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Financial Results Conference Call - Q&A Transcript

1st Quarter Ended June 30, 2020

Date and Time: 6:00-7:00 p.m. Monday, July 27, 2020

Please note that this document is not a direct transcript of the Q&A session from the conference call, but is a simple summary including additions and corrections at the discretion of the company. The results and forecasts are forward-looking statements determined by the Company based on currently available information that may include risks and uncertainties. Please be aware that actual results may vary significantly due to various factors.

1.Please explain the factors in the increase or decrease in the consolidated operating income for 1Q (3 months) ended June 30, 2020 compared to 1Q ended June 30, 2019.

The factors impacting the change in operating income are,

- Royalty income Approx. +3 to 4 billion yen
- Fixed costs Approx. +3.5 billion yen
- Product mix Approx. +1.5 billion yen
- Sales volume variance Approx. -4 billion yen
- Impact of foreign exchange Approx. -1.5 billion yen
- Price reduction offset by streamlining, etc. Approx. -1 billion yen

As a result, operating income increased by 2.6 billion yen.

2. Please explain the factors in the increase or decrease in the consolidated operating income for 1Q (3 months) ended June 30, 2020 compared to the previous quarter ended March 31, 2020.

The factors impacting the change in operating income are,

- Rebound from restructuring charges (impairment loss) Approx. +6.5 billion yen
- Fixed costs Approx. +4 billion yen
- Royalty income Approx. +3 to 4 billion yen
- Sales volume variance Approx. -4.5 billion yen
- Impact of foreign exchange Approx. -1.5 billion yen

As a result, operating income increased by 7.9 billion yen.

3. Please explain the full-year consolidated financial and dividend forecasts for the year ended March 31, 2021.

We have not been able to determine consolidated financial and dividend forecasts for the fiscal year ending March 31, 2021, as it was difficult to estimate the impact of COVID-19 on our financial results rationally. However, now that the restrictions on the movement of people, etc. have been eased in various countries, we hereby announce the forecasts, which are based on currently available data and projections concerning the impact on our Group companies.

-Industrial Tape
For Functional Base Products, demand for general-purpose industrial materials will weaken compared to the previous fiscal year. And for Transportation Business, the sales will decrease due to the decline in the automobile market.
-Optronics
For Optronics, demand, mainly for TV applications, is expected to decline.
-Life Science
For Life Science, we anticipate the performance to remain strong with a royalty income in the 2H of the fiscal year.

For the fiscal year ending March 31, 2021, we plan to pay an annual dividend of 200 yen per share including an interim dividend of 100 yen.

4. Please explain Optronics's business forecast for the 1H ending September 30, 2020 (6 months).

In the 1Q (3 months), the demands for laptop and tablet device have increased from the background of expanding telework.
From the 1Q to the 2Q, we expect increase in Information Fine Materials due to the increasing demand for smartphones related products and increase either in Flexible Printed Circuits related to the increasing demand for high-capacity HDD used in data center, even we expect a decline in this segment because there was a royalty income from the technological support for polarizing film used in TVs recorded in the 1Q.
As a result of these factors, we expect the results for the 2Q (6 months) to improve from the forecast as of April to 6 billion yen in revenue and 2 billion yen in operating income.

5. Please explain Optronics's business forecast for the 2H ending March 31, 2021 compared to the 1H ending September 30, 2020.

The demands for TV and expanding telework-related products, such as laptop and tablet device, are expected to decline compared to the 1H.
On the other hand, we expect an increase in Flexible Printed Circuits due to a strong demand in the market, such as high-capacity HDD used in data center.

6. Please explain Life Science's new forecast for the 2Q (3 months) compared to the initial forecast.

The royalty income will be recognized in the 2H of the fiscal year in the new forecast, while it was expected in the 2Q in the initial forecast.

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