Investor Relations | IR Events | Performance Briefing

[ 1st Quarter of fiscal 2024 Performance Briefing ]Q & A

Q1. Full year operating profit forecast for the fiscal year ending March 31, 2024 was revised downward from 190 billion yen at the previous announcement (April 28) to 150 billion yen. Please provide a breakdown of the 40 billion yen downward revision by segment.
A1. The main factors were that operating profit for the Passive Components segment and Magnetic Application Products segment were significantly lower than forecasts. The breakdown between the two segments is 60% for Passive Components and 40% for Magnetic Application Products. The Sensor Application Products segment has also performed slightly below expectations, but this has been covered by an upswing in the Energy Application Products segment.
Q2. How will the full year forecast for net sales (1.97 trillion yen) and operating profit (150 billion yen) be split over the first and second halves of the year?
A2. For net sales we expect a roughly equal split, and for operating profit, we project a mid-40s-to-mid-50s split between the first and second halves.
Q3. In the Magnetic Application Products segment, you explained that you would implement restructuring and build a structure in order to break even in the second half of the year. Has this assumption been factored into the full-year results forecast you have announced this time?
A3. The impact of restructuring has been factored into our forecast. We believe that HDD demand will bottom out in the first half of the year. We also expect that shipments of heads for HDDs will bottom out in the first half, and we project a recovery as we head into the second half of the year. We will downsize our production structure based on this assumption and aim to break even in the second half of the year.
Q4. What are your expectations regarding changes on a volume basis in the HDD-related market?
A4. We expect that HDD head volume will increase by around 20% from the first to second quarter. Since volume declined much greater than expected in the first half of the year, in the second half we expect it to increase by around 80% compared with the first half.
However, HDD suspensions have been somewhat sluggish, and we expect to see a decline of a little over 10% from the first to second quarters, with an increase of around 10% over the first half in the second half of the year.
Q5. You mentioned that you expect HDD head volume to increase heading into the second half of the year. Is the background for this assumption the effects of heat-assisted magnetic recording (HAMR) technology?
A5. We have not factored HAMR into our forecasts for the second half of the year, but we do project an increase from microwave-assisted magnetic recording (MAMR) to a certain extent. With regard to HAMR, we are continuing to invest in development in anticipation of the next fiscal year and beyond.
Q6. In the Energy Application Products segment, you explained that sales of small capacity rechargeable batteries have exceeded initial forecasts due to factors including higher market share, but do you see this trend continuing in the future?
A6. There is no change to our initial forecast regarding the number of units produced for the ICT market overall, but during the first quarter our market share of small capacity rechargeable batteries for the ICT market has expanded, and we expect increased volume associated with over the full year. We plan to continue implementing measures to increase market share for the ICT market from the second quarter and beyond. In the area of small capacity rechargeable batteries, we believe the question of how we will lead the market on the technical front is also important. In particular, we see a need to put products with higher energy densities on the market, and are also coming out with batteries that use silicon as an anode material. Through these products that improve energy density with the use of silicon, we can design batteries that are thinner and last longer. This will also enable greater flexibility in smartphone design. These are some of the ways we are striving to increase our market share through products that have added value and differentiating features.
Q7. What are your projections for medium capacity rechargeable batteries?
A7. For medium capacity rechargeable batteries, currently we are proceeding with the transfer to the joint ventures earlier than planned. In addition, sales of residential energy storage systems (RESS) have fallen short of expectations, particularly in Europe and the United States. According to TDK forecasts, sales of medium capacity rechargeable batteries are expected to decline by around 20% for the full year, but in lead of these factors, we project a drop of around 40%. In terms of unit prices, raw material prices have progressed largely in line with expectations, and we do not foresee major changes.
Q8. Regarding the Sensor Application Products segment, you have lowered your forecast net sales for the full fiscal year ending March 31, 2024 from the previous announcement (April 28), citing growth in MEMS motion sensors for the ICT market, microphones and other products falling below initial projections. What is the background behind this?
A8. For MEMS motion sensors, forecast net sales are greatly affected by the slow Chinese smartphone market and the sluggish IoT demand. In addition, delays in the launch of microphones from our initial expectations have also had an impact.
Q9. In the Passive Components segment, when do you think inventory adjustments affecting automotive products will be eliminated?
A9. We think that the inventory adjustment period will continue for the next few months, but expect demand to return to normal levels from the second half of the year. Also note that we have not seen a drop in the number of OEM units produced, and we see automotive production as being in line with initial expectations. If the inventory levels of Tier 1 (primary suppliers) are normalized, we believe that net sales will also return to normal levels.
Q10. What are your thoughts on the profitability of the Passive Components segment?
A10. We see profitability recovering provided that operating rates rise and net sales recover. Factors that put pressure on earnings include sharply rising energy prices and labor costs.