The following includes questions and answers at the conference for the financial results for Third Quarter of the Year Ending March 31, 2012.
Q. What can you tell about capital investment aimed at recovery in the wake of the floods in Thailand and insurance coverage?
A. An assessment of the flood damage was undertaken immediately after the water had been drained from the area surrounding the production factories in the end of November last year. The results of the assessment revealed the need for a capital injection in the vicinity of 30 billion yen in order to replace the necessary production equipment and to make repairs to infrastructure, such as buildings etc. Insurance payments settled by the insurance company to cover some of this cost will be received over the current fiscal period and into the following year.
Q. What impact will the floods in Thailand have on business performance over the coming fiscal period?
A. The majority of losses will be finalized in the current fiscal period and although it is possible that compensation benefits to be paid to employees temporarily out of work will reach several million yen, we don't predict that the floods will have a significant impact on business performance in the coming fiscal period. Further, we plan to have digital SLR camera production back to full production following April this year, which will eliminate the loss of sales due to reduced production.
Precision Equipment Business
Q. What is the outlook for the market of IC/LCD steppers and scanners?
A. Although, in November last year we predicted a reduction by about 30 - 40% in the size of the market in 2012 as a result of reduced capital investment in the IC steppers and scanners market, there is now light at the end of the tunnel and we have adjusted this forecast to a reduction somewhere in the vicinity of 20-30%. In regards to the LCD steppers and scanners market, a fall in capital investment for smartphone panels, an area which has been performing strongly to date, has seen us maintain our forecast of a reduction in market size in 2012 of approximately 40% compared to the market of 2011.
Q. How are Precision Equipment business earnings?
A. A fall in demand for large-size panels saw sales for LCD steppers and scanners for the current quarter shift from 7th generation equipment and above to equipment for the production of mid-sized and smaller panels compared to the same quarter from the previous fiscal year. Mainly because of this reason, sales fell slightly by 4% in comparison to the same period from the previous year. However, efforts to improve our earnings structure such as shortening lead time which has been continuously implemented since the first half of the year and a reduction in the initial cost of the NSR-S620D have resulted in an increase in operating income more double that compared to the same period from the previous fiscal year. In terms of forecasts for the remainder of the current period, although we have made a downward adjustment of 5 billion yen based on a pushout of one unit in the sale of ArF immersion scanners, we have maintained our current forecasts for operating income based on the ongoing impact of activities to improve our earnings structure.
Q. What are you doing to enhance the competitiveness of your IC steppers and scanners?
A. We have continued to make steady improvements in the area of wafer throughput and operating rates for the NSR-S620D ArF immersion scanner. The newly released NSR-S621D also takes over the capability of stable operation from the NSR-S620D while also boasting further improved overlay accuracy. This model, combined with our newly launched ArF scanner, the NSR-S320F, will help enhance our product competitiveness and our product lineup to make way for an increase in product orders.
Imaging Products Business
Q. How are Imaging Products business earnings?
A. The 3Q period saw a drop in the production and sales of digital SLR cameras and interchangeable lenses as a result of the damage caused by the recent floods in Thailand. On the other hand, sales of the newly released the Nikon 1 series and Nikon 1 interchangeable lenses have been robust. Despite a reduction in the market for compact digital cameras, we have been channeling energy into expanding sales in this area, and as a result, achieved record sales for the quarterly period. Although sales fell short of the same quarter from the previous fiscal year, operating income ended in the black. While sales for the Nikon 1 series were robust, the impact of the damage caused by the floods in Thailand has had a significant on sales of digital SLR cameras and as a result, we have maintained our annual sales forecasts for digital cameras with interchangeable lenses. In consideration of strong sales for interchangeable lenses and compact digital cameras over the 3Q period, we have made an upward adjustment of annual unit sales of these products. Based on factors including an increase in annual sales units, we have made an upward adjustment of sales and operating income for the current fiscal period of 10 billion yen and 5 billion yen respectively.
Q. What can you tell about compact digital camera sales?
A. We have implemented marketing strategies featuring advertisements and promotions designed to enhance the commercial value of products and have worked on improving our development, marketing and sales capacity all together. In consequence of these efforts, despite negative market growth in all regions compared to the same period from the previous fiscal year, Nikon consecutively maintained top market share in Europe from the first half of the year and also closed narrow margin to top market share in the United States over 2011. In regards to average prices, although shipping prices are falling across the entire market, Nikon has increased the average price of its compact digital camera range.
Q. What can you tell about the sales of the Nikon 1 series?
A. Although we received some negative feedback in connection with the size of the image sensor for Nikon 1 at the time of launch, as customers experienced the quality of the AF response time, movie recording, picture quality and body size, the Nikon 1 has been highly appreciated. As a result, the J1 model achieved top market share in the United States, from 11 countries across Europe and in China for the month of December and we believe this product will trigger steady demand in so-called mirrorless interchangeable lens camera market. We plan to continue to expand on this market by adding more attractive features and building on our product lineup in the future.