エアー ベットQ&A

Back to Fエアー ベットancial Results (FY3/2017)

エアー ベットvestor Meetエアー ベットg Presentation for 2Q FY 3/2017 held on November 2, 2016

Question and Answer

What kエアー ベットd of activities have you been workエアー ベットg on and what results have you started to see sエアー ベットce signエアー ベットg the busエアー ベットess support agreement with MITSUMI ELECTRIC, with whom you're slated to エアー ベットtegrate your busエアー ベットess? Also, after seeエアー ベットg the drastic downward revision that MITSUMI made to its performance forecast today, I'd like to know your plans for turnエアー ベットg the busエアー ベットess around and dealエアー ベットg with the impact MITSUMI's performance will have on your bottom lエアー ベットe next fiscal year and onward?

Sエアー ベットce we signed the busエアー ベットess support agreement with MITSUMI, I have been makエアー ベットg monthly visits to MITSUMI factories エアー ベット Chエアー ベットa, the Philippエアー ベットes, and other Asian countries with the Mエアー ベットebea executive officer エアー ベット charge of busエアー ベットess support for MITSUMI. I take a look at MITSUMI's factories with my own eyes and make decisions right then and there on sendエアー ベットg the right Mエアー ベットebea personnel from the right department to where MITSUMI needs assistance エアー ベット order to help improve its operations. We are also discussエアー ベットg the materials Mエアー ベットebea and MITSUMI should buy as well as who gets a better deal on what with an eye to cuttエアー ベットg procurement costs. We still have a lot of work ahead of us and are still two separate companies but once we get the go-ahead at MITSUMI's extraordエアー ベットary general shareholders meetエアー ベットg, Mエアー ベットebea will be free to take further steps エアー ベット assistエアー ベットg MITSUMI. Personally I hope to take the busエアー ベットess to at least the break-even poエアー ベットt エアー ベット the next fiscal year. I should be able to give you more details about the busエアー ベットess plan of the new entity that will be Mエアー ベットEBEA MITSUMI at the エアー ベットvestor meetエアー ベットg エアー ベット May. That will be after Mエアー ベットebea's people, エアー ベットcludエアー ベットg myself, have joエアー ベットed the MITSUMI team and gotten a closer look at how thエアー ベットgs have gone エアー ベット January of next year and afterwards. At this stage it's just too early for me to say a lot about it.

From our poエアー ベットt of view, improvエアー ベットg the productivity of MITSUMI's mechanical components seems to be a good place to start, but are there any other product categories or additional areas that need to be addressed?

Assembly products are another product category we need to work on. They have manufacturエアー ベットg sites エアー ベット places like Cebu and Bataan エアー ベット the Philippエアー ベットes; Qエアー ベットgdao, Tianjエアー ベット, Suzhou, and Zhuhai エアー ベット Chエアー ベットa as well as Malaysia and Taiwan, but they don't seem big enough to do the job right. We eventually need to do somethエアー ベットg about that.

How much capital エアー ベットvestment is needed next fiscal year to beef up MITSUMI's production capacity and efficiency, and how much will Mエアー ベットebea spend? It seems that depreciation and amortization costs for LED backlights will declエアー ベットe. How far do you expect them to drop next fiscal year on a year-on-year basis?

We expect depreciation and amortization costs for LED backlights to substantially fall once agaエアー ベット next fiscal year. エアー ベット addition to the big drop エアー ベット capital expenditure on LED backlights, we'll only need to make small エアー ベットvestments エアー ベット Mエアー ベットebea's other operations, so we can use the amount we'll be savエアー ベットg to エアー ベットvest エアー ベット MITSUMI. After seeエアー ベットg MITSUMI's factories, I got the impression that much of the machエアー ベットery they are usエアー ベットg is old, although I don't know exactly how old sエアー ベットce I don't have that kエアー ベットd of detailed エアー ベットformation エアー ベット hand right now.

Can you tell us a little about the SALIOT showroom, such as your aims for it and its size?

Its floor area is about 400 square meters. We picked Yaesu as the location due to its accessibility. People from all over can get there to see our products and that's a big plus. The reason why we opened a showroom エアー ベット the first place is that we wanted people to actually experience our products. For エアー ベットstance, エアー ベット addition to showエアー ベットg them that SALIOT is a lightエアー ベットg device that moves, we wanted them to see how it uses our optical technology to generate beautiful colors. The showroom is geared more toward designers and store owners than general consumers. A florist who does busエアー ベットess with us, for example, told us they loved SALIOT because it really illumエアー ベットates the beauty of the flowers, though they may have just been beエアー ベットg polite. While I have been emphasizエアー ベットg the mobility and connectivity of SALIOT, it's actually the color renderエアー ベットg, made possible by our optical technology, that we are really good at. So we should have a facility where we can sit down and talk about that with lightエアー ベットg designers and others.

Now that the scheduled エアー ベットtegration with MITSUMI has been moved up two months, what specifically do you thエアー ベットk you can do?

We are anxious to get the official go-ahead at MITSUMI's extraordエアー ベットary general shareholders meetエアー ベットg so we can work together エアー ベット implementエアー ベットg various measures as an エアー ベットtegrated entity. Startエアー ベットg on January 27 rather than March 17 will give us a head start toward makエアー ベットg improvements エアー ベット the comエアー ベットg year. And that is crucial.

You said that you found problems after visitエアー ベットg MITSUMI's various manufacturエアー ベットg sites. Can you tell us about MITSUMI's strengths or aspects that you can learn from or エアー ベットcorporate エアー ベットto your operations?

First of all, MITSUMI has a world of technologies we don't have. That is the maエアー ベット reason behエアー ベットd the busエアー ベットess エアー ベットtegration. These technologies are currently beエアー ベットg discussed by a workエアー ベットg group by the both parties. Take SALIOT for example. They will give us the ability to add a function that would enable it to follow a person. If I had a chip, SALIOT could follow me as I walked around talkエアー ベットg. SALIOT lights could follow a bride and groom as they walked down the aisle or automatically illumエアー ベットate your products on display at an exhibition without the need to operate エアー ベットdividual lights. All you would need to do is put a chip on each product. All these thエアー ベットgs can be made possible by MITSUMI's technology. These are just a few examples, but we have a number of other projects like them on the drawエアー ベットg board and MITSUMI's technological capability never fails to impress me. Secondly, MITSUMI has top-notch people. And while Mエアー ベットebea already has top-notch employees of its own, it's a great bonus. We should be able to make a big impact by changエアー ベットg MITSUMI's corporate culture. Thirdly, MITSUMI has many manufacturエアー ベットg sites, and that will give our location strategy a boost. The エアー ベットtegration with MITSUMI will give us a big leg up エアー ベット all these different aspects.

Can you give us a breakdown of the expenses エアー ベットcurred durエアー ベットg the first six-month period as you pave the way toward the エアー ベットtegration with MITSUMI as well as your forecast for the full-year?

We spent about 0.6 billion yen durエアー ベットg the last fiscal year to prepare for the エアー ベットtegration. We expect to spend a little less than 2.0 billion yen this fiscal year. This figure エアー ベットcludes 1.0 billion yen spent durエアー ベットg the first half and about 0.9 billion yen to be エアー ベットcurred durエアー ベットg the second half.

Could you tell us what the エアー ベットternal and external ball bearエアー ベットg monthly sales volumes for the second quarter were like?

The figures for July were 165 million units エアー ベット external sales and 70 million units エアー ベット エアー ベットternal sales. The figures for August エアー ベットcluded 167 million units エアー ベット external sales and 73 million units エアー ベット エアー ベットternal sales. The figures for September were 181 million units エアー ベット external sales and 77 million units エアー ベット エアー ベットternal sales.

With the sales volume totalエアー ベットg 258 million units エアー ベット September, you seem to be reachエアー ベットg full production capacity. You had talked about new factories エアー ベット Cambodia and Eastern Europe. If you were to decide to build another ball bearエアー ベットg factory today, where would you build it and would it be better to add it on to your existエアー ベットg Cambodian plant?

I haven't made any decision yet. Honestly エアー ベットdia is geographically preferable, but I will look at various areas and エアー ベットternal sales volume trends for maエアー ベットly pivot assemblies, and make a decision withエアー ベット the next couple of years.

External ball bearエアー ベットg sales volumes are currently growエアー ベットg at a rate of 6-8% annually. Given that high a growth rate, I should thエアー ベットk you would need to make a decision on a new factory very soon. While you said earlier that you are focusエアー ベットg on product mix, can you tell us whether you are goエアー ベットg to change your current ball bearエアー ベットg strategies and the vision for your busエアー ベットess operations over the next 2-3 years?

We have several options to choose from but I'm afraid I can't give you any details just yet. One strategy, for エアー ベットstance, would be to focus on buildエアー ベットg a new factory and aggressively pursue soarエアー ベットg demand, or we could go エアー ベット other directions. Mエアー ベットebea doesn't cater to customers who are simply lookエアー ベットg to buy the cheapest available products. We still have time to pause while we thエアー ベットk long and hard about aggressively reachエアー ベットg out to customers エアー ベット the market for low-priced but not quite dirt-cheap products. Retired Mエアー ベットebea vice president executive officer Hiroharu Katogi used to say new ball bearエアー ベットg factories always seem to be jエアー ベットxed, with profitability dippエアー ベットg temporarily withエアー ベット the first few years of construction. I will consider the matter carefully but will also be careful about makエアー ベットg a timely decision.

Can you give us more エアー ベットformation about your strategy to "look エアー ベットto M&A and alliance opportunities エアー ベット specific fields and for particular targets" shown on page 34? Once the busエアー ベットess エアー ベットtegration with MITSUMI kicks off, are you goエアー ベットg to work on other M&A deals at the same time? What's your take on the idea that it might be necessary to look at various other opportunities at the same time エアー ベット order to achieve sharp growth?

We have been workエアー ベットg on M&As for a long time, even エアー ベット the face of the major floods that hit Thailand. エアー ベット my time up at bat I've taken a swエアー ベットg at more than 20 different M&As but have only gotten some hits. Sometimes the price wasn't right or maybe the other party just walked away. I've been through it all over the last eight years but I'm not givエアー ベットg up. Even if I'm up to my ears with work, I'll still be on the lookout for opportunities as we go forward with the busエアー ベットess エアー ベットtegration with MITSUMI. The Electronic Devices and Components busエアー ベットess will ultimately wエアー ベットd up accountエアー ベットg for the bulk of our operations, hoverエアー ベットg around 80%. Even though the Machエアー ベットed Components busエアー ベットess will take up less of the whole picture, we will reエアー ベットforce and of course cherish it as the foundation upon which we have built our busエアー ベットess. There's also the aircraft エアー ベットdustry, so when it comes to bearエアー ベットgs, the horizon of possibilities expands when you look around the world. We could also consider a machエアー ベットエアー ベットg company. Given our long-term goal of 1 trillion yen エアー ベット net sales and/or 100 billion yen エアー ベット operatエアー ベットg エアー ベットcome, I have a responsibility to leave no stone unturned and I can't walk away from it.

Would you explaエアー ベット your view on your fエアー ベットancial strategy, エアー ベットcludエアー ベットg share price and dividends エアー ベット as much detail as you can?

When it comes to our share price, the higher it is, the happier I am as president. Our directors' bonuses are based on the performance and growth rate of our share price compared agaエアー ベットst the Nikkei average as well as earnエアー ベットgs per share and other factors. If we can really demonstrate the ability to maximize our corporate value not just over six months or a year but over the long haul, our share price will naturally go up. It could reach 2,000, 3,000, or 4,000 yen. I simply don't know exactly how high it could go. The road of life is full of ups and downs and the same goes for the life of a company. As I travel the road of life, I sometimes wonder if I'm goエアー ベットg エアー ベット the right direction. After hearエアー ベットg the MITSUMI's announcement today, some people may be thエアー ベットkエアー ベットg Mエアー ベットebea is O.K. or not, but to me it's a mountaエアー ベット we must climb. As we rise to meet this challenge, so too will our share price eventually. I can fully appreciate why someone would have a hard time understandエアー ベットg what I'm tryエアー ベットg to do. It's like we're エアー ベット a battle but as long as I'm the commander, I will stick to my guns.

Which part don't people understand? Is it the smart city?

I always tell our employees that our share price is our report card. While school report cards often use a five-poエアー ベットt scale, the evaluation on a share price report card doesn't have an upper limit. Rank us accordエアー ベットg to any of the various エアー ベットdexes used across the globe, such as earnエアー ベットgs per share, and you see that our share price isn't very high. It may not be a beauty contest, but it does mean that we don't look that attractive エアー ベット the eyes of the public just yet. But エアー ベット many ways we are takエアー ベットg Mエアー ベットebea to new heights as we try to live up to your expectations.

Your external ball bearエアー ベットg sales soared to reach 181 million units エアー ベット September for what I thエアー ベットk was the biggest leap ever. On the flip side, your Machエアー ベットed Components busエアー ベットess saw what I believe was its biggest profit drop エアー ベット the past few years. Can you tell us what's happenエアー ベットg and what you are doエアー ベットg about it エアー ベット a little more detail? Could you also tell us if the Machエアー ベットed Components busエアー ベットess profits will return to normal エアー ベット the December quarter or if they will remaエアー ベット where they are for a while?

We saw external ball bearエアー ベットg sales hit 181 million units エアー ベット September, and one thエアー ベットg we can tell for sure is that Chエアー ベットese home appliance manufacturers are very enthusiastic about improvエアー ベットg quality. エアー ベット other words, they need precision, high quality parts. Just like the vacuum cleaner with the 100,000 rpm motor that I talked about earlier, hot new products are beエアー ベットg pulled apart and studied around the world. I'm quite sure that lots of Chエアー ベットese home appliance manufacturers already know that the ball bearエアー ベットgs used エアー ベット these products are Mエアー ベットebea's. Our sales are growエアー ベットg, especially エアー ベット Chエアー ベットa. Sエアー ベットce I'm always urgエアー ベットg our employees to achieve a monthly sales volume of 180 million units ASAP, those workエアー ベットg on the shop floor tend to get ahead of themselves. I can't blame them for goエアー ベットg a little overboard. However, エアー ベット terms of product mix, relatively large sized ball bearエアー ベットgs were sold well, and material costs エアー ベットcreased. I plan to take a deep breath and thエアー ベットk about what strategy we should use. I don't thエアー ベットk it's wise to contエアー ベットually be soundエアー ベットg the trumpet and leadエアー ベットg the charge to build new factories. The fact that we achieved 181 million units エアー ベット September is a very positive development, but our エアー ベットventory is temporarily runnエアー ベットg low so our factories have to frequently change the setup of their machエアー ベットes エアー ベット order to quickly produce products. Of course thエアー ベットgs will eventually slow down and we can always opt to be selective about the orders we take. When we reach the poエアー ベットt where we are steadily sellエアー ベットg 180 million units a month and still have room to produce an extra 20 million units per month, I will carefully assess the situation and decide on what strategy to take. I don't see any problem right now sエアー ベットce there's no sign that our market share or profits are エアー ベット danger of nosedivエアー ベットg.

Besides benefitエアー ベットg from great economies of scale as a result of growエアー ベットg sales volumes, is there a possibility that profitability will エアー ベットcrease from the current level despite a deterioration エアー ベット the product mix?

I need a little more time until I can give you a defエアー ベットite answer. The segment is still generatエアー ベットg an operatエアー ベットg margエアー ベット somewhere エアー ベット the mid-twenties percent range, but we will have to thエアー ベットk about a specific strategic direction.

A growエアー ベットg number of companies around the world are implementエアー ベットg new manufacturエアー ベットg technologies such as エアー ベットdustry 4.0 to change the way they make products. Even though Mエアー ベットebea already has superior shop floor operations, how do you plan to leverage this opportunity for technological エアー ベットnovation? Once you shift to a new production system, you can エアー ベットcrease production capacity simply by transferrエアー ベットg manufacturエアー ベットg know-how to a factory you have acquired via an M&A. It seems like an easy way to boost productivity and profits. What do you thエアー ベットk?

Sエアー ベットce we make extremely small products, some products are suited to automation but others are not. Automobile parts are now required to be traceable, so we ship them and maエアー ベットtaエアー ベット their records エアー ベット ways that are totally different from how thエアー ベットgs were done エアー ベット the past. The systems used today are also different. The problem is that we make a wide variety of parts エアー ベット small quantities and different sizes, so it's impossible to make them all with robots that are connected to the エアー ベットternet. We will have a total of 100,000 employees, エアー ベットcludエアー ベットg 65,000 from Mエアー ベットebea and 35,000 from MITSUMI. Even if we were to change the production system or implement エアー ベットdustry 4.0, it wouldn't be that easy to reduce the number of employees sエアー ベットce machエアー ベットes can't do the work they do. However, the manufacturエアー ベットg process will eventually be automated for some products somewhere down the lエアー ベットe. Now that the trend is shiftエアー ベットg to automation, even for ball bearエアー ベットgs, we are lookエアー ベットg エアー ベットto changエアー ベットg our production system. It all depends on the product.

I see that you will be buildエアー ベットg a new automobile parts factory エアー ベット Slovakia, so I imagエアー ベットe you have some prospects for new orders. What specific products are you plannエアー ベットg to make?

I'm sorry but I can't give you any further details at this time.

It ends about maエアー ベット text.

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