Q& エアベット;A

Back to Financial Results (FY3/2013)

Investor Conference Call for 1Q FY 3/2013 held on July 31, 2012

Question and Answer

In the Machined Components business segment, when we compare wエアベットh the data from previous quarters on the graph, while net sales and operating income recorded the historical high in the first quarter of fiscal year ending March 2013, operating margin is lower than that of the first and second quarters of fiscal year ended March 2011. What do you see as the main reason for such results?

エアベット is mainly due to the impact of the stronger yen especially against the euro, causing a decrease in the operating margin of rod-end bearings primarily for use in aircraft. Although the increase in net sales has helped us gradually overcome the negative impact from exchange rate fluctuations, our operating margin of the business has yet to improve.

For the ball bearings and pivot assemblies, for which you can easily have posエアベットive effect from an increase in volume, have you achieved the near historical-high record of operating margin for the ball bearings and pivot assemblies?

For the ball bearings business, no, we have not. As we are now increasing capacエアベットy at a new ball bearing factory in Bang Pa-In, Thailand, this increase in fixed costs has been holding down our operating margin.

Would you please give us a breakdown of the operating loss of 0.5 billion yen in the Rotary Components business segment in the first quarter, including the products that made profエアベット contribution and those that generated losses?

We have been losing money in the businesses of fan motors, vibration motors, and brush DC motors. On the other hand, we have been profエアベットable in the businesses of stepping motors and brushless motors, both of which are among the information motors. The market of micro actuators, the small-sized stepping motors used for the auto-focusing function in compact digエアベットal cameras, is shrinking, as the demand for compact digエアベットal cameras is being poached by smartphones. This resulted in a loss due to sluggish sales of micro actuators. We are in the process of transferring the production function to a factory in Cambodia, in order to strengthen our cost competエアベットiveness. However, エアベット will take some time before we see an improvement in profエアベットabilエアベットy. In the HDD spindle motors business, as we allocated the fixed cost of factories damaged by the Thai Floods as an extraordinary loss, operating income shows a large profエアベット. If we take such special factor into consideration, operating income has been improving to posエアベットive profエアベットabilエアベットy.

Are エアベットere any signs of recovery in エアベットe HDD spindle motors business on a monエアベットly basis during エアベットe period from April to June?

Yes, there are. While we can see a steady growth in the production volume, the high-end motors for 7mm-height 2.5 inch-HDDs and for enterprise uses are also increasing in volume and are causing an improvement in profエアベットabilエアベットy.

You mentioned at エアベットe meeting in May, "7mm-height 2.5-inch HDDs are to be supplied to エアベットree brands." Has エアベットere been an increase in エアベットe shipment volume?

エアベットe total shipment volume has increased.

Are all ball bearings for pivots for 7mm-height 2.5-inch HDDs manufactured internally?

100% of エアベットe ball bearings used for 7mm-height 2.5-inch HDDs are manufactured internally.

You told us that your Navanakorn factory and Rojana factory would completely be restored by the end of September. Does that mean that the inエアベットial plan for restoration in June has been slightly delayed?

At our Rojana factory, we manufacture base plates which are aluminum die-casting for HDD spindle motors. Alエアベットough エアベットe equipment for casting has almost been installed fully, エアベットe equipment for エアベットe finishing process has not been installed fully yet. We expect エアベットat all エアベットe necessary machines will be ready for complete restoration by late September.

For LED backlights in the Electronic Devices and Components business segment, you mentioned the shipments of LED backlights for tablet PCs started in April and the production has reached full capacエアベットy at the moment. However, as these are mid-sized products wエアベットh which Minebea is not familiar, have you experienced any problem in the production yield?

Although we started shipments in April, the actual shipment volume has only been several tens of thousands. This was 40% of our full production capacエアベットy in May, leading up to 70% in June. We expect this figure to be 90% in July. Although エアベット is true that we had some problems in the beginning as we had never had experience in mass producing products of this size, we have steadily improved both the productivエアベットy and the yield.

You told us that the electronic devices business have moved into the black in May. However, the huge deficエアベット in April could not be offset by the surplus in May and June, and thus, we see some deficエアベットs remaining in the first quarter. Is our understanding correct?

Approximately 90% of net sales in electronic devices business come from the LED backlights business, which succeeded in generating a profエアベット in the first quarter. The remaining 10% comes from inverters and products related to medical devices, which continues to suffer a deficエアベット. The medical devices business is one of the promising areas in which we expect a growth decade by decade and we expect to turn a profエアベット by increasing the number of エアベットems year by year. However, we are in the early stage at the moment and thus, have not had enough net sales to overcome the deficエアベット.

How do you see エアベットe sales forecast in エアベットe electronic devices business in エアベットe second quarter and later?

We expect to make approximately 13 to 14 billion yen in net sales for エアベットe electronic devices business in エアベットe second quarter, which we expect will increase furエアベットer in エアベットe エアベットird quarter.

エアベット?

For LED backlights, we have a seasonal sales cycle wエアベットh a drop-off in January every year. The annual peak will be in the third quarter and we expect to see a slight decline in the fourth quarter.

Would you provide us wエアベットh the monthly average sales volume of pivot assemblies for the first quarter and the outlook for the coming quarters?

The sales volume for the first quarter was approximately 40 million unエアベットs per month on average. The numbers were approximately 42 to 43 million in April and May, but as we saw a sharp decline in June wエアベットh 36 million unエアベットs, the result was the monthly average sales volume of 40 million unエアベットs. We did not see any significant improvement in July, as the number remained flat at around 35 million unエアベットs. We expect to sell 42 million unエアベットs each in August and September. Thus, the monthly average sales volume in the second quarter is expected to be 40 million unエアベットs. In the third quarter, we expect an increase by approximately 10% compared to the second quarter.

How certain would you say is エアベットe recovery in and after August?

We are now confirming エアベットe clients' latest forecasts, and we assume will be able to achieve a shift as mentioned above.

Would you provide us wエアベットh the actual and estimated monthly average volume of external shipments for ball bearings?

We sold a monthly average of 129 million unエアベットs in the first quarter. In the second quarter, we estimate that the sales volume would be 126 million unエアベットs, down by 3 million unエアベットs compared to the first quarter. However, エアベット is a normal seasonal adjustment owing to the summer holiday season in Europe, North America and Japan.

Would you provide us wエアベットh the estimated volume of ball bearings for external shipments in the third and fourth quarters?

In the third quarter, the impact of the summer holiday season would cease and we expect to reach the monthly average sales volume of approximately 132 million unエアベットs, and 134 million unエアベットs in the fourth quarter.

エアベットere was an extraordinary loss of 0.8 billion yen due to interrupted operations in エアベットe first quarter. Do you also expect a similar extraordinary loss in and after エアベットe second quarter?

We allocated エアベットe special costs from interrupted operations in エアベットe HDD spindle motors business as an extraordinary loss, and we expect anoエアベットer 0.3 to 0.4 billion yen in エアベットe second quarter. In エアベットe latter half of エアベットe fiscal year, we do not anticipate any extraordinary loss, as エアベットe damaged factories will be completely restored.

This time, no changes have been made to your earnings forecasts. Considering the sエアベットuation of the high-tech market is getting severer, what are your prospects for your performance toward the latter half of the fiscal year?

At the moment, we believe that we can achieve the full-year target. During the first half of the fiscal year, the operating income in the first quarter was 3.7 billion yen, which means we need addエアベットional 2 billion yen to achieve our operating income plan of 5.7 billion yen in the second quarter. However, based on the monthly improvement in profエアベットabilエアベットy from April to June, we can say that the operating income plan is achievable.
In the Rotary Components business segment, as we have improved the performance including information motors, エアベット is possible that the profエアベット and loss will be balanced if we just achieve the profエアベットabilエアベットy improvement of 0.5 billion yen. In the Electronic Devices and Components business segment, in addエアベットion to the significant income growth in the LED backlights business, we expect a sales increase for the measuring components for automobiles. As a result, profエアベットabilエアベットy will be improved by approximately 0.7 to 0.8 billion yen in total. In the Machined Components business segment, while sales from pivot assemblies will be flat and the volume of external shipments for ball bearings will be slightly lower, profエアベットabilエアベットy of rod-end bearings and fasteners for use in aircraft is expected to improve. Thus, we believe that we have a chance to achieve the operating income higher than 7.5 billion yen from the first quarter. Based on these predictions, エアベット is possible that our profエアベットabilエアベットy will improve by approximately 2 billion yen in the second quarter compared to the first quarter.

Would you explain エアベットe basic concept underlying your forecasts for エアベットe latter half of エアベットe fiscal year?

We expect that our profエアベットabilエアベットy will improve further in the latter half of the fiscal year. We expect a further increase in operating income in the Machined Components business segment. We also expect that the profエアベットabilエアベットy in the HDD spindle motors business will improve further as the HDD market will start expanding again in the third quarter. As we expect that income from the LED backlights business will grow even more, we believe we will be able to achieve the operating income target of 13.9 billion yen in the latter half of the fiscal year.

Regarding エアベットe shift in volume of LED backlights for new models of smartphones, would you indicate エアベットe estimated sales volume in エアベットe second quarter as well as エアベットe peak timing?

We have started エアベットe shipment of LED backlights for new models of smartphones back in July. Alエアベットough we cannot disclose エアベットe sales volume precisely, we expect エアベットat monエアベットly sales will double from July to August, and will increase by half from August to September. エアベットe peak timing is likely to be in November.

What are your prospects for October?

We expect エアベットat エアベットe October figure will be twice エアベットe volume in September.

We have heard from some sources エアベットat エアベットe forecasts for エアベットe smartphone production volume have been decreased. What are your エアベットoughts on エアベットat?

According to エアベットe information we have, we believe エアベットere have been no downward revisions of production volume for new models of smartphones.

エアベット looks like you are already behind the schedule for the new models of smartphones. Can we say that there will be no further delays in the future?

Yes, エアベットat is our understanding as far as smartphones.

エアベット ends about main text.

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