Earnings Call: Q3 2018

Feb 7, 2018

Ladies and gentlemen, thank you all very much for waiting. Thank you very much for joining the telephone conference call for Minavia Mitsui Inc. The 3rd quarter results for fiscal year ending in March 2018. During the presentation, everyone will be on mute other than presented. So the participants will not be able to make any comments. And let me remind you that this broadcasting is recorded. Now let us open the conference call. Let me invite Mr. Yoshida, Senior Executive Director at MINABMICI, Inc. 3. This is Yoshida. Good afternoon. And let me explain the consolidated financial results for the third quarter for the fiscal year in March 2018. This is the highlights of our consolidated financial results for the 1st 9 months ending in March 2018, consolidated net sales was totaled 654,927,000,000, while over income came to 64,000,000,000 1,000,000, net income was 51,000,005,155,000,000. That is year over year increase of 48% in net sales. And operating income of 85.5 percent and net income of 2.1 times higher than the previous year's figures. Net sales operating income and net income totals For the first three quarters, all significantly exceeded the previous record highs. This uptick was due to significantly improved productivity for the Mitsubishi segment, which was integrated with the Milabia last January, as well as steady business for major products such as both bearings, motors and LED backlines. Currency fluctuations brought an app sales up by an estimated JPY 27,500,000,000 year on year, positive and operating income up by an estimated 1,000,000,000 year on year. Next slide please. As for the consolidated financial results for the 3rd quarter, net sales reached JPY 225,900,000,000 where operating income to JPY 22,437,000,000 year and our net income of JPY 17,000,278,000,000,000 net sales increased 35.0 percent year on year, while operating income net income were relatively 39 point 2% 42% higher than the previous year's figures. Net sales, operating income and net income respectively decreased by 4 point 2 percent, 9.9 percent 14.0 percent on a quarter on quarter basis, all of which exceeded the 3rd quarter record highs by a wide margin. Factors behind this big year on year increase include the steady business in chain components mainly for Bow Bearings as well as the consolidation of Mitsubishi Business. Currency fluctuations brought the net sales up by an estimated JPY 3,200,000,000 quarter on quarter and up JPY 12,700,000,000 year on year. Foreign exchange rates brought operating income up by JPY 40,000,000 quarter on quarter and JPY 500,000,000 year on year. Next slide please. This chart shows the trend in quarterly net sales. This quarter net sales reached 225,900,000,000 yen to significantly exceed the previous 3rd quarter record high. Next slide please. This is the graph with the bar chart for quality over income trends and line chart indicating operating margins. Operating income was JPY 22,400,000,000, the highest ever for any third quarter by a wide margin. This was also the 5th straight quarter we saw over income rise year on year. Next slide please. This slide shows the results for the machine components segment. On the left is the graph indicate quarterly net sales trends and on the right is a graph with a bar chart showing quarterly operating income trends along with a line chart for operating margins. Net sales for the third quarter were up 12 percent quarter on quarter to a total of JPY 46,700,000,000, exceeding previous quarter record high. Please note that beginning of third quarter, we have begun consolidating the results of CNA engineering in U. S. And a macro in France as other in Machine Components segment. Both clearing sales rose 3 percent quarter on quarter to a total of JPY 26,800,000,000, the average monthly total shipment volume, totaling 193,000,000 units this quarter, which was up year on year for the 21st quarter in a row. This November, our monthly production volume hit an all time high of almost achieving our The sales of Road Ams and Fasteners totaling 7,900,000,000 yen were up 1% quarter on quarter. Sales of Peabot assemblies increased 40 percent quarter on quarter with JPY 8,200,000,000 in sales. Peabot assemblies really contributed to our bottom line as we held on to over 80% of the market share. Operating income for the 3rd quarter totaled 11,000,000,000 yen exceeding previous quarter, record high, putting an operating margin at 23.6%. Operating income rose 2% quarter on quarter, while operating margin was 2.3 percentage points lower than what it was last quarter. Also, if we were to exclude the sales and operating income for CNA2 Engineering and MUC ARROW, the operating income for machine components would have been the same as the previous quarter. Looking at the results by product, we see the operating income for the ball bearing as well as the broad ends and fasteners increased quarter on quarter while assembly operating income was slightly decreased. Next slide please. This is the result of the electronics devices and components segment. This quarter net sales declined by 16 percent quarter on quarter to a total of JPY 112,300,000,000. Steady sales in automobile market kept motor sales up where they were last year at $46,700,000,000 again. Net sales of elacom devices were down by 27 percent quarter on quarter to a total of 1,000,000,000. Although we expected demand to peak and decline, demand for our LED backlights remained up and steady, resulting significant higher than expected sales. Sales for Sensing devices decreased by 7% quarteronquartertoreach1000000000. Operating income for the 3rd quarter totaled JPY 5,500,000,000, putting our operating margin at 4.9%. Operating income decreased 52% quarter on quarter, while our operating margin dropped by 3.7 percentage point. Looking at quarter on quarter comparisons by product, operating income for moderate remained steady, while profits for both electronics and sensing devices decreased. Next slide please. 3rd quarter net sales were up by 10 percent quarter on quarter to a total of JPY 66,700,000,000. The factors behind this uptick included peak demand of that same pickup may drove up the shipment volume for the new game console on top of the increased sales of camera actuators to major customers. The 3rd quarter operating income totaled 9,800,000,000 yen while operating margin reached 14.7 percent. That means operating income rose by 49% quarter on quarter while operating margin grew 3.9 percentage points. This increase was due to the growing shipment volumes for productivity across all products categories. Next slide please. This graph contains a bar chart showing quarter net income trends and the line chart indicating net income per share. Net income decreased by 14% quarter on quarter to hit 17,300,000,000, but still set the 3rd quarter record high. Net income per share was JPY 41.2.2 per share. Next slide. Here you can see a bar chart showing trends in quarterly SG and A expenses and the line chart indicating SG and A expenses to sales ratios. Quarterly SG and A expenses decreased $1,000,000,000 quarter on quarter to total $24,400,000,000 while the SG and A expenses to the sales ratio was 10.8% just as low as for the previous quarter. Next slide. The quarterly inventory trend as of the end of the 3rd quarter, inventories amounted 152,400,000,000 yen, down 10,800,000,000 from what it was 3 months ago, largely due to the diminished inventory of LED backlights, for which demand had peaked despite a 1,300,000,000 increase from the newly consolidated MAF ARO. Next slide? A bar chart on the left shows capital expenditure trends and 1 on the right shows depreciation trends. The 3rd quarter capital expenditures totaled $36,900,000,000, while depreciation and amortization expenses totaled 23,100,000,000. We will stick with this fiscal year's capital expenditures projection of 48,000,000,000 and expect depreciation and amortization expenses to be 1,000,000,000, which is lower than previously projected. Next slide. Here, a bar chart shows trends in net interest bearing debt, which is total interest bearing minus cash and cash equivalents and a line chart indicates free cash flows. As of the end of the third quarter, net interest bearing debt totaled 63,800,000,000, down 7,100,000,000 from the end of March. This fiscal year, we expect free cash flows to increase as profits grow and net interest bearing debt decreases even further despite increasing capital expenditures. In the meantime, we'll continue to actively pursue M and A opportunities with an eye to medium term growth. Next slide. Here, a summary of our forecast for this fiscal year. We expect net sales operating income, ordinary income and net income to exceed previous record highs by a wide margin. In the fourth quarter, we expect strong ongoing demand for ball bearings, alcohol products line, enhanced production capacity, and other factors to increase revenue and profit in light of these factors and short term demand trends for smartphone related parts of etcetera, inventory adjustment and eliminated exchange or estimated exchange rates, which were adjusted to reflect the Current rates, we have made upward revisions to the performance forecast that were revised last November as follows. The net sales from $810,000,000,000 to $850,000,000,000, the operating income from $73,000,000,000 to $80,000,000,000, the ordinary income from $72,000,000,000 to $79,500,000,000 and the net income from 1000000000 to 1000000000 respectively. Next slide. This slide shows the forecast by business segments. Next slide? Let me describe to shareholders' return. As announced last November, we are turn ratio, including share buyback we completed last year, should reach about 30%. This slide shows the current performance of miniature ball bearings, our anchor product line. The ball bearing business has been showing strong growth this fiscal year and expect it to grow further at a faster pace in the coming fiscal years. Let's look at the factors behind this growth with a focus on until last year, the external shipment volume drew 10,000,000 units per month on average. And this fiscal year, as you can see from this charge, it's increasing at a faster pace than before. This is just a preliminary figure, but the shipment volume for January has already exceeded 200,000,000 units. The production volume has also been rising quickly, where the monthly production volume was 250,000,000 units last April it went up to 282,000,000 units in November and will reach 287,000,000 units by the end of the fiscal year. This increase was paid off by our efforts to improve productivity and next fiscal year with additional equipment worth 8 1,000,000,000, we ordered last fiscal year, we will have enough production capacity to produce more than 300,000,000 units in total behind it all are 4 strong wins that are pushing us forward, namely automobile data center, for fan markets. And on the high end home appliances and smaller robots. The increasing number of cars equipped with more sophisticated energy efficiencies safety and comfort features as well as major or minor model changes has boosted the use of our bearings, which are being used more and more for these automobile applications. That is why our automobile buildings are growing at much faster rate than the increase the global automobile shipment volumes. The number of near turbo bearings used per vehicle is also expected to increase at an ever accelerating pace due to a shift to electronic vehicles and other innovations. When it comes to data centers, there has been a sharp rights in the demand for service that has been recently characterized in the news reports as exclusive shipping spray. Service, whether they are the HDDs or SDDs, must absolutely be reliable. The trouble is that they generate lots of heat and there are high function fan motors required to cool them down. Demand for these motors, employing a high performance bearings is skyrocketing. Another factor behind the John Pick in demand for bearing is the increasing number of high end home appliances incorporating high speed and dishy brushless motors to enhance the energy efficiency. Likewise, motors, equipped with high performance bearing have been adopted in small robots such strongs. While we expect that internal sales volume run. However, internal sales of bearing used for motors should it continue to rise, keeping our ball bearing business performance up we expect that the total volume sales for next fiscal year will be initially the 280,000,000 units with 200,000,000 units sold externally and 18,000,000 sold internally exceeding this year's level by a wide margin. Next, looking at the cost related factors, one time costs associated with initiative to boost productivity such as production, align setup and logistics costs are expected to be eliminated after the fourth quarter, hence profitability should significantly improve at the beginning of next fiscal year. However, due to rapid expansion of demand at present, we should expect that the productivity will increase going forward. However, some time some part of one time costs will also incur in the next fiscal years and onwards. Finally, we are planning to review our pricing policy. We will shift the focus from volume to quality requirement for pricing. Specifically, we will review the pricing of core parts and high quality products by proposing prices that are more in alignment with air value added. All these factors, including sales production, costs and pricing, we will, drive growth of all billings even further in the next year and year beyond. Next slide, please. Let's take a look at next fiscal year's 5 major growth engines. Firstly, as we touch on, with the previous side, Will Beering will enjoy a significant growth. Secondly, for road ends and fasteners, the efforts we've made to improve productivity will pay off and steadily enhance product activity. Additionally, increasing production of small and medium sized aircraft will drive the demand app so we can expect profits to soar next fiscal year. Thirdly regarding game console, we expect to see strong demand right from the beginning of next fiscal year and we still be working to align production capacity with the growing demand. From components. Since our UltraFan Lbd backlights have been rated quite highly by customers in terms of cost quality and supply, we expect demand to remain strong next fiscal year, we also anticipate that the more and more smartphones will be equipped with the camera actuators as they become more luxury. On top of that, we will aggressively expand sales targeting the Chinese smartphones market, including the meat range segment to achieve further growth. The final and the 5th engine is moderate. We project that the motor business will generate over 180,000,000,000 yen in sales this fiscal year and the figure will increase in the next fiscal year. The increase will mainly come from the automotive motors. We are planning to launch a number of new products such as drill shutter for luxury carts onto the market next fiscal year and years beyond. Motor business is expected to experience enormous growth over the long run. As we can see, we have a strong product portfolio that can weather the changes in market and customer trends. These products will enable us to sustain category, which profitability will be generated significantly. We will go on to more detail in the full year results announcement held to be held in May. Next slide please. Some overview of our ESG initiatives the Namibia, Mitsumi Group is working hard to address ESG or environmental, social and governance issues. To sustain specific measures, starting with E for Environment. 1st, most of our products are environmentally friendly. And by developing and selling them, we greatly contribute to solving environmental issues such as climate change and voice reduction. Specifically, bold bearing helps a lot of product to save energy with its super low friction provided by ultra precision machining technology whenever advantages. High Performance motors and LED backlights with ultimately high energy utilization efficiency greatly contributes to energy saving. For example, in Cambodia, we installed smart street lights in areas around or what under the Ministry of the Environment JCM Project Carbon Emissions Trading with an eye to building a state of the art smart city and reducing greenhouse gas emissions. In addition, under the Minabia Mitsumi Group Environmental Policy, we are promoting various environmental activities. For example, our factories are built for ultimate energy efficiency where state of the art 0 F1 systems, collect and reuse all factory wastewater, employing every possible technology designed to curb global warming, including LED lighting and thermal barrier coating. We are working to improve global environment and create economic values through activities to join development of infrastructure and industry in emerging economies and initiatives aimed at reducing the environmental footprint. Moving on to S for social, we are rigorously promoting automation of production lines including introduction of robots and Russian including in house equipment production. We are also creating a flexible production system considering characteristics of products and customer requirements such as production and cost competitive area for products suitable for labor intensive. This variety and diversity in manufacturing are one of the source of competitiveness. To strengthen this competitiveness, we actively utilize and empower women workforce. Our group employs about 100,000 people and of females account for about 70%. About 20% are on the managerial and supervisory positions. We actively hire women with outstanding skills based on characteristics of work to continuously supply high quality products to customers around the world. Since the 1970s, we went into Singapore and Thailand as a full runner and continued to improve Ultra Position Machinery Technology And Automation Technology, we have been trying to shift the structure from labor intensive production. In this process, we have fostered human resources through dispatching many local employees around the world, including Japan to acquire techniques and skills. Through the DNA of manufacturing acquired by our group employees fundamentally supports our manufacturing capabilities. At recent years, we have hired a significant number of young workers in emerging countries around Asia, such as Cambodia and the Philippines, where we have implemented our original training curriculum and employee benefit programs. In impoverished areas and areas where majority of people are engaged in agriculture, we provide employees with not only basic training on employment rules and work standards, but also paved the way to enhance self reliance through educational initiatives focused on issues of hygiene control as well as food, shelter and clothing. In areas where primary education is lacking, we operate schools and provide education in the employee's native language to improve literacy rates. These activities are well appreciated by local governments and communities are closely linked to our business growth and add to the economic value of our group. Finally, G for governance, Here, we are focusing on establishing and maintaining global risk management and compliance systems as we work to strengthen and improve our corporate governance and internal control systems. On the right side of the slide, you will see a major SBG icons that are related to activities. This slide as you have seen on our press releases and others, we will continue to make efforts to thoroughly refine the difference That is the source of our competitiveness and strive to create new value as our corporate slogan. This concludes my presentation. Thank you for your time interest attention. Let me move on to the Q And A session. Please press the star when 1. Pound 1. And then if you would like to cancel, please press We would like to limit the question to one question per person. And the question can be only raised by financial institution and the analyst. First question please. Please go ahead. This is Takayna of Goldman Sachs. There are three questions. First question is 4th quarter, of AeroTech that, what is the 4th quarter forecast for the last several months in terms of the model mix OLED is not actually increasing and instead perhaps LCD is going to be made? And are there any increasing China nano volume and if you could elaborate on that? That's the first question regarding the rozanfosnitz. First is Regarding the 4th quarter numbers, as is announced previously, regarding the sales, The seasonal adjustment is going to happen and that is the projection which we adopted for the fourth quarter of sales in regard to the next fiscal year. As you're aware, to the extent that we can announce as a very limited and as I explained in the previous slide. On page 19, Excuse me. Page 18. The performance is expected to be very robust. BLED or B OLED and Suphur? Perhaps you're all aware, but we will rather not to comment. On the breakdown. For the fourth quarter in terms of the sales electronics devices 4th quarter for a guest for your production 4th quarter. Electronic devices, if you did active, JPY 43,700,000,000, JPY 43,700,000,000 for the fourth quarter sales electronic devices. In addition, there is a second question. For electronics, 4th quarter profit. Seems to be increasing slightly visavis in the 3rd quarter. What are the reason behind us? In production, orders are performing quite well. And sensing devices are a little bit struggling. And that productivity improvement is going to be made and therefore profits going to be increased. On top of that, in relation with the customers, Partly some of the cost adjustment shall happen and that is projected into our current estimate. Usually, for electronic devices, if the sales is declining by about more than 10,000,000,000 yen than in the 3rd fourth quarter, usually the profit also declined as well. The motors and sensing probably the profit could not be declined, could not be offset fully. So are there any positive impact for the back license offers on the one time basis? Yes, a part of a one time impact of a backlight profit improve is actually projected. So do you see that these numbers are quite, assured? Yes, that's our take. The third question is regarding the gearing. Improvement of our profits regarding Barink was actually not continuous in the in the April and onwards. Well, how would you describe that situation? How much of a point of profit improvement that you are are expecting. This is a machine components segment and perhaps the, what is the target of that percentage points improvement in profitability that you are projecting? Or be it price? What is the on continuous improvement that you are seeing in the profits. The detail is going to be presented in May that we are scheduling the full year results announcement to the analysts. And please allow us to explain that for the detail at that occasion. But be a trend, although we have not explained the slide, however, at the time of the 2nd quarter results announcement, there is was an image for the future growth. And that remains true. And, even more robustly, we will be able to demonstrate of sales at the most recent situation. So external sales for the January was very strong and our production capacity is prepared well. Under time of the results announcement for the first half, as we explained beforehand, based on that particular number, you could actually make your own estimation, although I am not able comment on the specifics at this point in time. It's just a qualitative statement, but the performance is very robust. For instance, while RMB8 billion capacity enhancement was implemented, as I mentioned earlier. And for the capacity enhancement of 8,000,000,000 the production will soon start and we are preparing as we speak. And therefore, we are receiving very strong demand and we are taking countermeasures to accommodate with that. That's the current situation. Thank you very much. Moving on to the next person. Thank you. Hiroza from UBS Securities. I have questions. First, about the Mitsumi business, segment. For the 3rd quarter, compared to the 2nd quarter, sales, 3,200,000,000 increase in profit. So compared to the sales increase, the profit increase seems to have been large That's my impression. So compared to the plan, how did it do? And by product group, how did it do? Now improvement in the profitability, is it game console, smartphone related or is it more related to connectors and other businesses. Are you seeing a better productivity in those areas as well? In conclusion, basically productivity is improving in all areas and therefore, For all product quarter to 3rd quarter, there were some drivers: game control related business, in particular, has been the driver, but, profit increase did not come only from that factor in other product areas as well. We saw solid growth in profit, which resulted in 1,000,000,000 increase in profit. Smartphone related and camera actuator related business. Did you see a big growth in profit as planned? When you say plan, are you talking about the guidance as of the second quarter Briefing? Yes, that's what I mean. Well, in that sense, for optical devices, optical related devices, sales. Slightly from the third quarter to 4th quarter, there was some push schedule of behind. So in terms of sales, it was short of the plan, but in terms of profit, we did see growth as expected. Which contributed to the growth in profit that was mentioned earlier. I see. My second question, this is a related question, actually, in the Mitsumi business, segment from the third quarter to 4th quarter. When you do the subtraction, looking at the figures you presented, I find that the fourth quarter, both sales and profit are expected to decline. Now your 4th quarter projections have been retained you're just looking at the, increment in the third quarter for the revision for the 4th quarter. And the smartphone and game control related risks may be incorporated. Can you talk about that? Well, it's the latter So basically looking at more recent situations, we made the projections and in light of the Chinese New Year and other seasonal factors in the fourth quarter, we incorporated that and as for smartphones, as you know, some of the production landscape has changed and that has been factored in in making our forecast. As for game consoles, the strong business is expected to continue for next fiscal year included. We're again console, demand growth going forward. In the next fiscal year, from the beginning of the next fiscal year, we expect a high production level. For the fourth quarter, some of the seasonal factors have been incorporated the days of operation will be affected, partly due to the Chinese New Year's, but for the rest, the high growth in production is expected. And we're preparing for that. I see. Thank you. Actually, I have a third question as well, if I may. And bow bearing and pivot. The quarterly or monthly development, can you give us the details, the monthly figures? Airing, October production volume, $279,000,000, November 182,000,000 dollars, $272,000,000 for October 1,000,000, that is or December and 188 external sales 198 and 193,000,000 respectively internal sales. $82,000,000 $73,000,000. So the total was 27,000,000 D6. That's for bearing. HEVAT, October production, 25,000,000 November 25,000,000 December 25,000,000, sales, October 28, November 29 December 25,000,000. Next question please. Please go ahead. Good to talk to you. There are two questions. First, regarding Mitsumi, Canada Actuators, may I ask the following? The 3rd quarter sales at the time of November plan wasn't actually achieved. In North America customer, was that a major reason or was that because that the share of your company wasn't progressing as is expected? So OIS production included. Could you comment on that? That is the first question. The optical device production including OIF as we have explained in the past, I had improved significantly after integration and by accumulating day by day efforts, we are further improving the productivity of these production site as I have mentioned earlier, profitability is improving steadily. In regard to the volumes, share allocations, what had happened for that share allocations, which the company is not in the position to no survey. However, there's no losses in the market share at this point. But as many products are starting out and there are some intermediate emotional makers in between and perhaps inventory positionately, intermittently, a set maker and also the, ownership of new products and so forth. And perhaps material the timing of materializing sales could be shifting forward or backward. And perhaps for this particular quarter, our daily was slightly lower, but was the daily very small no, not at all, we were able to produce and be able to deliver in a steadfast manner and compared with the 2nd quarter this quarter, profitability is much better. Therefore, we are not very concerned about the situation. For the sales to North America, for such new products, OIS shipment over a hold was actually materialized. Is that correct? Well, when you look at the total of the third quarter 4th quarter, we are in the right direction. If you isolate 3rd quarter alone and what is the progress? Like I have briefly mentioned earlier, because of the timing of a startup and also the inventory accumulation and also in the process of whole supply chain the third quarter delivery was slightly lower than what Evie initially expected. Understood. Thank you very much. And the second quarter is regarding the next fiscal year. In the previous results announcement, our President Kainuma mentioned that the operating income, operating profit for the March 2018, the time of the December forecast, the probably the JPY 9,000,000,000 operating profit the incremental growth could be achieved. And, are you still stick with that idea at this point? Well, there's no change. So therefore, there is absolutely no change in that forecast. As I have mentioned in the slide in the middle, Our company toward the next fiscal year, whether are we projecting some negative aspects and so forth and then there's no negative factor at this point. Therefore, JPY 9,000,000,000 could be actually be incremental on the profits and in that situation for the next fiscal year? Of course, we will have to discern the situation quite well. However, at this point in time, a 9,000,000,000 or more is projected at this point in time. Now regarding LED backlights as well. The largest customer for smartphones on that particular customer, backlight sales will not decrease There will be more number of customers and application will increase and therefore there will be no negative impacts or your performance. Is that your understanding? Once again, regarding the comments on the particular customer, we are not allowed make any comments. But, for the overall LED backlight business itself, then as you pointed out in the next fiscal year, we will be able to enjoy a solid business. Is our take at this point. Thank you, Akiuki from Nomura Securities. I'd like to start with actuators. Looking at different applications in terms of sales, OA and communications, areas, quarter on quarter sales have declined by $20,000,000,000, which is the same as a decline in backlight. So it appears to actualator business is not growing. Now at the time of the second quarter, I think Mr. Kainuma talked about a better ramp up than expected. So I'm wondering if that's really true for this business. So in terms of sales, Did it grow dramatically or not is the first question? And isn't the inventories building up in this particular business year. If the production capacity was increased, then it should mean that the inventories have built up. Can you talk about that? Well, sales growth or not. Are you talking about 2nd quarter to 3rd quarter? Yes. So, quarter on quarter, yes, sales grew And as for inventories, looking at the inventory in the supply chain, we don't have a exact figures, but inventories within our company Is it building up and not being consumed by the end of the fiscal year? No, that it's not what's happening. But inventories did build up, right? Well, inventory total as was described, from the end of the fiscal second quarter to the full quarter, yes, it did build up. But it was not a big jump. So from the third quarter to 4th quarter, for Misumi business segment, you expect the, earnings to go down by 6,000,000,000 or so? I think that's your assumption. Of course, I know that there are some conservative factors being assumed, but Is it going to go down that large? Do you need to do that? What are the basic assumptions that you used to come up with this figure? If I could repeat myself, Chinese New Year is just one factor. So the rate of operation in February is going to be lower. And the currency foreign exchange assumptions have been revisited. I think that's the biggest factor. So, we have made conservative assumptions. We believe that is the requirements when we look at this business. So overall, these factors were taken into consideration to come up with that forecast. So as a direct overall direction, do you expect a decline in actuators or do you think what pent up in the 3rd quarter would be sold in the 4th order. Well, looking at the market situation, many things are being said by different people. And so maybe we don't We are not in agreement with that, but as far as we are concerned, as we have been explaining in the third quarter, some of the sales expected in the third quarter was pushed back to the 4th quarter. So in that sense, the sales for the 4th quarter, of course, on a quarter on quarter basis, we are factoring a decline, but is it going to be a large decline? No. I see. But the rate of operation, the utilization is expected to go down. Yes. Just one more question, if I may. Earlier you said that for the fourth quarter as for the backlight related business, You said that some will be pushed back to the end of the fourth quarter. Let's say some of the negative factors in the third quarter would they turn into positive factors in the fourth quarter and therefore it's not going to affect the full year forecast or is it that for some particular reasons, there were some revenues expected in the 4th quarter, which would be a pure increment in terms of profit. Well, there are many things that we have to keep secret in relation to our customers, so we can't give you the specifics. But in essence, we have been in this business for a long time. And from the business, they are many difficulties that we are aware of in relation to this business. For example, specifications determination through these. There are many gray areas, and They are recognized within the production in each quarter. That should result in this forecast. I'm not sure if this makes sense to you, but that's the situation. So, that would mean that I thought that the profit in the third quarter was too low in the electronics device, but you expect that would be absorbed in the 4th quarter. No, this is not just for the 3rd quarter, has been reported. On a full year basis, some of the expenses or costs might be might have the positive impact in the fourth quarter. So, in terms of the second and the third quarters for the past, the things that you could have expected more profit but those would be realized in the fourth quarter. Is that what you're saying? Once again, for questions, pound 1 and Now, we've got to conclude the Q And A session. Lastly, we've invite Mr. Yoshida of Minavia Mitsley Inc. To make any closing remarks. Well, today, thank you all very much. Your participation and we look forward to working with you going forward as well. Thank you. This concludes today's teleconference. Thank you very much for your participation.