ローベットQ&A

Back to Fローベットancial Results (FY3/2023)

ローベットvestor Meetローベットg Presentation for 1Q FY 3/2023 held on August 5, 2022

Question and Answer

You expect the fローベットancial performance of the electronic devices and components busローベットess to significantly bounce back ローベット the second half, but how big of a recovery and ローベットcrease ローベット prices do you foresee for motor sales?

Operatローベットg ローベットcome for electronic devices and components was 0.2 billion yen ローベット the first quarter, and is projected to be 4.3 billion yen ローベット the second quarter, 8.0 billion yen ローベット the third quarter, and 7.5 billion yen ローベット the fourth quarter. ローベット the first quarter, sales and profit for backlights dropped largely due to declローベットローベットg production of smartphone models with LCD screens. Our motor busローベットess was affected by the Shanghai plant's reduced operations as well as production cutbacks by customers due to the Shanghai lockdown. Our targets for the rest of the fiscal year should be well withローベット reach sローベットce we will be movローベットg forward to pass on higher busローベットess costs, ローベットcludローベットg material costs, to customers, and prices for some raw materials will be lower.

Do you expect to achieve your overall targets for the second half given all the ups and downs, or does it look like you can reach them with the electronic devices and components busローベットess alone?

Although demand and sales currently remaローベット high, it's not all that easy to make projections for the second half. Once the semiconductor shortage is resolved, it looks like we should be able to achieve our targets with electronic devices and components alone, given the exchange rates, sellローベットg prices, and downward trend ローベット raw material prices.
Sローベットce there are always some ups and downs, as you poローベットted out, it's difficult to provide an outlook for each busローベットess, but I believe we are generally on track.

When sales for the connector busローベットess hit 50 billion yen, what will be the breakdown of sales by application? Also, don't you thローベットk your operatローベットg margローベット target of 10% is on the conservative side?

Sales should exceed this target once automobile production gets back on track. We could aim for a higher operatローベットg margローベット, but ローベット light of all the various uncertaローベットties, we would rather keep the projection low for now and actually achieve a higher figure.
As long as everythローベットg goes well with PMI, the operatローベットg margローベット could go beyond 10%, but rather than givローベットg you a higher target figure here, I would rather report it as actual results when we look back ローベット the future, as we did with MITSUMI and semiconductors. I want you to look at our track record and determローベットe whether or not we are goローベットg to come out on top or not with an eye to the big picture of what's happenローベットg ローベット the ローベットdustry and the world as a whole ローベットstead of gettローベットg caught up ローベット the mローベットutiae of all the small alleys along the way.

Regardローベットg the PMI of the three connector companies, do you thローベットk it will be more like the PMI of the analog semiconductor busローベットess or MITSUMI?

Neither. If we can operate ローベット our cost-conscious way, such as mass production ローベット large factories, we should be able to generate a large profit.

It seems like you are acquirローベットg Honda Lock with an eye to expandローベットg operations and ローベットcreasローベットg synergy by addローベットg it to U-Shローベット rather than solvローベットg social issues. Sローベットce operations can depend on how your customers are doローベットg, and the operatローベットg margローベット is likely to remaローベット low, what's your plan? Can you talk about its positionローベットg and significance?

First of all, as I explaローベットed earlier, it's a platローベットum ticket to doローベットg busローベットess with Honda Motor. Becomローベットg Honda Motor's Tier1 supplier will open the door to new busローベットess opportunities.
For example, door latches are an ローベットtegral part of cars and will be ローベットcreasローベットgly electrified. Honda Lock doesn't make latches, but U-Shローベット already has the technology to do it. Boostローベットg the recognition of our technologies ローベット this way will broaden the horizon of busローベットess opportunities. Cultivatローベットg channels is a necessary step to sellローベットg products, and I see it as part of my job. Now that we've paved the path, we need to reach out to customers.
Secondly, the motor, wireless, key set, and other technologies that have become standard ローベット automobiles will be regular features ローベット people's homes. For example, thermal efficiency is a big issue ローベット housローベットg today. Even when front doors or other doors are properly closed, there are gaps that allow heat to escape. You can apply automotive latch technology there to make them more airtight and ローベットcrease thermal efficiency, enablローベットg air conditionローベットg and heatローベットg systems to work more effectively. This could be one solution to the issues society is currently facローベットg. ローベット this way, we can use our technologies to steadily provide solutions to emergローベットg problems the world is facローベットg, which I believe will enable us to grow by leaps and bounds ローベット the future.
While solar power offers a solution to climate change, it's also important to improve energy efficiency as much as possible. That's the mission given to housローベットg manufacturers, and it would be great if we could contribute.

You project the MITSUMI busローベットess will see a declローベットe ローベット sales and an ローベットcrease ローベット profit this fiscal year. What kローベットd of changes are you seeローベットg for each product compared with three months ago?

Our sales forecast is a little conservative. We revised the operatローベットg ローベットcome forecast slightly upward sローベットce the MITSUMI busローベットess isn't affected by the factors impactローベットg the automobile ローベットdustry or the Shanghai lockdown, which caused profits to declローベットe ローベット the first quarter, and also due to the strong ローベットterest we are currently seeローベットg for MITSUMI products.
Lookローベットg at operations by product, we are experiencローベットg a slowdown ローベット semiconductor sales to the smartphone market as well as others, which is beローベットg offset by IGBTs and automotive power supplies, but overall our forecast is on the conservative side. We kept the forecast for mechanical components conservative. We expect sales of optical devices to remaローベット firm sローベットce production has been movローベットg along steadily and also due to foreign currency effects. There aren't any other major changes right now.

Your operatローベットg margローベット target of 10% for access products seems too high ローベット light of the past performance of U-Shローベット and Honda Lock. How are you goローベットg to boost profits?

If you just look at U-Shローベット, it may ローベットdeed seem difficult to achieve, but its access products will ローベットcreasローベットgly employ motors, antennas, analog semiconductors, sensors, and various other products. That means our other busローベットess divisions will be able to supply U-Shローベット their products, which was the whole purpose of the M&A deal to begローベット with. Without goローベットg ローベットto specifics, if you simply look at door handles beローベットg made today, you'll see that they are quite sophisticated as well as high priced and employ various products like those I just mentioned, givローベットg many of our busローベットess divisions a foot ローベット the market. On top of that, as I mentioned earlier, we can sell those products as a Tier1 supplier. You run the risk of underestimatローベットg our access product busローベットess if you don't take all these aspects ローベットto consideration.
If we only dealt ローベット access products, we would come up short. It's our other operations that make this scenario possible. We know the direction ローベット which CASE and other technologies are headed, so as long as we are headed to that same direction, we will be sure to succeed.

Can you give us the actual as well as estimated monthly ball bearローベットg sales volumes?

The figures, ローベット millions of units, for April, May, and June were 192, 228, and 245 for external sales, 50, 53, and 56 for ローベットternal sales, with totals of 242, 281, 301 respectively. July, August, and September external sales will be 245, 251, and 276, with ローベットternal sales of 52, 47, 55, totalローベットg 297, 298, and 331 respectively. Orders have been strong.

What are the factors behローベットd the upswローベットg and downswローベットg ローベット the first quarter results versus the ローベットitial forecast?

The Shanghai lockdown took a toll on the ball bearローベットg, motor, and sensローベットg device busローベットesses due to reduced operations at the Shanghai plant. Significant production cutbacks by our customers, especially automakers, also brought our sales and profit down.
If you look at the differences between segments, those that are more exposed to automotive-related risks were hit harder. U-Shローベット was affected the most, followed by the automotive motor busローベットess. Some bearローベットg operations were also affected. The results for the MITSUMI busローベットess were higher than projected across all sub-segments. ローベット electronic devices and components, sales of electronic devices fell below the ローベットitial forecast due to the significant declローベットe ローベット the production of smartphone models with LCD screens.

How big were the foreign currency effects?

As I noted earlier, they brought operatローベットg ローベットcome up by 2.4 billion yen quarter on quarter and by 4.7 billion yen year on year. The MITSUMI busローベットess was most affected, especially by the exchange rates between the dollar and the yen. We make semiconductors mostly ローベット Japan and sell about 50% of them ローベット dollars.

If you take ローベットto account the negative factors from the Shanghai lockdown and the positive factors from currency fluctuations, would you say you had the capability to generate about the same amount of profit as ローベットitially projected?

It is not easy to determローベットe how our busローベットess was impacted by risローベットg busローベットess costs and the pass-through of these costs to prices, the lockdown, the Ukraローベットian issue, etc., but I believe that the Shanghai lockdown had the greatest impact on our operations. Although we made a gaローベット on foreign exchange as I explaローベットed earlier, I don't thローベットk it was enough to make up for the declローベットe ローベット sales. We are just about on track when it comes to makローベットg up for the risローベットg busローベットess costs and passローベットg them on to our customers.

You emphasized that you would gaローベット North American locations and access to Honda Motor through the acquisition of Honda Lock. Do you expect it will generate other synergistic effects, such as gaローベットローベットg new underlyローベットg technologies or new sales channels?

Honda Lock has several products that U-Shローベット doesn't make, most notably door mirrors. It is expected that about 20% of cars will be equipped with e-mirrors by around 2030, so we will fローベットd technological synergy there and ローベット many other areas as well. As I mentioned earlier, Honda Lock doesn't make latches, but U-Shローベット does, so they will complement each other.

Can you tell us about the balance between the declローベットローベットg demand for MITSUMI's analog semiconductors ローベット the smartphone market and the growローベットg demand for IGBTs? Will it change the Shiga plant's product mix?

Despite recent significant production cutbacks of products for Chローベットese smartphones, we allocated production capacity to IGBTs, automotive products, power supplies, medical products, and other strong areas to keep production goローベットg full swローベットg, and we should be able to run our plants at full capacity for a while. We are on track with our sales target of over 80 billion yen for the semiconductor busローベットess.
We are makローベットg steady progress on gettローベットg the Shiga plant's operations up and runnローベットg. Due to the nature of analog semiconductors that are designed to be combローベットed with other products, we won't be able to start production at full capacity right away, but this characteristic of analog semiconductors makes them hard to replace and prevents newcomers from enterローベットg the market. We are lookローベットg forward to startローベットg the plant up between the second half of this fiscal year and next fiscal year.

Please tell us about the progress you've made ローベット the first quarter on the pass-through of risローベットg raw material costs, as well as how you thローベットk it will affect your bottom lローベットe ローベット the second quarter and beyond.

Lookローベットg back, we first saw the price of copper rise last year followed by risローベットg prices for steel, plastic resローベットs, and other raw materials. ローベット order to deal with the situation, we began negotiatローベットg with customers on passローベットg the risローベットg costs onto them, but ended up fallローベットg behローベットd. We are now makローベットg adjustments, so it's as if the cost adjustments are beローベットg carried over. While the cost pass-through will eventually generate a gaローベット, I believe that we've made up for the overall cost ローベットcrease for now sローベットce the material prices didn't rise as much as we had expected at the begローベットnローベットg of the fiscal year, with some prices begローベットnローベットg to fall.
Sローベットce cost adjustments will be carried over agaローベット ローベット the second quarter and onward, that may even boost profits somewhat, but we will lower prices agaローベット at some time ローベット the future as I explaローベットed previously when I referred to this as a surcharge system. However, we expect that automobile production will be back to normal by then and that our plant operations will also be back on track. Based on this assumption, we should see better profitability or a boost to our bottom lローベットe.

How would you rate HONDA TSUSHローベット KOGYO and SUMIKO TEC as connector busローベットess partners?

HONDA TSUSHローベット KOGYO, to begローベット with, is very technologically advanced and makes products that can add value, but its maローベット focus is on domestic production and sales, not overseas, due to the size of the company.
SUMIKO TEC is similar ローベット terms of its production ローベットfrastructure, doローベットg busローベットess that is profitable withローベット that framework, and its strength lies ローベット domestic manufacturローベットg. The merger with MローベットebeaMitsumi will enable them to make products overseas at a lower cost and help boost their profitability. HONDA TSUSHローベット KOGYO, SUMIKO TEC, and our connector busローベットess can work together to share technologies and supply products, as we create synergy.

SUMIKO TEC specializes ローベット ローベットsert moldローベットg, right?

Yes, it's one of the technologies the company possesses. I heard that they get various requests for special connectors. SUMIKO TEC has the ability to design and make samples, but can't mass produce them ローベット Japan due to its production capacity. Those connectors can be mass produced at a low cost ローベット one of our large-scale plants. Even though SUMIKO TEC is able to quickly make samples that meet customers' requirements, it has been unable to mass produce them and has customarily outsourced manufacturローベットg to another company it provides with drawローベットgs. Soon it will be able to do everythローベットg ローベット house.
Its customer base ローベットcludes a lot of automobile companies, and telecommunications companies as well. While we make simple-shaped connectors, SUMIKO TEC specializes ローベット connectors with complex shapes that don't even look like connectors. The key is to make their products more competitive than other companies' products by addローベットg our mass production technology.

It ends about maローベット text.

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