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- 01:03:05.7 My first question is related to your operating income guidance of ￥68 billion for FY2017 and the roadmap to achieving ￥100 billion in FY2020. I believe you are expecting to see more growth at the OP level in subsequent years. However, your earlier comments about expenses suggests annual R&D expenses likely to increase by more than ￥10 billion annually and to remain at an elevated level for the next few years. Can you provide more specifics about what will drive profit growth given the higher levels of spending?
- 01:03:45.6 First and foremost, achieving sales of ￥1 trillion will be the largest contributor to higher profits. In addition, we will focus on growing the high margin businesses of IAB and HCB so the increased contribution from these segments is also a factor. Assuming that we only match our current forecast for sales in FY2017, by implication, it means that we will need to grow sales in the remaining three years by 7-8% annually. The key will be how successful we are in achieving the topline growth. Internally, we are already executing on measures to make this possible. If we can achieve ￥1 trillion in sales on the back of growth in IAB and HCB, then we should be able to achieve the earnings targets.
- 01:04:37.2 Do you have a sense for what the OPMs for IAB and HCB would be when you achieve the ￥1 trillion target?
- 01:04:45.1 In FY2017, IAB OPM is expected to be around 16% and HCB 9%. Although it will depend on the level of investments spent within SG&A, if we can continue to improve profitability at IAB, it is not unreasonable to think that we could achieve an OPM of close to 20%. Some of our peers generate margins around this level. I believe that HCB has the latent ability to generate an OPM of more than 10%. We will work to achieve these levels over the next four years.
- 01:05:20.3 Thank you. My second question is about the Other segment. For FY2017, you expect to remain in the red and are projecting sales of ￥60 billion. Under the medium-term plan, in the final year, you expect this segment to generate sales of only ￥40 billion. Can you talk about why this segment will remain in the red this year, as well as your medium-term outlook?
- 01:05:48.2 (Ohue) The major reason why we expect to remain in slightly the red in FY2017 is because the restructuring of the Micro Device business is a work in progress. Obviously, we are committed to executing on our restructuring plan. We are also optimizing our Backlight business. Of the businesses included in the Other segment, we aim to grow topline for the Environmental Solutions business but our priority for the Micro Device and Backlight businesses is to address profitability. (Yamada) Basically, we will be allocating management resources to the four domains I talked about earlier. For businesses in other domains, such as those included in the Other segment, we are not expecting growth, with the exception of the Environmental Solutions business. Instead, our plan is to take a more selective approach to businesses where profitability is challenged.
- 01:06:49.1 In other words, you do not expect much improvement in profits here in FY2017? Is this why you are projecting operating losses to only narrow slightly from last fiscal year’s ￥1.8 billion to ￥1 billion?
- 01:06:55.7 This fiscal year, we are still executing on restructuring measures in this segment.
- 01:06:58.5 In other words, there will be restructuring expenses that depress profits in FY2017?
- 01:07:00.5 Yes.
- 01:07:02.0 Thank you.
- 01:07:04.6 Next, the person in the second row.
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