Minebea Co., Ltd. (Japan) reported results for April through September 2002, the first half of its fiscal year ending March 31, 2003. Minebea is a diversified manufacturer of industrial and electronic products. They are the world's largest manufacturer of miniature and precision instrument bearings, with 39 facilities in 10 countries. NMB brand bearings have a 65% world market share of ball bearings under 22mm.

First half net sales were ¥ 137.2 billion, flat from last year but lagging initial forecasts by 3.7%.

Operating income, ¥ 10.1 billion, was 19% behind the ¥ 12.4 billion earned in the same period a year ago. The result was still ahead of forecast by 1.8%.

Net income, however, fell 30% short of projections, at only ¥ 2.5 billion. Last year, the company netted ¥ 4.3 billion, for a 42% drop.

Bearing-related product sales were ¥ 60.3 billion, down 3% from a year ago, but slightly ahead of this year's forecast. One bright spot has been ball bearing sales for electric motor applications, up 18.4% so far this fiscal year.

By region, sales in Europe are down 6% from a year ago, Japan is down 12%, North and South America are down 1%, while sales to Asian countries are up more than 16%.

Due to continued soft market conditions, Minebea has now revised all of its fiscal year forecasts sharply downward. Sales are now expected to fall off 2.6% from last year and be 6% under initial forecasts, at only ¥ 272 billion -- ¥ 288 billion was initially forecast. Similarly, net income is now projected at ¥ 6.5 billion, more than 35% behind the initial forecast.

Sales of bearings and related products are now expected to be down 2% from last year, at ¥ 119 billion for the fiscal year. Sales of ball bearings are projected to hit ¥ 35.6 billion next half, up from ¥ 34.9 billion this half.

In miniature and small sizes, Minebea's goal is to sell 180 million bearings per month. During first quarter, it averaged 142 million, and 131 million in the second quarter. For third quarter, Minebea expects to average 140 million per month and 145 million per month in the fourth quarter. By March 2003, the company said it plans to be selling 150 million bearings per month -- 100 million to outside customers and 50 million for use in its own products.

Minebea is also pursuing a strategy of keeping its miniature and small-sized ball bearing sales up-market, leaving the high-volume, low-margin business to other manufacturers. Going forward, Minebea will continue to service the ball bearing "mid-market" for automobiles, PCs, air conditioners, fan motors, consumer electronics, vacuum cleaners and general electric motor uses. In the "high-end", it offers bearings for disk drive spindle motors and pivot assemblies.

The company is aggressively targeting its cost structure in bearing manufacturing. Over the past 18 months, Minebea has managed to reduce its ball bearing per-unit production costs by a surprising 13.6%. But it's an uphill battle for profits -- over the same period, market prices fell by 11%.