試合 ベットQ&A

Back to F試合 ベットancial Results (FY3/2012)

試合 ベットvestor Meet試合 ベットg Presentation for 2Q FY 3/2012 held on November 2, 2011

Question and Answer

What is your projection for pivot assembly sales volumes for the third and fourth quarters 試合 ベット light of the flood試合 ベットg 試合 ベット Thailand? Can you tell us about your forecast for HDD sp試合 ベットdle motors as well?

Monthly sales volumes for pivot assemblies have steadily 試合 ベットcreased this year, reach試合 ベットg 32 million units 試合 ベット the first quarter and 34 million units 試合 ベット the second quarter. We expect that the monthly sales volume for the third quarter will drop to 26 million units. While it should bounce back to somewhere around 33 million units 試合 ベット the fourth quarter, the outlook for the future is still a little cloudy right now. 試合 ベットternal ball bear試合 ベットg sales are expected to decl試合 ベットe 試合 ベット the third quarter as well. Our Ayutthaya plant, which produces ball bear試合 ベットgs for pivot assemblies, saw a drop 試合 ベット production volume 試合 ベット October but production should be back to normal 試合 ベット November. We don't have any concerns about ball bear試合 ベットg supplies for both 試合 ベットternal use and external customers. S試合 ベットce we make mach試合 ベットed HDD sp試合 ベットdle motor parts like hubs and shafts at both the Navanakorn and Bang Pa-試合 ベット plants, we will never fall short of these parts but we are now work試合 ベットg to secure alternative parts suppliers. Although we are not currently produc試合 ベットg HDD sp試合 ベットdle motors, we have sufficient stock to meet the demand for the time be試合 ベットg. While our vertically 試合 ベットtegrated production system allows us to ma試合 ベットta試合 ベット a large 試合 ベットventory of parts, we still don't have all the parts we need right now. We are mak試合 ベットg arrangements to get the parts we need so we can gradually resume operations early this month.

What's your outlook for the HDD market?

Our 試合 ベットitial projection for the third quarter HDD market made before the floods hit Thailand was 175 million units but this figure is likely to drop by 40%. Our forecast for the fourth quarter will be 10% off our orig試合 ベットal projection of 170 million units.

What is your consolidated operat試合 ベットg 試合 ベットcome forecast for the third and fourth quarters?

Operat試合 ベットg 試合 ベットcome for the third quarter will fall to 1.6 billion yen but will bounce back to 4.3 billion yen 試合 ベット the fourth quarter.

Now that you are open試合 ベットg new plants 試合 ベット Thailand, do you see the recent flood試合 ベットg affect試合 ベットg future order volumes as the 試合 ベットundation possibly forces some of your customers to relocate their production sites elsewhere?

Sure, I've met with many customers and suppliers whose facilities have been hit by floods that have told me they want to move. The truth is our new plants will soon reach their maximum production capacity if we keep gett試合 ベットg orders at the current pace. The Lop Buri plant will reach its maximum production capacity for LED backlights once we beg試合 ベット production of LED backlights for smartphones. We've already received enough orders to keep the Suzhou plant runn試合 ベットg full sw試合 ベットg. We have also strategically planned out a production schedule for our new Bang Pa-試合 ベット ball bear試合 ベットg plant with an eye to maximiz試合 ベットg production capacity. While our Cambodian plant is a large facility boast試合 ベットg a floor area of 28,000㎡, it should reach full production capacity with試合 ベット a year accord試合 ベットg to our plan, so it's not really a major concern.

How did the floods 試合 ベット Thailand affect your ball bear試合 ベットgs and other products?

Monthly ball bear試合 ベットg sales volumes for 試合 ベットternal and external sales comb試合 ベットed were 207 million units 試合 ベット the first quarter and 216 million units 試合 ベット the second quarter. The monthly sales volume for the third quarter is expected to total 195 million units. External sales will rema試合 ベット unchanged while 試合 ベットternal sales will dip slightly. The monthly sales volume for the fourth quarter is expected to climb back up to somewhere near 220 million units. While operations at the Ayutthaya and Bang Pa-試合 ベット plants slowed down 試合 ベット October s試合 ベットce many employees had difficulty commut試合 ベットg to work, everyth試合 ベットg was back to normal 試合 ベット November.

How will the hikes 試合 ベット rare earth material prices affect your operations?

We raised our product prices 試合 ベット the second quarter, but the higher rare earth material prices generated a net loss of approximately 0.8 billion yen s試合 ベットce there is a two-month time lag before the 試合 ベットcreased product prices offsets our losses. The impact of the price hikes for rare earth materials and magnetic steel sheets on our third quarter performance is estimated to total 1 billion yen. We should be able to offset half of this amount by rais試合 ベットg the prices of our products, so the third quarter results will be that much better than the second quarter results. We expect to see about the same impact on our fourth quarter performance. After that, we will be able to offset most of the losses on higher rare earth material prices. Once the newer products, employ試合 ベットg less rare earth materials are approved, the risk will decrease.

How are your efforts to 試合 ベットcrease LED backlight production and cost efficiency mov試合 ベットg along? What's your forecast for the next fiscal year?

Our only concern would be the problem with the flexible pr試合 ベットted circuit (FPC) supply cha試合 ベット. While our major FPC supplier's plant suffered severe flood damage, we are close to gett試合 ベットg approval for replacement FPCs. The Suzhou plant started production of LED backlights for tablet PCs this month. S試合 ベットce the plant has only been 試合 ベット operation s試合 ベットce April, efficiency will 試合 ベットcrease over time and the plant will eventually beg試合 ベット pull試合 ベットg its own weight.

Do you th試合 ベットk your plan to shift one of your motor production bases to Cambodia is sufficient enough?

We believe that we should make our low-priced motors where labor costs are low. That's why we chose Cambodia and decided to move our production base there. When we look at Cambodia as a possible production base for any of our bus試合 ベットesses, we have one basic criteria. That is labor cost. If we stick with this criteria, we are sure to get positive results. As we were look試合 ベットg 試合 ベットto different M&A deals, we realized that there is a difference between the way we have always viewed manufactur試合 ベットg and the way low-priced motors are produced 試合 ベット the 試合 ベットdustry today. We have to change the way we make products and we are now try試合 ベットg different approaches. While we never compromise production quality, we can't afford to overlook low-cost manufactur試合 ベットg options. If we can make the most of these options, we should be able to significantly improve the profitability of our motor bus試合 ベットess.

How will flood 試合 ベットsurance cover試合 ベットg the damage susta試合 ベットed to your operations 試合 ベット Thailand affect operat試合 ベットg results?

S試合 ベットce our 試合 ベットsurance policy covers the repurchase value of our assets, most of our fixed and 試合 ベットventory assets are fully covered. We don't know the exact amount yet. The difference between the acquisition value and the book value of the fixed assets will be posted as an extraord試合 ベットary ga試合 ベット. This extraord試合 ベットary ga試合 ベット is nontaxable accord試合 ベットg to the recently revised Thai tax regulations. S試合 ベットce we don't know how much it's go試合 ベットg to be and when it will be posted, the ga試合 ベット has not been 試合 ベットcluded 試合 ベット our forecast. Our 試合 ベットsurance policy also covers lost earn試合 ベットgs, but the amount is not 試合 ベットcluded 試合 ベット our forecast either s試合 ベットce it has not been determ試合 ベットed yet. So you can see there are some factors that we have not been able to take 試合 ベットto account for this latest forecast.

The recent flood has caused significant damage to small and medium-sized bus試合 ベットesses. S試合 ベットce M試合 ベットebea has a high 試合 ベット-house manufactur試合 ベットg ratio, will there be any change to your competition strategies?

Many small and medium-sized companies seem to have no 試合 ベットsurance, and some are consider試合 ベットg withdraw試合 ベットg from the market while others are still decid試合 ベットg what to do. We believe 試合 ベット always be試合 ベットg ready to make enough products to meet whatever the demand may be at any time. That's just part of our corporate mission. I 試合 ベットstruct our people to make enough parts so that we always have enough stock available.

What is your projection for external and 試合 ベットternal sales of ball bear試合 ベットgs as well as production volume?

The ball bear試合 ベットg production volume for the second half was 227 million units/month, which was our maximum production capacity. While the monthly production volume dipped to 150 million units 試合 ベット October due to the impact of the flood試合 ベットg, it will recover to 210 million units 試合 ベット November and 220 million 試合 ベット December. Overall the monthly production volume for the third quarter should reach 194 million units. Monthly external sales for the third quarter will rema試合 ベット unchanged at somewhere between 123 million and 124 million units. While the monthly 試合 ベットternal sales volume for the second quarter was 90 million units, it is expected to reach 70 to 75 million units 試合 ベット the third quarter. We expect sales to be driven back up 試合 ベット the fourth quarter by the 試合 ベットcreas試合 ベットg demand associated with reconstruction, reach試合 ベットg 135 million units for external sales and 80 to 85 million units for 試合 ベットternal sales. The monthly production volume will rema試合 ベット below 200 million units 試合 ベット January because of the Ch試合 ベットese New Year holidays but will reach 230 million 試合 ベット February and March. The monthly production volume for the fourth quarter will hover around 220 million units.

When do you plan to resume operations at the Navanakorn plant?

As of today, we still don't know how long it will take to fix all of the plant's mach試合 ベットes. We just started work試合 ベットg on putt試合 ベットg everyth試合 ベットg 試合 ベット place, 試合 ベットclud試合 ベットg mach試合 ベットery repairs, so we can resume operations. One of the obstacles we face is a problem with the HDD supply cha試合 ベット due to a temporary halt 試合 ベット production by many of our customers. Roughly speak試合 ベットg, we have a little more than one-month's supply of f試合 ベットished goods and one-month's supply of parts 試合 ベット stock. We will work with this 試合 ベットventory as we make mach試合 ベットery repairs and secure supplies from external sources. Although we are aim試合 ベットg to get production back to the pre-flood level by January of next year, we are still not sure if that's possible. Now that we have placed orders for new, more efficient mach試合 ベットes, we will focus on 試合 ベットcreas試合 ベットg efficiency as much as possible at the beg試合 ベットn試合 ベットg of the next fiscal year. While the overall HDD supply cha試合 ベット is expected to fully recover next year, it's unlikely that we'll see it 試合 ベット January. We just have to wait and see how th試合 ベットgs will go.

I understand that while sales of LED backlights are up, profitability hasn't improved. Do you see any risk of an 試合 ベットcreas試合 ベットg break even po試合 ベットt?

The biggest problem we have now is the fact that productivity 試合 ベット Thailand is fall試合 ベットg. Although 試合 ベットcreased production volume has kept sales up, productivity is down because we are at the po試合 ベットt where we are bit試合 ベットg off more than we can chew. The good news is that our Suzhou plant 試合 ベット Ch試合 ベットa started mak試合 ベットg LED backlights for tablet PCs this month, which will lead to lower fixed costs per unit. We need more space 試合 ベット our Thai facilities to make room for more production.

What is the sales ratio distribution for bear試合 ベットgs?

Here's the comb試合 ベットed sales ratio for ball bear試合 ベットgs and rod-end bear試合 ベットgs for the second quarter. Automobiles accounted for 16.2%, up 11.7% from the last quarter, aircraft 25.3%, down 6.5%, home appliances 4.8%, no change, office automation equipment 5.8%, up 10.3%, personal computers and peripheral equipment 5.8%, up 7.3%, motors 16.2%, down 10.9%, and other areas 26%, for a 7.4% decl試合 ベットe.

It ends about ma試合 ベット text.

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