Investor Relations | IR Events | Performance Briefing

[ Financial Results for Fiscal 2022 Performance Briefing ]Q&A

Q1. It seems that the operating income projection for the fiscal year ending March 2023 suggests low profit growth relative to the net sales projection when excluding temporary factors. What will income changes be like by product or by business?
A1. When excluding the sales increase effect of foreign exchange and soaring material prices, companywide net sales are expected to increase around 4-7%. On the other hand, the income projection reflects the view that surcharges will not completely offset the impact. Passive Components segment sales are forecast to rise around 5-8%. Gross profit will show a rise in comparison with net sales to attain an income rise, and we think the income growth is at an appropriate rate to the sales growth. In the Sensor Application Products segment, net sales will rise by around 7-10% in real terms. We anticipate that real operating income will not grow as fast as net sales. In the Magnetic Application Products segment, real net sales is expected to rise nearly 6-9% and gross profit to grow. In the Energy Application Products segment, net sales will exhibit a limited hike in quantitative terms, by around 2-5% in real terms if the surcharge based on foreign exchange and the rise of material prices is excluded. We foresee that real operating income will manage to rise growth in gross profit due to cost improvements and other factors. The projections mentioned above are all from the viewpoint of sales and income changes in real terms.
Q2. For the fiscal year ending March 2023, net sales are projected at 2,200.0 billion yen and operating income at 185.0 billion yen. How will these amounts be split over the first half and second half? What do you foresee about sales changes from the fourth quarter to the first quarter in each segment? Will the lockdowns in China not impact the full-year results?
A2. We envision that net sales for the first half will make up slightly less than 50% of the annual total. As for income, the second half portion will be slightly larger. From the fourth quarter to the first quarter, foreign exchange impact and the surcharges that pass on the rise in material costs will influence net sales on a companywide basis. If they are excluded, companywide net sales will decline approximately 4-7%. Segment sales changes are forecast as follows. The figure will rise 2-5% in Passive Components segments, fall 4-7% in Sensor Application Products segments, drop 2-5% in Magnetic Application Products segments and slide 8-11% in Energy Application Products segments. Currently, the lockdown in Shanghai has a real impact as it imposes constraints on the supply chain. However, we basically expect no major impact on full-year results, partly because we have an order backlog, among other factors.
Q3. In connection with the joint ventures with CATL, TDK explained that, when it was run by TDK alone, hypothetical net sales of the medium-sized battery business would be 400.0 to 500.0 billion yen in 2030. What is the net sales target after foundation of the joint ventures?
A3. In the scenario of stand-alone operation, net sales are expected at 400.0-500.0 billion yen in 2030. In the scenario of the joint ventures, we hope to hold a market share of nearly 30%, which is around three times as large as in the scenario of stand-alone operation, where the market share would be around 10%. Among all operations of the joint ventures, it is the portion of packs that will be included in our consolidated financial results. The value added by a pack account for around or a little more than 30% of the value of the overall system. In this sense, the pack business will have a scale of around 400.0-500.0 billion yen, which is equivalent to nearly 30% of 1,500.0 billion yen.
Q4. Will future investments be made in the form of investments through this joint ventures?
A4. For Ampack, the joint venture for the pack business in which we have a 70% stake and which will be consolidated, we will recognize it as one of our investments. To Ampcore, the joint venture for the cell business in which we have a 30% stake, we will contribute to the form of investments.
Q5. Your sales to customers are through Ampcore, the joint venture for the cell business. Do you have a structure in which you can secure profitability when you focus on the process after the pack?
A5. We believe that expected synergies will have an extra effect on operating income in comparison with the case where we operate the business independently. We are thinking on the assumption that the joint venture for the pack business will achieve double-digit income growth in real terms. We expect that it will be more efficient when the joint venture for the cell business acts as a sales distributor.
Q6. When will you transfer the medium-sized battery business to joint ventures? When will these joint ventures start production? How much of the 300.0 billion yen earmarked for the capital expenditure plan for the fiscal year ending March 2023 will be allocated to batteries? How will it change in subsequent fiscal years?
A6. Construction of a plant is currently underway in Xiamen. We expect production to begin in the first half of the next fiscal year at the earliest. The impact from the establishment of the joint ventures on the financial results for the fiscal year ending March 2023 is insignificant.
As for capital expenditures of 750.0 billion yen during the period of the medium-term plan, we explained that we would change the allocation ratio to Energy Application Products segment from around 60% to approximately 40%. Also, with respect to the amount of 300.0 billion yen for the fiscal year ending March 2023, the allocation to Energy Application Products segment will be reduced. In line with the viewpoint of the medium-term plan, a large portion of this amount, 300.0 billion yen, for the fiscal year ending March 2023 will be allocated to Passive Components segment. There are two reasons behind the reduction of allocation to Energy Application Products segment. One is that we are shifting to investments mainly in joint ventures. The other is that, while sales volumes of small-sized batteries for ICT devices are sluggish, we are reviewing our investments.
Q7. Will you invest in joint ventures in the fiscal year ending March 2023 or in the next fiscal year?
A7. We will not invest the entire amount at the beginning. We will invest at the necessary time as local plant construction proceeds. It is included in the cash flow plan for the fiscal year ending March 2023. It will still have little impact on income for the fiscal year ending March 2023.
Q8. CATL currently deals, or will in the future deal, with packs for small-sized batteries. Will its business related to these be entirely transferred to Ampack, the joint venture for the pack business?
A8. Yes, CATL's pack business will be entirely transferred to the joint venture.
Q9. TDK explained that Ampcore, the joint venture for the cell business, would act as a distributor to customers. What advantage would this have for TDK? Why did you decide to concentrate the sales functions in the joint venture for the cell business? Is it possible that TDK might also engage in sales in the future?
A9. Currently, in the Japanese market for example, our Group conducts sales activities and we serve as a point of contact with customers. The joint venture for the cell business will act as a point of contact, but in the Japanese market for example, we will basically continue to act as such after launching the joint venture. However, we have been proceeding with discussions on the understanding that we will deal with the cell business joint venture. We will take flexible action if we judge that our sales will be smoother in other regions for geopolitical reasons.
Q10. TDK said that you will sell off your power cell assets in a phased manner and that this will impact the cash flows for the coming fiscal year. How will you spend the cash gained from the asset sale-off?
A10. Relatively speaking, we are moving in the direction of allocating it to growth businesses. Meanwhile, we have also made upfront investments for procuring materials. We will therefore allocate it for strengthening our financial position as well. We are thinking of using it differently according to the business environment.

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