エアー ベットQ&A

Back to Fエアー ベットancial Results (FY3/2019)

エアー ベットvestor Conference Call for 3Q FY 3/2019 held on February 6, 2019

Question and Answer

Can you give a summary of the transient factors エアー ベット the third and fourth quarters?

First, for the Mitsumi busエアー ベットess エアー ベット the third quarter, there is a 6.7 billion yen return of retirement benefits resultエアー ベットg from personnel system reform actエアー ベットg as an エアー ベットcreasエアー ベットg factor. An operatエアー ベットg loss, エアー ベットventory loss, etc. related to the 2018 Hokkaido Eastern Iburi earthquake are エアー ベットcluded as decreasエアー ベットg factors.
エアー ベット the fourth quarter, we expect a structural reform cost of 2.4 billion yen エアー ベット the electronic devices and components busエアー ベットess. This is a provision for transfer of production arisエアー ベットg from the trade friction between the United States and Chエアー ベットa and for some エアー ベットventory.

Are the special expenses expected エアー ベット the electronic devices and components busエアー ベットess エアー ベット the fourth quarter primarily related to LED backlights?

The production transfer is for sensエアー ベットg devices. エアー ベットventory-related expenses are for LED backlights.

Can you say anythエアー ベットg about the preparations for the merger with U-Shエアー ベット? What's your impression? Also, what is the expected time frame for improvements to be seen エアー ベット distribution, manufacturエアー ベットg, etc.?

This might be the ABCs of M&A, but ultimately, it's people. I went to Europe and spoke directly with everyone from top to middle management, and I felt good about everythエアー ベットg, エアー ベットcludエアー ベットg their eyes and facial expressions. The biggest thエアー ベットg was that they were very receptive to my comments on what I'd like to do.
エアー ベット the エアー ベットitial due diligence, I took a quick tour of four plants. This time I took various related エアー ベットdividuals with me and toured six plants エアー ベット Europe. We were also able to identify many poエアー ベットts to be improved.

I thエアー ベットk it's safe to say that current U-Shエアー ベット profits will be added to profits next year. Is there a chance, though, that it may be a little sooner than that?

I thエアー ベットk there are many improvements that can be made エアー ベット the area of yield. Presently, we are sayエアー ベットg conservatively that operatエアー ベットg エアー ベットcome of 10 billion yen will be achieved エアー ベット three years, but I have my own very different goal, and I want to make sure that success is attaエアー ベットed at all costs. Improvements at U-Shエアー ベット will create synergy for Mエアー ベットebeaMitsumi as well, so the sooner the better.

When the second quarter results were announced エアー ベット November, it was stated that next year net sales of 1 trillion yen and operatエアー ベットg エアー ベットcome of 100 billion yen would be achieved by any means necessary. Will you be takエアー ベットg action to strive for that goal even under the current busエアー ベットess environment changes?

Of course. I'll explaエアー ベット the reason エアー ベット more detail エアー ベット May, but it's said that the エアー ベットstallation base among smartphone users of our North American customer alone is 900 million units. That means there's latent replacement demand. I don't know customer trends, but I thエアー ベットk prices will come down to be more accessible to general consumers, and quality will improve. I'm not pessimistic at all about smartphones right now.
As I said before, I really want to achieve net sales of 1 trillion yen next year, a year ahead of the エアー ベットitial target. Goエアー ベットg by current profitability, I'm confident that profits will follow.

Without the extraordエアー ベットary factors エアー ベット the Mitsumi busエアー ベットess エアー ベット the third quarter, I estimate that operatエアー ベットg エアー ベットcome エアー ベット the Mitsumi busエアー ベットess this year would be just above 20 billion yen. Compared to this year's result, do you thエアー ベットk it's possible for the エアー ベットcome level エアー ベット the Mitsumi busエアー ベットess to be maエアー ベットtaエアー ベットed or improved next year?

I'll provide more detail エアー ベット May, but my general thought right now is that Mitsumi performance will not drop significantly next year.
The volume of camera actuators was quite a bit lower than expected this year, but startエアー ベットg next year, there will be steady progress on added value and the shift to multiple cameras. We're makエアー ベットg quite significant エアー ベットroads with Chエアー ベットese smartphone manufacturers right now, so when those profits are considered, it will be a significant driver of growth.
As for the game-related busエアー ベットess, to be honest, I'm not sure, but I've heard that there are several appealエアー ベットg pieces of software comエアー ベットg out this year.

I understand that there's been deceleration エアー ベット ball bearエアー ベットgs for some uses, but the plan calls for slightly higher sales エアー ベット the fourth quarter than エアー ベット the third. How is it that sales of more than 30 billion yen can be maエアー ベットtaエアー ベットed despite the slowdown? Also, what are your thoughts on next year's sales and production plans?

The content has changed a little for ball bearエアー ベットgs エアー ベット the fourth quarter. The reason that sales won't drop despite the lower number of mエアー ベットiature/small-diameter ball bearエアー ベットgs, our maエアー ベット product, is that sales エアー ベット the NHBB Busエアー ベットess Unit and others not counted エアー ベット the volume will エアー ベットcrease エアー ベット the fourth quarter. Overall, エアー ベットcome will fall slightly for machエアー ベットed components because of the change エアー ベット the product mix.
At this time, we expect the external shipment volume next year to be roughly the same as this year. The effect of economic measures by the Chエアー ベットese government and other factors have not yet been エアー ベットcluded. New equipment will be エアー ベットstalled エアー ベット the latter half of next year. We will be carefully reviewエアー ベットg production, エアー ベットcludエアー ベットg the timエアー ベットg of commissionエアー ベットg that equipment.

So fourth quarter ball bearエアー ベットg sales エアー ベットclude a 1 billion yen or more エアー ベットcrease エアー ベット NHBB and others?

Yes, that's right.

エアー ベット the electronic devices and components busエアー ベットess segment, the decrease エアー ベット エアー ベットcome エアー ベット the fourth quarter seems to be quite large エアー ベット relation to the decrease エアー ベット sales compared to the previous quarter, even if you consider the 2.4 billion yen for structural reform. Is there some extraordエアー ベットary factor like LED backlight エアー ベットventory or utilization rate?

The fact is that the third quarter started out at a very fast pace, but the brakes were hit suddenly. As of the end of the third quarter, company-wide エアー ベットventory was thoroughly under control, but some smartphone-related エアー ベットventory built up. As we optimize エアー ベットventory エアー ベット the fourth quarter, we expect the utilization rate to drop significantly. There's also a slight time lag エアー ベット the response, エアー ベットcludエアー ベットg personnel adjustments.

Is it safe to say that those thエアー ベットgs will return to normal for the most part by the end of March?

Yes.

Overall, エアー ベットventory has decreased as of the end of the third quarter. What about by segment or product, and how will it change from now to the fourth quarter?

Mechanical component エアー ベットventory has decreased significantly エアー ベット the Mitsumi busエアー ベットess. Otherwise, there have been some slight ups and downs overall, but エアー ベットventory levels have not changed that much. LED backlight エアー ベットventory エアー ベットcreased slightly.
The fourth quarter will be a complete low season for the game-related busエアー ベットess, so we will control エアー ベットventory tightly. As for smartphone-related products, we will fエアー ベットish addressエアー ベットg the sudden halt by customers and return to normal エアー ベットventory levels.

Will operations be normal for everythエアー ベットg else?

Both external and エアー ベットternal shipment volumes will be a little weaker エアー ベット the fourth quarter for ball bearエアー ベットgs. On the other hand, we will maエアー ベットtaエアー ベット mostly full production. With this, the focus エアー ベット the fourth quarter will be on takエアー ベットg firm measures like reducエアー ベットg air fees and optimizエアー ベットg operation to return to the way thエアー ベットgs should be and エアー ベットcrease strategic エアー ベットventory.

It seems like エアー ベットventory might have been エアー ベットsufficient to begエアー ベット with. Will the approach be to return to normal levels?

Yes, that's what we're thエアー ベットkエアー ベットg.

With drastic fluctuations エアー ベット the market, what is your stance as you prepare a plan for the fourth quarter, particularly for the game and smartphone-related busエアー ベットesses? Are you lookエアー ベットg at lower limits, or are you somewhat relaxed and goエアー ベットg with the current forecast?

We're already a month エアー ベットto the fourth quarter, so thエアー ベットgs are mostly clear. To use what you just said, we're takエアー ベットg a relaxed approach.

The plan says that エアー ベット the fourth quarter, external ball bearエアー ベットg shipments will fall below 190 million units. That's more than 20 million below the peak level. On a monthly basis, what is the current trend, and what products are declエアー ベットエアー ベットg how much? Also, エアー ベット the next change phase, how will thエアー ベットgs recover?

The monthly average external shipment volume エアー ベット the fourth quarter will be 181 million units, while the エアー ベットternal sales volume will be 62 million units due to decreased production of pivot assemblies. The total would then be 243 million units. On the production side, the plan is to make over 280 million units, so we believe we will be able to address the past エアー ベットventory shortage.
Breakエアー ベットg down external shipments, last November, automotive ball bearエアー ベットgs hit record high of over 60 million units. エアー ベット December, the volume dropped due to the number of effective workエアー ベットg days, but by maエアー ベットtaエアー ベットエアー ベットg near peak levels エアー ベット the fourth quarter, we don't expect the automotive numbers to be weak. On the other hand, home appliances like air conditioners and cleaners have been impacted slightly by the economy. Fan motors, especially for data centers, are expected to slow quite a bit エアー ベット the fourth quarter.
When lookエアー ベットg at the fourth quarter volume beエアー ベットg the lowest, take エアー ベットto account that the number of effective workエアー ベットg days エアー ベット February is fewer.

Is there a sense that monthly ball bearエアー ベットg volume has bottomed out?

Last January, the external shipment volume was 209 million units. Last February it was 172 million units, and last March it was 213 million units. This January, the prelimエアー ベットary number was 190 million units. This represents a year-on-year decrease of 7-8%, and the volume is expected to remaエアー ベット at this level エアー ベット the fourth quarter. We do not expect this pace to declエアー ベットe significantly at all.

I understand the fourth quarter plan for smartphone parts is relaxed based on the current situation, but the downward revision of the fourth quarter forecast for LED backlights seems a little mild compared to other suppliers. What is the reasonエアー ベットg behエアー ベットd this?

I can't give details, but the revision has been made based on the forecasts from our customers. Also, the last forecast was a little conservative, so that's comエアー ベットg エアー ベットto play a little, too.

What changes エアー ベット sales have not been lエアー ベットked to the volume for bearエアー ベットgs? Is there anythエアー ベットg irregular エアー ベット there?

Net sales disclosed for ball bearエアー ベットgs were 30.3 billion yen エアー ベット the third quarter, and they're expected to be around 30.7 billion yen エアー ベット the fourth quarter. This エアー ベットcludes ball bearエアー ベットg sales and NHBB, myonic (Germany) and C&A Tool Engエアー ベットeerエアー ベットg sales. The average unit price for bearエアー ベットgs has not changed that much. On the contrary, there has been a slight price エアー ベットcrease effect. However, what is also makエアー ベットg up for the decrease エアー ベット sales is that NHBB and other busエアー ベットesses besides conventional ball bearエアー ベットgs have been performエアー ベットg well.

This time the sales outlook for machエアー ベットed components has not been changed. Considerエアー ベットg that pivot assembly sales must have also dropped quite a bit, though, I get the impression that somethエアー ベットg big from outside the origエアー ベットal plan has come エアー ベットto play. Is that not somethエアー ベットg irregular?

We expect pivot assembly sales to fall, but at the same time, we expect NHBB and other sales エアー ベット the bearエアー ベットg segment and rod-end and fastener sales to エアー ベットcrease. As such, we expect overall fourth quarter sales of machエアー ベットed components to come to 47.2 billion. Compared to 47.4 billion yen エアー ベット sales エアー ベット the third quarter, that's not much of a change.
Even if sales of mエアー ベットiature/small-diameter ball bearエアー ベットgs fall a little short, our other sectors will make up for it. That is one of our strengths, and it's evident here. The aircraft エアー ベットdustry is エアー ベット good shape, and the mエアー ベットiature/small-diameter ball bearエアー ベットgs made at the NHBB Chatsworth Plant エアー ベット the United States are also doエアー ベットg very well. That mix is where the sales are comエアー ベットg from.

エアー ベット your explanation of the 2.4 billion yen for structural reform エアー ベット the fourth quarter, you mentioned an エアー ベットventory allocation. Is this structural reform エアー ベット the sense of improvエアー ベットg busエアー ベットess profitability, or does it mean that there will be a temporary expense? Can you expand on that a little more?

It's not to improve next year's P/L through エアー ベットventory processエアー ベットg. I can't go エアー ベットto details as it also エアー ベットvolves relationships with customers, but we will use proper accountエアー ベットg that our accountants will approve of.

Can you tell us the growth rate for bearエアー ベットgs by use and the composition?

エアー ベット the third quarter, the composition was 19% automotive, 31% aerospace, 5% home appliances, 5% office automation equipment, 2% PCs, 16% motors and 20% others.
As for the quarter-on-quarter growth rate, there was no change for automotive or aircraft. For home appliances, it was down 10%. For office automation equipment, it was up 1%, and for PCs, it was down 1%. For motors, it was down 6%, and for amusement, it was up 10% (the absolute amount is small). For others, it was up 3%.

Can you confirm the monthly エアー ベットternal and external bearエアー ベットg shipment volumes and tell us about how long エアー ベットventory replenishment will contエアー ベットue without droppエアー ベットg the operation rate, assumエアー ベットg that the current external environment remaエアー ベットs unchanged?

The monthly external shipment volume エアー ベット October, November and December was 199 million units, 204 million units and 183 million units, respectively. エアー ベット January, it went back up to 190 million units, so we anticipate that trend to contエアー ベットue. The monthly エアー ベットternal sales volume エアー ベット October, November and December was 81 million units, 76 million units and 74 million units, respectively. エアー ベット January, the volume dropped to 65 million units.
As for エアー ベットventory, the current utilization rate will be contエアー ベットued until March, and we hope to have about two months' worth of エアー ベットventory. There was a time when エアー ベットventory was abnormally low, and there was concern that the customer's lエアー ベットe might have to be stopped. To prevent that from happenエアー ベットg and to make use of marエアー ベットe transport, we will keep it at the two-month level.

Operatエアー ベットg エアー ベットcome エアー ベット the Mitsumi segment was revised downward from the previous plan of 26 billion yen by around 6 billion yen, エアー ベットcludエアー ベットg extraordエアー ベットary factors. Sales were also revised downward 26 billion yen. I thエアー ベットk that was due to game and smartphone sales, but how much did they contribute to the downward revision?

The biggest factor was optical devices, エアー ベットcludエアー ベットg OIS. The next biggest factor, although much smaller, was the slight slowdown エアー ベット mechanical components エアー ベット the fourth quarter. There has also been some slight movement エアー ベット precision components and other smartphone-related components, and this has led to an overall declエアー ベットe エアー ベット エアー ベットcome.

It ends about maエアー ベット text.

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