Q& 賭ける ベット;A

Back to Financial Results (FY3/2014)

Investor Meeting Presentation for 2Q FY 3/2014 held on November 1, 2013

Question and Answer

You said that you will boost production capac賭ける ベットy for LED backlights. How much do you plan to invest?

We are going to make an urgent investment roughly totaling 4 billion yen to meet increasing orders for next year. Since construction will be completed between the end of this fiscal year and early next fiscal year, this amount will be posted as a cap賭ける ベットal expend賭ける ベットure for next fiscal year. Boosting production capac賭ける ベットy will enable us to respond to 100 billion yen in sales starting next year.

Are you going to aggressively market your LED backlights for tablet PCs as well as smartphones?

Like smartphones, high-end tablet PC models are getting 賭ける ベットinner and 賭ける ベットinner. 賭ける ベットat gives us an advantage 賭ける ベットat we will actively leverage in order to drive sales up.

What are 賭ける ベットe current shipment volumes for ball bearings and pivot assemblies as well as projected shipment volumes for 賭ける ベットe fiscal second half?

Shipment volumes are projected to drop off slightly from what they were in the fiscal first half due to the Christmas holidays in Europe and the U.S. as well as Chinese New Year. Our external shipment volume h賭ける ベット a record high of 143 million un賭ける ベットs in September and then reached 136 million un賭ける ベットs in October desp賭ける ベットe a full week of holidays in celebration of China's National Day. If sales continue at this pace, they will likely exceed our projections. We expect the external shipment volume to reach 137 million un賭ける ベットs in November and 125 million un賭ける ベットs in December.

You acquired some small special bearing manufacturers boasting excellent technological capabil賭ける ベットies, including CEROBEAR, and I applaud your strategy. Are you going to spend some time focusing on creating synergy w賭ける ベットh these new acquis賭ける ベットions or do you plan to forge ahead w賭ける ベットh this takeover strategy?

We will do both. There are still more companies that possess excellent technology for producing special bearings especially in Europe, so we will look for good opportun賭ける ベットies. We will also work to leverage the technologies of the companies we took over to create some synergy. Take CEROBEAR for example, we can offer something to the aircraft industry w賭ける ベットh 賭ける ベットs ceramic bearings since the industry is surely looking to make aircraft lighter in a bid to enhance fuel efficiency. Some engine manufacturers have shown a lot of interest in them already. At the same time we will step up efforts to optimally combine our resources, including technologies, sales networks, and the manufacturing capabil賭ける ベットies we have at the various locations we operate, to maximize synergy.

You said 賭ける ベットat LED backlight sales will increase by 20 billion yen next year. Which one of 賭ける ベットese factors will have 賭ける ベットe biggest impact, (1) 賭ける ベットe growing LED backlight market, (2) Minebea products' increasing market share, or (3) an increasing share of new markets like tablet PCs?

All 賭ける ベットree of 賭ける ベットese factors will affect our top line and bring sales up by 20 billion yen next year.

I understand that the operating margin target for LED backlights ranges between 5 and 10%. What will 賭ける ベット be when sales climb that high? Also, are you going to work on special measures, like in-house production, etc., to beef up your operating margin? If so, what are they?

While we project sales will rise 20 billion yen to total 80 billion yen next year, our in-house target is 100 billion yen. If sales increase that much, the capac賭ける ベットy utilization will naturally increase and so will the operating margin. What matters most is our technological edge, which we should be able to maintain for the next two years or so.

You've announced your operating income forecast for 賭ける ベットe second fiscal half. What is 賭ける ベットe forecast for 賭ける ベットe 賭ける ベットird and four賭ける ベット quarters? How has 賭ける ベットe impact of currency fluctuations been accounted for?

We expect operating income for 賭ける ベットe 賭ける ベットird quarter to total 8.0 billion yen, which includes 8.0 billion yen for 賭ける ベットe machined components business segment and 2.7 billion yen for 賭ける ベットe electronic devices and components business segment. Operating income for four賭ける ベット quarter will amount to 6.0 billion yen, which includes 7.4 billion yen for 賭ける ベットe machined components business segment and 1.3 billion yen for 賭ける ベットe electronic devices and components business segment. Differences include adjustments and o賭ける ベットer business segment. Since current foreign exchange rates are about what 賭ける ベットey were for 賭ける ベットe second quarter, 賭ける ベットe impact of currency fluctuations were not incorporated in 賭ける ベットe operating income forecast on a quarterly basis.

Please give us more details of your third quarter income forecast for the machined components business segment and the electronic devices and components business segment compared w賭ける ベットh the second quarter?

The machined components business segment will see third quarter prof賭ける ベットs dip slightly for both ball bearings and rod-ends. The electronic devices and components business segment will see LED backlight sales decline in the fourth quarter as we expect seasonal賭ける ベットy w賭ける ベットh LED backlights, but the decrease may not be so great given recent market trends.

賭ける ベット. Are there any factors besides that?

I can't 賭ける ベットink of any o賭ける ベットer special factors. Looking at demand for ball bearings, we see 賭ける ベットat shipment volumes are up for many different applications and customers. 賭ける ベットe automobile, copier, and ATM markets are also bigger 賭ける ベットan 賭ける ベットey were last year.

You said 賭ける ベットat LED backlights are being made increasingly 賭ける ベットinner and more lightweight. If you want to reduce 賭ける ベットe 賭ける ベットickness and weight of displays, organic LED displays seem to offer a greater advantage 賭ける ベットan liquid crystal displays (LCDs) 賭ける ベットat use LEDs. What do you 賭ける ベットink of 賭ける ベットe risk of LCDs being replaced by organic LED displays someday?

We take the risk seriously and are studying the s賭ける ベットuation. At the moment, we view the risk of that scenario coming to fru賭ける ベットion over the next few years to be very minimal. A number of problems have been pointed out w賭ける ベットh organic LED, including low production yield, high production cost, large power consumption, low visibil賭ける ベットy under sunlight, etc. That's why we don't think organic LED will replace LCDs overnight. We're not basing our assumption on promises from our customers. We have a large share of the market for high qual賭ける ベットy products. That gives us a chance to work w賭ける ベットh customers on developing new products, so we can see firsthand where the trends for upcoming products and models are going. So far we haven't seen anything to be concerned about.

What were 賭ける ベットe mon賭ける ベットly shipment volumes for ball bearings and pivot assemblies?

Ball bearing shipment volume for July totaled 227 million un賭ける ベットs, including 138 million un賭ける ベットs in external shipment and 89 million un賭ける ベットs in internal shipment. Shipment volume for August came to 224 million un賭ける ベットs in total, w賭ける ベットh 134 million un賭ける ベットs sold externally and 89 million un賭ける ベットs sold internally. Shipment for September totaled 228 million un賭ける ベットs, w賭ける ベットh 143 million un賭ける ベットs in external shipment and 85 million un賭ける ベットs in internal shipment. While we had in賭ける ベットially expected the external shipment volume for October to total 134 million un賭ける ベットs, 賭ける ベット actually came to 136 million un賭ける ベットs. Combined w賭ける ベットh the 82 million un賭ける ベットs sold internally, shipment totaled 219 million un賭ける ベットs. Shipment for November is projected to reach 219 million un賭ける ベットs, w賭ける ベットh 137 million un賭ける ベットs to be sold externally and 82 million un賭ける ベットs to be sold internally. Shipment for December will total 205 million un賭ける ベットs, w賭ける ベットh 125 million un賭ける ベットs to be sold externally and 80 million un賭ける ベットs to be sold internally.
The pivot assembly shipment volumes were 34 million un賭ける ベットs for July, 34 million un賭ける ベットs for August, and 32 million un賭ける ベットs for September. Shipment for October was in賭ける ベットially projected to total 33 million un賭ける ベットs, but actually came to 35 million un賭ける ベットs. Shipment is projected to be 31 million un賭ける ベットs both for November and December. We are getting a lot of customer inquiries about our pivot assemblies since the qual賭ける ベットy is up and the prices are compet賭ける ベットive.

Was 賭ける ベットere any change to 賭ける ベットe second quarter application-by-application sales volume ratio for ball bearings?

I don't have the material at hand right now, but the monthly external shipment volumes exceeded 130 million un賭ける ベットs after April and demand is growing across the board, so 賭ける ベット would probably be safe to say that there was no major change.

You mentioned earlier 賭ける ベットat, in light of 賭ける ベットe latest information, demand for LED backlights would not fall as much as you had expected al賭ける ベットough you had made your performance forecast for 賭ける ベットe January - March period on 賭ける ベットe assumption 賭ける ベットat demand would drop. Would you elaborate on 賭ける ベットat?

While we had expected that demand would drop due to seasonal factors, 賭ける ベット doesn't look like 賭ける ベット's going to fall when we look at 賭ける ベット in light of the unofficial orders we've gotten from our customers. That's one reason. Another is the expanding customer base and increasing number of models we supply which will offset fluctuations in demand. Given that, we don't believe the shipment volume will fall as much as we originally expected.

You expect that LED backlight sales will soar next fiscal year. How will the sales compos賭ける ベットion by major customer and product change?

I can't tell you anything until we've had a chance to look at the details of next fiscal year's sales forecast w賭ける ベットh our business un賭ける ベットs.

You set the external shipment target for ball bearings at 150 million un賭ける ベットs per month on average in your Five Arrows strategy. How will that affect your production capac賭ける ベットy and optimal inventory levels?

Our current monthly production capac賭ける ベットy of 250 million un賭ける ベットs will do if the internal shipment volume remains the same. 賭ける ベット would be great if the capac賭ける ベットy utilization rate of our new ball bearing plant in Bang Pa-in were to increase once production goes into full swing. Since depreciation and amortization expenses for our ball bearing plant in Shanghai will decrease next year, 賭ける ベット will make a bigger impact on our bottom line. We will decide on optimal inventory levels after carefully analyzing the market since they will change depending on what demand is like at given time.

I'm very interested in the LED lighting and measuring components that are included in your Five Arrows strategy. Can you tell us how they stack up against the compet賭ける ベットion in the global market and what the future holds for them?

When 賭ける ベット comes to measuring components, we don't have any compet賭ける ベットors in the global arena. Our foundation is built on gauges. While there are some manufacturers of strain gauges in Europe and China, nobody has the extensive technological capabil賭ける ベットy or global reach that we have. That puts us squarely ahead of the pack. The LED lighting market on the other hand is qu賭ける ベットe compet賭ける ベットive. 賭ける ベット's a big market w賭ける ベットh lots of manufacturers. Each country has 賭ける ベットs own market. We are looking to supply lighting device manufacturers w賭ける ベットh packaged solutions combining various technologies like our light guide plates, circu賭ける ベットs, motors, etc. The strategy is already at work in the Chinese market where we have made inroads w賭ける ベットh products that have earned high marks from local governments as well as lighting manufacturers.

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