Q&A

Latest Update : Mar.2, 2017

Back to Financial Results (FY3/2017)

Investor Conference Call for 3Q FY 3/2017 held on February 13, 2017

* Some parts have been added and modified to make them easier to understand.

Question

Question and Answer

The MITSUMI inventory write-downs happened in light of a strict re-evaluation of its overall inventory. Optical devices such as OIS and VCM for smartphone camera actuators accounted for a large part of those write-downs. We worked on the impairment of assets across the board and the bulk of impairment losses came also from the optical device-related business.
Since announcing the business integration with MITSUMI, I have set our sights on generating 5 billion yen per year in operating income, or 400 million yen in several different months during the first year. Will we be able to continually hit this target? I can tell you now that we are able to reach that target over the course of a year. I'll give you more details about that at the investor meeting to be held in May. I expect operating income for MITSUMI operations to reach at least 5 billion yen, and that's a conservative estimate.
While year-on-year appreciation of the yen is factored into the LED backlight sales forecast for the March quarter, we expect a slight year-on-year increase in sales.
We took a hard look at profit projections mainly for electronic devices such as sensing devices and LED backlights.
We are being cautious and kept our estimate on the conservative side in light of the difference between the production volume and inventory due to inventory adjustments in the March quarter.
None of the calculations for per-share figures we have announced factored in treasury shares. Although we haven't decided on any specific measures, such as whether or not to cancel the shares we will buy back, we will continue to exclude treasury shares from profit per share or other per-share figure announcements.
We did that simply for technical reasons. The main thing to note is that MITSUMI's performance was better than expected and will help bring profits for the March quarter up on a consolidated basis.
Since we haven't installed equipment yet, we can't boost production beginning next month. We should be able to gradually increase production from the end of the September quarter of the next fiscal year. We are a seeing strong demand from external customers in the March quarter and are actually facing the problem of not being able to meet that demand, so the sales volume is expected to drop slightly below what it was for the December quarter. We will probably have to cut the internal sales volume back a little from what it was in the December quarter.
Production doesn't usually increase much between late January and February because of the Chinese New Year holidays as well as the fewer number of days in February. So we're going to put a limit on orders.
Yes.
There's nothing we can do about seasonal demand for game consoles. Demand is sure to rise when the launch date draws near. Honestly, I can't really say that sales will remain stable throughout the year. There will probably be ups and downs. Now that we are expanding our operations, we are in a generally favorable situation where our various business operations offset each other's ups and downs.
Although January results will not be consolidated, we have the actual figures for January since the announcement of financial results was postponed. I'll give you an internal managerial figure that does not exclude unrealized gains and others for your own reference. Operating income for the two companies combined reached almost 7 billion yen. I hope this gives you some idea.
We implemented various measures to boost performance and provided extensive support, including help to enhance productivity. Besides that, I see that overall employee enthusiasm about boosting profits has dramatically changed, which should explain why MITSUMI's performance is improving. As we carefully sow the seeds of new ideas and practices at MITSUMI, I can see the Minebea way of doing business gradually taking root.
Since July I have made monthly visits to the Cebu plant in the Philippines where the optical devices for camera actuators are made and, as I mentioned earlier, have seen positive changes in the shop floor. I've been told that demand will continue to grow, and we are gearing up to meet that demand, so I'm not that concerned. They should yield a profit next fiscal year.
According to the latest estimates, demand for LED backlights won't drop so much next fiscal year, but, to be honest, production yield was not very good this fiscal year. Things didn't go as we had planned due to the strict product tolerance requirements, and we will take it as a lesson for next fiscal year as we work to generate profits even if production volumes decline. As of today we don't expect any substantial drop in quantity next fiscal year. For now I expect that next fiscal year we should be able to generate the same kind of profit as usual or on par with this fiscal year. I'll talk more about it in May if anything comes up.
There are many factors, including new game consoles. Since we looked at asset impairment with a focus on optical devices, performance should eventually improve in this area as well. One thing for certain is that sales of optical devices will bottom out in February and March as usual, so while we expect they will generate a profit, it won't be that big.
Materials costs fell as did logistics costs while productivity increased. In announcing our financial results today, we included financial results for MITSUMI prior to the business integration under the category "MITSUMI business" in order to make everything crystal clear. However, we decided not to provide details of the cost analysis in order to protect our common shareholders' interests. So I can't say any more.
After taking a close look at all our business and customer locations, we consolidated specific logistics operations at either Minebea or MITSUMI wherever the costs were lower. We also consolidated purchasing of the same products through joint purchasing at whichever site they cost less. Since the business integration has made us a company generating more than 700 billion yen in sales, our suppliers have greater expectations and have given us better deals.
It varies depending on the product. I'll give you more details in May.
Yes, you can. Since our inventory valuation has been greatly affected by currency fluctuations, the inventory write-downs should have some positive effect from now on. They are not the direct cause of the recent improved performance, though.
I'll give you more details in May, but I'd say that MITSUMI has an excellent product portfolio. It's like a fine meal that tastes better with every bite. While we will eventually downsize product lines with low profit margins, right now we are putting that on hold as we reap the positive effects of the various improvement measures, which I mentioned earlier.
Ball bearing sales have been very healthy. External sales for the month of December were outstanding at nearly 180 million units. The upward trend looks like it will continue and I'm afraid that we may run out of stock. That's why I decided to give the go-ahead for capital investments.
Things are the same. It's not that there are new applications, but rather that sales in the automobile market are steadily increasing while demand for our high-end ball bearings is rising, and we must meet the demand.
Since we must work to improve profitability, we started to be selective about taking orders. We are asking our customers to cut back on orders for low-priced products. Since the inauguration of President Trump, the yen is getting even weaker, steadily bringing ball bearing prices up. While the sales volume dropped in January due to the Chinese New Year holidays, we have to wait and see how things go since prices are rising. Although it will take time, I'm sure we will be able to improve productivity. We can't stop our customers' production lines.
I myself had never really considered taking a close look at game consoles and you too, I'm sure, must have had some reservations about their profitability. When I took a closer look, however, I found that game consoles employ a wide range of technologies, and MITSUMI possesses those technologies. It was an interesting discovery that opened the door to different business opportunities and game consoles pointed the way. I now have a totally different idea about game consoles. That goes for semiconductors as well and I'll talk about it in more detail this May.
Basically yes. I think it's too soon to give you details today because I don't want to mislead you, but you know me. I'm actually aiming higher.
They increased their inventory of products for new game consoles in December quarter. Shipments of these products will begin in March quarter.
MITSUMI stocked up supplied parts by charge in preparation for the shipments that will begin in March quarter.
That's true for the current portion of the increase.
There hasn't been any change in accounting criteria. They are simply a result of their thorough re-evaluation of inventory and assets ahead of the business integration. They looked at everything from all angles, including potential orders, and that's the result they got.
That's our outlook as of today. It's too early to talk about next fiscal year now but I'll give you more details in May. We are getting a number of inquiries from Chinese customers and expect orders to increase although there will be some changes in the mix.
Yes, it's just as you see it.
We just finished implementing urgent assistance measures to improve its performance. What we are doing now is focusing on identifying products to develop in the future, how we should develop them, how we should enter their markets, and how we should improve them. MITSUMI's management team and I recently got together for a two-day conference to discuss these areas. Once we have identified them, we can move on to determine what to do with MITSUMI's manufacturing sites. That will be the third step. We should have some extra capacity and space as usual. We must carefully assess the situation since the inauguration of the new U.S. president has given rise to the possibility of trade friction. We should take the slow and steady path to solving manufacturing site issues and you can take that as a sign that we now have the breathing room that allows us to do that.
External sales, internal sales, and production volumes for October were 177 million units, 79 million units, and 245 million units respectively. External sales, internal sales, and production volumes for November were 180 million units, 85 million units, and 256 million units respectively. External sales, internal sales, and production volumes for December were 180 million units, 80 million units, and 250 million units respectively. Pivot assembly sales volumes totaled 31 million units for October, 32 million units for November, and 30 million units for December.

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