Briefing on items on the agenda
Latest Update : July 9, 2012
The 66th Ordinary General Meeting of Shareholders
We now report Minebea's business results for its 66th fiscal year, together with consolidated and non-consolidated financial statements.
More information is provided on pages 4 through 53 of the Notice of the 66th Ordinary General Meeting of Shareholders.
Brief Explanation of the Current Business Environment
To begin with, we summarize the present situation of the corporate group.
Current Situation of Japanese Economy
While the Japanese economy declined significantly due to the devastating 3-11 earthquake and tsunami that triggered the subsequent nuclear accident, it quickly rebounded over the summer. Despite an increase in domestic demand, the economy remained flat after that as exports declined due to the European sovereign debt crisis that put a damper on the local economy and pushed the yen up.
Current Situation of Global Economy
The U.S., whose housing market has been plagued by an imbalance between supply and demand, saw a gradual recovery in its economy thanks to an improved labor market as well as an uptick in consumer spending and capital expenditures.
The European economy sank as the sovereign debt crisis drove consumer spending and corporate capital expenditures down while governments across the region implemented belt-tightening measures.
Although severe flooding delivered a major blow to the economy of Thailand, increased domestic spending fueled growth in the Chinese market while other nations across Asia gradually moved forward on a path to economic recovery. Unfortunately the sluggish performance of the European economy in the second half slowed down the pace of that recovery.
Corporate Group Initiatives
Working against this backdrop, the Minebea Group has been moving to cut costs, create high-value-added products, develop new technologies, and enhance its marketing approach in order to boost profitability.
When severe flooding hit Thailand, we were still recovering from the impact of the 3-11 earthquake. Fortunately we avoided flood damage at three of our five main production facilities although the remaining two were hit hard.
Current Fiscal Year Results on Consolidated Basis
While we are moving ahead every month to offset the negative impact of the flooding, the lingering effect on sales and production as well as the appreciation of yen brought net sales down 17,781 million yen to 251,358 million yen year on year. Our operating income also fell 13,564 million yen to 8,599 million yen. Ordinary income fell 13,865 million yen year on year to 6,499 million yen. Extraordinary loss included losses due to restructuring of the keyboard business segment etc., which came to 1,602 million yen, as well as fixed costs associated with the slowdown caused by the flooding in Thailand and disposal of fixed and inventory assets etc., which totaled 7,844 million yen. Part of the insurance claim for flood damages was posted as extraordinary income totaling 9,614 million yen. Net income decreased 6,543 million yen year on year to total 5,922 million yen.
Business Results by Segment
Next, we review business results by segment.
Machined Components Business
Our products in the Machined components business segment include ball bearings, which are our mainstay product; mechanical components such as rod-end bearings primarily for use in aircraft and pivot assemblies for use in Hard Disk Drives (HDDs) and fasteners for automobiles and aircraft.
Ball bearing sales were gradually recovering from the effects of the 3-11 earthquake until the second quarter when flooding in Thailand as well as the rising yen triggered disruptions in the supply chain and production adjustments by our clients. As flooding in Thailand shut down local facilities and interrupted power, we made it a priority to ensure the safety of our employees. While the interruption in operations put a major dent in sales and operating income for the third quarter, an increase in the sales volume of pivot assemblies in the fourth quarter, which will be detailed later on, helped us get back on track.
While pivot assembly production for the HDD industry (our target market) had recovered with the completion of second quarter inventory adjustments, the ensuing flooding in Thailand forced our customers to temporarily shut down their operations due to supply-chain disruptions. Although this temporary suspension took a toll on our operations, we saw sales bounce back in the fourth quarter.
The rod-end bearing business enjoyed robust sales thanks to the growing aviation market despite the strong yen.
Resulting net sales totaled 107,037 million yen for a year on year decrease of 804 million yen. Operating income fell 2,477 million yen year on year to 25,611 million yen as operations at our bearing and pivot assembly plants temporarily slowed down following the floods in Thailand.
Rotary Components Business
The core products of the Rotary components business include information motors (fan motors, stepping motors, DC brushless motors, vibration motors and DC brush motors), HDD spindle motors and other precision motors.
Although sales of information motors and other precision motors increased during the second quarter once adjustments from the impact of the 3-11 earthquake were complete and demand recovered, it was severely impacted once again by price hikes for magnets and other raw materials as well as the flooding in Thailand that disrupted the supply chain and our customers' production operations. The lingering effect of the disrupted supply chain impacted our manufacturing operations during the fourth quarter, leading to a significant year-on-year decrease in both sales and operating income for information motors.
Even though the second quarter market recovery and our enhanced production efficiency had put HDD spindle motor sales and operating income back in the black, the parts facility was damaged by the flooding in Thailand and production was dramatically impaired. Our customers and their parts manufacturers were also hit hard and suspended operations, forcing the entire industry to scale back production. We ultimately saw both sales and operating income bounce back in the fourth quarter as the market started to recover.
Overall, net sales for this consolidated fiscal year dropped 9,776 million yen year on year to total 91,363 million yen. Although operating income for HDD spindle motors increased, information motor sales and profit fell sharply, bringing operating loss up 3,894 million yen year on year to total 4,118 million yen.
Electronic Devices and Components Business
LED backlights, inverters and measuring instruments make up the core products of the Electronic devices and components business.
Production efficiency for LED backlights dropped as the supply chain experienced materials delays in the face of the 3-11 earthquake and flooding in Thailand and also because we quickly increased production to make up for delay in supply. Production fell far short of our initial plan due to delay in launching the new plant in Suzhou, China. Both sales and profits dipped due to the discontinuation of game console measuring components, downward spiraling sales to the automobile industry, as well as the appreciation of the yen.
All these brought net sales for this consolidated fiscal year down 2,615 million yen year on year to total 37,887 million yen. Operating income also fell 5,119 million yen year on year, resulting in an operating loss of 959 million yen, due to a sharp decline in the LED backlight business.
The main products in the Other business segment are PC keyboards, speakers and special devices.
The segment saw both sales and profits decrease for PC keyboards due to stagnant market conditions, a hike in plastic material prices, the rising yen, as well as the restructuring of the keyboard business segment aimed at shifting its focus to parts production.
Net sales for this consolidated fiscal year fell 4,589 million yen year on year to total 15,068 million yen. Operating loss was up 836 million yen year on year to total 338 million yen.
Consolidated Operating Income for this Fiscal Year
Other than the above, operating income on the consolidated statement of income for the fiscal year includes 11,595 million yen of corporate expenses, etc. not belonging to each segment as adjustments. Adjustments for the previous fiscal year amounted to 10,358 million yen on a consolidated basis.
During the consolidated fiscal year under review, capital expenditures were 8,500 million yen for the Machined Components Business, 7,462 million yen for the Rotary Components Business, 2,647 million yen for the Electronic Devices and Components Business, 470 million yen for the Other Businesses and 8,225 million yen for adjustment, totaling 27,306 million yen.
The main capital expenditures for the Machined Components Business were equipment for increasing the production and product rationalization which for production of bearings and other components, and equipment for increasing the production of HDD pivot assemblies in Thailand. The main capital expenditures for the Rotary Components Business were equipment for spindle motors in Thailand and equipment for information motors in Cambodia, China and other countries. The main capital expenditures for the Electronic Devices and Components Business were LED backlights in Thailand and China. Capital expenditures include 382 million yen in intangible fixed assets and a 348 million yen increase in assets from new finance lease contracts.
Consolidated Financial Statements
Now we review the consolidated financial statements.
Consolidated Balance Sheet
First, a report on the consolidated balance sheet.
In the assets section the total was 306,772 million yen, higher by 15,680 million yen over the figure at the end of the prior year.
The principal operative factor was a recovery in production and sales, which brought about increases in inventory, tangible fixed assets, notes and accounts receivable.
In the liabilities and net assets section, we note first that liabilities totaled 196,995 million yen, up by 15,870 million yen year-on-year.
The principal factors were a production comeback that increased notes and accounts payable, and higher long/short term borrowings and issuance of convertible bond-type bonds with stock acquisition rights.
Net assets totaled 109,777 million yen, lower by 190 million yen vs. the prior fiscal year end.
This was due mainly to declines by stock buybacks.
As a result of the above, the total of liabilities and net assets was 306,772 million yen, up by 15,680 million yen over the prior fiscal year end.
Consolidated Statement of Income
Now we report on the consolidated profit and loss statement.
Sales declined by 17,781 million yen year-on-year to 251,358 million yen.
Operating profit was down by 13,564 million yen to 8,599 million yen.
Sales and operating profit were summarized previously, so here a review is omitted.
Recurring profit declined by 13,865 million yen to 6,499 million yen, due to the operating profit falloff and Thai interest rate hikes that increased interest payments. Net profit was 5,922 million yen.
Consolidated Statement of Changes in Net Assets and Notes
In as much as they were noted in pages 29 through 41 of the Notice of the 66th Ordinary General Meeting of Shareholders, the statement of changes in consolidated shareholder capital and consolidated notes are here omitted.
Non-Consolidated Financial Statements
Next is an overview of our non-consolidated financial statements.
Non-Consolidated Balance Sheet
First, a report on the balance sheet.
In the assets section total assets were 339,795 million yen, an increase of 16,002 million yen from the previous fiscal yearend.
The principle operative factor was a recovery in production and sales that increased accounts receivable and loans receivable from affiliates.
In the liabilities and net assets section, the total of liabilities was 163,965 million yen, up by 15,098 million yen over the prior fiscal yearend.
The principal causes were production recovery-driven increases in accounts payable and increases in convertible bond-type bonds with stock acquisition rights.
Net assets totaled 175,830 million yen, up by 904 million yen over the previous fiscal yearend.
The principal factors were an increase in retained earnings driven by net profit, a decline due to dividends of surpluses, and stock buybacks that shrank stockholders' equity.
As a result of the foregoing, liabilities and net assets totaled 339,795 million yen, up by 16,002 million yen over the previous fiscal yearend.
Non-Consolidated Statement of Income
Next, a report on the profit and loss statement.
Sales were 186,316 million yen, lower by 14,741 million yen year-on-year.
The decline was mainly due to the 3-11 earthquake and the flood in Thailand that disrupted supply chains, among other factors.
Operating profit was 1,916 million yen, down by 5,909 million yen.
The decline derived mainly from the lower sales.
As a result, recurring profit was 4,542 million yen, down by 4,470 million yen year-on-year.
Consequently, net profit was 4,556 million yen.
Non-Consolidated Statement of Changes in Net Assets and Notes
In as much as they were noted in pages 44 through 53 of the Notice of the 66th Ordinary General Meeting of Shareholders, the statement of changes in consolidated shareholder capital and consolidated notes are here omitted.