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Wednesday, June 29, 2005
Pioneer Posts Low Profits for 2005

The fiscal year 2005 ended March 31, 2005, and Pioneer reported that the year was not the easiest one for the Japanese giant. Consolidated operating revenue was Y733.6 billion (US$6,856.5 million), up 4.7% over the previous year, mainly due to increased sales of plasma displays worldwide and DVD recorders overseas, despite decreased sales worldwide of recordable DVD drives and audio products.

As for profit, however, Pioneer posted net loss of Y8.8 billion (US$82.1 million), compared with net income of Y24.8 billion in the previous year, due primarily to decreased gross profit margin as a result of intensified price competition of plasma displays and DVD recorders, impairment losses of the carrying value of certain production facilities and losses associated with Pioneer's decision not to sell cable TV set-top boxes in North America.

Net cash provided by operating activities was Y19.9 billion (US$186.4 million), mainly attributable to the net loss of Y8.8 billion (US$82.1 million) posted this year,compared with net income of Y24.8 billion for the previous year. Net cash used in investing activities was Y93.5 billion (US$874.0 million), mainly due to the acquisition of a plasma display production subsidiary and increased capital expenditures to expand the capacity to produce plasma displays.

To cope with the situation and to recover profitability quickly, Pioneer plans to move ahead with cost reduction efforts among the group companies. At the same time, the company is focusing its resources in the strategic plasma display, DVD and car electronics businesses.

Pioneer is also considering the possibility to cut a number of models in order to reduce costs on a global scale.

In the DVD business, although the market for DVD recorders and PC-use recordable DVD drives is rapidly growing, prices are sharply falling and competition is getting more intense.

In order to regain competitiveness, Pioneer plans to shorten the development time by 30% by renovating IT infrastructure and enhancing software development efficiency.

Pioneer aims to a twice-a-year launches of new models simultaneously worldwide. By cutting the manufacturing lead time and reducing inventory through a new production system which integrates all stages of DVD product manufacturing, from laser pickups to finished products, at facilities in China, the company will expects to reduce costs and release attractive products that meet customer demands.

The recordable DVD drives for personal computers generate sales, but competitors in Taiwan and South Korea are dropping prices aggressively on increasingly competitive products, so Pioneer cannot expect a return to earlier levels of high profitability. However, the company seeks to increase its share and maintain profit margins for these products, as it plans to focus on slim drives for notebook computers and sell more drives to both the OEM market and the consumer market worldwide.

In the device business, the Pioneer drive units for DVD recorders, mainly for electric appliance manufacturers on an OEM basis, but also for Pioneer brand products, currently command a 30% share of the market. Future plans include doubling of these sales. As for laser pickups, the key parts for DVD products, Pioneer also aims to expand sales of both recordable and read-only types.

In the car electronics business, Pioneer plans to expand its car navigation system business in Europe and North America, while maintaining its car audio product sales activity in growing markets such as China and Central and South America.

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