Nidec Corp Adr

Thank you very much for joining NIDIC conference call. My name is Chiharu Abe, General Manager, Institutional Safety Department of Mitsubishi UFJ Securities. As we start this conference, I would like to ask you to make sure all of materials are ready in front of you. If not, please download the files on NIDIC's website right now. Please note this call is being recorded and the conference materials will be posted on NIDEX website for the coming week for investors and analysts who are not able to join today's call. Now I would like to introduce today's attendees from Mr. Akino Samura, Senior Vice President and Chief Financial Officer, and Mr. Masahiro Nagayasu, General Manager, Investor Relations. First, Mr. Samura will make a presentation. After his presentation, we will move on to Q&A session, and then Mr. Samura will answer your questions. Mr. Samura now presents NIDEC's first quarter fiscal 2023 results, future outlook, and then management strategy. Mr. Samura, please go ahead.

Okay. Good day, everyone. I'm Akito Samura, Chief Financial Officer of NIDEC. Please see slide three and four for our first quarter results. As shown on slide four. you can see that the operating profit in each segment has recovered quite sharply in Q1. Please see slide 7. As quarterly operating cash flow keeps improving, we are targeting record high free cash flows in fiscal year 23. In summary on slide 8, net sales increased 4.8% year-on-year, to 566.1 billion yen. Operating profit increased 34.7% year-on-year to 60.2 billion yen, marking a record high on a quarterly basis. Profit before income taxes increased 51% year-on-year to 86.1 billion yen, after foreign currency gain of 24.3 billion yen posted, and marked a record high on a quarterly basis. Profits attributable to owners of parents increased 55% year-on-year to 64 billion yen, marking a record high on a quarterly basis. or ACI segment, which is one of our mid-term growth drivers, marked a record high. Please see slide 12. We are going to realize high growth by capturing a 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-efficiency 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 the joint venture business with Freya, a semi-solid lithium-ion battery manufacturer. Please see slide 13. A Moen stands for motion and energy that handles medium to large size motors, generators, drive and controls, elevators, robotics, infrastructure within ACI. Moen business is expected to contribute to increase in sales and profit of ACI in fiscal year 23. Please see slide 14. This slide illustrates four examples of solution business within Moen. Please see slide 15. The BESS business that I just explained on the previous slide is expected to grow sharply against the backdrop of energy crisis caused by Russian invasion of Ukraine. Under the current circumstances, we have a 7.4 gigawatt hour of BSS installed or in excursion in over 135 projects or 27 countries. We also completed establishment of a joint venture with Norwegian Freya battery last December, thus paving the way for a further growth of BSS business. Slide 16. NEDEC has made inroads to a new business of aerospace electrification within ACI. As you see on the left, we have announced an agreement to establish a joint venture company called NIDEC Aerospace to develop electric propulsion systems for the aerospace sector. The JV will develop and manufacture the electric propulsion system for electric vertical takeoff landing or VTOL vehicles to enter the urban air mobility market. Also on the right, NIDEC and the Japanese company SoftBank have jointly developed a lightweight, high efficiency and high reliability, actual flux type motor for high altitude Platforms Station, or HAPS. This newly developed motor also meets the specifications required for SunRider. The unmanned aircraft system developed by HAPS Mobile Inc., a subsidiary of SoftBank. The world's leading comprehensive motor manufacturer NIDEC stays committed to developing products based on these technologies to develop light, thin, short, small, high efficiency and highly controllable products and to offering at an overwhelming speed. Revolutionary solutions that contribute to the lives of people around the world. Please see slide 17. We have acquired ownership of HOMA Armature Works, a privately owned U.S. company from its founding family through our subsidiary NMC. HOMA has been a service partner that manufactures motors and generators and provides field service to oil and gas producers operating out of Louisiana and Texas. The end users of their services on and off shore during marine and wind-renewable energy power generators and manufacturers, including Kato Engineering, Aeroisoma, and U.S. Motors, all of which are under the NIDEC umbrella. Through these acquisitions, NMC will be able to enhance its service offerings, including expanding its share within its own U.S. installed bases. and HOMA will be able to provide services to NMC's customers. Please see slide 19. We are aiming to become number one automotive system company by anticipating the strong electrification demand boost by CASE, or Connected Autonomous Sharing Electronic Mobility Trends. In the EV area, the EV traction motor related business is expected to become profitable in fiscal year 23 through introduction of Gen 2, whose targeted replacement ratio is over 18%, and by reducing the cost and shipment volumes of Gen 1. In addition, 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-axles. In the organic oil area, NIDEC 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 20. With a battery EV related business made profitable for the first time in the June quarter of fiscal year 23, we will strengthen the business foundation by prioritizing profitability. Please see slide 21. We are targeting battery EV-related business at 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 22. NIDIC and Lunasoft Electronics Corporation have agreed to join forces on the development of semiconductor solutions for next generation E-axle called X-in-1 system that integrates EV drive motor and the power electronic for EVs. Today's EVs are increasingly adopting the three-in-one unit called e-AXO, which integrates motor, inverter, and gearbox to realize high performance and efficiency, as well as smaller size, lightweight, and lower cost, and to accelerate vehicle development. EVs are also integrating power electronics controls such as DC-DC converters and onboard chargers. EV manufacturers in advanced markets such as China have developed an XIN1 platform that integrates multiple functions, accelerating the adoption in many vehicle models. As XIN1 integrates multiple functions and increases in complexity, and maintaining a high level of quality in vehicles becomes challenging. Thus, developing preventive safety technologies such as diagnostic functions and failure predictions is crucial for ensuring safety and security in vehicles. To address this challenge, the two companies agreed to combine Nidex motor technology and Renesas semiconductor technology to jointly develop a highly reliable and high-performance proof-of-concept, or POC, for the XIN1 system. The POC is designed to support the industry's highest performance and efficiency, as well as smaller size, lightweight, and lower cost for the X-in-1 system. Building on the POC developed through this collaboration, NIDESC plans to rapidly increase, create e-access systems to add to its portfolio and wrap up to mass production to lead the ERC market. Please see slide 23. We are targeting a B-sharp recovery in fiscal year 23 after posting large structural reform expenses in the second half of fiscal year 22. Please see slide 24. We have started to mass produce small automotive motors in addition to capturing demand for energy efficiency and thermal management. As mid-term growth drivers, we are going to transform the portfolio firstly by actively working on small automotive motors such as electric two-foil vehicles and small EV motors that are less than 30 kilowatts. Secondly, by thermal solutions such as cooling fans and our group company CCI's products. And thirdly, by digital 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 28. A newly created business unit called Machinery and Automation is up and running from fiscal year 23. with Nidec Drive technology at the core company. This business unit handles reducers, press machines, and machine tools, and is going to drive a high growth of machinery business and aiming for the net sales of 500 billion NEM in fiscal year 25 and 1 trillion NEM in fiscal year 30. At mid-term growth drivers, We are aiming to gain a bigger global market share of strain waves gears for collaborative robots. As for planetary gears, we set a new production base in Europe by utilizing unused facilities of Nidec motors and 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 a growing demand for EVs, and launching product lineups from small and high-speed to large machines, and introducing related equipment. In machine tools, we are going to expand product lineups and market areas with a focus on the Chinese market to seek high growth. In addition to this, we announced commencement of tender offer for Takisawa machine tool. 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 will move to the Q&A session. Mr. Samura and Mr. Nagayasu will be pleased to answer your questions. Today's Q&A session will be conducted electronically. If you have any questions, please press the star key and then number 1 for your touchtone on. Again, please press star key and then number 1 if you have any questions. If you would like to cancel your request, please press star key and number 2. We will now pose for questions from the participants. The first question is from the Mr. James Parsford, Arma Capital. James, please go ahead.