Business Results Second Quarter of Fiscal Year Ending March 31, - - PowerPoint PPT Presentation

MinebeaMitsumi Inc.

November 7, 2018

Business Results

Second Quarter of Fiscal Year Ending March 31, 2019

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November 7, 2018

Today’s Agenda

• 1. Financial Results
• 2. Business Update and Management Strategy

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November 7, 2018

Financial Results

Katsuhiko Yoshida Managing Executive Officer

4

November 7, 2018

FY3/18 2Q 1Q 2Q YoY QoQ

Net sales

237,709 213,038 236,330

• 0.6%

+10.9%

Operating income

24,700 14,291 19,624

• 20.6%

+37.3%

Profit before taxes

24,483 14,170 20,106

• 17.9%

+41.9% 18,911 10,886 15,970

• 15.6%

+46.7% 44.91 25.95 38.04

• 15.3%

+46.6%

FY3/18 2Q FY3/19 1Q FY3/19 2Q ¥110.92 ¥108.10 ¥110.87 ¥129.65 ¥129.88 ¥129.13 ¥3.31 ¥3.42 ¥3.35 ¥16.53 ¥17.02 ¥16.37

Chinese RMB US$ Euro Thai Baht Profit for the period

attributable to owners of the parent

Earnings per share,

basic (yen)

Foreign Exchange Rates

Change (Millions of yen) FY3/19

Net sales and operating income were as expected

Summary of Consolidated Business Results for 2Q

*Based on IFRS

[ IFRS ]

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November 7, 2018

120.3 154.8 167.4 196.4 193.2 235.8 225.9 224.2 213.0 236.3 7.0 11.6 16.1 14.3 17.1 24.9 22.4 14.8 14.3 19.6 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Net sales Operating income (Billions of yen) Operating margin

5.8% 7.5% 9.6% 7.3% 8.8% 10.6% 9.9% 6.6% 6.7% 8.3%

Net Sales, Operating Income/Margin

*JGAAP until FY3/18, IFRS for FY3/19 [ IFRS ] [JGAAP]

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November 7, 2018

Machined Components

Electronic Devices & Components

+0.7

2Q Actual; Differences from the Forecast as of August

Forecast as of August Actual

240.8 236.3

(Billions of yen)

19.7 19.6

+0.2

• 0.5
• 0.5
• 4.4
• 0.1

Net Sales Operating Income

+0.9

• 9.9

Mitsumi Business

+4.7

Other

• 0.2

Machined Components

Electronic Devices & Components

Forecast as of August Actual Mitsumi Business Other

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November 7, 2018

23.6 22.3 23.1 25.2 25.2 26.0 26.8 27.8 30.4 31.1 8.0 7.1 6.8 7.7 7.5 7.8 7.9 8.7 8.9 9.1 7.6 7.9 8.7 8.4 7.9 7.9 8.2 7.5 7.9 8.0 3.8 3.3

39.2 37.3 38.5 41.3 40.6 41.7 46.7 47.3 47.3 48.2

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19 Ball bearings Rod-ends/Fasteners Pivot assemblies Other

10.4 9.1 9.5 10.1 10.4 10.8 11.0 10.5 11.7 12.5

26.5% 24.5% 24.7% 24.5% 25.6% 25.9% 23.6% 22.1% 24.8% 26.0%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Operating income Operating Margin

11.2

Excluding ¥0.7bn of PPA impact in Q4

Machined Components

Net sales (Billions of yen) Operating income (Billions of yen)

*JGAAP until FY3/18, IFRS for FY3/19

[ IFRS ] [JGAAP] [ IFRS ] [JGAAP]

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November 7, 2018

39.4 38.8 38.0 42.1 44.0 46.5 46.7 46.9 47.0 49.0 32.2 68.9 80.9 58.9 51.3 75.8 55.5 45.2 34.5 27.9

8.6 8.9 8.5 12.3 8.3 9.7 9.0 8.7 9.1 9.3

80.9 117.4 128.7 114.6 104.4 133.1 112.3 101.7 91.7 87.4

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Motors Electronic devices Sensing devices Other 0.4 6.4 9.4 5.6 6.8 11.4 5.5 7.5 1.9 4.0

0.5% 5.5% 7.3% 4.9% 6.6% 8.6% 4.9% 7.3% 2.1% 4.6% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Operating income Operating Margin

Electronic Devices & Components

Net sales (Billions of yen) Operating income (Billions of yen)

*JGAAP until FY3/18, IFRS for FY3/19

[ IFRS ] [JGAAP] [ IFRS ] [JGAAP]

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November 7, 2018

• 3.5
• 1.5
• 9.3

3.7 3.8 6.6 9.8 1.4 3.0 7.5

• 10.7%
• 3.4%
• 19.4%

7.1% 7.9% 10.8% 14.7% 1.8% 4.1% 7.4% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Operating income Operating Margin 3.0 *

0% *Excluding ¥12.3bn of inventory write-down in 3Q

32.6 44.6 47.8 52.9 48.1 60.8 66.7 75.0 73.9 100.6

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Mitsumi Business

Both net sales and operating income in and before 3Q FY3/17 are pre- merger results. 4Q FY3/17 results are based on managerial accounting for the three months. JGAAP until FY3/18, IFRS for FY3/19.

Net sales (Billions of yen) Operating income (Billions of yen)

[ IFRS ] [JGAAP] [ IFRS ] [JGAAP]

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November 7, 2018

87.0 96.4 96.7 120.4 134.0 163.2 152.4 150.1 169.1 176.8

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

(Billions of yen)

Inventories

*JGAAP until FY3/18, IFRS for FY3/19 [ IFRS ] [JGAAP]

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November 7, 2018

93.1 97.5 70.9 52.5 62.8 14.0

24.5

• 1.1

36.3 37.2

• 8.8

48.8

FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 1H FY3/19 Forecast

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

Net Interest-Bearing Debt/Free Cash Flow

[ IFRS ] [JGAAP]

*Excluding TOB impact

*JGAAP until FY3/18, IFRS for FY3/19

*

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November 7, 2018

FY3/18

Full Year 1st Half 2nd Half Full Year YoY Net sales

881,413 449,368 490,632 940,000 +6.6%

Operating income

68,902 33,915 51,085 85,000 +23.4%

Profit before taxes

66,855 34,276 49,724 84,000 +25.6% 50,326 26,856 40,144 67,000 +33.1% 119.61 64.00 95.64 159.64 +33.5%

FY3/18 Full Year FY3/19 2H Assumptions

¥111.19 ¥110.00 ¥129.36 ¥130.00 ¥3.35 ¥3.39 ¥16.70 ¥16.40 FY3/19

Euro (Millions of yen) Profit for the period

attributable to owners of the parent

Thai Baht Chinese RMB Earnings per share,

basic (yen)

Foreign Exchange Rates US$

Forecast for Fiscal Year Ending March 31, 2019

Revision for Profit for the Period

*Based on IFRS

[ IFRS ]

13

November 7, 2018 FY3/18 Full Year 1st Half 2nd Half Full Year YoY

Net sales

881,413 449,368 490,632 940,000 +6.6%

Machined components

176,427 95,435 94,565 190,000 +7.7%

Electronic devices and components

451,879 179,142 230,858 410,000

• 9.3%

Mitsumi business

252,415 174,482 164,518 339,000 +34.3%

Other

693 309 691 1,000 +44.3%

Operating income

68,902 33,915 51,085 85,000 +23.4%

Machined components

41,007 24,205 25,795 50,000 +21.9%

Electronic devices and components

24,096 5,914 21,086 27,000 +12.1%

Mitsumi business

20,069 10,484 15,516 26,000 +29.6%

Other

• 806
• 159
• 341
• 500
• 38.0%

Adjustment

• 15,463
• 6,529
• 10,971
• 17,500

+13.2%

(Millions of yen) FY3/19

Forecast for Business Segment

*Based on IFRS

[ IFRS ]

14

November 7, 2018

Sustainability Topics

NMB-Minebea Thai wins Thailand Labor Management Excellence Award 2018 Promoting ESG information disclosure and initiating ESG dialogues

• Ayutthaya and Rojana Plants recognized by the Thailand Department of Labour Protection and

Welfare

• For maintaining excellent work environments, employee welfare, and occupational health and safety

management

• Taking our motto to "Be a company where our employees are proud to work," which is part of our

company credo, "The Five Principles," and putting it into practice

Continually working to create better and safer workplaces across the globe

• Publishing integrated report as well as CSR reports and using them as communication tools to give

feedback to top management

• Improving the corporate website and information disclosure

Actively providing non-financial information, a key engine of sustainable growth

November 7, 2018 15

November 7, 2018

Business Update & Management Strategy

Yoshihisa Kainuma

Representative Director, CEO & COO

November 7, 2018 16

Today's Highlights

 2Q overall: Mostly in line with forecasts despite timing issue and one-time costs for some businesses.  Machined components: Sales and production volume of ball bearings hit quarterly record highs. OP of ¥50 billion is expected to be achieved two years ahead of the initial target (FY3/21).  Electronic devices and components: LED backlights saw timing issue. Ramp up of new model is in good shape. Motor sales are expected to reach ¥200 billion in the current fiscal year as initially planned.  Mitsumi Business: Mechanical components secures forecasted profit. Camera actuators to be in full swing in 2H.  Despite the LED backlight loss, overall OP hit ¥34 billion in 1H!  M&A paves the way to further growth. Strengthening portfolio of next-generation products.  Tariff issue is a great business opportunity. China +1 strategy and a 25% tariff on Chinese-made bearings exported to the United States.

November 7, 2018 17 (Millions of yen) FY3/18 Full Year FY3/19 Plan 1st Half 2nd Half Full Year Net sales Operating income Profit for the period

attributable to owners of the parent

Earnings per share, basic (yen) YoY

Keys to Achieving FY3/19 Targets

Core businesses keep driving growth

Points

• Top-line growth and profit improvement to continue for motors.
• Ramp up of components for new smartphone is in good shape.

(LED backlights, camera actuators)

• Machined components sure to continue growing.
• FX rate estimate: 1 USD = 110 JPY

881,413 68,902 50,326 119.61 449,368 33,915 490,632 51,085 940,000 85,000 67,000 159.64 +6.6% +23.4% +33.1% +33.5% 40,144 95.64

• Steady demand for ball bearings.

26,856 64.00

• Steady earnings are expected in mechanical components.

November 7, 2018 18

Machined Components

Targeting OP of ¥50 billion via strengthening profitability

137 145 155 171 190 203 206 203 225 238 232 240 272 285 299 294

Ball bearing external shipment (million units/month) Ball bearing production (million units/month)

FY 3/14 FY 3/15 FY 3/16 FY 3/17 FY 3/18 3Q FY3/19

(Plan)

2Q 1Q FY 3/14 FY 3/15 FY 3/16 FY 3/17 FY 3/18 3Q FY3/19

(Plan)

2Q 1Q

• 2Q external shipment and production volume

increased both YoY and QoQ

• Although demand may see temporary adjustment

for some applications from 3Q onwards, CASE of automobile, IoE and 5G infrastructure will drive growth in mid-to-long term

Ball bearings

• Fasteners totally turned around

Rod-ends & fasteners

Optimization of inventory level Reduction in shipment costs Effect of price adjustment

Opportunity to optimize profit structure

• Profitability improves even if demand sees adjustment

NO change in mid-to-long term demand outlook

November 7, 2018 19

Electronic Devices and Components

• Timing issue occurred in 2Q
• Ramp up of new model is in good shape.
• Developing anti-OLED panels with supply

chain partners

LED backlights

• Sales of motors remain up, mainly for

automobiles

• Aiming for ¥200 billion in sales this current

fiscal year

Motors

LED backlights ramped up in good shape Motors remain steady

74.2 200.0

250.0

220.0 184.2

Motor Business Sales Targets

Automobile applications Non-automobile applications

FY3/10 FY3/12 FY3/14 FY3/16 FY3/18 FY3/19 Plan FY3/21 Plan

(Billions of yen)

November 7, 2018 20

Mitsumi Business

Big increase in production from 3Q onwards despite timing issue and one-time costs in 2Q

Optical devices Mechanical components

• Significant increase in production from 3Q despite time lag for

some new products in 2Q (No big difference in quality and yield from projection)

• Expecting good business opportunities for Chinese

smartphones with better specs

• Earnings for the fiscal year remain mostly on track

Other businesses

• Semiconductors booked one-time costs due to the Hokkaido

Earthquake, but production resumed without any hitches

November 7, 2018 21

Huge Business Opportunity from US-China Tariff Issue  US-China tariff issue driving US companies to China +1  Opportunities to use 64 global manufacturing sites, including Cambodia factory, are rapidly expanding. E.g. a 25% tariff on Chinese-made bearings

• ->Reduction of price difference with

Chinese competitors  RFQs flowing into various businesses

November 7, 2018 22

TOB of U-Shin toward Business Integration

Target company

U-Shin Ltd. (ticker: 6985) TBD *Targeting at the end of January 2019

Tender offer period Tender offer price

JPY 985 per common stock

Tender offer funds

JPY 32,622 million

Number of shares to be purchased

Maximum: none Minimum: 22,079,500 shares (66.67% of the shares outstanding)

ESCL

(Electronic Steering Column Lock)

Various fuel pumps Electric door frame lock Automotive division Industrial equipment division Home security unit division

• 1. To expand presence in the automotive industry

Ability to develop and propose new products that meet customer needs

• 2. Enhance Tier1 sales force and global manufacturing sites

Realizing cross-selling and “Time to Market”

• 3. Exploiting technological synergies

To create new economic value through new products and services that INTEGRATE core technologies

• 4. Introduction of high functional safety and quality control methods

Master of know-how on the quality of automotive parts

• 5. Strengthening competitiveness by mutually promoting vertical integration

E.g. Application of U-Shin's molding, painting, and color adjustment technologies to a variety of automotive parts in MinebeaMitsumi.

• 6. Utilizing automotive technologies to housing

Creation of new solutions in IoE-related businesses

Expected synergies

November 7, 2018 23

131.8 160 200

18/3期 19/3期 計画 20/3期 予想 21/3期 予想

Automotive Business Opportunities in the CASE Era

U-Shin ◆Automotive Product Sales Target

Autonomous Electric Shared & Services Connectivity

• Demand for our energy-saving

products is riding high on soaring car utilization rates fueled by the spread of carsharing and ridesharing

• Strengthen ties with OEMs as a

Tier 1 manufacturer

• Expanding existing products for

EV such as ball bearings for various cooling fans, resolvers, and so on.

• Motorization of lock and gate

system, and enhancing competitiveness through the INTEGRATION with MinebeaMitsumi products

• ADAS devices such as BLDC for

LiDAR and high-frequency modules

• Strengthen sensing solutions,

including millimeter-wave radar using proprietary algorithms

• Leverage Mitsumi business to

make network devices, such as Car2Car and Car2X

• Expand product portfolio,

including key sets and switches

◆New business opportunities from synergy between our CASE business and U-Shin

Significant business expansion via strengthening portfolio through M&A and synergies from INTEGRATION

(Billions of yen)

MinebeaMitsumi

FY 3/18 FY 3/19 FY 3/20 FY 3/21

(plan) (target) (target)

November 7, 2018 24

Updates on New Product Trio

SALIOT Bed Sensor System Smart City

Soaring inquiries / Various events

acoya with lights by SALIOT

Sales activity launched by Ricoh

Strengthening product development

Nodes, gateways, environmental sensors, parking sensors, etc.

November 7, 2018 25

Hit ¥1 Trillion / ¥100 Billion Targets Ahead of Schedule Hit ¥1 trillion / ¥100 billion targets via

• rganic growth and aggressive M&As

(billions of yen) (billions of yen) M&A

M&A

Net Sales Operating income OP margin

881.4 940 1,000 1,080 68.9 85 92 102

20 40 60 80 100 120 140 200 400 600 800 1,000 1,200 1,400 FY3/18 FY3/19 Plan FY3/20 Plan FY3/21 Plan

7.8% 9.0% 9.2% 9.4%

November 7, 2018 26

Increase dividends reflecting business forecast Shareholder Return Policy

14

yen/share

Year-end dividend Interim dividend

FY3/19 Actual/Forecast

14

* Dividend for FY3/19 will be decided on business performance at payout ratio of around 20%

FY3/18 Actual

13

Total

26

*

yen/share

28

yen/share

*

yen/share yen/share yen/share

13

November 7, 2018 27

Top Priority for 2nd Half

Using all means possible to hit ¥1 trillion / ¥100 billion targets next fiscal year!

November 7, 2018 28

Any statements in this presentation which are not historical are future projections based on certain assumptions and executive judgments 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 but are not limited to: (i) changes in economic conditions or demand trends related to MinebeaMitsumi’s business operations; (ii) fluctuation of 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. All the information in this document is the property of MinebeaMitsumi Inc. 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 MinebeaMitsumi Inc.

November 7, 2018

29

Ref efer eren ence ce

30

November 7, 2018

87.5 97.4 94.1 105.9 123.6 30.4 32.1 29.6 31.9 37.0 37.9 34.3 32.6 31.5 29.4 7.1

155.8 163.8 156.3 176.4 190.0

FY3/15 FY3/16 FY3/17 FY3/18 FY3/19E

Ball bearings Rod-ends/Fasteners Pivot assemblies Other

39.7 40.9 39.1 42.7 50.0

25.5% 24.9% 25.0% 24.2% 26.3% FY3/15 FY3/16 FY3/17 FY3/18 FY3/19E

Operating income Operating Margin

43.4

Excluding ¥0.7bn of PPA impact in Q4

Machined Components

Net sales (Billions of yen) Operating income (Billions of yen)

*JGAAP until FY3/18, IFRS for FY3/19

[ IFRS ] [JGAAP] [ IFRS ] [JGAAP]

31

November 7, 2018

155.3 161.0 158.3 184.2 200.0 170.9 245.0 241.0 227.8 169.7 13.4 35.9 38.3 35.7 36.4 5.2 3.6 4.0 3.8 3.9

344.7 445.5 441.6 451.5 410.0

FY3/15 FY3/16 FY3/17 FY3/18 FY3/19E Motors Electronic devices Sensing devices Other

30.7 22.3 21.9 31.2 27.0

8.9% 5.0% 5.0% 6.9% 6.6% FY3/15 FY3/16 FY3/17 FY3/18 FY3/19E

Operating income Operating Margin

Electronic Devices & Components

Net sales (Billions of yen) Operating income (Billions of yen)

*JGAAP until FY3/18, IFRS for FY3/19

[ IFRS ] [JGAAP] [ IFRS ] [JGAAP]

32

November 7, 2018 1.0

• 4.6
• 10.6

21.5 26.0

0.6%

• 2.8%
• 5.9%

8.6% 7.7%

FY3/15 FY3/16 FY3/17 FY3/18 FY3/19E Operating income Operating Margin

0%

1.8

*Excluding ¥12.3bn of inventory write-down in 3Q

153.0 163.6 178.0 250.6 339.0

FY3/15 FY3/16 FY3/17 FY3/18 FY3/19E

Mitsumi Business

Net sales (Billions of yen) Operating income (Billions of yen)

[ IFRS ] [JGAAP] [ IFRS ] [JGAAP]

Both net sales and operating income in and before 3Q FY3/17 are pre- merger results. 4Q FY3/17 results are based on managerial accounting for the three months. JGAAP until FY3/18, IFRS for FY3/19.

33

November 7, 2018

17.4 18.7 17.4 23.3 23.8 25.3 24.4 25.0 23.5 24.5

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

3.2 9.6 12.2 16.2 14.2 20.1 17.3 7.8 10.9 16.0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

7.0 11.6 16.1 14.3 17.1 24.9 22.4 14.8 14.3 19.6

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

120.3 154.8 167.4 196.4 193.2 235.8 225.9 224.2 213.0 236.3

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY3/17 FY3/18 FY3/19

Profit attributable to owners of the parent/EPS S.G.&A. expence/ratio Operational profit/margin Net sales

Other Financial Data 1

*JGAAP until FY3/18, IFRS for FY3/19

34

November 7, 2018

9.0 9.7 12.3 24.4 12.3 25.0

FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 1H FY3/19 Forecast R＆D Expenses Ratio of R&D expnditures to revenue

Other Financial Fata 2

*JGAAP until FY3/18, IFRS for FY3/19

R&D Expenses

37.6 43.9 31.8 54.2 32.2 60.0 28.8 34.8 28.2 31.6 16.6 36.0 FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 1H FY3/19 Forecast

Capital Expenditure/D&A Expense

35

November 7, 2018

3.7% 6.4% 2.6% 2.1% 7.9% 11.8% 10.9% 10.4% 13.1% 12.6% 17.4% 14.0% 5.2% 9.0% 12.0% 19.5% 23.6% 22.5% 20.1% 24.8% 26.9% 28.0% 29.9% 30.1% 32.2% 31.3% 27.5% 25.3% 27.9% 30.0% 3.2% 2.8%

• 9.9%
• 6.7%

6.2% 19.7% 12.8% 10.5% 16.5% 17.8% 27.4% 11.9% 4.3% 4.5% 9.6% 6.3%

• 3.4%
• 9.2%

2.0% 1.6%

• 3.2%

2.0% 17.5% 13.3% 21.2% 27.3% 3.6% 8.2% 18.6%

• 20%
• 10%

0% 10% 20% 30% 40% FY3/10 FY3/11 FY3/12 FY3/13 FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 FY3/18 1Q FY3/18 2Q FY3/18 3Q FY3/18 4Q FY3/19 1Q FY3/19 2Q

Total Machined components Electronic devices and components Mitsumi business

ROIC (Return On Invested Capital)

MinebeaMitsumi ROIC

NOPAT Invested capital

(Notes receivable/accounts receivable + inventories + non-current assets - notes payable/accounts payable) (Operating income + extraordinary profit/loss) x (1-tax rate)

＝

Calculated using business assets (trade receivable/payable, inventories, non-current assets) by segment

Shareholder’s equity cost (max) 8%

*JGAAP until FY3/18, IFRS for FY3/19

※Total figures include other adjustment figures

[ IFRS ] [JGAAP]