Investor Relations | IR Events | Performance Briefing

[ Financial Results for Fiscal 2020 Performance Briefing ]Q&A

Q1. What are your projections for net sales and operating income for the first and second halves of FY March 2021?
A1. We expect that net sales for the first half will account for slightly less than 50% of the total for FY March 2021, and for the second half it will account for slightly more than 50%. The rate of operation is projected to recover gradually toward the second half. Therefore, we expect operating income for the second half to improve from the first-half level.
Q2. How do you expect net sales by segment to change from the fourth quarter of FY March 2020 to the first quarter of FY March 2021?
A2. We expect that consolidated net sales will remain almost flat or decline by up to approx. 3%. By segment, we forecast that sales in the Passive Components segment will decline by approx. 16% to 19%, those in the Sensor Application Products segment will change in almost the same way, and those in the Magnetic Application Products segment will decline by approx. 22% to 25%, while sales in the Energy Application Products segment will increase by approx. 22% to 25%.
Q3. Will operating income for the first quarter of FY March 2021 decrease significantly, considering the forecast change of net sales for the same period?
A3. We expect that the impact of the COVID-19 coronavirus will be greater in the first quarter of FY March 2021 than in the fourth quarter of FY March 2020. However, compared in real terms by excluding the impact of the COVID-19 pandemic, consolidated operating income for the first quarter is expected to be slightly greater than for the fourth quarter. Rechargeable battery sales have been growing in the period from the fourth quarter to the first quarter, allowing us to earn a profit. We forecast that operating income from passive components and sensors will increase slightly, while operating income from HDD heads will decline slightly, reflecting the decrease in sales.
Q4. Sales of rechargeable batteries were affected by conditions related to production in China in the fourth quarter of FY March 2020. Will the sales increase in the first quarter of FY March 2021 because such conditions no longer exist?
A4. Yes, they will.
Q5. Batteries for laptops, tablets, 5G smartphones, game consoles, and others are believed to be extremely strong. You said that you expect sales in the Energy Application Products segment for the first quarter of FY March 2021 to increase by approx. 22% to 25% from the fourth quarter of FY March 2020. Describe the current situation.
A5. Demand for batteries for laptops and tablets is increasing partly because telecommuting has been introduced widely, reflecting recent circumstances. While we received many orders in March and April, we feel that orders began to slow down around May. In the first quarter, we have seen stronger demand than initially expected, despite restrictions such as the shutdown of customers’ factories in India. We are responding to the demand with our current production capacity.
Q6. Previously, you said that sales of rechargeable batteries would grow by double digits in FY March 2021. Currently, however, you forecast that sales will remain flat. Why? What are your projections for sales in the second half?
A6. We forecast that sales of batteries for smartphones will decrease significantly, because shrinking of the smartphone market is expected. On the other hand, sales from mini cells and power cells are expected to increase, which is why we forecast that the full-year sales of all batteries will remain flat. Concerning the second half, the smartphone market remains extremely uncertain at the moment, so we expect sales to fall slightly below the initial projections. We will increase the production capacity as planned initially.
Q7. Why will you increase your production capacity while you expect sales of rechargeable batteries to remain flat?
A7. In FY March 2021, we will allocate capital expenditure appropriately on a segment-by-segment basis. We will invest aggressively in businesses from which we can increase earnings. Capital expenditure for rechargeable batteries accounts for the largest proportion of the expected total amount of capital expenditure, which is 180.0 billion yen. It will not be reflected immediately in the production capacity for the current fiscal year, but we expect that its effects will begin to be visible in the next fiscal year. While batteries for general smartphones do not require capital expenditure, we will invest in high-density products, specially shaped ones, mini cells, and power cells for residential energy storage systems. We are also planning to increase our production capacity of components compatible with 5G.
Q8. Due to the COVID-19 pandemic, the automotive market is likely to shrink to a greater degree than it did after the global financial crisis, and the supply chain is likely to change, resulting in the integration of Tier-1 manufacturers, the reorganization of OEMs, and similar changes. Do you notice any changes in the industry?
A8. While the shift to EVs and electrification progresses, movements in the automotive industry, such as reorganization, will be strongly related to TDK’s business. Further modularization of automobiles will occur. Therefore, we expect that at some point we will have to operate business near Tier-1 manufacturers, such as by delivering automotive parts as discrete components. By assuming this to a certain degree, we consider daily whether we can collaborate with other companies, regardless of the industry. We believe that such structural transformation is likely to be accelerated by the COVID-19 pandemic.
Q9. I believe that automation technologies are valuable during rapid changes in the business environment, such as those we are currently facing. Is there any field where investment in automation will allow you to differentiate yourself from your competitors?
A9. It is possible that we will leverage automation technologies for rapidly promoting improvements in the production of single parts and in assembly processes, such as the packaging of batteries. Above all, we feel that excellent automation technologies will determine the cost for products, such as automotive power supply, which will begin to grow. In addition, we feel that streamlining is possible through automation and other methods, such as detecting data with a variety of sensors and feeding back the data to the production line.
Q10. Can you improve the competitiveness of your automotive magnets by automating their post-processing?
A10. Regarding automotive magnets, we believe that, in addition to automating the processing, creative measures should be devised for the methods of the creation of magnetic flux and magnetization, among others, in the production of high-performance motors, high-torque motors, and similar products. We are earnestly developing more effective and efficient technologies.
Q11. It is believed that passive components are under tough conditions in the first half of FY March 2021 due to the COVID-19 pandemic. How do you view them during the second half to FY March 2022?
A11. During the second half of FY March 2021 to FY March 2022, the market for 5G-related and other devices and the infrastructure-related market will grow. This will increase the demand for high-frequency components and inductors and capacitors related to the power supply for infrastructure, among other products. Among products for 5G, high-performance ones, such as thin-film devices, are seeing growing demand, so we will be committed to the development and sales of thin-film electronic components. On the other hand, while it will take time for automobile-related markets to recover, we expect that the demand for EVs and hybrid vehicles will remain strong. In addition, 5G is related to automobiles, so we would like to discover the demand for high-frequency components.

Recommendations

  •  
  •  
  •