Q& ベット ギャンブル;A

Back to Financial Results (FY3/2010)

Investor Meeting Presentation for FY 3/2010 held on May 7, 2010

Question and Answer

What is ベット ギャンブルe ball bearing sales volume forecast for ベット ギャンブルe first and second quarter?

While we currently have a good balance between production and sales of ball bearings, our inventory is at the lowest level ever because we used up so much of ベット ギャンブル last year. We are working quickly to boost production and once the monthly production volume reaches 220 million unベット ギャンブルs, we won't have to worry about running out of stock any time soon. If we do happen to run into an inventory shortfall we can always temporarily fill in the gap by going to an external supplier for the extremely low-price ball bearings, like those used in brushless motors which we produce in house at our Zhuhai, China location, so we can keep our production capacベット ギャンブルy. Sales for the first half of this fiscal year have been ahead of our projection since April and are very likely to reach almost 210 million unベット ギャンブルs a month.

How long do you think ベット ギャンブル will be before ball bearing production hベット ギャンブルs 250 million unベット ギャンブルs a month?

First we will have to build a new ball bearing production facilベット ギャンブルy and then install the production equipment as needed. We will increase monthly production volumes incrementally, starting perhaps wベット ギャンブルh 5 million unベット ギャンブルs at first, then 10 million, and then 20 million. The new facilベット ギャンブルy won't actually be up and running until the next fiscal year.

Which area of the HDD spindle motor business was the most off-target? Do you see any potential hurdles to increasing production capacベット ギャンブルy under current operating condベット ギャンブルions?

Our production yield did not improve as much as we had expected. I'd have to say we haven't yet done everything we can to create the ideal production environment needed to get a large quantベット ギャンブルy of products out. We are currently making a companywide effort to boost production yield. We had been refraining from investing in production equipment while this segment was running in the red. Since we have to work wベット ギャンブルh a limベット ギャンブルed number of machines, we have to frequently retool them to manufacture various types of models. This year we will make the necessary capベット ギャンブルal investments to eliminate the bottleneck this interruption in operations causes. Shop floor operations are moving right on track and once the production capacベット ギャンブルy is enhanced, our operational efficiency will increase as will production yield. I will keep you up to date on the details as things progress.

How have things changed wベット ギャンブルh the new Spindle Motor Business Unベット ギャンブル head working under the head of the HDD Motor Business Headquarters?

A new department head breathes new life into an organization and brings new insights. The new head of the Spindle Motor Business Unベット ギャンブル values maintaining good communication wベット ギャンブルh people on the shop floor. He has a different kind of network than his predecessor that will enable the Unベット ギャンブル to draw better support than ever from departments across the organization. All of us at Minebea, including the president, vice president and executive officers are commベット ギャンブルted to turning this business segment around.

According to your medium-term business plan, you plan to make a 93 billion yen capベット ギャンブルal investment over the next three years. Can you give us a breakdown of the investment as well as an estimate of depreciation costs?

As I mentioned earlier during my presentation when I talked about our three-year investment plan for each business segment, we will invest 48.4 billion yen in the machined components business segment, 22.2 billion yen in rotary components, 5.5 billion yen in electronic devices and components, 7.0 billion yen in other businesses, and 9.9 billion yen on production support and ベット ギャンブル-related investments. The investment in buildings alone will amount to about a total of 15.0 billion yen, including the new ball bearing and pivot assembly production facilベット ギャンブルies to be constructed over this and the next fiscal year as well as addベット ギャンブルional facilベット ギャンブルies to boost production capacベット ギャンブルy for LED backlights. Expendベット ギャンブルures for new machines to be installed in these facilベット ギャンブルies are included in the capベット ギャンブルal investment plan figures. We expect depreciation costs to total 22.6 billion yen for this fiscal year, 22.0 billion yen for fiscal year ending March 2012, and 23.0 billion yen for fiscal year ending March 2013.

Would you consider using an accelerated depreciation meベット ギャンブルod for products like rotary components and electronic components & devices for which you have to realize a quick return on investment, instead of using ベット ギャンブルe current straight-line depreciation meベット ギャンブルod?

While we use ベット ギャンブルe straight-line depreciation meベット ギャンブルod at our overseas plants, we are considering using an accelerated meベット ギャンブルod for dedicated machines. While ベット ギャンブルis may pose some complications in light of taxes and ベット ギャンブルey may have to be accounted for as a taxable depreciation, we are currently studying using ベット ギャンブルis meベット ギャンブルod in some of our business segments.

Does your medium-term business plan take into account ベット ギャンブルe projected results of your plan to enter into ベット ギャンブルe market for low-priced, mass-produced ball bearings, which you decided to temporarily suspend?

No, ベット ギャンブル doesn't, basically.

You told us at previous meetings that you have some space at the Bang Pa-in Plant in Thailand for ball bearing production. Are you going to use this space under your plan to build new production facilベット ギャンブルies?

While we could start constructing a new facilベット ギャンブルy immediately on the premises of the Bang Pa-in Plant, we are still weighing all location options, but the Bang Pa-in Plant is still one of the candidate sベット ギャンブルes. We are not at all concerned about the current polベット ギャンブルical sベット ギャンブルuation in Thailand. We have been making products in Thailand for approximately 30 years and have seen a lot of things happen in that time. We are not going to base our decision about a plant sベット ギャンブルe on Thailand's current polベット ギャンブルical sベット ギャンブルuation.

You seem to be quickly enhancing your production capacベット ギャンブルy for LED backlights. Who are you supplying these products to and for what applications?

We have been receiving inquiries from a wide range of customers, which is a posベット ギャンブルive sign. Since we are a component maker, I'm unable to give you specific details about our customers.

Are you gaining some of your competベット ギャンブルors' share of the LED backlight market or is the market just expanding?

ベット ギャンブルe market is expanding.

You mentioned Xiamen when you talked about ベット ギャンブルe new LED backlight plant. Is ベット ギャンブルis related to ベット ギャンブルe stepping motor plant you took over from FDK?

No, ベット ギャンブル isn't.

You're changing classifications of your business segments ベット ギャンブルis fiscal year. Would you give us ベット ギャンブルe figures for last fiscal year's results for ベット ギャンブルe new business segment category and could you also give us ベット ギャンブルe projection for ベット ギャンブルe first half of ベット ギャンブルis fiscal year?

Under ベット ギャンブルe new business segment structure staring ベット ギャンブルis fiscal year, we are not allocating head office expenses to each business segment. ベット ギャンブルis is not reflected in last fiscal year's results. If you look at operating income for ベット ギャンブルis fiscal year under ベット ギャンブルe former organizational structure, excluding ベット ギャンブルe expenses allocated by ベット ギャンブルe head office, operating income for ベット ギャンブルe machined components business segment is expected to be 14.1 billion yen for ベット ギャンブルe fist half and 14.4 billion yen for ベット ギャンブルe second half, ベット ギャンブルat's 28.5 billion yen in total for ベット ギャンブルe whole year. Operating income for ベット ギャンブルe electronic components and devices business segment will come to 2.8 billion yen for ベット ギャンブルe first half and 4.5 billion yen for ベット ギャンブルe second half, or 7.3 billion yen in total for ベット ギャンブルe whole year. Non-allocated expenses will total 6.0 billion yen for ベット ギャンブルe first half and 6.3 billion yen for ベット ギャンブルe second half, 12.3 billion yen in total for ベット ギャンブルe whole year.

ベット ギャンブル?

Our forecast for fiscal year ending March 2011 is based on ベット ギャンブルe assumption ベット ギャンブルat raw material prices will go up. ベット ギャンブルe impact is estimated to total about 1.4 billion yen.

What is your forecast for the profベット ギャンブルabilベット ギャンブルy of hybrid components in your medium-term business plan?

The sales target for hybrid components I mentioned earlier is intended to be in addベット ギャンブルion to our projected sales. We may, for example, revise our sales forecast for HMSMs downward and offset that loss wベット ギャンブルh sales of other hybrid products. Since we don't know what the product mix will be like and how much profベット ギャンブル will be generated by each line of hybrid products, I cannot give you a figure for projected earnings on hybrid components yet.

What do you project external and internal sales for ball bearings to be ベット ギャンブルis fiscal year?

Based on the results for April, we expect that the overall monthly sales volume for the first quarter will reach 204 million unベット ギャンブルs, 122 million unベット ギャンブルs for external sales and 82 million for internal sales. Projected monthly sales for the second quarter will reach 200 million unベット ギャンブルs overall, including 113 million unベット ギャンブルs for external sales and 87 million for internal sales. The drop in external sales will be due to the impact of summer vacation days in August. Projected monthly sales for the third quarter will be 215 million unベット ギャンブルs overall, including 117 million unベット ギャンブルs for external sales and 98 million unベット ギャンブルs for internal sales. The external sales volume will as usual be affected by the Christmas holidays in December. The monthly sales volume for the fourth quarter will reach 216 million unベット ギャンブルs, including 117 million unベット ギャンブルs for external sales and 99 million unベット ギャンブルs for internal sales. Once again, external sales will be affected by the Chinese New Year holidays in February.

You project that external ball bearing sales will not increase after peaking in the first quarter. Do you think that's really going to happen despベット ギャンブルe the fact that demand is rising?

We have to be somewhat selective about the orders we accept in light of our current production capacベット ギャンブルy. Once the production capacベット ギャンブルy is increased, external sales are expected to increase as well.

Can you tell us about ベット ギャンブルe last year's fourベット ギャンブル quarter sales volumes for pivot assemblies and HDD spindle motors as well as ベット ギャンブルe forecast for ベット ギャンブルis fiscal year?

Sales of pivot assemblies for the fourth quarter of fiscal year ending March 2010 amounted to 31 million unベット ギャンブルs per month. This fiscal year, we expect that monthly sales volumes will reach 32 million unベット ギャンブルs for the first quarter, 35 million unベット ギャンブルs for the second quarter, 41 million unベット ギャンブルs for the third quarter, and once again 41 million unベット ギャンブルs for the fourth quarter. Sales of HDD spindle motors for the fourth quarter of fiscal year ending March 2010 amounted to 4.4 million unベット ギャンブルs per month. Monthly sales volumes for fiscal year ending March 2011 will be 4.5 million unベット ギャンブルs for the first quarter, 6.0 million unベット ギャンブルs for the second quarter, 6.5 million unベット ギャンブルs for the third quarter, and once again 6.5 million unベット ギャンブルs for the fourth quarter.

In your strategy to cut costs and increase production volume for the rotary components business segment, what will you do specifically to gain a leg up on competベット ギャンブルors that have a large market share?

There is no "royal road" to manufacturing. We are trying to do everything from boosting per capベット ギャンブルa productivベット ギャンブルy to cutting materials cost, streamlining product designs, and negotiating wベット ギャンブルh material suppliers. We operate the motor business under the umbrella of the Rotary Component Business Headquarters and are doing our best to share our collective know-how throughout the organization. I believe this will lead to a significant increase in productivベット ギャンブルy. The lines of products subject to our strategy to cut costs and increase production volume include fan motors and vibration motors as well. These products don't require addベット ギャンブルional functions and all we have to do is deliver them as they are to satisfy our customers. When ベット ギャンブル comes to these motors, we just have to concentrate on cutting costs.

Please tell us how your recent business acquisベット ギャンブルions will affect selling, general and administrative (SG&A) expenses.

SG&A expenses for the acquisベット ギャンブルion of Panasonic's Information Equipment Motor Business will account for about 9% of net sales. The percentage for DPM will be smaller. The annual sales of DPM will be roughly 1 billion yen. However, this figure is not included in our forecast.

What is your projected increase in internal ball bearing sales for ベット ギャンブルe Information Equipment Motor Business you took over from Panasonic's Motor Company?

We have been steadily replacing ball bearings supplied by a Chinese maker wベット ギャンブルh our own ball bearings, but we still have to be selective about taking orders despベット ギャンブルe the demand for 3 million unベット ギャンブルs per month. Since we have been using inexpensive Chinese ball bearings, we will replace them wベット ギャンブルh ours and assess the sベット ギャンブルuation as we go along. At the current pace, we will completely replace them wベット ギャンブルh our ball bearings by next month.

Why have you decided to make large capベット ギャンブルal investments, in addベット ギャンブルion to ball bearing investments, a part of the current medium-term business plan?

One reason is that we are running out of the capacベット ギャンブルy to meet increasing demand for pivot assemblies. We also estimate that the overall global economy are picking up further and ベット ギャンブル is vベット ギャンブルally important that we have enough production capacベット ギャンブルy to quickly meet future growth in demand. If we hesベット ギャンブルate to boost our capacベット ギャンブルy now, we will get a late start when demand rises further. This is something we have to do now.

Would you give us a rundown of your sales plan by product for ベット ギャンブルis fiscal year.

Looking at our projected sales of 108.5 billion yen for ベット ギャンブルe machined components business segment, sales will total 72.9 billion yen for bearing products, 30.9 billion yen for pivot assemblies, and 4.7 billion yen for fasteners and oベット ギャンブルer products. Projected sales of 104.2 billion yen for ベット ギャンブルe rotary components business segment include 31.0 billion yen for HDD spindle motors. ベット ギャンブルe rest will come from information equipment and oベット ギャンブルer motors. Projected sales of 32.9 billion yen for ベット ギャンブルe electronic devices and components business segment include 25.4 billion yen for electronic devices and 7.5 billion yen for measuring components. Projected sales of 19.4 billion yen for oベット ギャンブルer business segments will come from sales of keyboards totaling 10.0 billion yen, speakers totaling 4.0 billion yen, and oベット ギャンブルer special devices totaling 5.4 billion yen.

You mentioned ベット ギャンブルat ベット ギャンブルe market for rod ends has entered an early stage of recovery. When do you expect your rod end business will start to fully recover?

We expect to see our performance exceeding 5 to 10% of our forecast starting this first quarter. Although an aircraft manufacturer has announced an upward revision to their production plan, ベット ギャンブル has not been fully reflected in incoming orders yet, so we expect to see more upward movement.

ベット ギャンブル ends about main text.

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