and the competitors are spread all over the world.
In particular, manufacturers from Korea, Taiwan and China, benefiting
from low labor costs are gaining technological ground, leading
to a rapid fall in product prices. If such a fall of prices
goes beyond SANYO’s expectations, and it cannot maintain
its cost competitiveness, adverse effects on the performance
may occur.
-Various materials are used by SANYO but there is a possibility
of a steep rise in prices due to changes in the social situation,
or an unbalance between the forces of supply and demand, or
price-adjusting due to speculation. Materials are purchased
based on a systematic plan but a sudden hike in prices may considerably
worsen the ratio of the cost of materials. Cutting down of fixed
costs etc. would be implemented but surging material prices
may make that process difficult, resulting in poor performance.
-SANYO deals with certain products in which the proportion of
OEM brands is higher than that of the SANYO brand. Also, the
ratio of the sales of components may waver considerably due
to changes in policy of the OEM customers or suppliers of parts
(policy to purchase from two suppliers, cost reduction policy
etc.) that may cause a reduction in the number of orders and
have adverse effects on performance.
-SANYO actively promotes collaboration with other companies
in the fields of manufacturing, sales and R&D, through technological
tie-ups, administrative alliances and joint ventures etc. However,
due to various reasons, the continuation of such alliances or
the achievement of substantial results can be difficult, having
a negative effect on the performance.
-In the course of doing business, there are times when personal
information about customers and information about business partners
and customers etc. is gathered. SANYO strictly safeguards such
information by adopting several measures however the safeguard
of such information from outside sources cannot be totally guaranteed.
In the case of such a leak of information to the outside, there
is a possibility that the decline in credibility of SANYO or
the need for compensation for damage would worsen the company’s
performance.
-SANYO has drawn up a Mid-term Management Plan based upon the
structural transformation program ‘SANYO Evolution Project’,
and is pushing forward with the
structural transformation program. However, there are possibilities
that due to certain circumstances a business alliance or joint
venture with another company does not proceed according to the
basic agreement or does not attain the expected outcome and
may incur liability or adverse effects on the performance of
the company. |
| (2) |
Labor risks (Human resources, Health & Safety, Work-related
accident) |
| |
-In order to develop and manufacture SANYO’s products,
a high level of know-how and
knowledge is necessary and SANYO has been focusing on such fostering
of personnel.
However, as personnel strategy is executed on a global scale,
there is a possibility of that
know-how and skills leaving the company through job changes
etc. and may have an
adverse effect on the company’s performance. |
| (3) |
Financial risks |
| |
-There is a possibility of the value of assets owned by SANYO
to reduce owing to a drop
in share prices due to drastic changes in the market or fall
in land prices.
-Sharp fluctuations in the interest rate may have a negative
effect on the company’s performance.
-A large proportion of SANYO’s transactions takes place
outside Japan and are greatly
affected by fluctuations in the currency rate. SANYO tries to
hedge the risks by adjusting
the overseas production ratio and through forward-exchange contracts
but they may not
be absolutely risk-free. In the future, the performance may
be negatively influence if
there are drastic fluctuations in the currency rates.
-SANYO has a syndicate loan contract and agreement line contract
with Rating and
Investment Information, Inc. and Japan Credit Rating Agency
for a long-term debt rating,
and is committed to maintaining a value above BBB- which ever
rating is higher. In the
case that SANYO can not maintain this commitment, based upon
a demand by a
sufficient number of creditors, there is a possibility that
SANYO may lose the benefit of
term concerning the debt from the syndicate loan contract, may
lose the benefit of term
concerning the debt from the commitment line, or the loan obligation
of the creditor may
become extinct.
-In April 2006 SANYO issued preferred shares, however through
the conversion of these
shares into future common stock, there may be a dilution of
the company’s common
stock and an effect on the stock price.
-SANYO possesses an out-of-house reserve for retirement pension
plans. In the future, a
drop in the value of pension assets due to a reduction in the
return on pension assets or an
increase in retirement allowance because of a reduction of the
discount ratio may increase
an unrecognized actuarial loss and may increase the retirement
pension expenses. |
| (4) |
Political, Economic and Social risks (Overseas protection) |
| |
-SANYO has manufacturing and sales units spanning the globe
and has been able to disperse country risks to a large degree.
However, sudden changes in political or economic policies in
any country may cause registering a temporary deficit or causing
problems in the supply of the products.
-Abrupt onset of terrorist activities etc. may cause a stagnation
of business with that country, leading to a negative impact
on the company’s performance. |
| (5) |
Disaster and Accident risks (Natural calamities, accidents) |
| |
-Regarding the damage caused by natural catastrophes, measures
have been implemented
to minimize the damage caused to a site keeping in mind the
cost-effectiveness of the
measures. However for unforeseen natural disasters, the damage
caused is inescapable,
which may lead to stoppage of production, further causing loss
of faith from customers,
all of which may affect the company’s performance.
-SANYO has introduced anti-virus software across throughout
the company, however if
computers were to be infected with a virus, it may be the case
that our facilities be
adversely affected, part of an operation suspended or production
or shipping delayed. |
|
 |
|
|
|
|
Page
Top
