Consolidated Results for the First Quarter Ended June 30, 2014

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FAQ Summary of the Question-and-Answer Session at Seiko Epson's Announcement of Consolidated Results for the First Quarter (ended June 30, 2014).



Q&A summary

Click on the appropriate question to view the answer.


Overall

Q

Why did business profit exceed your first quarter plan?


Q

The biggest factors were in the information-related equipment business. These factors included an improvement in the inkjet printer hardware model mix that generated higher ASPs, ongoing cost cuts, increased consumables revenue caused by an improvement in the composition of the install base, and special demand for 3LCD projectors due to the football World Cup.
Business profit was also boosted by increased demand for semiconductors and precision assembly robots, and by the effects of yen depreciation.


Q

Can you provide more details about the cost cutting that positively impacted your first quarter results?


A

We have firmly established platformization in inkjet printer design and development as one of our core cost cutting efforts. We have improved the accuracy of our cost cutting plans, and have been able to raise the level of cost management.


Q

Why are you lowering your second half business profit outlook despite such good first quarter results?


A

One of the main reasons is in the information-related equipment business where we are aiming to boost consumables sales from the next fiscal year onwards. To achieve this we will be investing in sales promotions to boost sales of consumer and office inkjet printers in developed economies, and also in ramping up production.
Our second half outlook will also be impacted by some semiconductors orders being brought forward to the first half.


Q

What is your outlook for capital expenditure this fiscal year?


A

We will increase capital expenditure this year due to factors such as investment in volume production of our new inkjet printer printhead. We will continue to assess the prospects for returns on our investments as we invest strategically to achieve our plan.


Q

What will be your effective tax rate going forward?


A

It's possible that the loss brought forward may be eliminated in a few years if Japanese domestic taxable earnings continue as they did this year, but that the effects of tax accounting may see us return to a regular tax ratio before this time.
However, even if we return to the regular situation, we forecast that the effects of lower tax rates on overseas profits and of the Japanese government's tax incentives will give us a tax burden that is lower than the effective tax rate.


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Information-related equipment

Q

What has been the market reaction to the managed print service (click charge) in your new inkjet printers?


Q

Reaction has been very good so far. We have established the system in Japan and Europe, and will consider rolling it out into other regions after carefully assessing the situation there.


Q

What are the main risks facing your business now?


Q

We have to be especially careful about intensifying market competition. With flat inkjet printer market growth forecast in Europe and America, we expect tough market conditions as other companies launch competitive new models. Epson will also aim to develop and sell attractive new models, and will attempt to flourish in the severe market environment by generating new customer value through measures such as the new managed print service.


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