Consolidated Results for the First Quarter Ended June 30, 2007

Q&A summary

Click on the appropriate question to view the answer.

Information-related equipment

Electronic devices

General


Information-related equipment

  • Q1You said that your plan this year is to increase inkjet printer unit shipments and boost net sales of ink cartridges, but won't expanding sales put you in the same position as the year before last when profitability was poor?
  • ALast year we reduced printer shipments and concentrated on selling products that generated high print volume. This year, although we are looking to boost sales, we will look carefully at the market and control the level of sales to ensure there is no significant negative impact on profitability. We are also seeking to ensure stable profits by focusing on the business segment.
  • Q2Can you describe the trends in unit shipments and net sales for both inkjet printer hardware and consumables in the first quarter?
  • AHardware volume was flat year-over-year and consumables volume rose by a few points. Similarly, net sales were largely the same as the previous year for hardware, and rose by a few percentage points for consumables.
  • Q3Can you tell me about inkjet printer price trends broken down by single-function and all-in-one printers?
  • ACompared to the same period last year, single-function printer ASPs rose by around 10%, and all-in-one ASPs fell by 10%.
  • Q4I see there is a big difference in the number of planned unit shipments and the number of units to be manufactured in the second quarter. How will this affect profitability? And, given that you are going to run sales promotions, do you expect to increase shelf space in North America?
  • AAlthough we are expecting overall inkjet printer profitability to decline this fiscal year, we have already built in the cost of increasing sales volumes at the product planning stage. As for the second quarter, we don't anticipate major downward pressure as we carefully seek to achieve a balance between increased unit volume and profitability. There are encouraging signs that we will be able to increase shelf space compared to the previous year.
  • Q5Ink cartridge net sales grow in the first quarter. Do you expect this to continue in the second quarter and beyond?
  • AWe believe the trend will continue. This fiscal year we are seeking to increase hardware unit shipments to ensure we are not significantly affected by the volume decline in the previous fiscal year.
  • Q6Has there been any growth in print volume from photo printers?
  • AThere has been some growth, but the level of growth has been mild.
  • Q7How were unit shipments and net sales for laser printers and consumables in the first quarter?
  • ALaser printer hardware volume fell by 20% and consumables by 10%. In terms of net sales, hardware declined by 20% and consumables were flat year-over-year.
  • Q8Why do you think business systems are doing so well? Will this situation continue in the future?
  • AWe have slowly built up this business over time. Thanks to our success in capturing certain tender contracts, we forecast that this business will continue to generate stable profits.
  • Q9Is the market for business systems products growing?
  • AThe market is growing in some developing countries. However, as prices are low we are only able to expand by selling in volume. In this kind of environment, Epson believes it is necessary to build on the existing foundations of our business by generating new applications.

Electronic devices

  • Q10How do you plan to distinguish products against the competition in the display business? What is the status of these plans?
  • APreviously we have been dependent on mobile phones, but thanks to technologies like Photo Fine Vistarich we will be able to focus more on the non-handset segment. Despite our technological strength, we were unfortunately unable to achieve our planned sales volumes in the first quarter. However, we are not going to let ourselves be carried away by these results, and will continue to implement the policies we have set
  • Q11How are current utilization rates for small- and medium-sized LCDs?
  • AUtilization was poor in the first quarter as a result of fluctuations in customer demand and the postponement of some projects. We believe this situation will improve as volumes increase as we move from the second quarter into the second half.
  • Q12What are the prospects for restoring volume in the display business? And if you do increase volume, will that lead to improved profitability?
  • AThe first quarter was extremely tough for the display business due to fluctuations in demand and the postponement of some projects. Going forward, while the situation remains unpredictable, we are looking to improve profitability by continuing to cut fixed costs and seeking to increase sales of LCDs for non-handset applications.
  • Q13Will a change in your product portfolio result in excess capacity? On the other hand, if capacity is insufficient, do you plan to invest in more capacity?
  • AOur efforts to change our portfolio involve pursuing projects with high profit margins, and do not simply involve chasing increased volume. As a result, we believe we have sufficient capacity for the time being, and are not planning any major capital expenditures.
  • Q14Have you managed to improve yields to the extent that cost reductions can absorb the effects of price erosion?
  • AAlthough yields in amorphous-silicon TFT and LTPS are improving, they have unfortunately yet to reach the level of MD-TFD and C-STN. Going forward, we will improve this situation by concentrating our resources on amorphous-silicon TFT and LTPS.

General

  • Q15How was operating profit in the first quarter compared to the original plan? Give me a breakdown if there were any significant changes.
  • AWe originally planned for first half operating income of 19 billion yen, divided between first and second quarters in a ratio of approximately two to three. Going by this, actual results for the first quarter were approximately 4 billion yen higher than we anticipated. If you eliminate the impact of foreign exchange gains, however, first quarter results were basically on target.
  • Q16You didn't change the yearly forecast for operating income even though the exchange rate between the yen and the euro fluctuated by 10 yen. Why is this?
  • AOur major priority is to achieve the target.
    There is still a lot of unpredictability. While results in information-related equipment were solid, the restructuring in the display business is still underway and the recovery in the first quarter has taken off slower than we expected. As a result, we are standing by our original forecasts.
  • Q17Can you give a breakdown of the effect of price declines by business in the first quarter?
  • AWe can't give you any figures, but we can say that the price erosion was largely divided between small- and medium-sized LCDs and inkjet printers.
  • Q18With unit prices continuing to fall, was the decision to boost inkjet printer sales prompted by the weaker yen?
  • Ahe decision to boost sales was in our original plan.