Tdk Corp S/Adr

Okay, it's on time, so I would like to start the performance briefing of the TD Corporation on the first quarter FY in March 2025. Let me introduce today's speakers and attendees. Senior Executive Vice President and Corporate Officer, Tetsuji Yamanishi. Corporate Officer, Fumio Sashida. Corporate Officer, Taro Ikushima. and Corporate Officer Takao Tsutsui. Thank you very much everyone. I'm Yamanishi, and first of all, thank you very much for taking time out of the business schedule today for joining us in the business performance debriefing for the first quarter of the fiscal year, March 2025. First of all, I'd like to now give an overview of our consolidated business results. First of all, I will explain the highlights of the first quarter results. During the first quarter, the global economy remained unstable with the continued strength in North America and signs of economic recovery in Europe, while China continued to show economic slowdown, and the uncertainty in the Middle East also had an impact. In addition, the yen continued to depreciate significantly against the US dollar and the euro. In the electronics market which affects our business performance, the production trend for ICT related products such as smartphones and notebook PC showed a recovery trend on a year-on-year basis due to increased replacement demand and so forth. Besides, demand for near-line HDDs for data center is also clearly recovering. On the other hand, in the automotive markets, demand for the battery EV showed signs of slowing down, resulting in a lower demand for components than we had expected at the beginning of the period, resulting in a 3.1% increase in our first quarter sales. Sales of rechargeable batteries, passive components, and sensors increased due to a recovery in demand for components in the ICT market, while a slowdown in the sales of battery EV led to a slowdown in sales growth of passive components and sensors for the automotive market. Consolidated sales of the medium-sized batteries for that industrial equipment market decreased from the year earlier due to the fully shifting of the business to that GD from the current fiscal year, while the sales of passive components and sensors declined. Operating income increased 120% year-on-year due to the significant depreciation of yen and increased sales of products for the ICT market, as well as the effects of streamlining and structural reforms implemented in the previous fiscal year. Next, I will provide an overview of the first quarter business results, including the impact of exchange rate fluctuations of approximately 53.8 billion yen on net sales and 11.1 billion yen on operating income, and the net sales increased by 15.4 billion yen or 3.1% year-on-year to 518.8 billion yen Operating income increased by 31.6 billion yen or 120% to 57.9 billion yen. And income before income taxes increased by 48.6 billion yen or 3.3 times from the year earlier to 69.6 billion yen, including approximately 8 billion yen in foreign exchange rate, exchange gains. Net income was 59.6 billion yen or about four times as much as the year earlier. Earnings per share is 157.15 yen. As for the sensitivity to exchange rates, we estimate that a one-yen change in the yen-dollar exchange rate will result in an annual impact of approximately 2 billion yen. 1 yen change and the yen euro exchange rate will result in an annual impact of approximately 300 million yen, slightly lower than last year. Next, I will now explain the first quarter results by segment. First, I start with the passive components, the sales. were 143.1 billion yen, a slight increase over 1.6% from the previous year, and operating income was 13.9 billion yen, a slight decrease of 1.5% due to continued sluggish demand in the industrial equipment market and a slowdown in sales to the automotive markets, including the battery EV vehicles, despite increased sales to the ICT market, including smartphones. The sales and profits of ceramic capacitors decreased due to lower sales to the industrial equipment market and increased fixed costs in response to increased production despite higher sales to the automotive market, and the sales and profits of aluminum film capacitors decreased due to lower sales to the industrial equipment market and the automobile market. Sales and profits of inductive devices increased due to favorable sales to the automotive and ICT markets, while the sales and profits of high frequency components increased due to higher sales to the ICT market and improved profitability. By ease of electric material components and the circuit protection components, Recognize that the lowest sales due to lower sales to the automotive market bet higher profits due to foreign exchange gains. Next, the sensor application products. Net sales were 44.1 billion yen, up by 13.6% from the previous year, and operating the performance turned to be the loss of 700 million yen. Sales of temperature and pressure sensor increased due to higher sales to the automotive industry, but income decreased, excluding the one-time gain from the sales of assets in the previous year. In the MEMS sensor business, while the profitability and the microphone improved due to increased sales in the ICT market, overall sales and profits of MEMS sensors. So now, also MEMS sensors and also the motion sensors have been disturbed and sluggish. So what about the motion sensor for industrial equipment? Next, the magnetic application products business. Net sales were 55 billion yen, a significant increase of 43.9% from the previous year, and then operating income was positive, including a one-time gain of approximately 2.3 billion yen from HDD heads. In HDD heads and suspensions, demand for near-line HDDs for data center increased by 1.5 times year-on-year, and HDD heads and suspensions as a whole, returned to be profitable even under the basis excluding one-time earnings, as I mentioned earlier. Although head sales volume was 1.9 times, That of the same period last year, it was slightly below the break-even point volume after the restructuring, leaving the company slightly under the red. It clearly won time gains, but suspension sales volume exceeded the break-even point volume and returned to be profitable. Magnet sales declined due to lower sales to the automotive markets, but profitability improved. In energy-applied products, sales declined by 4.4% to 262.9 billion yen, while operating income increased by 71.9% to 55.3 billion yen. In the rechargeable battery business, sales volume of small batteries for smartphones and other applications increased due to higher demand in the ICT market but, on the other hand, sales decreased due to the impact of lower selling prices resulting from the falling material prices and a decrease in our consolidated sales as a result of the completion of the transfer of the business of the medium-sized batteries to the joint venture. Overall, sales decreased slightly from the previous year. On the other hand, operating income increased significantly due to the increase in volumes, rationalization effects, and foreign exchange gains. Both sales and profits of power supplies for industrial equipment declined due to lack of recovery and demand for industrial equipment, while profitability of power supplies for EVs improved despite lower sales.

Next, I will explain the variance in sales and profit from Q4 last year to Q1 this year. First, passive component segment. Sales increased 4.5 billion yen, or 3.3% from Q4, and OP increased 30%, excluding one-time expenses of 7 billion yen incurred in Q4. As for ceramic capacitors, sales volume fell mainly due to a decline in demand for BEVs and profit fell due to a decrease in sales volume and increase in expenses for increased production. As for aluminum film capacitors, sales and OP increased despite lower sales of automotive, thanks to higher demand mainly in the industrial equipment market related to solar or photovoltaic. Inductive devices saw an increase in sales in all markets, resulting in higher sales and profits. Sales and profits of high-frequency components and piezoelectric, and the circuit protection components remained almost unchanged. In sensor application products, sales fell by 1.1 billion yen and OOP declined slightly. Sales of magnetic sensors increased slightly due to increase in sales to the smartphone market, compensating for lower sales to the automotive market. However, OPE remained flat due to increase in fixed costs in response to increased production. In MEMS sensors, sales of microphones for the ICT market increased. while sales of motion sensors for drones and automotive markets decreased, and losses decreased due to improved profitability of microphones. Next, in the magnetic application products segment, sales increased by 6.1% to 3.2 billion yen, and operating profit increased significantly, excluding one-time cost of 4.7 billion yen in Q4 and one-time gain of 2.3 billion yen in Q1. Because of the recovery of near-lean line HD, the volume increased about 9%. Thanks to the recovery in total demand for near-line HDD, sales of HDD heads increased by 9%, sales of near-line HDD heads increased by 26%, sales volume of suspensions increased by 2%, leading to overall increase. The magnet business was able to reduce the amount of losses year on year. In the energy application products, segment sales increased by ¥24.7 billion and OP increased by ¥12.9 billion, excluding one-time cost of ¥2 billion recorded in the fourth quarter. In rechargeable batteries, sales volumes of small batteries to the ICT sector increased due to higher demand and higher spot orders related to customers' new product launches, while sales and profits from mid-sized batteries also increased due to an increase in sales to e-bikes. Sales and profits of power supplies for industrial equipment decreased, while losses of power supplies for EVs were reduced year on year. Next, variance analysis for the increase in OP of 31.6 billion yen in Q1 will be explained. First, sales factor was positive 12.2 billion yen, including increase in sales volume of rechargeable batteries, increase in sales volumes of HTT heads and suspensions. The decline in OP of 4.8 billion yen due to selling price fluctuation was offset by the benefit of cost reduction and restructuring of 10.2 billion yen. SG&A expenses decreased by 2.9 billion yen, including 2.3 billion yen in one-time gain in HDD heads. FX impact was positive 11.1 billion yen, resulting in an overall increase of 31.6 billion yen. Next, I would like to explain the projections by segment for Q2 this year. Q2 foreign exchange rate assumption is ¥140 to the US dollar, unchanged from the beginning of the fiscal year. For the sake of comparison, however, I will explain the impact the performance, excluding the FX assumptions. In passive components, sales to industrial equipment are expected to remain sluggish, while sales to automotive market should increase slightly. Sales to ICT market increase, especially in inductive devices, leading to an overall growth of 2-5%. In sensor application products, sales of temperature and pressure sensors are expected to increase for the automotive market, sales of magnetic sensors for smartphones are expected to increase significantly due to seasonality, and sales of MEMS sensors are expected to increase by 13 to 16 percent due to an increase in microphones. Next, in magnetic application products, HDD production volume is up 5%, and the near-lying HDD production volume is up 8%. That's the assumption. The expectation is a solid performance in HDD heads and suspensions. Magnet cells are also increasing. All in all, 0 to 3% growth is expected. Finally, energy application products. Sales of rechargeable batteries, small ones for smartphones, are increasing dramatically, partly due to seasonality. Sales of medium-sized batteries for ESS also increase. Sales of industrial power supplies are declining due to continued weak demand. Sales of power supplies for EVs for automotive sector are increasing. Overall, the segment is expected to grow by 21 to 24%. Finally, I would like to explain our full year forecast for FY25 ending March 25. Although we expect first and second quarter results to exceed our initial forecasts, we believe it is necessary to assess demand conditions in key markets in the second half of the year and beyond. At this point in time, we are maintaining a full year forecast as announced at the beginning of the fiscal year. The exchange rate assumptions for the second quarter onwards remain unchanged from the assumptions made at the beginning of the fiscal year, 140 yen per dollar and 156 yen to the euro. That concludes my presentation. Thank you.