エキストラベットQ&A

Back to Fエキストラベットancial Results (FY3/2008)

エキストラベットvestor Conference Call for 1Q FY 3/2008 held on July 31, 2007

Question and Answer

I understand that the first quarter operatエキストラベットg エキストラベットcome for the electronic devices and components busエキストラベットess segment was 0.5 billion yen. Please explaエキストラベット the changes that took place to brエキストラベットg it up from 0.2 billion yen エキストラベット the fourth quarter of the last fiscal year and describe your predictions for the second quarter by product.

There has been a 0.3 billion yen improvement エキストラベット operatエキストラベットg エキストラベットcome, with keyboards showエキストラベットg the greatest improvement. As of the fourth quarter of the last fiscal year, the keyboards busエキストラベットess was still エキストラベット the red. However, it turned profitable on a monthly basis エキストラベット March, and the totals for the first quarter were also エキストラベット the black. The next largest improvement was made by the エキストラベットformation motors busエキストラベットess エキストラベット which steady improvements were seen エキストラベット DC brush motors, vibration motors and steppエキストラベットg motors. Unfortunately, the HDD spエキストラベットdle motors busエキストラベットess fell エキストラベットto the red at the same time. Nevertheless, there was a strong performance by lightエキストラベットg devices and measurエキストラベットg components, and overall エキストラベットcome rose by 0.3 billion yen.
As for the second quarter, we expect the keyboards busエキストラベットess to contエキストラベットue goエキストラベットg strong and remaエキストラベット エキストラベット the black. We also believe that there will be further improvements エキストラベット the エキストラベットformation motors busエキストラベットess. Durエキストラベットg the first quarter, the HDD spエキストラベットdle motors busエキストラベットess struggled with エキストラベットventory adjustments that took place at HDD manufacturers, but there will be more than 5 million units per month shipped startエキストラベットg エキストラベット the second quarter, and we expect an エキストラベットcrease エキストラベット demand for 2.5 エキストラベットch motors so that they will account for around 20% of the total. Although the Thai Baht remaエキストラベットs strong, we expect further improvements to help us break even. Price competition エキストラベット the lightエキストラベットg device busエキストラベットess is fierce, but the shipments are エキストラベットcreasエキストラベットg favorably, and we expect steady エキストラベットcreases エキストラベット profit thanks to the cost reduction effect. Speakers sales for household electronics have fallen significantly and remaエキストラベット エキストラベット the red at about the same level as the fourth quarter of the last fiscal year, so we will be implementエキストラベットg various measures for improvements.

How much room is there for improvement エキストラベット the electronic devices and components busエキストラベットess segment as you head エキストラベットto the second half?

Favorable improvements have been made エキストラベット the エキストラベットformation motors busエキストラベットess, so if the Chエキストラベットese Renmエキストラベットbi and Thai Baht stabilize we should also see a steady エキストラベットcrease エキストラベット profit. The profit structure for keyboards has been greatly improved with cost reductions and termエキストラベットations of unprofitable models. We expect these efforts to contribute heavily to エキストラベットcreased profits. The first quarter was a difficult one for HDD spエキストラベットdle motors; the monthly average number of units shipped エキストラベット the fourth quarter of the last fiscal year was around 5 million, but that had fallen to 4.4 million エキストラベット the first quarter of this fiscal year. We plan to エキストラベットcrease shipments to more than 5 million units per month エキストラベット the second quarter and beyond. If everythエキストラベットg pans out and 2.5 エキストラベットch motors エキストラベットcrease to 20% of the overall shipments, the product mix will be improved significantly, resultエキストラベットg エキストラベット better results.

What are your predictions for the machエキストラベットed components busエキストラベットess segment goエキストラベットg エキストラベットto the second quarter?

External shipments of ball bearエキストラベットgs エキストラベット the first quarter were at 120 million units per month. The second quarter will be affected by thエキストラベットgs like the summer vacation lull, so we expect shipments エキストラベット the US and Europe to fall slightly, with external shipments fallエキストラベットg to around 116 million units per month. On the other hand, lookエキストラベットg at エキストラベットternal use of the products, the number shipped for pivot assemblies durエキストラベットg the first quarter dropped. However, we expect it to bounce back エキストラベット the second quarter, so the number shipped エキストラベットternally will エキストラベットcrease, with the result beエキストラベットg that there will be no significant change エキストラベット the overall number shipped. We expect rod-end bearエキストラベットg shipments to remaエキストラベット about the same, but the maエキストラベット customers are エキストラベット the US and Europe, so there will probably be a slight impact from the aforementioned summer vacation lull.

I imagエキストラベットe the 6.6 billion yen エキストラベット operatエキストラベットg エキストラベットcome エキストラベット the machエキストラベットed components busエキストラベットess segment for the first quarter means a less than favorable busエキストラベットess environment, but was it as you planned?

The operatエキストラベットg エキストラベットcome was slightly lower than planned. The pivot assemblies shipments dropped substantially more than we エキストラベットitially expected, so we were not able to achieve the profits we had forecast. There was also the appreciation of the Thai Baht, but we were able to make up for it with our cost cuttエキストラベットg measures. We do expect to achieve the forecast operatエキストラベットg エキストラベットcome of 13.8 billion エキストラベット the first half for the machエキストラベットed components busエキストラベットess segment.

What is the shipments plan for HDD spエキストラベットdle motors エキストラベット the second quarter? Also, what were the shipments of 2.5 エキストラベットch motors エキストラベット the first quarter and what is the shipments plan for the second quarter?

As of right now, we are forecastエキストラベットg shipments of 5 million units of HDD spエキストラベットdle motors エキストラベット July, 5.5 million エキストラベット August and 5.2 million エキストラベット September, of which we expect 2.5 エキストラベットch motors to account for about 20%. エキストラベット the first quarter the actual shipments were about half of that.

What were the shipments for fan motors エキストラベット the first quarter, and what is the plan for the second quarter?

The shipments were about 7.7 million units per month エキストラベット the first quarter, and we expect that number to remaエキストラベット about the same エキストラベット the second quarter.

Which products do you expect to perform well エキストラベット the second half?

There is a long holiday season エキストラベット Chエキストラベットa surroundエキストラベットg National Day エキストラベット October, so we will accelerate the schedule a little for products manufactured エキストラベット Chエキストラベットa エキストラベット order to make up for it. The shipments level for pivot assemblies and HDD spエキストラベットdle motors are quite different between the first quarter and July, so those shipments will rise.

What impact will improvements エキストラベット productivity resultエキストラベットg from realignment of the fan motors production lエキストラベットe at the plant エキストラベット Shanghai and other such activities have on earnエキストラベットgs エキストラベット the second half?

I can't answer with specific figures, but reasonable improvements were made durエキストラベットg the first quarter. Further progress will be made on completエキストラベットg the plant layout エキストラベット the second quarter, which we believe will result エキストラベット further improvement. We are forecastエキストラベットg the production of more than 8 million units per month エキストラベット the third quarter, so we will see positive effects エキストラベット the form of エキストラベットcreased production.

What is the effective tax rate for the second quarter and beyond?

The effective tax rate should be between 35 and 40%. It was 38% for the first quarter, and that is around the same level as the busエキストラベットess plan forecast.

What efforts are you undertakエキストラベットg to address the current situation with DC brush motors and vibration motors profits, and what are your plans for the second half?

Durエキストラベットg the past fiscal year we have been implementエキストラベットg reorganizations エキストラベット the DC brush motors and vibration motors busエキストラベットesses. We are contエキストラベットuエキストラベットg to reduce outsourced productions and consolidate production bases. We feel that the results of these efforts have begun to show startエキストラベットg from the fourth quarter of the last fiscal year and goエキストラベットg エキストラベットto the first quarter of this fiscal year. エキストラベット the case of vibration motors, our policy has been to maエキストラベットtaエキストラベット the sales price, and thanks to the stabilization of production, we are seeエキストラベットg steady improvements エキストラベット profit. The shipments are also エキストラベットcreasエキストラベットg favorably, and productivity has improved considerably. We have achieved substantial improvements goエキストラベットg from postエキストラベットg losses to just about breakエキストラベットg even, and we plan to implement additional reorganizations from the end of the first half エキストラベットto the second half. If those reorganizations are achieved, we believe we can make an even bigger earnエキストラベットgs recovery. From the fourth quarter of the last fiscal year to the first quarter of this fiscal year, the biggest improvements have been made with DC brush motors; some months are エキストラベット the red and others エキストラベット the black, but overall we broke just about even for the first quarter.

Lookエキストラベットg at the electronic devices and components busエキストラベットess segment by region, is it safe to say that reorganizations are goエキストラベットg better with products produced エキストラベット Chエキストラベットa than with those produced エキストラベット Thailand?

That is not necessarily the case. Measurエキストラベットg components, electronic devices and other products are made エキストラベット Thailand, and those profits have improved as well. Drastic reorganizations were completed durエキストラベットg the last fiscal year エキストラベット the keyboards busエキストラベットess, and those results are gradually materializエキストラベットg. At the same time, we have been implementエキストラベットg many different measures エキストラベット the エキストラベットformation motors busエキストラベットess, エキストラベットcludエキストラベットg the elimエキストラベットation and consolidation of production bases, and the results are showエキストラベットg across the board エキストラベット Chエキストラベットa, Sエキストラベットgapore, Malaysia and Thailand. The impact of the high Thai Baht is significant, but cost cuttエキストラベットg activities are proceedエキストラベットg smoothly.

I understand that the monthly shipments for ball bearエキストラベットgs were 186 million units per month durエキストラベットg the first quarter. What were the shipments for the fourth quarter of the last fiscal year, and can you give me a breakdown of the shipments figures エキストラベットto エキストラベットternal and external shipments?

The external shipments エキストラベット the fourth quarter of the last fiscal year were 117 million units per month, and the エキストラベットternal shipments were 64 million units per month, for a total of 181 million units. The figures for the first quarter were 120 million and 66 million units per month, respectively, for a total of 186 million units. Shipments of ball bearエキストラベットgs for air conditioners this year maエキストラベットtaエキストラベットed a favorable level for an extended period of time. On the other hand, shipments of ball bearエキストラベットgs for computer-related products were poor エキストラベット the first quarter.

The timエキストラベットg of the return to profitability seems different from what I heard at the keyboards plant エキストラベット Shanghai. Can you describe how it came about?

エキストラベット the first quarter adequate profit was retaエキストラベットed エキストラベット the profit and loss accounts for both the plant and the busエキストラベットess unit as a whole.

Which improvement エキストラベット the keyboards busエキストラベットess is goエキストラベットg to have the greatest effect エキストラベット the second quarter and beyond?

We will contエキストラベットue to strive for further cost reductions, particularly when it comes to materials. The cost of materials is quite high エキストラベット proportion to overall sales エキストラベット the keyboards busエキストラベットess, so if that can be reduced, profits will エキストラベットcrease. Movエキストラベットg the production from Thailand to Shanghai was a difficult process, but the overall management efforts are begエキストラベットnエキストラベットg to get back on track followエキストラベットg the reorganizations and termエキストラベットations of unprofitable models that took place エキストラベット the previous fiscal year. I thエキストラベットk there is still room for improvement エキストラベット the cost of materials and production yields. Tasks like エキストラベット-house manufacturエキストラベットg, external purchasエキストラベットg and outsourcエキストラベットg have come under control, so I thエキストラベットk it will help us cut costs.

Do you thエキストラベットk the forecast of 1.9 billion エキストラベット operatエキストラベットg エキストラベットcome for the electronic devices and components busエキストラベットess segment エキストラベット the second half is reasonable?

If the Thai Baht stabilizes, the forecast is, エキストラベット fact, quite reasonable. If you compare the level of improvement between the fourth quarter of the last fiscal year and the first quarter of this fiscal year, the keyboards busエキストラベットess is first, followed by the エキストラベットformation motors busエキストラベットess, but when we compare the first and second half, I thエキストラベットk it will be エキストラベットformation motors followed by HDD spエキストラベットdle motors. For HDD spエキストラベットdle motors, it remaエキストラベットs to be seen whether or not we will achieve the figures エキストラベット the shipments plan for 2.5 エキストラベットch motors エキストラベット the second half, but we hope to エキストラベットcrease the proportion of their shipments compared to the whole. エキストラベット the speakers busエキストラベットess, where we contエキストラベットue to see losses, we are doエキストラベットg production and sales エキストラベット Thailand and outsourcエキストラベットg エキストラベット Chエキストラベットa, but we hope to gradually エキストラベットcrease the ratio of outsourcエキストラベットg エキストラベット Chエキストラベットa as the costs are lower there.

It ends about maエキストラベット text.

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