Earnings Call: Q2 2018

Nov 8, 2017

Ladies and gentlemen, at 6:6 o'clock. Therefore, let me start the meeting. Thank you all very much for taking time at your busy schedule. To attend our session for the 2nd quarter results announcement for our fiscal year ending in March 2018 of Minabia Mizzi. Let me introduce the members of presenters today from to your right, the president and chairman of CEO and COO, Mr. Yoshiza Kainuma. Executive Officer in charge of Accounting And Finance Department, Mr. Hiroashi Yoda. Managing a executive officer and deputy charge of corporate management, Mr. Kazuhiko Yoshida. I will be serving as an embassy. My name is Yamaguchi of IR department. Very nice to meet you all. First of all, Mister Yoshida will give you the overall brief of that business results, and mister Kainuma will address all the management policy and business strategy. After that, we will take some questions. We are scheduled to finish this meeting by 7:30. Regarding for the retail of the financial statements, please refer to the supplemental financial data and the first first report and please refer to this document. Also, please be reminded that we have distributed 3 press releases notice on regarding the dividend on services intern in interim dividend of the revised, financial results, for, dividend forecast and a notice, regarding the divisions of Fluor consolidated results for the fiscal year ending March 2018, as well as, the notice regarding the acquisition of shares of Mark Iowa breaking rectification SAS, and, also, we have a distributed feedback form and, that will implement our IR activity. So please fill in and please leave the feedback form on your desk. This session is going to be streamlined over the Internet including the q and a session, and there will be some streamlining services, on the websites as well. Please remind it as well. Please refrain from taking photos of of recording on the session in this hall. Now with our federal due, Mr. Yoshida, please. Good afternoon. I am Yoshida. I would like to explain the consolidated financial results for the first half of the fiscal year ending in March 2018. Now, here are the highlights of our consolidated financial results. Consolidated net sales for the first half of the fiscal year 'ninety March, twenty eighteen, was 2 429,000,000,000 and 27,000,000,000 yen, while operating income was 41,000,000,000 and 951,000,000,000 yen and net income was 34,000,000,000 and 276,000,000. That's a year over year increase of 55.9 percent in net sales, while operating income and net income were respectively 2.3 times and 2.7 times higher than the previous year's figure. Net sales, operating income, order income, and income were all record highs as the half year results. This uptake was due to the improved productivity for all the products of the Mitsui Business segment, which was integrated with Minabia last January, as well as increased seasonal demand for products used in smartphones and game consoles. These factors significantly boosted our bottom line, while first higher than projected sales of LED backlights and also both earring, which is our major product and contributed to the outstanding performance. Currency fluctuations brought net sales up by an estimated 14,800,000,000 yen year on year and operating income was up by an estimated 1,800,000,000 yen year on year. Please move on to the next slide. Now I'd like to go over the consolidated financial results for the second quarter. Consolidated net sales reached 235,000,000,823,000,000, while operating income was 24,000,000,000 and 889,000,000 yen, and net income was 20,000,000,000 95,000,000 yen. And net sales increased by 52.3 percent year on year. And both operating income and net income rose 2.1 times the previous year's figure. Net sales, operating income, and net income respectively increased 22.1 percent, 45.9 percent, and 41.7 percent on a quarter on quarter basis. Net sales operating income, order income, and net income were all the highest ever recorded in any quarter. Factors behind these increases include a higher sales volume for LED backlights and smartphone components, such as camera actuators, whose sales were driven by the strong seasonal demand and the bigger shipment volume of game consoles due to, growing demand. And the robust sales of both earrings as well as other machine components. Currency for Appchations brought net sales up by an estimated 100,000,000 yen quarter on quarter and up by 15,000,000,000 yen year on year on operating income. And of the foreign exchange rates brought operating income down by 1,100,000,000 yen quarter on quarter and up 1,700,000,000 yen year on year. And next slide, please. This is the chart showing the trend in quarterly net sales In this quarter, net sales reached 235.8000000000, and this was the highest quarterly figure ever recorded. We anticipated that net sales for the 3rd quarter will decline from what they were in the 2nd quarter given the conservative forecast for smartphone components which account for the bulk of the overall sales, even though demand for game console is actually expected to be strong. Let's let's move on to the next slide. Here's a graph for the bar chart for a quarterly operating income trends and the line chart indicating operating margins. The operating income was the highest ever recorded for any quarter, and the operating margin had double digit. To a total of 10.6 percent. This was also the 4th consecutive quarters of positive year on year, operating income growth. Just like net sales, we expect that operating income for the 3rd quarter will drop slightly quarter on quarter given the conservative forecast for smartphone components, even though demand for game console is expected to be strong. This slide shows the result for the Machine Components segment on the left is a graph indicating quarterly net sales trends, and on the right is a graph with the bar chart showing Quarter operating income trend, along with a line chart for operating margins. Net sales for the 2nd quarter was up 3% year quarter on quarter, to a total of 40 1,700,000,000 yen. Bow bearing sales rose by 3% quarter on quarter to a total of 1,000,000,000 yen. The average monthly external shipment volume totaling 188 video units this quarter, which was up year on year for the 20th quarter in the row. We are making steady progress with boosting production capacity by improving productivity, this September our monthly production volume hit an all time high, of, 273,000,000 units. Sales of Raw Ens and fastener totaling 7,800,000,000 yen were up 5% quarter on quarter. Sales of pivot assembly remained, they remain the same as they were in the previous quarter at 7,900,000,000 yen, and people's assemblies steadily contributed to a bottom line as we, keep, over 8 80 80 percent of the market share operating income for the 2nd quarter totaled 10,800,000,000 yen, putting the operating margin at 25.9%. Operating income rose 4 percent quarter on quarter and the operating margin was 0.3 percentage points higher than it was last quarter. Looking at the results by product, we see that operating income for forbearance increased, as well as operating income for road ants and faster, slightly recovery quarter on quarter, while pivot assembly operating income remained flat. Moving on to the next slide, please. For the electronic devices and components. 2nd quarter net sales rose 28% quarter on quarter to a total of 133,100,000,000 yen. Motor sales grew steadily mainly in the automobile market to hit 46,500,000,000 yen, for a 6% quarter on quarter increase. Net sales of electronic devices were up 48% quarter on quarter to a total of net 75,800,000,000 yen. While demand peaked in the second quarter, production of LED backlight for our major customers continue to move along smoothly. We expect both sales and profit to slow down in the 2nd fiscal we have. Sales for sensing devices grew 17 percent quarter on quarter, to reach to, 9,700,000,000 yen. Operating income for the 2nd quarter was 11,400,000,000, up, which makes the operating margin at 8.6%. Operating income rose 67 percent quarter on quarter, while the operating margin edged up by 2.0 percentage points. Looking at quarter on quarter comparisons by product operating income roads for both electronic and sensing devices will remain in stability for motors. Please move to the next slide. This slide shows the results for the Mitsumi business segment. 2nd quarter net sales were 27 percent quarter on quarter to total 1,000,000,000. The factors behind this increase included peak demand that significantly drove our shipment volumes for camera actuators and new game consoles. 2nd quarter operating income totaled 6,600,000,000 and operating margin reached 10.8%. This means that operating income rose 72 percent quarter on quarter, while the operating margin grew 2.9 percentage points. This increases thanks to the shipment volume increase in addition to further progress in boosting productivity in the whole product categories. Please turn to the next slide. So this graph is a bar chart showing the quarterly net income trends and the line chart indicates a net income per share. Net income jumped 42 percent quarter on quarter to reach 20,100,000,000 yen. Sitting a new quarterly record high. This figure far exceeds the previous quarter record set in the fourth quarter of last fiscal year, which included a gain on negative goodwill and other extraordinary gains and losses. Net income per share was also the highest ever at 47.7 yen. Let's turn to the next slide. This bar chart shows the trends in the quarterly SG and A expenses and a line chart that indicates SG and A expenses to sales ratio. Quarterly SG and A expenses rose 1,500,000,000 yen quarter on quarter to total 25,300,000,000 yen, while the SG and A expenses to sales ratio was down 1.6 percentage points from the previous quarter to reach 10 point 7%. Please turn to the next slide. This is the chart of the quarterly inventory trend. As of the end of the second quarter, inventories amounted 163,200,000,000 yen. The figure was up 29,200,000,000 yen from what it was 3 months ago. The increase was mainly due to an inventory increase of components for smartphones and game consoles. Inventory should reach an optimal level in the third quarter and onwards as demand peaks. Please turn to the next slide. So the bar on the left shows the capital expenditure trends and The one on the right is for the depreciation trends. Capital expenditures for the 1st go have totaled 22,300,000,000 yen, while depreciation and amortization expenses amounted to 14,900,000,000 yen. We will add 4,000,000,000 yen to our initial capital finishes projection of JPY 44,000,000,000 to make it JPY 48,000,000,000 due to aggressive investments, mainly in the mid business, while we expect depreciation and amortization expenses for this fiscal year to be in line with our initial projections. Please go to the next slide. In this slide, there is a bar chart that shows a trend to the net interest bearing debt, which is total interest bearing debt minus cash and cash equivalents. And the line chart indicates the free cash flows. At the end of the 2nd quarter, net interest bearing debt totaled JPY 67,400,000,000 and was down JPY 3,500,000,000 from what it was at the end of the previous fiscal year. Please note that share buybacks and M and A expenses were included in the 2nd quarter. This fiscal year, we expect free cash flows to increase significantly as profits grow and net interest bearing debt decreases even further, despite increasing capital expenditures. In the meantime, we will continue to actively pursue M and A opportunities when I to medium term growth. Please go to the next slide. As approved by the Board of Directors on February 13th this year, we bought back 4,600 to 8200 shares with a total value of 8,351,000,002,07,184. Next slide, please. This is a summary of a forecast for fiscal year ending March 2018. We expect net sales, operating income, ordinary income, and net income for this fiscal year to exceed previous record highs, bioware wide margin. In the second half of this fiscal year, we expect the external shipment volumes of ball bearings, a core product line, to continue to grow However, due to the uncertain outlook for the smartphone components, we are keeping our projections for sales and profits on the conservative side. In light of these factors and the impact they will have on our operations as well as currency movements and customer trends, we made in upward revisions to a performance forecast which has been revised in For the operating income forecast was revised from JPY 67,000,000,000 to JPY 73,000,000,000, ordinary income from JPY 66,000,000,000 to JPY 72,000,000,000 and net income from 50,800,000,000 to 57,000,000,000. So, Mister Kainum, we'll elaborate on the reasons for these upward reasons later on. Please go to the next slide. So this slide shows a forecast by each business segments. This concludes my presentation. Next, President Kanua, please. Then let me describe the management policy and business strategy. I happen to catch a cold and perhaps my voice is hard to listen to. However, please, bear with me for a moment. This is the results for the first half, which was just described earlier. I will skip this slide. In regard to the second half of the Sierra, to be frank, in a way that we published the guidance, we made a lot of, discussions internally. And as a result of that, what we have come up with was that, in fact, for the smartphone components, which the market is not so clear at this point, where we decided to adopt a conservative approach, for our forecast. Because of the various reasons overall, we came up with a very conservative approach to announce the forecast need to app apologize because the gap, for the revise is very big. And, therefore, we have actually applied the most conservative assumption applied at the foreign exchange rate at 105 yen to the dollar. And, depending upon the situation, once we started to see, the situation clearer and we will once again announce, the, updated forecast. So roughly, JPY 42,000,000,000, which is JPY 41,900,000,000 in the first half and also the second half is going to be 31,000,000,000,000 yen. And last month was already, been closed and probably, 800,000,000 is going to be, shortcomings, and therefore, 4,660,000,000 is the remaining balance that we need to achieve because we were able to achieve the 800,000,000 yen. And then, looking at the overall progress and probably you will wonder, Oh, I do have to apply such a conservative, forecast. However, we just wanna emphasize that because the whole situation is not a clearly visible this point. And therefore, as soon as possible, we will be revising the forecast so that you will see, the final forecast from the company's point of view. MidSuite Business is making a great extent of contribution. That is for sure. But as you see from this, chart, the Fuma Minne Bea business we're able to see a great extent of improvement. For example, machine components, 1st of all, has not yet achieved the best performance at this point, but seeing any major improvements and also, electronic devices components such as LED lights as well as motors, mostly are seeing some improvement as well. For today, I've let you give the overall picture about this fiscal year, but that's, just been summarized on this, a slide. And I know it is slightly early, but let me discuss more about the forecast for the next fiscal year. First, about the ball bearing. Thanks, Lee. There was a big increase in demand, for the external sales. And, in the September month, 195,000,000, was the volume which we were able to achieve for the external ball bearing. And in October, their national foundation date. And therefore, there were 186,000,000, only. However, once again, this month, we were probably able to have a 190, uh,000,000 units per month basis, and that's an indication so far, automotive, high end home appliances And that is, of course, as motor and number of demand for motors is increasing drastically. And also, data centers are another drivers. And also small scale robotics, including drawings. Or perhaps the pet Roberts is another thing, but there will be smaller robotics be, interfering in the market and, lots and lots of a motors that's going to be used in the market. 258,000,000 units for this month. However, a year ago in this month, We were trying to increase, 10,000,000, units for the, the capacity. And, therefore, we have decided to cutbacks And therefore, they gradually, there will be the machines and facility to be, installed. And then by next year, we would like to achieve 300,000,000 units. With the current capacity, next February, we will be achieving a 285,000,000 units. And what about the profitability of such products? Profitability, starting from next fiscal year, It's expected to improve. The reason behind this is such that, first of all, We are working on variety of productivity improvement projects and in order to optimize the productivity we are realigning the, production sites. And therefore, there are some substitute production as well, logistic costs as well. And, we are seeing a production volume, or month or month. $278,000,000 was already achieved, very soon. $278,000,000 is going to achieve very soon, and we are rapidly increasing the production volume. But whilst bearing be a studied for production. And then, to be completed for production, they are still the manual work. And when the workload increases, and we have to increase the headcounts. And we identify that particular challenge. And how we're gonna Automate the manual processes is going to be a big challenge for our company, and we shall be achieving the, automation of the process, this year. Probably by the end of February, we will be finishing the realignment of the factories and we don't know for sure that how much inventory can we, accumulate, but if that happens and then we will be able to reduce the air freight. So, we know this plan, and therefore, we'd like to achieve this to the stand possible. So that's overall situation for the ball bearing business. So one point I would like to emphasize is that studying in April and onwards, which is the next fiscal year, and we will start to bear fruit. As of the 1st April, it was the, for an activity improvement project started in the mid February this year is going to be completed before the end of this fiscal year. And, therefore, that would make a full contribution in the next fiscal year. And then if this con situation continues and the boat bearing factory will be fully operated and capacity will not be sufficient. Today, we have this decided that in Pompying, we will start building the front end processes. And, we will probably bring all these apart assembly to, Cambodia. And if that's the case, then Well, let's say that if you exceed the the, demand increasing 310,000,000 for our company and we might be, we might have to think about the possibility of moving the assembly line to Cambodia. We have just, hosted the the board of director meeting, and we have adopted that decision at this point. And the LED back line next is that about 2 years ago, as this is covered by the media, LG, closing one through yoyan, started to produce the, organic, e d, or led. And, our stock price was plummeted from 2000 to 1300 yen, per share level. And, I've been insisting that, their project is not very clear at this point in time, and that remains true. What I can tell you today is that In the next fiscal year, there are various, customers' indication and approaches that we are, calculating, and there will be no major decrease in the demand, in to our company at this point. And we will expect that the high level of demand is going to continue, for a certain period of time. So your concern could be forgotten. And, that's a strong message. And, I cannot elaborate on this packet of point for myself and, therefore, please research into the markets and, there might be some speculative information, or perhaps there are some media coverage redirect it to this issue and as well. And please, perhaps, you may be able to investigate, this particular information on your own. So that's the extent of what I can explain at this point in time. And the next topic is quite, phenomenon. And, this is just a gauge of dreams that the company had worked over 15 years, and perhaps you might be surprised that Mina Bea is working in this area for such a long period of time, but, we made a lot of efforts, Tryna Era, many times. And, we are using J Gauge, And, that's, what is it called in academic area. And this is called Ann Gauge. And We were able to have a very super small, super sensitive, sensor that we were able to fit off by ourselves. Right outside of this conference hall, we are displaying the actual product, and please take a look Later. Application is expected to be in the automobile mobile whereabouts and, robotic sensors. These are the targeted market. And, the tens of 1,000,000,000 of yen, market sales is going to be expected, but I would say that, there will be a 100,000,000,000 yen level of sales that we could I could expect, but the sales is not going to be generated in the next school year, it will be in 2 years' time that a company will enjoy some contribution from this product. The sample distribution has already been started to many potential customers. We will capture the customer's response and We will be updating you on the list situation in the future meetings. Now regarding Mitsui me business. So, 2000 yen, reducing to 1300 yen, and a JPY 650. And, negative, 10,000,000,000 loss making company is becoming positive 70,000,000,000 yen profit company this fiscal year. Now the record high, results, for me to me, was, 33,100,000,000 yen of operating profit before. And currently, it it was a 20,000,000,000 so therefore, 33,100,000,000 yen, operating profit that, it's a it was generating, they were only counting on the single business. However, they are doing various smartphone business and also as the 7 arrow businesses are representing, many, the product are enjoying high productivity, and the power supplies businesses, food on a full capacity at this point. It's not that the game industry is occupying, capacity. Rather, I have instructed them to, catch, and capture all possible of the sales and demand, and therefore, the power supply is fully, occupied. And in Chintao, there is one factory which we've, built the building, and then lines are not fully installed. And that's the only, vacant capacity for the all other factory, they are all operating on the full capacity basis. I will later mention, but 25,000,000,000 is expected, in my opinion, in the future. But from our point of view, 33,100,000,000,000 yen need to be exceeded, after integration with our company, and that's an internal target. And I would say personally, that, we, are able to achieve a 33,100,000,000. And therefore, I hope that, you will understand and expect this business to a greater, great lot. Then in various areas, auto automobile, automobile, and, Well, if, you don't have a higher ratio rely, reliance on the automotive product and there will be no future, and that's mass media is covering. And therefore, I have mentioned all possible products related to automotive area, aviadis or others and, 100,000,000,000 yen worth of a sales is going to be growing to 200,000,000,000 yen level. And such a potential is now felt by myself, And for the, auto installed motors, mainly from the German automakers, we been approached in many times and also recently related coils or connectors or antennas. These are expected to be a sold war, and penetrate into more OEMs as well. The luxury carts or luxury products been launched in the market. And as a result of that, luxury components would also be launched in the market. That's a the formula that we cannot deny, and electrification of the, automobile is progressing such as EV ADAS and also environment, energy, consumption, safety, and so forth. And higher needs are observed in a market. As a result of that, Our components will be automatically sold to the OEMs, but that's the situation which we see. So electrification of automobiles and the high more high end functions, this will be a following for me, I mean, I mean, to me without mistake. So in the following years, this is a more short term perspective. What will be the growth driver. So we have a going to come up with a respiration of 3 year plan, but as I've said, smartphones I think that, next year, we will solve better than this year, game consoles this year So there was a situation in the supply chain for this year, but the market, has high variations, so the game consoles will sell more. And machine components. So 300,000,000 units, we have that capacity. And automotive So we have these various components that we'll be able to sell. And what is the most important is that these new products is going to go into the market So I can't mention specifically about these, and so sorry to say, but haptics devices, 6x sensors, high sensitivity, high resistance string gauges, new Salio. So of the We have the Salil showroom just across the street. And if you have some time, please take a look at the functionality of Salil. You can experience functionality of Salliot. It's just across the street. I hope you'll be able to experience that and bed sensors will come out So there's some things that are not included here, but they will come out into the market. So these products will be driving the minimum year to mid to mid business, mid to mid to mid to mid business going forward. So, if we go to page 29, this slide is the summary of the numbers I mentioned. The gray portion So we have the dark gray and the light gray. This is what we have announced in this May. This 3 year plan that you have announced, midterm business outlook for 3 years. So currently, FY 18, March 18. So at least to 73,000,000,000 is what we're looking at. So if we just put, aggregate that. So this 1,000,000,000 yen, 100,000,000,000 yen of OP, I think we'll be able to, achieve this 1 year ahead of schedule. So if things go well, maybe you'll be able to achieve it next year. That's what I think. So what I want to draw your attention to is so this, 73,000,000,000 and the difference between 70,000,000,000 and 82,000,000,000. This a 9,000,000,000,000 difference. So I can't give you the breakdown of this, but the smartphones have been selling better next year. Game consoles was so more next year. The Bearings Machine Components is going to be much better than this year. So So even these 3 combined, you'll be able to have a plus 9,000,000,000. So maybe 77 or 79,000,000,000, if you just end at that level, So there's a lot of potential for us to add another 9,000,000,000 to that figure. So today, I talked about our outlook, but in terms of more detailed contents, currently, there's things that I cannot mention specifically So May next year, as always, I will, we will revise and review these numbers and then make a presentation to you. So, 1 year or maybe 2 year ahead of schedule achieving these targets, the machine components, I we said 50,000,000,000 but maybe 51,000,000,000 is what we can achieve. So if you recall M and A, 15,000,000,000 is what we have been saying. The other segments has become better. And CNA and Mach Aero, we acquired these 2 companies, by doing so, the 10,000,000,000 is what we can do for, for the future M and A. So if you include that in the machine components in this within 3 years, 51,000,000,000 in this 3 years, I think this is a solid target. So electronic devices and components, the motor business is going to grow. Backlight business will continue to be strong. So if you consider all these factors at $33,000,000,000, I think will be achievable. So Mitsumi is $20,000,000,000 this year, So we think there is a lot of potential for this to go up further. So 25,000,000,000, it says here, but as I said, from my point of view, it's 33,100,000,000 would be the numbers that we will have in mind. So if you include all this M and A, 10,000,000,000 yen, and 100,000,000,000 of operating profit, I think that level of numbers is we is quite achievable for us. So game consoles, it used to be the case that in the past 110,000,000 of units were sold So maybe each household had one game console. So now we're talking about 1 person, 1 unit per person. So we want to have look at the long term growth, reflected in our business going forward. So the other day, we have made an estimate about our acquisition of the CNA, all shares of CNA. So, within three d printing, for the first time, they have been able, approved by the FDA. So this was the medical components. Have been forced ever to be approved by FDA. So they have the technology to make these medical components. So this 3 d printing, we have been we have been thinking that we should spend resources at an early timing and using this as an opportunity, So this, our, 3 d technology has become one of the technologies that we hold in our group, and I think this is a, good contribution. Another, acquisition is that, sorry, not an acquisition, but this, plant, the owner of this plant, In 2008, when the global financial crisis after the global financial crisis, So for the major plants, he bought it, but at a low price. And they're using part of it right now, and the other spaces are available. So this is NHBB, which is in New Hampshire. So we want to expand the capacity of NFBP utilizing this space. Although, we were talking about going to Mexico, but, maybe we actually referred to President Trump, but, well, that really didn't go in that direction. So we have excess capacity here in this plant, and, we can hire people. So NHBB capacity increase, what has to redo it? Is this one concern? But because we have CNA, So, in the natural transition, for the time being, we can't solve that issue. So I think that's the biggest, topic here. And I think yesterday, maybe 2 days ago, we have announced an acquisition of Machero. This is a French company. So this, they provide very important components to Airbus. So they are they are a company that are engaged in purchasing core components to aircrafts. By acquiring, this company, It means that, the core component manufacturing technology, we can learn about that, but not only that. So the relationship with the Airbus group is going to be very close. So the sales synergy and product synergy is what we're going to get. So NHBP and Minabia UK, they are, producing aircraft related products. So with the MAC Aero group, we want to leverage the cell synergy. And intake, basically, in has a plant in Bengal in India. And this plant, and the MEG ARROS, MEG ARROS plant is in Bengaluru. So Our we want to make it the R beachhead in India would be Bengaluru. So I think this is a natural transition or natural trend of things. So Mac Arrow and Intech are very excellent and talented Indian people working there. So with these Indian people, we would like to communicate. And look, we like to go into the Indian market, under long span. So, for the time being, if the bull bearing demand is going to grow rapidly, some of the things that we cannot produce in, current, locations will make components in Thailand and then ship and assemble that in Cambodia. So for the time being, I think basically we'll be able to cope by doing taking those actions. So the debt equity ratio, it was 103% when it became president. But, we have been able to bring it down to about 20%. So we are going to increase our dividend and the rating. So, we have been able to be upgraded to single A. So in terms of the dividend policies, because we have been because we have some issues about borrowing, but not maybe not, conservative, but basically we have been focusing on, investing for the future growth. And of course, we'll be spending our money for future growth. But, shareholder return, of course, is what we want to focus on. So that's all for me. Thank you. So let's go to Q And A. We'll bring you over a microphone. Those who have questions, please raise your hand. So the questions will be specifically from institutional investors and analysts. So before you state your question, please say your company name and your name as well. So let's go to the pressing the gray suit center middle front row. Took a moment from Goldman Sachs. I have three questions. So would you please answer them 1 by 1? Number 1 is that at the beginning, the beginning, president Kainuma said in the second half, it was difficult to have, you know, take a outlook for the second half. There was range that you have to consider. Would you elaborate? What is the range that you're looking at if it goes on the upward trend? What is a factor that will bring this up? So in terms of the magnitude of the impact, could you give us some color? Of course, the company plan, I think, basically, that's your guess, best guess. But if you make any assumptions, so what type of discussions, what type of possibilities have you discussed internally? So in terms of the way you thought about your la outlook, can you elaborate a bit more? So as you all know, the smart phone's actual numbers is going to come out from now. So 2 years ago, what we have experienced is that there was an announcement that was conducted, and we're not being able to reach those announced figures. And we were scolded severely. But that was based on the best available information, and we came out with those outlook. So announcing that on the beginning of November, I think that was a quite courageous thing to do based on my experience. So that's the reason why it's say it's very difficult because we are not the customers. We don't know how much smartphones is selling. We don't know how the market is going to react about these smartphones. We won't know. So we discussed various, these fund various aspects, but we said that this be conservative, and when we have a better, visibility, then we will revise again. But today's message is that this would be the minimal level. This is a very secure solid number that we are announcing today. Maybe that's the message I would like to send out. So the smartphones would be the biggest swing factor. Game consoles or what about those others? Well, the most volatile is a smartphone. Yes. So for the machine components, I'm not worried at all. So game consoles, it's a on a strong demand cycle. I don't we don't have to be too much concerned about the game consoles. And for the other products, overall, if you look at the overall situation, there's no there's not so many weak sectors right now. So, well, if I dare to give you some explanation, maybe that would be the way I would explain the current situation. Well, my second question is that so the Mitsumi business so, there has been a substantial, upward revision. In terms of the profit, so the full year 5,000,000,000 plus, there was upward revision for the full year. So if you break it out, So is it from the game consoles or for the actuators or from different products? What is the contribution of, these increase of the profit? Well, in terms of the level of contribution, to be frank, basically, it's equal. Well, that means game consoles, smartphones, and others. Others maybe will be the biggest. So maybe I should have risk order, but I think that's the image that you should have. Understood. So with any question, with this from next year onwards, in terms of the strategy that you want to have sovereigns as game consoles, there this this should be a lot of demand for capacity And you you under I think basically you understand the risk and you had discussed how to do about that. And for the actuators, if you, you know, focus on profitability. So what is your strategy about share for next year? So so the co you have saving in core sub core. If you have changed your strategy for next year, would you care to talk about that, or basically your strategy is unchanged? The current share, the current condition, under this current condition, and based on the external factors, next year, plus 9,000,000,000 is what we are, out, connecting outlook. So So, it's not the case that we're going to take share aggressively by reducing the prices. We don't have to do that. That's number one. And another point is that our strength would be the diversification because we have the worst type of businesses. So, I think it's difficult to understand that some are good, some are not that good, So there's a range, but, it's not the case that we line 1 or 2 specific products. Well, maybe octopus will not be a good expression, but we have a multitude, multiple accesses. And that actually serves to mitigate, minimize the risk and enhance the corporate value. And that a way of enhancing the company value, corporate value. And on top of that, from various customers, the various type of development projects are being brought to us, that's because we are engaged in various types of businesses. So I think that's what we should be focusing on. So rather than charge, we don't feel the necessity to just focus on the world type, business and try to gain market share in those specific products. Lastly, This is for your president. Now the business performance of Mitsy is very superb. That's put aside it. We believe that the performances are becoming better, but in fact, we'd like to pay attention to the fact that what president think about, what is improving and what are the many challenges? If you're just simply looking at the business results and we will conclude that mid Mitsumi business is improved. However, what is the very nature of the business? And how do you evaluate the Mitsumi business? Well, the only failure or perhaps the largest failure that I made this year is that, the lies in the fact that we were we did not, videotaping the operation, before the improvement. And if we're able to show, the before improvement status and once you visit our factory next time in, no doubt, he will understand that they which we made so far. And therefore, the only thing we can describe is that improvement was productivity improvement was done and also the motivation of the work has improved and so far. So of course, the looking is actually much convincing than listening to the hoards. And in fact, The fact that I failed to take a videotaping is something that regret to the largest extent, but I cannot explain, very well because a productivity improvement of a three times or large is actually very common. How to use, the lighting in a factory is completely different, to be honest. So it's beyond description, but a very superb, capable workers were in Mitsumi. That's quite clear. And I highly praise the workers in pit Mitsumi, and they were superb. That's the only description that I put out. And in fact, it is true that we supported them. That's one factor, of course. I always, discuss this with you, but there were 3,000,000,000 yen impairment loss that we had to incur and 3,000,000,000. That's a lot. And Also, to be very frank, the they were internal R and Ds contacted on the side of me, And we have shortlisted, the ones that we undertake on our side, and the cost of that is amounting to 1,000,000,000 in solvers. So in various, means and ways that, we implemented the, the things that we needed to implement and the total of a cost of a 4,000,000,000 per se incurred. But other than that, it's all up up to Mitsu meets our own capability. In this regard, I appreciate the offer, the efforts made at Mesa may very much What are the challenges? 7 spirits need to be growing more? Of course, they do not work on the bearing. So it's not as much as 7, but the connectors and also, IoT and also wireless technologies and, among Mitsumi business in that relates to our core business. And also power supply is actually, in fact, on the full capacity situation, if we need to increase such, great performing products. And together with the production, engineering of, Minabaya, I think, Mitsubishi were able to exert to its best. Mitsimi has a lot of engineers, the factory, director is the engineer, and sometimes the there are some. And I ask some of the workers, in the factory and ask that who what do you do? And did they answer that they were it's a software engineer. So I instruct them to go back to Tokyo, and, there were some stretched allocation of human resources in the past. And, of course, we are dispatching production and generate people dispatch from Namibia is actually working in that meets the factory. So for the future challenges, how we can do to, grow the core businesses and how we're gonna differentiate ourselves and try to gain the markets, gain market share. So that's the only thing. But Mitsumi, owns technology on its own, therefore, they are able to differentiate itself. And I think they are actually demonstrating some differential cessation factor So I'm looking forward, to the results and the tactic haptics sensor that they produced was actually designed by Mitsumi Whether they can actually start production and be able to commercialize their products, I think that, the minnebias and production engineers we'll have to support them, help support them to materialize such projects. I think these are the key factor. Any other questions? So the next of a gentleman in the next seat, please? Seltopumouin Stanley Securities, thank you so much for your presentation. So in terms of your management integration with Mitsumi, so improving the productivity with your Mitsumi, or through joint procurement, reducing costs, I think you have been more or less being able to go through that stage. In terms of technology in Mitsumi, utilizing that technology and with your company coming out with new products, I think basically you have entered that stage. So through that, what type of products from next year onwards is going to be launched? And from the next how this will have an impact from your performance fund next year onwards? Would you like to elaborate on that point? Well, But the most understandable, I think, would be so many that I referred to So this is the gauge, this new gauge that I talked about. So the gauge and the Analog Semiconductor, that's the combination of these 2, and an analog semiconductor is designed by me to me. So this is a collaboration So about 3,000,000,000 investment, we had decided to invest about 3,000,000,000, but the Dotsugi clean room is, is going to be used for that. It used to be used to be the same conductors. So many bears gauge will be producing Mitsumi Semiconductor Factory and Mitsumi Semiconductor will be put together. And produced as a product. So I think this will be the most understandable example that I can give you. So I was just to look through the presentation. Well, it is not shown in the presentation, but So that type of product. And so bed sensors Well, this is basically Mitsubishi chronology, and data logger box is of the size has been more than halved. And the at the Salio showroom, you'll be able to see, this will be a tracking Sareo and all the Sarajos will be track will be tracking me. So, basically, this is Misumi's technology. So there's a lot of examples that I can give you. So in various areas, it's this is the scope of things happening here. Thank you so much. I have 2 other questions. So this is on page 30, actually. So March 2020 sales, compared to 2019, it's going to go down by 1,000,000,000. Operating profit would be flat at 1,000,000,000. Is it because in March 2019, the game business is going to peak in that year? Is that the assumptions that you take making? Well, this is a conservative outlook where the games would be at the peak. However, maybe I should not be mentioning this, and maybe the, you at the market side should conduct a survey, but in the previous games, consoles, there was announcement that the year and and 5,000,000 resolve. And next year, 80,000,000, next year, 26,000,000, and the next year go to 20,000,000 So those are publicly available figures. So 110,000,000 units are sold for the previous generation. So I think it depends on how you look at this. So, but we do not belong to this world. So personally, I think the game console business is going to be strong at least for the following 2 years. If you consider, if you look into the past figures of what happened in the past years. So I hope that you will look into these market outlooks. So the third question I have is that the smartphone related sales, so in fiscal year 2018, we'll continue to grow, we'll continue to be strong. So if you divide it between backlights and camera actuators, are they going to be growing in tandem? So what is the probability that you think that, you'll be able to forecast this In terms of the backlights, I don't know what's going to happen, but I think our assumption is that it'll be flat. That's our image. For the other components, I think basically they're going to grow. Backlight would be flat, maintaining flat. The reason you say this is that the customer number, increasing the customer numbers or include increasing applications, you'd be able to maintain the flat? I, yeah, I think it's both. Understood. Any other questions? The second row to the right? Thank you very much. This is Watanabe with SMBC Nikko. About the concept of new factory I'd like to hear, Well, there are existing factories with higher productivity enhancement. And, is that going to be the concept or perhaps you would introduce a new concept to the new factory. That's one question. First question. Regarding the factory, where we are working on the product improvement. And if necessary, immediately, we will be able to launch exactly the same front end processes. Well, looking at the drastic increase and bearing is not, is not foreseeable, not precedented in the past. More than 20,000,000, increase has been, observed in order to accommodate with the rapid increase in the, demand, we may be lagging behind And, that is quite imminently felt because the number of motors increasing and because of the various factors as such, And in fact, building the, building, we need to construct the building, and we will have to make the space available because, the bearing, factory would have have to have a strong supporting, strengths or power to support the flower. And that's a critical issue. We can't just, use usual factory, and therefore, it's wise to start a construction work. In regard to the shares, then if you don't make this investment and perhaps the share would be moderate to other company, Or perhaps the overall industry is on the full capacity, and therefore, you are trying to fulfill the responsibility as a top manufacturer. Which one? Well, the approaches are coming to our company too much, perhaps because that the customers are using their products in the high quality products, which will be very sensitive to the, the quality of our products. For instance, automotive is one area. From this point of view, It's not a sheer competition. In fact, we provide high quality products with a certain sufficient supply capability. Therefore, we need to prepare an sufficient supply capability that actually gives a, assurance to, the customers and feel safe to, do a transaction with us in this the back end processes, you decided that you will use the Cambodia. I failed to visit in Cambodia's flattery recent months but, if a fixture is now sufficient, for example, highways are not well built and so forth, what is your, insights in that, when the factory is fully operated, then if is going to be fully, prepared, or, do you see some risk? Well, in fact, which is okay. 400 trucks are going back at 1st per month, So I don't expect, a lot of, shortages, no problem. And, the roads, on the side of, a cambodian side over 500 kilometers, may not be very, smooth and the flat. However, it's not the custom clearance stake of very long time and the bearing is fit to this type of a road transport. So there's no problem, from a point of view. Thank you very much. Any other questions? Okay. And the gentleman in front. Okay. So key phone number of securities, In terms of electric component sales, you have, put this down into I think the first step, it was under the target. So I would like to hear the reason behind this. So the in terms of profit, it was over the plan. So the sales has gone down, but profit was better than plan. I think that's the current situation. So in terms of the sales and profit, would you explain about how this works? That's the first question. In terms of sales, it is true that, with the sorry, The first half is slightly under our target, electronic devices and components. But, what's different from last year is that the start was very smooth. So in terms of profit, this year's first half, has been improved. So I think that's the biggest recent. Going to the 2nd half, compared to before Well, basically there, the peak, is different. Where the peak is coming is different. And the second half sales, we're conservative. But, of course, we have taken these into considerations. So in terms of the profit exceeding expectations, the back light outlook, the better productivity, better profitability. So that is the reason. Is that the way to understand that? Well, from April to June last year, there's nothing that we didn't produce on anything. This year, There's no technological challenges that we had to face. So in terms of the ramp up, we were able to do this very smoothly. So without any drop in yield, we have been able to ramp up. So from April to June difference, if you look at the full year comparison, this year, it's quite different from last year for the first quarter. We have, and that, that led to the situation in 1st half. Oh, understood. So second half, even even if the sales fell down and the profitability is good, then the profit may go down, that's why you conservative. But, if this grows, it's profitable. So then there's some there is room for the upper region. Yes. Maybe that's that is one. Factor. Well, the second question is page 30 of your presentation. So the midterm targets I would like to hear your explanation about that. So the Mitsumi business, so 220 4,000,000,000. So that's next year, you're forecasting 100,000,000,000 increase. So second half at 120,000,000,000 if you did, deduct to meet to me. I think in the 2nd half, 119,500,000,000, about 1 to 20,000,000,000. I think that's what you're looking at. And if we double that, in terms of sales, there's more than to double this figure of the half, year figure. So haptic these devices and new products mentioned those What is the reason that, is sales would be more than 80,000,000,000 than the double figure of the on half a year figures? Well, who the game consoles Components? So, so this will be supply the parts is included? Well, what I mean to say is that We include the, customs supply parts in our sales. So and, other companies do so. Misumi hasn't included that. So we thought that we should treat them as the same as other companies. So that's the reason why we decided to treat them this way. So is it going to start from next fiscal year? Yes. That treatment is going to start for next fiscal year. And there was a profit. So the Game Council business is going to grow, of course, and and OAS will be better than this year. So that is your assumption or for the overall improvement. The third question I have is that, again, this is going into detail again, but again, this is the 3rd, page 30, medium term business outlook, but the electric device is a components business. So so the next year, the sales is going to go down to BRL393 1,000,000,000 from BRL418 1,000,000,000. Backlight sales is flat is what you are looking at. Meaning that for the other, for instance, motors for automotives, we there's something that's going to grow a lot. But I do not know the, the breakdown of these sales. So what is the breakdown of these sales figures? Well, It's difficult. From our side, we cannot mention some things. Sorry. We can I cannot comment on that? Well, so if you look at the backlights, it's flat. But, there's some modules that, they is going to be go down, but the sales is go down, but in terms of the real profitability earnings, it's going to be the same, and no comment from our side. Understood. Any other questions? Any other questions? Please. Thank you for your presentation. This is Hietta of UBS Securities. There are three questions. First, on page 27 of this slide, and the automotive product sales is expected and the 26% per annum growth was expected and that is quite Good. And particularly electronics devices expect to be growing very rapidly, and that seems to be your essential motor. Of course, motor is likely to grow, but 20 to 30% growth was my image. And perhaps that image could be wrong. And perhaps, the timing of transformation and changing, or do you expect to see a launch of new products? Could you show more detail about these information? Like I mentioned earlier, for motors and drivers, this is automotive. So, car models, what year? How much sales be projected is already defined in the 3rd year? Hide the mast. The new products that I mentioned earlier is included. And if the components be installed in a brakes, 10. This is a high sensitive day. So therefore, breaking performance will improve. And the feeling of applying a break and also the breaking strings is also matching as well. So inclusive for all of these, electronics devices components is actually being generated So please do understand that there are multiple factors in a proxy devices and components. Understood. And the second question is, regarding ball bearings, and you mentioned about investment earlier. And, front end process a factory is going to be made in Pompanoing and the Cambodia will be in charge of the, back end processes. And when you build a bearing factory, you will have to make a significant CapEx. What would be the investment amount and, how much capacity increase that you are expecting? 310,000,000 you mentioned earlier by building this particular factory, how much of extra capacity you will enjoy in terms of a timeline The current CapEx is not that significant, 3,000,000,000, I would say. Of course. The current, front end capacity exists And, there are some, facilities and, of course, we will invest in the existing factory first and also any your capacity required is going to be put it into the new factory. So 330,000,000 is the overall capacity in my opinion. We really have to prepare ourselves unless, so we will not be able to make a time. In the case of the flood in Thailand, and we built a new factory in the past in 2011, then once we announced the, started the construction and it took, 6 years and then the, factory is on the full capacity. The project was, started, way before and, therefore, we were able to have a successful case, today. You don't know what would happen. And, therefore, At this point in time, the current well, currently projected, capacity would be sufficient. Of course, we would hope to, built a completely new factory, for example, places like India, but that is a tentative, counter major theft for their work. CapEx is minimized to a smaller extent. Thank you very much. And the third question is that, regarding the smartphone, and I will dive into the detail. The camera actuators, which Mhmm. Mhmm. Mhmm. Was struggling in this area, but because of integration with your company, the productivity is improving and the startup of production and also yield as well as, the second half projection that, could you elaborate, on that? The start of production is very Smooth. Rampas is very good and also yield is very solid as well. I cannot disclose the specific percentage, but I was saying all these figures are showing a perfect situation. No comments at all. Well, we will be able to produce as much as we need if a order been taken to a full capacity. Thank you. So let's go to the next question, second person from the right, please. Mr. Ms. Vijay Morgan Stanley, thank you so much. I have two questions. Number 1, So this fiscal year, smartphone related or the game console actuator backlight, game related products, the first half, So in terms of the, the assumption on the share that you had in the beginning of the first half, do you have any changes or maybe increase the share. It doesn't have a change. And would you, elaborate on how that has impact impacted your earnings Well, no change in shares, basically. The share is basically the same as we have assumed at the, initially. And I've been saying, it's not the case that we don't feel it's necessary to go out and get share. And, basically, it's is as planned. So in terms of the profitability, it has improved than you have assumed. It's because while yes, volume has gone up, of course, profitability and because of productivity improvement, it has improved considerably in that effect. Thank you. In terms of game consoles, is it the same situation? Completely the same. There's no change in share. Understood. The second question is so you talked about Minesh, which is strange. I think in terms of application and targets, you know, there's a lot But in terms of, in timeline wise, which is going to grow first, so you talked about 100,000,000,000. You'd be able to reach 100,000,000,000 with this business. So why do you think so? So as you've written here in this presentation, it's very small, and high sensitivity, there's various applications that you can think of. So for, automotive, mobile, wearable robotics, main targeted markets. These will be the, what we'll be looking at. And if we can sell into one of these major markets, oh, this will be a huge business. So I told you so when we went into backlight business, nobody believe me, but I think, we have been able to show you a good track record, maybe you'll believe me, Well, we don't know whether these, clients were using this, but in terms of potential, this has good potential. So that's what I want to communicate with you. So we're going to go and take orders, and we'll submit samples and we get evaluation and gradual things will be decided. So in page 29, so this will be a kind of a add on of what the page 29 numbers. Yes. For the 30 year, I think 2,000,000,000 of profit coming from this is reflected to our midterm business outlook. Understood. Thank you. Any other question? It seems that there there's no further question. We'd like to close this presentation session. Now we have highly sensitive strain, the gauge that we are demonstrating outside of this hole. And also, if you're interested in the product product presentation, we will be showing you around the Assurun for the Sarajot. And so please come