Jvckenwood Corporation · TSE:6632
Jvckenwood — Q2 FY2014 Earnings Presentation
47 slides from Jvckenwood's earnings presentation, Nov 7, 2013
Slide 1: Results and Forecast Briefing, Second Quarter FYE March 2014
Translation for Reference Only JVCKENWOOD Results and Forecast Briefing Second Quarter of Fiscal Year Ending March 2014 JVC KENWOOD Corporation November 7, 2013 Copyright © 2013 JVC KENWOOD Corporation. All rights reserved.
Slide 2: Abbreviations
[Abbreviations] Car Ele: Car Electronics (Segment) Consumer (Business) OEM (Business) Pro: Professional Systems (Segment) P&H: Professional and Healthcare (Business) COM: Communications (Business) Optical Audio: Optical & Audio (Segment) Audio (Business) Imaging (Business) Image & Optical Device (Bu
Slide 3: Agenda
1. Overview of financial results for the first half of fiscal year ending March 31, 2014 2. Issues to be addressed - Major factors underlying the decline in operating income 3. Priority measures 4. Full-year earnings forecast for FYE3/’14 5. Reinforcement of business execution structure 2
Slide 4: Agenda: Overview of financial results
1. Overview of financial results for the first half of fiscal year ending March 31, 2014 2. Issues to be addressed - Major factors underlying the decline in operating income 3. Priority measures 4. Full-year earnings forecast for FYE3/’14 5. Reinforcement of business execution structure 3
Slide 5: Financial Results for the First Half of FYE3/'14 - Summary
Financial Results for the First Half of FYE3/’14 - Summary * Net sales and income declined year on year. (Billion yen) Net sales Operating income Ordinary income Net income FYE3/’14 148.4 (2.2) (4.2) (5.1) First half of FYE3/’14 FYE3/’13 149.3 4.4 3.0 1.2 YoY change (0.9) (6.5) (7.2) (6.4) Profit-an
Slide 6: Consolidated Net Sales
Financial Results for the First Half of FYE3/’14 - Consolidated Net Sales * 1H FYE3/’14 results: JPY148.4B (Down 0.6% YoY) Looking at the results by segment, net sales increased in Car Ele and Pro while they decreased in Optical Audio and Soft. (Billion yen) Net Sales (YoY change) 180.0 160.0 Opti
Slide 7: Consolidated Net Sales (Reference)
Financial Results for the First Half of FYE3/’14 - Consolidated Net Sales (Reference) * Looking at the results by region, net sales increased in regions other than Japan. (Billion yen) Net sales (YoY change) 180.0 160.0 Asia, Americas China Others +0.4 Japan Europe +0 140.0 +3.8 -7.6 +2.5 149.3 148.
Slide 8: Consolidated Operating Income
Financial Results for the First Half of FYE3/’14 - Consolidated Operating Income * 1H FYE3/’14 results: -JPY 2.2B (Down JPY 6.5B YoY) Operating income decreased in all segments. (Billion yen) Operating income (YoY change) 6.0 4.0 Car Ele 2.0 4.4 -3.4 Pro Optical Audio 0 -0.5 Soft -1.0 -2.2 Others
Slide 9: Consolidated Ordinary Income
Financial Results for the First Half of FYE3/’14 - Consolidated Ordinary Income * 1H FYE3/’14 results: -JPY 4.2B (Down JPY 7.2B YoY) Non-operating P/L: -JPY 2.0B (Down JPY 0.6B YoY) (Billion yen) Ordinary income (YoY change) 4.0 2.0 3.0 Decrease in operating 0 income -6.5 Decrease in -2.0 non- -4.
Slide 10: Consolidated Net Income
Financial Results for the First Half of FYE3/’14 - Consolidated Net Income * 1H FYE3/’14 results: -JPY 5.1B (Down JPY 6.4B YoY) Special P/L: -JPY 0.1B (Up JPY 0.6B YoY) Income taxes: -JPY 0.8B (Up JPY 0.2B YoY) (Billion yen) Net income (YoY change) 2.0 1.2 0 Decrease in ordinary -2.0 income -5.1
Slide 11: Balance Sheet Summary
Financial Results for the First Half of FYE3/’14 - Balance Sheet Summary * Total assets increased roughly JPY 5.2 billion from the end of the previous fiscal year. * Interest-bearing debts (sum of borrowings and bonds payable) increased roughly JPY 4.9 billion from the end of the previous fiscal yea
Slide 12: Change in Interest-bearing Debts
Change in Interest-bearing Debts * Simultaneously as interest-bearing debts declined, loan periods lengthened even more. (Billion yen) Change in interest-bearing debts (consolidated) Net debt Cash and deposits 160.0 Redemption of bonds Redemption of bonds payable worth JPY 2.0 B (March 2012) payable
Slide 13: Change in Shareholders' Equity Ratio
Change in Shareholders’ Equity Ratio * Shareholders’ equity ratio rose as a result of curtailment of total assets, an increase in net assets and an international offering in January 2011. Change in shareholders’ equity ratio (consolidated) (Billion yen) Net assets Shareholders’ equity ratio 100.0 50
Slide 14: Cash Flow Summary
Financial Results for the First Half of FYE3/’14 - Cash Flow Summary * Free cash flow decreased in FYE3/’13 and the first half of FYE3/’14 due to strategic investments (purchase of Shinwa shares). (Billion yen) FYE3/’11 FYE3/’12 FYE3/’13 1H FYE3/’14 Cash flow from operating activities 20.0 8.9 9.8 3
Slide 15: Changes in Cash Conversion Cycle and Number of Days in Inventory
Changes in Cash Conversion Cycle and Number of Days in Inventory * Inventory is on the rise due to a decline in sales. Inventory days Cash conversion cycle Changes in cash conversion cycle and number of days in inventory (consolidated) (Days) 80 70 71 78 74 63 64 60 40 52 45 47 20 41 40 41 0 FYE3/’0
Slide 16: (Reference) Information by Segment
(Reference) Information by Segment 15
Slide 17: Net Sales and Profits & Losses by Business Segment - Summary
Net Sales and Profits & Losses by Business Segment - Summary * Both net sales and income increased in Car Ele and Pro while they decreased in Optical Audio and Soft in the first half as well as in the second quarter (July to September). (Billion yen) First quarter Second quarter First half Segment Y
Slide 18: Car Electronics
Car Electronics * 1H FYE3/’14 results: Net sales JPY 53.7B (Up 10.8%) Operating income: -JPY 1.6B (Down JPY 3.4B) Consumer: Sales were comparable to the results of the previous period as the yen-equivalent value increased due to foreign exchange fluctuations although overseas markets shrank. Opera
Slide 19: Professional Systems
Professional Systems * 1H FYE3/’14 results: Net sales: JPY 44.0B (Up 3.3%) Operating income: JPY 0.2B (Down JPY 0.5B) COM: Income expanded as foreign exchange fluctuations caused the yen- equivalent value to increase while new orders increased in Japan. P&H: Income expanded as a result of the ef
Slide 20: Optical & Audio
Optical & Audio * 1H FYE3/’14 results: Net sales: JPY 36.5B (Down 11.2%) Operating income: -JPY 0.7B (Down JPY 1.0B) Audio: Income fell as products in the home audio segment were decreased through streamlining of products. Imaging: The camcorder category faced difficulties and had lower sales du
Slide 21: Entertainment Software
Entertainment Software * 1H FYE3/’14 results: Net sales: JPY 17.0B (Down 15.3%) Operating income: -JPY 0B (Down JPY 1.3B) Content: Net sales and operating income declined mainly due to the postponement of releasing major titles to the second half of the year. OEM: Net sales and operating income
Slide 22: Topics of the Content Business in the Second Half
(Reference) Topics of the Content Business in the Second Half of FYE3/’14 * In the second half of the year, plan to release titles of leading artists in the third quarter or thereafter. Kazuyoshi Saito Kaera Kimura Leo Ieiri “Saito” / “Kazuyoshi” “ROCK” “Taiyo no Megami” Simultaneously released Rele
Slide 23: Agenda: Issues to be addressed
1. Overview of financial results for the first half of fiscal year ending March 31, 2014 2. Issues to be addressed - Major factors underlying the decline in operating income 3. Priority measures 4. Full-year earnings forecast for FYE3/’14 5. Reinforcement of business execution structure 22
Slide 24: Major Factors Underlying the Decline in Operating Income
Financial Results for the First Half of FYE3/’14 Major Factors Underlying the Decline in Operating Income * Operating income declined mainly due to lower sales caused by the rapid shrinkage of overseas markets and an increase in cost in Japan caused by the sudden depreciation of the yen. (Billion ye
Slide 25: Cost Hike in the Domestic Market Caused by Sudden Depreciation of the Yen
Cost Hike in the Domestic Market Caused by Sudden Depreciation of the Yen * Performance slacked due to a considerable increase in the cost of sales in Japan for models that were planned and designed prior to the sudden foreign exchange fluctuations. * Factors that caused an increase in the cost of s
Slide 26: Rapid Contraction of Markets: Car Ele Segment (Consumer Car Audio)
Rapid Contraction of the Japanese and Overseas Markets Car Ele Segment (Consumer Car Audio) * Consumer car audios are shrinking considerably in terms of both the number of units and the unit price. Number of units in the industry: Continues to slide both in Japan and in overseas. Average unit pr
Slide 27: Rapid Contraction of Markets: Optical Audio Segment (Camcorder)
Rapid Contraction of the Japanese and Overseas Markets Optical Audio Segment (Camcorder category) * Camcorder market (existing camcorder models) is shrinking considerably in terms of both the number of units and the unit price. Number of units in the industry: Continues to slide both in Japan and
Slide 28: Agenda: Priority measures
1. Overview of financial results for the first half of fiscal year ending March 31, 2014 2. Issues to be addressed - Major factors underlying the decline in operating income 3. Priority measures 4. Full-year earnings forecast for FYE3/’14 5. Reinforcement of business execution structure 27
Slide 29: Priority Measures: Summary
Priority Measures: Summary * Exert efforts in implementing three priority measures at three different timings to promote recovery of performance. (1) Business restructuring measures in the 2nd half of FYE3/14 (3Q & 4Q) Execute overall cost reform, sales reform, emergency measures (e.g. compensatio
Slide 30: Business Restructuring Measures in the Second Half (3Q & 4Q)
(1) Business Restructuring Measures in the Second Half (3Q & 4Q) * List of action plans for business restructuring Overall cost reform Sales reform Fixed cost reform Overall inspection of Review & revision of purchasing & Production reform investments procurement Overall inspection of Review & revis
Slide 31: Key Business Restructuring Measures in the Second Half
(1) Key Business Restructuring Measures in the Second Half (3Q & 4Q) * Overall cost reform Move up the launch of models that accommodates yen’s depreciation - By the end of the second quarter, closed the low-profitable 2013 model designed at the time when the yen was strong. Dissolve inventories i
Slide 32: Reform of Earnings Structure toward FYE3/'15
(2) Reform of Earnings Structure toward FYE3/’15 * Cost reform Promote value engineering (VE) activities to respond to the depreciation of the yen and to reduce the cost of sales (from the 2014 model) * Fixed cost reform Japan: Reform employment structure Overseas: Perform reorganization and c
Slide 33: Medium-term Measures
(3) Medium-term Measures * Reconstruct the company to achieve new growth Promote growth businesses and conduct Develop new-generation businesses reforms of business activities Car optronics and innovative Healthcare business and cyber A vehicle technologies D hospital B Broadband multimedia systems
Slide 34: A. Car Optronics and Innovative Vehicle Technologies
(3) A. Car Optronics and Innovative Vehicle Technologies (i-ADAS* commercialization task force * innovative Advanced Driver Assistance System) * Expand the car optronics business with JVCKENWOOD’s core technologies at the base. * Deploy innovative vehicle technologies by working with venture compani
Slide 35: B. Broadband Multimedia Systems
(3) B. Broadband Multimedia Systems * The professional radio market is shifting from voice communication on narrowband to high-capacity data communication, including image transmission on public broadband. Firemen life protection system (image) U.S. broadband market Prevent firemen from experiencing
Slide 36: C. Next-generation Imaging (Camera)
(3) C. Next-generation Imaging (Camera) * Develop in-vehicle camera for achieving a major evolution in car optronics. * Strive to expand the security business by making use of high-resolution and communication functions. * Deploy high-resolution (4K/8K) cameras toward the 2020 Olympic Games in Tokyo
Slide 37: D. Healthcare Business and Cyber Hospital
(3) D. Healthcare Business and Cyber Hospital * Healthcare business Succeeded the medical image display device business of TOTOKU Electric Co., Ltd. (“TOTOKU”) in July 2013 and expanded the healthcare business. Radiographic interpretation monitor for “GazeFinder”, a supplementary device to PACS* u
Slide 38: D. Healthcare Business and Cyber Hospital: Cyber hospital
(3) D. Healthcare Business and Cyber Hospital * Cyber hospital Business development through alliances across medical and engineering sectors (use of special medical zone) Cyber hospital scheme Remote medical system using the public broadband network - Identifying conditions of patients (in-home ca
Slide 39: E. Emerging Markets
(3) E. Emerging Markets Brazil • Car Ele business expanded significantly as competitors (Billion yen) JVCKENWOOD’s sales targets withdrew from the market. in emerging markets 120 • To establish a production structure aimed at oligopoly going China India forward. 100 Central & South America Russia Ch
Slide 40: F. Alliances with Venture Companies
(3) F. Alliances with Venture Companies * By developing new business models through forming alliances with venture companies, strive for achievement of strategies for new business creation. Example) Established a venture company with ZMP INC. (Announced on July 18, 2013) Large company (general exa
Slide 41: G. M&A and Strategic Alliances with Japanese and Foreign Companies
(3) G. M&A and Strategic Alliances with Japanese and Foreign Companies * Actively pursue reforms of business activities and inorganic growth. Major achievements to date: Action taken Purpose Made Shinwa a To create synergy in the area of consolidated optical disk drive mechanisms for Shinwa subsidia
Slide 42: Agenda: Full-year earnings forecast
1. Overview of financial results for the first half of fiscal year ending March 31, 2014 2. Issues to be addressed - Major factors underlying the decline in operating income 3. Priority measures 4. Full-year earnings forecast for FYE3/’14 5. Reinforcement of business execution structure 41
Slide 43: Full-year Earnings Forecast for FYE 3/'14
Full-year Earnings Forecast for FYE 3/’14 * The full-year earnings forecast is revised to: net sales of JPY 310B and operating income of JPY 1.0B (Billion yen) Operating Ordinary Net sales income income Net income Revised forecast for FYE3/’14* (Announced on November 6, 2013) 310.0 1.0 (3.0) (5.5) R
Slide 44: Dividend Forecast for the End of First Half and Year-End
Dividend Forecast for the End of First Half and Year-End of FYE3/’14 * No dividend at the end of the first half as initially projected. The year-end dividend forecast is revised to no dividend. Annual dividend End of 1Q End of 2Q End of 3Q Year-end Total Previously announced forecast Yen Yen (Announ
Slide 45: Agenda: Reinforcement of business execution structure
1. Overview of financial results for the first half of fiscal year ending March 31, 2014 2. Issues to be addressed - Major factors underlying the decline in operating income 3. Priority measures 4. Full-year earnings forecast for FYE3/’14 5. Reinforcement of business execution structure 44
Slide 46: Reinforcement of Business Execution Structure
Reinforcement of business execution structure * Purport of the new structure Results of the first half and the full-year forecast have fallen below expectation due to the depreciation of the yen and drastic changes in the consumer market. The new structure has been implemented and driven using a
Slide 47: Forward-looking statements disclaimer
Expressions contained in this presentation referring to the Company‘s future plans, intentions and expectations are categorized as future forecast statements. Such statements reflect management expectations of future events, and accordingly, are inherently susceptible to risk, uncertainty and other