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 ． Progress of V Plan 2017 (Long term Plan) Reference ; New housing starts forecast 2 October, 2009 Today, we will be covering the topics you can see here. 2

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. 3 October, 2009 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 organization and a reduction in the number of items. 3

FY 2009 First Half Financial Result ※ ¥ billion, rounded down FY08 1H FY09 1H YoY Plan Result Result Difference (Revised on 9/30) -29.3 220.0 204.6 Net Sales 233.9 (205.0) (-13%) -5.3 -1.5 -1.5 Operating Profit 3.8 (-2.2) -5.5 -2.0 -1.5 Recurring Profit 4.0 (-1.7) -0.9 7.4 Extraordinary Loss -8.3 0 -4.0 ± 0 -4.6 Net Profit -4.6 (-5.0) Decreased in sales and profit 4 October, 2009 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.

Sales by Business Segment ( )= （ ‘09 1H Result ） （ ‘08 1H Result ） YoY Growth （ ¥ Billion ） 233.9 204.6 (-13%) 250 33.8 200 26.6 (-21%) 4.4 2.7 (-38%) 150 121.1 115.0 (- 5%) 100 Overseas 50 New Business and Others 74.6 60.3 (-19%) Remodeling New Housing 0 FY08 1H Result FY09 1H Result New Housing Starts 540 thousands 400 thousands (-27 %) (Jan. - June) Demand based 520 thousands 460 thousands (-11 %) on delivery time 5 October, 2009 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.

Sales per Products -YoY Growth FY09 1H Result Products 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% TOTAL -13% Sales for all the products decreased impacted from demand decline 6 October, 2009 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.

Cause of Increase/Decrease of Operating Profit ※ Y billion, rounded down FY09 1H FY09 1H Cause of Increase/Decrease Plan Result +1.5 +1.5 Positive Cost Reduction Factors Decrease in SG&A +1.1 +5.9 +0.7 +0.9 Decrease in material prices +0.3 +0.5 Price Revision Hold down sales activities -1.0 +0.4 -1.1 -4.5 Negative Decraese in New housing sales -0.6 -2.1 Factors Decrease in Remodeling Sales Decrease in overseas sales -1.7 -1.8 -1.5 Increase in general products/Decrease in sales prices -1.5 -1.2 -2.9 Loss from decrease production due to furlough etc. Cost increase in allowance for retirement due to -0.6 -0.7 decrease in interest income -1.1 -1.0 Others -5.3 Total -5.3 7 October, 2009 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 of 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.

Cause of Increase/Decrease of Operating Profit ＜ Performance in local currency ＞ (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% 14.4 10.1 -30% 136 105 -23% Total sales including internal trades 1.0 0.3 -65% 9 4 -61% Operating Profit （ Exchange rate JPY/US$ ） 106.42 96.01 ＜ Performance in local currency ＞ (Unit: Y billion, rounded down) (Unit: Hundred Chinese yuan, rounded down) China '08/1H '09/1H YoY difference '08/1H '09/1H YoY difference 11.8 10.5 -11% 7.6 7.5 -2% for external customers 18.3 15.1 -17% 11.8 10.7 -9% Total sales including internal trades Operating Profit 3.0 2.7 -10% 1.9 2.0 +5% 15.51 13.22 North & Central America : Decreased (Exchange rate JPY/Chinese Yuan) in sales and profit impacted from sharp (Unit: Y billion, rounded down) decrease in demand and strong yen. Others '08/1H '09/1H YoY difference China: Though sales for external for external customers 5.5 5.1 - 9% customers (sales in China) were healthy, 11.3 9.5 -16% Total sales including internal trades decreased compared to former year as sharp increase in first half of FY08 for 0.4 -0.1 - Operating Profit Olympic demand. Total sales decreased (Unit: Y billion, rounded down) as export for Japan and U.S. decreased. TOTAL '08/1H '09/1H YoY difference Others (Europe): Invested for 31.7 25.7 -19% for external customers marketing and attending big trade show. Total sales including internal trades 44.0 34.7 -21% 4.5 2.9 -35% Operating Profit 8 October, 2009 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.