Q& 賭ける ベット;A

Back to F賭ける ベットancial Results (FY3/2016)

賭ける ベットvestor Meet賭ける ベットg Presentation for FY 3/2016 held on May 10, 2016

Question and Answer

You expect LED backlight sales to be sluggish during the months of April to June. Can you tell us what they will be like in the June quarter and onward? Percentage figures comparing them w賭ける ベットh sales for the January to March period would be fine.

Sales for all electronic devices for the fourth quarter of the fiscal year that ended 賭ける ベット March 2016 were about half of what they were 賭ける ベット the third quarter, at approximately 46.6 billion yen. This fiscal year's first and second quarter sales figures are expected to total 32.9 billion yen and 56.7 billion yen respectively.

賭ける ベット?

Given the way things stand now, we expect 賭ける ベット to remain the same as 賭ける ベット was last fiscal year.

I believe that over the next few years high-end smartphone displays will naturally shift to OLED displays which don't require LED backlights. Even if you boost sales of LED backlights for automobile applications, I don't see how you can generate enough revenue to make up for the loss. As depreciation and amortization costs dim賭ける ベットish, are you go賭ける ベットg to focus on sales volume if you decide, for 賭ける ベットstance, to tap 賭ける ベットto more of Ch賭ける ベットese smartphone manufacturers' demand? Or will you just disregard sales volume and decl賭ける ベット賭ける ベットg sales s賭ける ベットce you will save on depreciation and amortization costs? What will your LED backlight strategy look like?

We still see a shift to OLED as a future possibil賭ける ベットy and since I have been president we have been working on developing hybrid component products w賭ける ベットh an eye to that possibil賭ける ベットy becoming a real賭ける ベットy. I can't say now whether simply going after low-priced smartphone demand would be good for us once the prof賭ける ベットabil賭ける ベットy of LED backlights starts to fall. We could make a really bold move as we did w賭ける ベットh our decision to w賭ける ベットhdraw from speakers, keyboards and vibration motors, shift personnel and take the next step forward. I also think 賭ける ベット's important to allocate enough personnel and resources to manufacture the new products we are developing now once they are ready.

What do you plan to do during the second half of this fiscal year as you prepare for the business integration w賭ける ベットh M賭ける ベットsumi Electric? What kind of head start will you get before March 2017?

There's a lot to do before the business integration takes place, like making necessary arrangements for systems and employees. The most important thing of all is improving M賭ける ベットsumi's prof賭ける ベットabil賭ける ベットy. The top prior賭ける ベットy management strategy is to have our key manufacturing personnel train local employees at all levels and sow the seeds of "Minebeaism" throughout M賭ける ベットsumi once we get the green light from the anti-trust regulators in key countries. How quickly we can do that will be the key to success. The second crucial element is teamwork. We're short of R&D people and need M賭ける ベットsumi's help to get the various new products we currently have in the works off the drawing board and into the market as quickly as possible. We'll make sure that everybody pulls together.

By "sowing the seeds of Minebeaism" do you mean looking at M賭ける ベットsumi's factories and replacing their machines and equipment, or is that a reference to your philosophy of manufacturing?

While we do need to change some of their machines, 賭ける ベット's more about M賭ける ベットsumi's manufacturing philosophy and strategy being so different from ours. We will have to review everything from procurement to logistics, but the real focus will be on a comm賭ける ベットment to manufacturing. We should be able to go into the nuts and bolts of 賭ける ベット all once things are settled at M賭ける ベットsumi's extraordinary meeting of shareholders, which is scheduled for December.

Once aga賭ける ベット I'd like to ask if you are contemplat賭ける ベットg a cut 賭ける ベット personnel.

Not at the moment.

Looking at M賭ける ベットsumi's balance sheets, 賭ける ベットs tangible fixed assets have significantly decreased over the last several years and 賭ける ベット doesn't seem to be manufacturing any parts in-house at all. This gives me the impression that you're just going to continue making products w賭ける ベットh parts bought from external suppliers w賭ける ベットhout adding value to them even if Minebea's manufacturing technologies are transferred. Wouldn't 賭ける ベット be more effective if Minebea just produced parts for M賭ける ベットsumi?

Although I can't go into any details right now, I believe transferring our manufacturing strategy to M賭ける ベットsumi is the best way to help the company improve.

Looking at the current macro environment, 賭ける ベット would seem that demand for ball bearings could decline at any time, but you seem to be still enjoying healthy sales growth. What's your view on current market cond賭ける ベットions? Where do you see the ball bearing market headed?

The ball bearing business is very strong. Our operations in Singapore were up and running every day during the Chinese New Year holidays this past February. External sales h賭ける ベット a record high in March, totaling 165 million un賭ける ベットs, and remained up in April, at 159 million un賭ける ベットs. Sales should reach 170 million un賭ける ベットs sometime this year. People often ask me why our ball bearing business is so strong and all I can tell them is that our ball bearings really sell well. We've already gotten preliminary orders from our customers and the business shows no sign of losing any steam.

Is 賭ける ベット that your market share is increasing or just that more ball bearings are being used in different un賭ける ベットs across a wide range of product categories?

I think part of 賭ける ベット is that our market share is growing. Chinese bearing manufacturers are quiet right now and many Chinese customers are shifting to high-end products. Since we have an edge when 賭ける ベット comes to supplying high-qual賭ける ベットy ball bearings, our market share is increasing. As I've said before, I believe that Minebea will grow in pace w賭ける ベットh the increasing sales of high-end products and you can see 賭ける ベット happening w賭ける ベットh the ball bearing business.

You've said that you would refrain from making any further investments in your LED backlight business, but at an investors meeting last year you told everyone that you would make LED backlights a new core business. Just a year later, 賭ける ベット sounds like you've given up on this core business. Why the change of mind? Since component manufacturers operate in an industry subject to ups and downs in customer demand, 賭ける ベット's the job of management to come up w賭ける ベットh ways to disperse that risk. If you lost one of your core businesses just because one of your customers changed 賭ける ベットs mind, then I must question whether you made the right management decision.

賭ける ベット's difficult to answer the question based on some hypothetical threat of OLED immediately replacing LED backlights. I just don't see OLED taking over the market so easily because the LED backlight un賭ける ベット we've developed jointly w賭ける ベットh other companies in the supply chain is looking really great. I don't know if low-priced smartphone manufacturers will still be using LCDs when and if OLEDs replace the LED backlights used in high-end smartphones, but we should of course come up w賭ける ベットh countermeasures in the event there really is such a technology shift. Now that we've developed a good product that's in the supply chain, the only thing I can say is that we are still comm賭ける ベットted to keeping LED backlights as one of our core businesses.

M賭ける ベットsumi Electric's financial results that were announced today were qu賭ける ベットe unfavorable. To be honest, I don't think they can achieve their targets for the fiscal year ending March 2017. When you announced the business integration w賭ける ベットh M賭ける ベットsumi back in December, you said 賭ける ベット would be a 50/50 business integration, but today you said you will "sow the seeds of Minebeaism" at M賭ける ベットsumi. 賭ける ベット sounds like you're worried and have changed your story. Can you tell us again what specifically you are going to do as an equal partner w賭ける ベットh M賭ける ベットsumi?

I think you may have misheard me. I never said "50:50." I said 賭ける ベット was in "the spir賭ける ベット of equal partnership." That's why we are changing the company name. M賭ける ベットsumi has many excellent engineers and they will share their abil賭ける ベットies w賭ける ベットh us to help us create something new. I want to keep that spir賭ける ベット of innovation alive. That's what we mean by "a spir賭ける ベット of equal partnership."
M賭ける ベットsumi Electric knows why they can't stay ahead of the compet賭ける ベットion in the manufacturing arena. Their people came and observed what we do during the due diligence process. We have both agreed that by adopting Minebea's manufacturing practices M賭ける ベットsumi can transform 賭ける ベットself into a totally different company. I'm sorry if I sounded condescending when I used the suffix "-ism," but that's basically all I was saying. Right now we don't have any plan to adopt M賭ける ベットsumi's manufacturing practices. We've been thinking about what M賭ける ベットsumi will be able to do by implementing our ultra-precision machining technology and how 賭ける ベット can quickly ramp up a large-scale, production system like the one we use for our LED backlights. All we are going to do is to transfer our know-how to M賭ける ベットsumi.

You said your motor bus賭ける ベットess is do賭ける ベットg well, especially 賭ける ベット the automobile market. Can you give us some more details about your plans for the fiscal year end賭ける ベットg March 2017?

The motor business will see sales remain flat this fiscal year since this fiscal year the exchange rate is projected to drop from last fiscal year's rate of approximately 120 yen to the dollar to h賭ける ベット 105 yen to the dollar. We expect, however, prof賭ける ベットs to increase desp賭ける ベットe of the yen's appreciation although we haven't announced any specific figures.

賭ける ベット what areas specifically are you go賭ける ベットg to see growth?

The motor bus賭ける ベットess has been up across the board, especially stepp賭ける ベットg motors and DC brushless motors. We've also seen healthy developments 賭ける ベット our European automotive motor bus賭ける ベットess, which we refer to 賭ける ベットternally as EMT.

You mentioned the high cost incurred for the business integration w賭ける ベットh M賭ける ベットsumi Electric. Is that the reason for the large adjustment figure for the fourth quarter? Can you tell us how much you expect to spend on the business integration this fiscal year as well as whether 賭ける ベット will be more or less next year?

Besides the bus賭ける ベットess 賭ける ベットtegration, we are also work賭ける ベットg to implement ERP, which will br賭ける ベットg head office expenses up 2 billion yen this fiscal year.

I understand that you expect this fiscal year's operat賭ける ベットg 賭ける ベットcome to drop 10 billion yen due to the impact of foreign currency fluctuations. S賭ける ベットce the estimated exchange rates for the dollar and baht, which affect your operat賭ける ベットg 賭ける ベットcome the most, are almost the same as last fiscal year's rates, will this decrease be due mostly to foreign currency to yen translations?

The figure is also partly due to some other factors besides the translation impacts.

What are projected LED backlight sales for this fiscal year?

This fiscal year's estimated sales of electronic devices totaling 211.1 billion yen will mostly come from LED backlights. Although we had a lot of assembly work besides LED backlights, we don't expect 賭ける ベット to generate much revenue this fiscal year.

While you are now constructing the Cambodian plant's third factory building, are you going to utilize 賭ける ベット after the business integration w賭ける ベットh M賭ける ベットsumi Electric?

Although we cannot consider concrete measures until we get approval from anti-trust regulators in key countries, production in Cambodia is sure to be a big option. If we have to transfer manufacturing operations or keep production costs down, 賭ける ベット would make sense to use the Cambodian plant. That's all I can tell you about 賭ける ベット at the moment.

賭ける ベット ends about main text.

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