Explanatory Meeting for the Third Quarter Ended December 31, 2014Outline of Answers to Main Questions
Q: Regarding the financial result of the third quarter, depreciation of the yen has positively affected the net sales and the operating income. Nonetheless, operating income ratio does not seem to have increased. What are the factors behind this?
A: Depreciation of the yen has certainly pushed up net sales and profits. However, the composition of net sales has deteriorated in terms of profits, mainly due to a decrease of sales in China, sales of medium-sized excavators in Japan, and sales of mining excavators. Consequently, the operating income ratio has remained at the same level as the second quarter.
Q: The sales plan for the fourth quarter estimates the sales lower than the actual sales of the third quarter and such of the year-ago fourth quarter. Please tell us the reason for this figure. In addition, how much impact on net sales and operating income in FY2014 full-year forecast is estimated by revision of the assumed exchange rate? (the assumed exchange rate: ¥100→¥115/$・¥134→¥135/€・¥16.3→¥18.0/Chinese yuan)
A: Regarding the sales plan for the fourth quarter, we estimate sales to be lower than the actual sales of the third quarter and the previous fiscal year. This is because we considered the downward risks that would negatively affect our sales, such as a further decrease of machinery demand in China, deterioration of business environment in regions with geopolitical risks, and a performance decline in our customers purchasing mining machineries. We estimate the revised exchange rate would positively affect ¥ 21.5 billion on net sales and ¥13.9 billion yen on operating income, both in the FY2014 full-year forecasts. Also, we estimate a positive impact of ¥4.7 billion on operating income of the fourth quarter.
Q: What is the reason for a significant decrease year-on-year in the mining machineries' sales of the third quarter? Also, how do you forecast the sales of mining parts and service business?
A: For mining machineries, delivery concerning the project in Australia was postponed from the third quarter to the fourth quarter. Accordingly, sales has decreased year-on-year. However, we have already achieved the amount of estimated machinery orders for the fourth quarter. The persistently low operating rate of delivered machineries has remained unimproved, although there are some differences depending on the regions, such as suspended mines, or mines with a high operating rate. Therefore, we expect more time is necessary for the overhaul demand to result in an increase of sales in the parts and service business.
Q: HCM announced to adopt IFRS from FY2015. Please let us know the estimated impact of IFRS application, if some figures are already available.
A: Since the IFRS application is scheduled in and after FY2015, currently, we may not provide an explanation about the actual impact of the IFRS application on the company. However, the following are the points of difference in accounting standards:
(1) Goodwill shall not be amortized; instead, it shall be recorded as impairment losses of the difference in values when it is damaged;
(2) Recycling of comprehensive income shall not be conducted for profit or loss of pension, and changes in the present value of the liabilities of the defined benefit plan. Accordingly, there is no burden of the depreciation for net profit or loss;
(3) Profit and loss shall not be recognized for sales of cross-held shares.