MINEBEA MITSUMI Inc. (6479) Earnings Call Transcript & Summary

Good afternoon. I'm Yoshida. Today, I would like to explain the consolidated financial results for the third quarter of the fiscal year ending March 2025. Consolidated net sales for the third quarter of the fiscal year ending March 2025 was down 3% year-on-year and down 12.6% quarter-on-quarter to total JPY 369.643 billion. Operating income was up 7% year-on-year and down 6.1% quarter-on-quarter to total JPY 26.423 billion. Profit for the period attributable to the owners of the parent was up 15.7% year-on-year and increased by 45.4% quarter-on-quarter to total JPY 17.606 billion. Although net sales declined year-on-year, operating income increased mainly due to growth in high-margin business. We estimate that exchange rates have a quarter-on-quarter impact of minus JPY 9.3 billion and year-on-year impact of plus JPY 1.5 billion in net sales. The quarter-on-quarter impact was minus JPY 3.8 billion and year-on-year impact was minus JPY 2 billion in operating income. This is for quarterly trend in net sales, operating income and operating margin. The operating margin for the third quarter was 7.1%, up 0.6 percentage points year-on-year and up 0.4 percentage points quarter-on-quarter. Here shows the difference between the forecast as of November and actual results for net sales and operating income by business segment for the third quarter. Regarding sales in PT products for aircraft and special bearings for medical devices sold by our Western subsidiaries fell short of the expectations. In MLS sales, the motor for HDDs were strong and motors for automotive and non-automotive were generally in line with expectations, but sales of electronic devices fell short of the forecast. SE sales were lower than expected in optical devices, mainly affected by the slowdown in the smartphone market. AS sales was below the forecast due to the impact of the slowdown in the Chinese and European markets. With regards to the operating income, PT and MLS were generally in line with the forecast. SE was below the forecast, mainly due to the decrease in optical devices. AS fell slightly short of the forecast. This slide shows the quarterly trend of Precision Technology segment. On the left is a graph indicating yearly net sales trends. And on the right is a graph with a bar chart showing yearly operating income trends along with a line chart for operating margins. Third quarter net sales decreased 5.5% quarter-on-quarter to total JPY 61.4 billion. Sales of ball bearings decreased 6.1% quarter-on-quarter to total JPY 41.3 billion. The monthly external shipment volume almost remained flat from the previous quarter for an average of 243 million units. This is mainly due to flat growth in automotive and data center businesses. Sales of rod-ends/fasteners totaling JPY 13.9 billion were down 3.4% from the previous quarter. Sales of PMC decreased 5.6% quarter-on-quarter to total JPY 6.2 billion. Operating income for the quarter totaled JPY 14 billion, and the operating margin was 22.8%. On a quarter-on-quarter basis, operating income decreased 4.9% and the operating margin rose 0.2 percentage points. This slide shows the quarterly trends of Motor, Lighting & Sensing segment. Net sales decreased 5.1% quarter-on-quarter to total JPY 101 billion. Looking at the results by product, we see that the sales of Motors decreased 4.1% quarter-on-quarter and resulted in JPY 80.6 billion. Sales of HDD and automotive applications remained flat. Although it is within the expected range, non-automotive applications, mainly for PCs were sluggish. Sales of electronic devices were down 11.7% from the previous quarter to total JPY 9.9 billion. Sales of sensing devices were down 7% from the previous quarter to total JPY 8.9 billion. Operating income came to JPY 6.3 billion, and the operating margin was 6.3%. On a quarter-on-quarter basis, operating income decreased 6.9% and operating margin fell 0.1 percentage points. This slide shows the quarterly trends for Semiconductors & Electronics segment. Net sales decreased 25.2% quarter-on-quarter to total JPY 126.1 billion. This was mainly due to the decrease in sales of optical devices and mechanical components. Operating income totaled JPY 6.4 billion, while the operating margin was 5.1%. Operating income decreased 31.3% and the operating margin decreased by 0.4 percentage points quarter-on-quarter. This slide shows the quarterly trends for the Access Solutions segment. Net sales decreased 2.2% quarter-on-quarter to total JPY 80.2 billion. Operating income came to JPY 4.1 billion, and operating margin was 5.2%. Operating income increased 17% and the operating margin rose 0.9 percentage points quarter-on-quarter. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph shows changes in the profit for the period per share. The profit for the period was JPY 17.6 billion. Earnings per share was JPY 43.8. For the third quarter, foreign exchange losses amounted to JPY 1.8 billion due to revaluation of foreign currency-denominated receivables and payables. Next is the quarterly inventory trend. At the end of the third quarter, inventory totaled JPY 356.6 billion, which increased by JPY 20.8 billion from 3 months ago. This is mainly due to the impact of foreign exchange rates. This graph contains a bar chart showing trends in net interest-bearing debt with the total interest-bearing debt minus cash and cash equivalents and a line chart indicating free cash flows. At the end of the third quarter, net interest-bearing debt totaled JPY 244.5 billion and was up JPY 35.9 billion from the end of the previous fiscal year. This is due to mainly M&A-related expenses for Minebea Powered Semiconductor devices and other companies. Regarding the free cash flow, we expect JPY 18.1 billion for the fiscal year March 2025 as operating cash flow increased in the fourth quarter. We revised down the net sales and operating income forecast for fiscal year March 2025 from our November forecast. Operating income forecast includes a onetime charge of approximately JPY 4 billion due to the PPA of Minebea Power semiconductor devices and the medical device that was transferred from Socionext, loss on sales resulting from draw from the Russian business. The details by segment are shown on Page 13. Regarding the net sales, all segments have been revised downwards. For operating income, PT and MLS segments are unchanged, whereas the SE and AS segments have been revised downwards. The exchange rate is assumed to be JPY 150 to the U.S. dollar. This slide shows the forecast by business segment. This chart shows the difference between the revised forecast this time and the forecast as of November. This is all for my presentation. Over to you, Mr. Kainuma.

I would like to explain. So the things highlighted in red are the main messages for this slide, sub-core business. LED backlight and onwards, I have not touched directly. But now it's obvious that the earnings power is declining. And therefore, in December, what we call ICU, so I take a direct look at this business now. The cumulative numbers until Q3, both revenue and profit recorded a record high. However, it declined in December and 1, 2, 3 did not do very well. But the sub-core, the smartphones and the game consoles, if the budget had been achieved, we would have been able to offset the decline. However, it didn't work out that way. And as Yoshida-san explained, inclusive of PTA, the JPY 4 billion, the extraordinary losses had to be dealt with by operating income. So those things accumulated and led to this result. However, as for the positive message, the sub-core business was, in fact, burdened. However, fortunately, the core business saw a recovery in profit as expected. I will give you more details later on. PT, MLS, both are expected to renew the record high. And AS, more than JPY 5 billion profit increase is expected. On the same note, for the Chinese market, actuators for the Chinese market that we decided to exit. The reason is -- so the local production and local consumption, the Chinese manufacturers follow that policy as well to buy China, if the similar product can be sourced locally, they are to do so. In that sense, rather than allocating resources for such business, we should focus our resources on what we are doing now in order to recover the earnings capability. So as a basic principle, we will exit from the business for the Chinese market, but we will serve only the clients who will make the advance payment. Next page, please. As you can see here, we did make a downward revision. However, compared with last year, 26.5% operating income, increase we saw. That is our expectation, but there was exchange rate loss and the net income down to JPY 57 billion. So these are our expectations at this point. Next page, please. This page, I would like to explain. Core profit and sub-core business profit are shown by indices. The red line shows the sub-core business, smartphones and the game consoles. So if March 2019 is the benchmark, it went up to 143, then ups and downs, but 125, 67 and it's down to 14 this year. On the other hand, the bar graph, the Eight Spears operating profit is shown by CS and taking March 2019 as the benchmark year, base year. So it's been increasing obviously. So we take a positive view on this. PT segment, JPY 56 billion profit -- operating profit this year, which is the highest ever. And MLS doubled JPY 24 billion. And AS, as you may be aware, the Chinese automobiles have been sluggish, but more than JPY 5 billion increase in our operating profit. So what is very clear at this point is that the sub-core business earnings capability this fiscal year has deteriorated. We allowed this to happen. So towards this, we are going to take a three-pillar policy strategy. So I am going to directly reside and look over the sub-core business. So this Eight Spear strategy and M&A for the Eight Spear to accelerate the growth, we are going to continue on the strategy. And on the left, we show that this Eight Spear organic growth, we are going to further accelerate that growth. That will be my challenge right now. Next slide, please. So this is for the PT segment. So JPY 56 billion will be the performance. So JPY 60 billion of operating income is what we have been saying from before, but we have actually been able to see this become real. We have been able to grow to this level. I'm going to talk about board ratings afterwards. But for the aircraft business, this is going to be a growing market going forward. From our point of view, this Lop Buri Plant, we are going to build a new area capacity. And in India, Mach Aero, the second plant is going to be constructed. So from February this year, this month, production is going to start in this plant. So this will be aircraft and ball bearings. This will be these two wheels. These two businesses are going to drive the PT business. The record high level was 2019 March, JPY 47.8 billion operating income. That was the record high level. After that, due to COVID, there has been some adjustments in the market or there has been overcapacity in the supply chain, and there was adjustment there as well. And this year, we are looking at JPY 56 billion of operating income for this fiscal year. In terms of the sales, March 2020, around that period of time, until recently, PT, we have been saying -- I have been saying to the customers is JPY 200 billion of sales, but now we have been able to reach JPY 250 billion. So JPY 20 billion of ball bearings and JPY 20 billion plus coming from the aircraft business. So both of these businesses in the same way have been growing at the same pace. Going forward, I think, this trend is going to continue going forward. Next slide, please. For the ball bearing business, there has been some -- there seems to be some ups and downs, but you can see basically, this business has been growing steadily as a trend. Data center, air cooling fan motors for data centers, because data centers from now on, there's going to be a lot of investments. And of course, ball bearings will be necessary at data centers and content growth for automotive applications, as shown here. If it's HEVs, plus 11% of ball bearings content growth is going to -- can be anticipated. And in terms of the trend in the automotive market, it's shifting from EV to HEVs. So even if the EV demand decelerates as long as HEV sell, I think basically, we'll be able to offset this trend. Another point is that the humanoid robots, this is something in the future. But when we look about which would be the source of our profit, I think, it will be robots for us. So it is certain robots is making kind of dog type robots. They are using 27 of ball bearings. But these robots will be downsized or become smaller, meaning that the ball bearings will be used -- more ball bearings will be used. So for instance, for the finger joint, there are three joints and three decelerators will be used. And in one decelerator if you use two ball bearings, you need six. So if [ dog robots ] have 10 fingers, it means that for only the fingers, 60 ball bearings will be used. I think, basically, that's right around the corner in terms of what's going to happen. So from our point of view, this business opportunity -- to capture this business opportunity and conduct development going forward so that the ball bearings is a growth product. I would like to show that to people. Next page, please. Motor Lighting & Sensing. So what I would like to report to you here is, motors the OP margin has reached almost 9%. So slightly above JPY 300 billion revenue or JPY 320 billion sales and JPY 27 million or -- JPY 27 billion operating profit has been achieved, so above 8% OP margin. And the motors are the third spear and small-sized precision motors market will keep expanding. And therefore, for such a market, we will keep supplying markets. And backlight, in November, fortunately, the LED backlights for smartphones has become zero. So completely zero. And there is no special losses. So both machine and materials have not been wasted. We have suffered no loss whatsoever. In the past, LED backlight was a profit driver, but with no special losses, this business has ended. And I feel so much better. And going forward, we will be increasing sensing devices and the next-generation automotive display will use backlight technologies, HUD, and the production will begin next fiscal year. And it will be making even bigger profit contribution 2 years later. So the smartphone backlight volatility is now eliminated. And I think, this segment will make a fast growth going forward. Semiconductors fortunately exceeded JPY 20 billion operating profit or that is our expectation. And our niche market strategy has turned out correct. On the other hand, power devices. Sometimes we lost the orders from customers or the programs, some programs have been pushed off. That is true. But against such backdrop, by taking niche strategy, we have been able to secure this much earnings, which I think is a good result. On the other hand, as I said previously, sub-core business, there are two things. The former MITSUMI segment, actuators, the pricing has become very difficult. So I wouldn't call it a red ocean, but it's becoming more difficult, but we just need to make a bit harder efforts. And ICU is how we call it, and I will be taking the lead in making recovery in revenue. Next page, please. Access Solutions, JPY 17 billion operating profit, that is the promise I made to you back then. I thought the number was rather conservative. But as you are aware, in the past 1 year, the Chinese market has been going through a very tough time. Therefore, the profit that we generated in China has been reduced to 1/3. But our strength is that the U.S. has made a turnaround and the productivity in the U.S. is going up rapidly. And -- so there has been a huge swing from negative to positive. And the U.S. has been offsetting this decline. That is a fact. So in the U.S. factory, they used to be generating profit all the time, but they are now generating a good profit. The yield has been improving a lot. And currently, at last, it is the former Honda Lock factory, and we only just focus on the Honda jobs. But in the U.S., we have been able to get orders from a major U.S. automotive company and a lot of inquiries -- due to the strategy of the Trump administration, a lot of inquiries are coming to us in the U.S. In Europe, it was negative. But currently, about JPY 2 billion, we saw a swing of JPY 2 billion. So China went down a lot. And global total has gone down a bit. However, to some extent, we have been able to offset that through the profitability improvement of the Europe and the United States. We have been able to achieve that. So from my point of view, to be frank, I'm very proud. I think, the profit level, we can be proud about that. So going forward, initially, we had been forecasting some technological advancement in terms of the electrification of various access products, we will go forward, there will be a lot of interesting projects that will be coming up. So I hope that you will keep your expectations up for this business. Going to the next slide. From 1st of April 2009, I became the Minebea Mitsumi's President and up to now, so there are activity towards individual investors, we haven't been doing so. The reason why we didn't do so is that, for instance, in terms of the retirement money, the people who have saved all of their savings and investing it to our shares. And if they generate a loss, we -- it's a huge responsibility. So we didn't target retail investors. But -- this Eight Spear strategy, without mistake, will stabilize our profit level and grow our profit. Personally, I am very confident about this. So starting from this fiscal year, we are going to conduct a meeting for individual investors more proactively. So for the individual investors, they will be looking at the dividend yield. So the payout ratio, you talked about 20%, around 20% around -- with a range of about 5%. That has been what we have been saying. So 30% of consolidated payout ratio, this is what we are going to look at in the future. So the year-end dividend is going to be raised by JPY 5 to JPY 25. That is our decision. So that's all from me. Thank you very much for your attention.

Next, we'll go to Q&A. So let's go to the first question from Goldman Sachs, Takayama-san, please.

I have three questions, and I will ask you one by one. First would be -- this is a more short-term question. For the third quarter to the fourth quarter, operating income breakdown by segment, if you look at that, PT and Access Solutions quarter-on-quarter is going to improve. I think that is your assumption. So what is the probability to achieve this? I think PT, the ball bearings utilization rate will be going up and rod-ends/fasteners this is going to be the -- is the assumption why is this going to happen. So as the solution sales it is going to go up, profit is going to go up. So if the business environment allows this segment to behave so, what is your take?

So this is Yoshida speaking. In terms of the third quarter for PT against the second quarter, it has gone down. The reason behind this is that, the so-called Minebea conventional ball bearings business and the various business that we conduct in Europe -- Europe and the U.S., that is -- so the -- it's not Minebea's conventional business, but the European -- the U.S., European aircraft ball bearings is included in this segment, this has declined a bit. That's the reason. So that is one reason. And at the same time, within this segment, the medical equipment-related business has worsened a bit. So second quarter to third quarter, net sales and the operating income slightly went down. However, in terms of the difference of the margin -- because of the difference of the margins, the third quarter margins has improved a bit. Going to the fourth quarter, for the aircraft business, one of the reasons why this has gone down is that the -- there has been some Christmas holiday season because the production is conducted in Europe and in the U.S. Another issue is about Boeing situation. It has started to resolve itself. Boeing has restarted its production. We have started to see recovery of production. And for the medical equipment-related products, the inventory adjustment has ended, and this is going to recover as well. So the peak third quarter, fourth quarter improvement can be explained by these situations. In terms of AS, -- but there has been some situation in Eastern Europe, what's going to happen in the United States, the outlook is uncertain. But if you look at the current situation on a global perspective, there's some good areas and bad areas. In the third quarter sales, was JPY 81.1 billion and the third quarter -- fourth quarter, JPY 81.2 billion. So maybe flat or slight improvement against third quarter against the fourth quarter. In terms of the profit, specifically towards March, so the year-end special adjustments will have to be included here. So the fourth quarter will improve a bit. That's what happens. So in the automotive-related business, basically, this happens every year for us. I talked about this JPY 4 billion extraordinary losses. So withdrawal from Russia, we have been able to withdraw from the Russian market. So there has been some downside impact from this. So JPY 17 billion, we have reduced JPY 17 billion to JPY 16 billion, but most of this reduction is coming from -- of this JPY 1 billion reduction -- excuse me, out of JPY 1 billion -- out of the JPY 4 billion is coming from Access Solutions, and that is due to the loss coming from the build from the Russian market. Of course, we have decided to withdraw from Russia. But to exit from Russia, there has been some changes in the system. And when we conducted the final transaction, there was some additional costs that we have to account for. And that has been the main reason why we have seen a decline of JPY 1 billion. So if this didn't happen, actually, it has -- maybe this level was up by JPY 1 billion. Including this, for the fourth quarter for AS, it will improve a bit.

Understood. So a follow-up. So the one-off cost, this JPY 4 billion, the one-off cost. So JPY 1 billion for AS for the remainder will be in SE, JPY 1 billion -- that's in the fourth quarter. Understood. So my second question. So Mr. Kainuma, you talked about the ICU, the mobile phones, games will be included in the ICU, and it will directly reside over the business. More specifically, what will this be? What are you going to do? What type of profit level are you going to bring this? What are the actions are you thinking about? For instance, the -- not only boosting the short-term profit, are you going to set up the system so that it can be sustainable? Or is it because this ICU, you just want to turn this business profitable in the short term? Can you be more specific?

So I always do the same thing too. In a nutshell, the basic movements, everybody should be able to go through the basic procedures. When the management becomes complacent, people will not be able to do the basic things, whether it be sales or procurement and at the factories. So the procurement, you should be able to do the basic movement. So cost reduction, we should be able to do the cost reduction if it's sales. And I directly will go to the customers for the game business. For the actuators, I will directly go to the customers and do various negotiations or do negotiations so that we can produce the products more easily. So these will be the basic movements. When things go wrong, they will be -- have to go through these basic movements and revisit them.

Understood.

So the business per se towards the future, is, of course, maybe it will not be a high-growth business, but it will be a sustainable business. It still will be a sustainable business going forward. So I think you should think it this way. So my definition of sub-core is maybe this business will disappear in the future. But however, in terms of the -- if it's profitable, then we should be proactively being engaged in this business. So I have been saying this and doing this in the European business. So against that, improving the profit and when everybody is be able to go through the basic movement by making a decision how far the profit will improve and then we have to make a decision. And I will be in charge of that, and I will collect various information directly, and I will make a decision. So that's the basic movement of our company. And I am going to do it by myself.

Understood. Lastly, so next fiscal year's outlook for your performance. So you used to say that next year, we'll be able to see this level of profit and this segment will be able to achieve this level of profit. But you didn't talk about that. Is it because there's a low visibility? Or is it just a coincidence that you didn't talk about that? If you can talk about next year's profitability in terms of the valuation, including your share prices, I think that is one type of thing that we can look at. Is it difficult to refer to that?

Well, I will be frank with you. So this -- for the 2 years in a row, we've conducted a downward revision. And I am deeply -- I deeply would get this. So rather than talking various things at this point, I would like to go through these basic movements and embed that within this. And in May, I would like to communicate to you more concrete figures. For the core business, it has gone well all the time. How -- what are we going to do with the sub-core business? That will be next fiscal year's -- that will have a big impact on next fiscal year's profit, because it has gone down to this level. So in that sense, this time, I refrain from mentioning about the outlook of next fiscal year. So it means, that from the -- towards the end of the March, you will be engaged in improvement and you'll be able to -- and if you're able to get a grasp by how much improvement are you going to get, then you'll be able to mention about next fiscal year, at least 7% of profitability should be achieved at minimum or else it's meaningless to be in the business. So it all depends on whether these businesses will be able to recover to this level, and I will try to observe what will happen in this business.

Let us move on to the next question. Morgan Stanley, MUFG Securities. Mr. Sato.

So, I'm Sato from Morgan Stanley Securities. I have two questions. So if I may talk about numbers, ball bearings, October onwards, external sales and internal sales as well as the production actuals as well as the outlook for January to March. And at the same time, ball bearings, the main application status, if you could talk about that as well. The reason why I'm asking this question is Page 18, the data center business is weakening according to your explanation. On the other hand, HDD-related motors or PBOT bearings, how are they moving? So that is my first question.

Understood. Bearings production, I would like to start with the unit will be 1 million from October. 284, 302, 283, that is December and January onwards. 287, 280, 321. So those are the outlook for January to March. External sales are from October, 294 -- excuse me, external sales, 243, 246, 239, 234, that is January and 221 and 2,046. Internal sales from October, 51, 50, 46; January, 45, 47, 42. Total external sales from October, 294, 296, 285; and January, 279, 268, 288. HDD related question. PBOT internal sales. Internal sales numbers are closely linked with the PBOT, because motors are doing quite well. The Q3 average internal sales was 49 and the Q4, 45. So HDD production regarding January to March, overall, there may be some adjustments or corrections. But in the longer term, particularly helium related next year onwards will start growing once again. That is the trend that we are seeing. So that is the HDD-related situation. And bearings segment, inclusive of data centers, the current situation is as follows: in external sales, so cooling fan market, so to speak, will go down quarter-on-quarter. But next year onwards, it is likely to recover. On the other hand, automotive, the production volume has been talked about the content growth and so forth. It's really solid. So we are seeing a very robust trend.

My second question is SC, semiconductors and electronics. Page 7, looking at the Page 7, Hitachi Power Device, this is now consolidated this year, but the Q3 revenue has seen a decline year-on-year. So the optical devices and the mechanical devices, do they fully explain this decline or semiconductors, Hitachi, inclusive of Hitachi power devices, what changes is it going through, if you could explain?

Power devices. It's been quite steady. But of course, as Kainuma explained a little bit, so when we were thinking about the integration of the power devices, there were shortages of the power devices and the EV market was going through changes. And taking into account such changes, we put together this guidance and actuals and the guidance for this year were published based upon that. And things are moving in line with those numbers, but the semiconductor business, so like China, IGBT may be having a slight difficulty. But in total, there are businesses that are to back up those. And overall, things are being robust. Excluding that, year-on-year, what declined was, as you pointed out, the optical devices and game seasonality would justify. But the games, last year, games were not at a high level. So Q3 numbers, if you are asking about the Q3 numbers, this decline, the main part of the decline comes from optical devices.

Going to the next question. From Mizuho Securities, Goto-san, please.

So this is Goto from Mizuho. Can you hear me?

Yes, we can hear you.

I have two questions. One is that Mr. Kainuma, you explained about -- things went down suddenly in December, you talked about that. Was there any changes in some specific product areas? And as a background, what do you think was the reason of this decline? I would like to ask your additional information -- explanation about the current market condition.

December, from October to November. Against the guidance, I think we were more or less in line. But in December, overall, we saw a decline. However, against the JPY 29 billion guidance, it was about JPY 26.4 billion was the result. The difference against this is the optical device. So in that sense, from October to November, there were some decline. And what we were saying was that -- so October, if the October turnover level would have continued, the decline of the optical devices could have more or less been offset by other businesses. But the overall business in December was lower than we had expected in the first place.

So as a result, with the other businesses than optical devices was lower than expectations. So that led to the numbers that we have talked about. So the non-optical devices products, well, not -- there was less upward -- increase happened in December. So what was the reason behind this?

Well, actually -- Well, I think maybe there's an issue about the utilization within the portfolio. For instance, for Europe and U.S., there was holiday -- there's a holiday season during Christmas in terms of the season. From January onwards, to some extent, we are seeing recovery. So in December, we saw a decline. But what was the reason behind this? And is this going to continue? Or is it a one-off situation? At this point, we don't know. But in January, you have started to see recovery. It's not that this -- you're continuing to see a decline, right? In terms of sales, I think, maybe that's a good way to explain. So JPY 1.5 trillion is the guidance. And it's a downward revision, of course. But the third quarter, fourth quarter total numbers, third quarter, JPY 369.6 billion, JPY 352.1 billion. So rather than a sharp decline in general, and we're not seeing that happen, because there are various seasonalities that we have to account for in terms of products. And in the fourth quarter, because of the seasonality, the sales will be a bit low. And I think, that's the overall situation that we're seeing.

Understood. My second question is about -- you talked about the humanoid robots. So the ball -- not only ball bearings, but -- so the strain gauges or strain gauges, sensors using strain gauges, you have various motors as well. So in terms of robots, sensors for robots, I think you have some products that will target this market. And currently, in terms of business opportunity, what do you see in terms of robots? And in terms of integration, how much do you think that integration can be leveraged in this humanoid business?

In terms of ball bearings, as Mr. Kainuma has mentioned, I think, he covered that area. But besides that, I think there are various business opportunities that we can look at. The humanoid robots in itself, they can -- it's like a human being, it can walk. It's not that kind of uniform standard. There can be various devices that can be utilized for humanoid robots. So there are various formats. And I think there are various types of products we can supply to these type of robots. That's what we are currently doing right now. In terms of the details about this area, May, when we announce our full year results, I think we'll be able to talk about the possibility of business opportunities. Maybe like -- internally, we're discussing whether we'll be able to announce some of these business opportunities.

Yes, I'll be looking forward to that.

Let us move on. Nomura Securities, Mr. Akizuki, over to you.

Akizuki from Nomura Securities. Just one question. Mechanical parts and camera actuator businesses are facing challenges, I understand. What kind of challenges are you facing in these businesses? And what countermeasures are you planning to take? You said that you are going back to the basics, but can you be a little bit more specific about what you plan to do together with the recognition of the current status?

To be quite honest with you, actuators are defeated in the competition. And the reason is the lack of basic functions. So by increasing yield, and productivity and to make a machine available all the time. So those are the basic things for manufacturing. And we are already defeated in the basics, and we need to correct that, starting with the spindle motors. Everything goes through the same thing. So basic things. And pricing negotiation is also a part of it, sales and manufacturing as well as purchasing must make sure to follow and do the thorough work for the basics. And if we still cannot win, there's probably nothing we can do more.

What about the mechanical actuators, automating and other issues, I understand you faced with, and it may be taking time, but I can understand that. But what about mechanical?

It's in the similar situation. So actuator, the mass production and it's a build in a large sum, but in the development phase, the color unevenness must be eliminated and orders placed by customers or the orders -- I mean, customers' requirements. As a manufacturer, we must thoroughly respond, but that is not sufficiently worked on, in my opinion. So communication with customers, et cetera, there are various elements. And by correcting them, to what extent we can recover revenue, I would like to see.

Well, having listened to you, it's not going to take 2 or 3 years, but in a year or so, probably you can reach the situation where you want to be.

No, half a year. half a year. I mean, I'm getting old. I cannot wait for 1 year. So...

Okay. Okay. Then I have high expectations.

So the time is limited. So the next question will be the last question. UBS Securities, Hirata-san, please.

This is Hirata from UBS Securities. I have two questions. One is the breakup numbers. So SE for this fiscal year, JPY 12 billion downward revision of JPY 12 billion. So I would like to ask the breakdown of that. You talked about the -- so JPY 3 billion of the power devices, PPA and besides that, most of it will be optical devices. Is that the correct understanding?

Yes, exactly.

PPA, and other expenses.

Well, PPA is not really finalized yet, and we are going through the situation. So it depends on the outcome. So approximately JPY 2 billion is what I said. So that number is included. And for the other numbers, basically, it's coming from optical devices.

Understood. My second question is about the mechanical devices. You talked about the issues surrounding them. And the Chairman, Mr. Kainuma, you're going to be directly involved in that. For the new models, so in the latter half of the January to March quarter, it's going to start to contribute. I think initially, you were explaining as such. So once it starts up, according to the initial existing share, you'll be able to recover in next fiscal year. But maybe the share is going to go down, because you have shared us the various situations surrounding this mechanical devices. Is this a concern?

Basically, we are the third vendor, basically we are the third vendor. So as a third vendor for next fiscal year in terms of the volume within that allocation, we will do the business within the allocated volume. We'll do what we can in that context and enhance our competitiveness. I think, that's the way to understand this business.

With this, we'd like to end the Q&A session.

With this, we would like to end the business results meeting for the third quarter of this fiscal year. The screen will show the questionnaire screen. This will be a very precious feedback for IR activity. We are looking forward to your response. Thank you very much for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]