Isuzu 2013 Annual Report Download - page 19

Annual Report 2013 17
Management’s Discussion and Analysis of Financial Condition and Results of Operation
cost reductions to contribute ¥30.7 billion and ¥8.9 billion,
respectively, while cost fluctuations (steel, oil prices, etc.) and
exchange rate fluctuations caused by the weakness of the yen
added ¥4.4 billion and ¥4.0 billion, respectively. Offsetting these
were factors including an ¥13.1 billion increase in costs associated
with the growth in sales.
As a result, Isuzu’s operating margin increased to 7.9%,
compared to 7.0% for the previous year.
4. Non-operating gains/losses
In fiscal 2013, Isuzu posted a non-operating gain of ¥10.9
billion, an improvement of ¥5.4 billion from the previous year.
Equity-method investment income rose ¥4.7 billion from the
previous year to ¥10.8 billion.
Reduction of interest-bearing debt resulted in a net interest
(interest and dividends minus interest expenses) gain of ¥0.2
billion, an improvement of ¥1.4 billion compared to the previous
year. This was offset by a foreign exchange loss of ¥1.7 billion for
a deterioration of ¥2.0 billion compared to the previous year.
5. Extraordinary gains/losses
In fiscal 2012, Isuzu posted an extraordinary loss of ¥1.0 billion
due to such contributing factors as loss on disposal of noncurrent
assets, impairment loss, and loss due to disaster, as well as gain
from the sale of fixed assets, gain on negative goodwill, and
gain on step acquisitions. In fiscal 2013, the extraordinary loss
increased ¥2.5 billion to ¥3.5 billion, reflecting extraordinary
losses including loss on disposal of noncurrent assets, impairment
loss, and loss on reevaluation of investments in nonconsolidated
subsidiaries and credit obligations, and extraordinary income
of gain from the sale of fixed assets, gain on sale of investment
securities, and compensation income for expropriation.
6. Taxes
Isuzu’s net tax expense in fiscal 2012 including current income
taxes and deferred income taxes was ¥3.7 billion. In fiscal 2013,
the net tax expense was ¥28.3 billion due primarily to an increase
in current income taxes.
7. Minority interests
Minority interests consist primarily of profits returned to the
minority shareholders of Isuzu’s locally incorporated subsidiaries
in the ASEAN region, China, and North America, and its Japanese
parts manufacturers. Minority interests in fiscal 2013 increased to
¥13.3 billion, compared to ¥6.8 billion in fiscal 2012.
8. Net income
The Group posted a net profit of ¥96.5 billion in fiscal 2013, an
improvement of ¥5.2 billion from the previous year. Net income
per share came to ¥56.98.
(3) Financial conditions
1. Cash flow
Isuzu generated cash and cash equivalents (“net cash”) of
¥177.8 billion in fiscal 2013, up ¥17.2 billion from the previous year.
Net cash of ¥137.1 billion provided by operating activities offset
The following provides an analysis of the financial condition and
results of operation in fiscal 2013. The following information
contains forward-looking statements that reflect the judgment of
management as of June 27, 2013.
(1) Significant accounting policies and estimates
The consolidated financial statements of the Isuzu Group
are prepared in accordance with generally accepted accounting
principles of Japan. In the preparation of these statements, the
amounts recorded for items including allowance for doubtful
accounts, inventory, investments, income taxes, retirement
benefits, and provision for product warranties are estimates
that reflect the judgment of management. Due to the uncertain
nature of estimates, in some cases actual results may vary from
initial estimates, and this may have a negative impact on business
results.
(2) Results of operations
1. Overview of fiscal 2013
The Company posted sales of ¥1,655.5 billion (up 18.3% from
the previous year), operating income of ¥130.7 billion (up 34.3%
from the previous year), ordinary income of ¥141.7 billion (up
37.7% from the previous year), and net income of ¥96.5 billion
(up 5.8% from the previous year).
2. Sales
In fiscal 2013, Isuzu’s consolidated-basis sales rose 18.3% from
the previous year to ¥1,655.5 billion.
In the domestic commercial vehicle market, Isuzu maintained
its high market share through the introduction of products with
superior fuel efficiency and economy, capturing 33.9% of the
medium-duty and heavy-duty trucks market (up 2.8 points from
the previous year) and 39.5% of the light-duty (2-3 ton) truck
market (down 0.7 points from the previous year). Demand for
medium- and heavy-duty trucks rose to 68,535 (up 15.6% from
the previous year) and demand for light-duty trucks rose to 75,637
(up 15.8% from the previous year) due in part to reconstruction
efforts following the Great East Japan Earthquake. As a result,
domestic sales rose to ¥592.2 billion (up 6.1% from the previous
year).
Sales in Asia rose 42.2% from the previous year to ¥602.7
billion. Key factors included reconstruction following massive
flooding in Thailand that occurred during the previous
consolidated fiscal year and the Company’s retention of a high
30% market share in the Thai market.
North American sales rose 0.4% to ¥72.3 billion, reflecting
growth in demand due to a trend towards recovery in the U.S.
economy.
Sales to other regions grew 12.3% to ¥388.2 billion, reflecting
increased sales, particularly in the Middle East.
3. Operating income
Operating income in fiscal 2013 was ¥130.7 billion, up 34.3%
from a year earlier.
Sales and model mix fluctuations combined with material