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[March 2008]
TOTO Nine-Month Figures
Reviewing the nine months to 31 December 2007, TOTO reported that overseas sales, particularly in North and Central America as well as China, were steady. On the domestic front, however, operating conditions had been difficult. This was attributable to the significant drop in new housing starts compared with the previous year due to revisions to the Building Standards Law that came into effect in June 2007, and lacklustre demand for remodelling.
As a result, both sales and profit declined. For the nine-month period under review, net sales decreased approximately 2% compared with the corresponding period of the previous fiscal year to ¥371.6 billion. On the earnings front, recurring profit fell around 17% to ¥15.0 billion. In addition to the decline in sales, this was attributable to intense competition driving down product prices and higher raw material costs.
As a part of its efforts to bolster promotional activities in the remodelling business, TOTO held toilet remodelling fairs across its nationwide network of showrooms featuring the NEOREST HYBRID Series of luxury one-piece tankless toilets with Washlets, which premiered in August 2007. Despite receiving wide customer acclaim, these endeavours were insufficient to stimulate and expand latent remodelling demand. Accounting for these factors, sales in this business amounted to ¥183.2 billion, essentially unchanged from the corresponding period of the previous fiscal year.
Despite initial signs that sub-prime loan issues were having a growing impact on residential markets in North and Central America, the high-end sector remained relatively unscathed. Buoyed by efforts to enhance overall bathroom space proposals including steps to expand TOTO's product line-up in sanitaryware as well as bathtub and shower hardware, overseas sales in the Americas grew steadily. In China, which continues to exhibit robust construction demand, TOTO strove to further enhance its luxury brands. As a result, sales expanded favourably. In October 2007, TOTO was the first manufacturer in its field to open a showroom in Seoul, Korea. Through a series of exhibitions and events highlighting the company's high-function products, TOTO has established a strong presence in the luxury brand market. Accounting for these factors, sales in the overseas business climbed 15% compared with the corresponding period of the previous fiscal year to ¥47.3 billion.
(Note: Taking into consideration foreign currency exchange rate movements, specifically appreciation in the value of the yen, sales for the October through December quarter declined 6% year on year. Excluding foreign currency exchange rate movements, sales for the quarter increased 10%.)
In the new business segment, TOTO is engaged in the manufacture and sale of new ceramic products including electrostatic chucks, optical ferules and large precision ceramic components. Spurred by a steady increase in new customer orders for use in semiconductor applications, new business sales edged up 1% compared with the corresponding period of the previous fiscal year to ¥7.8 billion.
TOTO has revised downward its annual performance plan disclosed on 31 October 2007 at the time of the company's consolidated performance announcement for the six-month period ended 30 September 2007. Accordingly, TOTO aims to attain net sales of ¥500.0 billion and recurring profit of ¥19.0 billion for the fiscal year ending 31 March 2008. This represents a year-on-year net sales decline of 2% and a year-on-year recurring profit decline of 25%, and reflects a drop in sales owing to the slump in new construction demand, stagnant remodelling demand, the cost of raw materials, which have peaked at a high level and other factors.
Looking ahead, TOTO said it would endeavour to expand sales by pursuing those initiatives commenced during the first half of the fiscal year under review. Through these means, the company will strive to create and stimulate latent remodelling demand. At the same time, TOTO will work to improve its performance by continuously strengthening cost reduction measures and curtailing overhead expenses.
ENDS