To Our Shareholders and Investors

Business Results for Fiscal 2017

The business performance for the term under review witnessed an increase in sales reflecting growth of sales volume of large-size LCD-TVs of which unit price is relatively high and the launch of FUNAI brand products in the display business, one of our principal product lines, in Japan. Meanwhile, following the sudden rise of LCD panel costs at the beginning of the previous year, the price of LCD-TVs also bottomed out, resulting in the decreased demands in the LCD-TV markets in 2017 in North America and China. In addition, Chinese manufacturers shipped a large volume of LCD-TVs centering in large-size models to North America, which brought excess supply of these types of LCD-TV in the North American market. As a result, the LCD-TV manufacturers including the Company were left with a large quantity of excessive inventory. The Company’s profits were squeezed significantly by more-than-expected sales promotion expenses required for selling these inventories.

Consequently, net sales and operating loss for the fiscal year under review were ¥130,130 million (a 2.8% decrease year on year) and ¥10,885 million (compared with operating loss of ¥6,775 million in the previous fiscal year), respectively, whereas ordinary loss and net loss attributable to owners of parent were ¥11,909 million (compared with ordinary loss of ¥7,726 million in the previous fiscal year) and ¥24,709 million (compared with ¥6,745 million in the previous fiscal year), respectively.

Future Growth Starategy

In accordance with the Medium-term Management Policy the Company formulated at the beginning of the term, we endeavored to improve profits centering on the audiovisual business including the expansion of lineup of audiovisual products. However, we failed to respond to the unprecedented changes of markets where all LCD-TV manufacturers kept excessive inventories, and we take this result very seriously.

For the next fiscal year ending March 31, 2019, we foresee that the demand for LCD-TVs in the North American market will remain at the same level as in 2017 or slightly less. Considering various uncertain factors including the possibility of further intensified price competitions and the prices of semiconductors’ parts such as memory media being expected to remain high, we anticipate that severe business environment will continue further. Therefore, with the aim of attaining crucial corporate objectives “Break away from the deficit,” we need to concentrate our efforts in steadily securing profits rather than forcibly promoting sales expansion measures. From this point of view, we have formulated “FY2018 Strategy” aiming at realizing a profit structure reform towards sustainable growth by reviewing the Medium-term Management Policy.

In the North American market, our key driver, our efforts will be focused on the expansion of our market share by increasing spaces on a regular shelf at mass retailers and reinforcing internet sales business, and on the optimization of our production system and the reduction of service cost. In Japan, we will expand our product lineup by launching organic electroluminescent (OEL) television displays and disseminate the FUNAI brand through advertisements based on the partnership agreement with Los Angeles Angels. Other than the above, we will accelerate the development of new businesses likely to become the pillars of our future business including setting up an electric vehicle-related business by collaboration with alliance enterprises and application of microfluidics technology.

Hideaki Funakoshi President and CEO