Epson 2009 Annual Report Download - page 32

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31
3. Analysis of financial condition and results of operations
(1) Analysis of operating results
Net sales
Consolidated net sales decreased ¥225,344 million, or 16.7%, to ¥1,122,497 million compared with the
previous consolidated fiscal year.
Net sales by business segment are summarized as follows.
In the information-related equipment segment, sales declined ¥133,120 million, or 14.7%, to ¥769,850
million. The following major factors contributed to the decrease.
Sales of inkjet printers were affected by a stronger yen in addition to a higher proportion of low-priced
consumer products and lower demand for business products due to the steep economic downturn. POS
system products were impacted by yen appreciation and by lower sales volume of POS system products as
a result of retailers curbing investment due to the recession. SIDM printers had robust demand in China
and other emerging economies, but were also impacted by a shift to low-priced products and a stronger yen.
Shipments of page printers were down on intensified competition and a market slump due to poor
economic conditions. Meanwhile, 3LCD projectors were affected by yen appreciation and lower prices.
In the electronic devices segment, sales were down ¥83,570 million, or 21.1%, to ¥311,626 million. The
following major factors contributed to the decrease.
Sales volume was down for CSTN, production of which is scheduled to be scaled back, and for TFD, a
business that is to be terminated. The quartz device business was impacted by rapid production adjustments
in mobile phone handsets, digital cameras, digital home electronics and many other applications as a result
of the economic downturn. In addition to reduced shipments of color LCD drivers for mobile phones as
part of the realignment of the product mix, the semiconductor business suffered from yen appreciation and
lower demand for other products due to the weakened economy.
In the precision products segment, sales declined ¥11,229 million, or 13.4%, to ¥72,697 million. The
primary factors behind this decrease were lower sales volumes in watches and IC handlers.
In the other segment, sales increased ¥2,704 million, or 9.3%, to ¥31,828 million.
Cost of sales and gross profit
The cost of sales decreased ¥146,338 million, or 14.9%, to ¥833,053 million, while the cost of sales ratio
rose 1.5 percentage points, to 74.2%. The decrease in the cost of sales was due to lower revenue and yen
appreciation. The rise in the cost of sales ratio mainly reflects the inability of fixed cost reductions in the
information-related equipment segment to keep up with the rapid decline in sales.
As a result, gross profit declined ¥79,005 million, or 21.4%, to ¥289,443 million. The gross profit margin
ratio dropped 1.5 percentage points, to 25.8%.
Selling, general and administrative expenses and operating income (loss)
Selling, general and administrative (SG&A) expenses declined ¥19,840 million, or 6.4%, to ¥291,031
million. This was due to a combination of yen appreciation and reductions of ¥7,637 million and ¥4,188
million in salaries and wages and advertising.
All of these factors resulted in an operating loss of ¥1,588 million, down ¥59,165 million from the
previous fiscal year.
Operating income in each business segment is analyzed below:
In the information-related equipment segment, operating income plummeted ¥53,131 million, or 63.8%, to
¥30,143 million. This was a result of the decline in gross profit accompanying lower sales and a stronger
yen.
The electronic devices segment recorded an operating loss of ¥18,249 million, an increase of ¥1,081
million from the previous fiscal year. Despite the effects of cost reductions resulting from structural
reforms in the display business, gross profit declined due to significantly lower revenues throughout the
segment. In addition, lower salaries and wages due to reassignment of personnel and other reductions
could not make up for the decline in gross profit.
The precision products segment was down ¥4,640 million from the previous fiscal year with an operating
loss of ¥1,907 million. This was due to the decline in gross profit on lower revenue.
In the other segment, an operating loss of ¥12,073 million was ¥610 million more than that of the prior
fiscal year.