Date: 18 March 2011
Description: Notion VTec Berhad - Article in The Edge Financial Daily dated today on page 8 with heading "Japan Earthquake affects Notion VTec's camera business"
Announcement Details/Table Section: With regard to the article in The Edge Financial Daily dated today on page 8 with heading "Japan Earthquake affects Notion VTec's camera business," the management would like to provide additional information for clarity on the effects of the earthquake/tsunami in Northern Japan on 11 March 2011:
1. Nikon is a major customer in Notion's camera business. Nikon has made an announcement dated 14 March 2011, stating damage to some plant, equipment and buildings in 4 factories situated in the affected area. They have suspended operations there and will continue to evaluate details of the damage. Nikon has also formed Business Continuity Teams to normalize business as soon as possible. Details of the said announcement can be found at link: http://www.nikon.com/about/news/2011/0314_01.htm
2. Nikon's SLR camera and Interchangeable Lens main production and assembly operations are based in Nikon Thailand plant in Ayuthaya but supply of components are from both in-house as well as external approved vendors. Notion Thailand, Ayuthaya and Notion Venture Sdn Bhd, Klang ("Notion" or "Notion, Klang") are both supplying cam barrels and other camera parts to Nikon Thailand.
3. Amongst Nikon's in-house supply vendor will be Sendai Nikon Corporation, Natori, Miyagi and this plant is affected by the event and it manufactures the high end SLR camera body as well as body and lens mount. The body and lens mount are metallic mating surfaces for the lens to be attached to the camera body and are high volume parts typically in the hundreds of thousand per month.
4. As a contingency plan, Notion, Klang will be supplied with raw materials from Nikon for the production of the body mount with immediate effect. Notion is preparing jigs & fixtures and utilizing existing CNC machines to produce these precision components. Hard chrome surface treatment will be out sourced to a surface treatment company. The finished body mount components will be trucked to the customer's plant in Thailand for assembly. We expect this new business to contribute between RM36 million to RM60 million in sales per year.
5. There will be no additional capital expenditure for this new production.
6. The understanding is that this relocation will be long term.
7. Cam barrel in FY2010 recorded RM98 million in sales representing about 44% of the Notion VTec Group's revenue of RM223 million and Nikon was the major contributor besides Sony and Canon as well.
8. The management's internal revenue target for FY2011 is RM280 million with camera sales forming 50% or about RM140 million in sales. This has not factored in the new sub assembly of lens business in Notion Thailand which starts from the month of April 2011 and will contribute significantly to Notion's top and bottom line. The new body mount business is also not factored in.
9. Management thinks that due to the extreme nature of the crisis in Japan, its possible prolonged recovery process and the uncertainty of the total supply chain, it is likely that Notion's cam barrel sales will be affected by the likely slow down in SLR camera/Interchangeable lens.
10. There is no immediate cancellation of orders in the camera business thus far from any of our existing customers in the camera space.
11. Management thinks that on an overall basis, the contribution from the new business both in the body mount and sub-assembly of lens will more than compensate for the expected reduction in orders for cam barrels due to the disruption and possible slow down.
Management of the Notion VTec Group also wishes to express our sympathies and heartfelt concern to the victims and their families and pray that the suffering will be short lived.
Note: The management targets mentioned above are strictly management's expectations for growth based on our internal budgeting targets. The quoted statements are not intended to refer to any financial estimate, forecast or projection of our Group, and have not been reviewed by the external auditors. Notion VTec
is located in Malaysia. Nikon has made an investment in this company.