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Financial Review

Review of Operations

During the consolidated fiscal year ending March 31, 2018, Japan recorded a decline in the sales of passenger cars due to the effects of the final vehicle inspection problem. However, due to strong sales of new light vehicles (kei cars), total vehicle sales increased over the previous year for the second year in a row. As for worldwide automobile sales, although sales in the USA have decreased year on year, they have increased in many countries, including in China, where the sales of SUVs (Sports Utility Vehicles) and new energy vehicles were favorable. In addition, trends in the automobile industry show that innovation through new technologies such as automated vehicles, EV (Electric Vehicles), connected vehicles, and sharing vehicles, continues to push forward, and the competition within this swell of innovation continues to intensify globally.

Under this market environment, we have been making efforts to "shift business and management resources into growing fields and regions," "reorganize sales and production locations," and "streamline the group workforce" as we work towards our long-held corporate strategy of operating as a "solution provider for in-vehicle information systems," which is formed of the three main strategic pillars of "acceleration of business portfolio transformation," "expansion of business into global markets," and "promotion of business restructuring."

However, while the sales increase in OEM products (produced by a client brand) has been remarkable in Asia and Australia, a decrease in OEM product sales in Japan and the Americas has caused revenues to decrease by 6.0% compared to the previous year to ¥183.056 billion yen.

Regarding profits and losses, although we have been continuing activities to reduce both fixed and variable costs, the drop in revenues has resulted in adjusted operating income of ¥7,353 million yen, a 34.6% decrease compared to the previous year. Fees attributable to the business restructuring implemented throughout the fiscal year cost ¥2,521 million yen and operating income fell by 57.8% year-on-year to ¥4,792 million yen. Income before income taxes decreased 58.9% year-on-year to ¥4,515 million, and net income attributable to parent company stockholders decreased 73.1% year-on-year to ¥2,079 million.

A breakdown of results by segment is as follows. The sales revenues for each segment is recorded by external customer and the earnings of each segment represents operating income.

■ Japan

Domestically within Japan, there has been a decrease in OEM product sales due to the effects of the final vehicle inspection issue, and revenues for this segment have decreased by 18.1% to ¥57,653 million yen when compared to the previous year. Regarding profits and losses, despite efforts to reduce fixed costs and cost price throughout the entire company, we have been unable to compensate for the reductions in revenue and adjusted operating income has dropped by ¥4,202 million yen to ¥1,132 million yen when compared to the previous year. In addition, due to ¥1,696 million yen of costs incurred throughout the year by implementing business restructuring, this amount dropped by ¥6,187 million yen when compared to the previous year, resulting in an operating loss of ¥596 million yen.

■ Americas

In a market environment where automotive sales in the US have fallen to levels less than those of the previous year, the revenues for this segment fell by 8.1% to ¥80,580 million yen when compared to the previous year, mainly because sales of passenger cars, often equipped with our products, fell dramatically. Regarding profits and losses, adjusted operating income increased by 7.6% to ¥2,582 million yen when compared to the previous year due to reductions in fixed costs, improvement in variable costs, etc. For operating earnings, business restructuring, such as the consolidation of locations, which has been implemented throughout the year, has incurred costs of ¥238 million yen, resulting in a small decrease of 0.04% to ¥2,381 million yen when compared to the previous year.

■ Europe

In Europe, we experienced an increase in OEM product sales as automotive sales continue to be favorable there, and revenues for this segment increased by 2.3% to ¥13,635 million yen when compared to the previous year. Regarding profits and losses, adjusted operating income fell by 31.9% to ¥217 million yen when compared to the previous year, and due to the costs related to business restructuring throughout the year, which amounted to ¥463 million yen, this amount fell by ¥410 million yen, resulting in an operating loss of 190 million yen.

■ Asia and Australia

Due to the expansion of business towards domestic car manufacturers in China and a recovery in the sales of OEM products to Asian countries, revenues for this segment increased by 32.8% to ¥31,186 million yen when compared to the previous year. Regarding profits and losses, although adjusted operating income increased by 0.4% to ¥3,162 million yen when compared to the previous year, costs related to business restructuring throughout the year amounted to ¥123 million yen, leading to a 7.7% decrease in operating income to ¥2,947 million yen when compared to the previous year.

* Forward-Looking Statements

Future company plans, strategies and other items contained in this report, or contents related to future results are based on judgments and assumptions in light of information currently available to the company. Judgments and assumptions contain an element of risk and uncertainty, and actual future results may differ considerably, as a result of various factors. Risks and uncertainties include, without limitation, economic conditions and other factors in Clarion’s market.

Financial Position

Total equity at the end of the period was ¥126.755 billion yen, a reduction of ¥2.658 billion yen from the previous fiscal year-end. Of this figure, current equity totaled ¥76.781 billion yen, ¥3.665 billion yen higher than the previous fiscal year-end. Non-current equity totaled ¥49.973 billion yen, ¥6.323 billion yen lower than the previous fiscal year-end.

Total liabilities were ¥81.650 billion yen, ¥3.898 billion yen lower than the previous fiscal year-end.

Shareholder equity from the parent company totaled ¥44.921 billion yen, ¥1.211 billion yen higher than the previous fiscal year-end.

Cash Flows

With regard to cash flow relating to operating activities, there was an increase in accounts receivable and a decrease in payables, but due to the posting of net income, depreciation and amortization, as well as amortization of intangible assets, revenues totaled ¥8,328 million yen (compared with ¥19.964 billion yen in the previous fiscal year).

Net cash used in investing activities was ¥4,811 million. This was due mainly to payment for purchases of tangible and intangible assets and revenues generated from the sale of stocks and bonds, and other financial assets. Net cash used in investing activities in the previous fiscal year was ¥9,003 million.

Net cash used in financing activities was ¥1,826 million due primarily to payment of dividends. Net cash used in financing activities in the previous fiscal year was ¥6,632 million.

As a result of these factors, cash and cash equivalents at the end of the consolidated fiscal year amounted to ¥20.376 billion yen (compared with ¥18.763 billion yen at the previous fiscal year-end).

Outlook for the Next Fiscal Year

Our consolidated earnings forecasts for the full year are set out below. Exchange rates are assumed to be 107 yen to the US dollar and 130 yen to the Euro.

Next consolidated fiscal year (April 01, 2018 to March 31, 2019)
  • Revenues: 165 billion yen
  • Adjusted operating income: 3 billion yen
  • Income before income taxes: 2.4 billion yen
  • Net income attributable to parent company stockholders: 1.7 billion yen

Note: As of 2014, our consolidated financial statements are created according to IFRS (International Financial Reporting Standards).

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