Information Meeting for The First Half of
Fiscal Year ending March 2012

November 24, 2011
KAGA ELECTRONICS CO., LTD.
(TSE 1st section, 8154)
3-12-8 Sotokannda, Chiyoda-ku, Tokyo 101-8629
Tel: (03) 4455-3131 Fax: (03) 3254-7132
URL：http://www.taxan.co.jp

Financial Highlights
First Half of FY3/2012

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■ Consolidated Statement of Income(million yen)

1H FY3/2011
1H FY3/2012
ChangesAmountPct.
AmountPct.
AmountPct.
平成18年3月期
Net Sales
120,470 平成19年3月期（予）100.0%
116,271
100.0%-4,199-3.5%
Cost of sales
104,410
86.7%
101,91387.7%-2,497-2.4%
Gross profit
16,06013.3%
14,35712.3%-1,703 -10.6%
SG&A expenses
13,465
11.2%
13,551
11.7%
86
0.6%
Operating income
2,594
2.2%
805
0.7%
-1,789 -69.0%
Non-operating income
388
0.3%
381
0.3%
-7
-1.8%
Non-operating expence
338
0.3%
257
0.2%
-81 -24.0%
Ordinary income
2,644
2.2%
929
0.8%
-1,715 -64.9%
Extraordinary items
-23
0.0%
51
0.0%
74 -321.7%
Income before income taxes
2,621
2.2%
980
0.8%
-1,641 -62.6%
Income taxes
1,084
0.9%
677
0.6%
-407 -37.5%
Income taxes-deferred
104
0.09%
-48
-0.04%-152 -146.2%
Minority interests
20
0.02%
29
0.02%
9
45.0%
Net income
1,412
1.2%
321
0.3%
-1,091 -77.3%

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Segment information(million yen)

1H FY3/2011
Net sales
Segment income

1H FY3/2012
Net sales

Pct.

Segment income

Changes

Pct.

AmountPct.

Electronic
components

88,52873.5%

83,411

71.7%-5,117

-5.8%

2,042

78.7%

636

79.0%

-1,406-68.9%

Informationequipment

24,38420.2%

26,591

22.9%

2,207

9.1%

139

5.4%

-77

-9.6%

-216

-155.4%

2,715

2.3%

1,533

1.3%

-1,182-43.5%

298

11.5%

163

20.2%

-135

-45.3%

4,841

4.0%

4,734

4.1%

-107

-2.2%

209
120,4702,594

8.1%
100.0%
100.0%

142
116,271805

17.6%
100.0%
100.0%-67-4,199-1,789-32.1%-3.5%-69.0%

Software
Other
Total

* Figures of each segment income are not inter-segment adjusted other than total.

Summary Electronic components (Development, manufacture and sales of semiconductors, general electric components and other products,
electronics manufacturing service (EMS), and other activities)
Sales activities focused on increasing sales to current customers, capturing more orders from overseas for the EMS business, increasing sales tocompanies in China and other countries. However, orders in Japan decreased from EMS customers and other users due to lower output at clients
because of the Great East Japan Earthquake and slowing consumer spending. The result was segment sales of 83,411 million yen.
 Information equipment (Sales of PCs, PC peripherals, photograph and imaging products, original-brand products, and other products)
Performance reflected sales activities to increase sales of current products like PCs and PC peripherals, the addition of new products, and higher
orders of terrestrial digital TV broadcast tuners following the July end of terrestrial analog TV broadcasts in Japan. The result was segment salesof 26,591 million yen.

4
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Net Sales by Product (Reference)(million yen)

1H FY3/2011
Net salesPct.

1H FY3/2012
Net sales

Pct.

120,471

Changes

ChangePct.

Informationequipment

22,432

EMS

35,31231.1%

30,625

26.3%-4,687-13.3%

Semiconductor

31,34626.0%

30,09625.9%-1,250

-4.0%

18.6%

23,08719.9%

140,000

655(million yen)

1１6,271

120,000
17,954

2.9% 100,000

13,425

16,831
15,63380,000

OthersGeneralelectronics
compornent

31,34630,096

Semiconductor

60,000Generalelectronics
compornent

13,425

11.1%

15,633

13.4%

2,208

16.4%

40,000

Others17,954

14.9%

16,83114.5%-1,123-6.3%

20,000

Total

120,470

100.0%

116,271

100.0%-4,199-3.5%

35,312

EMS

30,625

Informationequioment

22,432

23,087

1H FY3/11

1H FY3/12

0Summary EMS sales: Down 4,687 million yen (-13.3%)
EMS orders increased outside Japan, but these orders were lower in Japan mainly because of a decline in output at client because of the Great
East Japan Earthquake and slowing consumer spending. The result was a decrease in sales of 4,687 million yen from one year earlier to 30,625
million yen.
 Semiconductor sales: Down 1,250 million yen (-4.0%)
Orders declined mainly because client for semiconductors cut production volume in response to the Great East Japan Earthquake and slowing
consumer spending. The result was a decrease in sales of 1,250 million yen from one year earlier to 30,096 million yen.

5
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Selling, General and Administrative Expenses(million yen)

1H FY3/2011
AmountPacking andfreight
R&D
OthersTotal selling
expensesPct,

1H FY3/2012
AmountPct.

ChangeChange
Pct.

1,161

8.6%

1,284

9.5%

123

10.6%

14,000

290
669

2.2%
5.0%

258
698

1.9%
5.2%

-32
29

-11.0%
4.3%

12,000

2,120

15.7%

2,240

16.5%

120

5.7%

389
1,055

2.9%
7.8%

333
995

2.5%
7.3%

-56
-60

-14.4%-5.7%

Personnel
expenses

7,210

53.5%

7,312

54.0%

102

1.4%

Others

2,690

20.0%

2,671

19.7%

-19

-0.7%

Depreciations
Rent

16,00011,34484.2%

11,311

83.5%

-33

-0.3%

Total SG&A expenses

13,465100.0%

13,551100.0%

86

0.6%

13,551(million yen)
Others

2,690

2,671
Personnel
expenses

10,000

Rent

8,000
7,210

7,312

R&D

4,000

0

Depreciations
Others

6,000

2,000

Total administrative
expenses

13,465

1,055
389
669
290
1,161

995
333
698
258
1,284

1H FY3/11

1H FY3/12

Packing andfreight

Summary Selling expenses: Packing and freight :High packing and freight expenses at KAGA ELECTRONICS and KAGA HIGHTECH were responsible for a 123 million yen increase over one
year earlier.
 Administrative expenses: Personnel expenses:
Personnel expenses were increased by 102 million yen and the workforce increased by 111 (5,439 to 5,550) from one year earlier.
*Increases: +178 workers at KAGA (Shenzhen) and +179 workers at KAGA Taxan (Suzhou) for overseas EMS factories*Decreases: -223 workers at factories in China and Malaysia of the KAGA Components group6© 20102011 KAGAKAGA ELECTRONICS
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■ Consolidated Balance Sheets(million yen)

End of
FY3/11（ASSETS）
Current assets
Cash and cash equivalents
Notes and account receiv able-trade

Merchandize and finished goods

Goods in progress
Raw materials and other supplies

Others114,686
92,876
11,92654,173
15,775
555
3,189
7,258

End of 1H
FY3/12

Change110,147
89,827
10,331
51,883
16,126
776
3,597
7,114

-4,539-3,049-1,595-2,290
351
221
408
-144

End of
FY3/11(LIABILITIES)Current liabilities
Notes and accounts payable-trade
Short-term bank loans
OthersLong-term liabilities
Long-term bank loans
Others(NET ASSETS)

End of 1H
FY3/12

Change66,08756,98740,790
8,505
7,692
9,099
4,636
4,463
48,59863,04954,87536,257
12,525
6,093
8,173
3,729
4,444
47,098-3,038-2,112-4,5334,020-1,599
-926
-907
-19
-1,50012,133
13,91225,038-1,332-2,817
1,664
114,686

12,133
13,912
24,946-1,332-4,1291,567
110,14700-92
0-1,312-97-4,539

Shareholders' equity

Fixed assets
Property, plant and equipment
Intangible assets
Investments and other assets

21,810
9,724
2,599
9,485

20,320
9,445
2,391
8,483

-1,490-279-208-1,002Paid-in capital
Capital surplus
Retained earnings
Treasury stock
Valuation and translation adjustment
Minority interests

Total assets

114,686

110,147-4,539Total liabilities and net assets

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■ Consolidated Cash Flows(million yen)

1H FY3/2011

1H FY3/2012

ChangeOperating activities

4,591-2,446-7,037

Investing activities-1,563-1,449114

Financials activities-3,024

2,735

5,759

Net change in cash and cash equivalents

-351

-383

-32

Increase (decrease) in cash and cash equivalents-348-1,544-1,196

Cash and cash equivalents at beginning of year

11,797

11,796-1

Cash and cash equivalents at end of year

11,44910,251-525

Summary Operating activities: Net cash used by operating activities was 2,446 million yen primarily due to a decrease in notes andaccounts payable-trade Investing activities: Net cash used in investing activities was 1,449 million yen primarily due to payments for the purchaseof property, plant and equipment.
 Financing activities: Net cash provided by financing activities was 2,735 million yen primarily due to an increase in Increasein short-term loans payable8© 20102011 KAGAKAGA ELECTRONICS
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■ Forecast for FY3/2012
Consolidated Statement of Income(million yen)

FY3/2011(actual)
Amount
平成18年3月期

FY3/2012 (plan)

Pct.
Amount
平成19年3月期（予）Pct.

ChangeChangePct.change

237,951

100.0%

238,000

100.0%

49

0.0%

207,298

87.1%

209,000

87.8%

1,702

0.8%

30,65312.9%

29,00012.2%-1,653-5.4%

27,08911.4%

26,900

11.3%

-189

-0.7%

3,563

1.5%

2,100

0.9%

-1,463-41.1%

175

0.07%

500

0.2%

325

185.7%

Ordinary income

3,738

1.6%

2,600

1.1%

-1,138-30.4%Net income

1,854

0.9%

1,300

0.5%

-554

-29.9%Net sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Non-operating income

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■ Forecast for FY3/2012 (Consolidated Forecast by Segment)(million yen)

FY3/2011(Actual)
Net sales
Segment income

FY3/2012(Forcast)
Pct.

Net sales
Segment income

Changes
Pct.

AmountPct.

Electronic
components

171,576

72.1%

162,500

68.3%-9,076

-5.3%

2,901

81.4%

800

38.1%

-2,101-72.4%

Informationequipment

50,88521.4%

55,000

23.1%

4,115

8.1%

72

2.0%

240

11.4%

168

233.3%

5,687

2.4%

8,200

3.4%

2,513

44.2%

487

13.7%

730

34.8%

243

49.9%

9,801

4.1%

12,300

5.2%

2,499

25.5%

230

6.5%

330

15.7%

100

43.5%

237,951

100.0%

238,000

100.0%

49

0.0%

3,563

100.0%

2,100

100.0%-1,463-41.1%

Software
Other
Total

Summary Electronic components (Development, manufacture and sales of semiconductors, general electric components and other products,
electronics manufacturing service (EMS), and other activities)
There are concerns about the impact of the flood in Thailand on the business operations of the KAGA Group. In response, group companies
are working on increasing sales to current customers and adding new products and business activities in order to expand operations.
 Information equipment (Sales of PCs, PC peripherals, photograph and imaging products, original-brand products, and otherproducts)
The primary goals to increase sales of existing products, such as PCs and PC peripherals, and to add more new products in categories likeportable devices and increase sales of existing products in these categories.

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■ Forecast for FY3/2012 (Net Sales by Product )(million yen)

FY3/2011
Net sales

Pct.

FY3/2012 (F)Net sales

Changes

Pct.

ChangePct.

(million yen)
250,000

237,951
33,898200,000

Informationequipment

47,336

19.9% 48,500

20.4%

1,164

2.5%

EMS

68,89729.0% 79,000

33.2% 10,103

14.7%

Semiconductors

58,588

24.6% 56,800

23.9%-1,788General electronic
components

29,231

12.3% 24,800

10.4%-4,431 -15.2%

Others33,898

14.2% 28,900

12.1%-4,998 -14.7%

Total

237,951

100.0% 238,000

100.0%

238,000
28,90024,80029,231150,000

56,80058,588Generalelectroniccom ponents
Semiconductors

-3.1%
EMS

100,000

49

Others

68,89779,000Inform ationequipment

50,0000.0%47,336

48,500FY3/2011

FY3/2012(F)0Summary Information equipment: Sales increased by 1,164 million yen (2.5%) because of growth in orders for PCS and PC peripherals and new products
 EMS: Sales increased by 10,103 million yen (14.7%) because of growth in orders in the overseas EMS business Semiconductors: Sales decreased 1,788 million yen (3.1%) mainly because of a downturn in shipments of TVs and digital consumer electronics
 General electronic components: Sales decreased 4,431 million yen (15.2%) mainly because of transfers of sales to the EMS business Others: Sales decreased 4,998 million yen (14.7%) mainly because of weaker demand in the golf product sales business11© 20102011 KAGAKAGA ELECTRONICS
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■ Forecast for FY3/2012 (Selling, General and Administrative Expenses)(million yen)

FY3/2011
AmountPct.
Packing andfreight
R&D
OthersTotal selling expenses
Depreciations
Rent
Personnel
expenses
OthersTotal administrative
expenses
Total SG&A expenses

2,340
659
1,318
4,317
787
2,102

8.6%
2.4%
4.9%
15.9%
2.9%
7.8%

FY3/2012(F)Amount
Pct.
2,496
547
1,318
4,361
642
2,173

9.3%
2.0%
4.9%
16.2%
2.4%
8.1%

(million yen)

Changes
30,000

156
-112
0
44
-145
71

25,00027,08926,900

5,448

5,131

Personnel

20,000Rent
15,00014,434

14,591

5,448
22,771
27,089

53.3%
20.1%
84.1%
100.0%

14,591
5,131
22,537
26,900

54.2%
19.1%
83.8%
100.0%

157
-317
-234
-189

Depreciations
Selling Others

10,00014,434

Administrative
Others

R&D
5,000

2,102
787
1,318
659
2,340

2,173
642
1,318
547
2,496

FY3/2011

FY3/2012(F)Packing andfreight0Summary Selling expenses:
Packing and freight – Increased by 156 million yen because of higher expenses at KAGA ELECTRONICS and KAGA HIGHTECH
R&D – Decreased 112 million yen mainly because development of products at SI ELECTRONICS was completed
 Administrative expenses:
Personnel expenses – Increased by 57 million yen *Primary cause is growth in the workforce at overseas EMS factories

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Key Issues at the KAGA Group
1. Cost cut
2. Rebuilding poorly performing
subsidiaries
3. Create new businesses

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Key Issues at the KAGA Group (1)1. Cost cut
Reduce selling, general and administrative expenses
The KAGA Group’s problem ⇒ Drop in earnings(Causes)•Weak sales•Higher SG&A expenses

Large administrative workforce is holding down profitability.
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Key Issues at the KAGA Group (2)Measures to downsize the administrative workforce
Administrative departments⇒ Lower the headcount(1) Standardize tasks performed by group company administrative
departments(2) Downsize administrative staff by merging and liquidating subsidiaries
Technical departments⇒ Use personnel as field application engineers whoplay a central role in sales activities

Cost-cutting measure
Switch from leased to company-owned head office building
First year after switch (2014)
Following years (starting in 2015)

Saving of about 100 million yen
Annual saving of about 400 million yen

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Key Issues at the KAGA Group (3)2. Rebuilding poorly performing subsidiaries
KAGA COMPONENTS(Manufacturer of power supplies)(1) Thorough reexamination of theorganizational structure(2) Reexamination of oversight ofproduction processes(3) Development of highly profitableproductsCYBERFRONT(Game developer)

Improve management

KAGA COMPONENTS (HONG
KONG) LTD.
(Overseas EMS business)(1) Reexamine manufacturing
processes(2) Increase the volume of orders
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Key Issues at the KAGA Group (4)3. Create new businesses(1) Expand overseas operations(Hollowing out of Japanesemanufacturing sector)• Enlarge the overseas network• Train overseas sales personnel• Shift sales personnel from Japan toother countries• Use M&A with companies in the same
industry to compete with overseas
companies• Expand the infrastructure for overseas
operations(2) Add new products• Seek new technologies and materials• Target opportunities in new markets(3) Expand activities involving theenvironment• Capture orders for LED lights, solar
panels, storage batteries and otherproducts

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Expand overseas operations (1)Aim is to expand overseas operations by establishing more business sites
Strategies

Strengthen operations in China (Beijing, Qingdao, Tianjin and cities in inland China)
Start operations in emerging countries (Asia, South America, Europe and other areas)
Develop relationships with local companies (move away from business activities that
rely mostly on Japanese customers)

Operations in emerging countries
Established subsidiary in India(July 2011)

Sells power semiconductors and electronic components of
Mitsubishi Electric; goal is to serve Japanese and othercompanies in India. Will also be a base for extending
operations to the Middle East and other nearby regions.

Indonesia Liaison Office(to be established in January 2012)

Roles will be increasing sales to Japanese companies inIndonesia (audio products, office equipment, home
appliances, etc.) and forming ties with other companies inIndonesia

Philippines Liaison Office(to be established in March 2012)

Roles will be increasing sales to Japanese companies in
the Philippines (automotive devices, etc.) and forming ties
with other companies in the Philippines

Start operations in Brazil

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Expand overseas operations (2)Overseas operations of KAGA Group
Europe (UK, Czech Republic, others)

China (HK, Shenzhen, Shanghai, Suzhou and others)

Russia liaison office

Czech factory
Shenzhen factory

India

Suzhou factory

China DalianUSA
Brazil(Conducting a field survey)

Dubai
Taiwan, Korea

Thai

Philippines liaison office(to be opened March 2012)
Singapore

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Indonesia liaison office(to be opened Jan. 2012)

19

KAGA ELECTRONICS CO.,LTD.
3-12-8 Sotokannda,Chiyoda-ku,Tokyo 101-8629

Contact: Public Relations Department
TEL:03-4455-3131
FAX:03-3254-7132
E-mail： webmaster@taxan.co.jp

http://www.taxan.co.jp
For more information,please contact the public relations department.

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