Earnings Call: Q2 2019

Nov 7, 2018

We would like to begin the the analyst session of Amina Bea Amitumi, the result of our first half of year ending in March 2019, despite your busy schedule, the participants from the company side are the representative director and CEO of the company Yoshihisa Kainuma. Next to him is the Managing Executive Officer, Katzuhiko Yoshida. My name is Yajiro from IR, depart I will have the privilege of serving us MC for this session. First, Yoshira will explain about the financial results. And then Kainuma, we'll talk about the business update and management strategy. Then we will have Q And A and we plan to finish this session at 8:30. Regarding the details of the financial statements, please refer to the supplementary information as well as a Tanshin flash report. As for the press release about allocation of the surplus, retained our surplus and revision of the dividend payout, please refer to them as well. And may I ask you to fill out the questionnaire form because it will provide us good feedback in order for us to do this in a better way. And this meeting will be uploaded to our internet, inclusive of our Q And A. So this will be recorded. This session will be recorded. And May I also ask you to refrain from taking photos and sound recording? Then Mr. Yoshida, the floor is yours. This is Yoshida. I would like to explain the consolidated financial results for the first half of the fiscal year ended March 2019. Consolidated net sales for the 2nd or the first half of the fiscal year ending March 31, 2019, a total of 1,000,000,000, down 0.6 percent year on year, but up 10.9 percent quarter on quarter. Operating income dropped at 20.6 percent year on year, but increased 37 point 3% quarter on quarter to total JPY 19,624,000,000,000 profit for the period attributable to the owners of the parent 46.7 percent quarter on quarter to total 15,000,000,000. Both net sales and operating income were as expected with solid sales of ball bearings and mortars and other products, despite timing issues and one time costs in some businesses. Currency fluctuations wrote a net sales up and estimated 1,000,000,000 quarter on quarter and down 100,000,000 year on year. It also brought operating income up by 1,000,000,000 yen quarter on quarter, but no change year on year. Also, we adopted the IFRS instead of co year. Moving on to the next slide, the bar graph on the left shows net sales and the one on the right is operating income along with a line chart for the operating margin. The OP margin for the 2nd quarter was 8.3%, down 2.3 percentage points year on year. But up 1.6 percentage points quarter on quarter. Now please note that, figures of the fiscal year ended March 2018 and before are based on JGAAP and are provided for your reference so that you can look up the past figures. The same applies here in NAFTA. Next slide, here shows the difference between forecasts as of August and actual results for net sales and operating income by business segments for the second quarter. Wire net sales for the machined components business segment were almost on par with the forecast. Sales for the electronic devices and components of business segment were higher than forecasted mainly thanks to electro devices. On the downside, the Mitsumi business sales were lower than projected mainly due to timing issue for smart form related parts. Although operating income for the machine components was about the same as projected. Operating income for the electronic devices and component business as well as Mitsumi business segments were lower than a forecasted due to the changes in shipment timing of a smartphone related parts. But others and head office adjustments improved slightly. Also, please note that temporarily expenses approximately a negative 1,000,000,000 yen from the Hokkaido East Amriburi earthquake was included in the Mitsumi segment On the left, next slide, on the left is graph indicating quarterly and net sales trends. And on the right is graph is a bar chart showing quarterly operating income trends along with a line chart for operating margins. Net sales for the 2nd quarter were up JPY 900,000,000, from the previous quarter to reach JPY 48,200,000,000. Ball bearings sales increased 2% quarter on quarter to total 1,000,000,000, the average monthly external shipment volume hit an all time high of 2 6,000,000 units marking and year on year increase for the 24 quarters in a row, the monthly production volume for August hit a record high of 3 2,000,000 units. Sales of rod end and fasteners, a 29,100,000,000 were up 2% over the previous quarter. Sales of pivot assemblies increased 2% over previous quarter to total 1,000,000,000, pivot assemblies as Sidoti contributed to our bottom line as we held on to 80% plus market share operating income for this quarter hit a record high of 1,000,000,000 to put the operating margin at 26%. Operating income was up 7% quarter on quarter, why the operating margin was 1.2 percentage points higher than what it was last quarter. Looking at the result by product that we see that the profits for ball bearings, road ends, fasteners and pivot assemblies all rose quarter on quarter. So this is about electronic devices and components. Net sales fell 5% quarter on quarter to hit JPY 87,400,000,000. Looking at the results by product, we see that sales of motors grew 4% quarter on quarter to reach 1,000,000,000 as sales remained strong, primarily in the automobile market. Sales with electronic devices were down 19% from the previous quarter at JPY 27,900,000,000. This was primarily due to the shift to new model of LED back life for major customers. Sensing device sales grew 2 percent quarter on quarter to hit 1,000,000,000. Operating income totaled JPY 4,000,000,000, while the operating margin reached 4.6%. We saw a JPY 2.14 quarter on quarter increase in operating income, while the operating margin climbed to 2.5 percentage points. Looking at the result byproducts, we see that all categories, including motors on the devices and sensing devices were higher operating income. Moving on to the next slide. Lastly, this is about the Mitsubishi business segment. Net sales increased 36% quarter on quarter to hit point 6,000,000,000. Sales in old products increased primarily in mechanical components. Operating income reached 7,500,000,000 to put the operating margin at 7.4%. These figures reflect the 1 off expenses in semiconductor business from the Hokkaido Eastern Iburi earthquake. So the operating income rose 2.5 fold quarter on quarter while the operating margin grew 3.3 percentage points. Moving on to the next slide. Next, this is the quarterly inventory trend. We see that as of the end of the second quarter, inventories amounted to JPY 176,800,000,000, that figure is up JPY 7,700,000,000 from 3 months ago. Link was largely due to the increase of strategic parts inventories considering market conditions. Inventory should reach an optimal level in the third quarter and onward as demand peaks. Moving on to the next slide. This graph contains a bar chart showing trend in the net interest bearing and interest bearing debt, which is total interest bearing debt minus cash and cash equivalents. And a line chart for free cash flows. At the end of the second quarter, net interest bearing debt, totaling 1,000,000,000 was up 10,300,000,000 yen from what it was, at the end of the previous year. Despite increasing capital expenditures this fiscal year, we expect free cash flow to increase as profits grow and inventory decreases and net interest bearing debt to decrease significantly at the end of the fiscal year. Please note that these figures do not include the impact from the TOP. Please go to the next slide. This is a summary of the forecast for the fiscal year ending March 31, 2019. In the second half, we expect the machine components and motors to continue to grow steadily and smartphone components to make a contribution to earnings from the 3rd quarter. However, future trends in the global economy are uncertain due to factors such as trade policies, exchange rate trends, and geopolitical risks in each country. Under these circumstances, we have revised the forecast of the profit of the period to the extent that we are currently able to forecast. The exchange rate assumption was changed to 110 to the U. S. Dollar. Moving on to the next slide, This slide shows the forecast by each business segment. Please go to the next slide. Finally, I'd like to go over our sustainability topics. We actively addressing ESG that is environmental, social, and government issues recognizing them as business opportunities as we aim for sustainable growth and response respond to the various needs of society. Here are 2 recent topics I'd like to share with you. 1st, NMB, MINIBIA Thai, our Thai subsidiary won the Thailand Labor Management Excellence Award 2018 for its 2 factories. These awards are a testament to our ongoing efforts to build better and safer workplaces across the globe. Secondly, we are doubling our efforts to disclose ESG information. Specifically, we issued an integrated report in addition to a CSR report. We will continue to realize sustainable growth by contributing to solutions for social issues. That's all from my side. Next, Mr. Khanuma, please. This is Kainuma. Thank you for staying with us for many hours. From now on, I would like to talk about the business update and management strategy. As Yoshida explained, to to se was affected by disaster, the 1,000,000,000 damage incurred in backlight in the first half suffered the losses, but JPY 34,000,000,000 more or less. The operating profit that was generated, that means that we have been strengthening our capabilities and machined components, 1,000,000,000 operating profit was a target and JPY 1,000,000,001,000,000,000 in March 2021, when I set this goal for the first time, this was JPY 50,000,000,000 was also the target I set about it, it's likely to be achieved 2 years ahead of the time. And Trump administration Chinese economy are slowing down so on and so forth. But as you can see here, Mina Bea Mitsumi is a diversity in this critical time, we have been able to effectively cope with those things. I will come back to this point later on. This time around our initial, projections remain virtually the same. As you already know, there are many uncertainties, but initially, we took a very conservative view in formulating the plan. So we changed the ForEx So $110 to a dollar, we should be able to achieve the targets. Machine components. Last month, the Automotive achieved 60,000,000 pieces of which is 11% growth year on year. And next year, 11% to 12% growth is anticipated In the background of that, the water, oil and air, all those pumps will be electrified. So automotive as electrification progresses, the more durable ball bearings will be will be necessary. So there is this peak anticipated in the demand and only Minnebela Mitsumi has the production capacity to meet that demand. And price hike effect, for example, last month, we have been able to raise 2 yen in average. And the cooling fans, 5G ADAS and base stations, the infrastructure preparation will, progress going forward. And therefore, even more cooling fans will be needed that will operate 20 fourseven So very durable bull bearings that will be required. And therefore, we anticipate a 10% annual growth in this area as well. Now a highly efficient vacuum cleaners is seen boom a certain non Japanese manufacturer's vacuum cleaner. And the like the Chinese customers are wanting high rotation of bearings So, 20% increase. Bowler bearings overall, I have no concerns at all. So production and sales we seem to have a little more production than the sales, but the air di airfreight Fitch cost at JPY 100,000,000 is coming down and we would like to reduce that to JPY 20,000,000 per month And we would also like to optimize inventory level as well. Ball bearings, we tend to focus on But, what is having high performances, rod end and fastener business as I may have explained to you several times already, the Mitsumi's techniques are applied to bow bearings and 3500 or a 35,000,000 pieces and 15,000,000 And the road end, and last month, the Carizawa had the record high shipment And the impacts of that on raw end, it's being very positive Anfasna has had complete the turnaround. Last year, we anticipated 1,000,000 of swing, but bigger swing than that I can be expected from fastener business. And CNA and Maka Aero are growing steadily. So, the US, the rod ends are are growing very steadily because of a booming economy. And now is a time for renewing a long term contract. And therefore, prices have been raised. And this trend is to say for some time because the prices have will be raised and they will stay that way. And about a JPY 55,000,000,000 a per year. And 10% additional increase is anticipated next year. Next It's backlights. So there was a timing issue And analysts are writing a detail that reports about the smartphone industry. So, I would like you to refer to those reports for more details But, now the smartphone, smartphones are slowing down. But this year's model compared with last year's model, The main models, the this year's model has a fewer parts. So the profit the profit that can be generated by a smartphone that we didn't anticipate, that much. So impact this time around is even if a smartphone business doesn't progress as planned, the impact that will be limited and automotive motors, the motor business is 200,000,000,000 and the automotive is the most or promising one, the 34,700,000,000 And as JPY 143.3000000000 and 48,100,000,000 dollars, $53,500,000,000 from 2016 to 2019. And actuators, we are having many inquiries And the 2021, the European regulations, the emission regulation, the PM, the mortars, the VLDC, brushless, those mortars are growing steadily. Mitsumi turning to Mitsumi Business. Optical devices had timing issue as well. But, Chinese Smartphones are having better specifications. So we are recording lots of revenue in that area. So impact on profit and loss, we took a conservative view therefore, probably, we can offset the impact. And what is most powerful in Mitsumi business is the semiconductors, a particularly analog, semiconductors. So then Japanese, Peppa grain may be small, but it does sting their time. So, it's focusing on a limited area. High end smartphones, the 75% of the global market has Mitsumi's analog, Semiconductors, and mechanical components according to the analysts, they are writing reports about a game, a consult, so on and so forth. And the revenue is likely to be in line with the plan. Risks. So we are very registrant to risks now. And, trump, administrations, issues. So China plus 1 by U. S. Companies is starting so far. The cheap ones, we it gave a cheap ones, the business of cheap ones that your Chinese players in the U. S. 20,000,000 pieces were sold in the U. S, but now it's down to 8,000,000 and they were replaced by a Chinese players, but 25% tariff will be imposed And we are now seeing inquiries from them or for those products, not just the bearings, but in other product areas, we have recommended a Cambodia a plant many times, but they were not interested. But this time, they are becoming interested So if the current trend continues, probably the customers, an increase in number of our customers will be wanting to use a Cambodia and plan. So this is an opportunity are not at risk. So this is a TOP towards the business situation with Yushin. I, made a presentation to to this with you already. So, I do not want to repeat it, but have 5 synergies that we have listed here. So $300,000,000,000 coming from the automotive business, we have that in the view So from the 1,000,000,000,000 BMEA Mitsubishi Automotive Business, that's the current level. On top of that, we had 1,000,000,000 coming from Yuching that's 280,000,000,000 in total. So this is going to grow, meaning that this 300,000,000,000, we'll be able to easily surpass this 300,000,000,000 for the automotive business. So this will be the updates of a new product Trio, the Salio, because, because a lot of good inquiries coming and not a lot of bulk orders, 100, 200 units at one time. So next fiscal year and the next fiscal year after that, I think this we can put a lot of expectations on this Salio. So we would like to I can't give you an example of where it is used and there are a lot of places that are using for you, but we can't be able to disclose. But, in your presentation material, we have those of brochures. And there's a lot of development using Saaliya going forward. So the including the quality of the light, the customers' feedback. We get very good feedback from the customers for the bed sensor systems. So Rico, from August has started to sell the bed sensor systems. So currently, we're struggling right now for this product. Our in terms of the product appeal, maybe it is lacking a bit. So we have to put in some improvements and then go forward on this business. For Smart City, so mainly in Cambodia. So, we have 5000 orders came and then we have 15,000. So it was 65,000. This is all pay as you go system. So various types of connectivities is a development because various things will be connected But maybe this will take a little bit of more time to develop further. So this 1,000,000,000 or 100,000,000,000, hitting these targets ahead of schedule, I think I have already shown you, this before. So $85,000,000,000 is 20.19 March period is what we're going to forecasting. In 2020, March, this is how we want to achieve our targets in this manner. In the previous, presentation, there has been a question about this. From my point of view, so in terms of our M and A strategy, I have no intention of you know, not focusing on MA surgery because we take a lot of time to seek with these opportunities and try to tap into these opportunities, but because you have to consider the account of part partner, and there's a lot of competition for M And A. So to be able to for us to achieve these, this will be very difficult, but if a company has a synergy with a company, we'll focus on those type of companies. For next fiscal year, JPY 1,000,000,000,000 will be the targets that I'm determined to achieve. So we are going to increase the dividend you're considered by 1 yen for the interim and year end. So 67,000,000,000 yen of the net income is our forecast. So this will be a record higher level for us. So compared to the previous year, so there has been less extraordinary loss compared to the previous year. That has been the help. And steadily, in terms of the synthetic test grade, we have been able to, contain that that's the reason why we have decided to increase the dividend by JPY 2,000,000,000, JPY 100,000,000,000 to be able to achieve the target for this fiscal year, it will take whatever means that it's possible to hit these targets. So that's all from me. Thank you so much. We would like to move on to a Q And A session. So on the institutional investors are allowed to ask questions and please state your name and affiliation before asking questions. If you have any questions, please raise your hand. So in the 5th row, in the middle section, Takayama from Goldman Sachs. Thank you once again. So, full year, the electronics and the Metumi electronics and Mitsumi. So electronics, JPY 10,000,000,000 sales and the North American smartphone, the business seems to be a phase space a tough time and what is the plan that you overcome that in order to actualize the upside and Mitsumi and a plan is maintained, but after including Hokkaido earthquake, is it included? So could you elaborate on that point? I would like to report to you about that. The smartphones or backlight last year, wasn't really started, but now we are having a better visibility right now and the changes that you have mentioned have been incorporated. Regarding Mitsumi, 1,000,000,000 in Q2, that number is included and in the impact of earthquake, in addition, there may be additional impact in Q3. So whether we can overcome that impact or not, we are thinking right now. So, the overall revenue is growing and, therefore, it's not because of one single factor, but overall revenue growth, backlight. So original forecast was too conservative. Are you saying that? Yes, you can understand that like that. My second question is the bearings In the past, the mister Kainuma, said that, it leveled off on a plato and, a revenue seem to have dropped us slightly in Q3, but how deep is this and the 10% increase is possible next the year you mentioned. So is it in your site already? And what is the a car you are anticipating? So back then, I participated in a conference call for the first time and probably the way I explained was not really appropriate. I didn't probably, people thought I said that there was, the things were, at the leveled off. But that's not what I meant. I thought that if things would slow down or reach will start to level off, it will be make it easier for us, but that's that was misunderstood. And Bitcoin was slowing down. And the momentum 2 hours the investment, the China the motivation was cooling down And probably those factors did affect our business. However, electrification but automobiles will progress for sure. And the Savers installations will take place without any doubt. So whether or not things will slow down. I don't know. But order received last month, 48,000,000 pieces last month, 1.5 months worth of orders so that we have a very solid bookings. So overall, I'm not that concerned. So page 18, it says that the earning capability is being enhanced So the profit margin will improve. Yes, it is already improving. So bearings, it's seen improvement in profit margin. Raw and Fasna is in the same situation. The profit margin is improving. Any other So let's just take the next question. Akizuki from Nomura Securities, I have some questions to ask. So in terms of ball bearings, I would like to ask a question there. So this is a more short term question. So 1st quarter results So when the material that it was $215,000,000 and 212,000,000 for the external sales for the and 260,000,000, think basically there has been a down, shortfall for the 2 months. If you look at to July to September, I think there has been some inventory adjustment and there may be some change in the customer's behavior. On the other hand, as Mr. Kainoa has said, so towards the European car manufacturers, there is going to be a increase. So in terms of seasonality, there's going to be a kind of a reversed trend. So would you towards the second half, can you please clarify what's going to go down, what's going to go up? So in terms of what's going to go down, basically, we do not know from our business. So 3,000,001,000,000, we talk about that level, basically 300,000,000 is a denominator. This is a margin of error. So it's down by 1,000,000. That's a big thing, but we are not nervous at all for that level of fluctuation, but because currently, we had that capacity in place. And in terms of the cooling fans and automotive, applications, that will be the drivers, for this business. And, we will want to prepare for that business, and we will hold inventory targeting those businesses. Thank you. The second question is that for the Amizumi business, I want to ask a question. In terms of the sales outlook, like, have reduced this by JPY 110,000,000 and the preferred haven't changed your outlook. So we do explain why you have made that kind of revision. So the reason why we made this template in downward revision, if you look at the pounds between the, 1st quarter 2nd quarter, results and the projection, there hasn't been the minor adjustment. It is not a major issue here. So as you all know, So whether for instance mechanical components, smartphone related products, they will be changing various changes in the market environment. So the I think this will be, again, like, marginal level of adjustment. So the overall trend, I think basically overall, I think basically we think that we'll be able to achieve these figures that we have announced. So my third question is, again, the same line as I've been saying. So the backlight business, so you have not changed your initial from your view from the initial announcement. So honestly speaking, maybe volume wise, we will not be able to achieve your target but we think it didn't change your outlook because you have the assumption of the pricing. Well, in the beginning of the year, Mr. Kainuma, you said Because you have to be, say, the situation is toughs, or you won't be able to raise the prices. Maybe you were very conservative in the assumption of the prices. Maybe the pricing was better than you have anticipated. But mainly that at the beginning of the year, you were a bit conservative in your outlook. I would try to explain about that. Well, in terms of pricing, I think we are able to sell a products. I think basically that goes without saying, but as I said, from the model the last year models, I think the profit structure is completely different compared to last year's models and this year's model. So in terms of the value of the profit, well, compared to let me, reword it. So against the assumptions that we were thinking from last year in terms of profit, this new smartphone's profitability or say or the profit generating power, I think is completely different from last year to this year. So in terms of the impact on the performance, it's will be mitigated. So we have been conservative in our outlook, but when is this we have said that 1,000,000,000 for the outlook for the machine components, but right now it's tracking at 1,000,000,000. So initially that we'll be able to achieve this level. But, that is what we have thought that we'll be able to achieve, but including the negative factors and including some positive impacts from our other businesses, mainly, I think our profit will be able to achieve at this level. But in terms of the, currencies situation, maybe we won't have much room to have a buffer there. So that's the reason why we set it a 110 and then said that we're gonna, a change in show outlook. So of course, the Backlight business initially Well, I think the market consists of us that it was like sell a lot. And secretly, I was looking forward to that kind of thing happening, but maybe that was a kind of a dream. Any other questions? So the person in the second row from the front. Thank you for your explanation. This is Goto from Mizuho Securities. I have three questions. First, the assumption for ForEx, so JPY 110 to a dollar and the Renminbi assumption has been changed as well. So this will have a positive impact, but still profit, projection remains the same. So smartphone related risks and game consoles and such uncertainties have been included in the numbers as I understand, am I right? So that is my first question. 1st of all, we cannot a comment on the situation of a certain customer. And therefore, I cannot, comment on the currency situation related to a certain customer. However, your understanding is more or less correct. My second question is, the Q2 actuals, electronics and Mitsumi, you said the timing issues Is that because of the changes in the production timing on the customer's part Or were there internal factors? It's basically the customer's circumstances. Understood. My last question is about ball bearings. In the equity market, the people think that it will peak out on how much downside will be there is the concern. So, what is the ratio of the products are likely to go down. So having listened to your explanation, probably, we don't need to be concerned that much, but if you can quantify the potential downside. So, large bearings and small bearings, people tend to mix them up, but they are totally different the industrial machines, when industrial machines a business, became sluggish, the bearings shipments didn't decrease because in because of some applications the some applications use a huge volume of bearings if it could replace the decline in other areas. But of course, if economy deteriorates significantly. It will be another story, but as long as the current situation continues, there should be no major declines. Yes, So what time for SMBC Nikko Securities? I have two questions. So for the ball bearing inventory, is it to normalize that. So conducting, if you look at the gap of the production and order, it talks that you have been you want to reduce the airfreight cost of 20,000,000 if that is adequate. What level of how long would you think you'd take that? Well, it depends on where you're going to hold the inventory because you have to observe the market carefully to make that decision. So according to our experience, so including the high inventory levels a maximum 3 months, maybe it was too high, but if the market economy is good, then you'll be able to scroll down immediately. So since I have started working in this company, I have no experience of disposing of ball bearings in the inventory. So currently, so we put 300,000,000 units per month. So So if he sells 1,000,000 per month, so his 3 months will be 1,000,000, so maybe that we're holding too much inventory But for 2 months worth, maybe we can hold it as inventory. So specifically for automotive and fan motors, because, well, the fan motors demand and the productivity improvement when we reached a peak, coincidentally, it was the same timing. So we were able to supply if we didn't have any inventory, we'll be able to supply or or we didn't do the productivity improvement, we'll be able to give the supply. So because I think basically, it would have led to a, Tysitry into the server market, our strength is that when there even if there's a downside, we'll be able to be prepared and respond to that and that has been a source of our competitiveness specifically for ball bearing that will be a very important factor in this business So I have always instructed so to the people in charge of ball bearings. So if it's a 2 month worth of inventory, it means that this 1 year. So there's only about 10,000,000 gap. So even, at maximum, maybe it'll take a year to take care of this inventory. Thank you. The second question is that well, the bottom line is that as long as there's no massive slowdown, I don't have to be a guest. Correct. My second question is that in terms of that your China plus 1 strategy, please elaborate So I think it's an overall concept, including products outside of non bear bearing. So what type of approach are the customers are requiring? For the I think the most understandable situation is that the US companies when they are doing the assembly in China, these US companies basically their products will be imposed of this tariff that we're talking about. So the midterm lectins has ended today, And so what type of foreign policy is going to be, like, in place? You don't know whether it's going to change or not, but this if this trend continues, they have to change their the location where they produce. So those type of customer that is the type of customers that we're talking about cable bearings, I don't know whether, well, no. Some people are saying that they produce in Mexico and then ship it out of there. So I do not think that, if there's a 25% tariff, all of that will come to, Milabia and Mitsumi. I don't think that all of the ball bearings they will want to buy from us, even with the 25% of tariff, but actually the we are getting requests to submit these RFQs. So from my point of situation is that we will observe the situation. And thankfully, we have some excess capacity when we operate. And so that is one of our characteristics in Cambodia that we still have a lot still have a lot of capacity. So if that is the case, we'll be shifting our production there Well, I think it'll take about another 6 months for me to talk more specifically. I think the customers have started to study the situation. They were just started to look at the situation. So next is the person in the 4th row. From Mitsubishi Securities. Thank you for this opportunity. I have two questions. The first one is somewhat related to the previous question. It's about tariff, the US tariff and Mitsumi business. In Q2 and Q3, because of a startup of a production, was there any time and difference in shipping shipment and are you going to review the production site? Mitsumi business is wide ranging and Mitsumi's assemblies there are some products for which the customers suggested relocation or transfer. So it depends on I mean, depending on the customer, enthusiasm level of enthusiasm is different. So I cannot speak for all of them. I it's rather difficult for me to keep you a more specific information. I hope I answered your question. But regarding Q2 and Q3, some of them are quite bulky and, gloomy, no particular movement with regards to those products. Understood. Thank you. My second question is about backlights. So I understand this year's trend and about the demand forecast for next year if you have any updates. I don't know if it is appropriate for me to talk about this, but, please take this as my personal view. It won't go away. It will not go away. And, it turns out, right, every So the tone remains the same. Yes, that is right. So if you have any questions, please raise your hand. So, yes, we have one person. From UBS Securities. Thank you for your presentation. So my first question is that the in the backlight Johnix devices, you said that there has been some timing differences. In in terms of your productivity in a yield, the second quarter, how was the situation in towards the third quarter? What are the outlooks for these areas? So if you look at some reports, the backlight is short of supply, some media supporting about that. So can I confirm out that? Well, I can't go into details, but in terms of yield, there's no issue about yield. So Mitsumi's business, smartphone related business, no issue at all, yes, no issue. My second question is that so the full year plan for the Packlight, so I have upgraded the sales by JPY 10,000,000,000. And for the 2nd quarter results, in terms of the sales, it has been over your expectations. So the full year plan, increasing that by 10,000,000,000, meaning that, have you changed your view about the product mix against your initial forecast Or is it just only to change the prices or less more sales of the older model and less sales of the new models? Would you please clarify on that mix. For the second quarter, the sales was more than we have anticipated. For that area, initially, we were too conservative in our outlook for the 2nd quarter. So the actual results, were better than the conservative outlook. And for the, term second quarter end, we have some contribution coming from the new products. So that has been with one of the factors to the initial guidance from our side, has been too conservative. In terms of the product mix that you have referred to, I think there are various variations that you can consider, but basically, against the in terms of the product mix that we have anticipated at the guidance, we have not changed that, dramatically from what we said initially. So my last question, this is rather technical So in terms of the elimination, the 1st quarter, first half is 6,500,000,000 in the 2nd quarter, We have this using, acquisitions, and we have some costs allocated for that. So it means that 11,000,000,000 yenneville emission, if you just to check that from the second half. So is there anything that you have in view, but is it the risk with the buffer for the smartphones or the game console business. So in the second half, as Mr. Kainuma has been explaining from before, we are going to be proactive in M and A activity. So that will be the assumption and that is the reason why we are, budgeting various expenses. That assumption is that meaning that this is the you see it's not on the M and A that we are looking at in the second half, So some environmental related, countermeasures, this will be some extraordinary cost that will come up. That will be included in the intercompany, elimination for the second half. So if possible, when you're talking about the environment related countermeasures, what level of cost are you referring to? Well, in each of the locations, it's not only one location that I'm talking about. So the related the authorities, regulatory authorities, we are discussing various things. We're just in the midst of these discussions. So I cannot mention specifically where and how much. So just to avoid misunderstanding, it's not in terms of magnitude. It's not that large. Just to give you some idea of how large this is, it's not that big of a magnitude. So the person in the front row. Sato from Morgan Stanley Thank you very much. I have two questions. The first one is Bow Bearings Production Capacity at this point in time, it's 300,000,000 pieces per month. But the up to 350,000,000 pieces, you can increase production And when is it likely to be? And beyond the 315,000,000 pieces, when do you plan to increase product beyond that level. So GBP 315,000,000, that is ongoing. And as I said, the other time in order to suppress our investment, so the next 100 or the 50,000,000 pieces, we have improved the productivity And, we would like to inter introduce machines at the lower prices and machines that will be installed in the middle of next year onwards. So 315,000,000 pieces will become a possible from the end of next year till early and the beginning of about 2 years later. Beyond that time frame. Beyond that time frame, I, have no ideas yet. Up till 335,000,000 pieces can be produced by the existing plant. So 335,000,000 pieces, we can use current production sites. But if that is not enough, then we will have to build a new factory But at this point in time, we are not seeing any signs for that. Thank you very much. My second question is Mitsumi business, particularly camera actuators in Q2, the new products, actual results, and, Me too, me, it's overall sales, will go down in the second half, but in starting in Q3, camera actuator sales are likely to increase going forward. So what kinds of actual results are you seeing at this point? First of all, the camera actuators the situation is, as you pointed out, in Q3 towards the Q3, and it will increase So, we are now working on trying to, respond into that. And we are, enhancing our capabilities. And as Kainuma explained, in addition to the North American customers, the Chinese customers that we are talking with. So we would like to make sure to respond to them. So, North American, several North American customers, I should say, Understood. Q3 and Q4, seasonality. What is your view on seasonality? So there are various changes anticipated, but at this point in time, Q3 will be the peak. And in Q4, things will slow down. That is our assumption behind our guidance. Any other questions? So if you have any question, please raise your hand. So there are no other questions. We would like to end the business results meeting. Thank you very much for participating today.