Explanatory Meeting for the Third Quarter Ended December 31, 2013 Outline of Answers to Main Questions
Q: The sales forecast for the mining machinery for FY 2013 was revised down, and what are the grounds for the revision? And have you received any order cancellations and requests for delivery date extension in the third quarter?
A: We received older cancellations of two confirmed orders that we determined in the end of the second quarter in Indonesia etc. We revised down the demand forecast for mining machinery by over 40% from last year, because many of business opportunities under negotiation have not progressed much due to a delay and cancellation in delivery, and demand environment for mining machinery remain weak. Based on the volume of confirmed orders as of the end of the third quarter, we made a downward revision of 17 billion yen in the mining sales forecast of FY 2013 announced in October 2013, to 128.5 billion yen.
Q: What would be the breakdown of Inventory, which increased by 39.9 billion yen from the end of last fiscal year to 354.8 billion yen?
A: Unit inventory increased by 8.7 billion yen from the end of last fiscal year to 119.7 billion yen. Among them, inventory of mining machinery accounts for 33 billion yen and it was decreased from the end of the last fiscal year, but since we increased the volume of stocks for China and Japan where demand is strong, inventory of the unit in the area of construction machinery increased. Parts inventory increased by 18.3 billion yen compared with the end of the last fiscal year to 115.4 billion yen. Among them, parts for mining machinery increased by approximately 17billion yen from the end of last fiscal year to 66 billion yen. This is because mining parts sales decreased along with a decline in machine utilization, while long lead item has been stocked.
Q: What would be the degree of foreign exchange sensitivity?
A: For the foreign exchange sensitivity on Operating Income in the forecast of the fourth quarter, we expect fluctuation of 1 yen in USD to have 240 million yen impact, 70 million yen for EUR, and fluctuation of 0.1 yen in RMB to have a 150 million yen impact. The foreign exchange rate impact on the actual of the end of the accumulated third quarter from Apr 1 to Dec 31 is, +59.7 billion yen year on year in Net Sales, +27.5 billion yen year on year in Operating Income. Also, forecast for the impact for the entire FY 2013 is, +76.6 billion yen year on year in Net Sales, and +39.5 billion yen year on year in Operating Income.