Tdk Corp S/Adr

So this is Yamanishi speaking. Thank you very much for attending this consolidated results for the first quarter fiscal year March 2021 briefing despite your busy schedule. And as before, this will be a remote meeting. And sorry to inconvenience you but thank you for your support. So I would like to explain about the consolidated results. This is a key point about the earnings. The COVID-19 pandemic has spread around the world, heavily impacting the real economy. Against this backdrop, the demand environment for our business for the first quarter is showing deviation from what we have forecasted at the beginning of this fiscal year. In the automotive and HDD hard disk drive markets, our major clients have suspended operations at their plants. This has had a major impact on our business, and our sales towards these markets is substantially lower than our initial forecast. In the ICT market, smartphone demand has declined sharply. than our initial forecast. That is basically in line with the initial forecast. However, due to digital transformation, DX has accelerated through remote working and remote learning. This led to an expansion of demand in mobile devices and 5G related products, which was higher than our expectations. The demand trend in our key markets has changed against our outlook, and there are differences in the performance by each segment. However, overall, year-over-year net sales decreased 8.1%, and operating income declined 26.4% year-over-year. Although the market environment has been tough, sales and operating income for rechargeable batteries has increased as we were able to tap into demand. Demand expanded for PCs, tablets, and 5G base stations through the acceleration of DX. Sales of rechargeable batteries, MLCCs, and high-frequency components increased. This led to higher sales year over year, and performance exceeded the initial forecast. As a result, these businesses drove the first quarter earnings despite the fact that we were assuming weak earnings for this quarter. On the other hand, due to the weak demand in the automotive market, we saw a lower than expected sales in passive components and conventional sensors which have a high sales composition to the auto markets. Sales of HDD heads decreased more than expected as the shutdown of our major client has had a major impact. As a result, sales volume was lower than expectations and earnings deteriorated sharply than expected. As for the consolidated results, due to the strong yen against the dollar and other currency, there was a negative impact on sales of 11.3 billion yen, 1.3 billion positive impact on operating income. Including this factor, net sales was 309.4 billion down 27.4 billion or 8.1% decline year over year. Operating income was 18.4 billion down 6.6 billion or 26.4%. Income before income tax was 20.7 billion. Net income was 13.2 billion. Earnings per share was 104.43 yen. Sensitivity against the currency is unchanged. On an operating income level, if yen fluctuates by 1 yen against the dollar, it will have a 1.2 billion yen impact annually. The yen euro impact is about 200 million yen. Let me explain the results by segment. Net sales for the passive component segment was $84.4 billion, down 14.1% year over year. Operating income was $7.7 billion, down 25.2%. OP margin was 9.1%. In the automotive industrial equipment markets, demand has continued to be weak from last year. Particularly in the auto market, as our major clients suspended operation of their plants due to COVID-19, demand dropped further than we expected. On the other hand, in the ICT market, demand for 5G terminals and base stations was very strong, especially in the Chinese market. There also was front-loaded demand in this area as clients moved to secure stock for components. This led to higher than expected sales for the ICT market. As a result, in products that have a higher proportion of sales to the auto and industrial equipment markets such as capacitors, inductors, piezoelectric material products and circuit protection components, and aluminum electrolytic and film capacitors, both sales and profit declined. However, in this first quarter, as demand grew strongly for 5G base stations, sales of capacitors for base stations increased substantially. Consequently, although profits declined, we were able to maintain profitability at the same level of the previous year. As for high-frequency components, which has a high sales ratio for the ICT market, both sales and profit increased thanks to the robust sales of 5G-related products. Profitability has improved substantially as well. Next is a sensor application product segment. Net sales was 14.7 billion, down 18.8% year over year. Operating income continued to be in the red at the same level as last year. As about 50% of our sales of the segment goes to the auto market, specifically for conventional sensors, it has been severely impacted by the weak demand in the auto market. In this first quarter, our major auto customers, mainly in the U.S. and Europe, have suspended the operation of their plants. This has had a direct impact on our temperature and pressure sensors and hole sensors, where sales declined sharply and earnings worsened as well. On the other hand, TMR sensors have been faring well, stably generating profit as sales have been robust due to increased share of our products for smartphones. In MEMS sensors, sales of microphone MEMS declined due to the shrinking demand for microphones for IoT devices, reflecting the weaker consumer sentiment under COVID-19. Sales of motion sensors have gone down as well as less smartphones models are using motion sensors. For MEMS sensors overall, as the top line did not grow, it is still loss-making, although the level of loss is improving. Going to the magnetic application product segment. Net sales was $38.3 billion, a 31.01% decline year over year. Operating loss was $3.8 billion. As for the overall market environment for the first quarter, total demand for hard disk drives went down by 20% year over year. But total demand for HDD heads was about the same as last year due to the increase of near-line HDDs. However, our major client suspended operation at their plant due to COVID-19. This led to a situation where shipment of HDD heads fell by 45%, which was worse than our initial forecast. As a result, although there was earnings improvement for HDD suspension assemblies year over year, for the HDD heads and HDD suspension assemblies business overall, both sales and profit dropped sharply. Most of the sales of magnets go to the auto industrial equipment market. As such, sales dipped and the loss level is about the same as last year due to the overall weak demand in these markets.

Next, energy application products. So that's net sales was 156.9 billion yen. Operating income was 31.3 billion yen, 8.6% increase of net sales, and that's a substantial increase of operating income of 18.1%. that operating margin was 19.9% and the improvements of the profitability for the rechargeable batteries and due to the decrease of the smartphone productions and although we could slightly over that initial forecast but now it has the negative growth year-on-year. But with the expansion of teleworking and tele-learning, now we observe that a substantial increase of demands of the tablet and notebook PC and that sales volumes have boosted. And also for that application, like the gaming consoles or the mini-cell for that available devices like a wireless phone, it's steadily expanded so that As a whole, now we could achieve and exceed the initial forecast and we have a significant increase in both net sales and operating incomes. For the industrial use of power supply, it was adversely affected by the declining demand and we have the negative growth in both net sales and operating income. Next, let me talk about the quota on quota changes of the net sales and operating income by segments. First off, passive component segments, the sales declined by 12.6 billion, 13.0% from the Q4. Operating incomes was increased by 1 billion yen, 14.9, When it comes to the net sales, particularly due to this increase of 5G-related businesses, now we have increase in the sales for the ICT markets. Also, we have the incremental business for the distributors. But on the other hand, now the customer in Europe for the automotive market suspended its factory operations, and that's significantly lower. That's our net sales. Except for the high-frequency components, which have been flat from Q4, the all-in-all S&R sale was negative. When it comes to operating income, excluding 2.1 billion yen of that impaired loss from the last quarter, and actually an upper-to-upper basis, 1.1 billion yen of the down. for that high frequency component products has been favorable in ICT market and have been significant increases to add the incomes also for the capacitors now and declining business automotives have been more than offset by that to the base station businesses so that you could improve that profitability, although that's the sales have slightly declined. All the other products affected, that's the decline of demand. When it comes to that the sensor application products, The sales declined by 4 billion yen, 21.4% Q and Q basis, and then we have this more 300 million of more operating loss. Again, it is due to the suspension of factory operation of our European automotive customers and have adversely affected the sales of the temperature and the pressure sensor and the whole sensor. But on the other hand, the MEMS motion sensor have been favorable and due to that sales for the gaming consoles and they can more than offset the negative impacts of other sensors and have been flat from the Q4. When it comes to the operating performance, temperature and pressure sensor had to decline its income due to the decline in the sales, but now magnetic sensor and TMO sensor have been steady and have been upset, and also for the MM sensors, now we could shrink and trim down. That's the loss due to our cost reduction. Next, magnetic application product sales have declined by 13.5 billion yen, 26.1% decline from the previous quarter. And excluding the 14.4 billion yen of that impaired loss in Q4 and Apple basis, it was declined by 6.7 billion yen. The sales of this segment have affected by the declining the sales volumes of HDD head, about 44%, and also HDD head suspension as a whole declined by 28% from previous quarter, and also, and the magnets have declined in 12% in terms of net sales. So this is for now, I continue the magnetic application products for the operating performance of this segments. Now HDD head have that the operating loss due to that's the decrease it, the sales volumes and also the magnets. Now we could trim down the margin of loss due to the cost reduction. Next, energy application product segments. The sales was 38.6%. billion yen, 32.6 percent increase operating income was 16.6 billion yen. It's about close to significant and increase about double. And when it comes to rechargeable batteries, now it has increased from the seasonally declined demand of the Q1 – of the Q4, I'm sorry, but also we have the incremental demand of the tablet and PC. And industrial power supply have a slightly lower than the previous quarter. Next, let me talk about breakdown of the operating income changes from year-on-year basis. It is about 6.6 billion yen down. First of all, due to the change in the sales, mainly for the passive components and HDD head, have the negative 9.7 billion yen. The sales price reduction have negatively also affected 2 billion yen, but on the other hand, now for the cost reduction efforts in order to absorb the impacts of COVID-19 have produced 5.3 billion yen of benefits and also now 500 million yen is also for the positive due to that the reselection benefits. And 300 million yen of the less for that M&A expenses for the infant sense. And now the SG&A, for example, when it comes to rechargeable business, then we need to have the more L&D expenses and also the termination under the filter fee. will be pushed up by 2.3 billion yen. This is for the SHNA and the 1.3 billion yen of the exchange of fluctuations and all in all 6.6 billion yen minus from the previous year. Next, let me talk about the projections on change in sales in Q2. In the Q1, due to that automotive industry, which was affected, the suspension of plant operations in Europe, and still some of the, in that the performance will be very from region to region. We think that it will be recovered to the level a little lower than the initial focus. Then when it comes to ICT markets, and now we expect that the smartphone production units will also be recovered to that a little over to that initial project, and the PC and tablet demand will be steady. So taking all this into consideration, now we like to look at the projections of the sales in each segment. When it comes to passive components, we expect that it will be also on the par, like the Q1, and we expect that the sales and automotive markets will increase, but when it comes to smartphone-related markets, we expect a reaction of four of the piled-up inventory and the Q1, and also we think that the demand at the base station will slowly, slowly decline, and also the inventory adjustments of distributors will have a better effect. When it comes to sensor application products, We expect that the restart of the factory operations of the European automotive customers, it will push that our business world temperature and pressure sensors and the TMO sensor and the MEMS microphone will increase from the Q2. When it comes to the magnetic application products, when it comes to the HDD head, we expect that our major customer will fully restart the factory operations, and we expect the recovery of that HDD head volumes up to that initial forecast, and HDD suspension will also be pushed up. for the demand for near-line solutions. And the magnets will also increase due to that increasing in the demands in automotive markets. When it comes to energy application products, on top of that, the demand for the smartphones and the PC and tablets demands will further surge. And we expect about a miniscule demand for the wearable devices. And taking all these into consideration, and the sales in Q to will increase by 11 to 14% from Q1 as a whole. This is our projections. Last of all, let me talk about the projections for the full year forecast. We did not change, we do not change from that forecast we announced the last time in May. In Q1, now we have the observer that boosted the demand for the digital transformations and also so the supply chain have increased at the inventory. So that's the performance was exceeded our, the forecast bet. Now, still, it's uncertain that what kind of impact we have to expect from that COVID-19 and the business, and the three major markets, automotive, ICT, and industrial equipment. Now, when I look at that forecast, still, as each market varies, from the market to market when it comes to that demand, and also we are looking at the changes and the difference, and that's each segment focus. But all in all, we expect that, and the projection is still stay the same, and we don't change our focus at this moment of time. That's all my presentation. Thank you very much. Thank you for your attention. Thank you.