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

Thank you. This is Yoshihisa speaking. I'd like to explain the overview of financial results for the fiscal year ended March 31, 2026, and the mid-term earnings forecast for the fiscal year ended March 31, 2027 and beyond. Consolidated net sales for the fiscal year ended March 31, 2026, increased by 9.3% year-on-year, totaling JPY 1,664.4 billion. Operating income increased by 10.1% year-on-year, totaling JPY 104 billion. Profit for the period attributable to owners of the parent increased by 66.6% year-on-year, totaling JPY 99 billion. Both net sales and operating income exceeded the plan. Operating income includes structural reform expenses of approximately JPY 2.6 billion. In addition, profit for the period attributable to owners of the parent includes special factors. Details will be explained later in the slides. Due to the appreciation of the yen, there was a negative foreign exchange impact on the previous year, decrease in net sales by JPY 1.2 billion and operating income by JPY 10.7 billion. Consolidated net sales for the fourth quarter of the fiscal year ended March 31, 2026, was up 15.3% year-on-year and down 4.8% quarter-on-quarter to total JPY 432.2 billion. Operating income was up 31.5% year-on-year and down 9.5% quarter-on-quarter to total JPY 28.3 billion. Profit for the period attributable to owners of the parent was up 2.9x year-on-year and up 2.3x quarter-on-quarter to total JPY 49.2 billion. As mentioned earlier, profit for the period attributable to owners of the parent for the fourth quarter includes special factors. We estimate that foreign currency exchange rates had a quarter-on-quarter impact of plus JPY 12.2 billion and year-on-year impact of plus JPY 13.6 billion in net sales. Quarter-on-quarter impact was plus JPY 0.1 billion and year-on-year impact was minus JPY 1.6 billion in operating income. This slide shows the difference between the forecast as of February and actual results for net sales and operating income by business segment for the fourth quarter. For net sales, PT sales were higher than expected, primarily due to strong performance in bearings for data centers and aircraft products. MLS sales were higher than expected due to steady growth, mainly in motors for HDDs and electronic devices. SE sales were higher than expected due to strong performance in mechanical components and optical devices. AS sales were above the forecast mainly for automotive devices. With regard to operating income, PT exceeded the forecast due to an increase in production volume of bearings and other products. MLS was below the forecast due to the impact of soaring material prices for motors and other products. SE exceeded the forecast due to steady growth mainly in optical devices. AS exceeded the forecast due to steady growth mainly for Europe. This chart shows the annual trends for sales, operating income and operating margin. The bar graph on the left shows net sales and the graph on right shows operating income and the line graph indicates the operating margin. The operating margin for the fiscal year ended March 31, 2026, was 6.2%. This slide shows the quarterly trends in net sales, operating income and operating margin. The operating margin for the fourth quarter was 6.5%. This was up 0.8 percentage points year-on-year and down 0.4 percentage points quarter-on-quarter. Next is the situation of each business segment, starting with the Precision Technologies segment. The graph on the left shows annual net sales trends. The graph on the right, the bar chart represents operating income and the line chart indicates operating margin. The fiscal year ended March 2026, net sales increased by 10% year-on-year, totaling JPY 281.2 billion. Sales of ball bearings increased by 8.5% year-on-year to reach JPY 186.4 billion. The monthly average of external bearing sales volume totaled 277 million units, an increase of 16.9% year-on-year. By application, sales of products for data centers increased, driving overall growth. Sales of Rod-ends/Fasteners increased by 11.7% year-on-year, totaling JPY 66 billion. Products for aircraft applications showed a strong performance. Sales of PMC increased by 16% year-on-year, totaling JPY 28.7 billion. Operating income for the fiscal year ended March 31, 2026, totaled JPY 62.2 billion with an operating margin of 22.1%. This represents a year-on-year increase of 11.8% in operating income and an increase of 0.3 percentage points in operating margin. By product, operating income for all products, including bearings, rod ends and fasteners and PMC increased, reaching a record high. For the fiscal year ending March 31, 2027, ball bearings, we expect volume growth for data centers due to continued demand and steady growth for automobiles due to continued content growth. In our aircraft-related businesses, including rod ends and fasteners, we will improve profitability through strong aircraft demand and price adjustments and accelerate earnings growth by strengthening our supply system. For PMC, we expect sales to increase primarily driven by automotive components for LiDAR. This slide shows our quarterly trends. Fourth quarter net sales increased 11% quarter-on-quarter to total JPY 77.8 billion. Sales of ball bearings increased 9.4% quarter-on-quarter to total JPY 50.6 billion. The monthly external shipment volume increased 3.9% quarter-on-quarter, averaging 287 million units. Sales showed steady growth driven primarily by applications for data centers. Sales of Rod-ends/Fasteners increased 17.4% quarter-on-quarter to total JPY 19 billion. Sales of PMC increased 7.3% quarter-on-quarter to total JPY 8.2 billion. Operating income for the quarter totaled JPY 17.7 billion, and operating margin was 22.8%. On a quarter-on-quarter basis, operating income increased 12.2% and operating margin was up 0.2 percentage points. Please note that due to the PPA for Minebea Linear Motion Inc., we made a retrospective adjustment of approximately JPY 0.5 billion to the operating income for the third quarter of the fiscal year ended March 31, 2026. Next is the Motor, Lighting & Sensing segment. For the fiscal year ended March 31, 2026, net sales increased by 12% year-on-year, totaling JPY 456.5 billion. By product, sales of motors increased by 5.6% year-on-year to reach JPY 340.3 billion. This was due to steady growth in motors for HDDs as well as automotive and nonautomotive motors. Sales of electronic devices increased by 65.2% year-on-year, totaling JPY 68 billion. Sales of sensing devices increased by 4.5% year-on-year, totaling JPY 38.5 billion. Operating income was JPY 26.9 billion with an operating margin of 5.9%. This represents a year-on-year increase of 17.2% in operating income and an increase of 0.3 percentage points in operating margin. Please note that the fourth quarter includes onetime expenses of approximately JPY 1.6 billion. This is due to the recording of structural reform expenses in the European sensing business. For the fiscal year ending March 31, 2027, we expect motors to show steady growth driven by server demand. We also expect an increase in sales for both electronic devices and sensing devices. These are quarterly trends for the Motor, Lighting & Sensing segment. Net sales increased 8.6% quarter-on-quarter to total JPY 124.1 billion. By product, sales of motors increased 9% quarter-on-quarter to total JPY 91.7 billion. Sales of electronic devices increased 5.3% quarter-on-quarter to total JPY 18.4 billion. Sales of sensing devices increased 7% quarter-on-quarter to total JPY 10.6 billion. Operating income for the quarter totaled JPY 6.3 billion and operating margin was 5.1%. On a quarter-on-quarter basis, operating income decreased 24% and operating margin was down 2.1 percentage points. the aforementioned onetime expenses of JPY 1.6 billion were recorded in the fourth quarter. Excluding these onetime expenses, operating income was JPY 7.9 billion and operating margin was 6.4%. Next, I will explain the Semiconductor and Electronics segment. In the fiscal year ended March 31, 2026, net sales increased by 11.9% year-on-year, totaling JPY 590.3 billion. This is primarily due to an increase in sales of mechanical components. Operating income was JPY 26.7 billion. Operating margin was 4.5%. This represents a year-on-year increase of 21.1% in operating income and an increase of 0.3 percentage points in operating margin. Please note that operating income includes special factors of approximately JPY 1 billion. Excluding these factors, operating income was approximately JPY 27.7 billion. This is due to the recording of structural reform expenses in our power supply business. For the fiscal year ending March 2027, as we expect a decrease in net sales due to lower sales of mechanical components, we expect optical devices and semiconductors to show strong performance, resulting in an increase in operating income. This shows the quarterly trends for the Semiconductor and Electronics segment. Net sales decreased 26.9% quarter-on-quarter to a total of JPY 136.4 billion. This was due to seasonality as sales of mechanical components decreased in the fourth quarter. Operating income for the quarter totaled JPY 6.2 billion and operating margin was 4.5%. On a quarter-on-quarter basis, operating income decreased 43% and operating margin was down 1.3 percentage points. Finally, I will explain the Access Solutions segment. In the fiscal year ended March 2026, net sales increased by 1.3% year-on-year, totaling JPY 332.2 billion. This was due to factors such as increased demand for communication antennas and industrial equipment components. Operating income was JPY 17.1 billion with an operating margin of 5.1%. This represents a year-on-year increase of 7.3% in operating income, an increase of 0.2 percentage points in terms of operating margin. For the fiscal year ending March 2027, we expect an increase in operating income due to acceleration of mass production of high value-add products. This slide shows the quarterly trend for the Access Solutions segment. Net sales increased 12.9% quarter-on-quarter to JPY 92.5 billion. Operating income for the quarter came to JPY 6.7 billion and operating margin was 7.2%. On a quarter-on-quarter basis, operating income approximately doubled and operating margin was up 3.2 percentage points. In addition to recovery from Nexperia related impact in the previous quarter, seasonal factors such as net sales in March boosted earnings. On this slide, the bar graph shows the trend in profit attributable to owners of parent and the line graph is showing the trend in earnings per share. Profit for the period was JPY 99 billion and earnings per share was JPY 246.6. Please note that profit for the period for the fiscal year ended March 2026 includes profit impact of approximately JPY 25.2 billion resulting from valuation of financial assets held by the company at fair value. Excluding this factor, profit for the period on a real basis was JPY 73.8 billion and earnings per share was JPY 183.87. This slide shows the quarterly trend. Profit for the period was JPY 49.2 billion, and earnings per share was JPY 122.46. The special factors of JPY 25.2 billion I mentioned earlier were recorded in this fourth quarter. Next, this slide shows the quarterly inventory trend. At the end of the fourth quarter, inventory totaled JPY 391.3 billion, which was a decrease of JPY 20.4 billion from the JPY 411.7 billion recorded 3 months earlier. Compared to the end of the previous fiscal year, which was JPY 350.9 billion. This represents an increase of approximately JPY 40 billion. However, approximately JPY 26 billion of this was due to the depreciation of the yen, meaning that the increase on a real basis was approximately JPY 40 billion, JPY 14 billion. This was primarily due to factors such as the buildup of necessary inventory as sales are expected to remain strong in the first half of the next fiscal year. This slide shows the trend in cash flows. The bar graph on the left shows operating cash flow. The bar graph on the right shows the investing cash flow and the line graph is representing the free cash flow. The adjusted free cash flow, which excludes onetime factors such as M&A expenditures, is shown in red. During the fiscal year ended March 2026, the strong business environment continued through the fourth quarter. Consequently, accounts receivables increased at the end of the fiscal year and the timing of cash collection was deferred to the following fiscal year. As a result, free cash flow for the current fiscal year decreased temporarily. Please note that these receivables will be converted into cash throughout the fiscal year ending March 2027, and we expect cash flows to improve significantly. This slide shows the trends in return on invested capital. The line graph on the left shows the annual trend and the line graph on the right shows the quarterly trend. Company ROIC has being on aggressive recovery since bottoming now and in the fisical year ended on March at 2024 on a quarterly basis it has been showing the steady improvement. The segment changes beginning ending march 2027 I will make the following changes first the last slides machines components for air craft and other applications which previously ground to the MLS segment will be transferred to the PT segment. Secondly within the PT segment the name of the sub segment as previously bought in and fasteners will be changed to aerospace. And from this page on with I continue to represent by explaining the medium term business forecast of the fisical year ending March 2027 and beyond. And this slide summerises the earnings forecast from the current fiscal year ending March 31, 2027 through to fiscal year ending March 2029 to fiscal year ending March 2027, we are assuming an exchange rate of JPY 155 to the U.S. dollar. This slide shows the forecast by the business segments. This slide summarizes the trend in cash flow forecast from the current fiscal year ending March 2027 through to fiscal year ending March 2029. We expect operating cash flow to expand along with growth of net sales and operating income. Regarding investing cash flow, we expect -- well, we anticipate it to remain at approximately JPY 90 billion to JPY 92 billion under a disciplined capital expenditure plan. As a result, we expect to see steady improvement in free cash flows. I will explain our medium-term cash flow allocation for the 3 years from fiscal year ending March 2027 to fiscal year ending March 2029. Our basic policy 50% of generated cash flow will be allocated to capital expenditure for organic growth. Of the remaining 50% will be allocated to shares and the other half will be earmarked as a budget for potential M&A investments. We anticipate a cumulative operating cash flow of JPY 500 billion over the next 3 years. Of this total, approximately JPY 270 billion will be invested as capital expenditure to support the growth of our Eight Spears Core products and approximately JPY 80 billion will be allocated for dividend payments. We will consider the remaining JPY 150 billion as funds for M&A investments and share buybacks. Furthermore, we will flexibly consider the use of debt financing for large-scale projects. in the medium term ROIC forecast. While we place our highest priority on profit margins we also focus on improving capital efficiency as one of our key management metrics. Over the next few years we will strive at further improve capital efficiency by focusing on two key drivers and improve our core business and the combination of discipline capital expenditures and the optimization of inventory level even the current environment of rising interest rates it is clear that higher capital efficiency even before is required. We are committed to achieving profitability that conscience consistently exceed the cost of capital and will continue to strive towards enhancing our corporate value. This concludes my presentation. Thank you.

Next, Mr. Kainuma, over to you. So I'd like to talk about management policy and business strategy. First, as an overview of FY March 2026, in general, things were doing very well. And going forward, the 5 growth areas plus 1 that we say, we are sure that this will strongly support our company. I'm sure about it. This time, Toshiba's market capitalization we had instruction from the accountant. So the figure was considered in a conservative manner, but please read the details on this page. Next page. Operating income this fiscal year will start with a figure of JPY 120 billion. Q1, fortunately, in a very strong manner, we could start Q1. And in all sectors, we can say, are doing well. If we achieve JPY 120 billion, not only sales, but operating income or the real operating income without making the revaluation of financial assets, we can expect increasing sales and profit for 4 consecutive years. Now next page. For PT, there are many inquiries, a lot of inquiries for bearings. And in particular, for data centers, bearings for data centers. It is more than 3x the level we had 3 or 4 years ago. In our case, not only quality, but the ability to provide supplies. Supply capability is our strength. When customers want large volume, we can prepare and provide that volume required. That is what is of utmost importance. So we will expand production capacity of 40 million units per month. Currently, the current production capacity, depending on the month, the month that we can operate in 4 months that we cannot. So on average, it might be about 404 million units. But by March 2027, we will increase 30 million to achieve a capacity of 434 million. And in January of the following year, already obsolete facilities must be replaced and there must be new facilities built. And with that, we want to have production capacity of 442 million. And in the latter part of 2028, we want to have production capacity of more than 460 million. And frankly speaking, going forward, by looking at the future trend, we will make the appropriate judgment when the appropriate timing comes. This year, operating profit of JPY 62 billion was achieved through bearings or through PT. In the past, we said JPY 10 billion per quarter. So operating profit of JPY 40 billion was the size of the business. But now it is more than JPY 60 billion. And this year may go beyond JPY 70 billion. In 3 years, we -- at the moment, we can say that we are quite sure we will achieve JPY 80 billion. Next page. Motor, Lighting & Sensing segment. There are many products here. And the variety of products will enter into mass production state. Hard disk spindle motors is a good example. AI data centers are growing steadily. So demand for hard disks increase. We have a helium type motor. We already made the investment to increase production capacity by 300,000 per month. Operations will start. So that will be 3.6 million units for year. And also fan motors is very popular among our customers and also DC motors that we are trying to improve profitability and impact in Europe, improve profitability in this sector. And as I mentioned, later sensing devices for the joints and fingers of robots, our sensors will be used. All these together, if all these grow together, -- we don't have a big star, but we can certainly develop together with the 5 growth sectors. As I mentioned, the thin-film sensor, I'm saying 2 million units now. But if we increase the volume of electronic property testers, it may be possible to increase to 4 million per month. Currently, it is the start of humanoid robots. Many sensors are experimented. And in there, our thin film-sensor, the Minege, which we introduced before. This is used for the buttons of mobile phones. Use pressure -- pressure is conducted to the mobile phone. That is what we were developing in a different form now this is leading to responses to inquiries about thin film sensors of humanoid robots. So depreciation is completed, so we will start production. If this becomes a mainstream sensor, this will become a very big business for us in the future. And so not written here, battery protection modules, here, building # 14 of the Philippines, a new factory and also factory in Mexico will be built. We'll be building these products. It's not that we have one big star, but many components are included in the 5 growth sectors. So MLS will be interesting. Next page. For SE, the message today is that finally, we will be able to realize a profit-making situation for a single month for Shiga factory. There was JPY 2.3 billion or JPY 2.4 billion negative figure per year continuously. We're supposed to handle semiconductors, but that was canceled by the customer and capacity is left open. So we were trying to fill that. So the MS microphone sensor or earphone sensors, we tried and fabless. Production of companies shifting from China will be accepted at our Shiga factory. And of course, power modules that we're handling already, power devices will gradually grow. So achieve a single month profit situation this year and total profitability next year. JPY 40 billion profit is aimed for semiconductors. Currently it is about JPY 24 billion or so. So increase of JPY 15 billion is expected. One more thing, a big message here. Optical devices, we call it subcore optical device and mechanical components for games. For this, until now, we were reluctant. In our 8 spares were our policy for growth in the future. And actually, that is what we are doing. But now the customers had a strong request for us to do this to continue to do this. So a model up to 2030, we are already receiving inquiries. So if that is the case, we will introduce our resources to make our products. So the driver here, one is semiconductor, another is optical devices. Next page. Access Solutions. As you know, among us, this is the area with the strongest headwind. Set manufacturers or OEMs, what should be the future movement? They are not sure. And the China market and the emergence of the Chinese automotive market, they're facing a lot of difficulties under such a situation. This is the nature of this segment. However, we will try many things. And among them, we want to earn profits, and we have been doing that. One thing is under such a situation, including wing handles, as you can see here, automated motor bhycles for 4 wheels. Many components that we have developed so far is now being introduced. So we are component manufacturers. So we sell many parts and components to many companies. And our difference is recognized by our customers. And by doing so, we are going to survive. So this year also, we will aim at increased sales and profit. In Europe, structural reforms are implemented. And by doing that, slightly less than JPY 2 billion improvement of profitability is expected through structural reform. We are not doing this forever, but things that we believe is better to be closed were closed. And this time also, we want to implement this type of structural reform. So next is the middle-term earnings forecast. I have your plan A. 7 years ago, I said 2029, 10 years later as a goal, what kind of growth are we going to aim for? Overall picture was indicated under plan A. And then organic growth and M&A -- M&A of a scale of Mitsumi. At that time, we would be already JPY 1 trillion. So a larger-size M&A to be implemented and then achieve net sales JPY 2.5 trillion, operating income of JPY 250 billion. So I have always been showing this chart. Time passes very fast. It is now 2026. So in 3 years, we will be achieving 2029. So we have to prepare also plan B. So next page. This is plan B. What is plan B? Mitsumi scale or even larger scale M&A. If there is no such an M&A of that scale, small-scale M&As that we have been doing recently, in addition to that organic growth, what we can achieve under such an assumption. We are not giving up plan A. That is a matter of chance. If there's any opportunity or chance, of course, we intend to do such an M&A, but we may not be able to find the appropriate counterpart. So we must also have a plan B in middle-term plan. So here, sales, JPY 1.9 trillion. Currently, it's about JPY 1.6 trillion or so or about JPY 1.7 trillion this year. So JPY 1.1 trillion in 3 years, I think there's no doubt about that figure. The problem is operating income, JPY 168 billion. Can this be achieved? JPY 168 billion at JPY 1.9 trillion. This means that parts will be purchased and add our parts and sold back to our customers, which is included in sales. When this figure is deducted, in the sales figure, 10.1% operating profit is aimed to be secured. So it means that the image has increased about JPY 20 billion every year, and that is included in this middle-term plan. Next page. A very rough image for 3 years. How are we going to achieve it? There is a type of graph mistake MLS on the left, it says incremental sales, JPY 100. It should be JPY 150. As I mentioned, spindle fan, DC motor, Intec, battery protection modules. These items are included here. So incremental sales should be the figure. That is overall image. Bearing, JPY 84 billion. So this year, we achieve about JPY 72 billion and add JPY 12 billion in the next 2 years. Humanid robots are emerging in the world. So humanoid robots will now face a problem of credibility. So that is when high-end components will play a role. Because of time limitations, I will skip this page. Please read this later. And next page, this is the 5 growth areas plus 1, how much growth can we achieve through that? About JPY 170 billion. related to the 5 areas. As you know, recently, Morgan Stanley says that by 2050, humanoids and industrial robots together, 1.4 billion units of robots per year will be manufactured. And bearings in that case will be 40.4 billion and motors, 27 billion and decelerator JPY 14 billion. Those are the figures mentioned. I don't know what will be the real figure, but the magnitude is very big. So including this, I have some pages about the drivers for the midterm earnings forecast. Next page. This is something I've already explained as part of the 5 growth areas. I'm not going to explain about it today. On the next page, for this fiscal year, we have various structural reforms here and there. So we've done a number of those, and we expect about JPY 2.5 billion of improvement for the fiscal year. And if you could also read through this, so how we're going to achieve a 10% operating profit margin. So this explains how we're going to get there. Just one point. And so after becoming the CEO, we have conducted the 30th the M&A and the net sales is about JPY 32 billion. And from Panasonic Industry, we have acquired the motor business. And one of the major reason for this is the hybrid EV motors and we have quite a high market share in this area now. And the expected life for this is extending now. So we want to capture this part at the same time, we need to work on the fluid dynamic fans. And looking at the robots, purchased a number of robots. I've seen them in operation, but they still do create quite a loud noise. And so thermal technology going forward -- and so for human robots to become human, they cannot produce the level of noise that they are producing right now. And so with that, so we have several dozens of several tens of engineers in this area. So we will utilize these engineers to work on undertaking development in this area. And these are the key points from today. So the major points are summarized on this page. So if you'd like to read through this in your own time later. And so on this occasion and when we announced the full year results in May, we say 25% or 30% return. That's what we normally say and it's not included. But as an indication of our confidence, we want to announce an increase of dividend of JPY 10. And so from our perspective, we want to take good care of the individual investors as well. And so we need to be thoroughly mindful of dividend as we operate going forward. And that is the basis upon which we have decided to increase our dividend. And not much more. And this is environment related matters, if you could read through this in your own time. One news. So what Nikon was doing previously, but this is the world champions for skateboard. And this is a perfect sport for us in one sense. And this sport has also been nominated as an official event for the Los Angeles Olympic games. And so this is also something that we intend to do. So that is, thank you very much for your attention.

Next, we'd like to have a question and-answer session. The first question from Goldman Sachs, Takayama.

I have 3 questions. One, Mr. Kainuma about the general way of thinking last year on the IR Day, you mentioned about the best case in case of organic growth. And this time, you have accumulated figures for 3-year span. During this period, was anything that became more visible were more realistic figures accumulated. Why is it that you came up with this 3 years figure? And these 4 segments, among the 4 segments, what is the segment that you are most confident about? And any segments that you include a challenging target? Could you introduce the background for each segment?

Thank you for your question. Your first question, why is it possible to add up those figures? Currently, what we are feeling by ourselves is that we now have a lot of inquiries. There's a lot of inquiries right now, frankly speaking. So every day, I'm receiving such reports. And I feel how pressing they are. So related to your second question as well, for bearings, I believe for sure that the target will be achieved. This supply capability to deliver to the customer in a short period of time as required by the customer, there is no other company in the world with such a capability. And I believe that is our responsibility. There's a large wave. I was talking about it in today's executive meeting. We have to ride on this big wave We should not be left behind after this big wave goes away. So we are very strong at bearings. This is our big pillar. And this is a background for the confidence. I'm always asked why are we doing so many things. But the 5 growth areas, for instance, Minege is a product that's already over. And this would not come back. It would usually be discontinued. But we have been pursuing this and differentiation that others cannot do is something that we can do. That is why we have so many inquiries. So this is the impression that we have. And I said that, of course, bearing is the strongest. And of course, there are ups and downs, something goes up and something is worse than expected. But during the past 15 years, we have been growing by overcoming this. That is how I feel right now. I mentioned before, JPY 100 billion is a node, and we'll be able to overcome that node and move forward. That is my feeling.

So second question is more to do with individual businesses, but strategy related to optical area. I think you have adopted somewhat of a different tone on this occasion. And by 2030, the road map until 2030, you shared that with us. And I understand you feel that you are able to generate profit there. But on what basis have you decided that you going to focus on this area? And what type of profit margin do you expect to be able to secure? And what was the basis on which you have made that judgment. If you could explain the background a little bit?

Well, profit margin, more than 7%, as I've been saying in the past. This is something that I say to customers as well, but this is something that I have continued to say and I went to the states. And I talked like that. And I have communicated directly with the customers and explained about the challenges that we face right now and sought their understanding or gaining their understanding. And that is the kind of activity that I've been doing all along. And in that kind of conversation, the trust from the customers towards us, the strong trust from our customers is something that I was able to fuel very strongly. And so from our perspective, we've decided that this is something that we should work on. And I apologize for not being very succinct, but this is people to people, person-to-person relationship. And we have gained that kind of feeling. And so we wanted to respond to the request of our customers. We wanted to make effort to enable that.

In 2030, we believe that technology may be quite different? And is there anything that you expect profitability in human relations, maybe there could be a new President by then? And do expect some changes in the way of thinking about manufacturing?

Well, frankly speaking, if we have proper capacity and we can secure our own productivity, I think we will not fail we must be very cautious and move forward carefully.

Yes, and lastly, about semiconductors, you said profit from JPY 24 billion to JPY 40 billion. Within SE, this might occupy a large share in terms of profit. And you also mentioned about Shiga plant achieving a single month profitability. For year ending March 2029, in semiconductor sales, what will be driving the growth? This year, slightly more than JPY 24 billion. And that profit includes negative JPY 2.3 billion or JPY 2.4 billion. And if that is not included, then at plus or minus 0, we can start at JPY 26 billion or JPY 27 billion. And then another JPY 13 billion, how can we make the remaining JPY 13 billion profit?

There are 3 points. Minebea Power Device (MPD) and including Fin-SiC, SiC and a foreign company, which will receive fabless work orders and we make products for and earn profit besides power device, ABLIC a handy ultrasound device to see inside the body of an expecting mother there's a lot of growth expected. So that is why we can expect profit.

Like to go to the next question from Morgan Stanley MUFG Securities. Shoji Sato, please go ahead.

This is Shoji Sato speaking. Please allow me to ask 3 questions. The first question is on Page 34 of the presentation material in regards to SE. For March 2027 sales will come down. And the profit in comparison to other segments is not growing. And if you could explain the reasons for this, explaining from the semiconductor optical device and mechanical component perspective. And you're going to redefine optical devices strategically. But for March 2029, JPY [Technical Difficulty] billion. How much contribution are we expecting from optical devices and also to JPY 45 billion of the profit we are expecting this increase in CapEx? Well, first of all, starting with the SC the net sales not increasing but coming down. This is due to games. The game of profitability is very limited and so this would be to the debt the sales coming down notably, but it will recover. But that's not due to game, but we are expecting something else to come in. That is the assumption there. As for the optical, the contribution to the performance, unfortunately, I'm unable to say that here as to how much it is included, but we essentially don't business unless we are able to generate operating profit, as I said before. So at the minimum, we want to secure 7%. So I just wanted to confirm for March 2029, the number here, optical device numbers are included to a certain extent is going to be additional an upside contribution? Is that the potential? How should I understand that?

This is Yoshida speaking. Please allow me to respond. As for the actual business, as Mr. Kainuma has explained, we do have certain confidence. But the numbers included in the guidance, if we talk about that, we have been very conservative. As for optical devices for the 3-year period the plan is essentially flat for numbers, both in terms of sales and the profit, we have essentially included a flat number. And the reason for the decrease is as Kainuma has explained. So there is that the game seasonality in the second year. And so the total production volume assumed is essentially being adjusted here. And the profit increasing more notably, the optical devices are considered considerably in that number. But for semiconductors, as Kainuma has explained, we have reflected a certain level of profit increase. And so those factors essentially constitute the overall numbers here. Thank you very much.

My second question about the questions about the figures. Ball bearings, Q4 external sales, internal sales, production monthly figures and the forecast for Q1. Could you tell me that? Yes. Ball bearing, do you say Q4 production in unit of millions? 339, 302, 335 and external sales, 287,265,309 for January, February, March, internal sales, 47,47,51 and Q1 production, 322, 356, 372 and external sales from April, 304, 315, 323, internal 48,48,48. And last point, the material cost increase, how did that impact the results for the year ending March '26? And how is that included in the forecast for this fiscal year? So which is the floor that you are going to use to calculate?

It may be dependent on that. But the largest impact in our case, based on copper from $10,000, it's up to $13,000 around the end of last year. So that part might be about JPY 1.5 billion. For this year, that level might continue. So not up to JPY 10 billion, but somewhere close to JPY 10 billion. So that high material cost hike is included. And as countermeasures to our customers for the price increase of copper, we want our customers to bear that cost. So we are negotiating with the customers right now. Under our guidance, slightly more than half. Well, basically, our policy is to have a customer pay for the total amount. But as a guidance policy, figures assumption that we want to collect about half of that. And the Strait of Hormuz, for oil and naphtha, that situation may have an impact. And at the moment, for resin-related products, prices are not yet getting higher. That may happen going forward, but not yet. So that impact is not yet included. If we see such an impact, just like copper, how are we going to negotiate with our customers, we will have the same policy in negotiating with our customers.

So I'd like to go to the next question from Nomura Securities, Akizuki.

This is Akizuki from Nomura Securities. First question, now you said that the demand was very strong in the first quarter, and the bearings is showing very strong demand right now. But Mr. Kainuma, I think you're very good at forecasting the macro situation. And for this year, what is generally being said is that there is a concern of a lack of the material procurement. And so there is a voice to say that the demand may have been brought forward, but there is a pickup in the semiconductor as well, the macro and the data center investment in U.S. has started to spill over. And so then we are starting to see the economic condition recover quite widely. So I think this is the macro perspective. So Kainuma, for this year and next year, the demand for your product, particular the bearings, how are you assessing the demand environment?

Well, on a B2B area, in particulary the technology related for us the five growth field or apply but there with oil shocks after a number of months this situation could end up being different, but negative impact may not be experienced and that is my view. So, forecast for is not reflecting the large negative in that sense. So basically, the increase in cost of materials leading to a rapid shrinkage of the market is not something that we are assuming at this point in time. So CapEx by companies, I think that is very strong. Is that the sense that you're getting?

Yes.

So one cannot be left behind in competition. So those companies not doing robots. When I say not doing robots thus at the retail end of our Competition even those customer trying to rush that is the sense I am getting. So, something in the technology area and related to the growth fields, I feel that we are not going to incur a large impact. So it's more home appliance the general consumer area, we see a sizable impact in the future there. But even if that event show a stronger will be, suppose, in a better position. Well, consumers, the high end is showing strong demand and you are particularly strong in the high-end area. So I would expect you to be able to overcome that kind of situation. So the second point.

I have a question about figures. Maybe you have already mentioned in the March 2027 on bearings and SC consignment results and for Q4 or first half or second half, what are the assumptions for consignment? And for confirmation, for optical, last year to this year, are you assumptions that sales will remain flat? First, about opticals, the figures in the guidance for optical is that -- well, we assume a slight increase in this figure of sales. The average unit price may get higher or the volume of sets itself, what will be the assumption for that? That may lead to differences, but we assume that the total volume we are a little conservative, and we believe that average unit price will be slightly higher. So we have assumption that sales will slightly increase. And for consignment, first half and second half and also figure for the fourth quarter also.

Katsuhiko will explain for Q4, slightly less than JPY 20 billion. And this fiscal year, year ending March 2027, first and second half, first half, about JPY 45 billion. Second half also a similar level, JPY 90 billion for the full year. And the volume for bearings for the full year, are you asking for year ending March 2027, what is your forecast of the total volume for the full year or year-on-year. We expect an increase of about 15%. That is in terms of volume of bearings? Yes. Data centers, we expect higher growth. So on average for bearings. On volume basis, that is the growth we expect.

Is that external sales?

Yes.

And lastly, for Access Solutions, could you let me know -- you have some specific customers and you have factories for specific customers. And we thought it would be high this year. But in your plan, you expect growth in sales and profit. So I have 2 questions related to that. Is there any program that was canceled and is absorbed or maybe there's nothing like that happening. And in growing profit, you mentioned the structural reform of Europe will be an effect of about JPY 200 million. Besides that, what are the drivers that will lead to profit?

Yes, there are some items when the programs itself disappear, expected projects that disappear. For that part, we will take actions to recover. And for that part, the positive contribution asking for a compensation. That's not included -- that was not included in the plan. That kind of payment was not included in the plan. And in growing profits, Integrated products are increasing. In particular, the major OEMs are facing difficulties in China, then are we having one single way of doing that work? No, that's not the case. Let us say, instead, the 2-wheeled vehicles are doing well or North America, though there might be a company is moving on steadily or there may be other customers. It's an average of everything. So it's not that in one location of one customer would lead to a large drop in profits.

I'd like to move to the next question from UBS Securities, Hirata-san.

This is Hirata from UBS Securities. I have 2 questions. First question is for the SC segment this fiscal year, in particular, semiconductors. In the third quarter, I think you said it's going to be flat. But for this fiscal year, you have given more aggressive explanation, inclusive of the middle-term plan. For March 2024, what is your views on net sales and profit? Generally speaking, so low-end Android smartphone is impacted by the increase in price of memories, that is the concerns in the share market. But for you, semiconductor battery and ICT, you do have high market share. And so how will you experience this impact? For the low end, smartphone manufacturers customers 10% drop to maybe 30% drop in other customers' quite varied, but that has been included in assumption. But in the end, being able to secure memory how much will go to smartphones, this is an area that is very difficult to assume. But based on the memory, the sourcing the customers I suppose, securing the memories will make up for the gap. And so we are not expecting the overall decline. So that's the assumption. And for the semiconductor sales forecast for this year, and if I give you numbers there, then net sales is expected to grow slightly, not flat, but we are not assuming to achieve a large growth in net sales this fiscal year. For profit, as Mr. Kainuma has explained before, improvement in the Shiga plant or other initiatives, the profit margin itself is expected to improve this fiscal year. But on the top line side, it's not the case that we are going to generate a strong profit, the revenue driver on the top line side. And the second is on Page 20 in regards to the free cash flow in the 3 years until the fiscal year that recently ended, free cash flow has been somewhat low. But from this year, in the medium term plan period, we expect to see a large increase. But last 4 years, the free cash flow has been somewhat low. What was the background? And what will change from this fiscal year? And if you could kind of explain about the management of the free cash flow, please.

Well, essentially, the year in which we have conducted M&A, if we actually reflect that, then the free cash flow will deteriorate quite significantly. But if we compensate for that and in this diagram, March 2023, we have purchased the Tokyo headquarter office and acquisition of real estate. So if we compensate for those, then we would have been able to generate a strong cash flow. However, right now in the last number of years, on that backdrop and the cash allocation for the 3 years is what I've explained before, but we have been undertaking quite an aggressive CapEx in the midterm period, of course, there are kind of business that will required for the bearings but overall, the trend is for us to enter into a period of recovery. And so, if we achieve this perfect plan, then for March 2027 onwards, the free cash flow level should make improvement. And just for this fiscal year, as I explained earlier, in the fourth quarter and the collection cycle, there is a seasonality there, whether it be gains or whether it be smartphones, there are seasonality there. And normally, January to March quarter is a cash collection period. But in this fiscal year, the net sales were very strong in the fourth quarter and for various products. And as a consequence, some of the collection timing has been deferred to the next fiscal year. And as said JPY 161.4 billion of the operating cash flow here. And so those delays are reflected there. So if we're able to adjust for that, then the part of this fiscal year would have been, I suppose, generated in the previous fiscal year. That would be one way to kind of interpret the situation.

So this concludes the questions-and-answers session. This concludes today's briefing. After it is closed, you will see a questionnaire screen. We are looking forward to your valuable feedback. Thank you very much for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]