索尼 (SONY) 2004 Q1 法說會逐字稿

Good morning. My name is Crystal and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Sony Corporation first quarter fiscal year 2004 conference call.

(Operator Instructions.)

The conference will now begin.

Thank you very much for that introduction, Crystal, and thank you all for joining us today, July 28 2004 for this discussion of Sony's financial results for the first quarter ended June 30 2004. I'm Jonathan Bates with Sony Investor Relations in Tokyo. We are joined this evening by Katsumi Ihara, Executive Deputy President and Group Chief Strategy Officer and CFO.

Mr. Ihara, would you please say a word of welcome to our guests?

Thank you, Jonathan. My name is Katsumi Ihara. At the end of June, I was appointed the new CSO and CFO for the Sony Group. Before this assignment, I was the President of Sony Ericsson Mobile Communications, which is a joint venture between Sony and Ericsson for mobile phone business.

Sony has an exceptional range of resources, including technology, content and talented individuals available to it. It is my aim as Sony's Chief Strategy Officer to effectively utilize these resources to bring about profitability for the group as early as possible.

In addition, as Sony's CFO, it is my goal to make our strategy easily comprehensible to people outside the group. Through this I hope to further strengthen the confidence of investors in Sony Group. I'm very much looking forward to an increased opportunity to meet and talk with you, our investors. Thank you.

Thank you very much, Mr. Ihara. We're also joined by Takao Yuhara, Senior Vice President, Officer in Charge of Finance and Investor Relations, and by Robert Wiesenthal, Executive Vice President and CFO of Sony Corporation of America. Mr. Yuhara, and Wiesenthal, could you both say a couple of words of greeting?

Yes, I'm Yuhara. I'm very pleased to join this conference with you, and I'm also very happy to answer your questions. Thank you.

It's Rob Wiesenthal in New York and we look forward to answering your questions on the entertainment segment, and welcome our investors and analyst friends here in the United States, and good afternoon to those in Europe.

Thank you very much for joining us, Mr. Wiesenthal and Mr. Yuhara. As Mr. Ihara just mentioned, in just a few moments I'm going to give a brief overview of our first quarter results. Then Mr. Yuhara and Mr. Wiesenthal, and Mr. Ihara will take your questions. During the question and answer session, I will be taking time out to pose to our two CFOs and Mr. Yuhara questions that we have received by e-mail.

Please be aware that statements made during the following remarks and Q&A session with respect to Sony's current plans, estimates, strategies, and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. These statements are based on management’s assumptions and beliefs, in light of the information currently available to it, and therefore you should not place undue reliance on them.

Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information as to risks and uncertainties, as well as factors that could cause actual results to differ, please refer to today's press release, available on our IR web site, "www.Sony.net/IR". With that, I am now going to turn to our results.

Due to the appreciation of the yen, an increase in consolidated sales of only 0.5% could be realized. However, on a local currency basis, sales increased 5%. The sales increase was mainly due to an increase in sales to outside customers in the electronics segment. With respect to products in the electronics segment, there were increased sales of LCD, PDP, LCD rear projection, and other flat-panel televisions, as well as semiconductors and components, in particular CCDs, low-temperature polysilicon LCDs, and optical pickups.

Europe, China and other parts of the world, excluding the US and Japan, experienced a large increase in sales. Consolidated operating income decreased 41% year-on-year. However, on a local currency basis, operating income increased 27%. Restructuring expenses included in operating expenses increased ¥5.5 billion year-on-year, totaling ¥12 billion.

Income before income taxes decreased 82% year-on-year. This was the result of the recording of a gain from the sale of securities investments in the same quarter of the previous year, and an increase of net foreign exchange loss year-on-year. However, net income increased significantly year-on-year. Equity and net income of affiliated companies improved considerably year-on-year.

Sony's -- Sony Ericsson’s significantly improved earnings and the recording of an equity gain from InterTrust Technologies, resulted in a ¥29.9 billion improvement to equity in net income and the recording of profit of ¥20.1 billion. In addition to Sony Ericsson, the joint venture with Samsung and the new joint venture with BMG suggests that the recording of equity and net income will continue to assume an even more important role for Sony.

Let me now take a few moments to touch on our business segments.

Firstly, the electronics segment. Sales in electronics decreased 0.2%, but increased 4% on a local currency basis. There was a 4% increase in sales to outside customers, 8% on a local currency basis. Sales on a local currency basis increased by 13% in Europe and by 29% in other regions. Operating income decreased by 50%. However, on a local currency basis, operating income increased 25%.

If we exclude restructuring expenses, operating income remains virtually unchanged year-on-year. Restructuring expenses totaled ¥10.7 billion for the first quarter, compared to ¥4.6 billion for the same quarter of the previous year. Some of the main reasons for this change to operating income were an 8% increase on a local currency basis in sales to outside customers; a decrease in selling, general, and administrative costs of ¥5.8 billion, mainly the result of a decrease in personnel costs; a decrease of ¥10.3 billion as a result of the appreciation of the yen; and a ¥9.8 billion yen increase in research and development expenses, mainly associated with semiconductor process technologies.

Next, Sony would like to comment on the profitability of each product category. With regard to audiovisual and IT, there was an increase in sales of flat-panel televisions and digital still cameras. LCD rear projection televisions, or Grand Wega, which incorporates the Sony made high-temperature polysilicon LCD, have been very popular in the US market. This was offset by a decline in sales for portable audio, resulting in total sales for AV IT being flat year-on-year, and a decrease in operating income, due to a decline in unit prices and the appreciation of the yen.

Regarding semiconductors and components, there was an increase in sales for low-temperature polysilicon LCDs and for CCDs, mainly for use in digital still cameras. There was a significant increase in operating income due to an increase in sales of CCDs and low-temperature polysilicon LCDs.

Inventory. As of June 30 2004, inventory was ¥603.2 billion, a ¥74.5 billion increase year-on-year. Days supply increased from 39 days to 45 days year-on-year. In particular, inventory of flat-panel televisions, digital cameras, and camcorders increased. This increase in inventory was associated with an increase in sales. However, the inventory of certain products also maintained a little high. Sony will continue to play close attention to changes in demand and will adjust levels of inventory accordingly. In the Games segment, both sales and operating income decreased year-on-year. However, retail sales of PlayStation 2 hardware and software remain steady. Sales decreased 16% compared with the same quarter of the previous fiscal year, and decreased 13% on a local currency basis. With regard to hardware, although unit sales of PS2 increased in Europe, unit sales decreased in Japan and the US, contributing to an overall decline in unit sales. With regard to software, both unit sales of software and associated sales revenue increased.

The Games segment recorded an operating loss of ¥2.9 billion compared with the operating profit of ¥1.8 billion from the same quarter of the previous year. The loss was recorded due to a decrease in the sales of hardware and sales of software published by Sony Computer Entertainment. Sellthrough in the retail market remains steady and maintained almost the same level as the same period of the previous year. As of this summer, we will boost production of PS2 in preparation for the year-end sales season.

Moving now to Entertainment, sales for the music segment as a whole increased 2%, and 7% on a local currency basis. Sales: SMEI, which accounts for 71% of total sales within the segment -- sales increased 8% on a dollar basis as a result of an increase in album sales and an increase in manufacturing revenues, due to a higher sales volume of DVDs.

Operating income. Although an operating loss of ¥1.1 billion was recorded, both SMEI and SMEJ experienced an improvement in operating performance, leading to an improvement of ¥4.9 billion year-on-year. SMEI's operating loss declined 40% year-on-year as a result of higher sales from stronger releases, as well as the realization of benefits from worldwide restructuring activities. With regard to SonyBMG, regulatory approval has now been obtained in the EU, and approval in the US is still pending.

Sales in the Picture segment decreased 2% on a yen basis, but increased 6% on a dollar basis due to higher home entertainment revenues led by the strong performance of movies, such as "50 First Dates" and "Big Fish." The theatrical release of "Spiderman 2," beginning at the end of June, is proving to be a huge success. It is expected that this will contribute to operating profits from the second quarter onwards.

The successful performance of home entertainment and theatrical releases and lower marketing expenditures in the current year's first quarter compared to the same quarter of the previous year contributed to an improvement of ¥6.5 billion year-on-year, and the recording of an operating profit of ¥4.1 billion.

In the Financial Services segment, revenue decreased 11% year-on-year, mainly due to a decrease in revenues at Sony Life. Revenue at Sony Life decreased 14% year-on-year as a result mainly of a change in revenue recognition methods. If we discount the change in accounting classification, revenue for the financial services segment remained almost unchanged year-on-year.

Operating income. Due mainly to the decrease in operating income at Sony Life, operating income for the financial segment decreased 26% year-on-year. Operating income at Sony Life decreased 26% year-on-year, primarily due to an increase in insurance claims paid, dividends, and the introduction of a new accounting policy.

Sony Ericsson. Sales revenue increased 34% year-on-year. Due in part to very healthy demand in the cellular phone market, sales of phones with built-in cameras increased. The total number of units sold increased 55%, an increase of 3.7 million units to 10.4 million units, new record sales.

Operating income. There was a significant increase in income before income taxes, a €215 million improvement on the operating loss recorded in the same quarter of the previous year, leading to a total operating profit of €113 million. Sony Ericsson contributed ¥5.8 billion to equity in net income, an ¥11.6 billion improvement year-on-year.

I will end this introduction with a forecast for the fiscal year ending March 31 2005. Profits for the first quarter of the fiscal year were better than our expectations. Nonetheless, because we are cautious about the operating environment, and also because we must wait to see the effects of the end-of-year sales season, we have not revised our forecast for the fiscal year ending March 31 2005.

And with that, I would like to turn the podium over to Mr. Ihara, Mr. Yuhara and Mr. Wiesenthal who will take your questions.

Crystal?

(Operator Instructions.)

OK. The first question comes from Connor O'Mora of Arete Research in the UK.

Connor, please go ahead with your question.

OK, I will read the question. According to Mr. O'Mara: I'm reading about an increasing number of players who are going to be more aggressive in flat-panel TV pricing. What is Sony's product and pricing strategy, including Sony-Samsung for this year and next year?

Yes, it is quite significant, the increase of market of this flat-panel TV, and, as you're saying, quite a number of players, entering in this flat TV market. So then -- there are two things which is: the flat-panel TV replacing the existing CRT TV, and those TVs offering a new usage by the digital technologies.

So as a result of the market expansion, the price is naturally reducing, year by year or quarter to quarter, if you like. So Sony is focusing on the middle and high-end market models, which would give us the rather high added values. Then - which would result in the better market share position, as well as good added value for this as well. Then, as you know Sony and Samsung just started the joint venture to make the LCD panels in Korea. Then this will start to production output somewhere in the middle of next year. Then, particularly for the large size of LCD TVs, we will expect it – those panels to be used for our large size LCD TVs. Then, in the sense we are very much expected the joint venture, the panels to be supplied to us. OK

Thank you very much, Mr. Yuhara. We have one more e-mail question from Connor O'Mora , which I will read. I appreciate the box office success of Spider-Man 2 but my concern is SPE’s home entertainment group. Based on what others have been announcing, such as 44% VHS declines at Tompson, I'm concerned that VHS is falling too fast and prices falling too quickly in DVD. Can you explain what's happening at Sony Pictures in this area and what you're doing to improve?

Could we go over to Rob to answer this question, please?

Hi, it's Rob Wiesenthal in New York. The home video and home entertainment market is very important at Sony Pictures. Since 2000, about 40% of our revenues have been derived from home entertainment. That has increased to about 50% this year. Overall, the market has enjoyed tremendous growth. Most industry analyst peg the total home entertainment market to increase over the next two years from $33 to 37 billion. And if you just take DV - and that includes VHS -- if you just take the DVD market, that growth is obviously more impressive at 29 to 36 billion. So overall, while VHS is declining, it's more than made up for by the DVD sales. And you also have to look at the penetration of the players. And over the next five years, right now we have domestic penetration of about 50%. We expect that to grow to 90% over the next five years. And internationally, that would grow from 12 to 30%.

With respect to pricing, obviously, over the last couple years there's been a shift from rental models to sell through. Additionally, given the increased presence of mass merchant retailers, home entertainment's become more of an impulse purchase. So while pricing has been mitigated in the sell through side, going from the rental market, we've more than made it up on the volume side.

At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from Ms. Margaret Moore, from American Century. Your line is open. Please go ahead with your question.

Yes, I have one question, I guess, for - regarding Spider-Man. I understand that Spider-Man 1's profitability was partially due to the share of box office profits that you enjoyed in the initial two weeks - initial two weeks of its run. And I was wondering if you could comment on the profitability of Spider-Man 2 versus Spider-Man 1. And if you are enjoying better overall terms of trade overall for your movie business.

And I guess my second question is if you could comment on your expectations for the Christmas campaign, given the buoyant numbers for consumer confidence in North America and, you know, why you have no plans to revise up, given what your Q1 has done. Thanks.

It's Rob Wiesenthal. I'll take the first part of the question, on the entertainment side, and defer to my colleagues in Tokyo with respect to the estimates. Obviously, we are very pleased with the performance of Spider-Man. It's over 600 million worldwide in total box office. And this is really more of an indication of the overall performance at Sony Pictures where we've had 10 profitable films in a row and we're number one in domestic box office to date.

As far as the specific performance, while we don't disclose the actual numbers, what I can tell you, Margaret, is that it is a very profitable film and that it will make a meaningful contribution to both the second and third quarter results. You should also note that whenever you have a sequel, there is a lift, in all windows, on the first film, which we are seeing a bit on the Spider-Man 1 side. The second quarter will exhibit the benefit of the theatrical results. In the third quarter, you'll start seeing the home entertainment results, as well. And you should also note that all of - or actually, the significant portion of the marketing costs have been incurred in the first quarter. So overall, a very meaningful impact to our bottom line over the next couple of quarters. And this is a film that, really, on an analytical basis, was profitable its first week out.

OK. I'm Takao Yuhara and I would like to answer your second question Margaret. And, as you know, the first quarter result was better than what we expected in April. It's - there are maybe three reasons, which is the in the electronics segment, device, such as a CCD or high temperature LCD itself is showing good business, better than we expected.

Secondly, there is good performance of pictures released during the first quarter, and also DVD and VHS sales was very good during that period. And thirdly, the yen was favorably good than we expected in the first quarter.

So results, first quarter was better than we expected. However, if you look at the economic business environment, the second quarter toward the end of this year, as you’ve said that maybe it was consumer regrouped. There are same number of people in the (inaudible). So, therefore, maybe it's not simple green light for this business environment itself. So rather, we'd like to see that conservatively on those environment. And those are the, as you know, those holiday season is our very important period. So then, we would rather like to see the - how the, we could do, but we, you know, the high-season period. So therefore, at a moment, and it could be a little early to look into the device division of that, year-end forecast. That is the reason that we didn't change the forecast, the forecast profit for the year.

Thank you.

Thank you very much for your question, Margaret. Next, we're going to go to a question from Connor O'Mora, again, from Arete Research. His question is can you help us understand the synergies you hope to extract from the Sony BMG merger? How will this company be incorporated into Sony's results? Fully consolidated or in the associates slang?

Over to Rob for the answer.

Hello. It's Rob Weisenthal again. With respect to the Sony Music Bertelsmann merger, as you heard from my colleagues, EU approval has been obtained and we expect that transaction to close shortly. We expect over 300 million of cost savings on an annualized basis, largely from back office functionality. But you should also note that we expect to continue to build the artists in repertoire investments at all the labels as part of this venture. And beyond that, I think that, on the distribution side, it is expected to be significant revenue opportunities, which have not yet been identified. And that's it. We expect it to close shortly and we're excited about the transaction. With respect to the accounting for the transaction, it will be accounted for on an equity basis. So with respect to total net income for the Group, it will be consistent as if we consolidated. But it will be accounted for on an equity basis.

Thank you very much. Our next question is an e-mail question from P. G. MacNally (ph) of American Technology Research. Their question is - is PlayStation Portable still scheduled for a December quarter launch in Japan? And has the hardware forecast of three - 3 million PSP units by March 2005 - is that still accurate?

Yes. And as far as PSP is concerned, currently, we are preparing on schedule. And that, at the moment, we have not changed the release schedule, as you mentioned: December in Japan and by the end of March in both Europe and America, with estimated quantity of 3 million in all areas. Thank you.

Thank you very much, Mr. Yuhara. Now we're going to go over to - for another live question.

Your next question comes from Mr. Matthew Troy (ph) from Smith Barney. Mr. Troy (ph), please press star on your telephone keypad. Your line is open. Please proceed with your question.

Good morning or evening, whatever the case may be. Thank you for taking my call. Just a quick one and that related to digital camera trends. Specifically, if you could comment on unit sale trends and pricing, in light of the inventory situation you referenced early in the call. And if you could perhaps give us some color as to whether your second half - calendar second half unit sales outlook remained intact. Thank you.

OK. I'd like to answer this question. And first, the price for this digital camera itself is - it's about 10 to 13 % eroded compared to the same period last year. And for the unit sales is concerned and in the first quarter, it's about 60% increase compared to the same period of this year. And as you know, we are just focusing the total quantity of 50 million unit for this year from the 10 million unit of last year, which is a 50% increase, year-on-year.

As far as the first quarter is concerned, this is just on the plaque, in terms of quantities. And also, toward the Christmas season and we are just to - going to introduce the new models. And also, we plan to increase the output for digital still cameras.

As far as inventory is concerned, there are some, the surplus inventory from region to region, because of such big increase of market these days, there are surplus inventory in one region and short of inventory in another region. So we are closely watching results, the inventory situations and try to maximize the sell–in to the market by doing this. OK. Thank you very much.

Thank you.

Thank you very much.

At this time, I would like to - at this time, I would like to remind you that when, in order to ask a question, please press start, then the number one on your telephone keypad. Your next question comes from Rami Adel Missy (ph) from J. P. Morgan. Mr. Missy, please press star one on your telephone keypad. Your line is open. Please proceed with your question.

Hi, sorry. Just a quick question. I don't know if I missed this. Usually, you guys provide the unit shipments for the hardware and software for PlayStation 2. I wondered if you could provide that by region for us - North America, Europe and Japan?

Yes. On the first quarter, production shipment for PS2 is 540,000 in Japan and zero in the United States and 170,000 in Europe.

Did you say zero?

Yes, zero in the United States. As you know, we have reduced the price right after the E3. You know, the conference in Los Angeles.

However, we have provided inventory anticipating that the increase of those quantities, before the end of March.

So, therefore, this quarter, we try to normalize – reduce the inventory levels. So, as a result of this, the product shipments is much lower compared to the same period last year.

Right.

However, the sell through itself is quite the same situation as last year. And other results, and we are going to increase the output toward the high season. And therefore, we are not changing the total production shipment of 14 million units for the year. OK?

OK. So, the reason for the zero in North America is simply because the inventory channel is pretty full going into the next ...

Yes, that's right.

OK. And then, for software?

Software itself is - we are considering that the harvesting time if you like. And currently, first quarter, we have shipped the 14 - 41 million, you know, the unit for the software for the PS2 - much more than at the same period last year. And therefore, although the portion of the PlayStation 2 software is increasing rest of the year. Then we still - anticipating that we will achieve the total number - the 250 million units for the software for the year.

OK. So, the 41 was total. Do you have the breakdown by region?

Yes. Well, we - unfortunately, we would not disclose the distribution of the regional base for the forecast unfortunately.

You guys are not going to provide that going forward? Because you guys have provided that in the past, I don't know, two years?

The actual figure we are providing and you can pick up that figure from the web. And however, we not disclose the forecast by region.

Oh, because ...

And please understand ...

Right, the forecast. OK.

Thank you very much for your question. Now we're going to go to an e-mail question from Connor O'Mora from Arete Research.

Can you help quantify the impact Spider-Man 2 box office sales to date will have on September sales and margins for pictures? We'll go over to Rob for this answer.

Hi, it's Rob Wiesenthal again. As we said earlier, we don't disclose the profitability on a film-by-film basis. But there will be a strong contribution to both the second and third quarter results from the film. All the marketing costs or the majority were expensed during the fourth quarter, that's all we can tell you at this time.

Thank you very much. Now we're going to go over to a live question.

Once again, I would like to remind you, in order to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from P. J. MacNally from American Technology Research. Mr. MacNally, please press star, one on your telephone keypad. Your line is open. Please proceed with your question.

Good morning and good evening. I'm a little confused and - about the production numbers versus the sell through numbers on the PlayStation 2. We've heard from Sony Computer Entertainment of America that they were selling 150,000 units per week after the price cuts. And we're reaching nearly a million units in early July, which means it have to have - they had to have sold a million units in the June quarter at least. But you're saying now that there were zero units shipped into North America for the June quarter and this was - everything that was sold in North America in the June quarter was in the inventory - was in the channel in March?

That figure is the sell through. The quantity sold from the store to the customers. And what I said - zero is a production shipment. Production itself. That was a zero for this period. So, therefore, figure is different in the - please understand that - we are always disclosing that production shipment from Sony Computer Entertainment during that period.

Thank you very much. The next question is an email question from Conor O’Mra from Arete Research. Why are video and TV margins slipping despite double digit sales growth? And Phillips has reported flat panel growth margins are lower than CRT margins. Is this also true for Sony?

Yes. The question is, why are the video and TV margins slipping despite the double-digit sales growth. OK. Yes. And so we are just announcing that sales and operating profits by the category basis. And as you can see, the profit of the TV category was dropping compared to the last year. The reason is, as you know, the CRT TV itself is reducing sales volume and also the value itself, resulting in the reduction of profit from the CRT TV. However, flat TVs itself is replacing more than this drop, so that's the reason why the sales were increased in this quarter.

However, currently, the flat - the profit margin of those flat TVs are not enough as the CRT TV so, eventually the profit currently - the loss itself is bigger than the past quarter - same period of last year.

OK. Now we're going to go to another e-mail question from Connor O'Mora, of Arete Research, about Sony Ericsson. What is your market forecast and market share targets? What new products will drive this target? And Sony mentioned it plans to introduce mid-range phones later in this year. How will this change in the product mix affect ASP's?

Also, could you please give us your views on the mobile phone competitive landscape at present? And Sony's unique selling points compared to Samsung, Nokia and others?

So this is Ihara speaking. I will answer this question. I believe that the Sony Ericsson made a Q2 announcement. At that time, Sony Ericsson also updated the total marketing estimations. Now the latest estimation for the total market is 600 million for the year, 2004, on calendar basis. This is a 20% increase from the year 2003. This is significant increase and the total market continues to be very strong.

One that's (inaudible) market share target, Sony Ericsson does not disclose any market share target but Sony Ericsson has been improving very steadily the overall market share in the worldwide market. The key product which drives this - the Sony Ericsson business today is a product called the T610 and P630, which is our middle price segmented products.

T610 is a one-year-old product and the T630 is the product based on the same platform. This occupies significant part of the total Sony Ericsson business today and the latest product, called the P700, which was introduced a couple of months ago, will take over this business going forward. Those are, kind of, key drivers of the Sony Ericsson total business today.

Today, I think the ASP of Sony Ericsson is one of the highest among all the manufacturers and this situation remains the same for the rest of the year because on the one hand they've introduced the every tier segment, but, at the same time, they are going to introduce the high end products like the 3G UMTS phone and also new smart phone segment.

So by combining those two effects, I think we will not see the deterioration in the speed in Sony Ericsson. If I talk about total landscape of the mobile phone today, although total market is increasing significantly compared to the last year, the price compression in the market place is becoming keener because of the - because some of the manufacturers cut the price to try to increase the market share and this is particularly true in the entry tier segment.

And actually it is really keener in the entry segment. Fortunately for Sony Ericsson, because Sony Ericsson has quite a wide range of products covering all the price segments from high end to entry tier segment, the negative impact coming from this price war will be less compared to the - to the other manufacturers so we will not see a strong deterioration in the body of our (inaudible) going forward. That is kind of overall description what's going in the marketplace and Sony Ericsson today.

OK. Now we're going to go for a live question.

Your next question comes from Mr. Ryan Rentaria (ph), from Batiasni Asset Management. Mr. Rentaria, please press star, one on your telephone keypad. Your line is open. Please proceed with your question.

Hi. Thanks very much. I'm just curious. There have been talks about PS2 inventory being light in the North American retail channel and I'm just wondering if Sony is working hard to replenish that inventory as fast as possible or if you do not see that as an issue?

Well, unfortunately, I couldn't tell you about the inventory by region or even the market inventory. However, as far as the sell through quantity is concerned, I have known that the situation is good and the sales itself is just going same as the same period of the last year.

And for this - the production base and from this summer, we are going to increase the production output towards the high season and that the (inaudible) again to the plan to make three million units for the monthly basis. So this is what we are planning at the moment.

Thank you very much.

Thanks.

Thank you very much for your call, Ryan. We have just - I'm afraid we're running short of time. We have time for one final question, which we received by e-mail. My question is, electronic growth in other regions is up sharply, 22%. Are there any particular countries, such as China, driving this impressive performance? And can it last?

Yes. And also in local currency basis, and the sales were increased by 29% and, compared to the same period of last year. And this is mainly due to the sales contribution of China. As we can see the market is expanding such as the digital still camera and the video camera, and some key components for this region.

And also, there is growing market such as the South America and we have sales improving in this region as well.

Thank you very much. I'm afraid we've run out of time for this conference call. Thank you again, Mr. Ihara, Mr. Yuhara and Mr. Wiesenthal for joining us today. I would like to take this opportunity to remind everyone of our investor relation's contact information.

In Tokyo, IR Staff can be reached at 813-5448-2180. In New York, Masaaki Konoo, Kumiko Koyama and Justin Hill can be reached at 212-833-6722.

In London, Chris Hohman and Shinji Tomita are available at 44-207-444-9713.

Again, thank you very much for joining us today. That concludes the call. Thank you.

Thank you very much.

Thank you, thank you very much.

Thank you for participating in today's conference. You may now disconnect.