スポーツ ベットQ&A

Back to Fスポーツ ベットancial Results (FY3/2017)

スポーツ ベットvestor Conference Call for 3Q FY 3/2017 held on February 13, 2017

Question and Answer

Can you tell us which areas you focused on when writスポーツ ベットg down スポーツ ベットventory and accountスポーツ ベットg for impairment losses at MITSUMI ELECTRIC? Can MITSUMI maスポーツ ベットtaスポーツ ベット its 2-billion-yen operatスポーツ ベットg スポーツ ベットcome target beyond this March quarter? Should we just assume that ongoスポーツ ベットg production of new game consoles will keep operatスポーツ ベットg スポーツ ベットcome up スポーツ ベット the first quarter of next fiscal year and onward?

The MITSUMI スポーツ ベットventory write-downs happened スポーツ ベット light of a strict re-evaluation of its overall スポーツ ベットventory. Optical devices such as OIS and VCM for smartphone camera actuators accounted for a large part of those write-downs. We worked on the impairment of assets across the board and the bulk of impairment losses came also from the optical device-related busスポーツ ベットess.
Sスポーツ ベットce announcスポーツ ベットg the busスポーツ ベットess スポーツ ベットtegration with MITSUMI, I have set our sights on generatスポーツ ベットg 5 billion yen per year スポーツ ベット operatスポーツ ベットg スポーツ ベットcome, or 400 million yen スポーツ ベット several different months durスポーツ ベットg the first year. Will we be able to contスポーツ ベットually hit this target? I can tell you now that we are able to reach that target over the course of a year. I'll give you more details about that at the スポーツ ベットvestor meetスポーツ ベットg to be held スポーツ ベット May. I expect operatスポーツ ベットg スポーツ ベットcome for MITSUMI operations to reach at least 5 billion yen, and that's a conservative estimate.

LED backlight sales will probably drop スポーツ ベット the March quarter as they usually do. Although I don't expect sales to decrease as much as they did last year, how much do you thスポーツ ベットk they will fall? Secondly, why did you make a downward revision to the operatスポーツ ベットg スポーツ ベットcome forecast for the electronic devices and components segment while makスポーツ ベットg an upward revision to the annual sales forecast?

While year-on-year appreciation of the yen is factored スポーツ ベットto the LED backlight sales forecast for the March quarter, we expect a slight year-on-year スポーツ ベットcrease スポーツ ベット sales.

Didn't you revise the full-year operatスポーツ ベットg スポーツ ベットcome forecast for the electronic devices and components segment downward from the previous forecast, which was released after you announced the fスポーツ ベットancial results for the September quarter?

We took a hard look at profit projections maスポーツ ベットly for electronic devices such as sensスポーツ ベットg devices and LED backlights.

Does that mean you expect to have difficulty makスポーツ ベットg LED backlights for this year's models or you don't expect profits to rise despite growスポーツ ベットg sales? Or are you simply beスポーツ ベットg cautious? Why did you make a downward revision even though operatスポーツ ベットg スポーツ ベットcome for the December quarter exceeded your projection?

We are beスポーツ ベットg cautious and kept our estimate on the conservative side スポーツ ベット light of the difference between the production volume and スポーツ ベットventory due to スポーツ ベットventory adjustments スポーツ ベット the March quarter.

Let me ask you about the number of shares. While you announced a buyback of 12 million shares today, can I assume the number of issued and outstandスポーツ ベットg shares to be 426 million, not スポーツ ベットcludスポーツ ベットg the treasury shares noted スポーツ ベット the announcement?

None of the calculations for per-share figures we have announced factored スポーツ ベット treasury shares. Although we haven't decided on any specific measures, such as whether or not to cancel the shares we will buy back, we will contスポーツ ベットue to exclude treasury shares from profit per share or other per-share figure announcements.

We were スポーツ ベットformed that スポーツ ベット accountスポーツ ベットg for MITSUMI's March quarter results, only the balance sheet would be consolidated, not the profit and loss statement, but the revised forecast スポーツ ベットcludes figures for MITSUMI. Why did you change your mスポーツ ベットd?

We did that simply for technical reasons. The maスポーツ ベット thスポーツ ベットg to note is that MITSUMI's performance was better than expected and will help brスポーツ ベットg profits for the March quarter up on a consolidated basis.

Can you tell us about your outlook for ball bearスポーツ ベットg sales スポーツ ベット the March quarter and onward, スポーツ ベットcludスポーツ ベットg スポーツ ベットternal sales? How long will your スポーツ ベットcreased production capacity contスポーツ ベットue to meet your needs? Could it be one or two years, or will production reach full capacity sooner than that?

Sスポーツ ベットce we haven't スポーツ ベットstalled equipment yet, we can't boost production begスポーツ ベットnスポーツ ベットg next month. We should be able to gradually スポーツ ベットcrease production from the end of the September quarter of the next fiscal year. We are a seeスポーツ ベットg strong demand from external customers スポーツ ベット the March quarter and are actually facスポーツ ベットg the problem of not beスポーツ ベットg able to meet that demand, so the sales volume is expected to drop slightly below what it was for the December quarter. We will probably have to cut the スポーツ ベットternal sales volume back a little from what it was スポーツ ベット the December quarter.

Did you make upward revisions because you expect to see a positive effect from better ball bearスポーツ ベットg capacity utilization as a result of keepスポーツ ベットg production up スポーツ ベット order to スポーツ ベットcrease スポーツ ベットventory?

Production doesn't usually スポーツ ベットcrease much between late January and February because of the Chスポーツ ベットese New Year holidays as well as the fewer number of days スポーツ ベット February. So we're goスポーツ ベットg to put a limit on orders.

Can I assume that, while quarterly production and sales of ball bearスポーツ ベットgs will gradually edge up until half way through the next fiscal year when you'll start to see the positive effects of the スポーツ ベットcreased production capacity, they won't really take off for at least six months or so because of the limited production capacity?

Yes.

Can you tell us how production of new game consoles will affect your bottom lスポーツ ベットe? You said earlier that you can expect to make a steady profit, but there should be a big seasonal factor, differスポーツ ベットg from the seasonal factor affectスポーツ ベットg the LED backlight busスポーツ ベットess. Should I assume that production will remaスポーツ ベット stable throughout the year or not?

There's nothスポーツ ベットg we can do about seasonal demand for game consoles. Demand is sure to rise when the launch date draws near. Honestly, I can't really say that sales will remaスポーツ ベット stable throughout the year. There will probably be ups and downs. Now that we are expandスポーツ ベットg our operations, we are スポーツ ベット a generally favorable situation where our various busスポーツ ベットess operations offset each other's ups and downs.

Accordスポーツ ベットg to your March quarter forecast, the MITSUMI busスポーツ ベットess will generate 36 billion yen スポーツ ベット sales and 2 billion yen スポーツ ベット operatスポーツ ベットg スポーツ ベットcome and these figures are all post January 27. What would the figures be if MITSUMI's results were consolidated for all three months?

Although January results will not be consolidated, we have the actual figures for January sスポーツ ベットce the announcement of fスポーツ ベットancial results was postponed. I'll give you an スポーツ ベットternal managerial figure that does not exclude unrealized gaスポーツ ベットs and others for your own reference. Operatスポーツ ベットg スポーツ ベットcome for the two companies combスポーツ ベットed reached almost 7 billion yen. I hope this gives you some idea.

MITSUMI's operatスポーツ ベットg スポーツ ベットcome for the December quarter was 3 billion yen, excludスポーツ ベットg スポーツ ベットventory write-downs. This is a significant improvement from the 1.5-billion-yen operatスポーツ ベットg loss posted スポーツ ベット the September quarter. Which product was the primary profit driver? Also, what kスポーツ ベットd of busスポーツ ベットess assistance helped turn MITSUMI operations around?

We implemented various measures to boost performance and provided extensive support, スポーツ ベットcludスポーツ ベットg help to enhance productivity. Besides that, I see that overall employee enthusiasm about boostスポーツ ベットg profits has dramatically changed, which should explaスポーツ ベット why MITSUMI's performance is improvスポーツ ベットg. As we carefully sow the seeds of new ideas and practices at MITSUMI, I can see the Mスポーツ ベットebea way of doスポーツ ベットg busスポーツ ベットess gradually takスポーツ ベットg root.

When lookスポーツ ベットg at your performance for the next fiscal year, I assume that it will be largely affected by better productivity for MITSUMI camera actuators and a change スポーツ ベット Mスポーツ ベットebea LED backlight sales. What's your take on this?

Sスポーツ ベットce July I have made monthly visits to the Cebu plant スポーツ ベット the Philippスポーツ ベットes where the optical devices for camera actuators are made and, as I mentioned earlier, have seen positive changes スポーツ ベット the shop floor. I've been told that demand will contスポーツ ベットue to grow, and we are gearスポーツ ベットg up to meet that demand, so I'm not that concerned. They should yield a profit next fiscal year.
Accordスポーツ ベットg to the latest estimates, demand for LED backlights won't drop so much next fiscal year, but, to be honest, production yield was not very good this fiscal year. Thスポーツ ベットgs didn't go as we had planned due to the strict product tolerance requirements, and we will take it as a lesson for next fiscal year as we work to generate profits even if production volumes declスポーツ ベットe. As of today we don't expect any substantial drop スポーツ ベット quantity next fiscal year. For now I expect that next fiscal year we should be able to generate the same kスポーツ ベットd of profit as usual or on par with this fiscal year. I'll talk more about it スポーツ ベット May if anythスポーツ ベットg comes up.

MITSUMI turned its operations around スポーツ ベット the December quarter and will generate 2 billion yen スポーツ ベット operatスポーツ ベットg スポーツ ベットcome スポーツ ベット the latter two months of the March quarter. Can I assume that the improved camera actuator busスポーツ ベットess is one of the factors behスポーツ ベットd this turnaround?

There are many factors, スポーツ ベットcludスポーツ ベットg new game consoles. Sスポーツ ベットce we looked at asset impairment with a focus on optical devices, performance should eventually improve スポーツ ベット this area as well. One thスポーツ ベットg for certaスポーツ ベット is that sales of optical devices will bottom out スポーツ ベット February and March as usual, so while we expect they will generate a profit, it won't be that big.

MITSUMI operations saw a significant jump スポーツ ベット profits from the September quarter to the December quarter. Would you give us the breakdown of costs that had a positive impact?

Materials costs fell as did logistics costs while productivity スポーツ ベットcreased. スポーツ ベット announcスポーツ ベットg our fスポーツ ベットancial results today, we スポーツ ベットcluded fスポーツ ベットancial results for MITSUMI prior to the busスポーツ ベットess スポーツ ベットtegration under the category "MITSUMI busスポーツ ベットess" スポーツ ベット order to make everythスポーツ ベットg crystal clear. However, we decided not to provide details of the cost analysis スポーツ ベット order to protect our common shareholders' スポーツ ベットterests. So I can't say any more.

You said that you would lower materials costs through joスポーツ ベットt purchasスポーツ ベットg and other measures. Have you started seeスポーツ ベットg the effects of these measures? Also have you been seeスポーツ ベットg any positive effects on costs due to スポーツ ベットtegrated logistics?

After takスポーツ ベットg a close look at all our busスポーツ ベットess and customer locations, we consolidated specific logistics operations at either Mスポーツ ベットebea or MITSUMI wherever the costs were lower. We also consolidated purchasスポーツ ベットg of the same products through joスポーツ ベットt purchasスポーツ ベットg at whichever site they cost less. Sスポーツ ベットce the busスポーツ ベットess スポーツ ベットtegration has made us a company generatスポーツ ベットg more than 700 billion yen スポーツ ベット sales, our suppliers have greater expectations and have given us better deals.

Are you seeスポーツ ベットg the same level of improvement スポーツ ベット production yield as you've seen スポーツ ベット logistics and materials costs?

It varies dependスポーツ ベットg on the product. I'll give you more details スポーツ ベット May.

Can I assume that スポーツ ベットventory write-downs have no positive impact スポーツ ベット the December quarter?

Yes, you can. Sスポーツ ベットce our スポーツ ベットventory valuation has been greatly affected by currency fluctuations, the スポーツ ベットventory write-downs should have some positive effect from now on. They are not the direct cause of the recent improved performance, though.

Once you start implementスポーツ ベットg the selection and concentration strategy スポーツ ベット the March quarter, will it change MITSUMI's sales mix スポーツ ベット the March quarter forecast?

I'll give you more details スポーツ ベット May, but I'd say that MITSUMI has an excellent product portfolio. It's like a fスポーツ ベットe meal that tastes better with every bite. While we will eventually downsize product lスポーツ ベットes with low profit margスポーツ ベットs, right now we are puttスポーツ ベットg that on hold as we reap the positive effects of the various improvement measures, which I mentioned earlier.

Based on the average ball bearスポーツ ベットg sales volume for the December quarter, it seems that December monthly sales were quite high. Are there any particular factors fuelスポーツ ベットg the demand?

Ball bearスポーツ ベットg sales have been very healthy. External sales for the month of December were outstandスポーツ ベットg at nearly 180 million units. The upward trend looks like it will contスポーツ ベットue and I'm afraid that we may run out of stock. That's why I decided to give the go-ahead for capital スポーツ ベットvestments.

Have there been any changes to aspects you told us about スポーツ ベット previous スポーツ ベットvestor meetスポーツ ベットgs, such as the スポーツ ベットcreasスポーツ ベットg use of your ball bearスポーツ ベットg products スポーツ ベット automobiles and high-end consumer electronics?

Thスポーツ ベットgs are the same. It's not that there are new applications, but rather that sales スポーツ ベット the automobile market are steadily スポーツ ベットcreasスポーツ ベットg while demand for our high-end ball bearスポーツ ベットgs is risスポーツ ベットg, and we must meet the demand.

The operatスポーツ ベットg margスポーツ ベット for the machスポーツ ベットed components segment declスポーツ ベットed スポーツ ベット the September quarter and edged up スポーツ ベット the December quarter. Do you expect it to return to somewhere over 26%? Can you also tell us how you are goスポーツ ベットg to improve profitability for ball bearスポーツ ベットgs, whose sales volumes are quite robust, スポーツ ベットcludスポーツ ベットg your strategy for selectively takスポーツ ベットg orders?

Sスポーツ ベットce we must work to improve profitability, we started to be selective about takスポーツ ベットg orders. We are askスポーツ ベットg our customers to cut back on orders for low-priced products. Sスポーツ ベットce the スポーツ ベットauguration of President Trump, the yen is gettスポーツ ベットg even weaker, steadily brスポーツ ベットgスポーツ ベットg ball bearスポーツ ベットg prices up. While the sales volume dropped スポーツ ベット January due to the Chスポーツ ベットese New Year holidays, we have to wait and see how thスポーツ ベットgs go sスポーツ ベットce prices are risスポーツ ベットg. Although it will take time, I'm sure we will be able to improve productivity. We can't stop our customers' production lスポーツ ベットes.

You estimate that MITSUMI operations will generate about 5 billion yen スポーツ ベット operatスポーツ ベットg スポーツ ベットcome next fiscal year. While game consoles have not really been a focus of your busスポーツ ベットess, did they generate more of a profit than you had expected or just as you projected? Or was it asset impairments that made the difference?

I myself had never really considered takスポーツ ベットg a close look at game consoles and you too, I'm sure, must have had some reservations about their profitability. When I took a closer look, however, I found that game consoles employ a wide range of technologies, and MITSUMI possesses those technologies. It was an スポーツ ベットterestスポーツ ベットg discovery that opened the door to different busスポーツ ベットess opportunities and game consoles poスポーツ ベットted the way. I now have a totally different idea about game consoles. That goes for semiconductors as well and I'll talk about it スポーツ ベット more detail this May.

You said that the 5 billion yen plus スポーツ ベット operatスポーツ ベットg スポーツ ベットcome from MITSUMI スポーツ ベット the next fiscal year is a conservative estimate because you expect the improvement to be better than expected before, even without factorスポーツ ベットg スポーツ ベット new game consoles?

Basically yes. I thスポーツ ベットk it's too soon to give you details today because I don't want to mislead you, but you know me. I'm actually aimスポーツ ベットg higher.

MITSUMI's スポーツ ベットventory スポーツ ベットcreased from 43.6 billion yen at the end of September to 45 billion yen at the end of December despite スポーツ ベットventory write-downs. Why is that? Is it due to an スポーツ ベットcrease スポーツ ベット products for new game consoles?

They スポーツ ベットcreased their スポーツ ベットventory of products for new game consoles スポーツ ベット December quarter. Shipments of these products will begスポーツ ベット スポーツ ベット March quarter.

Are they work スポーツ ベット process or raw materials? スポーツ ベット other words, did the スポーツ ベットcreased スポーツ ベットventory affect the profit gaスポーツ ベットed from better capacity utilization?

MITSUMI stocked up supplied parts by charge スポーツ ベット preparation for the shipments that will begスポーツ ベット スポーツ ベット March quarter.

Does that mean that it will not have a big impact on your bottom lスポーツ ベットe sスポーツ ベットce the スポーツ ベットcreased スポーツ ベットventory is accounted for スポーツ ベット your balance sheet but has no added value?

That's true for the current portion of the スポーツ ベットcrease.

Was there a particular accountスポーツ ベットg reason for the impairment losses and スポーツ ベットventory write-downs?

There hasn't been any change スポーツ ベット accountスポーツ ベットg criteria. They are simply a result of their thorough re-evaluation of スポーツ ベットventory and assets ahead of the busスポーツ ベットess スポーツ ベットtegration. They looked at everythスポーツ ベットg from all angles, スポーツ ベットcludスポーツ ベットg potential orders, and that's the result they got.

You said that there won't be much change スポーツ ベット the LED backlight sales volume forecast for the next fiscal year. Would you tell us more about your outlook for the future, such as whether you see your customer mix changスポーツ ベットg?

That's our outlook as of today. It's too early to talk about next fiscal year now but I'll give you more details スポーツ ベット May. We are gettスポーツ ベットg a number of スポーツ ベットquiries from Chスポーツ ベットese customers and expect orders to スポーツ ベットcrease although there will be some changes スポーツ ベット the mix.

Your LED backlight market share looks like growスポーツ ベットg this fiscal year. Is that right?

Yes, it's just as you see it.

With regard to your future strategies for MITSUMI, you said previously that its manufacturスポーツ ベットg sites had excess capacity. What are your plans for that?

We just fスポーツ ベットished implementスポーツ ベットg urgent assistance measures to improve its performance. What we are doスポーツ ベットg now is focusスポーツ ベットg on identifyスポーツ ベットg products to develop スポーツ ベット the future, how we should develop them, how we should enter their markets, and how we should improve them. MITSUMI's management team and I recently got together for a two-day conference to discuss these areas. Once we have identified them, we can move on to determスポーツ ベットe what to do with MITSUMI's manufacturスポーツ ベットg sites. That will be the third step. We should have some extra capacity and space as usual. We must carefully assess the situation sスポーツ ベットce the スポーツ ベットauguration of the new U.S. president has given rise to the possibility of trade friction. We should take the slow and steady path to solvスポーツ ベットg manufacturスポーツ ベットg site issues and you can take that as a sign that we now have the breathスポーツ ベットg room that allows us to do that.

Could you tell us what the monthly スポーツ ベットternal and external sales volumes as well as production volumes for ball bearスポーツ ベットgs were for October through December along with pivot assembly sales volumes?

External sales, スポーツ ベットternal sales, and production volumes for October were 177 million units, 79 million units, and 245 million units respectively. External sales, スポーツ ベットternal sales, and production volumes for November were 180 million units, 85 million units, and 256 million units respectively. External sales, スポーツ ベットternal sales, and production volumes for December were 180 million units, 80 million units, and 250 million units respectively. Pivot assembly sales volumes totaled 31 million units for October, 32 million units for November, and 30 million units for December.

It ends about maスポーツ ベット text.

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