The economic climate in the fiscal year ended in March 31, 2012 was quite severe. The Japanese economy was sluggish due to slowing economic activity in advanced countries and concerns over financial stability in Europe, not to mention the aftereffects of the Great East Japan Earthquake. In addition to these macroeconomic factors, the TDK Group's results were directly affected by the earthquake as well as flooding that hit Thailand.
Results in the electronics industry as a whole varied greatly depending on the set (final product). Production was up for mobile devices, particularly smartphones, along with hybrid electric vehicles and electric vehicles. In contrast, production of flat-panel televisions and PCs remained flat, while production of hard disk drives (HDDs) fell due to damage from the flooding in Thailand and was lower than expected.
Under such market conditions, TDK did well in rechargeable batteries for mobile devices but our sales in magnetic heads for HDDs dropped in step with a fall in production in the HDD market, causing sales to drop significantly in our Magnetic Application Products business. Sales were also stagnant in our Passive Components business due in part to a slowdown in the home information appliance industry, as well as to production adjustments among some major clients. As a result, our consolidated net sales for the year ended March 31, 2012 were 814.5 billion yen (down 6.6% year-on-year), with operating income of 18.7 billion yen (down 70.9% year-on-year), and a current term net loss of 2.5 billion yen.
In an effort to shore up our operating base we have already begun to take measures to deal with unprofitable businesses, sell off idle properties, and optimize our business locations and personnel system. Also, to boost profits we are aggressively implementing a business structure reform plan.
TDK has set two categories as areas for future growth, in which we will aggressively develop markets: Next-generation information and communications; and Energy-related.
In Next-generation information and communications, which is experiencing growth particularly in cloud computing, we plan to expand sales of storage-related products. Greater storage will be needed as data centers proliferate in response to more widespread use of smartphones and tablet devices. We forecast increasing demand especially for HDD heads as hard disk drives remain the ideal medium for storing large volumes of data.
TDK employs advanced technologies to develop and supply products such as high-capacity batteries and high-efficiency power supplies for which there is strong demand in Energy-related markets.
In research and development, TDK has long been a pioneer in magnetics and we continue to do groundbreaking work in magnetic materials. Specifically, we are now commercializing magnets that use only half the amount of dysprosium, and with further R&D effort we will be able to produce magnets that are completely free of rare earth metals. Similarly, we intend to make further refinements to process technologies that are a particular strength of TDK to accelerate our growth strategy.
We expect to see results from these efforts in fiscal 2013 ending in March 31, 2013, such as a 16.5 billion yen benefit from restructuring our businesses, with a consolidated net sales forecast of 900 billion yen, operating income of 57 billion yen, and a net profit of 40 billion yen.
We recognize that achieving growth in corporate value over the long term ultimately translates into higher shareholder value. In line with this, TDK's fundamental policy is to work to consistently increase dividends through growth in earnings per share. We therefore endeavor to reinvest profits into business activities to the greatest degree possible, and then base our dividends on a comprehensive evaluation. This approach takes into account consolidated-base return on equity (ROE) and dividend on equity (DOE) standards, changes to the business environment, and other factors.
Based on this policy, we have set the year-end dividend for the fiscal year ended March 31, 2012 to 40 yen per share. Together with the interim dividend of 40 yen per share paid in December 2011, the yearly dividend for the current term amounts to 80 yen per share. We anticipate reaching 90 yen per share as the yearly dividend for the year ending March 31, 2013.
TDK will continue striving company-wide to expand corporate value over the long term and steadily increase the dividend. In this endeavor we count on your continued support as shareholders.
July 2012
TDK Corporation
President and CEO
Takehiro Kamigama
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