Minebea Mitsumi Inc

TSE:6479

Earnings Call Analysis

Modest Sales Rise, Profit Spike, Outlook Lowered

In the third quarter of fiscal year ending March 2024, net sales rose slightly by 2.6% year-on-year to JPY 381.207 billion, despite operating income falling 5.8%. Surprising investors, profit for owners jumped 20.2%. Operating margin dipped slightly year-on-year to 6.3%. Performance by segment was mixed: Precision Technologies (PT) and Access Solutions (AS) outperformed expectations while the Semiconductors & Electronics (SE) segment lagged. The full fiscal year operating income forecast was trimmed from JPY 77 billion to JPY 70 billion.

Company Achieves Quarterly Record High Despite Varied Performance Across Segments

The company reported a mixed financial performance for Q3 of the fiscal year ending March 2024, showing resilience in the face of macroeconomic factors. Net sales reached a quarterly record high of 381.207 billion JPY, marking a 2.6% year-on-year increase, with significant contributions from foreign exchange movements. Despite these gains, operating income fell by 5.8% year-on-year, settling at 24.027 billion JPY, as some segments like Precision Technologies (PT) and Semiconductors & Electronics faced challenges in utilization and demand, respectively.

Noteworthy Trends in Business Segments

Examining the company's diverse portfolio reveals differing trends: PT's net sales soared on the back of automotive demand, the Motor, Lighting & Sensing segment saw moderate growth, and Access Solutions (AS) significantly outperformed with a 4.9x increase in operating income. However, Semiconductors & Electronics experienced a quarter-on-quarter sales dip, although its operating income and margin saw marginal improvements.

Strategic Moves and Expansion Initiatives

The company's strategic agenda includes acquisitions like RO-RA to bolster its aircraft business and the smooth integration of Hitachi Power Device, suggesting a positive long-term outlook. Moreover, with automation initiatives set to save the equivalent efforts of 13,000 workers by March 2026, operational efficiencies are expected to improve. In the renewable energy space, the company is venturing into solar power generation in Cambodia, which aligns with its ESG goals and sustainable growth aspirations.

Commitment to Shareholder Returns Amid Operational Hurdles

Despite experiencing operational hurdles with unprecedented market changes and downward revisions in projections, the company has maintained its dedication to shareholder returns, promising stable dividends and continued share buybacks. Moreover, even after adjusting the full-year operating income forecast downward from 77 billion JPY to 70 billion JPY, the company has solid plans to bolster its financials. Furthermore, the executive leadership reassures investors of a focus on consistent EPS growth, underpinning the company's commitment to value creation.

Investor Q&A Highlights Market Challenges and Recovery Projections

During the Q&A session, the company's executive acknowledged the market's unpredictable shifts, particularly in smartphones and ball bearings, which significantly contributed to the recent tough times. However, there were signs of bottoming out in certain areas such as hard disks, hinting at a gradual recovery ahead. The company conveyed cautious optimism, stating that while it's still unsure of the exact trajectory, there's a belief in progressive improvement as they move forward.

Earnings Call Transcript 2024-Q3

[Katsuhiko Yoshida, executive]

My name is Yoshida. I would like to explain the consolidated financial results for the third quarter of the fiscal year ending March 2024.

Consolidated net sales for the third quarter of the fiscal year ending March 2024 was up 2.6% year-on-year and up 0.4% quarter-on-quarter to total JPY 381.207 billion. Operating income was down 5.8% year-on-year and up 13.7% quarter-on-quarter to total JPY 24.027 billion. Profit for the period attributable to the owners of parent, up 20.2% year-on-year and down 7.7% quarter-on-quarter to total JPY 14.754 billion.

Net sales hit a quarterly record high. We estimate that FX translations have a quarter-on-quarter impact of plus JPY 12.3 billion and year-on-year impact of [ JPY 13.1 billion ] in net sales and quarter-on-quarter impact of plus JPY 2.6 [ billion ]. And year-on-year impact of JPY 0.4 billion in operating income. We made slight retrospective changes to last fiscal years. And Q1 and Q2 of this fiscal year financial statements are due to the PPA for Honda Tsushin Kogyo and Minebea Connect.

Please note that the figures on the following pages are revised figures.

Next slide, please. This is for quarterly trend in net sales, operating income and operating margin. The operating margin for the third quarter was 6.3%, which is down 0.6 percentage points year-on-year and up 0.7 percentage points quarter-on-quarter.

Next slide, please. Here shows the difference between the forecast as of November and actual results for net sales and operating income by business segment for the third quarter.

Net sales of PT exceeded the expectations due to solid growth in automobile and aircraft applications, although the sales to data centers remained sluggish. MLS sales exceeded expectations, mainly in motors for automotive applications and the electronic devices. SE sales was below expectations, mainly in optical devices. AS sales exceeded expectations due to a recovery in automotive production.

Operating income for PT was lower than expected due to a deteriorating utilization. MLS was broadly in line with expectations, mainly due to strong sales of motors for automotive applications and electronic devices. SE was lower than expected, [ mainly ] in optical devices. AS exceeded expectations due to factors such as price corrections and productivity improvement.

Next slide, please. Let's look at the quarterly results by segment, starting with the Precision Technologies business segment. On the left is a graph indicating quarterly net sales trends. And on the right is the graph with the bar chart, quarterly operating income trends, along with a line chart for operating margins.

Third quarter net sales increased 4.9% quarter-on-quarter to a total of JPY 53.9 billion. Sales of ball bearings increased 2.9% quarter-on-quarter to total JPY 38.2 billion. The monthly external shipment volume was up 9.2% quarter-on-quarter for a monthly average of 219 million units. This was mainly due to an increase in automotive applications, thanks to market recovery and content growth, as well as slight signs of bottoming out in data center applications.

Sales of rod-ends and fasteners totaling JPY 11.5 billion were up [ 13.3% ] over the previous quarter. Sales of pivot assemblies were up 1.9% quarter-on-quarter to total JPY 4.3 billion. Operating income for the quarter totaled [ JPY 19.8 billion ] and the operating margin was 18.2%. On a quarter-on-quarter comparison, operating income increased 8.3% while the operating margin improved 0.6 percentage point.

Turning to product-by-product results, operating income for rod-end and fasteners and pivot assemblies increased quarter-on-quarter.

Next slide, please. Now let's take a look at the Motor, Lighting & Sensing segment. Net sales increased 0.8% quarter-on-quarter to total JPY 91.9 billion. Looking at the results by product, the sales of motors increased 0.6% quarter-on-quarter to reach JPY 69.5 billion. This is mainly due to solid sales, particularly for motors for automotive applications.

Sales of electronic devices were down 3.2% from the previous quarter to total JPY 12.7 billion. Sales of sensing devices totaling JPY 8.9 billion were down 6.6% from the previous quarter. Operating income came to JPY 2.8 billion, and the margin was 3.1%. On a quarter-on-quarter basis, operating income decreased by 22.2% and operating margin was down by 0.8 percentage points.

Next slide, please. Let's look at the portfolio of the Semiconductors & Electronics segment. Net sales decreased by 6.8% quarter-on-quarter to total JPY 146.5 billion. This is mainly due to higher sales from optical devices amid ramp-up production of new products, while sales of mechanical components decreased.

Operating income totaled JPY 12.8 billion, with operating margin of 8.7%. Operating income increased 1.2%, and the operating margin increased 0.7 percentage points quarter-on-quarter. This increase was mainly due to the jump in sales for optical devices.

Finally, let's go to the next slide. Let's look at the Access Solutions segment. Net sales increased 13.3% quarter-on-quarter to total JPY 87.9 billion. This was mainly due to a recovery in production of automotive manufacturers.

Our operating profit totaled JPY 5.7 billion, and operating margin was 6.5%. Operating income increased 4.9x, and operating margin increased 5 percentage points quarter-on-quarter, mainly thanks to productivity improvement.

Next slide, please. The bar graph here shows trends in profit attributable to owners of the parent, while the line graph chart changes in the profit for the period per share. The profit for the period was JPY 14.8 billion. Earnings per share was JPY 36.5.

Next slide, please. Next, this is the quarterly inventory trend. At the end of the third quarter, inventory totaled JPY 300.5 billion, which is JPY 2.3 billion less than it was 3 months ago.

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 third quarter, net interest-bearing debt totaling JPY 237.6 billion was up JPY 35.9 billion from the end of the previous fiscal year. Regarding the net interest-bearing debt forecast at the end of the ending March 2024, we expect our cash position to improve due to our high cash generating capacity.

Next slide, please. The forecast for the full year ending in March 2024 has been revised downward, JPY 77 billion to JPY 70 billion in operating income after a close examination of market assumptions and the status of the order. Overall, net sales is unchanged, with slight revisions between the segments.

Operating income for AS is kept to the same level as initial plan, and the downward revision has been made for the other business segments. The exchange rate is assumed to be JPY 145 to the U.S. dollar.

Next slide, please. This slide shows the forecast by business segment.

Next slide, please. This chart shows the difference between revised forecast and the forecast as of November. This is all for my presentation. Chairman Kainuma, over to you.

[Yoshihisa Kainuma, executive]

I will explain about Page 15 onwards. Page 15 is as stated here, but I would like to apologize to you at the outset. So the Q3 result announcement. So this number, JPY 7.8 billion, is the bottom. But we had to make a downward revision. And I am very regrettable.

I am serving for 15 years, and we made an announcement in November, and revising it in February has never happened before. And that is because the customers-related information that we obtained in the past and the information we received in the New Year were different. But of course, we should have been able to assume such changes. But this time, it fell short.

So bearings are recovering, but now the recovery possibility is not strong as before, whether -- I mean, I do think that this is the real bottom of the business, meaning that we can expect a gradual recovery next fiscal year onwards. I think there is a higher probability of such a recovery. In March, we gather various data and receive reports from sales side and formulate budget spending 4 days. And after such process in March, we will be announcing in May.

Next page, please. What I want to emphasize here is the competitive landscape remains the same. And motors, by raising prices, we are now collecting business costs. And therefore, when the volume comes back, we can surely make a recovery. And bearings, if it improves just a little bit more, then the next year onwards, all the increments will be profit.

So centering around data centers, we have no other choices but to wait for the recovery. And we must do what we need to do now and wait for the right timing. Bearings, the improvement -- the productivity improvement, people have been working hard, and 10% improvement is now possible.

Page 17. Aircraft is progressing smoothly, and it has recovered to the pre-COVID level. And the one aircraft -- one type of aircraft has recovered to the pre-COVID level. And [ WI ], the double-corridor aircraft, the big aircraft, people are saying that they will recover in the summer of next year. And RO-RA, we have decided to acquire RO-RA link rod. At the edge of this, there is a rod-end. So vertical integration, this rod -- the rod-end will be attached and supplied to our customers.

Thus far, we have considered 3 companies. But unfortunately, for all 3 companies, we were not able to agree on pricing. And therefore, we did not acquire. But this is the last chance for us, and we have been able to capture this opportunity. The aircraft parts and components that are manufactured in various countries, and we are preparing. And we will be able to further broaden aircraft business with this new product.

Page 18 shows the more information about RO-RA. On Page 19, Hitachi Power Device, the integration, when that is finished, the power semiconductors will be number 2. I think the analogue power has hit the bottom. In the second half of next year, probably, we will be able to see full-fledged recovery. But once again, we will confirm that. And in May, we will report to you once again.

Fortunately, the preparation for integration is going through smoothly. And [ Averick], by integration, this lineup is expanding. There are no overlapping products. And this [ medical ], which is a niche market, we can increase the presence of our analogue products.

As I explained to you last time, in May, when we announce results in May, I think the integration will be more solid. And I will be able to share with you more stories then.

Page 20, please. Page 20, as I have said repeatedly, so the third quarter, JPY 5 billion I have been talking about, and the actual was JPY 5.7 billion. So this is in line with our expectation. And now, the production has been sluggish due to various issues such as supply chain disruptions and OEMs productions are slowing down.

And I wouldn't say we are not impacted, but JPY 10 billion, we should be able to achieve according to the reports I had. And next year, in April onwards, OEMs will be -- OEMs production will be normalized. So the JPY 20 billion will be in our sight. And JPY 5.7 billion has been achieved in Q3. This, I believe, have wiped out most of your worries.

Page 21. Some of you may be concerned that automation is not progressing. But finally, we have been able to work on this. In Shiodome, there is a robot, the [ floor ] newly created, and we have conducted various trials in order to see how production lines should be combined.

Until March of this year, without using this, we will reduce the processes equivalent to approximately 6,000 workers. And we will be automating more processes. And processes equivalent to 13,000 workers will be automated by March 2026. The wages are increasing, and hiring will be even more difficult in any country. So these things that we have contemplated for a long time, it can be realized now.

So going to Page 22, so these will be ESG topics. In Cambodia, the 50-megawatt, our large-scale solar power generation system business, is going to be started. So in the -- we have this plant in Cambodia, so 1.5x I would like to see that as used here. To be precise, so 1 plus 1.5x, so it's 2.5x of electricity can be covered through this system in terms of electricity supply.

So we have been able to get the approval from the government. And we have partners. 2025 will be the target year in the place called Pursat province, the solar power generation plant is going to be built this June. At the Annual General Shareholders Meeting, we will change the articles of incorporation of our subsidiary in Cambodia. So this will be an ultimate vertical integration, can be conducted in Cambodia with this plant.

Cambodia, Philippines as shown here. And another area will be Thailand. And with the government, we have conducted various negotiations. So I think next for fiscal year, I think we'll be able to make some kind [ acquisition ] about Thailand.

So I think basically, ESG matters cannot be avoided. It's because we are growing at the speed, how much we put in efforts and in terms of the plants that we get through acquisition, they are not solar power generation. It's very difficult to get to 100%, but we will not give and give up and do what we can. And with the cooperation with the overseas government that we hope that we'll be able to focus on the sustainable growth.

And so in FY '23, in terms of the ROE -- Page 23, excuse me. So in terms of the EPS growth, so the EPS CAGR is 15.8%, Since 2009 of the first of April, I became the President, if it's 1 as index, is about 7.8x. Going forward, we will continue to focus on EPS and continue to grow.

Page 24, so we have been giving you some concerns. But in terms of the dividends, it should be stable. So it's JPY 20 for the interim at the year-end, JPY 20. So before year-end, our dividend portfolio will continue to pay out. In terms of shareholder return, we have dividends.

And we -- in terms of share buybacks, in the past 15 years, we have conducted about 51 million shares, and we have acquired JPY 76.6 billion worth. So there was a 20 million with the share exchange at the time of MITSUMI Electric.

And conversion of euro, yen convertible bonds inherited from MITSUMI Electric, because the share price has gone up, so we have to convert because of that. So we have been able -- we have been using [ 9.66 million ]. So about 29 million shares is the number of shares that we have done, but we will continue to do share buybacks.

So I think people would be worrying what will happen next fiscal year. And if we look at appendix, that will be Page 27, with the last fiscal years, as we announced our results, so we gave you the image at the time that the market recovery, how this will look like.

So [ 77 ] will be the starting point. But wherever you look at it, if you look at a potential in terms of the operating income, the capability of our operating income, I think this is how it would look like. This is -- so with this going to recur from April, June or after summer. Depending on timing, it would differ. But again, I would like to explain about this in the May announcement. So that's all for me.

[Unknown Executive]

Next, we would like to go into Q&A. So there is the first question, [ Goldman Sachs ] Securities. [ Nakaima-san ] please.

[Unknown Analyst]

Thank you very much for explanation. I have a few questions. The first question would be, Mr. Kainuma, you said that -- so changing in [ December ] and then changing in January, you said that this was [ deeper ] unprecedented change that you have seen in the market. So can -- I want to confirm what happened? What was the change?

Of course, I think there was a drastic change in North American market. But what would be the magnitude? Give me top 3 factors in terms of what impacted your revision. Maybe there was some upside as well. So depending on the magnitude, can you explain more in detail about what impacted the performance?

[Yoshihisa Kainuma, executive]

So let's start on your first question. But basically, so the smartphones and I think the ball bearings. And I think with this -- this, I can explain everything. So you said that you should give you 3. But I think basically, with these 2, I can basically explain why our business was tough.

[Unknown Analyst]

So what of the upside, hard disks, data centers?

[Yoshihisa Kainuma, executive]

Yes, hard disks, it has hit the bottom, that's for sure. And so gradually, we have started to see an improvement. And the profit contribution, of course, they have been contributing more to our profit. But compared to the peak profit level, it is still not at that level. So of course, we have gone through -- passed through the worst, that's for sure. And the people who have [ rescind ] to the other divisions, we have called them back to the hard disk business.

[Unknown Analyst]

So going forward, how much -- how will this recovery look like?

[Yoshihisa Kainuma, executive]

We are not still sure how this recovery is going to look like. But it's still gradually recovering, and the profit is covering accordingly. I think that's what we're seeing right now.

[Unknown Analyst]

I see. My second question is that in terms of optical device, next fiscal year, how you're going to manage the business this fiscal year? It seems that in terms -- not on the volume outlook, and the pricing seems to be -- we do hear that maybe the pricing -- we may see pressure in terms of pricing.

But on the other hand, including how you can actually get the volume, I think basically, they will offset each other and be flat. But for next fiscal year, is there a risk that the profit is going down [ compared ] -- is there a soft landing insight?

[Yoshihisa Kainuma, executive]

So in terms of the -- how we're going to put assumptions on the volume, that's what we're looking at. And it's very difficult to actually foresee in the future, depending on the current market situation. I think basically, we can't foresee much of the growth right now.

In terms of the environment, so the customers' pricing pressure -- well, the pricing pressure coming to the customers is so strong. And that situation has been unchanged. And what -- in terms of us being engaged in the business, means that we will have to improve our productivity, improve our yield and by doing so, satisfy the requirements coming from the customers. So that is what we have to continue.

For this fiscal year and next fiscal year, if you compare these 2 years, well, this fiscal year compared to last fiscal year is struggling in the first quarter. We have been -- the competitors took our share, and we had a level of loss here. So that has led to a decline in profit. So if we consider this as [ floor ], next fiscal year, we'll be able to be -- want to capture the same level of profit or more than this year. And we think we are confident about that.

[Unknown Analyst]

My last question is about in terms of the macro cycle, well, semiconductors, bearings, those will be susceptible to the economic cycle. And how is this recovery?

So Mr. Kainuma said that you want to study until March. So currently, compared to the interim term and the current situation, I think from April to June, if you were able to recover from April to, June, you'll be able to reach what you have said in -- shown in the appendix. I think you -- basically behind by 3 months, or is it completely unforeseeable?

[Unknown Executive]

So I don't think whatever I say will be convincing, but that's -- but anyway, so I really do not think that from April, we're going to see a sudden recovery in the market. But May, what's going to happen, June, what's going to happen, we haven't analyzed the situation yet, so it's very difficult for us to give you a picture.

[Unknown Executive]

Let us move on to the next question. Mizuho Securities, Mr. Goto.

[Fumihide Goto, analyst]

Thank you. So some of my questions may be overlapping with the previous one. So smartphone and ball bearings are the two -- the only two reasons. And can you elaborate on -- more on each of them? So December and January forecast changed. Smartphone, I think I can understand, but what's been happening for bearings? Are there any changes that force you to put down the expectations? So can you help me understand more about the recent changes?

Smartphone, so it's sort of a time lag of [ ROM ] what we heard from last year, but there was no time lag. We thought that there would be a time lag for consumption issues and the customers' inventory issues. I would assume there are many issues. But we concreted and estimated that based upon the assumption that there will be a time lag, but it didn't. That is a problem. In other words, the sales of customers have been sluggish, and it has impacted your business, am I right?

[Unknown Executive]

I cannot explain the causal effect because I cannot disclose customers' information. However, the share and so forth, why they no longer need the products, I suppose they could not make so many.

[Fumihide Goto, analyst]

What about bearings?

[Unknown Executive]

The bearings, by application, first of all, automotive, has been robust, in line with the expectations, and there are no major changes. However, the data center recovery in January to March, we thought recovery would be stronger. However, actually, it's being flattish or slightly down. So our expectations and assumptions were wrong.

And also, HDDs for data centers has hit the bottom and started to recover. And we are assuming the same type of recovery. But Q3 to Q4, the sales are not coming back. So our assumption turned out wrong.

Accordingly, the things that we plan to produce with regards to March, inventory will be maintained. So the production plan has been revised down, which affected the profit. So negative impact will be seeing in January to March vis-a-vis the December numbers.

But there is one good news. As you may be aware, the [ farm ] motors, customers are mostly Taiwanese, and they had a huge volume of inventory. But they have consumed all those inventories, and we are seeing the various new moves. And if they -- if the constructions are started, I think the numbers will increase. But the U.S. interest rate and global interest rate are the main factors. As long as the rate remains high, the investment appetite will not be enhanced.

So now maybe the transitional period, that is how I imagine. But if the actual demand becomes stronger, things will be better. So for a few more months, we would like to wait and report to you again.

[Fumihide Goto, analyst]

In your explanation, I mean, I came up with additional question. The bearings for your data centers in January to March were sluggish. Understanding that in the second half of last year, there was a recovery due to the cycle, but it was eaten up. And now, the actual demand is not growing. And is that the reason why the business is being sluggish?

[Unknown Executive]

Yes, that is correct.

[Fumihide Goto, analyst]

Understood. I have another question. MLS, profit has been revised down. So the home appliances and automotive, so October compared with October to December, it's become even lower. Am I right in understanding it that way?

[Unknown Executive]

That is correct.

[Fumihide Goto, analyst]

Particularly, China -- the various customers in China are seeing weaker than expected recovery. So we put together the numbers with a conservative view, particularly for motors. So HDD and automotive are all right, but others remain weak.

[Unknown Executive]

Yes. And some others are not recovering at all. So there are the mixed situations.

[Unknown Executive]

Let's go to the next question from UBS Securities, Hirata-san, please. UBS Securities, Hirata-san, please.

[Shingo Hirata, analyst]

Excuse me, this is Hirata from UBS Securities. Can you hear me?

[Unknown Executive]

Yes.

[Shingo Hirata, analyst]

I have two questions. First question is about Access Solutions. Profitability has improved this quarter. The sales has increased. I think that is one of the reasons. But once again, can you explain what is happening at the Access Solutions segment? And the JPY 6 billion -- [ little ] JPY 6 billion in quarterly income, is this the run rate that we should assume for next fiscal year? Can you explain about that?

[Unknown Executive]

In terms of the Access Solutions, two reasons why this is better. But one is the productivity improvement. Various challenges were on the past couple of years, so we have steadily improved these issues. On top of that, volume has recovered. Because by the manufacturing business, specifically what we are producing, you have to produce volume or else, it will not generate profit.

In terms of the -- what we have supplied to the customers, because we have the line there, so that we can satisfy the demands coming toward the customers or else the customers who is giving -- won't give us orders. But due to COVID, these orders have stopped.

So basically, if there is a line that if you want to go over that, you'll be able to get profit. Once you exceed that level of volume in terms of the productivity improvement or eliminating waste, this will be effective. And then as a result, this will lead to a high profit. And this is a very simple story here. And I think -- basically, I think you should understand it that way.

On the other hand, so JPY 6 billion by quarter, this will be the run rate, going forward. We'll have ForEx and various other factors that you have to consider, and this will have an impact. Even if you consider that we have been able to improve the volume, maybe certainly some issues will come out.

And then, maybe the customers will stop producing or maybe there will be some -- one of the companies and supply chain will be impacted by an earthquake and they won't be able to supply. So these things will happen all the time. So if things -- nothing happens, I think basically, the number you're seeing for this quarter will be kind of what we can generate. But maybe there will be some fluctuations, if you consider the environment.

[Shingo Hirata, analyst]

Understood. So in terms of nothing -- no one-off [ differences in ] revision of the prices, which is...

[Unknown Executive]

No, no. So from now to 2025, they'll be -- we have been able to get a lot of types of orders. So from another -- some orders that were given to another company, completely given to us. So the electromagnetics and mechanic solution, door handles, 2025 is going to be used by various types of automobiles. I think that's what's happening right now.

[Shingo Hirata, analyst]

Understood. So my second question is about the semiconductors [ vision ] about next fiscal year. And you have introduced the reasons why this profit is going to improve. So for the mechanical components, next fiscal year's outlook, what is your outlook? Well, some -- maybe, it seems that some new products will start to contribute. So how should we consider this? So the customers, new models -- whether they have new models or not? Or you can't comment about that?

[Unknown Executive]

So as you have mentioned, next fiscal year, if there is a new model -- if any model comes up in the next fiscal year, for us, this will be a new business opportunity for us.

So currently, we have been reducing our production. So within this year's performance, the fourth quarter -- well, in terms of production, we are controlling the production. Based on what is happening in the next fiscal year, if new models start to come out, this means that next fiscal year, we'll see a positive trend compared to this fiscal year.

[Unknown Executive]

The next question is from Mr. [ Majazuki ] of Nomura Securities.

[Unknown Analyst]

[ Majazuki ] speaking. Can you share with me the numbers, the bearing October to December actuals and the outlook for January to March and mechanical consignment sales, the Q3 and Q4, if you have numbers with you?

[Unknown Executive]

First, the mechanical. The Q3, 121; Q4, 95. And then Q3 external sales from October, 220, 205 and 212, 214, 203, 234.

Internal sales 36 and 39. January to March 37, 36, 36. On October, 246, 255, 248. 253, 253 and 277. 277, very high, isn't it?

So Q4 average is 277. So about 30 million production reduction took place in the past.

[Unknown Analyst]

External sales for November, can you repeat? November external?

[Unknown Executive]

225.

[Unknown Analyst]

Thank you. If I may ask you one more question. Optical devices, Q3, Q-on-Q, probably Q4 will be lower due to seasonality. But how much decline are you anticipating, if I may ask you?

[Unknown Executive]

Q3, Q4 sales, it's like 15% growth, 15%. So at the end of Q2, as Kainuma said, regarding Q3, it was far below than expectation. In Q4, the 30% reduction or 40% reduction.

[Unknown Analyst]

So Q3 downswing and Q4 down shrink, probably 3 billion or 4 billion. Optical devices are likely to have tough time in Q4, which means that it's not going to be easy. But are there any segments that can offset such decline?

[Unknown Executive]

As of December, the numbers, Q3 downward change, but it's going to be offset in Q4. In other words, in the second half, we thought that the number would be maintained. But compared with that assumption, so downside in Q4, downside in Q3, there will be no upside in Q4. So there will be no downside in Q4.

[Unknown Analyst]

I see. Understood.

[Unknown Executive]

With this, we would like to close the Q&A session. With this, we would like to end today's meeting. Thank you very much for your participation.