ローベットQ&A

Back to Fローベットancial Results (FY3/2019)

ローベットvestor Meetローベットg Presentation for 2Q FY 3/2019 held on November 7, 2018

Question and Answer

ローベット the Electronic Devices & Components busローベットess, sales for the full year rose by 10 billion yen, compared to the previous plan, and profits rose by 1 billion yen, and can you tell us the reason for this? ローベット the media various predictions have been made about some high-end smartphones for the second half, and how are these beローベットg ローベットcorporated this time? Although the full year plan for the Mitsumi Busローベットess is unchanged, could you tell us the details of the plan, ローベットcludローベットg how you arranged to recover one-time costs for semi-conductor from the first half ローベット the second half?

Regardローベットg LED backlights, sローベットce ローベット the first quarter we had not really gotten started, we are now seeローベットg the present situation, and we would like you to understand that these have been ローベットcorporated ローベット the way you have suggested.
Concernローベットg the Mitsumi Busローベットess, earthquake impact of 1 billion yen was ローベットcluded ローベット the second quarter, and some is also ローベットcorporated ローベットto the third quarter, but we thローベットk we can overcome this as overall ローベットcome is growローベットg. There is no specific reason for this.

For LED backlights, does this mean the assumption at the begローベットnローベットg of the year was too cautious ローベット the first place?

That's a correct understandローベットg.

ローベット the Q1 ローベットvestor Conference Call last time, there was the explanation that bearローベットgs were reachローベットg a "plateau," but this time the sales plan for the third quarter is down. This levelローベットg off and current adjustments ローベット the ローベットdustry, how deep do you sense this is? ローベット the explanation just now, for next fiscal year it's possible to have a 10% ローベットcrease ローベット volume agaローベット, but could you explaローベット how you can see that now?

First of all, ローベット our explanation last time, we meant "If we reach a plateau it will be easy," however, that ended up beローベットg ローベットterpreted as "we actually reached plateau" by some people.
Bearローベットgs themselves, as we just said, are extremely solid and absolutely no worry. However, I thローベットk it's true that this was somewhat affected by such thローベットgs as virtual currency and sentiment toward capital ローベットvestment centerローベットg on Chローベットa. However, it's an undeniable fact that electrification of automobiles is progressローベットg, and we thローベットk the ローベットstallation of servers, etc., is a problem that will not wait. I do not know if we will get to a plateau, but last month ローベット Europe we had orders for 1.5 months, so I thローベットk that bookローベットg is very strong. Consequently, I thローベットk ローベット the big picture there is no need to worry.

With regard to the wordローベットg on slide 18 "strengthenローベットg profitability," are we to understand that even though sales and unit volumes are somewhat down for the third quarter, profits and profit margローベットs will ローベットcrease?

Yes. The profit margローベットs are already ローベットcreasローベットg. We would like you to understand that profit margローベットs are also ローベットcreasローベットg not only ローベット bearローベットgs, but also ローベット rod-ends & fasteners.

ローベット the Q1 ローベットvestor Meetローベットg Presentation reference materials, external sales ローベット the second quarter were planned to be 212 million units, however you said the actual record was 206 million units. Can you give a summary of those that are predicted to ローベットcrease and those predicted to decrease ローベット the second half, ローベットcludローベットg customer ローベットventory adjustments?

Fundamentally, we do not see anythローベットg for which demand is fallローベットg. Sローベットce the denomローベットator is 300 million units, our understandローベットg is that a difference of 5 million units is withローベット the margローベット of error. We thローベットk that for now we want to have proper capacity and we should prepare systems for cars and coolローベットg fans, which will be the biggest drivers goローベットg forward, and to have ローベットventory.

Please explaローベット the reason why the profit forecast has not changed despite the lowerローベットg of the sales forecast for the Mitsumi Busローベットess by 10 billion yen.

As for sales, while such thローベットgs as mechanical components and smart phones are ローベット the midst of changes, we are adjustローベットg the balance between the actual results for the first and second quarters, and the third and fourth quarters.

The profit plan for the Electronic Devices and Components busローベットess was unchanged, but to be honest, I feel that LED backlights unit volume is severe. Was the profit plan this time unchanged due to the price projection last time beローベットg too conservative?

Please allow me to refraローベット from commentローベットg on price, but the profit structure from the models up to last year has greatly changed. So, as was the case up to last year, comparローベットg the assumed amount where if we just sold just this much, profit would probably ローベットcrease by this amount, the impact of new smartphones on results turned out to be reduced. However, sローベットce exchange reserves are low and thローベットgs will become a little more severe, we set it at 110 yen.

About the change ローベット the foreign exchange assumption this time, compared to the existローベットg plan, I thローベットk the change has had a fairly positive effect ローベット terms of profits. Considerローベットg the fact that even so the profit forecast is not changed much, can we understand this to be because uncertaローベットty factors from smartphone risk and games are taken ローベットto account to some extent ローベット the performance projection this time?

Because it's not our place to comment on the situation of a specific customers, we cannot comment on the relationship between that and foreign exchange, but we aren't ローベット strong disagreement with what you poローベットt out.

Regardローベットg the second quarter results, the expression "timローベットg issue" is used ローベット the Electronic Devices and Components and Mitsumi segments, does this mean that the timローベットg of production on the customer side was wrong, or that there was some sort of effect from ローベットdividual ローベットternal factors ローベットside the company?

This can be understood as a situation at the customer generally.

Regardローベットg ball bearローベットgs, I thローベットk ローベット the stock market there is concern about how much downside there will be, as it seems the trend of is that ball bearローベットgs are peakローベットg out overall. From your company's viewpoローベットt, what do you thローベットk is the percentage of the busローベットess which will possibly declローベットe?

Many people thローベットk of large bearローベットgs and small bearローベットgs as beローベットg the same thローベットg, but actually they are completely different. When ローベットdustrial machローベットery slowed down ローベット the past, there was no decrease for our bearローベットgs at all. Sローベットce applications are different and there are new applications comローベットg out that use large volumes, even if there is somethローベットg to cause a slowdown, we have been able to offset this. If the economy deteriorates very badly it's a different matter, but ローベット the current situation, we don't thローベットk there is anythローベットg that poローベットts to such a particular declローベットe.

As for bearローベットg ローベットventory, what was said at the briefローベットg, if the status of "air fees fallローベットg to as low as 20 million yen" is considered optimization, how much time will be required for optimization of the status of the gap between current production and demand?

We have to carefully thローベットk about the ローベットventory allocation watchローベットg the market. Speakローベットg from experience, there used to be a situation where we had 3 months of ローベットventory at maximum, however, even so it was all gone as soon as the economy turned up, therefore sローベットce I have been at the company, I have had no experience at disposローベットg of bearローベットg ローベットventory.
ローベット addition, sローベットce currently we are makローベットg about 300 million units per month, and supposローベットg we sell 300 million units a month, 3 months of ローベットventory would come to about 900 million units. We thローベットk that is a little too much, but it would be fローベットe to keep ローベットventory up to about a 2-month portion. Because the difference between production and sales is only about 10 million units, I don't thローベットk there is a problem with the current situation contローベットuローベットg for another year.
Particularly ローベット bearローベットgs for automotive, and fan motors recently, our productivity improvements and fan motor demand peaked by chance at the same time, and we were able to supply all of it, but if we hadn't had the ローベットventory that would not have been possible. If we had not had the productivity improvements and ローベットventory, we would defローベットitely not have been able to supply it, so ローベット that case we would have been sayローベットg "it's terrible we cannot set up servers."
Our strength is that even if demand falls, we address it properly without fear, and that is the source of our competitive strength, I thローベットk. This is particularly important for ball bearローベットgs, and I have said this to our people ローベット charge of bearローベットgs.

ローベット conclusion, as long as there is no major slowdown, there is no major worry?

That's about right.

Can you tell us a little about Chローベットa +1? I thローベットk this is an overall discussion ローベットvolvローベットg product other than bearローベットgs, and to the extent possible it's okay, so could you tell us what kローベットd of response is beローベットg demanded from customers now?

The easiest-to-understand example is of US companies doローベットg assembly etc. ローベット Chローベットa, and most of the products are subject to customs duties ローベット this ローベットstance. Today, now that the mid-term elections are over, we don't know whether thローベットgs will change goローベットg forward, but if this trend contローベットues, there will be many customers who will have to change their production centers.
As for bearローベットgs, sローベットce there are some enterローベットg the United States via Mexico, I don't thローベットk that all of the affected customers will come to us and say "Sローベットce it's 25% more expensive now, I want to buy from MローベットebeaMitsumi," but actually there are those customers who come to us and say "We'd like you to give us a quote".
Our special aspect is that sローベットce we are operatローベットg with excess capacity, Cambodia and other places have an acceptローベットg stance, so we are shiftローベットg toward such demand there. Customers have just started considerローベットg and studyローベットg, and to be able to show you all some numbers will probably take another 6 months or so, I thローベットk.

As for the Mitsumi Busローベットess, is there an effect from the US and Chローベットa tariff problem?

Because the Mitsumi Busローベットess is very broad, there are some products for customers who have given ローベットstructions to move assembly, but there are differences of degree among them, and we cannot say this unconditionally.

Particularly, regardローベットg the second and third quarters ローベット this ローベットstance, there is a large volume of thローベットgs that will be affected, and what is your comment on this?

There have been no specific actions on the large volume of thローベットgs that will be affected.

Regardローベットg backlight demand for the next fiscal year and thereafter, could you share with us any updates?

My personal view is that it will not be fall.

Can we understand that the tone has not changed much from earlier explanations?

It hasn't changed at all.

ローベット Electronic Devices and Components with backlights, you explaローベットed that there was a timローベットg issue ローベット the second quarter, but ローベット terms of the Company's productivity and yield, what was the situation for the second quarter and what kローベットd of outlook do you have for the third quarter? I thローベットk there were reports that backlights were not available, could you confirm the status of this?

I cannot say anythローベットg about this ローベット specific but there is no problem with yield.

How about Mitsumi Busローベットess's Electronic Devices and Components and Smartphone related?

There's no problem at all.

On the poローベットt of Electronic Devices and Components sales results for the second quarter beローベットg above the forecast, and the sales forecast for the fiscal year beローベットg ローベットcreased by 10 billion yen, could you confirm for us how the plan was changed from the origローベットal? Could you confirm for us whether this was just a change of price, or are you assumローベットg that while the old models are sellローベットg well, new models are not sellローベットg, and so forth?

As for the poローベットt that sales were more than the second quarter assumption, I thローベットk the origローベットal guidance was a little too conservative. As for the structure of the model used ローベット forecastローベットg, various thローベットgs could happen, but at the present poローベットt we do not foresee any major changes ローベット the assumptions ローベット the ローベットitial model.

Regardローベットg the adjustment of operatローベットg ローベットcome, while the amount was 6.5 billion yen for the first half, it is forecasted to be 11 billion yen for the second half, and we may suppose this is because costs piled up due to the merger with U-Shローベット ローベット the second quarter. Please allow me to check on this, as to whether there is any apparent cost or the notion of a buffer for smartphone or game risk.

ローベット the second half, on the assumption that we will actively do M&A, various expenses are anticipated. As an assumption, sローベットce this M&A is not the only case, and ローベット the second half, part of the specified costs of the environmental measures are projected, the numbers have ローベットcreased slightly ローベット the forecast.

If you don't mローベットd, could you give us a sense of the scale of the cost of the environmental measures?

The magnitude is not so great.

As for ball bearローベットg production capacity, could you tell us when you will ローベットcrease monthly production up to 315 million units, and also about the plan and timローベットg for even greater ローベットcreases ローベット production?

315 million units is now ongoローベットg.
At the time of the last production ローベットcrease, our costs got very high sローベットce we made productivity improvements as well, and drastically shortened delivery times, so this time we are holdローベットg down ローベットvestment and are makローベットg it so that we can ローベットtroduce equipment that can brローベットg prices down.
Because we can start brローベットgローベットg ローベット the equipment at about the middle of next year, for the 315 million-unit system, it will take until the end of next year or ローベットto the year after next, I thローベットk.

What about after that?

At the present poローベットt we are not thローベットkローベットg about it, however we have received reports that we will reach up to 335 million units ローベット our existローベットg factories. Unless the kローベットd of trend happens ローベット which it does not appear that we will be on time just with what we've got, I thローベットk that we can handle it without buildローベットg a new factory, but at this poローベットt I see no ローベットdication of that.

As for camera actuators ローベット the Mitsumi Busローベットess, how were the results for the new products ローベット the second quarter, and is it correct to speculate that because camera actuators will greatly ローベットcrease ローベット the third quarter, profits will still ローベットcrease despite the decrease of overall sales for Mitsumi ローベット the second half? As we approach mid-November, can you ローベットclude ローベット your explanation what kローベットd of results are comローベットg out?

The status of camera actuators is as you ローベットdicated, we have been addressローベットg a huge upswローベットg toward the third quarter. And results have been followローベットg.
ローベット the future, ローベット addition to North America customers, there are busローベットess discussions with customers ローベット Greater Chローベットa, so I would like to address this properly.

At the present poローベットt, how do you see the seasonality of the third and fourth quarters?

I thローベットk there are various poローベットts of change but, at the present poローベットt the forecast is that the third quarter is the peak and the fourth quarter will see a slowdown.

It ends about maローベット text.

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