Earnings Call: Q1 2021

Aug 4, 2020

This is Yoshida speaking. Today, I would first like to explain the consolidated financial results for the first quarter of the fiscal year ending March 31, 2021, And then Mr. Kainuma, Representative Director, CEO and COO, will explain the highlights, including business updates. For the fiscal year March 2021, consolidated net sales, net sales was down 8.3% year over year and quarter on quarter went down by 17.4% at 187.46 1,000,000,000. Operating income was up 61.4% year on year and down 56.7 percent quarter on quarter to total 1,000,000,000. Public for the period attributable to Will 2 owners of the parent was up 64.4% year on year and down 65.7% quarter on quarter. To total JPY 3,573,000,000. So the operating income for this quarter includes special expenses of approximately 1,000,000,000 incurred due to impact of the coronavirus, etcetera. We estimate that the quarter on quarter for currency translation impact on sales was 1,000,000,000 year on year. 5,900,000,000 quarter on quarter, excuse me, year on year 5,900,000,000. The impact on operating income was plus JPY 8,800,000,000 quarter on quarter, minus 1,000,000,000 year over year. So we made a slight retrospective exchanges to last year's fiscal year's financial statements due to the PPA for Uxin Please note that the figures on the following pages are replies figures. Moving on to the next slide. This is the quarterly trend in net sales operating income and operating margin. Operating margin for the first quarter was 1.3 points year on year and down 2.6 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 the graph of the bar chart showing quarterly operating income trends along with a line chart for operating margins. 1st quarter net sales decreased 20.1percentquarteronquartertototalfeed35.5000000000. Salesable borrowings decreased 18.0 percent quarter on quarter to total 23,600,000,000. The monthly external shipment volume fell 9 percent quarter on quarter for an average of 172,000,000 units. While salesable bearings used in fan motors remained strong, those used for other applications, especially automobiles, were down substantially. Sales bearings for aircraft were impacted by the sharp market slowdown. Sales of rod ends and fasteners totaling 1,000,000,000 were down 26.4 percent quarter on quarter. Aircraft Manufacturing has slowed significantly and lagging production is expected to continue through this fiscal year. Sales of People Assembly decreased 19.8 percent quarter on quarter to total JPY 4,500,000,000. This is due to the production cutbacks in some light change due to the lockdowns in Southeast Asia. Operating income for the quarter totaled JPY 7,200,000,000 and operating margin was 20.1%. On a quarter on quarter basis, operating income fell 23.7% while the operating margin dropped 1.0 percentage points. Looking at the results by product, we see that operating income was down quarter on quarter for bullbearings, rodents and professionals and people at assemblies. Moving on to the next slide. Going to the Truck Devices And Components segment, Net sales decreased 10.5 percent quarter on quarter and stood at 1,000,000,000. Looking at the results by product, sales of motors decreased 8.6 percent quarter on quarter at 1,000,000,000. This is due primarily to the slump in the automobile market. Net sales of electronic devices decreased 13 points or percent quarter on quarter, JPY 32,500,000,000 was the number. Sales to the automotive industry declined, but for smartphones major customer smartphone models that used our LED pack lights were steady. Net sales of sensing devices totaled JPY 6,900,000,000, decreasing 7.5% quarter on quarter. Operating income was jpy2.2 1,000,000,000, the operating margin 2.7%. Operating income decreased 19.3%. And the operating margin declined 0.3 percentage points quarter on quarter. Operating margin by product has not changed significantly. Moving on to the next slide. Let's look at the performance for the Mitsubishi business segment. In this first quarter, Ablick, which was merged with Minnebiram Mitsumi as of April 30, was included in the scope of consolidation. Net sales decreased 9.3 percent quarter on quarter to total 1000000000. Mechanical components sales were up, thanks to growing demands as more people stayed at home, but sales of other products declined. Operating income totaled JPY 1,400,000,000, while the operating margin reached 2.4%. Operating income decreased 67.4 percent and operating margin declined 4.3 percentage points quarter on quarter. Looking at the results by product, we see that profits were up for mechanical components and then analog semiconductors, including ABLIC, but for other products, it went down. Moving on to the next slide. The Uxin Business segment 4th quarter net sales decreased 49.5 percent quarter on quarter to total JPY 15,600,000,000, affected by the in post on operations in Europe and the U. S. Due to lockdowns as well as production cutbacks by major customers. In the second quarter and onward, we expect an uneven recovery with some areas bouncing back more significantly than others. But overall, the business is expected to be on recovery track. The segment reported an operating loss of 1,000,000,000. Next slide. The bar graph shows trends in profit attributable to owners of the parent, while the line graph chart changes in the profit for the period per share. Profit for the period was 1,000,000,000. Earnings per share was 0.8%. Next slide. Quarterly inventory trend. At the end of the first quarter, inventories totaled 1,000,000,000, up 1,000,000,000 over 3 months ago. Due to an increase for some OEM products ahead of peaking demand and an increase resulting from the public consolidation. Next slide. The bar chart shows trends in net interest bearing debt, which is total interest bearing debt minus cash and cash equivalents. The line chart represents free cash flows. At the end of the 1st quarter, net interest bearing debt totaled 1,000,000, up 1,000,000,000 from the end of the previous fiscal year. This includes the cost of acquiring shares in ABLIK totaling 1,000,000,000 and the cost of additional acquisition of CNA shares, totaling 1,000,000,000. Next slide. Summary of the forecast for the fiscal year ending March 31, 2021, No changes to the full year forecasts, which are to remain in the ranges announced at the beginning of the fiscal year. We are still trying to figure out the projection for the second half and have decided to leave our initial projections as they are. Exchange rate assumptions is 1,000,000 to the U. S. Dollar both for the upper and lower end. Next slide, the forecast by business segment. No changes to our initial overall forecast by business segment either. That concludes my presentation. Thank you, Mr. Kainema, please. Hello, everybody. This is Kainema speaking. So from my side, Today, I only have about 2 slides in presentations. 1st of all, I'm going to page 13 I think everybody could read through this leisure. But from my side, I would like to give you 4 messages to give you some business updates. So the first quarter in terms of the Machine Components segment, it has gone down in terms of profit, but for the mid to mid business and electronic component business, we have been able to offset that decline. However, The Usim business, we will not be able to fully offset the Usim business performance. The previous year, it should have been JPY 7,300,000,000 So we have seen about a 2,000,000,000 yen decline in profit. I think that's the fact that we have to account for. But that said, The second point I want to make is that the sales has started to recover And I think in this, 3 months, so July of September, the second quarter period, $270,000,000,000 increase of sales of 27,000,000,000 plus sales is going to be generated. For the first half in terms of operating profit, I think will be in line with the last year. So in that sense, So in May, I talked about our forecast. I think basically we are on track with our initial forecast that we have made on in May. Going to the second half, there's some uncertainties, there's still some uncertainties in the situation. So we in terms of the forecast, we are giving it as a range And in November, we're going to report our results next time in November. And at that time, I think we'll be able to give you some more detailed information about our performance. The 3rd point I want to make is that for the LED backlight business over the couple or maybe a month or 2 months ago, so a certain economic paper talked about this about this on the front page and they said that the LV Graphite is going to disappear, but this same newspaper in terms of timeline related article, basically, they wrote that at the back, the LED Bakers will not go away. So that was the nuance of that article. So this type of well, I think the volatility related to this type of news has been moderate, but, there is a negative impact on the share prices. We can't deny that, but I have always been saying that L and B backlogs will not go away, so please understand my stance on this matter. So going to the actual status currently, so the ball bearing business I think basically, we have to talk about the market condition. We have to talk about market conditionable bearings. So the intuitive machine components, the automobile and air That was the reason why the performance for the Mercedes Benz versus the Banff for the first quarter. For the aircraft, I think that the damage was substantial. But, if you consider the product mix, So for the, for the defense aircraft, road and fasteners, so we have that. So We have that business, so it's not loss making for the ball bearings. So the product mix has changed because the 5G related fan orders has gone up, but the automotive applications has gone down. But recently, the automotive applications have started to recover very robustly. So that is our, understanding in Japan. So the forbearance for the Japanese cars, well, of 10,000,000 per month, if we sell that much, it means that it will be a very strong sales if we sell that level. So this month and next month, we think they will be able to achieve the 1,000,000 number. So Europe, in the United States, we are starting to see a increase for the automotive industry overall. So CHF 65,000,000 was the peak But currently, it's 1,000,000 plus. So gradually, I think this will start to recovered. So in terms of the product mix, for us, it is a very good situation. As for fan motors, because of the U. S.-China issue for the customers in China, The production on the part of the customers have slowed down somewhat, but eventually because of 5G related Ericsson, Nokia, there is a possibility that the orders will go to those, in fact, companies in any event our borrow bearings would be in need. So we do see some decline in volume, but we expect the return recovery to a more robust development going forward. Last month, $178,000,000 or $179,000,000 was the units sold at ball bearings. September to October, 190,000,000 to 200,000,000 for the external shipments that seem to be within the reach And, bold bearing is always a leading indicator. What, that's what I've been saying. So in terms of the leading indicator, we do see signs of recovery. Slide 14. The message here is very simple. We enjoy Alliance share in various markets in various products. And therefore, in the current global situation under COVID-nineteen, we are affected, but our growth story. Growth scenario remains unchanged. Once the economic activities return, owing to various factors, we believe that our earnings capability would be regained. That structure remains unchanged, and we have a strong belief in that. We are convinced of that. And that's all I have from me for today. And we will now take your questions. Thank you. Let's go to Q And A So this is the first question from Goldman Sachs Securities, Takayama san, please. Thank you very much. Can you hear me? Yes, we can hear you. So my first question So from the first quarter to 2nd quarter, I would like to give you the breakdown of what change has happened. You talked about sales So it's 1,000,000 1,000,000 plus 1,000,000,000 plus alpha. So the first half will be the same level as for set profits. So the 1,000,000,000 will be the calculation in the quarter on quarter. So 82.4 5,000,000,000 profit will increase. So in terms of the contribution, so for the 4 major segments, how much sales is going to go up and how much that will contribute to the increase of profit. Could you give me the breakdown? This is Yusta speaking. 1st, in terms of the Machine components segment, let me talk about the assumptions or the market conditions. Please explain, let me explain about that for the aircraft. So not only for the second quarter, for the full year, It will continue to be at a stagnant situation. For the ball bearings, for the automotive, numbers will start to recover. 2nd quarter, quarter on quarter will be positive. The 3rd quarter will look further beyond the positive trend. So that is our assumption. So against this backdrop, for the Machine Components business, a slight positive is what we are assuming. In terms of the electronic devices and compliance business, so the first and when we when the end of last fiscal year at the airport, for 2nd quarter to 3rd quarter, gradually, the volume is going to go down in terms of the LED backlight that as what we have been saying. But there has been some delay in that. 1st quarter, 2nd quarter sales is going to be more than 1st quarter. So the 2nd quarter is going to be the peak for the backlights. In terms of motors, Total Automotive business, it will start to recover. So that increase of sales, increase of profit can be expected for this business. So that's for the Electronic Devices And Components business. So in addition, in terms of LV Backlight. There are strong inquiries coming from the customers. So that trend is continuing. But the Mitsumi business Overall, so Automotive related business will recover that the trend will be unchanged In terms of the games related mechanical components, in the second quarter, the major peak will arrive. This will be a very strong orders are coming to us. This will be basically going to a strong operation environment. For the optical devices, For North America, we have a very strong orders coming for North America, but on the other hand, For China, for actuators for China, especially for the high end side, we're seeing a slowdown. So there are some differences depending on the business. For the semiconductors, So in terms of 2 businesses, in the SIM contractors, basically, it will be very stable. For the Usim business, The first quarter, I think it's not necessary to explain, there has been a lot downs in various lockdowns has been released in various countries and the automobile OEM productions has started to recover. So sales is going to increase. So that's the overall picture. So this will be a qualitative, but you could rank it. So the mid semisales and profit change will be the major factor of the increase of profit for the profit from the first quarter to 2nd quarter. Then next will be electric devices and machine components used seen, I basically would it be basically breakeven for you seen from the second quarter? I don't know whether it would be a breakeven, but against the first quarter, I think we will see a major improvement in the second quarter for Yushin. So that's the overall status, I think that you're correct. And the second question, Loves is related But in the first half outlook, I thought that maybe you should have come out with the outlook because the talks about profit is coming this much and sales is going to recover this much. So are were there some uncertainties besides the fact that you didn't, you didn't have outlook first half. I wouldn't understand they won't be able to come out with the second half of the full year, Mr. Kainua, what's your take? Well, I think it depends how you think about it. So I talked verbally about the we'll be able to develop the same as last year. But overall, I think you have to talk about give you a range. So simply speaking, we don't want to mislead you. So that's the reason why we're giving you a range in terms of our outlook. So for the first half, rather than talking about specific numbers for the first half, I think we should talk about this range so that you can reserve the full year performance of our company. So I haven't really thought that deeply about this. Understood. Lastly, So this is a very, I think this is a kind of rough observation, but compared to the couple of months ago, So towards the July to September September to December period, So if you do you think, by segment, by product, or what weird are you think that it would be on upper part of the range or lower part of the range? But by business, by products, if you look at that perspective, what type of momentum do you see by each of these aspects? Well, that's the reason why I'm giving you the range. So the automotive industry, I think we have started to see a slight light down the road. That's situation. So the initial scenario was that the first half will be the business will be supported by the sub core business, the second half, analog semiconductors, these new businesses, the 8 spear, the 8 spear is a new business will support us. So that has been our initial scenario. So I think this is related to the question that you asked. So our assumption, from, in terms of October and onwards, so we'll start to see a very strong upward trend or momentum, to be frank, we don't have that level of confidence, but in any case, At this stage, we'd like to offer you a range as an outlook. So I hope you understand our intention for the second half the H Spears core business, how much are they going to recover, how are they going to contribute to the profit? I think it all depends on that. Understood. Thank you. Thank you. The next questioner from Morgan Stanley MUFG. This is Hatu. I hope you can hear me. Yes. Thank you for your presentations. First, figures. I have three questions, but all bearing shipment volume, external, internal and production for April, May June. Monthly volume, please. And if possible, July trend as well, please. External April $1,000,001.77, $1.73 in $1.66. July, approximately SEK 180, SEK 2nd quarter SEK 180,000,000, would be the floor and some addition. And 3rd quarter onward 190,000,000 to 200,000,000 units. That's for external shipment, internal shipment, April, 52 in July, 5451, about the same. Level that's internal shipment volume. What about production volume? Again, starting in April, 2 50 8, 2 100 and in July, 240 to 250 are what we are projecting. Also about ABLEC. The sales in 2018 was over 1,000,000,000 operating profit over 1,000,000,000. That had been disclosed. What were the results in 2019? Fiscal 2019 and what were the results in the first quarter and the projection for the full year. Currently, due to macro factors, there are some impacts, but on a full year basis, about the same level, especially the profit level. We believe that, that could be achieved. The first quarter, Mitsumi, business segment. The impact of ABLEIC how much impact did it have on the sales and profit of Mitsumi business in the first quarter, please? The consolidation was only for 2 months So 300 Divided by 12, and a little less that would be sales and profit will be on track. And if you can multiply that by 2, you can get the fear for 2 months. Thank you. The profit for Mitsumi compared to the fourth quarter, there was a big decline. What are the reasons? What were the reasons for that? That's my last question. Optical devices business. Temporarily, the demand season ended at the end of fourth quarter. More specifically, in the Great China area. The demand is 4th quarter and demand has come down starting at the beginning of first quarter. That's the main reason. For 2nd quarter onward centering on North America, we expect recovery And what's different from the projection made at the beginning of the fiscal year was the smartphone, high end smartphone growth in the Great China area did not realize from the second to third quarter. Those are the differences. If I could add, the game console could not be built because of the component supply chain was disrupted because of COVID-nineteen impact. So the production could not be made during the first quarter. And that affected the original Mitsumi business segment in the first quarter. So the game console business, that portion should come back in the 2nd quarter. And for North America, in the 4th quarter, your market share increased And, that market share, do you think could be maintained for a camera actuator. I would not comment on the market share question. But currently, the preparation for production is steadily underway. And toward the second quarter, very strong production is being planned. That is for the North American market. That's where the game console business. What's the situation? Well, in the first quarter, as Kyla Kaimasu just said, in the first quarter, well, let me go back. In the fourth quarter, in the Great China area because of the lockdown, the production was disrupted. That's where all the plants are. And we were hoping that we could make up for that in the second quarter, but because of the disruption in the parts supply, we couldn't do that. But starting in June, things recovered and from July and then on to August, getting closer to the full operation. I see. Thank you. Thank you. From Mitsubishi of St. Morgan Stanley Securities, Uchinosun, please. So this is Uchinal. Thank you for taking my question. So I want to ask 3 questions. 1 is inventory assets. So can I confirm what is increasing? So you're preparing for increased capacity production. So by segment, where is you're seeing the increase in inventory assets? That's my first question. So ABLIC that we have here to consolidate ABLIC. That's one addition to our inventory assets and the I talked about the production trend for the games in the first quarter. We basically were thinking about seeing our production in games for the first quarter, but some components basically were not available. So we were not able to produce first quarter, so the inventory increase for the game consoles. But for this inventory, in the second quarter, the high level of operation is going to be planned and we'll be able to bring down the inventory. So that's the overall situation for the inventory. To Abilik, how much is accounting accounting for Abilik? So we do not actually, propaganda answer about the independent inventory, but I think generally speaking, it's about the same level as the general semi Doctor. Industry in terms of inventory. So you haven't started to produce actuators. Is that my correct understanding? Well, yes, in the 4th quarter, we're going to push for the production for the 4th quarter for the first quarter, including some prospects in the customers, but I will be able to shift that going into 2nd quarter. I don't think there are any issues surrounding actuators right now. Understood. So in terms of Mitsumi, I have two questions about Mitsumi. So in terms of the game, our console business, So the backup components has been solved and basically going back to full utilization, So as the outlook, how far can you go in terms of the order situation? How much visibility do you see in terms of, so I would like to look at your future outlook. So the custom well, basically, this is, basically what the customer's decisions have we can't say fully, but 2nd quarter 100 percent utilization 3rd quarter, I think basically pretty close to full utilization. So the 4th quarter in terms of, I think we'll be able to see a certain level of production, that's our assumption. So initially, at the beginning of this year, compared to that level and the production level that we are anticipating right now, I think basically if is going up. So if you look at seasonality and the middle of the quarter, the production tends to go down. I think that's a normal situation, but basically, does that mean that the momentum is improving because inventory is at a low level? So compared to a normal year, this is a more sustainable momentum that you're saying? Yes, I think that's the correct assumption. Yes, thank you. My third question is that so again, this is about Mitsumi. So the increase the production of actuators. So I think you have frozen the increase of the production. So what is your update of the situation with the actuators? So I think we have always explained about that. For the Philippines productivity should be improved, the asset efficiency should be improved, that would be our focus. And I think next, if it's clear onwards, there'll be more business opportunities. Thailand and Cambodia, we'll be looking at those countries. So that the overall by plant allocation should be considered and then we should base our plans on that allocation. So there's no change from the stance hasn't changed from the previous meetings. Understood. Thank you. Thank you. Next questioner from Mizuho. Can you hear me? Yes. Please start. I have 3 questions. I'll go 1 by 1. 1st, Val Uxin, the progress of PMI. The optional factors are very difficult. And So I think there are things that can be implemented, management wise, and what's your current view of the progress and above effect? This is Kainuma speaking. Due to COVID-nineteen until very recently, production had been halted But now, finally, we are seeing signs of resumption. We are implementing many things now for all products. Markup is being investigated 1 by 1 We are studying that and we are asking customers for their cooperation. Price increase and the withdrawal business in Southeast Asia and others So there are many things that we can work on. And in November, I think we can have a more solid explanation about Uxin, but currently, all we can say is that we are doing many things. Understood. I'll look forward to your next earnings briefing. And you maintained you made no changes to the full year guidance. And the risk factors for the second have. What are the things that you are worried about as management? What risk factors are you concerned about? If you can talk about that. And, Sephcor and, 8 spear, if you could, separate the 2, I'd appreciate it. Foreign exchange is the peripheral issue. So excluding that, in our mind, the biggest risk is the result of the U. S. Presidential election and the ensuing impact on the U. S.-China relations because many of the original assumptions that we have have been disrupted, for example, the cell phones or the mobile phones good balance. We were able to bring to a very good situation, but the high end products today China's customers are faced with a very difficult situation. So we have to keep a close eye on all these developments and overcoming the COVID 19, vaccines to be developed, and supplied in, fall. What would happen, what would not happen, we really don't know. Everything is uncertain. And this summer, we are seeing an increase in the number of people affected. And when winter comes in the north, northern hemisphere, what is going to happen in terms of infection. That's another risk. Now as has been mentioned many times, we enjoy lion's share in many products So once the economy returns, we can enjoy good business. And we're not going to be cut surprised, by an increase in production, we are already, we are always preparing for that, but we have to manage and control all possible risks for the time being. Understood. Thank you. My last question, a very simple question. Always pursuing new products. You are working on that. From the second half to next fiscal year, what are the areas where are the products that are expected to make contributions? Well, because of COVID-nineteen, everything has been pushed back postponed And so for this fiscal year, 0 is the answer. But In terms of, positive challenges that we are making smart lock, launch is what we are working on. And we're hoping that in October timeframe, product launch will be realized. We do sell masks as well, surgical masks and Menevia, Mitsumi, brand name to become more common to the general public, I think this will be a good opportunity. So, this will quote B2C Business the products that would allow us to go further into B2C Business We will be pursuing that, but in terms of sales contribution, it is not going to be large. We don't have much expectation there, but Going forward, we believe that that will be one of the major trends. So as a starting point, we are thinking of starting and increasing those businesses. But in terms of major new businesses, everything has been pushed back plants in Cambodia and Thailand. The plant factory audit has been suspended. No progress. And, we are suffering from that, but we're not the only one. All the vendors are faced with the same issue. No progress in the factory audit. So by overcoming all the difficulties related to the COVID-nineteen, I think that award gave us the opportunity to change the way SNBC Nikko Securities, Watanavistan, please. This is Watanbrae from SMBC Securities, Nikko Securities. Thank you for taking my question. Well, first of all, so the COVID-nineteen expenses are 4,000,000,000. How are you have you treated this? So can you talk about this using the P and Ls? So there has been about 4,000,000,000 extra ordinary expenses last year. So COVID-nineteen, is it in SG And A or is it in cost? Sales, how should I at it in the P and L. So it's in cost, however, but it's all expensed. So it's unrelated to inventory. So for the other expenses, it's in other expenses, excuse me, it's in other expenses. Is in cost. So going forward, how should I think about this? So going forward, is this going to happen again or is it going to come up in the second quarter again? So the lockdown, the level of lockdown has change. So it won't be 0, but I think it'll go down to a minimal number. So you see that you're in charge of this, I would like to ask you, in terms of the COVID-nineteen countermeasures, what is your stance for that? Well, I actually am in tochka in my speaking, so I would like to answer to your question. So right now, it's about 2 days a week. It used to be 3 days a week. We connect sites all around the world. Well, actually right now it's once a week that we do this conference. So I think well it's becoming more and more Sirius is Mexico, that's the country that's becoming serious, the Philippines, those countries gradually the people who are, infected are becoming the number is increasing But of course, it's very clear that what we should do. So we are very thorough in these countermeasures. So we are always vigilant. We have not dropped our guard at all. So your controlling, so is that people will not be infected? Yes. So we will prevent people of poor infected not to go into the plants. So if necessary, old employees will go through PCR testing. That's what we're doing. So if necessary, we will quarantine people as what people in, if necessary? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Sorry, I would like to make a correction. So basically it's in other expenses. It's in the billion other expenses. It's included in here COVID-nineteen related expenses. Understood. Well, my second question is that I will want to confirm about your strategy about using if you look at the automotive of my industry, I think it will take about 2 to 3 years to go back to the pre COVID-nineteen situation. So if you just take a normal measures, I think basically, it will take a lot of time to go back to the profit level that you think is ideal. So are you going to take a kind of a business with usual countermeasures or are you going to accelerate your measures compared to the original plan? We are actually accelerating our misses compared to the regional plan, but the biggest issue is Europe. So Europe's price price in Europe is not rational as in terms of the setting the price. This is not rational at all. Have seen those examples. So first, we have to correct the situation. That's where we have started. So of course, when we are in a difficult situation, that is an opportunity. And I said that in November, we'll be ready to announce more about UC But for specific measures, at the November earnings results meeting, I think we can give you some more specific detailed information. Understood. Thank you. Lastly, my third question. So in terms of the external environment for M and A has become better, But from the in terms of the capital market, the good companies are expensive and then the companies that are not performing well is cheap. So basically, you tend to have to buy high price, even if it's not a good opportunity. So I think there's things that you'll see rather than us. So Can you explain? Yes, exactly, though. We understand what you say. So we want to be very careful in going forward with these deals. Well, basically, we have some good and bad deals. Some companies are very good. I think in normal times, this is the same situation, there'll be some, joules out there, but I will look at the target. And if we will consider whether we can absolutely tapping with this synergy, I think that's the most important point. So we will observe that fact and go forward if necessary. Understood. Thank you. Thank you. The next question is from Akizuki san from Nomura Securities. Very simple question on figures and classification. Q1 Mitsumi consignment sales. What was the consignment sales of Mitsumi in the first quarter? And, if possible, can you talk about the projection for the second quarter as well? 1st quarter 1,000,000,000 and second quarter, approximately 1,000,000,000, which would mean that quarter on quarter consignment is increased and therefore the sales of mechanical components are expected to go up. You're talking about 1st quarter 2nd quarter? No, 4th quarter to 1st quarter, Q4 to Q1. Q4 to Q1? Yes, an increase. Of course, Q4 FY19 that was a period where the plants in China were shut down for almost 2 months. So the utilization rate was very low, whereas in first quarter Q1, although there were the component supply issue, the plant itself was operational. And therefore, Q4 to Q1 increase in sales. Which would mean that the camera actuators sales dropped significantly Was that the factor? Are you talking about the first quarter? Camera actuator sales? Yes. Compared to the fourth quarter. Yes. You are correct. And that has an impact on profit as well, correct? Yes. My second question is on camera actuators. The sales to the Chinese customers are not expected to go up because of the China U. S. Relation. But could you give us an update on Sebu. I understand that even stricter restrictions had been imposed in the Philippines part of Philippines today. So, in this situation, can you really expect a steady resumption of operations in the second quarter, July to September. Well, operation wise, it's 100% the utilization rate. And as Wes mentioned earlier, very harsh or very strict controls are underway. So so far, we don't see any issue. Simply put, this is the beauty of large scale operation. So what we are doing is partly when sales are not expected, it would mean that there's redundancy in people. Surplus in people. So we do the reverse isolation, and, send dispatch those people to the areas where manpower is needed. And therefore, in our operation, well, I'm not there personally, so I don't know to what extent exactly, but I am told and I have confirmed that there are no issues. Whereas in Mexico, where smaller scale in operation is to scale then, when you don't have many people and when the people affected infected increases, that will be an issue. And so in Mexico, In the case of Mexico, from Japan or China, we need to transport products to continue the product and the operation, plus continue the production to the extent possible. It's the hybrid operation. Whereas in large scale plants, there are many workarounds that we can implement. I see. Thank you. My last question. Rod ends and fasteners, listening to the foreign operators, for aircraft, sales are to further go down in July, September quarter. Even greater sales decline is expected going forward. I'm not an expert in this area. So could you share with us your view on this? Well, basically, personally, as was mentioned in May, even in that situation, what the time frame would be for the COVID-nineteen to be placed under control. That will be the key determining factor looking at Japan and others through the lifting of lockdowns and the self imposed restrictions, people who go out and the number of people infected would, be would increase. Now what about the overall trend? It's already at the low level. So we have already incorporated that. And, we are, blessed in that we have the defense business and therefore, the negative impact is limited in that respect. And in fact, at a time like this, we can put into practice what we had to do, what we wanted to do, including the inventory management as well as work in progress management. I see. So the level for April June 1st quarter would remain for some time, correct? Yes, that is correct. Thank you. So we have reached the end of this meeting. So I would like to end the Q And A session at this point. Thank you very much for participating. We'd like to end the meeting.