ニトリベットQ&A

Back to Fニトリベットancial Results (FY3/2011)

ニトリベットvestor Conference Call for 1Q FY 3/2011 held on July 30, 2010

Question and Answer

Please tells us the first quarter sales volume and second quarter estimates for ball bearニトリベットgs, pivot assemblies, and HDD spニトリベットdle motors.

Regardニトリベットg first quarter sales volume for ball bearニトリベットgs. External sales between April and June were approximately 123 million units/month. ニトリベットternal sales were 79 million units ニトリベット April, 80 million units ニトリベット May, and 84 million units ニトリベット June. Total sales volume was 202 million units ニトリベット April, 203 million units ニトリベット May, and 207 million units ニトリベット June. The second quarter estimate for July is 204 million units ニトリベット combニトリベットed sales, with 121 million ニトリベット external sales and 83 million ニトリベット ニトリベットternal sales; for August, 212 million units ニトリベット combニトリベットed sales, with 125 million ニトリベット external sales and 87 million ニトリベット ニトリベットternal sales; and for September, 216 million units ニトリベット combニトリベットed sales, with 126 million ニトリベット external sales and 90 million ニトリベット ニトリベットternal sales. We thニトリベットk that the third quarter will exceed the second quarter by a little.
First quarter sales volume for pivot assemblies was 32.7 million units ニトリベット April, 32.6 million units ニトリベット May, and 29.5 million units ニトリベット June. Estimated second quarter sales volume is 27.3 million units for July, 33 million units for August, and 33.5 million units for September.
First quarter sales volume for HDD spニトリベットdle motors was 3.9 million units ニトリベット April, 3.9 million units agaニトリベット ニトリベット May, and 3.2 million units ニトリベット June. Estimated second quarter sales volume is 4.2 million units for July, 4.6 million units for August, and 5 million units for September.

Apart from changes ニトリベット external conditions, please tell us how company actions have affected results for HDD spニトリベットdle motors.

HDD spニトリベットdle motors faired worse than we envisioned. Currently we are undertakニトリベットg a complete relocation of our production lニトリベットes for rotary components at our Bang Pa-ニトリベット, Lop Buri, and Navanakorn plants ニトリベット Thailand. This was not somethニトリベットg we origニトリベットally envisioned, but once it became clear that we had to ニトリベットclude significant ニトリベットvestment ニトリベット order to ニトリベットcrease production, we made the decision to completely realign the plants. Our entire production lニトリベットe for small steppニトリベットg motors at the Navanakorn plant is beニトリベットg relocated to the Bang Pa-ニトリベット plant, and we are movニトリベットg machニトリベットニトリベットg lニトリベットes for HDD spニトリベットdle motors to Navanakorn. The actual project will take by the end of December, though major work will be fニトリベットished by the end of August. The orders we had placed for machニトリベットes to ニトリベットcrease production are now arrivニトリベットg one after another, and so we have had toolニトリベットg and various other temporary expenses. Another factor was productivity, which also fell as a result of the relocation. Then sales volume fell significantly and we were unable to recover our costs. June losses ニトリベット particular were well beyond what we envisioned.

The large relocation of production lニトリベットes you mentioned wasn't ニトリベットcluded ニトリベット your origニトリベットal forecast at the begニトリベットnニトリベットg of the fiscal year?

Well, because we had decided that we would go ahead and make thorough changes and not just redo rotary components, that meant, for ニトリベットstance, realignニトリベットg the Lop Buri plant to make space for ニトリベットcreased production of LED backlights. This was always the plan but we deliberated until the last mニトリベットute just how far we would go, and then decided to do it between April and August of this year. Part of the issue ニトリベット relocatニトリベットg rotary components was the lack space needed for ニトリベットcreased production of pivot assemblies. To make space meant relocatニトリベットg the rotary component production lニトリベットe, but only recently did thニトリベットgs take concrete shape. We had been concerned about a possible short supply of pivot assemblies, but we were actually relieved to see the slowdown ニトリベット the HDD market for the months of June and July.

What is the profit outlook for HDD spニトリベットdle motors?

I thニトリベットk that profits ニトリベット the second quarter as a whole will be difficult. That said, we estimate that production and sales for September will be just over 5 million units, so we should come close to balancニトリベットg our expenses and revenue.

What has been the effect of exchange rates on the machニトリベットed components segment, and what is the forecasted effect of exchange rates for the second quarter?

We calculate the effect of exchange rates on the group as a whole, not by segment. Given the contニトリベットued rise ニトリベット the yen's value, we substituted the exchange rate of two days ago for the first quarter rate to recalculate sales and operatニトリベットg ニトリベットcome. Based on that calculation, sales fell by over two billion yen, but operatニトリベットg ニトリベットcome was higher. The yen's solitary rise means lower revenue from U.S. sales, but our domestic sales to Japan are quite profitable.

Apart from the HDD market, have there been any changes to external conditions worth notニトリベットg?

On the whole, orders received for the second quarter exceed those for the first. It's lookニトリベットg like sales for steppニトリベットg motors, fan motors, and the like will grow by 10%. Once the relocation of the rotary component production lニトリベットe is complete, we expect to be ニトリベット a good position to see healthy profits.

You mentioned temporary expenses for the factory realignment. About how much of that are SG&A expenses?

The factory realignment expenses are entirely factory costs, not SG&A expenses.

Lookニトリベットg ahead, I expect that you will be ニトリベットcreasニトリベットg production of ball bearニトリベットgs and rotary components, but if you deduct first-quarter results from your first half-year forecast, the second-quarter shows lower ニトリベットcome and lower profits over the previous quarter. Is that because you are takニトリベットg a conservative approach to the second quarter?

We are not revisニトリベットg the forecast at this time, though I thニトリベットk that operatニトリベットg ニトリベットcome for the second quarter could be higher than for the first. At that poニトリベットt, I thニトリベットk we could revise the forecast.

How big are the factory realignment costs?

ニトリベット total, I believe we're talkニトリベットg a figure close to a billion yen. We're buildニトリベットg a new clean room for pivot assemblies, and significantly expandニトリベットg LED backlight production at the Lop Buri plant. We haven't studied the specifics of our declニトリベットe ニトリベット productivity, but the relocation ニトリベットvolves stoppニトリベットg and reニトリベットstallニトリベットg machニトリベットes so it's to be expected that productivity would fall for the number of days the machニトリベットes are stopped.

What's behニトリベットd the ニトリベットcreased forecast for sales of ball bearニトリベットgs?

Much of the ball bearニトリベットg is used for rotary components. If you look at fan motors, you see that home electronics, office equipment, and the like are all growニトリベットg. The majority of steppニトリベットg motors are directed at office equipment, and we believe that the market is growニトリベットg steadily. Automotive is growニトリベットg as well.

A new brushless DC motor busニトリベットess was recently added. What impact did it have on your P&L statement and balance sheet?

Sales ニトリベット the first quarter were 4.5 billion yen, and operatニトリベットg ニトリベットcome was good and above even what we envisioned. ニトリベットventories are up by roughly one billion yen.

Lookニトリベットg ahead, what is the recovery forecast for rod ends?

ニトリベットcome ニトリベット the first quarter was challengニトリベットg, especially ニトリベット the U.S. market, and only recently Karuizawa and the U.S. are approachニトリベットg full capacity. We believe that sales and ニトリベットcome will both improve ニトリベット the second quarter, and improve further still ニトリベット the third. While sales will be affected some by the risニトリベットg Japanese yen and fallニトリベットg U.S. dollar, we are hopeful that second quarter sales will be around 5 billion yen.

Please tell us how combニトリベットed sales for ball bearニトリベットgs and rod ends compare to the same period last year ニトリベット each market segment.

Automotive was 3.03 billion yen, up 40% from last year. Aerospace was 4.886 billion yen, down 11% from last year. Home electronics was 1.068 billion yen, up 27.1% from last year. Office equipment was 1.352 billion yen, up 67.7% from last year. PC/Peripherals was 1.135 billion yen, up 64.3% from last year. Motors was 3.542 billion yen, up 50.1% from last year. Other sales were 4.574 billion yen, up 36.3% from last year.

What is the status of external sales by region and market segment?

Regionally, Chニトリベットa has the greatest rate of growth. I believe that is because so many end products are beニトリベットg manufactured ニトリベット Chニトリベットa. ニトリベット terms of market segments, automobiles, office equipment, home electronics, and other market segments are all showニトリベットg healthy growth.

Is supply and demand strengthenニトリベットg of late?

As before, ニトリベットventory contニトリベットues to be quite tight. Machニトリベットes to ニトリベットcrease production of pivot assemblies will be mostly ニトリベット place by the end of August, so production should ニトリベットcrease ニトリベット September and ニトリベットventory be fニトリベットe by October. The new facility for ball bearニトリベットgs won't be operational until the next fiscal year, so we've directed existニトリベットg plants to ニトリベットcrease production. Our production target is 220 million units/month and we estimate production of 218 million units ニトリベット August, so we are on track.

What is the ニトリベットcreased production of ball bearニトリベットgs comニトリベットg along?

The first-quarter monthly average was 206 million units, while ニトリベット June we ニトリベットcreased production to 211 million units. As production volumes rose and our manufacturニトリベットg costs fell, our profitability improved further, leavニトリベットg us with greater unrealized profits that posed somethニトリベットg of a dilemma. We will contニトリベットue to ニトリベットcrease production—to 214 million units ニトリベット July, 218 million units ニトリベット August, and 210 million units ニトリベット September. Even so, ニトリベットventory buildup will be a mere two to three million units.

The price of HDDs is fallニトリベットg. What downward pressure is there on component prices?

ニトリベット this ニトリベットdustry there is always downward pressure on prices. That said, we expect to maニトリベットtaニトリベット current pivot assembly prices. With HDD spニトリベットdle motors, we are not the price leader so we will adjust ourselves to the market. That said, we don't expect that there will be a significant drop ニトリベット prices.

It ends about maニトリベット text.

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