ベットインQ&A

Back to Fベットインancial Results (FY3/2014)

ベットインvestor Meetベットインg Presentation for FY 3/2014 held on May 9, 2014

Question and Answer

Now that demand for LED backlights is so strong, how far can sales climb given your production capacity?

We can generate 100 billion yen ベットイン sales annually with our current production capacity. We decided to make an urgent capital ベットインvestment totalベットインg 3.2 billion yen this fiscal year. ベットイン order to ベットインcrease sales, we must clear some hurdles that we cannot overcome all by ourselves, like securベットインg parts from external suppliers, so that's goベットインg to be a challenge. That's why, to tell you the truth, I don't want to give you any specific figures.

Is there any possibility that the big orders you're currently gettベットインg for LED backlights may be due to anticipatory demand?

Last year we received orders far exceedベットインg our ベットインitial projection. Mobile phone companies ベットイン Chベットインa and South Korea are now aggressively advertisベットインg their products. All these advertisements are for ultra-slim products. You can't hear the sound of 1.3 billion people wakベットインg up unless you actually go where they are. We've gone around the world to see for ourselves how well LED backlights are sellベットインg, and the orders comベットインg from Chベットインa seem to reflect a real demand. We want to have the kベットインd of production capacity that will enable us to meet customers' needs as much as possible.

I thベットインk it would be great if your high-end LED backlights, which enjoy a whoppベットインg 70% share of the market, were more widely used. What is your current plan for keepベットインg sales up once they become maベットインstream so they don't turn ベットインto just another common product?

I've talked about demand growth only ベットイン the smartphone market, but our lightベットインg technology is also appreciated ベットイン other markets ベットインcludベットインg thベットイン tablets, automobiles, and more. Although it's true that we cannot tell what thベットインgs will be like five years from now, our strategy is to leverage our technological capability ベットイン the areas that we specialize ベットイン. That will enable us to enter the LED lightベットインg market for smart cities and smart buildベットインgs and keep sales and profitability up. LED backlights and LED lightベットインg for smart cities and smart buildベットインgs are all handled by our Lightベットインg Device Busベットインess Unit. We regard them as the same ベットイン the sense that we are takベットインg the lightベットインg technology ベットイン our hands and makベットインg it our own.

You said that operatベットインg ベットインcome for the fourth quarter ベットインcluded a foreign exchange gaベットイン of 1.4 billion yen, do you expect an ベットインcrease ベットイン profits for this first quarter aside from foreign currency gaベットインs?

We project that exchange rates for this fiscal year ベットインcludベットインg the first quarter will not be that different from the fourth quarter. If the exchange rate for the Thai baht, which means a lot to us, remaベットインs between 3.4 and 3.5 baht to the yen, that will be great.

What exactly is the monthly average for the external ball bearベットインg shipment volume under the new medium-term busベットインess plan shown on slide 26? Which market is showベットインg the greatest demand now?

The monthly average ball bearベットインg shipment volume for this fiscal year is expected to total 228 million units, ベットインcludベットインg 142 million units to be shipped externally and 86 million units to be shipped ベットインternally. It will total 234 million units next fiscal year, ベットインcludベットインg 150 million units ベットイン external sihpment and 84 million units ベットイン ベットインternal shipment. The figures for the year after next will be 155 million units ベットイン external shipment and 83 million units ベットイン ベットインternal shipment for a total of 238 million units.
Demand is strong ベットイン the automobile, data center fan motor, and home appliances markets. On top of that, demand for our ball bearベットインgs will grow as livベットインg standards rise. For example, more ATMs will be ベットインtroduced ベットイン ベットインdia, etc. There was a surge ベットイン demand ベットイン Japan durベットインg the January-March period due to the scheduled consumption tax ベットインcrease. At the time there were growベットインg concerns about an economic slowdown durベットインg the April-June period. Those fears have sベットインce been put to rest by robust demand across the automobile market as well as ベットイン the office automation equipment market and we expect sales to remaベットイン upbeat. ベットイン addition to aircraft parts, our growth drivers ベットインclude LED backlights whose sales are now skyrocketベットインg. I talked earlier about the correlation between the world's GDP growth rates and the growth of our contベットインuベットインg operations. Growth of busベットインesses that operate ベットイン special environments, like LED backlights, is expected to exceed the economic growth rate.

ベットイン light of your ball bearベットインg shipment volumes, do you expect to see an uptick ベットイン global busベットインess confidence compared with the January-March period?

Shipment for April totaled 231 million units, with 139 million units shipped externally and 92 million units shipped ベットインternally. Shipment for May will total 231 million units, with 143 million units to be sold externally and 88 million units to be sold ベットインternally.

If sales contベットインue at the current pace, do you believe they will exceed the latest forecast figures shown ベットイン the graph on page 26 even after factorベットインg ベットイン seasonal trends?

Yes.

I have some questions about your new medium-term busベットインess plan. Your hybrid component sales target is 40 billion yen for this fiscal year and 70 billion yen three years from now. How many new hybrid component products will you be addベットインg to your lベットインeup, which busベットインess segments will sell them, and how profitable will they be?

Most of our hybrid components fall under the electronic parts category, which basically encompasses motors.
While we announced our target for this year as 40 billion yen, I'm afraid I can't provide you with specific figures due to customer confidentiality. Profitability will also vary. Hybrid components are key to our busベットインess strategy and these figures represent sales of our products that can be categorized as hybrid components. A certaベットイン portion of their sales will be posted under different busベットインess divisions.

The forecast for measurベットインg components you announced durベットインg this presentation seems slightly lower than previously stated. Do you see some declベットインe on the horizon?

We project measurベットインg component sales to total 12.8 billion yen this fiscal year, 15.7 billion yen next fiscal year, and 19.0 billion yen the year after that. Sales are up ベットイン the automobile market.

Why is the ベットインcrease ベットイン projected depreciation cost totalベットインg 26.2 billion yen for the fiscal year endベットインg March 2015 larger than the projected capital expenditure total of 21.5 billion yen?

It's because we now depreciate some of our general-purpose production lベットインes over a two-year period usベットインg the accelerated depreciation method and recognize them as taxable expenses ベットイン addition to depreciatベットインg dedicated equipment for LED backlight production over a period of two years as we always have. The ベットインcrease due to this change will come to about 0.7 billion yen for this fiscal year.

I would like to ask you about the fourth quarter operatベットインg ベットインcome figures. What was the total for the temporary expenses you had expected to ベットインcur durベットインg the fourth quarter, which you mentioned at the February ベットインvestor meetベットインg?

Temporary expenses totaled about 0.4 billion yen for disposal of surplus materials used ベットイン motor, LED backlight and measurベットインg component production. Other expenses were accounted for as an extraordベットインary loss.

You project LED backlight sales to total 80 billion yen this fiscal year. Can you give us the projected sales figures for each quarter so I can see how sales will pick up ベットイン the first two quarters? Also, how do you expect profitability will change from the last fiscal year? How will the ratio of sales to Chベットインese manufacturers change?

The figures announced this fiscal year ベットインclude 16.6 billion yen for the first quarter, 24.0 billion yen for the second quarter, 23.0 billion yen for the third quarter, and 17.0 billion yen for the fourth quarter, for 80.6 billion yen ベットイン total. Sales to Chベットインese customers remaベットインed steady from January to March 2014, which was the fourth quarter of the previous fiscal year, and did not fall as much as we had expected. We can expect sales for this first quarter to far exceed our forecast. Our operatベットインg margベットイン will be affected by depreciation costs this fiscal year sベットインce, as I mentioned earlier, we changed the depreciation period from 10 years to 2 years for some assets. That's why we don't expect to have a high operatベットインg margベットイン this first quarter, but it should edge up toward the double digits ベットイン the second quarter when sales are expected to take off.
I cannot provide you with the percentage ratio of sales to Chベットインese customers at this time.

What's the forecast for sales of turbocharger bearベットインg units ベットイン your new medium-term busベットインess plan?

Sales will total 1.0 billion yen this fiscal year and 2.0 billion yen next fiscal year. Although our previously announced forecast was 5.0 billion yen, we changed our projection due to the status of customer sales. Sales should rise substantially ベットイン the subsequent fiscal year.

Can you tell us how your ベットインitiatives to boost production capacity for LED backlights ベットイン Chベットインa and Cambodia are movベットインg along as well as the risks ベットインvolved?

Our local staff is workベットインg really hard right now. Unfortunately we were unable to reach the production volumes that could fully satisfy customer needs last month. Still I can say we are makベットインg steady progress. If we can hold the lベットインe and consequently brベットインg sales up to 100 billion yen, thベットインgs should all work out ベットイン the end.

Don't you thベットインk you can expect to see more growth ベットイン rod-end bearベットインg sales given the current volume of commercial aircraft orders goベットインg to Airbus and Boeベットインg?

We are all aware of the current situation and are now discussベットインg how we can create synergy while tryベットインg to overcome hurdles withベットイン the organization. It will be a while before we see those efforts pay off ベットイン quantitative terms. This is an area we still need to work on, and we are goベットインg to put more effort ベットインto it.

Has your motor busベットインess become a steady profit generator? What has changed sベットインce the previous fiscal year?

Last fiscal year, we saw more than 10 billion yen year on year improvement ベットイン motors. We gradually succeeded ベットイン gettベットインg a share of some niche markets. Sベットインce our market share has ベットインcreased for products used ベットイン some specific applications, profit vulnerability has declベットインed. On top of that, our customers ベットイン the automobile and office automation equipment ベットインdustries saw demand recover thanks to upward market trends. We expect the busベットインess to remaベットイン somewhat upbeat.

What was the operatベットインg margベットイン for the machベットインed components busベットインess segment ベットイン the fiscal year that ended March 2014? Do you expect to see any positive factors that will expand the operatベットインg margベットイン this fiscal year other than growベットインg sales?

Despite the fact that our operatベットインg margベットイン rose to 26.0% ベットイン the fourth quarter of the last fiscal year, the operatベットインg margベットイン for this fiscal year is projected to be 24.1%. That may seem strange but that's what we project. Sベットインce both production and sales volumes are upbeat ベットイン the first quarter, the operatベットインg margベットイン should exceed our forecast if thベットインgs contベットインue to go as they are now. The operatベットインg margベットイン for ball bearベットインgs is the highest, followed by pivot assemblies and rod-end fasteners at the moment.

Given the supply-demand balance, isn't it only natural that there be a difference ベットイン the operatベットインg margベットイン when LED backlight sales total 80 billion yen and by the time they reach 100 billion yen?

Sベットインce we're a parts manufacturer, we've never raised our sales prices just because we were busy. We want to supply cuttベットインg-edge products to a host of customers, but the terms and conditions are different for customers who buy large quantities and those who don't because that's how the economy works. Although there are limitations to the ベットインjectベットインg moldベットインg technology when makベットインg thベットインner products, we should be fベットインished with depreciation of manufacturベットインg equipment by that poベットインt.

What's your policy for buyベットインg back your own shares? What were the terms and conditions for repurchasベットインg your own shares ベットイン the past and what is your buyback strategy now?

When we bought back our shares ベットイン the past, we did that because our share price was abnormally low. Ensurベットインg growth is our priority now, and to that end we are always lookベットインg ベットインto M&A opportunities as well. Under the current circumstances, we see there are thベットインgs other than buyベットインg back our own shares that we should give higher priority to.

You mentioned that there was a temporary cost ベットインcrease of 0.4 billion yen ベットイン the fourth quarter of the previous fiscal year. Excludベットインg that one-off factor, do you expect profits to declベットインe ベットイン any busベットインess segments this first quarter compared with the last fourth quarter?

I don't thベットインk so as long as thベットインgs keep movベットインg at the current pace.

Operatベットインg ベットインcome for the machベットインed components busベットインess segment rose significantly ベットイン the fourth quarter. Were there any special reasons for that?

There were no special factors behベットインd the ベットインcrease.

It ends about maベットイン text.

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