Latest Update : May 20, 2010
Investor Meeting Presentation for FY 3/2010 held on May 7, 2010
* Some parts have been added and modified for a clearer understanding.
- What is the ball bearing sales volume forecast for the first and second quarter?
- How long do you think it will be before ball bearing production hits 250 million units a month?
- Which area of the HDD spindle motor business was the most off-target? Do you see any potential hurdles to increasing production capacity under current operating conditions?
- How have things changed with the new Spindle Motor Business Unit head working under the head of the HDD Motor Business Headquarters?
- According to your medium-term business plan, you plan to make a 93 billion yen capital investment over the next three years. Can you give us a breakdown of the investment as well as an estimate of depreciation costs?
- Would you consider using an accelerated depreciation method for products like rotary components and electronic components & devices for which you have to realize a quick return on investment, instead of using the current straight-line depreciation method?
- Does your medium-term business plan take into account the projected results of your plan to enter into the market for low-priced, mass-produced ball bearings, which you decided to temporarily suspend?
- You told us at previous meetings that you have some space at the Bang Pa-in Plant in Thailand for ball bearing production. Are you going to use this space under your plan to build new production facilities?
- You seem to be quickly enhancing your production capacity for LED backlights. Who are you supplying these products to and for what applications?
- Are you gaining some of your competitors' share of the LED backlight market or is the market just expanding?
- You mentioned Xiamen when you talked about the new LED backlight plant. Is this related to the stepping motor plant you took over from FDK?
- You're changing classifications of your business segments this fiscal year. Would you give us the figures for last fiscal year's results for the new business segment category and could you also give us the projection for the first half of this fiscal year?
- What do you estimate the impact of fluctuating raw material prices on your performance for this fiscal year will be?
- What is your forecast for the profitability of hybrid components in your medium-term business plan?
- What do you project external and internal sales for ball bearings to be this fiscal year?
- You project that external ball bearing sales will not increase after peaking in the first quarter. Do you think that's really going to happen despite the fact that demand is rising?
- Can you tell us about the last year's fourth quarter sales volumes for pivot assemblies and HDD spindle motors as well as the forecast for this fiscal year?
- In your strategy to cut costs and increase production volume for the rotary components business segment, what will you do specifically to gain a leg up on competitors that have a large market share?
- Please tell us how your recent business acquisitions will affect selling, general and administrative (SG&A) expenses.
- What is your projected increase in internal ball bearing sales for the Information Equipment Motor Business you took over from Panasonic's Motor Company?
- Why have you decided to make large capital investments, in addition to ball bearing investments, a part of the current medium-term business plan?
- Would you give us a rundown of your sales plan by product for this fiscal year.
- You mentioned that the market for rod ends has entered an early stage of recovery. When do you expect your rod end business will start to fully recover?
Question and Answer
- While we currently have a good balance between production and sales of ball bearings, our inventory is at the lowest level ever because we used up so much of it last year. We are working quickly to boost production and once the monthly production volume reaches 220 million units, we won't have to worry about running out of stock any time soon. If we do happen to run into an inventory shortfall we can always temporarily fill in the gap by going to an external supplier for the extremely low-price ball bearings, like those used in brushless motors which we produce in house at our Zhuhai, China location, so we can keep our production capacity. Sales for the first half of this fiscal year have been ahead of our projection since April and are very likely to reach almost 210 million units a month.
- First we will have to build a new ball bearing production facility and then install the production equipment as needed. We will increase monthly production volumes incrementally, starting perhaps with 5 million units at first, then 10 million, and then 20 million. The new facility won't actually be up and running until the next fiscal year.
- Our production yield did not improve as much as we had expected. I'd have to say we haven't yet done everything we can to create the ideal production environment needed to get a large quantity of products out. We are currently making a companywide effort to boost production yield. We had been refraining from investing in production equipment while this segment was running in the red. Since we have to work with a limited number of machines, we have to frequently retool them to manufacture various types of models. This year we will make the necessary capital investments to eliminate the bottleneck this interruption in operations causes. Shop floor operations are moving right on track and once the production capacity is enhanced, our operational efficiency will increase as will production yield. I will keep you up to date on the details as things progress.
- A new department head breathes new life into an organization and brings new insights. The new head of the Spindle Motor Business Unit values maintaining good communication with people on the shop floor. He has a different kind of network than his predecessor that will enable the Unit to draw better support than ever from departments across the organization. All of us at Minebea, including the president, vice president and executive officers are committed to turning this business segment around.
- As I mentioned earlier during my presentation when I talked about our three-year investment plan for each business segment, we will invest 48.4 billion yen in the machined components business segment, 22.2 billion yen in rotary components, 5.5 billion yen in electronic devices and components, 7.0 billion yen in other businesses, and 9.9 billion yen on production support and IT-related investments. The investment in buildings alone will amount to about a total of 15.0 billion yen, including the new ball bearing and pivot assembly production facilities to be constructed over this and the next fiscal year as well as additional facilities to boost production capacity for LED backlights. Expenditures for new machines to be installed in these facilities are included in the capital investment plan figures. We expect depreciation costs to total 22.6 billion yen for this fiscal year, 22.0 billion yen for fiscal year ending March 2012, and 23.0 billion yen for fiscal year ending March 2013.
- While we use the straight-line depreciation method at our overseas plants, we are considering using an accelerated method for dedicated machines. While this may pose some complications in light of taxes and they may have to be accounted for as a taxable depreciation, we are currently studying using this method in some of our business segments.
- No, it doesn't, basically.
- While we could start constructing a new facility immediately on the premises of the Bang Pa-in Plant, we are still weighing all location options, but the Bang Pa-in Plant is still one of the candidate sites. We are not at all concerned about the current political situation in Thailand. We have been making products in Thailand for approximately 30 years and have seen a lot of things happen in that time. We are not going to base our decision about a plant site on Thailand's current political situation.
- We have been receiving inquiries from a wide range of customers, which is a positive sign. Since we are a component maker, I'm unable to give you specific details about our customers.
- The market is expanding.
- No, it isn't.
- Under the new business segment structure staring this fiscal year, we are not allocating head office expenses to each business segment. This is not reflected in last fiscal year's results. If you look at operating income for this fiscal year under the former organizational structure, excluding the expenses allocated by the head office, operating income for the machined components business segment is expected to be 14.1 billion yen for the fist half and 14.4 billion yen for the second half, that's 28.5 billion yen in total for the whole year. Operating income for the electronic components and devices business segment will come to 2.8 billion yen for the first half and 4.5 billion yen for the second half, or 7.3 billion yen in total for the whole year. Non-allocated expenses will total 6.0 billion yen for the first half and 6.3 billion yen for the second half, 12.3 billion yen in total for the whole year.
- Our forecast for fiscal year ending March 2011 is based on the assumption that raw material prices will go up. The impact is estimated to total about 1.4 billion yen.
- The sales target for hybrid components I mentioned earlier is intended to be in addition to our projected sales. We may, for example, revise our sales forecast for HMSMs downward and offset that loss with sales of other hybrid products. Since we don't know what the product mix will be like and how much profit will be generated by each line of hybrid products, I cannot give you a figure for projected earnings on hybrid components yet.
- Based on the results for April, we expect that the overall monthly sales volume for the first quarter will reach 204 million units, 122 million units for external sales and 82 million for internal sales. Projected monthly sales for the second quarter will reach 200 million units overall, including 113 million units for external sales and 87 million for internal sales. The drop in external sales will be due to the impact of summer vacation days in August. Projected monthly sales for the third quarter will be 215 million units overall, including 117 million units for external sales and 98 million units for internal sales. The external sales volume will as usual be affected by the Christmas holidays in December. The monthly sales volume for the fourth quarter will reach 216 million units, including 117 million units for external sales and 99 million units for internal sales. Once again, external sales will be affected by the Chinese New Year holidays in February.
- We have to be somewhat selective about the orders we accept in light of our current production capacity. Once the production capacity is increased, external sales are expected to increase as well.
- Sales of pivot assemblies for the fourth quarter of fiscal year ending March 2010 amounted to 31 million units per month. This fiscal year, we expect that monthly sales volumes will reach 32 million units for the first quarter, 35 million units for the second quarter, 41 million units for the third quarter, and once again 41 million units for the fourth quarter. Sales of HDD spindle motors for the fourth quarter of fiscal year ending March 2010 amounted to 4.4 million units per month. Monthly sales volumes for fiscal year ending March 2011 will be 4.5 million units for the first quarter, 6.0 million units for the second quarter, 6.5 million units for the third quarter, and once again 6.5 million units for the fourth quarter.
- There is no "royal road" to manufacturing. We are trying to do everything from boosting per capita productivity to cutting materials cost, streamlining product designs, and negotiating with material suppliers. We operate the motor business under the umbrella of the Rotary Component Business Headquarters and are doing our best to share our collective know-how throughout the organization. I believe this will lead to a significant increase in productivity. The lines of products subject to our strategy to cut costs and increase production volume include fan motors and vibration motors as well. These products don't require additional functions and all we have to do is deliver them as they are to satisfy our customers. When it comes to these motors, we just have to concentrate on cutting costs.
- SG&A expenses for the acquisition of Panasonic's Information Equipment Motor Business will account for about 9% of net sales. The percentage for DPM will be smaller. The annual sales of DPM will be roughly 1 billion yen. However, this figure is not included in our forecast.
- We have been steadily replacing ball bearings supplied by a Chinese maker with our own ball bearings, but we still have to be selective about taking orders despite the demand for 3 million units per month. Since we have been using inexpensive Chinese ball bearings, we will replace them with ours and assess the situation as we go along. At the current pace, we will completely replace them with our ball bearings by next month.
- One reason is that we are running out of the capacity to meet increasing demand for pivot assemblies. We also estimate that the overall global economy are picking up further and it is vitally important that we have enough production capacity to quickly meet future growth in demand. If we hesitate to boost our capacity now, we will get a late start when demand rises further. This is something we have to do now.
- Looking at our projected sales of 108.5 billion yen for the machined components business segment, sales will total 72.9 billion yen for bearing products, 30.9 billion yen for pivot assemblies, and 4.7 billion yen for fasteners and other products. Projected sales of 104.2 billion yen for the rotary components business segment include 31.0 billion yen for HDD spindle motors. The rest will come from information equipment and other motors. Projected sales of 32.9 billion yen for the electronic devices and components business segment include 25.4 billion yen for electronic devices and 7.5 billion yen for measuring components. Projected sales of 19.4 billion yen for other business segments will come from sales of keyboards totaling 10.0 billion yen, speakers totaling 4.0 billion yen, and other special devices totaling 5.4 billion yen.
- We expect to see our performance exceeding 5 to 10% of our forecast starting this first quarter. Although an aircraft manufacturer has announced an upward revision to their production plan, it has not been fully reflected in incoming orders yet, so we expect to see more upward movement.