Explanatory Meeting for the Third Quarter Ended December 31, 2015 Outline of Answers to Main Questions
Q: Please let us know the detailed reasons for the revision in the earnings forecasts, sustained operating profit at ¥30 billion and reduced income before income taxes and significantly reduced net income attributable to the owners of the parent company.
A: The revenue is expected to fall below that of the previous forecast due to the worsening of the model mix and the decline of parts & service in the construction machinery, and the new machines’ sales in the mining machinery business. The operating profit is not expected to change due to the positive impact of the reduction of overhead costs although revenue will decline. We revised income before income tax downward due to the negative impact of the foreign exchange rate. Net income attributable to the owners of the parent company is also expected to be significantly lower than previous forecast due to the reduction of the tax effect, such as increase of the accounting tax due to increase of the taxable valuation reserves.
Q: Why did HCM suspend determining this fiscal year’s cash dividends per share at year end in accordance with the revision in earnings forecast?
A: We suspended determining the cash dividends per share at year end for this fiscal year because we have several unconfirmed factors, such as the possibility of having a significant impact to the net income due to the volume increase of the taxable reserves although we improved the cash flow.
Q: Please let us know the major contents of the actual restructuring cost of ¥14.2 billion up to Q3 and the possibility of exceeding ¥12.1 billon, forecasted cost for the full year.
A: Actual cost included ¥1.7 billion for the settled amount for the early retirement incentive program. In addition, we also counted the allowance for doubtful receivables, retrofit cost of stock machines and parts’ appraisal loss that occurred by retrofit and would like to refrain from showing each amount. For the full year, the early retirement incentive program is still open; consequently, there is a possibility of changing the total amount. When we close this program, we will immediately announce the result with detailed information.
Q: Regarding mining machinery, please let us know the backorder status and reason why HCM decreased the revenue forecast.
A: We mainly revised the revenue forecast of dump trucks downward because the order situation was slower than we expected on over 150t payload dump trucks, and we revised model mix as worse due to an increase of 50t payload dump trucks. We have 90% backorders of ultra large excavators’ forecast and 70% over of dump trucks in the revised Q4 revenue forecast.