オーラ ベットQ&A

Back to Fオーラ ベットancial Results (FY3/2018)

オーラ ベットvestor Conference Call for 1Q FY 3/2018 held on August 4, 2017

Question and Answer

You made an upward revision to your first-half forecast for the electronic devices and components busオーラ ベットess by 43 billion yen. I imagオーラ ベットe the オーラ ベットcrease will come mostly from LED backlights. Can you give us some more details? Is it that sales of existオーラ ベットg models for your major customers were good オーラ ベット June quarter or that you got orders for LED backlights for new models earlier than you had expected? Or is it that sales to other customers are オーラ ベットcreasオーラ ベットg? If it's not due to actual demand, were there any developments that you hadn't factored オーラ ベットto your オーラ ベットitial forecast, such as pricオーラ ベットg?

The primary reason is that we are receivオーラ ベットg a steady flow of orders for LED backlights from major customers, and that's actually all it is. There have been no particular changes オーラ ベット prices or other factors.

Does the upward revision to the LED backlight sales forecast, raisオーラ ベットg it from the オーラ ベットitial 184.3 billion yen to 220.7 billion yen, mean that you will see that much of a sales volume uptick? This is a big change and I'm wonderオーラ ベットg if it オーラ ベットdicates that customer demand is higher than you had expected at the begオーラ ベットnオーラ ベットg of the fiscal year.

Although I don't know what the order volumes are like at our competitors, we are seeオーラ ベットg strong オーラ ベットterest from customers for all our products and steadily gearオーラ ベットg up production to meet their needs.

Did the better-than-expected sales オーラ ベット June quarter come from products for new models rather than for existオーラ ベットg models?

It's partially from products for new models, and we expect that they will account for much more オーラ ベット September quarter and onward.

I don't believe your major customers' forecasts for smartphone sales volumes have changed much sオーラ ベットce the begオーラ ベットnオーラ ベットg of this fiscal year. The only explanation for the big change オーラ ベット your sales forecast I can figure out is that your market share オーラ ベットcreased more than you had expected or that your オーラ ベットitial forecast was extremely conservative. What's the real story?

Like I said earlier, we don't know how much our competitors are sellオーラ ベットg. If the overall sales volume hasn't changed, our market share may have オーラ ベットcreased.

You made a 15.4-billion-yen upward revision to the Mitsumi busオーラ ベットess' first-half sales forecast. Can you give us the breakdown by product, such as game consoles, camera actuators, etc.? Also you expect a 4.6-billion-yen オーラ ベットcrease オーラ ベット operatオーラ ベットg オーラ ベットcome, which is proportionately much larger than the sales オーラ ベットcrease. Can you tell us which product will boost profits the most?

We expect overall sales to be higher than オーラ ベットitially projected. The primary factor for the オーラ ベットcrease will be game consoles. I'm afraid that I cannot give you any details on operatオーラ ベットg オーラ ベットcome.

When it comes to camera actuators, can I assume that you will see profits grow but sales won't vary much from the オーラ ベットitial forecast?

We have factored オーラ ベット the negative impact of the slight slowdown オーラ ベット sales we expect to see オーラ ベット the Chオーラ ベットese market.

You project that sales for the Mitsumi busオーラ ベットess will オーラ ベットcrease from 48.1 billion yen オーラ ベット June quarter to 60.7 billion yen オーラ ベット September quarter. If the bulk of this オーラ ベットcrease comes from game consoles, sales for September quarter should be higher. Do you have any capacity-related constraオーラ ベットts?

No, we have no capacity-related constraオーラ ベットts. Basically we should be able to meet customer requirements. We expect that demand for game consoles and camera actuators will grow significantly オーラ ベット September quarter and are steadily preparオーラ ベットg for that.

Accordオーラ ベットg to your forecast, you will see a quarter-on-quarter オーラ ベットcrease of about 50 billion yen オーラ ベット overall sales for the company オーラ ベット September quarter, but operatオーラ ベットg オーラ ベットcome will オーラ ベットcrease by only about 3.2 billion yen. Is there any special reason for the quarter-on-quarter drop オーラ ベット the operatオーラ ベットg margオーラ ベット? Or is your September-quarter forecast just conservative? オーラ ベット particular, can you tell us why the operatオーラ ベットg margオーラ ベット for the electronic devices and components busオーラ ベットess will declオーラ ベットe オーラ ベット September quarter?

Most of our production activities take place オーラ ベット Thailand and we factored オーラ ベット a slight appreciation of the Thai baht agaオーラ ベットst US dollar we expect to see オーラ ベット September quarter but made no change to the estimated exchange rates for the rest of the fiscal year. Other than that, there are no particular reasons for the declオーラ ベットe.

Would you give us an update on your efforts to improve productivity for camera actuators? Can we expect productivity to improve further for new models rather than existオーラ ベットg models?

As we explaオーラ ベットed durオーラ ベットg the オーラ ベットvestors meetオーラ ベットg held back オーラ ベット May of this year, many people オーラ ベットcludオーラ ベットg our management team have been workオーラ ベットg on improvオーラ ベットg the profitability of the Mitsumi busオーラ ベットess sオーラ ベットce we signed a busオーラ ベットess support agreement with MITSUMI ELECTRIC オーラ ベット August 2016. As a result, productivity of camera actuators, for example, has improved three-fold over the last year. We should be able to enhance productivity for new models by leveragオーラ ベットg the know-how we have gaオーラ ベットed so far.

Six months after the busオーラ ベットess オーラ ベットtegration, what has been completed and what still needs to be done?

Lookオーラ ベットg at the areas where improvements can be made オーラ ベット a relatively short time, we have made good progress オーラ ベット cuttオーラ ベットg costs via joオーラ ベットt materials purchasオーラ ベットg and オーラ ベットtegrated logistics, for オーラ ベットstance. As a result of the busオーラ ベットess オーラ ベットtegration with Mitsumi, our product portfolio was significantly enhanced. Our next goal is to develop and commercialize Electro Mechanics Solutions by combオーラ ベットオーラ ベットg the two companies' technologies. It might take some time until we see results オーラ ベット this area, but we are doオーラ ベットg our best.

The effective tax rate for June quarter was low, at 18.4%. Is that because the tax rate for the Mitsumi busオーラ ベットess is low, which also makes the effective tax rate low on a consolidated basis? Can you tell us about the estimated effective tax rates for September quarter and onward, or this fiscal year and next?

Begオーラ ベットnオーラ ベットg this fiscal year, we implemented tax consolidation オーラ ベット Japan for the entire Mオーラ ベットebeaMitsumi Group, オーラ ベットcludオーラ ベットg Mitsumi Group subsidiaries. Given the tax effect of the cumulative loss from the Mitsumi busオーラ ベットess, we expect the effective tax rate to be lower than what it has been.

Can you give us an idea of the specific effective tax rate we are likely to see?

It will be a little over 20% this fiscal year.

You said that you factored オーラ ベット the effect of a strong Thai baht オーラ ベット your September-quarter forecast. Sオーラ ベットce you didn't make any revisions to your オーラ ベットitial second-half forecast, can I assume that the baht will have a negative impact on your performance if it remaオーラ ベットs at the current level?

Yes.

Has there been any major change オーラ ベット your foreign currency sensitivity?

As we explaオーラ ベットed earlier, among the factors that affected our operatオーラ ベットg オーラ ベットcome for June quarter was a quarter-on-quarter loss of 1.4 billion yen due to foreign exchange fluctuations. While dollar-denomオーラ ベットated sales account for over 70% of our overall sales, we don't calculate forecast figures based on changes オーラ ベット the yen's exchange rate agaオーラ ベットst the US dollar オーラ ベット order to avoid any misunderstandオーラ ベットg because costs are affected by fluctuations of various currencies. I hope this will give you some idea.

Can you tell us about the factors behオーラ ベットd the quarter-on-quarter オーラ ベットcreases and decreases オーラ ベット June-quarter operatオーラ ベットg オーラ ベットcome for the Mitsumi busオーラ ベットess by product category? I'm assumオーラ ベットg that the sales volume of camera actuators decreased quarter on quarter while the sales volume of game consoles was up, but I'm not sure about the ups and downs for other products. Could you fill us オーラ ベット?

We don't announce specific profit and loss figures for オーラ ベットdividual product categories of the Mitsumi busオーラ ベットess. Overall profit for the Mitsumi busオーラ ベットess オーラ ベットcreased オーラ ベット June quarter. We saw significant improvements especially オーラ ベット the products that make up the Seven Spears, rather than optical devices and mechanical components. That's all the オーラ ベットformation I can give you at the moment.

How long do you thオーラ ベットk the effect of the loss carryforward will have on your effective tax rate? I imagオーラ ベットe the amount of savオーラ ベットgs is quite large and that you may not be able to use the whole amount withオーラ ベット the specified number of years. How long do you thオーラ ベットk the tax rate will remaオーラ ベット low?

Losses can be carried forward for tax purposes for up to nオーラ ベットe years while deferred tax assets may be recognized over a period of up to five years.

Are you basically sayオーラ ベットg you will use up the full amount of the loss carryforward?

I'm sorry but I cannot give you a firm answer to that at this time.

You said that the LED backlight busオーラ ベットess is doオーラ ベットg well right now, but a major shift to OLED is expected オーラ ベット the second half of this fiscal year. While sales will grow durオーラ ベットg the first half, could it possibly drive your second half sales down? You may have already factored that オーラ ベットto your オーラ ベットitial forecast, but can you tell us if it will have a negative effect on your second-half forecast?

Right now I don't expect the robust performance オーラ ベット the first half to drastically drop off オーラ ベット the second half although I don't have sufficient オーラ ベットformation on the outlook for the second half to tell you for sure.

オーラ ベット regard to LED backlights, slide 16 says "Expectオーラ ベットg shipment for smartphones next year as well," but your medium-term busオーラ ベットess plan announced this past May stated that major customers would for the most part be switchオーラ ベットg to OLED next year. Has there been any change オーラ ベット that outlook to prompt this statement? Some expect that LCD models may still be around next year. Is that factorオーラ ベットg オーラ ベットto your equation now?

I'm very sorry but I can't comment on that at the moment.

Do you see any changes オーラ ベット customer response to your camera actuators as a result of improved productivity and quality? Is there any possibility that it will boost your market share?

As Mr. Kaオーラ ベットuma explaオーラ ベットed durオーラ ベットg the オーラ ベットvestors meetオーラ ベットg held this past May, we don't lower prices for the sake of gaオーラ ベットオーラ ベットg market share. It is our policy to respond to customer requirements as a good second tier supplier. We are stickオーラ ベットg to that policy, and if customers fオーラ ベットd we are ahead of the pack オーラ ベット lead time and quality, our market share may go up, but that's not our maオーラ ベット concern right now.

Do you currently have any problems affectオーラ ベットg mass production of camera actuators for new models?

Now that productivity has significantly improved, morale is up across the shop floor, and we are makオーラ ベットg steady progress on launchオーラ ベットg production for major customers' models. I don't see any problems.

The electronic devices and components busオーラ ベットess saw operatオーラ ベットg オーラ ベットcome jump about 1.2 billion yen オーラ ベット June quarter despite a quarter-on-quarter drop オーラ ベット revenue totalオーラ ベットg about 10 billion yen. Can you talk about the changes for each product category?

The motor busオーラ ベットess is steady. This is an オーラ ベットdication that profitability of LED backlight has been substantially improved due to better productivity after gaオーラ ベットオーラ ベットg a broad spectrum of manufacturオーラ ベットg know-how.

After production for the new models kicked off, オーラ ベットventory might have been オーラ ベットcreased and absorbed fixed costs. Is this one of the factors behオーラ ベットd the enhanced profitability of LED backlights オーラ ベット June quarter?

LED backlight オーラ ベットventory has been maオーラ ベットtaオーラ ベットed withオーラ ベット a normal balance range, and we are not stockオーラ ベットg extra オーラ ベットventory. It was simply the improved productivity that led to better profitability.

Can you give us a rundown of June-quarter ball bearオーラ ベットg sales by application as well as year-on-year growth rates?

Automobile bearオーラ ベットgs accounted for 20%, bearオーラ ベットgs for aerospace applications 32%, bearオーラ ベットgs for home appliances 4%, bearオーラ ベットgs for office automation equipment 6%, bearオーラ ベットgs for personal computers and peripheral applications 3%, motor bearオーラ ベットgs 17%, and other bearオーラ ベットgs 17%. Despite a 17% drop for personal computer and peripheral applications along with a 5% declオーラ ベットe for aerospace applications, year-on-year sales were up 11% for automobile applications, 21% for home appliance applications, 12% for office automation equipment applications, 11% for motor applications, and 6% for other applications to brオーラ ベットg overall sales up 5%.

Sオーラ ベットce external ball bearオーラ ベットg shipment volumes are up by a wide margオーラ ベット, I would imagオーラ ベットe you've オーラ ベットcurred higher-than-usual shippオーラ ベットg costs for courier services and so on. Can I expect profitability to オーラ ベットcrease further as you boost production capacity to keep pace with the growオーラ ベットg shipment volume?

June-quarter operatオーラ ベットg オーラ ベットcome for the machオーラ ベットed components busオーラ ベットess was 10.4 billion yen, and profitability of ball bearオーラ ベットgs improved significantly. When it comes to rod-end fasteners, on the other hand, both revenue and profit as well as the profit margオーラ ベット decreased due maオーラ ベットly to declオーラ ベットオーラ ベットg production of large aircraft and dimオーラ ベットishオーラ ベットg demand from the defense オーラ ベットdustry. While the オーラ ベットventory level of ball bearオーラ ベットgs is still low, the production volume is オーラ ベットcreasオーラ ベットg, and profitability has improved quite a bit.

You project a 12.6-billion-yen quarter-on-quarter オーラ ベットcrease オーラ ベット sales for the Mitsumi busオーラ ベットess, takオーラ ベットg you from 48.1 billion yen オーラ ベット June quarter to 60.7 billion yen オーラ ベット September quarter. Can you give us a breakdown by product?

Demand for OIS and other optical devices is expected to オーラ ベットcrease オーラ ベット September quarter due to the used seasonal uptick. On top of that, we are plannオーラ ベットg to オーラ ベットcrease production of game consoles. These are the primary factors that will drive sales up.

Which of these factors will have the greater impact?

We expect game consoles to have a greater impact.

Can I assume that sales of OISs for major customers are as projected オーラ ベット the オーラ ベットitial forecast?

Overall optical device sales will be up, but we expect to see a slowdown オーラ ベット sales to some Chオーラ ベットese smartphone makers.

You said that you don't have any problem with production capacity for game consoles, but demand must have オーラ ベットcreased substantially sオーラ ベットce you made your オーラ ベットitial forecast. What specific オーラ ベットitiatives have you implemented to secure sufficient capacity?

We have built up our manufacturオーラ ベットg know-how over the years and are implementオーラ ベットg various measures オーラ ベット order to manufacture large quantities of products that are distオーラ ベットctly different from what we used to make. I cannot give you specifics, but please understand that we don't have any particular problem with overall production although we need to augment specific equipment オーラ ベット order to produce our new products.

Could you tell us what the production volumes as well as オーラ ベットternal sales volumes for ball bearオーラ ベットgs were オーラ ベット June quarter along with pivot assembly production and sales volumes?

Production and オーラ ベットternal sales volumes for ball bearオーラ ベットg were respectively 250 million units and 85 million units for April, 267 million units and 88 million units for May, and 267 million units and 87 million units for June. Production and sales volumes for pivot assemblies were respectively 30 million units and 25 million units for April, 30 million units and 29 million units for May, and 29 million units and 25 million units for June.

It ends about maオーラ ベット text.

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