Second quarter consolidated net sales were 203.5 billion yen, up 9.5% quarter-on-quarter and up 2.7% year-on-year. Second quarter semiconductor sales were 199.1 billion yen, up 9.4% from the previous quarter that saw a decline in sales due to channel inventory adjustments, and up 2.5% year-on-year. Automotive sales increased by 1.7% year-on-year. Industrial sales increased by 6.2% year-on-year, mainly due to a strong demand in factory automation (FA) and home appliances. Broad-based sales remained flat year-on-year.
Non-GAAP gross margin in the second quarter was 45.4%, 1.4 points above the Company’s guidance, mainly due to decreased expenses in addition to increase in sales. On a sequential basis, due to a production decrease, gross margin decreased by 2.6 points and year-on-year decreased by 0.3 point.
Non-GAAP R&D (7) expenses in the second quarter were 30.5 billion yen, compared to 31.9 billion yen and 33.5 billion yen in the sequential and year-ago quarter. Second quarter R&D ratio to net sales was 15.0%.
Non-GAAP SG&A (8) expenses in the second quarter were 28.0 billion yen, compared to 26.0 billion yen and 28.0 billion yen in the sequential and year-ago quarter. Second quarter SG&A ratio to net sales was 13.8%.
While Renesas focuses its OPEX (operating expenses such as R&D and SG&A costs) on R&D expenses for future growth, the Company is continuing its control of disciplinary SG&A, and aims to sustain 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 33.9 billion yen, equivalent to 16.7% of operating margin in the second quarter, showing an increase of 2.5 billion yen from the 31.4 billion yen on a sequential basis. However, Non-GAAP operating margin decreased by 0.2 point from 16.9% in the previous quarter due to the decrease in gross margin. On a year-on-year basis, non-GAAP operating income improved by 4.9 billion yen (2.0 points) mainly due to sales increases and cost-containment effects.
Non-GAAP net income attributable to shareholders of parent company in the second quarter was 30.4 billion yen, and Non-GAAP net income per share was 18.2 yen.
Net cash provided by operating activities in the second quarter was 47.2 billion yen and net cash used in investing activities was 15.8 billion yen. These resulted in positive free cash flows of 31.4 billion yen.
Capital expenditures for property, plant, equipment (manufacturing equipment) and intangible assets, were 5.0 billion yen in the second 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 52.1% as of June 30, 2018, against 49.8% as of March 31, 2018. Debt/equity ratio (gross) was 0.43 as of June 30, 2018.
(7) R&D: Research & Development
(8) SG&A: Selling, general and administrative expenses
Outlook for Third Quarter 2018
In the third quarter of 2018, Renesas expects semiconductor sales of 172.6 billion yen (down 13.3% quarter-on-quarter, and down 10.2% from year-ago quarter).
Non-GAAP gross margin for the third quarter of 2018 is expected to be 43.2% (down 2.2 points quarter-on-quarter, and down 4.5 points year-on-year, mainly due to a sales decline and low operation with adjustments in production). For the cumulative nine months ending September 30, 2018, it is expected to be 45.6% (down 0.7 point from year-ago quarter).
Non-GAAP operating margin is expected to be 8.8% (decrease by 7.8 points quarter-on-quarter, down 9.6 points from year-ago quarter). For the cumulative nine months ending September 30, 2018, operating margin is expected to be 14.3% (down 2.2 points from year-ago quarter due to a decrease in gross margin and proactive investments in R&D).
The forecasts for the third quarter of the 2018 are calculated at the rate of 109 yen per USD and 126 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 nine months ending September 30, 2018, and they are expected to be 3.0% of net revenue.
References
Refer to Renesas Electronics’ earnings report “Renesas Electronics Reports Financial Results for the Second Quarter Ended June 30, 2018” for the consolidated balance sheets, the consolidated statements of income and the consolidated statements of cash flows.
Refer to the separate sheet for Japan GAAP – non-GAAP reconciliation.
Forward-Looking Statements
The statements in this press release with respect to the plans,
strategies and financial outlook of Renesas Electronics and its
consolidated subsidiaries (collectively “we”) are forward-looking
statements involving risks and uncertainties. We caution you in advance
that actual results may differ materially from such forward-looking
statements due to several important factors including, but not limited
to, general economic conditions in our markets, which are primarily
Japan, North America, Asia, and Europe; demand for, and competitive
pricing pressure on, products and services in the marketplace; ability
to continue to win acceptance of products and services in these highly
competitive markets; and fluctuations in currency exchange rates,
particularly between the yen and the U.S. dollar. Among other factors,
downturn of the world economy; deteriorating financial conditions in
world markets, or deterioration in domestic and overseas stock markets,
may cause actual results to differ from the projected results forecast.
