Japan bearing orders: bumping along the bottom in August 2012

by SR on October 17, 2012

Japan bearing book-to-bill ratio (x)

Move along, nothing to see here

There was some interest in the bearing order figures that are released as an adjunct to the Japan machinery orders on which I commented recently. Like the main machinery orders, there has been “no respite”. Orders in August 2012 bearing orders were very poor, falling 20% year-on-year and 15% month-on-month to 46.6 billion yen. The book-to-bill ratio (ratio of orders to sales) fell slightly to hit 0.94x, a weak figure (see chart above). For the January to August 2012 period, orders have reached 434.7 billion yen, down 1.8% over the same period in 2011, as shown in the chart below. Note how the red line (2012 orders) turned below the blue line (2011 orders) in August.

Japan bearing orders, cumulative year-to-date (billion yen)

Sales of bearings rose to 449.6 billion yen, up 1.1% over the same period in 2011. That’s because the bearing suppliers have been chewing through their order backlog, a process that has been supporting sales but that has led to a plunge in the backlog. As the graphic below demonstrates, the backlog is back down to 142.1 billion yen, a figure not seen since November 2004.

Japan bearing order backlog (billion yen)

What to do with bearing stocks like JTEKT, NSK and NTN? I don’t see a strong rationale for holding any of them. None of the three are pure auto parts plays, though JTEKT is closest so the market tends to treat these stocks as hybrid auto/machinery plays at a time when avoiding machinery it likely the best stance. All three are involved in the allegations of price-fixing in the Japanese bearing market. If China or capex is going to turn around, other stocks will react earlier to the good news before these three.

Japan bearing stocks share price performance year to date (%)

Previous post:

Next post: