Kokusai Electric Corporation · TSE:6525
Kokusai Electric — FY2024 Earnings Presentation
49 slides from Kokusai Electric's earnings presentation, May 10, 2024
Slide 1: Financial Briefings for the Fiscal Year Ended March 2024
TRANSLATION -FOR REFERENCE ONLY- Financial Briefings for the Fiscal Year Ended March 2024 (April 2023 to March 2024) May 10, 2024 KOKUSAI ELECTRIC CORPORATION KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All rights reserved.
Slide 2: Disclaimers
Disclaimers This document and the information presented in this document were created for the purpose of disclosing corporate information, etc., and do not constitute a solicitation of an offer to subscribe for shares or other securities of the Company, either domestically or internationally. ◼ Forw
Slide 3: Consolidated Financial Summary for FY24/3
Consolidated Financial Summary for FY24/3 KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All rights reserved.
Slide 4: Highlight
Highlight Consolidated Financial Summary for FY24/3 ◼ We recognized the market bottomed out, although some makers of semiconductor devices, particularly NAND, have continued to restrain investment. Capital investment in mature nodes increased in China, while investment in cutting-edge product develo
Slide 5: Consolidated Results Summary
Consolidated Results Summary Although full-year results showed a decrease in revenue and profit YoY due to the sluggish NAND market, the recovery trend from 2Q continues. Gross profit margin for full year increased YoY. FY23/3 FY24/3 Previous (JPY bn) 1Q 2Q 3Q 4Q Full Year 1Q 2Q 3Q 4Q YoY Full Year
Slide 6: 4Q FY2024/3 Results: Factors for Changes
4Q FY2024/3 Results: Factors for Changes Revenue decreased by JPY10.9 bn YoY, mainly due to restrained investment in NAND. Adjusted operating profit declined by JPY5.5 bn YoY, mainly due to the impact of sales decrease. Revenue Adjusted Operating Profit (JPY bn) (JPY bn) NAND -12.9 DRAM +8.3 60.1 Lo
Slide 7: FY2024/3 Results: Factors for Change
FY2024/3 Results: Factors for Change Revenue decreased by JPY64.9 bn YoY, mainly due to restrained investment in NAND. The impact of the decrease in sales was partly offset by an improvement in gross profit margin, resulting in a decrease in adjusted operating profit by JPY26.5 bn YoY. Revenue Adjus
Slide 8: Quarterly Revenues by Business
Quarterly Revenues by Business Revenue composition ratio from 3Q was sustained due to recovery of equipment sales. 64.4 65.2 (JPY bn) 60.1 56.0 54.0 49.2 45.0 71% 69% 66% 70% 32.7 70% 58% 73% 57% Equipment 34% 29% 31% 42% Service 30% 30% 43% 27% 7c FY23/3 FY24/3 (JPY bn) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Equi
Slide 9: Revenues by Business
Revenues by Business In FY24/3, the ratio of Service business increased due to a decrease in equipment sales. 245.4 245.7 (JPY bn) 178.0 180.8 69% 74% 65% 72% Equipment Service 31% 26% 35% 28% FY21/3 FY22/3 FY23/3 FY24/3 KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI
Slide 10: Quarterly Revenues by Application (300mm Equipment Only)
Quarterly Revenues by Application (300mm Equipment Only) In 4Q, while investment in NAND continued to be restrained, investment in DRAM and Logic/Foundry, including mature nodes, was strong, with 12% NAND, 44% DRAM, and 44% Logic/Foundry+Others. 45.4 45.0 7% 5% 42.3 (JPY bn) 11% 36.8 37.5 36.1 7% 27
Slide 11: Revenues by Application (300mm Equipment Only)
Revenues by Application (300mm Equipment Only) In FY24/3, with the impact of restrained investment in NAND, normal levels of sales in DRAM and Logic/Foundry, including mature nodes, were maintained and so the ratios of DRAM and Logic/Foundry increased. 181.8 (JPY bn) 2% 169.5 7% 31% 127.7 30% 2% 118
Slide 12: Revenues by Region
Revenues by Region In FY24/3, the ratio of Chinese sales expanded due to the deterioration of NAND market conditions worldwide and increased investment activity in China. In the future, the ratio of Chinese sales will return to its previous level as investment in cutting-edge products recovers world
Slide 13: Trends in Order Backlog
Trends in Order Backlog Projects with long delivery times included in the backlog are being shifted to sales and order backlogs normalized. Orders received bottomed out in 2Q and began to recover from 3Q, and 4Q is generally in line with plans. (JPY bn) 194.0 193.4 194.4 189.3 182.4 166.3 163.7 157.
Slide 14: Balance Sheet
Balance Sheet Total assets increased by JPY1.9 bn from the end of FY23/3 due to increase in inventories and property, plant and equipment, despite decrease in cash, trade and other receivables. Total liabilities decreased by JPY24.6 bn from the end of FY23/3 due to decrease in trade and repayment of
Slide 15: Equity Ratio / Cash and Cash Equivalents / Interest-bearing Liabilities
Equity Ratio / Cash and Cash Equivalents / Interest-bearing Liabilities The equity ratio was 50% at the end of FY24/3. Net debt at the end of FY24/3 was JPY0.4 bn. Interest-bearing liabilities were reduced as planned. Total Asset / Total Equity / Equity Ratio Cash and Cash Equivalents / Interest-bea
Slide 16: Quarterly Cash Flows
Quarterly Cash Flows Operating cash flows recovered in 4Q as revenue recovered. 22.1 20.5 (JPY bn) 13.2 10.1 9.9 8.6 2.4 0.1 -1.0 -2.1 -0.2 -7.4 -5.3 -2.0 -22.4 -0.1 -0.2 -1.3 -2.0 -1.7 -2.0 -0.9 -2.4 -3.4 -3.1 -3.2 -3.3 -3.0 -2.9 -4.1 -5.4 Cash flows from operating activities Cash flows from invest
Slide 17: Cash Flows
Cash Flows Due to the decrease in sales revenue, operating cash flows decreased, and free cash flows also decreased. 70.3 (JPY bn) 47.8 73.6 22.2 51.1 30.0 2.9 -9.0 -3.3 -3.3 -3.5 Cash flows from operating activities -7.8 -25.1 -6.3 -12.0 Cash flows from investing activities -48.3 Cash flows from fi
Slide 18: R&D Expenses / Capital Expenditure / Depreciation Expense
R&D Expenses / Capital Expenditure / Depreciation Expense Continue to invest in R&D and capital equipment in anticipation of medium- to long-term demand expansion. R&D expenses remained at the same level as the previous fiscal year. Capital investment increased 3.1 times YoY. Depreciation expenses i
Slide 19: Consolidated Earnings Forecast for FY25/3
Consolidated Earnings Forecast for FY25/3 KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All rights reserved.
Slide 20: Highlight
Highlight Consolidated Financial Summary for FY24/3 ◼ We recognized the market bottomed out, although some makers of semiconductor devices, particularly NAND, have continued to restrain investment. Capital investment in mature nodes increased in China, while investment in cutting-edge product develo
Slide 21: FY2025/3 Earnings Forecast
FY2025/3 Earnings Forecast Revenue is expected to increase by about 20% from FY24/3, as well as gross profit by about 24%, adjusted operating profit by about 35% and adjusted net income by about 30%. Annual dividends are expected to increase by JPY5 per half year to JPY32 per year. (JPY bn) FY23/3 F
Slide 22: FY2025/3 Earnings Forecast: 1H and 2H
FY2025/3 Earnings Forecast: 1H and 2H In 1H, legacy equipment included in Services business is expected to boost sales revenue. In 2H, sales of legacy equipment will calm down, and we are cautious about sales for China. On the other hand, our forecasts are based on the assumption that global demand
Slide 23: FY2025/3 Earnings Forecast: Factors for Change
FY2025/3 Earnings Forecast: Factors for Change For FY25/3, expect an increase in adjusted operating profit due to a recovery in sales, mainly for DRAM and Logic/Foundry, and an increase in gross profit margin. Revenue Adjusted Operating Profit +17.7 (JPY bn) (JPY bn) 51.0 -3.4 -1.2 +6.1 217.5 +30.6
Slide 24: Revenue Forecast by Business
Revenue Forecast by Business Both equipment and services revenues are expected to increase from FY24/3, sustaining normal sales composition by business. Equipment revenue for FY25/3 is expected to grow about 26% over FY24/3, with services revenue expected to grow about 10% over FY24/3. 245.4 245.7 (
Slide 25: Revenue Forecast by Application (300mm Equipment Only)
Revenue Forecast by Application (300mm Equipment Only) In FY25/3, sales are expected to increase for all applications, with no significant change in the sales composition ratio by application. Brisk capital investment in China will contribute to DRAM and Logic/Foundry sales, with NAND sales expected
Slide 26: Management Policy and Strategy
Management Policy and Strategy KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All rights reserved.
Slide 27: Highlight
Highlight Consolidated Financial Summary for FY24/3 ◼ We recognized the market bottomed out, although some makers of semiconductor devices, particularly NAND, have continued to restrain investment. Capital investment in mature nodes increased in China, while investment in cutting-edge product develo
Slide 28: Business Environment
Business Environment Market conditions bottomed out in FY24/3 and are expected to continue to recover. No change in the outlook for significant growth over the medium- to long-term. Outlook for Semiconductor Device Market Our Business Environment ■ The semiconductor device market bottomed out in CY2
Slide 29: Equipment Business Strategy
Equipment Business Strategy We aim for sales growth exceeding the WFE market growth by focusing on the R&D, acquiring new POR*1 and expanding sales for batch ALD equipment and treatment equipment which are technologically superior, in response to the multi-layering and three- depersonalization of se
Slide 30: Batch Deposition Equipment: Accelerating Batch ALD Demand
Batch Deposition Equipment: Accelerating Batch ALD Demand As devices become more complex, productivity challenges have become more apparent and highly difficult film deposition turned critical. Batch ALD has gained market share as a solution combining high difficulty film deposition and high product
Slide 31: Treatment Equipment: Demand Expanding as well
Treatment Equipment: Demand Expanding as well Treatment (film property improvement) in a wide range of temperatures by plasma and heating is possible. A solution that achieves high productivity with excellent isotropy and step coverage. Treatment on NAND/DRAM (Film Property Improvement) 1 By-product
Slide 32: Application-specific Initiatives
Application-specific Initiatives We are aiming for balanced growth in NAND, DRAM, and Logic/Foundry by expanding the leading technological advantages of 3D NAND to DRAM and Logic. We intend to grow power device into one of the pillars of our business. Business Environment Our Initiatives ・Demand for
Slide 33: Service Business Strategy
Service Business Strategy As a business that is less subject to market fluctuations and can expect stable demand, we provide after-sales services tailored to customer needs in line with the increase in the number of unit in operation. We also aim to expand our business by focusing on sales of legacy
Slide 34: Expansion of Production, Development, Sales, and Service Systems
Expansion of Production, Development, Sales, and Service Systems With the start of operations at the Tonami Plant in the fall of 2024, production and development capacity will expand significantly. We will strengthen after-sales services and sales in Asia by establishing a subsidiary in Singapore. G
Slide 35: ESG Initiatives: Materiality
ESG Initiatives : Materiality Based on our corporate philosophy, we are moving into a phase of upgrading the level of sustainability management groupwide, and will strengthen our efforts in both business and ESG aspects while becoming even more aware of our corporate social responsibility. Materiali
Slide 36: Summary
Summary Short-, medium-, and long-term growth drivers exist in a well-balanced way. Long-term Mid-term Short-term ◼ Demand expansion for our technology due ◼ Further demand expansion for our ◼ Increase of demand for DRAM and to the shift to Logic GAA*2 generation technology due to the shift towards
Slide 37: Information on IR Day
Information on IR Day (for institutional investors and analysts) Date and Time : June 18, 2024(Tue) AM(JST) Event format : Hybrid event planned Place : Bellesalle Yaesu 103-0028 First financial building, 1-3-7, Yaesu Chuo-ku, Tokyo, Japan Contact ： PR&IR Department, Corporate Strategy Division KOKUS
Slide 38: Appendix
Appendix KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All rights reserved.
Slide 39: KOKUSAI ELECTRIC at a Glance
KOKUSAI ELECTRIC at a Glance History Overview of Financials (FY24/3) 1949 s b s “Kokus r Co., L .” Adjusted Operating Profit Revenue Gross Profit Margin Margin Kokusai Electric Co., Ltd., Hitachi Denshi and Yagi Antenna 2000 r o or “H Kokus r I .” JPY 180.8bn 41.5% 20.9% 2017 KKR joined as a shareho
Slide 40: Management Policy
Management Policy B s o “K KU I L CTRIC W y” orpor p osop y , pursu o o u ro so u from both aspects of business activities and ESG initiatives, contribute to the achievement of SDGs, and continue to support a future where creation and innovation are born. “KOKUSAI ELECTRIC Way” Sustainability manage
Slide 41: Income Statement, R&D Expenses, Capex and D&A expenses
Income Statement, R&D Expenses, Capex and D&A expenses FY23/3 FY24/3 (JPY mn) 1Q 2Q 3Q 4Q Full Year 1Q 2Q 3Q 4Q Full Year Revenue 56,035 64,385 65,216 60,085 245,721 32,710 44,995 53,956 49,177 180,838 Gross profit 23,090 27,489 26,359 23,867 100,805 14,275 19,890 21,741 19,059 74,965 Gross profit m
Slide 42: Reconciliation of Adjusted Items
Reconciliation of Adjusted Items FY23/3 FY24/3 (JPY mn) 1Q 2Q 3Q 4Q Full Year 1Q 2Q 3Q 4Q Full Year Operating profit 12,984 16,407 15,527 11,146 56,064 3,990 9,383 10,689 6,683 30,745 Other income -30 -30 -191 -19 -270 -30 -110 -285 -254 -679 Other expenses 23 88 41 1,410 1,562 45 33 19 390 487 (Adj
Slide 43: Quarterly Balance Sheet
Quarterly Balance Sheet Total assets, inventories and tangible fixed assets are on an increasing trend. Total liabilities, interest-bearing debt decreased. Total equity, increased due to retained earnings. Assets Liabilities・Equity (JPY bn) 394.9 (JPY bn) 394.9 382.3 373.5 375.4 382.3 373.5 375.4 37
Slide 44: Key Balance Sheet Items
Key Balance Sheet Items FY21/3 FY22/3 FY23/3 FY24/3 FY21/3 FY22/3 FY23/3 FY24/3 (JPY mn) End of 4Q End of 4Q End of 4Q End of 4Q (JPY mn) End of 4Q End of 4Q End of 4Q End of 4Q Liabilities Current Loans payable + Lease liability 3,343 4,968 6,596 8,019 Assets Current Cash and cash equivalents 40,03
Slide 45: Cash Flow Statement
Cash Flow Statement (JPY mn) FY23/3 FY24/3 1Q 2Q 3Q 4Q Full Year 1Q 2Q 3Q 4Q Full Year CF from operating activites - 1,950 22,120 - 3,351 13,174 29,993 - 7,365 - 2,030 2,443 9,894 2,942 CF from investing activities - 982 - 1,657 - 2,069 - 3,117 - 7,825 - 5,278 - 2,037 - 3,321 - 1,314 - 11,950 Free C
Slide 46: Quarterly R&D Expenses / Capital Expenditure / Depreciation Expense
Quarterly R&D Expenses / Capital Expenditure / Depreciation Expense The ratio of R&D expense to revenue increased temporarily due to the continued investment in next-generation equipment development. The ratio will normalize as sales recover. Large-scale capital investments with long-term amortizati
Slide 47: Key Activities for FY2024/3
Key Activities for FY2024/3 Business Activities ◼ Received the 2024 EPIC Distinguished Supplier Award from Intel Corporation. (March 2024) ◼ Established an office in Yokohama for R&D of elemental technologies related to next-generation semiconductors, with plans to start full-scale operation at end
Slide 48: Key Activities for FY2024/3
Key Activities for FY2024/3 ESG Initiatives ◼ Recognized for the 3rd consecutive year as the 2024 Certified Health & Productivity Management Outstanding Organization (Large Enterprise Category). (March 2024) ◼ Signed an official partner agreement with professional soccer club Kataller Toyama, suppor
Slide 49: KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All
KOKUSAI ELECTRIC CORPORATION and its Affiliates Proprietary Copyright © KOKUSAI ELECTRIC Corporation 2024. All rights reserved.