Business Results First Quarter of Fiscal Year Ending March 31, 2009 - - PDF document

Business Results

First Quarter of Fiscal Year Ending March 31, 2009

July 31, 2008

Minebea Co., Ltd.

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July 31, 2008

Summary of Consolidated Business Results for 1Q

Net Sales and Income decreased due to negative impacts from currency and higher raw material costs

FY ending Mar.'09

1Q 4Q 1Q

YoY QoQ Net sales

81,766 81,042 74,041

• 9.4%
• 8.6%

Operating income

7,115 7,286 5,083

• 28.6%
• 30.2%

Ordinary income

6,252 6,999 4,685

• 25.1%
• 33.1%

Income before income taxes

5,476 6,055 4,057

• 25.9%
• 33.0%

Net income

3,133 3,775 2,635

• 15.9%
• 30.2%

7.85 9.46 6.60

• 15.9%
• 30.2%

1Q FY3/08 4Q FY3/08 1Q FY3/09 ¥119.85 ¥108.44 ¥103.36 ¥161.22 ¥161.16 ¥161.48 ¥3.70 ¥3.60 ¥3.24 (¥3.44) (¥3.29) ¥15.55 ¥15.06 ¥14.72 (Millions of yen) FY ended Mar.'08

Net income per share (Yen)

Change

( ) are on-shore rates reported by the Bank of Thailand. Large difference on

• n-shore Thai Baht rate and off-shore
• ne disappeared in March, 2008

when Thailand lifted its restrictions on short-term capital inflows.

Foreign exchange rates US$ Euro Chinese RMB Thai Baht

In the first quarter, net sales were 74,041 million yen, operating income was 5,083 million yen and net income was 2,635 million yen. Compared to the same period of the last fiscal year, net sales decreased by 9.4%, operating income decreased by 28.6% and net income decreased by 15.9% due to negative impacts from the weaker US dollar and higher raw material costs.

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July 31, 2008

Net Sales

Decreased 9.4% YoY Decreased 8.6% QoQ

Quarterly

80.2 83.8 83.7 81.8 85.1 81.0 74.0 86.5 83.3 0.0 20.0 40.0 60.0 80.0 100.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09 (Billions of yen)

First quarter net sales were 74 billion yen, 8.6% lower from the fourth quarter of the last fiscal year. This is mainly due to the weaker US dollar against the Japanese yen. Looking at products, sales of HDD spindle motors and pivot assemblies declined due to inventory adjustments in HDD market. The foreign exchange fluctuations decreased net sales by 7.5 billion yen from the same period of the last fiscal year, and by 3.1 billion yen from the previous quarter.

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July 31, 2008

Operating Income

Decreased 28.6% YoY Decreased 30.2% QoQ

Quarterly

6.3 6.6 7.5 5.9 7.1 8.0 8.4 7.3 5.1 7.3% 9.0% 7.9% 7.5% 8.7% 9.3% 9.8% 9.0% 6.9%

0.0 2.0 4.0 6.0 8.0 10.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Operating income Operating margin

(Billions of yen)

In the first quarter, operating income was 5.1 billion yen, 30.2% lower from the previous

• quarter. Operating margin as 6.9%, 2.1 points lower from the previous quarter. During

the quarter, we had negative impacts on operating income from the inventory adjustments in HDD market, rapid increases in production costs such as labor costs which were larger than our cost reduction results and the foreign exchange fluctuations such as the weaker US dollar. According to our estimate under certain assumptions, the currency impact on operating income was about negative 0.4 billion yen during the quarter compared to the previous quarter, and about negative 0.8 billion yen compared to the same period of the last fiscal year.

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Operating income Net sales

Business Segments

Machined Components Business

5.6 6.9 7.1 7.1 6.6 6.1 6.8 7.1 6.2

19.8% 16.8% 19.3% 19.3% 18.6% 17.1% 19.8% 20.6% 18.7%

0.0 2.0 4.0 6.0 8.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09 0.0% 5.0% 10.0% 15.0% 20.0%

Operating Income Operating Margin (Billions of yen) 18.0 18.4 17.9 18.9 19.1 18.2 18.6 17.7 4.8 4.6 4.6 5.2 5.2 5.3 5.0 5.3 5.0 5.8 6.6 6.9 6.7 6.6 8.1 8.1 7.6 6.5 4.8 4.9 4.9 4.9 4.8 4.2 4.0 18.9 4.6 4.5 0.0 10.0 20.0 30.0 40.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09 Other machined components Pivot assemblies Rod-ends Ball bearings

35.5 36.7 36.1 35.7

(Billions of yen)

33.3 33.3 34.5 34.2 35.7

For the machined components business segment, first quarter net sales were 33.3 billion yen, down 2.4 billion yen, or down 6.9% lower from the previous quarter due mainly to the weaker US

• dollar. Operating income was 5.6 billion yen, down 1.3 billion yen, or down 19.1% from the

previous quarter due to the weaker US dollar and other factors. Operating margin was 16.8%, down 2.5 points from the previous quarter. First quarter sales of miniature and small sized ball bearings decreased by 7.1% from the same period of the last fiscal year, and by 4.6% from the previous quarter due mainly to the weaker US

• dollar. External shipments increased by 2 million units per month from the previous quarter, and

we also expect steady sales volume in the second quarter and beyond. Profits decreased in this business from the previous quarter due to the weaker US dollar against the Thai Baht and other

• factors. We will drive our cost reduction programs further. In addition, we will adjust our product

prices to reflect increasingly higher raw material costs which we may not be able to overcome only by improved production efficiency. First quarter sales of rod-end and spherical bearings decreased by 4.7% from the same period of the last fiscal year, and by 5.9% from the previous quarter due to the weaker US dollar against the Japanese yen, despite continued strength in the global aircraft production. We will increase our production capacity to meet this growing demand in a timely manner. At the same time, we will actively promote our products for newly designed aircraft models. Profit decreased from the previous quarter due to increased raw material costs and the weaker US dollar against the Japanese yen. We will work to adjust our product prices to cover increased raw material costs. First quarter sales of pivot assemblies for Hard Disk Drives decreased by 0.5% from the same period of the last fiscal year, and by 13.9% from the previous quarter. During the quarter, sales volume of pivot assemblies was 26 million units per month, over one million units lower than the previous quarter, because of inventory adjustments by HDD manufacturers. There was also a negative currency impact from the weaker US dollar. For the second quarter and beyond, we expect an increase in shipments because the inventory adjustments are over and we will enter into a seasonally strong period. Profitability of this business significantly declined due to lower sales resulting from the weaker US dollar against the Thai Baht. We will adjust our product prices as soon as possible to reflect increasingly higher raw material costs.

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Electronic Devices and Components Business

Net sales Operating income

Business Segments

8.7 9.7 8.7 9.9 8.9 10.4 10.3 6.7 17.3 18.5 19.1 18.8 18.8 19.2 17.9 16.6 15.7 6.9 6.0 5.6 5.6 5.3 4.3 3.7 9.2 7.5 8.5 7.6 7.4 2.2 1.8 1.9 3.0 3.2 3.5 10.3 1.7 1.5 1.7 1.3 1.0 1.5 1.4 1.3 1.1 6.1 4.7 7.7 8.3 7.4 7.4 3.1 2.9 3.5 3.9 3.5 2.8 2.4 2.0 2.0 2.0 1.9 2.0 0.0 10.0 20.0 30.0 40.0 50.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09

HDD spindle motors Information motors Others Keyboards Electronic devices Speakers Measuring components

(Billions of yen) 46.2 45.3 49.1 49.8 40.8 46.9 49.3 49.1 48.0 (0.5) 0.4 1.2 0.9 0.5 0.2 (0.2) 0.4 (0.4) 2.5%

• 1.2%

0.9% 1.8% 1.1% 0.4%

• 0.3%

0.8%

• 0.8%

(0.5) 0.0 0.5 1.0 1.5 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09

• 2.0%

0.0% 2.0% 4.0% 6.0%

Operating Income Operating Margin (Billions of yen)

In the electronic devices and components business segment, first quarter net sales decreased by 4.5 billion yen from the previous quarter due to the weaker US dollar, terminations of magneto-optical disk drives and floppy disk drive heads businesses during the previous quarter, and inventory adjustments in HDD market. Operating loss was 0.5 billion yen. Operating margin was negative 1.2%. Net sales of HDD spindle motors dropped by 24.4% from the same period of the last fiscal year, and by 34.4% from the previous quarter. This is because of sales volume decline by 1.9 million units per month to 3.9 million units per month due to inventory adjustments by HDD manufacturers. However, sales volume

• f 2.5 inch HDD spindle motors increased by 0.2 million units per month to 1.2 million units per month as

we gained business with new customers. Profitability also deteriorated further compared to the previous quarter due to significant drops in sales and production volume and a negative impact from the weaker US dollar despite our efforts to improve yields and reduce costs. We will continue our efforts to achieve our target of producing positive operating income on a monthly basis during the second quarter. Net sales of information motors decreased by 16.2% from the same period of the last fiscal year, and by 5.1% from the previous quarter due mainly to the weaker US dollar against the Thai Baht and the Chinese Renminbi, and deterioration of product mix. Profits of this business decreased significantly compared to the same period of the last fiscal year and the previous quarter due to sales declines and intensified competition despite our efforts to reduce costs. We are aiming to improve profitability by improving the product mix and reducing costs further. Net sales of keyboards decreased by 20.9% from the same period of the last fiscal year due to terminations of low value-added products, and by 12.7% from the previous quarter due to volume declines and the weaker US dollar against the Chinese Renminbi. This business turned slightly unprofitable for the

• quarter. However, we expect increased sales towards the peak Christmas holiday demand.

Net sales of electronic devices decreased by 1.2% from the same period the last fiscal year, and by 3.4% from the previous quarter. Sales of LED backlights grew steadily as volume of backlights without LED attached increased. Compared to the previous quarter, sales declined due to terminations of magneto-

• ptical disk drives and floppy disk drive heads businesses during the previous quarter. Sales volume of

inverters for large LCD TVs grew since last year, but we now expect near term declines due to inventory adjustments by some customers. Profits of this business were flat compared to the previous quarter. We aim to increase profits by development of new products and entry into new markets. Net sales of speakers decreased by 33.3% from the same period of the last fiscal year, but increased by 6.6% from the previous quarter. Profitability was still negative as we are in a process to shift our in-house production in Thailand to outsourcing from China. Net sales of measuring components increased 74.0% from the same period of the last fiscal year, and by 11.2% from the previous quarter, due mainly to an increase in sales for a new application. Profit also increased from the previous quarter.

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Net Income

4Q

Quarterly

Decreased 15.9% YoY Decreased 30.2% QoQ

2.6 5.1 3.8 3.1 1.2 4.2 4.2 3.3 4.3 12.7 6.6 9.5 7.9 3.0 10.5 10.5 8.2 10.9

0.0 1.0 2.0 3.0 4.0 5.0 6.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY 3/07 FY 3/08 FY 3/09 2 4 6 8 10 12 14

Net income Net income per share (yen)

(Billions of yen) (Yen) Net income for the first quarter was 2.6 billion yen, a 1.2 billion yen, or 15.9% decrease from the previous quarter. Net income per share decreased by 2.9 yen to 6.6 yen from the previous quarter. This is due to a decrease in operating income, a 0.4 billion yen loss

• n transition to the defined contribution pension plan and other factors, despite a

decrease in interest payments and corporate taxes.

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S.G. & A. Expenses

Quarterly

12.3 12.0 12.8 11.4 11.7 12.0 12.1 12.4 12.8

16.6% 14.8% 15.1% 14.2% 13.9% 14.3% 15.2% 14.5% 14.8%

0.0 5.0 10.0 15.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY ended Mar. '07 FY ended Mar. '08 FY 3/09 0% 5% 10% 15% 20%

S.G. & A. expenses S.G. & A. to sales ratio

(Billions of yen) First quarter SG&A expenses increased slightly by 0.3 billion yen to 12.3 billion yen. While we continued our efforts to keep expenses low, the primary reason for an increase in SG&A expenses to sales ratio by 1.8 points to 16.6% was a decline in sales.

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Quarterly

Inventories

47.7 48.1 48.6 45.9 50.9 48.5 42.4 46.4 48.6 0.0 20.0 40.0 60.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q FY ended Mar. '07 FY ended Mar. '08 FY 3/09 (Billions of yen)

Inventory buildup to prepare for seasonal demand increases, in addition to currency impact of +1.6 billion yen

Inventories increased by 4.0 billion yen compared to the previous quarter due to an increase of 1.6 billion yen from the foreign exchange rate fluctuations and an inventory build-up to prepare for the expected demand increases for the back-to-school and Christmas holiday sales season in Europe and the U.S. during the second quarter and beyond.

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Net Interest-Bearing Debt

Target to reduce net interest-bearing debt to ¥100 billion by this FY end

Net Interest-bearing debt = Interest-bearing debt – Cash and cash equivalents Free Cash Flow = CF from operating activities + CF from investing activities

Yearly

146.9 128.5 109.5 100.0 109.6 150.7 3.8 9.1 22.7 23.4 3.9 16.0 0.0 40.0 80.0 120.0 160.0 FY 3/05 FY 3/06 FY 3/07 FY 3/08 FY 3/09 1Q FY 3/09 Forecast 0.0 10.0 20.0 30.0

Net interest-bearing debt Free cash flow (right axis) (Billions of yen) (Billions of yen)

Net interest-bearing debts, which are interest-bearing debts minus cash and cash equivalents, were 109.5 billion yen in the first quarter, a decrease of 0.1 billion yen from the previous quarter. The main reason was our efforts to reduce debts despite dividend payments and because free cash flow was relatively low for the quarter due to summer bonus payments. We will continue our efforts to achieve our target to reduce net interest- bearing debts to 100 billion yen by this fiscal year end.

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Capital Expenditure & Depreciation

Quarterly

6.3 23.1 29.0 21.9 17.0 24.9 5.9 22.5 24.0 24.6 26.4 26.8 0.0 10.0 20.0 30.0 FY 3/05 FY 3/06 FY 3/07 FY 3/08 FY 3/09 1Q FY 3/09 Forecast

Capital Expenditure Depreciation & Amortization Expenses

(Billions of yen)

*From FY 3/09, due to change in lease accounting, assets of finance lease are included.

Capital expenditure for the first quarter was 5.9 billion yen, compared with the full year forecast of 29 billion yen. Investments were mainly in capacity expansions in ball bearings and motors. Depreciation and amortization expenses for the quarter were 6.3 billion yen, compared with the full year forecast of 26.8 billion yen.

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Forecast for Fiscal Year Ending March 31, 2009 Initial forecast unchanged

FY ended Mar.'08

Full year 1Q 1H forecast

1Q/ 1H forecast Full year forecast Change Y o Y Net sales

334,431 74,041 162,000 46% 330,000

• 1.3%

Operating income

30,762 5,083 15,400 33% 32,000 +4.0%

Ordinary income

27,691 4,685 14,100 33% 29,500 +6.5%

Income before income taxes

25,254 4,057 13,500 30% 28,500 +12.9%

Net income

16,303 2,635 8,100 33% 17,000 +4.3% 40.86 6.60 20.30 33% 42.61 +4.3%

FY ended Mar.'08 FY ending Mar.'09 Assumption ¥115.29 ¥105.00 ¥162.18 ¥163.00 ¥3.70 ¥3.40 (¥3.39) ¥15.40 ¥14.90 (Millions of yen) Net income per share (Yen) Fiscal Year ending Mar.'09

( ) is on-shore rate reported by the Bank of Thailand. Large difference on on-shore Thai Baht rate and

• ff-shore one disappeared in March, 2008 when

Thailand lifted its restrictions on short-term capital inflows.

Foreign exchange rates US$ Euro Chinese RMB Thai Baht

As a result of the above, we decided not to change our initial forecast. The results for the quarter were lower than our initial plan due to negative impacts from the foreign exchange fluctuations, inventory adjustments in HDD market and rapid increases in production costs such as labor costs which were larger than our cost reduction efforts. In

• rder to achieve this fiscal year's forecast, we will reinforce our efforts to reduce costs
• further. In addition, we will adjust our product prices to reflect increasingly higher raw

material costs which we may not be able to overcome only by improved production efficiency.

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Further strengthening industry’s highest level of quality and cost competitiveness Specialized for energy-consuming front-end processes

• targeting 40% less electricity usage

(compared to existing factories) due to integration and more efficient air conditioning system

• recycling of more cutting oil and water
• next production base expansion will

be easier by utilizing this capacity

New Ball Bearing Factory in Thailand

Growth potential in miniature ball bearings

• forecasting volume growth of 5% or more per year for medium term

Energy-saving, environmentally-friendly ball bearing factory specialized for front-end processes (built in May 2008)

Production capacity : initially 10 million units per month on final product basis 30 million units per month in the future at full capacity

Before finishing, I would like to explain our new ball bearing factory in Thailand completed in May. Global demand for miniature ball bearings has been growing steadily despite on-going concern about macro economic slow-downs. If you take a look at external shipments since last year, they have been increasing quarter by quarter. This is due to growth in electronic products which use fan motors, growth of HDD which needs pivot assemblies, further utilization of electronics in automobiles which leads to more use of small motors and other factors. In order to meet these growing demands, and to further strengthen the industry's highest level of quality and cost competitiveness of our products, we built a new ball bearing factory in Bang Pa-in, Thailand. This factory is specialized for front-end processes such as machining which traditionally consume huge amounts of energy, rather than conducting all processes from the beginning to the end in a conventional factory. By integrating front-end processes in a single factory and by introducing a highly efficient air conditioning system in the entire building, we are now targeting to cut 40% of electricity usage compared to our conventional factories. This is an environmentally-friendly factory which recycles more cutting oil and water. Currently, we are shifting our existing production machinery to this new factory gradually. Initial production capacity is 10 million units per month on final product basis. In the future at full production, capacity is expected to be 30 million units per month.

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July 31, 2007

Minebea Co., Ltd.

Business Results

http://www.minebea.co.jp/

Any statements in the presentation which are not historical fact are future projections made based on certain assumptions and executive judgment drawn from currently available information. Please note that actual performance may vary significantly from any particular projection due to various factors. Factors affecting our actual performance include: (i) changes in economic conditions or demand trends around Minebea; (ii) fluctuation

• f foreign exchange rates or interest rates; and (iii) our ability to continue R&D, manufacturing and marketing in a timely manner in the

electronics business sector, where technological innovations are rapid and new products are launched continuously. However, this is not a complete list of the factors affecting actual performance. All the information in this document is the property of Minebea Co., Ltd. All parties are prohibited for whatever purpose to copy, modify, reproduce, transmit, etc. this information regardless of ways and means without prior written permission of Minebea Co., Ltd..