Pioneer : Announces Business Results for 2Q Fiscal 2019 (PDF 264 KB)

For Immediate Release November 7, 2018

Pioneer Announces Business Results for 2Q Fiscal 2019

Pioneer Corporation today announced its consolidated second-quarter and six-month business results for the period ended September 30, 2018.

Consolidated Financial Highlights

(In millions of yen except per share information)Three months ended September 30

Six months ended September 30

Percent	Percent
change	change
Net sales	¥ 92,851	¥ 87,117	-6.2%	¥ 176,170	¥ 170,928	-3.0%
Operating income (loss)	2,292	(113)	-	2,049	(1,688)	-
Ordinary income (loss)	870	(1,618)	-	(360)	(3,631)	-
Net income (loss) *	¥ (614)	¥ (3,270)	-%	¥ (2,649)	¥ (9,933)	-%
Net income (loss) * per
share	¥(1.67)	¥(8.64)	¥(7.21)	¥(26.26)

2017 2018

2017 2018

Consolidated Business Results

For the second quarter of fiscal 2019, the three months ended September 30, 2018, consolidated net sales declined 6.2% year on year, to ¥87,117 million, mainly from decreases both in the consumer market business and the OEM business in Car Electronics.

Operating loss was ¥113 million this quarter, compared with an operating income of ¥2,292 million for the second quarter of fiscal 2018. This reflected a deterioration in the cost of sales ratio, mainly as a result of an increase in depreciation and amortization in the OEM business and foreign exchange rate movements, and the decrease in net sales, despite reduced selling, general and administrative (SG&A) expenses. Net loss attributable to owners of Pioneer was ¥3,270 million, compared with a net loss of ¥614 million for the second quarter of fiscal 2018. This was mainly due to the increase in operating loss.

During the second quarter of fiscal 2019, the average value of the Japanese yen declined 0.4% against the U.S. dollar year on year, to ¥111.46=1 U.S. dollar, and rose 0.6% against the euro, to ¥129.63=1 euro.

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Car Electronics sales declined 5.6% year on year, to ¥70,367 million, due to decreases both in the consumer market business and the OEM business, despite an increase in sales of telematics services.

Sales of the consumer market business declined year on year. Car audio product sales decreased primarily due to a decline in emerging markets and Europe. Car navigation system sales decreased due mainly to a decline in Japan. Sales of telematics services increased owing to favorable performance in those for automobile insurance in Japan.

Sales of the OEM business declined year on year. Car audio product sales were almost unchanged year on year because of higher sales mainly in Japan, China and Southeast Asia, despite a decrease in North America. Car navigation system sales decreased, due mainly to lower sales in North America and China, despite higher sales in emerging markets.

OEM business sales accounted for 58% of total Car Electronics sales, compared with 57% a year earlier.

By geographic region, sales in Japan increased 3.9%, to ¥28,319 million, and overseas sales decreased 11.2%, to ¥42,048 million.

Operating loss was ¥1,115 million, compared with an operating income of ¥1,838 million for the second quarter of fiscal 2018. This was mainly due to a deterioration in the cost of sales ratio, as a result of an increase in depreciation and amortization in the OEM business and foreign exchange rate movements, and the decrease in sales.

In the Others segment, sales declined 8.3% year on year, to ¥16,750 million, because of lower sales of home AV products and factory automation systems.

By geographic region, sales in Japan increased 10.1%, to ¥11,596 million, and overseas sales decreased 33.4%, to ¥5,154 million.

Operating income increased by 2.1 times year on year to ¥1,046 million, mainly due to an improvement in the cost of sales ratio, although sales declined.

For the first half of fiscal 2019, the six months ended September 30, 2018, consolidated net sales declined 3.0% year on year, to ¥170,928 million. This was due to a decrease in Car Electronics and lower sales of home AV products.

Operating loss was ¥1,688 million, compared with an operating income of ¥2,049 million for the first half of fiscal 2018. This was due to a deterioration in the cost of sales ratio, mainly as a result of an increase in depreciation and amortization in the OEM business and foreign exchange rate movements, and the decrease in net sales, despite reduced SG&A expenses. Net loss attributable to owners of Pioneer was ¥9,933 million, compared with a net loss of ¥2,649 million for the first half of fiscal 2018. This mainly reflected the increase in operating loss and a recording of exchange loss of ¥1,186 million, as well as the recordings of ¥2,021 million in loss related to litigation concerning patent license and ¥1,323 million in loss related to competition law during the first quarter of fiscal 2019.

During the first half of fiscal 2019, the average value of the Japanese yen rose 0.7% year on year against the U.S. dollar, to ¥110.26=1 U.S. dollar, and declined 2.7% against the euro, to ¥129.85=1 euro.

Note: Operating income (loss) in each business segment represents operating income (loss) before elimination of intersegment transactions.

Consolidated Financial Position

Total assets as of September 30, 2018 were ¥275,480 million, a decrease of ¥12,026 million from March 31, 2018, mainly due to decreases in cash and deposits and trade receivables, despite an increase in intangible assets. Intangible assets increased ¥3,328 million, to ¥77,825 million, reflecting an increase in software, despite a decrease in software in progress. Meanwhile, cash and deposits decreased ¥7,616 million, to ¥28,026 million. Trade receivables decreased ¥7,167 million, to ¥52,927 million.

Total liabilities were ¥196,948 million, a ¥5,624 million decrease from March 31, 2018. This was primarily due to a decrease of ¥4,750 million in trade payables, and a decrease of ¥2,690 million in accrued expenses, despite an increase of ¥3,201 million in borrowings.

Total equity was ¥78,532 million, a ¥6,402 million decline from March 31, 2018. This mainly reflected the recording of ¥9,933 million in net loss attributable to owners of Pioneer for the first half of fiscal 2019.

Consolidated Business Forecasts for Fiscal 2019

For fiscal 2019, ending March 31, 2019, the forecast for net sales has been revised downward from the previous forecast announced on May 14, 2018. This reflects factors including a decrease in sales of Car Electronics, which is expected to fall below the initial forecast for the second quarter onward of fiscal 2019 mainly in the consumer market business, primarily due to the impact of sluggish emerging markets, and sales of certain subsidiaries.

The forecast for operating loss remains unchanged as a decline in net sales is to be covered by a decrease in depreciation and amortization, mainly owing to reviews of investment periods, and cost reduction efforts including lower research and development expenses.

Regarding the forecast for net income (loss) attributable to owners of Pioneer, we are currently pursuing consultations on support by a sponsor, and will announce the projection once the impact of the management improvement measures including revision measures in the OEM business has been determined.

(In millions of yen)

change	Results for
(A-B / B)	fiscal 2018
Net sales ¥ 350,000 ¥ 380,000 ¥ (30,000)	-7.9%	¥ 365,417
Operating income (loss) (5,000) (5,000) -	-	1,194
Net income (loss) * ¥ - ¥ - ¥ -	-%	¥ (7,123)
* Net income (loss) attributable to owners of Pioneer Corporation

Revised forecasts

Previous forecasts

(A)

(B)Amount change (A - B)Percent

Notes: The yen-U.S. dollar and yen-euro exchange rate assumptions for remaining six months of fiscal 2019 remain unchanged at ¥110 and ¥130, respectively.

Cautionary Statement with Respect to Forward-Looking Statements

Statements made in this release with respect to our current plans, estimates, strategies and beliefs, and other statements that are not historical facts are forward-looking statements about our future performance. These statements are based on management's assumptions and beliefs in light of the information currently available to it. We caution that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. It is not our obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We disclaim any such obligation. Risks and uncertainties that might affect us include, but are not limited to: (i) general economic conditions in our markets, particularly levels of consumer spending, and levels of demand in the major industrial sectors which we serve; (ii) exchange rates, particularly between the Japanese yen and the U.S. dollar, the euro, and other currencies in which we make significant sales or in which our assets and liabilities are denominated; (iii) our ability to continuously design and develop and win acceptance for our products in extremely competitive markets; (iv) our ability to successfully implement our business strategies; (v) the success of our joint ventures, alliances and other business relationships with third parties; (vi) our ability to access funding; (vii) our continued ability to devote sufficient resources to research and development, and capital expenditure; (viii) our ability to ensure the quality of our products; (ix) conditions in which we are able to continuously procure key parts essential to our manufacturing operations; and (x) the outcome of contingencies.

Pioneer Corporation is a leading global manufacturer of car electronics products. Its shares are traded on the Tokyo Stock Exchange.

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Attached are consolidated financial statements for the three months and the six months ended September 30, 2018.

Pioneer Corporation - Consolidated

(1) CONSOLIDATED BALANCE SHEETS

(In millions of yen)

March 31,	September 30,
2018	2018
ASSETS
Current assets:
Cash and deposits	35,642	28,026
Trade receivables	60,094	52,927
Finished products	21,590	24,088
Work in process	12,793	11,810
Raw materials and supplies	15,750	17,187
Other current assets	14,093	14,483
Allowance for doubtful receivables	(740)	(872)
Total current assets	159,222	147,649
Noncurrent assets:
Property, plant and equipment:
Buildings and structures	47,828	46,262
Machinery, equipment and others	117,881	108,148
Lease assets	8,620	11,169
Others	10,919	10,409
Accumulated depreciation	(147,039)	(140,736)
Net property, plant and equipment	38,209	35,252
Intangible assets:
Goodwill	396	374
Software	25,896	34,629
Software in progress	47,606	42,329
Others	599	493
Total intangible assets	74,497	77,825
Investments and other assets:
Investment securities	8,466	7,978
Deferred tax assets	3,006	3,218
Net defined benefit asset	973	971
Others	3,156	2,566
Allowance for doubtful accounts	(49)	-
Total investments and other assets	15,552	14,733
Total noncurrent assets	128,258	127,810
Total deferred assets	26	21
Total assets	287,506	275,480