Nidec Corp Adr

Now it's time for us to start the presentation on NIDEC Corporation's financial results for the first half of fiscal year 2023. First, please make sure to turn off your mobile phone or switch to silent mode. Thank you. Presenting the company's financial results are as follows. mr shigenobu nagamori representative director chairman and chief executive officer mr hiroshi kobe representative director president and chief operating officer Mr. Mitsuya Kishida, Executive Vice President and Executive General Manager of AMEC Business Unit. Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer. Mr. Masahiro Nagayasu, General Manager of Investor Relations and CSR Promotion Department. That is all. In today's presentation, these executives representing NIDA Corporation will provide an outlook and details of the company's financial results for the first half of fiscal 2023. After that, the floor will be open up for questions. This conference is planned to last until 1130. Thank you. Thank you very much for gathering at this conference. despite your busy schedule. I am Kobe, the president of the company. Mr. Samara will present our company's financial performance in detail for the first fiscal year of 2023, and Mr. Nagamori will explain the details of the company's performance. Then the floor will be opened up for questions for us to be able to answer. Now, Mr. Samara, please start your presentation. This is Samara speaking. I would like to give you a brief outline of our performance for that brief period. If you take a look at the slide three, first half net sales stood at the record high of 1.160.7 billion yen. Apprentice profit was increased 21.1%. and operating profit ratio was 10.0 percent. The first of operating before income taxes increased 22.8 percent to 144.4 billion yen, and profit attribute about the owners of the parent increased 22.4 percent to 106.1 billion yen. When it comes to sales and all the operating related ratio, were all record high. And now, here in this time, sales and other operating-related figures were record high as well. But the annual forecast remains unchanged. That is all from me. Now I'd like to give you the details of our financial performance for the first half of this fiscal year. Please take a look at slide four of the document. We have four main business categories. When it comes to small precision motors, compared with Q4 of 2022 fiscal year, we hit the bottom there. And in Q1 and Q2 of this fiscal year, we made a recovery. When it comes to this, particular business segment, we increased our prices and it was delayed. But this process was almost completed by the end of September. On a quarterly basis, we made a profit of 10 billion yen, approximately. That's the type of structure of this small precision motor business. When it comes to the sales, used to be 360 billion yen in total. That's the target we need to go back to. And we are expecting to achieve that goal. There are some new products in this area. We like to grow this business with these new emerging products. When it comes to automotive business, I believe this is one of the most paid attention to areas. We have a business strategy in place. We have changed it. First of all, we have focused on certain countries, in other words, China, We have deeply dependent upon the country so far, but now we have diversed our interest to Japan, the United States, and Europe. We have received many inquiries from these regions and countries. Profit recovery is the most important task that we have. There are quite a few companies that are in deficit in competition with us. The competition over a product's performance is not there yet. We are competing over prices in China. And these competitors are in deficit constantly while competing with us. Such a price-based competition is not something we are used to. It's not necessarily maybe healthy. We have been in a competition. And sometimes some competitors are enjoying 5% profit, others even more or less. We need to recognize the values of other companies with each other. And that's the type of competition we should be in. We launched in June 1 in the past. And at the most, they're at the break-even point. Currently, we have not accepted orders for Gen1 products, even though they do come to us. Basically, we elect a cheap operating profit ratio target of 15, 1.5%. And we elect to compete with other companies to be able to generate at least 15%, 1.5% operating profit ratio I cannot give you any names at this moment, but in Japan there are some OEM manufacturers. We are going to receive orders from an OEM manufacturer in the country. Instead of having many inexpensive products orders, And we have had production capacity. With such a system in place, we won't be able to foresee a much brighter future. Therefore, we decided to decline those offers for inexpensive products. We would like to secure profit first. We would like to be focused on generating profit. Starting next April, we're going to have NEP in Europe to be consolidated into our NIDA Group's performance. I'd like to give you figures in detail later in this conference. In addition, we have Japan, US new customers. Compared with current business partners, we have better unit prices. And we shouldn't generate any more deficit while we try to increase our production. In order to continue to win going forward in a business, when it comes to performance, we are a specialized motor manufacturer. compared with other competitors' performance, product-wise, our products excel them. We're not going to discount our products anymore. Because when it comes to components that we use We're going to use some of the components that are manufactured in China. It is okay, according to our customers, for us to continue to use China-made components, but we need to make some changes for that too. And the local production, local consumption is very important in China. When it comes to Japanese customers, they want us to produce components in Japan. So when the production size is right, we will produce those components for the customers in Japan. When it comes to United States, American customers, we will produce our components products in Mexico. It may not be right now, but in the future, we would like to be able to achieve the operating profit ratio of 15, 1.5%. That's the type of operating profit ratio that we need in order to avoid generating deficit. We like to avoid negotiation for lower prices when it comes to our products. It has been 50 years since I founded this company. It has not been really profitable to be in such a type of price reduction type business. We have never tried to reduce our mortars prices And all those competitors had to withdraw from the business. Because of that, we have been able to achieve profitability. Performance has not been so much of the focus, but the price has been people's focus. In such a market, we tried to reduce our price to the best extent possible. We still needed to make money. If we cannot make money, we shouldn't be in such a business. Unfortunately, we have some customers who have been giving us inquiries, orders, and we have negotiated with our Chinese customers to decide on appropriate level of prices for us to sell our components to our customers. That's the direction we're going into. We are selling Gen 2 and Gen 3 prices. going to reduce the prices of these new emerging products, but we will make sure to secure a healthy profit. We will review all the designs and everything else in our products. The performance will not be declined, but this is a very new market. at this moment it is not wise for us to try to reduce our price components and products prices in the end in all cases we have became we have become the worst leading manufacturers and the details of this area will be explained by our executive vice president in this area when it comes to appliance commercial and industrial products I have purchased Emerson's businesses on three different occasions. We have launched a lot of reforms when it comes to people and others, and top executives are there. We have new business units called ASIM and Moen. Both of these business units are... under my operation over the past 10 years or so, and they all know, do understand index policy. And they have launched many new products, and they are enjoying a very good profitability. They are making sure to achieve at least 15%, 1.5% of their management is very stable. And their profitability in Q1 and Q2, there are some seasonalities. Still, their profitability is going toward 15%, 15%. When it comes to slide 24, this is very important for our future profitability. When it comes to large industrial motors here, This is part of the infrastructure business in the United States and other places. And many parts of the infrastructure is being replaced with new ones for the next 10 to 15 years. And these were originally built in 50 years, and now it's time for replacement. On the other hand, we have some strict issues, serious issues such as CO2 emissions. motor's efficiency is in question. And in slide 24, you can see the market 2.5 trillion yen, and that's the size of the market. There's induction motors and others included in this market. Over the past years, I have researched in this area. This is one of the best areas that we are truly best at. We have brushless motors, and we have induction motors. Those high-efficiency motors are here, and they are now brushless already. Now, finally, my ideal is coming to reality. High-performance motors. Now, they are here. It has taken a long time, but they are here. And Shinra is the brand that we have for this product. But two years ago or so, this was introduced into the market. In the United States, technological innovation is already taking place, has received three major technological innovation awards in the United States already. And you can see the performance related differences between conventional motors and this one. And this is 40% smaller than the conventional ones, as you can see, among other features. This area, has had only 3% per year when it comes to profit. Now it's now up to 18%, 8% when it comes to 20% in a small circle here.

And you will see the market environment here. Nidec has number four in market share up until now. Now with Sinra Motors being launched, I think, We have been able to take away shares from our competitors all at once. And in FY 30, the market size is expected to grow to about 5 trillion yen. And we believe that we will be able to take more than half of that market share. So you know, the 18% today will increase to about 19% in margin. So the profitability of appliance and commercial industrial segment is increasing and becoming stable. And we're looking at this on a long-term basis as well. The induction motor market, as for the, you know, they still have a very large size motors. The Tesla market, new motor is using induction motor and this is the conventional induction motor so they're not using a very highly efficient motor but with the technological innovation I think we will be able to capture number one, overwhelming number one market share in the world, and I think our profitability will exceed 20%. And it's already implemented in the market. So that is why with products that are actually monopolizing some of the markets in the United States, we are able to see further growth in this business segment for appliance, commercial, and industrial, and we will also enhance on profitability. The motor industry, like I said, For example, in the infrastructure segment, they use a lot of large motors, but there's a lot of energy, electricity consumption here, and with this size, there's so much difference, and the market for induction motor in the world will change quite significantly. So for airlines and commercial, especially for industrial, I think the profitability structure will change quite significantly for the industrial segment. So induction motor used to be cheap and because it's easy to build and they thought it was good, but because efficiency is so bad, and so in terms of CO2, It's not compatible. So that is why the specification is changing. So there's really no choice. They are no longer able to enter the market unless you have that IEE specification standard. And we are actually meeting all the way up to number fifth IEE. So the situation is changing. quite significantly. And it's not just increased sales, but also better profitability. And this is a very large change that we're seeing in the motor segment. And also, this area, we're implementing new products like, for example, the flying cars from 2026, we're expecting to launch this. And we have already placed the order for the first manufacturer. This is at 150 million. I think this will come down to about 2 million in the future. And also, in terms of investment in this area, in India, there's a very large plant. So I think there's a lot of conversation. To have a conversation in one particular country or region will pose a lot of risk in the future. So often, you know, if you're considered to be a company with a great dependency on a particular country, then that's actually problematic. So we are looking at, you know, Vietnam. So the mainstay will be in India and also the United States, Mexico. So there will be large investments in those regions, countries. That's the direction. So in the world, we want to spread out our production bases And we're also seeing customers that want to have manufacturing bases in certain areas. So the idle plants we're utilizing in Japan because customers want to have it built in Japan. There's a request from customers asking for collaboration. So there are about three plants which we are actually trying to resume in Japan. So we can see a lot of different types of risks in the future. the company needs to make sure that we're able to deal with these risks. So whether it be the manufacturing basis or whether it be the sales basis, we need to make sure we scrutinize so that we can mitigate risks in terms of manufacturing and sales. So this would be different from the way we have done in the past. And next is machinery. Now, this is affected by global trend, but we actually advancing to machinery tool. This most recent case would be Takisawa. We have actually did a tender offer to this company, and we're almost done with this. But most of the large machinery tools have already been included in our lineup, including lathe. And there's a little bit that we're still missing in our lineup, but we will try to add on to that with that. And then we have a company called OKK. This used to be a company that was booking large losses. But I think Mitsubishi, we have acquired this company and we have been able to make a lot of profit, like 18%, same with Takisawa as well. So we think that we can rebuild this company in the short term and generate large profit. And as for press machines, We have been doing it from before, but we're beginning to see increased demand, especially EV motors are very large and therefore uses a lot of press machines. So this is in the machinery automation business unit. So we're looking at press machines and also reducers, gears. And the robot business performance isn't doing so well right now, so it's not as good. But the lines before and after the press process, we have acquired it with M&A. So we have been able to enjoy great competitiveness So I would say the greatest challenge we face today is even for Otto, the traction motor So other motor businesses, aside from traction motor, is also doing well. It's starting to recover. So brake motors, power steering, they're also performing quite nicely. We're beginning to see nice profits generated. And also traction motor, this is about running. We need to make sure that strategy doesn't go wrong here. And of course, in my past, my track record, I have never backed out of anything like this, especially at a degree like this. Whenever I started, I want to make sure I finish it strong. So, of course, you know, we have to adapt to the market, and there's a way we need to compete according to what the market, the environment is at that point in time. But if we do that, we can be strong. So, for Otto, I want to say at the outset that this year, as for traction motor, we are expecting to lose about 15 billion on an annual basis. We already generated that amount. on an overall basis. So 15 billion by the end of this fiscal year in March, we will develop different types of models. So we are looking at a loss of about 15 billion. We are estimating that, but with that, It doesn't mean that overall AMIC business will be loss-making. That's not the level, because we have the brake motors and other types of motors from conventional business, which is generating profits. So I think we should be able to offset that loss of 15 billion. And also another major change next year is that, you know, this year we were expecting to be profitable in traction motors, but unfortunately we're looking at a conservative loss of 15 billion. But next fiscal year, NPE will be consolidated. So my vice president will explain a little bit more about what would happen to this. So my name is Kishida, and I'm responsible for the automotive products business. So if you could go back to page 18. As we had explained earlier, at this point in time, with regards to the China business, we're seeing a rapid price destruction. And so we are intentionally trying to restrict orders so that we can be more profitable, especially our joint venture partner like NPE and Huanzhou. We want to make sure that we will accelerate our orders from our partners. That's our policy. And if you look at the current number today, you know, how solid are they? So as of today, the firm orders, we have revised it to the firm order numbers. And going forward, we will do the same. We will be very severe with our forecasting, and we will engage in order-taking from that. In 2025, That's the timing which the market would explode. We still have time for that. So how are we going to really finalize our strategy for that? I think that's really critical. So from 2024, NPE's number will be added to our consolidation. So we're looking at And then this will go to 2 million, 4 million. And our target is to achieve 10 million. So there's no change with our target. But we want to make sure that we're profitable in the China business and accelerate order taking in Europe and as for Japan. We want to make sure that we're able to increase business in Japan as well. So that's our target for 24-25. So if you could turn to page 19. So on a monetary basis, this is how it looks when it's translated. So from 2023 to 2025, as for traction business, we're looking at flat.

After 2024 fiscal year, NPA will be consolidated into a group of 24 million, and we are going to achieve 500 million currently. 387.2 billion yen is in our target. And we're going to do our sending our models into these vehicles. And we would like to expand our sales based on the sales of these models into these vehicles. And there are some reasons that this where this forecast is coming true. But when it comes to China, where price competition is extremely tough, What we need to do is we need to focus on production productivity, work productivity. In 2024 and onward, we're going to have a new joint venture with a new partner. Supply of components to Europe is something we're going to launch as well. That's part of this green section, part of the green sections on the slide. And external sales of the components, and that's another chance in business we would like to make come true. This battle has just begun. We are at just a starting point of this battle. That's one thing that I'd like to reiterate here. and we have investment in research and development. Please go back to slide 17, Generation 3 or Gen 3. We have Gen 1 and Gen 2 in place. We are doing our business with these models, Gen 1 and Gen 2. It's about 70% and 30% respectively in our business, automotive business. Towards June next year, we elect to launch Gen 3 in the market. This is not really our random target of entry into business. This is an automotive manufacturing plant with GSC, our partner. Here you can see the XE1 model. 7 in 1 is what we are going to start our business with. 7 includes these three major components, inverter, motor, and gear. We have IPS included in it. And here the PTC heater is also included in it. We have these are all heat source related components. These will be part of our inverter. That's how it's called, seven in one. ECU will be included in it. This is how we like to slash our cost as much as possible. As has been explained by Mr. Nagamori, we will produce and complete all the business in China, in China, for China, in China, so to speak. This is a very important point. 35% of materials are for inverters. We need to reduce the cost for that. When it comes to our customers, they are requesting us to use semiconductors produced in China for their products. We have found partners for that so that we can develop inverters in China. so that we can produce Gen3 products in China with these inverters on. That's part of our additional research and development investment for this fiscal year. That's part of our profit and loss statement. That's one thing that I wanted to add. That is all from me. Thank you. I would like to open the floor for questions, if that's okay. Thank you very much. Now I would like to open the floor for questions and answers. If you have any questions, please make sure to raise your hand, and we will hand over the microphone to you. Does anyone have any questions on the floor? This is Takayama Magoldima-Sacks. Thank you. My question is regarding China's EXO. The strategy has been changed, I believe. When it comes to Gen 3, with the Chinese market going to remain unchanged, are you going to continue to have a price competition? Do you have any risks for any changes? Do you have any ultimate form that you have in mind when it comes to these products that are used in China? What is the ultimate form going to be for these products? I'd like to ask this question to Mr. Nagamori and others on stage. When it comes to the traction motor strategy that we have as a company, if we take a look back, We have made some mistakes. I'm not going to say anything about the people who are no longer with us. But back then, one of them wanted to take everything in his power to make a decision on the automotive business of NIDIC. And delegating the responsibility was my mistake. When it comes to motors, our company is the world's leading motor manufacturer. We have purchased new companies. Inverter is the critical component. We have made a major mistake in the inverter strategy. We have components from China. We have components from Europe. We wanted to use those products in these regions in our country. We were performance focused. If you disassemble these components at 25% profitability for motor gear, 15% inverter, 25 to 30% in deficit, that's the inverter. So it is clear that where we had a mistake in our strategy. It is not right to purchase other components to assemble these components into one inverter and that's not really meaningful. I'm talking about the Chinese market here. For Chinese customers, we should use all the China-made components. 2,000 renminbi can be reduced to a lower price, like 1,200 renminbi. That's how much you can reduce the price in China by using China-made components. And we were given permission to use China-made components for Chinese customers. There are some quality issues, but even if they happen, that's not going to be a problem for a motor. Those are the problems with inverters, not with motors. We have a very good inverter manufacturer that is very reliable. And we decided to outsource the production of this inverter production. And their products are very inexpensive. We need to be competitive. We need to use competitive components in China. That's how, by switching the strategies like that, we can increase our profitability. inverter has a loss of 25% to 30%. In RMB, the price was 2,000 RMB, but additional costs are associated with such a problem. So far, when it comes to inverter business, we are yet to be capable enough to be able to produce inverters on our own. We cannot rely on our service to make everything, including all the inverter components and the inverter itself. When it comes to Japanese customers and European customers, the situation is different. They are purchasing our products at a higher price than they do in China. When it comes to MPE, next fiscal year, sales are expected to be 250 billion yen, including currency exchange rate changes. NPE does not say it is okay for us to use China-made components for investors. We can expect a 5% to 80% operating profit ratio from the beginning when it comes to NPE joint venture. That's the goal, the threshold that has been set between us and NPE. The price reduction aggressiveness doesn't exist in our European customers. They are willing to pay the price despite some problems that we face. Same thing can be said about Japanese customers. People understand what products are suitable for them and what products are not suitable for them. So when it comes to performance, some customers were used to make these products on their own. But they are now attracted to use our products because our products seem to be of better quality than theirs. It is not wise to do a loss-making business. Performance has to be considered in a right way. And price has to be set properly based on the performance. That's the type of customers that we are looking for. Still, the Chinese market is expected to grow even larger than it is now. There are quite a few Chinese companies there in China. Some of these companies are withdrawing from their market. numbers are rapidly increasing we need to be very selective in choosing our customers so that we can increase our overall profitability for a certain period i believe it is okay for to be in a deficit but a long-term deficit is not really a business that should be involved in that's not part of our nidec policy at least we have many customers in 2025 or so. 2025 will be a critical point in my opinion. And then there is some customers are coming to us because their production was not really right when it comes to 2025 as the critical turning point. The first step is to secure a very healthy profitability. When it comes to power storing unit and brake motors, we have been in this business over the past 20 years. And among the manufacturers that are supplying these components, there are quite a few companies that have to recall their products from the market due to some problems. But that's not the case with us. That has never happened to us at Nidec. We are reliable, and our customers are not aggressive in a price reduction on us when it comes to these customers. And we clearly state that we cannot do business with certain customers at a certain price range if that range is not acceptable to us. We are making products that make the car turn, stop, and run. Traction motors. is the unit that makes the car. It's for the car to be able to make very good turns. Generating a deficit constantly is not really good at all. Sometimes you have an increase in production productivity or volume over the past three months or so. We need to secure profit so that we can, it is not really my concern about receiving or being subject to criticism in investors' conference like this one. We need to secure profit. I'm not really answering your question at all, I believe, but that's what I wanna say here, your response to your question. When it comes to Stellantis that you have referred to, it says 8%. This number here on the slide doesn't cover that much. What is the secured amount of money with profit and sales for Stellantis? And these are all in yen, Japanese yen, 120, 130 per euro. Euro is currently 150 per yen. That's the difference in the currency exchange rate. Can you answer the question, Mr. Nagayasu? This is Kishida speaking. I'd like to answer your question. 130 yen per euro. Please make sure to use the right currency. I'm talking about in terms of euro. So 7% to 8% can be secured. Yes, that's right.