Thank you very much for participating with MinebeaMitsumi's Business Results Presentation for the Second Quarter Fiscal Year, March 2021. Let me introduce today's presenters. To your right, Representative Director, CEO and COO, Yoshihisa Kainuma. Director, Senior Managing Executive Officer, Katsuhiko Yoshida. Thank you. First, Mr. Yoshida 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&A session. We are planning to end this presentation by 7:00 P.M.
As for the financial statements, we have the supplementary material and the brief report of the financial results on the website. Please refer to those materials as well. On the upper right side of the screen, there is a link for a 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&A session, we are recording the proceedings so that it can be viewed on our website afterwards. Please, I ask for your understanding. Mr. Yoshida, please.
My name is Yoshida. Today, I would first like to explain the consolidated financial results for the second quarter of the fiscal year ending March 31st, 2021. Consolidated net sales for the second quarter of the fiscal year ending March 2021 was down 1.9% year-on-year and up 46.3% quarter-on-quarter at JPY 274,260.267 million. Operating income was down 10.5% year-on-year and 3.3 x higher than the previous quarter, reaching JPY 17.557 billion.
Profit for the period attributable to owners of the parent was down 6.4% year-on-year and up 3.7 x than the previous quarter, to total JPY 13.239 billion. Operating income for this quarter includes special expenses of approximately JPY 1 billion incurred due to the impact of coronavirus, et cetera. We estimate the foreign currency translations impact is -JPY 1.4 billion quarter-on-quarter and year-on-year, -JPY 2.9 billion. - JPY 1.2 billion impact on operating income and -JPY 0.3 billion in 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 U-Shin. 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%. It was down 0.6 points year-on-year and up 3.5 % 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 a graph indicating quarterly net sales trends, and on the right is a bar chart as the quarterly operating income trends and the line chart for operating margins. Second quarter net sales increased 7.1% quarter-on-quarter to total of JPY 38 billion. Ball bearing sales increased 10.2% quarter-on-quarter to total of JPY 26 billion. The monthly external shipment volume was up 13% quarter-on-quarter for an average of 195 million units. Sales rebounded mainly for automobile applications. Sales of aircraft bearings remain sluggish due to the stagnant market.
Sales of rod ends and fasteners totaling JPY 6.9 billion 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% quarter-on-quarter to reach JPY 5.1 billion, as production cutbacks and some supply chains due to lockdowns in the previous quarter were resolved. Operating income for the quarter totaled JPY 6.9 billion, 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 % points. Looking at the results by product, we see the profits for ball bearings and pivot assemblies increased quarter-on-quarter, while profits for rod 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% quarter-over-quarter to hit JPY 98.6 billion. Looking at the results by product, we see the sales of motors increased 24.8% quarter-over-quarter to reach JPY 49.1 billion, due mainly to the recovery of the automobile and other markets, as well as steady performance of new businesses. Sales of electronic devices were up 22.1% for the previous quarter to total JPY 39.7 billion. This is thanks to strong sales of major customer smartphone models that use our LED backlights, in addition to recovering sales to the automobile industry. Sensing device sales grew 25.5% quarter-over-quarter to hit JPY 8.7 billion. Operating income came to JPY 5.5 billion and operating margin was 5.6%. We saw a 2.5 x quarter-over-quarter increase in operating income, while the operating margin climbed 2.8 % 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 MITSUMI business segment. In this first quarter, ABLIC, which was merged with MinebeaMitsumi as of April 30th, was included in the scope of consolidation. Net sales rose 95.5% quarter-on-quarter to a total of JPY 110.7 billion. Sales increased across all product lines, including mechanical components, where full production continued in preparation for the year-end demand season. Camera actuators, whose production went into full swing following the launch of new products by major customers. Operating income totaled JPY 7.6 billion, while the operating margin reached 6.9%. We saw a 5.6 x quarter-on-quarter increase in operating income, while the operating margin climbed 4.5 % points.
Results by product saw profit growth across the board. Next slide, please. Finally, let's look at the U-Shin Business segment. Net sales increased 70.5% quarter-on-quarter to hit JPY 26.6 billion due to a better than expected, albeit uneven, recovery of the overall automobile market, where some customers bounced back significantly and others lagged behind. Operating income came to JPY 1.2 billion, and the operating margin was 4.5%. The business found itself back in the black 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 worked together to lower the break-even point. Next slide, please. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph charts changes in the profit for the period, per share. The profit for the period was JPY 13.2 billion.
Earnings per share was JPY 32.4 . Next slide, please. Next, we have the quarterly inventory trend. At the end of the second quarter, inventory totaled JPY 186.5 billion, which is JPY 17.9 billion less than what it was three months ago. This is due primarily to the start of 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-19. 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, and a line chart indicating free cash flows.
At the end of the second quarter, net interest-bearing debt totaling JPY 137.6 billion was up by JPY 62.4 billion from what it was at the end of the previous fiscal year. This figure includes the cost of acquiring shares in ABLIC, JPY 35.4 billion, and the cost of acquiring additional shares in C&A, JPY 4.6 billion. 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 forecasts are JPY 940 billion of net sales and JPY 50 billion 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-19 in the U.S. and Europe. The exchange rate assumption is 105 yen to a US dollar. Next slide, please. This slide shows the forecast by business segment. We also revised the initial forecast by business segment, which was in ranges. This is all from me. Thank you.
Next, Mr. Kainuma, please.
Good afternoon. This is Kainuma speaking. Please turn to the next slide. Mr. Yoshida has explained about the situation, this year's forecast. We were saying that between JPY 50 billion to JPY 60 billion would be the operating income. That has been the initial outlook. However, this time, the lowest range of JPY 50 billion will be this year's forecast. The reason will be explained in detail later. From April to May, the COVID-19 situation was tough, and we were wary of what's going to happen going forward. Last year's first quarter and second quarter was not good because the laws in Thailand have changed. In terms of the deficit on the reserve for the pension, there was a JPY 3 billion deficit.
That was a special factor for last year. Taking these into account, the first half of this year will be in line with last year's first half. That was our anticipation. 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 am very convinced about that. Next year, for sure, the COVID-19 will be under control more than ever. We would like to make a starting dash for next year. The second half, we'll be looking at that initiative, and we're putting various measures to be able to make that starting dash for the next fiscal year.
The inventory level has been high temporarily, but in terms of the fiscal discipline, we should not go after profit and have a poor production. We decided that the inventory should be controlled to the previous level. We want to put in these measures. Next slide, please. As I have said, JPY 50 billion-JPY 60 billion range. The JPY 50 billion is a kind of a bottom-up. Recent figures was JPY 50 billion operating income that was based on the bottom-up recent figures. It was very conservative back at that time. I considered the operating income capability, and I put in various stresses, and the top range was JPY 60 billion. 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 JPY 60 billion range by the vaccine.
I think more recently, we're talking about the vaccine being ready within this year. Right now, it's the 6th of November. It turns out that the vaccine will not be ready within this year. In the United States, the infection is spreading rapidly. If you take these into account, the lower range of our outlook has to be considered. There are two major outstanding points here. One is the aircraft market, as I said previously. We thought initially in the second half, it will recover somewhat. Unfortunately, for this fiscal year, we cannot predict the recovery for this market. What I missed the point most was about the U.S. China trade conflict issue.
In May, after the Golden Week holiday, I think about two to three weeks after that, from the U.S. to Huawei, there has been a sanction posed for the export of semiconductors of Huawei. Actually in September, this came into effect. Based on this, towards Huawei, we actually deliver a lot of our products, and this business stopped. This was an unexpected outcome. In the first half, I said that things will be the same as last year, but this JPY 23 billion, initially, I was confident that we'll be able to be over this JPY 23 billion line. In May, due to this trade conflict we have in China, this came to the surface. Unfortunately, the product supply to Huawei, we cannot do that. We cannot supply products to Huawei.
That is another reason why I am saying that our outlook for the operating income is at the lower range. On the other hand, in terms of an indicator for the economy, the ball bearings would be the indicator of the economy. It is showing a very powerful trend. In June, the bearings external sales was 166 million. July, it was JPY 183 million. In August, JPY 187 million. That has been the trend. In September, JPY 213 million. October, JPY 210 million. This month, it has been a record high, JPY 217 million. That will be our outlook for the external sales of ball bearings. The second half of this year, each month, more than 200 million units is going to be sold for ball bearings. That is our outlook. In that sense, the global economy has overall started to recover.
I think that is an unmistakable fact. Against this backdrop, the 230 million this month, we're going to have a record high level of volume for ball bearings. What stands out is the automotive market. The automotive ball bearings is going to hit a record high level. We say others, in other segments, we have the other segment. This will reach a record high level as well. The ball bearings growth for the future, I am very confident they will continue to grow. For the internal sales, for the pivot, for the hard disk drives, has dropped compared to the past. I think we are in the transitional period. Internal use of the pivot bearings, we had a lot of that demand. I think basically it's being handed over to the external sales. I think this is a transitional period.
This trend, if the COVID-19 situation is 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. It went up to 700 million in one period of time. However, originally, we want to bring down the inventory to a lower level. That is our ideal. Currently, as of end of March, about the second half of JPY 500 million or the mid-JPY 500 million level, to that level, we want to reduce the inventory of ball bearings. When the things are good, reducing the inventory, that is a very important activity. We will go forward with that. One other point I want to make is that the profitability of ball bearings will have to become higher.
From December, whether it be Thailand or Cambodia, I am able to go to these business trips. After I come back, I won't have to go to self-quarantine. I am scheduled to go over to Thailand or Cambodia. The cost down measures that I have been preparing, I will put them into execution 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. When is the aircraft market is going to recover? It is very difficult to make any prediction, but what we can do right now is that, I was calling this one push to pull activity. The pull type of production structure should be put in place. All the global aircraft related business, I have instructed them to do so.
In the past, late delivery affected quite severely, but we are building production system in order to avoid late delivery compared with our competitors. In other words, we are changing the risk or problems into opportunities. That is what we hope to do. The motor business, fortunately, we have been able to solidify the foundation in order to expand profit. Fan motor, we have entered into Cambodia, and we are now seeing profit and the volume compared with a number we saw in the past, has increased. HVAC motors are also increasing. Various motors are experiencing improvement. OP margin of 10% and JPY 20 billion were the targets for motor business, but JPY 20 billion, which was the initial goal for us, is now in the achievable range.
LIN bus supported motor and grille shutter, the motors for such vehicles, we will be increasing volume, and therefore, the motor business is now very promising. This is the second pillar out of Eight Spears, and we have been able to solidify the foundation. Backlight. As I have kept saying, backlight will not cease to exist. I think that is almost determined, not into perpetuity, of course, but for some time to come, backlight business shall continue. Of course, we cannot expect the same kind of profitability as we experienced in the past. Other Eight Spears will generate effects in order to compensate the decline in backlight profitability. That is what I believe.
MITSUMI business. The hottest business is the semiconductor. At this point, the operating profit by semiconductors, JPY 10 billion, has become achievable. It's far above JPY 8 billion. That is a profit earned by semiconductors. 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 one in the industry, aiming at achieving JPY 100 billion. A core business for Huawei has disappeared. Semiconductor, or the analog semiconductors for the smartphone application. Huawei, even if Huawei's volume of mobile phones goes down, it can be offset by other manufacturers. However, OIS, because the specification is different company to company, and therefore, in a short term, we will be affected. This is a wonderful technology, and therefore, we would like to expand the sales to other companies.
Eight Spears. Speaking about Eight Spears, 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. Production system has been established, and it's been shared by many plants worldwide, which further strengthens our basic capabilities, and therefore, we strongly believe that MITSUMI business will grow and develop going forward. Next is U-Shin Business. Since April, because of COVID-19, U-Shin business was most severely hit because this focuses on automotive business. Fortunately, in July, it turned profitable, and it's improving little by little. Having said that, Europe and the U.S., as you are aware, the situation is really bad. Therefore, the things that we can do is rather limited. We must continue working hard on improvement activities. That is very critical.
Also, we have put together a very clear set of strategies. In the past, we sort of focused on the low-end, cheap parts, low value added products. Now we are shifting towards more value-added products like a flush handle and CSD, the compact spindle drive. It's an automation mechanism for hatchback rear door. Focusing on these things, we are to improve U-Shin business. I have given a clear instruction to do that, and people working in the field clearly understand that. It will take time, of course, but we are changing gear to change U-Shin business positively to achieve a JPY 10 billion profit on Smart Lock by the end of this year or early next year. The retrofit Smart Lock development is progressing smoothly, and we would like to handle this as a full B2C business. We would like to start this business.
As a contribution to society, we are selling surgical masks, which is another B2C business. We are learning lots of things through this type of business. Through such efforts, we would like to have a smart start of Smart Lock business. JPY 100 billion of operating profit, that is, to us, is not a goal, but that number, the probability is high to achieve JPY 100 billion if the environment becomes positive. For example, mechanical components achieved JPY 48 billion. Conservatively, the business should recover to JPY 40 billion. Electronic parts should be able to achieve JPY 30 billion. It won't be so hard on MITSUMI if semiconductor earns JPY 10 billion, then JPY 20 billion to JPY 30 billion would be possible. U-Shin, JPY 10 billion is the target, but if the half amount is earned, like JPY 5 billion, then overall JPY 100 billion will be possible.
Measures for profit improvement, we will keep pushing hard to achieve those targets. Item number six, active recruitment of external talents, external human resources. By injecting fresh blood, we would like to change our mindset and share knowledge and expertise. That shall be possible, and therefore, in that sense, we will be changing. 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 two stealth products, and therefore, we shall be able to increase our revenues mostly. EV is one of the hot topics, and after electrification, these things will keep selling. These things, I mean these Eight Spears products. Because of EV, I am sure that the markets will keep expanding. This is part of the products.
I will not go into detail. I hope you will take a look at these, I think you'll understand in five years' time, this level of growth can be fully expected. In terms of SDGs, there are two slides that I have prepared. In December, we are going to host the IR day, at that day, I would like to explain more thoroughly about what we are doing. Thankfully, dimming function. This is a road light that can be controlled wirelessly, about 40,000 worldwide, it's close to 50,000 worldwide. In Cambodia, 15,000, that's plus 5,000. There are 20,000 Cambodia. Chile, 20,000 of these road lights. In total, there'll be 50,000. We'll be able to reach 50,000 of these road lights as our infrastructure business.
Initially, so these road lights is for the future smart cities, and it will be the key, and I have been very confident about that. Recently, there has been some interesting inquiries that have started to come to us. For instance, the Japan Meteorological Agency, jointly with them, our sensors will be controlled on a wireless basis. In terms of the output of the solar cells, so they can improve the prediction of the output of the solar power radiation. With Kyoto University, so the social demonstration test wireless power supply with. With Osaka Prefecture, demonstration of the experiment by using LED street lights with sensors, improving the functionality. What I have always been saying is that this is not our first SDG activity. Our products basically will be ultra-small, ultra-precise products.
These components themselves, to be more efficient, to optimize the energy consumption, and to minimize the energy consumption as a target. The small ball bearings, compared to the other competitors, their performance is far better. In terms of the electricity consumption by the motors, can be reduced considerably. 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. The JPY 600 million, we've invested that much in Bang Pa-in, in Lop Buri, on the ceiling of these plants. The total installation area is 30,000 sq m. This has the power generation capacity of 5 MW. The solar panels have been installed at these two plants.
The direction of a company is how we are going to use renewable energy, and at the same time, contribute to produce products that can contribute to a sustainable society. That would be the key. The necessary investment will be continued going forward. However, I would like to understand various issues, this is one introduction of the actions that we're going to conduct going forward. 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%. There have been some special factors, but our earnings capability has not diminished at all. This just seems to be a coincidence, but there has been a lot of things that have happened.
This year's outlook is a JPY 50 billion of operating income. For us, this is a very disappointing forecast. However, in terms of dividends, we want to offer a stable dividend payment. In terms of financial strength, we have enough strength to pay that amount. I hope that you feel assured about that. This JPY 50 billion of operating income, from our point of view, this is a conservative outlook, this is the minimum level. There are some Forex issues, et cetera. There are some headwinds blowing against us. However, all employees will be unified to be able to reach this operating income level of JPY 50 billion. When things recover at the next fiscal year, we want to achieve this JPY 100 billion operating income target as soon as possible. That's all from me. Thank you for your attention.
Next, we would like to have Q&A session. We would like to allow only the institutional investors and analysts who have pre-registered. If you have a question, please press asterisk and one. If you want to cancel your question, please press asterisk and two. We will appoint you one by one. When your name is called, please ask the question, and please ask one question at a time. The first question is from Goldman Sachs, Mr. Takayama.
Thank you. Can you hear me?
Yes. Yes, we can.
Thank you. I have three questions. One by one, I would like to ask. First of all, the overall performance. You set the forecast at JPY 50 billion, which is the lower limit. You explained about the aircraft and the Huawei , 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. You seem to have included only the negative factors, not the positive ones, other than that, bearing production adjustment and the backlight related risks anticipated in the second half. As a result of factoring in those factors, did you come up with this JPY 50 billion?
I can see why you understood it that way, but there are ups and downs, and it is true that automotive business started to rise in July. We thought it would be worse than that. Bearings is renewing a record high. We are very diversified, the business, like machinery for textile business and office automation and the special type of smartphones, such customer. There are quite a few negative factors. Looking at the overall picture, the increases are occurring in a limited area. As I said, we took a conservative view to decide on JPY 50 billion.
To be quite honest with you, bearing business are on a feeling every month it's changing. Like two weeks ago, the strong demand related information we obtained two weeks ago, and it's quite fluctuating. Bearing is shifting towards upside, so we are grateful. On the other hand, yen is becoming stronger. To be quite honest with you, right now it's very difficult to come up with a detailed projection. That is how I feel. We thought it would be better to take a conservative view. When the presidential election is over, the exchange rate may become JPY 100 to $ 1. 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 of a bearing, preparing for the next term, the intention behind that. Demand is increasing, as you said, and another possibility is to keep the same level of inventory. I don't think it's such a bad idea. You are adjusting the inventory, and that is because 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. JPY 1 billion or JPY 2 billion for such amounts, keeping inventory because things are so uncertain. This is the age of uncertainties, therefore, in order to respond to risks, we have been thinking about various strategies to cope with risks. Therefore, bearings, we thought that we should reduce inventories whenever we can. Next year, how things will evolve next year, nobody can predict. There is this U.S.-China issues. I thought the inclusive of the financial discipline, I thought that we should normalize the level.
In the slide, you have used the cost reduction quite a few times, not just for U-Shin, but bearings competitiveness, particularly cost competitiveness. Is that included?
Yes, exactly. Bearings, as a second step, we will be implementing additional measures. We were not able to make business trips. Therefore, it was rather difficult to implement the measures. Face-to-face, I believe it's very important to speak to people face-to-face in order to convince them. It was rather difficult because of this COVID-19 calamity. Using digital tools, to the extent possible, we try to use digital tools in order to communicate with them, in order to reduce cost. Ideas that people have been nurturing, we would like to implement this time around.
Understood. My last question. North America, the backlight and actuators are the two main products. Backlights, towards the second half, is it right that the situation is likely to be tough towards the second half? 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 seem to be no model changes. This morning, I read an article, but we have not been able to grasp the latest situation. We cannot make the latest version, and because of that, some people seem to think that the low-end products are likely to sell. We have not grasped the whole situation yet. Actuators, we have no production-related issues, nothing at all. Therefore, if we receive orders, we will be able to produce them. The situation is more solid than expected.
Understood. Thank you very much.
Thank you. Next question. From Morgan Stanley MUFG Securities, Sato-san, please.
This is Sato speaking. Can you hear me?
Yes. Please go on.
Thank you for taking my questions. I have three questions. First question is that the second wave of COVID-19, the impact in the second half, how much you have reflected that in second half projections? I think you have about JPY 100 million or JPY 200 million of COVID-related expenses, I think of the first quarter and second quarter, that is. How much are you expecting for the second half?
The most recent forecast, we're exactly looking at that, and based on that, we have an outlook. COVID-related expenses is included as well. That said, for example, with the lockdown of Europe and U.S. is happening, but whether the factories are reducing the production, that's not the case. In those coming from the plants not operating, I think that type of loss will not come up in the second half. The manufacturing industry will be able to continue their activity. In terms of demand, we have to put in some stress for our forecast. That is the basis of our outlook.
In terms of demand, the stress on demand is what you're putting on. In terms of the expenses or cost, no, that level of cost is not reflected.
Yes, that's correct.
Understood. Thank you. My second question is about the MITSUMI business. The profit against the first quarter has gone up substantially. In terms of the game console sales, from the JPY 2.7 billion for the first quarter to the second quarter, how did it trend? For the second half, JPY 174.7 billion for the second half, how much this is reflected? The first quarter and second quarter, the profit has increased. This was a game, camera actuators, and the ABLIC. What has been the biggest contributor? I would like to know about that.
First, for the game console, for the second quarter, it's about JPY 40 billion. About a 30 to 20 to 10. I think basically that will continue back into the third quarter and fourth quarter. In terms of the profit driver, for the second quarter, the game console production has peaked. That has been the major contribution to our profit. The next factor is the semiconductor business. This would be ABLIC and the former MITSUMI semiconductor business is both doing well. That is the second major contributor to our profit. The third contributor is the optical devices.
As Mr. Kainuma has explained, in terms of the business for Huawei, it has seen a downward trend. The North America business has recovered, and the trend will continue into the third quarter. For the optical devices, third quarter is going to be the peak. For the games, the third quarter will go down slightly, but the production level will be maintained at a very high level. That is our outlook.
Thank you. My third question is about ball bearings, external sales volume. Mr. Kainuma has given us some figures. How about internal sales and production volume from July onwards? Can you give us the numbers?
From July onwards, ball bearings. The external sales, JPY 183 million, JPY 188 million, JPY 214 million. The internal sales, that was external sales, JPY 55 million, JPY 52 million, JPY 47 million. Regional sales production, JPY 240 million, JPY 247 million, JPY 242 million. That is the track record for the second quarter. How about October or November onwards? For October, on average, JPY 210 million. That is on the graph.
The most recent number is slightly over that, JPY 211 million. JPY 217 million, JPY 218 million. December, JPY 207 million. On average, JPY 212 million. The external sales. On the internal sales, average JPY 55 million. Production is a little over JPY 250 million. This is the target for the third quarter onwards. As Mr. Kainuma has explained, now we have to incorporate the inventory adjustment. How are we going to control the production? We will consider that due to the inventory adjustment.
Thank you very much.
Let us move on to the next question. Mitsubishi UFJ Morgan Stanley, Mr. [inaudible].
This is [inaudible] . Can you hear my voice? Yes. Please go ahead. I have two questions. The first one is about actuators. Actuators, the specific customer is affecting. 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? The first half and second half, could you explain a little bit more? North America, how we should look at share. 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, but we have not changed our view. Actuators for non-North America, Q1 went up a little bit, and Q2, our production was reduced. Q3 and Q4, the same trend will continue. That is how we think at this point.
Front loading. Did you or did you not experience a front-loading business?
This is Kainuma. Semiconductor. For semiconductor, it is true. It happened. Actuators, it's high-end actuators. As you may be aware, the models with the functionalities that you may understand, that there was no front loading, and that is one of the reasons why our business became so tough.
Understood. Thank you. My second question is analog semiconductors. It's booming, I understand. Overall, the impact of COVID-19, I think some items in the analog semiconductors are in short. The Philippines, Cebu Island, I understand that the production is normal. The supply side, inclusive of the logistics, is it going as usual? Semiconductors are in shortage, and because of that, are you seeing stronger demand for your products?
Operation is normal, so both the front-end and the back-end, no problems. ABLIC, the back-end processes are conducted in Akita Prefecture, and we would like to further upgrade such processes. There is a strong demand and therefore, we are enjoying a good business. This is likely to continue for some time to come. That is how we think. In that sense, this business is quite promising.
The demand and supply is rather tight, isn't it? Do you have any concerns about that, production capacity-related concerns?
Well, we can make only up to a certain volume, and therefore, it's like a happy cry. The customers who favored our products, we must make sure we supply the necessary volume. That is the only thing I can say at this point.
I see. Understood. Thank you.
Thank you. Next question. From UBS Securities, Hirata-san, please.
Hello, this is Hirata from UBS Securities. Thank you very much for taking my question.
Yes, we hear you. Go ahead.
I have two questions. One, about the mechanical components. You said that from the first quarter to second 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 is the reason? Is this because the aircraft industry business? Towards the second half, the outlook for the profitability is going to go down further from the first half. 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 the third quarter. You have talked about the measures they're going to take and looking at the next fiscal year. The second quarter, how I should think about the margin from the second quarter and the second half? Are you just being conservative? I would like to ask your idea.
Yes, as you have pointed out, the aircraft market for the rod-end numbers , if you look at the rod-end sales , the second quarter against the first quarter, it has gone down again. That has been one of the reasons for the decrease in profit. Within the ball bearings, we have aircraft-related business, the sales has gone down for the aircraft industry. With that, the profit has declined. Due to this, the top line has increased, the operating profit has gone down.
That is the reason. The existing Minebea business, that is the ball bearings business. The production volume is going up, the profitability is the same. That is our outlook. Towards the second half, for the aircraft market, it will stay flat. On the other hand, the ball bearings external sales is growing. With that, how are we going to control the production? 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. You talked about the North American new technologies ramp up, and towards the productivity, there has been no issues. Towards next year, the North American business, how will be the business opportunities? Is there a possibility that the new technology is going to expand? If that is the case, the profitability will go down because there is a lot of processes, but I think this is a core business for you. For the technology change in North America over the next fiscal year, what will be the impact on your actuator business? Another point is about what is your response, major customers, when you're shifting in the China business, what other opportunities do you see in the China market?
As you have pointed out, when the new products are introduced, the unit price is high, and the per unit profitability will go up. The profit value per unit is going to go up. That direction is not going to change. Towards next fiscal year, the change of the product mix will happen. There will be issues about how many of our components are going to be included. Compared this year to next year, our business opportunities are apparently going to increase.
Non-North America actuator business, as I have explained, for the flagship makers of non-U.S., North American customers, they have very high functions, but that market has disappeared. On the other hand, 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. Putting these together, this fiscal year, because Huawei has had a negative impact, but next fiscal year, I think we'll be able to grow.
Thank you very much. A confirmation. The North American new product, per unit, the profit value is going to increase for you, that is. The profit value, is it going to increase or not?
It's very difficult to answer your question. I would like to refrain from answering. The added value per unit is going to increase.
Understood. Thank you very much.
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. 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? If game machines peak out, then actuators, well, how should I say? I do not think that the future is so bright, 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, ABLIC is included in MITSUMI business, semiconductors are likely to keep growing next year. Although it may not be so visible this year, power supply and connectors that we worked on, they are to generate a profit next year onwards. All these things, even if game business drops, whether other businesses can compensate the decline entirely, I don't know. The basic strategy that we have been working on, Eight Spears strategy, are starting to bloom now, and they will be able to compensate decline to some extent, I say.
Thank you. My second question is about actuators. Some customers have shifted to new methods, and it is likely to grow starting next year. In-house production of the parts and increase profit from additional value. Are you planning on that? Hypothetically, Huawei, the major company in China, may not be able to make a chipset themselves, but if they can buy a chipset from other companies like Qualcomm, can I assume that the actuator business will be resumed? Do you think it's going to be very difficult to recover to the original state?
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. About Huawei, there have been various changes, and if the possibility that you have just mentioned can be realized, I think we will be able to flow with the tide, and therefore we will keep watching what will happen.
If the company cannot design semiconductors in-house, then I don't think it's likely that the actuators will be able to follow the same path. 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. Therefore, things will be worked on going forward, not yet.
Thank you. Thank you very much.
Thank you. Let me repeat. For people who want to ask questions, please press the asterisk and then number one. If you want to cancel, please press two after pressing the asterisk key. Let's go to the next question. This is SMBC Nikko Securities, Watanabe-san, please.
Watanabe-san, can you hear me?
Yes, we can hear you.
I'm Watanabe from SMBC Nikko Securities. I have three questions. The first question is very simple. You talked about the ball bearings aircraft business related. This is confirmation. For the special ball bearings, because the high profitable business has gone down, that has had a big impact on the profit. Is that the correct way of saying? I guess, profit value. Is that what you're saying?
Yes. It has been impact the profit value, yes.
The second point is about the semiconductors. You talked about the high utilization rate. How much more can you go towards next year? If you have a high utilization rate right now, it's difficult to increase sales. Are you going to improve the productivity, or can you still increase the utilization ratio?
When you say that the semiconductor is busy, it's about 85% + utilization rate. I hear that it's difficult to bring it over that. Right now, it's 80% +, so internally, that's the level. We have some consignment production as well. On their side, of course, they have still capacity. It depends on the product mix, so it's not that you can consign everything. What are you going to consign? What are you going to produce internally? We already have a decision on that.
Within the product mix, how are we going to produce? Next fiscal year, what type of things are we going to consign for production?
We have already the plan in place. These activities is going to start. I think you should understand it that way.
Understood. My last question is more like on a strategy. This time, I think this has been the Huawei case, but the custom-made products basically will be influenced by the customer's trend. In terms of the general purpose type of things, you can compete in the market, leveraging your competitiveness, whether it be the actuator, assembly of games, or backlight. The customized products, how are you strategically going to approach these products? I would like to hear your idea about that.
I have been always saying that from my point of view, we call it our sub-core business. 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. Even if we can respond to that change, we have a high level of profit, we will be engaged in the business. In terms of the control, the overall percentage of this business, we can focus more on the core business, our Eight Spears, we will develop those business. We have been doing this from some time. It was very unfortunate that this happened, this is a kind of unprecedented. Suddenly, we see this situation between U.S. and China.
It's not that we don't do this business, 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, we want to bring our core business to 80% of our total business. I hope you understand our approach. It is true, this customized products, it carries this risk. 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. If you just focus on this business alone, then that's another issue. That's the reason why we want to develop this Eight Spears business. That's our basic policy.
Thank you. Thank you for it.
Thank you very much. Let me repeat. If you want to ask a question, please press asterisk and one. To cancel it, please press asterisk and two. Let us move on to the next question. SBI 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 were 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. Then in October, had a monthly record high. It recovered to that point. Fan motors had the record high in May and then affected by U.S. or China relation and a supply chain of Huawei, 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. Towards September and October, various products experienced record highs, like fishing tackles and electric tools. Because people stayed home, demand for some products increased.
Thank you. The other question of mine is the bearing, 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?
Of course, aircraft business must recover, otherwise we will be in a big trouble. The three-digit impact the business has. The bearings, external sales are increasing. No question about that. Pivot sales are decreasing, so internal sales are not growing. Overall, as I said previously, now it's going through a transition period, but external sales are likely to grow. Fan motors, compared with the peak time, there is a huge room for growth. Pivot, hard disk, if it compensates for the decline in pivot, the hard disk business, then we will be able to increase overall production, then the profitability will increase. This term, we are reducing inventory intentionally. In the middle of Q4, we will increase production, but we will intentionally reduce production for some time. Please look at it that way.
I see. Thank you.
Thank you. I repeat. If you want to ask a question, please press asterisk and one, and if you want to cancel, please press asterisk and two. It seems that there are no other questions. We would like to end the Q&A session at this point. With this, I would like to end the meeting. On the top right, there is a link to the questionnaire. Please, I would ask for your response. Thank you very much for your participation.