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Presentations & Events

FY2005

- ended March 2006 (For 167th Fiscal Period)

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Presentation for FY2005 Results

For Fiscal Year ended March, 2006 - April 28, 2006

PDF [295 KB/21 pages]
Earnings Release

Outline of the presentation

1. Consolidated results for FY2005

Net Sales	6,343.5 billion yen	(+9% YoY)
Operating income	240.6 billion yen	(+85.8 billion yen YoY)
Income before income taxes and minority interest	178.2 billion yen	(+67.0 billion yen YoY)
Net income	78.2 billion yen	(+32.2 billion yen YoY)

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

Toshiba Group aims for high growth in its Digital Products and Electronic Devices business domains. In Social Infrastructure domain, the Group seeks to secure stable growth and profits, mainly through expansion of its international business.
All business segments posted healthy business results, recording year-on-year increases in sales and operating income, as a result of business development based on the overall Group strategy of achieving high growth with steady profitability.

2. Financial Position and Cash Flows

Total assets increased by 155.7 billion yen from the end of March 2005 to 4,727.1 billion yen.
Shareholder' equity increased by 186.7 billion yen from the end of March 2005 to 1,002.2 billion yen.
Total debt decreased by 193.9 billion yen from the end of March 2005 to 917.5 billion yen, falling well below 1,000 billion yen.
Free cash flow was plus 198.0 billion yen, an improvement of 135.6 billion yen from the year-earlier period.
The debt-to-equity ratio was 92%, below 100% and a 45-point improvement from the end of March 2005.

3. Consolidated Projection for FY2006

Net Sales	6,600.0 billion yen	(+4% YoY)
Operating income	265.0 billion yen	(+24.4 billion yen YoY)
Income before income taxes and minority interest	220.0 billion yen	(+41.8 billion yen YoY)
Net income	90.0 billion yen	(+11.8 billion yen YoY)

Q & A Session

Q1. What impact did the increase in raw materials make on your business performance for FY2005 and FY2006?: Soaring oil prices impact on prices for plastics. For FY2005, each business imposed cost reductions that absorbed the impact. For FY2006, we will make efforts to cut costs and review designs, so that we can continue to absorb the impact.
Q2. Please tell us about your FY 2005 operating income for the individual semiconductor businesses: Discrete, System LSI, and Memory.: We do not disclose actual operating income figures for each business. However, Discrete business was in the black, System LSI business was in the black in the second half of FY2005, and Memory business was in the black.
Q3. What is the factory utilization ratio for each semiconductor product?: Himeji Operations, which produces Discrete devices is running at full capacity for both front and back end processes. Kitakyushu Operations, which produces optical devices, System LSI and Bipolar devices, is running at full capacity. The Oita factory, which also produces System LSI, is running at full capacity, as is Yokkaichi Operations, our production base for Memories.
Q4. Please tell us about the price performance of NAND Flash Memory in FY2005 and your estimate for FY2006?: Although NAND Flash Memory price have decreased since the turn of the year, especially in the spot market, the shift did not exceed our estimated range for the 4Q (Jan. to Mar.). We anticipate full year price erosion of as much as 30 to 40% in FY2006. Last year, we expected a bit growth rate somewhere in the order of over 2.3 times, but this year we expect it to exceed 2.5 times.
Q5. You anticipate FY2006 operating income of 30 billion yen for semiconductor business. Which business is expected to increase profits?: Improvement in System LSI operating income and a profit increase in Memories will contribute to the profit increase of semiconductor business.
Q6. Please tell us about your FY2006 operating income estimate for the Digital Products segment?: We expect improvement in the TV business, and predict a turnaround for the second half of FY2006. The profit increase that we expect in the HDD business will also provide a driving force for improved profits.
Q7. Please tell us about your FY2006 operating income estimate for the Social Infrastructure segment?: We anticipate a profit decrease in FY2006. However, because the profit of the medical business may be conservative, there is a possibility of improved income.
Q8. How do you see your free cash flow for FY2006?: We expect minus 200 billion yen as a result of the investment in Westinghouse.
Q9. What investment stance will you take for semiconductors in FY2006?: The performance of the semiconductor business is ultimately determined by our investment commitment. We will actively invest in the business. If we look only at NAND we can see that, despite the enormous amount of investment, we have generated cash flow of 200 billion yen or so from the business and recovered investment costs within a short cycle. Since last year, we have increased our investment commitment, but we can still keep the free cash flow at plus minus zero.
Q10. Please explain the reason why D/E(Debt/Equity) ratio increases from 0.9 in FY2005 to 1.1 times in FY2006.: More than 300 billion yen will be needed for the acquisition of Westinghouse in FY2006. Free cash flow will be minus. We will finance necessary cash by borrowing.
Over the past six years, we generated total cash flows of 600 billion yen, proving that we are able to produce free cash flow of 100 billion yen per year. Accordingly, we believe we are able to generate free cash flow of 300 billion yen in the next three years, from 2006 to 2008. The D/E ratio for FY2006 slightly exceeds one time, but it is expected to dip below that level again.
Q11. Does your FY2006 forecast consolidate Westinghouse?: Our sales estimate, 100 billion yen is included.
Q12. The tax rate still seems high. How do you expect to manage to lower the rate in the future?: The tax rate for FY2005 was 51%, which is about 10 points higher than the statutory tax rate of 40.7%. This mainly resulted from structural problems, such as deferred tax assets caused by cumulative losses in the past, and the inability to apply tax effects among some deficit-hit subsidiaries. Although our estimate for FY2006 is 52%, the tax rate will be back to the range between 40 and 49% for FY2007 as we have prospects for amortization of deferred tax assets.

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