First quarter consolidated net sales were 185.9 billion yen, down 11.6% quarter-on-quarter and up 4.7% year-on-year. First quarter semiconductor sales were 182.0 billion yen, down 11.8% quarter-on-quarter, but up 5.5% year-on-year. Automotive sales decreased by 5.6% year-on-year, due to the rebound of the strong demand last year. Industrial sales increased by 12.4% year-on-year, mainly owing to the strong demand for factory automation (FA) and home appliances. Broad-based sales increased by 32.3% year-on-year, mainly due to the integration of Intersil and the strong demand in analog semiconductor devices.
Non-GAAP gross margin in the first quarter was 48.0%, 4.2 points above the Company’s guidance, mainly due to production increase and cost-containment effects. On a sequential basis, gross margin increased by 0.1 point and improved by 2.6 points year-on-year.
Non-GAAP R&D (7) expenses in the first quarter were 31.9 billion yen, compared to 34.3 billion yen and 27.0 billion yen in the sequential and year-ago quarter. First quarter R&D ratio to net sales was 17.2%.
Non-GAAP SG&A (8) expenses in the first quarter were 26.0 billion yen, compared to 32.4 billion yen and 24.7 billion yen in the sequential and year-ago quarter. First quarter SG&A ratio to net sales was 14.0%.
Although OPEX (operating expenses such as R&D and SG&A costs) ratio to net sales was relatively high due to a temporary drop in net sales, Renesas aims its long-term financial targets at around 30%, which is the sum of the ratios of R&D- and SG&A-to-net sales.
Non-GAAP operating income was 31.4 billion yen, equivalent to 16.9% of operating margin in the first quarter, showing a decrease of 2.7 billion yen from the 34.1 billion yen on a sequential basis. Non-GAAP operating margin improved by 0.7 point from 16.2% in the previous quarter. On a year-on-year basis, non-GAAP operating income improved by 2.3 billion yen (0.5 point) mainly due to sales increases.
Non-GAAP net income attributable to shareholders of parent company in the first quarter was 25.9 billion yen, while Non-GAAP net income per share was 15.5 yen.
Net cash provided by operating activities in the first quarter was 15.4 billion yen and net cash used in investing activities was 17.8 billion yen. These resulted in negative free cash flows of 2.4 billion yen.
Capital expenditures for property, plant, equipment (manufacturing equipment) and intangible assets, were 4.1 billion yen in the first quarter. These expenditures are based on the amount of investment decisions made and does not refer to the cash outlays in the cash flow statement.
Equity ratio was 49.8% as of March 31, 2018, against 47.7% as of December 31, 2017. Debt/equity ratio (gross) was 0.45 as of March 31, 2018.
| (7) | R&D: Research & Development | |
| (8) | SG&A: Selling, general and administrative expenses |
Outlook for Second Quarter and First Half of 2018
In the second quarter of 2018, Renesas expects semiconductor sales of 192.7 billion yen (up 5.9% quarter-on-quarter, but down 0.8% from year-ago quarter). For the first half of 2018 ending in June 30, 2018, Renesas expects semiconductor sales of 374.7 billion yen, up 2.1% year-on-year.
Non-GAAP gross margin for the second quarter of 2018 is expected to decrease by 4.0 points quarter-on-quarter and 1.8 points down from year-ago quarter to 44.0%, mainly due to adjustment in production volume after an increase in production in the last quarter, However, Non-GAAP gross margin for the first half of 2018 is expected to come in at 45.9%, up 0.3 point year-on-year, mainly due to an increase in sales.
Non-GAAP operating margin is expected to be 12.8% (decrease by 4.1 points quarter-on-quarter, down 1.9 points from year-ago quarter). Non-GAAP operating margin for the first half of 2018 is expected to come in at 14.8%, down 0.7 point year-on-year due to proactive R&D investments.
The forecasts for the second quarter of the 2018 are calculated at the rate of 105 yen per USD and 129 yen per Euro, while the forecasts for the first half of 2018 are based on the rate of 107 yen per USD and 131 yen per Euro.
Capital expenditures are based on the amount of investment decisions
made for property, plant and equipment (manufacturing equipment) and
intangible assets during the first half of 2018, and they are expected
to be 3% of net revenue.
