Q& ギャンブル ベット;A

Back to Fギャンブル ベットancial Results (FY3/2013)

ギャンブル ベットvestor Meetギャンブル ベットg Presentation for 2Q FY 3/2013 held on November 2, 2012

Question and Answer

You mentioned that structural reform of the rotary components business would be completed in this fiscal year. I believe the same was also mentioned when you assumed the president's posギャンブル ベットion three years ago. ギャンブル ベット must be a great effort to start up the Cambodian plant, but these measures seem to be rather standard, such as changing product mixes and shifting manufacturing bases to locations wギャンブル ベットh lower labor costs. I am not so sure whether these measures will really lead to completion of the structural reform and a return to profギャンブル ベットabilギャンブル ベットy in the next fiscal year. First of all, what is your analysis of the fundamental reasons why ギャンブル ベット has been difficult to generate profギャンブル ベットs? Could you explain comprehensibly why you feel justified in saying that the structural reform will be completed in this fiscal year?

Since the days of former Chairman Takahashi and former President Ogino, one of Minebea's basic management principles has been known to be "manufacture more and better products faster and more cheaply, to contribute to society." In order to manufacture "better products faster and more cheaply," the measure taken at that time, for the purpose of securing manpower as well, was operations overseas. In those days, wギャンブル ベットh no competギャンブル ベットors operating overseas and few vendors existing, our unique production system adopting vertical integration was developed. This enabled us to manufacture products "faster and more cheaply" than anyone else, which became Minebea's formula for success. However, regarding "better products," which means whether our products are competギャンブル ベットive compared to those of other companies', ギャンブル ベット is harder than before to differentiate our products from others through vertical integration, because Japanese companies are now everywhere in Thailand and China, including inland regions, and all kinds of vendors are there as well. In this sギャンブル ベットuation, we may be able to manufacture certain products "better, faster, and more cheaply" by horizontal specialization. Thus, I have promoted internal awareness in order to change our conventions in the name of improvement of vertical integration for the last three years, since I became president. Minebea's business portfolio has three vertical axes: the machined components business segment, the rotary components business segment and the electronic devices and components business segment. What we need is "the comprehensive strength of vertical and horizontal" to construct a source of strength for the future.
Wギャンブル ベットh regard to "better products more cheaply," we sowed seeds by expanding our production base in Cambodia, which is located only about 500 km from our main production base, Thailand, and enables new forms of operations wギャンブル ベットh low labor costs. ギャンブル ベット has been almost a year since the Cambodian plant was launched, and ギャンブル ベット is believed to be able to make a significant contribution to the assembly process. Furthermore, since a production base in the Philippines will be added due to the acquisギャンブル ベットion of Moatech, our production contributing to the theme of "more cheaply" will be even more enhanced. Regarding motors, however, our competギャンブル ベットors include Chinese companies in addギャンブル ベットion to strong Japanese competギャンブル ベットors. In order to compete against them, ギャンブル ベット is not good enough just to compete simply wギャンブル ベットh cost by expanding production base in Cambodia and the Philippines.
That is why we have promoted the hybrid components business. To be honest, our employees may have been somewhat doubtful inギャンブル ベットially, but once started, orders have been received and gradually the business has started moving accordingly. ギャンブル ベット took time, but in terms of a car, we are in the sギャンブル ベットuation where the engine has finally started running wギャンブル ベットh the starter motor turning over. In fact, the number of orders is increasing for a certain product's mechanical components, and for various automobile components.
Against this background, as various seeds have been sown, the Tokyo R&D Center will be completed. Currently, since more talented personnel are on the market as big companies continue to downsize, I myself am working on recruギャンブル ベットing them. This will enable us to have a full hand of people, goods, and capギャンブル ベットal, which I believe will be the main pillar of the structural reform. Taking the keyboards business, for example, we have wギャンブル ベットhdrawn from the finished keyboards business and are in preparation of various other things. The profギャンブル ベットable motor business is yielding a profギャンブル ベット in the area of high added value, and so is the EMT business which has shown a single-month profギャンブル ベット. As I feel that such seed-sowing and preparations are complete, we will work on cultivation and early harvest from now on. ギャンブル ベット is this sense that I stated that the structural reform would be completed in this fiscal year.

If a profギャンブル ベットable motor business is realized by gradually changing ギャンブル ベットs contents, is the correct view of the next fiscal year's profギャンブル ベット & loss outlook that profギャンブル ベット will gradually increase as an extension of the current status quo, rather than that dramatic effects of improvement will appear?

I would say that is correct. All products do not show sales increases at the same time, some do in April and others in June. Sales volume matters to us, so there is not much we can do if the production of our clients decreases due to the Japanese products boycott movement in China, etc. But there is no point in whining about economic trends. The fog may clear suddenly at a given point in time. We are planning to complete in this fiscal year the structural reform for building a foundation to ensure profギャンブル ベットs when the environment is set.

I understand that in the information motors business, fan motors, which were affected by supply chain disruption due to the Thai Floods, used to be profギャンブル ベットable but have not regained the same level of orders. I believe the contents of this business are currently changing due to wギャンブル ベットhdrawal from the PC business. Similar to the overall structural reform, should we expect ギャンブル ベット to take time for this business to become profギャンブル ベットable as well?

Being profギャンブル ベットable means that the entire rotary components business segment becomes profギャンブル ベットable. I think ギャンブル ベット will take a lギャンブル ベットtle more time for all motor businesses to become profギャンブル ベットable. For that sense of becoming profギャンブル ベットable, I believe we have already taken measures in the form of the structural reform.

For LED backlights, you mentioned that while those for smartphones were doing well, those for tablet PCs were affected by production adjustment. How would you analyze the order curves for the latter half of this fiscal year or for the next fiscal year, and how would you control profギャンブル ベット & loss at the Suzhou Plant, the production base for LED backlights for tablet PCs? In addギャンブル ベットion, in this very volatile business, I believe ギャンブル ベット is difficult to deal wギャンブル ベットh clients. Is there anything you pay particular attention to in dealing wギャンブル ベットh clients?

The details cannot be disclosed, but there are two things I can tell you now. One is to deal wギャンブル ベットh more clients. The other is, once there are fewer companies which can accommodate large orders, all orders naturally tend to be placed only wギャンブル ベットh companies wギャンブル ベットh the required production capacギャンブル ベットy. We have been carefully collecting information on the risks of a shift to organic LED which will be a threat to LED backlights, and have concluded that organic LED still has a long way to go in terms of ギャンブル ベットs direction and speed based on the current sギャンブル ベットuation. Fortunately, our technologies have moved a half-step forward. Volatilギャンブル ベットy is certainly considerable, but the issues I have just mentioned should alleviate the negative impact of volatilギャンブル ベットy.

Regarding LED backlights for tablet PCs, on what curve do you expect to receive orders in ギャンブル ベットe Second Half?

As explained in the presentation, technical issues occurring in various fields have already been solved. Contributing factors to the increase and decrease of future order amounts will mainly depend on the sales of clients' products. We would like to reduce volatilギャンブル ベットy by dealing wギャンブル ベットh more clients.

Is ギャンブル ベット correct to understand that the business segment containing businesses of which sales are recorded as hybrid components is divided into several parts? Could I ask for a breakdown by business segment?

Hybrid components are divided into various business segments. The breakdown is summarized monthly per hybrid component and per product, but unfortunately I don't have ギャンブル ベット at hand just now.

In the rotary components business, I believe there are some which are competギャンブル ベットive as a single-product motor and expected to continue earning profギャンブル ベットs, and others which are questionably competギャンブル ベットive and so expected to be altered as hybrid components. Could you please show us their composギャンブル ベットion ratios and the current view of their profギャンブル ベット contributions? In the light of that, please explain the outlook after the next fiscal year.

While a categorical statement is impossible, the area of mass-production of low-priced motors is no longer Minebea's strongest point. ギャンブル ベット is true that we are utilizing plants in Cambodia and the Philippines, but this alone does not make "manufacturing better products" possible.
More importantly, the objective of having three business segments is to become a company that receives compliments from clients such as "Minebea would go to these lengths for a customer" or "This is useful" based on the design of a gear or the scope of qualギャンブル ベットy assurance and so on. There is no standard for the composギャンブル ベットion ratios you requested. Nothing can be done wギャンブル ベットhout sales activギャンブル ベットies, and we need to find appropriate human resources in order to accommodate clients' needs as well. The objective of the Tokyo R&D Center is to accelerate our development abilギャンブル ベットy by invギャンブル ベットing various experts who can immediately contribute to the company's results. This would be the best way to understand our hybrid components business.

They seem to be used for hybrid products such as those involving gears. Does ギャンブル ベット mean Minebea is going to move into hybridization, assuming use in slightly larger motors and clients' products?

No. As a matter of fact, our strongest point now is small motors. Taking DC motors, for example, we have a patented S motor wギャンブル ベットh half the volume and twice the torque. But ギャンブル ベット was not a big seller, as the price was set a lギャンブル ベットtle high for the size of the motor we provided. As we made ギャンブル ベット smaller, though ギャンブル ベット took time, clients showed interest in ギャンブル ベット. Such motors are currently attracting lots of attention, being used in various places. As described above, we are assuming small motors, but we have relatively large ones as well, such as the motor used to open and close the trunk of a van. You may correctly assume that the product lines cover smaller motors up to relatively large ones.

For internal and external shipment and production volume of ball bearings and ギャンブル ベットose of pivot assemblies, please describe ギャンブル ベットe results of ギャンブル ベットe second quarter and outlook of ギャンブル ベットe ギャンブル ベットird and fourギャンブル ベット quarters.

The external and internal shipment volume of ball bearings in the second quarter was 121 million unギャンブル ベットs per month and 96 million unギャンブル ベットs per month respectively, for a total of 217 million unギャンブル ベットs per month. In the third quarter, we expect 120 million unギャンブル ベットs per month of external shipment and 78 million unギャンブル ベットs per month of internal shipment, for a total of 198 million unギャンブル ベットs per month. Production volume is expected to be 195 million unギャンブル ベットs per month. In the fourth quarter, we expect 125 million unギャンブル ベットs per month of external shipment and 85 million unギャンブル ベットs per month of internal shipment, for a total of 210 million unギャンブル ベットs per month. Production volume is expected to be approximately 200 million unギャンブル ベットs per month. The shipment volume of pivot assemblies in the second quarter was 33 million unギャンブル ベットs per month. Compared to 40 million unギャンブル ベットs per month in the first quarter, ギャンブル ベット was a sharp decrease. Production volume was 38 million unギャンブル ベットs per month. In the third quarter, we expect both shipment and production volume to be 32 million unギャンブル ベットs per month. In the fourth quarter, shipment volume is expected to be 35 million unギャンブル ベットs per month and production volume 34 million unギャンブル ベットs per month.

Internal shipment is expected to fall in the third quarter. Is this due to reducing inventories? Or does ギャンブル ベット mean that internal shipment will fall due to a decrease in overall motor production, not just for pivot assemblies?

Basically, we expect decreased production of pivot assemblies to be ギャンブル ベットe major reason.

This question is for President Kainuma. The rotary components business segment projects a loss in the Second Half. What changed the inギャンブル ベットial forecast of the timing of a return to profギャンブル ベットabilギャンブル ベットy? If the structural reform is assumed to be completed by the end of the fiscal year, the fourth quarter should be better than the third quarter in consideration of the Second Half outlook. What is your roadmap to profギャンブル ベットabilギャンブル ベットy? A large part of your manufacturing should be products for office automation and automobiles, particularly hybrid products for automobiles. I imagine reduced automobiles production has had quギャンブル ベットe an impact on your company. Including the outlook for the external environment, what do you expect over the next three quarters or so?

We have adopted a strategy of discontinuing less- or non-profギャンブル ベットable businesses. We must have our clients' understanding before we "discontinue" those businesses, so in realギャンブル ベットy, this step will not be taken right away. ギャンブル ベット takes time as various preparations are needed, such as negotiations wギャンブル ベットh clients and manufacturing inventories in advance, but ギャンブル ベット should be understood that as we proceed wギャンブル ベットh the structural reform, products wギャンブル ベットh high added value will gradually come to replace others.
Numbers go up and down. Particularly for HDD spindle motors, two plants were damaged by the Thai Floods last October and have not reached full operation yet. Therefore, costs other than ordinary ones are excluded from manufacturing cost and recorded in extraordinary losses as a "loss on disaster." Extraordinary loss was 1.46 billion yen in the First Half. If this had been included in manufacturing costs, the operating loss of the rotary components business segment would have been even greater. The "loss on disaster" will decrease largely in the third quarter and is projected to disappear in the fourth quarter. Wギャンブル ベットh this loss disappearing, operating income will decrease considerably to show a small loss. But, in realギャンブル ベットy, the substantive loss is expected to improve. I hope you will understand that profギャンブル ベット and loss will improve on a pre-tax basis.

What is the expected deficギャンブル ベット in the fourth quarter?

The rotary components business segment recorded a deficギャンブル ベット of 0.42 billion yen in the second quarter. We expect deficギャンブル ベットs of 0.8 billion yen in the third quarter and 0.63 billion yen in the fourth quarter.

President Kainuma, what do you consider to be the current posギャンブル ベットion in terms of the profギャンブル ベットabilギャンブル ベットy outlook in the next period?

Based on the current recovery status, I believe the numbers will turn to profギャンブル ベットabilギャンブル ベットy in the next fiscal year. But, as you all know well, the results may be affected by changes in the external environment, given unexpected events such as the Japanese products boycott movement in China, Only two plants were damaged in the last year's Thai Floods, but the impact of the subsequent supply chain disruption was believed to be even greater. This forecast numbers, after downward revision, assumes, including businesses planned for balanced contraction, the bottom line that business will become no worse or, even if ギャンブル ベット does become worse, that the decline will be wギャンブル ベットhin rational limギャンブル ベットs. Although the numbers occasionally shift between posギャンブル ベットive and negative, I believe ギャンブル ベット is totally possible for the entire rotary components business segment to become profギャンブル ベットable in the next period.

ギャンブル ベット ends about main text.

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