Latest Update : Aug.9, 2006

Back to Financial Results (FY3/2007)

Investor Conference Call for 1Q FY 3/2007 held on August 1, 2006

* Some parts have been added and modified for a clearer understanding.


Question and Answer

HDD spindle motors and information motors broke even. Keyboards are still posting losses. In other areas we are generating profits. Initially, we said that the three non-profitable businesses would log a combined loss, but HDD spindle motors and information motors broke even. We have recorded a loss in our keyboard operations, so we will refrain from commenting about the total loss at the three non-profitable businesses.
Earnings of our main businesses by themselves are improving. Last fiscal year we made overhauls, including consolidations and closures of our factories in this business in the last quarter, and now we are seeing the results.
Although compared with the fourth quarter of fiscal 2005, sales of lighting devices have increased and profits are recovering, other businesses saw a drop in profits and, therefore, across the board they are offsetting each other. The loss recorded by keyboards became smaller slightly.
Because the number of HDD spindle motors produced and sold both increased in July, we believe that this business will improve in the second quarter. For information motors, starting with fan motors, we expect a considerable increase in products and sales amounts as well as a recovery in earnings. We see keyboards staying flat, but there will be a definite upward trend in production and sales quantities for lighting devices toward the end of the fiscal year. We are making efforts to achieve a profit in the electronic device segment in the second quarter.
Sales figures for July were strong. Even though there are some risk factors, such as how far sales will fall due to the effect of summer vacations in August and how the overall economy will move, for the time-being we predict that the sales in the second quarter will remain strong.
The average monthly sales volume of HDD spindle motors in the first quarter was around 4.5 million units. In the second quarter we think that we will sell around 5.2 to 5.3 million units. We anticipate that sales of spindle motors for 2.5-inch HDDs was about 10% of sales in the first quarter and will account for around 15% in the second quarter. In the second half, we expect average monthly sales volume of HDD spindle motors to be around 5.5 to 6 million units.
We are not sure what kind of impact summer vacations will have, but we think that sales will be around 22 to 25 million units, which is an average of around 23 million units.
Because the sales volume of pivot assemblies, which use ball bearings, in the first quarter, was low, sales within the company did not grow. However, from the first quarter to the second quarter, we think both the amount of ball bearings produced and sold will increase to about 185 million units.
Inventory reductions have yet to reach the targets, so we plan to make further cuts. Even though capital expenditure in the first quarter was around 700 to 800 million yen below plans, from the second quarter we believe that we can clearly generate a profit. Therefore, in terms of cash flow we believe that we will maintain the present pace.
One of our biggest goals is to cut interest-bearing debts and, therefore, we would like to continue in the same manner.
There were a number of overlapping factors, but the biggest reason was that across the board we generated profits, and the number of money-losing subsidiaries declined. From the second quarter onward, if we generate profits as planned, then the effective tax rate will improve.
We cannot make any promises, but we think it will be between 40 and 45%.
We have not altered our goal for achieving profits on a monthly basis in the fourth quarter for keyboards. We believe that HDD spindle motors and information motors will definitely improve in the second and third quarters. Even though we think it may be necessary to write-down some unnecessary assets, there should not be any large changes to our strategies.
Up until now, we have used the term "non-profitable businesses," but because HDD spindle motors and information motors are almost breaking even, we will shift our focus to carrying out structural reforms in our keyboard operations and to achieving a profit. Because there is very strong demand for ball bearings and lighting devices, we will boost production capacity to meet the demand and cut costs to further increase profits.
Speaker sales and others were slightly disappointing.
We do not foresee any sudden shift to sintered metal products; therefore, we do not think that there will be a large discrepancy for either the first or second halves with respect to forecasts for this fiscal year.
We cannot discuss the specific purchases of our customer, but the sales volume of products for 2.5-inch HDD has been climbing each month.
For the first quarter, we saw sales volume fall significantly below industry levels, so we believe that customers were adjusting inventories. Sales in July were very strong.
Compared with the fourth quarter, first quarter profits with ball bearings fell slightly. In the second-half of last year, we carried out production adjustments to radically cut finished goods inventories. As a result, unit production costs rose. However, from March there has been a rapid rebound in production amounts, and during this process unit production costs started to fall. In the second quarter we will boost output further than in the first quarter, and this should lead to a definite increase in profits.
The strengthening of the Thai baht is a negative. Even in the first quarter there was some impact.
We cannot comment on the yield of products for 2.5-inch HDDs. However, products for 2.5-inch HDDs have better profit margins than products for 3.5-inch HDDs because they have higher prices and use fewer materials. We will boost output so that second quarter production will be greater than first quarter production; and third quarter production will be greater than that of the second quarter.
Because our market share of products for 2.5-inch HDDs is still small, we think it is possible to increase the sales volume at a pace in line with market growth even though we keep our current product lineup.
In the first quarter we had discussed with customers issues including changing the suppliers of some products. We will stop producing unprofitable models from October to December this year. Because at that time we will dramatically cut production amounts, we plan to handle this by utilizing 3.5 billion yen business restructuring costs reserve set aside in the last fiscal year. Currently we are definitely in the process of continuing to make preparations for these movements.
We have generally had high proportions of in-house production. In this business, we may further increase the amount of keyboards made in-house in the future.
It has been two years since the start of the joint-venture company of Minebea-Matsushita Motor Corporation, and the company is progressing to a new stage of operations. Therefore we need the new management team.
Basic policies will remain the same, so I don't believe there will be any significant changes in that regard.

Go back to top of this page

Follow Us

Twitter Youtube