Explanatory Meeting for the Second Quarter Ended September 30, 2016 Outline of Answers to Main Questions
Q: Please elaborate the factors of the year-on-year decrease of the revenue, for example, the impact of fluctuations in foreign exchange rates and the sales volume, etc.
A: The total revenue of the cumulative second quarter decreased by ¥30.2 billion year-on-year to ¥334.9 billion.The factors that affected the revenue were a decrease of ¥39.1billion attributable to fluctuations in the foreign exchange rate and an increase of ¥9 billion resulting from the increase in sales volume. Regarding the full-year revenue, we expect that it will be decreased by ¥58.3 billion year on year to ¥700 billion.The factors that affect the revenue are a decrease of ¥78 billion due to fluctuation in the foreign exchange rate and an increase of 19.7 billion in sales volume.
Q: Please let us know the breakdown of ¥6 billion of the restructuring reform expenses in FY2016 and the timing of booking.
A: Out of the ¥6 billion restructuring reform expenses incorporated in the initial plan at the beginning of this fiscal year, ¥2.9 billion was booked in the second quarter. These expenditures are mainly attributable to impairment loss incurred from facilities, etc. in connection with the sale of the Second Plant in Anhui Province, China. We plan to book the rest of the expenses during FY2016; however, we would like to refrain from making any comments at this point on the specific application of the expenses, the timing of booking, etc.
Q: Do you think the decline in demand for mining machinery has bottomed out? Please tell us about the order situation as well.
A: Regarding the mining machinery demand for the full year of FY2016, we forecast the demand for ultra-large hydraulic excavators will decrease by 10% year-on-year and the demand for dump trucks will decrease by 20% year-on-year, as there remain a large number of inactive dump trucks in the field. While a sign of increase in resource prices is observed at the moment, we forecast recovery of the demand may start in or after FY2017. As of October, ultra-large hydraulic excavators and dump trucks account for 60% and 50%, respectively, of the order backlog against the sales forecast of the last half of FY2016 (unit basis).
Q: The operating results seem favorable in the Indian market. Please explain its market environment and order status of the dealers.
A: Demand for hydraulic excavators in India is continuously on an upward trend underpinned by infrastructure investments such as railways and roads. The demand is expected to increase 50% year-on-year to over 16,000 units. Furthermore, an increasing number of ultra-large excavators are expected to be delivered in the last half of FY2016 for coal mining to generate electrical energy domestically and for quarries to provide gravel necessary for road construction, etc. All inventories is held by HCM, and the dealers do not have any inventory; therefore, the increase or decrease in demand directly affects the sales of the HCM consolidated group.
Q: Please let us know your thought behind the decision to set the interim dividend as ¥4 and the year-end dividend as “to be determined.”
A: ¥4 of the interim dividend has been determined in accordance with the policy set at the beginning of FY2016 to maintain the dividend payout ratio at around 30% or more. The same policy is applicable to the year-end dividend as well.