Earnings Call: Q1 2022

Aug 4, 2021

This is Yoshida. Today, I would like to explain the consolidated financial results for the Q1 of the fiscal year ending March 2022. And then Mr. Kainuma, Representative Director, CEO and COO, will explain the highlights of this fiscal year. Page 2 please. Consolidated net sales for the Q1 of the fiscal year ending March 2022 was up 32.5% year on year and down 1.1 percent quarter on quarter to total JPY 248,305,000,000. Operating income totaled 19,628,000,000, which was 5.8 times higher than what it was in the Q1 of last year and up 83.6 percent quarter on quarter. Profit for the period attributable to owners of the parent increased 6.6 fold year on year and a twofold quarter on quarter for a total of 14,659,000,000 yen we estimate that the foreign currency translation have a year on year impact of plus 6,900,000,000 yen in net sales and minus 200,000,000 yen in operating income. Quarter on quarter impact was +7,000,000,000 yen in net sales and plus 1,900,000,000 yen in operating income. We made a slight retrospective changes to last fiscal year's financial statements due to the PPA for ABLIC. Please note that figures on the following pages are the revised ones. Moving on to the next slide. This is for quarterly trend in net sales, operating income and operating margin. The operating margin for the 1st quarter was 7.9%, up 6.1 percentage point year on year and up 3.6 percentage points quarter on quarter. Next slide please. Here shows the difference between the forecast as of May and actual results for net sales and operating income by business segment for the 1st quarter. While net sales for the machined components business segment had a stronger start, overall sales were generally in line with our forecast due to a slight decrease in sales to the automobile industry caused by a shortage of semiconductors. In the electronic devices and components business equipment sales for electronic devices were higher than forecasted. The Mitsumi business enjoyed higher than projected sales for Mechanical Component, Analog, Semiconductors and Optical Devices, the Uxin business are slightly higher than expected sales, mainly in the automobile market. Operating income for the Machined Components business segment were almost on a par with the forecast. The left hand Devices and Components business enjoyed higher than expected operating income due mainly to the recovery of expenses in the previous fiscal year. The Mitsumi business enjoyed higher than expected operating income as a result of increased sales. The Yuxin business lower than expected operating income due mainly to the impact of onetime costs, a further consolidation of Yuxin's retirement benefit plans. Next slide, please. Now let's take a look at results by segment. Starting with Machined Components Business segment, on the left is a graph indicating quarterly net sales trends. And on the right is a graph with a bar chart for quarterly operating income trends along with a line chart for operating margins. Q1 net sales were almost on the par with previous quarter to total 44,100,000,000 yen Ball bearing sales increased 2.5 percent quarter on quarter to total JPY 32,200,000,000 The monthly external shipment volume was up 1.2% quarter on quarter for an average of 246,000,000 units. The growing shipment volume of data center ball bearings continued to drive sales upward. Sales of aircraft bearings remained sluggish due to the stagnant market. Sales of broad ends fasteners totaling 6,400,000,000 yen were down 11.1% from the previous quarter. Although this has not yet led to an improvement in net sales at this point, we are seeing bright signs in the aircraft sales. Sales of Pivot assemblies remained at the same level quarter on quarter to total 5,500,000,000 yen Operating income for the quarter totaled 10,900,000,000 yen and the operating margin was 24.8 1% which is higher than the pre COVID level. On a quarter on quarter basis, operating income rose 23.5%, while the operating margin improved 4.8 percentage points. Looking at the results by product, we see that the profits for ball bearings, rod end fasteners and pivot assemblies all increased quarter on quarter. Next slide please. Now let's look at the Electronic Devices and Components segment. Net sales decreased 4.7% quarter on quarter to hit 90,400,000,000 yen Looking at results by product, we see that sales of motors increased 6.1 percent quarter on quarter to reach 62,400,000,000 yen This is because of robust sales in all types sub motors, mainly in the HCD and in the automobile market. Sales of electronic devices were down 29% from the previous quarter to a total of 17,300,000,000 yen This decrease was due primarily to a loss of approximately 4,100,000,000 yen in card as a result of the transfer of some businesses beginning in the fiscal year ending in March 2022, hereafter referred to as impact of the business transfer. And for your reference, figures for the years up till fiscal year ended March 2021 are based on the classification 4, the business segments were changed. Please note that the same applies to the rest of the presentation. Sales of Sensing Device totaling 8,000,000,000 yen were down 10.2% from the previous quarter. Operating income came to 7,900,000,000 yen and the operating margin was 8.7 percent. On a quarter on quarter basis, operating income increased 39.2%, why the operating margin rose 2.7 percentage points? Looking at the results by product, although profit of sensing device decrease of profits for electronic devices increased due mainly to the recovery of expenses in the previous fiscal year, while profit of Motor was about the same as the previous quarter. Next slide, please. So let's look at the performance for the Mitsumi business segment. Net sales decreased 3.3% quarter on quarter to total 800,000,000 yen Although sales of mechanical components and analog semiconductors increased thanks to strong demand, overall sales for the segment declined due to the impact of the business transfer. Operating income totaled 5,100,000,000 yen while the operating margin was 6.6%. On a quarter on quarter basis, operating income increased 70 7.7%, while the operating margin rose 3 point percentage points. The primary factors behind these increases include a further increase in the profitability of analog semiconductors in addition to the one time cost recorded in the previous quarter. You can see the operating income for this Q1 became negative, but this is due to the retrospective changes to the figures each quarter of last fiscal year due to the finalization of PPA for ABLIC. Going on to the next slide. Finally, let's look at the Yuxin business segment. Net sales rose 14.3% quarter on quarter to hit 36,900,000,000 yen Although there was a negative impact from production adjustment at some automotive OEMs due to the semiconductor shortage, overall sales for the segment were up due to the impact of the business transfer. While operating loss totaled 1000000000 yen and operating margin was minus 0.2%. If the impact of the onetime cost the consolidation of Yousine's retirement benefit plans were not factored in, operating income would be 400,000,000 yen and operating margin would be 1%. Going to the next slide. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph chart challenges in the profit for the period per share. The profit for the period was 14,700,000,000 yen Earnings per share was 36 0.1 yen. Moving on to the next slide. In this slide, we show the quarterly inventory trend. At the end of the Q1, inventory totaled JPY 195,500,000,000 which is JPY 24,100,000,000 more than what it was 3 months ago. This is due primarily to the fact that we strategically accumulated inventory to secure what was necessary for a currently anticipated sales increase. Going to the next slide. This graph contains a bar chart showing trends in net interest bearing debt, which is total interest bearing debt minus cash and cash equivalents in a line chart indicating free cash flows. At the end of the Q1, net interest bearing debt totaling 94,500,000,000 yen was up 10,200,000,000 yen from what it was at the end of the previous fiscal year. Moving on to the next slide. We made an upward revision to the full year forecast for the fiscal year ending March 31, 2022, which we announced in May. The SLA's vision, which has made only to the forecast for the first half, was prompted by higher than projected first quarter results the demand for ball bearings, motors, analog semiconductors, etcetera, will continue in the Q2. We have revised the forecast for net sales from 1,000,000,000,000 yen to 1,050,000,000,000 yen for operating income from JPY 80,000,000,000 to JPY 87,000,000,000 respectively. The exchange rate is assumed to be JPY 100 to the U. S. Dollar for the Q2. We have not changed assumptions for the second half. Going to the next slide. This slide shows the forecast by business segment. This ends my presentation. Mr. Kainuma, the floor is yours. I would like to touch upon the highlights for today. Page 14, please. So compared with the same period last year, APLIC PPA, we had and therefore, we cannot make apple to apple a comparison. However, 1st quarter performance improved quite significantly. The material shortage material price a soaring and the shortage of semiconductors, those are some negative impacts. However, the ForEx impact turned favorable to us. And all businesses are going quite well. So we are more than offsetting the negative impact. And the machined components, as operating income recovered and if aircraft business recovers, then JPY 50,000,000,000 will be a very achievable. PBOT are decreasing but bearing total demand is quite robust. And therefore, we would like to make a new capital investment, which I would like to come back later on and give you more details. Semiconductors, this is a typical subject nowadays. It's going extremely well. 2 or 3 years ago, we we are talking about the 10,000,000,000 yen target. However, we are very close to achieving a 10,000,000,000 yen in half a year. There's one good news, and that is Yuxin, highlighted in red. In 10 years, 100,000,000,000 yen door handle business, a super huge auto manufacturer is the client for this door handle business. And Yuxin has become the 1st vendor for this client. And the global door handle manufacturers must have been shocked by this news. And Yuxin Business, the reason why we acquired the Yuxin is because of many potential synergistic effects and electrification of door handles our analog semiconductors and many other components shall be positively impacted by this trend. That is what we thought. And our customers are fully aware of this. And our operation is global. And therefore, we can respond to huge scale orders, and that is a fact. And we now have it on our hand, not just the door handles, but CST compact spindle drives, inclusive of China major manufacturers' hatchbacks are adopting our products. So for automobile products, it always takes time. However, in terms of the direction, I think we are moving towards a good direction. So that is news I wanted to share with you. Page 15, please. As you may already know, since the end of this year towards the 1st and second quarter of next year, 345,000,000 units production capacity, we were to prepare, but we would like to increase that to 365,000,000 units of capacity. So last year, we made a 10,000,000,000 yen and next year, we will make a 10,000,000,000 yen as well. And if you look at this top right diagram, you can understand that in 2017, it was 250,000,000. And then by improving productivity, the number increased to 285,000,000. And then we worked on eliminating bottlenecks from 300,000,000, 10,000,000 to 325,000,000, the business divisions kept improving. And 345,000,000, which has been once again increased to 365,000,000 units. So the Automotive Farm Motors demand is growing. And I always said that even when vehicles are electrified, the farm motors will always be needed. Since 2017, it's 4 or 5 years. And in 4 or 5 years time, we were in a situation where we had to increase the capacity by 110,000,000 units. So there is this strong demand increase. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So in Thailand, we have been building a multipurpose factory. So we act quickly. So we have decided to put the equipment into facility into this factory. In 2011, it was about 10 years ago, so there has been a flooding plan. This was unforgettable. So in the well, maybe the former new factory, that's a strange way to put it. But in HT, this is a plant, we built that factory. And immediately after that, the flood hit us. Of course, we will not we did not receive any damage. But in taking 10 years, we have been putting in this equipment. And step by step, the depreciation is going to be burden is going to be fewer. So through this investment so even if you have a €20,000,000,000 investment in terms of depreciation, it won't change. So this was a kind of a positive cyclical situation is what we are looking at. So in terms of the bearing competitiveness in bearing, including supply capability, it means that we are by far most established in this area. And I'm very confident that we'll be able to hold that position. Going to Page 16, going to the EPACTA business, so all the things have not changed, but maybe slightly better than last year. That said, as you know, the United Airlines, they have bought 200 Airbus aircrafts and Airbus Boeing, they have become profitable. And the U. S, the domestic traffic has started to come back. Well, they have recovered to a certain level. And going forward towards carbon neutral, so the environment friendly type engine or efficient aircrafts. So the demand for those type of aircrafts is going to increase. So what is happening in Automotive? So this explosive demand is not in portfolio, that's what I'm thinking about aircrafts. So actually last week in terms of the there is there are the global sales, develop and business people for the global aircraft business. So we had a meeting. From the second half of last year, the anticipation is that the business is going to recover strongly. And actually, I think so too. And I have been saying it personally, I think so, that the recovery is going to be seen in the second half in next year. But the single aisle, meaning that there's only 1 aisle between and they're 1 seat each on each side of the aisle, that will be the main type of aircraft that's going to recover. For the double aisle aircrafts, the recovery will take some time to recover. That's what I have been communicated. But in terms of sales, if the single aisle aircraft has started to recover, I think basically the impact on the sales will be the same because we are basically, I think we'll be able to go back to the pre COVID levels. Going to Page 17 for the motors business. This year, So at least 60,000,000,000 higher than that the growth will be higher than that. So 260, 270, that will be the level that we will be targeting. So then well, in terms of the major business portion of the business, I think it's going to go up by 30%. So what's contributing to this is the hard disk drives and automotive. You can see that Automotive is contributing to a lot. Of course, it's our new products outside Automotive business. But for the Automotive business, as a trend, we have been our products has been starting to be taken up at a lot of OEMs. But we have started to see these new models ramping up, and we have seen that being reflected to our numbers. So the motor business is the 2nd spear within our businesses, within our 8 spear strategy. And I'm confident that this is going to continue to grow strongly. Page 18, this is about the semiconductor business. The last day, for the sell side analysts, I have conducted a meeting about the analog semiconductors. The material is uploaded in our homepage or the website. So for those who are not taking a look at this material, please check it out. So roughly speaking, so 10,000,000,000 and a half year, it has been able to be get to that level. So if that is the case, so is it JPY 20,000,000,000 for the airport for half past 5? No, things will not go that way because in the Yasu factory, we have acquired the Yasu factory. So from the 1st October, this will become one of our factories. And the designers and engineers in Gunma or Gifu, we have hired 60 of these workforce, so the costs will come first. So that will be for the half year about 1,000,000,000 yen for this type of cost. So when this is going to be trying to contribute profit contribution, I think this will be from the second half of last year. So until then, it will be a kind of the cost will come up. So if excluding the cost, maybe JPY 18,000,000,000 is what we're looking at for the profit. So one piece of new information is as highlighted touching red here, a subsidy has been granted 4,000,000,000 yen approximately we will receive. So major part of this will be subsidized. Following the government policy, we would like to become even more competitive analog semiconductor manufacturer. Page 19, please. So 10 our 100,000,000,000 target that we have been talking internally for some time. And in terms of the sales, we will be ranked among the top 10. And analog semiconductor market is 36,000,000,000,000 yen, and you may say it's only 100,000,000,000 yen. However, bearing 1.2 1,000,000,000,000 yen is the size of the market. And we are focusing on 22 millimeter and lower and have 1,000,000,000,000 yen as sales. So just like bearing, we would like to pursue niche strategy, so to speak. In other words, we will focus our efforts on profitable and promising areas. And then we will be able to put together bearing type business model. I am confident about that. So as soon as we can, we would like to make Yaasu! Fund a source of the profit. That is the critical path for analog semiconductor. Page 20, please. Optical Devices. In other words, sub core business for us. The production is going smoothly. And earlier, we face seasonality, particularly smartphones starting in Q2. It will make start making a contribution to profit. And game consoles are very robust. And logistics are related like containers are in short. And semiconductors related, there is also shortage and the customers have no other choices but to adjust the production because of such situation. But these two things that I have just described, the game consoles and smartphones in July onwards we'll be generating profits and making contribution. Page 21, recently, what's been reported in news media is the spread of COVID-nineteen in Southeast Asia. As you may be aware, in various countries in Southeast Asia, various clusters are formed at various locations. Our operation has been continuing without any major problems. But of course, there are some employees who have been infected with virus, but we had more than 200 CEO led meetings on countermeasures in 18 months. And we are making thorough countermeasures, which has been highly evaluated by the government of various countries, so they have high confidence in us. In supply chain, we also have issues, but we are making hard efforts in order to maintain high utilization. Page 22, please. EBITDA will probably exceed 103,000,000,000 yen or 130,000,000 yen And our share price, the evaluation on our company, we are not satisfied or convinced by the current share price, the P R is 59x or 19x. And the 1,000,000 yen in electrical sector is 22.5percent28.8 percent is the average. And now it's 18 point or something. So we are undervalued. But this year onwards, we decided to include the absolute amount of market cap. So how we can please our shareholders by improving the market cap. That is another area we would like to exert add most efforts into. Page 23 shows ESG topics. The major earthquakes, because of the major earthquakes, some children lost the parents, so we are focused on single parent support organization. And likewise, Page 24 and Page 25 here's one message I wanted to share with you. In May, we had financial result announcement for March 20 21,000,000,000 is our ability and then 50,000,000,000 yen operating profit we wanted to generate. And market recovery and ForEx are swinging back. Now we can perform at our fullest stability. But in terms of the 81,000,000,000,000 is a true profit capability compared to what I said last May, well, first of all, the semiconductor business is growing strongly. But 2 years ago, I said that we're going to target 10,000,000,000 yen, but we have been able to be looking at the momentum that we're going to achieve this in half a year. The ball bearing business growing, the motor business is growing. So out of the 8 spheres, the core businesses has been improving by leaps and bounds, and that has been contributing to a profit. So this February, so when we made a with some in the material in the Q3 of the fiscal year 'twenty in the end of March 2021, I'm showing you this. So this is the image estimated breakdown of the JPY 100,000,000,000 OP. So this is on the lower right hand side, this is estimated announced in May 2017. So this is kind of a 2 year delay that we're looking at. So M and A, JPY 15,000,000,000. So this is ABLIC and Yuxin. So maybe this can be considered in this manner. So if this momentum holds, the actual strength of OP, JPY 100,000,000,000, I think basically we have been able to lay the foundation for that. So machine components, if the aircraft business comes back, I think basically you'll be able to understand, we call over 50,000,000,000 yen. So you're seeing 10,000,000,000 yen is quite tough for tough to achieve the next fiscal year. But maybe there's some differences depending on the item, electronic devices, Mitsui. And then I think basically all that combined, we'll be able to exceed JPY 60,000,000,000. So roughly speaking, I think basically this is how our portfolio would look like. So this is all from me. Thank you very much. Next, I would like to go into Q and A. The first question is from Goldman Sachs, Takayama san, please. Thank you very much. I have three questions. So first of all, this is about goal bearing added capacity. You talked about multipurpose factory. So in this past 3 months, for the next year onwards, you are anticipating that the management will continue to be strong for the next year onwards. So for the second half, are you becoming more and more confident that the strength of the demand will continue. So for instance, in this I think 3 months ago, I think you were debating that maybe in the second half, going to see a reactionary drop. But I look at the other company's results and they other companies think that maybe the second half will become remain strong. So I want to understand the background of you making these comments. So yes, the questions will I will respond 1 by 1. So, Kainuma will respond. So the technological trend, this you have the EV Or the electrification of the automotives and then the number of ball bearings will increase. I have been communicating that to you from before. So that has become a reality. So the volume will go up has started to go up, that is. And for the automobiles, the inventory basically, there's no inventory for that industry. So to hold the inventory, this goes the same for the our ball bearings. You have to increase the capacity or else the adequate supply cannot be guaranteed to our customers. So that is the background. So from our point of view, so we have been saying that it's going to increase in terms of CAGR, maybe 8% is going that's going to be the growth for the ball bearing business. And actually, things are trending in line with our outlook. So that is the reason why we have decided to conduct the CapEx. So we are the front runner in this industry, so we can't be complacent. We always have to be able to supply and then move forward. I think that's important. Does that answer your question? So in the second half outlook, it becomes brighter compared to before or from well, we have not conducted a very precise analysis of the second half. In terms of the we feel that second half can be strong. Understood. And the second question is, well, the Mitsumi business, the first half operating profit initially, 11.5. I think you have upgraded that to 13.5. So in ABLIC, there's quite of a upgrade. So how can I see breakdown? Game, OIS, IBLIQ, if you break down the same business in that way, what would be the contribution of each of the businesses? Yoshida san will explain about that. In the first half is the first half total is what you're asking about? So this is for the Mitsumi business of first half Mitsumi not first half quarter and second quarter, the first half total. Is that okay with you? Yes. So the 2,000,000,000 yen in the first half is going to be going to exceed the first half target by that level, and most of it is coming from the semiconductor business. And optical devices will has been better than expected. So that is the breakdown of 2,000,000,000. So what I was thinking is that the semiconductor, I do understand the contribution is high. But the games, you have talked about 20,000 at the beginning of the year. In the North America, I think basically this momentum is strong. So the revised first half numbers, is it conservative in terms of the Mitsumi business? Well, in the first half, based on our available information, we are revising that number. So the Q2, for in the total looking at the total situation, you have made the upward revision. So lastly, I would like to ask Kainuma san. So next year, 100,000,000,000. So you have shown us the breakdown, Page 25. One is that for the Mitsubishi business. At the beginning of this year, I think it was 36,000,000,000 yen, but it's down from that. So first of all, I would so maybe this is the breakdown in itself is not that meaningful. So you said that this is the foundation. So to move to a higher level, is it the case that maybe you shouldn't be too optimistic about these figures if you're going to that direction? Well, this is basically a rough image because I'm not God. So I can be very precise. So May 2017, that's 4 years ago. But in terms of the direction that we're looking at, the major path that we want to move forward, I think based on that outlook, I think we are progressing on the right direction. I wanted you to understand that. So as I said so if you combine electronic devices in Mitsumi, the Q3 of the March 2021 fiscal year, well, this was last February, and so it's been 6 months since that. And the situation will be changing and the ForEx position would change. So in that sense, what I'm showing you here is when the external environment is good to some extent, we think that overall, we'll be able to achieve these type of numbers. Maybe there'll be some differences in each of the items. I think that's a rough image that you should So for 3 months ago, I'm looking at the material that you released 3 months ago. So it says with 36,000,000,000, but here you say 30,000,000,000. So to be able to look at 100,000,000,000, these numbers are not that meaningful? Yes, that's true. So that is just basically showing you the material of the we've shown on the 5th February. So in terms I just want you to understand the overall trend. Then there is a high Let us move on to the next question, Morgan Stanley, MUFG Securities. Mr. Sato? This is Sato. Thank you very much. I have 2 questions. The first one about camera actuators, visavis the previous year, in a full year basis, I think you had planned to double the sales. But you have said previously that the camera actuator in the first half, the it's likely to be higher than the forecast. So compared with 3 months ago or 6 months ago, how the situation changed? Could you explain by region? First of all, North America and the rest of the world in Q1 and Q2 in North America in the first half, it's better than the expectation. And production is starting quite smoothly. And I think we can maintain this momentum. And other regions, particularly, China high end smartphones, we thought that we will be able to grasp some business opportunities. However, it didn't realized. So we had the downside in Q1 and Q2. Adding all those elements up last year and this year, the final result we will be more or less the same. And in the second half, the business opportunities in the markets other than the North America, we would like to make sure that we grasp by business opportunities. So those are the changes for camera actuator. My second question is, in the first half, the forecast was revised up. And in the second half, you are not revising. So upward revision was made in the first half and comparing the first half with the second half. Is it possible that the second half will become even stronger than the first half? Or in the second half, what kinds of risks should we keep in our mind, if you can talk about that, please? Basically, this is my personal opinion because the company has not revised the numbers, but I do think second half will be stronger. And the reason why the company decided to maintain the same forecast, there are many things that have been delayed, like many people are saying, that automotive manufacturers will increase production in September onwards. And we believe that and we have no other choices but to believe such statements and follow them. So things are delayed and the seasonality, the Q3 is likely to be the peak. In Q4, during the spread of COVID, Q4 was really bad. But as I said, many things have been delayed. And if those issues are resolved, Q4 is likely to be very strong. That is my personal view. So if I may supplement about the numbers, take for example machined components. The revenue for first half was JPY 91,000,000,000 and Q1 was JPY 44,100,000,000. So, doing the calculation, 2nd quarter will be JPY46,900,000,000 and the second half remains the same. So it will be 42,000,000,000 yen each. And considering the current demand, it is unlikely that Q3 will be lower than Q2. Rather, the COVID-nineteen situation and the semiconductor situation taking into account those things in Q3 and Q4, because things have been pushed back to Q3 and Q4. So there is sort of a discontinuation between the first half numbers and second I have numbers. And first half, JPY 134.7 billion and the Q1, JPY17 the Q3, 58,000,000 and the 4th quarter, 60,800,000,000. So Q3 and Q4, the numbers are likely to be conservative, so to speak. But overall, this is a trend. So in November, the foreign exchange and recovery in semiconductor production, looking at those factors, I will be able to present to you more accurate forecast. So I would like to minimize my speculation and make as accurate as possible forecast. Understood. Thank you very much. Going to the next question from Mr. Hu Securities, Gotou san. Please go ahead. Can you hear me? Yes, please go ahead. I have two questions. One is a technical question. So the Q1, so the retrospective costs and in terms of the recovery of that, so what was the magnitude of that? And when you exclude that, so the Q1 results against your plan, how did that turn out? I would like to get your information about that. There are 2 components. 1 is that in electronic devices, the retrospective cost, we have been able to collect the cost at Uxin. So there has in retrospectively, the retirement benefit consolidation has been conducted. And we have been accumulated the lack of the allowance for 1,400,000,000. In total, it's 1,000,000,000 yen. So in that portion, in the Q1, is included. Those are the ordinary factors. So if we just adjust that, so that means that you'll be able to get the actual profit level. So about 1,000,000,000 yen plus and 400,000,000 yen on the minus. So net is the maybe about 100,000,000 yen gain. So I think basically, it's more than your expectations, maybe more than that you have mentioned. For electronic devices, Wi Fi and Bluetooth, like there are a little more than you have mentioned. So maybe net JPY 1,000,000,000 or something or so, maybe a little bit lower than that. So JPY 100,000,000, maybe single digit, not the half of single digit. Understood. Mix is about Yuxin. So you talked about a major door handle project. We have been able to get the Achieva first vendor. So what is the reason behind this? Can you elaborate about that? So is it a flush handle that you'll be able to leverage your swing? Is it kind of keyless for the kind of type of handle that you can leverage your synergy, what type of project are you talking about? From the customer's point of view, what was the evaluation? Can you talk about that? So it's difficult to talk specifically about this because we have some constraints. But our management policy, as I have talked to you, from we are going to move out from the low end type of products. We're going to go high end or more electrified type of products is going to be our focus. So if if you can imagine from that, I think you can understand. So as a trend, because automobile, everything will be electrified. So this product will be in line with that type of direction that I have talked about. So why Yuxin was chosen. So the former Yuxin would not have been able to get this order because we have been a good track record in the automotive industry, has been appreciated and quality improvement initiatives has been evaluated from the customers. And on top of that, our elemental technology has been evaluated. And on top of that, the supply capability because we have the global supply system, including Asia. Because European makers, they tend not to be that strong in Asia. They don't have many sites or factories. But I think various factors has contributed for us getting this project. I think that will be the correct way to look at this. So we talked about JPY 100,000,000,000 for 10 years. So it's for your business. So if it's a continues to be a single vendor for the 18 years, that will be the magnitude. But I think basically, at some time or other, they will switch to a 2 vendor system. But that will be not our call. Thank you. Let us move on to the next question, Mr. Akizuki from Nomura Securities. Please begin. Thank you for this opportunity. I hope you can hear me. Yes. So it's a rather detailed question. Sorry about that. Mitsumi Business, the so doing the calculation, deducting from first half sales, the second half sales will be 882,200,000,000 yen and camera actuator and the like. And Yaasu, what you have acquired, the Yaasu from OMRON, I think these numbers look rather weak. But would you explain about the background of this? So the profit is not growing that March. And therefore, profit is not expected to grow that much either. So it's different from what I was expecting. So please explain about the background, if you will, please. Mitsumi's first half revenue, 179,000,000,000 yen 179,000,000,000 yen sorry, my mistake. So the second quarter will be yen 102,200,000,000 yen but it's still weak, so profit is not going to grow that much. In the first half, 13,500,000,000 yen and Q2, 8,400,000,000 yen so it's not going to grow that much. So 33,400,000,000 yen Q on Q increase. Deep diving into it, semiconductor will remain solid. And from Q1, the high profit level is likely to continue. And as we have been talking about optical devices, Q2 onwards, the new model will have start FitBU impact. Of course, each customer has its own situation. And I cannot share with you all the information, but the machined components number is rather conservative. So semiconductor shortage, is it related to that? Well, customers are not saying they are having shortage Choku Semiconductors. And therefore, I cannot comment on that. Understood. And a similar question, Yuxin Business, Q1, 400,000,000 yen. This reversal of the retirement benefit provision, so the first half operating profit, JPY 1,500,000,000, I think. So it is likely to increase dramatically according to your plan. And why is that? In Uxin, this year onwards, Mitsumi's Automotive Product Business has been transferred to Uxin, and this business in Q1 struggled. So so called original Yushin compared with the numbers we explained up till last year, the numbers for this year seem rather weak. But in Q2 onwards, the numbers are likely to recover. And Mitsubishi's OEMs, the situation is different, OEM to OEM, but that Uxin is likely to overcome those issues. To the extent possible, so the former Mitsumi's Automotive business further, Yuxin, would you elaborate on that? It's about a certain customer. From Q1 to Q2, it's that the customer the business is likely to recover significantly, I cannot name that customer. And Fuma, Mitsumi's Automotive business, it's for Tier 1 OEM, so if a customer makes adjustment to production, we will have a direct impact. So it will have a direct impact on our business. So it's different from other business. And a customer some customers have put together recovery plan. And if it is actualized, I think there will be a double impact. I say, understood. Thank you. Going to the next question, Shiba Securities. Izumi san, please. Thank you. This is Izumi speaking. So in terms of the machine components, how we should think about the profitability? So if you look at the Q1, 24.8 percent and the pre COVID is March 2020, it has been going over at that level. So how is the margin profit trending? How is the fixed cost trending? What is the reason why you have been able to see this improvement of the operating margin. And for this year's plan, in terms of how the profitability is going to trend, is there any room to further improve the margin? So in terms of the ball bearings profitability, we do not disclose that. And for the long period of time, we have not disclosed this margin. But if you look at the material, the ball bearings margins is very, very high. And once the volume recovers, then it will be high. But the aircraft margins will not be that high. So if the aircraft business starts to come back, it means that, there will be a downward pressure for the margins that is. However, the ball bearings, we have been investing in the very low cost areas, and I think the margins is going to be very high. So I think there are a lot of ways to think about this, but you have to go to new markets, you buy the land and then train the employees from scratch. Rather than doing so, so in Bon Pain, for instance, a plant, we have the multipurpose plant. So we are have the plant or we already trying to add capacity in the already established plants. So it means that the margins are going becoming higher. And then there is potential to go even higher than now. But please do not focus on that because machine components in machine components, aircraft business is going to go come back, then that will be put a downward pressure. But in any case, overall, the high margin will be maintained. Thank you. And my second question is in the Uxin. So in Europe, you have been engaged in structural reform. So how is the progress? And you talked In March 2023, the Usim business is going to be JPY 10,000,000,000. You said that maybe that will be a bit tough. So including the structural reforms that you are conducting, so this 10,000,000,000 yen for next fiscal year, how should we think about Well, in terms of the actual capability of Yuxin, I think that is the starting point that we should look at. From our point of view, from if you have 7.7, there were negative factors. And then we have reached this current level. For instance, for the current the Hiroshima Usin Group, so the European Valeo Group, we have the former Yuxin has put that into their group. In their customers, do if the bottleneck for the semiconductors is resolved And when they start building up their inventory, then the actual level, maybe about 7,000,000,000 yen is what we're looking at, plus 300 restructuring of 300 people, and then we will move away from the low end products, then maybe this is the image that we're looking at. So that is the thinking behind this. So is the restructuring going well? Well, we are trying to first of all, we are focusing on production this low end products. So currently, I think things are going as planned. So what remains is that in automotive manufacturers, will they really recover, as I have said, in next fiscal year? If things that becomes clear, putting aside whether we will be able to reach 10,000,000,000 yen I think this year we will be able to go back to a rather good level profit. Thank you very much. Next question. Now the scheduled time to finish has been passed. And therefore, next question will be the last one, Mr. Hirata from UBS Securities, please. This is Hirata from UBS Securities. May I begin? Thank you. I have questions. First, Electronic Devices, Q1 profit, the split, the motor profit, Q2, it was flat. The sales are growing, but profit was flat. Probably, it's because of the increase in material prices, the raw material prices, is it because of the impact of raw material prices? And how do you plan to respond to that in Q2 onwards? With regards to Q1, the raw material, particularly copper price impacted. So we were impacted by raw material cost. The specific numbers, our motors are small and the copper wire, very fine wires and compared with our competitors. The usage volume is small, and therefore, impact may be smaller. And if it were not for such an impact, it would have been much higher, although we do not disclose actual numbers, but several 1,000,000,000 of yen of impact is anticipated. And is that utilization has kept rising. And the profit decreased and foreign exchange changed in a favorable direction. And additional raw material cost has been passed on to our customers. And Q3 and Q4, we will see such an impact. And therefore, profitability, although our raw material cost is increasing, this issue is likely to be resolved as time goes by. Understood. Thank you. We would like to close the Q and A session at this juncture, and we would like to close this analyst session. I would like to thank everyone for joining us.