Q&A

Back to Financial Results (FY3/2008)

Investor Conference Call for 3Q FY 3/2008 held on February 1, 2008

Question and Answer

Please explain your forecast for your pivot assemblies business in the fourth quarter.

Pivot assemblies sales volume has posted major growth from the second to the third quarters, with the average monthly sales volume surpassing 28 million units. The fourth quarter will be impacted by the lunar New Year in China, and we are predicting a decrease of 2 to 3% in the sales volume. January sales volume was extremely robust. While fourth quarter results will thus not measure up to the sales volume charted during the third quarter, we do not expect the decline to be so large.

With regard to operating income for your electronic devices and components segment, please explain what types of changes have occurred from the second to third quarters, as well as the changes for the fourth quarter.

Our HDD spindle motors finished slightly in the red from the second to the third quarters, although that situation has improved. For our information motors, unfortunately, profit has slipped somewhat. This can be grasped by looking at the minority interest in our income statement. Keyboards profits declined slightly also. Nevertheless, the profit level is at a level that we consider satisfactory to an adequate degree. In contrast, under electronic devices, sales of inverters and lighting devices have increased, with profit rising as well. In addition, with measuring component products also being used in the Wii Fit, overall sales were up and profit increased too. While speakers' loss widened slightly, the overall electronic devices and components segment scored a profit increase of 300 million yen since the second quarter. For the fourth quarter, we have been advancing the HDD spindle motors business with the goal of return to profitability on a monthly basis by this March. We are on target to achieve this, with improvements to occur. However, with the rising value of the Thai Baht and the Chinese Renminbi against the US dollar being one impacting factor, we expect information motors to either level out or post a slight decline. For keyboards, with sales to fall due to seasonal factors after the Christmas sales season, we are predicting a slight decrease on the profit front as well. Although lighting device sales will also decline in January and February, inverters are performing well and should hold steady. Measuring components are solid. With regard to speakers, the relocation of our production operations from Thailand to the South China region of Mainland China will be accompanied by losses, with the fourth quarter expected to come in worse than the third quarter. Overall, while third quarter operating income was 1.2 billion yen, we are predicting a level of 1.0 billion yen for the fourth quarter.

Please explain the sales and profits proportion of products, which are used in the Balance Wii Board, in measuring components business sales and profits. Is Minebea the only one company supplying these products?

Each Balance Wii Board unit uses four Minebea measuring components. However, as this involves a business with a specific customer, I cannot disclose any details pertaining to sales value or volume. Although the sales will not amount of one-half or one-third of the total measuring components, it allow reducing fixed cost because of volume efficiency. Minebea is the only one supplying company at the present time, we would like to continue to channel keen efforts into this sector from here on as well.

Your mid-term business plan mentions operating income of 34.0 billion yen for the next fiscal year. Are there any changes in the forecast?

There are many opinions about the trend of the economy, and we have also just begun the work of drawing up our business plan for the next fiscal year. We take it for granted that we are proceeding on the assumption of achieving the goals stated in our mid-term plan.

In your forecasts of full-year sales for the electronic devices and components segment, you have lowered your outlook for rotary components sales, while making an upward revision in predictions for sales of other electronic devices and components. Could you explain the reasons for these adjustments?

Basically, because there are no changes in our company-wide full-year sales forecast, you may feel there is some inconsistency. For our motor-related products, HDD spindle motors have recorded steady increases in production and sales volume, with sales volume increasing around 15% from the third quarter to the fourth quarter and sales value also increasing. For information motors, we estimate that sales of fan motors will decline slightly in the fourth quarter linked to seasonal factors, while vibration motors and stepping motors will both generally level off. However, because we compile our figures by converting foreign currencies into Yen, the recent appreciation of the Yen will reduce sales slightly. On a volume base, we expect that HDD spindle motors will increase, fan motors will slightly decline and other information motors will grow.

It seems that the sales volume for 2.5-inch HDD spindle motors in the third quarter was about 24% of the total. Will this expansion continue in the fourth quarter?

Yes, We expect that the expansion will continue.

What is your take on the attempts to move HDD spindle motors and speakers into profitability? Also, please comment on the contributions to be made in the next fiscal year.

There is no change in our plan to return to profitability on the monthly base for HDD spindle motors in the fourth quarter. Likewise, we have not shifted our goal of achieving profitability for the full year from the next fiscal year on, and we expect that we will be able to reach that target. Toward the end, we have been conducting various different trials in the parts and assembly divisions, with steady improvements achieved each month of the third quarter as well. With the shift of all speakers to outsourced production, we will close our production base in Thailand and move outsourcing to the South China region. When this move is completed, although we cannot expect major black ink, we think we will be able to maintain the level over the break-even point steady. We plan to complete this relocation at the end of March.

It seems that the momentum of improvements in information motors earnings from last year is running out of steam, with the effect of foreign exchange fluctuations. What is your outlook for earnings trends from here on?

Although there is impact from the raw materials prices and effect of foreign exchange fluctuation, as we and competitors are in the same condition, we are implementing reorganization. Although vibration motors and DC brush motors had been showing lackluster performance, we have advanced our reorganization over a three-year period. By this March we will close down our Singapore operation of information motors, the final stage of this reorganization. This will be a big step toward boosting efficiency, and we foresee major improvements and further advances in enhancing the performance for our all information motors at large.

What is your forecast for extraordinary profit or loss in the fourth quarter?

We are planning on 1.0 billion yen in extraordinary losses. The breakdown is 500 million yen from the closing of the information motors operation in Singapore, 400 million yen from the relocation of our speakers production, and the remaining 100 million yen from other business relocations and other sources.

To the greatest extent possible at the current stage in time, please tell us about new products on which you are pinning high hopes for the next fiscal year.

Among products introduced up to now, there are small motors, lighting devices, large-size mechanical components for aircraft and other examples. With regard to the specific details, however, I really can't comment any further at this stage.

Did effect of foreign exchange fluctuations have a positive impact on your third quarter operating income?

Compared to the second quarter, there was a positive impact of 100 million yen. For the Thai Baht versus the U.S. Dollar, the Baht was higher. With the Baht and the Yen, however, because the Yen appreciated slightly there was a gain. Because we are also importing and selling in Japan products from our Thailand base, a higher yen means that the import prices decline.

What are your impressions of capital investments and depreciation expenses for the next fiscal year?

In our mid-term business plan, we are thinking in terms of about 27.0 billion yen of capital investments for the next fiscal year. We expect money will be used for outlays to increase production of miniature ball bearings, pivot assemblies, HDD spindle motors and other motor products. With the new miniature ball bearing plant in Thailand to be completed in the next fiscal year, we foresee increased capital investments for projects like that as well. For our depreciation expenses, for this fiscal year we originally predicted 24.8 billion yen. Now, however, total may increase to 26.0 or 26.5 billion yen. We are predicting around the same amount of expenses on this front for the next fiscal year - namely, some 26.0 billion yen.

Please explain your forecast on the effect of foreign exchange fluctuations in the fourth quarter.

It's tough to determine the upcoming effect of foreign exchange fluctuations. In January and February the rate has fluctuated sharply because of appreciation of the Yen, and we still can't tell what March will bring. Our planned fourth quarter rates are 116 Yen to the U.S. Dollar and 157 yen to Euro. But in February the U.S. Dollar has depreciated against the Yen, falling to 106 yen. We haven't computed the impact of that shift accurately. If the Yen continues to rise against the U.S. Dollar, there is the possibility that a negative impact will emerge. On the other hand, while the U.S. Dollar is weak against the Thai Baht, the appreciation of the Yen against the Baht is working in a positive direction. On net, we can't tell what the degree of positive or negative impact may be, but we don't foresee the situation producing any extremely negative impact.

It ends about main text.

Tweet