Review of Operations
In the automobile industry during the fiscal year ended March 31, 2016, Japan recorded a decline in new car sales for the second consecutive year. This was due to factors including an increase in the vehicle tax on kei cars. In the United States, automobile sales increased for the sixth consecutive year, and a recovery trend was also seen in Europe. In China, however, sales growth slowed, and sales also fell in many emerging markets.
In this market environment, the Clarion Group is committed to transforming its business portfolio, as we strengthen the Safety & Information business (centered on automatic driving and parking) and the Connectivity business (enabling customers to “connect”) as pillars of our future growth. At the same time, we will further shift our business away from its previous focus on Japan and toward overseas markets. In this way, the Clarion Group has worked to bolster its global business management.
Although sales conditions in Japan have been challenging, for the period ended March 2016 the Clarion Group increased net sales by 8.9% year-on-year to ¥216,227 million due to factors including the yen’s depreciation compared with the previous year, expansion of OEM (original equipment manufacturer) markets in the Americas and Asia, and contributions from new products.
In addition, operating income increased 56.4% year-on-year to ¥11,551 million as a result of improvement in the capacity utilization rate due to higher revenues, as well as ongoing cost reductions. Pretax net income increased 71.2% year-on-year to ¥10,495 million, and net income attributable to parent company owners increased 58.8% year-on-year to ¥7,743 million. Thus profit growth was achieved at every level.
Results by geographic segment (excluding intra-Group transactions) are as follows.
With the slump in new vehicle sales in the domestic market and delayed market recovery, net sales in this segment decreased 12.8% year-on-year to ¥84,119 million. However, operating income increased 97.7% year-on-year to ¥4,232 million due to factors including the transfer of production from overseas to Japan in response to the weaker yen and companywide cost-cutting activities.
Net sales in this segment increased 47.6% year-on-year to ¥90,853 million and operating income rose 119.2% to ¥3,196 million due to factors including strong vehicle sales in the U.S. market, the launch of new products for OEM markets, and the expansion of EMS (electronic manufacturing services) by a subsidiary in Latin America.
Despite continued strong vehicle sales in Europe, net sales in this segment decreased 13.9% year-on-year to ¥13,845 million, in part because the year was an off year in terms of model replacements. However, despite a fall in net sales, operating income increased 6.8% year-on-year to ¥573 million as a result of ongoing cost reductions.
■ Asia and Australia
Net sales in this segment increased 11.8% year-on-year to ¥27,408 million and operating income rose 11.8% to ¥3,640 million due to factors including increased sales to the OEM market in Thailand and improvement in the capacity utilization rate resulting from increased production for the North American market.
The figures contained in this report with respect to Clarion’s plans and strategies and other statements that are not historical facts are forward-looking statements about the future performance of Clarion. Such statements are based on management’s assumptions and beliefs in light of the information currently available to it and involve risks and uncertainties. Actual results may differ from those in the forward-looking statements as a result of various factors. Potential risks and uncertainties include, without limitation, general economic conditions in Clarion’s market.
Total assets at the fiscal year-end increased ¥1,533 million compared with the previous fiscal year-end to ¥131,031 million. Current assets increased ¥4,037 million compared with the previous fiscal year-end to ¥71,245 million. Non-current assets decreased ¥2,504 million compared with the previous fiscal year-end to ¥59,786 million.
Total liabilities decreased ¥1,327 million compared with the previous fiscal year-end to ¥93,176 million.
The parent company shareholding increased ¥2,865 million compared with the previous fiscal year-end to ¥37,688 million.
Due to the recording of a net profit, retained earnings increased by ¥7,189 million. Accumulated other comprehensive income decreased by ¥4,315 million due to factors including a reduction in conversion differences at foreign operations arising from yen appreciation/dollar depreciation since the previous fiscal year-end.
Net cash from operating activities was an inflow of ¥19,465 million. Although inventories increased, net income, depreciation expenses and amortization of intangible assets were recorded, as well as a decrease in accounts receivable and an increase in accounts payable. Net cash from operating activities in the previous fiscal year was an inflow of ¥13,344 million.
Net cash used in investing activities was ¥10,993 million. This was due mainly to payment for purchases of tangible and intangible assets. Net cash used in investing activities in the previous fiscal year was ¥12,303 million.
Net cash used in financing activities was ¥1,583 million due primarily to payment of dividends and repayment of long-term debt. Net cash used in financing activities in the previous fiscal year was ¥6,908 million.
As a result of these factors, cash and cash equivalents at the end of the year amounted to ¥14,326 million compared with ¥8,257 million at the previous fiscal year-end.
The U.S. economy is maintaining an uptrend and vehicle sales are strong, but the prospects for the European economy are uncertain, and the Chinese economy is lackluster. In Japan, there has been a delayed recovery in vehicle sales and there are concerns about the impact of yen appreciation/dollar depreciation.
Under these circumstances, and setting our eyes on changes in the automotive industry, Clarion will strive to further increase net sales and profits by transforming its business portfolio and strengthening operations in growth fields, focused on safety and information systems and connected products.
Our consolidated earnings forecasts for the full year are set out below.
We have assumed an exchange rate of ¥110/US$ and ¥120/€.
Fiscal year ending March 31, 2017
Net sales ¥200 billion
Adjusted operating income ¥10 billion
Pretax net income ¥9 billion
Net income attributable to parent company owners ¥6.5 billion
Note: The Clarion Group has applied International Financial Reporting Standards (IFRS) since the consolidated financial statements in the Annual Securities Report for the fiscal year ended March 2015.