Date and Time: 6:00-7:00 p.m. Tuesday, January 26, 2021
Please note that this document is not a direct transcript of the Q&A session from the conference call, but is a simple summary including additions and corrections at the discretion of the company. The results and forecasts are forward-looking statements determined by the Company based on currently available information that may include risks and uncertainties. Please be aware that actual results may vary significantly due to various factors.
The factors impacting the change in operating income are,
- Fixed costs | Approx. +8.0 | billion yen |
- Price reduction offset by streamlining, etc. | Approx. +5.5 | billion yen |
- Sales volume variance | Approx. +5.5 | billion yen |
- Royalty income | Approx. +4.0 | billion yen |
- Impact of foreign exchange | Approx. -4.0 | billion yen |
- Product mix | Approx. -3.0 | billion yen |
- Others | Approx. -0.5 | billion yen |
As a result, operating income increased by 15.7 billion yen.
In current fiscal year, the cost of activities was curbed due to COVID-19. In addition, personnel expenses were reduced due to a decrease in automobile production in North America. As for activity expenses, since the work style reform is proceeding sharply, we do not anticipate it will return to levels as before. The plan for Fiscal Year 2021 will be examined in light of these changes in environment.
The increase of market prices for polarizers had limited impact on business results. The major factor in the increase in profits were rationalization for production in laptop and tablet device, those demand grew significantly in this period.
The factors impacting the change in operating income are,
- Sales volume variance | Approx. +12.5 | billion yen |
- Price reduction offset by streamlining, etc. | Approx. +2.5 | billion yen |
- Fixed costs | Approx. +1.5 | billion yen |
- Impact of foreign exchange | Approx. -2.0 | billion yen |
As a result, operating income increased by 14.4 billion yen.
The factors impacting the change in operating income are,
- Sales volume variance | Approx. +8.5 | billion yen |
- Product mix | Approx. +2.5 | billion yen |
- Price reduction offset by streamlining, etc. | Approx. +0.5 | billion yen |
- Fixed costs | Approx. -2.0 | billion yen |
- Impact of foreign exchange | Approx. -1.0 | billion yen |
As a result, operating income increased by 8.6 billion yen.
In Functional Base Products, sales of semiconductor-related materials used in the manufacturing process increased. Electronic component for high-end smartphone also remained firm, and profitability improved significantly due to an increase in demand for general industry materials. In Transportation business, the product mix was better with strong performance of car electronics related products. The Company is considering implementing structural reforms for the “demand that won’t recover”, which will result to the decline in 4Q.
In our medium-to long-term strategy, Transportation Business is to focus on car electronics related products. Currently, demand for vibration-damping materials for automobiles is strong, but it is difficult to expect the demand last long. In 4Q, we have incorporated expenses of almost 4 billion yen for the cost of structural reform.
Demand for polarizer for smartphones was better than expected, but revenue declined compared with the previous fiscal year. In the current fiscal year, polarizer for laptop and tablet device contributed significantly to the increase in profits. We expect this strong demand to continue in 4Q, but we expect a decline in 4Q as a whole, due to usual seasonal factors.
The revision was made based on the factor that the demand for polarizer for laptop and tablet device increased from the background of expanding telework.
In Flexible Printed Circuits, sales of products for HDDs are also strong. High-precision circuits have begun to make contribution, accounting for approximately 30% of Flexible Printed Circuits revenues. We expect further expansion in the next fiscal year.
We believe that we have a technological advantage over other companies. The manufacturing system is already prepared, and we will further stabilize production and respond to rising demand from the next fiscal year onward.
The revision was made based on the strong performance of the oligonucleotide contract manufacturing business. In addition, we expect a royalty income from drug discovery business in 4Q.
The nucleic acid drug business is divided into oligonucleotide contract manufacturing and drug discovery. We have begun to respond to the inquiry from customers for COVID-19 vaccines in areas related to the contract manufacturing. We will report back with any achievement.
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