Final Results
Maruwa Co Ld
09 May 2003
9 May 2003
MARUWA CO., LTD.
3-83, Minamihonjigahara-cho, Owariasahi-city, Aichi-pref., 488-0044 JAPAN
FOR IMMEDIATE RELEASE
Nagoya- MARUWA CO., LTD. today announced its consolidated business results for the full
fiscal year ended 31st March, 2003 as follows;
*The financial statements are prepared in conformity with the accounting principles
generally accepted in Japan.
*US dollar amounts are converted for convenience only at the rate of US$1 = 120.20 yen.
*Consolidated subsidiaries: 5 companies (Maruwa (Malaysia) Sdn. Bhd., Taiwan Maruwa Co.,
Ltd., Maruwa Europe Ltd., MARUWA KCK Co., Ltd., and TOKYO FINE GLASS CO,LTD.)
1. Summary of Consolidated Results
(1) Summary of consolidated statement of income
JPY million JPY million USD thousand
--------- --------- ------- --------
For year ended For year ended Change % For year ended
31st March 31st March 31st March
2003 2002 2003
--------- --------- ------- ---------
Net sales 10,337 9,933 4.1% 84,591
Operating income (loss) 307 (1,200) -- 2,511
Income before income taxes 233 (1,288) -- 1,909
Net income 105 (1,239) -- 858
JPY USD
Net income per share 8.99 (112.70) -- 0.10
(2) Summary of consolidated financial condition
JPY million JPY million USD thousand
--------- --------- ------- ---------
As of 31st As of 31st Change % As of 31st
March March March
2003 2002 2003
--------- --------- ------- ---------
Total Assets 26,881 26,730 0.6% 219,972
Shareholders' equity 23,489 24,247 -3.1% 192,214
Shareholders' equity ratio 87.4% 90.7% -3.7%
JPY USD
Shareholders' equity per 2,136.15 2,205.58 -3.1% 17.50
share
(3) Summary of consolidated statement of cash flows
JPY million JPY million USD thousand
--------- --------- ------- ---------
For year ended For year ended Change % For year ended
31st March 31st March 31st March
2003 2002 2003
--------- --------- ------- ---------
Cash flows from operating 1,891 231 718.6% 15,475
activities
Cash flows from investing (1,046) (3,786) -- (8,564)
activities
Cash flows from financing (1,013) (180) -- (8,289)
activities
Cash and cash equivalents 5,291 5,492 -3.7% 43,296
at the end of the period
2. Management Policies
(1) Basic management policy
'MARUWA OF CERAMIC MATERIAL TECHNOLOGY' is MARUWA's corporate vision. MARUWA strives to
enhance the corporate value by following consistently 'quality first' policy, which
entails constant technological innovation and to meet the expectations of all the
stakeholders including shareholders, customers, and employees.
Under this vision, it is MARUWA's management policy to survive among severe business
competition by reinforcing its core business with 'selection and concentration' strategy,
building up a highly profitable structure, and boosting the share of the global niche
markets.
(2) Dividend policy
The basic principle of MARUWA's dividend policy is to share profits stably with
shareholders. Dividend ratio will be determined based on the comprehensive assessment of the
financial conditions and operation results. At the same time, as stated in the basic
management policy, the company continues aggressive investment on R&D activities, especially
on technological innovation, to fill the needs from the market.
As for retained earnings, MARUWA considers effective uses, while keeping high availability,
to promote further improvements of the corporate structure so that MARUWA meets market needs
more appropriately and promptly.
(3) The number of shares per unit
MARUWA's basic policy for company shares is to increase liquidity at the stock market since
the company is currently on a growth phase. Based on this policy, MARUWA lowered the number
of shares per unit to 100 in August 1999 to increase the accessibility of shares for
individual investors. As a result, the number of total shareholders doubled from 2,800 in
August 1999 to 5,963 in March 2003, proving that the individual shareholder base was
successfully broadened.
(4) Business strategy and management issues
In the midst of the IT era, in which quick adjustment and sustained growth are required to
ride on the rapidly changing market, MARUWA aims to increase corporate value by bolstering
profitability and growth rate.
MARUWA is not aiming to expand in size and become a department store, but to focus on
quality as a manufacturing-based specialist.
As for management issues, MARUWA is determined to make intensive and collective efforts on
management objectives set our as plain as possible, taking advantage of small corporate size
that is right for company-wide efforts. In regard to manufacturing, one of the objectives in
fiscal 2002 was 'the reduction of production lead-time.' It is MARUWA's primary
commitment to meet resiliently the needs from the electronic components market that are
dynamically shifting to high-mix low-volume production and quick delivery along with
electronics' progress in multi-functioning, downsizing, and shortening the life-cycles.
MARUWA has enhanced the manufacturing system for prompt supply of products by improving
manufacturing process and inventory control in addition to reducing lead-time.
In fiscal 2003, 'material technological innovation' is adopted as a new commitment. This
means to enhance MARUWA's core competence, material technology, in order to survive among
both severe price competition to come centered around China and quality competition with
rivals. MARUWA focuses on the reconstruction of the flexible material-manufacturing system
and the R&D system that is directly linked to the needs from the market.
Regarding management, the paradigm-shift is currently progressing from management with
emphasis on consolidated operating income to management that values consolidated cash flows.
MARUWA, as a growing company, is not focusing only on the amount of profits that the company
gains, but on the structural strength of the company as a manufacturer. According to this
policy, MARUWA builds up itself as a strong company by introducing indicators for asset
efficiency in each production division and enhancing human resources development.
In addition, M&A is considered as an important strategy for further growth of the company,
and is continuously planned especially for material technological development. MARUWA holds
larger amounts of retained earnings than other companies do, but this purposes to deal with
M&A issues timely and successfully with adequate funds.
(5) Corporate governance policy and current issues
MARUWA's corporate governance policy is also based on the company's primary commitment to
respond to the rapidly changing market and to realize flexible management. Taking advantage
of small corporate size, every each production division was reorganized as a mini-company in
order to foster greater profitability of a division and swift communication of the
management's decisions throughout a division. The reorganization leads to realize open and
transparent management system, including division-based evaluation. In addition, the term of
company directors was cut to one year for greater exercise of directorship with clear roles
and responsibilities.
MARUWA is determined to continue to enhance the corporate governance for more transparent
and open management as a global company.
3. Review of Operations and Financial Condition
(1) Review of operations
The electronic components market, to which MARUWA belongs, was brisk especially for digital
household electronics and mobile phone-related items in Asia due to an increase of demand
for goods in a recovery period at the beginning of the fiscal year after inventory
adjustments had been completed at global level. On the other hand, a sharp decline of the
component prices discouraged the market's full-scale recovery, increasing uncertainty over
the future of the economy particularly after the third quarter.
In these circumstances, MARUWA's works of internal reforms, which were started in the midst
of recession last year, were found effective this year. The company achieves the new
flexible managerial and operational structures that create profits even when sales are
sluggish in the market-sensitive industry.
As a result, total sales for this year were 10,337 million yen, a slight increase of 404
million yen (4.1%) compared with the previous year. As for profits, the company successfully
returned in the black; operating income was 307 million yen, an increase of 1,507 million
yen compared with the previous year, and net income was 105 million yen, an increase of
1,344 million yen compared with the previous year.
Regarding sales by business divisions, sales of Circuit Ceramics increased compared with the
previous year and accounted for 45 % of total sales, increasing from 38% in the previous
year. Sales of EMC Components decreased, accounting for 30% of total sales, a decrease from
38% in the previous year. Sales of Radio Frequency Products increased, and sales of
Machinery Ceramics remained flat.
The year-end dividend will be 7.0 yen per share, amounting to 14.0 yen for the full year
together with 7.0 yen of the interim dividend.
Review of operation by product division is as follows.
Circuit Ceramics
Circuit Ceramics include one of MARUWA's core products, ceramic substrates for chip
resistors, glazed ceramic substrates for thermal printer head (TPH,) large ceramic
substrates for hybrid ICs, and Aluminium Nitride for power modules.
Net sales of Circuit Ceramics were 4,682 million yen, an increase of 929 million yen (24.8%)
compared with the previous year. At the beginning of the year, the sale was favorable due to
a recovery for demand that started from the last year. The second quarter was an adjustment
period, and after the fourth quarter, there were steady demands particularly for high
value-added ceramic substrates for resistors since the replacement of resistors by further
miniaturized types was accelerated in addition to the brisk market of PlayStation(R) 2 and the
production increase of mother boards for PCs.
Machinery Ceramics
Machinery Ceramics include magnetic head-supporting blocks for personal computers, and
ceramic facet valves.
Although supporting blocks kept steady sales until the third quarter, the division is
encouraged to shift the product-mix. Sales of faucet valves were good in the domestic
housing improvement-related market. As a result, net sales were 1,285 million yen, an
increase of 4 million yen (0.3%) compared with the previous year.
Radio Frequency Products
Radio Frequency Products include dielectric ceramic filters for mobile phones, base stations
and GPS (global positioning system,) and electronic devices such as VCO (voltage controlled
oscillator) for mobile phones and other wireless communication appliances.
Sales of dielectric materials tend to be greatly influenced by fluctuations in demand from
customers. The sales began declining sharply in the second quarter, but it is currently
recovering after hitting the bottom in January. Electronic devices, especially mobile
phone-related products, showed favorable sales during the first quarter, and have been in an
adjustment period since the second quarter. On the other hand, wireless LAN-related devices
held solid sales. As a result, net sales were 1,268 million yen, an increase of 158 million
yen (14.2%) compared with the previous year.
EMC Components
EMC Components include components for circuit-protection against noise/surge such as EMI
filters and chip varistors, and ceramic capacitors of high-voltage high-capacitance types.
Ceramic capacitors are mainly supplied for strobe parts of digital cameras, which have been
in good demand. It was a difficult year since the fall of sales prices was accelerated due
to severe pressures especially at the components market in Taiwan. Even in this environment,
sales of capacitors have remained flat since the second quarter thanks to a recovery of the
power supply market. Sales of EMI filters were stable for digital household appliances and
base stations, and have moved upward since the fourth quarter. Net sales of EMC Components
were 3,102 million yen, a decrease of 687 million yen (18.1%) compared with the previous
year.
(2) Financial condition
Net cash gained from operating activities was 1,891 million yen, an increase of 1,660
million yen compared with the previous year.
Income before income taxes was 233 million yen, an increase of 1,521 million yen compared
with the previous year, and depreciation cost was 1,460 million yen, a decrease of 80
million yen compared with the previous year. As for working capital, notes and accounts
receivable increased 1,920 million yen while accounts payable decreased 850 million yen.
Income taxes decreased 979 million yen compared with the previous year due to a tax refund
during the current year.
Net cash used in investing activities was 1,046 million yen, a decrease of 2,740 million yen
compared with the previous year. Most of the payments were for the purchase of property,
plant, and equipment, which amounted to 783 million yen, a decrease of 2,946 million yen
compared with the previous year, especially for metal molds and renewal both in Japan and
overseas.
Net cash used in financing activities was 1,013 million yen, an increase of 833 million yen
compared with the previous year, mainly for the payments of long-term debt, 858 million yen,
and for the payments of dividends, 154 million yen.
As a result, net cash and cash equivalents at the end of the fiscal 2003 were 5,291million
yen, an increase of 201 million yen compared with the previous year.
4. Outlook of the Full Fiscal 2004
Currently, uncertainty over the future remains due to the unsettled political condition all
over the world especially in Iraq and its influences to the global economy. The domestic
economy is forecasted to stay in a difficult time without robust recovery during the first
and the second quarters. Even in these situations, the electronic components markets are
expected to have an increase in demand due to the widening use of advanced mobile phones and
the expansion of mobile devices in the Chinese market. In addition, progress in the
computerization of automobiles will contribute to the modest growth of the electronic
components industry.
MARUWA is determined to deal with accelerating change of needs from the market by filling
orders for low-volume and quick delivery with right goods on right time. For Circuit
Ceramics, for which the company has yet achieved high global market share, the company
reinforces one of MARUWA's core technologies, metal mold technology, to improve response to
new orders and then to boost further the market share.
For EMC Components, the efforts to reduce lead-time have been continued since started in
last year in order to enhance the capability to deal promptly with quick delivery.
In Machinery Ceramics division, the quarts glass products of TOKYO FINE GLASS CO., LTD,
which was newly acquired by MARUWA through the transfer of stocks at the end of the current
term, are expected to contribute to increasing net sales.
For these reasons, consolidated business results forecasts for the fiscal 2004 are as
follows;
Net sales 11,600 million yen +12.2%
Operating income 640 million yen +108.5%
Net income 300 million yen +185.7%
*Cautionary statements: the above forecasts are forward-looking statements involving risks
and uncertainties. Due to a number of factors, actual results may differ significantly from
these estimates.
5. Consolidated Balance Sheet
JPY million JPY million USD thousand
-------- --------- ------- ---------
As of 31st As of 31st Change % As of 31st
March March March
2003 2002 2003
-------- --------- ------- ---------
ASSETS
Current assets:
Cash & deposits 5,291 5,492 -3.7% 43,296
Notes and accounts 3,249 2,473 31.4% 26,591
receivable, trade
Inventories 3,847 3,502 9.9% 31,477
Deferred income taxes 43 139 -69.1% 354
Other current assets 268 560 -52.1% 2,196
Allowance for doubtful (2) (26) -- (17)
accounts
-------- --------- ---------
Total current assets 12,696 12,140 4.6% 103,897
-------- --------- ---------
Fixed assets:
(Property, plant & equipment)
Land 2,541 2,473 2.7% 20,797
Building & structures 3,789 3,893 -2.7% 31,009
Machinery & equipments 4,891 5,371 -8.9% 40,018
Construction in progress 128 79 62.0% 1,051
Other 564 633 -10.9% 4,608
Net property, plant & 11,913 12,449 -4.3% 97,483
equipment -------- --------- ---------
(Intangible fixed assets) 440 403 9.2% 3,604
-------- --------- ---------
(Investment & other assets)
Investment securities 661 558 18.5% 5,410
Deferred income taxes 26 -- -- 211
Property & equipment for 1,016 1,066 -4.7% 8,318
investments
Other 153 120 27.5% 1,250
Allowance for doubtful (24) (6) -- (201)
accounts
-------- --------- ---------
Total investments & 1,832 1,738 5.4% 14,988
other assets -------- --------- ---------
Total fixed assets 14,185 14,590 -2.8% 116,075
-------- --------- ---------
Total assets 26,881 26,730 0.6% 219,972
-------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes & accounts 489 508 -3.7% 4,003
payable, trade
Current portion of 152 204 -25.5% 1,244
long-term debt
Accrued income taxes 54 7 671.4% 444
Accrued bonus 136 127 7.1% 1,109
Stock purchase warrants 11 11 0.0% 88
Equipment notes payable 341 194 75.8% 2,792
Other current liabilities 768 461 66.6% 6,288
-------- --------- ---------
Total current liabilities 1,951 1,512 29.0% 15,968
-------- --------- ---------
Long-term liabilities:
Long-term debt 630 822 -23.4% 5,155
Accrued pension & 139 17 717.6% 1,141
severance costs
Deferred tax liabilities -- 49 -- --
Consolidation goodwill 596 -- -- 4,877
Other 76 83 -8.4% 617
-------- --------- ---------
Total long-term liabilities 1,441 971 48.4% 11,790
-------- --------- ---------
Total liabilities 3,392 2,483 36.6% 27,758
-------- --------- ---------
Shareholders' equity:
Common stock, authorized: 6,683 6,683 0.0% 54,693
26,000,000 shares; issued & outstanding:
11,050,000 shares in 2002
Additional paid-in capital 9,710 9,710 0.0% 79,463
Retained earnings 7,748 7,797 -0.6% 63,404
Net unrealized gain (loss) (7) 86 -- (57)
on other securities
Foreign currency (443) 172 -- (3,636)
translation adjustment
Treasury stock, at cost (202) (201) -- (1,653)
-------- --------- ---------
Total shareholders' equity 23,489 24,247 -3.1% 192,214
-------- --------- ---------
Total liabilities & 26,881 26,730 0.6% 219,972
shareholders' equity -------- --------- ---------
6. Consolidated Statements of Income
JPY million JPY million USD thousand
-------- --------- ------- ---------
For year ended For year ended Change % For year ended
31st March 31st March 31st March
2003 2002 2003
-------- --------- ------- ---------
Net sales 10,337 9,933 4.1% 84,591
Cost of sales 7,999 8,946 -10.6% 65,462
-------- --------- ---------
Gross profit 2,338 987 136.9% 19,129
-------- --------- ---------
Selling, general & 2,031 2,187 -7.1% 16,618
administrative expenses -------- --------- ---------
Operating income 307 (1,200) -- 2,511
-------- --------- ---------
Other income (expenses):
Interest & dividend income 6 114 -94.7% 48
Interest expenses (15) (17) -- (126)
Foreign exchange gain (56) 49 -- (460)
(loss), net
Other, net (9) (234) -- (64)
-------- --------- ---------
Other income, net (74) (88) -- (602)
-------- --------- ---------
Income before income taxes 233 (1,288) -- 1,909
Income taxes:
Current 48 16 200.0% 394
Deferred 80 (65) -- 657
-------- --------- ---------
128 (49) -- 1,051
-------- --------- ---------
Net income 105 (1,239) -- 858
-------- --------- ---------
7. Consolidated Statement of Cash Flows
JPY million JPY million USD thousand
-------- --------- ------- ---------
For year ended For year ended Change % For year ended
31st March 31st March 31st March
2003 2002 2003
-------- --------- ------- ---------
Operating activities:
Income before income taxes 233 (1,288) -- 1,909
Adjustments for:
Depreciation 1,460 1,540 -5.2% 11,950
Increase (decrease) in (13) (31) -- (103)
allowance for doubtful accounts
Decrease in accrued 28 (7) -- 226
pension & severance costs
Loss on disposal of 82 47 74.5% 669
property, plant & equipment
Interest & dividends income (7) (114) -- (56)
Foreign exchange (gain) loss 43 (59) -- 352
Write-down of investment 9 27 -66.7% 71
securities
(Increase) decrease in (310) 1,610 -- (2,539)
notes & accounts receivable
(Increase) decrease in (46) 470 -- (375)
inventories
Increase (decrease) in (66) (916) -- (536)
accounts payable
Other 367 (281) -- 3,003
Sub total 1,780 998 78.4% 14,571
-------- --------- ---------
Interest & dividend income 7 114 -93.9% 56
received
Interest expenses paid (15) (21) -- (125)
Income taxes paid 119 (860) -- 973
-------- --------- ---------
Net cash provided by 1,891 231 718.6% 15,475
operating activities -------- --------- ---------
Investment activities:
Payments for purchase of (783) (3,729) -- (6,408)
property, plant & equipment
Proceeds from sales of 88 84 4.8% 720
property, plant & equipment
Payments for purchase of (291) (172) -- (2,378)
investment securities
Proceeds from sales of -- 118 -- --
investment securities
Payments for purchase of (55) -- -- (451)
stocks of subsidiaries
Payments for loans made -- (60) -- --
Collection from loan -- 62 -- --
receivables
Increase in intangible fixed (33) (89) -- (273)
assets
Other 28 -- -- 226
-------- --------- ---------
Net cash used in investing (1,046) (3,786) -- (8,564)
activities -------- --------- ---------
Financing activities:
Issuance of long-term debt -- 164 -- --
Payments of long-term (858) (200) -- (7,022)
debt
Cash dividends paid (154) (144) -- (1,266)
Purchase of treasury stock (1) (1) -- (1)
Sales of treasury stock -- 1 -- --
-------- --------- ---------
Net cash provided by (1,013) (180) -- (8,289)
(used in) financing activities -------- --------- ---------
Effect of exchange rate (33) (27) -- (266)
changes on cash & cash equivalents
Net increase (decrease) in (201) (3,762) -- (1,644)
cash & cash equivalents
Cash and cash equivalents 5,492 9,254 -40.7% 44,940
at beginning of year
-------- --------- ---------
Cash and cash equivalents 5,291 5,492 -3.7% 43,296
at end of year -------- --------- ---------
8. Segment Information
(1) Consolidated business segment information
MARUWA's business is comprised of one segment. Therefore, segment breakdown is not
applicable.
(2) Consolidated geographic segment information
JPY million JPY million USD thousand
-------- --------- ------- ---------
For year ended For year ended Change % For year ended
31st March 31st March 31st March
2003 2002 2003
-------- --------- ------- ---------
JAPAN
Net sales:
Unaffiliated customers 7,310 7,151 2.2% 59,811
Intersegment 470 429 9.6% 3,848
-------- --------- ---------
Total 7,780 7,580 2.6% 63,659
Operating cost 7,199 7,679 -6.3% 58,902
-------- --------- ---------
Operating income (loss) 581 (99) -- 4,757
-------- --------- ---------
ASIA
Net sales:
Unaffiliated customers 2,774 2,608 6.4% 22,704
Intersegment 862 723 19.2% 7,051
-------- --------- ---------
Total 3,636 3,331 9.2% 29,755
Operating cost 3,350 3,762 -11.0% 27,414
-------- --------- ---------
Operating income (loss) 286 (431) -- 2,341
-------- --------- ---------
EUROPE
Net sales:
Unaffiliated customers 253 174 45.4% 2,077
Intersegment 2 3 -33.3% 13
-------- --------- ---------
Total 255 177 44.1% 2,090
Operating cost 362 227 59.5% 2,966
-------- --------- ---------
Operating income (loss) (107) (50) -- (876)
-------- --------- ---------
TOTAL
Net sales:
Unaffiliated customers 10,337 9,933 4.1% 84,591
Intersegment 1,334 1,155 15.5% 10,912
-------- --------- ---------
Total 11,671 11,088 5.3% 95,503
Operating cost 10,911 11,668 -6.5% 89,282
-------- --------- ---------
Operating income (loss) 760 (580) -- 6,221
-------- --------- ---------
ELIMINATION
Net sales:
Total 1,334 1,155 15.5% 10,912
Operating cost 881 535 64.7% 7,201
-------- --------- ---------
Operating income (loss) 453 620 -26.9% 3,711
-------- --------- ---------
CONSOLIDATED
Net sales:
Total 10,337 9,933 4.1% 84,591
Operating cost 10,030 11,133 -9.9% 82,081
-------- --------- ---------
Operating income (loss) 307 (1,200) -- 2,511
-------- --------- ---------
(3) Net overseas sales by customer's geographic location
JPY million JPY million JPY million
-------- --------- ------- ---------
For year ended For year ended Change % For year ended
31st March 31st March 31st March
2003 2002 2003
-------- --------- ------- ---------
Overseas sales:
Asia 4,925 4,743 3.8% 40,302
Europe 294 228 28.9% 2,407
Others 143 166 -13.9% 1,169
Total 5,362 5,137 4.4% 43,878
Consolidated net sales 10,337 9,933 4.1% 84,591
% of consolidated net sales:
Asia 47.6% 47.7%
Europe 2.8% 2.3%
Others 1.4% 1.7%
Total 51.9% 51.7%
*Overseas sales indicate net sales of the Company and its subsidiaries to customers outside
Japan.
*Countries are divided in geographical vicinity.
*Main countries included in each are as indicated below;
Asia - Malaysia, Taiwan, Korea, Hong Kong
Europe - Germany, England
Others - United States
END.
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