Investor Relations | IR Events | Performance Briefing

[ Financial Results for Fiscal 2023 Performance Briefing ] Q&A

Q1. Please provide a breakdown of restructuring costs by segment for the full year ended March 31, 2023.
A1. Restructuring costs were 0.3 billion yen for the Passive Components segment, 2.5 billion yen for Sensor Application Products, 27.9 billion for Magnetic Application Products and 17.0 billion for Energy Application Products, making 47.7 billion yen in total. We recorded 12.0 billion yen due to a decrease in retirement benefit liabilities.
Q2. What are the details by segment in your operating profit projection for the fiscal year ending March 31, 2024?
A2. To start with, we project a slight increase companywide, taking into account forex effects and excluding restructuring costs recorded in the previous year. Among these results, we expect to see increased profits in the Passive Components segment based on increased sales. In Sensor Application Products, we will see increased revenue from temperature and pressure sensors, Hall sensors and the like, but since there is a slight cost burden from upfront investment for TMR sensors, despite increased profits we do not expect to see an increase that is consistent the rise in sales. For Magnetic Application Products, we project a slight increase in net sales, but in terms of profitability, we expect losses to shrink when excluding extraordinary expenses. However, in the HDD-related business excluding suspension application products such as HDD heads and HDD suspensions, we forecast profits and costs to be largely the same. On the other hand, suspension application products are expected to remain unprofitable, even taking the wind-up of business into account. We also expect magnetic heads to remain slightly in the red. Magnets are expected to shrink losses. Overall, there will be a decline in sales and profits from Energy Application Products. However, in terms of profitability, we do not foresee any significant change.
Q3. In your full-year sales projection for the fiscal year ending March 31, 2024, how do you expect results to progress when split between the first and second halves? Also, how do you see results emerging on a quarterly basis?
A3. Looking at the first and second halves first, we envisage a progress rate of just under 50% in net sales in the first half. We expect results to bottom out in the first quarter and peak in the third quarter, with seasonal factors placing slight downward pressure in the fourth quarter. Factors driving peak results from the second quarter to the third quarter include trends among major smartphone manufacturers. For the Passive Components segment, we expect the situation to remain flat almost throughout the year, but we should see a slight increase in the second half of the year depending on results for smartphones and other factors. For Sensor Application Products, due to the actions of smartphone manufacturers we expect results to bottom out in the first quarter, heading to a peak in the third quarter. We will generally see a similar pattern in Energy Application Products. For Magnetic Application Products, as we expect the TAM for HDDs in particular to show a recovery trend from autumn onwards, we expect a similar trend in sales of HDD heads. We project results to bottom out in the first quarter especially, and gradually rebound from the second quarter onwards.
Q4. What is the level of orders received for multilayer ceramic chip capacitors (MLCCs)?
A4. MLCC orders bottomed out in the third quarter, and although they are on the recovery track, orders are still short of sales. Orders are slightly low for general applications, but brisk performance continues for automotive applications. While we expect this situation to continue for the immediate term, we expect to see a gradual recovery over the second half of the year.
Q5. How do you expect net sales and profits to develop for medium capacity rechargeable battery?
A5. Net sales of medium capacity rechargeable batteries are expected to decline around 20% year on year in the fiscal year ending March 2024. We began production at the Xiamen Plant from April 2023, and production is gradually being transferred to the JVs. In the fiscal year ending March 2024, production at existing plants and the new plant will operate in parallel, and as a result we expect a year-on-year decline of around 20%. In the fiscal year ending March 2025, we plan for the production currently being implemented in parallel to be completely transferred to the JVs, and we expect net sales to be flat compared with the previous year as a result. In terms of profit, we were profitable in the previous fiscal year, and profitability is expected to continue in the fiscal year ending March 2024. After that, with the JV plants entering full-scale operations, we will aim to generate an operating profit margin somewhere between the mid-single digits and double digits.
Q6. What is your basic strategy in the battery business?
A6. In the area of small capacity batteries, our aim is always to lead the market on the technical side, rather than in terms of unit prices. We will continue to develop cutting-edge technologies, strive to secure profitability through high value-added products that offer safety in addition to rapid charging, and position those qualities as our competitive strengths.
Q7. What kind of restructuring have you implemented in the HDD-related business? Even if the market doesn't recover, will profits and costs from HDD heads and HDD suspensions be roughly equal?
A7. For HDD heads and HDD suspensions, we will mainly focus on workforce reductions to reflect current demand for hard disks, in order to achieve a production structure based on the decline in volume for HDD heads in the third quarter, and HDD suspensions in the fourth quarter. The TAM for HDD in the current fiscal year will be at quite a low level, with profits and costs for HDD heads and HDD suspensions roughly the same. We believe that we have developed a system that is capable of recording sufficient profits in the process of volume recovering in the future to meet the demand for data centers, etc. However, in suspension application products, a significant impairment loss was incurred in smartphone components and other areas. As it took time to launch this business and it recorded losses, through this impairment we recognize that there is a need to start liquidating the business. We will also record these restructuring costs and while some costs will remain in the fiscal year ending March 2024, as this loss will disappear in the future, the fiscal year ending March 2024 will represent a low mark, and we expect to be on a recovery track from the next fiscal year onwards.
Q8. You mentioned a projected year-on-year increase of 7-10% for in the full-year sales projection in the Sensor Application Products segment for the fiscal year ending March 2024. What is the breakdown by product?
A8. For the fiscal year ending March 2024, since we forecast a gradual recovery in the automotive market, in accordance with, among our lineup of magnetic sensors we expect to see positive movements in Hall sensors and temperature and pressure sensors, which are mainly used in automotive applications. Among magnetic sensors, we cannot expect to see significant growth in TMR sensors for the smartphone market, but we forecast an increase due to factors such as incorporating the use of the sensors in new applications into our projections. We expect the performance of MEMS sensors to remain flat, reflecting a slightly sluggish macro environment for smartphones.