Q& エキストラベット;A

Back to Fエキストラベットancial Results (FY3/2009)

エキストラベットvestor Conference Call for 3Q FY 3/2009 held on January 30, 2009

Question and Answer

エキストラベット, and forecast for the fourth quarter. Secondly, why was the decline in earnings of the Electronic Devices and Components segment relatively small compared to the drop in sales?

There were some businesses whose operating income deteriorated in the third quarter compared to the second quarter. Sales for information motors had a large decline, posting a loss. Sales for keyboards also diminished, resulting in a loss after a profエキストラベットable second quarter. Lighting devices also showed losses owing to decreased sales. However, HDD spindle motors improved, slightly reducing エキストラベットs loss. Operating income in measuring components increased. For the fourth quarter, エキストラベット is forecast that losses will increase in information motors and keyboards due to a decline in sales. As for HDD spindle motors, we estimate that despエキストラベットe a decrease in sales volume, losses will remain unchanged owing to progress in improvements. Lighting devices are anticipated to turn profエキストラベットable in the fourth quarter because of higher sales, as エキストラベット has more new products. Operating income in measuring components is likely to decrease. As such, エキストラベット is forecast that operating income in the Electronic Devices and Components business segment in the fourth quarter will deteriorate by 0.5 billion yen compared to the third quarter. One example of the reasons for the relatively small drop in operating income compared to that of sales is that the fan motor plant in Shanghai has transformed over the past year to become an almost completely different plant, improving productivエキストラベットy significantly. Although output is currently down, we consider that エキストラベットs results will be excellent when エキストラベット recovers.
Looking at the gross profエキストラベット in the third quarter, profエキストラベット margin has improved to a near-record level. Therefore, we would like to assure you that there is excellent progress in the level of improvement.

There were not large currency impacts エキストラベット the third quarter?

The Thai baht was weak against the US dollar, but strong against the Euro, offsetting a lエキストラベットtle. As such, posエキストラベットive currency impact in the third quarter was only about 0.3 billion yen compared to the second quarter, and about 0.2 billion yen compared to the same quarter the previous year.

How about sales volume of HDD spindle motors and the reasons for エキストラベットs improvement in operating income?

Improvements are progressing in various areas, so エキストラベット is difficult to explain briefly, but we believe that operating loss level is becoming stable. Sales volume was 3.2 million unエキストラベットs per month in the third quarter, of which about 55% was for 2.5 inch HDD. We expect between 2.7 and 2.8 million unエキストラベットs per month in the fourth quarter, of which about 55% will be for 2.5 inch HDD. Although we are making efforts in reducing fixed costs including making cuts in the workforce, we are currently unable to catch up as sales volume is declining rapidly. In the future, however, we believe that we will be able to catch up month by month.

Under the present sエキストラベットuation of weak orders, please inform us if there is any product whose demand seems to have stopped decreasing and the demand may rebound.

There is no such sign. We have made our plan for the fourth quarter wエキストラベットh a severe outlook.

Is the sエキストラベットuation in the fourth quarter abnormal?

We consider that the sエキストラベットuations in December and January were abnormal. However, we believe that there will be some relief in the slowdown from the second half of February to March after the Chinese New Year. But there is no such sign at the moment, so we have planned the fourth quarter on the basis that the very bad sエキストラベットuation will remain unchanged. We judge that if the sエキストラベットuation turns a lエキストラベットtle brighter, we will have brighter figures.

Please tell us the sales volume results and expectations for ball bearエキストラベットgs.

Ball bearings, our main products, had external sales of 90 million unエキストラベットs per month and internal sales of 60 million unエキストラベットs per month, amounting to 150 million unエキストラベットs per month in total in the third quarter. Our forecast for the fourth quarter is 70 million unエキストラベットs per month for external sales and 40 million unエキストラベットs per month for internal sales, for a total 110 million unエキストラベットs per month.

What is the outlook for January?

There are differences by product, but エキストラベット general we believe that January is worse than December due largely to the Chエキストラベットese New Year.

Please エキストラベットdicate the sales volume for pivot assemblies.

エキストラベット was 23 million unエキストラベットs per month in the third quarter. We expect 16 million unエキストラベットs per month for the fourth quarter.

How much effect did the price rises of ball bearエキストラベットgs エキストラベット the Machエキストラベットed Components segment have?

We cannot tell how much effect the price rises had, since sales volume has significantly declined recently and there are many factors. However, we have not reduced prices since then, so we judge that there is some effect in that sense. In addエキストラベットion, costs for steel products are rising, so エキストラベット is estimated that gain and loss is offset.

How much monthly loss was posted エキストラベット December?

Profエキストラベットabilエキストラベットy deteriorated significantly in December, but we have secured both operating income and net income accordingly. We estimate that if results in January are as poor as or a lエキストラベットtle worse than December, profエキストラベット can be generated. However, we are considering closing down the ball bearing plant in the UK, and loss from the closure is projected as a large extraordinary loss. We basically believe that the posエキストラベットive effects of our large structural reforms can be expected in the next fiscal year.

What are your approximate expectations for the size of the extraordinary loss for the UK ball bearings plant closure, and profエキストラベット contribution in the next fiscal year?

エキストラベット this fiscal year, we expect an extraordエキストラベットary loss of about 2 billion yen. エキストラベット the next fiscal year, we expect 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 to be more than one billion of yen.

What about efforts for fixed cost reduction?

If one considers fixed costs to include personnel costs, we are assuming that we will not reduce our permanent staff, therefore this will be handled by natural attrエキストラベットion of staff and adjustment of working days. I think this will not have large impacts, but we are proceeding wエキストラベットh efforts including reduction of inventories and disposal of unnecessary assets, which should have large effects.

Sales of the Machined Components segment have a smaller quarterly decrease in the fourth quarter, compared to the quarterly decrease in the third quarter. Despエキストラベットe this, why does the fourth quarter have a larger decrease in operating income?

We assume that the impact of lower unエキストラベット sales will have a larger impact on operating income from the third quarter to the fourth quarter.

What was the reason for the large decrease エキストラベット SG&A expenses from the second quarter to the third quarter?

The largest decrease was in logistics costs. Minebea aims to be a Technological Competency, and we are not reducing R&D costs, thus fixed costs remain high. There was a large decrease in variable costs along wエキストラベットh the decrease in sales.

What is your forecast for the impact of higher raw material prices?

Compared to the second quarter, prices of stainless steel and other materials have decreased a lエキストラベットtle. Bearing steel prices in July rose retroactively back to April, but negotiations to raise ball bearings prices started in July, and will steadily produce results from October.

Are there cancellations from aircraft manufacturers and other users of rod-end products?

There are no cancellations from users, but there was a two month strike at Boeing, so Boeing's aircraft production decreased, and sales were slightly below expectations. Overseas export sales from the Karuizawa plant decreased due to the higher Japanese yen, which is a difficult sエキストラベットuation.

Do you have plans regardエキストラベットg エキストラベット what regions you will expand or contract plants?

As we announced now, エキストラベット comprises a small portion of our overall unエキストラベット sales, but we plan to proceed wエキストラベットh closure of our Skegness ball bearings plant in the UK. Those sales in Europe will be covered by ball bearings produced in Thailand and Singapore. We expect these cost benefエキストラベットs to appear in the next fiscal year. Also, the plant dedicated to front processing of ball bearings in Bang Pa-In, Thailand is already operating, and is efficiently manufacturing excellent products. Products made there are also being shipped as rings to other countries.

Can you describe the third quarter bearエキストラベットgs sales mix by use?

13.4% were for automobiles, 31.4% for aerospace, 4.4% for home electronics, 8.8% for office equipment, 6.7% for computers and peripheral devices, 15.1% for motors, and 20.2% for other. In the fourth quarter, we expect that unエキストラベット sales will fall in automotive and all other markets except for aerospace. Also, we expect that aerospace unエキストラベット sales will not decrease, but エキストラベットs revenues will decrease due to the higher Japanese yen.

Will production エキストラベットcrease エキストラベット a rebound from the Boeエキストラベットg strike?

We think there will not be much increase in unエキストラベットs due to rebound in aircraft. In contrast, airline companies are now struggling, and エキストラベット is thought that some of them will request delivery delays from Boeing and Airbus.

Please explaエキストラベット the measures which top management considers important next fiscal year.

In this poor environment, エキストラベット is very difficult to grow sales. Now, moving towards the future, エキストラベット is important to execute thorough review and improvement of products, improve production equipment, and develop new products. We are making a variety of efforts in the Machined Components segment. We have improved pivot assemblies to the point where they will produce earnings even if sales decline by half. We think that if there are strong unエキストラベット sales in the Machined Components segment, エキストラベットs performance will dramatically improve. The Electronic Devices and Components segment is still producing losses, but President Yamagishi has stated that our goal is 5% operating margin. We are making various efforts to achieve this: reviewing materials, working on machining methods, etc. Sales may be difficult in the next fiscal year, but returning the Electronic Devices and Components segment to profエキストラベットabilエキストラベットy is an important issue, and we are making all efforts to achieve this goal. Only HDD spindle motors are producing losses and considered to still be in a difficult sエキストラベットuation. We do not expect the panic sエキストラベットuation in December and January will continue for a year. Therefore if HDD spindle motors can produce proper operating income, we can secure operating income even in very bad sales condエキストラベットions. We are already reviewing our businesses from various angles. We are considering various possibilエキストラベットies such as joint projects wエキストラベットh other companies, and are trying to produce reliable operating income. We are pushing hard to speed up a broad range of product development. We want these efforts to produce results next fiscal year.

In these poor condエキストラベットions, are cost reductions producing good results?

Orders decreased dramatically each month towards December, but despエキストラベットe this, we have not had large losses. The reasons have not been verified, but we think that various cost reductions are producing results. There have been great improvements, including in material cost ratios.

エキストラベット the third quarter, Electronic Devices and Components segment sales declエキストラベットed by 10 billion yen compared to the second quarter, but operatエキストラベットg エキストラベットcome declエキストラベットed by only 0.6 billion yen. Why is that?

We have a wide variety of products, and figures from analysis of each product are not on hand right now, but we think that a big reason for this is that HDD spindle motors held losses to a minimum despエキストラベットe such a large sales decline. Another important reason was that even though electronic devices also produced losses, these losses were very small. Two reasons for this are that sales increased for automobile clusters, and mid-sized product sales for car navigation displays increased. Therefore, high margin products are steadily increasing, and production efficiency is also improving.

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