- Q1. What progress has been made in improving the profitability of HDD heads and suspension assemblies?
- A1. In the fourth quarter we will be around 10% short of the production volume needed to break even, and expect to fall slightly into the red. As we have recently seen a recovery in demand for nearline HDDs, we will aim to achieve profitability in the next fiscal year and beyond. We expect a full-scale recovery to develop in the second half of the next fiscal year.
- Q2. The operating profit margin in the Energy Application Products segment exceeded 20% in the third quarter. Will profitability further improve toward the next fiscal year?
- A2. With the number of smartphones produced in the next fiscal year not expected to increase significantly, we do not think that sales volume for small capacity rechargeable batteries will increase by that much. We will continue to pursue cost reduction efforts as we have done this fiscal year, and will aim for an operating profit margin of at least 15%.
- Q3. How do you expect net sales of small capacity rechargeable batteries that use silicon anode electrodes to change in the next fiscal year?
- A3. We expect that products which use silicon anode electrodes to increase by several percent as a proportion of total sales next fiscal year. We have fielded many business inquiries regarding these products mainly in relation to high-end smartphone models, but the procurement of materials has proven to be a bottleneck to increasing production.
- Q4. Regarding passive components, what is the state of inventory adjustments for the automotive market?
- A4. In the third quarter some customers continued to reduce inventory, while distributors, etc. are holding on to slightly more inventory. However, inventory levels have definitely fallen.
- Q5. You mentioned that you would post around 12 billion yen in one-time expenses for restructuring, etc. in the fourth quarter. What is the breakdown of these expenses?
- A5. We expect to record around 3 billion yen in these expenses in each of the four segments. The main part of these expenses will be losses on the disposal of surplus equipment in Passive Components (high-frequency components) and Sensor Application Products (MEMS microphones). In Magnetic Application Products (magnets) and Energy Application Products (power supplies for EVs), we have factored in impairment losses in light of current conditions and the prospects for future cash flow acquisition.
- Q6. Your full-year consolidated financial results projection for the fiscal year ending March 31, 2024 was revised upwards. What specific factors played into this revision?
- A6. We expect net sales to reach 2.09 trillion yen, an increase of 120 billion yen from our previous projection. Around 100 billion yen of this is foreign exchange effects due to the weak yen. In real terms, the value is approximately 20 billion yen. And the performance upswing in Energy Application Products is a major factor. We project that operating profit will be 170 billion yen, an increase of 20 billion yen from the previous projection. While foreign exchange effects will be around 22 billion yen, as we expect to post restructuring costs of around 12 billion yen, the upswing will be around 10 billion yen in real terms. As with net sales, the Energy Application Products segment will contribute significantly.
- Q7. The next fiscal year will be the first year of your new medium-term plan. What do you expect the plan to contain?
- A7. We are currently in the process of calculating specific figures, but looking at demand trends in the three markets that TDK is focused on, in the automotive market we expect xEV production volume to increase by at least 20% in the next fiscal year. Meanwhile the industrial equipment market will be significantly affected by trends in economic recovery, particularly in China. For that reason, we expect Passive Components to be affected by both positive and negative factors. Regarding the ICT market, we see overall demand for smartphones growing no more than 1-2 percent, but we believe that growth in Chinese smartphones will continue in the next fiscal year. We project increases in small capacity rechargeable batteries, magnetic sensors and MEMS sensors in line with this growth. Also note that while HDD heads have now begun to recover, we expect a full-scale recovery will develop in the second half of the next fiscal year.
- Q8. Free cash flow has far exceeded the full-year plan you announced at the start of the fiscal year. What can you tell us about investment levels and approaches in the new medium-term plan that will start from the following fiscal year?
- A8. Over the course of our current mid-term plan, we believe that we have gotten to a level of to some extent achieving balance sheet structural optimization and the creation of cash flow to support it. In the next fiscal year, we expect that demand will decline for small capacity rechargeable batteries, for which investment needs have been the highest up to now among rechargeable batteries. Needs for medium-capacity rechargeable batteries will also decline due to the transfer to the joint ventures, and overall we expect to see a decline compared with the period of the current mid-term plan. Meanwhile, in terms of passive components and sensors, we have handled increased production with measures that include new plant construction, and we see a need to invest in these areas in the medium and long term. We hope to decrease the D/E ratio from its current level of about 0.4x to the 0.3x range.
