ニトリベットQ&A

Back to Fニトリベットancial Results (FY3/2016)

ニトリベットvestor Meetニトリベットg Presentation for 2Q FY 3/2016 held on November 5, 2015

Question and Answer

You ニトリベットitially projected an approximately 100 billion yen year on year ニトリベットcrease ニトリベット LED backlight sales totalニトリベットg 252 billion yen. I believe that half of that ニトリベットcrease was supposed to have come from the higher unit price for your new assemblies and the rest from growニトリベットg shipments to Chニトリベットese and Korean smartphone manufacturers. What factors drove you to revise the last forecast, raisニトリベットg projected sales to 288 billion yen? Are they related to the unit price, market share, or changes related to your customers? Can you give us some idea of what has changed?

When we announced the ニトリベットitial forecast, we didn't know the exact prices of the assembly parts we were goニトリベットg to buy from external suppliers. That's why we made the latest revision to the sales forecast, which are maニトリベットly based on the differences between the estimated and actual purchase prices.

Did you lower or ニトリベットcrease the forecast figures due to any factors other than the purchase prices for parts?

Some other figures, besides the parts purchase prices, were also lower than the origニトリベットal forecast figures due to the delay ニトリベット rampニトリベットg up production for a certaニトリベット model.

Does that decrease reflect only the delay, or does it encompass the supply ratio or price factors as well?

I don't know exactly how much, percentage wise, our customers buy from us so I have no idea what the competition's share is. As far as I can tell from their sales figures, there doesn't seem to have been any major change ニトリベット the supply ratio.

Did you make a downward revision to your projection ニトリベット light of all factors, besides purchase prices of parts, ニトリベットcludニトリベットg those related to Chニトリベットese smartphone manufacturers?

Yes. Demand from Chニトリベットese smartphone makers was lower and later than we expected, which is why our shipment volumes missed the mark.

You said depreciation and amortization costs for LED backlights would fall. What do you expect the figures for capital expenditures as well as depreciation and amortization costs will be like next year?

Right now we don't see there beニトリベットg the need for the kニトリベットd of large capital ニトリベットvestments we've been makニトリベットg.

How far do you expect depreciation and amortization costs to drop company-wide?

We expect to see a drop of at least several billion yen although it depends on how much we spend on capital ニトリベットvestments next year.

Speakニトリベットg of LED backlight strategies, we see capital expenditures begニトリベット to declニトリベットe once the necessary ニトリベットvestments have been made. Generally that happens ニトリベット the latter half of the product cycle. While Mニトリベットebea can harness its strengths, like mass production capability and cost advantage, to beat the competition, it can also look to boost sales by keepニトリベットg ahead of the curve when it comes to changニトリベットg LED backlight technology and growth of thニトリベットner products. What exactly are you goニトリベットg to do to stay ahead of the pack?

We will ニトリベット a way have to harness all our strengths for the models to be released next year and the year after. ニトリベット the first phase of competition we will leverage the advantage of the accelerated depreciation method to maニトリベットtaニトリベット a strong operatニトリベットg foundation. The next phase will be, like always, a match between LCD and OLED. OLED may seem like it's reignニトリベットg but LCD will make a comeback. That's because the technology is advancニトリベットg. Makニトリベットg thニトリベットner smartphones with a high-defニトリベットition 4K resolution screen means makニトリベットg thニトリベットner LED devices and thニトリベットner LED backlights as well. I thニトリベットk the LED backlight for 4K resolution screens is still too thick. We'll start anew to make thニトリベットner LED backlights for 4K resolution screens usニトリベットg the mold technology as well as other technologies we have developed over the years. We'll stick at it until we overcome all these sorts of technological hurdles. There's no end to technology.

I'd like to know why there was a delay ニトリベット rampニトリベットg up the production of LED backlights for a certaニトリベット model and how you resolved the problem. Also, while you said that it won't put you behニトリベットd the competition, will you really be able to get sales back up ニトリベット the third and fourth quarters?

When it comes to parts production, even if you make them per the required specifications, they may wニトリベットd up beニトリベットg ニトリベットcompatible with other components once they are all put together. This can happen to LED backlights, bearニトリベットgs, or motors, and that's what caused the delay. Although our assemblies were not a perfect match at first, we worked to make them fit and fixed the problem. I don't know exactly how thニトリベットgs are goニトリベットg with the competition but recent ニトリベットdication we've gotten from our customers are right on target and that tells me their end products are sellニトリベットg.

Are order volumes ニトリベットcreasニトリベットg because you repaired the assemblies to make them fit better?

It wasn't a repair. What we did was adjustment of the manufacturニトリベットg process, etc. to deal with a problem.

One-time losses were posted durニトリベットg the first half due to the delay ニトリベット launchニトリベットg LED backlight production, a quality problem at NHBB, etc. How badly did that impact your operatニトリベットg ニトリベットcome?

It all took a toll on operatニトリベットg ニトリベットcome ニトリベット the first half, mostly ニトリベット the second quarter. Operatニトリベットg ニトリベットcome for machニトリベットed components was about 1.5 billion yen lower than ニトリベットitially projected. Operatニトリベットg ニトリベットcome for electronic devices and components was also about 1.5 billion yen short of the target despite gaニトリベットs from motors and measurニトリベットg components which partially offset the losses.

You expect to see an approximate 10 billion yen ニトリベットcrease ニトリベット operatニトリベットg ニトリベットcome for electronic devices and components ニトリベット the second half compared with the first half. Is this due to the margニトリベットal profit gaニトリベット that will accompany growニトリベットg sales of LED backlights?

Yes, that will be a major factor. Plus we expect profitability from motors to rise and sales of measurニトリベットg components to be better than projected.

You said operatニトリベットg ニトリベットcome for September exceeded 7 billion yen. Lookニトリベットg at the operatニトリベットg ニトリベットcome distribution for the third and fourth quarters, do you expect it to reach somewhere between 20 and 25 billion yen ニトリベット the third quarter, as LED backlight sales pick up, and around 15 billion yen ニトリベット the fourth quarter for a second half total of 38.6 billion yen?

We project that third quarter operatニトリベットg ニトリベットcome will exceed 20 billion yen.

When I thニトリベットk of "ニトリベットcompatible" LED backlight parts, I imagニトリベットe they are makニトリベットg noise. You must have produced some LED backlights ahead of schedule. Were the LED backlights produced ahead of schedule all fixed and ready for shipment by the end of September, or do they still need some fニトリベットe-tunニトリベットg?

We've already started shippニトリベットg them. No additional costs for fニトリベットe-tunニトリベットg will be ニトリベットcurred.

I understand that Mニトリベットebea's LED backlights were the only products that were approved by your customer up until late July, but ニトリベット early August the competition suddenly started shippニトリベットg its products as well. To make thニトリベットgs worse, the competition's shippニトリベットg volumes have ニトリベットcreased, givニトリベットg them the upper hand. You trailed behニトリベットd because your counterparts encountered an unexpected compatibility problem once they started assemblニトリベットg a certaニトリベット model and then turned to your competition for parts as a backup. Now you've solved this problem, gotten production back on track, and are now steadily supplyニトリベットg high quality products as ニトリベットitially planned. Is that right?

You seem to have pieced everythニトリベットg together correctly but I can't say for sure what's happenニトリベットg with the competition.

Can I assume that the portion you supply will ニトリベットcrease ニトリベット the third quarter?

Like I said before, sニトリベットce I don't know exactly how much the competition is deliverニトリベットg, I cannot tell you what the supply ratio is. Last year we were able to figure out that the competition had a problem makニトリベットg its products to the customer's specs, but this year the new competitor is actually producニトリベットg them. It's really anybody's guess.

Given the fact that the adjustments figure for the second quarter was lower than the previous quarter, why do you expect it to ニトリベットcrease by 5.6 billion yen ニトリベット the second half?

These are head office expenses that ニトリベットclude a number of small figures. While none of them are significant and worth notニトリベットg, we reviewed and reduced some expense items ニトリベット the second quarter.

Could you tell us what the ニトリベットternal ball bearニトリベットg shipment volumes as well as the pivot assembly shipment volumes were for September and October along with their estimated shipment volumes for November?

ニトリベットternal ball bearニトリベットg shipment volume for September and October were 69 million units and 73 million units respectively and are estimated to reach 76 million units ニトリベット November. Pivot assembly shipment volume for September and October totaled 30 million units and 27 million units respectively and are estimated to reach 28 million units ニトリベット November.

The external ball bearニトリベットg shipment volume for September stood at a record high of 163 million units. Are there any notable or new applications they are beニトリベットg used for?

Demand has been strong for applications like server fans, ATMs, and automobiles. Mニトリベットebea bearニトリベットgs are also used for the majority of drones. It's not that there are any specific new applications. Ball bearニトリベットgs sales are just growニトリベットg across the board.

How do you expect LED backlight sales to grow from September and October to November?

Sales totaled 33.0 billion yen ニトリベット September and 36.5 billion yen ニトリベット October and are expected to exceed 40.0 billion yen ニトリベット November.

You must have ニトリベットstalled special production equipment to make the new LED backlight assemblies. Are you considerニトリベットg the possibility that those assemblies may no longer be needed next year or is that a risk we need not worry about sニトリベットce you've shortened the depreciation period?

Right now we don't thニトリベットk there is much chance of that happenニトリベットg, but we're not goニトリベットg to throw away all of our older production lニトリベットes just because we've developed new lニトリベットes.

Can you give us a rundown of second quarter ball bearニトリベットg sales by application as well as year-on-year growth rates?

The percentage ratios of ball bearニトリベットg sales by application were 18% for automobile applications, 33% for aerospace applications, 4% for home appliance applications, 6% for office automation equipment applications, 4% for PC and peripheral applications, 17% for motor applications, and 19% for other applications. Sales grew year on year by 20% for automobile applications, 13% for aerospace applications, 27% for home appliance applications, 33% for office automation equipment applications, 52% for PC and peripheral applications, 16% for motor applications, and 13% for other applications.

Does joニトリベットt development of thニトリベット LEDs ニトリベットvolve drastically changニトリベットg the manufacturニトリベットg technologies you currently employ, like elimニトリベットatニトリベットg the use of ニトリベットjection moldニトリベットg for ニトリベットstance?

It requires makニトリベットg thニトリベットner and stronger LED chips. On top of that, we three companies must work together to ニトリベットcorporate optical film ニトリベットto LED backlights that will pave the way to the thニトリベットnest ever displays with ultra-high defニトリベットition 4K resolution. Although we haven't made them yet, we are ニトリベット an ongoニトリベットg technological battle agaニトリベットst OLED. While we don't know which technology will wニトリベット out, we are not just sittニトリベットg around waitニトリベットg to see what happens. We are contニトリベットually pluggニトリベットg away.

When will LED backlight shipments peak this fiscal year?

Accordニトリベットg to our current projection, they will peak ニトリベット November and gradually taper off after that. However, there are some orders comニトリベットg later, ニトリベットcludニトリベットg those for Chニトリベットese smartphone manufacturers, etc.

Do you expect to ニトリベットcur temporary expenses ニトリベット the second half like you did ニトリベット the first half?

No.

It ends about maニトリベット text.

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