Q&A of Financial Results for First Quarter of the Year Ending March 31, 2010

The following includes questions and answers at the conference for the financial results for First Quarter of the Year Ending March 31, 2010.

Precision Equipment Business

Q:What is the outlook for the markets of IC steppers and scanners and LCD steppers and scanners?: A:
Though the capital expenditure of some memory manufacturers has resumed recently and the facility operating ratio seems to turn up, this has not led to any definite orders as yet. A little more time is needed before we can determine whether the market has bottomed out. Even so, we have seen changes in the LCD steppers and scanners market over the past three months which have led to the definite orders. Also, the number of business inquiries for the second half of this year through to the first half of next year is increasing.
Q:How is the operating loss for the precision equipment business?: A:
We are proceeding with structural reforms for our precision equipment business such as the reorganization of production bases. In addition, we are planning to review our inventory levels based on even stricter evaluation standards that take into consideration market conditions and demand. Revised inventory includes 1) products and materials at high risk of becoming stagnant over the mid-long term due to decreased demand, 2) products and materials whose added value is anticipated to comparatively decrease, and 3) components and materials no longer used due to specification improvements of the equipment. Based on this, we are currently forecasting an operating loss of 59 billion yen as a result of increased write-offs totaling less than 30 billion yen.

Q:What is the status of the digital camera market?: A:
The digital SLR camera market improved steadily each month in the first quarter, but overall the market remained almost flat compared with the same period of the previous year. However, we are anticipating a slight recovery in the second half of the year. Breaking this down by region, we recorded positive earnings in Europe and Asia, but negative earnings in Japan and the U.S. Meanwhile, although the compact camera market downsized of more than 10% overall compared with the previous year, our sales units remained unchanged. According to the industry data, market prices have dropped by 2 digits compared with the previous year, but we assume that the real situation is not nearly so negative considering the suppressing effect of the rising yen.
Q:How are imaging products business earnings?: A:
Middle to high-end class digital SLR cameras and interchangeable lenses sales exceeded our forecasts in the first quarter, and difference from our forecast in exchange rates helped us to achieve higher than expected profits. Therefore, we have upwardly revised our annual outlook. However, we keep our forecast for the second half as it is due to the current uncertainty of the performance during the year-end shopping season. In the future, we anticipate a further increase in profits as long as demand steadily increases.