Epson 2014 Annual Report Download - page 21

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Business Conditions
1. Overview of business results
(1) Operating results
Global economic recovery on the whole was still weak in the year under review, but there was also
evidence of underlying strength. The U.S. economy, boosted by lower unemployment and higher personal
spending, recovered at a gradual pace. The European economy remained weak but showed signs of picking
up, as the unemployment rate leveled off and manufacturing activity was solid. In China the pace of
economic expansion steadied, while the Indian economy showed signs of having bottomed out. Elsewhere
in Asia, the ASEAN and Taiwanese economies showed indications of a rebound, while improvement was
also seen in South Korea. Meanwhile, the Japanese economy gradually recovered, in part due to the effects
of an improved export environment owing to the weakening of the yen and effects of economic and
financial policies.
Conditions among the main markets of the Epson Group (“Epson”) were as follows.
Inkjet printer demand contracted in North America and Japan but drifted sideways in Europe. Large-format
printer sales were brisk for popularly priced models. Sales of high-end models were sluggish in the first
half but gained momentum in the second half as corporate spending picked up. The market for
serial-impact dot-matrix (SIDM) printers shrank in the U.S. and Europe but grew in China due to
infrastructure investment. Demand for POS systems products from small and medium-sized retailers in the
Americas was steady throughout the year and, in Europe, rebounded in the second half. Projector demand
was steady in Japan, flat in the Americas and Asia, and slack in Europe due to ongoing cutbacks in
investment budgets.
In mobile phones, the main application for Epson’ s electronic devices, demand was firm for smartphones
but continued to decelerate for conventional phones. In the PC market, sales of tablets were steady, but
demand for notebook and desktop models continued to contract. In the digital camera market, compact
camera sales remained sluggish and demand for SLR (single-lens reflex) and the MILC (mirrorless
interchangeable-lens camera) model also slackened.
In the precision products market, demand for premium watches grew, especially in Japan. Industrial robot
demand increased in the automotive and smartphone sectors, while IC handler demand trended upward as
investment resumed in the semiconductor market.
At the start of the 2013 fiscal year Epson began working under an updated three-year plan called the
Updated SE15 Second-Half Mid-Range Business Plan (FY2013-2015). We have been closely adhering to
the strategic course charted by the SE15 Long-Range Corporate Vision and, in line with the updated plan,
are pursuing a basic strategy of managing our businesses so that they create steady profit while avoiding the
single-minded pursuit of revenue growth. Our top priority will be steady income and cash flow. To achieve
this in existing segments, we will readjust our product mixes and adopt new business models. Meanwhile,
we will aggressively develop markets in new segments. We will move steadily forward to lay the
foundation for a metamorphosis during which Epson will change from being primarily a company that
provides consumer imaging products into a company that once again posts strong growth by creating and
providing new information solutions and equipment for businesses and professionals, as well as consumers.
The average exchange rate of the yen against the U.S. dollar and of the yen against the euro during the year
under review was ¥100.23 and ¥134.37, respectively. This represents a 21% depreciation in the value of the
yen against the dollar and a 25% depreciation in the value of the yen against the euro, year over year.
As a result of the foregoing factors, net sales for the fiscal year were ¥1,003,606 million ($9,751,321
thousand), up 17.9% from the prior fiscal year. Operating income was ¥84,968 million ($825,573 thousand),
up 299.8% from the prior fiscal year. Ordinary income was ¥78,121 million ($759,045 thousand), up
343.1% from the prior fiscal year, and net income was ¥83,698 million ($813,233 thousand), compared to a
net loss of ¥10,091 million in the previous fiscal year. In addition, after Epson analyzed potentially
recoverable deferred tax assets and adjusted the amount, tax expenses decreased, and Epson recorded a
¥30,734 million income tax adjustment.
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