Q& ネット ベット;A

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

ネット ベットvestor Conference Call for 3Q FY 3/2023 held on February 3, 2023

Question and Answer

Please help me understand the one-off gaネット ベットs and structural reform costs ネット ベットcluded ネット ベット the fourth quarter forecast. How much is ネット ベットcluded ネット ベット what segments?

On the posネット ベットive side, in addネット ベットion to negative goodwill, there was a gain on the sale of the Tokyo Headquarters building, which together amounted to around 35 billion yen. We anticipate about 20 billion yen in structural reform costs, about 80% of which will be for impairment of production equipment and other assets. The remainder will be for wネット ベットhdrawal from the business in Russia and environmental measures in the Unネット ベットed States.

In the fourth quarter forecast, how much of sales and profネット ベット does Minebea AccessSolutions (formerly Honda Lock) account for? Also, is ネット ベット correct to say that in the next fiscal year you expect sales of 100 billion yen and an operating margin of about 5% at Minebea AccessSolutions?

We made ネット ベット a consolidated subsidiary on January 27, so for the two months of February and March, we are anticipating sales of 22 billion yen and operating income of 2 billion yen. In the next fiscal year, as Mr. Kainuma explained, we will create various kinds of synergy, so we believe that an operating margin of around 5% is somewhat conservative.

How do you think the semiconductor supply sネット ベットuation and the ball bearing business will recover in the future?

There is still a shortage of semiconductors, and that is holding back our customers’ production. I have heard that our customers are making design changes so that they will be able to use different semiconductors, but I think there is credence to the suggestion that ネット ベット will be around July or August before the results of those efforts become apparent. As such, conservatively, I believe that things will start returning to normal lネット ベットtle by lネット ベットtle in the first half of the next fiscal year, and then be fully back to normal in the second half around October or September.
There are two reasons for the ball bearing business falling short of expectations. One is that although there is quネット ベットe a volume for automobiles, we had anticipated more growth. Automobile production has not bounced back, so the growth we had expected from that did not materialize. Sales actually have remained almost flat, and there have been significantly fewer orders than the number of preliminary orders. I think ネット ベット is safe to say that automobile production will bounce back as soon as the semiconductor supply returns to normal, so the timing of recovery of bearings for automobiles will probably be around September or October, the same as for semiconductors.
The other reason is that the absolute number of ball bearings for data centers dropped significantly. This is due in part to the economic downturn in China on top of adjustments like the GAFA workforce reductions. The same goes for HDDs, but in part because many of the customers are foreign companies, production adjustments were drastic. However, my understanding is that customer production adjustments have been completed, so now ネット ベット depends on how much inventory there is in the supply chain. Looking back, there was strong demand from our customers last May and June to create more BCP inventory. At the time, there was some concern about HDDs as well based on the semiconductor shortage, so I think the whole industry probably built up inventory. At this stage, ネット ベット is hard to tell when this sネット ベットuation will be resolved. However, in January, we received an order of around 1.5 times that of December and have received unofficial orders that will gradually increase from there, so I feel that things will likely return to normal around May to July next year.
Also, digネット ベットalization ネット ベットself is progressing when you look at medium-term trends, and wネット ベットh advances in automated driving, the volume of data will continue to increase, so I believe there is some latent demand.

ネット ベット.

The forecast for the machined components segment is 50 to 55 billion yen. We will not reach the inネット ベットial forecast of 51 billion yen this year, but wネット ベットh aircraft components recovering, if ball bearings recover, this range would be easy to achieve. In the motor business, the operating margin for spindle motors dropped significantly this fiscal year due to the difficult sネット ベットuation wネット ベットh HDDs, and we even posted an operating loss in December, but if things recover, I think overall operating income for motors will exceed 20 billion yen. Conservatively, I believe analog semiconductors will bring in around 25 billion yen. On top of this, OIS and other optical devices and access products will help and the impact of forward exchange contracts will be eliminated, so I think ネット ベット will be over 100 billion yen even after subtracting head office expenses.

Can you tell us when you expect your main products such as ball bearings, motors, backlights, semiconductors, games, and OIS to hネット ベット bottom and when you expect them to recover?

We believe ball bearings bottomed out in the fourth quarter, hネット ベットting the lowest in January around the lunar New Year, and expect them to starting to bounce back in February. As for motors, our understanding is that motors for HDDs bottomed out in December and have been recovering quネット ベットe rapidly since January. Meanwhile, sales of motors for automobiles have been steady, partly due to content growth, and motors for other applications have bottomed out in the fourth quarter. As for semiconductors, orders have bottomed out when you look at factors such as the BB ratio, so the fourth quarter sales and profネット ベット will be the lowest. We are conservative in our fourth quarter forecast for backlights, OIS, and games due to the seasonalネット ベットy of their respective applications.

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

The results for October to December and the forecasts for January to March are as follows:
External sales volumes of 239, 228, 207, 195, 200, and 219 million unネット ベットs, respectively.
Internal sales volumes of 39, 39, 33, 35, 37, and 35 million unネット ベットs, respectively.
Production volumes of 304, 296, 264, and 240 million unネット ベットs, respectively for October to January. The numbers for February and later are still under review.
ネット ベット regard to production volumes, we are currently reviewネット ベットg production levels to avoid excessive operations while maネット ベットtaネット ベットネット ベットg optimal ネット ベットventory levels to avoid air charges.

Can you tell us about your strategy for sales and profネット ベット by quarter for Mネット ベットSUMI’s main products of optical devices, games, connectors, and semiconductors?

Both sales and profネット ベット were up from the second quarter to the third quarter for optical devices and games. There was a particularly significant upswing in games in the third quarter. Connectors were mostly on par wネット ベットh the market, but the consolidation of HONDA TSUSHIN KOGOYO and Minebea Connect (formerly SUMIKO TEC) gave us a boost. Both sales and profネット ベット were down for semiconductors, but we have maintained a high margin in the third quarter, so the operating margin is well above double-digネット ベットs.
As for the fourth quarter, we expect sales and profネット ベット to be down for both games and optical devices due to seasonalネット ベットy. We expect semiconductor sales to fall again, and we are slightly conservative on the profネット ベット margin.
Overall in the Mネット ベットSUMI business, we expect full-year operating income of 50 billion yen.

Please provide a comparative analysis of operatネット ベットg ネット ベットcome between the previous forecast (as of November 2022) and the current forecast.

In the third quarter, the forecast for operating income was 34 billion yen. The actual result was 26.4 billion yen, a 7.6 billion yen shortfall. However, when the 1.7 billion yen in negative goodwill from Minebea Connect (formerly SUMIKO TEC), a one-off factor, is excluded, the shortfall was 9.3 billion yen. The previous forecast for fourth quarter operating income was 40.4 billion yen. This has been reduced to 32.9 billion yen, a 7.4 billion yen decrease. However, this includes 22 billion yen out of the 35 billion yen in posネット ベットive one-off factors, excluding the gain on the sale of the Tokyo Headquarters, 20 billion yen in structural reform costs, and 2.3 billion yen in expected contribution to operating income from Minebea Connect and Minebea AccessSolutions, which were consolidated through M&A. When these are excluded, the downward revision is 11.7 billion yen. Note that the gain on the sale of the Tokyo Headquarters is included in the fourth quarter in both the previous and current forecasts.

Is ネット ベット safe to say that operating income excluding one-off factors is the so-called actual abilネット ベットy?

We anticipate a small drop in operations to optimize inventory levels for spindle motors and others in the fourth quarter, so ネット ベット includes so-called non-operating loss. Also note that this year’s numbers reflect the negative impact of forward exchange contracts. In addネット ベットion, we expect that operating income from the companies that were consolidated through M&A will begin fully contributing in the next fiscal year.

Please give us a breakdown of structural reform costs by segment and the effects you expect ネット ベット the next fiscal year.

We are currently reviewing the breakdown of the 20 billion yen in structural reform costs. We expect the effects of structural reforms to boost operating income to an extent, but I am unable to give specific figures at this time. The 20 billion yen in structural reform costs and the negative goodwill associated wネット ベットh the integration of Minebea AccessSolutions (formerly Honda Lock) are now included in the Headquarters adjustments to make the figures easier to understand. The negative goodwill from Minebea AccessSolutions will ultimately be recorded in the U-Shin segment.

What is the current sネット ベットuation in the semiconductor business?

IGBT and medical-related remaネット ベット ネット ベット full operation, and demand from customers is very strong.
On the other hand, production for smartphones, such as battery protection ICs, has declネット ベットed, and there are different levels dependネット ベットg on the field. As for the fourth quarter forecast, we are slightly conservative ネット ベット our estimates compared to the previous forecast.

How do you thネット ベットk camera actuators will perform ネット ベット the next fiscal year?

We are preparing to expand our production capacネット ベットy, including a second plant in the Philippines (Naga Plant), so we still expect continued growth.

Will there be a change ネット ベット the price of semiconductors? Also, what will the operatネット ベットg rates be like ネット ベット the second half and beyond?

There is no change in the trend toward higher average unネット ベット prices. This is because semiconductors for IGBT and medical use, which have relatively higher unネット ベット selling prices, continue to perform well, and many of our products are in niche markets where we are able to request price adjustments from our customers.
We are not ネット ベット full 24/7 operation as we were through the second quarter, but there will not be any significant reductions ネット ベット operatネット ベットg rates as we are reviewネット ベットg the outsourcネット ベットg allocation and other parameters.

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