Tdk Corp S/Adr

Q1 of FY March 2022. Let me introduce to the speaker Mr. Tetsuji Yamanishi, Executive Vice President. Thank you very much. I'm Yamanishi. Thank you very much for joining us today with our performance briefing on Q1 of FY March 2022. We really appreciate that all of you have joined today and I am going to present about the consolidated business performance. I start with the key points. In Q1 last year, Due to the expansion of the infections in the COVID-19 pandemic, each country has a lockdown, and that will slow down the global economy and lead to major impacts on business too. But after the Q2 last year, the social and production activities in each country have gradually opened, And now, we observed that the recovery of the electronics demands, particularly in the digital transformations and energy transformation, the demand has been steady, so that the sales have grown by 35.8% year-on-year, operating income has grown by 67.4% from the year earlier. Now, going towards the last Q2, The automotive market's demand has slowed down due to some shortage of semiconductors, although they have been really good until the Q4, but now the further accelerations of the electrification of the EV or that increases the component counts in the vehicles have pushed up, and the demand ends now, and then order is steady, and we could expand the sales of passive components and sensors. As for the ICT market, due to the shortage of the semiconductors and also the research of the COVID-19 pandemic and that will lead to the departure of the lockdown, the production of the smartphone was lower than our initial projections. But on the other hand, that the demand on the PC and the tablet would continue to be on a high level, and investments in the data center have recovered, leading to the further demand expansion for the servers. And as a result of that, the sales of secondary battery sensors and HDD heads have increased. Also for the industrial equipment markets, now, The prime supply for the industrial equipment or the passive components the sales have included have expanded due to that the more the corporate capex based on the recovered production activity. Next, let me talk about that outline of a business. Now, the impact of the currency fluctuations and the impacts on the 21.4 billion yen in the sales and 1.7 billion yen of minus impact on the open income, but in all in all, The sales was 420.1 billion yen, 110.7 billion yen, or 35% increase in a year. And operating income was 30.8 billion yen, or 12.4 billion yen, or 67.4% increase from the year earlier. Income before tax was 32.2 billion yen. Net income... was 26.7 billion yen. Earning per share was 211.09 yen. When it comes to sensitivity to the currency, there was no any change. Now, in fact, on the open income, the one yen change to the dollar have the 1.2 billion yen, in fact, and the 200 million yen to euro. Next, let me talk about the segment-wise, the overview of the business in the Q1. Sales of the cost of the components was 121.2 billion yen, 43.6% increase from the year earlier. Now, there's still that the very high level of that the demand for the automotive markets contributed and also in the industrial equipment markets. Now, it has been really favorable in the renewable energies or the industrial equipment. In ICT markets have Now, although we have just a little less demand for the stations last year, but now the total 5G, later the demand is really steady, so then we could recognize the increases in the revenues in all businesses. Operating income was 18 billion yen. It was 2.3 times as much as last year as the substantial increase in operating income. income margin almost 14.9% making big contribution to the profitability. Excluding that the high frequency component business, all of the business recognize it and the increase in the both sales and the profits. But in high frequency component products, it's a little less than the last year due to that the R&D expenses for the new products. Next, sensor application products. Now, The last two, four, we have the record high sales, but we have also further substantial increase in the sales, this quarter, and the sales was 26.8 billion, 82.3% of increase in a year operating income. Also, open profit, we could substantially reduce the operating loss. And when it comes to TMR sensor, have been expanded the business with ICT markets. On the other hand, the MEMS sensors have successfully expanded the customer and application basis and they were starting to deliver all these efforts. The motion sensor and MEMS microphone sales have remarkably increased. Now we have improvements of the performance and we could substantially reduce the loss and It's just a conventional products like temperature and pressure sensor and hole sensors and will also be recovered due to that the good demands and the normal markets and we could improve that the profitability. And on top of that, now we have improved that the profitability and the performance including that the structural reform we have implemented the last quarter. Next, magnetic application products. Sales was 60.6 billion yen. 58.2% increase in a year. And that open income tended to be profitable for the big loss we had last year. HDD head business have been favorable due to that recovery of that investment and the data centers. They're not sober and the demand have increased and the sales volumes of near line HDD have doubled from the last year and also and it happened over go over 70% more than we have initial projections of the Q1 and So that we could eliminate that negative impacts of the closure of the factory of one of the major customers in Q1. We don't have any that kind of negative effects so that we have about the substantial increase in the sales and the profits. And for HDD suspension, and now near line HDD for our major primary customers data centers have been very favorable and we could secure an increase in both sales and profits. As with magnets, now sales for the automotive markets have remarkably recovered and the sales for the industrial equipments have also pushed up and our sales and we can substantially reduce the loss. Next, energy application product. sales was 199.6 billion yen, operating income was 23.4 billion yen, and 27.2% increase in the sales, and 25.2% less in the operating income from the year earlier. As for the secondary batteries, the smartphone, tablet, note PC, and other mobile devices, The businesses have been steady, and the minister products, the e-bike or that's the home power storage systems, and we also have the market favorable, and we have been good business power cell products. When it comes to operating income, now we have that, and the positive growth after the income due to that increase, increase the volume, but now we need to make the upfront investment for the power cell products, and also with the increase of the raw materials like the cobalt, and the open income was lower than the previous year. When it comes to industrial equipment, products and power supplies, now we could secure this with increase in both the revenues and profits.

Next is explanation of the reasons for changes in sales and operating income by segment from the fourth quarter of the previous year to the first quarter of the current year. In the passive component segment, sales increased by 7.3 billion yen or 6.4% from the fourth quarter. And operating income increased by 4.8 billion yen or approximately 36%, excluding 3.7 billion yen in one-time expenses incurred in the fourth quarter. Sales increased in all markets, including the automobile, ICT, and industrial equipment markets, as well as distributors. And all businesses posted higher sales and operating income. Next, in the sensor application product segment, sales was 2.9 billion yen, a 12.1% increase. Operating income improved by 2.4 billion yen, excluding 4.1 billion yen in one-time expenses incurred in the fourth quarter. Sales of temperature pressure sensors and hole sensors increased due to strong demand from the automotive industry. while TMR sensor cells volume increased for smartphones, and MEMS sensor cells increased for motion sensors for smartphones in China and game consoles. As for operating income, TMR sensors, which have good profitability, greatly expanded its revenue, and motion sensors' profitability improved substantially due to a favorable turnaround in the customer and product mix, which greatly contributed to the reduction of the overall loss. Next, in the magnetic application product segment, sales increased by 11% to 6 billion yen and operating income increased by 1.9 billion yen, excluding the 5 billion yen in one-time expenses incurred in the fourth quarter. Sales increased due to a 17% increase in the sales volume of HDD heads and an increase in HDD assembly sales from the fourth quarter. Sales of HDD suspensions remained almost unchanged due to a decrease in application products for smartphones despite an increase in sales volume for near-line HDDs. Sales of magnets increased slightly. Operating income for HDD heads improved significantly due to an increase in sales volume, while the operating loss for magnets increased slightly due to the impact of higher raw material prices. In the energy application product segment, sales increased by 6.6% to 12.3 billion yen, and operating income decreased by 6.4% to 1.6 billion yen. Sales of secondary batteries decreased, excluding the impact of foreign exchange rates related sales increase and increase in sales due to the passing on the rights of the raw material costs to the selling prices, so-called surcharges. Sales in real terms decreased on a volume basis due to a decline in smartphone products volume, while sales of industrial power supplies increased to a higher demand. Operating income decreased due to lower sales and profit of rechargeable batteries, including deterioration in capacity utilization due to lower volume and the residual impact of higher material prices. Operating income increased slightly in industrial power supplies. Next is a breakdown of the operating income changes of 12.4 billion yen. The increase in sales volume in all segments, including passive components, had the effect of increasing operating profit by 32.5 billion yen, despite the impact of higher material prices. There was a negative impact of 7 billion due to a sales price reduction, but a 2.4 billion contribution came from cost reduction through rationalization and the effect of structural reform that was conducted in the fourth quarter. In addition, SDNA expenses increased by 13.8 billion yen mainly due to the SDNA expenses associated with expansion of rechargeable battery business and increased development expenses from accelerated power cell development. Foreign exchange fluctuations reduced profits by 1.7 billion yen, resulting in a total operating income increase of 12.4 billion yen. Next, I would like to give you an idea of the changes in sales for the second quarter of the current year. I am comparing that against the first quarter. Sales to the automotive market are expected to remain strong on the assumption that car production will increase from the first quarter. Sales to the ICT market are expected to increase significantly on the assumption that smartphone production volume will increase from the first quarter and that PC and tablet demand will remain strong, despite the lingering effects of semiconductor supply shortages. Demand from the industrial equipment market is also expected to be strong. Based on the above-mentioned trends in the demand in the main market, and excluding the impact of exchange rate differences between the first quarter and second quarters, for the second quarter, we were using the assumption that we had announced in the NISL initially, So this is what we are showing in terms of changes. So if we exclude the exchange rate differences, the passive components cells are expected to increase by between 0 and 3% overall. Sales to the underwater market are expected to remain strong. Sales to the smartphone market are expected to increase significantly in line with the increase in smartphone production, and sales to industrial equipment and distributors are expected to decline slightly. In sensor applications, sales to the automotive market are expected to remain strong, while sales to the smartphone market are expected to increase by 11% to 14% on the back of a significant increase in the number of TMR sensors used and the launch of new products. For magnetic application products, we expect HDD heads for near-line HDDs and suspensions to perform well due to strong demand from data centers. We also expect sales of magnets to increase by 0 to 3% in line with rising demand for automobiles. We expect energy application products to grow 28% to 31% on the back of increased demand for smartphones, strong demand for PCs and tablets, and further growth in power cell products. Based on the above-mentioned factors, we expect overall sales to increase by 14% to 17% in the second quarter compared to the first quarter. Finally, I would like to explain a full-year consolidated forecast which remains unchanged from the previous forecast we announced in April. In the first quarter, smartphone production volume was lower than the initial forecast. and the rechargeable battery earnings were significantly lower than the initial forecast due to the impact of rising raw material prices. On the other hand, passive components, sensors, and magnetic application products supported the overall performance of the company. Looking at the demand trends for the full year, demand from the automotive and industrial equipment markets is expected to remain strong, while demand from the smartphone market is also expected to gradually recover in the second half of the year. Passive components, sensor application products, and magnetic application products will trend above our initial forecast in the second quarter, following the trend of the first quarter. We expect this to support rechargeable batteries, which are still affected by high raw material prices. However, we expect the impact of shortages in the supply of semiconductors and the spread of the coronavirus infection, as well as the raw material price trends, to remain uncertain. As such, we are maintaining a full year forecast announced at the beginning of the year. Exchange rates, capital expenditure, depreciation, amortization, and research and development costs remain unchanged from the second quarter onwards. The company board of directors today approved the 3-4-1 stock split of the company's common stock effective October 1, 2021. As a result of the stock split, the interim dividend forecast remains unchanged at 95 yen per share as initially announced. But the year-end dividend forecast has been changed to 32 yen per share after the stock split. On a pre-split basis, the full-year dividend forecast is 191 yen per share, an increase of 1 yen from the forecast announced at the beginning of the year. That is all from me. Thank you very much for your time.