Nihon Keizai Shimbun reported on May 17th that JDI, a large-scale LCD company, was at a critical juncture in the rebuilding of its business. The company's consolidated financial statements for the fiscal year 2017 (as of March 2018) released on May 15 showed that the final profit and loss was a loss of 247.2 billion yen (a loss of 31.6 billion yen in 2016 fiscal year), making it the worst loss in history. Although the fiscal year 2018 (as of March 2019) is expected to become profitable, the competition between JDI and Chinese and South Korean companies has become increasingly fierce, and the road to reconstruction is still uncertain.
"The company that has become a profitable body through structural reforms", JDI President stressed the significance of the worst losses in history in the press conference held on the 15th. The main reason for the loss was the expansion of structural reforms. The loss of production equipment and inventory loss reached 143.7 billion yen.
However, due to the impact of four consecutive quarterly losses, the net assets that played a buffer role in sustaining losses were reduced to a total of 117 billion yen even after the April increase. The self-owned capital ratio, which shows security, fell to 17.8%.
What's more serious is the ability to earn cash. As major customers Apple iPhone X released in autumn 2017 using organic EL panels, JDI's LCD panel sales decreased. The operating cash flow showing the ability to earn cash from the main business was reduced by 700 million yen in FY2017 (an increase of 112 billion yen in fiscal year 2016). In 2017, the main business failed to make cash, and the capital turnover had to rely on financial institutions such as banks.
It is expected that JDI's sales in fiscal year 2018 will increase by 10-20% year-on-year, and its operating profit margin will be 2-3%. JDI Chief Financial Officer Oshima Takashi said that "the next fiscal year is expected to increase substantially." The company is looking forward to the new iPhone that Apple will release this fall. Due to the expectation that the shipment of LCD models will surpass that of organic EL models (the senior director of UK survey company IHS Markit), there is a voice in the market that “JDI will benefit from this”.
However, the competition between the current JDI and the Chinese panel makers whose technological capabilities are continuously improving is becoming more and more intensified. From January to March, sales to China mobile terminals accounted for 11% of JDI's total sales, which was a year-on-year decline of 18%.
The reason is that the demand for smart phone market in China is decelerating and the competition with Chinese panel makers is becoming increasingly fierce. Due to the "higher profit margin for panels for high-end smart phones in China than for Macs" (a senior analyst at UOB Securities, Nakayama Yasuo), these two factors have caused a huge blow to JDI.
In addition, China-US trade friction has also become a risk. The U.S. Department of Commerce has imposed sanctions on ZTE for prohibiting U.S. companies from trading with ZTE for the next seven years. ZTE smartphones have been forced to stop selling. The arrival of JDI President East indicated that the impact of ZTE’s sanctions on JDI sales amounted to “a few billion yen”. If the U.S. sanctions are extended to other Chinese manufacturers such as Huawei Technologies, the impact on JDI will further expand.
Get rid of the dependence on smart phones
On May 15th, JDI officially announced the personnel adjustment of Vice President Yoshizaki Yoshizaki. The former president of He Xiu Er will serve as a technical advisor. In order to realize the goal of turning profit and loss into profit in the 2018 fiscal year, the company will strengthen the vehicle-oriented business with the new system and get rid of the profit model that relies on smart phones.
Moonsaki will be the third president of JDI since its establishment in 2012 six years ago. JDI's senior personnel has always been in confusion. After the presidential election was announced in March 2017, it was withdrawn again in May, two months later. It should have served as president of the East to serve as the president, while President He Xiu has been re-elected.
Tsuyoshi Kawasaki served as the head of JDI's vehicle department as of March and has played a role in negotiations with European auto parts manufacturers. JDI's vehicle-mounted business such as instrumentation sales exceeded 100 billion yen for the first time in fiscal 2017. According to the British survey company IHS Markit, its global share ranks first.
The business of mobile terminals accounts for 80% of the total sales. The performance of JDI has been dominated by smart phones. In order to consolidate its profitability base, the company urgently needs to expand its in-vehicle operations that provide stable returns.
In addition, the organic EL business has also become a topic. In order to achieve mass production of organic EL panels, JDI has been exploring capital cooperation with Chinese companies, but negotiations on relevant conditions have reached an impasse and the deadline for the original deadline for March 2018 was postponed. The president of the East I.com.com reduced the tone, saying that "the trend of organic EL has changed, and the mass production investment with overseas partners will be judged on the basis of careful observation of the market."
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"The company that has become a profitable body through structural reforms", JDI President stressed the significance of the worst losses in history in the press conference held on the 15th. The main reason for the loss was the expansion of structural reforms. The loss of production equipment and inventory loss reached 143.7 billion yen.
However, due to the impact of four consecutive quarterly losses, the net assets that played a buffer role in sustaining losses were reduced to a total of 117 billion yen even after the April increase. The self-owned capital ratio, which shows security, fell to 17.8%.
What's more serious is the ability to earn cash. As major customers Apple iPhone X released in autumn 2017 using organic EL panels, JDI's LCD panel sales decreased. The operating cash flow showing the ability to earn cash from the main business was reduced by 700 million yen in FY2017 (an increase of 112 billion yen in fiscal year 2016). In 2017, the main business failed to make cash, and the capital turnover had to rely on financial institutions such as banks.
It is expected that JDI's sales in fiscal year 2018 will increase by 10-20% year-on-year, and its operating profit margin will be 2-3%. JDI Chief Financial Officer Oshima Takashi said that "the next fiscal year is expected to increase substantially." The company is looking forward to the new iPhone that Apple will release this fall. Due to the expectation that the shipment of LCD models will surpass that of organic EL models (the senior director of UK survey company IHS Markit), there is a voice in the market that “JDI will benefit from this”.
However, the competition between the current JDI and the Chinese panel makers whose technological capabilities are continuously improving is becoming more and more intensified. From January to March, sales to China mobile terminals accounted for 11% of JDI's total sales, which was a year-on-year decline of 18%.
The reason is that the demand for smart phone market in China is decelerating and the competition with Chinese panel makers is becoming increasingly fierce. Due to the "higher profit margin for panels for high-end smart phones in China than for Macs" (a senior analyst at UOB Securities, Nakayama Yasuo), these two factors have caused a huge blow to JDI.
In addition, China-US trade friction has also become a risk. The U.S. Department of Commerce has imposed sanctions on ZTE for prohibiting U.S. companies from trading with ZTE for the next seven years. ZTE smartphones have been forced to stop selling. The arrival of JDI President East indicated that the impact of ZTE’s sanctions on JDI sales amounted to “a few billion yen”. If the U.S. sanctions are extended to other Chinese manufacturers such as Huawei Technologies, the impact on JDI will further expand.
Get rid of the dependence on smart phones
On May 15th, JDI officially announced the personnel adjustment of Vice President Yoshizaki Yoshizaki. The former president of He Xiu Er will serve as a technical advisor. In order to realize the goal of turning profit and loss into profit in the 2018 fiscal year, the company will strengthen the vehicle-oriented business with the new system and get rid of the profit model that relies on smart phones.
Moonsaki will be the third president of JDI since its establishment in 2012 six years ago. JDI's senior personnel has always been in confusion. After the presidential election was announced in March 2017, it was withdrawn again in May, two months later. It should have served as president of the East to serve as the president, while President He Xiu has been re-elected.
Tsuyoshi Kawasaki served as the head of JDI's vehicle department as of March and has played a role in negotiations with European auto parts manufacturers. JDI's vehicle-mounted business such as instrumentation sales exceeded 100 billion yen for the first time in fiscal 2017. According to the British survey company IHS Markit, its global share ranks first.
The business of mobile terminals accounts for 80% of the total sales. The performance of JDI has been dominated by smart phones. In order to consolidate its profitability base, the company urgently needs to expand its in-vehicle operations that provide stable returns.
In addition, the organic EL business has also become a topic. In order to achieve mass production of organic EL panels, JDI has been exploring capital cooperation with Chinese companies, but negotiations on relevant conditions have reached an impasse and the deadline for the original deadline for March 2018 was postponed. The president of the East I.com.com reduced the tone, saying that "the trend of organic EL has changed, and the mass production investment with overseas partners will be judged on the basis of careful observation of the market."
More news attention Tenco
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