Investor Relations | IR Events | Performance Briefing

[ Financial Results for Fiscal 2017 Performance Briefing ]Q&A

Q1. Operating income for the year ending March 2018 is projected to be ¥80.0 billion after real income of ¥85.5 billion for the year ended March 2017. What are the components of this change? What kind of change would you expect from discounting factors such as gains from profits on businesses sold during the year ended March 2017 and licensing fees received from Qualcomm? Also, how does the projected figure of approximately ¥80.0 billion for the year ending March 2018 break down between the first and second halves?
A1. First, in the year ended March 2017, the full-year figure of ¥85.5 billion is a real-based figure excluding restructuring expenses, and we expect this figure to be ¥80.0 billion for the year ending March 2018. Operating income for the year ended March 2017 was ¥208.7 billion, but this includes gains on the sale of the carved out High-Frequency Components business of ¥144.4 billion and restructuring expenses of ¥21.2 billion. Moreover, the sales of the carved out High-Frequency Components business are worth approximately ¥130.0 billion, with an operating income margin of more than 20%. If we exclude this gain on sale, business restructuring expenses, and operating income of the carved out High-Frequency Components business—looking at the result on the same basis as the year ending March 2018——then operating income for the year ended March 2017 was around ¥60.0 billion. So, we are projecting an increase in operating income to ¥80.0 billion from ¥60.0 billion. Basically, the most part of the increase will be due to profit growth of Passive Components. This includes approximately ¥5.0 billion as a filter fee under an agreement relating to the establishment of RF360. In terms of the distribution of the projected ¥80.0 billion in operating income between the first and second halves, we see around 45% of it in the first half with the remainder in the second.
Q2. Could you please give details of the capital expenditure for the year ending March 2018? The level is quite high, and it seems likely to include investments for medium-term growth, but how will the funds be used specifically? Could you also tell us how much investment will be needed in addition to this under the next medium-term management plan?
A2. For the year ending March 2018, we are planning around ¥160.0 billion in capital expenditure. Approximately 30% of this will be invested in each of the Passive Components segment and Rechargeable Batteries business. For the Rechargeable Batteries business, our investments will be focused on increasing production to meet increased volumes and rationalization, as well as investments for improving safety and reliability. For the Passive Components segment, we will mainly be making investments related to model lines for new plants and investments in new products. Investment in the Magnetic Application Products segment accounts for around 20%. This includes a certain amount of the investment in new businesses such as those of Hutchinson. We have made aggressive up-front investments under the current medium-term management plan, and one of our guidelines under the next medium-term management plan is basically depreciation plus extra components.
As I’ve just mentioned, the Magnet Application Products segment accounts for around 20% of our investment, but I’d like to add one point to this. You may have the idea that magnetic applications effectively refer to HDD heads, but we are currently undertaking a major conversion of our business activities in the Magnetic Application Products segment. Up until now, we have had a very high ratio of magnets for VCMs in HDDs, but we must convert these for automotive or industrial equipment applications. We have already started working on magnets for automotive use, and having secured orders for magnets to be used in motors, including for major customers, we will now start preparing a production system for this. Investment for these preparations, mainly in Japan, is also included in this approximate 20%.
Q3. Currently, demand for Electronic Components appears to be tight. If this is the only investment you will make in the Passive Components segment, I feel concerned that you might not keep up with the growth in demand for Inductors and Ceramic Capacitors in two to three years’ time, particularly for the automotive field. Could you share your thoughts on these demand trends and your investment in light of that?
A3. As you point out, demand from automakers for Capacitors and Inductors is soaring. Many customers have asked us to ramp up production even further. With regard to Capacitors, we made investments to increase production capacity in the year ended March 2017 and will make further investments in the year ending March 2018. In line with your expectations, we plan to expand our timely investments, including in Inductors. We are also planning to adopt a stance of selling on quality rather than quantity, centered on an ideal model line that will achieve zero defects. We will increase our production lines for Inductors, while utilizing the resources of the plant that we acquired from Renesas Electronics (currently the Tsuruoka Higashi Factory). We also plan to invest in high power, high inductance products going forward.