Interim Results

Maruwa Co Ld 14 November 2006 14 November 2006 MARUWA CO., LTD. 3-83, Minamihonjigahara-cho, Owariasahi-city, Aichi-pref., 488-0044 JAPAN Interim Results for Fiscal 2007 MARUWA CO., LTD. today announced interim consolidated business results for the fiscal year ending 31 March 2007 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 = 117.90yen. *Consolidated subsidiaries: 8 companies (Maruwa (Malaysia) Sdn. Bhd., Taiwan Maruwa Co., Ltd., MARUWA Electronics (Taiwan) Co., Ltd., Maruwa Europe Ltd., Maruwa America Corp., Maruwa Electronic (India) Pvt.Ltd., MARUWA QUARTZ Co., Ltd., and Hokko Denshi Co., Ltd.) I. Summary of Consolidated Interim Results (1) Summary of consolidated statement of income JPY million JPY million USD thousand For 6-month period For 6-month Change % For year ended For 6-month period period 1 Apr. - 30 Sept. 1 Apr. - 30 Sept. 31 March 1 Apr. - 30 Sept. 2006 2005 2006 2006 Net sales 9,763 9,005 8.4% 20,278 82,807 Operating income 822 718 14.5% 1,693 6,972 Income before 972 547 77.7% 1,669 8,244 income taxes Net income 631 282 123.8% 1,135 5,352 JPY USD Net income per 57.60 26.06 121.0% 103.82 0.49 share *Average number of 10,960,935 10,803,643 10,880,952 issued shares (2) Summary of consolidated financial condition JPY million JPY million USD thousand As of 30 Sept. As of 30 Sept. Change % As of 31 March As of 30 Sept. 2006 2005 2006 2006 Total Assets 32,496 30,538 6.4% 33,044 275,623 Shareholders' equity 27,037 25,272 7.0% 26,557 229,321 Shareholders' equity 83.2% 82.8% 80.4% ratio JPY USD Shareholders' equity 2,465.43 2,315.35 6.5% 2,423.40 20.91 per share *Number of issued 10,966,660 10,914,860 10,956,360 shares at the year end (3) Summary of consolidated statement of cash flows JPY million JPY million USD thousand For 6-month period For 6-month Change % For year For 6-month period ended period 1 Apr. - 30 Sept. 1 Apr. - 30 Sept. 31 March 1 Apr. - 30 Sept. 2006 2005 2006 2006 Net cash provided by 788 423 86.3% 2,036 6,684 operating activities Net cash used in (1,425) (181) 687.3% (1,234) (12,087) investing activities Net cash used in (185) 164 212.8% 51 (1,569) financing activities Cash and cash 7,226 7,401 -2.4% 7,899 61,289 equivalents at end of term II. Outlook for the full fiscal 2007 ending 31 March 2007 JPY million Full year Net sales 24,530 Net income 1,690 Net income per share 154.25 *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. Management Policies (1) Basic management policy Based on the basic corporate principle - The three roots of our trunk: Advancement of the company, Welfare of the workforce, and Satisfaction of the shareholders,- MARUWA group strives to differentiate us from our peers by consistently being professional of material technology and following quality first policy, and to enhance the corporate value to meet the expectations of all the stakeholders. Based on this policy, it is MARUWA's management policy to survive among severe global business competition as well as to develop No.1 products in global niche markets by reinforcing its core business with a selection and concentration strategy. (2) Dividend policy As a profit allocation policy, MARUWA considers to allocate acquired cash-flows through operations to active investment into new growing areas, consolidated results-considered dividends, and the appropriation of retained earnings for flexible use against management environment changes. We have made efforts to increase dividends since the previous term, focusing on profit returns to shareholders while we hold the internal reserves for strategic investment required to expand our core business continuously. (3) Targeted management indices MARUWA emphasizes operating income ratio as an important index to indicate profitability. We set a medium-to-long term target - net sales 40 billion yen and operating income ratio 20%. For this goal, we are determined to establish profit-acquiring system of production and sales together toward solid growth in the electronic components industry amid rapid changes and severe competition. (4) Business strategies in medium-to-long term We have enforced to build up an operational system responsive to market changes, learning from the management lessons of the IT bubble and its collapse in 2000 and 2001. As a result, we achieved the enhancement of financial condition and the establishment of profitability. Now the whole MARUWA group is focusing on the mid-term target - total sales 40 billion yen / operating income margin 20%. For a medium-to-long term growth strategy, in addition to the development and creation of new products and businesses within the company, we will maintain our M&A strategy to acquire business or products that could create a synergetic effect with our material technology and other base technologies and product line-ups. Together with above expansion strategy, MARUWA aims for being a respected company by sticking with the basis of manufacturing and contributing to local societies with fulfillment of social responsibility. Management issues 1. Enhance the businesses acquired through M&A The businesses acquired through M&A in the past have grown by management efforts from deficit to the level that can contribute to revenue. We will start working for new growth, further enhancing the business structure as well as adding synergetic effects with our core businesses. 2. Start the mass-production of new developed products We will start the mass-production of the products developed with our unique material technology to earn profits aggressively. 3. Improve material technology and product development capability For more customers' satisfaction, each product will be staffed with sales engineers in charge of product planning and development in order to supply products that meet the needs of customers in rapidly changing markets in the name of 'MARUWA of material technology'. 4. Strengthen the sales force in overseas To increase sales in the global manufacturing areas of our customers and the markets of important international companies, we will strengthen and increase overseas sales sites, take the needs of customers in advance, expand new customers, and improve our market shares. Review of Operations and Financial Condition I. Operating Results Quarterly JPY million Fiscal 2006 Fiscal 2007 1Q 2Q 3Q 4Q 1Q 2Q Net sales 4,481 4,524 5,082 6,191 4,878 4,885 Operating income 398 321 522 452 420 402 Net income 51 231 399 454 357 274 Semiannually JPY million Fiscal 2006 Fiscal 2007 For 6-month period For 6-month period For 6-month period 1 April - 30 Sept 1 Oct.2005 - 31 1 Apr. - 30 Sept. 2005 Mar. 2006 2006 Net sales 9,005 11,273 9,763 Operating income 718 975 822 Net income 282 853 631 (1) Review of operations Japanese economy in the first half of this fiscal term has been favorable, supported by increases of capital expenditures among enterprises and by consumer spending. Global economy continued to expand as U.S economy showed underlying strength. In such circumstances, our business environment has been generally solid, influenced by an aggressive production increase trend in IT-related industries. Net sales in this first half were 9,763 million yen, an increase of 8.4% with the first half of the previous year. As for profits, operating income increased 14.5% to 822 million yen compared to the previous fist half due to a revenue increase in Circuit Ceramics, contribution by Machinery Ceramics, which was enhanced in profitability through the last year, and a decrease of loss in Lighting Equipment business in spite of expenses for the reorganization of manufacturing equipments. Net income increased 123.8% to 631 million yen compared to the first half of last year. Considering operating results stated above, as for interim dividend in this first half, we will pay 12 yen per share, as announced in May 2006, up 3 yen compared with the previous first half. (2) Review of operating results by segment JPY million Fiscal 2006 Fiscal 2007 For 6-month period For 6-month period For 6-month period 1 Apr. - 30 Sept. 1 Oct.05 - 31 Mar. 2006 1 Apr. - 30 Sept. 2005 2006 Ceramic Components: Net sales 8,299 8,329 8,843 Operating income 1,198 1,036 1,294 Lighting Equipment: Net sales 706 2,944 920 Operating income (244) 217 (124) Total: Net sales 9,005 11,273 9,763 Operating income 954 1,253 1,170 Elimination: Net sales -- -- -- Operating income (236) (278) (348) Consolidated: Net sales 9,005 11,273 9,763 Operating income 718 975 822 Quarterly sales results of Ceramic Components segment by product division JPY million Fiscal 2006 Fiscal 2007 1Q 2Q 3Q 4Q 1Q 2Q Circuit Ceramics 1,649 1,576 1,519 1,601 1,778 1,908 Machinery Ceramics 1,129 1,117 1,135 1,063 1,148 1,189 RF Products 344 364 417 464 407 354 EMC Components 1,096 1,024 1,075 1,055 1,046 1,013 Total 4,218 4,081 4,146 4,183 4,379 4,464 *RF=Radio Frequency JPY million Fiscal 2006 Fiscal 2007 For 6-month period For 6-month period For 6-month period 1 Apr. - 30 Sept. 1 Oct.05 - 31 Mar. 1 Apr. - 30 Sept. 2005 2006 2006 Circuit Ceramics 3,225 3,120 3,686 Machinery Ceramics 2,246 2,198 2,337 RF Products 708 881 761 EMC Components 2,120 2,130 2,059 Total 8,299 8,329 8,843 *RF=Radio Frequency Circuit Ceramics Circuit Ceramics include ceramic substrates for chip resistors which are essential for a wide range of electronic appliances, glazed ceramic substrates for thermal printer head (TPH) for FAX or barcode label printers, large ceramic substrates for hybrid ICs, and Aluminum Nitride (AlN) for power modules and automobiles. Total sales of this division were 3,686 million yen, up 14.3% compared to the first half of the previous term, reflected solid orders in information communication devices such as mobile phones and PCs and industrial machineries markets. Ceramic substrates for chip resistors continuously enjoyed high demands, gradually showing positive effects from preparation for a production increase. Also, an increase of demand for large substrates for power modules contributed to increase in revenue. Machinery Ceramics Machinery Ceramics include quarts glass products mainly for semiconductor equipment, magnetic head-supporting blocks for PCs, and ceramic facet valves. The products in this division require high precision process techniques. In this division, quartz glass products, which had been inactive in the second half of last year, saw a sales recovery; on the other hand, some products which tend to have little demand posted sales decreases. Therefore, total interim sales were 2,337 million yen, up 4.1% compared to the interim results of last year. Radio Frequency Products Radio Frequency Products include device products such as band pass filters for mobile phones and other wireless communication appliances, dielectric ceramics for filters used in mobile communications or antennas, and thin film substrates for optical information and communications. Total sales of this division were 761 million yen, up 7.5% compared to the interim results of last term. Device products sales increased thanks to products for base stations and wireless communications for commercial-use. Thin-film products were affected from inventory adjustments by customers. EMC Components EMC Components include multi-layer ceramic capacitors of high-voltage/ high-capacitance mainly for digital cameras, LCD backlights, and power supply of electronic devices, and components as a countermeasure against noise/surge, including EMI filters, chip varistors, chip beads, and inductors. Such components against noise/surge are expected to be more required in the future for various electronic appliances such as information communication tools including mobile phones and PCs, digital home appliances, amusement equipment, and automotive electronics. Total sales were 2,059 million yen, down 2.9% compared to the last first half. EMI filters and chip varistors increased in sales; on the other hand, a part of lineups were influenced by inventory adjustments at customers. Lighting Equipment This segment includes lighting equipment for public works such as roads and bridges, and sales tend to be largely concentrated in the end of a fiscal term, and expenses exceed sales until then. Total sales in this first half were 920 million yen, an increase of 30.3%, and operating loss was 124 million yen. Operating loss was significantly reduced due to a sales increase in the first half and cost reduction efforts continued from the previous term. II. Financial condition JPY million JPY million As of 30 September As of 31 March As of 30 September Change to 31 Mar.2006 2005 2006 2006 Amount % Total assets 30,538 33,044 32,496 -548 -1.7% Total liabilities 5,266 6,487 5,459 -1,028 -15.8% Total shareholders' 25,272 26,557 27,037 480 1.8% equity Shareholders' equity 82.8% 80.4% 83.2% 2.8% ratio JPY million JPY million For 6-month period For 6-month For 6-month period Change period to 30 Sept. 2005 1 Apr. - 30 Sept. 1 Oct. 05 - 31 1 Apr. - 30 Sept. Amount % 2005 Mar. 2006 2006 Net cash provided by 423 1,613 788 365 86.3% operating activities Net cash used in (181) (1,053) (1,425) -1244 687.3% investing activities Net cash used in 164 (113) (185) -349 212.8% financing activities Cash and cash 7,401 7,899 7,226 -175 -2.4% equivalents at end of term Net sales 9,005 11,273 9,763 758 -8.4% Capital expenditures 746 991 1,155 409 54.8% Depreciation 756 858 805 49 6.5% Total assets at the end of at the end of this first half were 32,496 million yen, a decrease of 548 million yen compared to the end of last term as a result of operating activities in this half year. This was mainly due to a decrease in trade notes and accounts receivable in relation to a distinctive business trend at MARUWA SHOMEI Co., Ltd. Inventories increased 211 million yen, and net property, plant and equipment increased 286 million yen due to an increase of machineries with capital expenditures compared to last year end, respectively. Total liabilities decreased 5,459 million yen, a decrease of 1,028 million yen compared to the last year end due also to a decrease in trade notes and accounts payable at MARUWA SHOMEI. Shareholders' equity increased 480 million yen with payment of dividends and posting of net income. As a result, shareholders' equity ratio at the end of this first half end was 83.2%, up 2.8 points from the previous year end. Net cash provided from operating activities was 788 million yen, up 365 million yen compared with the previous first half due mainly to 972 million yen of net income before taxes, 805 million yen of depreciation, and 300 million yen of a decrease in retirement benefits. Net cash used in investing activities totaled 1,425 million yen, up 1,244 million yen compared to the first half of previous year, due especially to capital expenditures to prepare for an increase in Circuit Ceramics production; 1,023 million yen in payment for purchase of net property, plant and equipment; 286 million yen in loan receivable mainly for a subsidiary in India. Net cash used in financing activities amounted to 185 million yen, increasing 349 million yen from the last first half mostly because of 74 million yen of loan payment and 132 million yen of dividends payment. Consequently, cash and cash equivalents at the end of this first half were 7,226 million yen, down 175 million yen compared to the end of the previous first half since net cash used in investing and financing activities were larger than net cash provided in operating activities. Trends of cash-flows indices are as follows; For year ended For year ended For year ended 31 March 2005 31 March 2006 31 March 2007 Interim Final Interim Final Interim Shareholders' equity ratio 84.8% 85.5% 82.8% 80.4% 83.2% Shareholders' equity ratio 64.7% 80.3% 104.7% 100.8% 97.2% at market value Debt redemption period 0.2 0.1 0.5 0.2 0.3 (year) Interest coverage ratio 427.2 316.1 203.4 251.9 233.0 Note) Shareholders' equity ratio : Shareholders' equity / Total assets Shareholders' equity ratio at market value : Total market value of shares / Total assets Debt redemption period : Interest-bearing debts / Cash flows from operating activities Interest coverage ratio : Cash flows from operating activities / Interest payment *Each index is calculated with consolidated financial figures. *Total market value of shares is calculated by multiplying the share value as of the end of the fiscal year by the total number of issued shares after deduction of own shares at the end of the year. *For cash flows from operating activities, the figure in the consolidated cash flows statement is used. Interest-bearing debt includes all debts for which interests are paid among the liabilities booked in the consolidated balance sheet. For interest payment, the figure of interest expenses paid booked in the consolidated cash flows statement is used. III. Outlook for Full Fiscal 2007 JPY million For year ended For year ending Change 31st March 2006 31st March 2007 Amount % Net sales 20,278 24,530 4,252 21.0% Operating income 1,693 2,750 1,057 62.4% Net income 1,135 1,690 555 48.9% As for Ceramic Components business, a high demand is continuously expected in the electronic components market. In Circuit Ceramics division, new equipments were installed for production increase in this first half in order to further expand a market share in Alumina substrates, expecting its effect in the second half of this year. Machinery Ceramics division expects solid demands for quartz glass products even though some products are coming to an end. In Radio Frequency Products division, sales of thin film products decreased, but it will recover to a certain level. Sales of device products are expected to recover in demand from the second half of this term. EMC Components division will aggressively expand in sales as sales increases for component lineups including EMI filters and inductors in the second half. Considering these conditions, outlook for fiscal 2007 is not changed from the figures announced in May 2006. Meanwhile, net income is expected to include a loss of 100 million yen from disposal of equipments. *Cautionary statements: the above forecasts are based on the present business environment and currently-available information, and include forward-looking statements involving risks and uncertainties. The reader is cautioned not to place reliance entirely on the above forecasts for making investment decisions. Due to a number of factors such as future economic situations and market environment changes, actual results may differ significantly from these estimates. Also, please refer to Risks for business operations. IV. Risks for business operations MARUWA considers following issues as risks which may have influence on operating results, share price, and financial conditions of MARUWA group. Forward-looking statements contained in this document are due to discussion by MARUWA group as of the date this document was released. 1. Reliance on the electronic components market Our major customers are electronic components makers which are influenced by the semiconductor market. The semiconductor market has been fluctuating cyclically by the influence of the market's distinctive 'silicon cycle' due to market prices and technological innovation progress in addition to general economic influence. In the past, our operations were impacted by plunge in orders when the electronics and semiconductor markets declined. Even though we expect the electronics market will expand in the medium-term led by smaller sized products with multi-functions and rapidly developing automotive components, our operations may be adversely affected in case that the growth of the electronics market slows down due to influences of general economy or cyclical slump of the semiconductor market. 2. Response to technological innovation Amid the rapidly changing market requiring quick adjustment and sustainable growth, MARUWA group aims to increase our corporate values by enhancing profitability and growth, promoting product development in new areas with integration of our developed core technologies For this purpose, we believe it is important to recruit necessary personnel and train employees. In principle, MARUWA group conducts technological development in response to market needs, and will keep developing new products in the future. In case, however, we fail to catch up with development speed the market requires and to enhance production capacity, our operations may be affected along with the drop of our market shares 3. Product cycle in the electronic components market (risks of inventories at the market) In electronics markets, new products are constantly supplied supported by continuous technological innovation. Especially, when demands for new products with non-conventional functions are heightened in a full scale, orders rush temporarily due to competition for components among set makers. However, overestimation for demands among those set makers may cause an excess of inventories supply in the markets and saturation of the markets. In such market environment, our group business operations may be affected. 4. Regulations for environmental protection Various regulations are applied to us about the usage, storage, destruction and disposal of chemical products used in manufacturing processes. We have never been complaint regarding environmental regulations, and we believe that we comply with currently applicable environmental law and regulations. In case, however, that we are imposed any compensation or fine regarding a delay in response to future tightening of regulations and forced to halt production or terminate businesses, that we are required a large amount of expenditure for equipment or other expenses, and that we are accused of failing to comply with regulations for the usage, control and disposal of hazardous materials, operating results of the group may be impacted. 5. Risks on a growth strategy through M&A MARUWA group focuses on M&A (merger, acquisition and affiliation of businesses) as a part of our growth strategy. Regarding the cases which we were involved, acquired businesses were improved into revenue sources relatively in a short period with intensive investment in personnel and materials after M&A, following careful preliminary assessment. In the future, we are also planning on expanding business areas and exploring new fields, continuously carrying on M &A. Future M&A, however, may not be linked to the resources of profits unlike our past M&A cases. In case that restructuring at acquired businesses is prolonged or operating costs are mounted, the group's operating results and financial condition may be impacted. 6. Reliance on material suppliers For ceramics production, we purchase low materials such as alumina from several low material refining companies outside MARUWA group. Although we have ensured supply by appropriately increasing a number of trading suppliers according to materials price trend or our production volume, there is no guarantee that we will never have shortage of materials. The shortage of materials may cause escalating of materials prices, slowdown of supply, or increase of materials costs at our group, consequently affecting operating results and financial condition of the group. 7. Dependence on key persons The future growth of MARUWA group highly depends on key figures such as competent researchers or engineers since we mainly engage in manufacturing of electronic materials and components in rapid technological innovation. Therefore, it is essential for the management to ensure those core figures and to train them; otherwise, the future growth and operating results of the group may be impacted. On the other hand, active employment of highly capable or experienced engineers may largely increase recruitment and labor costs, influencing our operating results and financial status. 8. Violations of intellectual property rights of other companies MARUWA group aggressively promotes the development of new products, and prepare against the risks of violations at research and development with full preliminary research about intellectual property rights held by other companies. If we become an object of a suit for the fact of violations happened beyond our control, the group's business results and financial condition may be influenced. 9. Exchange rate fluctuations MARUWA group trades in foreign currency including U.S. dollar, Euro or Malaysia ringgit other than in yen. Also, we hold production and sales sites around the world, and some items on consolidated financial statements are converted into yen from originally traded foreign currency. Consequently, at the time of consolidation of financial statements, conversion into yen may affect the results of overseas companies of the group. MARUWA uses foreign exchange forward contracts if necessary to manage exposures resulting from fluctuations in foreign currency exchange, but it is impossible to avoid all the influences of foreign currency exchange. Therefore, our operating results may be affected by the fluctuations of foreign currency exchange. 10. Political and economic situations in Malaysia Maruwa (Malaysia) Sdn.Bhd., a 100% owned consolidated subsidiary of MARUWA, produces and sells products of Circuit Ceramics and Machinery Ceramics divisions, consisting of 19.3% of total sales for the first half ended in September 2006. Since there are instability factors in Malaysian political situation because of being a multiethnic state, future political conditions and financial instability may influence our operating results in case that there are difficulty for the Malaysian subsidiary to continue its operations. 11. Dependence on public works The lighting equipment business largely depends on public projects. It is a trend for public works in Japan to be focused on efficient projects such as for major/core cities, sightseeing cities matched with a national plan for promoting sightseeing, and development of central urban areas fit for an aging society, shifting from conventional pork-barrel projects. Compensating for this change of public works, MARUWA has promoted sales expansion and product development; however, our business results may be affected in case that the proceeding of public project delays due to various factors. 12. Product liability MARUWA group are making full efforts to ensure optimal quality suited for characteristics of products. However, in the event of unexpected quality problem, operating results of the group may be significantly affected. Consolidated Balance Sheet JPY million USD thousand As of 30 September As of 30 Change As of 31st Change As of 30 September March September 2006 2005 2006 2006 ASSETS Current assets: Cash & deposits 7,247 7,403 (156) 7,899 (652) 61,467 Notes and accounts 6,542 5,719 823 7,003 (461) 55,488 receivable, trade Inventories 3,080 2,723 357 2,869 211 26,124 Other current assets 667 448 219 834 (167) 5,657 Allowance for (9) (7) (2) (17) 8 (76) doubtful accounts Total current assets 17,527 16,286 1,241 18,588 (1,061) 148,660 Fixed assets: (Property, plant & equipment) Land 3,454 3,246 208 3,412 42 29,296 Building & 3,842 3,991 (149) 3,969 (127) 32,587 structures Machinery & 4,132 3,917 215 3,949 183 35,047 equipments Construction in 298 134 164 152 146 2,528 progress Other 647 563 84 605 42 5,487 Net property, plant 12,373 11,851 522 12,087 286 104,945 & equipment (Investment & other assets) Investment 749 809 (60) 784 (35) 6,353 securities Other 1,847 1,592 255 1,585 262 15,665 Total investments & 2,596 2,401 195 2,369 227 22,018 other assets Total fixed assets 14,969 14,252 717 14,456 513 126,963 Total assets 32,496 30,538 1,958 33,044 (548) 275,623 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes & accounts 1,639 1,403 236 2,590 (951) 13,902 payable, trade Accrued bonus 344 233 111 334 10 2,918 Other current 2,149 1,959 190 2,057 92 18,227 liabilities Total current 4,132 3,595 537 4,981 (849) 35,047 liabilities Long-term liabilities: Long-term debt 114 261 (147) 187 (73) 967 Accrued pension & 177 322 (145) 300 (123) 1,501 severance costs Other 1,036 1,088 (52) 1,019 17 8,787 Total long-term 1,327 1,671 (344) 1,506 (179) 11,255 liabilities Total liabilities 5,459 5,266 193 6,487 (1,028) 46,302 JPY million USD thousand As of 30 September As of 30 Change As of 31st Change As of 30 September March September 2006 2005 2006 2006 Shareholders' equity: Common stock, no par 6,710 6,683 27 6,710 -- 56,913 value Capital surplus 9,747 9,735 12 9,747 -- 82,672 Retained earnings 10,954 9,768 1,186 10,522 432 92,909 Net unrealized gains 0 44 (44) 38 (38) 0 (losses) on available-for-sale securities Foreign currency (143) (680) 537 (206) 63 (1,213) translation adjustment Advance on 1 8 (7) -- 1 8 subscription of own shares Treasury stock, at (232) (286) 54 (254) 22 (1,968) cost Total shareholders' 27,037 25,272 1,765 26,557 480 229,321 equity Total liabilities & 32,496 30,538 1,958 33,044 (548) 275,623 shareholders' equity Consolidated Statements of Income JPY million USD thousand For 6-month period For 6-month Change For year ended For 6-month period period 1 Apr. - 30 Sept. 1 Apr. - 30 31st March 1 Apr. - 30 Sept. Sept. 2006 2005 2006 2006 Net sales 9,763 9,005 758 20,278 82,807 Cost of sales 6,919 6,342 577 14,494 58,685 Gross profit 2,844 2,663 181 5,784 24,122 Selling, general & 2,022 1,945 77 4,091 17,150 administrative expenses Operating income 822 718 104 1,693 6,972 Other income (expenses): Interest & dividend 22 18 4 35 187 income Interest expenses (3) (4) 1 (8) (25) Foreign exchange gain 41 (70) 111 (158) 348 (loss), net Other, net 90 (115) 205 107 762 Other income, net 150 (171) 321 (24) 1,272 Income before income 972 547 425 1,669 8,244 taxes Income taxes: Current 331 97 234 299 2,807 Deferred 10 168 (158) 235 85 341 265 76 534 2,892 Net income 631 282 349 1,135 5,352 Consolidated Statements of Shareholders' Equity JPY million Common Capital Retained Net unrealized Foreign Treasury Advance on Total stock surplus earnings gains(losses) on currency stock subscription shareholders' available-for-sale translation of own equity securities adjustment shares Balance at 31 6,710 9,747 10,522 38 (206) (254) -- 26,557 March 2006 Net income 631 631 Cash dividends (131) (131) Directors' bonus (5) (5) Decrease on new (60) (60) consolidation Change in net (38) (38) unrealized gains on available-for- sale securities Translation 63 63 adjustment Advance on 1 1 subscription of own shares Changes in (3) 22 19 treasury stock Balance at 30 6,710 9,747 10,954 0 (143) (232) 1 27,037 September 2006 USD thousand Common Capital Retained Net unrealized Foreign Treasury Advance on Total stock surplus earnings gains(losses) on currency stock subscription shareholders' available-for-sale translation of own equity securities adjustment shares Balance at 31 56,913 82,672 89,245 321 (1,747) (2,154) -- 225,250 March 2006 Net income 5,352 5,352 Cash dividends (1,111) (1,111) Directorsf bonus (42) (42) Decrease on new (510) (510) consolidation Change in net (321) (321) unrealized gains on available-for- sale securities Translation 534 534 adjustment Advance on 8 8 subscription of own shares Changes in (25) 186 161 treasury stock Balance at 30 56,913 82,672 92,909 0 (1,213) (1,968) 8 229,321 September 2006 Consolidated Statement of Cash Flows JPY million USD thousand For 6-month period For 6-month For year For 6-month period ended period 1 Apr. - 30 Sept. 1 Apr. - 30 Change 31st March 1 Apr. - 30 Sept. Sept. 2006 2005 2006 2006 Operating activities: Income before income 972 547 425 1,669 8,244 taxes Adjustments for: Depreciation 805 756 49 1,614 6,828 Amortization of (107) (107) -- (214) (908) consolidation goodwill Increase (decrease) in (9) (4) (5) 7 (76) allowance for doubtful accounts Increase(decrease) in (300) (856) 556 (878) (2,545) accrued pension & severance costs Loss (gain) on sales of -- -- -- (146) -- investment securities Loss on disposal of 55 79 (24) 140 466 property, plant & equipment Interest & dividends income (22) (18) (4) (39) (187) Foreign exchange (gain) (35) 56 (91) 159 (297) loss (Increase) decrease in 610 903 (293) (303) 5,174 notes & accounts receivable (Increase) decrease in (143) 82 (225) (23) (1,213) inventories Increase (decrease) in (1,081) (1,416) 335 (250) (9,169) accounts payable Other 267 458 (191) 389 2,267 Sub total 1,012 480 532 2,125 8,584 Interest & dividend income 21 17 4 38 178 received Interest expenses paid (3) (4) 1 (8) (25) Income taxes paid (242) (70) (172) (119) (2,053) Net cash provided by 788 423 365 2,036 6,684 operating activities Investment activities: Payments for purchase of (1,023) (466) (557) (1,452) (8,677) property, plant & equipment Proceeds from sales of 165 8 157 78 1,399 property, plant & equipment Payments for disposal of -- (46) 46 (47) -- property, plant & equipment Payments for purchase of (198) (59) (139) (309) (1,679) investment securities Proceeds from sales of -- 5 (5) 163 -- investment securities Proceeds from purchase of -- 358 (358) 358 -- stocks of subsidiaries Payments for purchase of (67) -- (67) (23) (568) stocks of subsidiaries Loan receivable (286) -- (286) -- (2,426) Increase in intangible fixed (4) (10) 6 (29) (34) assets Other (12) 29 (41) 27 (102) Net cash used in (1,425) (181) (1,244) (1,234) (12,087) investing activities JPY million USD thousand For 6-month period For 6-month For year For 6-month period ended period 1 Apr. - 30 Sept. 1 Apr. - 30 Change 31st March 1 Apr. - 30 Sept. Sept. 2006 2005 2006 2006 Financing activities: Payments of long-term (74) (74) -- (147) (628) debt Proceeds from issue of -- -- -- 52 -- new shares Cash dividends paid (132) (81) (51) (180) (1,111) Sales of treasury stock 23 311 (288) 349 195 Advance on subscription 1 8 (7) -- 0 of own shares Purchase of treasury (3) 0 (3) (23) (25) stock Net cash provided by (185) 164 (349) 51 (1,569) (used in) financing activities Effect of exchange rate 55 60 (5) 111 466 changes on cash & cash equivalents Net increase (decrease) (767) 466 (1,233) 964 (6,506) in cash & cash equivalents Cash and cash 7,899 6,935 964 6,935 66,997 equivalents at beginning of year Increase in cash & cash 94 -- -- -- 798 equivalents on new consolidation Cash and cash 7,226 7,401 (175) 7,899 61,289 equivalents at end of year Segment Information (1) Consolidated business segment information JPY million JPY million USD thousand For 6-month For 6-month For year ended For 6-month period period period 1 Apr. - 30 Sept. 1 Apr. - 30 Sept. 31 March 1 Apr. - 30 Sept. 2006 2005 2006 2006 Ceramic Components: Net sales 8,843 8,299 16,628 75,004 Operating expenses 7,549 7,101 14,394 64,029 Operating income 1,294 1,198 2,234 10,975 Lighting Equipment: Net sales 920 706 3,650 7,803 Operating expenses 1,044 950 3,677 8,855 Operating income (124) (244) (27) (1,052) Total: Net sales 9,763 9,005 20,278 82,807 Operating expenses 8,593 8,051 18,071 72,884 Operating income 1,170 954 2,207 9,923 Elimination: Net sales -- -- -- -- Operating expenses 348 236 514 2,951 Operating income (348) (236) (514) (2,951) Consolidated: Net sales 9,763 9,005 20,278 82,807 Operating expenses 8,941 8,287 18,585 75,835 Operating income 822 718 1,693 6,972 (2) Consolidated geographic segment information JPY million JPY million USD thousand For 6-month For 6-month For year ended For 6-month period period period 1 Apr. - 30 Sept. 1 Apr. - 30 Sept. 31 March 1 Apr. - 30 Sept. 2006 2005 2006 2006 JAPAN Net sales: Unaffiliated customers 6,992 6,991 16,170 59,304 Intersegment 904 355 830 7,668 Total 7,896 7,346 17,000 66,972 Operating cost 7,122 6,685 15,354 60,407 Operating income 774 661 1,646 6,565 (loss) ASIA Net sales: Unaffiliated customers 1,994 1,767 3,528 16,913 Intersegment 745 621 1,349 6,319 Total 2,739 2,388 4,877 23,232 Operating cost 2,309 1,987 4,206 19,585 Operating income 430 401 671 3,647 (loss) JPY million JPY million USD thousand For 6-month For 6-month For year ended For 6-month period period period 1 Apr. - 30 Sept. 1 Apr. - 30 Sept. 31 March 1 Apr. - 30 Sept. 2006 2005 2006 2006 EUROPE and AMERICA Net sales: Unaffiliated 777 247 579 6,590 customers Intersegment 1 1 2 8 Total 778 248 581 6,598 Operating cost 743 284 617 6,301 Operating income 35 (36) (36) 297 (loss) TOTAL Net sales: Unaffiliated 9,763 9,005 20,278 82,807 customers Intersegment 1,650 977 2,181 13,995 Total 11,413 9,982 22,459 96,802 Operating cost 10,174 8,956 20,177 86,293 Operating income 1,239 1,026 2,282 10,509 (loss) ELIMINATION Net sales: Total (1,650) (977) (2,181) (13,995) Operating cost (1,233) (669) (1,592) (10,458) Operating income (417) (308) (589) (3,537) (loss) CONSOLIDATED Net sales: Total 9,763 9,005 20,278 82,807 Operating cost 8,941 8,287 18,585 75,835 Operating income 822 718 1,693 6,972 (loss) (3) Net overseas sales by customer's geographic location JPY million JPY million USD thousand For 6-month For 6-month For year ended For 6-month period period period 1 Apr. - 30 Sept. 1 Apr. - 30 Sept. 31st March 1 Apr. - 30 Sept. 2006 2005 2006 2006 Overseas sales: Asia 3,240 3,055 6,376 27,481 Europe 320 200 375 2,714 Others 316 217 495 2,680 Total 3,876 3,472 7,246 32,875 Consolidated net 9,763 9,005 20,278 82,807 sales % of consolidated net sales: Asia 33.2% 33.9% 65.3% Europe 3.3% 2.2% 3.8% Others 3.2% 2.5% 5.1% Total 39.7% 38.6% 74.2% *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 *Overseas sales indicate net sales of the Company and its subsidiaries to customers outside Japan. This information is provided by RNS The company news service from the London Stock Exchange
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