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| As to the outlook for the Japanese economy in fiscal 2010, developments are expected to be patchy in that domestic corporate earnings are likely to improve on the back of improvements in overseas economic trends especially in Asia and other such factors, while there are concerns over downside risks to the economy due to the impact of deflation and the continuation of tough employment conditions.
In the electrical machinery industry, to which the Company belongs, uncertainty is likely to prevail, notwithstanding the uptrend in consumer spending, given that it is expected to take more time for the domestic economy to recover as a whole, according to our analysis.
Meanwhile, in the amusement device market, which is positioned as the main market for the Company’s business, conditions might become harsh especially in the first half of the fiscal year according to our analysis, due to such concerns as: (i) pronounced tendency among customers to be discerning upon introducing pachinko machines (concentration of demand on specific amusement devices) as well as stockpiling of various components (LSI products), etc. already delivered to customers; (ii) continuing low demand for pachislot machines, which decreased as a result of the revision of amusement device regulations in previous years; and (iii) the impact of the commencement of a new implementation scheme for the distribution of second-hand amusement devices scheduled in June 2010 on the demand for new units. In consideration of such market environment, the Company predicts that its annual production of amusement devices for fiscal 2010 might be around 3.8 million units, a decrease of 200,000 from the previous fiscal year.
Based on the above analysis, the Company will strive to promote the sale of high-resolution graphics-rendering LSI products, including products with integrated functions targeted at the amusement devices market. It will also focus its efforts on sales activities to sell about 2.45 million units of graphics-rendering LSI products as a whole (actual sales in fiscal 2009: 2.62 million units) by releasing next-generation mainstay LSI products as soon as possible. For other products targeted at the amusement devices market, sales volume is expected to decrease on the whole due to the anticipated impact of customers’ plans to adopt products with integrated functions, customers’ demand trends and other such factors. In particular, the Company will engage in sales activities to increase the number of companies adopting LED driver LSI products in the future.
Other than the amusement device market, the embedded system market is expected to continue undergoing phased recovery following the completion of the inventory adjustment cycle in the second half of last year. The Company plans to sell around 80,000 units per year, which is more than roughly 30,000 units sold in fiscal 2009.
The Company plans to disburse record-high selling, general and administrative expenses in the amount of 3,240 million yen (up 21.7% year-on-year). The increase in selling, general and administrative expenses in fiscal 2010 is primarily attributable to the accounting of R&D expenditures for “AG4” (next-generation product targeted at the amusement device market) and “AG11” (next-generation graphics-rendering LSI product for embedded systems).
Based on the foregoing analysis, the Company’s forecasts for fiscal 2010 are: net sales of 15,000 million yen (down 3.2% year-on-year), operating income of 4,740 million yen (down 23.7% year-on-year), ordinary income of 4,750 million yen (down 23.7% year-on-year), and net income of 2,930 million yen (down 23.7% year-on-year).
Of note, the Company is currently being sued by Yamaha Corporation for compensatory damages, etc. for alleged patent infringement.
While some matters remain unclear at this point in time, the Company believes there is no such fact of patent infringement and there will be no impact of the lawsuit on fiscal 2010. |
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The 16th term |
Sales ratio |
yoy |
| Net sales |
15,000 |
100% |
-3% |
| Gross profit |
7,980 |
53% |
-10% |
| Operating income |
4,740 |
32% |
-24% |
| Ordinary profit |
4,750 |
32% |
-24% |
| Net profit |
2,930 |
20% |
-24% |
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