Oki 2009 Annual Report Download - page 25

Annual Report 2009 23
Financial Review
Annual Report for Oki Electric Industry Co., Ltd. and its Consolidated Subsidiaries
SCOPE OF CONSOLIDATION
In the fiscal year ended March 31, 2009, four companies were newly
included in the Group’s scope of consolidation while 28 companies were
excluded from the scope of consolidation. Of the latter, 18 companies were
excluded due to the share transfer of semiconductor subsidiaries, nine due
to integration and one due to business termination. This brought the total
number of subsidiary companies to 75. The number of equity-method affili-
ates remained unchanged from the previous fiscal year at three.
OVERVIEW OF THE FISCAL YEAR ENDED MARCH 31, 2009
Net Sales and Operating Income
In the fiscal year under review, the global economy faced extremely
difficult conditions on the back of the worldwide recession triggered
by the U.S. financial crisis. The U.S. economy, which had been sluggish
owing to the subprime loan crisis as well as high crude oil prices, sud-
denly worsened due to the bankruptcy of a major securities company in
September 2008. The faltering of the world-leading U.S. economy has
had significant impact that has spread to the real economies of Europe,
Japan and newly emerging countries, causing stock and real estate
prices to plunge, spending to slow and corporate capital expenditure to
drop substantially, making for worsening employment conditions.
Amid this drastically changing business environment, the OKI Group
is focusing on revamping its corporate structure aimed at reinforcing its
business foundation to ensure a sustainable earnings base. Among the
Company’s measures are efforts to “accelerate business selection and
concentration,” and, in line with this, OKI established a semiconduc-
tor business subsidiary in October 2008 and transferred 95% of its
shares in that subsidiary to ROHM CO., LTD. Due to the impact of the
share transfer as well as the weak performance of OKI’s Semiconduc-
tors segment up to the second quarter of the fiscal year under review,
consolidated net sales decreased ¥84.1 billion while operating income
deteriorated ¥8.9 billion year on year.
Excluding the results of the former Semiconductors segment, con-
solidated net sales fell ¥89.9 billion. The fall is attributable to a shrinking
of demand from the postal service following privatization, Japanese yen
appreciation and deteriorating economic conditions. In particular, sub-
sidiaries engaged in independent businesses in the components field,
including power supply and motor-related parts, as well as consigned
production were significantly affected. On the other hand, operating
income rose ¥3.2 billion during the fiscal year under review thanks to
profitability improvement efforts, including those addressing stagnant
sales of low-profitability businesses, procurement and production cost
reduction and the thorough control of fixed costs, all of which helped
to offset such negative factors as decreased marginal profit due to lower
sales volumes and prices.
As a result, consolidated net sales, excluding inter-segment sales, fell
24.2% year on year to ¥545.7 billion, while consolidated operating income
dropped ¥5.8 billion from the previous fiscal year’s ¥6.2 billion to ¥0.4 billion.
SEGMENT INFORMATION
Info-Telecom Systems
In the financial systems business, overall sales declined from the previous
fiscal year. This was due to the shrinking of demand from the postal service
following privatization and for domestic ATM replacement for the retail
market despite growth in sales of terminals for private financial institu-
tions’ bank branches in Japan and ATM shipments to China. In the telecom
system business, OKI withdrew from low earnings potential businesses in
line with its accelerated selection and concentration initiatives while record-
ing decreased sales of communication equipment to the private sector
due to the severe economic conditions. Accordingly, the overall income in
this business declined despite increased sales of optical network-related
equipment. In the information systems business, sales of systems to the
corporate sector declined reflecting conditions throughout the general
economy. This downturn in sales was also attributable to the reduction
of low-profit businesses.
As a result, consolidated segment sales, excluding inter-segment
sales, declined 15.8% year on year to ¥302.3 billion. However, OKI
recorded operating income of ¥7.0 billion, a turnaround from the ¥1.7
billion operating loss in the previous fiscal year for a net ¥8.7 billion
improvement, despite a decline in marginal profit due to decreased
sales. This was attributable to improved profitability due to the down-
sizing of low-profit businesses and thorough cost control initiatives as
well as reduced procurement and production costs.
Printers
In Printers segment, sales dropped substantially due to the strong yen. By
product, sales of consumables for business-use color printers remained
favorable. However, OKI recorded decreased sales of color printers due
to a price drop as well as the harsh economic conditions. Shipments of
monochrome printers remained almost on par with the previous fiscal year
thanks to the introduction of new products; however, due to the shrinking
markets worldwide, shipments of dot-impact printers declined.
0
200
400
600
800
Net Sales
Billions of yen
Years ended March 31 2007 2008 2009
718.8 719.7
545.7
−7.0
0
3.5
7.0
−3.5
Years ended March 31 2007 2008 2009
Operating
Income
Billions of yen
−5.4
0.4
6.2
2007 2008 2009 2007 2008 2009
(Info-Telecom Systems)
Net Sales
Billions of yen
Operating Income
Billions of yen
Years ended March 31
359.0
302.3
352.7
−1.7
7.0
−1.5
2007 2008 2009 2007 2008 2009
(Printers)
Net Sales
Billions of yen
Operating Income
Billions of yen
Years ended March 31
185.8 160.7
187.1 8.6 7.8
1.7