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Now it is time to begin the results announcement for the second quarter FY '22. We will hold this meeting on an online basis. Until 3:50, the company will make presentation and 20 minutes after that is going to be a Q&A session for only members of the media. We will accept questions from analysts and investors at around 10 past 4 to half past 4. We will accept your questions only via teleconferencing system. As I informed, beforehand, you need to preregister your participation. And when you raise questions when other noises are interfering, then we may not be able to hear you or understand you well. So please make sure that you are in the conference room or otherwise, so that the noise avoided to the extent possible.
Now as we announced in the 30th of September, a timely disclosure document. Since the company now expects to enter into a more critical phase of the process, the company does not anticipate to provide answers to the questions on the updates of the process. Please do understand the situation.
Now let me introduce the presenters today: Representative Executive Officer, Corporate Executive Vice President and CFO, Masayoshi Hirata; Representative Executive Officer, President and CEO of Toshiba Electric Device and Storage Corporation, Hiroyuki Sato; Corporate Officer, Vice President of Finance and Cash Management Division, Yasuhiro MATSUNAGA; I am Midori Hara, Corporate Communications Division.
Now without further ado, let me start the PowerPoint presentation for the results for the second quarter of FY '22. Mr. Hirata, please.
Now may I present on the results for the second quarter of FY '22. If you could kindly look at Page 3. This is the key points of the second quarter results announcement, there are 2 key points.
First is that in the first half results, in regard to operating income, there was a onetime factors, including provision for HDD product warranty and also drastic change in HDD market as well as the goodwill impairment in the printing businesses. So mostly because of the onetime factors, we have lower operating income. In regard to the nonoperating income, we were able to increase the net income, but I will cover the detail number later.
Second point is regarding FY '22 full year forecast. Because of the onetime factors that I've mentioned earlier, the JPY 45 billion of change was made to the operating income and revised forecast is JPY 125 billion. And just for your information, for net income, we have downward rebates by JPY 10 billion and revised forecasting is JPY 190 billion.
Now if you could kindly move to Page 6, this is the income statement. Now during the first half of FY '22, JPY 1,595.2 billion was the net sales, which was JPY 48.8 billion increase compared over year-over-year, and it is an increase of 3%. And operating income was JPY 2.7 billion. Hard disk drives and retail and printing and other onetime factors are mostly the reasons and we had a decline of JPY 42.3 billion of a decline year-over-year. However, the nonoperating income was improved. And therefore, net income was JPY 40.9 billion increase at JPY 107 billion.
Page 7 is the overall picture of the operating income. On the far left, you have the actual first half '21. And when adding back JPY 4.3 billion with restructuring costs and et cetera, the total -- the actual H1 operating income in FY '21 was JPY 49.3 billion. And far right, you have darker gray area called onetime factors. In hard disk businesses, there were market change, and also, there was a retail and printing business had some impairment and onetime factor existed.
And in the middle, as you can see, for material cost hike and logistic cost hike and there were some changes in our profitability. And we had about JPY 42.3 billion and JPY 11.6 billion of cost was incurred, but all these were actually offsetted by JPY 10.7 billion of exchange rate change as well as increase in sales, and we were able to absorb these changes.
Page 8 is a breakdown of nonoperating income. As as mentioned earlier, the sales of Toshiba Carrier posted some gains and JPY 90.9 billion was income on sales of securities as well as equity earnings from Kioxia and others of JPY 31.8 billion, total JPY 127.8 billion was the gain on operating -- nonoperating income.
And Page 9 is on cash flow items. EBITDA decline as well as the advances which had last fiscal year has no longer exist this year. As a result of that, the working capital was deteriorated. However, on the whole, we were able to make a positive cash flow from operating activities of JPY 18 billion.
With regard to cash flow from investing activities, while we are making investment for the growth, we were able to have some gains on sales of the securities. On a whole, JPY 57.8 billion positive investing activities cash flow. As a result, free cash flow was positive JPY 35.8 billion.
In the lower half of the same chart equity attributable to shareholders of the company was JPY 1, 245.8 billion. And there was a dividend -- a full year dividend as well as a special dividend was made and yet on top of the net income as well as the improvement of the comprehensive income. As a result of that, we have JPY 39.2 billion increase and 34.2% is the shareholders' equity ratio. And net interest-bearing debt was JPY 80.5 billion. That is the borrowing position.
If you could move on to Page 10, these are the detailed items of the previous items. So please refer to this for your reference.
Next, I will move on to explanation by segment. Please turn to Page 13. This is the breakdown of the Energy Systems & Solutions. Net sales was JPY 280.5 billion, a JPY 44.5 billion increase year-on-year. Operating income was JPY 5 billion loss, a JPY 9.5 billion decrease year-on-year. This operating loss of minus JPY 5 billion is due to in power generation systems, project cost reexamination in Toshiba Plant Systems and Services. And then in transmission and distribution systems soaring of transport costs and rising fuel prices due to the weak yen, et cetera, in biomass power generation business.
Page 14 is the breakdown of Infrastructure Systems & Solutions. Net sales was JPY 300.2 billion, and operating income was JPY 3.2 billion. Public infrastructure and railways and industrial systems are both trending steadily.
Page 15 is Building Solutions. Net sales was JPY 258.1 billion, and operating income was JPY 0.7 billion. Elevator and Escalator business saw decrease in sales and decrease in profits mainly due to part shortages such as semiconductors, especially in the Japanese market. Further, the air-conditioning business sale, a deconsolidation effect of minus JPY 27.7 billion in sales and minus JPY 9.5 billion in operating income year-on-year.
Page 16 shows the Electronic Devices and Storage Solutions results breakdown. Net sales was JPY 403.2 billion, a decrease of JPY 29.7 billion year-on-year. Operating income was JPY 20.2 billion, a decrease of JPY 14.5 billion year-on-year. In the semiconductor business, the market continues to be firm, plus the weak yen is contributing and NuFlare Technology technologies, mask writers sales are increasing, resulting in increasing sales and in profits of semiconductors.
On the other hand, in HDDs and Others, due to shrinkage of mobile and desktop markets and new line HDD market adjustment and increase of provisions for product warranty mainly due to these onetime factors profits decreased year-on-year. For our responses going forward, Mr. Sato, Representative Executive Officer Managing Electronic Devices and Storage will be explaining later.
On Page 17, upper half shows Retail & Printing Solutions. Net sales was JPY 246.2 billion, a JPY 24.5 billion increase. Operating income was a loss of JPY 4.5 billion, a decrease of JPY 8.8 billion year-on-year. This is due to goodwill impairment in the printing business. Details will be explained later.
Bottom half is Digital Solutions. Net sales was JPY 104.8 billion and operating income was JPY 8.3 billion. Although the sale of Chubu Toshiba Engineering has a deconsolidation impact, Digital Solutions is trending relatively steadily.
Page 18 shows orders received and order backlog 3-year trends. Orders received in the first half was consistent with previous years. For order backlogs, we are at a time of progression into sales of large orders we received so far, such as thermal power projects. Order backlogs are less year-on-year, the level is consistent with previous years.
While in the recent market environment, carbon neutrality related demand is increasing. And with the resolution of power shortage, service and maintenance-related demand is also growing. Further, social infrastructure-related demand is steady overall, with stable growth expected. With these market environments at the background, we are in a position able to expect further order growth.
Please turn to Page 20. This is the FY '22 forecast. Both net sales and operating income have been revised from the previous forecast. Net sales increased by JPY 50 billion due to yen depreciation and operating income decreased by JPY 45 billion. On the other hand, due to an increase in nonoperating income, net income is expected to be JPY 190 billion, although this figure is for reference only. Free cash flow forecast remains unchanged due to the revision of the timing of some investments and loans despite the deterioration of EBITDA.
Page 21 shows the FY '22 forecast by segment. Please refer to the column on the right versus previous forecast. Operating income has been revised downward by JPY 45 billion, mainly due to the deterioration in Electronic Devices and Storage Solutions at retail and printing solutions.
Page 22 is operating income comparison of FY '22 forecast and FY '21 actual. The leftmost column shows FY '21 actual operating income. FY '21 actual operating income was JPY 165 excluding the JPY 6.1 billion in restructuring costs. As we explained in the first half, there is onetime factor for the hard disk drive, deteriorated by JPY 34.7 billion and retail printing including goodwill impairment, onetime factor deteriorated by JPY 43.4 billion.
Other than the onetime factor, as shown in the center part of the chart, fixed cost for growth increased by JPY 93 billion as planned, which was fully absorbed by the effect of the yen depreciation, revenue growth and other factors. FY '22 forecast breakdown of the main business is shown on the appendix beyond Page 33. And please look at it for your reference.
I would like to make 3 additional explanations on Page 23 and beyond. So first is about the goodwill impairment of Retail and Printing Solutions. Please take a look at Page 24. The company recognized signs of impairment due to the decline in the share price of Toshiba Tech Corporation, a consolidated subsidiary of company and the impact of foreign exchange rate fluctuations and performed an employment test. As a result, a loss of JPY 10.4 billion was recorded for goodwill. And after goodwill impairments, the balance of goodwill is JPY 35.1 billion. This impairment loss was recorded in Toshiba's Group's consolidated accounting in accordance with U.S.-GAAP. In Toshiba Tech Corporation's consolidated accounting, most of the goodwill has been equally amortized at the end of FY 2021 in accordance with J-GAAP.
From Page 25, it is related to the HDD business, profitability improvement and the future forecast.
Mr. Sato, representing Executive Officer in Charge Electronic Devices and Storage will explain.
I will explain about the hard disk drive business. We have taken measures to cope with the deteriorating market conditions and quality problems as shown. For HDD, Philippines, our main HDD production site, we have already reduced the total number of direct employees by 1,500 or 16% of the total workforce between last year and this fiscal year due to the decrease in scale of production.
In addition to the 1,300 personnel downsizing, 200 personnel will be streamlined through the labor saving. Since there will be no hire for attrition, there is no restructuring costs. In addition, the entire business unit will review the timing of CapEx and reduce expenses, which will result in JPY 5 billion fixed cost control.
We believe; however, that the market downturn of the data center market is temporary, and we plan to continue to invest in R&D to realize next-generation high-capacity data centers. This is once again the storage market outlook. The 2020s will be the decade of data. Here is the transition for the 4-year period from 2021 to '25 and the amount of data creation will be approximately 2.2x greater. Storage capacity installed base will increase by 2x. HDD capacity installed base is expected to grow by 1.9x.
Although a decrease in demand occurred due to customers' investment restraint, we believe that the size of the market, which is the basis of future plans will not change significantly. Nearline HDDs are a large part of the right side in the tiered diagram and high-capacity data storage mix. It is a balance of capacity and speed and more economical near-line HDDs will be required.
As part of Toshiba HDD's growth strategy, we will continue to focus our resources on Nearline HDDs. We have already engagement with 8 out of 10 major cloud service providers and plan to launch new products to increase our market share.
For this year, FY '22, 20 terabyte customers' verification is taking place. Sales volume decreased due to the need for the reliability improvement with some customer. We will focus; however, on the development of the microwave-assisted switching technology and also the shingled magnetic recording and the 29 terabyte model and launched it as a leading-edge product in FY '24. Furthermore, we aim to achieve over 30 terabytes using 11 disc by FY '25.
Next, I will explain the semiconductor market. The pie chart on the left shows the semiconductor market, excluding memory and Toshiba sales by application for FY '22. In the semiconductor market, demand is softening in applications such as data centers and consumer equipment, which account for more than 70% of the market, and that is due to the impact of selling IT investment and consumer demand.
On the other hand, sales of automotive and industrial applications, which are relatively less susceptible to market fluctuations are expected to remain strong. Our semiconductor business, Automotive and Industrial Application accounts for 60% and remain our focus. We plan to grow our power semiconductor. And as you can see in the bar graph on the right, the size is accelerating due to the spread of electrification of automobiles. Therefore, we will continue to make capital investments of JPY 120 billion. JPY 20 billion more than our initial plan for FY '22. We will continue to invest our resources.
That will conclude my explanation.
So finally, I would like to discuss the equity earnings from Kioxia. The details, as usual. Based on the information that we have received, is explained and these are for your reference. So this is about the financial results for FY '22 second quarter.
Thank you. That concludes presentation by the company. We now move on to the Q&A session. [Operator Instructions] The Japanese channel first, please.
This is [ Yao of Nikkei. ] There are 2 questions. Once again, strategic alternatives, whatever the process for determining the strategic alternatives, what is the progress -- what is the projections for the future progress? I am aware that because it is going to face a more critical phase. And if it is difficult for you to make specific remarks, and could you just give us a general direction of the process.
Second question, in regard to the market fluctuations, in regard to a drastic change in HDD market that you referred during the presentation. And your assessment is that drastic exchange in the market is going to be a onetime factor. But to what extent do you expect that to continue? And as a result of that, the customers are suppressing the investment. And what are the reasons behind the customers' suppression of the investment?
These are related to the changes in the market. And also in the memory business, I know the company only have an equity interest in that. However, if you could also elaborate on the market changes for the memory side as well be appreciated.
Thank you for the question. For the first point, Hirata will answer and Sato will take up the second question.
Now as I mentioned, very outside. Now our special committee have been playing a role in exploring the strategic alternatives, and that effort is ongoing at this point in time. As of today, there is no new news to be announcing to you. And therefore, please forgive us and please allow us to refrain from making any comments at this point in time. And when appropriate timing comes, and when a specific event happens to allow us to make announcement, and we will appropriately disclose such information. So please do understand the situation. Thank you.
And in regard to the change in the market situation for HDD, this is Sato to take up your question. To what extent the situation will continue, it is very hard to see the end of the current situation. A full-fledged recovery will be coming in the next fiscal year.
Now in regard to the major factors contributing to the drastic change in HDD, companies are forecasting a future recession and the advertisement revenues and the cloud service revenues, the data center provider have reduced the investment emit the decline in advertising revenues or cloud services and that is our [indiscernible]. Thank you very much.
On top of that, in regard to NAND flash memory, I believe that you have asked good questions. And as always, Toshiba is only posting the equity income from Kioxia. In regard to the future forecast, we are not in the position to receive any type of outlook of Kioxia business. Therefore, at this point in time, our knowledge is the same as yours. Kioxia itself is that in the second half of this year, they are going to reduce its production volume, and therefore, perhaps they are adjusting at this point. Thank you very much.
Thank you very much. Then let us move on. Nikkei BP [ Kotecha. ]
I am Kotecha of Nikkei BP. I have 2 questions. The first question is decrease in operating profit this time. You say not onetime factors, but materials and components, cost soarings will continue going forward.
Sorry there is a lot of noise and feedback. I'm sorry, I could not hear your question.
This time, you have, although not included in the onetime factors, but materials and components cost increases with -- I think will continue to increase, free cash flow compared to last year first half, JPY 55.6 billion decrease. But the future expected cash flow, do you think these factors will affect. And secondly, you pose about dividend, JPY 290 full year, but operating income base is coming down and nonoperating income is increasing mainly due to the sale of Toshiba Carrier. So for dividends, do you link to net income regardless of the operating income, which comes from the main core businesses?
Now on the first question, future free cash flow, I think that was what you were asking about. Currently, apparently, materials, logistic costs are soaring, and this was happening, and we think are staying at a high level. In the last financial results announcement meeting, as we explained then, whilst gaining understanding from customers, we are also asking customers to bear the burden as well. This is the direction we are taking.
With this factor alone, we do not expect free cash flow to worsening. And now for dividend forecast, I think this was what you were asking. And our basic dividend policy is, as already announced. Full year 30% or higher payout ratio. And once the full year accounts are closed, the audit firms when the auditor's sign, we review the balance sheet and we calculate and evaluate the appropriate level of capital. And any shareholders' equity above appropriate level of capital. If there is such surplus, we will consider the future investments and what we consider a surplus will be returned to shareholders, special returns. This is our policy, and this is what we have been doing from the past.
In June, for FY 2021 and balance sheet, we reviewed and we returned back to the shareholders. This was the method taken, and we will go through the same process and method next year as well. This is all for me.
Excuse me. And to add one further question on that, 30% or higher annual payout ratio is the determined policy. Then for Kioxia Holdings, this part is difficult to expected this or you don't have full year PL forecast, but you still have the dividend forecast. What is the reason for this?
That several years ago, we announced our dividend policy. At that time, we said this, that is dividend payout policy, when calculating this payout ratio, Kioxia equity method holding will be removed. This has been the way we have taken. This with the way we have been operating. Therefore, even if Kioxia profits are up and down, we check the payout ratio, excluding Kioxia.
Thank you. Next, Yomiuri Shimbun [indiscernible]?
This is [ Ichihara ] from Yomiuri Papers. I have 2 questions. For second quarter, there was the yen depreciation and also an effect from the Forex and it contributed to increased profit and increased revenue. So how did it impact the segments and also what kind of risk does it pose?
My second question is the China lockdown, political risks. And so from the geopolitical perspective? And are you planning on restructuring the supply chain structure, if there's anything that is being planned. Could you explain and comment?
About the first question, Forex, for each business, well basically, for Q2, accumulated 6 months, the average rate is as written with the yen weakening and it is positive, especially for the semiconductor business. Also for the second half, JPY 140, that is the basis for the assumption. And last night, there was some correction to the weaker yen. And if it trends with this level, if that is the assumption for the plan. For the full year, it will have a positive effect to the semiconductor business.
And about China, there are various factors and elements with China. Well, it is not that at the moment, immediately, we are changing the operation. That hasn't decided. Of course, we are closely monitoring the situation. That is all.
Thank you very much. Next is from [indiscernible].
There are 2 questions. Now on Page 22, like you have discussed earlier, the logistic cost hike, material cost hike that during the first quarter result announcement, you mentioned that material cost is soaring. And towards the second half, such cost increase will be offset by the passing on to the customers through the price. But when we compare the data over quarter-on-quarter and as material cost increase, as you expect; however, it seems that price increase is not progressing well on the product side.
So probably the timing of passing the cost onto the customers may be lagging behind. And when you raise the prices, are there any particular segment or the product groups having difficulties in raising prices? If you could elaborate on that, the first question.
Second question is in regard to HDD, the market situation is aggravating and the large-scale investment in data centers and others are slowing down. Are there any particular breakdown in regard to each regions or by countries? Perhaps by customer or by regions or the countries, are there any particular characteristics?
I will take up the first question. And in regard to the second question, Sato will answer.
On Page 22, in the middle of this chart. Now logistics costs and the material cost increase, probably passing on to the price increases is not sufficient. And to be very honest, that is simply because of the time lag. There is always a time lag for passing on the cost to the customers.
And in fact, our products are not the catalog listed products, to be very honest. Particularly part of the lighting products, we've changed the catalog listed price. And the catalog, of course, bears a price list, and we've increased the tariff or the list of the prices at once. And yet, although if we change the price on paper, we have to have some time lag that the 2 catalog prices applied to the customer's preside price, and that's what we do.
In fact, the prices are determined based upon the negotiation on a one-on-one basis with each customer. And therefore, some of the contracts are stating that -- in the case that the material cost rises, which is what we call inflation cost, and we include such cost into the contract with the individual customers. We suggest application of such cost, and we request a price increase to the customers.
And of course, customer side would need some time to discuss internally on their side. Because of this reason, there is a time lag. Therefore, if the material cost hike happened during this fiscal year, would that be completely absorbed and price increases would not be guaranteed.
Now in regard to HDD, the market is -- slowing of the market demand. The question would say that were there any characteristics in regard to regions? There is no regional characteristics. The demand is slowing down across the world. The U.S. large-scale data centers, they are operating. Well, think about the advertising revenues and cloud services and because of expected recessions, they have tendency to suppress investment. And there are quite a large data center markets in China. There are data production in East side and then on the West side in China that the data is stored and data storage sites investment part of China, a lot of the players in that area is suppressing investment. And therefore, from our point of view, the market is tightening all across the world from our point of view.
Thank you very much. At this point, we want to switch over to the English channel questions. [Operator Instructions] No question? There seems to be no questions. Therefore, we will accept questions on the Japanese channel again. Please wait whilst we switch the channel. We have 3 more people remaining in [indiscernible], we will move on to the 3 people. Many apologies, but up to 2 questions per person, please. First of all, [ Shamisen ] of NHK, please.
This is Shimai of NHK. I have 2 questions. Operating income, as shown in the slides, cost increases minus JPY 14.9 billion. And with the weaker yen are some costs increasing. This is my first question. If the -- and what will be your reaction to the weakening? What countermeasures are you taking?
And the second question is, in June, you announced the growth strategy. And my question is your progression according to the strategy under the strategy as for Mr. Shimada, with -- going forward with data and digitalization operating income, I think your number was like JPY 170 billion this year with more data advancement and with growth strategy advancement. From this perspective, how much effect are you seeing? And what is your overall progress versus the growth strategy?
Thank you for your question. I think you're asking about Page 7. Out of the JPY 14.9 billion in the first half, material cost soaring out of which FX impact. I think that is what you are asking. And currently, we are in weak yen environment. And it's not just FX only, materials themselves costs are rising and the supply and demand is tight due to wars and other reasons. Major materials costs are rising and logistic costs are also rising. And of course, when the FX, thanks to the reverse side and if we are buying at dollar, if in that case, the prices will subside.
And then second point, data business contribution to performance. I think that was the intent of your question. This year and starting from this year, yes, we are seeing effects and see numbers, but not at the level that we can introduce to you in a straightforward manner. In this year's numbers, we don't see that yet. Next year onwards, under the midterm spend, we will be able to show data and service based upon data because we are expanding this business.
Next fiscal year onwards, we will start seeing generating numbers. And at some point in time, big sales and high profit margin will be also contributing to the operating income numbers. At that time, we will be introducing to you. And when we introduce and explain the next midterm plan, and in the next midterm plan presentation meeting, we will explain our plan in the numbers. Again, this is all for me.
But how is the progress compared to the initial plan, setting aside the details of the plan, are you advancing? Are you keeping pace?
The measures that we need to do today, for the measures for every item, we are steadily and favorably moving ahead. All the members of the staff are working very hard. In the not-too-distant future, big contribution to performance is expected.
Thank you very much. Next [indiscernible] from Asahi.
I have one question about the hard disk. In relation with the hard disk, so it is about the allowance reserve made. In Q1, in the press conference for the cars that is known and it was explained that Q2, the reason the cost will be investigated. And on Slide 16, still says that it is under discussion. So the amount, I believe that it is after investigation, and we already are close to knowing the cause or still it may fluctuate and increase in the future.
Yes, Sato will respond.
Last time, when we released the figures, we have explained that the number of returns have increased. And also, that is the reason we have made the revision. I will not go into details, but between our customer in terms of this quality issue, at the moment, the negotiation is ongoing, and -- the -- what we know is what we have already incorporated all the factors that are known in a conservative manner.
Lastly, [ Yamasaki of Kyoto, ] please.
There are 2 questions. First question is regarding the expenses costs related to Special Committee. During the first quarter, when you made an earnings release and JPY 13 billion was the number for the cost of the Special Committee. And on Page 7 of today's slide, the special committee cost of JPY 2 billion as listed in this chart. But JPY 13 billion 1st quarter, this JPY 2 billion included.
Yes. If you could pay attention to Page 22. Now when we explained 3 months ago, our annual cost is going to be JPY 13 billion. That's the intent of the company's announcement. And if you look at Page 22, a second bar chart, black, 43.3, the Special Committee costs of JPY 13 billion is included as is the same as the 6-month announcement.
Understood. So what is included in Page 7? A stated JPY 2 billion of social committee cost is a part of JPY 3 billion?
Yes, JPY 2 billion is the actual results for the first half.
I have second question. In regard to the schedule of the special committee's strategic alternative decision, would that be affected by the economic situation. Compared to the beginning of the year, the yen is depreciating to a quite extensive level. And also, there is some signs of other future recessions. And such a business environment change, would affect the timing with which the company decides on the strategic alternatives.
All right. That was quite a sensitive question. And in fact, economic situation will change over time, of course. So it is not just our side but also those who would be interested in our business would evaluate and assess depending on all the situation, and that is all from myself.
Thank you very much. With this, we would like to conclude questions and answers with the members of the media. Next, we would like to further move on to questions and answers with analysts and institutional investors. We will start with the Japanese channel first and then move on to the English channel. First of all, from the Japanese channel. [Operator Instructions] UBS Securities, Yasui, please.
First question, hard disk quality issue. The amount is quite big. At the time of the first quarter, you said, I think, will be over in one quarter. This is my memory. And the explanation was that there are product returns. Are there returns possibilities from other customers? And you say this is a certain customer, but will be limited to this specific customers? And is there any assurance that the issue will be over within this fiscal year?
Sato will respond.
On this matter, this is an issue limited to this specific customer. This issue is not taking place at other customers, and the response to the quality issue. We have been working diligently since we made the announcement last time. And we are confirming on both sides what is happening. And as of this stage, the information we share with the customer. And we maximize information sharing with the customer. And based upon the information we have, we have provisioned conservatively.
Any cash out items? Is any cash-out happening? Just provisioning only?
Yes, that is the case. No cash outs.
And then my second question is orders. First half FY 2020 orders same level, I think there was such a chart on Page 18, and FY 2020 and this year first half. FY 2020 is right after the start of COVID during the pandemic. Order level where there was a lot of economic anxiety, which appears to be weak. And considering FX, this appears to be very low orders. [ D/E ] ratio-wise also seems to be very difficult. Order environment, can you explain to me in more detail, for example, where orders are not favorable?
You raised [ D/E ] ratio. This order backlog, semiconductor-related area where Mr. Sato is responsible for is not included. Basically, this year's orders and this year's sales there, so not included in this group. Content-wise, [indiscernible], energy, infrastructure, elevator. These orders are included. You said you have the impression of orders being weak. But first half 2020, we had -- 2021 first half, we had large energy orders received. So 2021 is outstanding. But our feeling is, this year, we are at a normal level -- normal year level. Yes, in 2020, there was COVID that struck. But in energy and social infrastructure businesses, we are in -- orders COVID did not affect us that much. This is all.
Then finally, FX sensitivity, if possible, for device and others, can you explain to me the breakdown of the FX sensitivity more in detail? In the former, with JPY 1 fluctuation JPY 500 million for the second half. Do we know the sensitivity by division?
No, not that details. We don't have information by division. But broadly speaking, as explained, semiconductor-related with JPY 1 fluctuation, about JPY 600 million. Others, JPY 400 million with JPY 1 fluctuation or may be less JPY 300 million. This is the general idea.
With a weaker yen, there are cost increases and included negatively in the FX sensitivity resulting into this result. Then company-wide, second half, JPY 500 million by JPY 1 fluctuation. And JPY 600 million semiconductor with that full year or 6 months, second half. So other divisions will be affected negatively?
Yes. Not much sales in dollar area, we buy more in the dollar region. So other businesses, not semiconductor will be affected negatively.
Next, SMBC Nikko, Yoshizumi, please.
I have 2 questions. First is about second quarter for the 3 months alone. So out of the plan, some one-off factors. I would like to confirm about the onetime factors. Just a rough calculation, energy related, that is about JPY 5 billion. And for printing, that is 10.4 and HDD, JPY 9 billion. So I think roughly, it is mainly the 3. Is my understanding correct? I just want to confirm?
Right. Well, I think you were asking the question and responded yourself. Your understanding is correct.
So my second question. So price hike. So how are you responding by the each business by segment already executed in which areas already have been accepted, the price hike? And also, if you can explain for the plans, also if there is on the contract difficulties increasing the price, if there's any area that is difficult?
Yes, that will be explained by Mr. Matsunaga from the finance and cash management division.
For the first half, the situation is explained on Slide 7 and JPY 8.7 billion from price hike. And the impact and the contribution TDSC semiconductor are the major contributors. Also other than that, infrastructure, as Hirata explained, it is by each contract and each negotiation and for a building. Also by changing the catalog price and it may take some time for the customer to accept. So there are some time lag that is the situation. That is all.
So for example, the competition, any weaker demand and difficult to raise the price, is there any specific industry application?
In terms of competition, as Matsunaga explained for the semiconductor. Our business domain, there is a lack of products in the market. So relatively speaking, it is rather easier to raise the price. Also for the infrastructure, as I've said before, in the contract, so it does say by mutual negotiation. It could be discussed. We will make our rational explanation. But of course, there is some time required for the customer to accept and discuss. So we are having our customers discuss the matter.
For Elevator and Lighting, I would assume that it is difficult to raise the price. What is the situation for lighting?
Well, excluding some specific indent, we use the catalog price in many of the products. So in that sense, it is rather easier -- well, still having said that, the customer may say they want to wait for the new price to apply, but I would say it is relatively easier to change the catalog price.
For elevators, right. The needs of the customers is there. But on our part, we cannot have the parts. And sometimes we cannot service the demands and needs of our customers. So of course, we do mention about a price hike, but we cannot reach the stage to sit and negotiate because we are not able to meet the needs of activities. And we are not still not at that stage yet.
Next, Citigroup, Ezawa, please.
On Page 22, now the analysis is made, and I'd like to ask questions. First is that for the fixed cost growth, minus JPY 39 billion and previously it was minus JPY 45 billion. And what are the reasons of making changes in this regard? And also, the first half results as well as the second half plan or forecast. In the second half, the number is going to be heavy, and in total is going to be JPY 39 billion. It seems that investment seems to be reduced gradually going forward, if that the case. Second half budget may be reduced and perhaps the number could be smaller? Is it that a case? And I'd like to move from you.
Second question is right next to this particular number. Now there is a factor contributor fluctuations of the operating income. And there are some change we made, and for the gain of the net sales, and there is no change made at the beginning. However, first half result is negative and the second half is significantly positive and you are having such a number at this point in time. Now I believe that the second quarter is contributing positive for the earnings power, but what do you -- why do you expect that in the second half, you will have the better [indiscernible] power.
Now in regard to R&D, on the annual basis, as you mentioned correctly, annual number has declined or reduced a little bit. In particular, in regard to energy, we've accumulated the item to be implemented this year, at the beginning of this fiscal year. And yet 3 months, 4 months past so far. And there were some items, which is not truly necessary. And on the other hand, there are some additional items required. And on every month basis, we are reviewing R&D.
Therefore, on the whole for the full year basis, we are leaning toward reducing the R&D expense. It is not intentional. It is just for the better performance of the R&D, and we conducted a review of what is truly necessary, and this is the result of our exercise of review. And in the second half, the R&D expenses is higher than the first half. And that is the business as usual, our company always have such tendency.
Now we have higher proportion R&D conducted by our in-house employees, but we resort to cooperation to outside researcher and conducting R&D. And therefore, receiving an evidence in short term and posting expenses is not always the case. Because of the nature of the R&D, the activities will be made through the year, and results will be delivered in the -- near the end of the fiscal year. So we monitor their research activity outcome. And as a result of their delivery, we will make expenses or payments. And that's why in the second half, R&D is higher.
And in regard to the chain factors affecting changes, first half is 61 and -- excuse me, [ 66.1 ] and the second half is much smaller. It is the indent product or the custom made products. Roughly speaking, the negative 6.1 is that year-on-year. A year ago, in the first half, there were some provisions applied. And with the completion of the work is nearing, as a result of that, cost has reviewed once again. And it seems that cost hike is not that much, and therefore, some of the provisions were reversed back. That happened in FY '21 during the first half, but that impact is now gone. So with the absence of that factor, compared to the last year's results, we have some negative number for this first half.
Now in the second half, there are some opposite situation ongoing. As you remember, now for the connected grids and T&D. Now software was now contracted. However, that software was stopped, and because of the termination of the contract, we've applied a provision in the second half of the last fiscal year. Without such negative impact -- in absence of such negative aspects, we had a positive impact in the second half. And also because of the natural disaster last fiscal year, we had stopped some of the works. And that negative impact is gone in the second half of this year, and therefore, we would have positive impact.
Another factor is, I'm not sure if you remember correctly, but toward the end of the last fiscal year, there were so restoration costs, soil improvement cost of about JPY 6 billion or so provisions and we know that, that provision is sufficient enough, and therefore, there will be no additional provisions in the second half of this year. So these 3 are the key factors, which means that the some of the negative impact, which we had for the last fiscal year, which is no longer exist for this fiscal year. So we already applied probability analysis for the differences.
May I? Sorry. No one point. Now in regard to the fixed cost for growth, may I supplement some information, Hirata's comment is very true and happening when we look at the each business units, but how to read this analysis chart JPY 45 billion is reduced to JPY 39 billion. The largest effect is coming from the HDD and then Retail and Printing. These are reclassified, and that is the largest impact. So it appears to be a reduction of the fixed cost for growth, but in fact, actual investment for growth remains unchanged and how we managed the cost. But depending on the business, the timing of incurring such costs may change depending upon the situation. So on the whole, the number considers to be unchanged. So just to add to the explanation. Thank you very much.
Thank you very much. There is no participation on the English channel today. We have passed the scheduled time. So 2 hands raised now. So sorry, limit to one question per person. Per person, one question each. First is Okawa of Daiwa Securities.
I am Okawa of Daiwa Securities. I have a question on hard disk. First quarter versus second quarter sales, JPY 90 billion, JPY 100 billion second quarter, first half, second half, JPY 190 billion each. So the explanation versus the movements seem to be different. How come second quarter is more sales so much? And in second half, do we have enough risks factoring?
Sato would like to respond for the second half of the year.
Already, we are starting to acquire certifications, approvals of customers, and this customer's business will start contributing to sales. As of August, mobile, we had a conservative forecast for PCs and desktops. We thought there will not be much growth, but they are growing more than being flat. This is being reflected. But mobile index desktop market condition, we cannot be optimistic. And this is how we have made the forecast.
Just one supplementary question. In the press conference of the president, you indicated, suggested there will be an explanation of the midterm plan. Will there be a presentation of the midterm plan?
The next time means whether 6 months later, 1 year later or 2 years later, can be different time, it's not that we will never ever explain the midterm plan. We don't know when, exactly there is no specific timing determined. Sorry for causing this misunderstanding.
Thank you. So the final question. Tokai Tokyo, Ishino. [Operator Instructions]
I have one question. About the NuFlare Technology and the mask. So the performance between first half and the second half also, so recently, we see here about how the investment CapEx is softening, but could you explain about the environment at the moment?
I am in charge of the NuFlare and my name is Sato. I will respond NuFlare Technology. So now at the moment, we are receiving very robust inquiries. First half, second half. So the robust situation of the orders that we have received. And for the next fiscal year, also very good forecast and strength remains. And first half, second half, well, the number of units itself is limited. So the timing of when the revenue is booked. It could be skewed towards the first half or the second half, it may appear that way. But in general, for the full year, it is trending in a very good way.
So what about the balance between the sales and profit?
Unfortunately, for specific company's business, the sales and also profit is not going to be specified.
Thank you for the question. So now it's time to close the briefing and we will conclude the Q2 results briefing. Thank you very much for your participation.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]