Earnings Call: Q4 2019

May 8, 2019

We would like to begin the session. And thank you very much for coming to Minnie Bea, Umitumi, another session for financial results for the year ended in March 2019. Despite your busy schedule, First of all, I would like to introduce to you the participants for today. CEO and COO, Yoshihisa Kainuma. And management Managing Executive Officer, Katariko Yoshida. And my name is Yajiro. I am a member of the public relations and IR. And I will serve as the moderator for this session. First of all Yoshira will explain about the financial results and then Kaanuma will talk about management policy and business strategy. We will have Q1 A after that. And we are planning to end this session at 7 o'clock. For more details of the balance sheet, please refer to financial data and financial flash report. Of press releases are made today. The a notice regarding difference between non consolidated earnings of fiscal year and those for our previous fiscal year as well as notice regarding repurchase of our own shares. And the notice of personnel changes have been distributed to you. And also you should find a questionnaire survey form and if it will provide us with a valuable feedback for our future IR activities. So please fill out the form and leave it on top of the desk. And this session is livecast on Internet and for the website viewing, it's also recorded. I hope to have your kind of understanding and please refrain from taking photos and the sound recording this session unless you are the member of the company. Mr. Yoshida, the floor is yours. This is Yoshida. I would like to explain the consolidated financial results for fiscal year ended March 31, 2019. Consolidated sales for the fiscal year ended March 2019, a total of 1,000,000,000 while the operating income reach 1,000,000,000 and profit for the period attributable to the owners of the parent hit 1,142,000,000, these figures represent year on year increase of 0.4%, 4.5% and 19.5%, respectively, with net sales operating income as follows profit for the period hitting record highs. FX rates are estimated to have a year on year impact of -1000000000. Sales and minus 1,000,000,000 operating income. Next slide please. In the fourth quarter of fiscal year, we recorded net sales of 1,000,000,000, JPY 785,000,000,000 operating income of JPY 60994,000,000 and profit the period of JPY 9,109,000,000 net sales that decreased 17.2% operating income increased 8.4% profit for the period rose 5 falls year on year respectively as well as net sales decreased 25.6% operating income decreased 77.5 percent profit for the period decreased 62.3 percent quarter on quarter. Respectively. Operating income for the current quarter includes restructuring related expenses of About 1,000,000,000. We estimate that the foreign currency translations have year on year impact of my 1,000,000,000 in net sales and plus billion in operating income quarter on quarter impact was minus 1,000,000,000 in net sales and minus 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 right one is operating income along with the line chart for the operating margin. The operating margin for the year ended March 2019 was 8.1% down 0.9 percentage points year on year. Now please note that the figures on of the fiscal year and the March 2018 and before are based on JCAP and are provided for your reference so that you can look at the past figures, the same applies here in NAFTA. Next slide please. This is for quarterly trend in net sales, operating income and operating margin. The operating margin for the 4th quarter was 3 point 8%. 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. While net sales for the machine component segment were almost on a par with the forecast. Sales for the electronic device and component segment our lower than forecast are mainly due to order decrease in electronic devices. The Mitsumi business sales for lower than projection, mainly due to decline the shipments of smartphone related parts. Operating income for the machine components was high slightly below forecast due to inventory adjustments in the ball bearing market, the electronic devices and the Components segment underachieved along with sales decrease and the Mitsumi business segment was about the same as projected. Profitful Other Business segment and adjustment combined were slightly better than expected. Next slide please. Here shows the difference between the initial forecast as of May 2018 and actual results for net sales and operating income by business segment for the fiscal 2019. While net sales in the first quarter were almost as expected It went below the forecast at the end of the 3rd quarter and stayed that way. In the 4th quarter, sales were lower than projected due to changes in the external circumstances. Operating income remained roughly in line with the forecast until the third quarter but could not reach the forecast in the 4th quarter along with sales decrease. Next slide please. Now let's take a look at results by segment. Starting with Machine Components segment, on the left is the graph indicating yearly net sales trends and on the right is the graph is a bar chart showing yearly operating income trends along with the line chart for operating margins, net sales increased 7% year on year to reach a record high or high JPY 188,300,000,000 in the fiscal year. Sales of a forbearance increased 15% to 1,000,000,000. This increase was due to an average monthly sales of volume increased to 196,000,000 units 3% over the previous fiscal year in addition to approximately 1,000,000,000 increase in sales from CNA as well as continued strong demand in a wide range of markets, particularly automobiles. Sales of broadband fasteners increased to 18% to hit 1,000,000,000 pivot assemblies declined 6% to reach 1,000,000,000, our market share has remained about 80% keeping earnings stable. Operating income reached a record high of JPY 47,800,000,000 in the fiscal year And our operating income margin was 25.4 percent. This represents a 12% increase in operating income and 1.2 a percentage point increase in the operating margin. By product, operating income increased for both bearings and rod end fasteners but decreased slightly for pivot assemblies. In the fiscal year ending March 2020, we anticipate increasing profit that thanks to sales increase in bearings for aircraft applications, our product mix, the improvement due to the fact that the products sold in the market where the sales volume is declining are relatively low price and cost reduction with optimizing operation including over time worked by fund in line with some production adjustments for ball bearings. Also, we expect increasing both sales and profits for rodent fasteners and decreases in revenues and profits for pivot assemblies due to the contraction of the ATD market. Beginning the fiscal year ended March 2019 CNA has been included in bearings and mark error has been included in ROE and Fasa's next slide please. This slide shows security trends in the Machine Components segment Fourth Quarter revenues decreased 4% from the previous quarter to hit 1,000,000,000. Sales support bearing decreased 3% to reach 1,000,000,000. The number of ball bearings are sold outside the group totaled 178,000,000 units on average per month. Net sales of broadband fasteners totaled JPY 10,100,000,000, a 8% increase quarter on quarter pivot assembly sales declined 21 percent to total 1,000,000,000. Operating income totaled 1,000,000,000 and the OP margin was 23.5 percent operating income declined 17 percent to 3.6 percentage points in operating margin quarter on quarter. By product, the road ends fasteners saw a quarter on quarter increasing profits by ball bearings and pivot assemblies experienced a decline in profits. Next slide please. Now let's look at Electronic Devices And Components segments. Net sales for the fiscal year were 1000000000, a decrease of 14% from the previous fiscal year by product sales of motors increased at 2% to reach 1,000,000,000 mainly for automobiles electronic devices, sales were down 30% from the previous fiscal year at 1,000,000,000. This decline was due to a decrease in sales resulting from a drop in paid components and the lower sales volume of LCD and the products for major customers. Sales of sensing devices increased 2% to total 1,000,000,000. Operating income was 1,000,000,000 and the operating margin was 4.4% operating income declined 46% and the operating margin fell 2.5 percentage points. By product, the profit was almost unchanged for motors and dropped sharply for electronic devices, but were higher for sensing devices. For the fiscal year, end of March 2020, the motor sales and profits are expected to increase along this growing demand mainly in the automotive sector. In the electronic devices, we anticipate an increase in sales due to the Transco battery module business from Mitsumi business segment and an increase in profits are due to improved LED backlight productivity. In sensing devices, we expect a lighter a slight increase in net sales and the improvement in profit margins. This is the quarterly trends in Electronic Device And Components segment. Net sales decreased 18 quarter on quarter to reaching 1000000000. By product, motor sales decreased 5% quarter on quarter to 1000000000. Electronic devices were down 30% at 1000000000. This decrease was primarily due to a significant decline in shipments of new LED backlights to our major customers. Sensing device sales decreased 14 percent to 1000000000. Operating income totaled 1,000,000,000 and operating income margin was 0.5%. Operating income declined 96% and the operating margin fell 3.7 percentage points compared to the previous quarter. By product, profits declined in motors and system devices and significantly in electronic devices as well. Next slide please. Finally, let's look at the performance for the Mitsumi business segment. Net sales increased 23 percent year on year to total 1,000,000,000 in fiscal year March 2019. If it weren't for the increase in sales that came with the change in a customer contract, sales would have fallen 6%. Operating income was 1,000,000,000 and the operating margin was 7.2%. Although operating income improved by 1000000000 year over year, approximately plus 1,000,000,000 of extra ordinary expenses and losses were booked in the 3rd quarter. This includes profits of point 7,000,000,000 due to personal system reforms, including the extension of the mandatory retirement age, one of expenses from operating losses due to the Hokkaido earthquake, as well as expenses related to the disposal of some In terms of net sales for the fiscal year ending March 2020, sales are expected to decline mainly due to a conservative outlook and shipment of some OEM products in addition to the transfer of battery module businesses to the electronic devices and components segment. Operating income is expected to increase due to an increase in shipments of actuators for cameras. This is the Mitsubishi business segment quarterly trend. Net sales decreased 47 percent quarter on quarter to total 1,000,000,000. This drop was mainly due to the seasonal downturn in demand for game machines and camera actuators. The segment recorded an operating loss of 1,000,000,000. The bar graph here shows trends in the 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 hit a record high 1,000,000,000. Profit for the period per share was 1000000. Next slide please. This is the quarterly trends. The profit for the period decreased 62% quarter on quarter to total billion. Also as mentioned previously, the profit for this period includes approximately 1000000000 of restructuring cost. Earnings per share was Please go to the next slide. Next, we have the quarterly inventory trend. At the end of the 4th quarter, inventories totaled 1,000,000,000 which is 1,000,000,000 less than it was 3 months ago. Although bearing inventory increased to obtain a reasonable level, inventory amount decreased in total. Let's go to the next slide. This graph contains a bar chart showing trends in net interest bearing debt, which is a total interest bearing debt minus cash and cash equivalents. And a line chart indicating free cash flows. At the end of the 4th quarter, net interest bearing debt totaling billion was down 1,000,000,000 from the end of the previous fiscal year. In fiscal year ending March 2020, net interest bearing debt is expected to increase due to the payment for TOB of Uxin and consolidation of Uxin. Next slide please. This is a summary of the forecast for the fiscal year ending March 2020. Net sales operating income and profit for the period are all expected to reach record highs in the current fiscal year. As a result of growth in the automotive and aircraft businesses as well as the integration of Yixin, we expect overall sales to increase operating income should exceed 1,000,000,000,000. Operating income forecasts are highly uncertain due to extreme fluctuations in the foreign exchange market the smartphone market, we expect the total to expect the total to increase to JPY 77,000,000,000 due to the aforementioned growth in the automotive and aircraft business in addition to improved profitability, mainly cobalt bearings. The forecast for electronic devices and components that you're seeing are on the conservative side. The exchange rate is assumed to be JPY 110,000,000. Next slide, please. This slide shows the forecast by each business segment. Next slide, please. Now let's turn to our shareholder return policies. As we explained at the second quarter financial results briefing last November, we increased our dividend to per share in the square ending March 2019. The total return ratio, including the share buyback program, implemented last year, was approximately 37%. Next slide please. This chart shows ROIC trends by segment figures on the left are on an annual basis and those on the right are on a quarterly basis. Despite quarterly seasonal fluctuation since the companies of Rolls Royce remain in the double digits on the annual base and was 12.4% for the fiscal year ending March 2019. By segment, Machine Components had a stable ROIC reaching 31.1% Likewise, Electronic Devices And Components maintained a steady double digit annual ROIC while the Mitsumi business segment also improved significantly since the business integration. Please note that these figures of using our pre merger results and based on day gap and the annual figures are calendar year basis. This concludes my presentation. Next, Mr. Khanuma, the floor is yours. I would like to talk about management policy and business strategy. It's been 10 years since I assumed the Office of the President And fortunately, I have been able to enjoy rather steady business. And We have provided a lot of materials today. In addition to the last fiscal year's performance, I would also like to talk about how we want to be in the next 10 years as I only have limited amount time, I would like to focus on the important things. First of all, the summary of the last fiscal year operating profits of 1,000,000,000, I secretly thought that we will be able to achieve this number this time last year that is what I thought. And after this December, the performance was more or less in line with the forecast. But in Q4, the huge production decrease really hit us hard, but on a monthly basis, Some months had a very good profit that that will bring us to JPY 100,000,000,000, but in Q4, we were faced with such problems as U. S.-China trade war in addition to various other factors. So we didn't see as much momentum as we thought. So coupled with other factors in Q4, we so a more decline in profit than we expected initially. So how long this is likely to continue. I don't know, but I will talk about that no more later but probably this summer things will start picking up. And the highlights of the plan for this year As you heard, 1,000,000,000 operating profit and the revenue is likely to exceed 1,000,000,000,000, but why operating profit will be only 1,000,000,000 or 1,000,000,000 there are various factors in April new law was enacted in Thailand and a shortage of pension. Fund a billion had to be recognized. Actually billion is what we anticipated. What this means is So billion, but because of various factors, probably the realistic performance would be 1,000,000,000. So that was a starting point and the 1,000,000,000 from Uxin and machined components, the ball bearings units will decrease, but due to various measures, the profits will increase, but electronic components the motors and backlights, mainly motors and backlights, electronica devices, we'll see a growth. Amitumi Mitsumi very conservatively we scrutinized the business and 1,000,000,000 operating profit is announced as a forecast. 1,000,000,000 Unless we see a huge improvement and recovery, 1,000,000,000 may not be possible this fiscal year, but the next fiscal year, we would like to achieve this goal and probably by that time, U. S. China trade war would have been resolved and ADAS 5G big data. Various new technologies will be driving the growth So the JPY 1,000,000,000 revenue, we are sure to exceed that number in the next fiscal year and operating profit in March 2021, we shall be able to achieved a goal. Machine components, the increased profit. Is anticipated. What is going down is low endbearings So, the product mix due to the improvement in product mix, average unit price is increasing And we are reducing over time and changing shift. And we will be fully operating inexpensive plant while will not fully operate expensive plant and aircraft is business is doing good and the billion increase in a profit is anticipated from machine components segment. Electronic devices, motors electrified and Satya trend is not to be soft and backlight, the yield is very good from the beginning of this year and compared with the previous fiscal year, we will have increasing profit. And in Chinese market, smartphone, pop up camera actuators, booming and planting Cambodia is being very busy. Pushing up revenue and profit. Mitsumi Business There may be various rumors, but the game will remain similar to what we saw this year. In other words, the peak out, but OIS compared with the previous year, We are definitely going to see improvement using African profits 1,000,000,000 is the forecast. And at this point in time, no major decrease in revenue. And various synergies and immediate synergy like logistics and materials taken into account that those synergies I think there is at least 1,000,000,000 upside, but this time, we forecast 1,000,000,000. That is the plan. Please look at this. Uxin with regards to Uxin, I have spoken about many times. So I don't want to go into details, but we are focusing on PMI and Uxin yesterday or the day before yesterday moved into the upper floors of our company. And Japan and Europe, I will visit Europe early next month in PMI is succeeding quite significantly at this point in time. And the revenue and because it's automotive by business, we cannot expect an increase in all of a sudden takes time. Having said that, however, productivity and synergy, We would like to capitalize on to the extent possible. And next year Well previously, I said 3 years later, but next year, we can aim at achieving 1,000,000,000. So this I would like you to look at during your leisure time and Smighthouse. Likewise, please look at the later and please read it. Later. And the biggest message for today is Mina Bea Mitsumi is moving on to the new stage. That is a message. We have no intention to slow down growth I will come back to this point later on, but when I joined the company the revenue was 1,000,000,000 and the debts amounted to 1,000,000,000, but now it's 1,000,000,000,000 a company and the months of a failure alone, we have no debts, no borrowings. And going forward, we will see additional cash flow generate it. I will give you more details later on, but But going forward, we will continue to generate good performance. And of course, I would like to announce about our proactive shareholders return afterwards. So dividends, this about the 20 percent of payout ratio will be the target. We decide this based on the business environment every year. Apparently this is not determined yet. In terms of the share buybacks, we announced that So for this action, so I am talking about a proactive shareholder return policy that we'll elaborate later on. So this is one of the items and we took a resolution on this. We have decided on the framework, but in terms of this, amount is has a 1 year window and actually buy buyback will be conducted during the year at the optimal timing. Currently using inventory this inventory issues we're using and the 3rd party committee is conducting some investigations about that and the squeeze out period because of this is undecided. It won't take much longer, but as long as the issue is impending because this relates to the insider information, and the lawyer has advised us that at least we cannot conduct share buybacks during this investigation is ongoing. Within this year at the optimal timing, we would like to conduct the share buybacks. So this I went through this very quickly but this is this fiscal year's topics and our status quo. And specifically what I want to send a message to you is the slides that are going to touch upon this slide. So the next the last decade and next decade for the what in the next decade what we will be we have a new Emperor in Japan and the imperial era has changed from hesitate to lay So they were the 10th year of the they were era for us. Including the summary that for the past 10 years, I would like to talk about the 10 year vision for us. So this go through this open profit. Are we targeting this level? And this is a track record of our past 10 years this is what we are showing. And what I want to stress in this slide So if well, this well, Usim is fully consolidated, but if we are assumed that we have been able to achieve 1,000,000,000 when I became a president, well, 2003,000,000,000 was a revenue It means that 1,000,000,000 as revenue or sales has increased out of which we have conducted 17 M and As. So the sales coming from these M and As is about 1,000,000,000. So this means that organic growth would be so 1,000,000,000 became 1,000,000,000. So it's about 2.1 times of organic growth. And for the remaining 1,000,000,000 was conducted through M And A. I think that that will be the picture. So one thing I want to brag about, is in this slide, this 1,000,000,000 M and A, the cash that we have spent for this is about 1,000,000,000. So the goodwill on the gross is 1,000,000,000. So they have some negative goodwill, is included So in total, it's a negative of JPY 3,000,000,000. So the negative goodwill is JPY 0 point 1,000,000,000. So with that, we have been able to achieve a 1,000,000,000 of revenue. I think this has been a very good achievement So million of tax losses have come with this. And I think this is something that I can be proud about. If you look at the breakdown of organic grant breakdown or organic growth machine components 1,000,000,000 motor about 1,000,000,000, electric devices, about 1,000,000,000. So this is a breakdown for organic sales growth. Then looking to the next 10 years. So the data that we have in hand, these are the data that we can rely on. What I'm focusing most on is the last line the population income exceeding $35,000 in emerging countries of what we call as a wealthy people. So this is going to increase from 300,000,000 people to 600,000,000 people. I have always been saying that if the income level increases, people want higher products. To be produced high end products, you need high end components, meaning that there'll be more opportunities for us in business. I have been saying that from the past. As you can see in this chart, so the sales of 1,000,000,000,000 in terms of the even if we achieve a organic growth of plus 1,000,000,000,000,000,000,000,000,000,000,000, So it's not actually not far from the reality. So for instance, the following 10 years, India is going to grow and Africa in 10 years, this will become a good market. So for the Japanese component manufacturers, there are ample opportunities and the peak of those opportunities will be coming in the following 10 years. So the ElectroMechanic Solutions, since I have since I became the president, I made this a trademark. So I want to be a company that come out with only one product. So we want to combine all the technologies. I think I have been able to lay down the foundation for this. So going forward, I want to its curve to go up explanationally. This will not be a linear check track. So if we look at the past 10 years sales, once it's the 1st 4 years, the sales hasn't changed, the 1,000,000,000 of sales was achieved in the latter 6 years or the 10 years. And currently, we are preparing and a lot to achieve this growth. And I don't think that this will go up very diagonically like 4 to 5 degrees for this couple of years. Maybe it will be at a plateau, this will be a kind of a very clean curve. But in any case, if you look at the following 10 years, I think we'll be able to grow to a good level. And in terms of the strategy, this is before strategies that I think I can talk about. So we used to have 7 spheres. Are we going to change it to 8 spheres because you've seen is one of our consolidation. So the access products as this will be one of our spares. As I said, this experience or the previous 7 years, the market is huge and it won't go away easily. And in this niche market, we can leverage our strength. For instance, the ultra precise processing technologies. So another point is integration. So we can leverage our integrated strength and we want to focus on those areas. And we will launch new products, for instance, the technology drivers, there are a lot in the pipeline. So we will be launching new products appropriately in line with this roadmap. And medical infrastructure home equipment where we are weak, we will be proactively going into this market. And of course, we'll be aggressive in M and A's In the following 10 years, what I think will be the biggest challenge for us will be the personal development. So because the company is growing very rapidly and the current management has become older, it means that how are we going to nurture the next generation and hand over Arbaton to the next generation? So at the simultaneously with the growth of the company, this is a challenge that I have to address. So for M and A, I think we have been able to lay down the foundation for achieving 1,000,000,000,000. So I think we have been able to have a good focus in the with the era changing dramatically there will be a lot of companies that will just fall behind and left behind. So it means that we will be a vehicle to receive these companies and leverage our integrated capability, I think a lot of these opportunities will show up in the following 10 years. So if you look at number 4, aggressive M and A, I think I want to focus in this area as well. So if you put all this into thought, in the next decade, our sales maybe can reach about 1,000,000. Look at the past 10 years, we have conducted 1,000,000,000 of M and A. So we have a foundation of 1,000,000,000,000. Of course, 5500 to 1,000,000,000 M and A under the backdrop achieving this M and A, I don't think this is an outrageous idea And in terms of organic growth, I said that 1,000,000,000 has become 1,000,000,000 based on that precedent I think maybe 1.8x and below 2x, I think we can have to do 1.8x. The breakdown is machine components 1,000,000,000, more to 1,000,000,000 mainly experienced for the new products, 1,000,000,000. And this is what we hope to achieve in the next 10 years. Machine components, the bearings and aircraft that will not suffice, we need a nuclear in machine components of business, we must find new pillars. And regarding motors, we already have a roadmap in place. So 1,000,000,000 is not that difficult to achieve What is most challenging is the remaining 6 peers and others to generate 1,000,000,000 and OP, a margin of 10%, a shall be the target. Aircraft 10 years from now in total, JPY 100,000,000,000 sales is likely so hard on sensing can also aim at 1,000,000,000 revenue. This is something that I already shared Aviso with regards to our growth strategy. So 8 hours or 8 spares we have added the access products, Shades and Yellow and access products have affinity with all other spheres and they are differentiated from other company's products. So the next ten years in the market, please read through during your leisure time and all these information I'm sure you are already familiar with. So I would like to dispense this Lindsay explanation regarding these. So the core and sub core to give you some image, this is the image for 10 years from now. So the biggest message I want to convey to you today is Mina Bea Mitsumi wants to become a new company different from how it was cash and EBITDA 1,000,000,000 EBITDA, a company that can generate 100,000,000,000 EBITDA. So when I joined the company, the company had the JPY 400,000,000,000 debt and we were sort of traumatized But the question is how wisely we can use this much a cash flow in order to grow. And this chart I wanted to show to you today So we have 1,000,000,000 and half of the generated EBITDA should be spent to ensure future growth in other words CapEx remaining 1,000,000,000. So 50% nearly 50% return, we are thinking about as for the shareholder return and share buyback maybe one the measures or increasing dividend is another thing we are contemplating. And what we have done in the past certain years In other words, invest in very effective M and A. As you may have noticed, 1,000,000,000,000 when we reach 1,000,000,000 or 1,000,000,000 that we may have 1,000,000,000 of debt. Instead of accumulating the capitals excessively with no debts, we would like to keep providing return to the shareholder as we grow. That is the biggest message I want to share with you today. So that is what is depicted by these 2 pie charts. For the interest of time, I talked very quickly and if you have any questions, I'll be happy to answer. And this is the end of my explanation. Next, we'd like to go to a Q And A session. So the questions will be limited the institutional investors and analysts. Please state your company name and your own name before you ask a question. We will bring you a microphone So if you have a question please raise your hand. So at the very front row, please. Thank you. Takay Kumar from Goldman Sachs. So at first, So the 1,000,000,000 pension shortfall, this was unexpected, you said, So in terms of the segment, is it in the others or is it under adjustment? So this year's 1,000,000,000 expense you're talking about. So 1,000,000,000 plus is backlight. Besides that, is in Mitsami. Understood. And the second question for me is that I want to ask the President. So this is a page 30 in your slide, I assume. So you talked about the H Spears. In a couple of years overall, you have said that I won't be growing, but in the Mitsubishi business, I think in this recent three years, the experience results will be showing up. So for 'twenty two, booking in 'twenty two, 'twenty two, so the jump up of the Mitsubishi business What is the breakdown? So it's not OIS or games as a conventional business. There are some new areas that will bring up this performance. So I would like to go into more detail, know more in detail about the mid to mid business. So first, I would like to talk about explain about the numbers first. So the assumption is that the OEM including the game, this is the OEM products, these are the conventional main business, the customer for this fiscal year, we think they'll be strong this year and we'll just follow the customer says it's difficult to comment on this, but we have not assumed that it's going to grow at this pace going forward. In terms of OES related business, so the Chinese smartphones, in terms of they want a lot of added value on the lens. So we think the business at a certain level will continue at a certain level. For the at the 3rd year, the numbers jumping up relating to your question about that point, So new products that we have not introduced, the sales will start to be generated and they'll start contributing to our profit. That would be the breakdown. So not only these 3 years, but within mid to May, what was most promising is analog semiconductors. This is very they have a very good technology surrounding this area So currently, they are clarifying this tragedy and they are expecting where to focus on And so the profit coming out of the semiconductor business or the sales coming out of the semiconductor business, I'm looking forward to what's going to happen in this area. So IGBT and what's personally what I think I'm most excited about is the analogdigital converter So for all the SNC devices, well, basically, it comes in analogue because of those with the 5G, it's a very high speed. You understand that. But the first sensing portion, this is analog, you have to convert that to digital signals. If that speed is slow, however fast 5G is, it's meaningless. So we want to focus on those areas. So we I call the sales products, so we announced about this product 21, So this stealth project, we have these type of projects because for the customers agreement, we can't disclose about these, including these type of products, Midumi will be growing based on these type of products. So if you look at these numbers, it seems to be quite aggressive for 1,000,000,000 to 1,000,000,000. It's going to operating profit. It's going to go up sales. It's going to go up by little under 1,000,000,000. Is that gains or OIS? These are new products like analytics and conductors. The growth is mainly coming from these products. And As in T CMU products, what segment this is going to be included? It's not decided because we have in our MINABA, the former MINABA products or the machine component, electronic components and devices and the Midstream business or with Yuching, we are going to have some household related products. So So this is not a very accurate number, but this is roughly speaking, this is what we think we'll be able to achieve. And lastly, so you said that you are anticipating recovery starting from this summer, So I know it's very difficult to proceed the situation, but what is the reason why you think the recoveries will start from this summer? I think you have various applications and a lot of products and I think you have a good exposure to the customer's movement. So as I said in the very beginning, a lot of in the 4th quarter, the previous year's 4th quarter, a lot of things happened at the same time. And of course, the mobile phones and games and in terms of seasonality, the 1st quarter was a slow season. But by recovering from summer, I think that's natural a kind of a natural trend. So that's a kind of an underlying situation. At the same time, the current US China trade friction, the slowdown that we're experiencing, maybe the inventory has piled up, but this will go down So for instance, if there are some unprecedented items, for instance, the percent term talk of addressing the tariff 25% and this continuing. So if that type of thing happens, it means that from a different perspective, this will have a negative impact on the economy. But based on assumption that those things will not happen, I think recovery will happen. And we talked about hard disks. I have dinner with the president of a hard disk drive company the lead time will have a lead time for heartice drives this high months to 6 months. So maybe that is basically why the inhibitor has piled up, but this will gradually go down. So that is the reason why at the end of summer, we anticipate that recovery will happen, but said, I'm not god, so I can't say specifically whether this will happen or not, but our plan is based on these assumptions. So are there any applications or products that may have on the fast recovery? Or do you think everything across the board that will recover in a similar manner. As I always say, it may not be backed by solid the ground, but based upon my experience, bearings are the first ones to recover. But sometimes I hear that the bearings are maybe the last ones to recover and bearings were the last to drop this time. So probably, we should focus our efforts on bearings. Understood. Thank you. Any other questions? So the person in the front row. Sato from Morgan Stanley, thank you for your presentation. I have three questions. The first one is operating profit. 77,000,000,000 dollars, $27,000,000,000 in the first half and $50,000,000,000 in the second half. So What is the reason why profit increases significantly from first half to a second half? And what are the likely split? 1st, volatility volatility in Smartphone And Game Consult business, the Q1 Our anticipation is that the Q1 will be very slow. That is one thing, but that whereas Q2 because new models are to be launched and the customers' inventories shall build up And Q3 and Q4, with regards to those products, The result shall be within the expectation. Another change is as Akanuma touched upon slightly, hard disks and overall inventory, particularly for above bearings in Q1 and Q2, to some extent, our forecast are at a low level, but the Q3 and Q4, those inventories shall be consumed and the ball bearings, consumption may increase due to the electrification of automobiles. So the ball bearings, we will be selling more than our expectations on data center related the inventories that will be consumed and therefore various other products and components that will be shipped So based upon such a scenario, this type of balance between 1st and second halves, seem realistic. What about the Q4? What is your anticipation for Q4? Q4 numbers? Basically, based upon the forecast provided by our customers and the market trend is also taken into consideration. Visavisq3andq4 the Q4 will go down. My second question is about bullbearings. In fiscal 2018, 121,2000000000 and it's going to increase 1,000,000,000 in 20.19. So the parent company, a new Hampshire, ball bearing, if 2 entities are separated What kinds of changes is Mina Bea going through in 2018 through 2019? So original Minne Bear ball bearings, so to speak, on year on year, it'll increase slightly. And the 1st and second halves due to inventory and so forth, the the numbers are, as I stated before. And as Kainuma explained, It includes ball bearings for aircrafts. And those ball bearings will grow And at the outset or at the entrance and the video about the aircraft, ball bearing is shown, and that is the business that is growing. Ball Bearings the medium term growth rate, what is the medium term growth rate you anticipate? On page 53, In the next 10 years CAGR of 8% based upon that, the premise the overall numbers were estimated, a keyword is Automobile data center, high end home appliance and labor saving and automation. And bull bearing as a stable product for industries will grow. So that is the same as overall trend. So the volume grows by 8% per year. What would be the increase in value. It's rather difficult for us to give you numbers, but automobile unit price, it's very expensive. And high end home appliance, high precision bearings, we have high market share and that is the overall trend. So the average unit price will increase But of course, we must negotiate with our customers. And therefore, I cannot share with you exact numbers I see. Thank you. So my third question is about the Mitsumi business. In fiscal 2018, 1,000,000,000 was the operating profit, which included the 1,000,000,000, the special factors. So what was the reason for decline the profit? And I think you assume that the declined profit trend will continue in this year, March 2020. So 1,000,000,000 in Q3, billion. The retirement benefit system review and the earthquake related expenses So in net net, all those factors, added up to 1,000,000,000. And in Q2, there was impact of earthquake amounted to 1,000,000,000 in full year 1,000,000,000. So those that number comes from special factor. Based upon that premise, 1,000,000,000 And the difference is 1,000,000,000 and 1,000,000,000 this year So how realistic this number is, I guess that is your question. And if I may respond, the customers situation, And because of the customers, it's rather difficult for us to share with you specific a situation of each product. So specific customers, For specific customers, we have a conservative estimation And therefore, this year, the number will be lower than last year. But on the other hand, OIS inclusive of Chinese smartphones, we will have more business opportunities. So So the conservative estimation for a certain customer plus increase in OIS in net JPY 15,000,000,000, we came up with as a conservative estimation. So for March 2019, the profits going to go corporate went down. That is because of the decline in specific customer, the camera actuator has gone down as well. Is that a correct understanding? So for the smartphone related products towards the end of the year, it has declined And for the smartphone and data components, not only for OIS, including redo other components as well, maybe profit declined in those smartphone components. So if that is the case, So there's more specific customers and there's smartphone related and Camacho is if we exclude those products, towards 2018 to 2019 was basically flat. And from 20 20 hours is going to jump up dramatically. Is that assumption that you're taking? As Kainema has explained, this 7 spear Metomy based products, including semiconductors, it will start to contribute in terms of the profit. That's once aspect and new products, new business, we call it self projects. These products will come out as specific real projects into the 2nd and third year. Thank you. Next person, we'd like to take the question for next person. Let's go Thank you, Watan Ro from SMBC Securities. So the synergy of the Usim, when I want to confirm when the synergy is going to be achieved. So I looked at the display products, they use motors, And they have a lot of gearboxes using Extrusion, manufacturing. So of course, if there's internal production industry that you have expected a lot of cost synergy. And of course, with the timing that you get the customer's approval, that's another point. If you look at the 3 year plan, I do not think that you are reflecting a lot of synergy coming from Yixin. Is it correct to say that Yixin will not contribute that much in the following 3 years. Well, the automotive customers, it's exactly what you have said. 2023, up until 2023, they have already locked in their vendor sourcing. So changing motors and then selling these internally made components, selling that to the automobile customers will be very difficult but going beyond 2023 for the new models that will come out. So this kind of comprehensive products or integrated products we'll be selling that to the automotive customers. So you're correct in that sense, but synergy will not be limited in the automotive sector. Instance, how are we going to categorize those sales? Will it be at Mitsame, will it be at are using, I think there's a completely different argument. But for the non automotive areas in terms of synergy, well, to be frank, there will be the hasshole areas. That will be appearing. We want to achieve that in the second half of this year. So we are focused on accelerating those achievements. And the second question is that the ball bearing what will be the timing for the next capacity increase? So 8% CAGR growth in terms of volume, maybe the if the Peapod is going to go down, I think, even so, you have to increase the capacity at a early timing. So in the next mid range management plan timing, you have to select where the next plan is going to be. So what is your idea surrounding this? So currently, we are facing the situation. So I we are not thinking immediately building a new plant. And I think I have talked about this in previous meetings, So we have already prepared the machines and we have abundant and appropriate capacity already And I think the next question is how the recovery is going to happen. So on average, this is what it's going to look like. This is what we're saying. But in practicality, maybe the curve will be looking a different way. So we will be closely analyzing the market and make a decision based on our market analysis. So conversely within the 12 month window, I think basically you'll be able to operate within the current capacity. Yes, I understand. The third question is about the smartphone products you have actuator and you have pop up cameras included So as the market has started to mature, so it's a subcore business for you, but within with this industry maturing, how are you going to maintain profitability because you'll be receiving more downward pressure on the pricing? As you all know, We have not imagined this to happen, but there's a lot of trends that are coming. And I think our strength is that we can actually follow all these trends, for instance, I talked about the pop up cameras, the capture is used for that. So the Chinese smartphone makers, basically most of them are utilizing that. If you say even if you say smartphones, you say that everything is going to get these new technologies. Another point is it's 5G related development is happening. A lot of developments happening related to 5G. So I think the next question is how this is going to be used, how the market is going to be created, and with what speed is it's going to be disseminating. So you have to look at the market. So there will be a lot of new trends that will be coming up and we will be supplying our products to that market. I think that's quite we can consider that. So we have a very close relationship with the smartphone makers. We have a lot of stealth products. So we are not assuming that the sub core markets are going to disappear completely, but I cannot say things right now clearly. So it's very difficult to give you some figures or give you some visibility But the opposite things may happen, maybe even if we start selling the products, they won't so as we have anticipated, we had that experience in past. So including those type of background, I think for smartphones, I think we can continue to focus on the market and expect growth in the market. So the person in the 3rd row? Microphone is not on. Thank you for your presentation. This is Ereta from UBS Securities. I have three questions. The first question is in page 29 of the slide in the electronic devices, 158 to 161,000,000,000 The increase is anticipated and that is partly attributable to the transfer from Mitesumi and the impact from Blackwhite and the market share and the customers, what is your anticipation and March 2021, I think the alternative technologies will be pretty much adaptive So what is your expectation for profit and revenue? So what you are interested is the current smartphone backlight expectation. And this year, we will handle all the new models and all all the models, we would like to secure some market share, some market share in business. And beyond that timeframe, the backlight will not cease to exist based upon that assumption, volume how volume is to change. We don't know, but we do not expect the volume to be big. Then the sales decrease, is it only this much? That is probably your next question. The battery module product from Mitumi this year it will be transferred from Mitumi to Munibella and the starting amount, there will be JPY 10,000,000,000 and that will be growing And as I have been explaining, Sallio, things like Sallio, another new product sales towards March 20202022 the numbers shall grow in order to achieve these numbers. Electronic devices Profit, although revenue will go down, but you think that you can insure profits? Yes, because we don't think backlights will cease to exist, but in this midterm plan, we took a conservative view and thanks to products other than backflights, we should be able to achieve these numbers. And the motors motors will of course grow in order to grow profit on top of that, what I have just explained that will be added. My second question is ball bearings, inventory adjustment you touched upon and an application, I would like to know more and automotive, probably unit prices, high investory adjustment is not conducted to a large extent. So what kind of phase are your customers are in terms of inventory adjustment and related factors? First of all, automotive. Automotive market as a whole How is it like? But our automotive bubble bearings external sales went down. The total volume went down towards Q4 but automotive ball bearings were flattish and that trend should remain. And in the second half of this, automotive ball bearings should grow And what decreased significantly was a fan motor type of product. And in the second half of the we shall see a recovery. That is the assumption we have right now. Thank you very much. My third question is as follows. Mr. Kainuma, Yixin, you said Yixin as well as European sites have some issues and issues and opportunities. At what kind of time horizon do you think you can realize those opportunities? There are various issues. For example, yield must be improved and quality must be improved. New products must be. We need to get customers involved in an early stage for new products in order to get orders. So those are the 3 major things. And this time, I was very much pleased because our German team had the high involvement And all kinds of improvement activities are conducted through the German team, going through a German team means that we have 1 single channel and local people in Germany have arrangements, but Yushinzahiroshima site and that we will provide support and backups. And from Mina Bea, we are dispatched are Japanese or people in order to improve quality and yield. That is what is taking place. So it's very international team that is working on this matter. And I visited the site the other day, and I will visit again the next month. And they seem so cheerful. And our comments and instructions, they listen very attentively. So I have a positive feeling. They are very cooperative and nobody left the company. So I am confident that we can create excellent team. Thank you. Any other questions? Any other questions from the floor? If not, We'd like to end the presentation. So outside this room, we have a display of the UCIM products we will continue to display this even after this presentation with the LED light theme products, with the Salio showroom, we will be open until 7:30 pm. So the people who want to take a look, please drop by. Thank you very much for your participation. So please, write in the answer your questionnaire.