Nidec Corp Adr

Now, we would like to start the presentation on NIDEC Corporation's fiscal 2023 financial results. First, please turn off your mobile phones or put them on silent mode. NIDEC Corporation's representatives who are presenting the financial results are as follows. Mr. Shigenobu Nagamori, founder and executive chairman. Mr. Mitsuya Kishida, president and chief executive officer. Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer. and Mr. Teruaki Urago, General Manager of the Investor Relations Department. That is all. In today's presentation, these executives will present you with an overview of the company's financial results for fiscal 2023 that will be presented by Mr. Samura, and a strategic portion will be explained by Mr. Kishida. Then the floor will be opened for a question and answer session. Please kindly wait to ask questions until then. The meeting is planned to end at 11.30 a.m. Now, Mr. Samara, please start your presentation. I would like to make some statements first. Please. Thank you. If I may say, at the beginning of this conference, I'd like to give you some explanation here. From April the 1st, this fiscal year, we have a new president on board, and he is also serving as CEO. He has yet to become the board of directors. member that won't be until the general shareholders meeting in June. We have had so-called successor issue at our company. We have had this nomination committee. has gone through the selection process. We have had five members of the nomination committee, three of them from the outside members, and they unanimously agreed on Mr. Kishida to serve as the president of this company. This nomination committee is a very well-balanced committee. They made a very good selection in a very balanced manner. in a very proper process. He was a very good person that we have selected in the nomination committee. Mr. Kishida is a former Sony executive. He has spent a long time overseas. And also, he has worked in several different business projects. We have the President, the CEO over here, and he will be spending most of our time giving you an explanation. I didn't have to come here actually today, but I am here. But according to strong records by IR department, I'm here rather reluctantly. We made a financial announcement yesterday, and the details were already checked and written about by analysts. They seem to be interested in various new areas, and these analysts seem to be lacking proper knowledge about these industries, and many reports are not really accurate. Our businesses are in very different areas from these people's interest. And the explanations in these areas, on these areas, are not really accurate enough. And I have instructed Mr. Kishina not to use so many technical terms, but explain to everybody in a very easy and understandable way. If you have any questions, please let us know, and please try to gain your knowledge as much as possible so that you can have a proper understanding about our businesses. As far as I can see from the analyst reports, these reports are rather biased. That way, investors may make the wrong decision. Please keep that in mind. This is something that I was saying, like preaching to the converted. But as we give first to Mr. Samara, the CFO, we'll give you a presentation first, followed by Mr. Kishida. Thank you. Thank you very much. This is Samara speaking. I would like to give you an update on the financial report for fiscal 2023. Please go to slides number three and four. First of all, net sales were up 4.7% to 2.348202 trillion yen. It was the record high last year, and now we have more than 100 billion plus to that. Operating profit was up 63.1% to 163.106 billion yen. Operating profit ratio was 6.1%. This is due to the fact that we have made a strategic change in even traction motor business to be more profit-focused. According to that move, 59.8 billion yen was recorded as part of our structural reform expenses. This is not included in our presentation material, but if you included this, it's at 9.5% in total. Therefore, in the actuality, the profitability has increased tremendously from the prior fiscal year. Profit attribute about the owners of the parent, as you can see, increased as well. In addition to our sales, our profit before income taxes also stand at record high. Please go to slide number five. This is about an overview by a product group. First of all, top left corner, small precision motors. When it comes to the immediate issues, there are some seasonal issues. We have had some decline in operating profit and sales, but we have been eliminating a significant portion of fixed cost. And among other actions, they have increased and enhanced their profitability. When it comes to how they could drive, has bottomed out already. We have had new businesses such as water cooling modules. These are emerging as new businesses. We have these new spreads coming out. That's what the last fiscal year was about. Next, top right portion, automotive production. We have EV traction motor business, and we have recorded structural reform for the EV traction motor business. And all in all, the business was in a deficit, but the existing businesses were going very smoothly, and we were voraciously obtaining opportunities for future business expansion. When it comes to existing traction motor business, We are aiming for a profitability going into a positive territory as early as possible as we try to improve the business's profitability. Bottom left section, appliance commercial and industrial business. When it comes to this segment, both sales and operating profit account for about 40 percent of the entire group's sales and operating profit. This is the largest portion of our business. and this has improved their profitability significantly from prior fiscal year. We are aiming for a further improvement in the profitability of this business. Lastly, machinery business. The equipment investment is rather in a very harsh situation, but we have just Takisawa who joined our group very recently. They are now fully consolidated in our group. When it comes to machine tool business, we have had OKK and a former portion of Mitsubishi Heavy Industry Machine Tool Co., Ltd. They are all part of our NIDIC group now. We are making a structural reform happening in these newly joined members, and we have been selling land, and all we know, we have a significant increase in profitability. Please go to slide number six. This is year-on-year changes. When it comes to exchange, with the exception of excluding the currency exchange rate, et cetera, if you take a look at this vertically, small personal motor, less sales, more operating profit. Automotive, more sales and operating profit. And appliance commercial and industrial products, you can see a significant increase in operating profit, despite the slight sales decline. And you can see the sales were all in all very flat, but you can see the profitability has increased significantly. Please go to slide number eight. You can see the situation on a free cash flow status. If you go to the left section of the slide, you can see the quota two and three, we were rather low in momentum. In quota four, you can see we focused on inventory improvement especially. That was a situation in Q4. And free cash flow, 92.5 billion yen. And our record was back in 2020, 1118.6 billion yen. And interest-bearing debt was down. And on a net basis, we have been able to decrease our debt, which means a significant, very positive factor for our future growth when it comes to cash. Please go to slide number nine. For fiscal 2023, we have focused on improving efficiency here. In 2024, which is this fiscal year, we're going to continue to improve our efficiency. On the other hand, we are going to be making aggressive investment in growth for mid-term and long-term growth. Please go to slide number 10. This is our forecast for this fiscal year of 2024. Sales is projected to be 2.4 trillion yen operating profit, 230 billion yen profit ratio to reach 9.6%. Exchange rates, U.S. dollars, 145 euro, 155 yen per euro. and all the other information on the slide. That is all for the overview of our financial performance. This is Kishida speaking. I would like to give you important points about our individual businesses, and I would like to give you my thoughts on this company's future. If you go to slide number 11, you can see all the product different groups. Small President Motors, automotives, among others. First, I'd like to give an update on automotive business. Over the past two years, we have gone through various structural reform in Europe and elsewhere, and we have had this attraction about our business-related issues facing us. We need to have this large-scale, aggressive structural reform. That's what we needed over the past two years. We are now at a very great turning point in our business. We need to exercise our strengths so that we can help this automotive business continue to be a major pillar or column. That's what we regard this business as over the past two years. If we look back at the situation, especially in China, it is very unique. No one, no suppliers in the market was able to make a profit. That was a very unique situation there in China. And we made a structural change, a business shift that took place. And that's our part of a structural reform last year, last fiscal year. When it comes to this EV business, the industry structure itself is making some changes, and I believe this confusion is going to continue. That's my expectations about this industry. We have made a significant change in our strategy very quickly, so we were able to, I believe, minimize the impact of the industry on our business. we can make electronics-related developments and we are expected to have state-of-the-art technology to be included in our products. In that regard, we will continue to run the front line of the entire race in the competition. As far as our servers are concerned, we have made significant personnel changes. In 2024, fiscally, we are going to have this restart as a new automotive business. Secondly, When it comes to traction motor business, among others, we need to decide who we sell our products to and what type of products we are going to develop. We have various different options. Now we are going to selectively choose when it comes to who we are going to sell our products to. We have this joint venture, GAC. And GSE has another joint venture with Japanese companies, various different companies. It is to these companies we're going to sell our products to. We are going to be efficiency-oriented as we try to develop our motors in these joint ventures. And that's the situation we elect to update you with when it comes to 2024. When it comes to our traction motor business, of course this is a business, therefore we will move up, move down some projects in our business. But these are not going to make any huge negative impact anymore. That's what I believe in.

So let me explain about NPE. We will be consolidating this company from this fiscal year. So I want to introduce some elements of this company. Earlier I said that You know, unlike the Neadex traction business, where do we sell it to? What sort of technology do we develop? We have to work together with Stellantis, our customer, and we're 100% aligned with them, so there's no concern about it. I, myself, last week... met Mr. Carlos Stabalas, CEO of Stellantis, and we took the entire day to confirm our commitments as parent companies. In fiscal 2024, the numbers that we have published as guidance is unchanged from Q3. Now, the orders is much more than the number we have disclosed. But with regards to who we are producing it for, there's no contemplation. So the production yield and the inability to produce and improve our technology, this is where we will be focusing on. So that's how we will operate this business in 2024. In terms of production volume, there may be some fluctuations on a daily basis. However, The company does not believe that there will be any major changes that would impact the company. And we have already decided on the models, so the stator this is the rotating component this is probably where the greatest hurdle is in terms of technology and the parts supply from us will start from 2024 for mpe so we as a group We'll bring our wisdom together from the parents so that we can lead to the success of MPE. And we have confirmed this with Stellantis. And this is how we would like to promote our business in 2024. So going forward, there are two slides on automotive business, non-traction business. So when we say traction business, at the peak time, this was less than 5% of Nidex business as a whole. So, you know, the automotive business in the company is more than 20%. So I want to talk about non-attraction business in automotive, which we have started from 2012. And we are not just going along with the wave of electrification, but we're also looking at the advancement of the telecommunication technology within the automotive industry. There's a system called bus which transmits the signals. That system is advancing more and more. And this is not just for EV, but the wave electrification is really affecting everything on the automotive. And here you see drive-by-wire technology. this is using mechanical access where we were using mechanical access to transmit signals we will not be using electric access so this is how we are seeing advancement so if this is the case up until now we had power steering as you can see at the bottom left you have electric power steering and on the right hand side you see Excuse me, up above, feedback actuator. These two are linked and work together in conjunction. So when the signals will be transmitted by electric city, then you have the... The one that is sending the signal and the receptor of the signal, actually you need two motors, and we use motor and actuator in terms of names. But by using signals, the requirements on the motors is accelerating more and more. And also even in the brake, There are some advancements that we see. So brake up until now was used using hydraulic, using pump, but hydraulic itself will be electrified. And the pump itself will be electrified as well. So we are now seeing technological innovation in this area of electronics. And we will work together with customers so that we can go along with this wave of electrification. And I have one more on automotive business. So you have telecommunication, entertainment, and power train systems. If you break it down like that, and also if you look at the front end, the center, and rear zone, or if... We are now seeing advancement in zoning of the car itself, and ECU is what it supports. Now, when we say ECU, this is engine control unit. So that's actually maybe an old word. So now we will replace this with the word electronics, perhaps. But control units signal circuit design and also software designs. This is a motor control system business and we see advancement there as well. Here at the bottom you see a seat strategy as an example. There are more than 20 motors that's installed in the seat itself. For example, in addition to the function to just adjust the seat, there's assist function for users so that they can drive a long time, or warning motors so that the user, the driver, will not fall asleep. So there are many components that are equipped here. Now, the car manufacturers have to deal with alternative driving, and they are inputting all the engineering resources there. So for us, the manufacturers, we will be receiving orders as a system at zones. So here the car seat is considered as a system, as one single ECU. But aside from that, there's door zone, so which we receive as an order, or you have the hood in the front as one system, or a cockpit navigation signals where it is displayed on the glass. This is the projection motor business, And we have more than 90% market share here in that business. So what sort of signal should be sent to the user, the passenger? That sort of business is really increasing quite significantly. So we will take on these needs so that we can offer solutions. So automotive business will expand even going forward. So next is on the machinery and machinery tools. So this is looking at machinery and others. What we're introducing here is a SCARA robot and cobots. We have already announced this, but this is a strain wave reducer called FlexWave, which is equipped with sensors. And we also have a very powerful reducer which supports the bottom. It's called Kinex. It's a cycloid reducer. So motors in robots and reducers. There are actually a couple of companies that have been monopolized by Kinex. few players. However, we are now entering this space as well. So, for example, we have low price technology which we have always been strong in and we will use this as a trigger and we are now selling this as a system. The investment in China in our production facility is actually decelerating slightly, but from the second half of 2024, we're planning to expand this business quite significantly. So I want to talk about the press machine up above to the left. And you have the press machine for manufacturing. We have a very large market share globally. And the motor, which corresponds to this, you're using press machine in order to build layers for the core. And we're also producing motor cores for that as well. And electronics, semiconductors, plates, electronic components. This is the motor high speed precision press for motor core. We also have a Giga press. This is very large motor and Giga means 10 tons. So there is a machine that actually makes this a very large body for this 10-ton press. And we have a production facility in Mexico which would allow us to supply around the globe. And for the press machine, we have Asia, Europe, and North America. We do have the production facilities there. And as a result of that, we're able to meet the customer's needs, many automotive manufacturers and business operators. So our characteristic is that we have global structure in place and we're able to meet different models from small to large size. We have a very full lineup of press machines. So let's move on to the machinery tools. As you can see from this table, we have the time is 10 trillion yen in this market. So you have this process called drilling the hole in the middle. This is a machining center. We have a very large market share here. And in addition to that, the orange, this is lathe. By TOB, we have acquired Takizawa. They have this very strong technology in lathe, and we believe that this will contribute to the global market as well. And although this area is very small in terms of market, we have gear cutting machine. We see the use for electric vehicles and hybrids. This is high precision gear cutting machine. And there are customers who say that they're not able to live without us. And that's a high level of technology we have in the gear cutting machines. So the fact that we have this machine tool itself is the ability that links to the product capability.

When it comes to this industry, we were late into this industry. But we like to regard ourselves as a new innovator for the development of this industry. Going forward, I'd like to explain this water cooling module systems. It was April the 15th that we made this announcement to the public. It's called the CDU, Coolant Distribution Unit. That's what it stands for. This is AI-based, very promising components for the server system for which demand will be significant. Monthly production will be significantly increasing from 200 to significantly more going forward. And 3,000 units will be the production per month going forward. That's what we would like to reach as a company. Hard disk drive is our very initial business that we started our company with. We have been very close to the revolution of IT and HDD. With the development of computers, we have developed our technologies as the revolution takes place for semiconductors. That's what this NIDIC is about. As of today, when it comes to CDU and the cooling motor business, We have a coolant distribution manifold, and we have CPU units and GPU units that have to be cooled. We have an LCM to cool these units. A coolant module, that's what it's called. And electronic processing, machining is what went up the areas. We have a huge, very sophisticated technology. We have a very small space here. Quick cutting technologies and other technologies that we have. This is a cooling technology, water cooling technology. We need to use water flowing inside the circuit. It's very highly sophisticated. These computer systems must not be wet, but this water has to flow right next to these water-sensitive computer units, components. We have to combine these units based on our customers' requirements. We have to be able to do it as freely as possible based on our customers' demands and requirements. And this is like a conjoining above. We need to have a very super accurate machining technique. That's what we need to have as a company. And we have a meta-automative contact. in which we could possibly have a contamination inside the water because of the small pieces of metal that has to be avoided at all costs. We need to utilize our quick coupling technology for which we have been receiving a lot of inquiries. I have been getting excited about my own talk, and that is all about the water cooling business. And this is a continuation of this aforementioned business. This is going to become a hugely promising business. now or the animal e m manufacturers and uh... other uh... manufacturers are the companies we are uh... we'll probably be any contacting directly this industry itself is going to go on through a huge change we're going to be you've been extremely close to those changes so that we cannot achieve our technological success ahead of others when it comes to this server of business We have been involved in computer PC businesses, and we have a super computer business coming along. And as they develop, we have a GPU to take care of. Automotive driving is coming up to become a reality. In order to make that happen, we have super fast communications networks. We have 5G in place now. We have a millimeter wave is now starting in China. We have a network slicing taking place as well, which is to make the personalized components operations, and that will become advanced as well. For that, data explosion will take place as well. And in such communication businesses, we are having various businesses taking place as NIDIC. AI service revolution and other industrial revolutions are what we are becoming. We continue to be very close. This is my final segment, appliance commercial and industrial segment. We have sub-segments, as you can see on this slide. When it comes to air conditioners and home appliance components, we have a commercial and industrial components. For industrial components, we are in various types of businesses, and we like to pick up one, motion and energy business. We have two examples of their business. Please go to the next slide. First of all, if you take a look at the left-hand side of the slide, this is about AI servers. We have data center business. We have emergency generators for auxiliary power supply units for data centers. This business is growing significantly, surprisingly fast. 12% CAGR, as you can see on this slide. This is a sizable business, as far as we can see. When it comes to data centers, The power has to be on all the time, and the water has to be running all the time to cool these components down all the time. And we need to have a second and a third backup system. For that, the power generators like this one are needed. We have been required to produce and supply a very highly sophisticated system. We have more than 50% of the shares in the business. We continue to steadily grow our shares in the market. And solar, photovoltaic, and wind power generation business is growing. These energies are naturally supplied resources are very unstable. First of all, we need to make sure to secure a very stable supply by stabilizing the voltage. We have a best battery energy storage system. That's what we have to stabilize. And this is gaining a lot of attention. This is a standalone unit. You can install this anywhere in the world. CAGR is 28%. This is another very high market share for CAGR. I myself will be involved in this business, in promoting this business. And that is all for my explanation. But when it comes to areas for fossil fuel energy, decarbonization is coming or taking place as well. This slide is about the infrastructure-related business. We have solutions that we are offering to our customers. If you take a look at the left-hand side, this is about Torrieste, Italy. There are borders for Slovenia and other European countries there. It's about... And if you go over the office and... This is about the transportation of oil, a transalpine business to Australia, Germany, and the Czech Republic. We have this pump drive motors for which we have received orders. In addition to the order intake, We need to have a good maintenance for these recurring businesses. Another area we have received our orders, and right on the side, this is about the liquid natural gas system installed in Qatar. This is a compressor for liquified natural gas. This is a huge compressor, as you can see on the slide. Liquid natural gas has to be transported. This is a fuel, fossil fuel, but it has to be liquified for transport. We are producing maintenance component services, what we are providing to our customers. As you can see, Nidec has been producing Nidecs, of course. But we are not just about the motor manufacturer. We are making products that spins and move. We are in a power generation business. We are making air compression business as well. The basics about the business technology is about the same, but in various many industries, we have these industries growing up despite regardless of economic situations. We are making contributions in these areas. As you can see, we are in the motor business, of course, but so many other businesses as well. And what we do as a company is to prevent global warming, and we are promoting decarbonization. We are proud of that type of promotion that we are doing. We and I, together with so many others in our team, We are in the second generation of the management of this company or the NIDIC group as a whole. We need people, technology, and so many other elements for us to move forward. And we need to beat the competition to be able to provide our customers with various solutions. That's what we are going to do. We will continue to do. As you can see on this magnetic logo, all for dreams. That's what we stand for. We have huge dreams in our service for the world. In order for us to make these dreams even bigger than they are now, we need to be able to be as a company that will last for the next 100 or even 200 years. That's the type of all-out effort we are going to make. On the short term, we may disappoint you about our financial performance, but I myself see the long-term situation. I want a long-term perspective so that this company will become a truly globally essential business in the world. And that's what I like to have in mind as we go forward together with our team members. We're going to make a healthy and wonderful growth as a company. We don't have any time to go back. I received a button to move forward. All for dreams. Thank you very much. Thank you very much, Mr. Nagamori, Mr. Kishida, Mr. Samura. Thank you very much for your explanations. Now we would like to open the floor for a question and answer session. If you have any questions, please raise your hand for a microphone. Now, does anyone have any questions? First, please, the person who raised his hand ahead of others. Thank you, please. Thank you very much. This is Takayama of Goldman Sachs. I have three questions. I'd like to give you these questions one by one. First of all, when it comes to this 230 billion yen operating profit, can you elaborate on that? I believe this could be higher. and then other circumstances. But this number, according to my calculations, it looks very or too conservative. Could this be a minimum number for you to try to achieve? Or as you've said, does this number contain some basis for your future growth? And you are seeing this year as a year of making not so much profit. Are you contemplating about taking time before you will be able to achieve your ideal stage from your perspective, Mr. Kishida? Or could this number just a number or just a conservative number? Can you elaborate on this number over here? This number looks a little different from the number that I usually see in this type of presentation. I would like to give you my explanation here. This is Mr. Nagamori speaking. When it comes to this new management, Prior to the establishment of the new management, we have this decision-making process, new one, new business decision-making process in place. We have a CEO decided, nominated in the nomination committee. I have never been involved in the establishment of these numbers here, but this new management's numbers are based on very detailed plans. And they have been part of all the detailed process when it comes to these numbers and establishment. Over the past three fiscal years, we have been in a tumultuous situation. These people, new people, have had to organize the situation to put everything back into normal. And they have been able to capture all the issues in a short time and solve them. What we need to do is as follows. And we need to, we like to make the upward revision instead of the downward revisions we have had to do. Forget about the past. We would like to come up with a very solid figures and achieve those results as promised. And prior to the three-year period that I've mentioned, we have already always made pretty much overachievement. Over the past three years, though, the situation has changed for the negative. underachievement was not really in our dictionary, but underachievement did happen over the past three years. So we had to say, if you will, to this wrong past management. And we now have a new management in place when it comes to Q4. These numbers seem to me to be rather conservative, but these are the numbers they came up with, the new management. As has been explained by Mr. Kishida, the CEO, he has won over people in the company. To be honest, these numbers look to me to be very conservative, but these are the numbers they would like to stick to. Despite a temporary decline in the share price, this will be a small incident compared with the history to take place 20 to 30 years from now. I sometimes feel I'm not going to feel disgusted about your report, Mr. Takayama. I'm not really making any complaint at all about your report, Mr. Takayama. So succession is going very smoothly from me to Mr. Kishida. It's not just one person when it comes to candidates. And this information is shared by multiple people, and we have ACM and other overseas business groups. These executives, the leaders of these business units are now first senior vice presidents, and they are involved in the decision-making process of these members.