Epson 2009 Annual Report Download - page 28

27
Business Conditions
1. Overview of business results
(1) Operating results
The effects of the financial crisis that began in the United States spilled over into the real world economy
throughout the second half of the fiscal year under review, setting off a global recession that rapidly
intensified. The Japanese economic picture also worsened during the second half, with capital expenditures
and exports declining in step with the global economic slowdown, triggering declines in production and
corporate earnings, along with a rapid deterioration in the employment situation.
The situation in the main markets of Epson was as follows.
In inkjet printers it became evident that the market was trending toward a year over year decline as the
recession deepened. The serial-impact dot-matrix (“SIDM”) printer market remained soft. Despite a steady
performance in China and some other countries, SIDM sales were impacted by shrinking markets in
Europe, the United States and Japan and the effects of the recession. Likewise, the market for point-of
sales (“POS”) systems saw muted demand for receipt printers as retailers sought to curb their spending due
to the economic downturn.
In the projector market, business projector sales in the first half were on pace to exceed the fiscal 2007
numbers until the second half, when the sudden economic downturn caused the growth rate to decline.
Many of the main applications for small- and medium-sized LCDs have also been affected by the recession.
In the mobile phone handset market, new demand for low-end phones in the emerging economies of Africa,
the Middle East and Asia, most notably China and India, either peaked out or weakened after a period of
steadiness that extended across the first half of the fiscal year. At the same time, upgrade demand for 3G
phones in Europe, the United.States and Japan plummeted. The rate of growth in PDA phones, digital
cameras and portable media players (“PMPs”) also fell sharply.
Meanwhile, however, the markets for Epson's information-related equipment and electronic device
products suffered from continued price erosion due to fierce competition in every segment and a relentless
shift of demand toward the low-price zone.
In our precision products segment, demand for watches and semiconductor manufacturing equipment
softened as a result of the recession, while eyeglass lens revenues suffered from continued price erosion.
To succeed in this very challenging business environment, Epson engaged in a number of key projects in
fiscal 2008.
First, in the inkjet printer business Epson aimed to sustain unit sales growth by launching highly
competitive products and by adopting a marketing strategy designed to expand print volume. We also
continued to groom our business and industrial inkjet technology into a core business and source of future
earnings. Toward this end, we continued to fortify our efforts to penetrate segments where we can leverage
the advantages of our Micro Piezo technology.
Epson also made strides in transforming its small- and medium-sized display business by further
concentrating management resources on amorphous-silicon TFT LCDs (“a-TFTs”) and low-temperature
polysilicon TFT LCDs (“LTPS”) and by seeking to reduce dependence on mobile phone handset demand
with an ongoing effort since last year to capture business opportunities in other markets.
However, the transformation of the small- and medium-sized displays and semiconductor businesses
stalled due to the sudden downturn, and Epson, concluding that improving the profitability of these
businesses within the current framework would be difficult, took bold new action based on its SE15
Long-Range Corporate Vision. As a result of these actions, Epson recorded business structure improvement
expenses and an impairment loss totaling ¥76,244 million. At the same time, tax payments amounted to
¥26,188 million as Epson wrote-down deferred tax assets due to the deterioration in profitability.
The average exchange rates of the yen against the US dollar and of the yen against the euro during the year
under review were ¥100.53 and ¥143.48, respectively. This represented a 12% appreciation in the value of
the yen against the dollar and an 11% appreciation in the value of the yen against the euro compared to the
prior year.
Consolidated net sales were ¥1,122,497 million, down 16.7% year over year. Operating loss was ¥1,588
million versus operating income of ¥57,577 million last year. Ordinary income was ¥5,301 million, down
91.6% from the prior year. And net loss was ¥111,322 million, compared to a net profit of ¥19,093 million
in the previous year.