Investor Relations | IR Events | Performance Briefing

[ Financial Results for Fiscal 2021 Performance Briefing ]Q&A

Q1. Please provide a breakdown by segment of the sales and operating income forecast for the fiscal year ending March 2022.
A1. As we posted 17.6 billion yen in one-time expenses such as restructuring costs in the fourth quarter of the fiscal year ended March 2021, when these one-off expenses are excluded, we expect operating income to increase by 20 billion yen. Looking on a per-segment basis, we forecast that sales in the Passive Components segment will increase by 4-7%, and that income will increase in real terms based on the higher revenue. We expect sales in the Sensor Application Products segment to increase by 22-25%, marking a significant improvement from the deficit we ran in the fiscal year ended March 2021. We expect sales in the Magnetic Application Products segment to increase 9-12%, with income rising commensurate with higher revenue. We expect an increase of 8-11% in the Energy Application Products segment along with an increase in income due to the higher revenue, but as we plan to accelerate power cell development in particular and double sales, we also expect to incur greater development costs and SG&A expenses.
Q2. In your forecast for sales and operating income in the fiscal year ending March 2022, what is the breakdown between the first and second half?
A2. As we expect a seasonality impact in the fourth quarter, we expect the first half of the year to account for 53-54% of sales, and operating income on par with sales in each half.
Q3. How do you forecast sales changing for each segment from the fourth quarter of the fiscal year ended March 2021 to the first quarter of the fiscal year ending March 2022?
A3. We expect an increase in overall sales of 5-8%. By segment, sales in the Passive Components segment are expected to rise 1-4%.For the Sensor Application Products segment we believe sales will continue to be flat at the level of the fourth quarter in which we posted record sales on a quarterly basis. We have incorporated a slight decline in sales volume for the Magnetic Application Products segment, and expect a fall in revenue of 4-7%. We expect revenue from the Energy Application Products segment to increase 13-16% due to steady demand for PCs and tablets as well as higher power cell sales.
Q4. To what degree do you plan to expand MLCC production capacity this fiscal year? And, a very high percentage of TDK's MLCCs are for automotive applications. Please tell us about that market environment.
A4. We are aiming to for a double-digit expansion of automotive MLCC production capacity. We intend to expand production capacity for automotive products more than commodity products.
Orders from customers are continuing on a strong trend, and we recognize that demand and supply are tight especially with specialized products for ADAS and xEV.
Q5. In the Sensor Application Products segment, will there be a clear improvement in profit in relation to the expected increase in sales?
A5. For the fiscal year ending March 2022, in addition to expecting sales growth of 22-25%, we expect to see a considerable improvement in profit, in light of the fact that we recorded restructuring costs and other costs in the previous fiscal year. We expect a recovery in macro demand, but we believe that sales expansion measures will have an ever greater impact.
Q6. For the fiscal year ending March 2022 you expect an increase in overall volume of HDD heads. How much do you expect that increase to be?
A6. In the fiscal year ended March 2021, volume was at an extremely low level due to factors such as plant closures of a major customer in the first quarter. In the fiscal year ending March 2022 we expect volume to increase by at least 20%.
Q7. What factors will continue to increase revenue in the battery business by application? And what are your predictions for power cell profitability?
A7. First, we expect power cell sales to double, and increased sales for residential energy storage systems and electric motorcycles factor into that. There will also be a slight uptick in demand for smartphones, and we predict that demand for PCs and tablets will be flat.
Power cell profitability is affected by upfront development costs, but it is something we are looking to improve.
Q8. Do you have a conservative outlook on profit margins in the battery business?
A8. TDK's battery business has expanded rapidly over the past 10 years in applications for the ICT market, but due to the saturated smartphone market and TDK's high market share, it has become difficult to simply pursue growth. At the moment we are maintaining high profitability over 20% by reaping the benefits of our prior investments, but to shift to the next stage, we plan to make investments particularly in the next fiscal year and the one after that. In addition to refining our technologies and expanding production capacity, our forecast also incorporates upfront investment in the Indian market.
Q9. How do you see the possibility of parts inventory adjustments?
A9. Against the backdrop of geopolitical risks and the supply issues in the semiconductor sector, we believe there is a trend toward deeper inventories. Normally, sales in the first and fourth quarters are not that large, but in the fourth quarter of the fiscal year ended March 2021 consolidated net sales were 392.2 billion yen, which was a high level on par with the third quarter (395.7 billion yen) results. As we expect this to further increase in the first quarter of the fiscal year ending March 2022, we assume there is a risk of inventory adjustments in the second half of the year. We will keep a close eye on when and to what extent inventory adjustments may occur while monitoring the state of orders received.
Q10. Please provide a breakdown of your expected capital investment for the fiscal year ending March 2022.
A10. As with the previous fiscal year, we plan to allocate around 60% of our total capital investment to the battery business in the fiscal year ending March 2022. In particular, we are looking to make technical innovations in power cells and mini cells, invest in development, and enhance our presence in the Indian market. Of the remaining 40%, we will allocate around 15% each to Passive Components and Magnetic Application Products, with around 10% going to Sensor Application Products and Other.
Q11. What is the background to the establishment of joint venture companies with CATL?
A11. Behind the business alliance with CATL, which included the establishment of joint venture companies, we continued examining whether we would be able to expand our business to coincide with the growing market size while mitigating risks, even in the area of medium size rechargeable batteries.
TDK's subsidiary ATL had rapidly grown its business by providing small size rechargeable batteries for the ICT market, primarily smartphones. Moving forward, we want to continue to vigorously develop the market and provide our products for even more wireless devices to contribute to the realization of a convenient and comfortable society. Meanwhile, to fulfill contributions to society in the field of energy transformation (EX) as well, we have been making full-scale efforts to expanding our business for residential energy storage systems and electric motorcycles since the previous fiscal year. While we expect the size of the market for power cells to exceed that of the ICT market in the next three to four years, as the necessary technologies are also specialized depending on the application, we gave a lot of consideration to ATL pursuing the business on its own or not.
Q12. Regarding the business alliance with CATL, what sort of Monozukuri are you envisioning for power cells? With new battery technologies, the general approach is to apply them to power cells after first trying them in small cells. Since TDK has a lot of capacity to experiment with new technologies, I believe this will be highly beneficial to CATL.
A12. From our experience, we know that reliability and stability in battery quality are big advantages, and particularly from 2017-2018, we have been investing in achieving stable quality. As we assume that most of TDK's batteries will be installed in devices that are carried around, we believe we will be able to take great advantage of the collaboration and joint venture companies with CATL in product design and technologies for reliability. At the same time, since multi-cell battery management systems are more complicated than for mini cells, that expertise is on the CATL side. By having both sides share their respective strengths through this alliance, our main focus is to reduce risks and provide safe products to customers.