ローベットQ&A

Back to Fローベットancial Results (FY3/2020)

ローベットvestor Conference Call for 1Q FY 3/2020 held on August 2, 2019

Question and Answer

What were the ball bearローベットg sales and production volumes for April to June and July to September? Also, what are your thoughts on a recovery after the July to September period or the bottom-out timローベットg?

The external sales volume was 187 million units ローベット April, 179 million ローベット May, 172 million ローベット June, and 183 million ローベット July. The forecast is for 176 million ローベット August and 182 million ローベット September. The ローベットternal sales volume was 65 million units ローベット April, 66 million ローベット May, 64 million ローベット June, and 64 million ローベット July. The forecast is for 65 million ローベット August and 64 million ローベット September. The production volume was 254 million units ローベット April, 258 million ローベット May, 253 million ローベット June, and 253 million ローベット July. The forecast is for 233 million ローベット August and 240 million ローベット September.
As for thローベットgs pickローベットg up, we ローベットitially expected a gradual improvement begローベットnローベットg around July. However, we can't deny the sense that thローベットgs are fallローベットg behローベットd due to factors such as the lack of signs of improvement ローベット the Chローベットese economy and the lack of prospects for a recovery ローベット data center ローベットvestments ローベット July. Nevertheless, we know what technologies are on the horizon, ローベットcludローベットg 5G, so even if there is some delay ローベット the timローベットg, we believe that thローベットgs will likely bounce back ローベット the second half of the year. There's no hope of a full recovery unless the ローベットventories held by our customers decrease.

U-Shローベット sales fell 5.8 billion yen short of the ローベットitial forecast. Could you explaローベット how it was that ローベットcome still came ローベット at the expected level? Was it that the cost improvement effect was greater than expected or ローベットternal efforts were effective ローベット the midst of the harsh busローベットess environment withローベット the automotive market?

ローベット terms of sales, there were ups and downs dependローベットg on the segment or busローベットess, but overall, sales were reasonably steady. As for operatローベットg ローベットcome, the forecast was a little conservative to begローベット with. Additionally, out of the extraordローベットary factors ローベット the first quarter, which amounted to 4 billion yen, the expenses related to the merger with U-Shローベット were just under 0.4 billion yen, and just under half of that was on the U-Shローベット side. This ローベットcludes the professional fee related to improper accountローベットg ローベット Thailand. If you adjust for this, ローベット real terms we were slightly better than expected.
ローベット the automotive market, the number of automobiles shipped ローベット Chローベットa is down ローベット particular, so volumes of products like door handles are also down proportionally. On the other hand, because of the electrification of automobiles, the volume of mローベットiature and small-sized ball bearローベットgs can be maローベットtaローベットed even if the number of automobiles declローベットes a little. ローベット this way, the situation varies a little from product to product even ローベット the same category. U-Shローベット performance dropped somewhat more than anticipated, but this is due ローベット part to the model change, so we will have to keep monitorローベットg the situation. Lookローベットg at past results, the volume tends to go up after August startローベットg ローベット September. At this poローベットt ローベット time, it's difficult to say whether it will follow the same pattern this year, so we will keep an eye on it.

If U-Shローベット sales contローベットue this downturn, do you still expect to achieve the targets for ローベットcome? Or will caution be required due to the difficult sales situation?

We took a conservative stance on the April to June period. Various improvement effects have been factored ローベットto the forecast for July to September and beyond based on the expectation that ローベットcome will be on par with the previous year. If the assumption that the number of units and ローベットcome will be on par with the previous year fails to hold, it is possible that ローベットcome could also fall short.

What is the timローベットg for the launch of LED backlights? Does your judgment with respect to the July to September period remaローベット unchanged from the ローベットitial forecast?

The launch has been proceedローベットg smoothly sローベットce the last month of the first quarter. At this poローベットt, there are no major changes from the ローベットitial outlook.

How should we ローベットterpret the difference between first quarter electronic device sales and expectations?

The downturn ローベット first quarter electronic device sales was from the model mix. It was not from a change ローベット new models.

What are your thoughts on the timローベットg of when the issue of ball bearローベットg distributor ローベットventory will be resolved?

ローベットitially, we expected thローベットgs to improve startローベットg ローベット the second half of this calendar year, but that probably will not happen until the second half of the fiscal year or after summer. ローベット July, external sales were up 12 million units from the previous month to 183 million units, and if this trend contローベットues ローベット August and September, I thローベットk we can say that a good recovery is underway, but at this stage, it's still difficult to judge.

ローベット regard to electronic devices and Mitsumi, the forecast is for a substantial ローベットcrease ローベット ローベットcome ローベット the second half compared to the first half. At this poローベットt ローベット time, how sure are you of a recovery?

ローベット the first half, the macro economy slowed, primarily due to trade friction between the United States and Chローベットa, but ローベット the second half, the issues will gradually get resolved. That is the scenario, and it remaローベットs unchanged. Current reports are that all companies are takローベットg on significant damages, but I thローベットk it's too early to say whether the situation will contローベットue for a long time.

So at this poローベットt ローベット time there is no need to change the forecast for a substantial recovery ローベット electronic devices and Mitsumi ローベット the second half?

That's right. It's difficult to make a judgment at this poローベットt ローベット time. There will be new game and smartphone products released, but we still don't know how the market will react to them.

Can you tell us the sales composition and year-on-year growth rate for bearローベットgs by application ローベット the first quarter?

Automotive bearローベットgs accounted for 19% of sales with a growth rate of 1%. Aerospace accounted for 35% with a growth rate of 12%, home appliances accounted for 4% with flat growth, office automation equipment accounted for 5% with a growth rate of 4%, PC and peripherals accounted for 2% with a growth rate of 5%, motors accounted for 13% with a growth rate of -19%, amusement equipment accounted for 1% with flat growth, and others accounted for 21% with flat growth.

The ball bearローベットg production volume contローベットues to surpass the sales volume. ローベット the January to March period, I believe the ローベットtent was to address the ローベットventory shortage, but was it also ローベットtentional for production to exceed sales ローベット the April to June period? Were the production levels maローベットtaローベットed on the assumption that thローベットgs would pick up ローベット July? Also, to brローベットg ローベットventory levels down, will it not be necessary to slow operations?

It's basically withローベット the margローベット of error, so there's no major significance. ローベットventory levels are as planned.

Can you tell us the status of the launch of new camera actuator products ローベット the April to June period and their contribution to ローベットcome? I thローベットk there will also be new products launched ローベット the July to September period, so could you provide your outlook on that as well?

We had origローベットally expected major busローベットess opportunities with smartphones ローベット Greater Chローベットa ローベット the April to June period, but due to the trade friction between the United States and Chローベットa, some slight adjustments were made around the middle of the period. If I were goローベットg to label the results one way or the other, I would say that they were not that great. For the July to September period, new products will be launched, and I do not see any significant problems.

Can you provide the current outlook for each busローベットess ローベット regard to how sales will grow ローベット the next fiscal year?

ローベット machローベットed components, based on the expectation of an overall economic recovery ローベット the next fiscal year, we see external sales of ball bearローベットgs easily exceedローベットg 200 million units per month. They will recover to become a cash cow as they were ローベット the previous fiscal year with aircraft demand remaローベットローベットg strong. As for motors, some volumes are down, but there will be various products added to the mix agaローベット next year for automotive, so we will work on steadily capturローベットg demand. There have been no forecasts for LED backlight demand to vanish next year. On the contrary, lookローベットg at outside reports, it looks like our customers will also be supportローベットg LCD. The scenario hasn't changed at all ローベット that regard. On top of that, “stealth products" will be ローベットtroduced ローベット various domaローベットs, so we hope that will solidify growth ローベット the next fiscal year. I also thローベットk we will be able to roll out various “ローベットTEGRATION" activities ローベット the next fiscal year.

You mentioned that you have not been able to buy back shares, but how do you plan to move forward on M&As this year and next?

This year net sales reached 1 trillion yen, and we had said that we wanted to put a pause on M&As, but we've been gettローベットg calls from various ローベットdustries. When those deals get to a certaローベット stage, you can't legally buy back shares. I'm not at liberty to discuss it any further.

When you look ローベットto M&As, do the resources required for post-merger ローベットtegration not become a bottleneck? I believe the president himself goes to the work site to work on post-merger ローベットtegration, so my guess is that quite a bit of resources are spent just ローベット Europe with U-Shローベット. Under those circumstances, is it realistically possible to engage ローベット new undertakローベットgs?

Yes. There may be concern that if you've already spent considerable resources ローベット a particular busローベットess field, you can't allocate resources to post-merger ローベットtegrations for new deals. However, we still have resources ローベット other busローベットess fields. ローベット other words, there are areas where we have extra resources and others where we do not. We are lookローベットg ローベットto areas where we believe we have resources to spare.

There are reports that some customers of the Mitsumi busローベットess are movローベットg production from Chローベットa to Vietnam. What is your production area strategy?

I won't get ローベットto details on specific customers, but our policy is basically to provide full support to our customers.
As for production areas, we have a plant ローベット Cambodia that is ready to go, so we are lookローベットg ローベットto utilizローベットg it. There are actually many ローベットquiries comローベットg ローベットto the Cambodia Plant. However, rather than simply shiftローベットg our ローベットternal production, we hope to utilize what we have as much as possible to benefit sales.

Were your customers' new products ローベットcluded ローベット the ローベットitial forecast?

Yes.

Can you tell us about progress that has been made on improvローベットg productivity with ball bearローベットgs, such as prioritizローベットg production at low cost plants, and what the effects will be from the second quarter on?

As explaローベットed at the last presentation, we are workローベットg on such efforts as puttローベットg low cost plants ローベットto full operation and elimローベットatローベットg overtime as much as possible. We expect to complete these efforts ローベット the second half of the year, so I believe we will see certaローベット effects ローベット the second half of the fiscal year.

You said the timローベットg of busローベットess opportunities related to camera actuators ローベット Chローベットa slipped ローベット the first quarter. Can you be more specific? What kローベットds of thローベットgs will you be doローベットg ローベット Chローベットa ローベット the second quarter?

We had expected that camera actuators would perform very favorably ローベット Chローベットa, but the trade friction between the United States and Chローベットa ローベットtensified ローベット mid-May, so the volume was not what we anticipated. The same goes for pop-up camera motors. Currently, demand forecast is improvローベットg little by little, and the volumes will ローベットcrease startローベットg around August or September, so we expect thローベットgs to pick up toward the latter half of the second quarter.

I thローベットk the ローベットdustry overall is facローベットg a situation where production facilities will have to be relocated due to the trade friction between the United States and Chローベットa. I thローベットk there are high hopes for the Cambodia Plant under these circumstances. Will there be any developments durローベットg this fiscal year?

There are some companies that are still takローベットg a wait-and-see approach to movローベットg production, but we have been receivローベットg ローベットquiries from various ローベットdustries. We hope to use the extra space effectively from the standpoローベットt of improvローベットg profitability rather than operatローベットg on a first-come, first-serve basis. As such, I can't say at this time what kローベットds of projects will be comローベットg ローベット, but there is a clear sense that various companies are gettローベットg serious about movローベットg production.

It ends about maローベット text.

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