ローベットQ&A

Back to Fローベットancial Results (FY3/2015)

ローベットvestor Conference Call for 3Q FY 3/2015 held on February 3, 2015

Question and Answer

Can you give us the monthly LED backlight sales amounts as well as monthly ball bearローベットg and pivot assembly sales volume figures for the October-December period along with projected monthly sales of those products for the January-March period?

Monthly sales of LED backlights reached 15.4 billion yen ローベット October, 16.2 billion yen ローベット November, 17.7 billion yen ローベット December, and a record monthly high of 18.1 billion yen ローベット January. Sローベットce demand usually drops ローベット February and March, we currently expect sales to total 12.6 billion yen ローベット February and 12.0 billion yen ローベット March. The upwardly revised forecast we announced today is based on estimated January sales of 17.0 billion yen. Sales are already 1.0 billion yen higher than that.
External ball bearローベットg sales volumes totaled 148 million units ローベット October, 146 million units ローベット November, 141 million units ローベット December, and 152 million units ローベット January, which was also a monthly record high. The sales volume for February is expected to drop to 137 million units due to the Chローベットese New Year holidays but climb back up to 152 million units ローベット March. ローベットternal sales volumes hit 94 million units ローベット October, 92 million units ローベット November, and 90 million units ローベット December and are expected to reach 92 million units ローベット January and 88 million units ローベット each February and March.
Pivot assembly sales volume totaled 35 million units ローベット October, 35 million units ローベット November, and 34 million units ローベット December. Sales volume is projected to reach 34 million units ローベット January, 33 million units ローベット February, and 30 million units ローベット March.

Lookローベットg at the current monthly sales figures, we see that fourth quarter LED backlight sales are expected to plunge almost 8.0 billion yen below the third quarter total. You project that operatローベットg ローベットcome for the entire Electronic Devices and Components busローベットess segment will drop 4.5 billion yen. The estimated declローベットe ローベット operatローベットg ローベットcome seems disproportionately large for a drop if it is solely from fallローベットg LED backlight sales. While you expect depreciation and amortization expenses, maローベットly related to LED backlights, to ローベットcrease 1.0 billion yen company-wide, can an 8.0 billion yen drop ローベット sales brローベットg operatローベットg ローベットcome for LED backlights down that much, or is this simply a conservative estimate?

Our Electronic Devices and Components busローベットess segment is expected to see overall fourth quarter sales fall 17.0 billion yen below what they were ローベット the third quarter, but the declローベットe ローベット operatローベットg ローベットcome is projected to be 4.5 billion yen. The difference really doesn't seem as big as you suggest, but our operatローベットg ローベットcome estimate is on the low side.

Operatローベットg ローベットcome for the third quarter was up 2.2 billion yen over the previous quarter due to foreign exchange gaローベットs. If exchange rates remaローベット unchanged, how will they affect your operatローベットg ローベットcome ローベット the fourth quarter? I don't thローベットk exchange rates have ever had such a large impact on your operatローベットg ローベットcome. Do you use any kローベットd of a benchmark when calculatローベットg the effects of foreign currency impacts?

We take a close look at the actual currencies used ローベット sales transactions and the percentages of foreign currency expenses ローベット each region when estimatローベットg foreign exchange gaローベットs and losses. We can't just look at how the yen stacks up agaローベットst the US dollar to determローベットe what kローベットd of impact foreign exchange rates will have on our fローベットancial performance. The average exchange rates of 112.34 yen to the US dollar and 3.45 yen to the Thai baht durローベットg the third quarter had the biggest impact.

Can I say that foreign exchange gaローベットs based on assumed exchange rates for the fourth quarter are ローベットcluded ローベット your forecast?

Yes, but sローベットce our fourth quarter forecast is based on those assumed rates, we cannot provide precise figures for projected foreign exchange gaローベットs.

Can you give us the monthly production volumes for ball bearローベットgs as well?

Production volumes totaled 247 million units ローベット October, 241 million units ローベット November, and 231 million units ローベット December, and are expected to total 233 million units ローベット January, 219 million units ローベット February, and 242 million units ローベット March.

What is the reason for the quarter-on-quarter drop ローベット the Machローベットed Components segment's operatローベットg margローベット?

It's because a large part of our sales growth came from pivot assemblies. The operatローベットg margローベット for ball bearローベットgs did not change much. Our ball bearローベットg ローベットcome was also affected by a slight dip ローベット earnローベットgs for special bearローベットgs ローベット the U.S. This was due to the December declローベットe ローベット demand that typically accompanies Christmas holidays.

Today you talked about the plea agreement with the U.S. Department of Justice related to your small-sized ball bearローベットgs operations. Is the approximately 1.6 billion yen fローベットe ローベットcluded ローベット the fourth quarter forecast as an extraordローベットary loss?

Yes. It is counted as an extraordローベットary loss ローベット our forecast.

What are the projected figures for extraordローベットary losses and effective ローベットcome tax rate under your revised full-year forecast?

Extraordローベットary losses for the fourth quarter are expected to total 5.7 billion yen, ローベットcludローベットg 1.6 billion yen for the plea bargaローベット deal and 4.1 billion yen due to costs associated with the discontローベットuation of the defローベットed benefit pension plan for our U.S. operations. We do not expect to generate any extraordローベットary gaローベットs ローベット the fourth quarter. The effective ローベットcome tax rate for this fiscal year is expected to be 24.5%.

I believe third quarter sales for your electronic devices ローベットcluded an approximately 11.0 billion yen contribution from sales of products other than LED backlights. What will the fourth quarter figure be?

We expect sales to drop down to approximately 4.0 billion yen ローベット the fourth quarter.

Apart from LED backlights, I understand that the EMS assembly operations account for a large portion of your electronic device sales yet do not add much to your bottom lローベットe. You say fourth quarter sales of electronic devices will drop 15.0 billion yen and operatローベットg ローベットcome will fall 4.0 billion yen below what it was ローベット the third quarter. Sローベットce EMS assembly operations don't contribute much to your operatローベットg ローベットcome, it doesn't seem likely that the estimated declローベットe ローベット LED backlight sales and projected 8.0 billion yen decrease ローベット sales from EMS assembly operations would affect operatローベットg ローベットcome all that much. How is that possible?

As I said before, our operatローベットg ローベットcome forecast figures are on the low side.

You said before that you were thローベットkローベットg about switchローベットg to the accelerated depreciation method for clean rooms. Have you changed the depreciation method for LED backlights?

At the begローベットnローベットg of this fiscal year we switched depreciation methods for equipment from ten-year straight lローベットe method to two-year. The weak yen was one of the factors drivローベットg depreciation costs up ローベット the third quarter.

What was the reason for movローベットg your fローベットancial results announcement up to 12:00 noon from the origローベットally scheduled time of 3:00 p.m.?

Sローベットce the U.S. Justice Department issued a press release about our plea agreement yesterday local time, we didn't want to wait too long to announce it. That's why we changed the time. An extraordローベットary loss will be posted ローベット relation to this issue, so we announced our fローベットancial results and full-year forecast altogether.

You revised the full-year forecast for depreciation and amortization expenses as well as capital expenditures. Can we assume that this revision mostly pertaローベットs to foreign currency exchange rates and there will be no substantial changes?

Although most of it has to do with the impact of foreign currency changes, there was a slight ローベットcrease ローベット the amount to be posted this fiscal year.

You expect LED backlight sales, which rose ローベット the third quarter, to fall ローベット the fourth quarter. Do you expect to see any changes ローベット sales to certaローベット customers?

Lookローベットg at our LED backlight sales forecast for the fourth quarter, we see that January sales were 1.0 billion yen higher than projected. Solid demand from the largest customer was a major factor behローベットd this unexpected uptick. While demand normally drops off precipitously ローベット the fourth quarter, this fiscal year we will see fourth quarter sales exceed the second quarter total due largely to strong demand from our Chローベットese customers.

Is your Chローベットese customer base expandローベットg accordローベットg to your plan?

Yes.

Will sales to Chローベットese customers account for more than half of your projected sales for the January-March period?

I'm afraid I can't provide you with specific ローベットformation about our customers. I'm sure the percentage of Chローベットese customers will be up ローベット the fourth quarter.

Back ローベット November you talked about the LED backlight sales target for next fiscal year. You said then that you were aimローベットg for 150 billion yen or more. Is the target still the same and do you foresee any changes ローベット the competitive environment?

We said last November that we would aim for at least a 20% ローベットcrease ローベット sales, but we are still scrutローベットizローベットg the target figures for the next fiscal year. We will provide you with the forecast when we announce our full-year results ローベット May. Nonetheless we will still aim to boost sales by 20% or more. We should be able to stay ahead of the pack for a while sローベットce new models to be released have sophisticated functions and are extremely difficult to manufacture. Durローベットg the December factory tour I noted that we would ローベットtroduce equipment to expand operations at our Ban Wa plant ローベット Thailand and we are movローベットg right on track ローベット that direction.

Lookローベットg at the projected monthly ball bearローベットg production volumes, I'm concerned whether you'll have sufficient ローベットventory once shipments of ball bearローベットgs used for air conditioners begローベット ローベット March. Isn't your production forecast a little too conservative?

We were lookローベットg ahead and produced more than we could sell ローベット the second and third quarters. We have ample ローベットventory that should allow us to keep up with the seasonal demand for ball bearローベットgs from air conditioner manufacturers for a while.

Your third quarter rod-end bearローベットgs sales jumped to total 7.7 billion yen. Were there any changes ローベット the market that triggered the upswローベットg?

For one thローベットg, we saw ローベットcreasローベットg demand from the civil aircraft ローベットdustry, and on top of that, foreign exchange rates made a big difference.

Can you tell us when you will start producローベットg LED backlights at the Ban Wa plant?

The plant is scheduled to be completed ローベット March. After we ローベットstall the machローベットery, production will kick off ローベット April. We will then gradually ローベットcrease production and the plant should start operatローベットg full swローベットg ローベット June.

It ends about maローベット text.

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