Nidec Corp Adr

And we'd like to start the presentation on NEDA Corporation's performance for the first half of fiscal year 2024. Thank you very much for your attendance today despite your busy schedule. First, I'd like to give you an introduction of our attendees today. First of all, Mr. Mitsuya Kishida, President and Chief Executive Officer. Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer. And I am the moderator, Taira Kirigo, General Manager of the IR Department. In today's presentation, Mr. Samura will give you an overview of the company's earnings results for the first half of this fiscal year. And Mr. Kishida will explain the company's business strategy going forward. Then the floor will be opened for a question and answer session. And we'd like to finish this meeting at 1130 a.m. Now, Mr. Samura, please. Thank you. This is Samura, a company CFO. I'd like to give an update on the earnings results of the first half of this fiscal year. First of all, our net sales were up .8% to ,293.8 billion yen, which is an 11.11%. This is a record high on a quarterly basis. And operating profit was up by .9% to 121 billion yen, which is another record high on a quarterly basis. Operating profit ratio was 9.4 billion yen. But when it comes to operating profit income before taxes and operating attribute to owners of the parent was both down. And operating profit before income tax was down by .9% to 102.2 billion yen. On a dollar basis, we had the depreciation of them by a little more than 20 yen per dollar. Because of that, we have incurred a loss in our profitability. This is just a price-all basis, an evaluation basis. And now we have gained approximately 10 yen out of the amount of loss we have had. And on an annual basis, as you can see on the right hand side of slide three, we have had the up of the revision, as you can see. And the up of the revision remains unchanged. Next slide, please. This is an overview by product group. First of all, top left corner, a small-priced motor, Nialine and other demands for how this drive business continue to recover. And with this color, we have an urgent, rapidly growing need, demand for water cooling module business. And we have been able to debut various products in this area. And that's the type of shift we have been making in this business. And we have been able to increase both in sales and operating profit in this area. Next section, automotive products, top right section, we have NPE, which is an adjunct venture with our Stalentis in Europe. We have had some 10.1 billion yen worth of adjustment that we have to make. Considering that, we have EV attraction motor business, which has been in a positive territory. And NPE has now progressed with mass production preparations. Because of that, the demand of the deficit has shrunk. And we have been able to achieve this much, as you can see on the chart. And appliance commercial and industrial price segment. We have had restructuring efforts, but the 2 billion yen worth of expenses has been incurred. And we have some seasonal elements here, air conditioning needs. And that has declined. All in all, we have a better product lineup. We have a better cost structure compared with the past. And we have a significant decrease in profitability. Lastly, machinery segment on the bottom right section of the slide. We have had a struggling business situation in the market. But there is a sign of recovery there, especially in terms of machining tools. We have been trying to do optimization of the business. Because of that, we have been able to have this amount of sales as well as operating profit. And we have details of this information, including structural reform as well as loss and gain and operating profit based on the current exchange rate. And you can see the comparison between now and the fiscal year before. And we have had the current exchange rate was up both in sales and operating profit. And we have had the restructuring effort in appliance and commercial and industrial product segment. 3.5 billion yen has been incurred as the structural reform expenses. And we have had increases in sales and operating profit in small-precision motors and automotive products. All in other areas, there has been some loss in either sales or operating profit. Next slide, this is a -on-quarter changes. We have had the reflection of a gain on a step acquisition of NPA minus 0.9 billion yen. And we have had a 500 million yen increase in one of the segments. And we have 10.1 billion yen of stretching effort is included in this area. And virtually all of these areas have had increase in sales and operating profit. This is the flow of cash flow situation. And we are trying to enhance the cash flow generating ability to maximize corporate value. We are trying to achieve a balanced cash allocation to growth investment, shareholder return and interest bearing debt control. This is how we like to maximize our profitability as a company. Through these activities, we like to turn our businesses around. We have been able to have a record high amount of free cash flow in the end, to us the end of last fiscal year. And this fiscal year, we have NPE which is in recovery track. And we have been trying to enhance our cash flow generating ability. There are some issues that are facing us. 28 billion yen which is lower than last year's performance. But throughout the fiscal year, we are aiming to achieve a balanced cash allocation and a balanced shareholder performance. Next slide, please. This is my final slide. When it comes to capital expenditure depreciation and R&D, we are doing our very best to optimize our performance in these areas. We are continuing our aggressive investments and our support to mid-term growth. That is all for my segment of the presentation. Thank you. This is Kishida speaking. I would like to take over the role of explaining our performance in Q2. And there are some changes we have experienced. And I would like to give you some update on our strategy going forward. When it comes to this first half of this fiscal year, we have had various issues. We have had discussions. We have supported with each other for the past six months. And in China, in Japan, in Europe, and in America, in North America, we have had various meetings with people of these regions. And we have had a meeting last time. We have covered major three areas of growth and business. And based on these topics, we have had various discussions about what to do going forward. We will be able to do more than we have done in the past so far. Going forward, there are some voices of concern to us. However, under the new management, we are going to make firm steps one by one, clearing and solving those issues one by one, in order to achieve our results in the end. When it comes to organizational changes, I would like to give an update on that as well today in this meeting. In NIDIC, so far, there are some things that are totally unprecedented that we are going to launch as action going forward. That's what we would like to do. That's what we would like to present to you today. Now, I would like to give you information on these topics one by one. First of all, automotive business. Looking back, it was about a year ago in this meeting. I was here for the first time at that time. I was able to give you a presentation on automotive business, especially on traction motor business. It was this meeting, in this meeting, it was about exactly a year ago that I was able to give you a presentation on the first half of this fiscal year. I truly believe that I was made a very good decision at that time. I was able to make the decision. It was about a year ago that we have had a joint venture with the GSE of China. We have another joint venture with a European partner, with Stellantis. We are going to focus on these two joint ventures when it comes to automotive business. Other than that, we will focus our efforts on component of business. That's what I said at the meeting a year ago. Year eight, we have this G-Nut, which is a joint venture with the Guangzhou Automobile Corporation Group. We are going to turn our business around. That's one thing that I like to say. This business will be in a positive territory going forward. We will make sure never to let this business into the red ever going forward. That's the type of determination that we have. In this third quarter, we have a third generation with Gen 3 products. We are going to have those business on the production line. We are going to spread the use of these new products in Chinese market going forward. We have had Gen 1 and Gen 2 products in the past. We have had a series of troubles. We have had the troubles of starting up the production lines of these products. Compared with those circumstances, we are much extremely more smooth than we have been in the past. We have had semi-converting manufacturers and other manufacturers with whom we are working. Other global companies cannot work like this. That's the type of equipment and system that we have as we launch these businesses. When it comes to NPE, down at the bottom left slide, this is our joint venture with Stalantis in Europe. Everything is going as planned when it comes to improvement of business. When it comes to Q2, we were able to shrink the degree of deficit than expected. From the second quarter of this fiscal year, we would like to go into the positive territory when it comes to profitability of this business. When it comes to European OEMs, when it comes to EV market, Stalantis is in the league of winners, which many people have said so far, and especially recently. Among the European OEMs, there are some changes in EVs. There are huge waves coming toward them. Stalantis forecast may go below the original expectations, but we are going to establish a system with Stalantis in the form of discussion to make sure profit under any circumstance. Therefore, despite all the changes in sales volume, we would like to make sure to maintain our status in the black. If you take a look at section 2 on the left-hand side, you can see the component of business. We would like to give an update on that too. In this meeting, it's about a year since we have shifted our business strategy. In the automotive market, there are hardly any cases you could get orders in a year. We have had some major inquiries within this year, within the past year. I cannot give you any names of the companies, however, I would like to keep you updated in this area of business as well. We have motors, rotors, rotors used in EVs. We are having a lot of inquiries

from

our possible candidates, business partners. And we have started our business activities in this second half. If you take a look at the right section of the slide, you have the existing traditional business. We have electronics, powertrains, and these are the major areas, as you can see on the slide. In any of these groups, we are doing relatively good in any of these areas. But when it comes to NSEJ, NIDAC corporations, we have the powertrain, the powertrain in the break of businesses. In these businesses, we have had European OEM and we have TLN customers mainly. Since 2000, we have had a business with these companies, especially in Europe. European companies, customers are struggling because of that. We have had some losses in the business posturing and breaks. We need to shift our business strategy. When it comes to European businesses, EV-related business, hybrid businesses are having this imported, actively imported. And existing European manufacturers are struggling. We need to be able to understand what we can do to accelerate this business. That's one major issue that we have as we try to go to the next step in business. That is what I can say to you now today.

So this is the organizational transformation that's unprecedented, and I mentioned this at the outset of the meeting. In European and U.S. business, we are going to embed the business from Japan. That will be achieved as of October 1st, and we would like to share with you that we have started this initiative. For the NIDEC parent automotive business, our operations are cutting edge, being in Japan and China. Also, we have an excellent level of management, and this top tier management exists within the group. However, we see challenges in the European and U.S. for their operations. So I personally recognize this challenge. And hopefully two and a half years ago, I myself was in Europe to lead this business. So based on that experience, I would like to take on the challenges we face today, and also over the medium to long term. I have been thinking what we should do from a longer perspective. So under such circumstances, this time, in order to drastically reform the operation, including talent management, we would like to have -to-local communication with the customers to manage the business locally. So for a long time, the ACING team, which is very good in managing the operation in those markets, the automotive business will be integrated into the ACING organization. So we have made this bold decision to integrate the two businesses, and together with the local subsidiaries and the clients, we are now endeavoring on this task. And going forward for the automotive product business within NIDEC, it will continue to be a major pillar of the business. And that said, we have this opportunity in our pipeline. I have a strong conviction about that. So taking a longer term perspective, we decided to make this organizational change to achieve the longer term growth. So that's shown on the left-hand side of this slide. And on the right-hand side, we are now embarking on the second phase of reform on the automotive business. Recently, the development of electronics, software, and also the control system demand is significantly increasing for our automotive product business. On the other hand, for the clients, the autonomous driving and in-axle development are things that they need to address. So by team or divisions, they have ECU and parts and systems, and they want to outsource that capability to a third party. So taking on that opportunity, we would like to capture such demand. And we have two companies acquired through acquisition, NIDEC Mobility and NIDEC Galasis, and comprehensively they will be integrated. So we are now in discussion for this opportunity and collaboration. And within NIDEC, businesses, you can see that at the bottom right, there are business units who are responsible for the automotive business. Listening to the feedback from the clients, for the clients, single interface to offer solutions is something that they expect. And we get inquiries for that. BYD, Tesla, Honda, Toyota, for the major OEMs. As a group, we would like to establish a capability to address their needs. So as a first phase of that, Mobility and LSS will be integrated. And we have started this initiative. So these are the updates on the organizational changes. And regarding the water cooling module business, let me give you some updates. Regarding quick coupling, this is connecting parts, which are under development, so we are manufacturing this. And for LCM, which is a plate that touches the chip to cool, and also CDU, which is the coolant distribution unit. So I'd like to give you three updates on this product. For quick coupling, in the previous IR meeting, I explained about the manufacturing in Thailand. And three months later, production in China and expansion of the capacity in Philippines has been achieved. And in addition, we have been able to prepare for the future growing demand. And now we want to secure quality 100 percent. So we have a proprietary leak testing. Because if we do not see air leakage, there should not be water leakage. So thanks to the technology with our HDD business, we have established the inspection model and the testing model. And we will be utilizing this capability to capture the expanding business opportunity for LCM. For the current GenGPU CPU, we have been able to address that. And for the next GenGPUs, we are now developing the new LCM. And for CDUs, the customers are demanding for a variety of requirements. And we are now developing to address that. Over the short term, I think you may be asking for the opportunities for this fiscal year in terms of numbers. And I understand that we are getting those questions many times. And for the new GPUs and new chipsets, they will be launched in the future. And in order to address those new generations together with our clients, we are now well prepared for the next generation. And these are the activities that we have conducted throughout Q2, and I'd like to update you on that. When some may kick in from the latter part of Q3 or from Q4, but aiming for that target date, we are well prepared for those launches in the future. And next, for the Appliance Commercial Industrial Products Group, this has become a very big profit contributor. And we want to grow the Moen business as the growth driver next year. I have three things to update. This is just a tip of the iceberg, but from the left, it's India. In the middle is Europe, and on the right is what we're doing in North America for growth. So starting from the left in India, this is driving our strategy in India. And this is our HUBLY second factory in the Karnataka State, which is the southwestern part of India. And we will complete the building of the second factory before the end of this year, and it will start operation from next year. The Moen mid-sized motor products will be produced in this new factory. And as we have announced, in India, the big commercial vehicle manufacturer Ashok Leyland is our partner. We have signed a partnership agreement, and we have been doing the traction for the commercial vehicles. But we will now have a partnership with the local OEM, which will be augmented. So what we have been doing with the passenger cars in China, so this is totally different from what we have been doing in China, where we do not strike any partnership. But in India, we are taking this different strategy to strike and leverage on the strong partnership to grow our business. And on this HUBLY second factory, we'll be driving those initiatives. In the middle, this is a conversion business, the best business in France. And we already are short of our own capacity. So we are ramping up our capacity, and from 425, it will start to have a full contribution. This is a factory based in Saint Etienne, and it will be in the southeast part of France, and this new factory will be up and running. And for the water current module, which is related to our data center business in North America, the data center demand is just exploding. So the alternate of the emergency power generation is increasing. And ultimately speaking, we have a high market share in this space. So we will be fully prepared for this opportunity. So in the U.S., we have the Lexington factory, and in Mexico, we have the factory in Reynosa, and the capacities have been ramped up. And on the central machine tools business updates, we have been making announcements for a series of new product launches. But today, I would also like to share our concepts behind those new product launches. The key thing about the machine tools business is synergy. So for the first time, we have a high precision gear technology. Our machine tools business and Taki Sawa have made the joint development. And these new products are ready to be launched into the market. On the right-hand side, the digital twin and simulation, and also fully capitalizing on the AI technology, which is unprecedented in the machine tool industry. So this cutting-edge technology are embedded in a product. And we are working on the machine tools that's very unique to our company. And this business for many years was leading as a cutting-edge market for this business, Japan and Europe. But now China is trying to catch up very quickly. Also for this business domain, with certain discipline, we would like to capture this opportunity. And we will be developing a business in China, and we are working on the production site in China as well. And also for the machinery business, recently we made an announcement to expand the press related business. And we have acquired a Canadian company called Linear Transfer Automation. To date, for the press business, we had small size, medium size and large size. And we were offering a comprehensive product, but we have been able to prepare for the preprocess part of the line. And we are now ready to offer the post-process part of the whole flow by acquiring Linear Transfer Automation. Also, those are the updates from different businesses in Q2. And going forward,

I

would like to quickly give you a review on the mid to long term interaction. Also, at the Q1 results, I mentioned about the three core technologies and the five business pillars. So I would like to offer you some progress on these points.

This is what we have today, five business pillars, a footprint of existing businesses, in order for us to be able to achieve our target for the fiscal year 2025. We have five different groups, as you can see on the slide. We have people assigned to each of these activities. You can see the pillar leading to which types of businesses, etc. We have had a group of discussions on these areas, and we are going to enhance the depth as well as a horizontal range of each of these businesses. That's what we have done up until today. Take a look at curves of business expansion. We have a linear expansion in some businesses, and we have the businesses to be expected to grow larger in the second half of the growth period. There are some differences like that. We have a better life area in which we have been doing business for a long time, and we have long been focused on mobility innovation. These curves in these areas are rather straight, as you can see. When it comes to AI supporting areas, we need more discussions. We need to have more businesses in this area. We have a lot of things to do in this area. This is something we would like to share with you today in this meeting in order for us to be able to enhance our business even further. There are some major points that I would like to make based on these businesses. Group synergies are what we are trying to achieve when it comes to these businesses. Over the past 50 years, as you may already know very well, we have had a very strong leadership under which we have been able to grow individual businesses. That is my understanding. Going forward, we need to accelerate even further the pace of our growth. In order to do that, we have three different technological areas and we have five different business pillars that you can see on the slide here. We need to establish and generate group synergies to share technological capabilities with each other within the NIDAC group. That is the major point that we need to carry going forward. In order to generate the group synergies, as I have been saying, we need to have this consolidation with ASIM business unit. We have some consolidations taking place in other areas of our group. We have had some areas outside AMIC. There are some movements like that. That is what I would like to update you today. First of all, when it comes to the first better life area, on a global basis, we are having a very high market share. Frigate compressor, air conditioner, large scale motors. We have an ASIM business unit here. And we have a home appliance air conditioning motor. We have a NIDAC Technomotor Corporation. We are going to have very good synergies between these two different business organizations in our group. In the Americas, we have air conditioning system is different compared with the rest of the world. In the American and North American and other American houses, they have a business unit, a huge business unit, in the underground or beneath the floor of each house, basement of each house. But we have not been able to generate synergies because of these differences. However, due to the current needs for efficiency, there are some needs in the Americas for different types of air conditioning unit. Because of that, we have been able to utilize our ASIMs product, which has different types of merits compared with the air conditioning units used in investments of North American families. We need to get the support from ASIMs. We like to utilize ASIMs sales route to help NIDAC Technomotor sell more of their products, even more, going forward. When it comes to automotive business, we have this ECU business. There is a need growing in this area, ECUs. Traction motor uses inverters. It's a huge computer chip devices. And we have control units. These are called ECUs. Individual OEM manufacturers are giving us orders and inquiries to tier 1 and tier 2 companies, including NIDAC. There are quite a few needs for us to be able to develop everything about ECUs. And we can utilize NIDAC mobility LSS design capabilities to acquire various businesses, ECUs and brake businesses. NIDAC Corporation may have had some problems in the past in these areas. However, when it comes to ECU businesses, by having this business added to our product portfolio, we like to generate the synergies to generate more business opportunities. Lastly, I'd like to talk about AI related area. This is about the business in which we expected growth in the second half of the growth period. This is probably the largest expectations that we have in this area. It's not just a water cooling module business. We have a chiller business, a water cooling fan and cooling equipment itself. And on a group-wide basis, we like to enter into these business areas. We like to cover thermal management, everything that spins and moves, power generation among so many others. We like to utilize all of these opportunities for our future growth. Going forward, we will continue to work in these areas. And I will make sure to keep you updated on a quarterly basis on occasions like this one. NIDAC will make sure to achieve a lot. We are after a very good new start under the new management. We will continue to stay united going forward and going through a large different waves, different tasks, problems, issues. And on a quarterly basis, we like to continue to make achievements under various circumstances. Please help us draw our blueprint for the brighter future. That concludes my presentation. Thank you very much for your attention. Thank you. Thank you very much. Now we would like to go into a question and answer session. If you have any questions, please make sure to use a microphone from one of our staff members here. Please raise your hand beforehand. First, we would like to entertain questions from security analysts followed by people in the mass media. Please understand these roles first. Thank you. First, if you have any questions, please let me know. Thank you. The person on the front wall, please. Thank you very much for your explanation. This is Takayama of Goldman Sachs. I would like to give you three questions here. First of all, one of the keys that group synergy to be generated, you have gone through organizational changes in various areas in your group. That's one thing that impressed me. And in one year, two years, and several years going forward, and in this fiscal year, in this quarter, are you sure that you will be able to make a profit? Do you think that you will be able to generate a profit based on the new management? Do you see any internal changes occurring for the better under your leadership, Mr. Kishida? What is happening to these figures that we are seeing? That's my first question. Thank you. Thank you very much for your question. When it comes to Q1 and Q2, and in Q2 as well, we are going to achieve the sales of 60 billion yen. Of course, we are not sure what's going to happen to us. There are some uncertainties. There are quite a few of them, countless number of them. And under the circumstances, we are having a conversation, discussions internally as to what we can do, what we should do going forward. So far, we have been focused on immediate situations right in front of us. This situation has not been completely changed when it comes to just being focused on immediate circumstances. But we are trying to become more future-oriented. First, we need to understand, try to see what type of -of-result we are likely to achieve towards the end of this fiscal year. That's the type of conversation we are having in the form of discussion in the group, NIDEC group. Of course, it's very difficult for you to be able to achieve your short-term targets as well as long-term and mid-term targets. Currently, you are generating profit in some areas. I believe you are trying to make quick responses to changes, and you are making smoother communications and dialogues than before. Is that the reason for your current profitability? There is one group, SPMS business, ACM, Moen business, you need to have made significant contributions to the current level of profitability. And we have Traction, which is the deficit-ridden organization. And we have one epoch-making progress in that area too. When it comes to ACM and Moen, I have had very extensive discussions, dialogues, and part of that passion is shown in this area. We have had some struggles in the automotive business, and this struggle will probably continue in the second half of this fiscal year. We need to try to offset or overcome this difficulty. And I have made a request to do more to ACM. That's one thing that I can say to you, or tell you proudly, and additionally, for it to be made. Under this new circumstance, we like to be united, stay united, going through those difficulties. That's the type of discussions we are having on a group-wide basis. Thank you very much. My second question is as follows. On a mid-term basis, you have some numbers that you are working on, as far as I understand. I don't think these figures are finalized yet. For the next three years, for example, what is your target sales, operating profit target? What type of drivers that you have? Please tell me within your capability to be able to tell us. I understand what you are trying to say in your question there. I would like to try a different perspective over here. This is what I think. In the history of NIDEC, it has taken about 40 years to get to the sales of 1 trillion yen, and has taken an additional 8 years to achieve the 2 trillion yen sales target. And I believe 6 additional years will be what we need to take to achieve our second target of 3 trillion yen. You know, 6 years to 3 trillion. And 5 years more, and we will be in 2030 fiscal year. So this target of 7 trillion yen is truly a huge target for us. In 2030, we should be able to touch 5 trillion yen by increasing our sales by 1 trillion yen each fiscal year. We need to make firm steps one by one, day by day. That is something that I can tell you today. It might be difficult for you to answer the question, but when it comes to organizational changes, sales as well as operating profitability are something that we can expect to see grow higher and higher. Is that the correct understanding? First of all, we would like to achieve 10 trillion yen. That would be just a turning point, just a milestone for us. When it comes to myself, the largest point in my mission is that we need to make a global organization, a mechanism, a system that's what I need to make as the leader of this organization. Without such a system, you won't be able to achieve a sales target of 3, 4, or 5 trillion yen. What we need to do is to establish the mechanism, a system that can secure profitability with the high profitability products and that can secure a high level of growth. With M&A and other measures, we would like to make a step even further. That's the type of strength that we would like to secure for our service. That's what's important for us for the next two to three years.

Thank you very much. My last question is a bit specific, but for the water cooling system, I think you get this question a lot, but let me ask as well. From Q3, I think the launch is going to become more evident. I think it's a bit delayed, but if you look at Q4, what is the revenue size? And also for next fiscal year, I think you're expecting the revenue to double to 80 billion, but is the view remain unchanged? As for the next urgent GPU, there was some delay. So there were a lot of forecasts and expectations. And even today, there are divided views and opinions, but as a manufacturer, what we need to do is that we make a preparation and progress toward our original plan. So in that sense, this will be our original plan. We don't see much of a downside. Going forward, there could be a bigger deviation from the original expectation, but quality or expansion of the channels, by doing so, we would not want to fall into a trap. So that's what we try to emphasize, and this is how importantly we see this business. So in Q4, as the GPU makes a full launch, from next year onward, I think the growth curve is going to become more significant. Dr. Wagosan, do you have anything to add? No. Also, any other questions, please? Also, other person there, please? My name is Goto from Missile Security. Thank you for your presentation. I have two questions. With the new management team, it's been six months, and you see, I think you have searched the potential for growth synergies. And as you have analyzed the capabilities inside the group, what do you see as the opportunity, and what do you think is the room for future growth opportunities? I can share what you have identified. And I think you have given us the vertical and horizontal axis in your business operation, but what kind of synergy can we expect to see? So that's my first question. And my second question is, for the EV traction motor, you have made progress in margin improvement, and I think that's a good change. And as the next step for the next phase of growth, what are your plans, and what's the timeline for that? Are you going to do finished products or components, or who are going to be your clients? So to the extent possible, can you share your direction for that business? Yes. So as you pointed out, in creating the synergies, we have completed the inventory assessment, so to speak, to identify the opportunity. So I have been leading that initiative, and as the next step, what we should focus on is the automotive product business. And I think you can see that from what we are doing. Globally, there is a shortage of software talent, and I think this is going to be increasingly evident. And to compensate for that shortfall, I think there is a big opportunity for further growth. What I mean by that is for system design and also ECUs, that's the spaces that we are looking at. If you think about that, within the other motor business, the control is always required. So from April onward, we established the technological strategy committee, and a global software engineer assessment has been conducted. And as a group, we have considered which area to reinforce, which area to use third party capabilities. So for system designs, with the system designs, we are going to develop new business opportunities. So that's the first key point. For many years, we have been looking at the vertical axis.

So

I'm not being excessively optimistic that a lot of synergy can be generated, but for those software where the need is imminent, by fully leveraging on that, I think the interbusiness collaboration will be effective for different businesses. And I want to prove that. As the first step, the good example is the integration of the mobility and LSS to augment their collaboration. And the second question regarding the traction motor business. The traction motor business in and of itself, as I said, is done through JV with a Stilentos and also a GSC component. Other than that, we will focus on the traction component business. As I started to allude earlier for the traction parts business, for large clients, we have received a couple of inquiries. We would like to make sure that we cater to those requests. As NIDEC, I think we should have started on those opportunities. That's one opinion. But with NIDEC, there's a traction motor product for the commercial vehicles, which is partly addressed by Moen and also the other group companies are addressing this as well. Also, by combining those capabilities, we are trying to figure out what we can do. And another point that I would like to share regarding the traction business is that because we were to focus on China, so what is the unique traction technologies that's available just from NIDEC is something that we did not explore enough. So as NIDEC, not in the context of manufacturing the traction motor by ourselves, but we have to dedicate ourselves to fully explore the opportunity for the transmission business as NIDEC. So we are now in Gen 3, but we are already starting to talk about the future generations, and that task has already been addressed. So next question, please. The person at the far left. My name is Akizaki from Nomura Securities. Thank you very much. I have two questions. First. For the appliances and commercial and industrial products, you were very successful in developing the overseas business, but in terms of the organic business, how much operating profit margin are you trying to achieve with existing business? And if possible, I think it's about .5% today, but what is going to be the driver for margin enhancement? So that's my first question. Yes, on that point, I would like to have Mr. Samura answer part of that question, and I will follow later. Yes, for the appliances, commercial and industrial products, we already have achieved .5% OPM, but having said that, if we look closely by subsegments, it's a mixed fixture because some are very close to just break even, and others are generating close to 19 to 20% operating margin. Those two are to be specific. For ASIM, global appliances, and also U.S. Motors and CNI, those three subsegments are under ASIM. And right now, we are conducting the restructuring for CNI, and profitability is still tough for CNI. However, for U.S. Motors, in our near future, we believe we can reach 20% operating margin. Also, within our business portfolio, we want to grow the highly profitable business, and for the businesses which are struggling with profitability, many of those businesses are still operated or managed under the base at the time of acquisition. So by consolidating and making the operation efficient, we'd like to enhance the margin. Thank you very much for your question. This is Kishida speaking again, and I think what you pointed out is key. Looking at the subcategories, there are areas where we see future challenges, but for those businesses, we have taken measures in the first half for ASIM, especially for Europe. We have conducted structural reform. So for those businesses, we believe the impact will start to kick in from the second half. And as I presented earlier for the ASIM, it's a mixed picture. For the consumer, there are consumer appliances, but then there are products that can be used for data centers, like the HVAC system for data centers. So within this huge portfolio, we are identifying which area we should concentrate on, because for this category, we believe 20% of the PM is not a dream. And as an organization, this is managed by Moen, but we have the battery energy solution business, and mainly driven by Europe. We are making progress and steps for the best business. And I personally want to focus on studying what are our competitive strengths here, so that we can globalize this business. So that's another area that I would like to focus on personally. So I think minimum 15%, I guess, would be your target ASAP, the data image. Yes. And for best, today, Tesla has released their results. The margin is very high, so it's attracting a lot of attention. But I think you have the number one market share in Europe. And for your business, you already have a high market share. And by expanding geographically, this will help to enhance the group margin. Is that correct? Yes. Even today, for the European business here, best is making a strong profit contribution. Also, doing a consumer business kind of best, and also that's specific to particular applications. I think there are two approaches for the best business. And Tesla, not the product that's installed on the highways, but for power stations, they have these different projects, which are generating good margin. So that's my take on their results. So this is like one industrial item that we can utilize. So for different countries, different markets, and the power market, electricity market is different from market to market. But I believe this is a business that we would like to steadily grow so that it can have a big profit contribution. Thank you. My second question is, you mentioned about the five businesses of the pillars, five pillars of the businesses. And my question is around that. In the past, looking back your history, you have grown substantially through a series of M&D activities. And you started with small-size motors and then mid-size motors. Your big M&D transactions are mainly on the motors. I think you've done transactions in the mid-size motors and are shifting to the large size. Also, I think your M&Ds were driven by the motor business. But if you look out into the future for your M&D strategy, within the five business pillars, are you going to focus on like big M&D transactions, or are you going to do more of a mid-size M&D strategy to close the gap of these five businesses? Or are you interested in the big size M&D transactions to leverage on your global operation? What is your strategy on M&D?

We like to have various opportunities, including large-scale M&Ds. We have a mission given by Mr. Nagamori's mission is having various different types of strategies for those future M&Ds. We like to have a combination of both small and large-scale M&Ds. In order for us to become an authentic and truly global company, we need to have both types of M&Ds, large and small. We have three different business areas of business, and we have different technological areas, including what we have and what we don't have. We have started defining all of those areas. We have some things that we do not have, and in order to start, instead of starting from scratch, we like to have existing businesses as part of our five different business pillars that you can see on slide 18. We like to add new elements. That's one thing that I think is very important in order for us to have these five different business pillars actually in place. That's something that I'm studying on a daily basis. Thank you. Any other questions from anyone? The person on the right, please. Thank you very much. I'm here at WBS Securities. I'd like to ask you two questions. My first question is, first, when it comes to EV drive business, drive motor business. Kishida-san, you have mentioned you will be able to turn business around in quarter three, and in an annual basis, 490,000 units, I believe. This forecast, how is it going to change if you go below the target, even though you said the chances are very low, but what's going to happen if you actually go below the target, fail to touch the target in other words? And if you can achieve your target and go into the black, you will continue to have this component of business, but when it comes to component EV module business, you're going to incur development cost even further. What type of margin would you like to achieve? And as you incur a lot of development cost, how would you like to drive this business? Thank you very much for your question. First of all, I'd like to give you an answer to the question. This is Raghu speaking. This is the number of 190,000 units, and based on external circumstances, 355,000 units, that's about 70% of the original target, and that's our latest forecast. And the Stellantis giving us a different forecast day by day, it's changing frequently, and I'm a member of the Stellantis board of directors that have been receiving various information, and this situation is rather fragile at this moment, and we have European EV business, and as far as I can see, it's very fragile and fluctuating frequently. This is something that I had hardly expected to happen when it comes to European EV business. At the start of this fiscal year, the situation differs from their model to another. They have the capacity for 900,000 to 1 million units. We have made an investment, and we will not invest no further than that. We'd like to achieve the system as well as yield based on the current target, which is our short-term strategy, and that's what we are expected to achieve. For the next fiscal year and onward, we are going to have negotiations on the number of units, several thousand units, that's the type of discussions that we are having currently, but even though we failed to achieve the target, I don't think the next year's target will be lower than this year's target. Next year's target will be more than that. Next year's actual production will be more than that. But at the same time, when it comes to this kind of situation, it is not that the strength will stop increasing the target or actual production of aircraft. There are some routes of procurement, and stators, routers, and other components are what we are going to make based on these routes that they have. When it comes to operating profit ratio or margin, traction motor business itself, as well as traction motor business in China, we are trying to achieve a certain level of profitability. When it comes to NPE, we do not have any intention of having an extremely low profitability level when it comes to this joint venture, NPE. We will make sure to secure a certain level of profitability, just like any other component of businesses that we have in our group. That's my forecast for the future business. Thank you very much. My second question is, when it comes to ASIM, business unit, you are trying to consolidate part of the Amex business. Do you have any time slot, time forecast, timing schedule forecast, cost forecast? As of today, as of October 1st, this new consolidation process has started. We are having this one-year plan in place, and we have this six-month period, and we have the next six-month period, next fiscal year. We are going to have the complete consolidation phase or timing to be set up at October 1st, next fiscal year. We are going to take action based on an agreement with the executives of ASIM business. There are quite a few talented ASIM as well as Moen executives. There are quite a few talented personnel in these two business units. I'm having the agreement with Mr. Walter Transano, who is the leader of the ASIM business unit. He has an ambition, he has the power to be, and we have some talented person, Mr. Transano. And we are trying to negotiate with him. We are negotiating with him to try to have the talented person at the top of this current Amex business unit. Are you expecting any huge amount of cost to be incurred? There is structural reform taking place in any business organization. There are quite a few large-scale structural reforms that have taken place in our Amex business unit. Going forward, we are going to generate a profit as we try to plan to have another type, another structural reform. Samra, do you have anything to add? This is Samra speaking. We have Europe and we have the Americas where there are some operational related issues with our Amex business. If you take a look at the regions by region, we have some dispersion of our businesses in these areas and regions. We need to take actions to consolidate. Structural reform may be necessary. Another structural reform may be necessary going forward, of course. That is something we need to specify as an issue in our discussions going forward. At any rate, we need to turn our business around. We need to change the business for the better. This type of consolidation is one of those actions that we need to do to improve our business. We like to make sure to keep this type of changes rolling, keep on keeping on rolling. Thank you very much for your explanation. That makes sense very much. Thank you. The person in the middle, please. I'm Sato, Morgan Stanley, Securities. Thank you very much for your explanation. I'd like to check two figures with you. Stata, router, and other EV components. How large or small the business are compared with the entire group's business? And how are you going to expect the growth of these component business going forward? It is correct to understand that you have already secured a certain level of profitability when it comes to these component businesses. When it comes to Stata router business for this fiscal year, the number is not so large, rather small, but we have some businesses taking place during this fourth quarter in the businesses. Other than the outside of joint venture business, we're going to have our Stata router businesses to take place. It usually takes a year before the SLP, the start of production. So it will be after the first half of the next fiscal year that we will be able to reach that stage of SLP. What would you expect to the size of this business three years from now? It will be a large business in three years from now. That's what I'd like to see happen. When it comes to current AMEX existing or traditional businesses, we have started this business around two-thirds or so. It has taken about 10 years to grow this business to the current size. We do not want to spend so much time. We'd like to achieve a four-digit number eventually. In terms of profitability, mobility innovation access that we have, as part of that access, we'd like to achieve a big with this business. We do not ever intend to make any blueprint to disappoint anyone here. My second question is as follows. This is rather short-term strategy related to the question. When it comes to water cooling business, two-thirds of the units is I believe production. You forecast about when it comes to Q2 shipment and Q3 and going forward, what is the production capacity and expected size of shipment? Mr. Urgo, please answer the question. This is Urgo, the head of the IR department. 6.6 billion yen. That's our sales. 5 billion yen is our latest sales record. We have an extra generation GPUs needs growing. It's not really clear yet actually. In the past week to one and a half weeks, we do not have any communication with it because this was a silent period. But now information is becoming clearer. As of December, we're going to have a surprise according to our current forecast based on what our customers told us. We have November before December. In the second and first quarters, we have figures leveling up. We're going to have one step further. During the January through March period, we're going to have increasing in demand. What customers have told us is that in not just in 2024, but in 2025 fiscal year, the level will be in parallel with the January through March period of this fiscal year. That's the type of expectations that we have and we're going to be prepared fully for that type of demand increase. This is another very short time based related question. You talked about the sales of 40 billion yen. That's what you said you expected. What is your current expectations of the sales and how this number is going to change for the next fiscal year? Mr. Samarasan, please answer the question. As you know, NADV GPU is something that we are experiencing a delay there. The actual number didn't go up as high as we expected this quarter, the second quarter. The growth curve will be about the same, will remain unchanged. The same curve will be drawn in one quarter later. Secondly, we have been focused on CDU business. Other than that, we have ALCM, quick coupling businesses and many other businesses. These businesses are going to secure a certain level of sales as well. Please take that into consideration as well. At the end of this fiscal year, I believe we will not experience so much decline. We are thinking, seeing far ahead into the future. There may be some delay by a week or two. That's not really a huge part of my logic or part of our discussions. Once these products are in the market, the world will change. How about the customers? You have existing customers. Are you focused on these existing customers? When it comes to products and capacities, how are the capacities changing?

So for the customers, as we have been telling you, we will cater to the demand coming from the existing clients. And I'd like to note that the capacity is something that we are consulting with the clients. We are trying to be out of the curve to make sure that we have enough capacity to cater to the customer's demand. This is about CDU, but for other components like quick coupling and other parts, for those inquiries, we are making progress so that we can supply to more customers. So I think we'd like to switch to get the questions from the media, please. The person in the middle row. My name is Nita from Nikkei. This fiscal year, or in the first half, revenue of the both record highs and the weaker yen, I think, pushed up the revenue by 17.9 billion. So I think it did seem like you struggled a little bit, but the automotive product business, some component you mentioned about that, but for the auto business and the infrastructure business that you are focusing on, data centers and such, what is the trend in the market? And there's election in different countries, and I think there is less visibility, but your business will be impacted by the currency. But what is your outlook going forward? Yes, so this time, we said that we will reiterate the full year outlook. In Q1, we said that the plan, the vision was plus 15 billion, and we revised up by 10 billion. And for Q2, it was higher by 6 billion, but we did not change the full year guidance. Going forward, there are a lot of uncertainties. And as the management team, we share that outlook. Also, at this point, just because we had a strong first half, we did not want to revise the full year outlook. So looking at Q3, Q4, and also next fiscal year, we want to make sure that we deliver our commitment. Thank you. And for the IMEK business and infrastructure business, what's the investment trend in the market? Do you expect investment to rise going forward? In terms of the economic sentiment, you mean? Well, I think economy is a mixed picture depending on the region. The five business pillars that I mentioned earlier will not be impacted by the economic cycle. Also, these are the businesses where we can make steady progress in the business agnostic of the economic cycle. So for our industrial business and the IMEK business, even if there are changes in EV or hybrid market, there always will be cars in this world. But in the meantime, we can focus on the other four businesses to compensate for the shortfall in one business. So with these five businesses, we believe that we have a robust business portfolio where we can aim for steady growth overall. Thank you. My other question is, the integration of the ACMOM automotive business, I think, is your first step. And you have many group companies. What are your plans for future consolidation and what is the timeline for that? Yes, one correction. We are not integrating ACMOM. We are integrating ACMOM existing auto business. So ACMOM are different businesses and they have different people responsible for each of the businesses. And what you see on the right hand side is the automotive related business. We have the three group companies. Two of them will be integrated. We want to maximize the group synergy. And for that, one way to achieve that, if that is to integrate the business units or the organization, we will go ahead and do that. But we're not saying that we will continue to actively integrate in consolidate to recruit companies or business units. I see. Thank you very much. Any other questions? Okay, so the person over here, the lady, please. My name is Tomohiro from Nippo Kanko Gyo Shinbu. Regarding the integration of ACMOM and existing auto business, your existing auto business in Europe and the U.S., what are the challenges for the business in Europe and the U.S.? And how can ACM help to resolve those challenges? Yes, thank you for that question. For the existing auto business, I was actually in that business myself. And we did not have a local management who were in position for a long time. That was the biggest challenge for the Americas. We had the Mexican factory, which was a challenge for many years. And the leadership has been changed from time to time. So that was our history. When I was in Europe, few management people, because of different reasons, left the organization. Many of the talent people have been invited back. That's what we were doing in the last two years. So with that, we have the European management team and also we have the U.S. local management team. Also, fundamentally, ACM had that capability. Also, we wanted to reintroduce that management philosophy. If we look at NIDEC as a whole, for many years, we did have some philosophy of local management which penetrated in the organization. But because of the history of the automotive business, which started in Japan and globalized later, and because of that, we had to change the management structure and local to local management. And also, we wanted to capitalize on the great talent held within ACM. So that's where we're starting to change the challenges for the existing auto business. My other question is the machine tools. I think you're aiming to become the number one market share in China. So what is the actual financial value of that, and what is the percentage of the share, and how do you expect to see the contribution for that? Yes, I would like to have Samira-san answer that question. Yes. First, looking at the market in China, for the machine tools, there's Japan, Germany, and those are the strong markets. And relative to that, the China market is quickly catching up. Also, for high speed quality and other quality, Japan and European countries are still having the lead. But for some of the more standardized requirement, the local products are now going into the market. So one of our appeal is that our machines are made in Japan, and we are positioned as the mid to high end product. But the Chinese players are also moving upward in the market segment. And for that, as the market expands, we continue to maintain the leading position. And that's why we established the Soapingu factory. Thank you. Did that answer your question? Yes. Any other questions? I saw the person in the back. My name is Nomoto from Nikko Shimbun. I have two questions. Regarding the integration of LSS and mobility, in the presentation, you mentioned collaboration. But are you going to integrate them as an organization and make it into one? How are you going to unify the two? Are you going to integrate the IT systems? I think they have different production capacity. But how are you going to organize that? What you were manufacturing previously at LSS, are you going to manufacture that in mobility going forward? Yes, in this presentation, it's a little bit fake in expression. But with this announcement and going forward, officially, we will be communicating this to our clients. So that said, internally, mobility and LSS will be integrated. That's what we are saying. And we have set a schedule for that. As you know, for the automotive business, with the clients, we need to be able to share data online. And there are a few thousand SKUs underneath that. So without the customer's consent, we cannot say we are going to do this and that by one. So that's why the expression is quite vague. So working together with the customers, we have started to make steps to integrate the business as the core message about this presentation. So how about the production of mutual production of the product? Well, in Thailand, we are doing a similar substrate mounting. And depending on the production sites, I think there will be different opportunities. Where we see benefit with integration, we would also like to consolidate the production sites. On a related note, I think LSS, it was formerly Honda LSS. So they have a lot of business with Honda. But right now, after your acquisition, is the non-Honda business increasing in terms of proportion? Yes, for LSS. Of course, Honda is a key important customer that has been the case and that will continue to be so going forward with our expectations. But LSS has a diverse array of businesses which are non-Honda. And that's also true for mobility. So we will be aligned with the customers' interests to solve the choking points of the customers. So that's the intention of our integration. So we want to make sure that we pursue that. In order to cater to the requests of the customers, we would like to integrate your technology. And that's the primary intention of the integration. I see. My second question is for the Gen 3 or after Gen 3, you said that you are already working on the new project. Also with Gen 3, you have 7 in 1, which is a higher margin. But going forward, what is the direction, especially in China? I think they're talking about 10 in 1. But as a direction, what is your strategy?

When it comes to China, we have a GAC group. It all depends on how they're going to make a decision. And a 7 in 1, 7 in 10, 1 in 7, 1 in 10, it could be anything else. When it comes to development electronics products and semiconductor product development, they have our own partners in China. We are making great synergies with these companies in China. And based on the depends on various circumstances, we will be able to do business, continue with our business. Thank you. Now we like to finish today's conference on earnings report by NIDEC Corporation. Thank you very much, everyone, for your attendance today. Thank you very much.