Ferrotec Corporation Results for the 1 st half of the fiscal year ended March 31, 2014

Transcription

1 Ferrotec Corporation Results for the 1 st half of the fiscal year ended March 31, 2014 November 27, 2013 (JASDAQ 6890) ferrotec. co. jp/ 1. This 1st half results cover six months period from April to September of Ferrotec, and six months period from Jan. to June of consolidated subsidiaries and affiliated companies included in investment profit loss in equity method. 2. These materials were prepared for the purpose of providing information regarding the company s results of operations for the 1 st half of the fiscal year ending March 31, These materials were prepared based on information available as of Nov. 27, All opinions, forecasts and other forwardlooking statements are based on management s judgments in accordance with materials available at that time and may be changed without prior notice.

2 First Half of FY March 2014 Financial Results

3 Consolidated Financial Summary FY March st half FY March st half YoY change Amount Pct. of sales(%) Amount Pct. of sales(%) Difference Pct. change Net sales 20, , cost of sales 16, , , Gross profit 3, , , SG&A expenses 5, , Operating profit 2, ,312 - Non-operating income , ,171 1,361.6 Non-operating expense Ordinary profit 2, ,241 - Extraordinary income Extraordinary loss 2, , Net profit 6, ,851 - Capital investment 1,820-1, Depreciation 1,573-1, Note: Exchange rate FY3/13 1H FY3/14 1H : / US dollar / RMB (avg. rate during the period)

4 Consolidated Financial Summary in millions FY March st half Amount Pct. of sales(%) Net sales 20, Cost of sales 15, Gross profit 5, SG&A expenses 4, Operating profit Non-operating income 1, Non-operating expense Ordinary profit Extraordinary income Extraordinary loss Income before income tax 1, Income taxes No posting of valuation loss due to lower-of-cost-or-market method resulted in improvement in cost rate YoY Business structural reform plan, improved for not posting a large amount of allowance for doubtful accounts Included an exchange gain of 1,100 million in non-operating income due to the sharp depreciation of the yen and an additional expenses of 462 million associated with the Photovoltaic business in non-operating expenses 645 million in gain on sale of investment securities included 4 Net profit

5 Net Sales and Operating Profits by Segment Net sales ( in millions) FY March st half FY March st half YoY change Amount Pct. Of Sales(%) Amount Pct. Of Sales(%) Difference Pct. change Equipment-related 9, , Electronic device 2, , Photovoltaic-related 7, , , Others 1, , T o t a l 20, , Operating income ( in millions) FY March st half FY March st half YoY change Amount Pct. Of Sales(%) Amount Pct. Of Sales(%) Difference Pct. change Equipment-related Electronic device Photovoltaic-related 2, ,282 - Others Corporate & elimination T o t a l 2, ,312 -

6 Comparison of Operating Income Operating income : Major factor for 2,312 million increase YoY ( in million) FY3/13 1 st half 2,153 Sales increase Cost reduction 1,360 Previous 2Q Lower-of-cost-ormarket method, etc. 1,264 Reduced SG&A expenses 907 Previous 2Q Provision of allowance for doubtful accounts 711 FY3/14 1 st half

7 Consolidated Balance Sheet ~Assets~ ( in millions ) FY3/13 FY3/14 1H Difference Current assets 34,271 39,165 4,894 Cash & deposits 7,373 8, Note & accounts receivable 15,235 15, Inventory 9,536 11,604 2,068 Major factors for increase in current assets Mainly due to increases in cash and deposits and inventories Major inventories Vacuum feedthroughs: 712 million, quartz: 872 million, thermo module: 1,491 million, ceramics: 796 million, PV manufacturing equipment: 3,747 million, PV silicon products: 1,228 million Fixed assets 32,072 33,979 1,907 Tangible fixed assets 24,914 27,523 2,609 Building 5,409 5, Equipment & machinery 10,165 11,831 1,666 Tools, furniture, and fixture 5,980 6, Land Major factors for increase in tangible fixed assets A majority of the Company s tangible fixed assets are owned by a Chinese subsidiary and are due to increase resulting from the effect of the weak yen ( ; 15.3%), and investments in fixed abrasive wire saw requested by powerful customers as a result of specializing in OEM in the PV-related business 7 Intangible fixed assets 1,683 1, Goodwill Investments & other assets 5,473 4, T o t a l a s s e t s 66,343 73,144 6,801 Intangible fixed asset situation Amortization of goodwill : 1 st half(actual): 212 million 2 nd half(plan): 159 million

8 Consolidated Balance Sheet ~Liabilities and net worth~ ( in millions) FY3/13 FY3/14 1H Difference Current liabilities 27,243 30,884 3,641 Major factors for decrease in current liabilities Increased mainly due to short-term debt based on short-term commitment line contract Notes and accounts payable 8,554 9, Shot-term debt 9,667 12,055 2,388 Current portion of longterm borrowings. 2,867 2, Fixed liabilities 8,660 7,498 1,162 Interest-being debt Short-term debt +Current portion of long-term borrowings Long-term debt + bond etc. Total 14,746 million ( 12,534million) 4,822 million ( 5,836 million) 19,568 million ( 18,370 million) Long-term debt 5,836 4,822 1,014 Net interest-being debt 11,353 million ( 10,997 million) Total liabilities 35,904 38,382 2,478 Net Assets 30,439 34,762 4,323 8 Shareholder s equity 29,366 29, Total adjustment 399 4,111 3,712 Minority interests Total liabilities & shareholder s equity 66,343 73,144 6,801 Net assets Shareholders equity: Net income: 649 million Dividends: million Foreign currency translation adjustments: 3,995 million

9 Consolidated Cash Flow 9 ( in million) FY3/13 1H FY3/14 1H Cash flow from operating activities 157 2,013 Income before income taxes 5,541 1,182 Depreciation 1,573 1,981 Exchange gain & loss( :gain) Changes in restructuring expense ( :decrease) 2, Changes in notes & accounts receivable ( :increase) 321 3,430 Changes in inventories( :increase) Changes in accounts payable( :decrease) Others 984 2,436 Cash flow from investing activities 2,024 1,761 Payments for purchase of tangible fixed assets 1,820 1,640 Proceeds from sales of tangible fixed assets Payments for purchase of marketable securities 1 67 Proceeds from sales of marketable securities Others Cash flow from financing activities Changes in short-term borrowing 175 1,579 Proceeds from long-term debt 2, Payments of long-term debt 1,572 1,573 Payments for dividend Others Changes in cash & cash equivalents 2, Cash and cash equivalents, beginning of year 9,560 7,373 Cash and cash equivalents, end of year 7,460 8,215 Operating CF Income before income tax + Depreciation: 3,163 million Increase in operating CF due to increased allowance for business structural reform: 462 million Increase in operating CF due to decreased accounts receivable: 3,430 million Decrease in operating CF due to increased inventories: million Decrease in operating CF due to decreased accounts payable: million Investing CF Main content of payments for tangible fixed assets acquired Shanghai subsidiary: 690 million Hangzhou subsidiary: 392 million Yinchuan subsidiary: 169 million Financing CF Increase/decrease in short-term debt Mainly debt based on short-term commitment line contract Repayment of long-term debt Ferrotec Group s scheduled payment

10 Full-Year Forecast ( in millions) FY3/13 FY3/14 FY3/14 Comparison between FY3/14 and figures Initial forecast Revised forecast Vs. FY3/13(%) Vs. Initial plan(%) Net sales 38,424 42,000 42, Operating profit 3,608 1,000 1, Ordinary profit 3, Net profit 6, , Capital investment 3,706 1,500 2, Depreciation 3,321 3,600 3, Note: Exchange rate FY3/13 FY3/14(assumed rate) : / US dollar / RMB Capital investment is based on cash flow considering unprojected large-scale capital investment and accounts payable facilities at the end of previous year.

11 Business Forecast (sales by segment) YoY ( in millions) FY3/13 FY3/14(E) (%) Equipment-related 18,867 22, Vacuum Feedthroughs 4,686 5, Quartz 3,420 4, Ceramics 4,108 4, EB-Gun, LED 2,724 3, semiconductor wafer 3,930 4, Electronic device 4,563 5, Thermo-electric module 4,126 4, Ferrofluid, others Photovoltaic-related 12,345 11, Quartz crucibles 2,709 3, Solar silicon 5,509 6, PV manufacturing Epuip. 2, Solar cell, Others 1, Others 2,648 3, total 38,424 42,

12 Status by Segment and Outlook

13 Segment 50% Equipment-related Segment 14% Electronic device Segment 28% Photovoltaic-related Segment Vacuum Feedthroughs Quartz Ferrofluid PV silicon(ingot) OEM Single crystal ingot Multi- crystal ingot PV wafer Consumable Ceramics Thermo-electric Module Quartz crucible Hot zone DCBSubstrates for power semiconductor Vessel 13 The bar chart represents the pct. of each segment in FY3/14 1H sales

14 Equipment-related Segment Sales ( in million) 14,695 11,967 10,188 9,509 9,358 10,189 Semiconductor wafer Ceramics EB-gun, LED, others Quartz Product Vacuum Feedthrough 14

15 Status and Outlook for Vacuum Feedthroughs (m ) Transition of sales Sales by category 1. Status of 1 st half of FY3/14 In the FPD market, capital expenditure in large LCD for TV, smalland-mid- sized high definition LCD for mobile phone and Organic Electro-Luminescence(OLED) manufacturing equipment in China completed In the semiconductor market, major companies started making capital expenditure again but weakened due to downsizing and postponement from the middle of the 1st half Slightly decreased for robot manufacturers 2. Outlook for 2 nd half of FY3/14 Cannot expect large-scale capital expenditure in the FPD market and capital expenditure for mobile application will be the key Growth is expected in the semiconductor market anticipating increase in orders Contract manufacturing from companies branching out into China is expected to be strong Measures Boost demand for contracted equipment sub-assembly products Provision of engineering after-sales services 15 Industrial: Industrial Vacuum Equipment Others: Aero, Medical, Science etc

16 Status and Outlook for Quartz Products (m ) Transition of sales Sales by category 1. Status of 1 st half of FY3/14 Weak until the early part of the 1st half but recovered from orders for OEM from the latter part of the 1st half Orders from 2 major OEM companies in the US (SWP demand) gradually recovered Decisions to make investments by IC makers in Japan and Asia took longer than expected LED market remained the same Pressure to cut price is increasing and drop in highly-value added high purity products and products to expand sales in Taiwan put pressure on profit 2. Outlook for 2 nd half of FY3/14 Orders from major OEM companies in the US and Japan (batch) are expected to recover Increase in orders due to reinvestment by the companies in Japan and Asia and increase in request for quick delivery Increase in production capacity due to approval of high purity products by the Chinese plant Expected to be strong due to increase in inquiries Measures Increase production in China to reduce cots Sales of next-generation quartz and silicon parts Marketing for Taiwanese companies, quick delivery, stable product quality, customization 16

17 Status and Outlook for Ceramics Products (m ) 6,000 5,000 4,000 3,000 2,000 1,000 0 Transition of sales 2,345 2,148 1,960 1,841 FY3/13 1H FY3/13 2H FY3/14 1H FY3/14 2H(e) Sales by category 1. Status of 1 st half (Jan-Jun) of FY 3/14 Machinable Ceramics (Photoveel) Remained in a sever condition in terms of sales on orders for both Memory (N/Flash) and Non-memory (Logic) due to sluggish demand for electronic devices for consumer use. In particular, sales of semiconductor inspection tools were significantly affected by the adjustment of production of high end smartphone device Fine Ceramics Started making capital expenditure in the finer design rule mainly in Taiwan from the beginning of the year and orders recovered in early spring. Overseas sales remained favorable and overall sales were on a par with the previous term 2.Outlook for 2 nd half (Jul-Dec) of FY 3/14 Machinable Ceramics (Photoveel) Production of Non-memory high functional devices remain low but expects to receive orders for inspection tools of the next-generation device in early winter A gradual recovery in N/Flash from the end of 3Q Bulk orders for products for general use due to mass production of medical-related products for the US Fine Ceramics Faster-than-expected recovery in memory makers and foundries capital expenditure in cutting-edge areas (miniaturization/3d) and sudden increase in orders from equipment makers in Japan and overseas in the 2nd half Increase in overseas market share Sales are expected to greatly exceed the 1st half 17 FC(Fine Ceramics) MC(Machinable Ceramics) 3.Continued sales policy <Machinable> Global-scale development of new customers and use of wafer circuit inspection tools (further strengthen marketing) Global-scale development of new customers and use of products for non-semiconductor application (further strengthen marketing) <Fine Ceramics> Continuing marketing activities to develop new customers and use in the European market as well as in the US and Asia <Common> Sales expansion through development of new materials and new processing technological development and strengthening of sales competition

18 Status and Outlook for Semiconductor wafer and Deposition Equipment (m ) (m ) Transition of sales Semiconductor wafer EB Deposition Equipment Semiconductor Wafer : 1. Status of 1 st half of FY 3/14 The market condition recovers in general and own brand in particular is expected to expand Japanese market sluggish in the 1st half but will show signs of recovery in the 2nd half Take measures to meet customer needs 2. Outlook for 2 nd half of FY3/14 Expect increase in own brand products due to recovery in the market Chinese and Taiwanese markets remain strong. Unclear in the latter half Expect sales increase by increasing the variety of wafers Measures Establish a system in response to the expansion of mass production Capital expenditure in upgrading of facilities under review, establish a system for services including technology and quality EB Deposition Equipment: 1. Status of 1 st half of FY 3/14 Decreased due to the completion of Capital expenditure in LED, inquiries for mobile transmitter chip 2. Outlook for 2 nd half of FY3/14 18 Expect sales increase due to recovery in demand from the 2nd half Measures Focus on optical market and start taking orders ntroduce new model

19 Electronic Device Segment Sales ( in million) 3,220 2,117 2,195 2,368 2,801 2,662 Ferrofluid,SMT, others Thermo-electric module 19

20 Status and Outlook for Thermo-electric Module Products (m ) Transition of sales 1. Status of 1 st half of FY 3/14 Automobile Seat Application Increased due to the launch of a new model Other Application Biotech equipment, semiconductor and optics applications were strong Consumer application increased for adopting electric shaver and water purifier, etc. Released and began mass production of power device substrates Sales by category 2.Outlook for 2 nd half of FY 3/14 Automobile Seat Application Expect to remain strong in the 2nd half due to the favorable sales of automobiles Other Application Expect to remain flat for biotech equipment and optics applications Consumer application expects to be favorable as a result of favorable sales of electric shavers, beauty home electric appliances and water purifiers and strong sales of air conditioners Increase in sales of power device substrates Measures Focus on expanding share of the US and European markets Strengthen marketing for power device substrates Raise production efficiency to increase cost competitiveness 20

21 Photovoltaic-related Segment Sales ( in million) 16,659 Solar cell & Others 10,698 Solar silicon Quartz crucibles 7,022 5,323 5,680 5,762 PV manufacturing Equip. 21

22 Status and Outlook for Quartz Crucibles (m ) Transition of sales 1. Status of 1 st half of FY3/14 Demand for PV application settles but there is growing pressure to cut price The price bottomed out from the latter half but quantity increased Tried expanding market share for small diameter semiconductor use Steady growth in vessels for multi-crystal for customers in Taiwan 2. Outlook for 2 nd half of FY3/14 Expect demand to increase but varies due to the price Change in customers needs from multi pulling to single pulling apparatus? Start negotiations to restore the price; moderate increase in quantity Continue to increase sales for semiconductor use Expect increase in the quantity of vessels for multi-crystal Measures Price shift by introducing long-lasting products Recycle raw materials at the Yinchuan factory, reduce costs in the scouring process Receive approval for for semiconductor Si makers in Japan Build in quality, maintenance of production line Single-crystal quartz crucible Multi-crystal vessel 22

23 Status and Outlook for Solar Silicon (m ) Transition of sales 1. Status of 1 st half of FY3/14 Focus to OEM and demand was strong. Inquiries also increased Consumers demanded high performance and low-cost products Demand stagnated in Europe but brisk demand in Japan, China and the US Price remained flat, sluggish for domestic consumption due to severe competition 2. Outlook for 2 nd half of FY3/14 Under evaluation for the approval of new OEM customer Customer needs for high conversion efficiency multi-crystal and N type single-crystal PV demand in Eastern Europe, the Middle East, South America and other emerging countries emerge Price is expected to remain low Measures Transfer crystal manufacturing to Yinchuan factory; receive approval Differentiate by upgrading fixed abrasive cutting wafer technology Secure orders by enhancing the performance of N type singlecrystal Single crystal ingot Multi- crystal ingot PV wafer 23

24 Reference Materials

25 Corporate Date Corporate Name Ferrotec Corporation Date of Foundation September 27, 1980 A d d r e s s Nihonbashi Plaza Building, 2-3-4, Nihonbashi, Chuo-ku, Tokyo Japan L i s t e d JASDAQ (Listed Code:6890) P r e s i d e n t Akira Yamamura Business Segment Equipment-related business : Vacuum Feedthrough, Quartz, Ceramics, silicon, wafer processing PV-related business : PV manufacturing equip, Quartz crucibles, solar silicon Electronic device business : thermo-electric module, Ferrofluid C a p i t a l 13,201,346,010 JPY I s s u e d S t o c k 30,903,702 Related Company 24 Consolidated Subsidiary 5 Companies Accounted for by the Equity Method 25 E m p l o y e e s Consolidated 5,395 Non-consolidated 173

26 History 1980~ Started manufacturing and selling products using ferrofluids (computer seals, vacuum feedthroughs) Vacuum Feedthroughs 1990~ 92 Started manufacturing and selling thermomodules and modules in China 98 Started manufacturing and selling quartz products for the semiconductor industry Thermo-electric module Quartz 2000~ 02 Started contract manufacturing service business for silicon wafer processing, machine tool production and other activities (Shanghai factory) 05 Started photovoltaic products business; started manufacturing and selling machinery and crucibles for manufacturing silicon ingots and crystals 08 Started manufacturing and selling ceramic products Ingot Single crystal silicon growing furnaces Machinable Ceramics With a core of ferrofluid expertise ~ Ferrotec s core Technology ~ Establishing operations in other countries 91: Established subsidiary in Massachusetts, USA 92: Established subsidiary in Hangzhou, China 95: Established subsidiary in Shanghai, China 97: Established subsidiary in Singapore 99: Started operations in North America and Europe by acquiring Ferrofluidics Building a new profit structure 02: Started contract manufacturing service (CMS) business at the Shanghai factory, including silicon wafer processing, machine tool production and other activities Expertise in production technologies extending from component processing to final assembly allowed Ferrotec to start the CMS business 05 : Increased manufacturing and sales activities for photovoltaic products in Hangzhou, China 26

27 Sales and Operating income Trend Sales Trend Operating income Trend ( in millions) ( in millions) 3,564 24,351 20,048 18,376 20, ,153 1,455 30