Pioneer Corporation. for Second Quarter of Fiscal Susumu Kotani, President and CEO

Transcription

1 Pioneer Corporation Business s for Second Quarter of Fiscal 2015 Susumu Kotani, President and CEO November 7, 2014

2 2 Main Points of Today s Presentation 1. Business s for Second Quarter of FY2015 In the second quarter, both net sales and operating income declined year on year, but operating income was higher than planned. For the first half, net sales were almost the same year on year, while operating income rose year on year, and was higher than planned. 2. Business Forecasts for FY2015 We have revised our net income forecast to reflect such factors as, the transfer of the DJ equipment business and streamlining of the overall Group (net sales: billion yen; operating income: 12.5 billion yen; net income: 20.0 billion yen). 3. Topics Final agreement on integration of home AV business Growth strategy for Car Electronics Company-wide Medium-Term numerical targets

3 Today s Agenda 3 1. Business s for Second Quarter of FY Business Forecasts for FY Topics Cautionary Statement with Respect to Forward-Looking Statements Statements made in this presentation with respect to our current plans, estimates, strategies and beliefs, and other statements that are not historical facts are forward-looking statements about our future performance. These statements are based on management s assumptions and beliefs in light of the information currently available to it. We caution that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. It is not our obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We disclaim any such obligation. Risks and uncertainties that might affect us include, but are not limited to: (i) general economic conditions in our markets, particularly levels of consumer spending, and levels of demand in the major industrial sectors which we serve; (ii) exchange rates, particularly between the Japanese yen and the euro, the U.S. dollar, and other currencies in which we make significant sales or in which our assets and liabilities are denominated; (iii) our ability to continuously design and develop and win acceptance for our products in extremely competitive markets; (iv) our ability to successfully implement our business strategies; (v) the success of our joint ventures, alliances and other business relationships with third parties; (vi) our ability to access funding; (vii) our continued ability to devote sufficient resources to research and development, and capital expenditure; (viii) our ability to ensure the quality of our products; (ix) conditions in which we are able to continuously procure key parts essential to our manufacturing operations; and (x) the outcome of contingencies.

4 1. Business s for Second Quarter of FY2015 4

5 Consolidated s for Second Quarter & First Half of FY2015 FY2015 Second Quarter First Half Prior Year % to Prior Year FY2015 Prior Year % to Prior Year Net Sales % % Operating Income % % Ordinary Income/Loss Net Income/Loss Average Currency Rate (yen) 1 US$ % % 1 Euro % % (yen) Net Income/Loss per Share ROE -1.9% 25.1% -27.0% -6.5% -12.4% +5.9% Book-value per Share ROA -0.4% 6.3% -6.7% -1.5% -3.1% +1.6%

6 6 Operating Income Structure Breakdown (FY15/2Q compared to FY14/2Q) Lower Profit Due to Decrease in Net Sales Worsening of Cost of Sales Ratio Increase in SG&A Impact of Currency Exchange FY14/2Q Operating Income (FY15/1H compared to FY14/1H) Lower Profit Due to Decrease in Net Sales Decrease of 5.0 billion yen Improvement in Cost of Sales Ratio Decrease in SG&A Impact of Currency Exchange FY15/2Q Operating Income FY14/1H Operating Income Increase of 2.8 billion yen FY15/1H Operating Income

7 7 Quarterly Net Sales & Operating Income: Car Electronics < Net Sales > Net Sales OEM Ratio to Net Sales: 56% (FY14/2Q: 53%) % to Prior Year 97% (Japan 82%, Overseas 109%) Increase Factors OEM car audio products, and OEM car navigation systems Japan Decrease Factor Consumer-market car navigation systems < Operating Income > Year-on-Year Decrease of 2.4 billion yen Overseas 50.2 Operating Income FY14/2Q FY15/2Q Positive Factor Impact of currency exchange (+0.2 billion yen) Negative Factors Worsening of cost of sales ratio (-1.4 billion yen), lower profit due to decrease in net sales (-1.1 billion yen), and increase in SG&A (-0.1 billion yen) Main products are: Car navigation systems, Car stereos, Car AV systems, and Car speakers Note: Operating income by segment represents figures prior to elimination of transactions among segments.

8 8 Quarterly Net Sales & Operating Income: Home Electronics < Net Sales > Net Sales 29.8 % to Prior Year 86% (Japan 91%, Overseas 84%) Increase Factor AV accessories Japan Decrease Factors Home AV products, and Optical disc drive-related products 7.6 < Operating Income > Year-on-Year Decrease of 1.7 billion yen Overseas 21.4 Operating Income 18.0 Positive Factors Negative Factors Decrease in SG&A (+0.4 billion yen), and impact of currency exchange (+0.1 billion yen) Lower profit due to decrease in net sales (-1.2 billion yen), and worsening of cost of sales ratio (-0.9 billion yen) FY14/2Q FY15/2Q Main products are: Audio systems, Audio components, DJ equipment, Equipment for cable-tv systems, Blu-ray Disc players, Blu-ray Disc drives, DVD players, DVD drives, AV accessories, and Telephones Notes: 1. Operating income by segment represents figures prior to elimination of transactions among segments. 2. In FY2015, the Company classified telephones in Home Electronics, which were previously included in Others. Figures for FY2014 have been reclassified to conform to this presentation.

9 9 Quarterly Net Sales & Operating Income: Others < Net Sales > % to Prior Year 123% (Japan 122%, Overseas 123%) Increase Factors Decrease Factor Factory automation systems, and Map software Electronic devices and parts Net Sales 8.9 Japan < Operating Income > Year-on-Year Decrease of 0.2 billion yen Positive Factors Improvement in cost of sales ratio (+0.5 billion yen), and higher profit 5.2 due to increase in net sales (+0.3 Operating Overseas Income FY14/2Q Negative Factor billion yen) Increase in SG&A (-1.1 billion yen) Main products and services are: Factory automation systems, Speaker units, Electronic FY15/2Q devices and parts, Organic light-emitting diode displays, Electronic manufacturing services (EMS), and Map software Notes: 1. Operating income by segment represents figures prior to elimination of transactions among segments. 2. In FY2015, the Company classified telephones in Home Electronics, which were previously included in Others. Figures for FY2014 have been reclassified to conform to this presentation.

10 10 Quarterly Net Sales by Geographic Segment 60 Japan 30 North America 40 FY15/2Q compared to prior year 88% Increase Factor Factory automation systems Decrease Factors Consumer-market car navigation systems, and OEM car navigation systems FY15/2Q compared to prior year Yen basis: 108% Local currency basis: 103% Increase Factors OEM car navigation systems, and OEM car audio products Decrease Factor Home AV products 0 0 FY14/2Q FY15/2Q Europe 20 FY15/2Q compared to prior year Yen basis: 93% Local currency basis: 90% Increase Factor OEM car audio products Decrease Factors Consumer-market car audio products, and home AV products FY14/2Q FY15/2Q Other Regions FY15/2Q compared to prior year Yen basis: 103% Local currency basis: 99% Increase Factors OEM car navigation systems, consumer-market car audio products, and Factory automation systems Decrease Factor Home AV products 0 FY14/2Q FY15/2Q 0 FY14/2Q FY15/2Q

11 Second Quarter of FY2015: Summary of Consolidated Statements of Cash Flows 11 Second Quarter First Half FY2015 FY2014 FY2015 FY2014 Income (loss) before income taxes and minority interests Depreciation and amortization (Decrease) increase in liabilities related to retirement benefits (*) Cash flows from operating activities Decrease in provision for restructuring costs Loss (gain) on sale and disposal of noncurrent assets Cash flows from investing activities Free cash flows Gain on sale of investment securities (Increase) decrease in trade receivables (Increase) decrease in inventories Increase in trade payables Increase (decrease) in accrued expenses Others Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Foreign currency translation adjustments on cash and cash equivalents Free cash flows Net increase (decrease) in cash and cash equivalents FY14/2Q FY14/3Q FY14/4Q FY15/1Q FY15/2Q (*) : Increase in accrued pension and severance costs is included. Balance of cash and cash equivalents Net cash balance

12 12 Second Quarter of FY2015: Inventories (turnover days) '13/09 '13/12 '14/03 '14/06 '14/09

13 13 1H of FY2015 : Net Sales & Operating Income/Loss by Segment Car Electronics Home Electronics Others Net Sales Japan Net Sales Japan Net Sales Overseas 94.9 Operating Income Overseas Operating Loss Japan 10.3 Overseas 7.7 Operating Loss FY14/1H FY15/1H FY14/1H FY15/1H FY14/1H FY15/1H -2 Notes: 1. Operating income/loss by segment represents figures prior to elimination of transactions among segments. 2. In FY2015, the Company classified telephones in Home Electronics, which were previously included in Others. Figures for FY2014 have been reclassified to conform to this presentation.

14 2. Business Forecasts for FY

15 Consolidated Business Forecasts for FY2015 Current Forecasts Previous Forecasts Prior-year s % to Prior Year Net Sales % Operating Income % Ordinary Income % Net Sales Extraordinary Income/Loss times Net Income times Currency Rate Net Income per Share Current Forecasts Previous Forecasts (yen) Prior-year s 1 US$ Euro Current Forecasts Previous Forecasts Prior-year s Yen/% to Prior Year ROE 23.5% 2.7% 0.7% +22.8% Japan Overseas Operating Income Book-value per Share ROA 6.1% 0.6% 0.2% +5.9% FY2014 FY2015 FY2015 s Previous Current Forecasts Forecasts Notes: 1. The yen-u.s. dollar exchange rate assumption for remaining six months of fiscal 2015 is 105 yen, while the yen-euro exchange rate assumption is 135 yen. 2. In case of 1 yen depreciation against US$ and euro, remaining six months impact on: Net sales: US$: 1,320 million yen / euro: 250 million yen; Operating income: US$: -180 million yen / euro: 150 million yen.

16 16 Revisions to Business Forecasts for FY2015 Net sales of billion yen: Unchanged from previous forecast Forecast for Car Electronics raised to billion yen from previous forecast of billion yen Forecast for Home Electronics lowered to billion yen from previous forecast of billion yen Forecast for Others unchanged Operating income of 12.5 billion yen: Unchanged from previous forecast Decreases in depreciation and amortization and expense reductions to offset negative impact of foreign exchange rates Total extraordinary income of 25.0 billion yen : Raised by 25.5 billion yen from previous forecast Extraordinary income of 58.0 billion yen from items including transfer of DJ equipment business, and extraordinary loss of 33.0 billion yen from items including streamlining of the overall Group

17 17 Operating Income Structure Breakdown (FY15/2H compared to FY15/1H) Higher Profit Due to Increase in Net Sales Improvement in Cost of Sales Ratio Impact of Currency Exchange Increase in SG&A FY15/1H Operating Income Increase of 5.8 billion yen FY15/2H Operating Income Forecast

18 18 Forecasts for FY2015: Car Electronics Net Sales < Net Sales > OEM Ratio to Net Sales: 55% (FY14: 54%) % to Prior Year 105% (Japan 94%, Overseas 113%) Increase Factors Decrease Factor OEM car audio products, OEM car navigation systems, and consumer-market car audio products Consumer-market car navigation systems Japan % to Prev. Forecasts 101% (Japan 98%, Overseas 104%) Increase Factors OEM car audio products, and OEM car navigation systems Negative Factor Consumer-market car navigation systems < Operating Income > Operating Income Overseas Year-on-Year Positive Factors Negative Factors vs. Prev. Forecasts No change Improvement of 0.6 billion yen Improvement in cost of sales ratio (+3.1 billion yen), and higher profit due to increase in net sales (+2.0 billion yen), and impact of currency exchange (+0.4 billion yen) Increase in SG&A (-4.8 billion yen) < Shipment to Consumer Market > (thousand units) FY2014 FY2015 FY2015 s Previous Current Forecasts Forecasts Note: Operating income by segment represents figures prior to elimination of transactions among segments. FY2015 FY2015 FY2014 Previous Current s Forecasts Forecasts Car navigation systems Car CD players 7,999 8,650 8,300

19 19 Forecasts for FY2015: Home Electronics Net Sales Japan < Net Sales > %t to Pi Prior Year 99% (Japan 107%, Overseas 95%) Increase Factors Decrease Factor Equipment for cable-tv systems, and DJ equipment Home AV products % to Prev. Forecasts 96% (Japan 93%, Overseas 98%) Increase Factor Decrease Factors None Optical disc drive-related products, Home AV products, Equipment for cable-tv systems, and AV accessories Overseas 75.6 Operating Income/ Loss -0.0 FY2014 s < Operating Income/loss> Year-on-Year Positive Factor Improvement of 0.5 billion yen Improvement in cost of sales ratio (+2.9 billion yen) Negative Factors Increase in SG&A (-1.7 billion yen), Lower profit due to decrease in net sales (-0.5 billion yen), and impact of FY2015 FY2015 currency exchange (-0.2 billion yen) Previous Current Forecasts Forecasts vs. Prev. Forecasts No change Notes: 1. Operating loss by segment represents figures prior to elimination of transactions among segments. 2. In FY2015, the Company classified telephones in Home Electronics, which were previously included in Others. Figures for FY2014 have been reclassified to conform to this presentation.

20 20 Forecasts for FY2015: Others < Net Sales > % to Prior Year 105% (Japan 106%, Overseas 103%) Increase Factor Factory automation systems Net Sales Decrease Factors vs. Prev. Forecasts < Operating Loss > Business-use AV systems, and Electronic devices and parts No change Japan Overseas Operating Loss Year-on-Year Positive Factors Negative Factor vs. Prev. Forecasts Decrease of 0.2 billion yen Higher profit due to increase in net sales (+0.3 billion yen), and improvement of cost of sales ratio (+0.1 billion yen) Increase in SG&A (-0.6 billion yen) No change FY2014 s FY2015 Previous Forecasts FY2015 Current Forecasts Notes: 1. Operating loss by segment represents figures prior to elimination of transactions among segments. 2. In FY2015, the Company classified telephones in Home Electronics, which were previously included in Others. Figures for FY2014 have been reclassified to conform to this presentation.

21 Forecasts for FY2015: Net Sales by Geographic Segment Japan 120 North America FY15 compared to prior year 98% Increase Factors Equipment for cable-tv systems, optical disc drive-related products, and factory automation systems Decrease Factor Consumer-market car navigation systems, and OEM car navigation systems FY15 compared to prior year Yen basis: 111% Local currency basis: 107% Increase Factors Car audio products both in consumer market and OEM, car navigation systems both in consumer market and OEM, and DJ equipment Decrease Factor Home AV products FY14 Europe FY15 Forecast FY15 compared to prior year Yen basis: 99% Local currency basis: 99% FY14 FY15 Forecast Other Regions FY15 compared to prior year Yen basis: 109% Local currency basis: 106% Increase Factors OEM car audio products, and DJ equipment, and AV accessories Decrease Factor Consumer-market car audio products, and Home AV products Increase Factors OEM car navigation systems, car audio products and car navigation systems for consumer market, DJ equipment Decrease Factor Home AV products, and optical disc drive-related products 0 FY14 FY15 Forecast 0 FY14 FY15 Forecast

22 Forecasts for FY2015: Inventories, R&D Expenses, Capital Expenditures, Depreciation & Amortization 22 Inventories (turnover days) R&D Expenses (% to net sales) (13.7) FY11 FY12 FY13 FY14 FY15 Forecast Note: As for FY15 forecast, inventory amounts for home AV products and DJ equipment are deducted. FY11 FY12 FY13 FY14 FY15 Forecast (Six-month result) Capital Expenditures Depreciation and Amortization (11.1) (11.2) FY11 FY12 FY13 FY14 FY15 Forecast (Six-month result) FY11 FY12 FY13 FY14 FY15 Forecast (Six-month result)

23 3. Topics 23

24 24 1. Final Agreement of Integration ti of Home AV Business Final Agreement on Integration of Pioneer s Home AV Business and Onkyo Corporation s Home AV Business Achieve reinforcement and growth of home AV business of Pioneer Corporation and Onkyo Corporation Final Agreement Image of alliance aimed by Pioneer and Onkyo Subjected Business : Home AV business, Home Telephone business, Headphone related business Equities owned by Pioneer Corporation on Onkyo Corporation : 14.95% OS Holdings Gibson Brands Inc. Other Share- holders Pioneer Policy of alliance : Alliance is issued based on the equal spirit and aims to maximize corporate value of both companies in cooperation Date of final agreement : November 7, 2014 Onkyo Corporation AV Business 14.95% Date of share transfer: March 2014 (scheduled) Date of Home AV business integration: July 2014 (scheduled) Pioneer Home Electronics Corporation + Onkyo AV Business Integration

25 25 2. Growth Strategy for Car Electronics Our Direction Grow Connected Cars Business Creating Value Developing Value Aim to be a leading company for Comprehensive Infotainment Use open platforms to integrate car AV equipment and car navigation systems Promote connected models Hardware Information services Value Peripheral devices Create and expand businesses Expand consumer-market business Information services, peripheral devices Telematics Commercial-market solutions Grow OEM business Tackle emerging markets OEM Aim to be an indispensable key supplier to automakers and their mega suppliers Consumer Market Aim to be a Pioneer in providing new value by promoting world-first and the most advanced value in connected car life markets Strengthening of Management Base

26 26 2. Growth Strategy for Car Electronics Connected Cars Realize a comfortable, exciting, safe and reliable car experience through seamless cloud services and analysis of information obtained from cars and drivers, and exchanging optimal information via an optimal interface Pioneer s Strengths Measures Going Forward Aims Information services Alliance with NTT DOCOMO, INC. In-house map data Server services using probe information Strengthen big data analytical capabilities Business alliance with Treasure Data, Inc. (U.S.) Develop map data for ASEAN region Agreement to establish JV with MappointAsia i Upgrade for detailed map data Business alliance with NTT GEOSPACE CORPORATION Strengthen th technological l development capabilities for safe and reliable driving Promote alliances with diverse institutions (JARI,* etc.) Establish base in ASEAN region Use business model established in Japan Global expansion Strengths in maps, hardware, peripheral devices Acquire technological development capabilities Establish position for automated driving Peripheral devices HUD, OLED, audio equipment Strengthen interfaces and ADAS**-related areas Utilize alliances for cameras and other sensing devices Consider alliances and M&A Acquire related technologies and expertise Hardware High global share and strong brand recognition Car AV and car navigation equipment Strengthen alliances with IT companies Use open platforms to integrate car AV and car navigation models Link information services and peripheral devices Promote connected functionready equipment *JARI: Japan Automobile Research Institute. Pioneer is participating in JARI s development of danger prediction technologies, commissioned by METI. **ADAS: Advanced Driver Assistance Systems

27 2. Growth Strategy for Car Electronics OEM and Emerging Market Strategies Expand OEM Business 27 Expand business with existing OEM customers Provide unique value using customer feedback from early introduction of connected products to consumer market Acquire new global OEM customers Obtain business from new customers and mega suppliers with unique connected solutions, devices, and peripheral devices Started regional headquarters in Brazil in October 2014, and will establish sales subsidiary in Indonesia in July 2015, as a part of efforts to strengthen management base Strengthen speaker business Double OEM car speaker sales by FY20 (vs. FY14 actual) Strengthen development capabilities by consolidating dispersed internal resources and integrating related divisions Expand existing areas ranging from entry to high-end models Strengthen new areas incorporating audio technologies (use of user interface, noise cancellation, simulated engine sounds, etc.) Tackle Emerging Markets Cultivate new business for both compact cars and cars without pre-installed car audio products Develop products appropriate for compact cars in emerging markets, using structures and processes that conform to local economic level, such as smartphone-ready models

28 28 2. Growth Strategy for Car Electronics Investment Direction Sound financial position to enable appropriate investment from FY2016 onwards Proactive upfront investment for execution of growth strategy Technology, production M&A Alliances, JVs marketing, etc. Key strategy Grow connected cars business Investment policy Global development / Upfront investment for technological development / Promotion of alliances Grow OEM business Strengthen global solutions and marketing capabilities / Expand speaker business Tackle emerging markets Strengthen R&D / Establish production sites / Enhance brand strength and marketing

29 29 2. Growth Strategy for Car Electronics Improving profitability Strengthen profitability based on existing, highly profitable fields Maintain high profitability in car AV products. Secure profit margin of more than 10% in consumer market. In addition, increase market share of affordably priced-models for compact cars in emerging markets In car navigation, improve profitability with significant development cost reductions through integration of car AV equipment via open platforms Further reduce costs via realignment of production sites and standardized di d product architecture Steadily increasing profit contribution from new fields from FY2018 Expand solutions businesses including commercial, map-related, telematics, and peripheral devices including HUD / ADAS-related In speaker business, consolidate dispersed resources Further expand in wide range of new areas ranging from entry to high-end, especially OEM business, and pursue new fields 12.4 billion yen (3.6%) 20.0 billion yen (5.1%) OEM Profit improvement New business fields] Existing area Car navigation Integrated models 27.0 billion yen (6.2%) Image of Operating income (margin) transition Existing area Car AV products FY14 FY15 FY16 FY17 FY20

30 30 2. Growth Strategy for Car Electronics Numerical Targets FY17: Net sales of billion yen, operating income margin of more than 5% FY20: Net sales of billion yen, operating income margin of more than 6% (Unit: billion yen) Net sales (bar chart) Solutions business Consumer-market business Growth strategy for achievement of FY20 targets Grow solution business by 3 times or more (vs. FY14 actual) Capture potential customers in Japanese commercial business Business growth from expansion of telematics market Expand business area of map services in Japan and overseas Operating income (broken line chart) Secure business scale in consumer market Be first to launch, and popularize connected products Additional sales by targeting cars without pre-installed audio systems in emerging markets 30% growth in OEM business (vs. FY14 actual) OEM business Strengthen solutions capabilities to increase business with existing customers Additional sales from compact cars in emerging markets Double OEM speaker sales Commercialize key modules and key devices Operating Profit Margin 3.6% 3.6% 3.4% 5.1% 6.2% Exchange rate assumptions: 1 US$=105 yen; 1 euro=135 yen

31 Car Electronics Business 3. Medium-Term Numerical Targets FY14 s FY15 Forecasts Previous Forecasts Current Forecasts FY16 Plan FY17 Plan 31 Net Sales Operating Income (Margin) 11.2 (2.2%) 12.5 (2.4%) 12.5 (2.4%) 12.5 (2.6%) 20.0 (4.1%) Ordinary Income Net Income Net Sales Business Operating Income Non-Car Electronics Business Average Currency Rate Net Sales Operating Income/Loss (yen) 1 US$ Euro Note : In case of 1 yen depreciation against US$ and euro for FY16 and FY17: Net sales: US$: 2,300 million yen / euro: 300 million yen; Operating income: US$: -300 million yen / euro: 200 million yen.

32 3. Medium-Term Numerical Targets Inventories, R&D, CAPEX and Depreciation & Amortization 32 FY14 s FY15 Forecasts Previous Forecasts Current Forecasts FY16 Plan FY17 Plan Inventories Turnover Days(days) R&D Expenses (% to Total Net Sales) 26.9 (5.4%) 27.0 (5.2%) 27.0 (5.2%) 25.0 (5.3%) 26.0 (5.4%) Capital Expenditures Depreciation & Amortization

33 3. Medium-Term Numerical Targets - Cash Flows and Financial Data 33 Cash Flows FY14 s FY15 Forecasts Previous Forecasts Current Forecasts FY16 Plan FY17 Plan Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities Free Cash Flows Financial Data FY14 s FY15 Forecasts Previous Forecasts Current Forecasts Equity Equity Ratio (%) 22% 23% 30% 33% 35% Net Debt Cash and Deposits FY16 Plan FY17 Plan

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