Tdk Corp S/Adr

So I'd like to start the TDK's 2022, fiscal year 2022, March first half results. We have Mr. Ishiguro Fazio and the senior executive officer, Mr. Tetsuji Yamanishi. We have two from TDK. Thank you very much. So first of all, In terms of the performance briefing for the first half, Mr. Yamanishi will give you a briefing. This is Yamanishi speaking. Thank you very much for attending despite your busy schedule for a performance briefing for the first half of fiscal year March 2022. I would like to start by giving you the outline of our consolidated results. Touching upon the key points of the first half, From the second quarter of the previous year, social, economic, and production activities at each countries around the world have gradually restarted. And with the progress of the vaccination for COVID-19, mainly in the developed countries, social and economic activity is normalized. Production activities continue to recover and demand for electronic components continues to remain on the recovery trajectory, specifically DX, and EX-related demand remained strong, leading to a 29.4% increase of net sales and 28.2% increase of operating income compared to the previous year. Net sales and operating income achieved record highs for both quarterly and half-year results. In the automotive market, due to the impact of semiconductor shortages, Production output did not recover to pre-COVID levels. However, through the acceleration of electrification such as XEV, the number of components installed per vehicle is increasing. This has led to a continued robust sales to the automotive market with sales of passive components and sensors increasing. In the ICT market, the shortage of semiconductors and the resurgence of COVID in some Asian countries has led to a situation where the production of smartphones was at the same level as last year, which is under our initial forecast. However, though sales for smartphones was under our initial plan, Demand for PCs and tablets continued to be strong, and investments for data centers remained robust, leading to an increased demand for servers, so sales of rechargeable batteries, sensors, and HDD heads increased. In the industrial equipment market, with the recovery of production activity, capital expenditure from corporates stayed at a high level and sales for power supplies for industrial equipment and passive components increased. Next, going to the financial highlights. Due to the forex fluctuation against the dollar, sales has increased by $45.4 billion and operating income has declined by $1.8 billion due to this impact. Sales was ¥894.2 billion year-over-year plus ¥203.1 billion, 29.4% of increase. Operating income was ¥80 billion year-over-year, an increase of ¥17.6 billion, an increase of 28.2%. Profit before tax was ¥84.5 billion. Net income was ¥68.2 billion. So for all the items, we have been able to achieve a record high level. The ring's share was 180.03 yen. In terms of forex sensitivity, it is the same as before against the dollar. With the 1 yen fluctuation through the year, it's a 1.2 billion impact. In terms of the yen-euro situation, it's a 200 million yen impact. Next. Next, let me explain about the buy segment results for the first half. Passive components net sales was 248.5 billion yen, 35.2% up year over year. Demand for automotive markets continues to be strong. In the industrial equipment market, demand for renewable energy and production equipment maintained a high level. In the ICT market, Although demand for base stations, which increased substantially in the previous year, decreased, however, demand for smartphones stayed strong. As a result, net sales increased in all markets and all businesses. Operating income was $39.4 billion 2.3 times year-over-year. Operating margin improved significantly to 15.8%. By business, net sales and profit increased across the board excluding high-frequency components. Especially, improved profitability of capacitors and inductive devices contributed to the overall improvement of profitability for the passive components. In the high-frequency components, profit declined slightly as they were spending in advance for development for new products. Going to sensor application products. The first quarter broke the record high quarterly sales, but the second quarter went even higher than that. First half net sales was 59.5 billion yen, 72.5% up year over year. Operating income went into the positive territory in this quarter thanks to top-line growth and improvement of product mix. Profits have improved substantially, with the first half becoming very close to break-even. Temperature pressure sensors saw an increase for both sales and income due to the robust demand in automotive and home appliances market. Whole sensor sales increased significantly for the automotive market, leading to a strong improvement in profitability. TMR sensors saw a large increase in both sales and profit as more and more products in the ICT market are taking up this product. As for MEMS sensors, the expansion of the customer base and applications has steadily started to show results, such as increased sales of motion sensors and MEMS microphones. Earnings improvement has been boosted and the amount of loss shrunk. Next is the magnetic application products segment. Net sales was 126 billion, 42% up year over year. Operating income was positive, though it was loss-making last year. For HDD heads, Demand for service increased due to recovery in data center investments. Sales volume of near-line HDD heads increased by 2.5 times year-over-year. Volume-wise, compared to our initial outlook, it grew by 18%. Moreover, in the first quarter in the previous year, sales volume plunged due to the planned closure of our major client, This impact was eliminated this year, which led to a significant increase in both sales and profit. As for HDD suspensions, near-line HDDs for data centers for our major client showed strong sales and earnings expanded. However, in the second quarter, we booked a one-off expenses of 4 billion yen related to antitrust litigations. so the first half was loss-making. The market business net sales has increased as sales for the automotive market was robust. The amount of loss is shrinking as well. In the energy application product segment, net sales was $435.1 billion and operating income was $57.7 billion, while net sales increased 21.7% year-over-year profit declined by 27.5%. If we exclude the sales increase of rechargeable batteries influenced by Forex fluctuations and pass-through of material costs increased to the price, sales for smartphone-related products stayed flat year over year, as the production volume of smartphones was virtually the same as last year. However, sales of tablets and laptop PCs were good, and sales of Paracel products for electric motorcycles, which we think will grow, and residential energy storage systems expanded, leading to an overall increase of sales in this business. As for operating income, the lingering impact of profit decrease in the first quarter due to skyrocketing raw material prices An upfront investment for Paracel products and loyalty payment of $5 million in the second quarter led to a decline in profit. However, price pass-throughs of increased raw material prices has proceeded in the second quarter, and a cost improvement is being accelerated. Although there are loyalty payments, profitability will improve substantially from the first quarter. Power supplies for industrial equipment booked increase for both net sales and operating income as demand for industrial equipment such as semiconductor production equipment was good.

Next, the breakdown on 17.6 billion yen year-on-year growth of operating income, boosted profits by sales increase of passive components, substantial reduction of loss on sensors as well as recovery of profits and HDD head, all pushed up operating income by 49.6 billion yen even with material cost increase. The negative impact of 7.6 billion yen caused by the sales price discount was offset by 11.9 billion yen generated by cost reduction efforts with operational streamlining and structural reform implemented in the Q4 last year. Exigen A went up by 34.5 billion yen, mainly due to the sales administration expenses for secondary battery, as well as development expenses for power cell and the incremental logistical costs under COVID-19 pandemic. and 5 billion yen of loyalty concerning secondary battery, and the recognition of 4 billion yen related to the antitrust case as one-off cost. While the Japanese yen depreciated to the dollar, the currency fluctuation, including the appreciation to RMB, reduced the income by 1.8 billion yen. And taking all these factors into account, operating income has grown by 17.6 billion yen year-on-year. Just for your information, the royalties cost for secondary battery, which was recognized in Q2, tended to be in the development expenses in S-gen A. This was 15 billion yen annually. However, It has already been included as the incremental cost in the business forecast at the beginning of the fiscal year and had no impact. Next, please let me explain the consolidated business performance of Q2. Net sales were 474.1 billion yen or 24.2% increase from the year earlier. Operating income grew by 11.9% to 49.2 billion yen. Income before tax was 52.2 billion yen and the net income was 41.6 billion yen. All these results were all-time high as the quarterly performances. Next I'd like to explain the factors for increasing and decreasing net sales and operating income by segment quarter-on-quarter basis. Starting with passive components, sales increased by 6.2 billion yen or 5.1% from Q1 and operating income increased by 3.3 billion yen or 18.5%. Sales for the automobile market remained almost flat, while sales of ICT and industrial equipment business, as well as in distributed channel, increased, and the sales and operating income both went up for all business except for high-frequency components. Sales of high-frequency components recognized and changed, with operating income slightly declining due to upfront costs for new product development. Next, as for sensor application products, net sales were 5.9 billion yen, an increase of 21.8%, and operating income grew by 3.4 billion yen, having intended to be profitable on a quarterly basis for the first time. Sales of temperature pressure sensors and hole sensors increased due to strong demand for automobiles, sales of TML sensors, also increased significantly due to the expansion of adoption in new products by major customers for smartphones, and the sales of motion sensors and MEMS microphones grew steadily too. As for operating income, TMI sensors have greatly boosted profits, and motion sensors have improved profitability due to the improvement of customer mix and product mix, making great contribution to the profitability as a whole. Next, in the magnetic application product segment, sales were 4.7 billion yen, or the 7.8% increase, and operating income increased by 3.2 billion yen, excluding the Q2 one-time expense of approximately 4 billion yen. Sales volume of HDD heads increased by about 11%, mainly for the near-line heads. and HDD assembly sales remained almost flat, recognizing positive growth in sales. While sales of HDD suspensions for near-line HDDs increased, overall sales increased only slightly due to a decrease of sales in smartphone applications. Demand for magnets for automobiles is steady, and net sales increased slightly. Operating income has improved significantly, where the increase in sales volumes of HDD heads and suspension and operating loss of magnets has shrunk. Next, in the energy application product segment, sales were 35.9 billion yen, or increased by 18%, and operating income was 10.9 billion yen, up by 46.8%. Sales of secondary batteries increased with favorable business for smartphones due to the increased production units of smartphones and enhanced sales of power cell products, even excluding the impact of currency fluctuation and price hike by passing material cost hike onto the products. Excluding these factors, it has positively grown from Q1. On the other hand, The shortage of semiconductors for the industrial machinery sector adversely affected the shipments of industrial power supply products and pushed down its sales. Operating income has almost absorbed the impact of soaring material prices in Q1 for secondary batteries, and with cost reduction, profitability has substantially recovered, offsetting 5 billion yen of recognized license expenses. That's the business performance in the first half. Next, Mr. Ishiguro is going to talk about the full-year forecast. I'm Ishiguro. Thank you very much for joining us today. Thank you very much. I'd like to explain the full-year forecast for the fiscal year ending March 2022. First of all, I'd like to talk about the key points in making a full-year outlook. In the automobile market, aside from the end-of-customer demand, Sufficient production is not possible due to the lack of supply of semiconductors and other components. Therefore, unfortunately, we think that the production units are only on par with the last year's level. It's not more than that. As for smartphones, the demand for smartphones is expected to be slightly lower than the initial forecast due to the COVID-19 pandemic in India and the Southeast Asian markets, again with the bottlenecks on supply chain of materials and the components. So on a global basis, now the demand will be a little bit lower than we had expected. As for hard disk drives, Demand for data centers continues to grow, and we expect strong demand and steady demand. And we also expect that PCs and tablets will exceed the levels expected at the beginning of the time slow to the ear. As far as the demand for electronic components is concerned, the production of automobiles and smartphones is sluggish, but the demand for the The new models equipped with the EXV and advanced driving system is expanding, and the market for electronics such as industrial equipment and medical equipment is being diversified, leading to the further expansion of the demands. And what's better, the investment in the 5G-related facilities and devices have gradually grown, although the pace has slowed down. With all these factors, we conclude that the demand will be steady for the time being. Based on this market background and the status of promotion of expansion measures taken so far, for each business to date, we have decided to revise our full-year earnings forecast upwardly for both net sales and profits and incomes. Along with this, the interim dividend and the year-end dividend forecasts have also been revised upward. with the interim dividend increasing by 5 yen to 100 yen, the year-end dividend forecast increasing by 12 yen to 108 yen, and the full-year dividend will be 208 yen, both on before-the-stock-split basis. Next, I would like to talk about the sales forecast by segment from October to December. So this is the forecast. in the quarter. Overall, we expect net sales to be on par with the second quarter, although the positive and negative aspects vary from segment to segment. As for passive components, the forecast is based on the assumption that demand will continue to be rather stable with a little negative trend including some seasonal factors, but I feel that it may be almost just a 1 to 4, but It will be based on some a little bit slightly negative, but I felt that it may be almost a flat until this quarter. Regarding market inventory, we recognize that the pipeline is filled with more inventory than before. However, looking at the flow of goods such as VMI warehouses, And when I look at those information, we think that the level of inventory might not be excessive yet. As far as sensor application products are concerned, they will be more susceptible to seasonal fluctuations in the specific customer demand, and we expect a 2% to 5% minus. Regarding magnetic application products, we do not expect any significant negative impact against the backdrop of steady data center demand, although there are some uncertainties ahead. Regarding energy application products, our forecast assumes that the Chinese smartphone market will somewhat recover from the previous two quarters. Not so much favorable in the past two quarters, but they will slightly recover. Recover, we continue to expect high demand levels for power supplies too. And we think that's a high level of demand we expect on the power supplies. Finally, I'd like to explain the forecast for consolidated business results for the fiscal year ending March 2022. We have revised our sales forecast to 1.82 trillion yen. Operating income to 157 billion yen, pre-tax income to 162 billion yen, and net income to 110 billion yen. The expected increase from the year earlier is to be 21.7% for sales, 40.8% for operating income, and 38.6% for net income, respectively. The human exchange rate is 109 yen to the dollar and 120 yen to euro, respectively. The said upfront revision of sales includes the impact of a push-up of the top line by depreciation of yen as well as a selling price hike due to material cost increase. So that and all factors will be also included. The development cost will be increased by 20 billion yen, but as Mr. Yamanishi explained earlier, that development expenses include royalty costs of secondary batteries and it does not affect the business performance per se. That's all my presentation. Thank you very much for your kind attention. Thank you.