Tdk Corp S/Adr

Okay, thank you very much. Now it's on time, so let's get started. And the performance briefing, first half of fiscal year, March 23 of TDK Corporation. Let me introduce today's attendees. Mr. Noboru Saito, the President and CEO, and Mr. Tetsuji Yamanishi, Executive Vice President, Mr. Fumio Sashida, the Corporate Officer, Mr. Taro Fukushima, Corporate Officer, Mr. Takao Tsutsui. That's all. Thank you very much. I hope for your kind cooperation. Thank you very much.

This is Yamane speaking. I would like to thank you for your precious time despite your busy schedule to attend our performance briefing for the first half of FY March 2023. Now allow me to go through an overview of the consolidated financial results for the first half. In the first half of the fiscal year, while China showed signs of recovering from the lockdown caused by the spread of the new coronavirus infection, the global economy showed a slowdown mainly in the ICT market due to the growing concerns. about an economic slowdown in the world economy caused by the heightened geopolitical risks associated with Russia's invasion of Ukraine. Although there was a slowdown in demand mainly in the ICT market, the accelerated demand remained strong. and rapid depreciation of the yen contributed to a 25.5% increase in net sales and a 47.4% increase in operating profit compared to the previous year. This was the highest ever recorded on a half-year basis. In the automotive market, although supply chain constraints continued, such as semiconductor supply shortages, but gradual recovery was seen in China and other regions as a whole. Demand for components remained strong due to the increasing ration of XEVs and the progress of ADAS. As a result, sales of passive components and sensors expanded. On the other hand, in the ICT market, demand for notebook PCs and tablets, which had been strong due to the corona pandemic, slowed down significantly, and demand for data centers also slowed down sharply due to the economic slowdown and inventory adjustments in the supply chain. Demand for the smartphones was also sluggish overall with no recovery seen in the Chinese market, but the sales of rechargeable batteries and sensors for new models from our major customers increased. So these are the experiences we had in the first half. Sales of medium-sized rechargeable batteries continued to increase, partly due to the rapid expansion of the demand for residential energy storage systems, which has been affected by energy supply instability and price hikes worldwide as a result of heightened geopolitical risks. sales of power supplies for the industrial equipment and passive components for use in renewable energy and energy-saving facilities are also growing. As explained so far, the demand for the components is undergoing rapid changes amid growing uncertainties about the global economic outlook. We will continue to improve sales and operating profit by firmly capturing EX demand by expanding our business base and expanding sales by continuing to offer distinctive DX products. Next, let me go through the highlights of the business performance. Mainly driven by the FX fluctuations to the US dollar, net sales was up about 164.1 billion yen, up in profit up about 36.9 billion yen, making the positive profit. Net sales was 1 trillion 122 billion yen, up 227.8 billion yen, or up 25.5%. Operating profit was 120.3 billion yen, up 38.7 billion yen or up 47.4% year-on-year. Profit before tax was 119.9 billion yen. Net profit was 87 billion yen. Earnings per share was 229.39 yen. As for the FX sensitivity, due to the rapid depreciation of the yen and the euro to the dollar, as well as due to the change in the earnings structure, with one yen fluctuated, it was about 2 billion yen per year vis-à-vis the US dollar, and it was about 600 million yen to the euro, so the sensitivity has increased since the first quarter. I will now explain the situation by segment for the first half of the fiscal year. Passive components were 294.3 billion yen in sales, up 17.8% year-on-year. Automotive markets, in particular XEVs and ADAS components, continued to be firm in demand. Demand for industrial equipment was firm, particularly for renewable energy and production facilities. In the meantime, in the ICT market, due to the declined demand for smartphones, except for the high-frequency components with the higher ratio in the smartphone, yes, it suffered, but all the other businesses enjoyed growth both in revenue and profit. Particularly, MLCC is continuing its full production, and thanks to the improved product mixture, profitability has improved sharply. Next, in the innocent application product business, net sales was 84.9 billion yen, a significant increase of 42.7% year-on-year, and operating profit was 7.1 billion yen, a significant improvement from the previous year's loss due to the effect of significantly improved earnings. Net sales and operating profit of temperature and pressure sensors decreased due to the supply chain restrictions on the automotive parts caused by the problems in Russia and Ukraine, which resulted in decline in orders mainly from European automotive manufacturers. On the other hand, sales of whole sensors for smartphones expanded in addition to the automotive market, and sales of TMR sensors for smartphones increased significantly due to the increased adoption in addition to the steady sales for the automotive market resulting in the significant increase in overall profit for magnetic sensors. Sales of MEMS sensors increased even in the ICT market, where demand has been somewhat sluggish, and sales to the automobile market, game machines, and industrial equipment such as drones also increased due to the expansion of customer base and applications. Next, in the magnetic application products business, net sales were 109.8 billion yen, down 12.8% year-on-year, and operating profit was a loss of 2.5 billion yen. In the HDD and suspension business, we had expected a further decline in demand for HDDs for personal computers, while demand for the near-line HDDs was expected to recover from the second quarter onward. But the economic slowdown and other factors include a decline in the data center's investment and rapid HDD inventory adjustments. All in all, it resulted in a decline in sales volume for near-line HDDs in the first half. As a result, the sales volume of near-line HDDs has in the first half declined approximately 13% from the previous forecast, and HDD suspension volume also fell approximately 18%, resulting in a significant decrease in both sales and profits. Sales of magnets increased due to the increased sales of XEVs, and earnings improved in real terms, excluding the effect of exchange rate fluctuations, despite the ongoing deficit. In the energy and application products, net sales were 602.4 billion yen, and operating profit was 80.9 billion yen, up 38.5% and 40.1%, respectively, year-on-year basis. Sales of rechargeable batteries for mobile applications such as smartphones, tablets, and notebooks and PCs declined, but sales of small batteries increased due in part to an improved product mix, and sales of medium-sized batteries, mainly for residential energy storage systems, expanded steadily. sales in real terms and also exceeded the level of the previous year, excluding the impact of FX rates and surcharges. Open profit increased on a real basis, excluding the impact of foreign exchange rates due to the overall cost-efficiency improvements, including SCA expenses, and improved profitability of medium-sized batteries, despite the negative impact of the declined volume of small batteries. In power supplies for industrial equipment, demand for industrial equipment such as semiconductor manufacturing equipment remained strong, resulting in increased sales and profit. Now, do you allow me to go through the details of the growth of 38.7 billion yen in operating profit. Excluding the FX impact of 36.9 billion yen increase, here I would like to expand on the factors for the 1.8 billion yen in profit. Although there was a 5.3 billion yen decrease in operating profit mainly due to a decrease in sales volume of hard disk drive heads and suspensions and the impact of selling price discounts, rationalization and cost reductions mainly in rechargeable batteries and passive components, as well as the effects of the structural reforms implemented in the fourth quarter of the previous fiscal year, we were able to observe the impact of the decrease and contribute to the increase in the operating income. Although S&AN expenses increased by 3 billion yen from the previous year, The license fee of principally 4.1 billion yen for CATL was not recorded in the first quarter of the previous year. Thus, actual SE&AN expenses decreased, contributing to the increase in profit. Amid the uncertain demand environment, we are striving to improve profitability by enhancing management efficiency. Next, I would like to provide a summary of consolidated business results for the second quarter. Net sales increased 29% year-on-year to 611.5 billion yen. Up in profit increased 50.5% to 75.7 billion yen. Profit before tax was 76 billion yen, and net profit was 55.5 billion yen, reaching record highs in all categories on a quarterly basis. I will now explain the factors behind an increase or decrease in sales and operating profit by segment from the first quarter to the second quarter of the current fiscal year. In the passive component segment, sales increased by 11 billion yen or 7.8% from the first quarter, and operating profit was 5 billion yen, up 20.3%. Sales increased in all the markets, mainly in the automotive and industrial equipment markets, and both sales and profit increased in all the segments. Sales of sensor application products It was up 6.9 billion yen in sales, up 17.7%. Open profit was 56.7%, up 1.6 billion yen. Sales and profits of temperature and pressure sensors increased as a result of recovery in demand for automotive applications especially in China. In magnet sensors, both TMR sensors and hole sensors increased due to the seasonal factors including a large increase in new models from major customers in the second quarter and operating profit increased despite one-time expenses related to the launch of new models in TMR. In MEMS sensors, sales of motion sensors for smartphones in China declined, but sales of microphones increased, resulting in almost the same level of sales, while the deficit in operating income narrowed due to the increased sale of high-value added products. In the magnetic application product segment, sales declined 0.8% over the minus 400 million yen and operating profit declined 1.1 billion yen. Although we had previously forecast a 40% increase in overall HDD head sales volume in anticipation of recovery in demand for near-line HDDs, the sharp slowdown in demand occurred and resulted in an increase of only about 8% in sales volume. HDD assembly sales also declined, resulting in only a slight increase in overall head sales from the first quarter. Hard disk drive suspension sales also declined due to a sharp drop in demand from major customers, as was the case with heads, resulting in lower overall sales and profits. Sales of magnets increased due to higher sales for XEVs. Next, in the Energen applied application product segment, sales increased 31.6% to 82.2 billion yen, and operating profit increased 1.9 times to 26.2 billion yen. In rechargeable batteries, while sales volume of small batteries for i18 applications remained at the same level as in the first quarter for smartphones in China, sales increased actually for new models from the major customers. and sales of medium-sized batteries increased mainly for the residential energy storage systems, resulting in a significant increase in overall sales. Operating profit increased significantly as a result of the surcharge and cost improvements that observed the impact of higher prices. Profitability of industrial and power supply also improved significantly due to increased sales. This concludes our March donation. Thank you indeed for your kind attention.

Hello, I'm Saito. Thank you very much for joining us today. I would like to explain our full year earnings forecast for the fiscal year ending March 2023. To begin with, I would like to explain our consolidated earnings and dividend forecast for the full year ending March 2023, as well as the market background as the assumption. As of April, the global economic growth rate assumed for the market forecast was revised downward to 3.6% and further downward to 3.2% in October. While production activities showed signs of gradual recovery from the lockdown caused by the resurgence of COVID-19 in some regions, continued geopolitical risks associated with the situation in Russia and Ukraine, and higher-than-expected pace of interest rate hikes raised concerns about the slowdown in the global economy. In light of this macroeconomic environment, we have reviewed our forecast for demand and the production volume for major devices related to our business. And based on the current order status, now we have revised our full year sales and to that 2.22 trillion yen and 200 billion yen for offering the income and the 200 billion yen for the income before tax and 147 billion yen for the net income, then all that upward revision. From the previous announcement, the exchange rate assumption for the second half of the fiscal year is 135 yen to both US dollar and euro. The company plans to pay an interim dividend of 53 yen and the year-end dividend of 53 yen and for an annual dividend of 106 yen as planned at the beginning of the fiscal year. And the capital expenditures are reviewed based on the macroeconomic and the demand trend but remain unchanged from the beginning of the fiscal year due to the depreciation of Japanese yen L&D expenses have been reduced from 190 billion yen to 180 billion yen. Depreciation expenses is expected to be 210 billion yen. Now, I will explain the demand and production volume for major devices which is the assumption for the full-year forecast. As for automobile production, We expect a slight increase from the forecast at the beginning of the period to take into account an increase in XEV vehicles, although the shortage of materials and components has eased slightly. That 84 million units is the latest forecast. On the other hand, the production of smartphones, which leads the ICT market, was expected to remain flat year-on-year at the beginning of the fiscal year, but now is currently forecast at 1.184 billion units, down 10% from the previous fiscal year. The production of PCs and tablets has been revised downward significantly from the forecast at the beginning of the fiscal year to 2021. 205 million units down 21% a year and 147 million units down 11% from the year earlier for tablets. Accordingly, HDD production which was expected to be minus 8% of the previous year's level at the beginning of the period but is now expected to be further Drop of demand of the PC not only for that data center, currently minus 36% of the previous year's level, or 161 million units. Next, I will explain the projected increase and decrease in sales by segment for the third quarter. Total sales are expected to be, as I mentioned earlier, and assuming the macro environment and exchange rate assumptions explained earlier of 135 yen to the dollar and euro, so now we expect to be between flat to minus 3%. from the second quarter. For passive components, although vehicle production is recovering and the demand is strong due to the shift to EVs and ADAS, we forecast a negative 1% to negative 4% taking into account seasonal factors. For sensor application products, Taking into account the trends in the major markets, our forecast is plus-minus 0%. For magnetic application products, as I explained earlier, due to the sluggish demand for ATDD and PCs and data centers, we expect between the negative 14% to the negative 17%. For energy application products, While mid-sized batteries are expected to remain strong, taking into account ICT market trends, our forecast is ±0%. Next, I'd like to explain the key points of future actions and measures for each segment. First of all, with regard to passive components, as a result of the acquisition of APICOS, The business structure reform centered on MLCC, as well as the subsequent development investments and the sales expansion activities focused on automotive and industrial equipment. Automotive sales now account for 43% of passive components business sales, and industrial equipment sales account for 30%. We believe that we have established a product portfolio that can respond to the automotive markets, especially EVs, which are expected to spread rapidly amid the trend toward the carbonized society, as well as the renewable energy and energy saving related markets and the system that can supply these products on a global basis. As for selective capacitors, we will enhance our product competitiveness in areas such as high temperature and high voltage support, and we will implement the investment for increased production capacity announced at the beginning of the fiscal year as planned in order to respond to the increased demand. and also for that invest in increase the production of not only ceramic capacitors but also and about for all this we like to take advantage of all about just like the capacitors and EV and ADAS so that in order to deal with that demand from the market we like to invest for that their developments and their enhanced capacity Next, sensor application products business. ICT account for 47%, and automotive, 33%, and industrial equipment account for 17%, respectively, of sales in the sensor application products business. Sales of TMR magnetic sensors increased for smartphones, and the demand is expected to further increase in the future as cameras become more popular. highly functional. In addition, TMR magnetic sensors are beginning to be used not only in smart phones but also in an electric power steering system for the devices and it has angle sensors and current sensors for motors and brakes and the like. We will continue to make aggressive investments to increase production to meet the growing demand. Demand for the temperature, pressure and whole magnetic sensor is expected to increase in line with the EV's electrification and automatic driving, and we will continue to aim for further sales expansion. And we will also continue to expand our customer base and application base for MEMS motion sensors and MEMS microphones. as we did in the past. In the magnetic application product business and the head business, although HDD production volume is sluggish in the short-term basis, but on the other hand, we will expand the production of mama heads and continue developments of and for the general next generation technology hammer we will continue that with the view to business growth and medium to long term in addition we will continue to work on improving the productivity in the magnet business which is our challenging business finally let me talk about energy application project business and The joint venture, JV with the CTO, for the mid-sized Charlie Butler business is progressing with a delay. In recent past, the demand for energy storage system for home use has been growing rapidly due to concerns about energy supply caused by the rising geopolitical risks triggered by the invasion of Russia into Ukraine, and we will continue to expand our business by capturing demand for batteries for electric motorcycles and drones. which are expected to grow in the future, we will continue to expand our business, too. Although there are growing concerns about the slowdown in the global economy on a short-term basis, but as I mentioned earlier, we will steadily implement the measures and actions I have explained, and I strive to increase our corporate value over the medium to long term. That's all my presentation. Thank you very much. Thank you.