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