Consolidated Results for the Full Year Ended March 31, 2008

Q&A summary

Click on the appropriate question to view the answer.

Information-related equipment

Q1
Can you give me an idea of the sales trends for inkjet printers by region in the fourth quarter?
A
The overall market was either flat or down year on year in each region of the world. Sales continued to be steady in Japan, although we felt the impact of aggressive pricing from a competitor. In North America, we were able to remain in the second tier of manufacturers, while in Europe we maintained our position among the second tier manufacturers by increasing share following the introduction of new products in the third quarter.
Q2
Although you managed to boost inkjet printer sales in the fourth quarter, the figures suggest you didn't increase sales promotion expenditure by all that much.
A
That is the case if you simply compare the figures with those for the previous year. However, sales promotion expenditure did increase as a proportion of net sales. Against declining net sales, which partly stemmed from our efforts to aggressively promote even low end products to generate future consumables sales, sales promotion expenditure increased in the fourth quarter.
Q3
Am I right to believe that price erosion in inkjet printers is easing, and that the structure of the inkjet printer business is improving as a result of your cost cutting efforts? Is it possible to say that your inkjet printer business has fully recovered?
A
We think the business structure is improving. Although aided by foreign exchange rates, in the fiscal year ended March 2008, we were able to achieve sales of 15 million units without suffering a decline in profitability, and were able to report earnings in excess of plan.
Q4
Is it possible to replace office laser printers with inkjets?
A
We don't think it is possible to completely replace office laser printers with inkjet right now. However, by emphasizing the environmental advantages of inkjet, for example, we think it is possible to boost the position of inkjet in the market.
Q5
Why do you forecast consumables net sales to decline in the fiscal year ended March 2009?
A
While we do expect to boost sales volumes against the previous year, we believe net sales will suffer from a higher yen and lower ASPs.
Q6
While your competitors are forecasting increased sales of consumables, you are forecasting lower net sales. Is there something fundamentally different among Epson and its competitors?
A
Epson strategically reduced sales of hardware in the fiscal year ended March 2007, and then aggressively sought to boost sales the following year. We are forecasting the situation you describe as a result of our strategy, which we believe has temporarily impacted the total number of machines in field.

Electronic devices

Q7
Can you give me a breakdown of amorphous silicon TFT LCD sales by application?
A
Although we can't give precise figures, the proportion of sales for non-handset applications in the fiscal year ended March 2008 increased compared to the previous year. We believe the proportion will remain largely unchanged in the fiscal year ending March 2009.
Q8
Can you give me an idea of the costs associated with streamlining your display business manufacturing sites, and also of the effects of the subsequent reduction in fixed costs?
A
We don't anticipate a significant extraordinary loss. Wherever possible, we plan to use the facilities in other parts of the Group. We expect the effects of the fixed cost reduction to be in the region of several billion yen.
Q9
Your display business continues to post significant losses, and it looks difficult to anticipate profitability going forward. Do you plan to terminate or sell off the business?
A
At present, our first priority is to achieve break even by driving the structural reforms mentioned in the presentation. We believe our displays are technologically superior in terms of wide-viewing angles and response speeds, and provide us with the potential to expand into new non-handset applications.
Q10
Can you give me an image of the profit picture for the small- and medium-sized display business from the fiscal year ending March 2009 onwards?
A
Our first priority is to break even on an operating profit level.

General

Q11
What is the background to the extraordinary loss you recorded in the fourth quarter?
A
The main portion of the extraordinary loss is associated with idle assets at the Chitose Plant, where we have production lines for high-temperature polysilicon (HTPS) TFT panels.
Q12
In the full-year figures for fiscal year ending March 2008, you dramatically scaled back capital expenditure compared to the previous forecast. Why wasn't there any significant reduction in depreciation and amortization?
A
The reason for this is a change in the tax system relating to depreciation and amortization.
Q13
At the third-quarter results announcement, it looked as if full-year profitability would be significantly in excess of plan. However, the actual figures didn't go as high as many people thought. Were you down in the fourth quarter? If so, what were the causes of this?
A
With an eye to future consumables sales, we put a lot of emphasis on achieving our sales target of 15 million inkjet printer units. As a result, we took various measures in the fourth quarter aimed at achieving this target. Accordingly, the proportion of hardware out of total net sales increased, and profitability declined due to the additional costs incurred. We largely anticipated this situation.
Q14
Why do you forecast operating profit to be heavily weighted towards the second half of the fiscal year ending March 2009? Are you anticipating the effects of foreign exchange or other macroeconomic factors?
A
We don't expect any change to the usual seasonable trends in which profitability, especially in the printer business, is weighted towards the selling season in the second half. In the fiscal year ending March 2009, we are planning an increase in sales volumes, which will generate extra manufacturing costs in the first half. It is noticeable that we will recoup these costs in the second half.
Q15
What will be your management priorities going forward? (Question to Managing Director Minoru Usui, who has been nominated as the next president from June 2008)
A
I would like to boost net sales and profitability by creating attractive new products based on unique Epson technologies.