Earnings Call: Q4 2020

May 8, 2020

Now it is 5:30, a time to begin the meeting. Thank you very much for joining us for the analyst meeting for Mediobayami, March 2020 financial results. I would like to take this opportunity to express my deepest sympathy for those who are infected with COVID-nineteen and related people. Allow me to introduce to you the speakers for today from right hand side, Representative Director, CEO and COO, Yoshheesha Kainnomah. And Senior Managing Executive Officer, Katuhiko Yoshida. I have the privilege privilege of serving as the moderator for this meeting. My name is Yajiro. I'm a member of IR. And public relations. First Ayashida will talk about financial results and then Akainuma will explain to you about management policy and business strategy. After that, we will have Q And A session. We are planning to end this meeting at 7 o'clock Regarding the details of financial statements, it's uploaded on website as part of financial supplementary information and tansheng flash report. For your reference. For your information, this meeting, inclusive of a Q And A is being video recorded for later distribution of website. Mr. Yoshida, the floor is yours. My name is Yoshida. Today, I would first like to explain the consolidated financial results for the fiscal year ended March 31. 31, 2020. Consolidated net sales for the fiscal year ended March 31, 2020 total, the JPY 978,445,000,000, while operating income reached the JPY 58 1,647,000,000 and profit for the period attributable to owners of the parent hit 45000000000,975,000,000. These figures represent year on year increase of 10.6%, a decrease of 18.6% and 23.6 percent, respectively, with net sales for the period hitting record highs. Foreign currency exchange rates are estimated to have a year on year impact of minus JPY 19,400,000,000 in net sales and minus JPY 8,000,000,000 in operating income. Next slide please. Consolidated net sales for the fourth quarter of the fiscal year was up 22.1%. Year on year and down 15.2 percent quarter on quarter to total JPY 226,897,000,000,000 net sales hit the 4th quarter record highs. Operating income was up up 79 0.5% year on year and down 45.6 percent quarter on quarter to total the JPY 4,000,000 profit for the period attributable to owners of the parent was up 18.2% year on year and down 43.3% quarter on quarter to total 10,771,000,000. Operating income for this quarter includes a special factors totaling about 9,400,000,000 in card due to impact of the novel coronavirus and the cost related to M and A activities. We estimate the foreign currency translations, Abeona impact of minus JPY 2,800,000,000 in net sales and minus JPY 1,300,000,000 in operating income quarter on quarter impact was plus 1,000,000,000 in net sales and plus 1,000,000,000 in operating income. Next slide please. This is the annual trend in net sales operating income and operating margin. The bar graph on the left is net sales and the one on the right is operating income along with the line chart for the operating margin. The operating margin for the year ended March 2020 was 6%. Down 2.1 percentage point 2021, we are currently investigating the effects of the global spread of the novel coronavirus and the lockdown in each country, etcetera, and it is difficult to make a reasonable calculation at this stage. So we have forecasted sales and profits with a range Now please know that the figures of Safis Goya ended the March 2018 and before are based on JGAAP and provide it for your reference. The same applies here in NAFTA. Next slide please. This is for quarter trend in net sales, operating income and operating margin. The operating margin for the 4th quarter was 5.5%, up 1.7 percentage point year on year and down point one percentage points quarter on quarter. The special factors were, as I explained earlier, next slide, please. Here shows the difference between forecast as of February and actual results for net sales and operating income by business segment for the 4th quarter. Net sales were lower than previously forecast that in all business segments due primarily to the impacts of the coronavirus and others and our production The coronavirus pandemic also had an impact on our operating income in each segment. The UHIN business, however, recognized a certain amount of costs due to a step up of inventory and fixed assets as part of a PPA. Next slide please. Now let's take a look at the result by segment starting with Machine Components business segment. On the left is a graph indicating yearly net sales trends and on the right is a graph with a bar chart showing yearly operating income trends along with the line chart for operating margins. In the fiscal year, March 2020, our net sales were down 4% year on year to total of JPY 180,900,000,000. Sales of ball bearings decreased 3.4% year on year to JPY 117,100,000,000, the monthly average bearing sales volume totaled the 189,000,000 units, which is a decrease of 3.6 percent year on year looking at the sales by application, we see that annual sales of ball bearings are using data centers decline day on year, but sales were clearly, clearly up in the 3rd quarter and onward. On the other hand, the sales of ball bearings for automobile applications gradually slowed in the latter half of the fourth quarter, although overall sales were up year on year the fiscal year, sales of broadband and fasteners were up 4.4% year on year to total JPY 39,300,000,000 Sales of Peabot assemblies decreased 17 percent year on year to total JPY 24,500,000,000. While we were impacted by market factors such as the Nobel Coronavirus, the pivot assemblies, steadily contributed to our bottom line as we held on to an 80% plus market share. Operating income for the fiscal year, a total of JPY 39,900,000,000 putting the operating margin at the 22%. Aviso operating income decreased 16.5% and the operating income margin declined 3.4% percentage points year on year. Looking at the year on year results by product, we see that the profits are for a rodent and fasteners arose by the profits for ball bearing some pivot assemblies fell. For the fiscal year, March 2021, we can see clear up trend in demand for ball bearings used in servers, sales for commercial aircraft will be affected by a production adjustment. Sales for automobile applications is expected to recover gradually, although they will be affected by demand decline in the first half of the fiscal year, rod end fasteners are expected to be affected by production adjustments for commercial aircraft. For pivot assembly, We anticipate a decline in demand as the HED market shrinks. Next slide, please. This slide shows a quarter closely trend in the Machine And Components segment, the 4th quarter net sales decreased 1.7% quarter on quarter to total 44 point 5,000,000,000. Sales of our borrowings decreased a 2.4% aquarteron quarter to total JPY 28,700,000,000. The number of ball bearings are sold outside the group totaled 189,000,000 units per month on average the external sales volume reached 210,000,000 units in March, thanks to growing demand for ball bearings using fan motors after it temporarily dropped in February due to the novel coronavirus outbreak. Sales of a broadband and fasteners, a total totaling JPY 10,100,000,000 were up 5.7% over the previous quarter. The coronavirus did not have a significant impact on our fourth quarter results and operating operations and servicing the aircraft industry, especially small and medium sized aircraft, remained robust although the sales are partly slowed down in relating to 7073 7 max. Increased a 9.8 percent quarter on quarter to total JPY 5,600,000,000 due partly to the impact of the NOVO coronavirus operating income for quarter totaled JPY 9,400,000,000 and the operating margin was 21.1% on a quarter on quarter basis. Operating income fell 2.2% while the operating margin dropped 0.1% to each point. So looking at the result by product that we see the profits for ROADN and fasteners, rose wide profits for ball bearings and pivot assemblies fell. Due to the impact of the novel coronavirus. Next slide please. And now let's look at the Electronic Devices And Components segment. And the fiscal year ended March 2020, net sales were down 2.2% year on year to total JPY 379,400,000,000. Looking at the results by products, we see that sales of motor decreased 4.2% year on year to reach 180 1,000,000,000. The decrease was primarily due to the slowdown in the automobile market, electronic devices our app by 2.4 percent year on year to hit that 162,400,000,000, thanks to strong sales of models are using LED backlight. Net sales of sensing devices a total of 1,000,000,000, decreasing 10.7% year on year. Operating income increased 3.7 a percent year on year to reach JPY 17,600,000,000, why the operating margin rose 0.2 percentage points to reach at JPY 4.6 percent. Looking at the results by product, we see that operating income was up for electronic devices about down for sensing in the fiscal year ending March 2021, even the motors are expected to be affected by decline in demand for automobiles or launches of new products, including those related to games are expected to contribute to our earnings. So quarterly trends in alternative device and component segment net sales decreased 20.1 percent quarter on quarter to 1000000000 Looking at the results by product, we see that sales of motors decreased 7% quarter on quarter to reach 1,000,000,000, while sales of electronic devices decreased 32.5% from this quarter to JPY 37,700,000,000. This was because some shipments were delayed due to the novel coronavirus, although the demand was stronger than usual seasonality, thanks to strong sales of major customers models using LED backlights. Net sales of sensing devices totaled 1,000,000,000 decreasing 13.2 percent quarter on quarter. Operating income was jpy 2,700,000,000 that put the operating margin 3.0%. Operating income decreased 69.1% and operating income declined 4.9 percentage points quarter on quarter. Looking at the results by products, operating income was down quarter on quarter for electronic devices as well as motors and sensing devices. Next slide please. Let's look at the performance for the Mitsubishi Business segment. Net sales decreased 5.2 percent year on year to 1,000,000,000 in fiscal year 2020. But we saw a sharp revenue increase for optical devices, sales and mechanical components decreased due to a change in the product mix of some OEM products. Operating income was JPY 18,700,000,000 and the operating margin was 6.4%. These figures represent a 16.3 percent year on year decrease in operating income and a 0.8 percentage point decrease in the operating margin. Profit for optical devices and analog semiconductors grew while other businesses saw profits decrease. In fiscal year ending March 31, 2021, we expect optical devices to buoy sales. Also the forecast includes AVLIX forecast which was merged with Menevia Mitsumi as of April 30 beginning in May. Let's go to the next slide. This is Mitsubishi Business segment, the trends Net sales decreased 21.2 percent quarter on quarter to JPY 62,400,000,000, while sales of multiple devices increased sales decreased for other products primarily mechanical components due to the novel coronavirus impact. Operating income totaled JPY 4,200,000,000, while the operating margin was 6.7%. Operating income decreased 42.5 percent and the operating margin declined 2.5 percentage points quarter on quarter. Looking at the results by product, we see that profits were up for analog sim conductors, but down for other products, mainly mechanical components. Next slide please. Finally, let's take a look at the Usim Business segment. Net sales decreased 15.8% compared to full year ended December 31, 2018 before the integration to JPY 125,500,000,000. In March, fiscal year 2020, the factors for this decrease include a significant slowdown in production, mainly in Europe in the fourth quarter because of the restrictions imposed on operations due to the novel coronavirus pandemic on top of the slump in the automobile market in China, Europe and elsewhere, operating income was JPY 2,600,000,000 and operating margin was 2.1%. These figures represent a 62.9% year on year decrease in operating income and a 2.6 percentage point drop in operating margin. Tempo expenses was about 1,000,000,000 incurred in relation to the integration of Yuchine operations and then long term new products. We expect sales and profits to decline in this fiscal year ending March 2021 as the outlook for the automobile market remains slow. Next slide please. This is used in business segment quarterly trends. 4th quarter net sales decreased 1.9% quarter on quarter to a total JPY 30,900,000,000. As the business was hit hard by the restrictions imposed on operations due to the Nobel Coronavirus pandemic as well as a slump in the automobile market. The segment recorded an operating loss of JPY 1,000,000,000, Tiber expenses of about JPY 0 point was incurred in relation to the launch of new products, etcetera. This was accounted for as a special factor in the 4th quarter. Let's go to the next slide. The bar graph here shows trends and profit attributable to owners of the parent, while the line graph chart changes in the profit for the period per share. The profit for the period was JPY 46,000,000,000. Earnings for the period per share was JPY 111.1. Let's go to the next slide. The bar graph shows the profit attributable to the owners of the parent and the line graph of the earnings per share. The profit for the period was JPY 10,800,000,000, earnings per share was JPY 26,300,000,000. Next slide please. Next, this is the quarterly inventory trend. At the end of 4th quarter, inventories totaled JPY 169,800,000,000 which is a 1,000,000,000 less than it was 3 months ago. Inventory of 1,000,000,000 was included from the consolidation of Yixin. 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 aligned to our indicating free cash flows. At the end of the 4th quarter, net interest bearing debt was JPY 75,202,000,000, was up by 1,000,000,000 from the end of the previous fiscal year. Let's go to the next slide. Regarding the forecast for fiscal year ending March 2021, as I explained earlier, we are currently investigating the effects of the global spread of novel coronavirus and down in each country, etcetera. And it is difficult to make a reasonable calculation at the state. So we have forecast sales and profits with the upper and lower ranges. The exchange rate assumption is to the U. S. Dollar both for the upper and lower range. Next slide please. This slide shows the forecast by business segment. Midstream Business segment includes the sales and operating income of IBLIC from May which was merged with Miya Mitsumi as of April 30. This is all for my presentation. Next, Mr. Kainuma, the floor is yours. Good afternoon. This is Kai Numa. I would like to talk about management policy and business strategy. Last year, I personally find it very regrettable. Since 5 years ago, we have been aiming at becoming a company with JPY 1,000,000,000,000 and I have been leading this organization. And in December last year, at the year end, I was reported by my subordinate that we will be able to reach 1,000,000,000,000, but oftentimes, we may be sure by surprises when things are going well. So JPY 22,000,000,000 in shortage 20 2,000,000,000 in shortage and 978,000,000,000. So we all we renewed the record high, but still, it's a short of 1 and lots of things are written here and I would like you to read it during your leisure time, but this time around we maintained the dividend payout and our dividend payout ratio is 20% as I always say. Which means that between 17.25% and 22.25%. But this time, as an exception, because of this situation, percent dividend payout ratio, we would like to maintain for our investors, our share buybacks and many other things we have been doing to, secure funds for M And A. And from a long term point of view, to run a company from a long term point of view, we would like to or I would like to maintain this dividend payout ratio and the payment. Usually, in mid July, the payment is made. And in our case, we can make a resolution for dividend payout at the Board of Directors. So it doesn't take the approval at AGM. So when we send out a notice of a convocation of AGM, we can make a decision to pay the dividend in June. And assumption for this year, it's rather difficult. I think you can imagine why and how this new pandemic will be suppressed how economy will recover and how fast it will recover will all depend upon how this pandemic will be suppressed. So various vaccines and medicines are being developed right now. If something very effective comes out at an early stage, then the pandemic will be suppressed quite effectively and economy is likely to recover very quickly. However, if it last spo a long time and if it persists until wintertime, then the economic recovery could be delayed and I have no idea how things will be, but saying, I have no idea, I will not get us anywhere. And, like I did at the time of Valima crisis, I thought I would present to you the guidance with the range and that is the reason why I decided this way. For your information, sales for April, we already have the number compared with April last year, it's virtually the same that is a fact Yuching last year compared with April of last year. The sales for this April are JPY 7,000,000,000 Fitches, a major decline, but Mina Bear, former Mina Bear, last year was 52,300,000,000 and this year was 53,800,000,000 and Mitsumi 15,300,000,000 and this year, JPY 16,800,000,000. And Minabera Mitsumi, plus 5 companies the 5 overseas company CNA, various other major companies, 5 of them, if they are included, 1,000,000,000 last year, and this year is JPY 55,700,000,000. So Fuma, Minabaya and Fuma, Mitsumi, revenue remained virtually the same except for Uxin. Last year was JPY 12,000,000,000 and this year it's JPY 5,000,000,000. So last year and this year, the starting point was about the same. And the remaining question is how things will recover? It depends on how the pandemic will be suppressed. As I said previously guidance when we issue our guidance, this range of 50,000,000,000 to 60,000,000,000 as I said, the recovery scenario we cannot forecast. However, in the past 11 years, I served as CEO for this company and my gut feeling is the stress scenario is probably the reasonable thing to do. And operating income 1,000,000,000 for last year, inclusive of all special factors like forex. If I exclude all those factors last year, the tie parts or dollar parts, foreign exchange rate, 32.84 was the assumption. However, it turned out 39.36.96. And we have 40,000 workers in Thailand So two parts difference was a major obstacle for revenue, but it came back to 83 or and we completed Forex hedging and the reversal of all those plus stress applied. Machine components about the 10,000,000,000 and electronic components, another 10,000,000,000 and Uxin, 5,000,000,000 Mitsumi is about the same OIS will go up. And game consoles are doing quite well. So JPY 25,000,000,000 stress has been applied On the other hand, highly possible factors for profit increase, I will talk about this later on. Like a break. Plus 4,000,000,000. So at least at least 4,000,000,000 yen plus minus JPY 25,000,000,000, it will be JPY 60,000,000,000. So, this is my personal projection. The midpoint of my personal projection. So once in 200 TES pandemic, This is larger than demon crisis according to some people. But as I said earlier, depending on how it's suppressed, the outcome could be different, but JPY 10,000,000,000 range was set, so 1000000000 to 1000000000. At the time of, Lehman Crisis, this company was rather small. So 1000000000 to 1000000000 was range back then and I announced that number in Q1 and Q2 regarding the range, we were not able to project, but in Q3, 12,000,000,000 in other words, the midpoint and 12,100,000,000 was the result. So it was in the middle of range. And, I don't know how things will turn out, at this time, but the company has grown 4, 5 times bigger. So as I said, those are the likely result, very close to CHF 60,000,000,000. So the guidance that I can give you here is very rough. So I have to apologize about that, but This is the only way that we can show you the guidance nobody can predict what's going to happen in by March next year, nobody will be able to make a projection. So please forgive us to giving you this level of guidance So that said, some institutional investors have said that in this electronic components sector? So how is the ranking within this electronic components sector and basically, this is to show how good we have been in the ranking for operating income. This essentially invested the analyst compiled this So we basically confirmed and looked at what the ranking in each of the each year I think we have been able to go, up by 1 notch. So this electronic components sector basically will be influenced by the global economic trend or the Oryx. So it is impacted by these external factors, this cannot be avoided, but even in those cases, we have been steadily been able to improve as it's relatively speaking, improve operating income. So this slide is to show how we have been able to do that. So in terms of the Novo Coronavirus impact, So in mid May, as of mid May, all of the factories are operating. Is going to operate, whether it be in Europe from this 4th, the factories have started to operate. China they are 100% in operation already. So gradually, the operating activities is going to recover So I always show you the 3 year plan, but we do not know what's going to happen next year. So to be frank, I cannot show you any guidance for the 3 year plan. That is my frank feeling. So this is an image that I'm showing you here. So please understand that this is an image. For the machine components, for bearings, ball bearings, I have no nothing to worry about, about ball bearings. There's some ups and downs, but the demand for ball bearings is going to increase steadily. And our competitiveness is very solid. However, customers, if their operations stop, of course, they might be using ball bearings if the customers go back 100% if the customers do not go back 100% operation means that the ball bearing demand is going to go down. So this is unavoidable. Rather than that, I think we have to be carefully looking at the aircraft related situation, we have to observe what's happening there. The airline industry, each of the companies, they are weak financially. And people Whether it be overseas travel or domestic travel, there are a lot of countries that are not, people are not moving. So whether these aircrafts will be selling or not, I think that is a big question. But this is a reference that I want to show you. So our US related various subsidiaries, their calculated subsidiaries, if you look at the breakdown, About 25% is for the defense industry. So currently this defense business is not impacted at all. The 14% is medical related. For instance, X-ray tubes for the X-ray So there's a lot of orders coming in. And, as a trend, it's actually increasing its production. Put it commercial aircrafts. So that's about a 60% of the overall business out of that even if we assume a 4% decline, that's a 25% to 30% impact coming from the commercial aircraft and maybe it'll take about 2 years for a recovery. So that is what I am thinking. But, I think it's too early to say definitely definitively what's going to happen. Of course, there's a lot of drugs that are being developed. And if you look at what's happening in China, and who look at some countries, people want to go out. They want to go travel, move around. That's a kind of what human beings want to do. So people, a lot of people are saying that the life cycle is going to change but as long as the safety is guaranteed, I think people will just resume to the previous lives. For lifestyle. So I think we have to observe what's going to happen in this area. For the electronic device and components targets, and I think basically people focus on LED backlights, So the volume is going to go down. I always have a set so, but we have from being preparing for that from before. So the decline of LED backlights can be compensated by other businesses like Elite or OIS from 2 years from 2 years ago to last year to last year to this year, the sales has gradually been growing. So OIS is another factor and gains because people are staying at home and games, is a come, is a, very popular. So in area, various various countries, we are producing our products and we are producing a variety of products. So that means as a result, we have been able to manage a risk So even if one product, earnings capability declines, we can be Mitsami business, I think one point I want to make is that after the integration of Mitsami, we I always talk about the core business and sub core business. For the core business, we have a 8 spear business, we have named this a 8 spear business as a core business. Within this, the Analog Semiconductors is a core business because the market is large and will not go away easily. And the within the niche market, we can exert our strength and uniqueness. So we want to make this core business. For the Mitsumi business, games and mobile phones. So within our business, this has a fluctuates in terms of technology. So we call this a sub core business. However, in terms of profit, it can generate a certain level of profit. So we wanted to create a core business here. And, so the semiconductors was the 1st that came out. So afterwards, I will talk about this in more detail, but one of the topics I want to communicate is that Misumi has been able to come up with the core business. We have a very strong spear that has been created for the MiXME business. That is what I want to communicate at this point. For the Houston business, it's 100% automotive business So they are facing tough times. That's true. However, you see So it isn't a company that has invested a lot in CapEx and there's a high level of depreciation. So I think even if it is loss making, it will not be a huge loss. If you consider the size of a company, it's manageable So I think this is a good opportunity. We have to do some things. We have to improve the productivity. We have to reduce the fixed cost. And looking at case, we have to look into the integration activity with us. There will be Semiconductors, there will be motors So, lock mechanics and access and mechanics, we have to develop and we have to accelerating the speed of development. So ABLEC So this is, excluding power semiconductor with the 2 companies together, we're coming to number 3 for the Alex conductors. This is about approximately JPY 60,000,000,000 of sales will be coming out from this integration. So within the JPY 2,500,000,000,000 concept. So then Luxury Semiconductor should have about JPY 100,000,000,000 of sales. So we already have JPY 60,000,000,000. So even after 9 years or 10 years, I think we'll be able to exceed JPY 100,000,000,000 and in terms of profitability is very high. So I think you'll be able to understand that as time goes by. But as I've I've said, this would be the core I think this can become the core business of Mitsumi. Is in what kinds of areas are these analogue Semiconductors become effective as you can see here Mitsumi has 5 spares, so to speak. 5 areas to focus on in semi conductors from 1 through 5 and incidentally APLIC has 5 areas as well. So 5+5 equals a 10, but 1 and 2 overlap, color, the in purple. So these 1 and 2 are overlapping areas. The batteries and parts supply. So out of a 5 core areas, these are the overlapping areas and the ones in blue show Mitsumi's and the ones in pink show ABLEX Businesses and the orange ones are the new three new areas that, in former Minabay or Mitsumi did not have medical magnetic sensor and clean boost, this is registered trademark. Without battery, the electricity is boosted So without the batteries, the sensors sensing information can be transmitted. So we are involved in social infrastructure related businesses like, the meters that, media precipitation, rain, snowfall, wind, so on and so forth, but without a battery. The data can still be transmitted to a nearby station. On the small volume of information, of course, but it's a very interesting technology and number 7, magnetic Sensa, the vertical integration. So our HPS By combining, we can make even better things. Like a whole element, a rig has this wonderful technology, which is used in a BLDC motors, or encoder, the rotation encoder number of rotations and angle detection. So this integration with ABLEC provides Minne Bea with various benefits and advantages, Avlick is located in Chiba Prefecture and we are of course allocated in AMITA Tokyo. And the semiconductor business is located in Natsuki and Titose as well. So we are rather in a adjacent environment, analog, semiconductors cannot be copied. And this is probably one of the products that the Japanese people are very good at making by accumulating the details so we can create a wonderful product. So in eight areas, as I spoke about, we are to grow going forward. In order for us to grow, we need to look for the sites for new plants, both plants are making 6 inches wafers as the main product, but they are having, people are having space problem. So we need to find a new site for factories. In order to pursue this activity, So analog, our semiconductor used to be the ace spear, but now it's a full spear. And this explains about our countermeasures for coronavirus. 90,000 people we have, but none of them have been infected yet one in the U. S. And 8 in Europe. Unfortunately, the infected recently. However, in Asia and all countries, In Asia, we have no infected people. That I think is because we have implemented a very strong countermeasures in early stage So I have already mentioned about this already. So last year, so JPY 100,000,000,000 of the financing has been made into long term in terms of our borrowing. So this year we only have to pay back 1,000,000,000 of long term borrowing. So in terms of the cash position, we are in a very good cash position. So that's the early payment of our dividends and the payout ratio will be 25%. So that's all from me. Thank you very much for your attention. Next let's go to the Q And A session. Today's question will be we will be receiving from the institutional investors and analysts who have been registered beforehand and are participating through the telephone conference system If you want to cancel your question after you press 1, please press 2 after the star. We will ask you in order if you can name call please ask your question and one question at a time please. So the first question is coming from Goldman Sachs, Takayamasan, please. Hello, can you hear me? Yes, yes, we hear you. I have three questions. So I will ask you 1 by 1. This first two is about the overall plan, about the assumptions. First of all, if possible, in the first quarter or the first half, in terms of the sales of world sales and profit, what will be the waiting against the full year of course the risk score in second quarter will be tough, but if you have some figures in mind, can you tell me that. So as you know, the aircraft business is going to they were going to see a decrease in production and the automotive business is going to be very tough. If you consider those factors, the 1st half, especially for the first quarter, this situation is going to be very severe. That is our assumption, but So JPY 50,000,000,000 between JPY 50,000,000,000, the full year operating profit range. How in each quarter, what will be the breakdown? Currently that we cannot disclose because we do not have sufficient information. Please forgive us to giving you this level of answer. So the reason I ask is that the range for the top end and the low end for the full year, if you want to consider that, because I think basically between the top end and the low end, it's going to be a period in the first quarter. I thought that maybe in the short term, you'll be able to have more visibility. Yes, the first half would be tougher. In the second half, I think we will be able to see a certain level of recovery. That is our assumption. And the numbers has been compiled as such but specifically at this point we cannot disclose specifically what we are thinking for each quarter or each half. Understood. Well, my second question is, again, a question about assumption. For the full year, the top end, the low end range. So if I look at the sales, the motor Mitsumi Yuchin, these three businesses I think in terms of the fluctuation of the sales to top end to the bottom end, it's large. So what is the different assumptions that you have made for each of the businesses. Again, because we have not any precise assumptions behind these numbers we look at each of the businesses and we assume that this will be within this range. For instance, for the motor business, the automotive will be tough, but the other new applications will be ramping up. So these for each segments, by each product, I think there's a difference And but overall, we cannot give you any clear or precise numbers. So if that is the case, what is the process? What kind of process did you follow? To reach these numbers. So Mr. Kainuma has talked about this 1,000,000,000 operating profit. So we have this of stress and then 1,000,000,000, is that the starting point or is that the starting point or is this a kind of the sum of all parts in terms of the sales? It just sum up all the sales and then you calculate the marginal profit and then come out with that operating profit. This is kind of a speaking let me answer your question. So I think it's twofold. One is that of course each each of the best units the submit numbers and every time this happens but sometimes they're very pessimistic and sometimes it's very optimistic. So when these numbers are compiled, depending on the business environment, these outlooks will change. So the management we'll put on supply stress. In some cases, in some cases, we'll say that we're better than that. So because we have to make a prediction for the 1 year, this is not a simple task. So this process we go through this process But in currently the JPY 50,000,000,000, but maybe slightly over the JPY 50,000,000,000 is the kind of sum of all the figures that has been submitted. So that's one aspect. On the other hand, so if we allocate all these numbers because the businesses won't do this. So if we apply all the special factors and then if you just simply apply stress, for instance, these aircraft business. So 25% to 30% decline is going to decline by 25% to 3% or smartphone business because we already have been given some indication of what the demand is going to be. It has it was quite strong. So you add these factors in applied stress So then we reach the numbers. So 1,000,000,000 is a kind of sum and then it's a little 1,000,000,000. So even with kind of a top down approach, 1,000,000,000 is what we reach So that's the range of 1,000,000,000 to 1,000,000,000. So that's the type of guidance that we're showing you. This is a range that we are showing you. So within these numbers, So it's not just a process to all the full year. It's just looking at this specific year, you have the bottom up and the top down and then the that you arrive at? Yes. And within this accord, depending on the past experience, for instance, April basically not changed from the previous year but you're seeing $7,000,000,000 decline that has been the starting point. So what type of improvement or is going to be seen? For instance, ForEx for us, the currency exchange rate is favorable for us. The yen against the dollar is stronger. However, tie parts has been quite weak. So if you consider all these factors, from this starting point that we're seeing here, how much sales are we can increase? So 50 or the operating profit of 1,000,000,000 is 1 range and 50,000,000,000 is another range. So that will be the range that we'll be able to assume when we have go through this practice So April, May, June would be bad. And then followed by that July, August September, be slightly better than that, but not that good. So that is the kind of assumption that we are taking. So from basically, the calling from April, you don't know it how the pace is, but you continue to go up from May to June. What's yes, yes, I think that right, because April, Europe, there's no basically no operation being conducted in Europe and the United States, for the civil aircraft basically no business at all. On the other hand, LED backlights, we have business with the minimum SME Group compared to last year as a result is unchanged because there are always fluctuations among businesses So it's very difficult to make a clean prediction for the full year. But that said, if you take all these fluctuations within taking into account, the risk will be mitigated. So that is based on our experience. And based on this experience, that is the guidance that we came out with. Understood. Lastly, and this is about ball bearings But the January to March sales and production, well, you have your results to the first quarter to 2nd quarter of this fiscal year in terms of volume on the bearings. So what will the volume be looking like? And you always talked about how utilization rate is very important. So you want to be aggressive in taking the volume. So 2020, you're going to do that. So increasing the share or increasing the volume, including those activities, what type of management or the operation management are you going to do? Can you tell us what you plan to do? So, in terms of the volume, please report, let me report, in terms of bull brings, external sales, January 188,000,000 dollars, February, $237,000,000, and March $210,000,000, $270,000,000 to $70,000,000,000 to $70,000,000,000 to $70,000,000,000 to February. So 68,000,000 dollars, $59,000,000, $62,000,000, that is what the internal use. And production January, 259,000,000, so 249,000,000 for February, March, 290,000,000 for March. So up until March, we have been seeing a great increase in terms of production volume. So before the pre current days, external sales, we were assuming that external sales is going to recover and the production pace, we wanted to bringing it up to 1,000,000. So March, that is the reason why we had a 1,000,000 in the production in March. For this fiscal year's first quarter, as you know, has been very slowdowns in various areas. So the production is going to be decelerating. So 1,000,000 on average for the 1st quarter on average per month. I think the bridge is going to go down to that level. For the external sales, 118,000,001 190,000,000 will be the level of external sales. So that is the outlook for the first quarter for external sales. Understood. So that's the current status. So to give you the outlook, the 5G related orders, there's a lot of orders coming from 5G and and medical, although the volume is small, for instance, with the artificial heart and lung devices or the blood testing devices, these a lot of bull bearings, a lot of motors and these type of areas good, but if you look at the overall volume, these are very small. So automotive specifically for the high end automotives ornobiles are bullbearings are used, we have all been seeing. So if the volume goes up and if the ball bearings for the automotive has started to go up, but, we see it seen a slowdown in the automotive market. So for the automotive market, we'll see a slowdown that's unavoidable. But as I said in the beginning, so it depends on how this pandemic is contained. How is the automotive market going to look out look like? I think we'll be able to see, but if we look at the current situation, that's the status And for the home appliances, because the stores are closed, you won't be able to sell products if the stores are closed. I think you can easily imagine that kind of situation. So China will start the stores South Korea, then we start the retail shops. So there's a lot of revenge products that are being talked about. So Japan can control this pandemic by this summer, I think a different type of consumption is going to come up So I think if you look at the demand, I think basically production is in line with the demand. Well, after the Lehman Brothers suck, I think you have been very proactive in acoustic capacity. So that being able to recover quickly, increase the shares. So are you I think that from last year, you're seeing that you were saying they want to take market share they want to be proactive. So I was just thinking that maybe you will be looking at the next stage to be aggressive from the first quarter. I think I will just look at the demand because the you have inventory and I think we'll be able to respond with the inventory. So we do rather than trying to produce something that will be wasted, we want to be focusing and logical in terms of production. So I think that's the way we should go. Thank you very much. Thank you very much. Let us move on to the next question, SMBC Nikko Securities, Watanabe san. This is Watanabe from SMBC Nikko. Can you hear me? Yes, I can. First of all, the capital expenditure, how you plan to use money, would you explain reading the supplementary information regarding investment, you are slashing, but R and D expenditure is to be increased. So I don't have an impression that you are trying to reduce the amount how do you plan to use money? That is my first question. This is Kainuma. Quite frankly, So stress and stealth products, so there are various things. And initially, the amount was JPY 100,000,000,000 But at this point in time, we have reduced the amount to 35,000,000,000 So that is what happened. The reason why I said that is as I have been explaining how things will recover going forward is still not certain at this point in time. In other words, we cannot be so bold. We need to keep watching how the situation will evolve and then we will approve the applications for investments later on. So that is the reason why we came up with this number. So if I try to respond to your question 1,000,000,000. This amount At this point in time, this number is much smaller than what we really need to invest. If I may supplement the JPY 35,000,000,000, this is a sum of application. Applied number, JPY 43,000,000,000 is probably the number what Amazon is looking at. Because there is a time lag. Some of the projects were approved last year and delayed until this year. So you are being very selective about the projects being very prudent at this point in time. I understood that. And earlier, you said that new plant in Philippines, it is to be frozen for some time, but increased the production of actuators. Would you elaborate on that, please? Actuators as I said earlier, there is a huge growth potential and that we have high expectations for that. So we maintain our stunts. But the reason why we froze this supply in Philippines, so there are 2 reasons. 1, In the current premise, we can handle the incremental production. That is what I heard from people working in the field. That is number 1. And second reason is making the products in Philippines is one option but using clean room in Thailand may be more cost effective. That is another point we considered. So at this point in time, we decided to suspend the project if it is really necessary. I mean, using clean room in Thailand, Probably, we will shift, I guess, to that option. If I may share with you. So this vacant site in the Philippines, you have not started the construction of the building, that is right. We stopped in the last minute. Lastly, this year, Mitsumi's the game application or the motors for games, new products, I think you are expecting the revenue increase from many new products and page 21 this shows only the profit. But the sales, I think there are many products that will see increase in sales. So if you can share with me some information about that. Each the sales for each business line I cannot share with you, unfortunately, but new game related motors business we got at some of them are starting and how many units and how much sales, such numbers I cannot share with you because of confidentiality Understood. Thank you very much. So let me repeat So please press the star 1 for your question. If you want to cancel, press please press 2 after the star. Next question please for Mizuho Securities. Kotosa, please. Hello. Can you hear me? Yes, we can hear you. I have two questions. One is about the current situation. So how is your portfolio been effective to counter the situation that you're facing right now. So if you look at April year over year, it's basically the same as of last year. And for the ball bearings 1st quarter outlook, so GBP 118,000,000 to GBP 190,000,000. I think basically this is the same level as a a short time a while ago. So the reason why you've been able to maintain this level although the external condition is tough. So where is can you tell me which is going up and which area is going down? So because we think that overall illustration is deteriorating, but how are you being able? I want to understand how your portfolio is actually effective in coping with the situation. Another question is that in slide number 26, so you talked about how to think about the guidance. So 1,000,000,000, what is the meaning of this 1,000,000,000 so excluding all these special factors, what is the how did it arrive to this 1,000,000,000 these are my two questions. So then let me explain about this 1,000,000,000. So if you go to slide 4, special factors lower left hand side, special factors including coronavirus impact. So 1000000000 14,600,000,000 year over year JPY 38,800,000,000. So basically if you include these factors that will bring us to 81 1,000,000,000. Is it do you understand? Sorry. 1,000,000,000 plus 8+58.6. Yes, yes, I understand what you're talking about. So byproduct1stquarterportfolio trend what we're seeing for the 1st quarter So with the machine components, I think basically it's going to go down a lot. The reason is that with the aircraft with the commercial aircraft decline in production So it was not happening in the fourth quarter in the last fiscal year. It's going to it's happening in the first quarter of this fiscal year. So I think this is a kind of a late cycle situation for the ball bearings. For 4th quarter production, and sales was not was okay in the 1st quarter. So it's going to have a reverse impact. So the automotive and the aircraft impact for the first quarter is going to be seen for the missing components. So this is kind of speaking. So comparing the April situation from the last year to this year. I understood that was a question. Is that okay? Yes, yes, my question was about that. But of course, of course, if you can talk about the first quarter direction, that will be good as well. So then let me answer your first question. So basically, So in the former MINIBI business, so the machine component was got was down the April, but the LED backlights, offset that. And that's the reason why the sales was the same as last year. For me, to me, last year's start was very bad. Because the game business because, they have produced a lot and they sold that. And from February, they've had they haven't seen a increase of the business, maybe they, overmade because maybe if it, against the demand, they did, they over Pritos. So April, the business was not that good. So this fiscal year from February, March in China, the gaming related business was frozen and the supply chain was disrupted. So this was a situation So for basically they were bad for April this year and last year. So that's the reason why it was the same. Maybe that's a good understanding. So the one negative factor was Yushin, so it went down by JPY 7,000,000,000. So that's the April to April comparison. So let me just talk about the 1st quarter outlook, the motor business because the automotive business is slow. So year over year, it's going to be go down for the backlight business. Electronic devices, it will go be on the positive side because and for mid to mid overall, we will be on the positive side and we have the ABLEIC 2 months worth of contribution. So year over year, I think, their production is going to increase in terms of the order for using that is. So, Q1. So the automotive production trend will be impacting our business, meaning that it will be impacted substantially by the situation. So that's basically assumption that we're using. For the LED backlight, the positive for the Mitsumi, the reason why it's going to be contribute on the positive side? Or what is the reason? Well, for the LED backlights, So the fourth quarter last fiscal year, there was a very strong demand on orders. So we had a tight demand situation. So excuse me, we had a question in Thailand. We were not impacted by China, but the customers are impacted by the coronavirus situation in China. So we saw a slight slowdown But in the first I think and that's basically been pushed back to first quarter this fiscal year. So the first quarter, we have been we are assuming that the sales is going to be robust that about the backlight. And for me to me, So the for the machine components, the supply chain is somewhat decelerating. However, year over year is on the positive trend. So that will be reflected on the sales. With optical devices, again, the same trend and ABLEX 2 months worth of contribution can be added on. To year over year, I think we'll be able to see a considerable level of increase in revenue. Understood. Any other questions? If you have a question, please press ask the risk and one. UBS Securities, Sahirat Hassan. This is Yreta from UBS Securities. Please begin. Yes, thank you for this opportunity. I have two questions. 1, actuator business taken up by Misumi, for 2021, now you have a strong outlook, and I want to know more about the background. Smartphone market is likely to deteriorate about 10% But you anticipate a growth do you anticipate the growth by increasing share or growth in China and installation rate? So what is your views on that? With regards to our share, I don't think we are in appropriate position to comment on that, but we should be able to maintain about same level of a share as last year and average selling price has been increasing as things have got more functionalities. So the average selling price and unit price have been increasing in North America as well as in Chinese market. So we are seeing more business opportunities So that is how we project about actuators. The other question is about the guidance. So in Mitsumi business, you said that the ABLIX numbers are included, can you be more specific, about sales and operating income? I cannot share with you exact numbers, but the numbers that we published more than JPY 30,000,000,000 sales and more than JPY 4,000,000,000 profit. So those are the actuals from last year. And we are to we are we have been accumulating, even more profit since then. So 1,000,000,000 or JPY 4,000,000,000 are to be exceeded. And in terms of the contribution, yes, that is right. So let's go to the next question. So again, this is Mr. Koto from Mizuho Securities. Can you hear me? Yes, please go on. Sorry, this is the second time for me. For the ball bearings 180,000,000 to 190,000,000 first order outlook. So what is the breakdown by application? Is there any change in the breakdown by application? Last year's mid middle of last year, I think it was about 1,000,000. I think the fan motor implications was half compared to the past and the automotive was basically holding its level. So went back to CHF 210,000,000, then, let's call it gone down again. So if you go by application, What's the breakdown between breakdown in FY application within 1000000 to 1000000 of poor bearings? So I think it's the completely reverse of last year. So automotive is going to go down substantially that is the forecast for the first quarter. On the other hand, fan motors, we are going predicting a very we are receiving very strong orders. So currently, so the business plan that we have compiled before the coronavirus situation, I think this is even stronger than that for fan motors. So the prem modems compared to the past peak, maybe more than 10,000,000, and the automotive is basically half compared to the past. I think that is that the breakdown you're talking about? It's not half automotive, but automotive. I think tens of percentage points decline is the 1st quarter for the fan motors the past peak, I think it's going to exceed the past peak. Some month we'll be exceeding the past peak for Pan Motors. So about because data centers or the 5G, telecommunication infrastructure business is increasing. Is that the reason why? Yes, yes, that's our understanding. So if that is the case, in terms of the mix of the profitability, is this a positive? So I think basically we have to think which plant is going to operate. And how is the inventory level? So we cannot give you a kind of a one fits all answer, but with with these conditions in mind, how are we going to operate? Efficiently, I think that's what we have to consider. Morris Stanley, Mitsubishi UFJ Securities, Setosan. This is Sessa from Morgan Stanley. I have two questions. 1, Mitsume Optical related business seems to be very robust recently and by region, which region is stronger than the others and additional values will be heightened starting with this year's model. So I heard, so shipment of those products when the shipment will start, if you could tell me that is my first question. My second question is ball bearings. April to June, external sales, 1000000 to 1000000 is the guidance? And when do you think do you think things will actually start to pick up in a privileged manner. So when you say recently, do you mean 1st Dakota? And you think April to June will be also strong. When April to June will be affected by seasonality. So compared with Q4, it will be it will go down, but whereas Q2, it will increase once again. And by region, North America, because of the seasonality in North America, the production will increase going forward and the Chinese market has a different seasonality So Q1 and Q2, we may not see an increase. May I, about may I speak about the actuator or if that is the case, the new products to be shipped in North America the shipment will start in Q2. Inclusive of the new products, there will be a peak in Q2 and Q3. I see. Thank you. And, bow bearing recovery pattern, as Kainuma explained a while ago, It depends on the recovery scenario of COVID-nineteen but the Q1 shall be the bottom. Automotive utilization hit the bottom and Q2 onwards we shall see some kind of recovery. If that is the case, with regards to production, if I may repeat, The Q1 is the bottom. Am I right? So, April to June will be worse than January to March, that is the projection you have at this point in time. Well, the inventory level is we need to consider and to what extent, a demand will recover will be one of the questions for the Q2. In terms of the production, Q2 is likely to be better. That is how we think at this point in time. I see. Thank you very much. So Izimisan from SVI Securities, can you try to connect again? Hello. Hello. Yes, we can hear you. Go ahead. For the automotive related business, So there's a lot of pessimistic, situations, but there are a lot of plants or the companies that are reopening their production So maybe if we have this coronavirus situation, I think people will want to drive their own cars more I think that has been kind of a talk, but for your business, in terms of the future outlook for the automotive business, what is your outlook can you give me a hint? And this is a very short term question, but from your point of view, so the supply chain for the automobiles I think, I understand there's a lot, do you think that there's a lot of inventory in Tier 1? Even if the production for automobiles restart, in terms And do you think that they will be a a lot of time lag for youth if actually feel the recovery of the production? Basically, exactly as you have pointed out. So what is going to be happen going forward. We don't know because maybe people think that it's safe to drive your own car because I think we have allowed people to use their own cars for commuting and the gasoline prices are becoming cheaper. So if things stay this way, maybe that will be true. However, to be frank, at this point, to make any prediction is very difficult. But our assumption is that as he has said, this April to June, everything has stopped, but things have started to restart it, meaning that this first quarter should be this bottom. Then from this bottom, what will be the recovery trajectory? I think this that depends how this pandemic is contained or controlled. However, if you look at the current situation, I think in terms of the countermeasures for the pandemic, I think basically has been disseminated because we have 90,000 people as employees, but nobody was infected So maybe nice as we will some are asset symptomatic maybe because they're taking countermeasures or latent infected people maybe they if they come out and then if you get to understand this kind of situation, I think the production activity will recover. In terms of components, automotive components you see is the biggest portion. So Tier 1 has a lot of inventory I don't think that there will be a delay because we they handle bigger components and then they use the combine method don't think that there's a big lot of inventory, but but there is some things that we have produced too much and it's piling up for instance. So for instance, the driving angle sensors, angle sensors for the automobiles, we may be made too much of these. So maybe things are different product by product, but within the mainstream products of our automotive as I don't think that there are many, many major issues. The time has come to end the meeting and therefore we would like to close the Q and A as well as this analyst meeting. Thank you once again for joining us.