Tdk Corp S/Adr

Thank you indeed for your precious time. Let us now start the TDK. If I, on the 2023, ending March 31st, this is going to be the explanation for the results and for the third quarter. We have Mr. Tetsuya Manasik, Vice President, and also Executive Officer Fumio Sashida, Executive Officer Taro Ikushima, and Executive Officer Takao Tsutsui. They are the participants for this meeting. Thank you. This is Tetsuji Yamanashi, Exit Vice President. We do appreciate your precious time despite your busy schedule to attend our financial results briefing for the third quarter FY March 2023. We are so happy to have so many of you. I am now pleased to go through this overview of the consolidated financial results. First, key points for the earnings for Q3 and FY March 2023. The global economy has become increasingly stagnant as a result of the continued price hikes in energy and certain materials due to the heightened geopolitical risks, including Russia's prolonged invasion of Ukraine, as well as high interest rates due to the policy rate hikes in the U.S. and European countries aiming at quelling inflation. As a result, the financial demand remained sluggish in the electronics market as well. But, supported by the demand for EVs such as XEV and automobiles, sales increased 17.5% year-on-year basis and operating profit rose 14.5% year-on-year basis. In addition to the first half results, the third quarter was also firm. resulting in record high sales and operating profit on a cumulative 9-month basis. In the ICT market, demand for PCs and tablets, which had been rather strong due to the corona pandemic, declined further, and sales of ICT-related components fell sharply as demand for data centers remained sluggish. While our smartphone production remained sluggish, sales of rechargeable batteries and sensors expanded for new models from major customers. In the automotive market, despite the ongoing supply chain constraints such as semiconductor supply shortage, a gradual recovery was seen in overall, and sales of passive components and sensors expanded as a result of continued strong demand for the components, especially with the increasing ratio of XEVs and shifting to ADAS. The rising geopolitical risks have caused energy supply instability and price hikes worldwide, and the demand for renewable energy, energy-saving equipment, and energy storage systems for home use has continued to grow. I am so happy to be able to report these positive points. Next, I will give you an overview of our business performance. First, the nine-month cumulative results shows an increase in net sales of 251.4 billion yen and an increase in operating profit of approximately 60.9 billion yen due to exchange rates fluctuations against the U.S. dollar in particular. Net sales amounted to 1 trillion and 79 billion yen, up 315.1 billion yen, or 22.6% year-on-year, and operating profit amounted to 188.7 billion yen, up 47.4 billion yen, or 33.5% year-on-year, with profit before tax totaling 188.7 billion yen. Profit before tax was 181.1 billion yen, up 47.4 billion yen year-on-year basis, or 33.5%. 33.5% and the net profit was 136.9 billion yen. Earnings per share was 361.06 yen. As for the sensitivity to exchange rates, we estimated that as the last time, one annual change in the yen dollar exchange rate would result in an annual change of approximately 2 billion yen and one change in the yen euro exchange rate would result in an annual change of approximately 600 million yen. Next, the third quarter results, including the impact of exchange rate fluctuations. Debt sales increased 87.3 billion yen or 17.5% year-on-year to 587 billion yen. Open profit increased 8.7 billion yen or 14.5% year-on-year. to 68.4 billion yen. Profit before tax was 68.2 billion yen. Debt profit was 49.9 billion yen and net income was 49.9 billion yen, down 1.7% from the same period last year. Profit before tax was 68.2 billion yen, net profit was 49.9 billion yen and earnings per share was 131.64 yen. The following is an overview of the third quarter results by segment. Sales of passive components was 144.6 billion yen, up 11.2% from the same period last year. Demand for the components for the automotive market, especially for the XEVs and ADAS, remained strong. and demand for the capacitors and inductive devices for the industrial equipment market remained rather strong, as the demand for the capacitors for renewable energy and production equipment On the other hand, high-frequency components, which account for a large proportion of sales for smartphones, suffered a large decrease in both sales and profit due to a decline in demand for smartphones, while piezoelectric market components and circuit protection components suffered a decrease in profits due to a decline in sales volume for smartphones and home appliances. Next, the sensor and application products business. Net sales was 45.6 billion yen, a significant increase of 26.3% year-on-year. And operating on a profit increased 1.8 times due to a significant improvement in profitability, partly reflecting the effect of increased sales and the operating income margin reached double-digit for the first time. Sales of temperature and pressure sensors increased for automotive applications, whole sensors for automotive applications and new products for smartphone applications expanded, and TMR sensors for automotive applications remained rather strong, while sales for smartphone applications expanded due to the increase in adoption. Profitability has also improved. In MEM sensors, sales to the ICT market, where demand has been rather sluggish, declined, but sales to the automotive industry expanded, and sales to wearable and game consoles also grew steadily, ensuring an increase in revenue Next, as for the magnetic application products, net sales was 47.5 billion yen down 25.8% year-on-year, and operating profit was a loss of 13.9 billion yen. In the HDD enhance and HDD suspension assemblies, sales volume of both HDD enhance and suspension for the PCs and the near-line HDDs dropped by more than 40% year-on-year basis due to a further decline in overall demand for HDDs from the second quarter as a result of the lower data center investment due to the economic and solar and HDD inventory adjustment in addition to the impact of the PC market. As a result, sales volumes of both heads and suspensions for HDDs fell by more than half on a year basis, resulting in a significant decrease in sales and posting loss. In addition that it will take some time for overall HDD demand to recover, structural reform of HDD heads was implemented in the third quarter, resulting in an expense of about 1 billion yen. Sales of magnets increased due to the higher sales for the XEVs but earnings declined due to the soaring material cost and delay in the productivity improvement This is the last in the business and the energy application products and which reported net sales of 331.4 billion yen and operating income of

59.8 billion yen up by 29.4% and 53.4% respectively on a year basis. In rechargeable batteries, sales volume for mobile applications such as smartphones, tablets, and notebook PCs in China declined, but the sales for the new smartphone models increased, and sales of medium-sized batteries, mainly for home energy storage systems, also expanded steadily, resulting in year-on-year sales growth in real terms, excluding the effect of exchange rates. Upgrading income was also up year-on-year in real terms excluding the impact of foreign exchange rates due to a turnaround in mix, improved efficiency and overall cost including SDG&A expenses, and improved the profitability of medium-sized batteries, despite the negative impacts of a decrease in the volumes of small batteries. Sales and profits of power supplies for industrial equipment increased due to steady demand for industrial equipment such as semiconductor manufacturing equipment and medical equipment. Next, I will explain the factors behind the increase and decrease in sales and operating income by segment from the second quarter to the third quarter of the current fiscal year, Q-on-Q basis The first, in the passive component segment, sales decreased by 8 billion yen or 5.3% from Q2 and operating income declined by 3.6 billion yen or 12.1% In addition to a decline in sales to the ICT market mainly for the smartphones sales to the industrial equipment market, consumer electronics and sales to distributors also declined resulting in lower sales in all businesses Sales over capacitors for which sales to the AXB market have been strong increased while other businesses saw a decrease in profits due to the impact of lower sales In sensor application products, sales remained almost flat while operating income increased by 1.2 billion yen or 27.5% Sales and profits over temperature and pressure sensors decreased due to seasonal factors such as Christmas vacations in the automotive industry and lower sales in the consumer electronics industry was another negative factor For magnetic sensors, both TMR sensors and host sensors saw sales and profit increased due to the peak season demand for new models from the major customer Sales and income of MEMS sensors decreased due to a decline in sales of motion sensors for smartphones in China and decreased in sales of microphones Next, for the magnetic application product segment, sales decreased by 7.2 billion yen or 13.2% and operating income declined by 12.1 billion yen. Sales fell sharply with a 29% decline in HDD head sales volume and 17% drop in the suspension sales volume. mainly as a result of a further decline in overall demand for near-line HDDs and operational losses also had a significant impact resulting in a sharp decline in the profits and the recognized loss In consideration of future demand trends after this we have decided to implement structural reforms under the post-process of HDD head with 1 billion yen recognized in Q3 Sales of magnets increased due to higher sales for EXVs Next, the energy application products The sales decreased by ¥10.9 billion or 3.2% while operating income increased by ¥6.3 billion or 11.7% Sales volume of rechargeable batteries for ICT applications increased for new models from a deep major customer while overall sales of smaller batteries for ICT applications decreased due to lower sales for wearables such as PCs and tablets and the sales of medium-sized batteries remained almost flat mainly for home-use energy storage systems and the sales for the rechargeable batteries as a whole declined Although operating income was affected by price discounting due to lower material prices, we secured an increase in operating income by improving overall costs, including SG&A, in addition to improving the profitability of medium-sized batteries. Profitability of industrial power supplies has also improved due to increases in sales. Next, breakdown of operating income. income changes of 8.7 billion yen This change shows a significant decrease of 28.6 billion yen due to the decrease in sales volume of HDD heads and suspensions and rechargeable batteries which are significantly affected by the decline in demand in the ICT market However, ¥24 billion of which was offset by the incremental income due to the effects of yen depreciation And in addition, we improved the profits by approximately ¥15 billion from the previous year by promoting rationalization and cost reduction mainly in rechargeable batteries and passive components as well as by streamlining SG&A expenses So this is about to have improvements by 15 billion yen. So we can secure the positive growth. We also implemented the selection reform in the third quarter of this fiscal year in consideration of the drastically changing demand environment for HDD heads and recognized approximately 1 billion yen as expense for these efforts. Finally, I would like to explain an outlook for the consolidated business results for the full fiscal year basis ending March 23. As I mentioned earlier, the global economy has been suffering from a growing sense of stagnation triggered by continued price hikes in energy and materials caused by geopolitical risks and the rising interest rates caused by policy rate hikes in Europe and the United States due to carbon inflation. and the demand and production volume for major devices related to businesses are also expected to decline from the previous forecast announcement. Given this and the demand environment, we have, including based on the results through the target quarter and the current order status, Now we have revised the forecast downward to 2.170 billion yen, trillion yen in the sales and 185 billion yen in operating incomes, 185 billion yen in income before income taxes and 132 billion yen in net income. This is downward revision. So in light of the current pressure on the demands we decided to revise the forecast downwardly with approximately 20 billion yen to be recognized for the one-time restructuring cost aiming at improving asset efficiency So this is a major reason for this downward revision but on the other hand we expected the business environment to be difficult to forecast due to the lack of growth in sales volumes Therefore we will do at most to improve profitability by streamlining fixed cost and improve cash flow by reducing inventories and the like and so consequently we expect the free cash flow at the end of current fiscal year to be higher than initially projected The exchange rates assumed in the forecast are 130 yen to dollar in Q4 and 135 yen for the full year. When it comes to Euro, 137 yen to Euro in Q4 and 140 yen for the full year. We plan to pay a year-end dividend of 53 yen per share or 160 yen per share for the full year as we planned at the beginning of the fiscal year. and capital expenditures, depreciation, and R&D expenses remain unchanged from the previous forecast. This is all my presentation. Thank you very much. Thank you.