I'm Yoshida. Today, I'd like to explain the consolidated financial results for the third quarter of the fiscal year ending March 31, 2020. Mr. Kainuma, Representative Director, CEO, and COO, will explain the highlights, including business updates. Consolidated net sales for the third quarter of the fiscal year ending March 31, 2020, was up 7.2% year-on-year and down 4.2% quarter-on-quarter to a total JPY 267,650 million. Net sales hit the third quarter record highs. Operating Income was down 25.9% year-on-year and up 19% quarter-on-quarter to a total JPY 23,058 million. The results for the third quarter of the fiscal year ended March 2019 include a one-time profit gain due to changes in the personnel system of the extended retirement age, as well as other special factors, which all added up to a gain of approximately JPY 5 billion.
If this amount were not to be accounted for, the year-on-year decrease in operating income would be 11.7%. Profit for the period attributable to owners of a parent was down 21.5% year-on-year and up 36.5% quarter-on-quarter to a total JPY 18,991 million. Currency fluctuations brought net sales up an estimated JPY 2 billion quarter-on-quarter and down JPY 10 billion year-on-year. It also brought operating income up JPY 0.3 billion quarter-on-quarter and down JPY 3.5 billion year-on-year. Moving on to the next slide. This is the quarterly 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 third quarter was down 3.9 percentage point year-on-year, but up 1.7 percentage point quarter-on-quarter to reach 8.6%. Expenses including business integration cost of U-Shin, totaling approximately JPY 0.5 billion, are accounted for as special factors in the third quarter. Otherwise, the operating margin would be 8.8% if these expenses were excluded. Please note that figures of the fiscal year ended March 2018 are based on JGAAP and are provided for your reference so that you can look at past figures. The same applies hereafter. Moving on to the next slide. Here shows the difference between the forecast as of November and actual results for net sales and operating income by business segment for the third quarter. Net sales for the mechanical components business segment was almost on par with the forecast.
Sales for the electronic devices and components business segment were higher than forecasted, thanks to steady sales of electronic devices. Overall sales for the MITSUMI business were below the forecast due to shipment delays for some optical device products. Although shipments of mechanical components were higher than projected. The U-Shin business saw lower than expected sales due to a significant slowdown in production as a result of a slump in automobile market, especially in China. While the mechanical components business segment saw the external shipment volume for ball bearings bounce back, the Operating income fell shy of a forecast since we shipped inventory that incurred higher manufacturing costs first. The electronic devices and components business enjoyed higher than expected Operating income as a result of increased sales. Operating income for the MITSUMI business was higher than projected, mainly for mechanical components and analog semiconductors.
U-Shin saw higher than forecasted operating income as a result of improved profitability of its automotive business. Moving on to the next slide. Here shows the difference between the actual results for the third quarter of fiscal year ending March 2019 and actual for the third quarter of this fiscal year for net sales and operating income by business. The results are as shown in this slide. Operating income for the MITSUMI business was roughly flat in reality since its operating income for the third quarter fiscal year ending March 2019 include a one-time profit gain as a result of changes in the personnel system of extended retirement age, as well as other special factors, which all added up to a gain of approximately JPY 5 billion. Next slide, please. Let's take a look at the results by segment, starting with mechanical components business segment.
On the left is a graph indicating quarterly net sales trend, and on the right is a graph with a bar chart showing quarterly operating income trends, along with a line chart for operating margins. Net sales for the third quarter increased 0.2% from the previous quarter to a total of JPY 45.2 billion. Ball bearing sales increased 1% quarter-on-quarter to a total of JPY 29.4 billion. External shipment volume of ball bearings totaled 202 million units per month on average. These figures are the result of continuing steady demand from the automobile industry, greater year-on-year demand for ball bearings used in fan motors, and growing demand for bearings for air conditioners. Sales of rod-ends and fasteners totaling JPY 9.5 billion were down 0.8% over the previous quarter. Business for the aircraft industry, especially small and medium-sized aircraft, remained steady.
Sales of pivot assemblies decreased 1.6% quarter-on-quarter to reach JPY 6.3 billion. While we were impacted by the weakness of the entire HDD market, our ability to maintain 80% share of that market has provided stable earnings. Operating income for the quarter totaled JPY 9.6 billion, and Operating Margin was 21.2%. While this represents a 1.4 percentage point decrease in Operating Margin, Operating income declined 6.1%. Looking at the results by product, also the external shipment volume of ball bearings was up. Profit declined quarter-on-quarter, since we shipped inventories that incurred higher manufacturing costs first, after seeing the total sales volume, including internal sales, exceeded the production volume. Moving on to the next page.
Next, let's look at the Electronic Devices and Components segment. Net sales increased 10.1% quarter-on-quarter to reach JPY 111.5 billion by product. Sales of motors were about the same as last quarter, at JPY 46 billion. Electronic devices sales increased 20.5% quarter-on-quarter to total JPY 55.9 billion. This was because LED backlight sales, which had been booming since the second quarter, remained solid in the third quarter. Sales of sensing devices increased 4.8% to total JPY 8.6 billion. This was due to general sales to a handful of customers. The segment recorded an operating income of JPY 8.8 billion and an Operating Margin of 7.9%. Looking at the results by product, operating income was mainly driven by electronic devices. Moving on to the next slide. Let's look at the performance for the MITSUMI business segment.
Net sales were down 21.5% quarter-on-quarter to hit JPY 79.2 billion. While the sales of optical devices, analog semiconductors, and automotive parts increased, the sales for other products, primarily mechanical components, decreased. Profit rose quarter-on-quarter, mainly for optical devices and analog semiconductors, with operating income totaling JPY 7.3 billion, and the Operating Margin reached 9.2%. Operating income was down 2.4% quarter-on-quarter, while Operating Margin was up by 2.1 percentage points for the same period. Next slide, please. Finally, let's look at the U-Shin and business segment. Net sales decreased 1.8% from the previous quarter to total JPY 31.5 billion. This was due to a significant production decline as a result of a slowdown in the automotive markets in China, Europe, and elsewhere.
There was approximately JPY 300 million of one-time expenses in third quarter related to special factors such as business integration expenses and ramp-up expenses for new products. One-time expenses for full year is expected to be approximately JPY 1 billion. Operating Income for the quarter grew 2.3 times higher than the previous quarter to total JPY 1.2 billion. Operating Margin increased 2.2 percentage point to 3.8%. Next slide, please. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph charts changes in the profit for the period per share. The profit for the period was JPY 19 billion. Earnings per share was JPY 45.8. Moving on to the next slide. Next, we have the quarterly inventory trend. At the end of the third quarter, inventories totaled JPY 175.9 billion, which is JPY 5.5 billion less than what it was three months ago.
JPY 16.2 billion of U-Shin inventory was included because of the consolidation. Next slide, please. This chart contains a bar graph showing trends in net interest-bearing debt, which is total interest-bearing debt minus cash and cash equivalents, and the line graph indicating free cash flows. At the end of the third quarter, net interest-bearing debt totaling JPY 82.9 billion was up JPY 61.2 billion from the end of March 2019. Next slide, please. This is a summary of the forecast for the fiscal year ending March 31st, 2020. Although profit for the first three quarters exceeded the expectations, the picture of global economy, including the impact of the new coronavirus and the fluctuating exchange rates, is becoming increasingly unclear. As it is not possible to predict the impact of these factors on our business performance at present, we have decided to keep our full-year business forecast unchanged.
We will keep a close eye on developments and will make an announcement if there are any major changes in our business forecast. The exchange rate assumption is JPY 108 to USD 1. Next slide, please. This slide shows the forecast by business segment. We did make minor changes to performance forecasts by business segment, given our current status. This is all for my presentation. Thank you for listening.
Thank you. This is Kainuma speaking. I'd like to present my part. First, please look at page 15 of the slide, which are today's highlights. Overall, the impact of U.S.-China trade friction hit us. This is a fact. In terms of risk diversification, our portfolio is diversified in a well-balanced manner, which is supporting our bottom line, as you can see from the present situation. This announcement with regards to the new coronavirus is not included. This impact is not included in this announcement. When we are making this presentation, the situation was worsening, as you all know. Operations started from the 10th, but the supply chain might be impacted in some way or another. In 2011, there was a flood in Thailand. The scale is entirely different from the present situation, but that also greatly impacted our supply chain.
Now, final products, we cannot imagine any final products without any components from China. We believe there will be some impact. We are considering catching up from March. As soon as the situation gets more clear, we'd like to inform you. We ask for your understanding. As for mechanical components, ball bearings, external shipment volumes, as I mentioned before, is showing a clearly recovery trend. External shipment strategy for the next term is already being made. 210 million units per month on a monthly basis. External shipment is scheduled. In the company, we are looking at a higher level. As of today, 210 million units is a figure. One lesson that we have now is that to manufacture volumes, we reduce manufacturing cost per unit.
In the next term, considering the current situation, we would consider more aggressive pricing policy and secure the maximum possible volume. For electronic devices and components at MITSUMI, in the fourth quarter, more than we have assumed, frankly speaking, we have impression that the situation is better. I would like to repeat that the current situation in China is something that we will keep watching to overcome the fourth quarter. For U-Shin, the same might be in other companies. As you might all be familiar with, the automobile market is slowing down greatly. More than we had expected, we cannot avoid having quite poor results. What we have to do is very clear. To improve our performance, we will keep doing what we have to do. If time changes, we are sure we will be able to turn around.
For the share buyback, this was started from last December. One topics now is that book value per share achieved the highest ever. next page. External ball bearing shipment volume, as you can see, it is clear. As I have mentioned, next fiscal year, the plan will be very aggressive. Recovery of revenue is something that we are sure we will be able to achieve. The next page also shows the same. 210 million units, as I have mentioned. We hope we can add more on top of this. After the previous presentation of financial results, we announced the stock purchase of ABLIC. I'd like to explain about it. page 18. Development Bank of Japan Inc. holds 70% and Seiko Instruments Inc. 30%. Those are the major shareholders of ABLIC, and we are going to acquire 100%. This agreement was reached.
Now already, with relevant countries, with the authorities related to anti-monopoly, we have submitted our application. Results of the last three years is shown on this slide. Next is page 19. Page 19 shows what kinds of synergies are expected because of this integration. I would like you to read it during your leisure time. Moving on to page 20, Eight Spears strategy includes analog semiconductors. Based on the 10-year plan, of which we announced last year, nine years from now, we would like to grow our semiconductor business to JPY 100 billion. That is what we said. When this becomes a success, we will be able to make a company with JPY 56 billion sales.
In the next nine years, both organic and inorganic approaches will be taken, we shall be able to achieve JPY 100 billion, JPY 100 billion. Eight Spears of the strategy, analog semiconductor business will be able to form the basis for this. Page 21, a s you are aware, the smartphone is having many lenses, the new technologies will be introduced. In order to cope with a strong demand at Cebu plant, what we call the building number 12, which is a camera actuator factory, right next to it, we are to build a new factory. The backlight, we can no longer expect a big volume like we used to do, sub-core business, camera actuator, backlight. Camera actuator and backlights volumes are declining, such a decline can be offset to some extent. We would like to solidify our positioning in this area.
Page 22, t his is the outline of share buybacks. We will continue to buy back our shares for some time. This is the end of my brief presentation. Thank you for listening.
The first question, from Goldman Sachs, Mr. Takayama, please.
Thank you very much. I have two questions. Thank you. First is about ball bearings, that the inventories with higher cost were sold first. In the interim results last year, I think you should have known that. That is surfacing on accounting basis now, I find it strange. What was it that you have not seen? For next year, towards April, June, if utilization goes up, that seems to be good. Operating Margin, as you have mentioned previously, might get higher compared to the past. Is there such a potential higher Operating Margin from April to June?
Yes, this is Yoshida speaking. About the mechanical components Operating Profit, JPY 9.6 billion. Compared to previous quarter, it is worse. The reason for that, before talking about ball bearings, the aircraft business, which is included in the ball bearing segment, and this is also included in the rod-end sector, as we have been explaining so far. In the second quarter on quarter, there's quite a large drop in income, because 737 MAX. This is a partial reason, but in the third quarter, including Christmas, the days of operations in case of aircraft, though since most of it is manufactured in Europe and the U.S., there is a decline. That is one factor for the decline. For external shipments for ball bearings, the average on second quarter is JPY 185 million, and now is JPY 202 million, so there is an increase.
The increase in sales, the profit was not as much as we had assumed. In the first, second, and the third quarter, recovery of the market was slower than what we had expected. Production volume in the first quarter, JPY 225 million. In the second quarter, JPY 244 million. In the third quarter, JPY 259 million. It is much less than what we had assumed. That raised the inventory level, and as a result, profit was not as much as we had expected. What is different from our assumptions? Declining capacity utilization. For that portion, we thought we would be able to increase production, but in the third quarter, we're not able to do so.
That is the major factor. As for the future production, well, external shipment will increase and HDD market is not that good, but considering that we have external shipment, we plan to have this production level. The turnover of inventory is a few months. If we can overcome that situation from the next fiscal year, we believe profitability will return. There is a slight drop in profit, but in the third quarter, during this period, there was a decline in income, which we believe we soon will be able to recover.
In addition to that, when you are busy, distribution cost and production improvement might be too tight. When you have some room, you may try to increase Operating Margin as a manufacturer. With shortage of production, I believe that had an impact. The pace of increased production in the second half, from April to June quarter, manufacturing and the cost-benefit relationship, that may influence. For next fiscal year, April to June, will that be a moderate increase compared to the fourth quarter? What curve do you assume? How will production level be increased?
When we are manufacturing 300 million, production cost, by having appropriate inventory, for example, compared to that, we could be more efficient. We believe the level is lower. At a relatively early stage, increase in income over income level of the previous year, I believe, will be recovered. At the moment, we want to examine more of the situation.
Let me make some additions. This is Kainuma speaking. Basically, external shipment and internal shipment, both is the total of bearings sales. In the past, we had a capacity JPY 300 million, but we raised as a formality to JPY 315 million. What I mean is that there are machines, but it's not that everything is being utilized in full, because total of internal and external shipments has not reached JPY 300 million. What have I mentioned, in the fiscal year, external shipments on a single month might be JPY 220 million. A certain volume, the monthly volume of bearings, at the minimum, we want to recover to JPY 300 million. The remaining is what we want to keep in case something happens. Internal production is declining, and pivots has happened compared to the past. The total volume, compared to the best situation, the total volume is low.
This is another reason.
As you have mentioned, including the price, profit margin will rise by increasing volume, right?
Yes.
Total volume of bearings, adding internal and external shipments per month, the sales volume per month should be raised, and by doing so, we want to increase production volume. This is what we are trying to do.
Thank you. With regards to MITSUMI business, the full year has been raised, and Q4 is to maintain the same level of profit and revenue. The game console did well, but camera actuator, there may be a time lag in Q3 and Q4. There seems to be an upside for both revenue and profit. Could you elaborate on that point, please?
First of all, Q3, regarding game console, as you are aware, the sales are booming, as you might have heard in the market. Accordingly, we saw a better result than expectation. Optical devices.
The things that were planned in Q3 were pushed back to Q4, not because of our plan, but because of the supply chain, whether the parts and components are sufficient or not, or that type of issues. I don't know if that is true, but some will be pushed back to Q4. Regarding Q4, coronavirus problem, how it's going to evolve is unknown, but excluding that, there will be new models for our Chinese smartphones, and we will be able to supply our products. Therefore, Q4, we should be able to achieve a certain level of revenue. MITSUMI business JPY 205 and JPY 65 is the profit for full year, which seems to be pretty good for Q4 game consoles, although there is a seasonality in North America. Is it because of China? I cannot disclose the information about each individual customer, but particularly product mix.
The models with new functionality are being launched and that impacted. Understood. Thank you very much.
Please push asterisk one for your question, and if you want to cancel, push asterisk and number two. The next question. Morgan Stanley, MUFG Securities. Sato-san, please.
Thank you. This is Sato speaking. I have three questions. My first question is about the volume. In the third quarter, external shipments of about 202 million. What is the monthly external-internal shipments and production from October in terms of millions?
JPY 195, JPY 206 external sales and internal sales JPY 65, JPY 67, JPY 65.
65, 67, 65. How about production?
Production, JPY 254, JPY 260 and JPY 263.
The last one is 263. Thank you.
January, March quarter, do you expect an increase, including external and internal shipments and production?
Yes, I'll repeat. On assumption that there is no coronavirus impact, for external shipment, JPY 205 million and internal shipment, JPY 67 million, and production JPY 271 million. March, nearly JPY 300 million.
My second question, for LED backlight or electronic devices, Q3 was very strong. In Q4, what's the situation after Q4?
In the briefing at the second quarter, you provided us with an explanation, compared to that, the forecast for the next fiscal year, have there been any changes? First, Q3 electronic devices was so and so, Q4, there was start of new models and production of conventional models were doing well. A certain level of utilization is still going on the profit accompanying this situation in the Q4, we'll be able to secure certain level of profit. For the next fiscal year, it is difficult to say, as I have been saying so far, LCDs will not be gone.
What is the background for the volumes?
There are many forecasts available in the market. If you consider that, we can see that we have a certain level of business opportunities.
Early November, compared to the situation early November and the current moment, the forecast for the next fiscal year, has there been any changes?
It's very difficult to say about the next fiscal year, but at the moment, we believe there will be no major changes.
Thank you very much. ABLIC lastly. In your presentation material, it was introduced about ABLIC. Could you explain the semiconductor business of MITSUMI, what kind of technological affinity will there be and what is the supplementary relationship between the two? Could you explain that briefly?
This is Kainuma speaking. Page 19, please look at page 19. For automobiles, for industrial machinery, for medical sector. These are markets that they are strong at. In our case, as we have been saying, with IGBT coming on and digital-to-analog converters, we want to expand sales in these areas. Analog semiconductors, comprehensive power, that is just like a trading firm, we will be able to have this kind of comprehensive ability. The BCP is becoming such a problem now. Our post-process is Philippines, their case is Akita, so there will be two locations. The pre-process is Chitose, Hokkaido and Chiba. There will be two separate locations. There will be 250 engineers for analog semiconductor, which is an area that Japan is strong at.
This is a niche market, so this will not be gone, but it's a very niche market which we want to secure.
Thank you very much. Engineers, you said 250 people. In total, 250 for both together? How many for each?
In our case, we have 100 people, as we have always been saying.
Thank you very much.
Thank you. Let us move on to the next question from Nomura Securities, Mr. Akizuki. Mr. Akizuki, please ask your question.
Thank you for this opportunity. This is Akizuki from Nomura Securities. I would like to ask you about the bearings business. By calculating in a dollar-denominated way, the unit price seems to be declining Q on Q. On the other hand, in the first half, when adjustments were made, the unit price was rather high. After the inventory adjustment, the ones that have a rather low unit price are recovering. Due to such a product mix, maybe the result is not growing as much as the expectation. How do you analyze this situation, if you can share with us that? Another thing about the bearing, pivot volume, could you give me the pivot volume numbers? The internal shipment number seems to be high, 66 million internal shipment. I am wondering, you may be trying to build up inventory for internal shipment. That is my first question.
First of all, the average unit price or selling price of bearing. The bearing information that we disclose includes aircraft bearing, IC, New Hampshire Ball Bearings, and et cetera are included. As I said previously, the sales of that portion is declining. Production volume and the revenue, if you calculate using those numbers, it may seem that unit price is falling very significantly. Actually, unit price is not falling that dramatically. The fan motor is the one reason previously, but it's recovering. Unit price of a fan motor is rather low. Having said that, however, it's not pushing back overall unit price.
Aircraft, the bearing of the special aircraft that is included in the number is the factor behind this decline. Turning to pivot, Q2 or Q3, production and sales were JPY 20 million each. Q4, JPY 19 million each. In other words, JPY 1 million lower. Compared with the market trend, you may think this number is low. With regards to pivot, comparatively, we are trying to level off the production and the market, as you may know. We think that we understand the market, the situation to some extent, and therefore, we are trying to manage the appropriate inventory level, meaning that it's not excess. It's JPY 40 million for pivot, and JPY 60 million is the internal shipment, and therefore, the remaining internal shipment for other than pivot is JPY 26 million. This year, motors are not doing well. This relation between internal shipment and the pivot.
That was what I wanted to ask.
With regards to that, motors. Overall, motors are not growing that much, as you can see in these numbers. However, the rate of the motors that use ball bearings are increasing gradually. The automotive market is struggling, however, we are capturing new opportunities, and the rate of the motors that use ball bearings is increasing gradually.
Thank you. Just one more question, if I may. Backlights. If I do the calculation, decline in Q4 may be very low, looking at the segment. Having said that, the models that are selling, they are selling, but they are expected to go down, and the reason why the revenue stays at the high level, and also towards the next year, the backlight for LCD, there is such a model, and the mainstream high-end. Should I take it as a mainstream high-end, or is it a legacy model? If I may ask such a question, to the extent possible, please respond.
First of all, the digital devices, the Q3 JPY 518, and JPY 453 is the Q4 number. JPY 453 may be too high, you may be implying, but the new models, so to speak, LCD model, or last year's LCD model, order placement progressed well, and truly new models are starting. That is the reason why we came up with this number. In January, there wasn't much impact of coronavirus, and things have progressed quite smoothly. Towards next year, the total LCD model, how we should think about the total volume of LCD models. The new models, as people are saying, if it's entirely OLED, LCD models will remain in one form or another.
Several tens of thousands of units, we will still have business opportunities, and instead of several tens of millions. That is how we think about this. The mainstream high-end models may be added on top of that, I expect it, but you don't know for sure at this point in time. I cannot comment on that at this point.
Okay. Thank you.
The next question, please.
From UBS Securities, Mr. Hirata. Hirata from UBS.
Thank you. I have two questions. My first question, as we heard previously about MITSUMI business, Q4's profit. Sales was from JPY 79.2 billion- JPY 70.2 billion. From the third to the fourth quarter at MITSUMI, what is the situation of actuators as a whole? What is the situation of mechanical components?
As you know, mechanical components are going down. Compared to the full year, mechanical components are areas that we can have a good production, but our assumption is there will be a decline in this quarter. For North American business, there will be more business opportunities. The mix also, business with higher average unit price is available, so it's possible to expect certain profit.
Do you believe opticals will slightly decline?
For opticals, we expect increase in income.
In North America?
It's not so, but there will be a general increase. I cannot refer to the contents. Chinese smartphones will increase, relatively speaking.
Another question. In the last part of presentation material, you talked about the new factory for camera actuators. Could you explain the details about it? How much capacity will increase with this? What is the investment amount? What is the destination? Who are the customers? Could you explain a little more of the details? The investment size.
I cannot mention the specific numbers, as you can see in this presentation, 15,000 sq m is the size of a factory. As an actuator factory, this is not small. We will build this building, and we want to operate this one. In general, we can say that the investment is not that small.
This is Kainuma speaking. Let me add. As you can see, it is exactly the same size. Building number 12, as I mentioned before, this is for North America. On the other hand, if it is the same thing we are manufacturing now, we can double the production, but there will be different lines. The size is larger, so in terms of unit volume, it's not that level. That is what we assume in general. As for the investment amount, basically, we want to gradually introduce facilities into this factory. Ultimately, it would be around JPY 10 billion. That is the general image. At first, we have to make a clean room, and we must make this facility. The building itself will be about JPY 3 billion. That is the general image.
As for the destinations, the ultimate customers, region would be North America?
Yes.
You want to aggressively increase the share. Is that the objective?
I already mentioned that in November.
Thank you very much. Another question. The impact of the coronavirus. At the moment, what is the situation in China operations?
China, as you know, you might be familiar with the situation. From Monday to Friday, I will be the head of the operations trying to collect information. Until the 9th, manufacturing industry was shut down, excluding some regions, and other regions have a longer shutdown. Until the 9th, manufacturing was stopped.
After the 9th, how many employees can commute? Also, there is a supply chain, and the customers are also under holidays or the Chinese New Year.
China, in general, is still under their New Year's holiday. In general, they are not yet operating. I think we will be able to identify the general situation by sometime after mid-next week. However, informally, we are talking with many customers that they want to catch up by March as much as possible. Including that, we will take all the possible measures that we can take.
Thank you very much.