Slide 1: 1H FY07/3 Financial Results and Outlook
1H FY07/3 Financial Results and Outlook Toshio Nakajima President and CEO October 25, 2006 NEC Electronics Corporation http://www.necel.com/ir/en/ 1
Slide 2: Cautionary Statements
CAUTIONARY STATEMENTS: The statements in this presentation with respect to the plans, strategies and forecasts of NEC Electronics and its consolidated subsidiaries (collectively “we”) are forward-looking statements involving risks and uncertainties. We caution you in advance that actual results coul
Slide 3: Agenda
Agenda I. 1H FY07/3 Financial Results II. FY07/3 Financial Forecasts III. Progress on Measures to Improve Performance © NEC Electronics Corporation 3
Slide 4: A Financial Snapshot
A Financial Snapshot FY06/3 FY07/3 Q2 Q1 Q2 1H JPY Bn Previous HoH YoY Forecasts Net Sales 166.8 165.2 177.8 343.0 + 10.0 + 30.1 345.0 Semiconductor Sales 160.0 158.1 169.7 327.8 + 9.0 + 27.5 330.0 Operating Loss -2.3 -5.8 -1.2 -6.9 + 16.6 + 5.2 -5.0 Operating Margin -1.4% -3.5% -0.7% -2.0% +5.1% po
Slide 5: Trends in Quarterly Results
Trends in Quarterly Results JPY Bn Net Sales 191.2 185.6 Other 177.8 166.8 170.3 165.3 165.9 162.7 165.2 169.7 146.1 181.2 160.0 179.1 156.8 162.0 160.7 158.7 140.3 158.1 Semiconductor Sales 8.2% 8.1% Operating 15.2 15.5 Margin 0.8% Expensed 0.7% 1.3 Assets -2.3 1.2 -1.2 1Q 2Q 3Q 4Q 1Q 2Q -1.4% 3Q -
Slide 6: Q1-Q2 Revenue Growth by Platform
Q1-Q2 Revenue Growth by Platform JPY Bn 200 Semiconductor Sales Growth Factors in Q1-Q2 Revenues 169.7 158.1 +7% 160 SOC Platform •An increase in sales due to launching shipments of LSIs for a new game console 67.5 •An increase in sales of LSIs for printers and 59.0 DVD drives due to seasonality fac
Slide 7: Q1-Q2 Revenue Growth by Application
Q1-Q2 Revenue Growth by Application JPY Bn Growth Factors in Q1-Q2 Revenues Semiconductor +7% 169.7 Sales 158.1 • Sales of digital baseband LSIs for mobile handsets 24.6 decreased •Sales of LCD driver ICs for mobile handsets increased due -14% to an increased share Communications 28.5 • Sales of LSI
Slide 8: Changes in Q1-Q2 Profits
Changes in Q1-Q2 Profits Q1 Q2 QoQ YoY JPY Bn (% Against Net (% Against Net sales) sales) Semiconductor Sales Net Sales 165.2 177.8 +12.5 +10.9 +11.7 169.7 158.1 Semiconductor 158.1 169.7 +11.7 +9.7 Sales Cost of Goods 118.9 124.7 Sold +5.8 +3.4 (72.0%) (70.2%) Gross Profit 46.3 53.1 Operating Incre
Slide 9: R&D Expenses (for the last 5 interim terms)
R&D Expenses (for the last 5 interim terms) Intensive R&D Spending in Growth Areas 25% Sales to R&D Expense Ratio 19.8% 18.3% 20% 17.5% 16.6% Approx. 18% (excl. one-time expensed 15% tech. assets) 14.0% 10% 75 JPY Bn One-time Expensed tech. assets Breakdown of Increased portion of R&D Expenses 50 Sh
Slide 10: Balance Sheet
Balance Sheet JPY Bn 05/9 06/6 06/9 Cash and Cash Equivalents 201.7 204.8 222.0 Accounts Receivable 113.3 106.5 116.7 Inventories 72.2 76.1 83.1 PP&E 324.7 309.5 305.9 Other Assets 88.0 45.6 49.4 Total Assets 799.7 742.6 777.0 Accounts Payable 117.5 137.5 169.2 Debt Payable 151.9 146.6 146.0 Other L
Slide 11: Cash Flows
Cash Flows Free cash flow turned black for the 1H FY07/3 JPY Bn FY06/3 FY07/3 1H Q1 Q2 1H Cash Flows from Operating 14.7 7.8 26.8 34.6 Activities Cash Flows from Investing -34.2 -12.4 -8.7 -21.1 Activities Free Cash Flow -19.5 -4.6 18.1 13.4 © NEC Electronics Corporation 11
Slide 12: Agenda
Agenda I. 1H FY07/3 Financial Results II. FY07/3 Financial Forecasts III. Progress on Measures to Improve Performance © NEC Electronics Corporation 12
Slide 13: FY07/3 Forecasts
FY07/3 Forecasts FY06/3 FY07/3 JPY Bn Full Year 1H 2H Full Year Previous 1H Previous 2H Full Year changes changes Previous changes Forecasts Forecasts Results (as of April 25th) Forecasts Forecasts Forecasts (as of April 25th) (as of April 25th) Approx. Approx. Net Sales 646.0 345.0 343.0 -1.9 360.0
Slide 14: Non-Operating Income and Expenses
Non-Operating Income and Expenses FY06/3 FY07/3 Full Year 1H 2H Full Year JPY Bn Previous 1H 2H Previous Full Year changes Previous changes changes Forecasts Forecasts (as of April 25th) Results Forecasts Forecasts (as of April 25th) Forecasts (as of April 25th) Approx. Approx. -6.7 -2.0 ＋1.3 ＋3.3 -
Slide 15: Changes in Previous and Current 2H Forecasts
Changes in Previous and Current 2H Forecasts JPY Bn Semiconductor Sales -10.0Bn Semiconductor Sales 350.0 Market slowdown and sales decline in the mobile 340.0 handsets area drag down overall semiconductor sale Cutting SG&A Expenses Approx. +2.0 Lower profits from Sales decline Changes in Exchange R
Slide 16: Semiconductor Sales Forecasts (HoH)
Semiconductor Sales Forecasts (HoH) 400 Semiconductor Sales JPY Bn +4% SoC Platform 327.8 (+) Volume shipments of LSIs for a new game consoles 300 (+) Increase in shipments of LSIs for mobile handsets, such as digital baseband LSIs, due to a recovery in the Japanese market from 126.5 UP: High single
Slide 17: Changes in 1H – 2H Operating Income (Loss)
Changes in 1H – 2H Operating Income (Loss) JPY Bn Semiconductor Sales 340.0 327.8 Approx. +1 2.2 Bn Cost cutting effect Approx. +4.5 Increase in Lower foundry rate R&D expenses Depreciation & lease Approx. +4.5 Approx. -11.5 Approx. Cutting SG&A Expenses +18.5 Approx. +2.0 0 Operating Income Operati
Slide 18: Capex, Depreciation and Lease expenses
Capex, Depreciation and Lease expenses Majority of Capex spent in 1H, Expenses increase in 2H Capex Spending Depreciation & Lease expenses JPY Bn 80 R&D Expenses, Others 60 Back-end Lease 40 Depreciation 20 Front-end 0 1H 2H 1H 2H 1H 2H 1H 2H FY06/3 FY07/3 FY06/3 FY07/3 (Tangible assets, delivery ba
Slide 19: Agenda
Agenda I. 1H FY07/3 Financial Results II. FY07/3 Financial Forecasts III. Progress on Measures to Improve Performance © NEC Electronics Corporation 19
Slide 20: Measures to Improve Performance
Measures to Improve Performance Expanding orders and sales Lower costs to sales ratio with capacity increase and higher utilization rate 2nd Half FY07/3 Develop Stronger Products and Recover Profitability © NEC Electronics Corporation 20
Slide 21: Measures to Improve Performance
Measures to Improve Performance Lower costs to sales ratio with capacity increase and higher utilization rate 9 Manufacturing capacity is expected to increase by about 10% from 1H to 2H due to investments in the 300mm line at Yamagata and the OEE* activities, however, not enough orders to fill the l
Slide 22: Our Progress and Issues We Face
Our Progress and Issues We Face 2nd Half FY07/3 Develop Stronger Products and Recover Profitability Steady progress in the MCU sales increase and the ASSP expansion, but the profits have not yet shown true recovery The EMMA™ series for the digital AV platform All Flash™ MCUs 2H: design-ins for 50
Slide 23: Measuring Our Progress
Measuring Our Progress Continue to work on sales & order expansion and cost cutting measures, while developing products to recover profitability Expanding orders and sales Lower costs to sales ratio with capacity increase and higher utilization rate Develop Stronger Products and Recover Profitabilit
Slide 24: © NEC Electronics Corporation
© NEC Electronics Corporation 24