Nidec Corp Adr

And we'd like to start the presentation on NIDA 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, Tarek Urago, general manager of the IR department. In today's presentation, Mr. Samara 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 would like to finish this meeting at 11.30 a.m. Now, Mr. Samara, please. Thank you. This is Samura, the company's CFO. I'd like to give an update on the earnings results of the first half of this fiscal year. First of all, net sales were up 11.8% to 1,293.8 billion yen, which is an 11.11%. This is a record high on a quarterly basis. Operating profit was up 1%. by 4.9% 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, an operating attribute about the owners or the parent was both down and And operating profit before income tax was down by 30.9%, 100.2 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 press-all basis, evaluation basis. And nowadays, we have gained approximately 10%. out of the amount of loss we have had. And on an annual basis, as you can see on the right-hand side of the slide 3, we have had the up-water revision, as you can see, and the up-water revision remains unchanged. Next slide, please. This is an overview by product group. First of all, top left corner, a small pressure motor. near-line and other demands for hard disk drive business continue to recover. And with this career, we have an emergent, 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 a joint venture with our Stellantis in Europe. We have had 10.1 billion yen worth of adjustment that we had to make, considering that we have an EV traction motor business, which has been in a positive territory, and NPE has now progressed with the mass production preparations. Because of that, the different... Demand 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, conditioning needs, and that has declined. All in all, we have a better product lineup, we have a better cost of 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. We have details of this information, including the structural reform as well as the loss and gain in operating profit based on the current section trade. And you can see the comparison between now and the year. fiscal year before, and we have had the current exchange rate was up both in sales and operating profit, and we have had a restructuring effort in appliance and commercial industrial products segment. 3.7, 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. Only in other areas, there has been some loss in either sales or operating profit. Next slide, this is a quarter-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 the five... 100 million yen increase in one of the segments, and we have about 10.1 billion yen of trashing effort is included in this area. Virtually all of these areas have had increase in sales and in operating profit. This is the flow of cash flow situation. and we are trying to enhance the cash flow generating ability to maximize our corporate value, 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, towards the end of last fiscal year. And this fiscal year, we have NPE, which is on the recovery track, and we have been trying to enhance our cash flow generating ability. There are some issues that are facing us. to 28 billion yen, which is lower than the last year's performance. But throughout the fiscal year, we are aiming to achieve a balanced cash allocation on the balance sheet 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 that support the 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, 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. However, under the new management, we are going to make steps, 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'd 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. And it was this meeting, in this meeting, it was about exactly a year ago that I was able to give you a presentation of the first half of this fiscal year. I truly believe that I made a very good decision at that time. It was very good that 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 a component of business. That's what I said at the meeting a year ago. A year later, we have this G-Net, which is a joint venture with Guangzhou Automobile Corporation Group. We're 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're going to have those business on the production line. And we're going to spread the use of these new products in Chinese market going forward. We have had a Gen 1 and a Gen 2 products in the past. We have had a series of troubles and we have had troubles 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 semiconductor manufacturers and other manufacturers with whom we are working, and the other global companies could not 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 of the slide, this is our joint venture with Stellantis 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. And from this 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, Stellantis is in the league of winners, which many people have said so far, and especially recently. And among the European OEMs, there are some changes in EVs. there is huge waves coming toward them. And Stellantis forecast may go below than the original expectations, but we are going to establish a system with Stellantis in the form of discussion to make sure a profit under any circumstance. Therefore, despite all the changes in sales volume, we 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'd 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, stators, rotors used in EVs. We are having a lot of inquiries from our possible candidates, business partners. and we have studied 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, electronics, powertrain, chargers, 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 NCJ, NIDAC Corporations Group, We have a pause trend, a pause trend and a 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 a pause trend and a break of businesses. 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 an organizational transformation that's unprecedented, and I mentioned this at the outset of the meeting. In the European and the U.S. business, we are going to embed the business from Japan that will be achieved as of October 1st, and we I would like to share with you that we have started this initiative. For the NEDEC parent automotive business, our operations are cutting edge, being in Japan and China. So we have an excellent level of management, and this top-tier management exists within the group. However, we see challenges in Europe and U.S. for their operations. So I personally recognize this challenge. Roughly 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 and including talent management, we would like to have a local-to-local communication with the customers to manage the business locally. So for a long time, ASIM team, which is very good in managing the operation in those markets, the automotive business will be integrated to the ASIM 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 NIDIC, 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 of 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 any actual 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 company. So taking on that opportunity, we would like to capture such demand. And we have two companies acquired through acquisition, Nidec Mobility and Nidec Galasys, 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 the connecting part. which are under development, so we are manufacturing this. And for LCM, which is a plate that really touches the chip to cool, and also CDU, which is the coolant distribution unit. So I would like to give you three updates on these products. For quick coupling, in the previous slide, 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 we want to secure quality 100%. 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 a growth driver in next year. I have three things to update. This is just the 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 Hubli 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 this Hubris Second Factory will 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 2025, it will start to have a full contribution. This is a factory based in Saint-Étienne, 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 alternative 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 this is your 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 Takisawa have made a joint development. And these new products are ready to be launched into the market. On the right-hand side, digital twin and simulation and also fully capitalizing on the AI technology, which was unprecedented in the machine tool industry So this cutting-edge technology are embedded in our 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. So 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 that 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 pre-process part of the line, and we are now ready to offer the post-process part of the whole flow by acquiring linear transfer automation. So 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 directions. So at the Cuba 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 of 2025. We have five different groups, as you can see on this slide. people assigned to each of these activities. You can see the pillar relating to which types of businesses, et cetera. 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'd 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'd 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 have already known very well, we have had a very strong leadership under which we have been able to grow individual businesses. That is my understanding. But going forward, We need to accelerate even further the pace of our growth. 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 NIDEC group. That's 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, and we have some consolidations taking place in other areas of our group. And we have had some areas outside AMEC. There are some movements like that, and that's what I'd like to update to you today. First of all, when it comes to first better life area, On a global basis, we are having a very high market share, refrigerant compressor, air conditioner, large-scale motors. We have an ASIM business unit here, and we have a home appliance air conditioning motor. We have Nidex Technomotor Corporation. We're 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 there 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. We have not been able to generate the 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 American tech conditioning units used in investments of North American families. We need to get the support from ASIMS, and we'd like to utilize ASIMS sales route to help NIDEC 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 device. 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 NIDIC. 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 break 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 synergies. to generate more business opportunities. Lastly, I'd like to talk about the 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 expectation that we have in this area. It's not just a water cooling module business. We have a chiller business, a 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 generations, 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. NIDIC will make sure to achieve a lot, and we have embarked on, we are off to a very good new start under the new management, and 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 would 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'd 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 before. First, we'd like to entertain questions from securities analysts followed by people in the mass media. Please understand these rules first. Thank you. First, analysts, 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'd like to give you three questions here. First of all, one of the keys that your group synergy to be generated, you have gone through organizational changes in various areas in your group. That's one thing that impressed me. 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'll 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 goes to Q1 and Q2, and in Q2 as well, We are going to achieve 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 the immediate circumstance, but we are trying to become more future-oriented. First, we need to understand, try to see what type of end result we elect to us at the end of this fiscal year. That's the type of conversation we are having in the form of discussion in the group, NIDAC 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 reasons for your current profitability? There's one group, SPMS business and ASIM. Moen business units 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 ASIM 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 ASIM. That's one thing that I can say to you or tell you proudly, in addition to effort to be made. Under these new circumstances, we elect 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, but for the next three years, for example, what is your target sales operating profit target What type of drivers do you have? Please tell me within your capability to be able to tell us. I understand what you're trying to say in your question there. I'd like to try a different perspective over here. This is what I think. In the history of NIDIC, 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 is what we need to take to achieve our second target of 3 trillion yen, you know, 6 years. 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's something that I can tell you today. It's 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, and 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, and that's what I need to make as the leader of this organization. Without such a system, we won't be able to achieve a sales target of 3 or 4 or 5 trillion yen. What we need to do is to establish a mechanism, a system that can secure profitability with high profitability products, and that can secure a high level of growth. And 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 little 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 the view remains unchanged. As for the next surge in 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, vis-à-vis 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. Do you have anything to add now? So any other questions, please? The 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 at the potential for group 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 and opportunities? Can you 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 a 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? Yes. So today it's impossible. 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 a 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. I'm not being excessively optimistic that a lot of synergy can be generated, but for the softwares where the need is imminent, by fully leveraging on that, I think the intra-business 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 of itself, as I said, is done through JV. with Stellantis and also GSC component. Other than that, we will focus on the traction component business. As I started to allude earlier, for the traction parts business, from large clients, we have received a couple of inquiries. We would like to make sure that we cater to those requests. As NIDIC, I think we may have started, we should have started on those opportunities. That's one opinion, but with NIDIC, 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 too focused on China, so what is the unique traction technologies that's available just from NIDIC is something that we did not explore enough. So as NIDIC, 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 NIDIC. 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 Akizuki 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 the existing business? And if possible, I think it's about 12.5% 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 12.5% OPM. But having said that, if we look closely by sub-segments, it's a mixed picture because some are very close to just break-even, and others are generating close to 19% to 20% operating margin. Just to be specific, for ASIM, global appliances, and also U.S. Motors and C&I, those three subsegments are under ASIM. And right now, we are conducting the restructuring for C&I, and profitability is still tough for C&I. However, for U.S. Motors, In the 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 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 ACM, 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 ASEAN, 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% OPM is not a dream. And as an organization, this is managed by Moen, but we have BESS, 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 on 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, would that be the 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 growth margin. Is that correct? Yes. Even today, for the European business here, BES is making a strong profit contribution. Also, doing a consumer business kind of BES and also BES that's specific to particular applications, I think there are two approaches for the BES business. In Tesla, not the product that's installed on the highways but for power stations they have these different projects which are generating good margins 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 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&A activities. And you started from the small size motors and then mid-size motors. Your big M&A 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&As were driven by the motor business. But if you look out into the future for your M&A strategy... Within these five business pillars, are you going to focus on like big M&A transactions or are you going to do more of a mid-sized M&A strategy to close the gap of these five businesses? Or are you interested in the big size M&A transactions to leverage on your global operation What is your strategy on M&A?

We like to have various opportunities, including large-scale M&As. We have a mission given by Mr. Nakamura. His mission is having various different types of strategies for those future M&As. We like to have a combination of both small and large-scale M&As. In order for us to become an authentic and truly global company, we need to have both types of M&As, large and small. We have three different 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 probably just existing businesses as part of our five different business pillars that you can see on the 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 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 on an annual basis of 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, if you don't 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 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 the answer to that. First, I'd like to give you a question. I'd like to give an answer to the question. This is Urago speaking. This is the number of 190 southern units. And based on the external circumstances, 355 southern units, that's about 70% of the original target. That's our latest forecast. And Stellantis is giving us a different forecast day by day. It's changing frequently. And I'm a member of Stellantis' board of directors. I have been receiving VRC information, and this situation is rather fragile at this moment. And we have European EV business. 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 Navy 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 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 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 current situation, it is not that the strand test will stop increasing the target or the actual production of forecast. There are some routes of procurement. And staters, routers, and other components are what we are going to make based on these routes that they have. When it 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, and that's my forecast for the future business. Thank you very much. My second question is as well. When it comes to ASIM business unit, you're trying to consolidate part of the MX business. Do you have any 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. And we are going to have the complete... consolidation phase or timing to be set at October 1st of next fiscal year. We're going to take action based on an agreement with the executives of ASM Business. There are quite a few talented ASM 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 Tranzano, who is the leader of the ASM 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 person, talented person, at the top of this current business. Are you expecting any huge amount of cost to be incurred? There is a structural reform taking place in any business organization. There are quite a few large-scale structural reforms that have taken place in our AMEC business unit. Going forward, we are going to generate a profit as we try to plan to have another structural reform. Samarasan, do you have anything to add? This is Samarasan speaking. We have Europe and we have the Americas where there are some operation-related issues with our AMEC 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's 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, and 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, keeping on rolling. Thank you. Thank you very much for your explanation. That makes sense very much. Thank you. The person in the middle, please. I'm Sato of Morgan Stanley Securities. Thank you very much for your explanation. I'd like to check two figures with you, Stata, Rotor, and other EV components. How large or small the business are they compared with the entire group's business, and how are you going to expect the growth of these component business going forward? Is it correct to understand that you have already secured a certain level of profitability when it comes to these component businesses? When it comes to Seta Rota business for this fiscal year, the number is not so large, rather small, but large. We have some businesses taking place during this fourth quarter in the businesses. Other than the outside joint venture business, we're going to have our state road businesses to take place. It usually takes a year before the SLP, the start of a 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 2000 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 elect to achieve a four-digit number eventually in terms of profitability. In the mobility innovation axis that we have, as part of that axis, we elect 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 question. When it comes to water cooling business, 2,000 units is, I believe, production forecast. But when it comes to Q2 shipment and Q3 and going forward, what is your production capacity and expected size of shipment? Uragosan, please answer the question. This is the Urago, the head of the IR department. 6.6 billion yen. That's our sales. And 5 billion yen is our latest sales record. We have an extra generation GPUs needs growing. It's not really clear yet, actually. For 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 event. according to our current forecast based on what our customers told us. And we have November before December. In the first and second quarters, we have figures leveling up. And we're going to have one step further. And during the January through March period, we're going to have increasing in demand. And what customers have told us is that... And not just in 24, but in 25 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, and that's what you said you expected. What is your current expectations of the sales, and how this number is going to change, do you think, for the next fiscal year? Samarasan, please answer the question. As you know, NADBI GPU is something that we are experiencing a delay there. And the actual number didn't go up as high as we'd expected this second quarter. And the growth curve will be about the same. It 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 LCM. quick coupling businesses, and many other businesses. And 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?

For the customers, as we have been telling you, we will cater to the demand coming from the existing clients. On a related note, the capacity is something that we are consulting with the clients. We are trying to be ahead of the curve to make sure that we have enough capacity to cater to the customers' demands. 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 would 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, we're in the first half. Revenue will be both record highs. And the weaker yen, I think, pushed up the revenue by 17.9 billion. So that said, 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're 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, with the plan, the vision was plus 15 billion, and we revised it 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 four-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 AMEC 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 industrial business and the AMEC 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 AC Moen 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 AC Moen. We are integrating AC Moen existing auto business. So ACIM and Moen 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 and consolidate group 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 Nippukan Kogyo Sinbu. Regarding the integration of ASIM and existing auto business, your existing auto business in Europe and the U.S., what are the challenges for the business in Europe and U.S., and how can ASIM 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 Americans. 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 talented 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. So fundamentally, ACIM had that capability, so we wanted to reintroduce that management philosophy. If we look at NIDIC 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 ASIM so that's why we're starting to change the challenges for the existing auto business my other question is on 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 requirements, 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 made-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 Saipingu factory. Thank you. Did that answer your question? Yes. Any other questions? I saw the person in the back. My name is Nomoto from Nikkan Shimbun. I have two questions. Regarding the integration of LSS and mobility technology, 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 vague in expression, but with this announcement 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 when. 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 mutual production of the products? Well, in Thailand, we are doing a similar process. like 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 not Honda, and that's also true for mobility. So we will be aligned with the customer's 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. So with Gen 3, you have seven in one, 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 GSA group. It all depends on how they're going to make a decision. One in 7, one in 10, it could be anything else. When it comes to development of electronics products and semiconductor product development, we 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'd 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.