Q&A

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Investor Meeting regarding the Sartorius Intec Acquisition held on December 24, 2014

Question and Answer

Can you tell us about Sartorius Intec's business operations in terms of its financial volatility, such as past sales/profit growth and changes? You said that support and maintenance services are important. How will they be linked to your business? Do you see the acquisition creating a stable flow of business opportunities on a long term basis?

While we acquired part of Sartorius' business operations, the company still operates other businesses. We took time to carefully examine the profitability of the division we acquired and discovered a performance record characterized not by volatility but rather steady profits. One of its businesses, service operations, generates about 3 billion yen from after-sales services.

While the service business generates substantial sales, won't it be difficult to take a bite out of the competition's market share?

The largest benefit of the acquisition is the regional synergy between the two companies. Since each company has very different product lines, there is still potential for demand out there. We can also stimulate demand by incorporating our wireless communications technology. One example is China. Growing food safety awareness there has fueled demand for foreign body detectors. We are seeing similar demand growth in other Asian countries as well. Not only that, we'll see synergy develop from the integration of our wireless communications technology, etc.

Do you have any concerns about the acquisition of Sartorius Intec putting you in competition against current customers of your Measuring Components Businesses Unit?

Sartorius Intec mainly operates in the European market and has only a minor presence in the Japanese market.

Can you give us some specific examples of products that might result from the synergy between the two companies?

One example is tank & hopper scales. The use of cables in these products is quite costly, but if we were to incorporate our wireless communications technology in their design, it would open up totally new horizons. Wireless here doesn't mean simply using Wi-Fi transmission but processing various protocols using a single router. Applying this technology to tank & hopper scales would not only make it possible to transmit weighing data but organically manage entire systems as well. That could be an outcome of the synergy between the two.

Will these ideas start taking shape in financial terms in the fiscal year ending March 2018?

Sales for our measuring components are likely to exceed 13 billion yen this fiscal year as we move forward with the fourth arrow of our Five Arrows strategy. If Satorius Intec's sales were to hit a little over 15 billion yen, the combined total should be roughly 30 billion yen, but it all depend on foreign exchange rates. To earn 20 billion yen more, beginning with the latter half of next year through the following year, we will work on wireless communications-related products to spark synergy. Since Satorius Intec doesn't use measuring components as sensors, we will work together to develop applications. We will also leverage its global network to promote sales of Minebea sensors, which we are not aggressively marketing in Europe now.

Can you give us a breakdown for each section of your measuring components business shown on slide 5? Since your business lines are quite different from Satorius Intec's, why consolidate?

I'm sorry but I cannot go into the details of our measuring components business operations. Except for the tank & hopper segment, our business operations do not overlap, so sales from Satorius Intec will be a bonus for us. In addition to the geographical areas complementing one another, we are looking to create synergy by complementing each other's R&D work. We don't expect sales to fall, at least not in this business area.

Are you aiming to expand your Electro-Mechanics Solutions business related to wireless communications and other solutions? Isn't that the motive behind this acquisition rather than trying to boost profitability in a tough market via consolidation within the measuring components industry?

That's one of the major reasons. We will create unique products that only Minebea can make for the tank and hopper market as well. For example, just as we have applied our light guide plates to lighting equipment, we will develop solutions that combine measuring components with wireless devices and cultivate geographical synergy that will enhance our marketing capabilities.

Can you tell us about the scale of the industry and market share of both companies? Also, how do the strengths of Satorius Intec and Minebea measure up against the industry's leading company?

The market for high-end products is estimated to be worth about 180 billion yen. When the two companies are combined, we can expect to reap advantages from a larger scale operation over a broader range of market segments that extend from the mid- to high-end.

What is the size of each market segment when you divide the entire market into high-end, mid-range, and low-end segments?

The low-end segment is made up of Chinese players and the prices are very low. The major players in the high-end segment are manufacturers employing ultra-precision machining technology and wielding major brand power. That's what makes this market a world unto itself.

What is your forecast for Satorius Intec's revenue and goodwill value?

Net sales for the next fiscal year are expected to reach 17 billion yen, with 10% operating income (before amortization of goodwill). The value of goodwill is estimated to be 0.3-0.4 billion yen. We expect to generate roughly 1.4 billion yen in profit even after deducting goodwill.

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