- Q1. What is the projection of profit in the second quarter on a per-segment basis?
- A1. In Passive Components, we expect, basically, an increase in profit due to increases in marginal profit from higher sales in each business. MLCCs, inductors and high-frequency components are the main drivers of the increased profits. In Sensor Application Products, we expect to see increased sales and profit with magnetic sensors as well as temperature and pressure sensors, reflecting an increase in automotive applications along with the smartphone market entering its peak season. We expect segment profit to fall in the black for the second quarter. In Magnetic Application Products, we expect head volume to be on par with the first quarter. In terms of operating profit, excluding the one-time revenue that was recorded in the first quarter, we anticipate results largely on par with the first quarter. Sales of suspension assemblies slipped from the first to the second quarter, and there will therefore be a significant increase in volume for the quarter. We expect an increase of roughly 30% in sales, which will drive an increase in profit. We take the view that the shift of suspension assemblies into profitability has taken root. In Energy Application Products, we expand sales volume of small capacity batteries to increase by 16% and also anticipate a slight recovery trend in medium capacity batteries for ESS applications. As a result, we expect improvements in both net sales and profit. However, due to a slight impact due to the further decrease in material prices in the first quarter being passed on to sales prices in the second quarter, combined with an expected impact from sales price discounts, we project that the increase in profit driven by higher sales will be somewhat offset. In power supplies, challenging conditions with power supplies for industrial equipment have driven sales and profit down, and despite higher sales of power supplies for EVs, we project a decline in profit, in part due to production adjustments.
- Q2. You mentioned that volume in the first quarter beat your forecasts by 5%. What change did you see from the fourth quarter of the previous year to the first quarter of this year? In addition, please comment on the competitive climate for silicon anodes and the pace of expansion from the next fiscal year and beyond.
- A2. Volume of small capacity batteries increased 16% in the first quarter compared with the fourth quarter of the previous fiscal year. We mentioned our plan to increase silicon anode batteries as a percentage of small capacity battery sales to near 10% this fiscal year, and our progress has been in line with these plans. We will aim to achieve a further expansion in the following fiscal year, and hope to increase this percentage to 15%. Regarding these technologies, we believe the competitors are also pursuing various measures to catch up, and that is an area we will closely watch.
At the moment we are fielding business inquiries regarding silicon anode batteries from many manufacturers. In addition, we plan to introduce a second generation product whose energy density has been further increased by several percent during this second quarter. In this way, we are at the forefront of technology related to small capacity batteries while leading the industry.
- Q3. You noted that head volume in the second quarter would be on par with the first quarter, but industry trends seem to suggest an increase. Have you actually received orders but are just making conservative projections?
- A3. In terms of our expectations for volume from the second quarter onwards, we are in a phase of inventory reduction while HDD recording density continues to be improved. It is difficult to predict demand with respect to recording capacities. In that sense, from the first to second quarters we expect volume to remain flat.
- Q4. Please talk about the outlook for industrial equipment components and the timeframe for the recovery of BEV demand. For MLCCs, will the amount of increased production from the new plant (in Kitakami, Iwate Prefecture) reliably lead to sales?
- A4. In terms of components for industrial equipment, both orders and demand are currently weak, and growth has not been as much as we expected. Regarding increased MLCC production, our new plant is launching as scheduled and we expect to complete equipment deliveries during the second quarter. We have not seen the expected level of growth with BEV, but we expect to see a recovery in the second half and will make efforts to secure orders.
- Q5. There is an impression that inductors are finally on a recovery track. In what areas is TDK producing results with inductors?
- A5. Sales of inductors are on the rise across all categories. For automotive applications we are seeing growth with metal coil products and thin film coil products. In the ICT market, there has been growth in thin film and multilayer products. As TDK supplies a wide range of products from all directions, we believe our results improve based on overall market trends. We have seen a particular uptick in inquiries from customers regarding metal coils. We think this is a change from the past climate.
- Q6. What is your approach to cash flow? From the first quarter it seems there has been an upswing, but what developments do you have in mind for this fiscal year in terms of capex, M&A activities, shareholder returns, and so on?
- A6. Since we had initially expected to proceed with investment amid inadequate profits in the first quarter, we anticipated negative free cash flow. However, profits increase significantly while capex remained at around 42 billion yen, and the result was a positive turnaround from our initial forecasts. In the second quarter we expect to see a slippage in the timing of cash outlays for capex, so we do not foresee major improvements at the level of the first quarter. For the full year, we expect to be able to make improvements since we have a great deal of control over inventory, but our full-year outlook is that the extent of the increase will not be that great. We want to consider matters such as shareholder returns by looking at the accumulation of free cash flow in the following and subsequent fiscal years.
