Earnings Call: Q2 2021

Nov 6, 2020

As the time has come, I'd like to start the meeting. Thank you very much for participating Minipay Mitsubishi's business results presentation for the second quarter of fiscal year, March 2021. Let me introduce today's presenters. To your right, Representative Director, CEO and COO, Yossi Hisakainuma, Director, Senior Managing Executive Officer Katushiko Yoshida. Thank you. First, Mr. Yoshita is going to explain about the financial results. And next, Mr. Kainuma will give a presentation about the business update and management strategy. After that, we will go into a Q And A session. We are planning to end this presentation by 7 pm. As for financial statements, we have the supplementary material the brief report of the financial results on the website. So please refer to those materials as well. And on the upper right side of the screen, there is a link for questionnaire. This will be very important for the IR activities to get your feedback. So please respond to the questionnaire. In this presentation, including the Q And A session, we are recording the proceedings so that it can be viewed on our website afterwards. Please, again, it's for your understanding. Mr. Yoshida, please. Name is Yoshida. Today, I would first like to explain the consolidated financial results for the second quarter of the fiscal year ending March 31, 2020 1. Consolidated net sales for the second quarter of the fiscal year ending March in 2021 was down 1.9% year on year and up 46.3% quarter on quarter at 1,000,002,660,000,000. Operating income was down 10.5% year on year. And 3.3 times higher than the previous quarter reaching 1,000,000,000. Profit for the period attributable to owners of the parent was down 6.4 percent year on year and up 3.7 times than the previous quarter to total 1,000,000,000. Operating income for this quarter includes special expenses of approximately 1,000,000,000 incurred due to the impact of coronavirus We estimate that foreign currency translations impact is minus 1,000,000,000 quarter on quarter and year on year minus 1,000,000,000. And minus 1,000,000,000 impact on operating income and minus 1000000000 operating income from the quarter year on year. We had made a slight retrospective changes to last fiscal year's financial statements due to the PPA for Yushin. Please note that the figures on the following pages are revised figures. Please go to the next slide. This is the quarterly trend in net sales, operating income and operating margin. The operating margin for the second quarter was 6.4%. So it was down 0.6 points year on year and up 3.5 percentage points quarter on quarter Moving on to the next slide. Now let's take a look at the results by segment starting with Machine Components business segment. On the left is the graph indicating quarterly unit sales trends and on the right is a bar chart as the quarterly operating income trends and the line chart for operating margins. 2nd quarter net sales increased 7.1 percent quarter on quarter to total JPY 38,000,000,000. Bow bearing sales increased 10.2 percent quarter on quarter to total 1,000,000,000. The monthly external shipment volume was up 13% quarter on quarter for an average of 195,000,000 units. Sales rebounded mainly for automobile applications. Sales of aircraft bearings remained sluggish due to the stagnant market. Sales of Broadlands and fasteners totaling 1,000,000,000 were down 6.5% from the previous quarter. Aircraft Manufacturing has not yet recovered and is expected to remain in the doldrums for a while. Sales of pivot assemblies recovered increasing 13.7 percent quarter on quarter to reach 1,000,000,000 as as production cutbacks and some supply chains due to lockdowns in the previous quarter were resolved. Operating income for the quarter totaled 1,000,000,000 and the operating margin was 18.2%. On a quarter on quarter basis, operating income fell 3.4% while the operating margin dropped by 1.9 percentage points. Looking at the results by product, we see the profits for ball bearings assemblies increased quarter on quarter, while profits for what ends and fasteners decreased. Moving to the next slide. Now let's look at the electronic devices and components segment. Net sales increased 23.8 percent quarter on quarter to hit 1,000,000,000 Looking at the results by product, we see the sales of MultiUs increased 24.8 percent quarter on quarter to reach 1,000,000,000. Due mainly to the recovery of the automobile in other markets as well as steady performance of new businesses. Sales of electronic devices were up 22.1 percent for the previous quarter to total 1,000,000,000. This is thanks to strong sales and major customer smartphone models that use our LED backlights in addition to recovering sales to the automobile industry. Since in device sales grew 25.5 percent quarter on quarter to hit 1000000000. Operating income came to 5,500,000,000 and operating margin was 5.6%. We saw a 2.5 times quarter on quarter increase in operating income, while the operating margin climbed 2.8 percentage points. Looking at the results by product, we see that profitability of sensing devices improved in addition to better profitability of motors as a result of cost cuts and product mix improvements. Next slide please. Let's look at the performance for the Mitsubishi business segment. In this first quarter, Eblick, which was merged with Minnebir Mitsumi as of April 30 was included in the scope of consolidation. Net sales rose 95.5 percent quarteronquartertototal110.7000000000. Sales increased across all product lines including mechanical components where full production continued in preparation for the year end demand season and camera actuators whose production went into full spring following the launch of new products my major customer operating income totaled JPY 7,600,000,000, while the operating margin reached 6.9%. We saw a 5.6 times quarter on quarter increase in operating income, while the operating margin declined JPY 4 point 5 percentage points. Results by product show profit growth across the board. Next slide please. Finally, let's look at the Yoshin Business segment. Net sales increased a 70.5 percent quarter on quarter to hit the 1,000,000,000 due to a better than expected Albeit and even recovery of the overall automobile market where some customers bounced back significantly and others lagged behind. Operating income came to 1,000,000,000 and the operating margin was 4.5%. The business found itself back in the block thanks to improved quality and productivity as well as a strengthened management system following the business integration and better profitability due to rebounding sales that all work together to lower the breakeven point. Next slide please. The bar graph here show trends in profit attributable to owners of the parent, why the line graph chart changes in the profit for the period per share. The profit for the period was 1,000,000,000. Earnings per share was 1,000,000,000. Next slide please. Next we have the quarterly inventory trend. At the end of the second quarter, inventory totaled 1,000,000,000, which is 1,000,000,000 less than what it was 3 months ago. This is due primarily to the startup full scale shipments of some OEM products and our efforts to optimize inventory levels in light of the changes in the situation associated with the prolonged spread of COVID-nineteen. Next slide please. This graph contains a bar chart showing trends in net interest bearing debt, which is total interest bearing debt minus cash and cash equivalents underlying chart indicating free cash flows. At the end of the second quarter, net interest bearing debt, totaling 137.6 1,000,000,000 was up by 1,000,000,000 from what it was at the end of the previous fiscal year. This figure includes the cost of acquiring shares in Evilik 35,400,000,000 and the cost of acquiring additional shares in CNA 4,600,000,000 Next slide please. We revised the full year forecast for the fiscal year ending March 2021, which were announced in ranges at the beginning of this fiscal year. The revised forecast are 1,000,000,000 of net sales and 1,000,000,000 of operating income While operating income for the second quarter was just about on target, we factored in the ongoing slump in the aircraft market a lack of any sign that the U. S.-China trade frictions will be resolved as well as the reemergence of COVID-nineteen in the U. S. And europe exchange rate assumption is JPY 105.05 to U. S. Dollar. Next slide please. This slide shows the forecast by business segment we also revised initial forecast by business segment, which was in ranges. This is all from me. Next, Mr. Kainema, please. Good afternoon. This is Kainema speaking. Please turn to the next slide. So Mr. Yoshira has explained about the situation this year's 4th year forecast So we were saying that between 1,000,000,000 to 1,000,000,000 would be the operating income that has been the initial outlook. However, this time the lowest range of 1,000,000,000 will be this year's forecast The reason will be explained in detail later. So from April to May, the COVID situation was tough and we were wary of what's going to happen going forward. But last year's first quarter 2nd quarter was not good because the laws in Thailand has changed and in terms of the deficit on the reserve for the pension. So that was a billion deficit. So that was a special factor for last year. So taking these into account, the first half of this year will be in line with last year's first half. That was our anticipation. So that was the basis of our outlook. For the first half, I think basically we were in line with our expectations. However, that said, and I will go into details later, but the basic earnings structure, there has been no major changes. And I'm very convinced about that. So next year, for sure, COVID will be under control more than ever. And the we would like to make a starting dash for next year. So the second half, we'll be looking at that initiative we'll put in various measures to be able to make that start task for the next fiscal year. And the inventory level has been high temporarily but in terms of the fiscal discipline, we should not go after profit and have a full production we decided that the inventory should be controlled to the previous level. So we want to put in these measures. Next slide, please. So as I have said, so 1000000000 to 1000000000 range, Well, the JPY 50,000,000,000 is a kind of a bottom up recent figures was JPY 50,000,000,000 operating income that was based on the bottom up recent figures. So it was very conservative back at that time. And I consider the operating income capability. And I put in various stresses and the top range was 1,000,000,000 So I think some of you remember, but the COVID towards the second half of this year will be somewhat controlled. That scenario was the basis of the 1,000,000,000 range, but the vaccine I think recently we're talking about the vaccine being ready within this year, but right now it's 6th November. It turns out that the vaccine will not be ready by the within this year and the Europe in the United States, the infection is spreading rapidly. So if you take these into account, the lower range of our outlook has to be considered. There are 2 major outstanding points here. 1 is the aircraft market as I said previously and we thought initially in the second half some things it will recover somewhat, but unfortunately for this fiscal year, the aircraft market cannot we cannot predict the recovery for this market and what I missed the point most was about the U. S. China trade conflict issue in May after the Golden Greek holiday, I think about 2 to 3 weeks after that from the United States to Huawei, there has been a sanction imposed for the export of SIM conductors of Huawei. I was wondering whether become realized, but actually in September this came into effect. So based on this, so towards Huawei, we actually deliver a lot of our products and this business stopped So this was an unexpected outcome. So in the first half, I said that things will be the same as last year, but this 1,000,000,000, we initially I was confident that we'll be able to work be over this 1,000,000,000 line, but in May due to this trade conflict because in China this became to the surface. So unfortunately the card supply to Huawei has we cannot do that. We cannot supply products to Huawei. So that is the another reason why I am saying that our outlook for the operating income is at the lower range. But on the other hand, in terms of a indicator for the economy, the bull bearings would be the indicator of the economy. So it is showing a very powerful trend in June, the bearings and sales of external sales was 166000000 in July. It was 183,000,000 and August 187,000,000 so there has been the trend in September in 1,000,000 October 1,000,000 this month it's been a record high, 1,000,000. So that will be our outlook for the external sales of borrowings. So the second half of this year, each month more than is going to be solved for ball bearing. That is our outlook. So in that sense, the global economy has over will start to recover. I think that is an unmistakable fact. So against this backdrop, the so JPY 230,000,000 this month, we're going to have a record high level of volumes for ball bearings. So what stands out is the automotive market, the automotive ball bearings is going to hit a record high level and as you say others, in other segments. We have the other segment. So this will reach a record high level as well. So as the ball bearings and growth for the future, I am very confident that we'll continue to grow. But for the internal sales for the pivot for the hard disk drives has dropped compared to the past. So I think this we are in the transitional period. So internal use of the people billings, we had a lot of that demand. I think basically is being handed over to the external sales. I think this is a transitional period. This trend if the COVID situation is going under going to come under control, it means that the external sales volume is going to continue to grow. On the other hand, the inventory level, so it went up to 1,000,000 in one period of time, However, originally, it should be we want to bring down the inventory a lower level, that is our ideal. So currently, as of endofMarch, about the second half of 1,000,000 or the mid 1,000,000 level to that level, we want to reduce the inventory of both bearings. So when the things are good, reducing the inventory, that is a very important activity. So, we will go forward with that. And one other point I want to make is that so the profitability of bullbearings will have to become higher. And from December, whether it be Thailand or Cambodia I am able to go to these business trips. And after I come back, I won't have to go to self quarantine. So I am scheduled to go over to Thailand to Cambodia. So the cost down with a measure that I have been preparing, I will be put them into, execution and put towards next year. The substantial improvement of the profitability is what I am aiming for. Another point is that this is for the aircraft business. So when is the aircraft market is going to recover. It is very difficult to make in prediction, but what we can do right now is that I'm calling this from push to pull activity. So the pull type of production structure should be put in place. The all the global aircraft related business. I have instructed them to do so. Did you understand that? In the past, late delivery affected quite severely, but we are building system production system in order to avoid late delivery compared with our competitors. In other words, we are changing the risk or problems into opportunities. So that is what we hope to do. The motor business Fortunately, we have been able to solidify the foundation in order to expand our profit fan motor we have entered into Cambodia and we are now seeing profit and the volume compared with an number we saw in the past has increased and VAC motors are also increasing So various motors are experiencing improvement and OP margin of 10% and 1,000,000,000 were the targets for motor business, but 1,000,000,000 of which was the initial goal for us is now in the achievable range on lean bus supported, motor and, grill or shutter, the motors for such pericals, we will be increasing volume. And therefore, the motor business is now very promising. This is the 2nd pair out of 8 spares and we have been able to solidify the foundation backlight. As I have kept saying, backlight, I will not see to exist and I think that is almost determined not into perpetuity of course, but for some time to come back by the business shall continue. But of course, we cannot expect the same kind of profitability as we experienced in the past, but other eight spares will generate the effects in order to compensate the decline in backlight profitability. That is what I believe Mitsumi Business. So the hottest business is the semi conductor at this point. The operating profit of the semi conductors 1,000,000,000 has become achievable. It's far above 1000000000 Yen that is a profit, earned by Semiconductors and to what extent that we can further increase that will depend upon my hard work and my ability as the top management Optical devices, we are to become a number 1 in the industry. Aiming at achieving 1,000,000,000 and a core business for Huawei has disappeared. Semiconductor or the analog, the semiconductors for the smartphone application. The 4 way, even if 4 ways volume of mobile phones goes down, it can be offset by other manufacturers. However, OIS because the specification is a different company to company. And therefore, in a short term, we will be affected, but this is a wonderful technology. And therefore, we would like to expand the sales to other companies And 8 spares, speaking about 8 spares. The connectors and power supply, which were rather quiet in the past. But automation is progressing and the market is huge and it will never cease to exist. And production system has been established and it's been shared by many plants worldwide, Fitch Father Pringsons are basic capabilities and therefore we strongly believe that Mitsumi business will grow and develop going forward next is Yushane Business. Since April, because of COVID-nineteen, Usane business was most severely hit because this is this focuses on auto business. However, fortunately in July, it turned profitable and it's improving a little by little Having said that, however, Europe and the U. S, as you are aware, the situation is really bad. And therefore, The things that we can do is rather limited. However, we must continue working hard on improvement activities. So that is very critical. And also we have put together a very clear set of strategies. So in the past, we sort of focused on low and the cheap parts, low value added products, but now we are shifting towards more value added products like a flash handle and CSC, the compact spindle drive, it's an automation mechanism for hatchback rear door. So, focusing on these things, we are to improve using a business. So I have given a clear instruction to do that and people working in the field clearly understand that. So it will take time of course, but we are changing gear to change a UHIN business positively to 1,000,000,000 profit and smart lock by the end of this year or early next year, the retrofit smart lock development that is progressing smoothly. And we would like to handle this as a full B2C business. So we would like to start this business as a contribution to society. We are selling surgical mask, which is another B2C business and we are learning lots of things through this type of business. And through such efforts. We would like to have smart start of smart lock business. So 1,000,000,000 of operating profit, that is to us. Is not our goal, but that number the probability is high to achieve JPY 100,000,000,000. If the environment becomes positive. For example, mechanical components achieved JPY 48,000,000,000 and conservatively, the business should recover to 1,000,000,000. And electronic parts should be able to achieve a JPY 30,000,000,000. It won't be so hard on Mitsumi If a semiconductor aren't 1000000000, then 1000000000 to 1000000000 would be possible. And Uxin, 1,000,000,000 is the target, but if the half amount is earned like 1,000,000,000 then overall 1,000,000,000 that will be possible and measures for profit improvement, we will keep pushing hard to achieve those targets. So item number 6 active recruitment of external talents, external human resources So by injecting a fresh blood, we would like to change our mindset and share knowledge and expertise So that shall be possible. And therefore in that sense, we will be changing that we will be transforming going forward. I don't want to speak much about this slide, but these are the products that we have high expectations for. Other than that, there are 2 stills products and therefore we shall be able to increase our revenues mostly and EV is one of the hot topics and after electrification, these are things that we'll keep selling. So these things I mean these 8 spare products. And because of EV, I am sure that the markets will keep it spending. So this is part of the products. I will not go into detail. I hope you will take a look these and I think I understand in 5 years' time, this level of growth can be fully expected. So in terms of SDGs, there are two slides that I have prepared In December, we are going to host the IR day and at the day, I would like to explain more thoroughly about what we are doing. But thankfully, so dimming function. This is a road light that can be cut it to a wirelessly, so about 40,000 worldwide, and it's close to 50,000 Worldwide. So in Cambodia, 15,000, there's plus 5000 so the 20,000 Cambodia and Chile 20,000 of these road lights. So in total, there'll be 50,000, you'll be able to reach 50,000 of these road lights as our infrastructure business. And initially, so these road lights is for the future Smart Cities it will be the key now have been very confident about that. And recently there has been some interesting inquiries that has started to come to us. For instance, the Japan Technology agency jointly with them our sensors will be controlled on a wireless basis. And then in terms of the output of the solar cells, so they can improve the prediction of the output of the solar power radiation over the koto University so the social demonstration of test the wireless power supply with or with the Osaka Prefecture demonstration of the experiment by using LED Street by switch sensors, improving the functionality. What I have always been saying is that This is not a 1st STT activity, our products basically will be ultra small ultra precise products. And these components themselves to be more efficient to optimize the energy consumption and to minimize the energy based consumption as a target. So the small ball bearings compared to the other competitors, how their performance is are better. And in terms of the electricity consumption by the motors can be reduced considerably. So towards the investors, I want to appeal about those points. And by doing so, I would like to specifically introduce our initiatives in these areas So the 1,000,000, we've invested that much in Bampang in Elopupuri on the ceiling of these plants, the total installation area is 30,000 square meters. This has the power generation capacity of 5 megawatts. So the solar panels has been installed. At these two plants. So the direction of a company is how we are going to use the renewable energy and at the same time contribute to a sustainable produced products that can contribute to a sustainable society, that will be the key. So the necessary investment will be continued going forward. However, the scale of of the installation of power solar power generation. So I would like to understand various issues And then this is one introduction of the actions that we're going to conduct going forward. So this is the last slide that we have in terms of dividends we're going to maintain the dividend. The reason is that I have been always saying that the payout ratio is 20% So there have been some special factors, but our earnings capability has not diminished at all. So this just seems to be like a coincidence, but there has been a lot of things that has happened. So this year's outlook is 50,000,000,000 of operating income. So for us, this is a very disappointing forecast. However, In terms of dividends, we want to offer stable dividend payment And in terms of financial strength, we have enough strength to pay that amount. So I hope that we feel assured about that. So this 1,000,000,000 of operating income from our point of view, this is a conservative outlook. So this is the minimum level, there are some Forex issues, etcetera. So there is some headwind flowing against us. However, So all the employees will be unified to be able to reach this operating income level of 1,000,000,000. And when we think recover at the next fiscal year, we want to achieve this 1,000,000,000 operating income target as soon as possible. That's all from me. Thank you for your attention. Next, we would like to have Q And A session. And we would like to allow only the institutional investors and analysts who have pre registered. If you have a question, please press asterisk and 1 If you want you one by one. So when your name is called, please ask the question and please ask one question at a time. The first question is from a Goldman Sachs, Mr. Takayama. Thank you. Can you hear me? Yes, yes, we can. Thank you. I have three questions. So one by one, I would like to ask first of all, the overall performance, so you set the forecast at JPY 50,000,000,000, which is a lower limit. And you explained about the aircraft and the Farway but looking at other, apart companies, the Automotive And Gaming Console went above the assumption and the backlight in other than North America should have had a positive result. But you seem to have included only the negative factors, not the positive ones. And other than that, bearing production adjustment and the backlight related risks anticipated in the second half. So as a result of a factoring in those factors, did you come up with this 50,000,000,000 So I can see why you understood it that way, but there are ups and downs And it is true that, Automotive Business are started to rise in July. We thought it would be worse than that. Bearings is renewing a record high, but we are very diversified the business like machinery for textile business and office automation and the special type of smartphones as such customer. So there are quite a few negative factors So looking at the overall picture, the increases are occurring on the in a limited area. And as I said, we took a conservative view to decide on JPY 50,000,000,000 But to be quite honest with you, bearing a business or feeling every month it's changing like 2 weeks ago that the strong demand related to information we obtained 2 weeks ago and it's quite fluctuating, but bearing is shifting towards upside. So we are grateful, but on the other hand, Jan is becoming stronger. So to be quite honest with you, right now, it's very difficult to come up with detailed projection. So that is how I feel. So we thought it would be better to take a conservative view when the presidential election is over, the exchange rate may become $100,000,000 to a dollar So we thought it would be better for us to explain it this way I see. Understood. My second question is, this question is also for Mr. Kainuma. The reducing inventory or by bearing preparing for the next term, the intention behind that So demand is increasing, as you said. And another possibility is to keep the same level of inventory. I don't think it such a bad idea, but you are, adjusting the inventory and that is because to you want to reduce costs for the next term and leveraging, to increase the profit. In other words, is that the reason why you are reducing inventory now? To increase profit going forward, am I right? Yes, exactly as you say. So 1,000,000,000 or 1,000,000,000. For such amounts, keeping inventory because things are so uncertain. This is the age of uncertainties. And therefore in order to respond to risks, we have been thinking about of various strategies to cope with risks and therefore, bearings we thought that we should reduce inventories whenever we can. And next year, how things will evolve by next year? Nobody can predict there is this U. S.-China issues. So I thought the inclusive of the financial discipline, I thought that we should normalize the level In this slide, you have used the cost reduction quite a few times not just for Uxin, but bearings, competitiveness, particularly cost competitiveness. Is that included? Yes. Exactly. Bearings as a second step, but we will be implementing additional measures, but we are not able to make business trips And therefore, it was rather difficult to implement the measures, but face to face I believe it's very important to speak to people face to face in order to convince them, but it was rather difficult because of this COVID-nineteen calamity and using digital tools to the extent possible, we try to use additional tools in order to communicate with them in order to reduce cost And ideas that people have been nurturing, we would like to implement at this time around Understood. And my last question, so North America, the backlight and actuators are the 2 main products and backlights towards the second half Is it right that the situation is likely to be tough, but whereas the second half, an actuator, there are new production technologies And is it proceeding in line with the plan for North America? Backlight, As you may be aware, there seemed to be no model changes And this morning, I read an article, but we have not been able to grasp the latest situation that we cannot make the, the latest version and some people because of that, some people seem to think that low end products are likely to sell, but we have not grasped the whole situation yet. And actuators We have no production related issues, nothing at all. And therefore, if we receive orders that we will be able to produce them. So, the situation is more a solid than expected. Understood. Thank you very much. Thank you. Next question. From Morgan Stanley, MUFG Securities, Sato san, please. This is Otto speaking. Can you hear me? Yes, please. Thank you for taking my questions. I have three questions. First, question is that the 2nd wave of COVID, the impact in the second half, how much you have reflected that in second projections. So I think you have about 1,000,000 or 1,000,000 of corporate related expenses. The first quarter and second quarter, that is how much are you expecting for the second half? So the most recent forecast we're looking at the calculated looking at that and based on that, we have a outlook. So COVID related expenses is included as well. But that said, for example, with the lockdown of the United Europe and U. S. Is happening, but whether the fact theories are reducing the production. That's not the case. So in the those coming from the product the plans not operating. I think that type of was going to come up in the second half. So the manufacturing industry we'll be able to continue their activity. But in terms of demand, we have to put in some stress for our forecast. So that is the basis of our outlook. So in terms of demand, the interest on demand is what you're looking putting on. So in terms of expenses or costs, no that level, of course, is not reflected? Yes, that's correct. Understood. Thank you. My second question is about the Mitsumi business. So the profit against the first quarter has gone up substantially So in terms of the game consignment sales from the 1,000,000,000 for the first quarter, the second quarter, how did it trend? And for the second half, So $17,400,000,000 for the second $174,700,000,000 for the second half, how much this is reflected? So the first quarter 2nd quarter, the profit has increased So this was again a camera actuator and the a break. So what has been the biggest contributor? And I would like to know about that. First, for the in consignment for second quarter, it's about 1,000,000,000. So about a 32 2010, I think basically that will continue back into the third quarter 4th quarter. In terms of the profit driver, for the second quarter, the game production is going has been has peaked. That has been the major contribution to our profit. And next, the next factor is a semiconductor business. So this will be ABRIC and the for our Mitsumi Semiconductor business is both doing well. So that is the second major contributor to our profit. The 3rd contributor is the optical devices. As Mr. Kainama has explained, in terms of the business for Huawei, there has been a double trend, but the North America business has recovered. And the trend will continue into the 3rd quarter for the device, the 3rd quarter is going to be the peak and for the games. So the 3rd quarter will go down slightly, but the production level will be maintained at a very high level. So that is our outlook. So my third question is, so about the ball bearings external sales volume, Mr. Kain Duma has given us some figures. So how about internal sales and production volume? From July onwards, can you give us the numbers? So from July onwards, ball bearings So the additional sales, 100 and 83, 1000000, 1000000, by 1,000,000. In the internal sales, that was in external sales 55,000,000 dollars, $5240,000,000, return on sales production, 2040, 2047, 2022, that is the track record for the 2nd quarter. How about October or November onwards? For October, on average, 1000000 that is on the graph, the most recent number is slightly over that. So 211,000,211,011,000,000. So 2017, 2018, December 207. So on average, So it's 1,000,000. So the external sales, so the internal sales average So production is a level over 1,000,000. This is the target for the third quarter onwards. So as Mr. Kainoa has claimed, I have to incorporate the inventory adjustment How are we going to control the production? We will consider that due to the inventory adjustment. You very much. Let us move on to the next question. Mitsubishi, you have to Morgan Stanley and Mr. Ruchino. This is Ruchino. Can you hear my voice? Yes. Please go ahead. So I have two questions. The first one is about actuators. Actuators the specific customer is affecting? And up until the middle of the first half, there was a front loading of the business. And after that, the business slowed down Am I right in understanding it that way? So the first half and second half, could you explain a little bit more? And North America, how we should look at share. So you said that you are going to get the 50% and what is your outlook? That is my first question. Regarding share, I would like to withhold making any comments that we have not changed our view. And actuators for non North America, Q1, that went up a little bit. And Q2, our production was reduced and and Q4, the same trend will continue. That is how we think at this point. A front loading or did you not experience a front loading business. This is Kainuma. Semiconductor. For semiconductor, it is true. It happened, but actuators, it's high end actuators And as you may be aware, the models are with the functionalities that you may understand that there was no frontal loading and that is one of the reasons of why our business became so tough. Understood. Thank you. My second question is analog Semiconductors Now it's a booming, I understand. But overall, the impact of COVID-nineteen And I think some items in the analog semiconductors are, in short, and the Philippines, serve island. I understand that the production is normal. So the supply side, inclusive of the logistics, is it going as usual and, semiconductors, in a short shortage and because of that, are you seeing stronger demand for your products? Operation is normal. So both front end and the back end are no problems. And ABLEIC, ABLEIC the back end, the processes are conducted in Akita Prefecture and we would like to further upgrade such processes and there is a strong demand. And therefore, we are enjoying a good business. And this is likely to continue for some time to come. That is how we think. In that sense, this business is quite promising. But the demand and supply is rather tight, isn't it? And do you have any concerns about that production capacity related concerns? Well, we can make only at to certain volume. And therefore, so it's like, happy, cry, but the customers who favored our products, we must make sure we supply the necessary volume. That is the only thing that I can say at this point, I see understood. Thank you. Thank you. Next, question. From UBS Securities, Hiroatazan, please. Hello. This is Hirta from EVS Securities. Thank you very much for taking my question. Yes, we hear you. Go ahead. So I have two questions. 1, but the machine components. So you said that from the first quarter to 2nd quarter, the profit has gone down slightly and the profitability has declined, but the top line has grown, but the profit has gone down. What the reason. Is this because the aircraft industry business? And towards the second half, the outlook or the profitability is going to go down further from the first half. But on the other hand, where the ball bearings shipment is strong and the production is not going to go down from the second quarter to 3rd quarter. So you have talked about the measures they're going to take and looking at the next fiscal year, but the second quarter, how I should think about the margin from the second quarter and the second half are just being conservative? I would like to ask your idea. Yes, as you have pointed out, the aircraft market for the word end numbers, if we look at the word end sales, so the second quarter against the first quarter, it has gone down again. So that has been one of the reasons for the decrease in profit. Within the ball bearings, we have so aircraft related business and profitability, excuse me, the sales has gone down for the aircraft industry. And with that, the profit has declined. And due to this, the top line has increased, but the operating profit has gone down. That is the reason So, the existing Innovia business, that is a ball bearing business, So the production volume is going up and the profitability is the same. That is our outlook. Towards the second half, through the aircraft market, it will be stay flat. But on the other hand, So the external sale, the bull bearing's external sales is growing. And with that, how are we going to control the production? But the numbers that we are giving, it will be slightly on the conservative side. Understood. Thank you. My second question is about the actuator business So you talked about the North American new technologies ramp up in terms of productivity. There has been no issues. But towards next year, the North American business, how is it how will be the business opportunities And is there a possibility that the new technology is going to expand? And if that is the case, So the profitability will go down because there is a lot of processes, but I think this is a core business for you. For the the technology change in North America over the next fiscal year, what will be the impact on your actuarial business? Another point is about the what is your response? Major customers when you're shifting in the China business What other opportunities do you see in the China market? So as you have pointed out, the when the new products are introduced, the enterprise is high, and the per unit profit visibility will impact the profit value per unit is going to go that Derek is not going to change. And towards next fiscal year, the change of the product mix will happen. And So there will be issues about how many of our components are going to be included So from compared this year to next year, our business opportunities is apparently going to increase And none for North America actuator business as I have explained, for the collection makers of non U. S. North American customers, they are very, high function they have very high functions, but, that market has disappeared. But on the other hand, So the Chinese smartphone flagship makers, besides those makers, there are new specs new technological elements, these type of business opportunities from next fiscal year onwards is going to increase. So putting these together this fiscal year because the Huawei has had a negative impact, but next fiscal year, I think we'll be able to grow. Thank you very much. A confirmation. So the North American new product per unit, the profit value is going to increase for you, that is. The profit value is going to increase or not. It's very difficult to answer your question. I would like to refrain from answering, but the added value per unit is going to increase. Thank you very much. Let us move on to the next question. Nomura Securities, Mr. Akizuki. Thank you for this opportunity. I can hear you So my first question would be because of the lockdown, people stayed at home. And therefore, the game business went well What about the next year onwards? So if game machines peek out the actuators. Well, how should I say? I do not think that in the future is so bright, but the Mitsumi business In order to realize increased profit and increased sales, what plans do you have? That is my first question. This is Kainuma. As I said previously, ABLEX is included in Mitsumi Business, so semiconductors are likely to keep growing next the year. And although it may not be so visible this year, but power supply and connectors that we worked on and they are to generate profits on next year onwards. So all these things even if game business drop, whether other businesses can compensate the decline entirely. I don't know, but basic strategy that we have been working on, 8 spear strategy are starting to bloom now and they will be able to compensate decline to some extent. I see. Thank you. My second question is about tax traders. So some customers have shifted to new methods and it is likely to grow starting year and the in house reduction of the parts and increase profit from additional value Are you planning on that? And hypothetically, the 4 way, the major company in China, may not be able to make a chipset themselves, but if they can buy chipset from other companies like Qualcomm, can I assume that the actuator business will be resumed? Or do you think it's going to be very difficult to recover to the original state? So in house production, inclusive of whether we are considering it or not, I cannot give you a clear answer but the profit margin shall improve because of multiple measures that we are taking. And about the Farway, there have been various changes and if the possibility that you have just mentioned is can be realized. I think we will be able to flow with the tide. And therefore, we will keep watching what will happen. But if the company cannot design a semiconductor's in house, then I don't think it's likely that actuators will be able to follow the same path but am I right in understanding that you haven't considered that. We have not considered that possibility yet because Our customers are still confused. That is the actual situation because various vendors have to supply various parts and components in order to make a finished product. And therefore, things will be worked on going forward. Not yet. Let me repeat. For people who want to ask a question, please ask the asterisk and then number 1, you want to cancel please press 2 after pressing Costa's key. Let's go to the next question. This is SMBC Nikko Securities. Can you hear me? Yes, yes, we can hear you. And Watana Refines And Besin Eco Securities. I have three questions. The first question is very simple. Talked about the ball bearings aircraft business related. So this is confirmation for the special ball bearings because the high profitable business has gone down. So that has had a big impact on the profit. Is that the correct way or anything? I guess the profit value Is that what you're seeing? Yes, yes, it has been in by the product value. Yes. The second point is about the semiconductors So you talked about the high utilization rate. So how much more can you go towards next year So you have a high utilization rate right now. It's difficult to increase sales. Are you going to improve the productivity or still increased utilization ratio. So for the semi when you say that at the semiconductor, it's busy. It's about 85% or plus utilization rate. So I hear that it's difficult to bring it over that. So right now it's 80% plus. So internally, that's the level, but we have some consignment and production as well. So on their side, this of course, they have still capacity. It depends on the product mix. So it's not that you can consign everything to what are you going to consign? What are you going to produce internally? We already have a decision on that. So within the product mix, how are you going to produce? And next fiscal year, what type of things are we going to cosign for production? We have already the plan in place So these activities are going to start. I think you should understand it that way. Understood. So my last question is more like on a strategy. So this time, I think this has been the Huawei case, but the custom made products basically will be influenced by the customers trend. So in terms of the general purpose type of things, it can compete in the market looking your competitiveness, whether it be the actuator, assembly of games or backlight. So the customized products How are you strategically going to approach these products? I would like to hear your idea about that. So I have been always saying that from my point of view, the you call it as our sub core business. So we are more or less prepared about the technological changes or the various changes that may happen towards our customers and we can respond to that or even if we can respond to that change, we have a high level of profits. So we will be engaged in the business. On the other hand, In terms of the control, the overall percentage of this business so that we can focus more on the core business, our eight spares, we will develop those business and we have been doing this from some time. So it was very unfortunate that this happened, but this is a kind of unprecedented. So suddenly, we see this situation between years in China. But it's not that we don't do this business, but overall, about 20% of our overall business will be the sub core business. We should control that level. At the same time, 80% of our business want to bring our core business to 80% of our total business. So I hope you understand our approach. It is true that customized products carries these risks, but on the flip side is that it has a very high added value and that is the reason why we are engaged in this business. But if you just focus on this business alone, then that's another issue. That's the reason why we want to develop this 8 spear business. That's our basic policy. Thank you for Let me repeat if you want to ask a question, please press asterisk and 1. To cancel it, please press asterisks and 2. Let us move on to the next question. SBI Securities Mr. Kasai. Can you hear my voice? Sorry. It's Mr. Izumi, right? Yes. I can hear your voice. Ball bearings, the external sales split fan and Automotive And Private Sector, or several usage, the recent trend, if you could explain, because I want to confirm when it hit the bottom, When it hit the bottom, is that your question? Yes. First of all, automotive, May was the bottom And then in October had a monthly record high. It recovered to that point. And fan motors They had the record high in May and then affected by a U. S. China relation and a supply chain of Huawei was a part of it was suspended. So it went down and since then, it's been flat. Other than that, May was the bottom in many cases, September towards September and October various products, experienced a record highs, like efficient tackles and electric car tools, because the people stayed home, demand for some products increased. The other question of mine is the bearing, the how to look at the profit margin of the machined products in order to get back to 25% it would take aircraft business recovery. Am I right? But of course, aircraft business must recover. Otherwise, we will be in a big trouble. The 3 digit impact the business has. And the bearings, external sales are increasing no question about that, but the fee bot sales are decreasing. So internal sales are not growing And overall, as I said previously, now it's going through a transition period external sales are likely to grow fan motors compared with the peak time. There is a huge room for growth So P bought, hard disk, if it compensates for the decline in a P bought, the hard disk business, then we will be able to increase overall production. Then the profitability will increase, but this term, we are reducing inventory intentionally but in the middle of Q4, we will increase production, but we will intentionally reduce production for some time. So please look at it that way. I see. Thank you. I repeat. So if you want to ask a question, please press asterixin 1 and if you want to cancel, please press asterixin 2. It seems that there are no other questions. We'd like to end the Q And A session at this point. So with this, we'd like to end the present meeting. So on the top right of there is a link to the questionnaire. Please ask for your response. Thank you very much for your participation.