Presentations & Events


- ended March 2006 (For 167th Fiscal Period)

Presentation for FY2005 Q3 Results

For First 9 months and 3rd Quarter ended December, 2005   - January 31, 2006

Outline of the presentation

1. Consolidated Results for the 9 Months Ended December 31, 2005

Net Sales 4,483.2 billion yen (+8% YoY)
Operating income 115.0 billion yen (+63.4 billion yen YoY)
Income before income taxes and minority interest 86.8 billion yen (+59.3 billion yen YoY)
Net income 36.5 billion yen (+26.5 billion yen YoY)

Note) For the FY2005, equity in earnings of affiliates has been included in income (loss) before income taxes and minority interest.

  • Digital Products, Electronic Devices, Social Infrastructure and Home Appliances all saw sales increase against the year-earlier period.
  • Digital Products, Electronic Devices and Social Infrastructure all reported improved operating income (loss), while Home Appliances saw a comparable operating loss.

2. Financial Position and Cash Flows

  • Total assets increased by 331.9 billion yen from the end of March 2005 to 4,903.3 billion yen.
  • Shareholder' equity improved by 75.4 billion yen to 890.9 billion yen from the end of March 2005.
  • Total debt decreased by 3.7 billion yen from the end of March 2005 to 1,107.7 billion yen.
  • Free cash flow was plus 105.6 billion yen during the nine-month period, a 156.5 billion yen improvement from the same period in the previous year.
  • The debt-to-equity ratio was 124%, a 12-point improvement compared with the year-earlier period.

3. Revised Business Forecast for FY2005

Net Sales 6,300.0 billion yen
(+300.0 billion yen to the previous forecast)
Operating income 210.0 billion yen
(+40.0 billion yen to the previous forecast)
Income before income taxes and minority interest 160.0 billion yen
(+30.0 billion yen to the previous forecast)
Net income 65.0 billion yen
(+10.0 billion yen to the previous forecast)

Q & A Session

Q1. Toshiba has revised up its operating income forecast for FY2005 by 40 billion yen. Please break down this 40 billion yen on a quarterly basis.
Operating income was already favorable in the 1H, compared to the same period the previous year. It was not only the 3Q that produced good results. Our forecast for the 4Q's operating results is not optimistic.
Q2. What was the reason for the large operating profit of 63.7 billion yen in the 3Q?
Primarily, the favorable result in Electronic Devices and the result achieved by the Social Infrastructure segment, which emerged from a loss into the black. In Social Infrastructure, results for the Medical Systems, Industrial and Power Systems & Services and Social Network & Infrastructure systems businesses all improved.
Q3. Do you see any prospect for profit in your audio-visual businesses?
The DVD business saw a loss. The TV business is following a recovery trend. It is improving, but still not yet at a point where the results will immediately turn profitable.
Q4. Please breakdown your FY2005 sales forecast for the Semiconductor Company by Memory, Discrete, and System LSI.
The expected breakdown ratio for Discrete, System LSI and Memories in FY2005 are 20%, 45% and 35%, respectively. There is no revision of sales from the forecast made at the beginning of the fiscal term. As for operating income, the company initially anticipated 75 billion yen, but it will be approximately 130 billion yen.
Q5. Have you revised the capital expenditure for the Semiconductor business for the FY2005? How much capital expenditure does Toshiba plan for FY2006?
Toshiba has not changed its plan of 225 billion yen for the Semiconductor business in FY 2005. We have not yet confirmed capital expenditure for FY2006, but we will pro actively invest in the Semiconductor business, based on our analysis of the market environment.
Q6. How do you see trend in price-per-bit for NAND-type flash memory in the 3Q and 4Q?
Prices of NAND-type flash memory showed more stability in the 3Q than in the 2Q. For the 4Q, we project price erosion on expanding demand for larger capacity memories, but we expect that this will further boost overall demand.
Q7. Please tell us the current supply-demand ratio in NAND-type flash memory.
We were able to meet 75% of demand in the 3Q. In the 4Q, we expect that to rise to approximately 90%.
Q8. Please tell us your manufacturing quantities for NAND-type flash memory.
The average manufacturing quantities in the 2Q and 3Q were 70 million and 80 million units a month, respectively, at a capacity equivalent to 512Mbit.
Q9. What are the business trends in the Discrete and System LSI business?
Sales of Discrete devices in the 3Q were at almost the same level as for the same period the previous year. We forecast a seasonal sales decrease for the 4Q, to the level of the previous year.

In System LSI, we maintained favorable operations in image sensors and custom SoC, but saw decreased demand for System LSIs for consumer products, such as TVs and other audio-visual products, and for MCU and Analog devices. Thus sales of System LSIs decreased from the 2Q. In the 4Q, we expect the market to ramp up earlier than in a typical year in places like China, where we anticipate increased demand, especially in the consumer electronics field. Broadband system LSI produced at the company's Oita Operations will also contribute.
Q10. Please tell us the factory utilization ratio for each semiconductor production site.
At Himeji Operations-Semiconductor, the wafer processing facility is operating at full capacity, the assembly facility for Small Signal devices is operating at 95%, and at 100% for Power Transistor devices. Kitakyushu Operations is operating at full capacity, and so are Oita Operations and Yokkaichi Operations.
Q11. Suppose Capital Expenditure for the semiconductor business for FY2006 is 200 billion yen. If Toshiba plans to invest in Westinghouse in addition to this, I believe the cash flow required for investments will go beyond the scope of operating cash flows. Please tell us how Toshiba sees this.
For the past three years, Toshiba generated annual free cash flows of 100 billion yen on average. By taking future profit increase into account, we believe that the investments will not go beyond the scope of cash flows, even if we invest in both Semiconductors and Westinghouse. These investments will not be negative factors that cause deterioration in the company's financial situation. We cannot comment on recouping the investment, other than to say that, in the Nuclear Power business, we see the time frame for such considerations as in the range of 10 to 20 years. We believe the business will generate sufficient profitability.
Q12. Please tell us how Toshiba sees Westinghouse's goodwill.
Because Toshiba employs U.S. generally accepted accounting principles, the goodwill is subject to annual impairment test, not amortized in 20 years. Toshiba does not suppose that it will decrease soon.
Q13. A credit-rating firm placed Toshiba on 'CreditWatch', following announcement of possible purchase of Westinghouse. Does Toshiba have any comment on this?
It is regrettable. As announced in Toshiba's press release on January 24, Toshiba has just obtained preferred negotiator rights and started negotiations. In addition, there are restrictions on what we can explain. But we believe this judgment is too one-sided and that it is too early to make such assessments. We would like to see ratings made in a more cautious manner in future.

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