Nidec Corp Adr

Now, we would like to start the presentation on NIDEC Corporation's performance for the first quarter of fiscal year 2024. First, please turn off your mobile phones or put them on silent mode. Nidec Corporation's representatives to be presenting today's earnings results are as follows. Mr. Mitsui Kishida, the president and chief executive officer of Nidec Corporation. Mr. Akinobu Samura, senior vice president and chief financial officer of the company. Mr. Teruaki Urago, general manager of the investor relations department. That is all. In today's presentation, Mr. Samura will present an overview of the company's earnings results for the first quarter of first fiscal year 2024. Then Mr. Kishida will present the company's business strategy going forward. Then the floor will be opened for question and answer session. Please kindly wait until then to ask your questions. The meeting is expected to last until 18 o'clock today. Now, Mr. Samura, please start your presentation. Thank you. This is Samura speaking. Thank you very much. I would like to talk to you and explain to you about our performance for the first quarter of this fiscal year. Please turn to slide three. Net sales were up 14.8% to 648.2 billion yen. This is a record high result for us. Operating profit was up 0.1% to 60.3 billion yen. It was a slight increase, but this is also once again a record high operating profit. operating profit ratio was 0.38%. And this operating profit ratio includes the Nidex PSAE motors. It's called NPE for short. This was an equity method affiliated until the end of fiscal 2023, but from April, this company, General Venture, was consolidated, and then the 10.1 billion yen was included as a result of re-measuring the share of the said company. This will be explained in detail later. When it comes to The operating profit before income taxes, profit attributable to the owners of the parent were both down. This is due to the effect of currency exchange rate. We had a decrease in the area of construction trade. Please turn to slide four. This is about the NPE's constant gain step acquisition of NIDIC PSA eMotors. NIDIC acquired a controlling interest in NIDIC PSA eMotors S.A.S., an equity-immediate affiliate of NIDIC. and the NIDIC made it a consolidated subsidiary as of April 1, 2024. Correspondingly, NIDIC recognized a gain on step acquisitions of 10.1 billion yen as a result of re-measuring the share of the said company held by the end of the previous fiscal year in fair value on the acquisition date. In this case, as of March 31st, which is 6.7 billion yen, this was evaluated and based on a fair value and etc. And gain on a step acquisition is going to be minus 6.7 billion yen plus 16.8 billion yen, which equals 10.1 billion yen. We had a third-party evaluation of this calculation base. When it comes to this accounting method, this is not so familiar with the general public, but this is not so much of an incident. SoftBank, Rakuten, Ricoh, Jal, and so many other companies have been involved in a similar method of acquisitions. Please turn to slide five. And based on the financial explanations, we have made upward revisions on the forecast. in terms of net sales, operating profit, operating profit ratio, among others. And we have this balance between the first and the second half of this fiscal year. We are trying to move up the schedule as much as possible. And we have more value balanced on the first half rather than on the second half. Please go to the slide number six. And this is about our profit performance by group product group. And when it comes to small precision motors, we have a recovery in the demand for the HDD motors, and we have a growing demand for water cooling module units. And we have the vertical startup of this water module unit business. And we accelerate the pace of this recovery, and we have made a V-shaped recovery, as you can see. And next, automotive products. We are yet to launch a mass production system, and this 33.8 billion yen is the amount of deficit for these automotive products. And we have 10.1 billion yen for – we have a positive number of 6.3 billion yen, as you can see on the top right-hand side of this chart. But in the end, we have been able to achieve the increased sales and operating profit. Next, appliance commercial and industrial products. consolidated and accumulated restructuring cost of 1.5 billion yen. We have a slight decrease in the year profit. Next, machinery. We have an optimization of our machinery production system. In the previous quarter of quarter four, last fiscal year, we have had some financial difficulties, but today we have had the transfer of people as well as machinery. Because of that, we have a temporary decline in our profitability and profit efficiency. And because of that, we have a decline, a slight decline in profitability. Please go to slide 7 for more detailed information, year-on-year changes. And you can see that we have a chart on the slight increase or decrease of our performance compared with the last fiscal year. And you can see the We have an increase in operating profit. We have the ACM and Moens restructuring taking place in Europe, including all of these elements. We have an increase in profitability and sales, and a small increase in motor and automotives. But we have a decrease in appliance commercial, industrial, and machinery, and some other business. And you can see this decrease in appliance commercial industrial products in terms of earning a profit. And the small precision motors and other units have enjoyed an increase in profitability. And the other sections have suffered some decrease. And you can see the transition of free cash flow And we have improved our performance when it comes to free cash flow. And we have been able to use this increased profitability for our shareholders and reinvestment purposes in order to maximize our profitability as a group, as a whole. And we were able to recover from the deficit from last fiscal year. And we have been able to generate a record high amount of free cash flow of 167.2 billion yen. And we have at the low level $18.5 billion, as you can see. But on a year-on-year basis, we have been able to achieve an improvement. Lastly, on slide 10, these are the highlights of what I have just explained to you. That is all for the outlook of our performance, latest performance. Thank you very much. This is Kishida speaking. I'd like to give you an important point, as well as our long-term business strategy. First of all, when it comes to Q1, for NIDIC, this was a very important three-month period for us to be able to make a very important step. Over the past years of hard work and dedication, we have looked at the reality very hard so that we could see for whom and how we should develop and make our products. And we'd like to give you an update on some of our business activities. First of all, when it comes to Q1, I'd like to give you some topics over here. I'd like to give you two points in this section of our presentation. First of all, automotive business. It was back in October last year that we have launched a very good restructuring reform. And we have talked to various people in the market. And these people's focus of interest was on the traction motor. We were able to understand that in the previous session of this meeting. And we were able to understand the very huge impact of this business on us. This year, last year, we have changed our strategy in this business, and we were able to see very positive changes, which I would like to give you an explanation on today in this meeting. And also, I would like to explain to you how we could make a further development of this business. First of all, The major change is as follows. We have had many traction businesses in China, and we have shifted our focus to be only dedicated on our joint venture in China. We have a GSC as our main customer, and from this fiscal year on, we have a joint venture in Stellantis, and the joint venture is called NPE. These are two major automotive joint ventures that we have. And we have a traction business mainly in China with JSC. And from the second fiscal quarter and onward, we are going to make a profit. We will make sure to advance our schedule as much as possible. And we are ahead of our schedule. That's why I wanted to report to you here today. When it comes to NPE, we will try to minimize the amount of deficit to the best extent possible so that we can start generating profit from the third quarter of this fiscal year. We have had a direct talk between the two parent companies' executives, and I can say this to you with confidence. When it comes to NPE, 670,000 units is our target. We have made a downward revision of this number to the 400,000 unit level. This is how we like to minimize the negative impact on our financial capability. We like to focus on our production in the second half of this fiscal year. When it comes to these two parent companies, we have had various series of discussions with each other. We have had discussions on investment. We have had a capacity of 1.5 million units, and that's our basic target for these two parent companies. That's going to be the area of our focus. We have a French production capacity. We will suppress it to a certain level. When it comes to the additional level, as you can see on this second section of this slide, we have been in a very strict, severe business circumstance. We will maximize the experience from the country, and we will be focusing on the supply of components such as motors and stators and rotors. We will be talking to European OEM manufacturers as well as Japanese OEM manufacturers to whom we elect to start supplying these products components. On to the right-hand side of this slide, these are the existing businesses. In these businesses, we have had major changes as well. first of all this market itself whether it be a ev or hybrid in either case we will make sure to we have been able to secure very good demands and orders of our products first when it comes to electronics we have inverters And we have this DC-DC converters. These are ECU units. Designing and delivery of these products are the new areas emerging in our company and business. We have OEM manufacturers, automotive, driving, EXO, the areas of other companies' concentrations. And we have had the orders for the entire seat related components, interior motors, brakes in the entire unit. All of these products are the areas in which we are receiving a growing number of inquiries and orders. In this area, we are making group-wide efforts. We have a large number of products ready to be supplied to our customers, the cockpit, etc. We are going to receive orders for a system basis as a whole.

Another point of change in this quarter is, as you can see on the upper left, is the water coolant system. And we have seen increased business here. If you look at this water coolant system, it's called the CDU unit. But aside from that, you have quick coupling and there are many peripheral devices and components, and we have decided to manufacture them in-house. So we are promoting production of critical components in-house. So when we say water coolant system, we have a tendency to speak only about water coolant system, but if you look at it as a whole, the AI data centers, which is experiencing an explosive growth, you will be able to see how our components are utilized in the AI data centers. So, for example, in the server racks of AI data center, there are water cooling system, spindle motors for the drivers, there's cooling tower, there's motors for the air conditioners or alternators for energy power generator or for Clean Energy, AI Data Center, BESS. This is the energy storage system. And we are able to supply all of these in a comprehensive manner. In fact, NITEC We do inspection devices of semiconductors, which is part of water coolant system. So we offer a variety of different types of products, which will contribute to the growth of the AI data centers. So going forward, based on what we have considered, we would work together with many core management around the world and steer our directions in this mid- to long-term direction that we have set out. And let me share that with you. So we have been aiming for 10 trillion sales. We will achieve this organically, which will contribute to 7 trillion and 3 trillion through new M&As. This is our mid- to long-term direction which we have set out, which we would like to describe to you. The mission of the new management is to carry on the strength of NIDIC so far, but also enhance our corporate value through quality growth in the period of the second founding. So this is what we have defined very clearly. And on top of that, we want to be a global company, and we will enhance that foundation as a global company. And also, we want to improve the quality of the company for corporate value. And as a passing point of that, we will aim for market cap of 10 trillion yen. In order to enhance our corporate value, It will not be all uniformly EV or any other one single product, but we have three axes of technology and five business axes which we would overlay. No matter what age we are in, no matter when, we will be pursuing something that would allow us to be needed by the society at all times, and therefore we would engage in activities towards the realization of circular society, and that's how we would like to grow as a company. So first of all, what is core of NIDEC? First of all, we had thoroughly discussed this, what it is. And we have the 73-year history since the foundation of the company over half a century or so. We have built track record on things that spin and move, and that's what it is. And in addition to that, when we think about what the core is, we have found that there are two other access for us. One is thermal management. Starting with motors, things that spin and move as we produce them, we need to convert from motion to heat, and that cannot be avoided. So how do we control a loss called heat? And that's a big challenge. And this is where we have built up a lot of know-how. The great leaps we have made in AI servers and also water cooling system. We will continue to build up on that capabilities and make sure that we bear fruit in AI service. And it's not just thermal management, but we have compressors which will reduce or compress the coolants. And it's not just cooling system, but we will also look at heating system as well. And we believe that there's room for expansion in the AC area. And other core access is electricity generation, storage, charge and conversion. This is area where we actually treat electricity. So we have more than 50 years of experience in this area. And so electricity, which is the source of energy, how do we manage this efficiently? This is something that we have been challenging on since the foundation of this company, and we have built up our experience in the 2010s. We have acquired companies outside of Japan, and we have been able to grow as a result of that. So from electricity to electricity, electricity to motion power, or mechanical power, we have this product line, lineup, and groups, which we would like to continue to increase and enhance. So the core of the three technologies will be the source of competitiveness of Nidec. and we will continue to drive towards the involvement and advancement. So change the world, move the world, change the future. This is the circular society which we would like to realize and we will do so with the contribution of this great technological capabilities and we will be able to become a solution provider which would reduce, which would realize carbon neutrality and CO2 reductions. So through this, what would be the applications in which we would be able to contribute to the world? There's five business pillars which we have identified and clarified. First pillar is supporting the AI society. That's how we had defined it. Today, AI today, it's not just the boom for today. AI's existence will become a norm in every industry and every life. And we would see explosive AI growth and demand for servers which support that. And we know that this will accelerate going forward. Edge AI will be embedded in different devices and terminals. It would be hard disk drivers, coolant fans, coolant and water cooling modules. These are the needs of the customers which we would incorporate so that we can be growing at the cutting edge of IT. And with that experience, we would do chillers, baths, power generator, and also semiconductor inspection devices. So that's thermal management, that's electricity generation and storage. All of these would allow us to face towards this explosive growth. The other pillar is the sustainable infrastructure and energy. In order to lead the circular economy, we need to meet the global demand for energy and support the conversion to sustainable energy. And what is it that we can do? Motor comprises 50% of the energy around the world. Therefore, we need to supply high efficient motors, which would lead this industry. In addition to that, renewable energy stability and supply and also levelizing electricity demand. In the area of power generation and battery, we have control system and battery storage system and electricity management system. These are the technologies that we have which we can contribute to the growth of this business segment as well. Next is the area of efficient manufacturing. Even in the monozukuri manufacturing We can contribute as we see automation evolve very rapidly, and as we see increasing labor costs, we're now beginning to see a big reform taking place in manufacturing. And we have been highly regarded in precision reducers, but we would also be able to offer solutions, especially for robots, especially reducers and motors. and in other areas as well. And we will make this our third pillar for growth. The fourth area is the pursuit for a better life. And we would like to contribute to this business as well. smart appliances and ACs for industrial purposes. These are the equipment and devices that will support the life and this will continue to advance even in global service. As we see increasing move towards higher quality of life, we believe that we can continue to expand our business in this domain as well. Safe and secure and health, those would be the perspective we would use to contribute to new product development, especially in AC. We will realize air to water, which is highly regarded. This is high efficient. compressors and we are also capturing new technologies such as heat compressors so that we can also contribute to the world. And finally, we have mobility innovation. This is electrification and automation of eco-friendly vehicles. We will begin to see continuous innovation in this area. And ahead of that, we can see new mobility such as eVTOL. Just recently, as I have just said, we have electric solutions. which we have been highly appreciated, and we can expect great expansion in the mobility products as well, which will contribute to the growth of this business area. So in these five business areas, we would like to continue to expand and leverage our strength so that we can generate next-step growth.

In various applications, we have areas, some areas for us to pursue. And we sometimes acquire knowledge internally, but sometimes by way of demand. And we like to drive this effort on a global basis. We have these five pillars of businesses, as you can see. This is how we like to grow each of these businesses. From the left, we can see the dark green. These are the areas, size is last fiscal year. 2.3 trillion yen in total. And towards the 2030 fiscal year, we would like to improve the sizes of these wheelers so that we can achieve more than 7 trillion yen in addition to the additional 3 trillion yen coming by way of M&A. And by growing these five pillars, we like to pursue the improvement and evolution of things that move and things that spin and move so that we can pursue a better life and a sustainable society. As a solution provider, we like to make contributions in these areas. Next, I would like to talk to you about India, which is one of our highly strategical areas in the world. This country as a market is continuing to grow rapidly. Ten years ago, we started doing business in the area. And we have 14 different areas of businesses. We have several in the northern part and some others in the southern part of the country. We can be as close to our customers as possible so that we can make the best way of contributions to each of these customers. As you can see, we have three cities. city where, in accordance with the growing demand for air conditioners, we would like to complete the construction of a campus. This is going to be our 15th construction business base. And in this rapidly growing country of India, we would like to secure a great number of talented and brilliant engineers. so that we can have this area as a center of excellence. That's what we would like to achieve in the future. In these activities, we would like to accelerate the pace of these activities, and we have made a press release today. We have this MOU to be established with Tata Electricies. Especially in the area of software programming, we like to deepen our relationship with each other by sharing with each other our knowledge and expertise. That's the contents of the press release. India will continue to grow and develop as a country. And we like to provide our companies customers with a global level of services. And that's part of our strategy. And towards 2030, we would like to achieve a huge growth as well as stable cash flow. That's what we need to do. As a matter of course, in order to grow these pillars of businesses, we would like to generate the cash flow better than we have been able to before. That's the type of change we would like to make happen. This is how we like to improve the cash flow, and eventually we like to have acquisitions by M&A, and we like to continue to make investment. At the same time, as has been the case, we will continue to make contribution back to our shareholders who have been great supporters of our company. that this is, in addition to this dividend and other things that have been already released to the public, we will continue to maintain the principle of a stable provision of dividends. We would like to continue to do that in a stable manner. In addition to that, in today's Board of Directors meeting, we have this effective date of October 1st. We are going to have a stock split, and the record date will be September 30th this year. The date of issue will be October 1st of this fiscal year. Split ratio will be two for one common stock. We like to continue to share the enjoyment of growth with as many people as possible. That's our strong wish as a company. On to the next slide. This is our organizational structure for our future growth. We have had a huge conversion of management system as of April 1st of this fiscal year. We will continue to be a global company. We will continue to pursue our dreams as a company. And we will continue to take on challenges more than any other companies out there in the market. No matter what changes we face and no matter what times we go through, we will continue to have this corporate culture as a foundation, as a company, so that we can have more people and so that we can enjoy more technologies as a company. This is the second phase of NIDAC's funding. We have now embarked on this process. We are going to move the future. We will change the future. We will move the world. This is how we like to continue to take on challenges as a part of our DNA, and we will continue to make steps one by one, all for our dreams. Thank you very much for your attention. Thank you.