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- Q & A Archives FY2014
FAQ:Q & A Archives FY2014
FY2014 Q1 Results Announcement - July 31, 2014
- Q1. Please explain the main points of the FY2014 first quarter consolidated results.
- Sales increased by +36.9 billion yen from the year-earlier period, primarily reflecting growth in the Energy & Infrastructure and Community Solutions segments. The Energy & Infrastructure segment saw higher sales, reflecting good performances in social infrastructure businesses, including Solar Photovoltaic Systems and Railroad Systems, as well as the steady performance of the Power Systems business. The Community Solutions segment also recorded higher sales on good performances by the building solutions business and Toshiba TEC Corporation.
Operating income of 39.5 billion yen was the highest ever and an increase of 57% against the year-earlier period. In the Electronic Devices & Components segment, NAND flash memory business maintained high profitability. The Energy & Infrastructure segment recorded higher operating income, reflecting higher operating income in the Solar Photovoltaic Systems, Railroad Systems and Nuclear Power Systems businesses. The Community Solutions segment also recorded higher operating income, reflecting higher operating income in the Commercial Air-Conditioner business and at Toshiba TEC. The Lifestyle Products & Services segment saw a significant increase in operating income of 21.6 billion yen.
- Q2. Please tell us about the FY2014 first quarter business results in the Energy & Infrastructure segment.
- The segment as a whole saw higher sales on good performances in renewable energy businesses, including Solar Photovoltaic Systems, and in the overseas Railroad Systems, Automotive Systems and Industrial Equipment businesses. We also saw steady performances in the power systems businesses including Thermal and Nuclear Power Systems. Higher operating income reflected a significant increase in the overseas Railroad Systems business and in the Solar Photovoltaic Systems and Nuclear Power Systems businesses. The Thermal Power Systems business also maintained high profitability.
- Q3. Please tell us about the FY2014 first quarter business results in the Community Solutions segment.
- The segment as a whole saw higher sales. Solar Photovoltaic Systems and Disaster Prevention Systems for local governments saw steady sales, as did building solutions, such as Elevators and Building Systems and Commercial Air-Conditioners. Overseas sales increased, and Toshiba TEC also recorded higher sales. Higher segment operating income reflected good performances in Solar Photovoltaic Systems and Disaster Prevention Systems for local governments and building solutions businesses. Overseas Commercial Air-Conditioners business saw higher operating income, as did Toshiba TEC.
- Q4. Please tell us about the FY2014 first quarter business results in the Healthcare Systems & Services segment.
- The segment as a whole saw lower sales. In Japan, equipment sales, especially of X-ray and ultrasound diagnostic systems, declined as the result of higher demand in the previous quarter prior to an increase in the consumption tax, while sales in the U.S. and Europe were impacted by policies to curb total spending on medical care. Lower operating income reflected lower equipment sales, despite stable performance in the domestic and overseas service sectors.
- Q5. Please tell us about the FY2014 first quarter business results in the Electronic Devices & Components segment.
- The segment as a whole saw lower sales. Sales in the NAND flash memory business were lower due to controlled production and sales in response to market trends and lower sales prices. The Storage Products business, notably 3.5-inch HDDs, recorded higher sales. The segment as a whole saw lower operating income, but still at a high level. The NAND flash memory business retained high profitability, despite lower sales prices, reflecting enhanced competitiveness on advances in process technology. The Storage Products business saw higher operating income, and the Discrete and System LSIs businesses saw a significant improvement.
- Q6. Please tell us about the FY2014 first quarter business results in the Lifestyle Products & Services segment.
- The PC business saw positive operating income in the FY2014 first quarter. The operating loss of the TV business decreased significantly as a result of restructuring implemented last fiscal year. The business environment remains severe, and additional measures will be taken to ensure stable profitability, regardless of the amount of sales. The Home Appliances business has maintained positive operating income for three consecutive quarters since the FY2013 third quarter, showing a profitable trend.
- Q7. Please tell us about further structural reforms of visual products business.
- Last year’s measures have won improvements and taken the business toward profitability. The latest round will concentrate resources on growth markets, as a means to secure stable profit at a higher level. The business will now focus on Japan, where growth in demand for large size Ultra HD (4K) LCD TVs is anticipated, and on high growth emerging markets. Sales sites in low profit countries and regions will be optimized, from 24 to 12 sites around the world, by the first half of FY2015. This move will also reduce the visual products business’s global workforce by about 25%, excluding the manufacturing operation which has already reduced its headcount, and is expected to cut fixed costs by a further 10 billion yen against the FY2014 level.
- Q8. Please give us your forecasts for FY2014's first half and full-year results.
- We are not changing our results forecast for the first half and full fiscal year. We have set the forecast as our minimum target and aim to achieve further improvement, because the Energy & Infrastructure and Community Solutions segments are continuing healthy performances and the NAND flash memory business in the Electronic Devices & Components segment is expected to retain high profitability.
Mid-term Strategies for Sustained Growth through Creativity and Innovation (FY2014-2016) - May 22, 2014
- Q1. What are important points in your FY2014 Medium-term Business Plan?
- We place most importance on are“promoting a healthy financial base,” “organic growth” and “enhancing profitability.”
- “Promoting a healthy financial base”
In our growth businesses, we will continue to make resource inputs necessary to sustain our competitive power; however, when executing them we will put the priority on strengthening our financial base. We will carry out capital expenditures and investments during the Medium-term Business Plan now under way within a planned frame of ¥1.5 trillion. With regard to business alliances with other companies as well as M&A, our intention is to carry them out within this planned frame, with priority placed on Healthcare, Data Storage and Energy. With regard to business acquisitions in particular, our policy is to carefully select the opportunities that will lead to the strengthening of our financial base through the making of higher profit from synergies with existing businesses. We have already started up a Productivity Improvement project, Project GAIN,*1 that will help us transform Toshiba into a truly innovative enterprise. Project GAIN involves thinking outside of the box to review productivity processes in all areas in order to optimize total costs and utilize resources and assets more efficiently. We will create enormous benefits through cost reductions in procurement and logistics as well as by maximizing the efficient use of our production bases, and we will achieve increased sales by spreading into all areas the various measures that have achieved results. Through Project GAIN we will generate additional investment funds that will be utilized to further improve our financial base and to make timely investments for growth. By improving our total assets turnover ratio and cash conversion cycle, we will strengthen our cash flow management and lower our D/E ratio to 0.8 times at the end of FY2016 from 1.1 times in FY2013. Similarly, we will improve, respectively, ROI*2 from 10% to 14% and our shareholders' equity ratio from 20% to 23%.
- *1: Global Action for Innovative Enterprise
- *2: Return On Investment
- “Organic growth”
Our Medium-term Business Plan sets the FY2016 net sales target at ¥7.5 trillion. This is approximately the same average growth rate of 5% as the forecasted world GDP growth rate during the Medium-term Business Plan. However, the market growth rate of Toshiba's business pillars of Data Storage, Energy and Healthcare is expected to exceed this percentage figure. So far, Toshiba has focused on allocating resources to strategic growth areas and we have concentrated on transforming our business portfolio. As a result, we have many businesses that have the world's top-level competitive power in the Data Storage, Energy and Healthcare markets — all markets where big growth is expected. For example, in the data storage business, NAND flash memory has high technological capabilities and profitability and we are looking to expand our strong NAND business to enterprise fields. In the energy business, we have the world's highest efficiency combined cycle technology for thermal power generation, and with regard to renewable energy, our hydroelectric pump-up power generation and geothermal power generation are also businesses in which we have the world's top share. We will expand our energy business centering on the application of low-carbon technologies. In healthcare, which we have decided to make our third business pillar, we are targeting the position of being among the world's top three in diagnostic imaging systems. In new healthcare business areas, we are developing such exciting new products as heavy-ion radiotherapy systems that offer improved treatment for cancer patients and DNA testing kits. The unique technology strengths Toshiba possesses in healthcare systems and services can lead us to win in the healthcare market.
In this manner, by absolutely strengthening the strong global businesses that Toshiba already possesses in line with the expansion of growth markets, including in emerging economies, we will achieve increased profit from increased sales – not necessarily by depending on business acquisitions. In addition, by creating new markets through New Concept Innovation, we will steadily realize our sales targets. This is my view of the role to be played by “organic growth.”
- “Enhancing profitability”
In addition to enhancing the profitability created through “organic growth,” we will resolutely carry out the restructuring of low-performance businesses to return such businesses into black figures. Moreover, in all of our businesses we will enhance profitability by strengthening our maintenance and services businesses.
- Through “organic growth” and “enhanced profitability” we will aim to further strengthen our presently strong businesses and work to effectively improve our businesses with issues. Going forward, we will aim in all of our business fields for a Return On Sales (ROS) of 5% or more.
- Q2. Please explain your Data Storage business strategies.
- Maintaining high profitability and technological superiority in Data Storage
- With the arrival of the use of Big Data and the more information intensive society, such as IoT,*1 globally the volume of information storage is growing by leaps and bounds, and going forward, the demand for data storage-related products such as Toshiba's NAND flash memory, SSD*2 and HDD is expected to further greatly grow. In NAND flash memory, for which we have the world's topclass competitive power, from April 2014 we began mass production of the world's most advanced smallest-class 15nm product. In addition, we are promoting the development of and building a production system for the coming next-generation 3D multilayer NAND flash memory era, which is expected to begin in the latter half of FY2015, and we are aiming to make sample shipments within FY2014. In such a way, we continue to make excellent progress in our pursuit of miniaturization and efficiency as well as cutting costs and continue to speedily bring to market products that have a strong competitive power. Going forward, in order to keep our technological superiority and continue to lead the market, we will selectively allocate management resources focused on the data storage business.
- *1: Internet of Things
- *2: Solid State Drive
- Q3. Please explain your Energy business strategies.
- Contributing to the global environment by using “low carbon” technologies in making, transmitting and distributing, storing and smartly using energy
- It has become a crucial global task to tackle resource and energy issues while giving consideration to the effects on the global environment, such as the need to reduce greenhouse gas emissions. Toshiba will continue to contribute to the solution of these problems by offering highly efficient, low greenhouse gas emission power generation systems, including the world's highest efficiency combined cycle units and renewable energy systems such as hydroelectric power, geothermal power and solar power generation. Energy problems are urgent issues, especially in the emerging economies, and in this context, Toshiba is also aggressively carrying out the development of its energy businesses. For example, in India, we established joint-venture companies with local companies, and we are strengthening our overseas operations by establishing a global horizontal division work structure, including for manufacturing in the thermal power generation business and the power transmission, transforming and distribution business. We are developing our energy business with a view toward promoting exports to Asian and African markets from India.
In our nuclear power business, it is important to work on receiving new orders and the construction of new plants. However, a key foundation for Toshiba's earnings is in maintenance services and the supply of fuels for existing plants. These areas account for more than 80% of our nuclear business sales. Presently, about a 28% share (ratio of installed capacity) of the world's operating nuclear plants are those that Toshiba Group has handled, and we can expect stable profitability in this business in the future as well. While pursuing further safety in nuclear power generation, we will aim to improve profitability based on maintenance services and our fuel business for existing plants.
In the Community Solutions segment, towards the early realization of the Human Smart Community, we have participated in a total of 36 demonstration plants and commercial projects regarding the Smart Community around the world. With the knowledge and information we have gathered so far, we will accelerate commercialization and will work to realize stable energy supply and safe, secure and comfortable communities.
- Q4. Please explain your Healthcare business strategies.
- Aiming for the world's top 3 share in diagnostic imaging systems, expanding into new healthcare business areas
- In diagnostic imaging systems, which are a key foundation of our healthcare business, we aim to be among the world's top 3 in market share by such means as strengthening product competitiveness, expanding into new areas such as the in-vitro diagnosis (IVD) business, expanding and strengthening our global operations structure and strengthening our maintenance and service operations. For example, for our CT systems, which have already obtained a very high reputation from medical institutions around the world, we will aim for a top-level global market share by enhancing our products' appeal in such ways as incorporating low radiation dose technology in all of our CT models. Furthermore, we will further expand our global operations by such means as expanding production at our Brazil plant and implementing a co-development system at each of our bases in Japan, the U.S., Europe, China and India. In our maintenance and services business, we will contribute to shortening patients' waiting times, and achieve improvements in medical institutions' management by guaranteeing the stable operation of equipment in conjunction with diagnosing signs of a problem through the use of a remote maintenance system and by reducing costs by speedily inspecting and repairing systems.
- Q5. Please explain your Lifestyle Products & Services business strategies.
- Realizing black figures by further strengthening the business efficiency of the Lifestyle Products & Services segment
- In our home appliances businesses that are already in the black we will expand these businesses mainly by focusing on emerging economies, such as in Asia and the Middle East, where the markets are growing, and we will aim for 5% or more Return On Sales (ROS). In our TV business, due to the effects of the restructuring steps that we have implemented so far, the improvement of the cost structure is steadily progressing. We will work to build up a business system that can better withstand the influence of fluctuations in sales by thoroughly further implementing a streamlining of management. In the PC business, where market growth is hard to expect, we will further proceed with restructuring efforts by such means as focusing on particularly promising sales regions and reducing the numbers of product models.
At the same time, we will considerably improve our earnings power by expanding sales to enterprises.
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