Deteriorating profitability in the device business due to a slowdown in the smartphone market and the Chinese economy

「During the fiscal year, revenue was ¥15,021.7 million, up 7.9% year on year, driven by firm sales of electromechanical components and products from overseas manufacturers, as well as the contribution from the automotive new business, which gained momentum in the second half of the previous fiscal year, from the beginning of the current fiscal year. However, segment profit fell 2.8% year on year to ¥2,694 million because the gross margin declined due to changes in the sales mix and selling, general and administrative expenses increased.」

「During the six-month interim period, revenue was ¥6,792.2 million, up 0.3% year on year, and segment profit was ¥1,325 million, up 0.5% year on year, as the yen remained weak against major currencies.」

「During the fiscal year, revenue declined from the previous fiscal year. Gross profit also fell substantially because the loss of some high-margin projects reduced the gross margin, while higher non-operating expenses, including interest payments, also affected profitability. As a result, revenue was ¥12,490.5 million, down 15.4% year on year, and segment profit was ¥2,102 million, down 49.3%.」

「During the cumulative period through the third quarter, sales declined from the year-earlier period, while the loss of some high-margin projects caused gross profit to fall. In addition, increases in non-operating expenses, including interest expenses, affected profit and loss. As a result, net sales were ¥9,831.3 million, down 16.8% year on year, and segment profit was ¥172.2 million, down 53.7%.」

「During the cumulative period through the second quarter, sales performed strongly against the initial plan, but declined from the year-earlier period. The loss of some high-margin projects and increases in non-operating expenses, including interest expenses, also affected profit and loss. As a result, net sales were ¥6,769.1 million, down 12.9% year on year, and segment profit was ¥131.7 million, down 50.4%.」

「During the cumulative period through the third quarter, sales of electronic components remained firm, while sales of overseas semiconductors increased owing to expanded sales rights and strong sales for home video game consoles. The weaker yen against the year-earlier period also provided a tailwind. As a result, net sales were ¥11,822.0 million, up 45.3% year on year. Despite an increase in selling, general and administrative expenses, the effect of higher sales resulted in segment profit of ¥371.6 million, up 141.9% year on year.」

「During the cumulative period through the first quarter, sales of electronic components remained firm, while sales of overseas semiconductors increased owing to expanded sales rights and strong sales for home video game consoles. As a result, net sales were ¥3,356.5 million, up 50.2% year on year. Despite an increase in selling, general and administrative expenses, the effect of higher sales resulted in segment profit of ¥120.5 million, up 226.3% year on year.」

「During the first nine months of the current fiscal year, sales of Renesas products declined because the exclusive distributor agreement with Renesas Electronics Corporation was terminated in June of the previous fiscal year. Overall sales nevertheless remained firm, driven by growth in products from overseas semiconductor manufacturers, expansion of distribution rights for existing suppliers and acquisition of distribution rights from new suppliers. Revenue was ¥8,135.9 million, up 6.8% year on year.」

「Although sales of Renesas Electronics Corporation products declined following the termination of the authorized distributor agreement with the company in June of the previous year, sales overall remained strong, led by growth in products from overseas semiconductor manufacturers. As a result, revenue was ¥51.851 billion, up 7.9% year on year. Segment profit was ¥840 million, compared with a segment loss of ¥65 million in the same period of the previous year.」

「During the nine months ended the first quarter, the global spread of the novel coronavirus led to stagnation in customer and supplier production activities in the same period of the previous year. Against this backdrop, sales to the home video game console market increased, and strong recovery in semiconductor demand also supported revenue, which rose to ¥22.343 billion, up 15.4% year on year. The increase in revenue and improvement in the gross margin also resulted in segment profit of ¥369 million, compared with a segment loss of ¥143 million in the same period of the previous year.」

「During the nine months ended the third quarter, the strategic device business, which mainly handles IoT-related businesses and new overseas products, increased year on year. However, the core device business declined due to the spread of COVID-19 and changes in suppliers’ distribution channels. In addition, volume-business sales fell substantially following the optimization of sales scale as part of business portfolio reform, resulting in revenue of ¥76.206 billion, down 12.3% year on year. Although we worked to reduce SG&A expenses, the decline in gross profit resulted in segment profit of ¥211 million, down 63.1% year on year.」

「The Core Device Business declined due to the spread of COVID-19 and changes in suppliers' distribution channels. The Volume Business also declined substantially, partly because sales volume was optimized as part of portfolio reform. As a result, revenue was ¥4,807.0 million, down 19.1% year on year. Despite efforts to reduce selling, general and administrative expenses, the decline in gross profit resulted in a segment loss of ¥65 million, compared with segment profit of ¥488 million in the same period of the previous year.」

「During the first quarter of the current fiscal year, volume business declined from the same period of the previous year. In addition, production activities at customers and suppliers stagnated as COVID-19 spread, causing the Core Device Business and Strategic Device Business to decline as well. Revenue was ¥1,936.4 million, down 19.2% year on year. Despite lower selling, general and administrative expenses, the decline in gross profit resulted in a segment loss of ¥143 million, compared with segment profit of ¥59 million in the same period of the previous year.」

「During the fiscal year, the Strategic Device Business increased from the previous fiscal year, driven by growth in IoT-related businesses and overseas products, but volume business and the Core Device Business declined. Revenue was ¥10,907.5 million, down 18.2% year on year, partly because the business was also affected, albeit slightly, by the spread of COVID-19 from the fourth quarter onward.」

「During the first nine months of the current fiscal year, volume business declined from the same period of the previous year. In addition, sales were affected by the discontinuation of production for some products handled by the core device business and lower sales to the home video game console market. Revenue was ¥8,686.7 million, down 17.8% year on year. Although the company worked to improve the gross margin through portfolio reform and reduce selling, general and administrative expenses, these efforts did not offset the decline in revenue. Segment profit was ¥571 million, down 7.5% year on year.」

「During the first six months of the current fiscal year, volume business declined from the same period of the previous year. In addition, sales were affected by the discontinuation of production for some products handled by the core device business and lower sales to the home video game console market. Revenue was ¥5,945.1 million, down 9.5% year on year. Segment profit increased 81.0% year on year to ¥488 million, owing to a higher gross margin resulting from progress in portfolio reform and lower selling, general and administrative expenses.」

「During the first quarter of the current fiscal year, volume business declined from the same period of the previous year. In addition, sales were affected by the discontinuation of production for some products handled by the core device business and lower sales to the home video game console market. Revenue was ¥2,396.5 million, down 11.5% year on year. Meanwhile, segment profit increased to ¥59 million from ¥5 million in the same period of the previous year, owing to an improved gross margin and lower selling, general and administrative expenses.」

「During the fiscal year, new businesses increased from the previous fiscal year, but sales to the social infrastructure and industrial and TOY sectors declined, among other factors. As a result, revenue was ¥13,327.5 million, down 7.3% year on year. Although operating profit exceeded that of the previous fiscal year due to an improved gross margin and lower selling, general and administrative expenses, non-operating expenses increased because of higher working capital and interest payments due to rising interest rates. Segment profit was ¥465 million, down 35.8% year on year.」

「During the first nine months of the current fiscal year, sales to the automotive sector remained firm and new businesses increased from the same period of the previous year. However, sales to the information and communications and social infrastructure and industrial sectors declined, among other factors. As a result, revenue was ¥10,562.2 million, down 5.4% year on year. Although the company worked to improve the gross margin and reduce selling, general and administrative expenses, these efforts did not offset the decline in revenue. Segment profit was ¥617 million, down 18.0% year on year.」

「During the first six months of the current fiscal year, sales to the information and communications and social infrastructure and industrial sectors declined from the same period of the previous year. As a result, revenue was ¥6,571.0 million, down 10.6% year on year. Although the company worked to improve the gross margin and reduce selling, general and administrative expenses, these efforts did not offset the decline in revenue. Higher interest payments due to rising overseas interest rates also contributed to segment profit of ¥270 million, down 16.5% year on year.」

「During the first quarter of the current fiscal year, sales to the information and communications sector, particularly for mobile applications, declined from the same period of the previous year. As a result, revenue was ¥2,707.2 million, down 17.9% year on year. The decline in revenue was not offset by an improved gross margin or controls on selling, general and administrative expenses. In addition, higher interest payments due to rising overseas interest rates contributed to segment profit of ¥5 million, down 96.3% year on year.」

「As a result, Device Business revenue was ¥14,370.1 million, down 7.6% from the previous fiscal year. Profitability improved, with segment profit of ¥724 million, compared with a segment loss of ¥2,028 million in the previous fiscal year, owing to an improved gross margin, substantial reductions in inventory valuation losses and foreign exchange losses, and the effects of fixed-cost reductions, including the consolidation and closure of business locations.」

「During the nine months ended the third quarter, the automotive business remained strong and sales of new businesses increased. However, sales of liquid-crystal-related products remained sluggish, while sales of some products declined following changes in product strategy by a major supplier.」

「During the first six months of the current fiscal year, sales of LCD-related products remained sluggish, and sales of some products declined following changes in the product strategy of major suppliers. As a result, revenue was ¥7,349.6 million, down 8.1% year on year. Profitability improved, with segment profit of ¥323 million, compared with a segment loss of ¥2,003 million in the same period of the previous year, owing to an improved gross margin and substantial reductions in inventory valuation losses and foreign exchange losses.」

「During the first quarter of the current fiscal year, sales to the social infrastructure and industrial sectors declined because sales of materials remained sluggish compared with the same period of the previous year. Sales to the TOY sector also declined following changes in the product strategy of a major supplier. As a result, revenue was ¥3,299.3 million, down 10.7% year on year. Profitability improved, with segment profit of ¥137 million, compared with a segment loss of ¥1,473 million in the same period of the previous year, owing to an improved gross margin and substantial reductions in the foreign exchange losses and inventory valuation losses recorded in the prior-year period.」

「During the first nine months of the current fiscal year, sales to the automotive sector remained firm, but sales to other sectors, led by the information and communications and TOY sectors, generally declined. As a result, revenue was ¥11,635.0 million, down 19.6% year on year. In addition to lower revenue, foreign exchange losses of ¥1,749 million were recorded, resulting in a segment loss of ¥1,683 million, compared with segment profit of ¥831 million in the same period of the previous year.」

「During the first six months of the current fiscal year, sales to the social infrastructure, industrial and automotive sectors increased from the same period of the previous year, but sales to the information and communications and TOY sectors, among others, generally declined. As a result, revenue was ¥7,998.7 million, down 17.5% year on year. Profitability also deteriorated as the rapid appreciation of the yen led to lower selling prices and an inventory valuation loss of ¥313 million, reducing the gross margin, while foreign exchange losses of ¥1,506 million were recorded. The segment loss was ¥2,003 million, compared with segment profit of ¥701 million in the same period of the previous year.」

「In the Device Business, sales to the information and communications, TOY and digital AV sectors, among others, generally declined from the same period of the previous year, resulting in revenue of ¥3,695.5 million, down 16.4% year on year. Profitability also deteriorated as the rapid appreciation of the yen led to lower selling prices and an inventory valuation loss of ¥390 million, reducing the gross margin, while foreign exchange losses of ¥1,050 million were also recorded. The segment loss was ¥1,473 million, compared with segment profit of ¥133 million in the same period of the previous year.」

「Sales to the information and communications sector declined substantially from the initial plan, owing mainly to sluggish growth in new businesses against the backdrop of a slowdown in the smartphone market and the Chinese economy. As a result, revenue from the Device Business was ¥18,332.6 million, down 9.4% year on year. In addition to lower revenue, the segment loss of ¥96 million was affected by the recognition of foreign exchange losses as the yen strengthened from the second half of the fiscal year; the prior fiscal year recorded segment profit of ¥1,470 million.」