Tdk Corp S/Adr

Now it's on time. I would like to start the performance briefing sessions of Q3 of FY March 2022 of TDK Corporation. Today's speaker is the Executive Vice President, Tetsuji Yamanishi. I'm Yamanishi. Hello, everyone. Thank you very much. I'm Yamanishi speaking. Thank you very much for joining us today in your very busy schedule. Thank you. Okay then, I'd like to start with the performance briefing of Q3 of FY March 2022. I start with the key points concerning earnings. And even under the COVID-19 pandemic and continuing from the first and a half, and that normalizations of the social and economic activities is going on and all over the world, but still, and it's the constraints on the supply chains and have prolonged it, so that would adversely affect the production units of automobiles and smartphone. But on the other hand, Now, our electronics business have been steady so that we could have the increase with sales in all segments and including that's the improvement of profits under the passive components and also the sensor profitability have been increasing and we have a very well-balanced running structure. Sales have increased by 26.3% year-on-year, and operating income have increased by 31.3% year-on-year, and for both the Q3 and the first nine months of the fiscal year have both, and have recognized the all-time high. In the automobile market, and due to the shortage of semiconductors, for example, and that have lowered that protectionists and the , but still the further development of EXP and the further electrification of ADAS have increased in the number of components installed per vehicle that are favorable for a business so that our business is steady and we could expand the sales of the passive components as well as sensors. In ICT markets, and now still, and some, the shortage of the semiconductors and the push down to the production of smartphones, and also better lower than the last year, but our own components have adapted more in the smartphones, and on the top of that, the very strong demand in the PC and the tablets, They make a contribution of a steady business and still that's a very good investments to the data center pushing up to the server demands. In all of these, our sales on the secondary battery sensor as well as HDD head have increased. Also, the end of the market of industrial equipment. Now, CapEx is very steady by the corporations, and then our sales for that semiconductor manufacturing equipment and renewable energy have increased. And also, passive components and industrial power supply have expanded its sales. And also, for the secondary battery, And we also have a very good business including that's the increasing sales of the middle-sized battery for the home use ESS. Just like under this and the good favorable environment, then the first nine months of this fiscal year have largely surpassed our forecast. So, that's why and the full year projection were revised upward in light of operating results through Q3 and that latest order trends. Again, we have this and revision and from the last time in October. I'll explain the details later. Next, let me talk about the consolidated result of the first nine months of the Q3. Exchange impacted too that the net sales have about 85.3 billion yen and also 3.5 billion yen in open income, including all these. The total sales was 1 trillion and 393.9 billion yen. That is 307.1 billion yen, a 28.3% increase year-on-year. Open income was 139.2 billion yen. That is 31.8 billion yen, or 29.5% up from the year earlier. The income before tax was 146.6 billion yen. Net income was 117.3 billion yen. So all these KPIs, we could recognize an all-time high. Earning per share was 309.52 yen. When it comes to the Sensitivity to the currency, there's no any change before, so that one yen change to the dollar have the impact on the operating income of 1.2 billion yen and 200 million yen for the euro. Next, let me report about the consolidated results for Q3. So again, the next change impacts on the sales have this 39.9 billion yen and also 5.3 billion yen impact on the operating income. And including all these impacts, the total net sales was 499.7 billion yen. That is 104 billion yen or 26.3% increase year-on-year. And then operating income was 59.2 billion yen. That is 14.1 billion yen, 31.3% of the increase in the year. Income before tax was 62.2 billion yen, and net income was 49.1 billion yen, just like for the nine months. First to the nine months in the total, also we have the record high KPIs for all these and the figures, and an unexpected share was 129.50 yen. Next. Now, let me talk about the segment wise business performance in Q3. The passive component segments, the sales, were 129.5 billion yen. That is 18.3% increase year-on-year. The demand in automotive markets have been pushed up by the increasing number of components and amounted on to the vehicles. And also, now, in the industrial equipment markets, the renewable energy business also have been favorable. And in the ICT market, although the demand in smartphones declined, but the strong demand in Base stations' valuable devices have more than offset. So in all of these installations, we could have that positive growth in all of the segments. Operating income was 22.6 billion yen, that is 69.3% of increase year-on-year, and operating income margin was 17.5% with increased profitability. Business-wise, excluding high-frequency components, then we have all the profit increase, particularly an improvement of the profitability of the capacitive and inductive devices that pushed up the business performance of all the segments. When it comes to high-frequency components, the profit have declined slightly due to that upfront investment for the R&D for new products. Next, sensor application product segments. Now, we have consecutively deposited all-time high sales from the last Q3, and also in this Q3, we also have a record high sales of 36.1 billion yen, and that is a 57.1% increase in the operating income. could also secure the profits, including the push-up sales and also the better product mix. So now we can push up the flexibility from the Q2, and now we have the operating income margin of over 10%. And the result of that, also in the first nine months of the fiscal year, we could secure the profits. The temperature and the pressure sensors, there was very steady and a demand for the industrial equipment, so the home appliances. Then we have the increase in sales also for the whole sensors, and that is supported by the automotive markets, and we have largely improved that profits. TML sensor is in the ICT markets now and the increase of demand in ICT market, but also and adapted for the new applications and will have the larger and substantial increase of the sales and the profits. For the MEMS sensors, we could enjoy it about the expansion of customer base and application base. Now, have it reflected steadily on the performance. Motion sensors, MEMS microphone from sales, have increasing and substantially, and now with the profitability improvement, we could successfully shrink that largely, the loss.

Next, magnetic and application products business. Net sales were 64 billion yen, 14.4% year-on-year. Operating income was 3.3 billion yen, down 22.5% year-on-year. But here may I remind you that in the third quarter previous year, we had booked 2.4 billion yen from the sales gain of suspension business. So in substance, this segment was able to secure growth in profit. HDD in head. Server demand for data centers has been firm. Near-line HDD heads grew 1.8 times in volume. The total HDD head became profitable with its volume growing 28%. Hard disk drive suspension. Near line on the hard disk drives for the major customized data centers continue to be firm, giving us growth both in revenue and profit. Magnet. Sales for the automotive has been firm in sales. With the price increase of raw materials, loss number increased slightly. Next, I will explain our energy and application products. Revenue was 256.1 billion yen. Operating income was 30.9 billion yen, up 31.1% in sales and 8.9% in profit year on year. As for rechargeable batteries, this segment was impacted by the effect changes as well as the increased price of raw materials, token of FX, the cheaper Japanese yen. But if we are to exclude this, with the smartphone production decline as much as 11% from the previous year, sales for smartphones declined. In contrast, power sales for electric motorcycles and residential energy storage systems expanded. For the entire business, it became almost flat year on year. excluding the effect and impact and also the price factor. Operating income, while the real sales did not grow, we made efforts to improve cost and fixed cost efficiency. And we are seeing improved profit starting from the second quarter. But in the third quarter this year, raw materials price started again going up rapidly. So now we still have some potential factor to push down profit. And also now we have about 5.1 billion as the real estate to be paid. As for the industrial equipment, the power devices, demand, intersection action has been rather firm, given us opportunity to increase the revenue. But we also have been faced with an increase in the materials we had to procure, and also we have been with COVID-19, and with all these factors in place, we are having a slight decline in profit. Next, I'd like to go through the factors behind the ups and downs of sales and operating profit numbers for the third quarter buy segment. First, the passive component segment. Net sales was up 2.2 billion yen, or 1.7% from the second quarter. Operating income was up 1.3 billion yen, or 5.9%. As for sales, it grew slightly thanks to the strong and order market. In the industrial equipment market, renewable energy and manufacturing facilities grew in sales, whereas in the ICT market, sales for smartphones declined. The business became profitable except for the RF components. Open income side, capacitors and inductors contributed to the overall profit growth. Next, sensor and application products. Revenue here was 3.5 billion yen, up 10.6%. Operating income was up 2.3 billion yen. We continued to improve further since the second quarter. Temperature and pressure sensors slightly declined, partially due to the seasonal factor. In MIR sensors, whole sensors grew firmly, particularly for the auto, and TRM sensors grew significantly in the sales volume of new products, since Q2, thanks to the major customers for smartphones. Motion sensors are firmly growing in sales thanks to the expanded base of customers and applications. Operating income grew significantly thanks to the good business of TMR sensors. Motion sensors contributed greatly to profit, reflecting the improved customer mix and product mix. All in all, they contributed greatly to the overall profit improvement. Next, I will explain magnetic application products. Revenue being 1.3 billion yen, down 2.1%. Operating income was... down ¥2.7 billion, excluding a one-time cost of about ¥4 billion we had in the second quarter. Revenue, HDD has volume mainly in four pieces, was down about 8%. And assembly sales volume also was down about 15%. In contrast, HDD suspensions had a growth in profit driven by near-line business. Magnets. This business grew in profit thanks to the firm demand for auto. Operating income declines sharply due to the decline in HDH volume as well as the selling pricing erosion. Suspension improved and its profit driven by the growth in sales and the mixture improvement by high-value products. Magnets are still in loss because the impact from the price rise is still with us. Next, energy and application product segment. Revenue was 20.6 billion yen, up 8.8%. Operating income was 4.7 billion yen, up 13.6%. Rechargeable batteries sales grew thanks to the increased production volume of smartphones. Power cell products sales grew. Even when excluding the FX impact and raw materials price increase shifted to our selling price, revenue actually grew. From the second quarter, industrial power supplies grew slightly in revenue. Operating income, raw materials, and for the rechargeable batteries started rising further from the second quarter, and its impact is still with us. But we made further efforts to improve the efficiency of fixed costs resulting in improved profitability starting from the second quarter. Industrial power supplies, thanks to the increased sales, resulted in growth both in revenue and profit. Next, I will go into details of 14.1 billion yen of the operating income. With the growth in sales of passive components, profit expanded. With the sensor business becoming profitable, profit expanded. with the recovered profit of HDD heads. Though we had some impact from the rising cost of materials, we had an increase in profit as much as 12.6 billion yen. Impact from the sales price discounts remained rather small. Rationalization, cost down efforts, as well as the impact of 8.6 billion yen coming from the structural reform we executed in the fourth quarter in the previous fiscal year. Our profit has been raised up. H1N1 actually increased 12.5 billion. Major factors for that, first, in the third quarter previous year, we had sales of the suspension budget almost 2.4 billion yen. And also the rechargeable royalty cost being 5.1 billion yen. And with COVID-19 going on, there has been price increase in the distribution cost. Well, of course, Japanese yen becoming cheaper and actually up 5.3 billion. All in all, it is going to be 14.1 billion yen improvement in profit. Lastly, I will explain our focus for the fully consolidated performance. As I said in the outset, with the actuals up until the third quarter, and in light of the orders we have received in the latest quarter, We revised upward our last numbers we announced back in November, November the 1st. So we made this revision again. Full year net sales is now 1,850,000,000 yen. Open income 160,000,000 yen. Income before income taxes now 168,000,000 yen. Net income is now 113,000,000 yen. As for net sales, Demand for passive components, particularly for auto and industrial equipments. And also for the rechargeable batteries, demand for smartphones turned out to be much faster than we had expected. So these are the reasons why we wanted to actually make the Apple revision. As for the operating income, We expect to grow the profit thanks to the increased sales. We are also expecting to have one-time cost of 9 billion yen for the consolidation of locations as well as the sales disposition of assets. And that has been expected in the fourth quarter. We expect to have one-time cost of tax around 17 billion yen about. that is expected in the fourth quarter. So with these factors in place, we are happy to announce that we made these revisions. As for the year-end dividend and capex and depreciation, amortization, and hourly costs, there has been no change since the last time announcement. This concludes my explanation. Thank you indeed for your kind attention.