Tdk Corp S/Adr

If I may, I would like to start the TDK Corporation third quarter and performance briefing for Fiscal Year in March in 2024. Let me introduce the attendees. We have Tetsu Yamanishi, NJ Vice President. Thank you. Kumio Sashida, Corporate and Officer. Taro Ikshima, Corporate Officer. Thank you. Thank you indeed for the introduction. That's all. Thank you again for your kind attention. This is Yamanashi speaking. I'd like to thank you for your precious time despite your busy schedule to attend our third quarter performance briefing for F5 in March 2024. I'm so happy to have so many of you. If I may now, I'd like to go through the outline of the consolidated results. First, during the third quarter year to date, although the global economy remained firm in North America, the economic slowdown in Europe and China, as well as the unrest surrounding the Middle East region caused a growing sense of the economic slowing down. Furthermore, the Japanese yen continued to depreciate against the US dollar, as well as against the Euro. Under such a business environment in the electronics market, which actually affects our business performance, in addition to the stagnant demand in the ICT and HDD markets due to the prolonged slump, the overall demand in the industrial equipment market remained weak. In the automotive market, production of SUVs and other vehicles exceeded the level of the same period of the previous year. But parts inventory and adjustment by some customers were prolonged, resulting in a lower demand for parts done we had expected at the beginning of the period. And on a year-on-basis, net sales went down 5.3% and operating profit was down 17.5%. Looking at the sales by the business segment by market, sales of the passive components for the ICT and industrial equipment markets declined significantly. while sales of passive components and sensors for the automotive market increased, but the growth slowed down due to the prolonged inventory adjustments by customers. Demand in the HDD market was also significantly lower than the previous year, and sales of HDD heads and suspensions declined sharply, but signs of improvement began to appear from the third quarter. Sales volume of small rechargeable batteries for the ICT market remained almost unchanged year on year, but sales decreased due to a drop in selling prices following a decline in market prices. Next, I'd like to go through the highlight of the Q3 year-to-date result. With FX fluctuations, net sales was up about 22.5 billion yen. Up in profit was about 17.2 billion yen, including that. With this impact in place, net sales was 1.97 billion and 90 billion yen basis, 5.3% down. Operating profit, 157 billion yen basis, 32.9 billion, 17.5%. And profit before tax was 17.8 billion. And actually net profit to owner spread was 65.3 billion yen. Actually, earnings per share was 172.14 yen. As for the forex sensitivity, we estimate that, as before, the impact of one Japanese yen fluctuation against US dollar would be 2 million yen, and the impact of one exchange vis-a-vis euro would be about 600 million yen. Next, allow me to explain the third quarter results on the consolidated basis. Including the impact of change rate fluctuations of approximately 22.5 billion yen on net sales and 3.8 billion yen of operating income, net sales decreased 27.7 billion yen or 4.7% year-on-year to 559.3 billion yen, while operating profit increased 1.8 billion yen or 2.7% to 70.2 billion yen. Profit before tax was 76.9 billion yen, and net profit attributable to owners or parent was 65.3 billion yen, up 30.8% from the same period last year. Earnings per share amounted to 172.14 yen. I will now explain the situation by the segment for the first nine months of the fiscal year. Net sales of passive components were 427.1 billion yen, down 3.2% year-on-year basis. Although the sales grew in the automotive market mainly for XEVs caused by the declines in the sales for the ICT market as well as the industrial equipment market, operating profit was 50.2 billion yen down 37%. Although sales to the automotive market increased in all businesses, the performance of each business segment varied due to the ups and downs of orders received in each market and each application. Though we were able to secure the growth in sales in ceramic capacitors due to the increased sales, particularly in the automotive market, but earnings declined due to the deteriorated product mix and other factors. while sales and the profit of aluminum electronic capacitors and the film capacitors decreased due to slowdown in demand in the industrial equipment market. Sales and profits of inducted vices and piezoelectric are the material components and the circuit protection components declined due to decreased demand from the industrial equipment market as well as the ICT market and also from the consumer electronics and gaming markets. Next, the sense application products business. Net sales being 135.3 billion, up 3.6% year-on-year, and operating profit was 9.8 billion yen, down 23.2%. Sales and profits of temperature and pressure sensors increased due to higher sales to the automotive industry despite lower sales to the industrial equipment market and consumer electronics. Sales and profits of magnetic sensors increased due to higher sales of hall sensors to the automotive industry and strong sales of TMR sensors for smartphones. On the other hand, the sales and the profits of MEMS sensors decreased due to lower sales in the ICT market and industrial equipment, although the sales of motion sensors to the automotive industry expanded. Next. In regard to the magnetics application products, net sales were 132.4 billion yen down 15.9% year-on-year, and operating profit was a loss of 26.2 billion yen. In HDD heads and suspensions, the continued sluggish demand for HDDs resulted in a 24% year-on-year decline in total HDD demand, and in particular, a 35% decline in total near-line HDD demand. which led to a significant year-on-year decline in sales volume for both heads and suspensions for HDDs, so revenue went down and the loss became larger. Structural reforms to optimize the production systems are now being implemented as planned. We have allocated approximately 1.9 billion yen for nine months on a cumulative basis. Sales of magnets declined due to lower sales of industrial equipment. And then deficit increased slightly due to the delayed productivity improvement.

Next, energy application products. They recognize that the sales of 883.5 billion yen and operating income of 155.3 billion yen, a 5.4% increase from the same period last year on sales, but on the other hand, it's the increase of 10.4% for the operating income. In the rechargeable battery business, while the sales volume of small batteries for smartphones increased, sales increased due to the lower selling price and caused by the falling material prices. and also the price discounting, and also the sales of the medium-sized batteries also decreased due to the business transfer to the JV. And despite the decline in sales, we secured an increase in operating income due to Wanting the increase in the sales volumes per second, streaming lightning effects, and the foreign exchange gains. Sales and the operating income of power supplies for industrial equipment increased due to enhanced sales to industrial equipment, such as semiconductor manufacturing equipment and medical equipment in response to backlog of orders. while the loss on the power supplies for EVs narrowed significantly due to the effects of structural reform at the end of the previous fiscal year, in addition to increases in sales. Next. This is a waterfall chart representing the change of operating incomes of 1.8 billion yen. The factors leading to this increase in the third quarter include, for one thing, the decline in the volume of possible components, a deterioration in the product mix, and the decrease in operating capacity. But on the other hand, operating income of rechargeable batteries increased due to their boosted sales. So the total change of the profits due to the change in the sales amounted to 3.8 billion yen. Rationalization cost reductions and structural reform effects of 10.8 billion yen almost upsets the 13.7 billion yen decrease in profits due to change in the selling prices. SG&A expenses increased by 2.5 billion yen due to an increase in the sales volumes of rechargeable batteries and new product developments. And the restructuring cost of 900 million yen in the previous fiscal year and another 900 million yen in the current fiscal year. And we recognize it considering HDD heads. On top of that, another 400 million yen was recognized for discontinuing the legacy products for the inductive devices. This increase was almost offset by the impact of yen depreciation of 3.8 billion yen and eventually resulting in an overall increase of operating income by 1.8 billion yen. And we now explain that the factors behind the increase or decrease in sales and operating income by segment from the Q2 to Q3 of the current fiscal year. First, in the passive component segments, sales decreased by 4.5 billion yen or 3.1% on a Q1-Q2 basis from the Q2, while operating income increased by 1 billion yen, or 5.7%. Sales and income of a ceramic capacitor increased due to higher sales for automotive applications, while the sales and income of aluminum film capacitors decreased due to lower demand from the industrial equipment market, and the sales of inductive devices remained almost flat due to a decrease in sales for the industrial equipment market. However, sales to that automotive and ICT market increased, resulting in an increase in profit sales, and even with 400 million yen of structural reform cost to discontinue legacy products. Sales and earnings of high frequency components increased due to higher sales to ICT market, while the sales of piezoelectric and circuit protection components declined in all markets, resulting in a slight decrease in earnings. Next, in sensor application products, sales increased by 2 billion yen and operating income grew by 400 million yen. Sales of temperature and pressure sensors increased due to an increase in sales for automotive applications, while magnetic sensors saw a slight decrease after that demand in the ICT market peaked out. But on the other hand, the sales to the automotive market increased, and both sales and operating income remained almost afloat. In the memory sensor business, the sales volumes of motion sensors for smartphones in China and went up and supported net sales growth. Next, in magnetic application products segment, sales increased by 4.5 billion yen or 10%, and operating income increased by 2.2 billion yen and reducing the loss. Sales of near-line HDDs bottomed out in Q2 and showed a sign of recovery in Q3, and leading to a about the 14% increase in an HDD head sales volume from Q2. and approximately about 1% increase in suspension sales volume, and eventually resulting in an increase in overall head sales and reducing the loss. Restructuring the cost of 900 million yen were recognized in both Q2 and Q3, and there was no increase or decrease on a Q1Q basis. Sales and operating income of Magnet remained almost unchanged. Next, in the energy application product segment, net sales increased by 600 million yen and operating income rose remarkably 8.1 billion yen. In rechargeable batteries, sales declined due to the transfer of medium-sized batteries to the joint venture, while the sales of smaller batteries increased for smartphones in China and resulting in an overall increase in the sales and profits. Business of power supplies for industrial equipment remained steady, while the sales and profits declined in power supplies for EVs. Next, let me explain the cash flow. For the first nine months total of the current fiscal year, operating cash flow was 333.3 billion yen, Investment cash flow, including CapEx, was 147.8 billion yen, and free cash flow was 185.5 billion yen. In light of the market demand situation, we have further optimized the inventories since the end of the first half and have also made capital investments while carefully assessing the supply and the demand. And Q4, and we will continue to optimize the inventories. And we have another 500 million yen and also for that stake, an 8%. Video Yen is already have exceeded from the forecast and also going into the Q4, we're going to work on that's the optimizing the inventories and examining that's the capital investments. Now, I would like to explain full year forecast for the fiscal year March 2024. First of all, I would like to explain the image of sales increase and decrease from the third quarter to the fourth quarter of this fiscal year. We have assumed an exchange rate of 145 yen to the US dollar for the fourth quarter. So there would be almost no foreign exchange impact compared to Q3. As for passive components, sales of ceramic capacities for the automotive market are expected to grow. On the other hand, sales of inductive devices are expected to decline due to such factors as the seasonality of demand from the ICT market and overall passive component sales are expected to increase by plus minus 0 to 3%. In sensor application products, sales of TMR sensors are expected to decrease due to a seasonal decline in demand from the ICT market. And the sales of MEMS motion sensors and MEMS microphones are also expected to decrease due to a decline in ICT market. and as well as decline in the sales for the game consoles. And it will be an 11 to 8% overall decrease is expected. As for magnetic application products, while the total demand for HDD is expected to decline by approximately 6%, total demand for near-line HDD is expected to increase by approximately 9% as signs of recovery are being seen. And about the 10% growth over the sales volumes of HDD headband suspension is expected. On the other hand, sales of magnets for the automotive market are expected to decline. And overall sales of magnetic applications are expected to increase by plus minus 0% to 3%. The energy application products, overall sales are expected to decline by and ended dramatically in the sales. And then also for that is, and with that's the transfer of business to the, and the joint ventures and total 27 to 24% some decline is expected. So, and so that's in the eventually and results we expect an overall decrease of 16 to 13% in this segment. And lastly, I'd like to explain our full year earnings forecast for the current fiscal year. During the nine-month period, production for the electronics market as a whole remained sluggish due to the weak end market demand. On the other hand, in the third quarter of the current fiscal year, in addition to the effects of the weaker Japanese yen and the demand, this recovered in the Chinese smartphone market, resulting in higher than expected sales of small rechargeable batteries. and higher expected sales of HDD heads and suspension. And result of all this, the nine months total period performance exceeded the forecast announced on August 2nd. Based on this performance, We have revised upwardly our full-year forecast for the fiscal year March 2024 from those announced on August 2nd to net sales of 2 trillion and 90 billion yen, operating income of 170 billion yen, and net income of 120 billion yen. The first quarter forecast assumes an exchange rate of 145 yen to the US dollar from that previous forecast of 130 yen to the dollar. In addition, we expect to implement measures to improve asset management efficiency in anticipation of future changes in the demand trends. and to recognize one-time expenses such as restructuring the cost of approximately 12 billion yen in the first quarter. Dividends are unchanged from the beginning of the fiscal year, And we have revised down wildly our capital investment focus by 10 billion yen to 230 billion yen after careful consideration of demand trend, including a review of the timing of the investments made. And increase... and increased depreciation and R&D expenses by 10 billion yen for each. Taken into consideration, I've expected the cost increase triggered by the further depreciation of the Japanese yen in the second half of the fiscal year. Thank you very much. Thank you.