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Business Report for FY2006 Business Report for FY2006 October,2006 http://www.smk.co.jp/ - - From Apr.2006 to Sep.2006 From Apr.2006 to Sep.2006 - -

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Business Report for FY2006Business Report for FY2006

     October,2006

http://www.smk.co.jp/

-- From Apr.2006 to Sep.2006 From Apr.2006 to Sep.2006 --

34,89736,963

39,30037,000

2,349

1,941

2,400

3,3132,9452,567 2,700

3,834

1,6341,839 1,750

2,335

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY2005 1H FY2005 2H FY2006 1H/Plan FY2006 1H0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

<<Consolidated> Performance for FY2005/1H to FY2006/1H Consolidated> Performance for FY2005/1H to FY2006/1H Unit:Million yen

Net Sales Operating Profit

Ordinary Profit

Net Profit

2/18

0

10,000

20,000

30,000

40,000

2,349

53.6%

8.4%

18.0%

9.1%4.1%

53.1%

7.7%

17.4%

9.4%4.0%

32,548 35,987(93.3%) (91.6%)

3,313

Material costs

Labor costsExpenses

Depreciation allowances

( ):Percentage to sales amount

Expenses for external manufacturing processing

1. Sales ExpenseFY2005

1HFY2006

1H

Unit:Million yenUnit:Million yen

Operating profit

[(Material costs + expenses for external manufacturing processing)Improvement by 1.3%]

 62.1%->60.8% About 511 million yen

[Labor costs decreased by 0.6%]

<<Consolidated> FY2006 1H settlementConsolidated> FY2006 1H settlement--ofof--accounts presentationaccounts presentation3/18

△51 2

△1 4 0

5 1 1

△56 3

1 , 6 6 8

-1,000

-500

0

500

1,000

1,500

2,000

((Unit:Million yen)Unit:Million yen)

Analysis of profit increase/decrease factors for FY2006 1H

Comparison of consolidated operating profits in 2 fiscal terms [FY2005 1H vs. FY2006 1H]

Increase in sales am

ounts (to include price reduction)

B.Factors for profit decreaseA.Factors for profit increases

2,179 total Total -1,215

Material cost

reduction

Labor cost

increase

Depreciation

allowance

increase Expense

increase

2. Analysis of sales expenses

Net Total964

4/18

-100

0

100

200

300

400

500

600

700

596 521

2,945 3,834

(1.7%) (1.3%)

3. Non-operating profits and losses ((Unit:Million yen)Unit:Million yen)

Ordinary profit

( ):Percentage to sales amount

Revenues from and expenditure to fixed assets

Misc. revenues

Financial account balance

Foreign currency exchange gain or loss

FY20051H

FY20061H

Comparison with the previous mid-term performance: -75 million yen

[Decrease in foreign currency exchange gain: 172 million yen]

Previous mid-term –Yen depreciated by 5.8 yen (as of Sept.30,2005)

Current mid-term –Yen depreciated by 0.43 yen (as of Sept.30,2006)

[117.47(06/3)-117.90(06/9) ]

312

321

328 72

156

△41 △28

△3

5/18

3,3132,349

Net sales / Operating Profit by Product Division (FY2005 1H, FY2006 1H)

Net SalesNet Sales

Operating ProfitOperating Profit

16,122 20,166

16,13216,753

2,6432,381

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FY2005 1H FY2006 1H

34,89739,300

Unit:Million yen

Million yen

CS FC TP

1,9082,751

661

672

-220 -110-5000

5001,0001,5002,0002,5003,0003,5004,000

FY2005 1H FY2006 1H

6/18

11,964 11,575 12,345

3,129 3,483 3,483

8,764 11,05915,063

6,7765,869

5,2452,1982,448714

1,959711715

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FY2004 1H FY2005 1H FY2006 1HAudio & Visual Car ElectronicsTelecom. ComputerAmusement & Appliance Others

11H Net Sales by Market(FY2004 H Net Sales by Market(FY2004 --FY2006)FY2006)

34,897

126.2%

96.7%

86.6%

112.2%

Million yen

33,309

111.3%

99.4%

39,300112.6%

106.7%

100%

136.2%

89.4%111.3%100.4%

7/18

77,300

71,86075,000

4,290

5,5005,000

6,4005,6005,512

3,9003,473 3,600

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

FY2005 FY2006 Original plan FY2006 Plan (modified)0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Net Sales Operating Profit Ordinary Profit Net Profit

Net Sales / Operating Profit / Ordinary profit / Net ProfitNet Sales / Operating Profit / Ordinary profit / Net Profit(FY2005(FY2005--FY2006)FY2006)

Net Sales : Million yenProfit : Million yen

9/18

3,461

8,1108,652

3,684

49

0

5,000

10,000

FY2005 1H FY2006 1H

FCFC

Comparison to last year performance 106.7%

Audio & VisualAudio & Visual[[Net Sales]Net Sales]

Unit:Million yen ■■Remote control unitRemote control unit

■■New New coneccttersconecctters’’ contribution to sales contribution to sales increaseincrease

TN sales increase

• For thin TVs:European and ASEAN markets

•For STBs:North American market

Flip structureFPC connector

CSCS

11,57512,345

TPTP

HDMI connector

For audio system applications

Plug cords/sockets

For thin TVs

Business trend of Business trend of individual marketsindividual markets--11

10/18

839

639

2,005

1,142

608

1,733

0

2,000

4,000

FY2005 1H FY2006 1H

3,483

CSCS

FCFC

TPTP

Sales increase of jacks for car audio equipment for market installation(for connection of silicon audio devices)

■■Temporary decline in Temporary decline in Touch panelsTouch panels

Comparison to last year performance 100.0%

Car ElectronicsCar Electronics

[[Net Sales]Net Sales]

3,483

Unit:Million yen

  Sales decline due to change of product models

■■Increase in ConnectorsIncrease in Connectors

For digital radios in the North American market

Sales increase of coaxial connectors

11/18Business trend of Business trend of individual marketsindividual markets--22

8,479

2,571

12,122

2,909

9

824

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

FY2005 1H FY2006 1H

15,063

CSCS

FCFC

■■Expansion of connector Expansion of connector salessales

Sales increase of camera connectors,system connectors and coaxial connectors due to respectable overseas mobile phone markets

Comparison to last year performance

136.2%

CommunicationCommunication

[[Net Sales]Net Sales]

■■Increase in unitsIncrease in units

11,059

Unit:Million yen

Increase in sales of BluetoothTM units due to rising domestic demand for music

TPTPOthersOthers

12/18Business trend of Business trend of individual marketsindividual markets--33

1,889 1,825

3,4422,887

538

52112

0

2,000

4,000

6,000

FY2005 1H FY2006 1H

5,869

5,245

CSCS

TPTP

Comparison to last year performance

89.4%

[[Net Sales]Net Sales]

ComputerComputer

Unit:Million yen■■CradleCradleDecrease in cradle sales due to continually decreasing digital camera prices

■■FPC ConnectorFPC ConnectorDecrease in FPC connector sales for optical disc

Increase in sales of power connectors due to application with more notebook PC models

■■Power connectorsPower connectors

FCFC

13/18

OthersOthers

Business trend of Business trend of individual marketsindividual markets--44

SMKSMK’’s 3 major management challengess 3 major management challenges1.Three Challenges

*Enhancement of SMK’s brand power.*Promotion of TN wide activity for ZD (Zero Defect) to improve quality.*Another try for product creation⇒Start for “SMILE” activity (For 3 years)

   SMK Manufacturing Innovation Leads to ZD2.Turning red-ink businesses into black at an earliest opportunity3.Undertaking to Medium term business plan*Higher than 10% ROE*Continued payment of an annual dividend of 12 yen or more

4. Environmental business*Compliance with the RoHS Directive (effected in July 2006)*Publication of an environmental report (July 2006)

5.CSR management*Establishment of the “SMK Group’s Code of Conduct”(proclaimed in April 2006)*Compliance with the Japanese version of the SOX law

14/18

TopicsTopics--1 Opening / expansion of 4 overseas 1 Opening / expansion of 4 overseas sales offices (Sept. to Oct. 2006)sales offices (Sept. to Oct. 2006)

Opening: Chicago,Dortmund and Beijing

Expansion: Seoul

15/18

TopicsTopics--2 Enhancement of production bases 2 Enhancement of production bases 1.China

Dongguan : Addition of production floors(Consolidation of factories 1 and 2, plus construction of a new building)Production capacity ->A 50% increase over the 2005 capacity (effective from Oct. 2006) Shenzhen: A 50% increase by addition of production floors (effective from July 2006)

2.MexicoIncrease of production floors (addition of SMT lines,molding machines and painting facilities) A 20% increase of production capacity (effective from Sept. 2006)

ShenzhenMexico

16/18

The 7th medium term business planThe 7th medium term business plan(for 2007 through 2009) being laid down(for 2007 through 2009) being laid down

CREATING AN EXCITING FUTURECREATING AN EXCITING FUTURE

2010 Sales - 100 billion yen, Operating Profit - 10%2010 Sales - 100 billion yen, Operating Profit - 10%

Slogan

Target

Earliest achievement of becoming Earliest achievement of becoming a 100 billion yen selling companya 100 billion yen selling companymaintaining reasonable profitsmaintaining reasonable profits

17/18

Innovation and creation Innovation and creation

-Practicing speedy company management-Practicing speedy company management

18/18

CS Div.IR’06.10

CS Division

1. Transition of sales and profits2. Market-specific sales3. Product strategy and Division policy

CS-1/10

 CS= Connection System  

■■ConnectorConnector ■■JackJack

FPC connectorFPC connector

I/O connectorI/O connector

Card connectorCard connector

【Main products】 :Connector/Jack

Speaker terminalSpeaker terminal

DC power supply jack,DC power supply jack,

Headphone jackHeadphone jack

CS-2/10

CS Div.IR’06.10

192202

394

333

0

100

200

300

400

FY2005 Result

FY2006 Prospect

FY20061HResult

FY2006 2HProspect

Net sales

Operating profits

<<Consolidated>Net sales,Operating profitsConsolidated>Net sales,Operating profitsUnit:100 million

(118%)

20

40

80

27.5 18.6

36.646.1Percentage

of profits11.0%

11.7%

13.6%

9.7%

(95%)

CS-3/10

CS Div.IR’06.10

60

0

0%

50%

100%

FY2005 FY2005 FY2006 FY2006

Audio/visualCar electronics

Information technologies

Transition of consolidated marketTransition of consolidated market--WGWG--specific salesspecific sales

1H Result 2H Result

57% 60% 63%

32% 29% 27%

5% 6% 5%5% 4% 4%1%

1H Result 2H Prospect

64%

26%

6%3%

CS-4/10

CS Div.IR’06.10

IndustrialLiving1% 1% 1%

157131

100

2004FY 2005FY 2006FY

Interface connectorsInterface connectors

For mobile phones and portable audio devices

*With FY2004 as 100Sale transition

Micro USB connector

Connectors for mobile phones

Optimization of items compatible with fast transmission and standard specification

HDMI Connector

For AV and PC equipment

Connectors for notebook PCs

CS-5/10

CS Div.IR’06.10

Multi-functionality and addition of high value,Good business records with small and compound items

0.4mm PitchB to B connectors

PB-4B :H=1.2mm PB-4A:H=0.8mm     H=0.7mm

★Enrichment of shielded products★Deployment for general applicability to portable equipmentDSCs,camcorders,portable AD devices,notebook PCs,etc.

181

94100

2004FY 2005FY 2006FY

B to B ConnectorsB to B Connectors

0.3mm pitchSuccessful approach to industry’ smallest product levels

Strategic products

Sales strategy

Sale transition

CS Div.IR’06.10

EMCHigh speed transmission

CS-6/10

*With FY2004 as 100

ETC

Coaxial connectors for digital broadcast

Coaxial connectors,TC-15 series

Coaxial connector,SMB series

Business experience with antenna manufacturers

Coaxial connectors for glass antennas

North America:Xm broadcast

Japan:For terrestrial digital broadcasting

NK-10:Connector for FOMA-USB signal

Multi-pole external connectors

Car electronics

Under development

CS Div.IR’06.10

CS-7/10

In-vehicle camera connector market

Monitor camera connectors

・Water-resistance technology

・Business experience with camera module manufacturers

Front Back

CS-8/10

CS Div.IR’06.10

Enhancement of SMK-SZ’s production capacity

Enhancement of domestic production capacity using automatic machines

CS-9/10

CS Div.IR’06.10

        

        

                

  CS Div.’s policy for FY2006                

CS Div.IR’06.10

CS-10/10

1.Promotion of development of technologies and products

2.Pursuit of optimal means

3.Elevation of total strength

FCFC DivisionDivision

1.<Consolidated> Sales and operating profits

2.<Consolidated> Market-specific sales

3.Introduction of key strategic products

FC-1/7

Achievement for the 1st half of FY2006 and projection for the 2nd half

FC=Functional Components

[Main products]:Switch/Keyboard/Control panel/Earphone microphone/Cradle/Microphone/Remote Control Unit/Camera module■■SW (SW (SwSwitch)itch) ■■UN (UN (UnUnit)it)

■■MD (MD (MMooddule)ule)

Earphone Earphone microphonemicrophone

Electret Electret Condenser Condenser Microphone (ECM)Microphone (ECM)

CradleCradle

Remote Control UnitRemote Control Unit Color Intelligent Color Intelligent Remote Control UnitRemote Control Unit

■■RC (RC (RRemote emote CControl)ontrol)Various type of switchesVarious type of switches

FC-2/7

Camera ModuleCamera Module

6.7

3.6

9.8 10.3

0

50

100

150

200

250

300

350

0

5

10

15

20

25

30

35

1.<1.<Consolidated> Net sales,Operating profitConsolidated> Net sales,Operating profit[Net sales]

FY2005Result

Net sales Operating profit

FY2006 Projection

Net sales Operating profit

337337 328328

FC-3/7

[Profit]

FY2006 2HProjection

168168

FY2006 1HResult

160160

Unit:100 million yen

Net sales Operating profit

Net sales Operating profit

56 53 54 53

3 4 4 4

25 25 25 25

8 9 9 9

9 8 98

0

10

20

30

40

50

60

70

80

90

100

2.<2.<Consolidated> MarketConsolidated> Market--specific salesspecific sales%(Composition ratio)

FC-4/7

Audio/VisualAudio/Visual

Car electronicsCar electronics

Information Information technologiestechnologies

LivingLiving

IndustrialIndustrial

FY2005Result

FY2006 Projection

FY2006 2HProjection

FY2006 1HResult

3. 3. FC DivisionFC Division’’s key strategic products s key strategic products --11FC-5/7

☆AV equipment application market

Remote controls for large flat-screen TVs

BluetoothTM pendantsEarphone microphone

☆Mobile phone application market

Remote controls for Windows Vista

☆PC market

1-Seg. Broadcast antennas

3.3.FC DivisionFC Division’’s key strategic products s key strategic products --22FC-6/7

2-Dome switchSmall horizontal

switches

Thin slide switches

Rubber single key switch

Detector switches(DSI/DSJ)

Multi function switches

☆AV equipment application market

☆Mobile phone parts market☆Car electronics parts market

FY2006 : Seeding for the medium term FY2006 : Seeding for the medium term business planbusiness plan

FC-7/7

((for FY2007 throughfor FY2007 through through FY2009)through FY2009)

Product developmentProduct development

Human resourcesHuman resources

Cost reductionCost reduction

TP DivisionTP Division

1.Introduction of TP Division and its products 2.Achievement and projection of consolidated sales amounts and profits3.Market specific-ratio of sales4.TP Div’s major activity points

Contents

Optical system

Digital type

Main productsMain products

TP DivisionTouch Panel

Resistance sensitive system

Analog type

Sealed-in liquid type゚•High transparency low reflectance type

Glass+Glass+polarization plate type (Low reflectance type)•Linear polarization type•Circular polarization type 

Glass type

Force feedback function featuring type

Film+Glass type•General use type•Low reflectance type•Contamination-resistant type

Acrylic resin type

▲ 0.4▲ 1.1▲ 1.5▲ 3.5

2724

5148

<Consolidate>Net sales and Operating profit

Domestic

Overseas

Net sales

Operating profit

Unit:100 million yen

FY2005Result

FY2006 Projection

FY2006 2HProjection

FY2006 1HResult

Car electronics

Ratio of sales per market:%

PCOthers

TP Div’s <Consolidated> market-specific ratio of sales

70%

ATM

POS

FY2004 Result FY2006 ProjectionFY2005 Result

75%

21% 21%19%

75%

  Marketing of differentiation products      Touch panels of Glass+Glass,high transparency and low reflectance Film+Glass,force feedback,and integrated optical types 

Marketing in the overseas markets    Glass+Glass:Europe and USA    Film+Glass:USA    Optical system:USA and China  Expansion of overseas production      Improvement of production yields in the Philippines       Production of integrated optical types in China(SMK-DG)

  

FY2006 key activity pointsFY2006 key activity pointsAchievement of planned sales(for improved profits)Achievement of planned sales(for improved profits)

1

2

3

PPC

FA

Game

ATM

Medical<Qty>

100>

300>

500>

1,000>

5,000>

10,000>

2,000>

3,000>

50,000>

KIOSK

Arcade game

POS

Car NaviDVC

Business achieved

Target

Mobile

Portable nav. PDA

PC

2.5   3.8     17   19  12.1 15 6.5  7  8   10.4 Small Medium Large<Size>

Unit:K set/Y

MFP

Smart phone

Markets under an intense focus (by size)

Portable terminal

Interphone

Car nav.

Portable terminals

PDA/PC

PPC/MFP

Household elec.appliances

POS

Force feedback touch panel Optical touch panels

Shinkansen’s cockpit seats

Bank clerk side

ATM Terminal Resistance sensitive system &LCD module

Optical touch panels & LCD

module

User side