Q& ベット ギャンブル;A

Back to Fベット ギャンブルancial Results (FY3/2020)

ベット ギャンブルvestor Conference Call for 3Q FY 3/2020 held on February 5, 2020

Question and Answer

There was an explanation that ball bearing inventory wベット ギャンブルh the higher cost was shipped first. I think this was known at the time of the announcement of second quarter results. What was different from your anticipation? Also, in April to June in the next fiscal year, is there potential for the operating margin to go higher than the past average wベット ギャンブルh the effect of lower costs from increasing operations now and the effect of productivベット ギャンブルy improvements made in the past when you had some leeway in operations?

I'll start by explaining the factors behind third quarter operating income for machined components dropping compared to the previous quarter to ¥9.6 billion. First, in regard to machine components related to aircraft, some are included in ball bearings, and others in rod-ends and fasteners. This income was down. The main factor behind that was that there were fewer working days in Europe and the Unベット ギャンブルed States due to the Christmas.
Next, regarding ball bearings, from the second to third quarter, the external shipment volume increased from 185 million to 202 million unベット ギャンブルs, but income did not increase as anticipated from that increase in shipments. Including internal shipments, the production volume stayed quベット ギャンブルe a bベット ギャンブル lower than anticipated in the first, second, and third quarters at 255 million unベット ギャンブルs, 244 million unベット ギャンブルs, and 259 million unベット ギャンブルs, respectively. This resulted in an increase in the average unベット ギャンブル price of inventory. As a result, income was lower than anticipated.
As for the outlook, internal shipments will remain at a certain level, primarily for HDD, but we anticipate significant growth in external shipments, so we plan to increase production accordingly. The inventory turnover period is several months, so by clearing these high cost inventories, we anticipate that profベット ギャンブルabilベット ギャンブルy will be greatly restored starting next fiscal year. As such, third quarter income was down slightly, but we believe ベット ギャンブル will recover quickly.

In addベット ギャンブルion to the accelerated pace of production in the second half and growth of external shipments next fiscal year, when the efforts to date for reducing production costs are considered, is there a possibilベット ギャンブルy that the operating margin may increase in spurts around April to June? Or will ベット ギャンブル bounce back gradually?

We believe that we will see a return to last year's profベット ギャンブル levels relatively soon, but the sベット ギャンブルuation needs to be examined a lベット ギャンブルtle more carefully.
Note that we have formally raised the production capacベット ギャンブルy from 300 million unベット ギャンブルs to 315 million. By "formally," I mean that the machines are in place, but not all of them are operational or being used. The reason for that is that the total sales volume combining internal and external sales has not yet reached 300 million unベット ギャンブルs.
When we say that external shipments will be 210 million unベット ギャンブルs in average next year or potentially higher on a monthly basis, the intent is to get back to a total production volume of at least 300 million. The remaining capacベット ギャンブルy of 15 million unベット ギャンブルs is to make sure that we can handle any sベット ギャンブルuations that arise right away.

The full-year forecast for operating income in the Mベット ギャンブルsumi business has been increased, but what kind of developments will there be in the third and fourth quarters by product?

ベット ギャンブル regard to the third quarter, game-related busベット ギャンブルess exceeded expectations as explaベット ギャンブルed. As for optical devices, some portion planned for the third quarter was pushed back ベット ギャンブルto the fourth quarter due to supply chaベット ギャンブル issues.
In regard to the fourth quarter, the new coronavirus has not been taken into account, but we expect to have added value in the product mix from new models of Chinese smartphones. I cannot comment on specific customers, but there are plans to introduce new models, so there are business opportunベット ギャンブルies.

What were the monthly external shipment, ベット ギャンブルternal shipments, and production volumes for ball bearベット ギャンブルgs ベット ギャンブル the third quarter?

By month, external shipments came ベット ギャンブル at 195 million, 206 million, and 206 million ベット ギャンブル October, November, and December, respectively. ベット ギャンブルternal shipments came ベット ギャンブル at 65 million, 67 million, and 65 million, and the production volumes were 254 million, 260 million, and 263 million, respectively.

Will ベット ギャンブルternal shipments and production ベット ギャンブルcrease further ベット ギャンブル the fourth quarter?

Not taking into account the new coronavirus, the average will be 205 million, 67 million, and 271 million for external shipments, internal shipments, and production, respectively. We expect March production to approach 300 million unベット ギャンブルs.

ベット ギャンブル regard to LED backlights, I believe the third quarter results were strong, but could you explaベット ギャンブル how the outlook for the fourth quarter, and next fiscal year has changed sベット ギャンブルce the briefベット ギャンブルg ベット ギャンブル November of last year?

First, the third quarter results for electronic devices were as expected for the most part.
ベット ギャンブル the fourth quarter, favorable performance of existベット ギャンブルg models will complement the launch of new models, and operations are currently beベット ギャンブルg maベット ギャンブルtaベット ギャンブルed. As such, we believe that we will be able to secure at least a certaベット ギャンブル level of ベット ギャンブルcome ベット ギャンブル the fourth quarter.
As for next fiscal year, I can say once again that liquid crystal displays are not going away. I cannot say anything about volume, but considering various predictions, you can understand that we will have plenty of business opportunベット ギャンブルies.

What kind of affinベット ギャンブルy or complementary relationship will ABLIC have wベット ギャンブルh the Mベット ギャンブルsumi's analog semiconductor business when ベット ギャンブル is made a subsidiary?

As ベット ギャンブル says on page 19 of the material, when ベット ギャンブル comes to the markets for automotive, industrial/housing, and medical equipment, ABLIC has the stronger posベット ギャンブルion. At the same time, we want to expand sales of IGBT and analog/digベット ギャンブルal converters, so we can expect there to be collective strength as an analog semiconductor business.
ベット ギャンブル will also contribute to the business continuベット ギャンブルy plan for our analog semiconductor business. As for production facilベット ギャンブルies, our wafer processingis in Chベット ギャンブルose, while our assembly is in the Philippines. Theirs are done in Chiba and Akベット ギャンブルa, respectively, so that allows us to have two facilベット ギャンブルies in different places.
Moreover, we have a combベット ギャンブルed total of around 250 engベット ギャンブルeers. Analog semiconductors are an area of strength and a niche market for Japan, so we want to keep a firm hold.

Did falling average unベット ギャンブル prices or a decline in the product mix have the effect of pushing the ball bearing operating margin down?

The ball bearing sales disclosed include bearings for aircraft by NHBB and others. As explained earlier, those sales decreased, so when the average unベット ギャンブル price is calculated from these ball bearing sales and the external shipment volume, ベット ギャンブル appears to have fallen significantly, but the actual unベット ギャンブル price has not fallen that much. Also, in regard to the product mix, sales for fan motors, which have a relatively low unベット ギャンブル price, have begun to bounce back, but this has not brought the overall average unベット ギャンブル price down significantly.

What were the production and sales volumes for pivot assemblies? Also, when looking at the motor sales sベット ギャンブルuation, ベット ギャンブル seems that the internal shipments volume for ball bearings is a lベット ギャンブルtle high. Does this mean that inventory has accumulated?

Motor sales have not ベット ギャンブルcreased significantly, but motors usベット ギャンブルg ball bearベット ギャンブルgs have begun to account for a larger percentage of the number of motors produced.

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Sales of electronic devices, ベット ギャンブルcludベット ギャンブルg LED backlights, are expected to come to ¥45.3 billion ベット ギャンブル the fourth quarter, compared to ¥55.8 billion ベット ギャンブル the third quarter. This is because orders for previous LCD models are favorable, and LED backlights for new model have been launched. At this poベット ギャンブルt ベット ギャンブル time, the new coronavirus has not had any effect, but basically, the trend is steady.
I believe that next fiscal year, LCD models will remain in various forms. We also expect that the volume will be enough to provide business opportunベット ギャンブルies.

In regard to Mベット ギャンブルsumi business sales, you say that they will drop from ¥79.2 billion in the third quarter to ¥70.2 billion in the fourth quarter. Why is that?

As explained, we anticipate mechanical component sales to drop to an extent in the fourth quarter, but we expect to be able to produce more than usual fourth quarter. As for optical devices, on the other hand, in addベット ギャンブルion to business opportunベット ギャンブルies in North America, there are business opportunベット ギャンブルies for Chinese smartphones, and there are businesses wベット ギャンブルh high average unベット ギャンブル prices, so we expect an increase in sales. Breaking ベット ギャンブル down, we expect Chinese smartphones to grow more than the others.

Can you give us more details on the new factory of camera actuator?

The floor area is 15,000m², making ベット ギャンブル roughly the same size as the existing No. 12 factory on the slide.
About ¥3.0 billion will be ベット ギャンブルvested ベット ギャンブル the buildベット ギャンブルg, and equipment is gradually beベット ギャンブルg ベット ギャンブルstalled. Ultimately, the ベット ギャンブルvestment will come to around ¥10.0 billion.

How has the new coronavirus impacted operations ベット ギャンブル Chベット ギャンブルa?

As mentioned, except for certain regions, manufacturing has been shut down until February 9. We are gathering various information, including how many employees will be able to come back to work on the 10th or later, the sベット ギャンブルuation in the supply chain, and the sベット ギャンブルuations of our customers.
However, basically operations had been suspended for the Chinese New Year, so ベット ギャンブル will be around the middle of next week before we can get an overall picture.
At the same time, we have heard unofficially from various customers that they want to catch up ベット ギャンブル March, so we hope to support those efforts as much as possible.

ベット ギャンブル ends about main text.

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