Thank you very much for joining us for the analyst meeting for MinebeaMitsumi March 2020 financial results. I would like to take this opportunity to express my deepest sympathy for those who are infected with COVID-19 and related people. Allow me to introduce to you the speakers for today. From right-hand side, Representative Director, CEO, and COO, Yoshihisa Kainuma. Senior Managing Executive Officer, Katsuhiko Yoshida. I have the privilege of serving as the moderator for this meeting. My name is Yahiro. I am a Member of IR and Public Relations. First, Yoshida will talk about financial results, and then Kainuma will explain to you about management policy and business strategy. After that, we will have Q&A session. We are planning to end this meeting at 7:00 P.M.
Regarding the details of financial statements, it is uploaded on website as part of financial supplementary information and transient flash report for your reference. For your information, this meeting, inclusive of Q&A, is being video recorded for later distribution on 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 31st of 2020. Consolidated net sales for the fiscal year ended March 31st, 2020, totaled JPY 978,445,000,000, while operating income reached JPY 58,647,000,000, and profit for the period attributable to owners of the parent hit JPY 45,975,000,000. These figures represent year-on-year increase of 10.6%, a decrease of 18.6%, and a 23.6% respectively, with net sales for the period hitting record highs.
Foreign currency exchange rates are estimated to have a year-on-year impact of - JPY 19.4 billion in net sales, and - JPY 8 billion 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% quarter-on-quarter to a total of JPY 226,897,000,000. Net sales hit the fourth quarter record highs. Operating income was up 79.5% year-on-year and down 45.6% quarter-on-quarter to a total of JPY 12,554,000,000. 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 a total of JPY 10,771,000,000. Operating income for this quarter includes special factors totaling about JPY 9.4 billion incurred due to impact of novel coronavirus and the cost related to M&A activities.
We estimate the foreign currency translations have a year-on-year impact of - JPY 2.8 billion in net sales, and - JPY 1.3 billion in operating income. Quarter-on-quarter impact was + JPY 1 billion in net sales and + JPY 0.3 billion 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 a line chart for the operating margin. The operating margin for the year ended March 2020 was 6%, down 2.1 percentage points year-on-year. Regarding the forecast for March 2021, we are currently investigating the effects of the global spread of the novel coronavirus and the lockdown in each country, et cetera, and it is difficult to make a reasonable calculation at this stage. We have forecasted sales and profits with a range.
Please note that the figures of the fiscal year ended March 2018 and before are based on JGAAP and are provided for your reference. The same applies hereinafter. Next slide, please. This is full quarter trend in net sales, operating income, and operating margin. The operating margin for the fourth quarter was 5.5%, up 1.7 percentage points year-on-year, and down 3.1 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 fourth quarter. Net sales were lower than previously forecasted in all business segments, due primarily to the impact of the coronavirus on orders and our production. The coronavirus pandemic also had an impact on our operating income in each segment.
The U-Shin business, however, recognized a certain amount of cost due to a step-up of inventory and fixed assets as part of a PPA. Next slide please. Let's take a look at the result by segment, starting with Machined Components business segment. On the left is a graph indicating yearly net sales trends, on the right is a bar chart showing yearly operating income trends, along with a line chart for operating margins. In the fiscal year March 2020, net sales were down 4% year-on-year to a total of JPY 180.9 billion. Sales of ball bearings decreased 3.4% year-on-year to JPY 117.1 billion. The monthly average bearing sales volume totaled 189 million units, which is a decrease of 3.6% year-on-year.
Looking at sales by application, we see that annual sales of ball bearings used in data centers declined year-on-year, but sales were clearly up in the third quarter and onward. On the other hand, 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 for the fiscal year. Sales of rod end and fasteners were up by 4.4% year-on-year to a total of JPY 39.3 billion. Sales of pivot assemblies decreased 17% year-on-year to a total of JPY 24.5 billion. While we were impacted by market factors such as the novel coronavirus, pivot assemblies steadily contributed to our bottom line as we held on to an 80%+ market share. Operating income for the fiscal year totaled JPY 39.9 billion, putting the operating margin at 22%.
We saw operating income decrease 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 for rod end and fasteners rose, while profits for ball bearings and pivot assemblies fell. For the fiscal year March 2021, we can see a clear uptrend in demand for ball bearings used in servers. The sales for commercial aircraft will be affected by customer production adjustments. 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 assemblies, we anticipate a decline in demand as the HDD market shrinks. Next slide, please. This slide shows a quarterly trend in the machine component segment.
The fourth quarter net sales decreased 1.7% quarter-on-quarter to a total of JPY 44.5 billion. Sales of ball bearings decreased 2.4% quarter-on-quarter to a total of JPY 28.7 billion. The number of ball bearings sold outside the group totaled 189 million units per month on average. The external sales volume reached 210 million units in March, thanks to growing demand for ball bearings used in fan motors after it temporarily dropped in February due to the novel coronavirus outbreak. Sales of rod end and fasteners totaling JPY 10.1 billion were up by 5.7% over the previous quarter. The coronavirus did not have a significant impact on our fourth quarter results, and operations servicing the aircraft industry, especially small and medium-sized aircraft, remained robust although the sales partly slowed down relating to 737 MAX.
Sales of pivot assemblies decreased 9.8% quarter-on-quarter to a total of JPY 5.6 billion, due partly to the impact of the novel coronavirus. Operating income for the quarter totaled JPY 9.4 billion, 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 percentage points. Looking at the results by product, we see the profits for rod end and fasteners rose, while profits for ball bearings and pivot assemblies fell due to the impact of the novel coronavirus. Next slide, please. Now let's look at the electronic devices and components segment. In the fiscal year ended March 2020, net sales were down 2% year-on-year to a total of JPY 379.4 billion. Looking at the results by products, we see that sales of motors decreased 4.2% year-on-year to reach JPY 180.2 billion. The decrease was primarily due to the slowdown in the automobile market.
Electronic devices sales were up by 2.4% year-on-year to hit JPY 162.4 billion, thanks to strong sales of models using LED backlights. Net sales of sensing devices totaled JPY 32.5 billion, decreasing 10.7% year-on-year. Operating income increased 3.7% year-on-year to reach JPY 17.6 billion, while the operating margin rose 0.2 percentage points to reach 4.6%. Looking at the results by product, we see that operating income was up for Electronic devices but down for sensing devices. In the fiscal year ending March 2021, even the motors are expected to be affected by a decline in demand for automobiles. Launches of new products, including those related to games, are expected to contribute to our earnings.
Quarterly trends in electronic device and component segment. Net sales decreased 20.1% quarter-on-quarter to JPY 89 billion. Looking at the results by product, we see that sales of motors decreased 7% quarter-on-quarter to reach JPY 42.7 billion. While sales of Electronic devices decreased 32.5% from the previous quarter to JPY 37.7 billion. This was because some shipments were delayed due to the COVID-19, 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 JPY 7.5 billion, decreasing 13.2% quarter-on-quarter. Operating income was JPY 2.7 billion. That put the operating margin at 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 MITSUMI business segment. Net sales decreased 5.2% year-on-year to JPY 292.2 billion in the fiscal year 2020. While we saw a sharp revenue increase for optical devices, sales of Machined Components decreased due to a change in the product mix of some OEM products. Operating income was JPY 18.7 billion, and the operating margin was 6.4%. These figures represent a 16.3% year-on-year decrease in operating income and a 0.8 percentage point decrease in the operating margin. Profits for optical devices and analog semiconductors grew, while other businesses saw profits decrease. In the fiscal year ending March 31st, 2021, we expect optical devices to buoy sales. The forecast includes ABLIC's forecast, which was merged with MinebeaMitsumi as of April 30th, beginning in May. Let's go to the next slide. This is MITSUMI business segment quarterly trends.
Net sales decreased 21.2% quarter-on-quarter to JPY 62.4 billion. While sales of optical devices increased, sales decreased for other products, primarily Machined Components, due to the novel coronavirus impact. Operating income totaled JPY 4.2 billion, while the operating margin was 6.7%. Operating income decreased 42.5%, 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 semiconductors but down for other products, mainly Machined Components. Next slide, please. Finally, let's take a look at the U-Shin business segment. Net sales decreased 15.8% compared to fiscal year ended December 31st, 2018, before the integration, to JPY 125.5 billion in March fiscal year 2020.
The factors for this decrease include the 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 2.6 billion, 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. Temporary expenses was about JPY 1.0 billion incurred in relation to the integration of U-Shin operations and the launch of new products. We expect sales and profits to decline in the fiscal year ending March 31st, 2021, as the outlook for the automobile market remains slow. Next slide, please. This is U-Shin's business segment quarterly trends.
Fourth quarter net sales decreased 1.9% quarter-on-quarter to a total of JPY 30.9 billion, as the business was hit hard by the restrictions imposed on operations due to the novel coronavirus pandemic as well as a slump in the automobile market. The segment recorded an operating loss of JPY 0.1 billion. Temporary expenses of about JPY 0.1 billion was incurred in relation to the launch of new products, et cetera. This was accounted for as a special factor in the fourth quarter. Let's go to the next slide. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph charts changes in the profit for the period per share. The profit for the period was JPY 46 billion. Earnings for the period per share was JPY 111.1. Let's go to the next slide. This slide is the quarterly trends.
The bar graph shows the profit attributable to the owners of the parent, and the line graph is the earnings per share. The profit for the period was JPY 10.8 billion. Earnings per share was JPY 26.3. Next slide, please. Next, this is the quarterly inventory trend. At the end of fourth quarter, inventory totaled JPY 169.8 billion, which is JPY 6.1 billion less than it was three months ago. Inventory of JPY 15 billion was included from the consolidation of U-Shin. Next slide, please. This graph contains a bar chart showing trends in net interest-bearing debt, which is total interest-bearing debt minus cash and cash equivalents, and a line chart indicating free cash flows. At the end of the fourth quarter, net interest-bearing debt was JPY 75.2 billion and was up by JPY 53.5 billion from the end of the previous fiscal year. Let's go to the next slide.
Regarding the forecast for the fiscal year ending March 2021, as I explained earlier, we are currently investigating the effects of the global spread of novel coronavirus and the lockdown in each country, et cetera, and it is difficult to make a reasonable calculation at this stage. We have forecasted sales and profits with the upper and lower ranges. The exchange rate assumption is JPY 107 to the U.S. dollar, both for the upper and lower range. Next slide, please. This slide shows the forecast by business segment. MITSUMI business segment includes the sales and operating income of ABLIC from May, which was merged with MinebeaMitsumi as of April 30th. This is all for my presentation.
Next, Mr. Kainuma, the floor is yours.
Good afternoon. This is Kainuma. I would like to talk about management policy and business strategy. Last year, I personally find it very regrettable. Since five years ago, we have been aiming at becoming a company with JPY 1 trillion, and I have been leading this organization. In December last year, at the year-end, I was reported by my subordinates that we would be able to reach JPY 1 trillion. Oftentimes, we may be shocked by surprises when things are going well. JPY 22 billion in shortage, and JPY 978 billion. We renewed the record high, but still it's short of JPY 1 trillion. Lots of things are written here, and I would like you to read it during your leisure time.
This time around, we maintained a dividend payout, and our dividend payout ratio is 20%, as I always say, which means that between 17.25% and 22.25%. This time, as an exception, because of this situation, 25% 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&A. 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 payment. Usually, in mid-July, the payment is made. In our case, we can make a resolution for dividend payout at the Board of Directors, so it doesn't take the approval at the AGM.
When we send out a notice of a convocation of AGM, we can make a decision to pay the dividend in June. Assumption for this year, it's rather difficult. I think you can imagine why and how this new pandemic will be suppressed. How the economy will recover and how fast it will recover will all depend upon how this pandemic will be suppressed. 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 the economy is likely to recover very quickly. If it lasts for a long time, and if it persists until winter time, then the economic recovery could be delayed. I have no idea how things will be. Saying I have no idea will not get us anywhere.
Like I did at the time of the Lehman 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. U-Shin, last year, compared with April of last year, the sales for this April, JPY 7 billion, which is a major decline. Minebea, former Minebea, last year was JPY 52.3 billion, and this year was JPY 53.8 billion. MITSUMI, JPY 15.3 billion, and this year, JPY 16.8 billion. MinebeaMitsumi, plus five companies, the five overseas companies, C&A and various other major companies, five of them, if they are included, JPY 51.2 billion last year, and this year is JPY 55.7 billion.
Former Minebea and former MITSUMI revenue remained virtually the same, except for U-Shin. Last year was JPY 12 billion, and this year it's JPY 5 billion. Last year and this year, the starting point was about the same. 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 guidance, this range of JPY 50 billion-JPY 60 billion, 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. Operating income, JPY 58.5 billion for last year, inclusive of all special factors like Forex. If I exclude all those factors, last year, the Thai baht or dollar baht foreign exchange rate, 32.84 was the assumption.
It turned out 30.96. We have 40,000 workers in Thailand, so THB 2 difference was a major obstacle for revenue. It came back to THB 83. We completed Forex hedging. The reversal of all those, plus stress applied. Machined Components, about JPY 10 billion. Electronic components, another JPY 10 billion. U-Shin, JPY 5 billion. MITSUMI is about the same. OIS will go up. Game consoles are doing quite well. JPY 25 billion stress has been applied. On the other hand, highly possible factors for profit increase, I will talk about this later on, like ABLIC +JPY 4 billion. At least JPY 4 billion plus. -JPY 25 billion, it will be JPY 60 billion. This is my personal projection, the midpoint of my personal projection. Once in 200 years pandemic. This is larger than Lehman crisis, according to some people.
As I said earlier, depending on how it's suppressed, the outcome could be different. JPY 10 billion range was set, so JPY 50 billion-JPY 60 billion. At the time of Lehman crisis, this company was rather small, so JPY 10 billion-JPY 14 billion was the range back then. I announced that number in Q1 and Q2. Regarding the range, we were not able to project, in Q3, JPY 12 billion, in other words, the midpoint. JPY 12.1 billion was the result, so it was in the middle of range. I don't know how things will turn out at this time, the company has grown four or five times bigger. As I said, those are the likely results, very close to JPY 60 billion. The guidance that I can give you here is very rough, I have to apologize about that.
This is the only way that we can show you the guidance. Nobody can predict what's going to happen by March next year. Nobody will be able to make a projection. Please forgive us to giving you this level of guidance. That said, some institutional investors have said that in this electronic component sector, so how is the ranking within this electronic component sector? Basically, this is to show how good we have been in the ranking for operating income. This institutional investor analyst compiled this. We basically confirmed and looked at the ranking in each year. I think we have been able to go up by one notch. This electronic component sector basically will be influenced by the global economic trend or the Forex. It is impacted by these external factors. This cannot be avoided.
Even in those cases, we have been steadily being able to, relatively speaking, improve our operating income. This slide is to show how we have been able to do that.
In terms of the novel coronavirus impact, as of mid-May, all of the factories are going to operate. Whether it be in Europe, from the 4th, their factories have started to operate. China, they are 100% in operation already. Gradually, the operating activity is going to recover. I always show you the three-year plan, but we do not know what's going to happen next year. To be frank, I cannot show you any guidance for the three-year plan. That is my frank feeling. This is an image that I'm showing you here. Please understand that this is an image. For the Machined Components. For bearings, ball bearings, I have nothing to worry about ball bearings. There are some ups and downs, but the demand for ball bearings is going to increase steadily, and our competitiveness is very solid.
However, our customers, if their operations are stopped, of course, they'll not be using ball bearings. If the customers do not go back 100% operation, it means that the ball bearing demand is going to go down. 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. People, whether it be overseas travel or domestic travel, there are a lot of countries that people are not moving. Whether these aircraft will be selling or not, I think that is a big question. This is a reference that I want to show you. Our U.S.-related various subsidiaries, the aircraft-related subsidiaries, if you look at the breakdown, about 25% is for the defense industry.
Currently, this defense business is not impacted at all. The 14% is medical related. For instance, some X-ray tubes for the X-ray. There's a lot of orders coming in, and as a trend, it's actually increasing its production for the commercial aircraft. That's about 60% of the overall business. Out of that, even if we assume a 40% decline, that's a 25%-30% impact coming from the commercial aircraft. Maybe it'll take about two years for recovery. That is what I am thinking. I think it's too early to say definitively what's going to happen, because there's a lot of drugs that are being developed. If you look at what's happening in China, and if you look at some countries, people want to go out. They want to go, travel, move around. That's what human beings want to do.
A lot of people are saying that the lifestyle is going to change, but as long as the safety is guaranteed, I think people will just resume to their previous lives, for lifestyle. I think we have to observe what's going to happen in this area. For the electronic device and components targets, I think basically people focus on LED backlights. The volume is going to go down. I always have said so, we have been preparing for that from before. The decline of LED backlights can be compensated by other businesses like ABLIC or OIS. From two years to last year, to last year to this year, the sales has gradually been growing. OIS is another factor. Games, because people are staying at home, games is very popular.
In various applications, various areas, various countries, we are producing our products. We are producing a variety of products. That means, as a result, we have been able to manage our risk. Even if one product's earnings capability declines, we can be able to offset that by other products. For the MITSUMI business, I think one point I want to make is that, after the integration of MITSUMI, I always talked about the core business and sub-core business. For the core business, we have the Eight Spears business. We have named this Eight Spears business as a core business. Within this, the analog semiconductors is the core business because the market is large and will not go away easily. Within the niche market, we can exert our strength and uniqueness. We want to make this our core business. For the MITSUMI business, games and mobile phones.
Within our business, this has a fluctuate 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. We wanted to create a core business here. The semiconductors was the first that came out. Afterwards, I will talk about this in more detail, but one of the topics I want to communicate is that MITSUMI has been able to come up with the core business. We have a very strong spear that has been created with the MITSUMI business. That is what I want to communicate at this point. For the U-Shin business, it's 100% automotive business. They are facing tough times, that's true. However, U-Shin, so it isn't a company that has invested a lot in CapEx, and there's a high level of depreciation.
I think even if it is loss-making, it will not be a huge loss. If we consider the size of a company, it's manageable. 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. Looking at KIS, we have to look into the integration activity with us. There will be semiconductors, there will be motors. Lock mechanisms and access mechanisms. We have to develop, we have to accelerating the speed of development. ABLIC. This is excluding power semiconductor with the two companies together, becoming the number three for the analog semiconductors. This is about approximately JPY 60 billion of sales will be coming out from this integration. Within the JPY 2.5 trillion concept, the analog semiconductor should have about JPY 100 billion of sales.
We already have JPY 60 billion, even after nine years or 10 years, I think we'll be able to exceed JPY 100 billion. In terms of profitability, it's very high. I think you'll be able to understand that as time goes by. As I've said, I think this can become the core business of MITSUMI. Next is in what kinds of areas are these analog semiconductors becoming effective? As you can see here, MITSUMI has five spears, so to speak, five areas to focus on in semiconductors, from one through five. Incidentally, ABLIC has five areas as well. 5 + 5 = 10, but one and two overlap, colored in purple. These one and two are overlapping areas, the batteries and power supply. Out of five core areas, these are the overlapping areas.
The ones in blue show MITSUMI's, and the ones in pink show ABLIC's businesses. The orange ones are the three new areas that former MinebeaMitsumi did not have, medical, magnetic sensor, and CLEAN-Boost. This is a registered trademark. Without a battery, the electricity is boosted. Without the batteries, the sensors, sensing information can be transmitted. We are involved in social infrastructure-related businesses, like the meters that measure precipitation, rain, snowfall, wind, so on and so forth. 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. Number seven, magnetic sensor, the vertical integration. Our Eight Spears, by combining, we can make even better things, like Hall elements. ABLIC has this wonderful technology, which is used in BLDC motors or encoder.
The rotation, encoder number of rotations and angle detection.
This integration with ABLIC provides Minebea with various benefits and advantages. ABLIC is located in Chiba Prefecture, and we are, of course, located in Mita, Tokyo. The semiconductor business is located in Atsugi and Chitose as well. We are rather a decent enevironment, 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, we can create wonderful products. In Eight Spears, 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 inch wafers as the main product, but people are having space problem, so we need to find a new site for factories in order to pursue this activity.
Analog semiconductors used to be the eighth spear, but now it's a full spear. This explains about our countermeasures for COVID-19. 90,000 people we have, but none of them have been infected yet. One in the U.S. and eight in Europe, unfortunately, infected recently. However, in Asia and all countries, in Asia, we have no infected people. That, I think, is because we have implemented very strong countermeasures in early stage. I have already mentioned about this already. Last year, JPY 100 billion of the financing has been made into long term in terms of our borrowing. This year, we only have to pay back JPY 3.5 billion of long-term borrowing. In terms of the cash position, we are in a very good cash position. Lastly, an early payment of our dividends and the payout ratio will be 25%.
That's all from me. Thank you very much for your attention.
Next, let's go to the Q&A session. Today's question we will be receiving from the institutional investors and analysts who have registered beforehand and are participating through the telephone conference system. If you have a question, please press the star and then one. If you want to cancel your question after you press one, please press two after the star. We will ask you in order. If your name is called, please ask your question, and one question at a time, please. The first question is coming from Goldman Sachs. Takayama-san, please.
Hello, can you hear me?
Yes. Yes, we hear you.
I have three questions. I will ask you one by one. The first two is about the overall plan, about the various assumptions. First of all, if possible, in the first quarter or the first half, in terms of the sales, overall sales and profit, what will be the waiting against the full year? Of course, the first quarter and second quarter will be tough. If you have some figures in mind, can you tell me that?
As you know, the aircraft business, we're going to see a decrease in production, and the automotive business is going to be very tough. If you consider those factors, the first half, especially for the first quarter, the situation is going to be very severe. That is our assumption. Between JPY 50 billion-JPY 60 billion, the full-year operating profit range. How, in each quarter, what will be the breakdown? Currently, we cannot disclose because we do not have sufficient information. Please forgive us to giving you this level of answer.
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. I think basically, between the top end and the low end, it's going to be a period waiting the first quarter. I thought that maybe in the short term, you'll be able to have more visibility.
Yes. The first half will be tougher. In the second half, I think we will be able to see a certain level of recovery. That is our assumption. The numbers has been compiled as such. 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 the assumption. For the full year, the top end, the low end range. If I look at the sales, the motor, MITSUMI, U-Shin, these three businesses, I think in terms of the fluctuation of the sales from the top end to the bottom end, it's large. 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. For each segment, for each product, I think there's a difference. Overall, we cannot give you any clear or precise numbers.
If that is the case, what is the process? What kind of process did you follow to reach these numbers? Mr. Kainuma has talked about this JPY 60 billion operating profit. We have this JPY 10 billion of stress, and then JPY 50 billion. Is that the starting point, or is this a kind of the sum of all parts in terms of the sales? You just sum up all the sales, and then you calculate the marginal profit and then come out with the operating profit?
This is kind of speaking, let me answer your question. I think it's twofold. One is that, of course, each of the business units, they submit numbers. Every time this happens, but sometimes they're very pessimistic and sometimes it's very optimistic. When these numbers are compiled, depending on the business environment, these outlooks will change.
The management will apply stress in some cases. In some cases, we'll say that it'll be better than that. Because we have to make a prediction for the one year, this is not a simple task. This process, we go through this process. Currently, maybe slightly over the JPY 50 billion is a kind of sum of all the figures that has been submitted. That's one aspect. On the other hand, if we reallocate all these numbers, because the businesses won't do this. If we apply all the special factors, and then if you just simply apply stress, for instance, this aircraft business. 25%-30% decline. It's going to decline by 25%-30%. The smartphone business, because we already have been given some indication of what the demand is going to be. It was quite strong.
We add these factors and we apply stress. Then we reach the numbers. JPY 50 billion is a kind of a sum, and then slightly over JPY 50 billion. Even with a kind of a top-down approach, JPY 60 billion is what we reach. That's the range of JPY 50 billion-JPY 60 billion. That's the type of guidance that we're showing you. This is a range that we are showing you. Within these numbers, so it's not just a process for the full year. It's just looking at this specific year. You have the bottom up and the top down, and then this is the range that you arrive at. Yes. Within this accord, depending on the past experience, for instance, April, basically not changed from the previous year, but you're seeing JPY 7 billion decline. That has been the starting point.
What type of improvement is going to be seen? For instance, Forex for us, the currency exchange rate is favorable for us. The JPY against the USD is stronger. However, THB has been quite weak. If you consider all these factors, from this starting point that we're seeing here, how much sales are we can increase? The operating profit, JPY 50 billion is one range and JPY 60 billion is another range. That will be the range that we'll be able to assume when we go through this practice. April, May, June will be bad, and then followed by that, July, August, and September will be slightly better than that, but not that good. That is the kind of assumption that we are taking.
From that decline from April, we don't know how the pace is, but you continue to go up from May to June, almost?
Yes. I think that's right, because April, Europe, there's basically no production being conducted in Europe and the United States for the civil aircraft, basically, no business at all. On the other hand, the backlights, we have business with the MinebeaMitsumi Group. Compared to last year, as a result, it's unchanged because there are always fluctuations among businesses. It's very difficult to make a clean prediction for the full year. That said. If you take all these fluctuations within, take into account, the risk will be mitigated. That is based on our experience. Based on this experience, that is the guidance that we came up with.
Understood. Lastly, this is about ball bearings. For the January to March sales and production, well, you have your results to the first quarter, to the second quarter of this fiscal year in terms of volume of the ball bearings. What would the volume be looking like? You always talked about how the utilization rate is very important, so you want to be aggressive in taking the volume. 2020, you're going to do that. Increasing the share or increasing the volume, including those activities, what type of production management or the operation management are you going to do? Can you tell us what you plan to do?
In terms of the volume, please let me report. In terms of ball bearings, external sales, January, JPY 188 million. February, JPY 227 million. March, JPY 210 million. JPY 217 million, similar to February. JPY 68 million, JPY 59 million, JPY 62 million, that is for the internal use.
Production, January, JPY 259 million. JPY 249 million for February. March, JPY 219 million for March. Up until March, we have been seeing a great increase in terms of production volume. Before the pre-COVID days, the external sales, we were assuming that external sales is going to recover. The production pace, we wanted to bring it up to JPY 200 million. March, that is the reason why we had a JPY 219 million of production in March. For this fiscal year's first quarter, as you know, it has been very slowed down in various areas. The production is going to be decelerating. JPY 230 million on average for the first quarter, on average per month. I think the average is going to go down to that level. For the external sales, JPY 180 million, JPY 190 million will be the level of external sales.
That is the outlook for the first quarter for external sales.
Understood.
That's the current status. To give you the outlook, the 5G related orders, there's a lot of orders coming from 5G. Medical, although the volume is small, for instance, with the artificial heart and lung devices or the blood testing devices, they use a lot of ball bearings, a lot of motors. These type of areas are good. If you look at the overall volume, these are very small. Automotive, specifically for the high-end automotives, automobiles, ball bearings are used. We have all been seeing, if the volume goes up and if the ball bearings for the automotive has started to go up. We have seen a slowdown in the automotive market. For the automotive market, we'll see a slowdown. That's unavoidable.
I said in the beginning, it depends on how this pandemic is contained. How is the automotive market going to look like? I think we'll be able to see. If you look at the current situation, that's the status. 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. China will restart the stores. South Korea, they will start the retail shops. There's a lot of revenge products that are being talked about. Japan, if it can control this pandemic by this summer, I think a different type of consumption is going to come up. I think if you look at the demand, I think basically production is in line with the demand.
Well, after the Lehman Brothers shock, I think you have been very proactive in increasing the capacity so that being able to recover quickly, increase the shares. I think that from last year, you were saying that you want to take market share and want to be proactive. 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 you have inventory. I think we'll be able to respond with the inventory. Rather than trying to produce something that will be wasted, we want to be focusing and logical in terms of production. 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 CapEx, how you plan to use money. Would you explain? Reading the supplementary information regarding investment, you are slashing. R&D expenditure is to be increased. 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, stress and sales products, there are various things. Initially, the amount was JPY 100 billion, but at this point in time, we have reduced the amount to JPY 35 billion. 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, then we will approve the applications for investment later on. That is the reason why we came up with this number. If I try to respond to your question, JPY 35 billion. 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 billion, this is a sum of application applied number. JPY 43 billion is probably the number Watanabe-san is looking at. There is a time lag. Some of the projects were approved last year and delayed until this year.
You are being very selective about the projects, being very prudent at this point in time. I understood that. Earlier, you said that new plant in Philippines, it is to be frozen for some time, but increase the production of actuators. Would you elaborate on that, please?
Actuators, as I said earlier, there is a huge growth potential, and we have high expectations for that. We maintain our stance. The reason why we froze this plant in Philippines, there are two reasons. One, in the current premise, we can handle the incremental production. That is what I heard from people working in the field. That is number one. Second reason is, making the product in Philippines is one option, but using clean room in Thailand may be more cost-effective. That is another point we considered.
At this point in time, we decided to suspend the project. If it is really necessary, using a clean room in Thailand, probably we will shift gears to that option, if I may share with you.
There's a 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. Page 21, this shows only the profit, but the sales, I think there are many products that will see increase in sales. If you can share with me some information about that.
The sales for each business line, I cannot share with you, unfortunately. New game-related motors business we got, and some of them are starting.
How many units and how much sales, such numbers I cannot share with you because of confidentiality.
Understood. Thank you very much.
Let me repeat. Please press the star one for your question. If you want to cancel, please press two after the star. Next question, please. From Mizuho Securities, Goto-san, please.
Hello, can you hear me?
Yes, we can hear you.
I have two questions. One is about the current situation. How is your portfolio being effective to counter the situation that you're facing right now? If you look at April, year-over-year, it's basically the same as of last year. For the ball bearings first quarter outlook, so JPY 180 million-JPY 190 million. I think basically this is the same level as a short time a while ago. The reason why you have been able to maintain this level, although the external condition is tough. Can you tell me which is going up and which area is going down?
Because we think that overall the situation is deteriorating, but how are you being able I want to understand how your portfolio is actually effective in coping with the situation. The other question is that in slide number 26, you talked about how to think about the guidance. JPY 81 billion, what is the meaning of this JPY 81 billion? Excluding all these special factors, how did you arrive to this JPY 81 billion? These are my two questions.
Then, let me explain about this JPY 81 billion. If you go to slide four. Special factors on lower left-hand side. Special factors, including COVID-19 impact. JPY 116.4 billion, JPY 14.6 billion year-over-year, JPY 8 billion. Basically if you include these factors, that will bring us to JPY 81 billion. Do you understand?
Sorry. JPY 14.6 billion plus JPY 8 billion plus JPY 58.6 billion. Yes, I understand what you're talking about.
By product, first quarter portfolio trend, what we're seeing for the first quarter. With the Machined Components, I think basically it's going to go down a lot. The reason is that with the commercial aircraft decline in production, it was not happening in the fourth quarter in last fiscal year. It's happening in first quarter of this fiscal year. I think this is a kind of a late cycle situation for the ball bearings. With fourth quarter production and sales was okay in the first quarter. It's going to have an adverse impact. The automotive and the aircraft impact for the first quarter is going to be seen for the Machined Components. This is kind of speaking. Comparing the April situation from last year to this year, I understood that was the question. Is that okay?
Yes. Yes. My question was about that. Of course, if you can talk about the first quarter direction, that would be good as well.
Let me answer your first question. Basically, in the former Minebea business, the Machined Components was down April, but the LED backlights offset that. That's the reason why the sales was the same as last year. For MITSUMI, last year's start was very bad because the game business, because they has produced a lot, they sold that. From February, they haven't seen a increase of the business. Maybe they over-made because maybe against the demand, they over-produced. April, the business was not that good. This fiscal year, from February, March in China, the game related business was frozen and the supply chain was disrupted. This was the situation.
They were bad for April this year and last year. That's the reason why it was the same. Maybe that's a good understanding. The one negative factor was U-Shin. They went down by JPY 7 billion. That's the April to April comparison.
Let me just talk about the first quarter outlook. The motor business, because the automotive business is slow, year-over-year, it's going to go down. The backlight business, electronic devices, it will be on the positive side. For MITSUMI, overall, we will be on the positive side, and we have the ABLIC two months' worth of contribution. Year-over-year, I think their production is going to increase in terms of the automotive, for U-Shin that is.
With Q1, the automotive production trend will be impacting our business, meaning that it will be impacted substantially by the situation. That's basically the assumption that we're using.
For the LED backlight, the positive for the MITSUMI, the reason why it's going to contribute on the positive side, or what is the reason?
For the LED backlights, the fourth quarter last fiscal year, there was a very strong demand on orders. We had a tight demand situation. Excuse me. We had production in Thailand, we were not impacted by China, but the customers were impacted by the coronavirus situation in China. We saw a slight slowdown. That's basically been pushed back to first quarter this fiscal year. The first quarter, we are assuming that the sales is going to be robust. That's about the backlights.
For MITSUMI?
For the Machined Components, the supply chain is somewhat decelerating. However, year-over-year, it's on the positive trend. That will be reflected on the sales. With Optical devices, again, the same trend. In ABLIC, two 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. Thank you.
Any other questions? If you have a question, please press asterisk and one. If you want to cancel your question, please press asterisk plus two. UBS Securities, Hirata-san.
This is Hirata from UBS Securities.
Please begin.
Yes, thank you for this opportunity. I have two questions. One, actuator business taken up by MITSUMI. For 2021, 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 a growth by increase in share or growth in China and installation rate? What is your views on that?
With regards to our share, I don't think we are in a appropriate position to comment on that. We should be able to maintain about the same level of share as last year.
Average selling price has been increasing as things have got more functionalities. The average selling price and unit price have been increasing in North America as well as in Chinese market. We are seeing more business opportunities. That is how we project about actuators.
Thank you very much. The other question is about the guidance. In MITSUMI business, you said that the ABLIC 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 are more than JPY 30 billion sales and more than JPY 4 billion profit. Those are the actuals from last year. We have been accumulating even more profit since then. JPY 30 billion or JPY 4 billion are to be exceeded, and in terms of the contribution.
Yes, that is right.
Let's go to the next question. Again, this is Mr. Goto from Mizuho Securities.
Can you hear me?
Yes, please go on.
Sorry, this is the second time for me. For the ball bearings, JPY 180 million to JPY 190 million first quarter outlook. What is the breakdown by application? Is there any change in the breakdown by application?
Middle of last year, I think it was about JPY 180 million. I think the fan motor applications was half compared to the past, and the automotive was basically holding its level. We went back to JPY 110 million, then it's gone down again.
What's the breakdown by application within this JPY 180 million to JPY 190 million ball bearings?
I think it's the completely reverse of last year. Automotive is going to go down substantially. That is the forecast for the first quarter. Fan motors, we are receiving very strong orders.
Currently, the business plan that we have compiled before the coronavirus situation, I think basically is even stronger than that for fan motors. The fan motors compared to the past peak, maybe more than 10 million, and automotive is basically half compared to the past. I think, is that the breakdown you're talking about?
Maybe not half automotive, but automotive.
I think tens of percentage points decline is the first quarter for the fan motors. The past peak, I think it's going to exceed the past peak. Some months will be exceeding the past peak for fan motors.
That because data centers or the 5G telecommunication infrastructure business is increasing. Is that the reason why?
Yes. That's our understanding.
If that is the case, in terms of the mix of the profitability, is this a positive?
I think basically we have to think which plant is going to operate, and how is the inventory level? We cannot give you a kind of a one fit all answer. With these conditions in mind, how are we going to operate efficiently? I think that's what we have to consider. Thank you.
Morgan Stanley, Mitsubishi UFG Securities, Sato-san.
This is Sato from Morgan Stanley. Thank you very much. I have two questions. One, MITSUMI optical related business seems to be very robust recently. By region, which region is stronger than the others? Additional values will be heightened starting with this year's model, so I heard. 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, JPY 180 million-JPY 190 million is the guidance. When do you think things will actually start to pick up in a full-fledged manner? When you say recently, do you mean first quarter? You think April to June will be also strong?
Well, April to June will be affected by seasonality. Compared with Q4, it will go down. Whereas Q2, it will increase once again. By region, North America. By seasonality in North America, the production will increase going forward, and the Chinese market has a different seasonality. Q1 and Q2, we may not see an increase.
May I speak about the actuator? 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.
Ball bearing recovery pattern, as Kainuma explained a while ago. It depends on the recovery scenario of COVID-19, 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? 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 another factor we need to consider, and to what extent demand will recover will be one of the questions. In terms of the production, Q2 is likely to be better. That is how we think at this point in time. I say thank you very much.
Izumi-san from SBI Securities, can you try to connect again?
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. Maybe if we don't have this coronavirus situation, I think people will want to drive their own cars more. I think that has been a kind of a talk. For your business, in terms of the future outlook for the automotive business, what is your outlook? Can you give me a hint? This is a very short-term question, but from your point of view, so the supply chain for the automobiles, 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, do you think that there will be a lot of time lag for you to actually feel the recovery of the production?
Well, basically, exactly as you have pointed out. What is going to 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. If things stay this way, maybe that will be true. However, to be frank, at this point, to make any prediction is very difficult. Our assumption is that, as I have said, this April to June, everything has stopped, but things have started to restart, meaning that this first quarter should be the bottom. From this bottom, what will be the recovery trajectory? I think that depends how this pandemic is contained or controlled.
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. Maybe 90,000 people, some are asymptomatic, maybe because they're taking countermeasures, or latent infected people. Maybe if they come out, and then if we get to understand this kind of situation, I think the production activity will recover. In terms of automotive components, U-Shin is the biggest portion. Tier 1 has a lot of inventory. I don't think that there will be a delay because they handle bigger components, and then they use the Kanban method. We don't think that there's going to be a lot of inventory. There is some things that we have produced too much and it's piling up.
For instance, the driving angle sensors for the automobiles, we maybe made too much of these. Maybe things are different product by product. Within the mainstream products of our automotive components, I don't think that there are many major issues.
The time has come to end the meeting, and therefore, we would like to close the Q&A as well as this analyst meeting. Thank you once again for joining us.