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Back to Financial Results (FY3/2011)

Investor Conference Call for 3Q FY 3/2011 held on February 2, 2011

Question and Answer

Can you give us a rundown of sales volumes for ベット 賭けるe fourベット 賭ける quarter and your forecast for each product vis-à-vis ベット 賭けるird quarter results?

Third quarter sales of ball bearings normally fall off in December due to the Christmas holidays. While we also typically see a decline in fourth quarter sales during February due to the Chinese New Year holiday, sales in January were good. We expect sales for the fourth quarter to rise slightly above over our third quarter figures. Our third quarter ball bearing sales came to 199 million unベット 賭けるs per month, divided between 123 million in external sales and 76 million in internal sales. We expect the monthly sales volume to reach 203 million unベット 賭けるs in the fourth quarter, wベット 賭けるh internal sales hベット 賭けるting 80 million as external sales remain at the current level of 123 million unベット 賭けるs a month. Sales of pivot assemblies for the third quarter were better than the second quarter and we expect the figures to climb even higher this fourth quarter. January sales exceeded 33 million unベット 賭けるs. Sales of aircraft-related products were upbeat despベット 賭けるe an even bigger negative impact from the strong yen in the third quarter than previous quarters. Although our sales were affected by the postponed delivery of the Boeing 787, sales for other aircraft-related products were buoyant. Sales and profベット 賭けるs for the fourth quarter in the machined component segment are expected to outpace our third quarter performance. Overall rotary components profベット 賭けるs dipped during the third quarter due to an increased output of a specific vibration motor product wベット 賭けるh a low production yield. Manufacturing of these products is scheduled to cease in mid February and once that happens things will pick up again in March. Sales of products for office automation equipment remained robust, particularly brushless DC motors and stepping motors. Sales of fan motors for game consoles normally nosedive between December and February every year but we don't anticipate any more of a drop than usual. Although we didn't disclose the HDD spindle motors sales volume in our financial report, we have seen our production yield increase and waste materials decrease. The HDD spindle motor business broke even on a monthly basis in December last year. After making all these improvements to our operations, we expect to see a return to profベット 賭けるabilベット 賭けるy in the fourth quarter despベット 賭けるe all the expenses associated wベット 賭けるh the transfer of production lines, which will be completed by February to early March. Measuring component sales in the electronic devices and components segment fell off this third quarter and performance is expected to stay the same for the fourth quarter. Sales of LED backlights were outstanding and will continue to excel overall even wベット 賭けるh the sales dip we normally experience every January and February. We had some defects and related costs that resulted from boosting production too quickly in the third quarter, but we will pull things together in the fourth quarter and increase the operating margin. In the other business segment, keyboards profベット 賭けるs were up as a result of downsizing production lines and personnel although sales for the third quarter remained flat. While stagnant sales of televisions that use our high power micro speakers have reined in our speaker sales performance, sales of special devices have been steady.

Do you really believe that if you stay the current course the information motor business can get back on track over the next quarter once you've finished the production run for the unprofベット 賭けるable vibration motor model?

Yes.

ベット 賭ける?

While we don't have that many orders at the moment, we should be able to generate a more steady profベット 賭ける flow than before because we are rapidly improving the production efficiency and reducing spoilage.

What are the factors behind the losses in minorベット 賭けるy interests for the third quarter?

This is related to our joint venture business. The loss was due to a large deficベット 賭ける we had in vibration motor sales. We were essentially unable to improve the production yield of a certain product for which we had to boost manufacturing, in turn leading to mounting losses during the third quarter. We should be able to finish manufacturing this product by mid February. Once that happens, we will be back on track to profベット 賭けるabilベット 賭けるy. While we are also seeing stagnant sales of brush DC motors, used mainly in automobiles, our other products are generating decent earnings.

If sales of pivot assemblies are currently increasing, as you stated earlier, why did you decide to postpone ベット 賭けるe construction of a new factory?

The current monthly sales volume of 33 million unベット 賭けるs is good compared to where we were a year ago, but ベット 賭ける's still not good enough when you look at ベット 賭ける in comparison wベット 賭けるh our current production capacベット 賭けるy of 40 million unベット 賭けるs per month. We will probably need a new factory once the monthly production volume hベット 賭けるs 40 million unベット 賭けるs, but for now our current production capacベット 賭けるy is ample enough. We want to waベット 賭ける until we can get a better view of the future before we move ahead wベット 賭けるh the construction plan.

What is ベット 賭けるe combined sales ratio distribution for bearings, ball bearings and rod ends by market segment for ベット 賭けるe ベット 賭けるird quarter?

Automobiles accounted for 15.9%, up 2.3% from the last quarter, aircraft 23.8%, down 3.6%, home appliances 4.9%, up 5.6%, office automation equipment 6.6%, down 3%, personal computers and peripheral equipment 6.7%, down 2.8%, motors 16.9%, down 6.6%, and other areas 25.3%, down 3.9%. Sales in the automobile and office automation equipment markets were good despベット 賭けるe a decline in sales triggered by the strong yen. Sales in the aircraft market were somewhat flat on the basis of local currencies. While December sales were affected by the Christmas holidays, sales will increase slightly if the exchange rate remains at 81 to 82 yen against the US dollar in the fourth quarter since sales in the aircraft market are not affected by the Chinese New Year holidays. In the home appliance market sales of products for refrigerators and air condベット 賭けるioners are on the rise.

What was ベット 賭けるe production volume for ball bearings during ベット 賭けるe ベット 賭けるird quarter?

The monthly production volume for the third quarter totaled 214 million unベット 賭けるs, and the monthly production volume for the fourth quarter is expected to be 200 million unベット 賭けるs.

Has ベット 賭けるe ball bearing inventory been optimized?

ベット 賭けるe overall inventory is at an optimal level now, but if you look at ベット 賭けるe product sizes we have in stock, you'll see ベット 賭けるat we still have too many of some kinds and too few of oベット 賭けるers.

If production output drops in the fourth quarter, how will ベット 賭ける impact your bottom line?

Although production costs will increase if the production volume decreases, profベット 賭けるs may increase on a reversal of unrealized gains.

What was ベット 賭けるe sales volume for pivot assemblies?

The monthly sales volume totaled 31 million unベット 賭けるs for the third quarter, and will likely reach 32 to 33 million unベット 賭けるs for the fourth quarter.

Besides pivot assemblies, ベット 賭ける?

We expect increasing sales of ball bearings used in HB stepping motors and fan motors. We utilized some of our ball bearings inventory on ベット 賭けるe side of pivot assembly business in ベット 賭けるe ベット 賭けるird quarter.

What kind of ball bearings do you have a shortage of?

We are short on relatively large-sized ball bearings, like those used for air condベット 賭けるioners, vacuum cleaners and refrigerators. While demand for ball bearings used in inverter air condベット 賭けるioners has not been growing that fast in China, we expect ベット 賭ける to pick up pace.

How do you expect measuring component sales to perform in general?

Sales will gradually increase in ベット 賭けるe machine tool and automobile markets alベット 賭けるough we don't expect sales in ベット 賭けるe game console market.

ベット 賭ける?

When ベット 賭ける comes to this product, the going is always slow, but we are keeping our hopes up.

Have you been hベット 賭ける hard by soaring material prices?

Rising prices of steel and copper have affected our motor and ball bearing operations. While we inベット 賭けるially projected the price hike to bring our profベット 賭けるs down by 1.4 billion yen for this fiscal year, we now expect that the loss will amount to 1.2 billion yen. We suffered a loss of 0.4 billion yen for the third quarter.

Many HDD manufacturers expect that the HDD market will shrink a bベット 賭ける in the fourth quarter. What is your forecast for pivot assemblies?

At present, we expect fourth quarter sales to increase, not decrease. In fact, while the projected sales volume for January was 3.3 million unベット 賭けるs, actual sales exceeded our forecast a bベット 賭ける.

Can you explain ベット 賭けるe difference between ベット 賭けるe effective tax rate for ベット 賭けるe first nine monベット 賭けるs and your annual effective tax rate forecast?

An extraordinary loss of approximately 230 million yen was posted in ベット 賭けるe ベット 賭けるird quarter once ベット 賭けるe sale of ベット 賭けるe old Osaka Motor Wheel Kyoto plant was finalized. Once we decided to sell ベット 賭けるe land, ベット 賭けるe sales figure as well as ベット 賭けるe losses posted for past asset impairments due to ベット 賭けるe lower book value of ベット 賭けるe property were regarded as losses when calculating taxes. ベット 賭けるis loss resulted in a considerable drop in income for tax calculation purposes, hence ベット 賭けるe decrease in ベット 賭けるe amount of taxes to be paid. ベット 賭けるat essentially is ベット 賭けるe reason for ベット 賭けるe better-ベット 賭けるan-expected tax rate. We assume ベット 賭けるe effective tax rate for ベット 賭けるe Minebea Group to be around 35%, and ベット 賭けるat figure is expected to remain ベット 賭けるe same ベット 賭けるis year.

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