CEO Message
Latest Update : Sept.30, 2024
After 15 years of revenue growth, our focus is shifting from the scale of the business to sustainable, profitable growth.
It has been 15 years since I was appointed CEO of MinebeaMitsumi. In the fiscal year that ended March 2024, we achieved record-high consolidated results for the 11th consecutive fiscal year, with net sales of 1,402.1 billion yen and operating income of 73.5 billion yen. Contrast that with net sales of 256.2 billion yen and operating income of 13.4 billion yen in the fiscal year ended March 2009. Over the last 15 years, our net sales and operating income have grown more than fivefold.
As an executive, I believe that the essence of management is sustainability, and I have pursued continuous growth and sustainability because of it. Over those 15 years, my focus has been specifically on the Company's scale with the idea that expanding the scale would lead to greater profits, which, in turn, would improve earnings per share. Meanwhile, based on the concept of "INTEGRATION," we have been aiming to create new value by capitalizing on all of the Group's resources. I believe we have successfully established a foundation for growth as the world's only "INTEGRATION" manufacturer of precision components centered around the "Eight Spears" of our core businesses. Through 27 M&As, we have enhanced our approach to diversifying risk and do not rely on a single business or market.
Additionally, growing the scale of our Company is necessary due to the importance of securing talented professionals to allow MinebeaMitsumi to achieve sustainable growth amid Japan's progressively declining birthrate and aging population. Due to various initiatives such as the expansion of our enterprise through organic growth and M&As, and by relocating our operations for Tokyo X Tech Garden (Shiodome) in March 2023, I am confident we have positioned ourselves to attract talent that will serve as the driving force for future growth.
The Company has set long-term targets of achieving net sales of 2.5 trillion yen and operating income of 250 billion yen in the fiscal year ending March 2029. We plan to achieve net sales of 1.5 trillion yen for the fiscal year ending March 2025 and consider the 2.5 trillion yen target within reach.
On the other hand, I believe that our most critical management issue is that of enhancing earnings power and profit margins amid a situation where operating income for the fiscal year ended March 2024 was 73.5 billion yen and our operating margin on a pro-forma basis amounted to a low 5.2% (operating margin calculated on sales including purchased and supplied parts as the denominator). Given that the Company's prevailing valuation relative to its peers remains low, I wish to ensure that our stakeholders appreciate the Company's value and further increase our market capitalization, representing our corporate value. To accomplish this, we must demonstrate our ability to consistently achieve a 10% operating margin, a benchmark in the electronic components industry, while also adhering to our net sales target of 2.5 trillion yen. As CEO, I will articulate our vision and strategy while aggressively moving forward with the implementation of various measures, working in conjunction with President Katsuhiko Yoshida, who serves as COO & CFO.
Now is the time to harness the combined strengths of our 100,000 global employees, leveraging their diverse backgrounds to accelerate growth by creating synergies through INTEGRATION.
Path to achieving operating margin of 10% by the fiscal year ending March 2029
In order to achieve operating income of 250 billion yen, which equates to an operating margin of 10%, by the fiscal year ending March 2029, we are aggressively implementing various earnings improvement measures. Through management meetings and other forums, we are calling on our members company-wide to embrace our 103 billion yen operating income plan for the fiscal year ending March 2025 as a milestone, and continue to take on greater and greater challenges.
Through the use of automation in production, we generated manpower savings of 6,000 employees in the fiscal year ended March 2024, and we expect to save the equivalent of an additional 5,000 employees in the fiscal year ending March 2025. Going forward, we will continue our rigorous cost-cutting and productivity improvement measures and continue to improve product quality at the same time as a manufacturer of ultra-precision components.
On the sales front, we have been pursuing revenue and sales volume increases and are also working to satisfy customers by providing added value, quality, and services at a competitive price through the use of DX.
As the machinery and electronic components industry is facing the need for high voltage, high current, high frequency, and high speed, the Company has been fortifying its competitiveness using its distinctive approach to manufacturing through the "Eight Spears" of its core businesses and leveraging its ultra-precision machining technology, as well as its mass production and other respective underlying technologies.
In addition to bearings that have long served as the Company's profit driver, we have established additional high-margin earnings pillars, namely analog semiconductors and motors, and have captured a substantial share of these global niche markets. Furthermore, Access Solutions (AS) generated operating income of 10.6 billion yen in the fiscal year ended March 2024 after having long endured low profitability. This indicates that our efforts to restructure the organization in Europe and integrate the business are finally achieving positive results. Now that we have decided to launch our innovative new products enlisting INTEGRATION of the Eight Spears, to be described later in this report, I feel the time has come to seek greater understanding from our investors as to why we embarked on the Access Solutions Business.
While smartphone LED backlights were once the Company's largest source of earnings, they now contribute only minimally to the bottom line due to technological innovations in organic light emitting displays. However, we have succeeded in opening up the market for tablet devices and automotive applications and expect substantially higher profits going forward. As this illustrates, I believe we have developed the resiliency we need to raise our bottom line, even when encountering temporary effects of external business factors, as a result of strengthening our core businesses and establishing a framework that minimizes the effects of volatility through our sub-core businesses.
Under our Midterm Business Plan extending from the fiscal year ending March 2025 through the fiscal year ending March 2027, we will seek growth outpacing that of worldwide automotive production, primarily when it comes to bearings and motors, through content growth (increase in automotive products), amid a scenario where the Company is expecting market trends of progressive premiumization and electrification, countered by a sense of uncertainty, particularly in the automotive industry. Meanwhile, the highly profitable data center and healthcare markets are beginning to show signs of recovery. Despite some remaining supply chain issues in the aircraft sector, we anticipate robust growth amid increasing passenger demand and opportunities associated with environmental improvement efforts. The semiconductor business is currently undergoing recovery, and with the business integration of Minebea Power Semiconductor Device with the Group on May 2, 2024 and the synergies with MITSUMI and ABLIC, we expect sales growth, and we are targeting this to be the second pillar of earnings after bearings. Since many of our businesses are related to equipment industry and we possess high marginal profit ratio, we are poised to regain substantial profitability once production and sales volumes return to previous levels.
With signs of recovery in respective markets beginning to emerge, the fiscal year ending March 2025 will serve as a make-or-break year in terms of our ability to achieve the target of increasing operating margin as outlined in our Midterm Business Plan and long-term plans.
Proposing new value to the world through MinebeaMitsumi's distinctive manufacturing and INTEGRATION
Further improving the Company's corporate value hinges on our ability to create synergies derived from INTEGRATION of our people, technologies, and businesses. We have finally managed to produce substantial results in our INTEGRATION initiatives, which we had previously not been able to demonstrate to our external stakeholders. One example of this is the Company's new product, the "wing handles," which is among the door handles that are the mainstay products of Access Solutions. Until now, the technology to detect and process the force exerted on the handle by a person's fingers had not been commercialized. However, by combining our proprietary technologies, which include handles, motors and sensors, we have now successfully realized an innovative yet simple product model that allows for greater flexibility in automotive design and enables people to open and close car doors simply by touching the handle. BMW has decided to use this new product.
Developing and supplying such complex products typically involves purchasing components from various companies, involving long lead-times. However, given the Company's ability to integrate mechanical and electronic technologies, we can provide our customers with high-value-added products based on new concepts that defy conventional thinking. We take pride in our ability to meet customer expectations and supply significant product volumes worldwide, based on our rapid system of mass production that leverages the Company's manufacturing strengths.
Going forward, we will continue to produce high-value-added products to address social issues and create new value through INTEGRATION, the Company's distinctive approach to manufacturing.
Targeting high-margin enterprises also in M&As
We have also been reassessing our strategy for M&As, one of our key management strategies that has served as a driving force for the Company's growth. This entails focusing on profitability while aligning with our established principles:
- M&A's that can strengthen our existing businesses and/or provide INTEGRATION,
- M&A's that are priced appropriately.
We have successfully integrated business by acquiring appropriately priced unprofitable companies with the potential for generating synergies with the Eight Spears of our core businesses and turning those enterprises around financially with a focus on financial discipline. This approach of prioritizing scale expansion has sometimes led to temporary downturns in profitability as we work toward business integration. Going forward, we will prioritize profitability when arranging M&As without excessively fixating on financial discipline.
System for diversifying risk to minimize effects of changes in the market environment
In seeking to achieve our long-term targets for the fiscal year ending March 2029, If we were to mention a risk, we may encounter unforeseen risks associated with the global economy and geopolitics. Over the past 15 years alone, we have faced various threats, including global economic volatility triggered by the Lehman bankruptcy, natural disasters, infectious diseases, and political conflicts. To counter that, we have been mitigating risk across all aspects of our business, including human resources and production activities through diversification. For instance, our earnings were buoyed by stay-at-home demand and business related to data centers while the aircraft market encountered a slowdown during the COVID-19 pandemic. Conversely, sales to the aircraft-related market have helped to make up for the current slowdown in the data center market. These are examples of how the strength of our business lies in how our portfolio strikes a balance among multiple businesses and multiple markets. Additionally, our global network spanning Southeast Asia, China, Europe and the United States enables us to take a flexible approach in addressing customer requirements such as those involving manufacturing sites and production volumes. For instance, we are able to offset effects of trade friction between the United States and China by generating customer interest in Southeast Asia and other regions. In the machinery and electronic components industry, we need to respond flexibly and rapidly to customer order volumes and changes. Therefore, we have established a production system for swiftly and consistently meeting customer needs with a focus on maintaining redundancies.
Initiatives for carbon neutrality
The Company earnestly engages in efforts to achieve carbon neutrality by seeking to fulfill its social responsibility to attain both sustainability as a company and sustainability of the earth and society, as is set forth in its corporate philosophy. Particularly in recent years, we have been focusing on adopting renewable energy in Japan and abroad, notably at the Company's core plants in Thailand, the Philippines, and Cambodia. We work closely with local governments to reach a mutually beneficial outcome. We have initiated a 154 MW solar power generation business in Thailand involving investment of 17 billion yen, and a 50 MW solar power generation business in Cambodia's Pursat Province involving investment of 6 billion yen. In Cambodia, we project 100% renewable energy use with respect to electricity consumption both of our existing Cambodian plants and upon future expansion of plants. At our Ordinary General Meeting of Shareholders held in June 2024, we resolved to add a provision on renewable energy commercialization to our Articles of Incorporation to further strengthen efforts toward achieving carbon neutrality. We will continue to meet the environmental requirements of our customers and local communities while also reducing costs by achieving self-sufficiency of electric power.
Bring out the passion of each individual and achieve the INTEGRATION of the energy of 100,000 people
Ultimately, it is our people who are at the root of our efforts to achieve our long-term targets for the fiscal year ending March 2029 and who support our growth leading up to MinebeaMitsumi's 100th anniversary. Furthermore, it is the INTEGRATION of our people that allows for INTEGRATION of the businesses and technologies that are at the core of the Company's expansion.
As a contributor to the "Topics for Tomorrow" editorial column featured in the evening edition of Nihon Keizai Shimbun between the months of January through June 2024, I wrote a message to new employees urging them to "serve as a cog with a motor." As the term "cog" may hold negative connotations, it would be better to rephrase it to "motor with gears," given that energy driving a motor is derived from the unique passion of each and every individual. The point is that when employees embrace lofty goals and aspirations, or, in other words, express their passion, this comes to serve as the energy that drives the gears, which in turn propels the company and organization forward.
It is my mission to create a workplace environment that allows the next generation of talent responsible for the Company's future growth to demonstrate their capabilities with passion and enthusiasm. While the Company's personnel education to date has prioritized on-the-job training, we are formulating a more systematic and efficient talent strategy and employee development policy for the future.
During the fiscal year ended March 2024, we administered an employee engagement survey at our major domestic companies to gauge employee attitudes. The survey pinpointed the need for the transformation and upgrade of our talent development measures aimed at our next generation of leadership. We are addressing this, in part, by initiating training programs. Since 2023, we have worked on establishing a structure for developing employees who will assume future management of the Group and setting up a three-tiered pool of talent consisting of Chief of Headquarters candidates, head of Business Unit candidates, and young professionals with high potential. Through the training programs, we have been seeking to ensure that the Company's DNA and passion are passed on to the next generation by having myself and other members of top management speak with these employees in the three tiers of training sessions.
We have also adopted the Samurai Project as a new initiative. Under the guidance of retailer NITORI, the Company has set up a project team within the Human Resources Development Department consisting of managers equipped with extensive experience at overseas plants from the respective domains of manufacturing, technology, and sales. The Company has accordingly developed a framework where these members who are familiar with the on-site situation can offer advice after listening to concerns of managers and young employees at overseas plants and other such locations. In addition to identifying and developing the next generation of leaders through such initiatives, we have also been moving forward with initiatives that include updating our approach to performance evaluations under our HR systems to create workplace environments that empower employees to passionately take on new challenges.
The Company's human resources management policy is firmly rooted in a "spirit of equality," which I believe culminates in opportunities for talented individuals to excel regardless of nationality or previous employment, thereby motivating employees with diverse backgrounds.
We will achieve further growth as an "INTEGRATION" manufacturer of precision components and improve manufacturing and people's lives around the world. We will ensure that the next generation inherits our manufacturing DNA amassed throughout our 70-year history. We will promote INTEGRATION initiatives by unleashing and sharing the passion inherent in each and every employee.
We sincerely appreciate your continued support.
Related links
