Interim Results
Maruwa Co Ld
08 November 2002
8 November 2002
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 first half of fiscal 2003, the six-month period ended 30 September, 2002
is 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$ = 120.60 yen.
*Consolidated subsidiaries: 4 companies
1. Summary of Consolidated Results
(1) Summary of consolidated statement of income
JPY million USD thousand
Six month period Six month period Change % Six month period
ended ended ended
30 Sept. 2002 30 Sept. 2001 30 Sept. 2002
Net sales 5,430 5,370 1.1% 44,288
Operating income (loss) 272 (46) -- 2,219
Income before income taxes 227 55 312.7% 1,853
Net income 139 24 479.2% 1,132
JPY USD
Net income per share 12.62 2.15 487.0% 0.10
(2) Summary of consolidated financial condition
JPY million USD thousand
Six month period Six month period Change % Six month period
ended ended ended
30 Sept. 2002 30 Sept. 2001 30 Sept. 2002
Total Assets 26,447 28,341 -6.7% 215,720
Shareholders' equity 23,746 24,790 -4.2% 193,685
Shareholders' equity ratio 89.8% 87.5% 2.6% 89.8%
JPY USD
Shareholders' equity per 2,160.06 2,254.98 -4.2% 17.60
share
(3) Summary of consolidated statement of cash flows
JPY million USD thousand
Six month period Six month period Change % Six month period
ended ended ended
30 Sept. 2002 30 Sept. 2001 30 Sept. 2002
Cash flows from operating 974 311 213.2% 7,954
activities
Cash flows from investing (358) (2,795) -- (2,921)
activities
Cash flows from financing (245) (167) -- (1,997)
activities
Cash and cash equivalents 5,841 6,583 -11.3% 47,646
at the end of the period
2. Projections
(1) Consolidated earnings forecast for fiscal 2003 (Revised in November 2002)
JPY million
Net sales 10,300
Net income 255
*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.
3. Management Policies
(1) Basic management policy
'MARUWA OF CERAMIC MATERIAL TECHNOLOGY' is the corporate vision of MARUWA CO.,
LTD. and its subsidiaries (together with the Company, 'MARUWA.') For this
vision, we strive 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, the Company has set the management policy that the Company
will continue to remain as a winning company under business competition by
reinforcing its core businesses through selection and concentration,
constructing highly profitable structure, and developing products with No.1
share in the niche market at global level.
(2) Dividend policy
The basic principle in MARUWA's dividend policy is to maintain stable dividend
payments to the shareholders. We will determine dividend ratio based on
comprehensive assessment of the Company's financial conditions and operation and
meeting customers' demand as stated in the Basic Management Policy.
(3) Business strategy and management issues
In the midst of IT era, in which quick transformation and continuous growth are
expected in response to rapidly changing market,MARUWA aims to increase
corporate value by bolstering profitability and growth ratio. In order to
achieve this goal, we proceed the utilization of our basic technologies such as
of ceramic material, of electronic circuit design, and of multi-layering, all
which have been accumulated in MARUWA for years, in telecommunication industry.
To promote the reform of managerial organization, we changed the conventional
internal hierarchical system into more compact and flexible structure. In this
structure, the locus of responsibilities for results in each department became
clearer, and, the evaluation of each department according to its result has
contributed to make the management open.
4. Summary of the Interim Business Environment
The Japanese economic climate has been stagnation, influenced by the slowdown of
U.S. economy.
The electronic components industry to which the Company belongs had also been in
a sharp decline since last term. However, MARUWA kept rather slightly firm sales
condition due to an increase in demand for stocks during the first quarter as
customers' inventory adjustments were completed. Also, the effect of our
through internal reform which started in last year of recession began to appear.
We are achieving a flexible structure that could create profits even when sales
are sluggish in this market sensitive industry. As a result, sales of the six-
month period was 5,430 million yen as originally planned, an increase of 60
million yen (1.1 %) compared with the first half period of last year. As for
the profits, since we continued to try to cut fixed cost even though there was
influence of a decrease in stocks as a result of our intensive effort in
shortening lead time, operating income was 272 million yen, an increase of 318
million yen compared with last year's first half period. Net income was 139
million yen, an increase of 115 million yen compared with the first half period
of the previous term.
The interim dividend to be paid is 7 yen per share as originally planned.
Review of operation in each business division is as follows.
Circuit Ceramics
Circuit Ceramics include ceramic substrates for chip resistors which is one of
our core products, glazed ceramic substrates for thermal printer head (TPH,)
large ceramic substrates for hybrid ICs, and Aluminium Nitride for power
modules.
Net sales of this division was 2,351 million yen, an increase of 145 million
yen, 6.6 % up compared with the previous interim results. The sales was
favorable due to a rise in demand for stocks from the rapid recovery in March to
the first quarter period when our customers' inventory adjustments were
completed and digital household electronics market was good. Although it turned
into a modest adjustment period, in and after the third quarter it tends to be
recovered.
Machinery Ceramics
Machinery Ceramics include magnetic head-supporting blocks for personal
computers, and ceramic water valves.
Supporting blocks showed favorable sales in Asian markets throughout the first
half period. As for the valves, demand rose in the Taiwanese market.
Therefore, the total sales of this division was 733 million yen, an increase of
168 million yen, 29.7 % up compared to the previous interim results.
Radio Frequency Products
Radio Frequency Products include dielectric ceramic filters which are used for
cellular phones, base stations and GPS (Global Positioning System,) and VCO
(Voltage Controlled Oscillators) for cellular phones and other wireless
communication.
The sales of dielectric filters was influenced by the sharp fluctuations in
demand from cellular phone's parts makers; from the first quarter in shape via
an adjustment period in the second quarter, it is now on a track to recovery.
VCO sales was in a boom especially in Asian markets of cellular phones, wireless
LAN and base stations, and LTCC (Low Temperature Co-firing
Ceramics) grew as well.
As a result, the total sales of this division was 755 million yen, an increase
of 219 million yen, 40.9 % up compared with the previous interim results.
EMC Components
The name of this division was changed in the beginning of this term from
'Capacitor Products' to ' EMC Components' for the purpose of making clear
direction of our products. EMC Components division includes noise/surge
protecting components such as EMI filtersand chip varistors, and ceramic
capacitors of high voltage/high capacitance types.
The digital camera market keeps in a good condition, and consequently we faced
increasing price pressure especially on Taiwanese components market and forced
to accelerate the fall of unit sales prices. As a result, multi-layer ceramic
capacitor production was is in a difficult phase, but it bottomed out in August.
EMI filters had sales at a low level but firm demand. The divisional sales
resulted in 1,591 million yen, a decrease of 472 million yen, 22.9 % down
compared with the previous interim result.
5. Financial Condition
The amount of cash flow gained from operating activities in the first half of
this term was 974 million yen and increased 663 million yen compared with the
previous interim result. The income before income taxes for the first half of
this year was 227 million yen ( an increase of 172 million yen compared to the
last interim result, and the depreciation cost increased slightly to 683 million
yen. As for the working capital, the notes and accounts receivable increased to
476 million yen while the accounts payable increased to 222 million yen.
The amount of cash flow used in investing activities was 358 million yen, a
decrease of 2,437 million yen compared to the last interim result.
The payments for purchase of property, plant & equipment resulted in 292 million
yen, especially for metal molds and renewal both in Japan and overseas, a
decrease of 2,427 million yen compared to the last interim result.
The amount of cash flow used in financial activities was 245 million yen, an
increase of 78 million yen compared to the last interim result. It mainly
includes the payment of long-term debt of 168 million yen and cash dividend paid
of 77 million yen.
As a result, the amount of cash and cash equivalents at end of the interim
period increased 349 million yen to 5,841 million yen compared to the end of
last fiscal year.
6. Outlook of the Full Fiscal 2003
In remaining uncertainty due to the bad loan problem and concern about falling
stock price in Japan and also the unforeseeable future of the U.S. economy,
full-fledged recovery of the domestic economy including consumer spending is not
expected.
Under these circumstances, in the electronic components industry, especially
in Asian markets, the shift to new models of telecommunication appliances such
as cellular phones started in a full scale, and it is forecasted that the
shipping amount of personal computer-related components will increase. However,
there still remain many uncertainties in this industry.
In the fiscal year 2002, MARUWA had resulted in a heavy deficit, but the
profitability was improved as a result of the internal reforms started in last
year. For in this interim period, the foreign exchange loss unexpectedly
affected to the income negatively and economic uncertainty still remains, we
posted the revised projection of results below.
MARUWA, in production, is going to continue to improve profitability by
proceeding the incentive reduction of lead time started in last year. In sales
operation, we will enhance the flexibility in responding our customers' diverse
needs and quick delivery requests, and develop more our sales outlets. In R&D,
we will concentrate in developing new high-level technology based on MARUWA's
unique material technology to stay ahead of the severe price competition coming
particularly in Chinese markets.
The revised forecasts of the consolidated business results for the full fiscal
year 2003 ended in March 2003 is as follows;
Net sales 10,300 million yen
Operating income 500 million yen
Net income 255 million yen
Assuming that these figures will be realized, we are planning to pay dividend at
the rate of 7 yen per share at year-end, collectively 14 yen a year together
with the interim dividend.
*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.
6. Consolidated Balance Sheet
JPY million JPY million USD thousand
Six-month Six-month Year ended Six-month
period period period
ended 30 Sept. ended 30 Sept. Change % 31 March Change % ended 30 Sept
2002
ASSETS 2002 2001 2002
Current assets:
Cash & deposits 5,741 1,364 320.9% 5,492 4.5% 46,830
Notes and accounts 2,889 2,998 -3.6% 2,473 16.8% 23,566
receivable, trade
Marketable securities -- 5,219 -- -- -- 816
Inventories 3,451 4,156 -17.0% 3,502 -1.5% 28,148
Deferred income taxes 49 25 96.0% 139 -64.7% 398
Other current assets 456 396 15.2% 560 -18.6% 2,906
Allowance for doubtful (2) (42) -- (26) -- (19)
accounts
Total current assets 12,584 14,116 -10.9% 12,140 3.7% 102,645
Property, plant & equipment:
Land 2,471 2,474 -0.1% 2,473 -0.1% 20,153
Building & structures 5,245 4,518 16.1% 5,348 -1.9% 42,783
Machinery & equipments 11,411 10,733 6.3% 9,258 23.3% 93,079
Other -- -- -- 2,441 --
Construction in 85 740 -88.5% 79 7.6% 693
progress
Total 19,212 18,465 4.0% 19,599 -2.0% 156,708
Less-accumulated (7,461) (6,238) -- (7,151) -- (60,859)
depreciation
Net property, plant & 11,751 12,227 -3.9% 12,448 -5.6% 95,849
equipment
Investment & other
assets:
Investment securities 580 441 31.5% 558 3.9% 4,732
Deferred income taxes -- 22 -- -- --
Property & equipment 1,054 1,080 -2.4% 1,066 -1.1% 8,599
for
investments
Other 478 455 5.1% 518 -7.7% 3,895
Total investments & 2,112 1,998 5.7% 2,142 -1.4% 17,226
other assets
Total assets 26,447 28,341 -6.7% 26,730 -1.1% 215,720
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes & accounts 711 889 -20.0% 508 40.0% 5,800
payable, trade
Current portion of 153 199 -23.1% 204 -25.0% 1,252
long-term debt
Accrued income taxes 9 12 -25.0% 7 28.6% 74
Accrued bonus 119 -- -- 127 -6.3% 968
Stock purchase 11 -- -- 11 0.0% 88
warrants
Other current 881 1,580 -44.2% 655 34.5% 7,186
liabilities
Total current 1,884 2,680 -29.7% 1,512 24.6% 15,368
liabilities
Long-term liabilities:
Long-term debt 705 763 -7.6% 822 -14.2% 5,752
Accrued pension & 30 29 3.4% 17 76.5% 245
severance costs
Deferred tax 2 2 0.0% 49 -95.9% 15
liabilities
Other 80 77 3.9% 84 -4.8% 655
Total long-term 817 871 -6.2% 972 -15.9% 6,667
liabilities
Shareholders' equity:
Common stock, 6,683 6,683 0.0% 6,683 0.0% 54,514
authorized:
26,000,000 shares; issued &
outstanding:
11,050,000 shares in
2002
Additional paid-in 9,710 9,710 0.0% 9,710 0.0% 79,204
capital
Retained earnings 7,859 9,137 -14.0% 7,797 0.8% 64,102
Net unrealized gains 22 20 10.0% 86 -74.4% 183
on other securities
Foreign currency (326) (559) -- 171 -- (2,672)
translation adjustment
Treasury stock, at (202) (201) -- (201) -- (1,646)
cost
Total shareholders' 23,746 24,790 -4.2% 24,246 -2.1% 193,685
equity
Total liabilities & 26,447 28,341 -6.7% 26,730 -1.1% 215,720
shareholders' equity
7. Consolidated Statements of Income
USD thousand
Six-month Six-month
period ended period ended
30 Sept. 30 Sept.
Change % Six-month
period
2002 2002 ended 30
Sept 2002
Net sales 5,430 5,370 1.1% 44,288
Cost of sales 4,165 4,328 -3.8% 33,967
Gross profit 1,265 1,042 21.4% 10,321
Selling, general & 993 1,088 -8.7% 8,102
administrative
expenses
Operating income 272 (46) -- 2,219
Other income
(expenses):
Interest & dividend 2 97 -97.9% 16
income
Interest expenses 8 (9) -- 67
Foreign exchange gain (63) (17) -- (511)
(loss), net
Other, net 8 30 -73.3% 62
Other income, net (45) 101 -- (366)
Income before income 227 55 312.7% 1,853
taxes
Income taxes:
Current 6 12 -50.0% 51
Deferred 82 19 331.6% 670
88 31 183.9% 721
Net income 139 24 479.2% 1,132
8. Consolidated Statement of Cash Flows
JPY million JPY million
Six-month Six-month Year ended Six-month
period period period
ended 30 Sept. ended 30 Sept. Change % 31 March ended 30 Sept
2002
2002 2001 2002
Operating activities:
Income before income 227 55 312.7% (1,288) 1,853
taxes
Adjustments for: --
Depreciation 683 719 -5.0% 1,540 5,574
Increase (decrease) in (18) (9) -- (31) (149)
allowance for doubtful accounts
Decrease in accrued 13 5 160.0% (7) 103
pension & severance costs
Loss on disposal of 25 31 -19.4% 47 207
property, plant & equipment
Interest & dividends (2) (97) -- (114) (19)
income
Foreign exchange 35 6 483.3% (59) 284
(gain) loss
Write-down of 0 15 -- 27 1
investment
securities
(Increase) decrease in (476) 982 -- 1,610 (3,879)
notes & accounts receivable
(Increase) decrease in (18) (287) -- 470 (149)
inventories
Increase (decrease) in 222 (476) -- (916) 1,811
accounts payable
Other 130 (45) -- (281) 1,064
Sub total 821 899 -8.7% 998 6,701
Interest & dividend 2 97 -97.9% 114 20
income
received
Interest expenses paid (8) (8) -- (21) (65)
Income taxes paid 159 (677) -- (860) 1,298
Net cash provided by 974 311 213.2% 231 7,954
operating activities
Investment activities:
Payments for purchase (292) (2,719) -- (3,729) (2,377)
of
property, plant & equipment
Proceeds from sales of 58 24 141.7% 84 469
property, plant & equipment
Payments for purchase (108) (1) -- (172) (876)
of
investment securities
Proceeds from sales of -- -- -- 118 --
investment securities
Payments for purchase (16) -- -- -- (133)
of
stocks of subsidiaries
Payments for loans -- (60) -- (60) --
made
Collection from loan -- 2 -- 62 --
receivables
Increase in 0 (41) -- (89) (4)
intangible fixed
assets
Net cash used in (358) (2,795) -- (3,786) (2,921)
investing
activities
Financing activities:
Issuance of long-term -- (100) -- 164 --
debt
Payments of long-term (168) 0 -- (200) (1,363)
debt
Cash dividends paid (77) (67) -- (144) (632)
Purchase of treasury 0 (1) -- (1) (2)
stock
Sales of treasury -- 1 -- 1 --
stock
Net cash provided by (245) (167) -- (180) (1,997)
(used in) financing activities
Effect of exchange (22) (20) -- (27) -183
rate
changes on cash & cash equivalents
Net increase 349 (2,671) -- (3,762) 2,853
(decrease) in
cash & cash
equivalents
Cash and cash 5,492 9,254 -40.7% 9,254 44793
equivalents
at beginning of year
Cash and cash 5,841 6,583 -11.3% 5,492 47,646
equivalents
at end of the period
9. 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
USD thousand
Six-month Six-month Six-month
period
period ended period ended
30 Sept. 30 Sept. Change % ended 30 Sept 2002
JAPAN 2002 2001
Net sales:
Unaffiliated customers 3,797 3,751 1.2% 30,970
Intersegment 293 189 55.0% 2,386
Total 4,090 3,940 3.8% 33,356
Operating cost 3,716 3,656 1.6% 30,308
Operating income 374 284 31.7% 3,048
(loss)
ASIA
Net sales:
Unaffiliated customers 1,494 1,494 0.0% 12,189
Intersegment 457 416 9.9% 3,730
Total 1,951 1,910 2.1% 15,919
Operating cost 1,760 1,853 -5.0% 14,357
Operating income 191 57 235.1% 1,562
(loss)
EUROPE
Net sales:
Unaffiliated customers 138 125 10.4% 1,130
Intersegment 1 2 -50.0% 6
Total 139 127 9.4% 1,136
Operating cost 187 142 31.7% 1,525
Operating income (48) (15) -- (389)
(loss)
TOTAL
Net sales:
Unaffiliated customers 5,430 5,370 1.1% 44,288
Intersegment 751 607 23.7% 6,123
Total 6,181 5,977 3.4% 50,411
Operating cost 5,663 5,651 0.2% 46,190
Operating income 518 326 58.9% 4,221
(loss)
ELIMINATION
Net sales:
Total 751 607 23.7% 6,123
Operating cost 505 235 114.9% 4,121
Operating income 246 372 -33.9% 2,002
(loss)
CONSOLIDATED
Net sales:
Total 5,430 5,370 1.1% 44,288
Operating cost 5,158 5,416 -4.8% 42,069
Operating income 272 (46) -- 2,219
(loss)
(3) Net overseas sales by customer's geographic
location
JPY million JPY million USD thousand
Six-month Six-month Year ended Six-month
period period period
ended 30 Sept. ended 30 Sept. Change % 31 March ended 30 Sept
2002
2002 2001 2002
Overseas sales:
Asia 2,603 2,483 4.8% 4,743 21,233
Europe 114 98 16.3% 228 930
Others 120 115 4.3% 166 979
Total 2,837 2,696 5.2% 5,137 23,142
Consolidated net sales 5,430 5,370 1.1% 9,933 44,288
% of consolidated net sales:
Asia 47.9% 46.3% 47.7%
Europe 2.1% 1.8% 2.3%
Others 2.2% 2.1% 1.7%
Total 52.2% 50.2% 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 a s indicated below;
Asia - Malaysia, Taiwan, Korea
Europe - Germany, England
Others - United States
END.
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