Okay. Thank you very much. We are wasting so much of your time . I'd like to start that TDK Corporation full-year performance briefing on March 2024. Today's speakers and attendees are President and CEO Noboru Saito, Senior Executive Vice President Tetsuji Yamanishi. Hello, everyone. And Corporate Officer Hiroyuki Uemura, Corporate Officer Taro Ikushima.
Thank you.
Corporate Officer Takao Tsutsui .
Hello, everyone.
That's all the speakers and attendees from TDK Corporation today. Thank you very much. I'm Yamanishi. Thank you very much for taking time out of your business schedule today to attend our full-year performance briefing on March 2024. Thank you very much. I will now give an overview of our consolidated and the business's performance on a full-year basis.
First of all, as for the key highlights of the full-year results, although the global economy remained steady in North America, mainly, there was still the growing sense of deceleration due to the economic slowdown in Europe and in China, as well as the uncertainty and geographical uncertainties in the Middle East. In addition, the yen continued to depreciate against the US dollar and the euro. Under such circumstances, in the electronics market, which affects our business performance, sales decreased by 3.5% year-on-year due to sluggish demand in the ICT and HDD market, caused by prolonged weak final demand and weak capital investment demand in the industrial equipment market in general. It is the 3.5% year-on-year decrease.
However, operating income increased by 2.4% year-on-year, yielding relatively high profits, mainly due to an increase in sales to the automotive market resulting from an increase in the production of xEV vehicles and improved profitability of small rechargeable batteries for the ICT market. Looking at sales by business segment by market, sales of passive components and the sensors for the automotive market increased due to the shift to xEVs and the ADAS, while the sales of passive components and the sensors for the industrial equipment market, where demand remained sluggish and declined significantly. Small rechargeable batteries for the ICT market secured an increase in profit despite a decrease in sales due to a drop in the selling prices, accompanying the decline in the material prices.
Sales of HDD heads and suspensions declined significantly, owing to stagnant demand in the HDD market, but the signs of improvements began to emerge in the third quarter. One-time expenses of JPY 19.8 billion were recognized for the implementation of structural reforms, including optimization of production capacity in anticipation of the demand environment. Next, I will provide an overview of the full-year results, including an increase of approximately JPY 101.1 billion in net sales and an increase of approximately JPY 25 billion in operating income due to exchange rate fluctuations. Net sales amount to JPY 2,103.9 billion, down by JPY 76.9 billion or 3.5% from the same period last year. Operating income was JPY 172.9 billion, up JPY 4.1 billion or 2.4% from the year earlier, including one-time expenses of JPY 19.8 billion.
Income before income taxes was JPY 179.2 billion, and net income was JPY 124.7 billion. Earnings per share is 328.7 yen. As for the sensitivity to exchange rate fluctuations, we estimate that one yen change to the dollar will result in an annual change of approximately JPY 2 billion, and one yen change to the euro will result in an annual change of approximately JPY 7,600 million. I will continue with an explanation of the full-year results by segment. In passive components, sales to the automotive market, especially for xEV vehicles, increased, but demand from the industrial equipment and ICT markets was sluggish, resulting in sales of JPY 565.6 billion, down by 2.3% year-on-year basis. Operating income decreased by 43% to JPY 539 billion due to sales volume decline.
Sales and earnings of ceramic capacitors increased due to higher sales to the automobile market, but earnings decreased due to deterioration-related product mix and lower sales volumes to industrial equipment and distributors and the sales and earnings. Both of the sales and aluminum, film capacitors decreased due to lower sales to the industrial equipment market and the distributors. Sales and operating income of inductive devices decreased, owing to lower sales to industrial equipment and the distributors, while sales to the automobile market increased. Sales and earnings of piezoelectric components and circuit protection components also declined for products for the industrial equipment market, as well as the distributors, due to the decrease in demand. Both sales and income of high-frequency components decreased due to lower sales to the ICT market. In addition, one-time expenses of JPY 7.4 billion were recognized for the period.
Next, the sensor application products business. Net sales were JPY 180.5 billion, up by 6.5% year-on-year, and operating income was down by 43.7% or JPY 6 billion, including one-time expenses of JPY 3.3 billion. The profitability of temperature and pressure sensors improved thanks to increased sales to the automotive industry, and both sales and profits of magnetic sensors increased due to increased sales of Hall sensors and TMR sensors to the automotive industry, as well as to smartphones. On the other hand, both sales and profits of MEMS sensors decreased due to lower sales to smartphones and industrial equipment, although sales of motion sensors for automobiles expanded. Next, in the magnetic application products business, net sales were JPY 184.2 billion, down by 8.2% year-on-year. Operating income was a loss of JPY 35.6 billion, including one-time expenses of JPY 6.5 billion.
In the HDD head and suspensions business, HDD demand continues to be sluggish, with the total HDD demand down by 23% from the year earlier. And in particular, the total Nearline HDD demand down by 30%. As a result, sales volumes of both heads and suspensions for HDDs have fallen significantly from the previous year, and we had to recognize sales decline and operating loss again. Sales of magnets declined due to the lower sales in the automotive market and for industrial equipment, and so forth. Profitability improvement has not been as expected due to slow progress and productivity improvement. Next, in energy application products, net sales were JPY 1,121.7 billion, and operating income was JPY 195.7 billion, including JPY 2 billion of one-time expenses. A 4.4% decrease in sales from the previous year, but 32.7% increase in income.
In rechargeable batteries, although sales volume of small batteries for smartphones increased, total sales decreased due to lower selling prices and the price discount caused by falling material prices and reduced sales of medium-sized batteries due to business transfer to the joint venture. However, the company secured an increase in profits due to volume growth, rationalization effects, and foreign exchange gains. Both sales and profits of the power supplies for industrial equipment increased as sales to industrial equipment such as semiconductor manufacturing equipment and the medical equipment increased in response to the backlog of orders, while the profitability of power supplies for EVs improved. Next, I will explain the factors behind the change in the sales and operating income by segment from the Q3 to Q4 of the current fiscal year.
In the passive component segments, sales declined by JPY 2.5 billion or JPY 1.7 billion, 7% from the Q3, and operating income fell by JPY 14.9 billion or 80.1% on a quarter-on-quarter basis. Sales of ceramic capacitors increased due to higher sales for automotive applications, but operating income decreased due to the increased expenses for the production enhancement. With both sales and operating aluminum, film capacitors decreased due to lower demand in the industrial equipment market, and both sales and operating income of inductive devices also decreased, owing to lower sales in the industrial markets.
Both sales and income of high-frequency components decreased due to lower sales in the ICT and industrial equipment markets, while both sales and income of piezoelectric and circuit protection components remained almost flat thanks to higher sales in the automobile market despite the lower sales in the industrial equipment and ICT market. A restructuring cost of approximately JPY 400 million in Q3 and about JPY 7 billion in Q4 were recognized. Next, sensor application products. Sales declined by JPY 4 billion, and operating income decreased by JPY 8.4 billion. Sales of temperature and pressure sensors remained almost flat, while the sales of magnetic sensors for the automotive industry increased, but the peak of demand in the ICT market has passed, peaked out, so resulting in lower sales as well as profits. In addition, one-time expenses of JPY 3.3 billion were recognized in Q4.
Next, in the magnetic application products segment, sales increased by JPY 2.6 billion or 5.2%, as I mentioned earlier, and the operating loss increased by JPY 2.1 billion. Sales increased by approximately 8% in HDD head sales volumes due to the recovery of overall demand for Nearline HDDs and by approximately 10% in suspension sales volume, resulting in an overall increase in head sales and reduction of the deficit. As for magnets, sales decreased, the decline and the operating loss expanded. One-time expenses of JPY 900 million were recognized in Q3 and JPY 4.7 billion in Q4. Next, the energy application products segment. Sales declined by JPY 66.4 billion, and operating income decreased by 25.2 billion yen.
In rechargeable batteries, sales of small batteries to the ICT sector declined significantly due to seasonality, resulting in lower sales and profits. Sales of power supplies for industrial equipment remained steadily, with both sales and profits declined, and the power supplies for EVs. One-time expenses of JPY 2 billion were recognized in Q4. Next, the factors of changes in operating income of JPY 4.1 billion on a full year basis. While in rechargeable batteries, so an increase in profit due to the growth in sales volume, the decrease in passive components was largely due to a decline in volume, deterioration in the product mix, and reduced capacity utilization, and the decrease in HDD head sales volume, resulting in a profit change of JPY 57.7 billion due to the sales fluctuations.
Rationalization, cost reductions, and structural reform effects of JPY 424 billion offset the JPY 41.5 billion decrease in profit due to changes in the selling prices. SG&A expenses were reduced by JPY 20 billion through silo cost streamlining efforts, mainly in rechargeable batteries and HDD heads. The one-time expenses, such as restructuring cost, decreased by JPY 15.9 billion from the previous year. JPY 25 billion gained by the depreciation of Japanese yen also contributed to the total increase of operating profit of JPY 4.1 billion. Next, I will explain the cash flow. The full year operating cash flow was JPY 447 billion. Investment cash flow, including CapEx, was JPY 216.6 billion. Free cash flow was JPY 330.4 billion, a significant increase from the JPY 28.4 billion free cash flow in the previous year.
In addition to a significant increase in operating cash flow due to a decrease in working capital, including ongoing inventory optimization based on market demand conditions, capital expenditures were also reduced by approximately JPY 40 billion from the initial estimate of JPY 260 billion as a result of careful assessments of demand trend. As a result, free cash flow increased significantly from the previous fiscal year to JPY 230.4 billion. In addition, the financial target of a positive free cash flow after shareholder returns set forth in the previous midterm plan was also achieved, even exceeding the initial target by approximately JPY 50 billion. In the new midterm plan, we will also aim to increase free cash flow through further improvements of capital efficiencies. That's all my presentation today. Thank you very much for your attention. Thank you.
Hello. I am Noboru Saito, President and CEO.
Thank you very much for your time for the occasion. I will explain our full year projections for fiscal year March 2025. First, allow me to explain our consolidated forecast for FY March 2025, as well as the market background behind our forecast, as well as our planned production volume of the major devices. As for the automobile, we are assuming the market size, including commercial vehicles and to be, 91 million units level, up 2% year-on-year. Production of EVs and eco-friendly cars having a major impact on TDK are continuously expanding. For the entire xEV in the market, we are assuming 26.4 million units level, up 21%. As for smartphones representing the ICT market, we are assuming 1,144 million units level. This is a significant increase of a slight increase rather than 1% from the previous period.
As for the HDD market as a whole, we expect an increase of 3% or around. As for the production volume of Nearline HDDs for data centers, a recovery in a trend is being observed from the last year's rapid decline, and we believe it will be around 51 million units, up 31% year-on-year. As for notebook PCs and tablets, we are assuming for a growth of 3%-4% positive side. On the other hand, we are not seeing a recovery for the overall IT equipment in the industrial equipment market, and it will be rather weak throughout the year. Production volume of major devices excluding industrial equipment seem to have hit the bottom, now going up from the previous year, but the macroeconomic environment is still very unclear. So we need to be extremely careful as to the demand for parts and components going forward.
With the production volume of those major devices as well as the order situations, our outlook for the consolidated performance for FY March 2025, full year net sales being JPY 2,105 billion, operating profit being JPY 180 billion, profit before tax being JPY 184 billion, and net profit attributable to owners of parent being JPY 128 billion. As for the exchange rate, we are assuming 140 JPY to the USD and 156 JPY to the EUR. Now, allow me to explain our shareholder returns. In the new medium-term plan, considering the changes in the business environment, investment for the growth business, and ROE and others, we plan to have shareholder returns with the dividend payout ratio of 30%. Now, it is going to be raised to 35% according to our plan. The annual dividend is expected to be JPY 120, increase of JPY 4.
Next, allow me to explain our projections for cost items. CapEx for fixed assets is JPY 250 billion. For depreciation and amortization, JPY 190 billion. For R&D and expenses, JPY 220 billion are expected. For further information, as for the R&D and spend due to the partial revision of categories both in SG&A and R&D and expenses, it is expected to increase about JPY 30 billion for FY March 2025. Next, I will explain our assumptions for ups and downs by segment for FY March 2025. As for the passive components segment, though sales may grow driven by the xEV progress, but due to the assumed decline in the selling price of MLCC and others, as well as the sluggish market for the industrial equipment, we are now assuming the growth of 4%-7% for the segment as a whole.
In the sensor and application products segment, magnetic sensors such as TMR and Hall, which are firm thanks to the automotive and ICT applications, xEV-related demand is expected to grow, temperature and pressure sensors. On top of that, MEMS microphone sales growth would result in the expected revenue growth for the segment of 8%-11%. As for magnetic application products segment, we are observing that the production volume of HDDs and Nearline HDDs for data centers appear to have hit the bottom. Though we could expect sales growth, but due to the drop in the magnet sales, we are now expecting to have a drop in sales in the range of -2% to +1%.
In the energy and application products segment, though we are observing the demand has hit the bottom of smartphones, notebook PCs, and tablets because we are expecting a certain level of drop in selling prices due to the price decline of raw materials of rechargeable batteries. So we are assuming the segment would be -4% to -1% year-on-year. Next, allow me to explain the outline of our new medium-term plan, which we plan to announce on May 22nd next month. The current medium-term plan was made by backcasting from what we want to be, namely from our long-term vision. So this is going to be our foundation building phase where we would like to build a firm foundation and would like to solidify our foothold.
As for the company-wide financial goals, besides the same operating profit ratio, we are going to pay more attention to ROIC instead of ROE. That's where we are going to aim at improving profitability of our capital invested. In order to realize these goals, for the prioritizing growth businesses, we will continue our aggressive investment in order to further improve our profitability. For the challenging businesses, we will quicken our activities in order to execute appropriate measures so that we could further improve our capital efficiency. We will be more strongly aware of the capital costs and carry out more proactive business portfolio management. Among the major growth businesses are, first, with the xEV trend in place, energy transformation. We will continue to invest into MLCC and other passive components which have high reliability where we can expect the demand to grow. So we could continue to strengthen our competitiveness.
So we could surely go for the demand. Decarbonization and renewable energy are progressing. Demand for mid-sized rechargeable batteries is expected to enjoy the growth not only for home but for commercial ESS and UPS and for the data centers. So here, we would like to maximize the joint venture synergies so that we could expand ourselves on the mid- to long-term basis. With the digital transformation direction trend further advancing, in line with the AI-enabled devices becoming popular as well as the increased demand for the foldable smartphones and other high-feature devices , we will further expand the sales of high value-added products such as silicon anode lithium batteries, TMR sensors, and MEMS microphones. Next, I will explain our outlook for the free cash flow, which is going to be our continued focus in the new medium-term plan.
In the previous midterm management plan period, MLCC and other passive components business and TMR sensor and other sensor application products business improved profitability. Furthermore, by improving the working capital, our operating cash flow tended to grow. Furthermore, in the final fiscal year, with the decreased investment in energy application products, we were able to generate JPY 156 billion in cash flow for the three cumulative years. In the new midterm plan, we will further improve our profitability of the capital invested. We will further reinforce our business portfolio management. We focused on our investment into growth, small-sized rechargeable batteries, passive components, and sensor application products enjoyed improved profitability. We believe during the new midterm period, we believe that we can further generate higher free cash flow. The free cash flow after the shareholder returns will be used for growth investment and further reinforce shareholder returns.
I am planning to explain details of these financial initiatives as well as ESG and other non-financial initiatives on next month, May 22nd. On the short-term basis, the global economy is still faced with great uncertainties. But TDK will define the three years starting from FY March 2025 as a period for us to build a strong foundation and solidify our footsteps on the long-term basis. We will aim at sustainable value creation. With this, I'd like to conclude my explanation. Thank you indeed for your kind attention.