We asked William J. Edwards, executive vice president and CFO of Kyocera International Inc. — the headquarters and holding company for six Kyocera enterprises in North America — about the challenges of doing business internationally in today’s economy.
What is your forecast for the global economy for the coming year?
Globally, we expect the financial difficulties in Europe to continue throughout this year, along with continued high valuation of the Japanese yen, which presents a challenge for enterprises that have a significant portion of their cost structure denominated in that currency.
However, the global market for consumer electronics is expected to grow, particularly with regard to smartphones and tablet PCs, creating demand both for these devices and for the electronic components that manufacturers require to produce these devices. Kyocera Corporation is therefore forecasting a 15 percent increase in consolidated revenue and a 21.5 percent increase in consolidated operating profit for the fiscal year ending March 31, 2013. Regionally, the 3 percent annualized growth in United States GDP during the fourth quarter of CY2011 slowed to an annualized rate of 2 percent in Q1 and 1.5 percent in Q2. The U.S. economy therefore appears unlikely to experience a full recovery during this calendar year, though we expect some 2H improvement.
What changes have you seen in the global economy in the past year?
On a global basis, not much change, unfortunately. In the United States, late July brought reports of some strengthening in consumer confidence and in residential real estate prices that could foreshadow an improvement in overall economic conditions. However, the jobless rate remains historically high, and large private employers are reluctant to commence hiring. The good news is that inflation appears to be in check in most markets outside of energy and food commodities, at least for now.
Are there any particular regions that are of greater concern than others, such as China or Western Europe?
Both China and Western Europe represent significant variables that remain beyond estimation. Both economies have a major impact on global economic conditions. China’s recent economic cooling could actually be good news, if it helps reduce the likelihood of ripple effects from a larger correction later this year or beyond. Efforts to shore up the euro and deal with European debt have the attention of economists worldwide and are unlikely to be resolved during this calendar year.
What indicators do you watch for your business, on a global scale?
The U.S. semiconductor industry’s “Book-to-Bill” ratio is a good barometer of the technology sector in general. The ratio of 0.94 reported in June means that producers received $94 of new orders for every $100 in shipments, which is about 9.8 percent below the level in May after seven months of growth. It may be too early to refer to this as a slowdown, but any Book-to-Bill ratio below 100 holds some portent for technology, at least in the near term, and technology is a primary engine of economic growth in the world economy.