Third quarter consolidated net sales were 180.2 billion yen, down 11.4% quarter-on-quarter and down 7.8% year-on-year. Third quarter semiconductor sales were 175.6 billion yen, down 11.8% from the previous quarter that saw a decline in sales due to channel inventory adjustments, and down 8.7% year-on-year. Automotive sales decreased by 5.8% year-on-year. Industrial sales decreased by 13.8% year-on-year, mainly due to a weak demand in factory automation (FA) and home appliances. Broad-based sales decreased by 9.6% year-on-year.
As for the sell-out basis (7) sales trend, Automotive sales for Japanese customers remained almost flat year-on-year, while non-Japanese customer sales were up by mid-single digit year-on-year. Industrial sales declined by mid-single digit, and Broad-based sales were down by mid-single digit compared to the year-ago quarter.
Non-GAAP gross margin in the third quarter was 44.4%, 1.2 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 1.0 point and decreased by 3.3 points on a year-on-year basis.
Non-GAAP R&D (8) expenses in the third quarter were 30.4 billion yen, compared to 30.5 billion yen and 31.0 billion yen in the sequential and year-ago quarter. Third quarter R&D ratio to net sales was 16.9%.
Non-GAAP SG&A (9) expenses in the third quarter were 25.5 billion yen, compared to 28.0 billion yen and 26.3 billion yen in the sequential and year-ago quarter. Third quarter SG&A ratio to net sales was 14.1%.
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 24.1 billion yen, equivalent to 13.4% of operating margin in the third quarter, showing a decrease of 9.8 billion yen from the 33.9 billion yen on a sequential basis. Non-GAAP operating margin decreased by 3.3 points from 16.7% in the previous quarter due to the decrease in gross margin. On a year-on-year basis, non-GAAP operating income decreased by 11.8 billion yen (5.0 points) mainly due to sales decreases and reduced production.
Non-GAAP net income attributable to shareholders of parent company in the third quarter was 18.6 billion yen, and Non-GAAP net income per share was 11.2 yen.
Inventories at the end of the third quarter was 141.5 billion yen, a 3.1 billion yen increase from the 138.5 billion yen in the previous quarter.
Net cash provided by operating activities in the third quarter was 41.6 billion yen and net cash used in investing activities was 14.5 billion yen. These resulted in positive free cash flows of 27.1 billion yen.
Capital expenditures for property, plant, equipment (manufacturing equipment) and intangible assets, were 4.1 billion yen in the third 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 53.7% as of September 30, 2018, against 52.1% as of June 30, 2018. Debt/equity ratio (gross) was 0.41 as of September 30, 2018.
| (7) | Sell-out basis: Internal indicator including sales from exclusive distributors and sales agents’ inventories | |
| (8) | R&D: Research & Development | |
| (9) | SG&A: Selling, General and Administrative expenses | |
Outlook for Fourth Quarter 2018
In the fourth quarter of 2018, Renesas expects semiconductor sales of
181.1 billion yen (up 3.1% quarter-on-quarter, and down 12.3% from
year-ago quarter). For the full year ending December 31, 2018, it is
expected to be 737.8 billion yen, down 3.6% from year-ago quarter.
