Mitsubishi Electric Corporation’s President and CEO, Setsuhiro Shimomura, has announced the company’s consolidated and non-consolidated financial results for fiscal 2006 (April 1, 2005 - March 31, 2006).
Consolidated Financial Results
Net sales were 3,604.1 billion yen (6% increase from the same period last year). The operating income was 157.7 billion yen (31% increase from the same period last year). The company’s net income was 95.6 billion yen (34% increase from the same period last year).
Non-consolidated Financial Results
Net sales were 2,217.0 billion yen (10% increase from the same period last year). The ordinary profit was 75.1 billion yen (26% increase from the same period last year). Net income here was 48.5 billion yen (85% increase from the same period last year).
The business environment in FY 2006 saw a general underlying strength in the global economy mainly in the U.S. and China, with European manufacturing and capital investment also picking up slightly in the latter half of the fiscal year. The Japanese economy gradually broke away from its deflationary slump experiencing increased demands for capital investment than initially anticipated in addition to brisk consumer spending from continued improvements in employment and income conditions.
Meanwhile, the Mitsubishi Electric Group is involved in structural reforms that respond to changing operating circumstances to increase and strengthen profitability in each business segment under its 'make strong businesses stronger' strategy. We also continue to strengthen production and sales systems both in domestic and overseas markets by establishing and reinforcing operating facilities as well as strengthening our competitive edge through business alliances, etc. In addition, we are involved in company-wide management renewal activities like reducing inventory and increasing productivity in addition to continuing our cost reducing A-Sigma program and Just In Time activities. We are also strengthening our competitive edge through HR investments and optimizing our HR structure.
Consolidated Financial Results By Business Segment
Energy and Electric Systems
Total sales were 868.7 billion yen (10% increase from the same period last year). The operating income was 25.2 billion yen (2.8 billion yen decrease from the same period last year).
The social infrastructure systems business saw increases in both orders and sales from the same period last year from reintegration of electric transmission and distribution related business in addition to expansions in the overseas business for electric equipment for rolling stock.
Building system business experienced an increase in both orders and sales from the same period last year due to an increase in domestic large-scale orders for elevators and escalators in addition to initiatives in India and the Middle East.
As a result, total sales for this segment increased 10% from the previous fiscal year, and operating income decreased 2.8 billion yen from the previous fiscal year due to price erosion, etc.
Industrial Automation Systems
Total sales were 860.1 billion yen (10% increase from the same period last year). The operating income was 95.9 billion yen (23.6 billion yen increase
from same period last year).
Factory automation systems business saw an increase in both orders and sales from the same period last year due to increases in investments in flat panel display related investments in Japan, Korea, and Taiwan and overseas and domestic automotive related investments, etc.
The automotive equipment business saw an increase in both orders and sales from the same period last year with increases in alternators and starters etc. for both domestic and overseas automotive manufacturers.
As a result, total sales for this segment increased by 10% compared to the same period last year. Operating income rose by 23.6 billion yen from the same period last year due to increase in sales, etc.
Information and Communication Systems
Total sales were 644.1 billion yen (5% increase from same period last year). The operating income was 20.6 billion yen (20.4 billion yen increase from same period last year).
The telecommunications equipment business saw an increase in both orders and sales due to increases in infrastructure equipment such as optical broadband access system products, etc. as well as 3rd generation mobile handsets for the domestic market.
The information system service business saw an increase in sales from the same period last year due to expansion in the system integration business.
The electronic systems business orders increased from the same period last year due to orders for the Superbird 7 satellite etc., however sales remained the same as the same period last year.
As a result, total sales for this segment showed an increase of 5% from the same period last year. Operating income increased by 20.4 billion yen from the same period last year due to improvement in mobile handsets, etc.
Electronic Devices
Total sales were 170.3 billion yen (4% increase from same period last year). The operating income was 13.5 billion yen (7.4 billion yen increase from same period last year).
The semiconductor business saw an increase in both orders and sales from the same period last year due to increases in power modules for hybrid cars and domestic industrial machinery as well as red laser diodes for recordable DVD players.
The liquid crystal business saw a decrease in orders and sales from the same period last year. Despite increases in small and medium sized products for industrial use, there were decreases in large sized products for PC monitors.
As a result, total sales for this segment increased by 4% from the same period of the previous fiscal year, and operating income increased by 7.4 billion yen from the same period of the previous fiscal year due to increased sales, etc.
Home Appliances
Total sales were 896.4 billion yen (3% increase from same period last year). The operating income was 14.9 billion yen (10.7 billion yen decrease from same period last year).
The home appliance business saw a 3% increase in sales from the same period last year due to increases in room and package air conditioners etc. for both the foreign and domestic market in addition to residential home equipment such as solar power generation systems, electric water heaters, IH cooking heaters, etc. as well as refrigerators, and LCD televisions etc.
Operating income decreased by 10.7 billion yen from the same period last year due to price erosion, etc.
Others
The total sales were 603.5 billion yen (4% increase from same period last year)
The operating income was 13.3 billion yen (2.7 billion yen increase from same period last year).
Sales increased 4% from the same period last year mainly in our material procurement, engineering, etc. affiliated companies. Operating income increased by 2.7 billion yen from the same period last year due to increased sales, etc.
Dividend
With our financial standing and business performance continuing to improve, Mitsubishi Electric will pay a year-end dividend of 5 yen per share for fiscal 2006. Adding the interim dividend of 3 yen per share, the total annual dividend is 8 yen per share.
Cash Flow
Cash flows from operating activities for this financial year increased 115.9 billion yen compared to the same period of the previous fiscal year to 304.8 billion yen (positive) due to improved earnings.
Investment cash flow increased 55.0 billion yen to 156.2 billion yen (used) due to capital expenditures mainly in such business areas as automotive equipment and factory automation systems as well as payment in consideration of assets purchased for reintegration of electric transmission and distribution related businesses as a result of termination of a joint venture. Consequently, free cash flow was 148.6 billion yen (positive).
Financial cash flow was 100.6 billion yen (used) due to continued debt repayment and bond redemption in order to improve financial standing.
Current forecast for fiscal 2007
The world economy is expected to slow down slightly from its recovery despite steady undertones similar to the previous fiscal year. The Japanese economy is also expected to slowdown slightly in the later half of fiscal 2007 from its slight recovery centered on consumer demand. There are also concerns about the exchange rate and the direction of prices of things like oil and materials as well as increased feelings of uncertainty as to the direction of domestic demand in consumer spending and capital expenditure. This is in addition to concerns about the effects of increasing interest rates worldwide as well as risks from a fluctuating exchange rate, creating a not necessarily optimistic management environment.
In the meantime, the Mitsubishi Electric Group will continue to increase and strengthen profitability in each business segment. In addition, we are committed to implementing various company wide measures toward improving business performance and financial standing. The growth strategies will be steadfastly adhered to in the interest of maintaining sustainable growth.
Current forecast for fiscal 2007: consolidated
Net sales were 3,700.0 billion yen (3% increase from fiscal 2006). The operating income was 175.0 billion yen (11% increase from fiscal 2006). The net income was 105.0 billion yen (10% increase from fiscal 2006).
Current forecast for fiscal 2007: non-consolidated
Net sales were 2,270.0 billion yen (2% increase from fiscal 2006). The ordinary profit worked out to 75.0 billion yen (same as fiscal 2006) and the net income was 50.0 billion yen (3% increase from fiscal 2006).
Fundamental Management Policy
Based on its corporate statement ‘Changes for the Bette’, the Mitsubishi Electric Group hopes to build a better tomorrow by contributing to the creation of new societies, industries and lifestyles.
Keeping this corporate approach in mind, Mitsubishi Electric will establish a solid business foundation and implement sustainable growth through a three point balanced management of "Growth," "Profitability & Efficiency" and "Soundness".
Mitsubishi Electric will also work to further enhance its corporate value by becoming a conglomerate of highly competitive electric-electronic businesses with a synergistic unity, capable of responding to the expectations of customers, shareholders, and all of our stakeholders.
Fundamental Profit Distribution Policy
With the ultimate objective of enhancing corporate value, Mitsubishi Electric's fundamental policy is to comprehensively improve shareholder profitability both in terms of profit distribution in response to earnings from the corresponding fiscal year and reinforcement of our financial standing by adding to our internal reserves.
Policy on Reducing Minimum Stock Purchase Requirement
Mitsubishi Electric recognizes that increasing corporate value to expand a base of long-term and stable investors as one of the most important managerial issues. Mitsubishi Electric has been considering the effects and expenses related to reducing the minimum stock purchase requirement and will continue to carefully study this issue.
Criteria for Management Targets
Measures to improve our business foundation and financial standing have resulted in the Mitsubishi Electric Group posting ROE of 11.5% in fiscal 2006, which fulfilled our original management target of "10% or more". In addition, the ratio of interest-bearing debts resulted in 20.9% in the Fiscal 2006, which was effectively less than the original target of "25% or less". The Group revised its targeted ratio of interest-bearing debts to 20% or less, and continue make effort to accomplish this targeted ratio of operating profit to sales as well as ratio of interest-bearing debt to total assets.
Corporate Agenda
Based on its three point balanced management of ‘Growth,’ ‘Profitability & Efficiency’ and ‘Soundness’, the Mitsubishi Electric Group will continuously improve by strengthening quality, cost competitiveness, and intellectual property as well as productivity, R&D, and sales capabilities. We will also strengthen our two tiered growth strategy VI strategy, 'making strong businesses stronger', and AD strategy, 'reinforcing solutions businesses centered on strong businesses'. While also restructuring business segments in response to changing business environments, we strive to create a management base that will continue to strengthen and improve our business performance.
Specifically, with an objective of strengthening our integrated ‘Craftsmanship’, we will improve our research and development for software and hardware, continue to streamline our productivity with measures like Just In Time production, promote cost reduction activities such as procurement structural reform and exert quality consciousness from the very first stages of design and development. Further, we are keenly aware of that our human resources are essential in enhancing competitiveness, and we will endeavor to reallocate our human resources in an appropriate and optimized organizational structure so that we can properly coop with the so called 'Year 2007' problem. We will improve our financial standing by strengthening our productivity by further pursuing such measures as inventory reduction etc. Also, we will further promote 'Global Integration' to build an optimal business structure both in global terms and for the entire corporate Group. In business development in overseas markets, we will pay intensive attention on managing associated risks. Finally, we will enhance our operational structure to manage various businesses, through integration and coordination among various aspects, including research, development, procurement, production, sales and services etc.
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