Presentation Transcripts

Looking at ball bearings first, we set the external monthly average sales target at 180 million units under the first arrow of our new "Five Arrows" strategy. While we had originally set the target at 150 million units under the previous Five Arrows strategy, we raised the figure to 180 million after quickly achieving that initial target. As things turned out, the shipment volume hit 181 million units in September, which is an extremely impressive figure for us. It was quite a jump over the previous record-high shipment volume of 168 million units set in June. I have been told that this rise was due to a temporary surge in demand in China, our primary market, in anticipation of its National Day holiday coming the following month. Then on top of that, October sales shot up to hit 177 million units, giving us a big push forward. This means that in response to a growing demand for high-end products, Chinese home appliance manufacturers are now pursuing high quality, high performance products. You're probably all familiar with the vacuum cleaner fitted with a high-speed motor that runs at a speed of 100,000 rpm. The ball bearings used in those vacuums are entirely Minebea's. The same manufacturer who makes these vacuum cleaners also uses Minebea ball bearings in its new high-end line of hair dryers. Chinese manufacturers as well as a host of others have taken these products apart and discovered that they all use Minebea ball bearings. Now they are placing orders with us.
Secondly we see that the average price has dipped slightly on a local currency basis and that's perhaps my fault since I'm always urging our people to go for a monthly sales volume of 180 million units ASAP.
Then came some small-lot orders and without any surplus we were suddenly faced with an inventory shortage that we needed to make up for. That meant our factories had to frequently change the setup of their machines, which caused a decline in production efficiency.
While all these factors dragged profits for the Machined Components business down during this past quarter, we are definitely leading the pack and will dramatically boost production volume as well as our inventory. We should also be somewhat selective about the orders we take. We have enough extra space to produce 20 million units a month more at our new factory in Thailand. If we fill that space with manufacturing equipment, we'll have to make a big investment in building another facility. I'm telling our people to take a deep breath and think carefully about what strategy we should use before moving ahead. Since this profit drop is not accompanied by a decline in our market share, I think it's just temporary.