second quarter of fy 2016 consolidated financial …...2016/11/09 · to the next quarter and...
TRANSCRIPT
November 9, 2016
Second Quarter of FY 2016
Consolidated Financial Results
Japan Display Inc.
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Agenda
Note: The depreciation costs noted in this document include amortization of goodwill and non-operating depreciation. The R&D costs noted in this document are the total of the amounts included in costs of goods sold and SG&A.
1. 2Q16 Financial Results & 3Q16 Guidance
2. Technology Strategy
3. Growth Strategy (Structural Reforms)
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2Q16 Financial Results & 3Q16 Guidance
Keiichi Yoshida Chief Financial Officer
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2Q-FY16 Topics
(Billion Yen)Net
salesOp.
incomeOrdinaryincome
Net profit Dep. &Amort.
R&Dexpense
FX rate(\/US$)
2Q-FY16 (A) 196.6 1.2 (6.3) (4.9) 21.5 3.6 102.42Q-FY16 (F) 210.0 1.0 - - 21.0 4.6 105.02Q-FY15 (A) 261.7 8.3 1.8 0.1 20.2 6.5 122.3
Due mainly to lower demand from some customers, shipments carried over to the next quarter and stronger yen 2Q sales fell short of Aug 9 announcement, but cost improvements etc. brought op. income near forecast.
20 yen YoY appreciation against a dollar likely to have reduced sales by roughly Y30bn & op. income by Y5bn.
Large YoY drop in sales due in part to forex effects, but mgmt. & structural reform benefits started from last year to limit op. income decline.
With higher demand ahead in 2H, from late 2Q seeing higher fab utilization rate
Non-operating: Forex & other losses booked
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2Q-FY2016 Financial Results (Billion yen)
Q2-FY16 Q2-FY15 Q1-FY16Net sales 196.6 261.7 (65.1) -24.9% 174.3 +22.3 +12.8%
Cost of sales 183.5 237.1 (53.6) 165.9 +17.6Gross profit 13.1 24.6 (11.5) -46.9% 8.4 +4.7 +55.8%
6.7% 9.4% 4.8%
SG&A 11.9 16.3 (4.4) 11.8 +0.1Operating income (loss) 1.2 8.3 (7.1) -85.2% (3.4) +4.6 -
0.6% 3.2% -2.0%
Non-operating profit (loss) (7.6) (6.6) (1.0) (10.8) +3.2Ordinary income (loss) (6.3) 1.8 (8.1) - (14.2) +7.9 -
-3.2% 0.7% -8.2%Extraordinary income (loss) 0.0 0.0 +0.0 (1.6) +1.6Income (loss) before tax (6.3) 1.8 (8.1) - (15.8) +9.5 -
-3.2% 0.7% -9.1%
Net income (loss) (4.9) 0.1 (5.0) - (11.8) +6.9 --2.5% 0.1% -6.8%
EBITDA 20.3 28.4 (8.1) -28.4% 15.0 +5.3 +35.7%10.3% 10.8% 8.6%
Avg. FX rate (JPY/USD) 102.4 122.3 108.0Q-End FX rate (JPY/USD) 101.1 120.0 102.9
QoQ Chg.YoYChg.
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1H-FY2016 Consolidated Operating Results
6 mo. endedMar.31, 2015
Net sales 371.0 507.9 (136.9) -27.0%
Cost of sales 349.5 465.4 (115.9)Gross profit 21.5 42.5 (21.0) -49.4%
5.8% 8.4%
SG&A 23.7 31.9 (8.3)Operating income (loss) (2.2) 10.6 (12.8) -
-0.6% 2.1%
Non-operating profit (loss) (18.4) (8.9) (9.5)Ordinary income (loss) (20.6) 1.7 (22.2) -
-5.5% 0.3%Extraordinary income (loss) (1.6) 0.0 (1.6)Income (loss) before tax (22.2) 1.7 (23.8) -
-6.0% 0.3%
Net income (loss) (16.7) (0.3) (16.4) --4.5% -0.1%
EBITDA 35.3 50.8 (15.5) -30.6%9.5% 10.0%
6 mo. endedMar.31, 2016
(Billion yen)
YoY Chg.
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-3.4
1.2
-0.2
+6.4
+1.8 -2.0
-1.4
(Billion Yen)
Selling prices & product mix
Variable costs
Fixed costs
FX
Shipment Volume
1.0 1.2 -0.5
-0.9
(Billion Yen)
Shipment volume
Variable costs
Fixed costs
Selling prices & product mix FX
+1.9
+1.6 -1.9
Operating Profit Change Factors
2Q16 forecast
2Q16 actual
vs. August 9 forecast vs. Previous quarter
1Q16 actual
2Q16 actual
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Balance Sheet (Billion yen)
9/2016 3/2016 Cash and deposits 72.7 55.1 Accounts receivable 81.3 80.7 Other receivables 103.0 57.1 Inventories 109.2 114.1 Others 26.6 15.8Total current assets 392.9 322.8Non-current assets 516.8 491.0Total assets 909.7 813.9 Accounts payable 226.7 138.1 Interest-bearing debt 55.3 77.3 Advance payments 190.9 131.9 Other liabilities 93.2 101.3Total liabilities 566.1 448.6Total net assets 343.6 365.2Shareholders' equity ratio 37.5% 44.6%Net debt to equity ratio -17.4 22.2
Merchandise and finished goods 14 28 Work in process 25 21 Raw materials and supplies 11 10
Days in inventory 50 58
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Cash Flows
(1) Working capital = Accounts receivable + Inventories + Accounts payable + Other receivables (2) Free cash flow = Cash flow from operating activities + Cash flow from investing activities
(Billion yen)
Q1-FY16 1H-FY16 1H-FY15 Increase/Decrease
Income before income taxes (15.8) (6.3) (22.2) 1.7 (23.9) Depreciation and amortization 20.0 21.5 41.5 40.5 1.0 Working capital (1) (26.4) 61.7 35.3 (52.9) 88.2 Advance receipts 60.0 (1.0) 59.0 17.8 41.2 Other (4.7) (2.9) (7.5) 6.0 (13.5)Cash flow from operating activities 33.1 73.0 106.1 13.1 93.0 Acquisitions of property and equipment (42.2) (23.9) (66.1) (59.4) (6.7) Other 0.5 3.4 3.9 2.0 1.9Cash flow from investing activities (41.7) (20.5) (62.2) (57.4) (4.8)Cash flow from financing activities 20.5 (42.7) (22.3) 1.3 (23.6)Ending balance, cash and equivalents 63.6 72.7 72.7 51.8 20.9Free cash flow (2) (8.5) 52.5 44.0 (44.3) 88.3
Q2-FY16
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3Q-FY16 Guidance
※3Q-FY16 forex impact per ¥1 movement against $US1 = ¥600mn operating income/quarter
3Q-FY16 Forecast
• Sales forecast to rise 35% QoQ to Y265bn on seasonal factors & recovery of China market share.
• Operating income of Y10bn owing to higher sales.
• Utilization rate high at every fab, same expected in 4Q.
• Appreciation of Y16.5 YoY likely to lower op. income by about Y10bn but expect mgmt. & structural reforms to largely offset
(Billion Yen)Net
salesOperating
incomeOrdinaryincome
Netincome
Dep. &Amort.
R&Dexpense
FX rate(\/US$)
3Q-FY16 (F) 265.0 10.0 - - 21.7 4.8 105.02Q-FY16 (A) 196.6 1.2 (6.3) (4.9) 21.5 3.6 102.43Q-FY15 (A) 305.0 13.3 8.2 4.7 20.3 3.9 121.5
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Technology Strategy
Shuji Aruga President & Chief Operating Officer
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Quarterly Sales by Product Category and Region
0
50
100
150
200
250
300
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16F
(Billon Yen)
(FY)
4Q16 sales forecast
US/EUR
China
Other region Automotive, Non-mobile
Mobile
2Q16 sales: Lower demand from some customers in China, US/EUR sales short of forecast
3Q16: US/EUR recovery driven by new product starts. China: steady business with established customers & with customers switching from OLED to LCD => expect much higher revenues QoQ
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3Q16 and 4Q16 Forecast
Expect 3Q total sales to greatly exceed 2Q. Recovering share of China smartphone makers.
4Q sales: Lower vs. 3Q due to US/EUR seasonal
factors but forecast higher sales YoY on recovery in China smartphone display business.
Automotive sales to rise thru 2H. Anticipate continuous steady growth.
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Platform Technology That Supports Growth
Reflective LCD
“FULL ACTIVE” 4-side bezel free/ Non-rectangular
Low-power consump
Thinness
High-speed response
Pixel Eyes™・Sensing
MIP
Flexible
E-paper
Plat
form
tec
hnol
ogy
Ultra high res.
With platform core technology as base => expand applications& business
Envisioned applications
Signage Automotive
Smartphone Aviation/ Medical Book/
Education Gaming PC VR/AR 2in1 PC
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“FULL ACTIVE” Technology Road Map
2017 2018 2019
Phase1
Phase2
Phase3
4-side bezel free, Non-rectangular shape
Low power consump, Thin formfactor
Flexible
Co-development with multiple firms in LCD supply chain
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Flexible OLED vs “FULL ACTIVE” OLED FULL ACTIVE(LCD)
Flexible Phase3 (Flexible) Resolution Fair (=<400ppi) Excellent (=<800ppi)
Power consumption Good Excellent
Des
igna
bilit
y Thinness Excellent Excellent Border
(Top, left, right / bottom) Fair / Excellent Good / Excellent
Bendable Excellent Excellent Foldable TBD TBD
Movie quality Excellent Excellent Contrast Excellent Excellent
Color viewing angle Fair Excellent
Luminance viewing angle Excellent Good
Life time (burn-in) Poor Excellent Cost Fair Excellent
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Growth Strategy (Business Structural Reforms)
Mitsuru Homma
Chairman and Chief Executive Officer
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Medium-Term Business Scenario : Structural Reforms
Change business portfolio;
Non-mobile 33% of portfolio by 2018, 50% by 2021 (mfg ratio)
・ With CMOS (LTPS/Advanced-LTPS) as core technology shift to high value-added displays
OLED R&D to continue going forward, will build
structure geared to customer demand for either LCD or OLED
■ Cooperation with different types of businesses to
drive open innovation
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Current Display Revolution = Growth Industry
VR/AR
Book/ Education
1. Expanded display application areas 2. Evolution of interactive devices
Growth opportunities
Smart- phones
Faster comm. infrastructure
(5G/6G)
•Cooperation with different types of businesses to drive open innovation
•Fusion of software/hardware •System integration
FY21 Approx. Y5 Trillion scale
(Global market)
FY21 Approx. Y2 Trillion scale
(Global market)
Auto
Gaming PC
Signage
2in1 Note PC Aviation/
Medical
More IoT/AI
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Platform Technology That Supports Growth (same slide as P14)
Reflective LCD
“FULL ACTIVE” 4-side bezel free/ Non-rectangular
Low-power consump
Thinness
High-speed response
Pixel Eyes™・Sensing
MIP
Flexible
E-paper
Plat
form
tec
hnol
ogy
Ultra high res.
With platform core technology as base => expand applications & business
Envisioned applications
Signage Automotive
Smartphone Aviation/ Medical Book/
Education Gaming PC VR/AR 2in1 PC
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JDI’s Target Segments
1000 800 600
400
200
0 0 5 10 15 20 30
ppi
Size (inches)
VR AR
40 50 60
Wearable
Key areas: FHD smartphones (FULL ACTIVE), automotive (designability), VR/AR (ultra fast response & high-res), light & thin/2in1 note PCs (low-power consumption/Pixel Eyes™), signage (reflective)
*()= Technology advantage of each application
TV Signage
High-res・Low power consump(LTPS) FULL ACTIVE・Flexible
*PE: Pixel Eyes™
Fast response
Auto(CID/Cluster) Aviation
2in1 notebook PCs /tablets
Sensing(PE*)
Monitors
Gaming PC Book/ Education
Medical monitors
Smart- phone
Auto (HUD)
Reflective・ E-Paper
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Strategic Alliance with E Ink® Holdings Inc.
Electronic paper displays using E Ink's "electrophoretic ink
technology"
JDI's LCD-nurtured LTPS "backplane technology",
in-cell touch etc. × Strategic alliance with E Ink is a business structural reform for creating a variety of non-mobile new markets in the areas of signage, electric shelf labels, logistic tags, electronic-note &
education, building materials etc.
✓ Leading innovator of electrophoretic technology ✓ Excellent display quality with paper-like still images ✓ Promoting electronic paper display applications
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JDI & E Ink Strategic Alliance Offers Synergies Strategic alliance with E Ink to add to line-up of electronic paper
displays & strengthen line-up of reflective displays
TFT backplane
E-Ink
E Ink (EPD)
TFT backplane Organic EL
Sealants
OLED
TFT backplane
Color filter
LCD (Reflective MIP)
LCD
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Progress of Structural Reforms
■ Progress Transfer of all shares in MOZ, a low operating
rate maker of low-end products, to a Chinese mobile phone module maker Holitech Technology Co. (Nov 3, 2016: MOZ equity transfer registration of alteration completed)
■ Related Reorganize Taiwan operations (including
subsidiaries STC & TDI, which managed sales of MOZ products) & improve business efficiency (Nov 15: STC to delist)
MOZ
KOE
TDI STC JDIT
Sale
*JDI Group companies in Taiwan STC: Star World Technology Corp. TDI: Taiwan Display Inc. KOE: Kaohsiung Opto-Electronics Inc. JDIT: JDI Taiwan Inc.
Reorganize Taiwan operations
1. Back-end production: MOZ* share transfer/Taiwan business reorg.
Structural Reforms (Announced March 2016)
Delist
■ Goal Lower fixed costs by reorganizing back-end mfg ops
*Morningstar Optronics Zhuhai
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Progress of Structural Reforms
Japan employees
Overseas employees Total
End of March 2016 5,702 10,020 15,722
End of March 2017 (est) 5,066 5,920 10,986
2. Front-end production
Front-end mfg.
Higashiura Plant
・ Structural reform: Completed retirement of Fab 1
・ Fab 2: Currently at full operating capacity
Mobara Plant, V3 line
・ Closure impending, so building inventory ・ Glass input ending in Dec.
3. Labor cost reductions Plan to reduce no. of employees by 4,736 (Japan: 636, overseas: 4,100)
as of March 2017 (end FY16), 30% fewer vs a year earlier.
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Forward Looking Statement: Any information related to market trends or industries mentioned in this document is based on information available at present and JDI does not guarantee that this information is accurate or complete. Any plan, estimation, calculation, quotation, evaluation, prediction, expectation or other forward-looking information in this document is based on the current assumptions and beliefs of JDI in light of the information currently available to it, and involves known and unknown risks, uncertainties, and other factors. Such risks, uncertainties and other factors may cause JDI’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, without limitation: economic conditions and individual consumption trends in Japan and overseas, currency exchange rate movements, trends in the market for smartphones and other electronic equipment, the management policies of our major business partners and fluctuations in the price of raw materials.