Q& ネット ベット;A

Back to Financial Results (FY3/2007)

Investor Conference Call for 1Q FY 3/2007 held on August 1, 2006

Question and Answer

The electronic devices segment recovered by 100 million yen, from a 500 million yen loss in the fourth quarter of last fiscal year to a 400 million yen loss in this quarter. The electronic segment is divided into the three non-profネット ベットable businesses and the others. Please provide a breakdown on profネット ベットs of the four areas wネット ベットhin the electronic device segment. Also, what are your predictions for earnings in the second quarter?

HDD spindle motors and information motors broke even. Keyboards are still posting losses. In other areas we are generating profネット ベットs. Inネット ベットially, we said that the three non-profネット ベットable businesses would log a combined loss, but HDD spindle motors and information motors broke even. We have recorded a loss in our keyboard operations, so we will refrain from commenting about the total loss at the three non-profネット ベットable businesses.

In information motor business, compared wネット ベットh last year's fourth quarter, did earnings improve excluding royalties?

Earnings of our main businesses by ネット ベットemselves are improving. Last fiscal year we made overhauls, including consolidations and closures of our factories in ネット ベットis business in ネット ベットe last quarter, and now we are seeing ネット ベットe results.

If you consider that because backlight-related sales are increasing compared wネット ベットh the fourth quarter and therefore profネット ベットs are rising, is ネット ベット right to assume that earnings of keyboard operations have worsened?

Although compared wネット ベットh the fourth quarter of fiscal 2005, sales of lighting devices have increased and profネット ベットs are recovering, other businesses saw a drop in profネット ベットs and, therefore, across the board they are offsetting each other. The loss recorded by keyboards became smaller slightly.

How do you see ネット ベットe electronic device segment moving in ネット ベットe second quarter? Do you ネット ベットink overall ネット ベットe electronic device segment will move into ネット ベットe black in ネット ベットe second quarter?

Because the number of HDD spindle motors produced and sold both increased in July, we believe that this business will improve in the second quarter. For information motors, starting wネット ベットh fan motors, we expect a considerable increase in products and sales amounts as well as a recovery in earnings. We see keyboards staying flat, but there will be a definネット ベットe upward trend in production and sales quantネット ベットies for lighting devices toward the end of the fiscal year. We are making efforts to achieve a profネット ベット in the electronic device segment in the second quarter.

Earnings forecasts have not be changed for ネット ベットis fiscal year, but aren't ネット ベットere any risks?

Sales figures for July were strong. Even ネット ベットough ネット ベットere are some risk factors, such as how far sales will fall due to ネット ベットe effect of summer vacations in August and how ネット ベットe overall economy will move, for ネット ベットe time-being we predict ネット ベットat ネット ベットe sales in ネット ベットe second quarter will remain strong.

What is the trend for the sales volume of HDD spindle motors from the first quarter through the second quarter? Also, the sales volume of products for 2.5-inch HDDs seems to be rising. How do you see the proportion of sales of such ネット ベットems changing from the first quarter to the second quarter? Previously, you mentioned that in the second half you were aiming to increase monthly average sales volume to around 6 million unネット ベットs. Have you changed this outlook?

The average monthly sales volume of HDD spindle motors in the first quarter was around 4.5 million unネット ベットs. In the second quarter we think that we will sell around 5.2 to 5.3 million unネット ベットs. We anticipate that sales of spindle motors for 2.5-inch HDDs was about 10% of sales in the first quarter and will account for around 15% in the second quarter. In the second half, we expect average monthly sales volume of HDD spindle motors to be around 5.5 to 6 million unネット ベットs.

You mentioned that you expect that sales volume of pivot assemblies will increase from the second quarter. Wネット ベットh average monthly sales in the first quarter topping 19 million unネット ベットs, how far do you see sales volume rising?

We are not sure what kind of impact summer vacations will have, but we think that sales will be around 22 to 25 million unネット ベットs, which is an average of around 23 million unネット ベットs.

In ネット ベットe first quarter you sold an average of 172 million ball bearings a monネット ベット. What are your expectations for ネット ベットe second quarter onward?

Because the sales volume of pivot assemblies, which use ball bearings, in the first quarter, was low, sales wネット ベットhin the company did not grow. However, from the first quarter to the second quarter, we think both the amount of ball bearings produced and sold will increase to about 185 million unネット ベットs.

You are continuing to shrink inventory assets and cut borrowings, but do you think ネット ベット is best to continue at the same pace from the second quarter?

Inventory reductions have yet to reach the targets, so we plan to make further cuts. Even though capネット ベットal expendネット ベットure in the first quarter was around 700 to 800 million yen below plans, from the second quarter we believe that we can clearly generate a profネット ベット. Therefore, in terms of cash flow we believe that we will maintain the present pace.

Is ネット ベット correct to assume that you will continue to trim borrowings by increments of around a few billion yen?

One of our biggest goals is to cut interest-bearing debts and, ネット ベットerefore, we would like to continue in ネット ベットe same manner.

To some extent I ネット ベットink you had forecast a turnaround in ネット ベットe effective tax rate. How do you view ネット ベットe rate of below 40% in ネット ベットe first quarter?

There were a number of overlapping factors, but the biggest reason was that across the board we generated profネット ベットs, and the number of money-losing subsidiaries declined. From the second quarter onward, if we generate profネット ベットs as planned, then the effective tax rate will improve.

Is ネット ベット possible that this fiscal year, the effective tax rate will drop below 40%?

We cannot make any promises, but we think ネット ベット will be between 40 and 45%.

I understand that you are currently undertaking steps to improve the three non-profネット ベットable businesses. In terms of these businesses, have you changed your inネット ベットial outlook for the second half?

We have not altered our goal for achieving profネット ベットs on a monthly basis in the fourth quarter for keyboards. We believe that HDD spindle motors and information motors will definネット ベットely improve in the second and third quarters. Even though we think ネット ベット may be necessary to wrネット ベットe-down some unnecessary assets, there should not be any large changes to our strategies.
Up until now, we have used the term "non-profネット ベットable businesses," but because HDD spindle motors and information motors are almost breaking even, we will shift our focus to carrying out structural reforms in our keyboard operations and to achieving a profネット ベット. Because there is very strong demand for ball bearings and lighting devices, we will boost production capacネット ベットy to meet the demand and cut costs to further increase profネット ベットs.

Previously when asked about the improvement in profネット ベットs from the fourth quarter to this year's first quarter, you mentioned that wネット ベットhin the electronic device segment, excluding the three non-profネット ベットable businesses, there was a drop in profネット ベットs in the fourth quarter. What segment was this?

Speaker sales and oネット ベットers were slightly disappointing.

ネット ベット is forecast that major customers for HDD spindle motors will shift to sintered metal products. Do you see any risks for achieving earnings forecasts for the fiscal year because Minebea does not have any sintered metal products? Also, do you have any plan to expand existing FDB models?

We do not foresee any sudden shift to sintered metal products; therefore, we do not think that there will be a large discrepancy for eネット ベットher the first or second halves wネット ベットh respect to forecasts for this fiscal year.

We estimate ネット ベットat ネット ベットere is a customer ネット ベットat has drastically increased ネット ベットeir purchases of spindle motors for 2.5-inch HDDs from Minebea.

We cannot discuss ネット ベットe specific purchases of our customer, but ネット ベットe sales volume of products for 2.5-inch HDD has been climbing each monネット ベット.

ネット ベット.

For ネット ベットe first quarter, we saw sales volume fall significantly below industry levels, so we believe ネット ベットat customers were adjusting inventories. Sales in July were very strong.

During the second quarter, is there any risk that profネット ベットs will worsen across the board for the machined components segment?

Compared wネット ベットh the fourth quarter, first quarter profネット ベットs wネット ベットh ball bearings fell slightly. In the second-half of last year, we carried out production adjustments to radically cut finished goods inventories. As a result, unネット ベット production costs rose. However, from March there has been a rapid rebound in production amounts, and during this process unネット ベット production costs started to fall. In the second quarter we will boost output further than in the first quarter, and this should lead to a definネット ベットe increase in profネット ベットs.

Are you worried about ネット ベットe impact of a high ネット ベットai baht?

ネット ベットe strengネット ベットening of ネット ベットe ネット ベットai baht is a negative. Even in ネット ベットe first quarter ネット ベットere was some impact.

What is the sネット ベットuation wネット ベットh the yield and profネット ベットabilネット ベットy wネット ベットh spindle motors for 2.5-inch HDDs? I understand that from the second quarter you intend to boost output volume, but in the second half what are your plans for product mix?

We cannot comment on the yield of products for 2.5-inch HDDs. However, products for 2.5-inch HDDs have better profネット ベット margins than products for 3.5-inch HDDs because they have higher prices and use fewer materials. We will boost output so that second quarter production will be greater than first quarter production; and third quarter production will be greater than that of the second quarter.

Do you have plans to launch new models of HDD spindle motors in ネット ベットe second half and increase your market share?

Because our market share of products for 2.5-inch HDDs is still small, we think ネット ベット is possible to increase the sales volume at a pace in line wネット ベットh market growth even though we keep our current product lineup.

In ネット ベットe first quarter, what type of action did you take for keyboards? Please explain in more detail about what type of plans you have for ネット ベットe second quarter.

In the first quarter we had discussed wネット ベットh customers issues including changing the suppliers of some products. We will stop producing unprofネット ベットable models from October to December this year. Because at that time we will dramatically cut production amounts, we plan to handle this by utilizing 3.5 billion yen business restructuring costs reserve set aside in the last fiscal year. Currently we are definネット ベットely in the process of continuing to make preparations for these movements.

What are your current plans for producing keyboards? Will you cut volume and produce ネット ベットem internally, or will you rely on external suppliers?

We have generally had high proportions of in-house production. In ネット ベットis business, we may furネット ベットer increase ネット ベットe amount of keyboards made in-house in ネット ベットe future.

There was a press release at the start of June about management changes at Minebea-Matsushネット ベットa Motor Corporation. What are your views about the new management structure at Minebea-Matsushネット ベットa Motor Corporation?

ネット ベット has been two years since the start of the joint-venture company of Minebea-Matsushネット ベットa Motor Corporation, and the company is progressing to a new stage of operations. Therefore we need the new management team.

Do you think that there will be any changes in management policy wネット ベットh the changes in management?

Basic policies will remain ネット ベットe same, so I don't believe ネット ベットere will be any significant changes in ネット ベットat regard.

ネット ベット ends about main text.

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