Earnings Call: Q3 2019

Feb 6, 2019

This is Yoshida. I would like to explain the consolidated financial results the third quarter of the fiscal year ended March 31, 2019, and then Mr. Kainuma, Representative Director, CEO and COO, will give the updates on and present the strategy on machine components, electronics, devices and components, and Mitsubu business. Page 2, please. Consolidated to net sales for the 3rd quarter totaled 249,000,000,000 up 11.2% year on year and up 5.6% quarter on quarter. Operating income was up 47.9% year on year and 58.6 percent quarter on quarter to total 31,000,000,000 Profit for the period attributable to owners of the parent increased 42.2% year on year and 51.4% quarter on quarter to total JPY 24,177,000,000. Both net sales and operating profit hit a record high as a quarter. Currently, currency fluctuations have brought done its sales up an estimated 1,000,000,000 yen aquarteron quarter and 1,000,000,000 year on year. It also brought to operating income up 1,000,000,000 quarter on quarter and 1,000,000,000 year on year. Also, we adopted IFRS instead of JGAAP from the current fiscal 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 shows net sales And the one on the right shows operating income along with a line chart for the operating margin. The operating margin for the 3rd quarter was 12.5% up 2.6 percentage points, IONIA and up 4.2 percentage points quarter on quarter. Now please note that the figures of the fiscal year ended the March 2018 and before are based on JGAAP and provided the full year reference so that you can look at the past figures, the same applies here in NAFTA. Next page please. Here shows the difference between forecast as of November and actual results for net sales and operating income by business segment for the third quarter. While our net sales for the machine component segment were almost on par with the forecast sales for the electronic devices and component segment, mainly electronic devices were lower than the forecast. The Mitsumi business sales were lower than projected mainly due to declined shipments of smartphone related part operating income for the machined components as well as the electronic devices and component segments were about the same as projected. The Mitsumi business beat the previous forecast by 1,000,000,000 thanks to some special factors including one of revenue gain of JPY 6,700,000,000 resulting from changes in the personnel system such as standard retirement age as well as one of our expenses due to non operating loss and inventory disposal related Hokkaido earthquake and so on. Profit for other business segment and adjustment combined were slightly worse than expected. Next slide please. Here shows the difference between actual results for 2nd quarter and the third quarter for net sales and operating income by business segment. Net sales for the machine components segment were almost on a par with 2nd quarter. Sales for the electronic devices and component segment increased mainly thanks to electronic devices of which the shipment went into full swing. On the downside, the Mitsubishi business sales were decreased mainly due to the seasonality of mechanical components offered income for the machine components were steady and operating income for the electronic devices and components increased thanks to a sales increase. Mitsumi Business segment booked some special factors as explained previously. Profit for other business segment and adjustment, the combined were slightly down quarter on quarter. Next slide please. Now let's take a look at the results by segment, starting with machine components segment, on the left is a graph indicating quarterly net sales trends And on the right is the graph of Visa bar chart showing quarterly operating income trends along with the line chart for operating margins. Net sales for the third quarter declined 1,000,000 from the previous quarter to 47 point 1,000,000,000, sales of ball bearings decreased 2 percent quarter on quarter to 1,000,000,000. The average share monthly external shipment volume totaling 195,000,000 units this quarter was up year on year for the 25th quarter in a row. Sales of Rawlins and fasteners totaling 9,400,000,000 were up 4% over the previous quarter. Sales of pivot assemblies dropped to 5% quarter on quarter to total 7,600,000,000 both assemblies are steadily contributed to our bottom line as we held on to an 80% -plus market share operating income for this quarter hits a record high of about JPY 12,900,000,000 to put the operating margin at 27.1%. Operating income was up 3% quarter on quarter why the operating margin was 1.1 percentage points higher than what it was last quarter. Looking at the result by product, we see that quarter on quarter profits for ball bearings and rod end and fasteners rose but fell for pivot assemblies. Next slide please. This shows the results for the Electronic Devices And Components segment. Net sales increased 31 percent quarter on quarter to total 1,000,000,000. By product, sales of motors dropped 4 percent quarteronquarter@47.1000000000. Quarter on quarter sales of electronic devices doubled to 1,000,000,000. This was primarily due to shipments of new LED backlight products to major customers moving into high gear. Sales of sensing devices grew 4 percent quarteronquarterto9.7000000000. Operating income was 10,600,000,000 yen with operating margin at 9.2% representing a 2.6 fold quarter on quarter increase in operating income while the operating margin rose 4.6 percentage points. By product, we see quarter on quarter drop in operating income for motors, but a quarter on quarter profit increase for electronic devices and sensing devices. Next slide. Performance of the Mitsimi Business segment. Net sales decreased 13 percent quarter on quarter to total 87,600,000,000 yen. While sales of optical devices and semiconductors increased, sales decreased for other products, primarily mechanical components. Operating income was 1,000,000,000 with the operating margin at 14.8%. Operating income includes some special factors which were explained in the previous slides. Quarter on quarter, operating income rose 74% and operating margin grew 7.4 percentage points. Next slide. A quarterly inventory trend At the end of the 3rd quarter, inventories totaled 156,800,000,000 yen which is 1,000,000,000 less than 3 months ago. Although some smartphone related inventory increased Total amount decreased. Thanks to inventories that have been held for strategic reasons in light of the parts market condition were sold. Next slide. 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 third quarter, net interest bearing debt, totaling 1,000,000,000 was down 1,000,000,000 from what it was to increase as profits grow and inventories decrease and net interest bearing debt to decrease at the end of the fiscal year. Please note that these figures do not include summary of the forecast for the fiscal year ending March 31, 2019. In the fourth quarter, we foresee a slowdown of smartphone and HDD mainly from demand decrease in China. In addition to the demand decrease due to the trade friction between the US and China, given the backdrop, we have revised our forecast downward. For the full year, net income has been revised downward 1,000,000,000 from 1,000,000,000 to 1000000000. And operating income has been revised downward 10,000,000,000 from 1000000000 to 1000000000. Profit for the period has been revised downward 1,000,000,000 from 1,000,000,000 to 1,000,000,000 Exchange rate assumption was unchanged at 110 yen to the US dollar. Next slide, forecast by business segment. Next slide please. The difference between our 4th quarter forecast and the forecast announced in November along with the 2nd quarter results for net sales and operating income by business segment. Nets sales for the machine components segment will be almost on par with the previous forecast. The electronic devices and components segment will be almost in line with the previous forecast with decrease in motors and slight increase in electronic devices. The Mitsumi business sales will be lower than projected mainly due to declined shipments of mechanical components and smartphone related parts. Operating income for the Machine Components segment will be below previous forecast due to demand slowdown in China and the Electronic Devices And Components segment and Mitsumi Business segment will be lower than the projection due to demand slowdown in China in addition to decline in smartphone and game, especially for the smartphone related businesses the sudden reduction of production will cause non operating costs as factories related to increase of inventory and delay a personnel adjustments. Results in sudden reduction or would result from the sudden reduction in the production causing non operating cost at factories. Also, please note that the Electronic Devices And Components segment operating income forecasted for the 4th quarter includes 2,400,000,000 yen of restructuring costs. Now I'd give the floor to mister Kaimu. Good evening. This is Kai Numa. First, I would like to share explain about today's highlights. Regarding Q3, 28,000,000,000 yenoperatingincomeprojection compared with that excluding the special factors, I think it is still within the range of errors or margin of errors. And, at that time, meaning in Q3, we announced the results and at that time the Q4 outlook regarding LED backlight, we had a rather aggressive outlook However, in Q4 particularly, backlight things dropped significantly not just backlights but the slowdown in a Chinese economy had the major impact And other than smartphone related parts, overall our business was affected. In usual, years before the Chinese New Year, we are requested to up inventory. However, it didn't happen this year. So across the board, we are affected and some parts are going through a massive production in production and therefore the burden of personnel costs became heavier and the billion reduction from 85,000,000,000 is expected and mechanical parts. The volume was inventory adjustment and took place in Q4, but the April onwards, things are expected to normalize And in China, I hear that North American smartphones are starting to sell once again, according to the rumors I hear, and in April onwards, the current model production will continue and therefore It is likely to be different from Q1 of last year and HDD related parts production. The capital investment in China is slowing down and there for, we need to keep paying new attention, Uxin, and new product launch as well as shareholders return are also described in this page, but I would like to give you more details regarding those things later on. Page 15 please, the ball bearings or machine components, internet share, up until Q3, things were good. However, slowdown in China is affecting our business. Slowdown in China, how long it is to continue? It's something that we need to carefully watch. Today I received an information from sales team about the sales forecast for next year 5,000,000 pieces up from last year. This is monthly number. And internal minus a 5,000,000 unit. So it will be a plus minus 0. If a slowdown in China is to continue, then the ball bearings will face a flat period probably But as I said repeatedly, everything depends upon the economic performance and therefore if economy recovers in April, things will normalize rather than that, at a time a company is that we are so diversified machine components. It's not just a bearing but rod end and fasteners business is included. It's mainly for aircrafts. And Aerospace Industry it's uh-uh booming and a strong backlog continues to come in. Productivity improvement, we started working on last year and it's an ongoing effort and brought in and fastener business operating. Preferred or the ability to earn money is being enhanced and as I said in the past. Now we are going through renewing the long term contracts and therefore we have had opportunities to increase prices. In addition, CNA and the and Ciono Precision. Those companies that we have in our group, so by putting together one sales team, we would like to appeal our synergy to our customers more proactively. So machine components and a growth driver will be rod end and fasteners. In a short term, I think I can say that. Page 16 shows the aircraft demand forecast. Right now 22,000 is the number but many of these aircrafts will become aged 16,000 replacement and 17,000 new aircrafts will be made And in the next 20 years, the Kiga is likely to be around the 3% and our abilities are increasing. And in other words, we should be able to expand a share more. So aircraft business We would like to focus on as another pillar in order to solidify our growth potential. Moving on to page 17, this is about electronic devices and components, the motors, as you can see here, hard disk, office automation related equipment and home appliances and because of a slowdown in Chinese economy are these businesses have been affected as I said previously LED backlogs is in the same situation but looking at the sunny side, expensive smartphones are not selling. I think it's been proven at various places. So LCD life is likely to be a prolonged extended and therefore this quarter went through a sudden production adjustment. However, in a long term LCD's attractiveness, shall remain. Page 18 the Mitsumi business, which was covered already in the optical device this. I think many of you are saying that we should increase our production, but I think looking back, it was okay. It was a good thing that we kept at the current capacity. When we focus in certain areas, we will be at a risk, at a situation like this. And in fact, we did feel the risk, but overall, the impact has been minimal. But going forward, as is described on this slide, the multi camera and new products will come online. And since we are supplying to all of those, we are not pessimistic about the future. We see no reason to be pessimistic about the future. In fact, we believe that current situation is at the bottom And as was mentioned earlier, for mechanical components, we expect the profit contribution starting from the beginning of the next fiscal year. Page 19. The progress on business integration with Uxin due diligence continues. We expect it to be over shortly. We have completed the procedure of competition law clearance. So we are now ready for the integration. In fact, last week, I visited 6 different, operations in Europe, myself, last week, and, added with the video conferencing. I talked with about 300 middle management personnel in English so that I could talk to them directly At the time of the earnings briefing in May, I should be able to give you the details, but as has been said for quite some time, We will leverage the operating sites of Yushin for connectors and Tena of automobiles as well as which will be mentioned later. For those products, we will utilize UHINT's European operations so as to raise their capability as well as to take advantage of their, technical capabilities, for the expansion into the home equipment sales. And on the Port of Ushen, This integration would mean more support from for production. And, after visiting 6 production sites in Europe last week, I have a stronger feeling that there is good synergy. So as long as the due diligence process, is completed, Our experts will be sent to the production sites. So as to provide necessary support, we are thinking of sending the appropriate personnel to the appropriate sites And what was confirmed last week is that they are sourcing quite a bit of Japanese equipment and supplies. So we should be able to have the concentrated purchase leverage advantage of scaling logistics and procurement but we need to improve the productivity and revisit the yield situation in Europe. There's still room for improvement including the possible automation, we want to reform the production capability. So while solidifying the foothold win new orders and as was mentioned earlier, have new product launches at the production sites. Those are the plans that we have. Page 20. The new product trio took off, it says, 100 to 200 unit orders for Saliet per week. Is where we are today. We only have 8 personnel for sales and marketing, but we do have the lighting companies with them, we have the lines and they have started to sell the museums and galleries. They really appreciate the new saliot. So the new products are being well received and there'll be more interesting products being launched and by connecting Sallia to the cloud for various control is currently being pursued together with Mitsumi. As for smart city, We have been talking about Cambodia for many times. And a couple of weeks ago, we received orders from Chile for 22,000 notes and 2000 gateways. We are told that Chile is considering for the new street lights the 6 low pan as the basic infrastructure protocol. And this is the protocol that we are using. And since that seems to be the intent on the part of Chile, I think the deployment in Latin America is going to be exciting. Now as for bed sensors system in terms of units sold, we have yet to see, an increase, but the, sensor system, for the, sound sensors. Are proving to be beneficial. And we are receiving various inquiries and increasing number of institutions are using our system on a trial basis. And with the technology being refined, we again believe that this will be an interesting area. And new product development that we have been working on for a long time. When the economic stagnates, there are only 2 things that you can do. 1 is to increase the market share. And the other is to launch new products increasing the market share could hurt with the prices going down. And there could be some backlash. So maybe it's not rewarding. So on our part, What we are thinking is not to pursue the increase in market share of the existing products, but rather launch new products as listed on the slide for significant improvement in results in next fiscal year onward. There it says other products not available to public and this is because of the NGA agreement with our customers. So while there are many items that are to be launched next year. We can't disclose them. But even when the economy is to stagnate through the new product launches as well as mergers and acquisitions. By executing this squarely, we would like to ensure growth. Page 21 You are aware of this already. So this is for your reference. And with that, I can create my presentation. Thank you for your kind attention. First, first question, Goldman Sachs. Mr. Takayama, Mr. Takayama, please begin. Thank you very much. Thank you. First of all, let me confirm a few things So the one off things, the net number, what would be the net number in Q3? I probably missed it and I heard 67 as a positive impact. So, what is a total one off impact in Q3, the positives, for example, by a change in HR system The reversal of retirement, provision, 6,700,000,000 and then the negatives, the Hokkaido earthquake and inventory losses, the several billions of yen are included So those are the special factors included in Mitsumi Sector in Q3 and what was included in Q4 projections, Q4 forecast for electronic devices, the restructuring expenses of 2,400,000,000 or which the expenses for transferring a production site due to the US China trade friction Those are included. Electronic devices, is it so phronomic devices, you are mentioning backlights, backlights included relocation is not for backlights. But it's for the measurement devices and the inventory it's mostly related to backlights. Understood. My second question is Mr. Kai Numa I spoke about the positive impact about the plant in Europe Yushin related? Could you elaborate on the positive factors in that area so that I can have a better understanding and I understand that it's rather time consuming but in terms of the effectiveness logistics and manufacturing, when do you think you will be able to start seeing the positive impact So the positive factors more specificity about that M And A this may be the very basic things about M And A. By the end of the day, it is humans who do things, the management, the top management and the next layer of the management and middle management speaking directly with them seeing how they look in their eyes and so forth. Those are things I included when I say I got a positive reactions if they are cold and if they are not interested, I understand looking at their faces because it's humans who do things but I feel that people give me positive reactions that they seem to be eager to do things with me and at the 1st round of due diligence, I think I observed the full factories and this time, 6 factories I observed and the 2nd round I was accompanied by various people when I visited Europe and there are many areas that where there were rooms for improvement Well, because TOP is not finished, I didn't take actual data, but we would like to tackle with those things when the time is ready. In the past you said that the revenue for the next fiscal year and the Uxin's portion will be simply added I think that's what I said, but do you think you can increase the speed of growth? But of course, the yield and quite frankly yield isn't that great in many areas and as long as we correct them we can see an improvement. Rather than setting up a stretched goal at the outset because if we set a stretch goal and miss it that people would criticize us as So the 10,000,000,000 in 3 years time, we always say, but what I want to promise to everyone is we will make sure to achieve a 10,000,000,000 in 3 years time. But if it is possible, we will bring about improvement as early as possible time. So we will keep working hard. My third question, again, for Mr. Kainema, back in November, you said that for next fiscal year, you will take all measures to achieve 1,000,000,000,000 yen or 100,000,000,000 yen. Now these changes in demand. Maybe that can't be helped, but, for next fiscal year, still, would you be targeting the figures that you mentioned. So you'll be taking actions? Of course. In this business environment, I still am confident that we can do. We'll explain in more details why I feel confident in May. In smartphone related business, about 900,000,000 units in North American market alone. And there is a potential replacement demand for sure. And our customers are looking into various possibilities that expensive high end products would not sell. I think they learned a lesson. And I don't know if they're gonna launch similar models. I personally doubt that something more affordable with better quality. I think that's where the demand is going to be. So the smartphone era isn't over. Rather, the new ways for smartphones, the market taught a lesson to the manufacturers is the way I see it. So I'm not pessimistic at all. Now, Yushin, 1,000,000,000 associated. So in May, if I could repeat, I would give you the details. 1,000,000,000,000 yen, 1 year ahead of schedule, is what we like to achieve. Given the current earning capability, The profit will follow for sure. So the target that has been set I have no intention of giving it up now. I see. Thank you. Thank you. Thank you, Mr. Tokayama. Next person, please. From Morgan Stanley, MUFG Securities, Mr. Sato, please. Good evening. Satya speaking. I have three questions. First, 3rd quarter, Mitsumi, special factors without which what would have been the operating income of me over a 20,000,000 or 20,000,000,000 yen is what my math says. So for next fiscal year, Compared to this year's results, would the profit be maintained or could it be even increased is the question and the LED backlight business would the loss on the part of a Mitsumi be made up for by Yushin and for increase. Is that a way to look at it? Kind of speaking, for next fiscal year. Of course, in May, we will make our projection, but I can share with you what I have in mind right now. We do not expect a big drop because, frankly, for OIS, the business really suffered this year with the volume plummeting but for next fiscal year onward as written on one of the slides, the new specifications, and multi camera, are certain to come in and, to Chinese customers. We are making entry. We are supplying to Chinese manufacturers as well. So given those factors, I'm not that pessimistic. How much would the game console sell Frankly, we don't know. Some say that the software applications this year are more interesting And some people talk about the 3rd year jinx that the 3rd year is when the products sell the most. So I don't know which way it's gonna go. But even with slight decrease, you can more than make up for that decline. And I want to make sure that that's what happens. So those are the factors that I have in mind. I hope that helps. Thank you. What about LED backlights? Similar story here. This year, not a very exciting. It turned out But we don't know. But generally speaking, the next generation models should have some mechanism to make it more attractive and more selling, I think. I see. Thank you. My second question about ball bearing business. In some applications, It's slowing down. I understand. Signs of slowing down. Still on quarter on quarter basis, unless I'm not calculating right, I think the 4th quarter sales would be higher So even with slowing down over 30,000,000,000 yen sales, why is it being maintained? And since December, to what extent did the orders actually fell and for next fiscal year for 315,000,000 units and 335,000,000 units beyond. The capacity increase what is your current view on the capacity increase towards that? The 4th quarter machined, composed or old bearing business. The, breakdown has changed conventionally, we have explained to you that primarily in Asia the main products, the small ball bearings, that we supply, the number of units, is going down. But the sales aren't declining because within the segment, new vaccine. New Hampshire, both bearings and other sales are included, as you know. And sales from those portions are contributing. And therefore, it makes it appear that on a quarter on quarter basis, sales will grow from third quarter to 4th quarter. And, for the machined components segment overall, slight decline, and there are some ups and downs in the bold bearing business as well. For next fiscal year, as Mr. Kangama said earlier, at this current point in time, various impact from China. The economic revamping measures, by the government, etcetera, we're not factoring those in. And yet, we are expecting the volume to be about the same. So, in the 2nd half of next fiscal year. New facilities will come online the utilization rates, and, the details have yet to be worked out. I see. Thank you. So that would mean that for New Hampshire Bowl bearing, The increase in sales amount to over 1,000,000,000 or several 1,000,000,000 of yen. Am I correct? Yes. My last question about electronics, components, and devices. The sales in the fourth quarter 102,400,000,000 yen, I think. Compared to the 3rd quarter, the sales would decline but a 2,400,000,000 yen cost associated with the restructuring I still get the impression that the profit is rather sizable. Is this in relation to the LED back light inventory, or would the production going to go down so are there any special reasons or factors is my question? As you know, in the third quarter initially, we, we're really speeding up, or the markets and the customers were really speeding up but came to a sudden halt. That's what happened in the third quarter. We are controlling the overall inventory But for smartphone related products, we do see the inventory building up. As for the fourth quarter, we are thinking of a main gain the inventory level to the optimal level. And in doing so, operating utilization rate is going to go down more than the decline in sales. And because the sudden halt had a really significant impact as was mentioned in the presentation including the personal cost. There has been some time lag in appropriately responding to the situation. So by the end of March, Oh, those would normalize. Am I correct? Yes. Thank you. Thank you very much, Mr. Sato. The next is from Mitsubishi of Jae Morgan Stanley Securities, Mr. Ruthuno. This is Tsuno. Thank you very much. I have two questions. One about inventories. At the end of Q3, the total number declined strategically some items were reduced and some were increased, I would assume. And the inventories If it is alright by segment or by product, could you share with me what went up and what went down and how things are likely to be in Q4? That is my first question. So the items that went down in inventories is a Mitsumi's mechanical parts. And also overall, there are some ups and downs, but in terms of the inventories, no major changes and what slightly increased was backlight. Backlight, the inventories increased a little bit. I see. Twres Q4, what is the projection? Q4 Regarding game consoles, it will be off a season So, it's going to be slow and the smartphone related, the customers reducing volume, while reducing volume all of a sudden, but things are likely to be normalized. So probably the inventories will become a normalized going down in other words and other than that everything else will be as usual, bearings As you may know, the external sales and internal sales regarding Q4 will weaken or deteriorate and manufacturing We will maintain a full utilization. And, as I have been explaining, the air freight reduction and optimization of utilization or operation, we will take a thorough measures to make that happen. So, for ball bearings, we will build up a strategic inventories in Q4. So, inventories, I had a feeling that inventories level was a little bit lower than it should be. So is it going to be normalized? Yes, that is what we think. Understood. Thank you very much. My second question is q4 how plan is formulated for Q4, the some markets are going through fluctuations like a game consoles and smartphones, And as for the stance or the thinking behind formulating the plan, are you looking at the current forecast or what are the assumptions behind a Q4 plan? So, already 1 month has passed in Q4 So I think we have a better visibility and therefore we are simply looking at the current situation. Understood. Thank you. Thank you very much, Mister Ocino. Next is from Mizuho Securities, Mister Goto, please. Good evening. Two basic questions. 1st of all, bearing. For January, March, I think it's going to be less than 1,900,000 external sales compared to the peak, it's gonna go down by more than 2,000,000. So on a monthly basis, what's the level what's this decreasing? And based on that, can you talk about the next transition point to what extent you expect a recovery? That's my first question. I'll stop here. 1st, 4th quarter, external shipment. 181,000,000 average and 198,000,000 on average in March and, pivot HDD related reduction in production in the 4th quarter. We So internal 62,000,000. Total 244,000,000 And on production side, 280,000,000 plus, which means quite a bit of inventory to be built. And the content, the breakdown of a 100 and 80,000,000. What's strong? What's weak? What's your question? Automotive. Last year in November. That was the peak over 60,000,000. In December, because of the operating dates, some decline. And, first quarter, we believe that the peak level would be maintained. And therefore, for automotive, we are not assuming weak shipment volume for air conditioner and cleaner and other home appliances applications. As you know, because of the impact of the economic slowdown. We are projecting that and fan motor application. For the first quarter, rather significant slowdown is a projection. It is the basis of 480,000,000. But February, as you know, fewer operating dates on the part of the customers? So for the fourth quarter from the very beginning, this is the slow season. So with that being factored in, you should be looking at these figures. So on a monthly basis, looking at the current situation, do you feel that you have hit the bottom? And if the recovery is a expected in what way do you think the recovery would be made? Hi, Numa speaking. Specific figures in January of last year, 209,000,000 February 179,000,000, and, 212,000,000 in March. This January, and China is already in the Chinese New Year, so it's not definite yet. 109,000,000. So or by the 190,000,000 So, maybe 7 to 8% low, not 10%. And so for the fourth quarter, we believe that that level is going to be maintained and has been set for quite some time. The investment in China investment, a promotion policy in China and economic revamping measures by the government. How effective they're going to be And what's going to happen to the U. S.-China relations, I don't think it will be resolved squarely but to an extent, that will be alleviated. I think would be the critical questions. I always say when you say is this a risk? Is this a risk? And I always answer it's a macroscopic macroeconomic risk. So still, they are uncertainties. But, would there be further slowdown? That is not what we anticipate. Understood. My second question, clarification of figures. Smartphone related 4th quarter projection. Said, that normal situation for electronic devices and components. The revised figure compared to the 3rd quarter, the high end smart phone reduction, is being said. Compared to that, it seems more moderate. So within the electronic devices and components segment, sales projection for the fourth quarter, are you factoring in the reduction in smartphone production? I'm sure you do, but yet the reduction size seems to be small. Why is that? As for the backlight portion, The forecast from the customers are the basis for our projection. And so that is what is being reflected. So maybe there are many factors involved. I'm afraid I can't say anything more than that It's not that we are manipulating the figures. No. So older models being built and maybe being built more in preparation from end of life. Is that a factor? Sorry. Could you repeat that? The older models being increased. And before the end of life, build, inventories, are there's one of, or temporary factors taking place. For q4, the selling models, are different from the original projection. And for that, the older models, we are increasing for backlight overall. We had been rather conservative in our projection, and we see the actual being more strong than the Those are the factors. I see. Thank you. Thank you very much, Mr. Goto. Next is Mr. Akizuki from Nomura Securities. Thank you very much. First, about the bearings, this is sort of a follow-up question to the previous one, the bearings volume, inclusive of ForEx, so it's likely to go down by 10% So far, the bearings, numbers in Q on Q I think you said something that something which was not previously included in a bearing revenue will be reflected. So the decline in varying volume, there will be a huge impact and net a quarter onwards, is it going to be sort of a irregular factor? I want to confirm. So the changes in revenue of things other than miniature miniature bearings. First of all, what we disclose about a bold bearings. So, what are included are so called bold bearings and new Hampshire ball bearings, Mionix, work and CNA, tool engineering, the company we acquired recently So those are included in terms of revenue, 30,300,000,000 would be 30,700,000,000 So the bearings volume, the average unit price remains virtually the same. Or rather there is a small impact of price hike and other than that, The reduction in revenue is offset by a new Hampshire bearings, a type of things. In other words, additional additional products are doing well. The ball bearings recovery as Mr. Kainuma said if assumptions remain the same, it's going to be slightly above this terms average. But the machine components, the revenue remain the same, but I understand that the people with the revenue It has gone down. Is it not regular factor? In terms of machined components, as you may be aware, pivot will go down and ball bearings or other than ball bearings and new hampshire increased and broadband and fastener revenue will increase And as they are sort of offset each other, and it's going to be 47,300,000,000 versus 47,200,000,000. In other words, our revenue will remain more or less the same. I would like you to understand it that way. Please wait for a second. As I have said, the R Springs is that even if a miniature small diameter products go down, other sectors can compensate for that aircraft, the business is doing extremely well and the bearings in U. S. Market HPB a miniature, a small diameter made in Chatswarz are doing very well. So, That is the overall situation. I see. Thank you. And my second question is about the how to understand this. So, 2,400,000,000 yen as restructuring expenses in And provision for inventories, are you talking about the restructuring in order to improve a business restructuring or is this 2 point 4,000,000,000 is it for one time expenses to change across the structure Can you share with me the more details about this? Simply dispose of all the stocks by intentionally slashing inventories, I mean, we are not we are not the manipulating things by slashing our inventory of certain models. It's not that and I cannot give you details. Unfortunately, cause of confidentiality but it is something it is an appropriate thing that our accountant or the CPA, I would agree. So, that is how, we would like you to understand. Understood. Thank you. Just briefly, could you give me the bearings? A growth rate, the power application, the growth rate, right? Or a proportion, the Q3 bearings, proportion, automotive by 'nineteen airspace, 31. Home Appliances 5, Office Automation 5, PC 2, motor 16, others, 20. And the growth rate as well, if you could please Q on Automotive, the same aircraft, the same home appliances minus 10, office automation, plus 1, PC minus 1. Mortars minus 6. Amusement plus 10, well, the absolute number is very limited to begin with. And others plus 3. Okay. Thank you very much. Thank you very much, Mr. Akizuki. Senator time is the next question will be the last question chain from UBS Securities, Mr. Hirota. Hirota from UBS Securities. Good evening. Not bull bearing. I have a question, and I have in on Mitsumi segment. First on bull bearing, the external sales, the monthly movement, in December, I suppose there was a big drop. Can you confirm that? And you said that inventories will be built and therefore the capacity utilization rate is not going to go down much in the fourth quarter. And for how long do you expect that to continue to build the inventory? Is it going to be until April, June period, July, September, quarter of next fiscal year? The figures, external shipment from October, over 1000000. 199000000. 204. And 183,000,000 in December in January was 190,000,000. So it has gone up again. So 199 to 4183 in October, November, December, and 190 in January regarding the inventory until March, we expect the current level about 2 months inventory. At one point in time, it was a very tight and, it threatened the line operation of the customers and we want to ship the ball bearings, not airlift, and therefore, 2 months inventory is the benchmark that we are using. So by the end of March, 2 months. Correct? Yes. I see. Thank you. Bob bearing. Can you talk about the external shipment as well for October, November, December? External shipment or internal shipment, 817674. And 65 in January 8176, 74, 65,000,000. That is And then the Mitsumi segment, you said that they are special factors. 26 or maybe revised downward by a somewhat and 1,000,000,000 downward revision for sales. And I think that the factors are game controls and smartphone. Can you give us the breakdown of these 2 different businesses? The biggest factor is, as you know, OIS, optical device. Our major share, was in the LCD model and a big reduction in volume there affected us. From the second half of 3rd quarter to 4th quarter that had a major impact. The next biggest factor is it's much smaller, but gain console. Slowdown in the 4th quarter, that is at the mechanical components in the 4th quarter. Switches and other smartphone related parts had an impact. So overall, they accounted for the decline in profit. I see. So in other words, the majority is OIS or smartphone related. Yes. I see. Thank you. Thank you, Mister. With this, we conclude the Q and A session. I would like to invite Mr. Kainema for the closing remarks. Thank you for your participation. Ladies and gentlemen, the macroeconomic situation is what it is on our part. We'll do our best so that we will not be affected by the situation in the macroeconomy through new product launch and we would ensure the success of Yushin So I ask for your continued support and understanding. Thank you.