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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Now it's time to begin the meeting. Thank you very much for joining us in the MinebeaMitsumi analyst session for the first quarter of the fiscal year ending in March 2023. Allow me to introduce to you today's participants. From your right, Representative Director, CEO and COO, Yoshihisa Kainuma. Director, Senior Managing Executive Officer, Katsuhiko Yoshida at your service. Thank you very much.
First, Yoshida will take you through our financial results, and then Kainuma will give you a business update and management strategy. which will be then followed by Q&A, Sasha. We plan to finish this meeting at 7:00. For more details of the financial statements saline we plan to finish this meeting at 7:00. For more details of the financial statements, please access our website where you can see supplementary information and the flash reports. And there is a link on the screen to the questionnaire. We will welcome your feedback so that we can carry out IR activities in a better way. In today's meeting, inclusive Q&A session will be video recorded for uploading on the website later on. Thank you for your understanding. Mr. Yoshida, over to you.
My name is Yoshida. Today, I would like to explain the consolidated financial results for the first quarter of the fiscal year ended in March 2023. Consolidated net sales for the first quarter of the fiscal year ending March 2023 was up 1.1% year-on-year and down 13.3% quarter-on-quarter to total JPY 251.040 billion. Operating income down and down 27.4% quarter-on-quarter to total JPY 14,255 billion. Profit for the period attributable to the owners of the parent down 26.8% year-on-year and down 30.7% quarter-on-quarter to total JPY 10.734 billion. Net sales hit a first quarter record high. In addition, operating income exceeded the initial forecast despite the impact of the lockdown. We estimate that the foreign currency translations have a year-on-year impact of plus JPY 21.2 billion in net sales and plus JPY 4.7 billion in operating income Quarter-on-quarter impact was plus JPY 14.2 billion in net sales and plus JPY 2.4 billion in operating income. Next slide, please. This is for a quarterly trend in net sales, operating income and operating margin. The operating margin for the fourth quarter was 5.7%, down 2.2 percentage points year-on-year and down 1.8 percentage points quarter-on-quarter. If the loss of approximately JPY 8.3 billion due to special factors such as the lockdown in Shanghai were excluded, the operating margin would be 9% up 1.5 percentage points quarter-on-quarter.
Next slide, please. Here shows the difference between the forecast as of May and the actual results for net sales and operating income by business segment for the first quarter. Net sales of the machine components were higher than project projected mainly because of steady sales of ball bearings for data centers despite the impact of the lockdown in Shanghai. Net sales of the electronic devices and components were lower than the projection due to the impact of the lockdown in Shanghai, lagging recovery in automotive motor sales caused by semiconductor shortage and the slowdown in smartphone backlight sales. The MITSUMI business enjoyed higher-than-projected sales overall, mainly for mechanical components, semiconductors and optical devices, the U-Shin business experienced a slightly lower-than-expected sales due to a slow recovery in automobile production.
Operating income for the machine components was almost on par with our forecast, but was lower than the projection for the electronic devices and components primarily due to the impact of the lockdown in Shanghai. The MITSUMI business enjoyed higher-than-expected operating income, thanks to the increased sales of mechanical components and further improvements in the profitability of semiconductors. In the U-Shin business, quarterly operating income was almost on par with our forecast. Although sales to the automobile industry started solving signs of recovery in June. Next page, please. Now let's take a look at the results by segment. starting with the machined components business segment. On the left is a graph indicating quarterly net sales trends, and on the right is the bar graph that charge, quarterly operating income trends, along with the line chart for operating margins. First quarter net sales increased 0.8% quarter-on-quarter to total JPY 46.4 billion. Sales of ball bearings increased 3.2% quarter-on-quarter to total JPY 34 billion. The monthly external shipment volume was down 3.9% quarter-on-quarter for an average of 222 million units. Net sales remained strong as sales began to rebound, mainly in the automobile market, although they were affected by the shortage of semiconductors and the lockdown in China. Sales of rod-ends and fasteners totaling JPY 7.6 billion were up 0.1% over the previous quarter. Sales of pivot assemblies decreased 12.9% quarter-on-quarter to total JPY 4.7 billion. Operating income totaled JPY 10.2 billion, and the operating margin was 22%. On a quarter-on-quarter basis, operating income decreased 9.6%, while the operating margin dropped 2.5 percentage points. Next slide, please. Now let's look at the electronic devices and components segment. Net sales decreased 15.4% quarter-on-quarter to total JPY 81.4 billion. Looking at the results by product, we see that the sales of motors decreased 10.9% quarter-on-quarter to reach JPY 62.7 billion. This is mainly due to the impact of lockdown in Shanghai.
Sales of electronic devices were down 36 points 6% from the previous quarter to total JPY 9.7 billion, this is due to declined sales of LED backlight models by our key customers.
Sales of sensing devices totaling JPY 8.2 billion were down 10% from the previous quarter. Operating income came to JPY 0.2 billion, and the operating margin was 0.2%. On a quarter-on-quarter basis, operating income decreased 95% and the operating margin decreased 3.9 percentage points. Next slide, please. Let's look at the performance for the MITSUMI business segment. Net sales decreased 19% quarter-on-quarter to total JPY 86.8 billion. This is primarily due to the seasonal drop in demand for optical devices and mechanical components. Operating income totaled JPY 9.1 billion, while the operating margin was 10.5%. Operating income decreased 10.6%, while the operating margin rose 1 percentage points quarter-on-quarter. This is due to a profit loss resulting from the aforementioned seasonal decrease in demand that brought the sales down. Next slide, please. Finally, let's look at the U-Shin business segment. Net sales decreased 9.6% quarter-on-quarter to JPY 36 billion. This is mainly due to the lagging recovery in automobile production caused by the lack than in Shanghai. Operating loss totaled JPY 0.3 billion, and operating margin was minus 0.9%. Next slide, please. The bar graph here shows the trends in the profit attributable to owners of the parent, while the line graph chart shows changes in the profit for the period per share. The profit for the period was JPY 10.7 billion. Earnings per share was JPY 26.4. Please go to the next slide. Next, here we have the quarterly inventory trend. At the end of the first quarter, inventory totaled JPY 264.4 billion, which is JPY 45.1 billion more than what it was 3 months ago. This is primarily due to the foreign exchange effects as well as the fact that we strategically built up our inventory to secure in stock to keep pace with the growing sales of optical devices and other products that we currently expect.
Next slide, please. This graph contains a bar chart showing trends in net interest-bearing debt, which is total interest-bearing debt minus cash and cash equivalents and the line chart indicating free cash flows. At the end of the first quarter, net interest-bearing debt totaling JPY 179.7 billion was up JPY 92.8 billion from what it was at the end of the previous fiscal year. This is mainly due to the expenditure for the purchase of the new headquarters building as well as the increase in inventories. Of this amount, JPY 13.2 billion CB-Euro-Yen denominated convertible bonds with stock acquisition rights has been almost all converted by due date of redemption of August 3. At the end of the fiscal year ending March 2023, the net interest-bearing debt forecast is expected to increase from the end of the previous fiscal year. However, excluding the expenditures for M&A announced recently, the net interest-bearing debt forecast is expected to be at the same level as the end of the previous fiscal year. Although the first quarter results exceeded our initial estimates, we made no revision to the full year forecast for the fiscal year ending March 31, 2023, taking a cautious view of inflation, other changes in the macroeconomic environment. The exchange rate is assumed to be JPY 115 to the U.S. dollar.
Next slide, please. This slide shows the forecast by each business segment. This is all for me. Next, Mr. Kainuma, please. The floor is yours.
I would like to update you on the current situation and the management strategy. First of all, the impact of Shanghai look down. So JPY 12 billion operating margin in Q1, I expected. And we had JPY 2 billion upside. So JPY 14 billion or more than JPY 14 billion profit that we recorded, so I feel much better now, but it lasted longer than expected. Last time I spoke with you in early May, and I was expecting that the Shanghai lockdown would be finished in mid middle of the month. However, it continued for 2 months, May and June.
And as a result, JPY 8 billion negative impact existed on the business. So without this, JPY 22 billion, it would have been recorded. So 2 months lockdown, happened. But unfortunately, bearing recovered very quickly and bearing customers, we were able to supply from other plants, but farm motor Shanghai plant, unfortunately, Cambodian plant was not able to offset the shortage, which was the biggest difference, bearing the profit recovered very quickly and machined components profits because of the aircraft issues, which I will come back later on. I think that the negative impact was not as bad as expected, but the fan motors for 2 months lockdown continued and employees, only 20% of the employees came to work at the plant and stayed there or lived there for some time. But still, we had the JPY 2 billion upside exceeding the plan. And we made a release about 3 M&As, mergers and acquisitions. So the COVID was subsiding in May or in May, I explained to you that M&A activities became more active and deals progressed very quickly after that, and each deal took about 2 years. I mean I was not able to pay a visit to the site and some deals just didn't work out, but I would like to explain to you the 3 deals later on. Month of June. More than JPY 8 billion operating income was generated, so maybe recovered to the original state. And July to September, every month, revenue is likely to exceed JPY 100 million. So JPY 102 billion, operating income will be achieved so [ Mita ] building selling process is approaching its final stage. And it's likely that we will enjoy a gain on sale property. And after the closing of M&A, we may have a one-off profit. And we -- the which you buy back shares, but this is a situation we are in right now. So in order to explain the situation, we added this page. Next so 3 spears out of 8. So 3 plus 1, this is subcore, regarding our business, I would like to share with you the current situation. First of all, ball bearing, it's very robust. And last year, the automotive ball bearings, 14%. And this year, 19% or bigger than 19% growth rate has been reported to me recently. Why? Because automobile production is not growing that much. But the per unit a number of bearings used per unit of automobile is increasing. And we have been able to increase our share. That is our assumption, without that, we could not have this much growth. So overwhelmingly a better quality of our products has been highly evaluated by the automobile market. So I am very grateful about that. And many people said the data center business may be slowing down, but at least ball bearing units show that it's not slowing down at all. In China the fixed asset investment statistics I looked at the real estate is in fact in negative area, but the data communication in the first half of the calendar year had 20% growth. So centering around the Chinese market, the data center investment is made quite actively and bearings are supplied. So that, I think, is a positive move. And right now, there are nothing that you need to be worried about.
On the other hand, aircraft are coming back, particularly Airbus, it's recovering. And therefore, this year, of course, the situation is mixed. But the machine component has a very solid business JPY 50 billion or more operating income. And the investments, $365 million, plus JPY 50 billion or JPY 70 million has been finished. So in the next 1 or 2 years, I think that the JPY 60 billion can be exceeded which is 1 goal for machined components. So JPY 60 billion can be exceeded. Next is the motor business. As I said earlier, Shanghai fan motor plant. Only 20% of the workforce was able to work. So the plant was more or less stopped for 2 months facing a very difficult situation. But the overall motor business, since June -- June, July and August, it is expected to recover. And the price increase is starting. We have requested our customers to accept the price increases, and it's been growing every month. In that sense, the situation is likely to improve going forward. And automobile business is improving. But office automation, because of a semiconductor issue, it's slow, but spindle motor, the overall business is soft. However, as you may be aware, [ helium ] and near line overall, is at the core of our profit. And it is true that the units are falling in number. However, the profitability has not deteriorated that much. So the motor business in the next few years, JPY 25 billion operating profit is down the yield. Analog semiconductors. It's doing extremely well at this moment. And recently, the smartphone volume is shrinking so I heard. And I think it is true. However, the smartphone is not the only main business for us, but IGBT. We still have strong inquiries and automotive and medical are still very strong. And all of these are made in Japan. O we are in good position to achieve a goal when Shiga plant started its operation 30% OP margin and JPY 100 billion operating profit. So the JPY 30 billion operating profit is likely, but some people are talking about the competition from China, but not at all, at this moment, not at all. But there is -- rather, there are so many development activities going on internally, which I am really looking forward to MITSUMI semiconductor plus [ Erik ] and Omron, Shiga plant plus 60 people -- the semiconductor engineers have been added. So our engineering capacity has been strengthened enormously. So I had mentioned the JPY 25 billion, and this is JPY 30 billion. Maybe this is going to be a kind of opposite. So maybe the -- in terms of the order of the peers, this is going to be a change in order. Ball bearings will be followed by analog semiconductors. There is a possibility that this is going to happen. And for the plus one business, that is the optical device business, the sales is going up and new applications are starting -- is being coming up. As a profit driver, I think this can be considered as a profit driver. So if that is the case, the machined component is JPY 60 billion. And so this can be achieved. So on top of that, smartphone-related business, we are still engaging the backlight business. I don't want to mention about this profit much. But for the [ 6 spears plus 1 ], about 100 -- more than JPY 130 billion of operating profit. In the near future, I think we will be able to achieve that. So it means that our foundation business is ball bearings. So we have been focusing on the specific business and that has been the source of our profit for the long period of time. But at last, we have been able to through the 8 spears strategy, we have stable profit earnings generating business, and I think this has been started to become a reality. So this slide onwards, I would like to talk about the growth strategy from a new perspective. And that will lead to the background of an M&A. So I would like to talk about this matter. So this is kind of a recap. So I hope we're saying that when I'm asked, what is the management? I think I always say that it is to be sustainable and survive. So being sustainable, if you just look it up in the dictionary, so it continues for the long time to survive for a long period of time, meaning that our company, we will have to sustain our company for the long period of time. I think that is the essence of management.
If you look at the past couple of years, the aircraft business was bad, for the automotive business, a struggle, but we have this kind of sit at home demand have been able to achieve a record high level of profit and people are saying that the sit at home effect is moving away. But what's happening, the aircraft business is starting to recover. And automobiles with new technology is going to come up 1 after the other. It means that the 8 spears businesses is going to be utilized there. So this resilience this essence of resilience is that basically, we don't rely on 1 specific business. And I have been saying that for a long period of time. I think I have been able to prove that what I have been saying is true. So again, this is a recap, this experience. And this is the -- we are in the era of VUCA. So we have volatility, uncertainty, complexity and ambiguity. So this is a VUCA. So it's unpredictable. We don't know what's going to happen next. So -- so I don't know how many industries there are in the world, but all the -- it's a mixed picture among all the industry. So what are we want to minimize the risk as much as possible. That is our focus. So in that sense this 8 spears strategy. Well, it means kind of all the place. But this 8 spears. This 8 spears is of selection and concentration. That is what I want to stress today.
So these 3 points. So I have been explaining about #1 and 2, the global GDP will grow. The disposable income per person is going to grow. So this year's GDP is going to be a 3.4% growth. I think the most recent announcement is pointing to that number. Disposable income per person is going to go up. People want to buy better things and better things will be provided, a, components will be necessary. So that has been the driver of the growth. So if you past 70 years, the ball bearing business has consistently grew. And this time, so the 24th and 25th since I became the President, M&A deal, so JPY 650 billion worth of M&A, Well, I have been saying that JPY 50 billion was coming from M&A. But I think with this around JPY 650 billion of revenue is coming from our M&A. So the third point I think going forward, this is going to be our driver. And what I want to talk about today in terms of M&A, deals, this is very closely related to this. So that is the reason why I won't talk about #3. So you talk about social issues. So there are some examples of low birth rate and aging, population issues, health care, there's a lot of social issues to be solved. But if you think, well, so I am, so to speak, and I realize. So this is technology can explain these social issues. I thought that way. So we are in the fourth industrial revolution. So from the 18th century, end of 18th century and onwards, we had hydro, core to the steam engine, we have the industrialization and the beginning of 20th century, there's electricity in 1970s, we had automation. So we have IoT, big data, AI, this fourth industrial revolution ultrasmart society. This is what is being said. So technologically, if you look at this closely, I think I can break it up into 4 areas: electrification, automation, ultra high-speed communication and sensing. So if you use these 4 technologies, the social issues can be solved. However, there, the hurdles will be high, the big various requirements, high-voltage, high-current, high capacity, et cetera, et cetera. So this will be unprecedented needs. For instance. So stay at home at was okay for electricity, but you have the EV, it means that you have to have in a vault to charge those EVs. So it's a completely different picture that is before us. that will come into the home. So by focusing on these technologies, various social issues can be solved. So going to the next page. Well, simply put, so the surgeon in Tokyo exclude on medicine. So they want to have surgery and the patient Osaka. You have the power supply and the Tokyo surgeon will move his fingers, sensor is necessary and it has been converted to analog to digital, using high-speed communication and have to communicate the AI microcomputer and the -- this instructions goes to Osaka with high-speed communication. And the instruction is given. And with the motor or the Grippers. Grippers are used. So -- so this will be what that utilizes the sensor motions. And the feedback is constantly given and the surgery will go forward. So if you look at this, every point is related to our 8 spears. So you do have to have this high-end components or this very light contact, very high precision components. You have to have that or else we will not be able to solve the social issues. It goes a simple automotive driving. And you have new sensors to drive a car and this loop is basically continues in the automotive -- autonomous driving, excuse me. So MinebeaMitsumi's product going forward is going to be used. And that will be integrated or there will be synergies from the sales perspective. So I think I, myself, is very excited every day. So that is what I am feeling every day. So based on what I have said, I would like you to listen about the connectors, about 2 out of the 3 deals of M&A is the connector business. So for the 8 spears, we want to make these spears thicker. We want to increase these 8 spears, but that has to be areas that we can leverage our competitiveness and where we can leverage integration. So connectors and the fourth industrial revolution will have a very important role to play. That's what I think. First, I would like to talk about HONDA TSUSHIN KOGYO Company Limited. So this is a listed company. So the overseas operation is a small portion. So Panasonic has about 21% of the shares of this company, but they think this is a noncore business for them. So from Panasonic's point of view, in terms of the connectors with ultra high speed and high capacity they want to grow, but they don't have -- excluding Panasonic based. They want to build plants, but they don't have funds. So I think basically, they were able to agree with us. And the -- if the TOB goes well, us with us, they will be able to go forward with the connector business. For more details, please access our website. Another 1 is SUMIKO TEC. The parent company has a copper mine, and it's in copper smelting business. And I would assume this was also a noncore business for them. And this one doesn't have any overseas plants. However, my gut feeling is that this company has much more advanced technology regarding connector production. So in Japan, they can make products that would meet their customer needs. However, other companies would take mass production orders. So in that way, the company -- this company was operating. But if we get together, if we could move on to the next page, as you know, we have a huge global network. Cambodia it still has 1/3 of its total space empty. And Thailand is very advanced. And if they capitalize on these assets, and if TOB becomes successful, this diagram becomes viable. And it will be shown later on, but super high-speed communication era is coming. And many special connectors will be needed. MITSUMI connectors like a type [ C par-type ] common connectors are made in huge volume. I wouldn't say red ocean, but it's rather difficult to make profit. And global niche top so to speak. So by doing the same thing as what we did in the bearing business and semiconductor business, we should be able to enjoy a huge success once again. And Japanese corporations we have affections for the Japanese traditional technology and technological capacity, we must work even harder in order to maintain them in analog world, there are so many players. Many of them are small sized but I would like to lay the foundation for them so that the Japanese parts and components industry will be able to enhance its presence. So I recruiting the friends and the allies. And I think this company has agreed to my thought. And the next -- on the next page is one example, trust the full industrial revolution various devices will become smart devices and the remote, medicine and automotive autonomous are driving will employ those parts and components and communication will become super high speed. And the types of the signals or the downsizing of connectors and light weighting and connections that suit applications will become necessary. In other words, the diversification will take place and the volume will increase. And -- if you look at the CAGR, you can see that the 3D LIDAR, in-vehicle network, and sensing camera, radar sensor, these are the growth areas. So applications dramatical changes of the applications and market expansion to be brought about such changes, we would like to capitalize on. So the next page is quite easy to understand. So there are many synergies and no duplications or no overlaps. So by pricing and quality, we will enhance our competitive edge. So by these acquisitions, the connector lineup will be expanded enormously, which will lead to enhance the presence of our company. Next page, please. So our initial goal. The JPY 33.8 billion is the total sum of the revenue and the COVID calamity. And if automobile business recovers fully, I think it will be quite easy to achieve this. In other words, JPY 50 billion or plus. And it says here in FY '28. But I don't think it will take that much time. Probably we will achieve this much sooner. But for today, I wanted to share this graph with you.
Now Honda Lock comes into play at this juncture? Why you may think. But as I have been talking about bearings. Increasing number of bearings are adopted in a car. And this trend is not ending semiconductors, IGBT and the new type of vehicles will have even more bearings and the motors. The same applies to the motors. No reasons why we do not do connector business, we can capitalize on our competitiveness, and we can sell them together. Honda, as you may know, Honda is aiming to create the flying cars and our road and will be useful to Honda and also what Honda is developing with Sony, they can use our products. So the Japanese OEM, the platinum ticket, so to speak, we have again, U-Shin, Mazda and Suzuki. U-Shin has been always strong for those players, plus Honda. And the Nissan, we have always being Tier 1 supplier like antennas, that I will explain to you later on. So the products that are demanded by the age or era, and we will be supplying. And another gate has been opened for us, which I am very grateful about -- there's another thing I want to say, and that is U-Shin, in Europe, Japan, China and Brazil, it has sites, but the Honda Lock in the U.S., it has plants and engineers. So we now have completed the global network that we can supply products to automobile manufacturers in the U.S., a huge volume of cars be made in the U.S. And many of them are becoming electrified and the new types of vehicles are being manufactured. So being able to get that site in the U.S. is, in fact, another synergy. And the expansion of a Tier 1 business, there are so many things. But what we supply as a Tier 1 supplier is U-Shin products and Honda Lock products if TOB succeeds and antenna, the less than meter precision antenna, high precision, this is quite impressive. Nissan's Global Innovation Award, this product was awarded. And a major car manufacturer has placed a huge order for this -- and these type of things, other companies, I mean, what the U-Shin is strong about Honda and Mazda and Resolver is another example. And a secondary cooling fan and the charge support door for electric vehicles when it's supplied in the door will open automatically. There are various things that we can do together and this go to the next slide. So in terms of the access products, the OP margin, 10%, the sales of JPY 300 billion. Already the simple aggregation is JPY 239.1 billion adding these to but yen under covet, automobile industry has not recovered. And with the conditions, JPY 239.1 billion. So the JPY 300 billion will be a high hurdle. So it says FY '28. But this is what IR people say, I think we'll be -- I think I will be able to dial this number far earlier than FY '28. So just to give you some update and go to the next slide. So this will be the new headquarters. We're going to call the MinebeaMitsumi Tokyo X Tech Garden. So X Tech, you expect X Tech . So this will be the -- with AI and IoT and then connecting with existing technology. So this will be the integration of [ Sogo ] within our company, so not on technology, but people as well. And going forward, this will be the era of people. So basically, we -- this is a clear target, a clear lane mark that we're going to get engineers get to enhance that technology. So the Tokyo X Tech Garden, this building we have here is going to move out. We're going to move into the X Tech Garden. So Mr. Yoshida has talked about this. So the conversion -- convertible bonds, 99.9% was converted into shares. So in criticality, this JPY 13.2 billion balance, so this is our ability, this is the balance that we have. At end of June, I took the figures I showed you was end of June. So in terms of interest-bearing debt. Maybe it is not accurate because there is a kind of a difference in the date or the schedule. So I just have to inform you. So lastly, this is what I always say lastly. So that is all for me. Thank you very much.
Thank you very much. Next, we'll go to the Q&A session. So we will be taking questions from the investors and analysts that has been registering from our telephone conference system beforehand. [Operator Instructions]
So let's go to the first question. Goldman Sachs Takayama-san please. Go ahead with your question.
I have three questions. So can you answer one by one? First of all, against the first half and the second half for the electronic components, it seems that the second half in terms of the profit, you have to generate a lot of profit in the second half. So for the motors recovery, including profitability. How much can you achieve that? So how much visibility do you have, increasing the price increase, how much have you been able to negotiate about that as well? Can you elaborate on that?
So in terms of the electronic devices and components. The first quarter OP was JPY 197 billion. And we have revised that. The second quarter is JPY 4.3 billion. So third quarter, JPY 8.1 billion. For fourth quarter, JPY 7.5 billion. So that is basically the breakdown of the numbers. So the first quarter, the backlight, we have motors, but the backlight specifically LCD models, a reduction of production has had a huge impact. So that is the reason why the decline in sales and declines in profit in terms of motors, as Mr. Kainuma has explained. Specifically, the Shanghai Lockdown, our Shanghai plant has there was a decline in utilization. And for the auto motors, the customers has received a huge damage. And there has been a very tough situation in terms of our income for us. And on top of that, as you have pointed out, the so-called -- from the previous year, various material costs as supply have been going up and the business cost has been going up. and we have been negotiating to pass it on to the customers. And the results have started to come out. Towards the second half, on top of these factors, some materials cost is going to go down. We are anticipating that is going to happen. Copper, I think, basically is going to back to the $7,000 level. Some materials will not go back to the normal level. But if that happens in the second half -- in the second half, we think that we will be able to see that contribute to the profit. So in terms of the profit situation, I think it is quite achievable. That's all for me.
So the way you're thinking of this is that in the second half, the initial plan you have not changed any a plan. And on top of that, the second quarter for -- so I talked about 4.3%, 8.7%, 7.5%. In terms of profit, the second half, it's going to go up quarter-by-quarter. And as a result, is there any type of -- some areas are higher, some areas are lower. But in totality, you'll be able to achieve this? Or as you have said, this third quarter, fourth quarter, in terms of the you have the present visibility about the profit? What is the nuance behind your thoughts?
Well, in terms of production, so the customer needs is very high. And as Mr. Kainuma has explained, the current sales level is very high. And of course, the second half, specifically for the fourth quarter, it's very difficult to have a visibility about the fourth quarter right now. But that said, the customer's forecast is showing a decline. And for the automobile, North America inventory issues or various elements will come into play. So for this fiscal year, if the semiconductor shortage is resolved, as long as. This is resolved, we anticipate that a certain level of orders will come to us. So based on the assumption and we're looking at the exchange rate and the sales price, and the raw material cost that will be going down, partially going down in some areas. So if you look at this in totality, the second half profit. Well, we -- it's not a stretch for us. I think this is a quite achievable profit that we are seeing right now. So for the motor business, JPY 300 billion sales is going -- is what we are forecasting. So if we consider this sales number, I think the profit number is very much achievable.
May I follow up. As you have pointed out, of course, there is a different situation by a category by category, but aircraft aerospace. We didn't expect this recovery to happen that soon, but we have seen a dramatic recovery. So the overall numbers.
I think basically to a certain level of probability, we have -- we are confident that we can achieve this. But if you look at 1 item by item. And if you look into the breakdown, I think it be difficult to mention about that. because there are some various options and depending on the industry, but it's in that range. So if you consider it understand it that way, I think that is quite understandable.
Understood. So my second question is I would like to ask Mr. Kainuma. So we talked about soybean social issues. And I think that was very clear. And within that, the connector business, and I think the focus on connector business was very clear and based on that, so FY '28 connector business. So the JPY 50 billion, what is the vector automotive, telecommunication. So what will be the -- in terms of margins, if you look at other companies, I think they have a higher margin. So 10%, I think it's quite conservative from my point of view. So what is your view about this?
So in terms of sales, as I've said, as just simple aggregation under the COVID situation. So if you just considers that if the real industry recovers, I think basically we'll be able to achieve more than JPY 50 billion. And as we have said, it's not the case that we just -- 10% is okay with us. We want to target a higher level. We think we'll be able to target a higher level of operating margin. But I always say, well, every time I make a presentation, I will not give you a high number. We want to -- I give you a number that we'll be able to surpass that target. So to be frank, this is the business in business is something that you'll be able to know until you do it. So the auto analog semiconductors has been better than we had expected. We have to acknowledge that. And in this business, can we replicate the same thing that we did. Of course, we have done due diligence. But if you look at each ending year, so I think basically, we'll have to get motivations waited in years. So I think that is PMI. So with MITSUMI, with [indiscernible] what you've seen, we have been doing that all the time. So for the engineers, when they get fired up or if the people working at the company is fully motivated, this niche business I think it's safe to say the operating margin 1% will be able to say have more. But I think it's means mentioned about that rather than that. So with PH1, -- so mentioning components JPY 60 billion, so it's going to go over JPY 130 billion. Talking about that, I think that is far more real. So -- so basically, in hindsight, you will realize that it has been much better than we have expected. I think that's the best way -- so for motors, I think people said that we not go well, but if rates also, but certainly, it was doing very well. So I think basically, our basic profitability will improve. So I think we shouldn't really go into the details at the initial stage. I think you have to look at the overall industry. And you look at the overall trend in the world. So whether we can win or we cannot win, and I think basically, if you decide that looking at our track record and decide whether we're going to win or not win. I think there will be the better way to make that consider above this.
So the connectors business, is it the same image that you have acquired analog semiconductors? Or is it closer to the recovery on the MITSUMI. So I don't think that there is a profitability recovery that we going to do. They don't have a major factory. And basically, they don't focus on the cost-conscious management.
So we have a large site in Southeast Asia. And every time I go, so we don't have to send with people like HR or the affairs. So -- we can send over the engineers and the staff and then they'll be able to do work from day 1. So that's the strength. That is the way that we operate our large-scale factories. So I want them to enjoy the cost efficiency. And then if we go forward with that, I think that they'll be able to generate a lot of -- more profit.
So lastly, for the Honda Lock. So now it's time to -- in terms of the resolution, there's also issues within that trend, maybe this is a bit different. So you're seeing -- I think if you see plus are you going to add scale or are going to take scale or take integration and then you just added it on. So in terms of the comfortability seems a bit low because with the customer base. So is it going to be at the end of these 2 companies? Or is it going to be a further road ahead? So I would like to know the background of your thinking.
Well, they are very wise to think about this. One, as I said, as I stress, this will be a platinum ticket for the Honda Motor business. So by becoming Tier 1 Honda, it means that there will be a lot of business opportunity. For example, they Honda Lock, they don't do latch, they don't produce latches. But latches when we have an automobile door, it will always be there. And that will be -- you have to have digital latches as well. So in that sense, we have the technology, the using has the technology it means that you'll be able to get a further customers. So it's a synergy. So this will be a gateway to go to on. You have to have a customer to sell products. And the customers, they will have to recognize us to some certain level or else. They will not be able to sell all those type of products. So currently, I think what I -- I think what was good was that the using has a lot of people that used to work in Mazda. The reason we do this is that the Mazda that it has not understood the position of you're seeing. And they don't know what we are assuming at all.
They don't know what we can do. So first, by making them understand, it means that right now, there's a lot of discussions that are coming out. That's not only Mazda for and we have to do this at Honda as well. So selling products that have to do that. If you're talking monozukuri manufacturing, but you have to sell products, we have to, I think, basically cultivating that root sales route is my job. So we have the path in front of us. What we have to do is that to show our presence and trying to appeal what we are doing. That's a major thing.
Secondly, I've obviously been saying that -- so motors, but we already sell them or the key sets on that would be wireless technology that can be utilized in homes, and I think that's going to happen going forward because the momentum is there. So for the home, -- the 1 issue there is that about the heat efficiency specifically in Japan, there's a lot of gaps and for the entrance is a lot of gaps. So have the simple [indiscernible] latch, there will be a lot of sealant it will be good. So the heat efficiency will be good. So I think this is a challenge for the social issues. So our using, it's not good. People tend to do that. And I think basically, whether automotive industry was not doing well. So -- so people are saying that they are not engaging case, what are you doing, but the semi-contract liking and then people will just come out and criticize us. But I think that it's already given that where the world is looking at going at. But taking initiatives 1 by 1 will lead us to a fruitful success. So you're seeing -- and Honda Lock is just an add on who you're seeing is no, that's not the case. This business area potentially there's a huge, there's huge potential because the electricity cost is going up in Tokyo and about solar power, solar power generation -- but on the other hand, we have to focus on how to enhance energy efficiency. And that is the mission that each of the home makers will have to cover. And I think I'll be able to offer dissolutions, and I think that's a great thing. Thank you very much.
Let us move on to the next question. Morgan Stanley, MUFG Securities, Mr. Sato.
This is Sato. I have three questions. One, MITSUMI's this year's plan, the revenue has been revised down and operating profit has been revised up. But by product, and by product , can you tell me the changes compared with 3 months ago? Regarding revenue for sales, we have taken a conservative view. And there are many assumptions we employed but compared with 3 months ago, for example, there is this ForEx translation issue. But there is potential that sales will grow. Against such backdrop, semiconductors continue to be robust towards the second half, many things could happen.
I do think so. But at this point, as Kainuma explained earlier, the smartphone-related slowdown may take place with IGBT or GBT and automotive battery can offset the decline. And therefore, regarding sales we maintained the same view. So that is 1 of the reasons why we are taking a conservative view. Regarding profit, the automobiles and Shanghai, these are the key words for the first quarter for reduced profit. But MITSUMI does not fall into either of them. And overall, inquiries have been very active and the profit projection has been upwardly revised. Camera actuators and gaming consoles compared with 3 months ago, what is the current outlook. So the games -- our customer announced its financial results. Very strong JPY 21 million. And if this number is achieved because we are taking a conservative view, there may be some gap -- our customer has this projection. Therefore, that makes us -- makes it more difficult for us to explain, but there is a possibility for upside. So our numbers are a bit stressed. And OIS, optical devices production is progressing smoothly. And for translation impact exists. And we will be able to enjoy solid business and no other major changes.
My second question is Related to the previous question asked by another gentleman, but the access product, 10% OP margin is a very high hurdle but U-Shin and Honda Lock track records, how do you think you can raise OP margin to 10%, if you could share with us your measures.
I would like to respond. If you look at U-Shin alone, it may be difficult. However, as I said, there are motors, antennas and analog semiconductors plus sensors. And by doing this business, other divisions we will be able to supply our products. So that is our strength. And for this, we integrated U-Shin and we are integrating Honda Lock. And technologies already exist. I just cannot share with you, but the door handles used to be very cheap, but the package, one unit of package is very expensive now and set to manufacturers and OEMs are really saying that the door handles have become very expensive because it's so high specifications and air resistance is almost 0, and you need to attach it with one finger in order to open it. So this is a trend. And other divisions can enter into this space.
And as Tier 1 suppliers, we can -- as a Tier 1 supplier, we can sell many other products. So you have to look at the total picture. Otherwise, you get the wrong idea. I mean, if we are dealing with on the access business, we would -- I would not do something like this. But because we are doing other business, we can put together this type of scenario. I have thought about many things. I may not be smart enough, but I do think about many things every day. And I talk with the customers and develop things.
I can see clearly that the things are moving towards that direction. So please keep watching. So VUCA era and then automobile business declined, many things happened. But the technology direction is very clear, and we want to move towards the same direction in order to succeed, and we will succeed.
I see -- so my last question is about the numbers. The bearings demand is very strong, and April to June period, the external sales, internal sales results and the outlook for July to September as well.
Bearings external sales from April, 192, 228, 245. And internal sales, 50, 53,56 and the total 242, 281 and 301. July onwards 245, 251, 276 external sales, I mean, and internal 50, 47, 55. And the total 297 298 and 331. So very strong demand we see.
[Operator Instructions] Going to the next question. Mizuho Securities, Goto-san.
Can you hear me? I have three questions. The first question is the confirmation of the numbers. First quarter results compared to the initial plan, when you compare that. So the reason behind the overstood, understood. Can you explain that? Lockdown exchange rate and the business related, if you break that in 2 factors and in the business-related factors in terms of the vision. So I think in Page 6, you gave us by segment detail, but can you go into sub segments to give me more detail? So yes, would you please respond to this question first.
So the first quarter, in terms of the decline in the sales and declines in profit, the Shanghai lockdown issue. And with that, as the Shanghai plant utilization rate has gone down. So that is for ball bearing and for the motor business, that -- and the sensing device -- part of the siting device has been impacted by this. And this is the reason one. Well, this will be the major reason. And automotive makers has saw a decline in their production. And with that, we saw a decline in sales and profit. The by segment situation, based on this situation to give you an explanation for the higher exposure to the onboard sector, the more downward pressure. So using will have the biggest impact. And then next will be with the motors, the automotive business has been impacted. And some of the ball bearing business that said, has been impacted as well. Conversely, with the MITSUMI business, all the segments have seen a better performance in the initial forecast. So that has been reflected on the results of the first quarter. And on top of that, for the electric devices and components in terms of the current devices, I have explained about this already. But within the smartphone, specifically, with the models that use LCDs, the reduction of the production output has been larger. And because of this, I guess, initial plan that has been seen a more downward pressure. Well, that's the end of the question.
In terms of the exchange rate, is it -- I think it's a positive impact? How -- what the magnitude of the impact on the exchange rate?
Yes. So the breakdown of the exchange rate, we do not disclose about that. So I would forgive me if I can answer you. But at the beginning, I have explained that -- in terms of the operating profit quarter-on-quarter, about JPY 2.4 billion year-over-year, JPY 4.7 billion has been through the currency translations. So the MITSUMI business has been impacted the most. At MITSUMI has a higher sensitivity towards the dollar yen translation. And among -- well, basically, MITSUMI has the biggest impact. Semiconductors is produced in Japan and half of that is sold in dollars. And besides that, in terms of the profit structure, that is the situation for them.
Understood. So if that is the case, the foreign exchange plus locked down a bit negative on the actual business, it will be basically in line with the plan. Is that the right way to look at this?
So I think basically, it depends on what you're going to take as a standard or the starting point. In terms of our actual business capacity, well, the material cost increase and the various business cost increase and towards that including electricity cost, that is, how far have been able to pass it on to the sales price. So we can talk on that angle. And then there's another angle about the exchange rate and then they have the lockdown, and we have the Russian-Ukraine situation as well. So how are we going to interpret all this is very difficult. But I think the biggest impact will be coming from the Shanghai lockdown and the customers decreasing production and so some were offset by other areas. So they had the exchange rate, of course. But the top line has gone down. So -- that has been -- we have not been able to compensate therefore, the material cost in terms of the sales price. Basically, we have been able to catch up in terms of the -- passing on the material cost to the sales price.
Well, my second question is about Honda Lock by acquiring Honda Lock. So I think basically, you'll be able to get -- are you going to get some elemental technology they did have sales food, for instance, is that any synergies that you can expect Honda Lock? So I mean the production side and the approach to Honda, I think that is what you have focused on. Are there other synergies that we can expect? Can you elaborate.
So there's a lot of things that I can talk about. For example, the products that you see does not produce. There are some products that Honda Lock makes mirrors, I think, one example. We're going to go to e-mirror. We're going to do e-mirror. So not all the areas are going to be e-mirrors, but by 2030, about 20% of the automobiles will be using e-mirrors. That is my view.
And Honda -- Honda Motors. Actually Honda, I think basically, that is the plan. So I talk Honda that I talk about Honda Lock. So including this view, we think there's a lot of technological synergy that we can expect. And as I have said, Honda Lock, it's not engaged in latch business, but we produce latch and latches or at least have 2 on each car. In some cases, there 4 latches in a car. So those synergies, technological speaking. Well, I think basically we can actually provide each other with the technologies.
Let us move on to the next question. Mitsubishi Ruchun Morgan Stanley. Mr. Ruchun over to you.
This is in Ruchun. My first question is as follows. About analog semiconductors. So the private sector demand, lithium ion batteries demand is declining. And IGBT is very strong. And to what extent the slowdown in growth you're seeing and the IGBT to what extent is IGBT stronger than the expectation. So Shiga plant, I think you are engaged in starting up Shiga plant. And the mix may be changing or is it changing? So semiconductor outlook, if you could tell us about.
So specific breakdown numbers I don't have, but the recent sales situation mainly for Chinese smartphones, a huge reduction in production happened. And we have been assigning the production lines. And in a net, it's not going down. So the plant is operating at the full capacity. In the first quarter as far as the second quarter, the situation is continuing. And more than JPY 80 billion sales were expected for semiconductor business, that is what we explained. And we are progressing on track. It was that goal right now.
What about the IGBT? So what is offsetting is IGBT, automotive and medical. So those are more than offsetting the decline in smartphones. So IGBT is very strong as well. In total, the capacity has been insufficient, but the plant is operating at full capacity. And therefore, even though the production has been reduced, no negative impact. That is right. And we are operating at fullest capacity. And at this point, we think that the situation is going to last for the entire year.
And Shiga plant. So we are preparing for the startup of the operation analog semiconductors because of the nature of the product, we cannot start full capacity production overnight. And there are entry barriers or the entry barriers and the replacement risk is low, and we are preparing for that steadily. In the second half of this year towards the first half of next year, the plant will be starting. So we have something to look forward at you.
My second question is as follows. Earlier, it was commented that passing on the incremental cost, material cost. So what is the progress in the first quarter? And quarter-on-quarter, do you think -- I think that there will be an impact going forward. But how is it going to impact? So that is my second question.
So the material cost has charged and looking back, what happened in the last fiscal year, the copper price went up and then steel and resin with some time lag, various material costs increased. And for each, we negotiated with the customer to pass on the incremental cost, but we were not fast enough. And now we are trying to remedy the situation. So it's been pushed back from last fiscal year. So material cost before the material costs increased being the floor, we are negotiating with the customers. And that, as time goes by, this is going to be a positive factor. So that is the current situation. But the materials themselves, when we put together the budget this year, we think that the prices will increase, we thought the prices will increase. However, the copper price and the non-ferrous materials, some of them are now declining. So the relation with the selling prices, I think the profitability will improve in the second and third quarters. That is what I think.
So there is this lag in timing. So when comparing fourth quarter and the first quarter, how much cost increase car, it may be odd to make this comparison. But are you saying that you are catching up?
And as for the future outlook, then you will enjoy the positive impact. Up until last year, you were impacted negatively, but this is going to turn to positive impact.
Yes. So the balance between the increased cost and passed on to the client. I think we are catching up in that sense, but there is a time lag in the second and third quarters. I think we will see some benefits in terms of the profit. And surcharge system is what we explained to you at some point in the future regarding the decline in the material cost that we will change selling prices again. And when utilization of the plant, the utilization of the plants have recovered and most of them are at full capacity and how we should project the impact of the reduced production, as I said previously, we do not assume that there will be a huge reduction in production of automobiles. And therefore, the improvement in the profit, we will be able to enjoy.
I see. My third question is connectors, the total of these 3 companies will contribute, you said. And Honda, U-Shin, so technological capability and engineering capability the company seems to have. So what is your evaluation and the SUMIKO TEC. So the customized capability, the manufacturing capability the company seems to have. So what is your evaluation of their technological capabilities?
As Kainuma explained earlier, Honda, U-Shin has excellent technological capability, and it is capable of making high value-added products. But on the other hand, the overseas production and overseas marketing because of the size of the company, it has not been doing a good job and is focused on the domestic market.
So that is what you mentioned and SUMIKO TEC in terms of the production base, the same thing, basically the domestic production within such a framework, it is generating a good profit. And as you pointed out, the terminals it's making in Japan and it's one of the strengths. And after the integration with us, they will be able to make products at lower cost overseas. And the feasibility of various businesses will open up, which will be one of the positive factors for improving profitability. And the technology of making products, the former Minebea connector business and Honda, U-shin connector business. The mutual supply will be possible which will lead to a greater synergy. So SUMIKO TEC. So interforming, is it good at things like interforming. It's one of the technologies that the company is good at. That basically, as I said, the special connectors. And it seems that the company receives various requests from various players. So rather than designing capability, huge volume of samples they can do, they can handle. But -- when it comes to mass production, because of the limited capacity of the factories they cannot make in Japan. So our huge factories can handle them. So in the past, a customer came to them and asked that you make a certain product. And when the customer agrees to a certain product and 10 -- or 1 million or 1.5 million pieces orders, the company cannot handle. And therefore, other companies achieve the order. But going forward, we would like to [indiscernible] one stop type of business. So automobile customers and communication customers, that is one of the trends. So big names that you are familiar with, they are, I mean, very interesting or even odd-shaped connectors. I mean our idea of Connecta is very simple which looks like a connector. But their connector is very complex and doesn't look like connector. And the company is good at making such things. And we would like to most-produce such connectors in order to enjoy competitive edge. So the sample production, the company handles and then provide the design sheet to design drawings to another company, I guess.
I see. Thank you.
So with this, we'd like to end the Q&A session. Again, would you please answer the questionnaire from -- joining from the link on the upper part of the slide. Thank you very much for your participation.