Minebea Reports Second Quarter 2006 Results

Minebea Co. Ltd. (Japan; TSE: 6479) reported financial results for second quarter 2006, ended September 30, 2006. Minebea is an internationally diversified manufacturing company, producing a wide variety of high-precision components for the automotive, industrial and electronics industries. Bearings are the company's primary and most important product line. Sales in the quarter were ¥164.0 billion (USD $1.4 billion), up 8.3% from 2005's ¥155.7 billion ($1.3 billion). Operating income jumped 85%, to ¥13.4 billion ($115.4 million), from ¥7.3 billion ($62.8 million) for 2005. Net income was even higher, rising more than 208% to ¥7.5 billion ($64.6 million) from ¥2.4 billion ($20.7 million) in 2005. Minebea's 43 individual business operations are divided into two segments: Machined Components and Electronic Devices & Components. Bearing manufacturing is part of the Machined Components business unit. Machined Components produces Minebea's primary product line, ball bearings; mechanical components such as rod end bearings primarily for use in aircraft and pivot assemblies for use in hard disk drives; screws for the aircraft and auto industries; and defense-related devices and equipment. Of the 43 subsidiaries which make up Minebea, 10 are involved in bearing manufacturing: Minebea Co. Ltd., New Hampshire Ball Bearings Inc., NMB-Minebea UK Ltd., NMB Singapore Ltd., Pelmec Industries Pte. Ltd., NMB Thai Ltd., Pelmec Thai Ltd., NMB Hi-Tech Bearings Ltd., Minebea Electronics and Hi-Tech Components Shanghai Ltd. Minebea said sales of ball bearings to automakers and for IT equipment were up strongly year-on-year, primarily due to renewed marketing efforts. Rod end bearings sales were up, primarily to the U.S. and European aerospace markets. Pivot assembly sales were also up. Overall, Machined Components business unit sales were up 8.9% in the quarter, to ¥67.8 billion ($583.6 million) from 2005's ¥62.2 billion ($535.4 million). Operating income rose 20%, to ¥13.3 billion ($114.5 million). Minebea credited Machined Components' healthy operating income gain to both the increased sales and production, and cost reduction efforts, and "pursuance of basic technologies, product technologies, and manufacturing techniques." In North America, sales of U.S.-made ball bearings and rod end bearings into the aircraft and aerospace markets continued strong. The domestically produced New Hampshire Ball Bearing division products sales were up, while sales of other Minebea imported bearings were down. Sales were essentially flat at ¥28.6 billion ($246.2 million), but operating income rose more than 25% to ¥1.9 billion ($16.4 million). European sales of ball bearings, rod end bearings and other products were generally strong as the region continued to experience moderate economic growth. Sales were up 15% to ¥14.2 billion ($122.2 million), and operating income up 8% to ¥794 million ($6.8 million). Asian markets, including China and Japan, continued very strong growth trends. Sales in Japan were up 6.6% year on year, to ¥41.8 billion ($359.8 million), while operating income reversed its minor loss in 2005 to post ¥4.8 billion ($41.3 million) profit. The other Asian markets, particularly China, were extremely strong, led by higher demand from the IT industry and for bearings to the home appliance industry. Sales hit ¥79.4 billion ($683.6 million), up 5.3%, and operating income was up 3% to ¥5.9 billion ($50.8 million). As a market, Minebea said Japan is "challenging," because many of its customers and their related suppliers are shifting manufacturing resources to lower-cost areas of China and parts of Asia, "placing us in a severe business environment." The company is countering the tide in Japan by reinvigorating its sales operations there. Looking forward, Minebea said the Machined Components business will continue aggressive sales efforts for ball bearings into the household electrical appliance, automotive and IT equipment industries, all of which are experiencing strong and steady growth. Economies of scale from higher sales will help further cost reduction programs, further improving results. In addition, Minebea said the market for rod end bearings in the U.S. and European markets is particularly strong and that strength should continue.