Latest Update : May 23, 2012

Back to Financial Results (FY3/2012)

Investor Meeting Presentation for FY 3/2012 held on May 10, 2012

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


Question and Answer

You bring up a good point. While the floods wreaked havoc they also paved the way to replacing our old machines with new ones. That change made production efficiency far better than it was before. We are currently in the process of launching a new aluminum die casting system that will cut labor in half and anticipate a full recovery of aluminum die casting production sometime in June. A new production system for machined HDD spindle motor components was also implemented at the Navanakorn Plant, and plant operations were just about back to normal at the end of April.
Although order volumes have not rebounded completely, we see cycle time improving and manpower significantly reduced. For now we are focusing on launching new production systems.
Profitability is sure to go up since we expect monthly sales to reach 6 billion yen in July according to the best-case scenario I mentioned earlier. However, as you pointed out, this all depends on how much our production team's skill level increases. More realistically, actual sales will probably fall just below the best-case scenario. Our engineers also tell us that the technical hurdles related to smartphones and portable music players are much easier to overcome than those related to tablet PCs. While I can't give you any concrete news now, I look forward to reporting on a breakthrough over the next month or two.
We are not that concerned about the yield for tablet PC LED backlights since we see it rising.
We should be able to reach the first half operating income target of 9.4 billion without any problem. While performance of LED backlights is just as I have told you, what's really reassuring is that ball bearing sales are on the rise. I'm sure that we will be able to maintain at least an 80% share of the pivot assembly market for the time being. The outlook for the future remains bright. HDD manufacturers have told us that they will increase order quantities in June through August. Sales will gradually increase every month during the first quarter and will quickly pick up in the second quarter to make up for the delay.

When the Thai government raised minimum wages to 300 baht in April, it pushed up our labor costs by 3.9%. Since our initial projection was an approximate 9% increase, the increase turned out to be a positive when compared against our business plan forecast although it will still have some impact on performance. My projection is 35% of overall operating income for the first half will be generated during the first quarter while the other 65% will come in the second quarter.
It will be spent mainly on buildings. We will invest about 9 billion yen in total, including 2.5 billion yen in the second plant in Cambodia and another 2.5 billion yen in additional building equipment.
We posted an extraordinary loss of 3.9 billion yen last year due to interruptions in operations resulting from the slowdown of operations following the floods as well as the disrupted supply chain which caused production efficiency to decline. We are currently negotiating with the insurance company and hope to get compensation for at least the interrupted operations, which we have coverage for.
While Alphana Technology makes products for 3.5-inch HDDs, ours are mainly for 2.5-inch HDDs, so we won't be competing in the market. We have been shifting our focus to higher-end 2.5-inch HDDs.
External sales volumes for bearings have been steadily increasing from 114 million units in January to 121 million units in February, 124 million units in March, and 127 million units in April. Sales are good in the automobile and office automation equipment markets and are expected to grow in the coming months, totaling 127 million units in May and 128 million units in June.
To be honest, I'm not really sure about the overall economy, but I do get the feeling that at the very least production has been gradually picking up across the globe over the last few months.
Sales totaled 89 million units in January, 89 million units in February, 95 million units in March, and 98 million units in April. Sales for May and June are projected to total 105 million units and 109 million units respectively.
While we expect to see sales increase for fan motors and stepping motors, they will not account for a large percentage. It will come mainly from a sharp rise in ball bearing sales for pivot assemblies.
The average monthly shipping volume for January through March was 39 million units. While we had expected that the monthly shipping volume for the first quarter would be 43 million units, it is likely to reach 44 million units thanks to the good performance for April.
It is expected to reach 45 million units.
Losses due to interrupted operations for the fourth quarter totaled 0.9 billion yen. These losses largely came from spindle motors. The losses in other areas were minor.
Production and sales volumes for the fourth quarter were about 70% of what they were in September last year.
We didn't announce specific figures for that. Production and sales for the first quarter will be 80% of the September level and are expected to exceed 100% in the second quarter.
We don't expect any loss from interrupted operations other than some losses expected at our die casting and hub plants that suffered major damage.
Yes, we expect it to be in the black.
Many of the machinery orders, totaling about 5 billion yen, that were placed last fiscal year weren't recognized in the books until this fiscal year. Some of the building-related capital expenditures will be recognized next fiscal year since construction will not be completed this fiscal year. If you look at these capital expenditure projections in light of the actual equipment purchases we've made, you'll see that they're pretty much on target.

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