Investor Relations | IR Events | Performance Briefing

[ 1st Quarter of fiscal 2019 Performance Briefing ]Q&A

Q1. How are you planning to promote investment in TODA Kogyo?
A1. TDK is making efforts with an aim to manufacture high-quality products in its new medium-term management plan. TODA Kogyo excels in synthesis technology of magnetic materials and TDK has strengths in Monozukuri (manufacturing excellence) competitive products from such materials with its original process technology. Therefore, we intend to combine both technologies and utilize them in manufacturing. TODA Kogyo is our partner with whom we conducted joint development. As for projects which we have already promoted, we would like to lead them to mass production by further strengthening our relationship with TODA Kogyo.
Q2. There were one-time expenses of 4 to 5 billion yen in the fourth quarter of the previous year but were there any in the first quarter?
A2. There are basically no one-time expenses in the first quarter. Approximately 1 billion yen was included in other deduction with the adoption of the Accounting Standards Update but that has already been incorporated in the full-year projection.
Q3. As for ceramic capacitors, you announced that competitors will push to promote price increase as well as downsizing. What kind of impact will such strategy have on TDK?
A3. Reliability and redundant design are required for automotive products with the progress in Advanced Driving Assistance Systems (ADAS) and automated driving and we believe that competitors are also responding very cautiously. TDK is promoting manufacturing centering on redundantly designed products and we believe that we can continuously increase net sales. As it is technologically difficult to secure reliability while downsizing products with high rated voltage, we expect to receive orders of large products over the short term. We intend to realize downsizing of products with next-generation Monozukuri and material development in the future.
Q4. Please tell us about the increase in production capacity for automotive products in this period.
A4. As for automotive products, we are increasing capacity by approximately 10% or more through investment. However, contracts for supplying a stable number of products are concluded after limiting to certain types of products. If possible, we would like to respond to production while concluding long-term contracts.
Q5. Has there been any change in capital investment in MLCC from 3 months ago?
A5. There has been no change. As we’ve mentioned previously, we are carrying out a plan to increase the capacity by approximately 20% this period which includes that for the next period.
Q6. Please tell us how the quantity and unit price of HDD Heads will change in the second quarter.
A6. While the shipment index for the first quarter is 93, the index for the second quarter is assumed to be around 101 which is approximately an increase of 8% on a volume basis. As for product mix, it is forecasted that the number of 2.5-inch HDD Heads will increase slightly and the unit price will decrease slightly from the first quarter.
Q7. We believe that TDK has started production in the Tsuruoka Higashi Factory but what is the status of automotive power inductors?
A7. We are currently expanding sales of power inductors centering on those for automobiles and the number of cases accepted by automobile manufacturers including Tier 1 is increasing. We would like to achieve results as we believe that there is a potential following canvas filters.
Q8. How were net sales and operating loss for the first quarter change compared with the annual plan regarding sensor application products? Also, please tell us whether you can make up for the loss from the July to September period onwards as well as about specific products and period.
A8. Net sales for the first quarter decreased slightly from the initial projection. As for profits, acquisition-related costs decreased by 2.1 billion yen year on year while profits decreased by 0.5 billion yen for total substantive decrease of 2.6 billion yen. However, as expected at the beginning of the period, acquisition-related costs accrued and the result was almost the same.
We believe that the certain increase in the number of models adopted as magnetic sensors for mobile devices in the second quarter onwards will become a positive factor in the future. In addition, the customer base of motion sensors for ICT is expanding continuously. The use of microphone is spreading and we are eyeing not only AI speakers but also the use of hearable devices. The possibility that ultrasonic fingerprint sensors can also be used for IoT and automotive products is spreading. We aim to achieve the increase in full-year net sales by not only applying sensors for smartphones but also assessing the points that the characteristics of TDK’s sensors can be utilized and value can be appealed to the maximum extent and that the use of sensors is spreading.
Q9. We believe that movements to use TMR sensors for smartphones and automobiles are increasing. Please tell us the current situation.
A9. The adopted models of TMR sensors for mobile devices are spreading and we believe that their use will further spread over the medium term. In addition, the number of inquiries for automotive TMR sensors is increasing significantly. Since TDK’s TMR sensor is developed by applying the technology of HDD Heads, we intend to differentiate ourselves from competitors while maintaining the technological advantage.
Q10. There are some products whose momentum cannot be maintained or those that are not improving such as magnets. Please tell us of any change in future initiatives.
A10. For magnets, we still haven’t accomplished the plan as indicated but we are steadily making progress in structural reform. For metal magnets, we are investing in strengthening Monozukuri mainly at the Narita Plant. We would like to create a system to that will allow us to steadily generate profits as we are receiving orders that were scheduled to be made 1 to 2 years ahead of now from major automobile manufacturers. Although the number of orders for wind power generation has recently been below the level of the initial plan due to decrease in demand, we will make progress by covering it through other businesses such as automotive products. In addition, we also aim to achieve results at an early stage in the strengthening of Monozukuri at overseas bases.
Q11. Net sales of rechargeable batteries was 79.7 billion yen and operating income was 12.7 billion yen for the first quarter of the fiscal year ended March 2018. What was the result for the first quarter of the fiscal year ending March 2019?
Also, full-year net sales of energy application products for the fiscal year ending March 2019 was forecasted to increase by 8% to 11% year on year as of the end of April. As of the first quarter, net sales already increased by 25% from the fourth quarter of the previous year and it is forecasted to further increase by 9% to 12% in the second quarter. Therefore, we believe the full-year projection indicating that net sales will increase by 8% to 11% year on year is conservative. Please tell us about the projection for the second half of the year.
A11. Net sales of energy application products for the first quarter is increasing by approximately 30% year on year including the impact of exchange fluctuations and net sales of rechargeable batteries should also see the same level of increase. Sales of power supplies is also growing steadily but the increase itself isn’t that large. Please note that most of the year-on-year increase is due to the increase in volume.
Furthermore, as you mentioned, net sales for the first quarter increased more than the initial projection and this was largely due to extremely strong net sales for China and reception of orders ahead of schedule especially for new models. Since there is a sense of uncertainty in the projection for the second half of this fiscal year, we would like to make assessments carefully.
Q12. You mentioned that net sales of batteries will increase by approximately 30% from the fourth quarter of the previous year. What are the factors of the increase? Also, net sales for the second quarter is expected to increase by 9% to 12%, but what exactly will increase? Please explain your view.
A12. The main factor of the increase in net sales is the increase in net sales of batteries for Chinese smartphones. The increase in sales of batteries for laptop PCs, tablets, and game consoles has also had an effect. As for the projection for the second quarter, we believe that there will be no large increase in the second quarter as batteries for Chinese smartphones were ordered ahead of schedule during the first quarter, however net sales of batteries for laptop PCs and game consoles is expected to increase slightly. In addition, as net sales of smartphones for North America will increase in the second quarter, the ratio of net sales of batteries for smartphones for North America is expected to increase.

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