Qu Quest estion ons & s & An Answers swers (Res (R - - PDF document

1 May 9, 2006 Minebea Co., Ltd

Qu Quest estion

• ns &

s & An Answers swers (R (Res esults P Presen entation

• n for

for F Fiscal al Year ar E Ended ded M March 31, 2006 31, 2006) )

Some parts have been added and modified for a clearer understanding. Q : Q : Th The ke keyboard b busi siness i ss is to to b be c continued f d focusing o

• n h

high e end mo d mode

• dels. Wh

. When do do you e expe pect i it to to turn pr profitabl able? Are you assu assured t d that at t the bu busi siness c ss can g generate st stable pr profit, o , or i is r reac aching brea eakev keven y n your ur f first s t step ep? A : Breakeven is not our final goal. However, in reality, we need to set our goal to generate some profit for a start. We are running the keyboard business with our sight set on the market several years ahead when we expect products such as notebook type, keyboards with FeliCa function and 2.4 GHz wireless keyboards as I mentioned in the presentation. Q : : D Do yo you e expect ct t the k keyb yboard rd b business t to i incre crease p profit i in t the f firs rst o

• r s

seco cond ye year a after re r reaching brea eakev keven, n, or

• r d

do y you ha u have a a long longer er t term hor horizon a n as y you need u need t the nex e next gene neration p

• n prod
• ducts t

to fu full lly t y take o

• ff b

ff befo fore re t the b business ca can ge genera rate p profit it. A : I do not expect long before the start of the next generation products such as keyboards with various functions or desktop keyboards with notebook technologies applied. I expect the next generation products to be launched in one to two years, in other words the market to require such products in the near future. Q : Q : Wh When en do y do you ex expe pect th the i e information moto motor b business to tu to turn pr profitable on e on a a mon monthly b basis? Explain f furt rther d r details re rega gard rding re g reduct ction o

• f ro

royalty p y paym yment. A : We expect information motor business to generate profit in the second half and be in black for the full fiscal year. Royalty payment in the last fiscal year was over 1 billion yen. The amount will be significantly reduced to a very small amount this fiscal year and onward. Q : : Why Why is is this this f fiscal y year's 's op

• per

eratin ing in income f me forecast f for the ma the machined ined comp mponent s

• nent segment f

ent flat fro from la last fis fiscal y year? r? A : Firstly, we see several uncertain factors. In addition, in pivot assembly business, volume is expected to increase but some price decline has been assumed. In ball bearing business we forecast a small increase in profit because internal usage by pivot assemblies is expected to

• increase. In rod-end bearing business, demand from commercial aircraft market is extremely

strong but in military area development of aircraft is in-between cycles. Overall, we expect no decline in profit. We also expect fasteners for aircraft and defense-related special parts to generate less sales and profit this fiscal year.

2 Q : Q : Is Is th the oper e operating income f me forecast f for th the ma e machined c ed compon mponen ent s t segmen ent s t set c t conservati tive, , as assuming u unce cert rtain fa fact ctors i in t the m mark rket? ? A : We consider HDD market, one of our principal markets, volatile and is an uncertain factor. Our forecasts are what we assume we can achieve even in the situation the HDD market undershoots

• ur expectation.

Q : : B Ball be bear arings, r rod- d-end be d bear arings an and pi d pivot asse assemblies s ar are categori rized as g d as growth bu busi sinesse sses.

• s. Yet,

ma machined ined c comp mponent b

• nent busines

ness is is ex expected ed no no grow

• wth in p

th in prof

• fit th

it this is f fiscal y

• year. H

How d do y you u consider er th the g e growth

• wth r

rate i te in th three to f ee to five y years? A : This fiscal year's focus is on aligning strategy, business and technology in order to grow from next fiscal year. Active expansion will be sought from next fiscal year. Q : : How How m much w will i ill interest e expens nses es im improv

• ve t

e this is fis fiscal y year? A : Last fiscal year, yen depreciation and rising interest rates in Asia led to an 1.4 billion yen increase in interest expenses. We expect interest rates to continue to rise this fiscal year but if yen appreciation continues, payment may decrease due to effects on translation of overseas payment to Japanese yen. Reduction of interest bearing debt is an important theme this fiscal

• year. Our reduction plan of 17 billion yen is the minimum goal and we aim for net interest

bearing debt of 130 billion yen or less. Q : : Ex Explain in d n in details ils how how c corpor

• rate t

e tax r rate w will i ill improv

• ve ne

e next fis fiscal y year, f fiscal y year e ending ng March 2008 008. A : We look for two issues to be solved. Firstly, currently, loss making subsidiaries worsen tax rate

• n the consolidated basis. Secondly, the parent company currently receives dividends from
• verseas subsidiaries but indirect foreign tax exemption cannot be applied fully due to remaining

deferred tax assets at Minebea. We expect tax rate of 40-45% from next fiscal year when the two issues to be solved. Q : : W What at ar are m measu asures f for vibr brat ation m motors an and D d DC br brush m motors t to m make t them pr profitabl able du during this f fisc scal al y year? ar? A : Production of DC brush motors will be consolidated to the plant in Malaysia. Previously subcontracted work at Malaysian plant has already been switched to in-house production. We will transfer production from China. Market of DC brush motors is wide. We are reviewing prices and orders for products with thin margins. Turnaround of production at Malaysia is in sight. With these two measures, we aim to generate profit. For vibration motors, consolidation to plants in Indonesia and China is almost complete. With the production integrated, we will aim to lower production costs of parts. Moreover, we will maintain sales price this fiscal year.

3 Q : : T This is f fiscal y year's 's s sales les p plan f for H HDD s spind indle m e motor tors is is no d no different f nt from ex

• m expected

ed ma market g et grow

• wth

th

• rate. Is

Is t this is becaus use a e aggres essive ex expans nsio ion in s n in sales les is is not not soug ught ht a as r reinf inforcement nt m measur ures es a are e still b ill being ing im implem emented, inc includ uding ing d develop lopment ent o

• f 2.5-in

inch m motors? A : Last fiscal year's turnaround of HDD spindle motor business is a result of measures to keep volume flat and seek profit. We are continuing our measures to achieve higher profit. We do not plan to lower prices by seeking higher market share. Q : : I It a appears fu furt rther re r reduct ction i in i inve ventory i y is n nece cessary

• ry. D

Do yo you h have ve a a t targe rget? W ? What a are re reasons for for r reduction b n by 5 5.0 billion illion yen in n in four fourth q quarter compared ed t to t thir ird q quarter? A : Reduction of large amount of inventory during fourth quarter owes to lower inventory of final products, work in progress and raw materials of ball bearings. For around six months, production volume of ball bearings was reduced in order to reduce inventory, leading to higher production costs and lower profit for machined component business in fourth quarter, but now production volume is brought back to the same level as the sales volume. For this fiscal year, we plan for 1.7 billion yen or more reduction in inventory. Q : : W What is is s sales les v volum lume o

• f F

FDB m B motors? Ha Has it it in increased ed c compared ed t to la last fis fiscal y year? A : All of our HDD spindle motors are now FDB motors. Sales volume is 5.0 million per month, same level from a year ago. Q : : Are the e there ef e effects of

• f hi

higher r raw ma mater terial p pric ices es such a as s steel? eel? Are y e you u rais ising ing p prod

• duc

uct p t pric ices es to to

• f
• ffset the imp

et the impact? A : There is large impact of rise in raw material prices, especially in motor, keyboard, rod-end bearing businesses. Impact is small for ball bearings with outer diameter 5mm or less, as raw material costs make up small proportion of total costs. There are effects of rise in costs of steel, copper, aluminum and plastic. Prices of electromagnetic steel sheet and bearing steel have

• stabilized. We expect the current situation to continue this fiscal year.

Q : : Wha What a are e reasons

• ns tha

that op

• per

eratin ing in income me of

• f e

elec ectr troni

• nic d

devices a and comp mpone

• nent w

t will ill imp improve i e in the the second h half c compa mpared to th ed to the f e first h t half? A : We expect all of HDD spindle motor, information motor and keyboard businesses to generate profit in the second half. We do not expect large profit contribution by lighting devices in fourth quarter due to seasonal volatility. Measuring component business is expected to generate stable profit this fiscal year. Q : : R Rod- d-end be d bear aring, pi pivot asse assembly an and l d lighting de device bu busi sinesse sses ar s are c categorized as g d as growth businesses, a and d at th the s e same ti me time, i me, information mo motor tors, n , new pr w produ

• ducts

ts f for key keyboa

• ards, 2

2.5-inch motor motors f for HDDs a are a e also a area eas w with v th various

• us mea

measur ures

• es. Wher

Where d e do you s u see g ee grow

• wth p

th pros

• spect a

and pl plac ace impo portan ance?

4 A : Ball bearings, rod-end bearings, lighting devices and pivot assemblies are businesses with prospect for growth in absolute profit but businesses such as HDD spindle motors have outlook for high growth rate. I consider growth business as those with large absolute profit and sustainable high market share. Q : : Are yo you co committing g re resource ces s such ch a as R R&D a and p pers rsonnel t to g growth a areas? A : Through engineering and technology development activities within Business Units, we aim to crate new market based on existing products, thus allocating resources based on sales and profit

• sizes. On the other hand, engineering and technology development activities at Engineering

Headquarters determine areas of basic technology development for the company, thus we are committing more personnel resources in Engineering Headquarters.