Toshiba 2003 Annual Report Download - page 30

28 TOSHIBA CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS
a sales increase of 27% year on year to ¥837.8 billion (US$6,982 million).
Europe—Overall sales growth of 12% to ¥509.6 billion (US$4,247 million) year on year was recorded, thanks to steady
demand for portable PCs and PC peripherals.
As net sales increased ¥261.7 billion year on year to ¥5,655.8 billion (US$47,132 million), the gross profit margin improved 2.2 per-
centage points to 26.7%. Selling, general and administrative expenses decreased ¥43.7 billion year on year to ¥1,393.8 billion
(US$11,615 million). The primary reason for the decrease in selling, general and administrative expenses was the restructuring effect
of an approximate ¥30.0 billion reduction in fixed costs.
Although the impact of an average sales-price reduction of 9.4% amounted to ¥587.0 billion, operating income increased ¥229.1
billion year on year to ¥115.5 billion (US$963 million). The primary reasons for this increase included a reduction of ¥441.0 billion
in procurement costs, ¥182.0 billion in personnel and restructuring costs, a ¥17.0 billion foreign exchange gain, and changes in
sales volume and product mix of ¥176.1 billion.
Non-operating loss decreased ¥200.7 billion year on year to ¥62.4 billion (US$520 million). The main reasons for this
decrease were a decline in restructuring charges and additional termination benefits for voluntary early retirement of employees.
Total restructuring charges and additional termination benefits in fiscal 2002 and 2001 were ¥10.9 billion (US$91 million) and ¥208.9
billion, respectively. During the fiscal year under review, the Company recorded a ¥4.3 billion improvement in its net financial expens-
es, primarily due to a decline in interest expenses and an increase in dividend income. The Company also recorded a ¥21.5 bil-
lion (US$179 million) loss on marketable securities.
Income before income taxes greatly improved from a loss of ¥376.7 billion in the previous fiscal year, to a gain of ¥53.1 bil-
lion (US$443 million) in the fiscal year under review. Accordingly, income taxes increased ¥162.4 billion, which included the effect
of a revaluation of deferred income taxes in connection with adoption of Business Scale Taxation.
Minority interest in losses increased ¥5.0 billion from the previous fiscal year. This reflected mainly the increased net loss of
consolidated subsidiaries where Toshiba's ownership is less than 100%. The Company recorded equity in earnings of affiliates
of ¥2.6 billion (US$22 million), and this mainly reflected gains posted by foreign affiliates, while the domestic affiliates posted loss-
es. As a result, net income greatly improved by ¥272.5 billion from the previous fiscal year to ¥18.5 billion (US$154 million).
Information & Communications Systems—Sales declined by 5% against the previous fiscal year to ¥908.7 billion (US$7,573
million), and the segment’s proportion of total sales slipped to 14% from 16% the previous year. Operating income for the seg-
ment, while negatively affected by the decline in sales, nevertheless recorded an 8% increase to ¥10.4 billion (US$87 million), owing
to effects from restructuring and other measures.
Sales of information systems continued to feel the adverse effects of falling stock prices, curtailed IT investment in the pri-
vate sector, and continued deterioration in the domestic financial services sector due to delays in disposal of non-performing loans.
Communications systems saw a sharp fall in sales and global demand as the telecommunications industry sought to overcome
a shortage of funds and past excess investment. On the positive side, orders booked for broadcasting systems were boosted by
investments in digital broadcasting facilities.
Social Infrastructure Systems—Sales for the segment slipped 3% from the previous year to ¥922.8 billion (US$7,690 million).
Operating income rose 52% for the year to ¥20.7 billion (US$173 million), boosted by structural reforms and efforts to reduce costs,
which also contributed to profit increases in social infrastructure and industrial systems and the medical systems business.
Intensified restraint in public spending and private sector capital expenditures led to lower sales of system business in both
the public and private sectors.
Transportation business sales received a boost despite this climate of restraint, mainly from increased sales of electrical equip-
ment and substation facilities for new lines and bullet trains for JR (Japan Railways) group companies. Sales to private railways
also contributed to the increase.
Conditions remain severe in the domestic medical systems market, as structural reforms to Japan’s health insurance sys-
tem are directed to reducing fees for medical service. Increasing cost consciousness among domestic medical institutions and
intensified competition from foreign suppliers also added to market severity. Overseas markets were more positive, and sales were
particularly robust in the U.S. and Europe. Although a worsened market environment undercut sales from MRI equipment, CT and
ultrasonic diagnostic equipment revenues were favorable. Overall sales remained steady, supported by a stronger euro to the yen.
Power Systems—Sales in Power Systems were ¥523.7 billion (US$4,364 million), a 10% decline for the year, accounting for 8%
of total sales compared to 9% the previous year. Operating income for the division, reflecting lower sales and exchange rate fluc-
tuations, declined 19% for the year to ¥21.6 billion (US$180 million).
In the domestic market, electric power companies met rolling deregulation by curtailing capital expenditures, and sales results
were also impacted by the transfer of the power distribution and transmission business to a joint venture with Mitsubishi
Electric Corporation. Overseas, exports of thermal power plants to Taiwan saw solid growth.
Digital Media—Sales for the segement grew by 13% to ¥1,658.1 billion (US$13,818 million), and increased as a proportion of total
sales to 26% from 24% the previous year. Operating income recovered from a ¥14.9 billion deficit in the previous year to ¥9.3 bil-
lion (US$78 million), and accounted for 8% of total operating income.
In the portable PC market, PC sales saw a notable downturn in market demand due to large U.S. and European corporations’
deteriorated capital spending. The severe slump in demand lasted in Japan as IT investment was cut back due to the sluggish econ-
omy. Models for consumers achieved steady sales in the U.S. and Europe, but sales in Japan declined reflecting raised prices due
to raised components prices from spring to summer, and reserved consumer spending.
Toshiba focused on retail sales, succeeded in increasing market shares in each region and achieved higher growth in unit sales.
In optical disk drives, the sales shift from single-functional CD-R/RW or DVD-ROM to multifunctional DVD-ROM/CDR-RW dri-
ves accelerated further. Toshiba was able to lead the market with the introduction of an ultra-thin recordable DVD (DVD-
R/RW).
Mobile phone sales in Japan grew favorably and Toshiba’s introduction of leading-edge models with moving picture functions
allowed it to win market share. Overseas sales were weaker, hampered by waning sales in North America. Meanwhile,
Toshiba successfully launched the CDMA 1X handsets in the China market, and the GPRS models that support i-mode features
in Europe.
In the network services and content business, the “Ekimae Tanken Club” portal site became an established revenue earner,
and mobile application service provider (ASP) services also contributed to segment sales growth.
Home Appliances—Sales for the year eased 3% to ¥660.7 billion (US$5,506 million), accounting for 10% of total gross sales
against 11% in the previous year. Operating income fell by 69% to ¥3.5 billion (US$29 million).
The prolonged economic malaise in Japan has shrunk consumer spending, and overall demand for home appliances
remained flat. Shipments of major products, such as refrigerators and washing machines, were higher by volume than in the pre-
SEGMENT
INFORMATION
NET INCOME
(LOSS)
ｱﾆﾚﾎﾟp27-33(英)6.18 03.6.25 5:41 PM ページ 28