Nidec Corp Adr

Thank you very much for joining NIDEC conference call. My name is Abe, Chihara Abe, General Manager, Institutional Assets Department of Mitsubishi UFJ Morgan Study Securities. As we start this conference, I'd like to ask you to make sure all of the materials are ready in front of you. If not, please download the files on NIDEC's website right now. Please note this call is being recorded and the conference materials will be posted on NIDIC's website for the coming week for those investors and analysts who are not able to join this call. Now I would like to introduce today's attendees from NIDEC Corporation, Mr. Akinov Samura, Senior Vice President and Chief Financial Officer, and Mr. Masahiro Nagayasu, General Manager, Investor Relations. At first, Mr. Samura will make a presentation. After his presentation, he will move on to Q&A session and then Mr. Samura and then Mr. Nagayasu will answer your questions. Mr. Samura now presents NIDEX fourth quarter fiscal 2022 results, future outlook, and then management strategy. Mr. Samura, please go ahead.

Good day, everyone, and welcome to today's conference call. I'm Akinobu Samura, Chief Financial Officer of NIDEX. I'll be your main speaker today and answer your questions with the help of Mr. Hironari Novichi as an interpreter. Please see slide 3 for the fiscal year 2022 full year results. As shown on slide 4, net sales stood at the record high of 2,242.8 billion yen, 16.9% higher year-on-year. Operating profit decreased 41.3% a year to 100.1 billion yen due to structural reform expenses of 75.7 billion yen. Profit before income taxes decreased 29.1% a year to 120.2 billion yen. after foreign currency gain of 20 billion yen posted. Profit attributable to owners of parent decreased 66.9% year-on-year to 45 billion yen after income tax expenses of 75 billion yen and losses from discontinued operations of 2 billion yen. We will continue WPRX, the drastic reform of profitability, and aim to make a V-shaped recovery in fiscal year 23. On slide five and six, you have step charts showing the net sales and operating profit year on year and quarter on quarter, respectively. As you see, slide five, the operating profit declined roughly corresponds to the structural reform expenses in the period. As we also see in slide 6, the quote-unquote earnest sales decline roughly matches the exchange rate decline. And Q4 operating profit was slightly down before the effects from exchange rate and the structural reform expenses. Please see slide 8. For the fiscal year 23 forecast, we are aiming for the net sales of 2 trillion 200 billion yen, operating profit of 220 billion yen, and operating profit margin of 10%. Please see slide 10. Out of the five executive vice presidents appointed by the nomination committee in March, A new president will be selected by the same nomination committee in April next year. The new president succeeds to the management position with four-year term of office as president and another four years as chairman. When the new president is selected in April next year, the current CEO, Mr. Nagamori, is going to become representative of NIDEC group and board director, while the current CEO, Mr. Kobe, will be promoted to CEO of the company. Please see slide 11. We exceeded the net sales of 10 billion yen in fiscal year 1985. And then 12 years later, we hit 10 times higher net sales of 100 billion yen sales in fiscal year 1997, 17 years later, in fiscal year 2014. We achieved another 10 times higher net sales of 1 trillion yen. Last fiscal year, we exceeded 2 trillion yen net sales, and going forward, We are going to increase sales and profit through organic growth and M&As with a focus on expanding markets and aim for net sales of 4 trillion yen in fiscal year 2025 and in fiscal year 2030, that is 16 years after we hit net sales of 1 trillion yen in fiscal year 2014. We are aiming for another 10 times higher net sales of 10 trillion yen. Please see slide 12. NIDEX midterm strategy vision 2025 remains unchanged. That is organic sales target of 3 trillion yen. It's operating profit margin of 15% and M&A sales target of 1 trillion yen. Please see slide 13. We are aiming to become number one automotive system company by anticipating the strong electrification demand boosted by CASE or connected autonomous sharing electric mobility trends. In the area of EV traction motors, EXL business is expected to become profitable in fiscal year 2023 through introduction of Gen 2, whose targeted replacement ratio is over 70% and cost reduction of Gen 1. In addition to this, the market areas will be shifted from China-centric to global, including Europe and North America. And the growth of sales and profits will be promoted strongly through focus on traction motors only and other components in addition to e-axle. In the organic auto area, NIDIC will capture increasing demand for electrification and gain further market share for motors for electric power steering and electric brake despite slower growth in the global auto sales. Please see slide 14. The sales of EVs using Nidex EXO made a rapid growth of 90% in fiscal year 20, 140% in fiscal year 21, and 138% in fiscal year 22, year-on-year respectively. The number of models has reached 15, with one new model added in the March quarter. Please see slide 15. In China, the share of NEB, or New Energy Vehicle, including OCEBs and PHBs, is seeing a prominent increase until the current year, 2025. While in Europe, It will be after calendar year 2025, when a remarkable increase of NEB share is recognized. The global market is expected to see NEB share of 38% in calendar year 2030. Please see slide 16. Out of an index forecasted on year self-sales volume of 949,000 units, this fiscal year. 71% or 812,000 units will be Gen 2. 26% will be value engineered Gen 1. We are targeting 10 million unit sales of e-axles in fiscal year 30 by expanding into the European markets, et cetera. with a focus on profitability in fiscal year 23 onwards. Please see slide 17. We are targeting EV traction motor business sales of 500 billion yen in fiscal year 25 by supplying traction motors only and other components in addition to e-axles. Please see slide 18. The operating profit and operating profit margin dropped significantly in the second half of fiscal year 22 due to massive structural reform expenses. However, we are preparing for a V-shaped recovery in fiscal year 23 by building a lower cost structure. Please see slide 19. With the organic sales target of 600 billion yen vision 2025, a small precision motors division is transforming the portfolio by actively working on firstly small automotive motors for electric two-wheeled vehicles and small EV motors that are less than 30 kilowatts And secondly, thermal solutions such as cooling fans and our subsidiary CCI's products. And thirdly, data home appliance motors. In HDD, we continue to focus on data centers and servers to improve the product mix for higher profitability. Please see slide 20. A small pressure motor division is preparing for mid-term growth while implementing WPRX for short-term recovery. Please see slide 21. We are going to realize high growth by capturing green innovation demand created by replacement with high-efficiency motors. As mid-term growth drivers in the home appliance area, we offer brushless DC motors for air conditioners, washing machines, dryers, dishwashers, and compressors for refrigerators to meet the increasing demand for replacement with high-sense motors. In the commercial area, We continue to supply motors used for commercial air conditioners and robot modules used for e-commerce. In the industrial area, we are focusing on battery energy storage solutions, essential systems in the renewable energy industry, and a joint venture business with Freya, a semi-solid lithium-ion battery manufacturer. Please see slide 22. We keep pursuing profitability improvement, and it continues to slow down in the home appliance and commercial areas. Please see slide 23. We have created a new business unit called Machinery and Automation, starting from fiscal year 23, with Nidec Drive technology as the core company. This business unit handles reducers, press machines, and machine tools and is going to drive high growth of machinery business and aiming for net sales of 500 billion yen in fiscal year 25 and 1 trillion yen in fiscal year 30. As mid-term growth drivers, we are aiming to gain bigger global market share of strain wave gears for collaborative robots. As for planetary gears, we set a new production base for Europe by utilizing unused facilities of Nidec motors actuators in Spain. In press machines, we are focusing on anti-plastic demands and EV demands against the backdrop of a shift from plastic to canned bottles and growing demand for EVs, and launching full product lineups from small and high speed to large machines, and introducing related equipment. In machine tools, we are going to expand the product lineups and the market areas with a focus on the Chinese market to seek high growth. Please see slide 24. The operating profit ratio of other product groups remains stable at a high level of over 15% since fiscal year 21, with the exception of the March quarter of fiscal year 22. Please see slide 25. Our subsidiary, Nidec Components, former Nidec Copper Electronics, completed the acquisition of all the shares of Midori Precision at the end of last month. Making Midori Precision a full-owned subsidiary of Nidec Components enables the two companies to develop products jointly based on each other's technological strengths. And the NIDEC group to enhance its product lineup of potential meters and encoders. In addition, via this stock acquisition, utilizing NIDEC components global sales channels, the two companies will deliver products across the world to meet the global demand for sensors. Going forward, NIDEC components will make gross investment in middle positions in a timely and appropriate manner to make the positions a sensing business, a major pillar of the NIDEC components businesses. Lastly, on behalf of the entire management team, we would like to thank our customers, partners, suppliers for their support and commitment, as well as our shareholders. At this time, we would like to open up the call for questions.

Thank you very much, Mr. Samura. Now, we would like to turn to the Q&A session. Mr. Samura and Mr. Nagayasu will be pleased to answer your question. Today's Q&A session will be conducted electronically. If you would like to ask a question, please press the star key and number one on your touch-tone phone. Again, please press star and number one if you would like to ask a question. If you would like to cancel your request, please press star and number 2. We will now pause for questions from participants. So today's first question is from Mr. James Passford from Aruma. James-san, please go ahead.