Overview of Financial Results for the Fiscal Year Ended March 31, 2013
During the consolidated fiscal year under review, the deceleration of the global economy strengthened as a result of developments in the European debt crisis and the effect of slower economic growth in emerging nations such as China and India. Nonetheless, some positive signs did emerge, such as improvements in economic indicators in the United States and economic growth and expansion in ASEAN countries.
In Japan, although business confidence worsened, mainly because of declines in exports and domestic production affected by the global economic slowdown and deteriorating relations between Japan and China, positive trends gathered momentum driven by a correction in the value of the yen and stock price rises achieved by strengthening the easy-money policy. These included a turnaround in corporate performance and a recovery in capital investment, as well as improvement in the employment situation and consumer sentiment.
In the vehicle market, the market for semiconductor inspection systems and the cellular phone market, which are among the Group’s key sectors, performance in market segments related to eco-friendly vehicles and smartphones, which continued to expand despite the slower growth anticipated for the broader market, is having a significant impact in determining which companies succeed.
Consequently, the Yokowo Group worked to advance three innovations (product, process, and personnel) that are described in its basic management policy. For product innovation, it focused on the development of higher value-added or more cost-competitive strategic products and promoted them actively. For process innovation, the Group moved to the full-scale operation of its Vietnamese plant with the aim of establishing a production system for two major manufacturing bases including the Chinese plant in the vehicle communications equipment segment. It also built up production facilities and equipment for the Malaysian plant to increase the profitability of the supply chain in the circuit testing connector segment and implemented the partial transfer of production from domestic subsidiaries that were behind schedule, achieving certain of the target effects sought.
As a result, sales for the consolidated fiscal year under review rose 4.6% from the previous year, to ¥29,215 million, as sales in the personal communication equipment segment increased significantly from the second quarter and sales denominated in foreign currencies increased in Japanese yen terms as the value of the yen underwent a correction, despite a fall in sales in the vehicle communications equipment segment and the circuit testing connector segment in the second half of the year. Operating income declined significantly by 42.0% year on year, to ¥529 million, reflecting negative factors including a lower profit margin, mainly on the back of changes in the structure of products and businesses, intensifying price competition and delays in production transfer, as well as rising labor costs in China and the higher fixed cost ratio associated with lower capacity utilization. Ordinary income increased 36.6% year on year, to ¥963 million, primarily because of the recording of foreign exchange gains of ¥415 million attributable to the correction in the value of the yen. Net income increased a significant 75.7% from the previous year, to ¥598 million, despite an increase in tax costs caused by the recording of higher income by Yokowo and its subsidiaries with solid results.
Overview of Sales by Product
Vehicle Communication Equipment
The vehicle market, the major market for the Group in this segment, is expected to continue to grow steadily driven by the US economy, which is on the recovery track, and the continued economic growth in ASEAN nations, notwithstanding the slowdown of economic growth in emerging nations such as China, India, and Brazil, which is cause for concern. In the domestic market, sales of new vehicles increased due to the eco-car subsidies that strongly encouraged their purchase and also the number of units produced increased significantly in the first half of the year. Accordingly, the results for the entire fiscal year have exceeded those of the previous year, offsetting the decrease in sales of new vehicles in reaction to the termination of the eco-car subsidies and the decrease in production for export, due in part to the deterioration in relations between Japan and China in the second half.
In this environment, sales of the Group’s core micro-antennas and other automotive products declined year on year in the second half, but exceeded the previous year’s level, thanks to the contribution made by the sharp rise in sales in the first half. However, sales of film antennas, mostly generated from the domestic market, declined significantly from the previous year because the demand created by digital terrestrial broadcasting had run its course, among other factors.
As a result, sales for this segment increased 3.0% year on year, to ¥16,811 million. Net income for the segment increased 27.3%, to ¥144 million.
The development and introduction of strategic products with higher added value in design and cost competitiveness as well as in function and quality will be accelerated. In addition, efforts will be made to achieve "multilevel" development/production/customers through the establishment of a production system for two major manufacturing bases of the Chinese and Vietnamese plants, the strengthening of technical functions, and the establishment of new bases and the expansion and improvement of existing bases, to focus on the reinforcement of the business structure from the viewpoint of both strong profitability and an enhanced response to risks.
Circuit Testing Connector
In the market for semiconductor inspection systems, a key market for this segment, while demand grew in areas related to smartphones and cloud computing, which have been expanding satisfactorily, demand declined in other areas, mainly because of sluggish sales of personal computers worldwide.
In this environment, sales of the Group’s core BGA sockets for IC inspections were higher than the previous year’s level due to increased demand for inspection for smartphones/tablet devices and an increase in sales denominated in foreign currencies as a result of the correction in the value of the yen, notwithstanding the effects of sluggish sales to certain major customers and intensifying price competition. In addition, sales of unit rings and vertical probe cards for wafer inspection were significantly higher than the previous year because of increased sales to new customers. Sales of other products, by contrast, were lower than the previous year, mainly due to falling orders from domestic customers.
Consequently, sales increased 4.6% year on year, to ¥5,312 million. Net income from this segment declined 81.1%, to ¥67 million.
Efforts will be made to strengthen the bases for business expansion and the rapid restructure of the profit structure by swiftly transferring the design and mass production of modified products to the Malaysian plant as well as focusing on the introduction of state-of-the-art technology, the improvement of core technologies, and a reduction in the lead time for product development through the reform of the technical development structure in Japan to increase the market share by developing and introducing strategic products that adequately satisfy changing customer needs, and by improving the cost competitiveness of existing products.
Personal Communication Equipment
The cellular phone market, our principal market in this segment, continued to grow, thanks to the steadily increasing use of smartphones and tablet devices. However, on the supply side, including set manufacturers, a number of other leading global companies with a competitive advantage made progress in dominating the market.
In this environment, sales of fine connectors, centered on the Group’s mainstay fine spring connectors, declined year on year, reflecting subpar sales to certain major overseas customers, offsetting the contribution to sales from new customers.
Sales of portable terminal antennas rose significantly year on year, thanks to a sharp increase in orders in the second quarter for built-in main antennas and sub-antennas for use in key models, as well as strong orders in the second half under review, as the Group’s core major overseas customers increasingly adopted these products for new smartphones and tablet devices.
In the medical device business, which is part of this segment, sales rose slightly year on year. This was attributable to a steady increase in sales in the assembly and manufacture of guide wire units, among other sectors, despite a temporary decline in sales, while the Group reviewed which products should receive the main focus in bolstering sales.
As a result, sales for this segment increased 8.5% year on year, to ¥7,092 million. Net income from this segment declined 13.7%, to ¥366 million.
In the fine connectors business, efforts will be made to expand the business scale and achieve "multilevel" development/production/customers by accelerating the development and introduction of products for vehicles and medical care, which are new segments to be covered, as well as the core smartphones/tablet devices and POS terminals and other information terminal devices.
In the medical device business, efforts will be made to further expand the assembly and manufacture of guide wire units, catheter units, etc. and make inroads into foreign markets in earnest to make the medical device business the fourth core business following the other core businesses (vehicle communications equipment, circuit testing connectors, and fine connectors) through the concentration of management resources.
|Sales (million yen)||Whole fiscal year||27,129||27,933||29,215||31,000|
|Ordinary Income (million yen)||Whole fiscal year||955||705||963||930|
|Net Income (million yen)||Whole fiscal year||586||340||598||620|
|Net Income per Share (yen)||Whole fiscal year||29.33||17.03||29.92||30.99|