Future Direction of Management
(1) Progress of Previously Announced (Aug 2) Measures to Reinforce Business Foundations
The following is a progress report on measures to reinforce Sharp’s business foundations, which we announced on August 2, 2012.
<Off-balance-sheet arrangements of large-size LCD business>
We improved our financial position by 110.0 billion yen through transferring a portion of SDP shares and off-balancing large-size LCD business.
<Issuance of new shares through a third-party allotment>
We are still in discussions with the Hon Hai Group. Meanwhile, the business collaboration on mobile phones and large-size LCDs is steadily progressing.
<Reduction in inventories and noncurrent assets>
We achieved a 118.3 billion yen inventory reduction, excluding the inventory write-down. We also decreased noncurrent assets by 10.8 billion yen through sales of selected business bases and securities. As a result, the reduction totaled 129.1 billion yen.
<Reduction in capital investment>
By reducing capital investment, we improved cash flow by 37.5 billion yen.
(2) Future Direction of Management
<Clarification of Sharp’s direction>
We will make the most of our various strengths—technological advantages, device development capabilities, product planning capabilities, and sales channels—and have business divisions work together in a “FUSION”, thus becoming a “Lifestyle Creating Company” that creates lifestyles that offer convenience and affluence at home and at work.
<Business Restructuring of Core Business Units>
We plan to conduct drastic reforms in five businesses in which we face difficulties: audio-visual equipment, communication equipment, solar cells, small- and medium-size LCDs, and large-size LCDs.
-In audio-visual equipment, solar cells, and communication equipment, we face significant falling prices and intensifying competition with overseas manufacturers. In these businesses we will streamline our business structure and dramatically change conventional operations. This is to be achieved through reduction in fixed costs by selling off old assets and recording impairment loss.
-In large-size LCDs, the reduction in assets through off-balance sheet arrangements for SDP and an improvement of plant utilization rate have been already achieved, based on the collaboration with the Hon Hai Group. With the business restructuring, profitability is robustly improving.
-As for the small- and medium-size LCDs, which are the growth engine of our business, we will strive to enhance profitability by responding adeptly to market demand and maximizing our plants. We will enhance our customer base centering on IGZO LCD technology and develop a wide range of applications.
By specifying the target for each segment—for example, stabilizing and strengthening profit structure with a creation of new categories and overseas business expansion; turning a profit through business restructuring; or making the segment a driving force for growth—we will take various measures accordingly to improve our profitability.
<Reformation of Cost Structure>
-We will move ahead with cutting fixed costs by establishing a personnel framework scaled to match sales volume, and by reviewing our sales and operation bases.
-We will strive for total cost reductions of more than 100.0 billion yen for fiscal 2013 compared to fiscal 2012.
<Stabilization of Capital>
-We are making every possible effort to sell non-core assets, including securities and real estate. In addition, we are taking other measures, including additional cost cutting, as well as reductions in inventory and capital investment.
-In September 2012, we entered into an agreement for a syndicated loan of 360.0 billion yen with our two main financing banks. We expect as many other financial institutions as possible to get involved in the scheme.
-We will realize even higher profitability and even greater improvements in financial structure, to establish a new financial strategy that includes a bond retirement slated for fiscal 2013 and beyond.
<Strengthen Execution Framework>
We will work to strengthen our execution framework in order to implement each measure of business restructuring step by step.
-As of October 1, 2012, we have established an Executive Committee for Urgent Business Issues headed by the president and featuring a horizontal structure encompassing our various business groups.
-We have added external advisors as members of the committee, in order to ensure greater objectivity and a top-down approach to implementation.
