Earnings announcements

QWhy was the definitive agreement with the sponsor not executed at the end of October as scheduled initially?

AAs we are thoroughly discussing details such as the future direction with the sponsor, it is taking longer than expected. However, we are continuing consultations and discussions to execute a definitive agreement with them.

QWhat is the status of significant revision measures in the OEM business that are being considered?

AWhile conducting various consultations and discussions, we have determined that it is necessary to carry out improvement measures not only in the OEM business but on a group-wide basis. Going forward, we will focus on the early restoration of the financial base, business and structural reforms on a group-wide basis, and the enhancement of the corporate governance system.

QIn the business forecasts for the full-year, why was the forecast for operating income/loss left unchanged while that for net sales was revised downward by 30.0 billion yen?

ADespite lower profit due to a decrease in net sales, the forecast for operating income/loss was left unchanged as a decrease in depreciation and amortization as well as a reduction in costs, including in R&D expenses, are expected.

QWhy was the full-year forecast for depreciation and amortization revised?

AIn addition to reviews of investment schedule, due to a review of the amortization period to match the sales period in some parts of the OEM business, the forecast has been revised downward by 4.0 billion yen.

QHow are the situations of the consumer market business in Car Electronics?

ADue to the impact of weak local currencies and market conditions mainly in emerging markets, net sales for the first half of the fiscal year fell short of our plan, and full-year sales plan was revised mainly in Central and South America and the ASEAN region.

QWhy was there a significant year-on-year increase in the operating income of Others business in 2Q? Will this effect continue in the second half of the fiscal year onward?

AWhile FA systems contributed significantly to operating income in 2Q, they will become a decreasing factor in the second half of the fiscal year due to a business transfer.

QWhat was the state of each country within emerging markets, which was the main cause of net sales for fiscal 2017 underperforming the target? What is your view for these markets in the forecasts for fiscal 2018?

AAs for Car Electronics sales for consumer markets in emerging countries, we were projecting　a recovery from the second half of fiscal 2017, and Brazil and Russia were on a recovery trend, but going into 4Q, sales in Mexico and India fell short of our targets. For fiscal 2018, we expect increases from fiscal 2017, as we have already begun to see a recovery in countries such as Mexico and India, and sales of new cars are also growing in the ASEAN region.

QWhat is the background to the significant improvement in the cost of sales ratio in fiscal 2018? How do you view changes for the consumer markets and for OEM?

AIn Car Electronics, we expect an improvement in the cost of sales ratio for both the consumer markets and OEM. For the consumer markets, in addition to a recovery in markets in emerging countries, we are also projecting a contribution from the introduction of new products with an improved cost of sales ratio such as car AV products for overseas markets and car navigation systems for Japanese market. The improvement for OEM is due to a decrease in depreciation and amortization. In addition, we expect an improvement in the Others business owing to the effect of business mix.

QWhat is the balance of income between the first half of fiscal 2018 and the second half?

AAs for operating income, we expect it to be weighted more toward the second half than in previous years, owing to the timing of the introduction of new products in Car Electronics.

QWhat progress has been made in the autonomous driving field?

AThe development of 3D-LiDAR sensor is progressing well. The increase in R&D expenses in fiscal 2018 is because we are bringing forward 3D-LiDAR development expenses, and this fall, we plan to develop a working sample and supply it to automakers. With regard to the collaboration with HERE, we are discussing specific themes following the business partnership announced in February, and plan to make an announcement as soon as confirmed.

QWhat is the purpose of the “reversal of additional paid-in capital” announced that will be proposed at the General Meeting of Shareholders?

AWe consider the resumption of dividends is one of the most important management issues, and we have worked on securing funds for a dividend. Now, as preparation for the resumption of dividends, we have decided to submit a proposal on the “reversal of additional paid-in capital” to the General Meeting of Shareholders to be held in June 2017.

QWhat was the state of recovery in emerging markets during 3Q?

AIn emerging markets overall, sales increased year on year, and we see a recovery trend. By region, Brazil, ASEAN region, and Russia have begun to recover from the second half.

QWhat is the background for the 4.0 billion yen net income forecast for 4Q against the 3.0 billion yen net loss for the nine months?

AFor 4Q, we forecast 4.6 billion yen for operating income and the foreign exchange gains that are projected to arise under current foreign exchange rate assumptions.

QWhat is the background for the 2.5 billion yen decline in the depreciation and amortization estimate for the full year?

AThis is due to a change in the timing of capital expenditures, and revisions to development schedules for some of our products.

QWhat is the purpose for the transfer of cable-TV business to Technicolor, a French multimedia company, for which an extraordinary loss was recorded?

ATo concentrate resources on the core business of Car Electronics, we had been seeking a partner in the cable-TV business. With this optimal business partner, we aim to expand the cable-TV business. From fiscal 2018 onward, income of cable-TV business will be recorded as equity in gains of affiliated companies under non-operating income.

QRegarding the partnership with HERE, what are the differences with the previous announcements?

AUntil this point, announcements were made about proof experiment of “data ecosystem” to update HD (high definition) maps utilizing 3D-LiDAR sensors in our future plans, but this time, it’s about expanding the scope of the partnership for businesses on a global scale in the near future. We will generate new business models through initiatives that include mutual usage of current digital maps and cloud-based probe data owned by both companies.

QWhat was the breakdown by currency for the negative 0.5 billion yen impact of currency exchange on operating income for 2Q?
Also, are there any changes from the previous plan for currency rate assumptions in the Thai baht, Brazilian real, and Russian ruble?

AWhile the negative impact from the U.S. dollar and the positive impact from the euro offset each other, other currencies including the Chinese yuan and the Thai baht had negative effects on operating income for 2Q. Currency rates for emerging markets during the second half have been modified slightly, in light of current conditions.

QAre there any signs of a recovery in consumer-market car audio products in emerging markets?
If sales do not meet plans, can this be offset by cost reductions in areas such as SG&A expenses?

AAlthough recovery conditions in emerging markets vary by country, emerging markets overall are on a recovery trend, and as new models will be launched globally during the second half, we forecast higher sales compared to the first half.
In cost reductions, the effects of measures such as promoting modular design concept, integrated development of car AV products and car navigation systems, and promoting open platforms are producing results from fiscal 2017, and this is leading to an improvement in the cost of sales ratio for the full year.

QWhat is the background for the 5.0 billion yen increase in the forecast of borrowings from the previous forecast?

ATo ensure progress in the medium-term plan, we decided that it was preferable to secure funds ahead of expected future funding demand.

QIs progress in improvement in production efficiency and the cost of sales ratio accelerating compared to the medium-term plan?

AReduction in costs, including materials expenses, is progressing in line with plans.