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Hitachi Posts Higher Profit on Lower Sales

Nov 29, 1999 08:58 AM

TOKYO--(BUSINESS WIRE)--Nov. 29, 1999--Hitachi, Ltd. (NYSE:HIT) today announced results for the first half of fiscal year 1999, ended September 30, 1999. Sales for the period amounted to 3,802,999 million yen ($35,542 million), a 2% decrease from the corresponding period of the previous fiscal year. Sales in Japan were slightly higher than a year earlier but overseas sales were down sharply owing to the appreciation of the yen.

Both income before income taxes and net income moved into the black, at 31,815 million yen ($297 million) and 3,448 million yen ($32 million). The improvement, achieved despite the severe negative effect of the stronger yen, was due mostly to a marked recovery in semiconductor operation results

Consolidated business results are for Hitachi, Ltd. and its 1,033 subsidiaries, including 306 overseas corporations.

During the first half of fiscal 1999, the Japanese economy was buoyed by a gradual recovery in consumer spending and continuing sound housing investment. However, the sluggish pace of private sector investment in new plant and equipment remained a severe negative force, and the strong yen added further downward pressure. Outside Japan, the Asian economies began to revive and the U.S. economy maintained its robust performance.

In Information Systems & Electronics, the long depressed semiconductor sector posted higher sales than in the same period last year, thanks to expanding demand from manufacturers of PCs and cellular phones, and thin-film transistor (TFT) LCDs advanced strongly, mainly on the strength of demand from PC manufacturers. In the computer sector, systems integration services did well but mainframe computers faltered because of intensifying competition and customer concern about the year 2000 problem. The result was a 2% decline in overall segment sales.

In Power & Industrial Systems, sales were down from a year earlier. Power systems were held back by the low level of investment in new equipment by Japanese power companies, while industrial systems were affected by slow capital investment throughout Japanese industry.

In Consumer Products, sales were substantially unchanged as the vigorous performance of refrigerators and the good showing by washing machines in Japan was offset by a downturn in overseas sales.

In Materials, surging demand for semiconductors and LCD materials boosted sales in the electronic materials sector but overall segment sales were depressed by a drop in cable and wire sales due to inactive capital investment by Japan's private sector.

In Services & Other, financial services performed strongly but, in general trading operations, overseas sales of mainframe computers were weak and the electronic components sector experienced a decline in color display tubes caused by declining prices and heightening competition. Sales in this segment also fell below the year-earlier level.

The company spent 217,445 million yen ($2,032 million) on research and development, a decrease of 12 % from the same period last year. R&D expenditures as a percentage of net sales were 5.7 %.

During the period, Hitachi's plant and equipment investment amounted to 275,530 million yen ($2,575 million), a decrease of 13 % from the same period a year earlier.

While the Japanese economy has begun to show some optimistic signs, no recovery in private sector plant and equipment investment is in sight and the adverse effects of a worsening employment situation and the strong yen are likely to persist. Globally, the promise of continuing economic recovery in Asia is heartening but is dampened by concern about whether the U.S. economy will sustain its strong performance. Because of these circumstances, Hitachi does not expect the Company's business environment to improve greatly during the second half of fiscal 1999, ending March 31, 2000.

Against this backdrop, Hitachi plans to reinforce consolidated earning power by transforming itself to a solutions-providing company. Corporate resources will be particularly focused on Information Systems & Electronics as the nucleus of this effort.

Hitachi's current consolidated forecast for fiscal 1999, ending March 31, 2000, is as follows:

• Net sales 7,800,000 million yen ($72,897 million)
(down 2% from the preceding year)

• Operating income 165,000 million yen ($1,542 million)

• Income before income taxes 115,000 million yen ($1,075 million)

• Net income 35,000 million yen ($327 million)

All figures were converted at the rate of 107 yen = U.S. $1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 30, 1999.

Cautionary Statement

Statements in this news release contain forward-looking statements which reflect management's current views with respect to certain future events and financial performance. Words such as "anticipate," "believe," "expect," "estimate," "intend," "plan," "project" and similar expressions which indicate future events and trends identify forward-looking statements. Actual results may differ materially from those projected or implied in the forward-looking statements and from historical trends. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate.

Factors that could cause actual results to differ materially from those projected or implied in any forward-looking statements include, but are not limited to, rapid technological change, particularly in the Information Systems & Electronics segment; uncertainty as to Hitachi's ability to continue to develop products and to market products that incorporate new technology on a timely and cost-effective basis and achieve market acceptance; fluctuations in product demand and industry capacity, particularly in the Information Systems & Electronics segment and the Consumer Products segment; exchange rates and their fluctuations between the yen and other currencies in which Hitachi makes significant sales or in which Hitachi's assets and liabilities are denominated, particularly between the yen and the U.S. dollar; uncertainty as to Hitachi's access to liquidity or long-term financing, particularly in the context of restrictions or availability of credit prevailing in Japan; uncertainty as to Hitachi's ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates; general economic conditions and the regulatory and trade environment of Hitachi's major markets, particularly, the United States, Japan and elsewhere in Asia, including, without limitation, continued stagnation or deterioration of the Japanese or other East Asian economies, or direct or indirect restriction by other nations of imports; uncertainty as to Hitachi's access to, or protection for, certain intellectual property rights, particularly those related to electronics and data processing technologies; Hitachi's dependence on alliances with other corporations in designing or developing certain products; the market prices of equity securities in Japan, declines in which may result in write-downs of equity securities Hitachi holds; and uncertainty as to the result of Hitachi's effort to deal with the Year 2000 problem.

For Media/Investor Inquiries, please contact:

Gerard F. Corbett
Hitachi America, Ltd.
Vice President
Corp. Communications Group
Tel:(650) 244-7900
Fax: (650) 244-7920

For all other inquiries please call:

If you have any questions specifically about Investor Relations in the United States, please contact our Investor Relations Department at

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