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November 25, 1999
Media Contact:
Matthew Nicholson
PR Dept.
Mitsubishi Electric Corporation
03-3218-2346
Matthew.Nicholson@hq.melco.co.jp
MITSUBISHI ELECTRIC REPORTS
CONSOLIDATED HALF-YEAR RESULTS FOR THE PERIOD OF APRIL 1 - SEPTEMBER
30, 1999
TOKYO, November 25, 1999--Mitsubishi
Electric Corporation today announced its consolidated financial
results for the half-year ended September 30, 1999
During the six month period (April 1 - September
30, 1999), net sales amounted to 1.68 trillion yen, a 6% decrease
from the same period last year. Profits improved compared to the
first half of the previous fiscal year with operating profits at
21.7 billion yen and income before income taxes amounting to 0.5
billion yen. However, a net income loss of 3.3 billion yen was recorded
for the period.
In the first half of the fiscal year, the Japanese
economic climate improved due to investment in public works projects
and supportive policies in areas such as the taxation system. Furthermore,
there was a trend towards recovery in personal consumption and housing
investment. However, private capital expenditure remains inactive
and there is still no improvement in the employment and income environment.
As for overseas, even though fear of inflation has not been completely
wiped out, the U.S. economy is mostly becoming bullish while the
European economy generally continued to expand. In Asia, while the
trend towards business expansion in China was further refined, South
Korea and other countries made rapid business recoveries. As the
economy became increasingly borderless, domestic and overseas market
competition intensified, and prices continued to decline, difficulties
in the management environment intensified
As part of the company's top priority to improve
financial results, efforts have been made to expand the development
and marketing of new products, and increase the number of orders
received. In addition, the company pursued more efficient management
activities and business unit competitiveness to strengthen its group
companies.
Results by Business Segment
Heavy Machinery saw sales decrease by 12%
to 336.7 billion yen but operating profits were at 4.6 billion yen.
There was significant demand on the strength of large orders from
Japan Railways and public railway corporations. However, with restraint
in domestic capital investment and fewer large orders overseas,
power generation sectors, electrical equipment for manufacturers,
public works projects, and building systems operations met decreased
sales which led to an overall decline in sales for this segment.
Industrial Products and Automation Equipment
experienced a decrease in sales of 4% to 298.1 billion yen but operating
profits amounted to 19.0 billion yen. Car audio and automotive electronics
enjoyed an increase mainly due to greater exports of car audio products
and an increase of sales to U.S. compact car manufacturers. However,
excluding growing industries such as semiconductor and LCD manufacturing
devices, sales of factory automation equipment and industrial products
declined due to sluggish demand at home and reduced demand for exports
to the U.S. and Europe causing sales for the entire segment to decline
on a year on year basis
Information, Telecommunications and Electronic
Systems and Devices recorded a decline in sales of 3% to 675.8
billion yen and operating profits were at - 11.3 billion yen. Telecommunications
experienced favorable results due to an increase in demand and scale
for cellular phones and optical submarine systems. Electronic Device
operations also met an increase due to increased demand in LCD monitors
and TFT panels. The computer division, however, met a decrease in
revenue due to the scaling back and restructuring of its operations.
In total, the segment as a whole saw sales figures fall below those
recorded for the same period last year.
Consumer Products saw sales decline by 5%
to 493.7 billion yen with operating profits at 9.3 billion yen.
The audio-visual equipment business met lower sales due to scaling
back and restructuring. The home appliance business, faced with
unseasonable weather and lowered prices, also faced a decline. The
entire segment's sales decreased on a year on year basis.
Annual Consolidated Forecast for Fiscal 2000
(April 1, 1999 - March 31, 2000) In the current unforeseeable
conditions where exchange rates remain unstable and business recovery
is slow, Mitsubishi Electric will further consolidate cost reduction
in fixed costs and procurement costs. The company is also determined
to fully conduct financial improvement measures which include business
structure reform in business units such as semiconductors. Every
effort will be made in order to achieve the profit figures set in
May this year for the entire fiscal year 2000.
The company forecasts the following business results
for its consolidated operations in the fiscal year ending March
31, 2000:
| Net sales: |
3.75 trillion yen |
| Operating Profits: |
40 billion yen |
| Income before income taxes: |
20 billion yen |
| Net income: |
8 billion yen |
CONSOLIDATED HALF-YEAR RESULTS
OF MITSUBISHI ELECTRIC
(UNAUDITED)
April - September, 1999
(in billions of yen)
|
|
(A)
Apr. -- Sept.
1999
|
(B)
Apr. -- Sept.
1998
|
(A)/(B)
(%)
|
Fiscal 1999
(Apr. 1998 -- Mar. 1999)
|
|
Net Sales
|
1,678.7
|
1,793.7
|
94
|
3,794.0
|
|
Income before Income Taxes
|
0.5
|
- 28.4
|
n/a
|
- 113.7
|
|
Net Income
|
- 3.3
|
- 31.7
|
n/a
|
- 44.5
|
|
Net Income per Share
|
- 1.54 yen
|
- 14.81 yen
|
n/a
|
- 20.75 yen
|
CONSOLIDATED HALF-YEAR SALES BY PRODUCT
SEGMENT
(UNAUDITED)
April - September, 1999
(in billions of yen)
|
Product Segment
|
(A)
Apr. -- Sept.
1999
|
% of total
|
(B)
Apr. -- Sept.
1998
|
% of total
|
(A)/(B) (%)
|
Fiscal 1999
(Apr. 1998 - Mar. 1999)
|
% of total
|
|
Heavy Machinery
|
336.7
|
19
|
384.2
|
20
|
88
|
912.7
|
23
|
|
Industrial Products and Automation Equipment
|
298.1
|
17
|
309.3
|
16
|
96
|
608.8
|
15
|
|
Information, Telecommunication
and Electronic Systems and Devices
|
675.8
|
37
|
693.5
|
37
|
97
|
1,482.3
|
37
|
|
Consumer and Other Products
|
493.7
|
27
|
519.2
|
27
|
95
|
1,019.1
|
25
|
|
Subtotal
|
1,804.4
|
100
|
1,906.3
|
100
|
95
|
4,023.1
|
100
|
| Intersegment Sales |
(125.6)
|
N/a
|
(112.6)
|
n/a
|
n/a
|
(229.1)
|
n/a
|
|
Total Net Sales
|
1,678.7
|
N/a
|
1,793.7
|
n/a
|
94
|
3,794.0
|
n/a
|
|
of which Overseas Sales
|
436.1
|
26
|
538.5
|
30
|
81
|
1,044.7
|
28
|
Note:
1) Financial charts made according to U.S. accounting standards.
2) Company has 136 consolidated subsidiaries.
MANAGEMENT POLICY
Mitsubishi Electric Moves from
Countermeasures Against Non-profitable Businesses to Positive Promotion
of Strategic Businesses
In this world of severe market competition, the
company has endeavored to carry out measures to unify its group companies
in order to strengthen business competitiveness and ensure stable
management and growth in the future.
Currently, the company has pushed to strengthen
its managerial promotional functions, and with the adoption of independent
management of business groups and affiliated companies, structural
reforms have been taken to counter unprofitable business segments
such as semiconductors, audio-visual, and information systems. Furthermore,
in order to strengthen responsiveness to the changing managerial climate,
the company is pursuing reform by taking structural measures against
high costs and optimizing the allocation of human resources.
In addition to these plans for improvement in
short-term business results, this fiscal year the company has put
forth a mid-term plan to set targets for the fiscal year 2001 as a
measure to strengthen management from a mid and long-term point of
view. Due to brighter prospects for business structure countermeasures
in areas that greatly affected business results such as semiconductors
and audio-visual, this mid-term plan reverted to a viewpoint of "countermeasures
against non-profitable businesses to positive promotion of strategic
businesses" with the intention of allocating important resources to
strategic businesses and expanding the managerial foundation. With
business groups such as next generation telecommunication systems,
satellite systems, ITS (intelligent transport systems), and IT (information
technology) as core businesses, and IT supporting businesses such
as System LSI, the company expects great future growth while it strengthens
its ever-important strategic businesses.
Furthermore, regarding core businesses such as
heavy machinery, industrial products and automation equipment, and
automotive electronics, the company will accelerate investments in
systems and products that are IT-friendly. While strengthening competitiveness,
the company plans to expand sales by developing global businesses.
This is the managerial foundation and policy
that will make Mitsubishi Electric a strong company in the 21st
century and mid-term corporate plan targeted for the fiscal year 2001
marks this beginning.
Mitsubishi Electric will strive forward to meet
the expectations of its stakeholders and challenges of the future.
The main business targets (consolidated) for
the mid-term plan for the fiscal year 2001 are as follows:
| Net Sales |
4 trillion yen
or more |
| Income before Income
Taxes |
120 billion yen
or more |
| Return on Equity |
10% or more |
Y2K COMPLIANCE AT MITSUBISHI ELECTRIC
1. Compliance Status
(1) Compliance Guidelines
Mitsubishi Electric recognizes that the
Y2K problem is, for itself, more than just a question of upgrading
internal computer systems. As a general manufacturer of electrical
and electronic equipment, Y2K is a key challenge that could potentially
affect stable supplies of our products, systems, and services
to customers and business partners at home and abroad. Mitsubishi
Electric's Y2K compliance program is therefore global in scope,
encompassing all members of its corporate group.
(2) Compliance Organizations
Individual business divisions within
Mitsubishi Electric began in 1996 to upgrade computer and microprocessor
products, components, and applied systems from the standpoint
of suppliers and users to bring them into Y2K compliance. In November
1998, a company-wide "Y2K Compliance Committee" was established
under the leadership and control of a vice president. This committee
has taken the lead in organizing uniform, company-wide efforts
for Mitsubishi Electric and its group companies, monitoring progress,
and developing risk management systems and organizations. The
committee reports regularly to the Management Council on its efforts.
(3) Compliance Progress
1) Products
By the end of September of this year,
notifications to customers using products that may have Y2K
problems were virtually 100% complete. It is, however, difficult
to identify the users of some products, and for these products
basic information continues to be provided in Japan and internationally
on our Internet web site
(http://www.mitsubishielectric.co.jp/) and in newspapers advertisements.
We also have a liaison office established to answer questions
from customers. By the end of September, approximately 90% of
the products requiring Y2K upgrades had been upgraded. Upgrades
for the remaining products were delayed at the request of customers,
and these upgrades are scheduled to be completed during November.
2) Internal Information Systems and
Production Equipment
General verification tests for those
portions of the core information systems and production equipment
of Mitsubishi Electric and its group companies that directly
impinge on stable product supplies had been fully completed
by the end of September.
3) Sourcing
Securing materials is essential to
maintaining the operations of the company. We are in the process
of confirming Y2K compliance at the firms with which we do business,
providing follow-up for the drafting of their contingency plans,
and arranging for advanced deliveries of required components
and materials.
2. Spending on Y2K Compliance (all
figures in consolidated terms)
Although it is difficult to clearly distinguish
the expenditures for Y2K compliance, we estimate that the Mitsubishi
Electric group as a whole will spend a total of about 8.0 billion
yen on outside services related to product and system studies and
upgrades, and upgrades to information systems and production equipment.
Of this figure, approximately 3.9 billion yen was posted to expenses
for fiscal 1998, and an additional 2.4 billion yen was posted during
the first mid-term accounting period. We do not anticipate these expenses
having a significant impact on our results or cash flow in the future.
3. Risk Management Plans
Mitsubishi Electric and its group companies have
done everything possible to bring products and systems into Y2K compliance
and are confident that this has been accomplished. However, we have
also formulated risk management plans as described below to vouchsafe
operations and minimize the impact on our business and our customers
in the event of unforeseen circumstances.
(1) Establishment of Y2K General
Compliance Headquarters
We have established a Y2K General Compliance
Headquarters (chaired by Mr. Hiroshi Kameda, Senior Executive
Vice President) for the period extending from December 16, 1999
to January 15, 2000. The headquarters will be responsible for
responding to inquiries from customers, gathering relevant information
from within and outside the company, overseeing internal and external
communications and notifications, and responding to any events
that may impact on our business activities.
(2) Establishment of Special Monitoring
Period, Assignment of Staff
Mitsubishi Electric has established a
Special Monitoring Period from December 31, 1999 to January 8,
2000 during which it will conduct round-the-clock monitoring.
Approximately 15,0000 members of the domestic and international
Mitsubishi Electric group staff (peak days) will be assigned to
product and user response and internal information system and
production equipment response.
(3) Formulation of Risk Management
Manual and Staff Training
Mitsubishi Electric formulated a company-wide
Risk Management Manual at the end of September, and based on this
manual, individual business lines formulated their own risk management
manuals and operational contingency plans by the end of October.
Y2K staff training began in November.
4. Other Issues
Mitsubishi Electric and its group companies are
keenly aware of the need to respond to the Y2K bug. We cannot, however,
declare that we have fully and completely averted all influences on
our business and all problems in our products as there may be circumstances
that are beyond our control. Nonetheless, we will continue to enhance
and reinforce our risk management so as to minimize the impact should
problems arise.
# # #
About Mitsubishi Electric Corporation
With more than 75 years of experience in providing
reliable, high-quality products to both corporate clients and general
consumers all over the world, Mitsubishi Electric Corporation is
a recognized world leader in the manufacture, marketing and sales
of electrical and electronic equipment used in information processing
and communications, space development and satellite communications,
consumer electronics, industrial technology, energy, transportation
and construction. With operations in 34 countries, Mitsubishi Electric
Corporation recorded consolidated group sales of over US$31 billion
in the year ended March 31, 1999. Additional information on Mitsubishi
Electric Corporation is available at global.mitsubishielectric.com.
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