SLIDE 1
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1
October, 2009
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October, 2009
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Fiscal Year 2009 First Half Result and Second Half Plan October 30, - - PDF document
Fiscal Year 2009 First Half Result and Second Half Plan October 30, - - PDF document
Fiscal Year 2009 First Half Result and Second Half Plan October 30, 2009 October, 2009 1 1 1 Financial Result for First half of FY2009 Contents 2 FY2009 Full Year Financial Plan 3 First half Results and Second half Measures 2
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SLIDE 3
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October, 2009
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Summary of FY 2009 1H Financial Results
Sales and profit decreases resulted in an overall loss The fall in operating profit from lower sales was partially offset with cost and SG&A cuts
- Sales for new housing fell substantially as demand for new homes remained weak.
- Sales for the Remodeling Business fell year on year, with no clear signs of a recovery
in remodeling demand.
- Overseas sales dipped substantially below the year-ago level in the period following
the financial crisis, reflecting the sharp fall in demand in the United States and the stronger yen.
- Operating profit of 1.5 billion yen was achieved in 1H, in spite of an operating loss of
3 billion yen posted in the first quarter.
- Inventory cuts were larger than originally planned, thanks to reviews of the
production organization, including a reduction in the number of items.
Results for the first half of fiscal 2009 were disappointing, with declines recorded in both sales and profit, and a net loss posted for the term. In Japan, sales for new housing fell significantly from the year-ago period, reflecting weak demand for new homes. Remodeling demand also cooled, influenced by sluggish domestic consumption, with the result that sales from the Remodeling Business were also down year on year. The stronger yen affected our results in overseas markets, as did the rapid deterioration in U.S. demand conditions in the aftermath of the financial crisis. The business downturn also affected our performance in Asian markets. As a consequence, overseas sales fell short of the previous year’s level. The Group was able to absorb the effects of the sales decrease on operating profit to a certain extent with inventory downsizing through across-the-board reviews of our production organization, comprehensive cost-cutting, and savings through initiatives such as temporary releases from work and wage cuts. We achieved a first-half operating profit of 1.5 billion yen, reversing the operating loss of 3 billion yen posted in the first quarter. The Group also exceeded its plan in inventory cuts, through a rigorous review of its production
- rganization and a reduction in the number of items.
SLIDE 4
October, 2009
4
FY08 1H Net Sales 233.9 220.0 (205.0)
204.6
- 29.3
(-13%)
Operating Profit 3.8
- 1.5
(-2.2)
- 1.5
- 5.3
Recurring Profit 4.0
- 2.0
(-1.7)
- 1.5
- 5.5
Extraordinary Loss
- 8.3
- 0.9
7.4
Net Profit
- 4.6
- 4.0
(-5.0)
- 4.6
± 0
Result
YoY Difference
Result FY09 1H Plan
(Revised on 9/30)
FY 2009 First Half Financial Result
※¥ billion, rounded down
Decreased in sales and profit Our results for the first half of fiscal 2009 are shown in the table.
Net sales fell 13% year on year, to 204.6 billion yen. Operating profit fell 1.5 billion yen. Recurring profit declined 1.5 billion yen. We posted an extraordinary loss of 0.9 billion yen. And as a result, the Group posted a net loss of 4.6 billion yen.
SLIDE 5
October, 2009
5
60.3
74.6
115.0
121.1 4.4
2.7
33.8
26.6
50 100 150 200 250
FY08 1H Result FY09 1H Result
Overseas New Business and Others Remodeling New Housing （‘08 1H Result）
233.9
（‘09 1H Result）
204.6
（¥ Billion）
Sales by Business Segment
(-21%) (-38%) (- 5%) (-19%)
( )= YoY Growth
(-13%)
New Housing Starts (Jan. - June) Demand based
- n delivery time
540 thousands 400 thousands (-27 %) 520 thousands 460 thousands (-11 %)
Looking at sales for segments including new housing, remodeling, new business and others, as well as overseas, sales for the new housing segment fell 19% year on year, to 60.3 billion yen, reflecting the impact of severe declines in demand for new homes. Sales for the remodeling segment were down 5% year on year, to 115 billion yen, as weaker business confidence countered our efforts to communicate value to customers and to stimulate demand that focused on remodeling club stores. Sales for the new business and others segment dropped 38%, to 2.7 billion yen, attributable to a steep fall in ceramics sales associated with capital investment controls in the semiconductor industry. Finally, sales for the overseas segment was down 21% from the year-ago period, to 26.6 billion yen. This was primarily the result of sharp falls in sales in the United States and Asia, which reflected rapidly worsening demand conditions.
SLIDE 6
October, 2009
6
Sales per Products -YoY Growth
Sales for all the products decreased impacted from demand decline
FY09 1H Result
YoY increase/decrease
Sanitaryware
- 11%
Washlet
- 12%
Restroom Products
- 12%
Bathroom
- 13%
Fittings
- 11%
Modular Kitchen
- 16%
Lavatory
- 10%
Bath/Kitchen Products
- 13%
Ceramics
- 59%
- 13%
TOTAL Products Looking at sales by product, several products enjoyed growing demand thanks to their popularity with customers. These included the Octave series of lavatory dressers, released in February and featuring a sink and improved storage capacity. However, sales were down year on year for all product types, a reflection of sluggish demand.
SLIDE 7
October, 2009
7
FY09 1H Plan FY09 1H Result
Positive Cost Reduction
+1.5 +1.5
Factors Decrease in SG&A
+1.1 +5.9
Decrease in material prices
+0.7 +0.9
Price Revision
+0.3 +0.5
Hold down sales activities
- 1.0
+0.4
Negative Decraese in New housing sales
- 1.1
- 4.5
Factors Decrease in Remodeling Sales
- 0.6
- 2.1
Decrease in overseas sales
- 1.7
- 1.8
Increase in general products/Decrease in sales prices
- 1.5
- 1.5
Loss from decrease production due to furlough etc.
- 1.2
- 2.9
Cost increase in allowance for retirement due to decrease in interest income
- 0.6
- 0.7
Others
- 1.1
- 1.0
- 5.3
- 5.3
Total Cause of Increase/Decrease
※Y billion, rounded down
Cause of Increase/Decrease of Operating Profit
Looking now at factors that had a positive impact on operating profit, cost reductions reached 1.5 billion yen as projected. Cuts in expenses meanwhile exceeded our forecast to reach 5.9 billion yen, the result of Group-wide efforts to reduce manufacturing and related costs, and also to lower selling, general and administrative expenses. The Group also cut investments to boost sales by 0.4 billion yen, for instance by postponing outlays that were unlikely to produce immediate effects given weak demand. The effects of lower raw material prices amounted to 0.9 billion yen, including the impact of the lower copper price. Negative factors for operating profit were as follows. Operating profit fell on lower new housing and remodeling sales, with effects
- f 4.5 billion yen and 2.1 billion yen, respectively.
The impact of the decline in production associated with inventory-reducing activities and temporary releases from work totaled 2.9 billion yen. As a result, operating profit declined 5.3 billion yen from the first half of the previous fiscal year.
SLIDE 8
October, 2009
8
(Unit: Y billion, rounded down) (Unit: $ million, rounded down)
North & Central America
'08/1H '09/1H YoY difference '08/1H '09/1H YoY difference
for external customers
14.4 10.1
- 30%
135 105
- 23%
Total sales including internal trades
14.4 10.1
- 30%
136 105
- 23%
Operating Profit
1.0 0.3
- 65%
9 4
- 61%
（Exchange rate JPY/US$）
106.42 96.01
(Unit: Y billion, rounded down) (Unit: Hundred Chinese yuan, rounded down)
China
'08/1H '09/1H YoY difference '08/1H '09/1H YoY difference
for external customers
11.8 10.5
- 11%
7.6 7.5
- 2%
Total sales including internal trades
18.3 15.1
- 17%
11.8 10.7
- 9%
Operating Profit
3.0 2.7
- 10%
1.9 2.0 +5%
(Exchange rate JPY/Chinese Yuan)
15.51 13.22
(Unit: Y billion, rounded down)
Others
'08/1H '09/1H YoY difference
for external customers
5.5 5.1
- 9%
Total sales including internal trades
11.3 9.5
- 16%
Operating Profit
0.4
- 0.1
- (Unit: Y billion, rounded down)
TOTAL
'08/1H '09/1H YoY difference
for external customers
31.7 25.7
- 19%
Total sales including internal trades
44.0 34.7
- 21%
Operating Profit
4.5 2.9
- 35%
North & Central America : Decreased in sales and profit impacted from sharp decrease in demand and strong yen. China: Though sales for external customers (sales in China) were healthy, decreased compared to former year as sharp increase in first half of FY08 for Olympic demand. Total sales decreased as export for Japan and U.S. decreased. Others (Europe): Invested for marketing and attending big trade show.
＜Performance in local currency＞
Cause of Increase/Decrease of Operating Profit
＜Performance in local currency＞
The table you see here shows the status of our overseas businesses. United States: Sales were down sharply, falling 23% on a local currency basis and 30% on a yen basis, reflecting the effects of exchange rate fluctuations. China: Sales to external customers fell 2% on a local currency basis, and 11% on a yen basis, influenced by exchange rate fluctuations. A substantial sales boost in the first half of the previous fiscal year attributable to the Beijing Olympics was the primary factor in the year-on-year sales declines. Actual performance in this market remained strong. Other areas: We invested in trade shows and marketing activities in Europe, where the Group launched full-scale operations during the year.
SLIDE 9
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October, 2009
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1．Financial Result for First half of FY2009 2．FY2009 Full Year Financial Plan
Contents
3．First half Results and Second half Measures 2．Progress of V Plan 2017 (Long term Plan) Reference ; New housing starts forecast
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October, 2009
10
Summary of FY 2009 Full-Year Plan
Sales and profit forecasts have been revised downward, and a net loss is anticipated for the second consecutive year, given a slow recovery in domestic and overseas demand.
- The sales forecast has been revised from 455 billion yen to 418 billion yen, and the
- perating profit forecast from 6.5 billion yen to 5 billion yen.
(2H operating profit is expected to rise from 2.6 billion yen in FY2008 to 6.5 billion yen in FY2009.) The FY 2009 net profit forecast has been revised from 2 billion yen to a loss of 1 billion yen.
- Net sales for new housing now forecast to fall 21% year on year, given sharp drops
in housing starts.
- Net sales for the Remodeling Business should decline 3% year on year, with a slow
recovery in demand offsetting efforts to stimulate the market for this Business through new product introduction and sustained sales measures.
- Overseas sales are likely to drop 8% year on year, as the rebound in the United
States and other markets takes longer than originally anticipated.
- Minimize the operating profit decline by sustaining efforts to reduce costs and
lower SG&A.
The Group is revising downward both net sales and profits forecasts in its fiscal 2009 full-year plan. This is based on our expectation that a recovery in demand in Japan and overseas will take more time than initially anticipated. We now expect full-year sales for new housing to decline 21% year on year, in light of the steep fall in housing starts, which is likely to continue into the second half. We predict full-year sales for the Remodeling Business will slip 3% year on year, as the slow restoration of demand offsets our efforts to stimulate the market for this Business through new product introduction and sustained sales measures. Demand is picking up overseas, but the pace of recovery is showing signs of slowing in the United States and other markets. In view of this trend, we forecast that overseas sales will fall 8% year on year. We aim to minimize the scale of declines in operating profit by continuing efforts to reduce selling, general and administrative expenses, while taking steps to lower manufacturing costs. Through these initiatives, we plan to increase our profit in the second half of the current fiscal year.
SLIDE 11
October, 2009
11
YoY 1H 2H Increase Result Plan Decrease Net Sales
464.5 455.0 204.6 213.4 418.0
- 46.5
(-10%)
Operating Profit
6.5 6.5
- 1.5
6.5 5.0
- 1.6
(-24%)
Recurring Profit
5.9 6.0
- 1.5
5.5 4.0
- 1.9
(-33%)
Extraordinary Loss
- 20.4
- 0.9
- 0.5
- 1.4
+19.0
Net Profit
- 26.2
2.0
- 4.6
3.6
- 1.0
+25.3
Total FY09 FY09 Original Plan FY08 Result Revised Sales and profit downward
FY 2009 Full Year Financial Plan
※¥ billion, rounded down
We have revised our forecasts for the full year as shown in the table. Specifically, we expect net sales to fall 10% year on year, to 418 billion yen. Operating profit is now forecast to fall 24%, to 5 billion yen. We expect recurring profit to decline 33%, to 4 billion yen. And we anticipate an extraordinary loss of 1.4 billion yen. Based on these figures, we are now predicting a net loss of 1 billion yen for the year.
SLIDE 12
October, 2009
12
119.4 152.0 239.0 245.8 7.7 5.6 59.0 54.0
100 200 300 400 500
FY08 Result FY09 Plan Overseas New Business and Others Remodeling New Housing （FY09 Plan）
418.0
（¥ Billion）
Sales by Business Segment (Full year Plan)
（FY08 Result）
464.5
(-8%) (-27%) (-3%) (-21%)
( )= YoY Growth
(-10%)
Expect New Housing Starts to decrease
1.09million 0.8million (-27%) 1.07million 0.9million （-16%） New Housing Starts (Calendar Year) Demand based
- n delivery time
This graph shows our net sales forecast by business segment. The Group originally estimated that housing starts would total 950,000 in fiscal 2009. Given the sharp fall in new housing activity, we have revised this figure to 800,000. Together with this change, we changed our net sales forecast for new housing to 119.4 billion yen, down 21% from the previous fiscal year. Demand in the Remodeling Business is recovering, albeit at a pace that is slower than originally anticipated. In view of this, we expect net sales for the Remodeling Business to fall 3% year on year, to 239 billion yen. Improvements in overseas markets are also likely to be slow, and so we revised our full-year net sales forecast for the overseas segment to 54 billion yen, a decrease of 8% from the previous fiscal year.
SLIDE 13
October, 2009
13
FY09 Plan
YoY
Sanitary ware
- 5%
Washlet
- 7%
Restroom Products
- 7%
Bathroom
- 15%
Fittings
- 11%
Modular Kitchen
- 15%
Lavatory
- 10%
Bath/Kitchen Products
- 13%
Ceramics
- 40%
- 10%
TOTAL Products Sales per Products -YoY Growth (Full year Plan)
This table shows our net sales forecast by product. We plan to limit the year-on-year net sales decline for restroom products to 7%, through more aggressive actions to boost remodeling demand with products centering on those in the new NEOREST Hybrid series, which we released in August. In the meantime, we expect that net sales for bathroom products and modular kitchens will fall 13% year on year, primarily the result of a substantial decrease in condominium starts.
SLIDE 14
October, 2009
14
Continue to reduce SG&A
※Y billion, rounded down
Cause of Increase/Decrease of Operating Profit
FY09 Original Plan
FY09 Revised Plan
Positive Cost Reduction +3.7
+3.9
Factors Decrease in SG&A +3.4
+11.0 Decrease in material prices
+1.5
+1.3 Price Revision
+1.0
+1.1 Hold down sales activities
±0
+2.2
Negative Decraese in New housing sales
- 4.1
- 10.1
Factors Decrease in Remodeling Sales
+1.8
- 2.2
Decrease in overseas sales ±0
- 1.3
Increase in general products/Decrease in sales prices
- 2.9
- 2.3
Loss from decrease production due to furlough etc.
- 2.0
- 3.0
Cost increase in allowance for retirement due to decrease in interest income
- 1.2
- 1.4
Others
- 1.2
- 0.9
±0
- 1.6
Total
Cause of Increase/Decrease
This table shows factors that could cause our operating profit to fluctuate. On this occasion, we revised our forecast for full-year operating profit to a fall of 1.6 billion yen from the previous fiscal year. Positive factors anticipated for operating profit include cost savings of 3.9 billion yen, a reduction in expenses of 11 billion yen and cuts in investments to boost sales of 2.2 billion yen. We will continue these and other efforts to reduce expenses. However, we anticipate that operating profit will be strongly affected by likely negative factors, including a decline in new housing sales of 10.1 billion yen, a fall in remodeling sales of 2.2 billion yen, and a drop in
- verseas sales of 1.3 billion yen.
SLIDE 15
October, 2009
15
(Unit: Y billion, rounded down) (Unit: $ million, rounded down)
North & Central America
FY08 Results FY09 Plan YoY difference FY08 Results FY09 Plan YoY difference
for external customers
24.0 19.8
- 17%
263 220
- 16%
Total sales including internal trades
24.0 19.8
- 17%
264 220
- 16%
Operating Profit
1.8 1.1
- 40%
20 12
- 40%
（Exchange rate JPY/US$）
91.03 90.00
(Unit: Y billion, rounded down) (Unit: Hundred Chinese yuan, rounded down)
China
FY08 Results FY09 Plan YoY difference FY08 Results FY09 Plan YoY difference
for external customers
21.9 22.6 +3% 16.6 16.8 +1%
Total sales including internal trades
33.5 31.4
- 6%
25.4 23.3
- 8%
Operating Profit
5.9 6.2 +4% 4.5 4.6 +2%
(Exchange rate JPY/Chinese Yuan)
13.22 13.50
(Unit: Y billion, rounded down)
Others
FY08 Results FY09 Plan YoY difference
for external customers
10.1 11.8 +17%
Total sales including internal trades
19.5 20.8 +7%
Operating Profit
1.1
- 0.1
- (Unit: Y billion, rounded down)
TOTAL
FY08 Results FY09 Plan YoY difference
for external customers
55.9 54.2
- 3%
Total sales including internal trades
77.1 72.0
- 7%
Operating Profit
8.8 7.1
- 19%
North & Central America：Decrease in profit as decrease in sales China：Increase in sales for external customers (domestic sales) while export sales decrease. Maintain the profit level by working on cost reduction. Others (Europe): Revised sales plan downward due to delay in product launch.
＜Performance in local currency＞
Cause of Increase/Decrease of Operating Profit
＜Performance in local currency＞
We think that both net sales and profit will decrease in the United States, where demand remains anemic. We expect net sales will rise 1% on a local currency basis in China, taking into account risks such as the effects of the financial crisis. We forecast
- perating profit of 0.46 billion yuan, as initially projected, and will improve
the figure on a yen basis through Group-wide cost-cutting activities. In other regions, we are steadily advancing our efforts to develop sales networks in Europe. At the same time, we are delaying our product releases in Europe to make minor modifications needed to achieve wider acceptance. For this reason, we have revised our net sales forecast for the region.
SLIDE 16
October, 2009
16
FY09 P FY09 Plan an 1H 1H ¥5. ¥5.0 2H 2H ¥5. ¥5.0 Ful Full Y Year ¥10 ¥10.0
Dividend per Share
Keep the dividend plan for 10yen We have made no change to the dividend plan we originally announced. Namely, we will continue with our plan to pay dividends totaling 1 billion yen in fiscal 2009, including interim dividends of 5 yen per share and year-end dividends of 5 yen per share.
SLIDE 17
17
October, 2009
17
1．Financial Result for First half of FY2009 2．FY2009 Full Year Financial Plan
Contents
3．First half Results and Second half Measures 2．Progress of V Plan 2017 (Long term Plan) Reference ; New housing starts forecast
SLIDE 18
October, 2009
18
67.2 66.7 55.9 495 509 490
40 45 50 55 60 65 70 07.03 08.03 09.03 09.09 10.03 10.03 Inventories (billion yen)__
Inventory reducing activities
1H -6.4
(Initial plan) (Revised plan) FY09 1H result FY09 2H plan
Labor expenses (salary cuts for management position holders, overtime controls, etc.)
2.5 1.9
Indirect expenses (reduction in traveling, communications and other expenses)
1.6 2.4
Sales promotion expenses (reduction in advertising, showroom and other expenses)
0.4 1.8
V ariable cost reduction in response to sales decline
1.8 0.8
Total
6.3 6.9
Profit improvement (year-on-year basis)
Cost reduction (primarily manufacturing cost reduction) SG&A expenses reduction
Individual initiatives Sanitary ware, fittings and washlets Reduction in the number of items: 15% in
- Mar. 09 and 23% in Sep. 09, compared with
the Mar. 08 level Modular kitchens Inventory reduction with shortened production lead time 30% in Sep. 09, compared with the Sept. 08 level
Initiatives for Consolidating Our Financial Position
2H plan -0.5 Controlled cost in response to a sales decline and reduced SG&A expenses 8% in 2Q (July to September).
FY09 1H result FY09 2H plan Purchasing cost reduction
1.2 1.8
Production streamlining
0.2 0.4
Business withdrawal
0.1 0.2
Total
1.5 2.4
(Billion yen) (Billion yen)
I would like to talk about the actions we have taken to improve profit and reduce inventory, as initiatives to consolidate our financial position. To improve profit, we are reducing costs, primarily by cutting purchasing costs. To lower selling, general and administrative expenses, we have introduced measures such as reducing labor expenses through salary cuts for management and overtime controls, cutting indirect expenses with reductions in traveling and communications expenses, and lowering sales promotion expenses. We effectively controlled our costs in response to the fall in net sales, and reduced selling, general and administrative expenses by 8% in the second quarter. We also lowered the breakeven cost to sales ratio by 10 points. We significantly downsized the volume of modular kitchens in stock by shortening production lead time and taking other steps, while reducing inventories of sanitary ware, fittings and washlets, which had been our focus. With these measures, in the first half we were able to reduce inventory by an amount greater than the 5 billion yen set as the target for March 2010. We plan to reduce inventories by another 0.5 billion yen in the second half.
SLIDE 19
19
October, 2009
19
Group Activities for Stimulating Remodeling Demand
Chain of activities for knowing, communicating and connecting the value and attractiveness of remodeling Connecting: knowledge through the introduction system
- Remodeling sites
- Voices of delighted customers
Knowledge through education
- Activity
- bjectives
- Commodities
- Business flows
- Introduction system
- Customer service
styles
- What is remodeling?
Target: Stimulating long-term remodeling demand through concerted efforts Giving all employees the ability to communicate the value and attractiveness of remodeling to anyone, at any time and any place Plan to keep holding two fairs a year at each plant H1 Result: Held at 14 venues in Japan Total turnout: approx. 30,000
Communicating: knowledge through remodeling fairs in plants
- Customer response to commodities
- Clerks at remodeling club stores
- Jobs at remodeling club stores
Next, I would like to talk about the progress with Group-wide activities to stimulate remodeling demand. We launched these activities during the current fiscal year, and they are long-term
- initiatives. Through this initiative, we seek to improve awareness among all our
employees, including those not usually involved in sales, about the value and attractiveness of remodeling, communicating this value and appeal to customers and acquaintances, and stimulating demand. Our goal through these activities is to enable all employees to communicate the value and attractiveness of remodeling, to anyone in any time and any place. During the first half, we organized remodeling fairs at 14 plants in Japan. Approximately 30,000 people visited these fairs. The fairs gave employees the opportunity to inform their friends and local residents about TOTO and the attractiveness of remodeling. They also allowed our plant employees, who would normally have no contact with customers, to deepen their understanding of remodeling by explaining its value and attractiveness verbally. We plan to continue these activities and hold two fairs at each plant every year.
SLIDE 20
October, 2009
20 0% 5% 10% 15% 20% 25% 30% 07 H1 08 H1 09 H1
Overseas Businesses: North and Central America
Business conditions in the United States
Housing demands remain sluggish. Demand for high-end housing and commercial properties is likely to remain weak, in spite of minor movements seen in the low-end housing market attributable to factors such as interest rate falls, declining housing prices, and federal government measures to encourage home buying.
TOTO’s strategy
Changes in the ratio of 4.8L toilet bowls to all toilet bowls sold
2% 25% 12%
Demand has been weak, but products with strong features are enjoying growth.
Boost efforts to promote the sales of eco-friendly commodities, our strength. Shipments of 4.8L water-saving toilet bowls rose sharply in a weak market.
I would now like to move on to explain our overseas businesses. To begin, housing demand in the United States remains weak. In this environment, TOTO is continuing to promote sales of ecological products, an area of strength for the Company. With stronger sales promotion, we are winning high marks among customers with
- ur 4.8L water-saving toilet bowls.
This popularity has meant that shipments of these toilet bowls as a percentage of all toilet bowls shipped is rising rapidly each year. We plan to continually step up our efforts to promote sales of eco-friendly products such as water-saving showers, in which TOTO excels, in addition to boosting sales of 4.8L toilet bowls.
SLIDE 21
21
October, 2009
21
Business conditions in China
Overseas Businesses: China
(1) Promoting water-saving toilet bowls (2) Promoting sales of washlets, a priority commodity The economy is recovering China’s GDP expanded 7.9% in 1H, a substantial increase from 6.1% in FY08 1H. The Chinese government expects the country’s economy to grow at a rate of 8% in FY 09. However, exports have been declining at a rate in excess of 20%. There are also additional causes for concern in China, including the durability of the effects on domestic demand produced by large-scale government measures to stimulate the economy and ease credit. Fiercely competitive environment to continue Competition is intensifying among companies operating in China. They are scrambling for market share and for agents. TOTO aims to continually differentiate itself from competitors by introducing products that incorporate its strength in high-end markets, where European companies are escalating competition with aggressive sales.
TOTO’s strategy
TOTO products won first and second place in a washing power evaluation test conducted by a Chinese architectural decoration association
- n 83 domestic and imported toilet bowls at
the end of September. Shipments of washlets surged at the year-on-year rate of 15% in
- 1H. Promoting sales of washlets
further in 2H through campaigns, etc.
The Chinese economy is recovering. However, competition in the Chinese market for bathroom products is intensifying, given aggressive sales efforts by European companies and other factors. In this environment, TOTO is continuing to promote sales of its water-saving toilet bowls and washlets, where it excels. A Chinese architectural design association conducted a washing power evaluation test on water-saving toilet bowls in September 2009. TOTO’s products won first and second places in the test. We will step up efforts to communicate to distributors and customers the excellent reputation that TOTO’s technological capabilities enjoy. Thanks to stronger promotional activities, washlet shipments also grew at an impressive year-on-year rate of 15% in the first half.
SLIDE 22
22
October, 2009
22
Overseas Businesses: Europe
Marketing strategies
Establishing a classy brand image for TOTO by taking advantage of showrooms for high-end products (1) Developing distribution networks for high-end products Successfully introducing TOTO to facilities used by high-end consumers (2) Activities to install products in high-end facilities in key cities focused on sales bases
Long-term strategies for establishing the brand and achieving growth are making steady progress.
- Distributors contracted or under
negotiation in Europe total 200.
- We are expanding our sales networks
steadily. A Neorest Suite display example at a German showroom for distributors
- Steady results according to the plan to supply products to 50 high-grade sites in
Europe by the end of 2010
Our basic strategies in Europe are to develop distribution networks for high-end markets and to provide our products to well-known facilities in key cities such as Paris and London. We are developing our distribution networks at a steady pace. We have contracted or are in negotiation with 200 distributors. We are also displaying TOTO products in order of release at our showrooms for distributors in Europe. Precise points for product improvements for European consumers have begun to be identified in the course of communicating with local distributors. We are delaying product releases in Europe to ensure broader acceptance of our products by modifying specifications and other aspects. We are aiming to supply our products to 50 high-grade sites by the end of 2010. The number of such sites being supplied with TOTO products, including hotels and restaurants, has been steadily increasing.
SLIDE 23
23
October, 2009
23
1．Financial Result for First half of FY2009 2．FY2009 Full Year Financial Plan
Contents
3．First half Results and Second half Measures 2．Progress of V Plan 2017 (Long term Plan) Reference ; New housing starts forecast
SLIDE 24
24
October, 2009
24
V Plan: Reinforcing the Foundations: Progress (1)
Plant restructuring Implementing “production organization reforms” to strengthen operations in a changing market Fittings Plant (Apr. 2010 ) Moving some of the lines at Oita Plant to Kokura No.2 Plant for consolidation Operating rate: 80% ⇒ 95% Effect: 500 million yen a year Transfer of Nakatsu Plant to a Group company (Apr. 2010) Shiga Plant Nakatsu Plant
Transferred to TOTO SANITECHNO in Apr. 09
Scheduled for transfer to TOTO SANITECHNO in Apr. 10 Starting in 10 H1
Improving manufacturing quality and cutting manufacturing costs further
I would like to start by describing our activities to strengthen the foundations of
- ur business.
We are undertaking a series of production organization reforms to bolster our ability to operate in a changing market. As the first step, we transferred our sanitary ware manufacturing plant in Shiga to TOTO SANITECHNO, a Group manufacturer, this April. Following this, we will transfer the Nakatsu Plant to Sani Techno in April 2010. We will use these transfers to improve manufacturing quality and further reduce
- ur manufacturing costs.
As we announced in August, we are also preparing to relocate some of the lines at our fittings plant in Oita to the Kokura No. 2 Plant. This should achieve costs savings of approximately 500 million yen a year.
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October, 2009
25
V Plan: Reinforcing the Foundations: Progress (2)
Reforms to logistics center operations
Retirement: 80 million yen (old facility removal from 09 2H) Retirement: 80 million yen (old facility removal from 09 2H) Investment: 300 million yen (facility and system buildup from 09 2H) Investment: 300 million yen (facility and system buildup from 09 2H)
Effect: 500 million yen a year
Starting in Sep. 2010
Previous practice After improvement Order changes Order changes Changes in logistics conditions: decrease in material volume, trend toward small-lot orders due to reduced commercial inventories Two days before Shipping day: AM Shipping day: PM Day before Material arrival Material dispatch Material arrival Material dispatch
Dispatch Dispatch Inspection Inspection Transportation Transportation Dispatch Dispatch Inspection Inspection Transportation Transportation Dispatch Dispatch Inspection Inspection Transportation Transportation Dispatch Dispatch Inspection Inspection
Transportation Transportation
Dispatch Dispatch Inspection Inspection
Transportation Transportation
Dispatch Dispatch Inspection Inspection
Transportation Transportation
Shortening logistics lead times
(1) Reduced lead time for arrangements (1) Reduced lead time for arrangements (3) Reduced workload through deadline extensions for changes in orders (3) Reduced workload through deadline extensions for changes in orders (2) Productivity improvement through waste elimination at logistics centers (2) Productivity improvement through waste elimination at logistics centers
I would next like to explain the reforms we have made to our logistic center. Lots for incoming orders are becoming smaller, as a result of a decline in material volumes and cuts in commercial inventories. Efficiency is falling at logistics centers that were originally designed for mass shipments. To date, we have operated our logistics centers in a three-day cycle. They respond to order changes and other requests between operating periods. We will change this operating cycle to half a day, and slash lead times. With these changes, we will eliminate excess space reserved for dispatch preparations. Moreover, we will eliminate layaway articles and retained cases by extending hours for accepting order changes while responding to requests for these kinds of changes until the last minute. We plan to retire old facilities worth 80 million yen, and invest 300 million yen in system and facility buildups in connection with these logistics center reforms. We expect the reforms to reduce our logistics center expenses by approximately 500 million yen a year, starting in September 2010.
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October, 2009
26
Strengthening IT divisions
Strengthening TOTO’s information and planning division Bolstering functions through complete outsourcing to specialist IT companies
- Strengthening development capabilities as the common base for all Group
companies
- Reducing environmental footprint and costs through shared services
- Training IT specialists and using overseas development personnel effectively
TOTO’s IT division Group company’s IT division Group company’s IT division Group company’s IT division
Information and planning functions System development and
- peration
functions
- Restructuring for optimizing systems for all Group companies
- Realizing cross-sectional functions and enhancing governance
Restructuring internal communications systems Introducing cloud computing to
- verseas e-mails
Bring together and strengthen the information and planning functions of the TOTO Group, and outsource system development and operation entirely to external parties.
- Reducing operating costs with the introduction
- f package information-sharing tools
- Replacing mailing systems
- Establishing, teaching and spreading rules
Complete replacement by systems of the governance-enhancing type Simultaneous introduction of systems with cross-sectional functions Introducing a cloud computing-type mailing system at overseas bases Effect: 900 million yen a year
(Starting in Apr. 2013)
Effect: 200 million yen a year
Starting in Apr. 2012
Effect: 50 million yen a year
Starting in Apr. 2010
V Plan: Reinforcing the Foundations: Progress (3)
- Strengthening capacity to cope
with changes in business conditions
- Increasing security
- Reducing operating cost
TOTO IT Innovation Plan
As the third step, we launched the IT Innovation Plan. To strengthen our IT divisions, we will bring together the information and planning functions that have previously been dispersed among Group companies. At the same time, we will outsource system development and operation entirely to parties outside the Group. These measures should produce cost savings of 900 million yen a year. In an additional move, we will restructure our internal communications systems to improve governance and introduce cross-sectional functions. We will also establish systems that enable a speedy response to changes in business conditions, and we will reduce operating cost by introducing a mailing system of the cloud computing type to our overseas bases.
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Overseas Businesses: Achieving Further Growth
Establishing new plants abroad (for sanitary ware)
Europe
Middle East
India China
China: Expanding East China No.2 Plant
Operational launch : Feb. 2011 Expansion objective : for serving demands in China
Thailand: Establishing a manufacturing subsidiary
Company name : TOTO Manufacturing Thailand Operational launch : Jan. 2012 Establishing objective : Production for shipments to Europe, the Middle East and India
We will increase the number of overseas plants, anticipating long-term growth in
- ther countries.
To begin with, we will expand our East China Plant in Shanghai to meet demand in
- China. The expanded plant is scheduled to begin operation in February 2011.
In addition, we will set up a new manufacturing subsidiary in Thailand. This is a sanitary ware plant designed for exports to growing markets, such as India and the Middle East. The plant is expected to begin production in January 2012. This concludes our briefing today. Thank you very much for your attention.
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1．Financial Result for First half of FY2009 2．FY2009 Full Year Financial Plan
Contents
3．First half Results and Second half Measures 2．Progress of V Plan 2017 (Long term Plan) Reference ; New housing starts forecast
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29
◆ Demand based on delivery time (Fiscal Year) 1H(result) 2H(forecast) Full year(forecast) 0.46 million 0.44 million 0.90 million
- 11%
- 21%
- 16%
◆ TOTO's new housing sales (Fiscal Year) 1H(result) 2H(forecast) Full year(forecast) 60.3 billion 59.1 billion 119.4 billion
- 19%
- 24%
- 21%
◆ New Housing Starts（Calender Year） Original Forecast Revised Forecast 0.95 million 0.80 million
(YoY)
- 13%
- 27%
New Housings
SLIDE 30