Ques Questions & tions & Answers swers (Res (Results - - PDF document

1 November 1, 2005 Minebea Co., Ltd

Ques Questions & tions & Answers swers (Res (Results presen ults presentation for tation for the first h the first half of fisc lf of fiscal year en al year ended March ded March 31, 2006 31, 2006)

Some parts have been added and modified for a clearer understanding. Q : : F For t the t e three b ee busines ness t that fa face ong

• ngoing

ing challe lleng nges es t to im improve p e prof

• fit

itabilit ility, w what w was t the los e loss am amount i in t the se second qu quar arter an and w d what at ar are e estimates f s for t the t third qu d quar arter an and t d the f fourth quarter ter? E Explain how n how m much ea each of

• f t

the b e busines nesses is is ex expected ed to imp to improv

• ve in t

in the s e second nd ha half lf f from

• m

the f the first ha t half lf, in t in the or e order of

• f a

amount of

• unt of i

improveme ement. t. A : The loss for the total of the three businesses was 2.7 billion yen in first quarter and 2.6 billion yen in second quarter, so 5.3 billion yen for the total of the first half. The businesses other than the three businesses in the electronic device and component segment posted profit of 0.6 billion yen in first quarter, 0.8 billion yen in second quarter, thus 1.4 billion yen for the total of the first

• half. As a result, total loss of the electronic devices and component segment was 2.1 billion yen in

first quarter, 1.8 billion yen in second quarter, so 3.9 billion yen for the total of the first half. In the second half, the three businesses are forecast to record a loss of 1.8 billion yen in third quarter, 1.3 billion yen in fourth quarter, so a loss of 3.1 billion yen in the total of the second half. For the other businesses, we forecast profit of 0.8 billion yen in third quarter and 0.9 billion yen in fourth quarter, so 1.7 billion yen for the total of the second half. As a result, for the total of electronic device and component segment, we forecast a loss of 1.0 billion in third quarter, 0.4 billion yen in fourth quarter, so a loss of 1.4 billion yen for the total of the second half. For the full year, the three businesses are forecast to post a loss of 8.4 billion yen, the other businesses are forecast to post a profit of 3.1 billion yen, and thus the total of the electronic device and component segment is forecast to post a loss of 5.3 billion yen. (Billions of yen) Q1 Q2 H1 Q3 Q4 H2 Full year 3 businesses

• 2.7
• 2.6
• 5.3
• 1.8
• 1.3
• 3.1
• 8.4

Sum except for 3 businesses +0.6 +0.8 +1.4 +0.8 +0.9 +1.7 +3.1 Electronic devices and components business total

• 2.1
• 1.8
• 3.9
• 1
• 0.4
• 1.4
• 5.3

Of the three businesses, the HDD spindle motor business posted the least amount of loss in the second quarter. The loss from the HDD spindle motor business halved in second quarter from first quarter and we expect the loss to improve to almost zero in the second half. The second largest improvement in the second half is expected at Minebea-Matsushita Motor joint venture.

2 There was no improvement by the keyboard business as cost reduction was not sufficient to offset adverse effects of steep rise in plastic resin material costs. For the first half, of the three businesses, HDD spindle motor posted the least amount of loss, the next was Minebea-Matsushita Motor joint venture, then keyboard. We forecast similar situation in the second half. Q : : T The H e HDD s spind indle moto e motor b busines ness ma made a an imp improv

• veme

ement a t after ter a a la launc unch of h of a a new new p polic licy — to — to im improv

• ve p

e profit

• fitabilit

ility w while m ile maint intain ining ing t the s e same lev level of l of volum

• lume. W

What is is t the nex e next m measur ure t e to achiev hieve a e an a adeq equa uate lev te level of l of p prof

• fit.
• it. T

The g e gap b betw tween M n Mineb nebea a and a a c comp mpetitor etitor is is w wideni ning

• ng. T

The e FDB motor motors f for 2 2.5-inch th that a are n e not s t sintered met ed metal ty type do n pe do not s t seem to eem to be s sufficien ent to n t to narrow

• w

th the g e gap. Wh

• p. What are mea

e measures es, i , including pr produ

• duct r

t roadmaps ps, i into th to the f e futu ture? A : Because of our small market share, the gap between us and our competitor is difficult to narrow down just with FDB motors for 2.5-inch. In the area of 3.5-inch, staying competitive in the market of low-price-range-products is not easy, but because our product quality receives high assessment from customers, we will compete with regards to quality. We are confident we can make profit in the area of high-priced-products. As for volume, we do not plan to continue with monthly volume of 4.5 million to 5.0 million next fiscal year. We plan to increase production level to around 6 million by securing a certain level of share in the spindle motor market, which is growing along with HDDs. During these processes, we plan to establish fundamentally FDB technologies. Q : : You s u said id prof

• fit c

it can b n be g gene nerated ted f from

• m hig

high-priced-mod models ls in the c in the current en ent environment w nment with th rela latively s stable s e sales les p pric ices

• es. Ha

Have y you a u assumed p pric ice w e will d ll decline ne ine next fis fiscal y year? A : We have assumed some price decline. However, if prices fell more than forecast, we are confident we can generate profit by increasing monthly volume from 4.5-5 million to 6 million. Q : : F For the ke the keyboa

• ards, w

what a are c e criter iteria ia us used ed in d in decision ma

• n makin

king? You menti u mentioned ned tha that y you a u are e workin ing on c

• n cost r

reductio ion in t n in the a e area ea of p

• f parts p

proces essing ng a and log logistic

• ics. W

What c crit iter eria ia d do y you s u set for the p the prof

• fit ma

it margin in? A : The condition required for the business to be continued is to generate profit. For the keyboard business, we could not foresee the current situation. By verifying, in a short time, to what level can the sales prices be raised, to what level can the raw material prices be lowered and to what level manufacturing cost can be reduced, we intend to consider the direction the business should take. Q : Q : Wh What do do y you pl plan to to do do wi with th th the jo joint v t venture str structure o

• f th

the ke keyboard b busi siness wi ss with th H Huan Hs Hsin G in Group

• up. P

Personally lly, I t I think ink Mineb nebea s should

• uld t

take m more init initia iative a and r run t un the op e oper eratin ing inde depe pendentl tly.

3 A : I intend to make decisions after considering various phases and situations. Q : : W What d do y you int u intend nd t to d do if if t the im e improvem ement ent d does

• es not

not m make ke progress a as p planned nned? You s u said id y you u will r ill review ew t the b e busines ness fr from

• m a

all a ll angles

• es. How

How m much t time is is need needed ed t to m make d decisions

• ns?

A : For the keyboard business, about half a year should be sufficient to make decisions. Q : : Are c e crite iteria ia a and c cond nditions itions the s the same f me for the b the busines nesses other

• ther tha

than th the key e keyboa

• ards?

A : Criteria for HDD spindle motor and Minebea-Matsushita Motor joint venture businesses are different from those for the keyboards. Because we have motor businesses beside Minebea-Matsushita Motor joint venture, there are synergetic effects for the overall motor

• business. There are also motors that use large volume of ball bearings. Therefore, we do not

make judgments with same criteria as the keyboard business. Q : : Ho How d did p profit a and l loss fo for t r the k keyb yboard rd b business a and Mi Minebea-Ma Matsushita Mo Motor j r joint ve venture chan ange from first qu quar arter t to se second qu quar arter? W What at ar are f forecast sts f s for 3 qu 3 quar arter an and f d fourth qu quar arter? A : In second quarter, the loss from the keyboard business was flat compared to first quarter, while performance of Minebea-Matsushita Motor joint venture worsened. The latter was due to a decline in productivity while structural reform was still ongoing. From now on, we will verify

• utcome of the structural reform. We believe we can make a large improvement in the second half,

now that the structural reform is over. Q : : W What d degre gree o

• f i

impact ct d do yo you e expect ct fro from t the stru ruct ctural re refo form rm a at M Minebea-Ma Matsushita Mo Motor r joint joint ventu nture? A : We forecast 2.2 billion yen in improvement for the three businesses from a loss of 5.3 billion yen in the first half to a loss of 3.first billion yen in the second half. For each of the three businesses, we look for similar amount of improvement. Q : : T The p e prof

• fit lev

it level l for th the b e busines nesses other

• ther tha

than the thr the three b ee busines nesses d does

• es not s

not seem to b eem to be inc increa easing ng a as y you ex u explained t that t the t e total p l profit

• fit w

was 0 0.6 b billion y illion yen in fi n in first q quarter, 0 0.8 b billion illion yen in s n in second nd q quarter, 0 0.8 b billion y illion yen in t n in third q quarter a and 0 0.9 b billion y illion yen n in fou in fourth q

• quarter. W

What we were th the r resu sults a s and wh d what a are f forecast f st for th the f full y year, a , and a d at wh what l level is th the o

• perating

inc income me? P Plea ease a also ex explain the new n the new p prod

• duct tha

t that w was d develop loped w with a th a c coop

• operation of

ion of N Nichia ia Corp rporation a and a announce ced re rece cently? ? A : We were initially forecasting 15 billion yen in sales for the full year but we now expect 16 billion

• yen. Moreover, we were originally expecting operating income margin of high single digit but we

now expect the margin to exceed 10% significantly for the full year. The new backlight product announced in a press release on October, 18 has been introduced to

• ur customers and we began mass production in October. Lighting devices generally experience a

decline in demand in third quarter, however, we expect the new product launch will offset the fall in demand.

4 Q : : Why Why w was ther there no i e no improvement in the a ement in the amou

• unt

nt of

• f los

losses f for the key the keyboa

• ard b

busines ness, d despite a ite an increase i in s sales i in s seco cond q quarter f r from fi firs rst q quarter? r? A : Increase in plastic resin material costs from first quarter to second quarter and completion of production transfer from Thailand to Shanghai in September delayed productivity improvement, and thus cost reduction was not sufficient. In the second half, we believe cost reduction is possible through efficiency improvement. Q : Q : C Compa mpared to to ke keyboard pr producti tion, wh , which i is i integrated i in S Shanghai, a , and H d HDD spi DD spindl dle mo moto tor prod

• duc

uction, w whic ich is h is int integrated ed a at Ba Bang ng p pa-in, n, m manuf nufacturing lo locations

• ns of
• f M

Mineb nebea-Matsus ushit hita Moto tor jo joint v t venture se seem to to b be di dispe sperse sed a d at S Shanghai, B , Bang pa pa-in, Lo Lop B p Buri a and d Malaysia. H . Has stru ruct ctural re refo form rm b been re really co completed? A : The first stage of the structural reform has been completed but I do not consider all the structural reform is completed. By first verifying outcome of this first stage of the structural reform, we can make decisions for the future. Q : Q : W With th th the s e shift of t of ke keyboa

• ard pr

produ

• ducti

tion

• n from C
• m China to

to Thailand, y , you men mentioned b d before th that subcon

• ntr

tracto tors h had to b d to be tr

• trained. Is
• d. Is i

it pos possible to tr e to train i in a a s shor

• rt ter

t term? A : There are high quality subcontractors in China. However, although basic, one example is that there are some language barriers because we are running the operation which was brought from

• Thailand. Unlike motors, competitors of the keyboard business are also experiencing effects of

steep appreciation in raw material costs. Therefore, I believe the situation will settle down once the issues of the high raw material costs are solved. Q : : I und I under erstand t that t the s e strategy for for t the b e ball b ll bearin ing w was t to lim limit it f furthe her ex expans nsion o ion of c custom

• mer

base a and v volum lume g grow

• wth. W

What s strategy d do y you ha u have in or in order t to in increase p e profit itabilit ility in t in the e second nd ha half lf? A : For the ball bearing business, we are not considering to increase sales and profit while limiting volume growth. There may be a situation when volume growth temporary stops due to shuffling

• f models as required by customers' business. We will continue to promote expansion of the ball

bearing business. Demand for pivot assemblies and fan motors are brisk in the second half. Because we sell our ball bearings to our pivot assembly and fan motor competitors, our business is tight to the extent that production is running below order levels.