Latest Update : Aug.6, 2012

Back to Financial Results (FY3/2013)

Investor Conference Call for 1Q FY 3/2013 held on July 31, 2012

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


Question and Answer

It is mainly due to the impact of the stronger yen especially against the euro, causing a decrease in the operating margin of rod-end bearings primarily for use in aircraft. Although the increase in net sales has helped us gradually overcome the negative impact from exchange rate fluctuations, our operating margin of the business has yet to improve.
For the ball bearings business, no, we have not. As we are now increasing capacity at a new ball bearing factory in Bang Pa-In, Thailand, this increase in fixed costs has been holding down our operating margin.
We have been losing money in the businesses of fan motors, vibration motors, and brush DC motors. On the other hand, we have been profitable in the businesses of stepping motors and brushless motors, both of which are among the information motors. The market of micro actuators, the small-sized stepping motors used for the auto-focusing function in compact digital cameras, is shrinking, as the demand for compact digital cameras is being poached by smartphones. This resulted in a loss due to sluggish sales of micro actuators. We are in the process of transferring the production function to a factory in Cambodia, in order to strengthen our cost competitiveness. However, it will take some time before we see an improvement in profitability. In the HDD spindle motors business, as we allocated the fixed cost of factories damaged by the Thai Floods as an extraordinary loss, operating income shows a large profit. If we take such special factor into consideration, operating income has been improving to positive profitability.
Yes, there are. While we can see a steady growth in the production volume, the high-end motors for 7mm-height 2.5 inch-HDDs and for enterprise uses are also increasing in volume and are causing an improvement in profitability.
The total shipment volume has increased.
100% of the ball bearings used for 7mm-height 2.5-inch HDDs are manufactured internally.
At our Rojana factory, we manufacture base plates which are aluminum die-casting for HDD spindle motors. Although the equipment for casting has almost been installed fully, the equipment for the finishing process has not been installed fully yet. We expect that all the necessary machines will be ready for complete restoration by late September.
Although we started shipments in April, the actual shipment volume has only been several tens of thousands. This was 40% of our full production capacity in May, leading up to 70% in June. We expect this figure to be 90% in July. Although it is true that we had some problems in the beginning as we had never had experience in mass producing products of this size, we have steadily improved both the productivity and the yield.
Approximately 90% of net sales in electronic devices business come from the LED backlights business, which succeeded in generating a profit in the first quarter. The remaining 10% comes from inverters and products related to medical devices, which continues to suffer a deficit. The medical devices business is one of the promising areas in which we expect a growth decade by decade and we expect to turn a profit by increasing the number of items year by year. However, we are in the early stage at the moment and thus, have not had enough net sales to overcome the deficit.
We expect to make approximately 13 to 14 billion yen in net sales for the electronic devices business in the second quarter, which we expect will increase further in the third quarter.
For LED backlights, we have a seasonal sales cycle with a drop-off in January every year. The annual peak will be in the third quarter and we expect to see a slight decline in the fourth quarter.
The sales volume for the first quarter was approximately 40 million units per month on average. The numbers were approximately 42 to 43 million in April and May, but as we saw a sharp decline in June with 36 million units, the result was the monthly average sales volume of 40 million units. We did not see any significant improvement in July, as the number remained flat at around 35 million units. We expect to sell 42 million units each in August and September. Thus, the monthly average sales volume in the second quarter is expected to be 40 million units. In the third quarter, we expect an increase by approximately 10% compared to the second quarter.
We are now confirming the clients' latest forecasts, and we assume will be able to achieve a shift as mentioned above.
We sold a monthly average of 129 million units in the first quarter. In the second quarter, we estimate that the sales volume would be 126 million units, down by 3 million units compared to the first quarter. However, it is a normal seasonal adjustment owing to the summer holiday season in Europe, North America and Japan.
In the third quarter, the impact of the summer holiday season would cease and we expect to reach the monthly average sales volume of approximately 132 million units, and 134 million units in the fourth quarter.
We allocated the special costs from interrupted operations in the HDD spindle motors business as an extraordinary loss, and we expect another 0.3 to 0.4 billion yen in the second quarter. In the latter half of the fiscal year, we do not anticipate any extraordinary loss, as the damaged factories will be completely restored.
At the moment, we believe that we can achieve the full-year target. During the first half of the fiscal year, the operating income in the first quarter was 3.7 billion yen, which means we need additional 2 billion yen to achieve our operating income plan of 5.7 billion yen in the second quarter. However, based on the monthly improvement in profitability from April to June, we can say that the operating income plan is achievable.
In the Rotary Components business segment, as we have improved the performance including information motors, it is possible that the profit and loss will be balanced if we just achieve the profitability improvement of 0.5 billion yen. In the Electronic Devices and Components business segment, in addition to the significant income growth in the LED backlights business, we expect a sales increase for the measuring components for automobiles. As a result, profitability will be improved by approximately 0.7 to 0.8 billion yen in total. In the Machined Components business segment, while sales from pivot assemblies will be flat and the volume of external shipments for ball bearings will be slightly lower, profitability of rod-end bearings and fasteners for use in aircraft is expected to improve. Thus, we believe that we have a chance to achieve the operating income higher than 7.5 billion yen from the first quarter. Based on these predictions, it is possible that our profitability will improve by approximately 2 billion yen in the second quarter compared to the first quarter.
We expect that our profitability will improve further in the latter half of the fiscal year. We expect a further increase in operating income in the Machined Components business segment. We also expect that the profitability in the HDD spindle motors business will improve further as the HDD market will start expanding again in the third quarter. As we expect that income from the LED backlights business will grow even more, we believe we will be able to achieve the operating income target of 13.9 billion yen in the latter half of the fiscal year.
We have started the shipment of LED backlights for new models of smartphones back in July. Although we cannot disclose the sales volume precisely, we expect that monthly sales will double from July to August, and will increase by half from August to September. The peak timing is likely to be in November.
We expect that the October figure will be twice the volume in September.
According to the information we have, we believe there have been no downward revisions of production volume for new models of smartphones.
Yes, that is our understanding as far as smartphones.

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