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- 00:34:33.7 Thank you for the presentation.
My first question also relates to slide 7. If you were to break out the added value into topline growth and improvements to the added value ratio, is it an even split? A 60-40 split? Can you talk about what drove the improvement in added value? Also, you talked about the impact of restructuring. If you combine the reduction in fixed manufacturing costs and the increase in SG&A, I believe it comes to around ¥1.7 billion. Are expenses down as a result of last fiscal year’s write-downs? Are you having notable success in reducing variable costs? Can you provide a little more color for these two things, please?
- 00:35:27.7 (Oue) With regard to the increase in added value, obviously we have seen a substantial YoY increase in sales. If you do the calculations, you will see that this is a significant factor, as you have probably inferred.
There are three major factors contributing to the improvement in GPM this time around. The first is the strong growth we saw in both IAB and HCB and the resulting improvement in business company mix. Second is the impact of last fiscal year’s restructuring. Also, although sales were up significantly, manufacturing fixed costs did not go up that much. This is the result of both improved productivity and the fact that capacity utilization is now running close to full capacity. These three factors were the major drivers underpinning the improved GPM.
(Nitto) With regard to the impact of restructuring on fixed manufacturing costs, we restructured the backlight business last fiscal year, as previously discussed. In addition to the write-down which had a positive impact, there were also direct cuts to fixed costs, such as a significant reduction of capacity in China, which are also contributing meaningfully to lower fixed manufacturing costs. Please note that I cannot comment on specifics, such as the number of people we let go.
- 00:37:29.7 Understood.
You did not talk about your full-year forecasts this time, which is fine, but if you look at the percentage achievement rate versus your full-year targets, while Q1 sales is 25%, OP, at ¥22.6 billion, is 33%. This implies that you are expecting your OPM to decline relative to the Q1 levels. Should we view this to be a natural consequence of the expected QoQ increases in R&D and SG&A spending which you alluded to in response to a previous question? Or, will your margins fall on changes to product mix as the high-margin smartphone business declines? I do not need specific numbers but can you give us some sort of hint on how we should think about your earnings going forward? This is my second question.
- 00:38:24.9 From the standpoint of costs, we expect fixed costs to increase. In terms of production, as touched upon by Mr. Oue earlier, we are running very close to full capacity on the back of a surge in demand so we will be increasing production capacity. Also, we will see an increase in R&D spending as discussed earlier, particularly in IAB where we will be adding headcount globally for customer-facing SEs in sales roles. I expect these sequential increases will depress margins.
It would be very simple if you could just multiply the Q1 levels by four but it is unlikely to be so simple, in my opinion.
- 00:39:24.3 Thank you.
- 00:39:26.4 Next, the person diagonally behind him, please.