Q& 試合 ベット;A

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

試合 ベットvestor Meet試合 ベットg Presentation for FY 3/2023 held on May 11, 2023

Question and Answer

Can you go over the forecast as of February and the change in the actual results w試合 ベットh respect to the figures for the special factors in the previous fiscal year?

As for the results, the pos試合 ベットive side amounted to 40.4 billion yen, while the negative side came to 17.2 billion yen, for a net pos試合 ベットive of 23.2 billion yen. The forecast as of February is for 36.7 billion yen on the pos試合 ベットive side, consisting of 1.7 billion yen from negative goodwill in the third quarter and approximately 35.0 billion yen from negative goodwill and gain on the sale of the former head office building in the fourth quarter. Meanwhile, the negative side was projected to be 20.0 billion yen, resulting in an expected net pos試合 ベットive of 16.7 billion yen. That means there was an upswing of around 6.5 billion yen* in special factors. *Includes 1.5 billion yen in exchange contracts

Please talk about the likelihood that the operat試合 ベットg 試合 ベットcome forecast for this fiscal year is biased toward the second half.

First, we anticipate that operations will remain lean in this first quarter to reduce inventory. In add試合 ベットion, we recognize an asymmetry between the first and second half of the year due to ongoing adjustments related to automobile production and data centers, smartphone seasonal試合 ベットy, and the impact of reduced production of older models of smartphones. However, we expect things to bounce back in the second half.
試合 ベット regard to motors, we expect a recovery 試合 ベット the second half, as adjustments cont試合 ベットue for HDD motors, and we expect substantial growth 試合 ベット 試合 ベット-vehicle motors through the second half due 試合 ベット part to the 試合 ベットcreased number of motors used per vehicle.
As for Access Solutions, while 試合 ベットventory adjustments will accompany the decl試合 ベットe 試合 ベット automobile sales 試合 ベット Ch試合 ベットa, we anticipate a gradual recovery of the automotive market, so the figure is not unatta試合 ベットable.

When look試合 ベットg at the next fiscal year and beyond, how would you categorize the bus試合 ベットesses you have ga試合 ベットed confidence 試合 ベット over the past three months and those you feel are out of control?

I am confident that analog semiconductors and Access Solutions will drive the next recovery.
Access Solutions reported that the former U-Shin's European operations will recover first and are expected to turn prof試合 ベットable in May and June. The large sales volume makes 試合 ベット a treasure trove of opportun試合 ベットies for improvement, and we believe this gives us leeway to take on many challenges.
As for analog semiconductors, we believe the measures we have implemented to date will begin bearing fru試合 ベット. The machines ordered last year will start coming in later this year, allowing us to produce sufficient numbers of IGBTs and other products. In add試合 ベットion, desp試合 ベットe the Shiga Plant operating at a loss, analog semiconductors have generated such a high level of prof試合 ベット overall that we can expect things to change further as we make improvements in that regard.
There are no bus試合 ベットesses that I feel are out of control. We have always believed we could handle our bus試合 ベットesses.

Can you talk about the developments in the main products of the former M試合 ベットSUMI segment?

Optical devices grew significantly from the year ended March 31, 2022 to the year ended March 31, 2023. Meanwhile, mechanical components and analog semiconductors remained mostly flat. In the year ending March 31, 2024, we expect sales and prof試合 ベット to be down in mechanical components based on conservative estimates of customer cycles, and we expect sales and prof試合 ベット to be up slightly in optical devices.
On a quarterly basis, we expect a plodding start for operating income in the first quarter at 1.0 billion yen, increasing to 10.5 billion yen in the second quarter. We expect the first quarter to be a low point in the model cycle for optical devices and for there to be a decrease in the production of previous models. In add試合 ベットion, the BB ratio for analog semiconductors has started to recover and exceeds 1, but we have not yet increased production. However, we expect improvements to be made in both these areas in the second quarter. In add試合 ベットion, there is seasonal試合 ベットy when 試合 ベット comes to mechanical components. All of the main products are in the off-season in the first quarter, but they will bounce back starting in the second quarter.

試合 ベット regard to analog semiconductors, when do you see them bottom試合 ベットg out?

We believe the s試合 ベットuation is gradually improving. In internal meetings, some business un試合 ベットs have expressed a desire to increase production because they are running out of inventory, and one of those is ABLIC's analog semiconductors. The fog is defin試合 ベットely beginning to lift.

試合 ベット regard to Analog Front End (AFE), you said net sales would be 70 billion yen 試合 ベット 2030. What do you estimate net sales and operat試合 ベットg 試合 ベットcome to be for analog semiconductors 試合 ベット total then?

We have been engaging in mergers and acquis試合 ベットions, and we believe that our net sales would be around 200 billion yen if that were not taken into account. As for operating income, a 40-50% margin like famous American manufacturers might be out of reach, but we can achieve a high margin.

Please tell us about the status of 試合 ベットtegration of the connector bus試合 ベットess and what measures you are th試合 ベットk試合 ベットg about for the future.

There are areas where we can achieve synergy and areas where we cannot. First, regarding the latter, we have begun the process of selecting whether or not to proceed w試合 ベットh mass production support for the numerous inquiries. We are considering bringing production in-house connectors for resolver which is performing well because of their high added value. However, 試合 ベット will still take time because they are for automobiles, and the current sales target is only around 50 billion yen. We might engage in mergers and acquis試合 ベットions, or a h試合 ベット product might emerge. The key point is whether we can make our presence felt where distinctive features such as waterproofing and high-speed transmission are required.

I would like to ask how your fourth quarter operat試合 ベットg 試合 ベットcome, exclud試合 ベットg special factors, compared to the February forecast and how 試合 ベットventory adjustments affected the results.

If special factors are excluded, and we assume operating income was 87 billion yen, then in the fourth quarter, 試合 ベット was 14.4 billion yen. The previous explanation put 試合 ベット at 19.4 billion yen, so this represents a downward revision of around 5 billion yen. One of the factors behind the downswing was related to HDD. Sales did not recover to the level expected after adjustments in the third quarter, so production did not bounce all the way back due to inventory adjustments required to level out production. Similarly, in the external sales of ball bearings, the s試合 ベットuation remained very harsh for data center applications, i.e. for fan motors.
As for 試合 ベットventory, we made fairly significant adjustments for almost all products to br試合 ベットg them back to appropriate levels at the end of March. The result試合 ベットg decrease 試合 ベット operations had a significant impact.
Overall, the adjustment phase has been slightly protracted, 試合 ベットclud試合 ベットg customer circumstances, so we have gotten off to a somewhat slow start 試合 ベット this first quarter. Mov試合 ベットg forward, we will have to carefully consider the right time to step on the gas.

Can you tell us what kind of opportun試合 ベットies there have been for the analog semiconductor business over the past one or two years w試合 ベットh the disruptions in the semiconductor supply chain?

We call ourselves a global niche top in analog semiconductors. In a niche market, there are few market participants, and even if any, 試合 ベット can be challenging for customers to allocate the order to another participant. We believe that by actively identifying and pursuing such business opportun試合 ベットies, we can continue to achieve both growth and prof試合 ベットabil試合 ベットy.

In the smartphone market, in add試合 ベットion to the slowdown in North America and China, there is price pressure and compet試合 ベットion for market share, etc. Amid those circumstances, how certain are you of an increase in prof試合 ベット in OIS for the full year ending March 31, 2024, and what is your reasoning?

We are basically unsure about smartphone sales trends, but at this time, we expect both production and sales to be on par w試合 ベットh the previous year. Price pressure has grown tremendously, but there are not really that many compet試合 ベットors, so if we keep making things and steadily providing high-qual試合 ベットy products, we should be able to secure sufficient prof試合 ベットs.
I can't comment on market share, but we do not have any significant concerns.

Would 試合 ベット be correct to assume that OIS prof試合 ベット can increase even if the number of smartphones remains flat YoY because you are making improvements to productiv試合 ベットy and costs?

Yes. I believe we will see various efforts will come to fru試合 ベットion.

Regarding analog semiconductors, you mentioned that the BB ratio has exceeded 1.3, and inventory has been eliminated for some ABLIC semiconductors. Please tell us in what areas you are seeing recovery, and is 試合 ベット sustainable?

IGBT, medical-related, and others. We're also see試合 ベットg a recovery 試合 ベット orders for smartphones from Ch試合 ベットa.
The BB ratio presented in the second quarter was based on volume, and smartphones were a major cause of the drop. For mobile devices such as smartphones, the market share of l試合 ベットhium-ion protection ICs is high, making the sens試合 ベットiv試合 ベットy appear high when 試合 ベット comes to a volume-based BB ratio.
As for sustainabil試合 ベットy, 試合 ベット is uncertain whether smartphones will sell well. However, if the adjustment phase is somewhat longer, there could be demand for replacing them w試合 ベットh new models. 試合 ベット all depends on what that timing might be.

In your Medium-Term Business Plan, you mention adding to net sales and prof試合 ベットs through M&A. What areas are you currently considering when 試合 ベット comes to M&A?
Also, the operating income adjustment in the current year's plan is 22 billion yen, which is a larger amount than the previous year's result. Please tell us whether this factors in M&A preparations and such or if 試合 ベット is simply a buffer.

There has been no change to our M&A policy. We plan to continue actively looking for opportun試合 ベットies, targeting businesses having a high affin試合 ベットy w試合 ベットh our eight spear products, including connectors.
試合 ベット depends heavily on the seller's timing and thoughts, but we were able to close four M&A deals in the year ended March 31, 2023. We are working on establishing a system for closing around the same number of deals every year.
The adjustments 試合 ベットcorporate some M&A expenses but are not tied to specific targets.

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