Nidec Corp Adr

Now let's start the presentation on NIDAC Corporation's performance for the third quarter of fiscal year of 2024. We would like to thank you very much for your participation in this virtual business schedule. We have Mr. Mitsuya Kishida, President and Chief Executive Officer. Mr. Tatsuya Nishimoto, Executive Vice President in charge of Automation and Machinery Business Unit. Mr. Takamitsu Araki, first senior vice president in charge of companies' M&A activities. Mr. Akinobu Samura, senior vice president and chief financial officer. I am Teraki Urago, general manager of the investor relations department, and I'll serve as the moderator for this meeting. In today's presentation, we have two sections. The first section will be about the company's latest performance results, followed by the second section, which is about the press conference on Nidex TOB-based acquisition of Makino milling machine. We will have a question and answer session for each of these sessions. Thank you very much for your understanding. Now we would like to start the first section of the presentation. First, Mr. Samura will present an overview of the company's latest earnings results, followed by the presentation and explanation detailed by Mr. Kishida. This first session is expected to last until 5.45 p.m. Mr. Summer, please. Thank you very much. I would like to give an update on the financial results of this quarter three. Please take a look at the middle section of the page over here. First of all, net sales, which was up by 11.5 percent to 1.946 trillion yen. This is a record high result in terms of net sales. When it comes to operating profit, it was up by 5.0 percent to 175.5 billion yen, which is another record high result for us. when it comes to operating profit before income taxes as well as profit attributable to owners of the pair. And these were down by 4.7% and 6.7% respectively. This is due to the temporary effect of the depreciation and the fluctuation change in the currency exchange rate, which resulted in the financial loss of 22.5 billion yen. And all the other numbers, exchange rate-related data, are remaining unchanged since the first half of this fiscal year. Next, I'd like to give an update on the product overview by product group. The demand for hard disk motor remains to be high, and demand for the AI server has been growing rapidly. And due to the late in the delivery of some products to the customers, there has been some loss in the latest quarter, this past latest quarter. Next, automotive products. Profitable situation in China remained continued. And due to some positive impact, we have been able to reduce the amount of debt We have some selection situation in European and American car manufacturers. And we have done some restructuring efforts in this amount. And then we have lost some profit. And when it comes to the appliance commercial industrial products, we have done some consolidation of our business basis in this area. We have spent about 2 billion yen for that effort. And we have U.S. motor products, which are very profitable. There has been a seasonal temporary loss in momentum, and there has been other effects due to that. All of that, we have suffered some loss. And lastly, when it comes to machinery, we have had some ongoing sluggish situation, but there are signs of recovery in this business. And we have press machines and machine tools. Sales have increased. And the results are as you can see here on the slide. And these are the details over here on this slide. You can see the year-on-year changes. Here you can see the chart. And you can see the increases and decreases from the previous fiscal year. And we have the exchange rate, which is up 91.5 billion yen in terms of net sales. And machinery, small precision motors have enjoyed increased sales and operating profit. And the other ones have enjoyed increased sales, but some of them have suffered a decreased operating profit. And when it comes to quarter-on-quarter changes, as you can see, there are some decreases in some of these businesses, including small precision motors, automotive products, and appliance commercial and industrial segments. I would like to skip the detailed explanation here because this overlaps with the previous slide situation. Next, promoting cash flow management. 41.1 billion yen for operating cash flow. You can see the steady growth improvement from the past fiscal quarter, but slightly decreased from the previous fiscal year. And we are doing the company-wide efforts to increase our efficiency as a business. we continue to accelerate our pace of cash-generating activities. And these are the major points. That is all for the summary of our financial situation. From now on, I would like to explain major topics from quarter three of this fiscal year. And I'd like to give an update on our activities for fiscal year 2025 and thereafter. First of all, please take a look at this chart over here. This is our initial original business, hard disk drive motor business. This is our history over the past 35 years or so. We have hit the bottom in 2023 fiscal year, and we are expected increase in the numbers of HDD shipment from 2024 commercial year. DATA SANTA related hard disk drives are spearheading this effort. When it comes to our NITX situation over here, please take a look at the chart on the right. You can see that these products account for 60% of the entire product portfolio. And this hard disk drive business continues to be a growing business for us. Please take a look at this slide over here. This is one of our new businesses, some of our new businesses here, water cooling system business. It includes GPU and chipsets. And we are enjoying the growing momentum of this business over here. In Q3 and Q4, these quotas are truly important for us when it comes to the preparations for the future growth. That's what we realized once again. Here are the details of the preparations here. We need to expand our component business. It includes quick coupling, LCM, and other important components are included here. When it comes to quick coupling, which is something that I've touched upon last time, we need preparations for our Chinese customers as well as our American customers, and we are utilizing Philippine factories for that. Starting from December, we have started shipping our components that are explained over here. When it comes to sales route, that's another important topic here. As of today, our water cooling business is... We are... limited to direct sales of our products to server makers such as Supermicro, Fujitsu, among other companies. That's a direct business between us and them. And plus, we have a data center business operators system integrators. All EM and OEMs are making a strong demand for us to ship them our products. In-world types and other types components are what we are preparing to ship to them. Timings are very important, and we would like to give you a very detailed explanation in the future. When it comes to Q3 and Q4, we will make sure to do a very good, solid development of our products. There is one more topic over here, production-related preparations. Please take a look at the photograph over here. This is our Thailand factory. We have this Rojana Industrial Park. Factory 2 and Factory 6 are the areas where we are making preparations for producing CTUs. These are the solid preparations we are making for upcoming Q1 and thereafter. That's what I'd like to report to you. Thank you.

Next. This is the water cooling system, including the telecom business. We are talking to Fujitsu, and we would like to further broaden this business to address the technologies for the next generation telecommunication technology. So what we are trying to offer with the five business pillars is that this will be necessary for all the five business pillars. So for that, as NIDEC, we decided to participate in IOWN. For this initiative, I wanted to offer you some report. NIDEC. has been providing the cooling system for the base stations and we have a broad range of telecommunication related businesses. But we'd like to make further contribution to this sector. So for our five pillars, we are going to acquire this technology that will be a common base for five business pillars and that's the reason for participating in IOWN. And also, Moen is engaged in the battery energy storage system and there are some updates that I'd like to make. Here, we are enjoying strong order taking and this fiscal year, the business unit has expanded to roughly 50 billion yen. Going forward, we expect a CAGR of high 20% to 30%. And with that in mind, we would like to grow the business. As of today, this business is mainly focused on the European market to grow. As you can see at the bottom right, I visited this factory in December in the suburban area of Lyon, France. There are nine buildings and we are making production in these nine buildings. But we are going to relocate to Saint-Ien to the new plant in order to consolidate these nine bases to expand our business. beginning of FY25 as this will contribute to our business. We are also making similar preparation in Italy to expand our factory. So this is for the large capacity and large voltage control will be enabled. We believe this is a competitive edge, and we would like to utilize this high-quality production expertise to be competitive. So today, on a project basis, we have an order of roughly $2 billion. Also, we want to make sure that this business will become one of the strong contributors to the profit. And today, in the second part, we will offer you more details on this topic. Also, we made a letter of intent in order to maximize our corporate value. With the high technology and also high solution capability, we are targeting a Makino milling machine. And in order for us to become one of the leading machine tool manufacturers, And we want to maximize our corporate value working together with the target company. Nidec have built our technology based on 97 M&As across the world. and we would like to work together closely with the Makino milling machine, leveraging on the high management capability to become one of the world's leading machine tool manufacturers. So we would like to be in discussion in good faith with Makino milling machine. Mr. Araki and Mr. Nishimoto will offer your details in the second part of today's meeting. In the last three years, we have continued to conduct structural reform on the auto business. We are now in the final phase of the structural reform for this business. As of October 1st, the automotive existing business was transferred to ASIM. The existing auto business As you can see on this slide, there were three, one, two, three, indicated on the slide. The first one is the automotive motors manufactured in China. And the second business is automotive motors manufactured in Europe and America. With more than 10 group companies in Japan, we have the third automotive business, which is catering to the Japanese OEMs. There are some seasonality, but each of these businesses have generated about 200 billion yen, so altogether, the automotive existing business has a size of 600 billion yen. For many years, we struggled with the second part of this auto business where we are manufacturing in Europe and America. We have rolled a lot of countermeasures and there are a lot of things that we were doing for structural reform and from Q3 we commenced on rolling out these initiatives. So that said, as countermeasures, What we needed to do has already been implemented. In Q3, Q4, we will continue further improvement so that the second business domain We will start to make profit contributions from FY25 and from FY26, 27. We would like to make a double digit profit contribution from this business, and we have put together a business plan to achieve that. And also, for many years, the traction business was causing concern over the investors. But as was indicated earlier, the traction business based in China is starting to generate profit from Q3. And for Q4 and for FY25, we have been able to turn around the business so that they will continue to generate profit. And also, the Stellantis JV business in Q1, Q2, Q3, we're seeing improvement in reducing the losses. Also, finally, in Q4, we will start to generate profit. And also, two years ago, we have been communicating about the traction-related component business, and we are going to exploit this opportunity, and Slantis is injecting money into the deep motors, and from that, we have received the order of from December and from Huawei we were certified as the manufacturer and we plan to ship out in February. Also for the component business, we have made progress. So for the traction business, we are making progress on par with the plan. For the 10 months with the new management team, we have embarked on new initiatives but there are more that we can do. And from FY25, we will start the business plan leading up to FY27. And we want to turn around our business foundation so that we will be highly profitable. And for that, we are going to roll out various structural reform. And the ASIM integration, automotive integration, and mobility services integration are some iconic measures that we have taken. And we will... make further progress in trying to further consolidate your businesses without making any exceptions. We will consider how the business should look like to improve. In India, where we cannot achieve enough growth on a standalone basis, we will conduct a group-wide measure to accelerate our growth. And on top of that, the business space consolidation will be conducted on a cross-functional basis, and we will start a fundamental reform. And we are feeling a good impact and results from those initiatives. Unnecessary assets, divestitures, and also the interventional fundamental reform will be conducted in each of the regions like Europe. And as new management team, we will continue to augment the structure as an organization. The operation capability will be improved and the DX will be supporting those initiatives. DX investment plan is in place for us to facilitate the structural reform. The head office functions will be globalized and we will make a fundamental change effective April 1st in the HR area. and also the global organizational team and the CFO teams. And the current organization structure will be revisited so that there will be a change in the organizational structure inviting participation from the overseas talent.

Starting from this fiscal year, we have a technological committee, and we have discussed all the reforms on software and other issues. We will continue to do that relentlessly. Starting from 2025, we are going to launch a new system. We have this new three-year-old business plan, new three-year strategy to fiscal 2027, and we would like to be updated in the future meetings. Structural reforms will be necessary, and the consolidation of business spaces will be necessary. Investment in new organizations, investment in human resources, structuring reforms will all be necessary. We would like to share with everyone all the detailed information, the latest information, so that we can visualize our service. This is going to be a full-fledged effort for us to globalize our service, and we are going to become a truly important or leading high-efficiency organization. This type of effort have already started. Starting from this second half of this fiscal year, we have already started some of these actions. And for the three fiscal years starting from the next one, we'd like to establish ourselves as a high-efficiency organization. That is all from me. Thank you. Thank you very much. Now we'd like to open the floor for question and answer session. If you have any questions, please raise your hand, and please make sure to receive a microphone from one of our staffers. First, we'd like to entertain questions from securities analysts, followed by people from the mass media. Thank you. in advance for your understanding. First of all, does anyone among the security analysts have any questions? The person in the front row, please. Thank you very much. This is Takayama of Goldman Sachs Corporation. I'd like to give you three questions here. First of all, when it comes to individual products, including water, cooling, and traction motor-related products, can you elaborate on numbers of these products for this fiscal year as well as for next fiscal year? What type of focus do you have for these products when it comes to sales and other important elements? When it comes to non-super micro customers with non-CDU products, how much do these other products account for in your product portfolio? Thank you very much for your question. I would like to give the answer. And as necessary, I would like to have Raghu as well as Mr. Samra would like to add some information as necessary. When it comes to water cooling business, for this fiscal year, We have exchanged several numbers, 200 billion yen at the beginning of this year. And during the middle of the process, we wanted to start aiming for 400 billion yen instead. But at this moment, we are now going back to the initial level, which is 200 billion yen. But in the end, I believe this business can become a 500 billion yen business in the future. We'd like to start the preparations for that from now. When it comes to the breakdown of the non-supermicro customers, as of today, we are still in the planning process phase. We are working with Supermicro as well as Fujitsu. We like to continue to grow with these companies, and we like to expand our sales with other customers as well for this fiscal year and thereafter. Urago-san, do you have anything to add? No? Okay. Here's my second question. When it comes to EXO-related products, can you elaborate on that topic as well? When it comes to EXO products, We have a Chinese business going on. Every quarter, we are at the break-even point. When it comes to Q4 and thereafter, we are going to have production starting for other customers as well. When it comes to annual numbers, it's about 160,000 unit level. When it comes to NPE, Q1 minus three, And Q2, 1.6 billion yen in deficit. And Q3 was about 600 million yen in deficit. So we have a very good chance for us to go into the positive territory in Q4 and thereafter. This is Samra speaking. When it comes to our preparations for traction motors in 2025 fiscal year, in Europe we have established a mass production phase. This quarter, the production will be 100,000 unit level. For the next quarter, 150,000. And annual basis, it will be 6 million unit level. So the sales will be more than 100 billion yen or so. Thank you. Here's one thing that I'd like to confirm with you. When it comes to water cooling and EXO businesses, sales will be 50 billion yen and 100 billion yen for EXO. Are these accurate numbers? Well, these numbers, I believe these numbers have been subjected so far, depending on customers, but how accurate are these numbers? We are going to promote the visualization, and one of the important elements in that regard is the components or parts of our products. It is very difficult to predict in the industry how much is the demand for GPUs, for example. It's very difficult to predict at this moment. It's highly difficult to predict actual numbers for GPUs and other similar products. We are in a preparation period as far as we are concerned. As far as January through March period is concerned, we can visualize more and more of these numbers. When it comes to traction business, In China, we have destruction business taking place, and visualization is very good, so accuracy of the numbers regarding this particular market is very high. But the remaining portion, which is we have an NPE, which is a joint venture with Stellantis. We need to make sure to understand the business very accurately. And quarter by quarter, we have suffered a loss so far. I myself am a member of the supervisory board of this company, NPE, joint venture, NPE. So I would like to make sure to talk to all the people concerned about increasing accuracy. My third question is about automotive and ASIN business unit. What is the timing for the improvement of profitability? It would be next fiscal year, quarter one of the next fiscal year. That's what I thought that you said. But you have some suffered loss in Q3 and Q4. How is this growth curve is going to be? Can you give me some forecast on that? When it comes to Q3 and a quarter four, When it comes to existing AMEC business that was integrated into ACIM, this organic business will continue to be in a very severe situation. And Q3 and Q4 will continue to take very good measures. That's what I want you to understand. in Q1 of the next fiscal year and thereafter, I would like to make sure that this segment will be able to start making contributions profit-wise to the NIDIC group so that they can eventually achieve the tableau-digit operating profit ratio thereafter next year in the non-world. How about the automotive? I believe you have just talked about AC business ore. I just talked about AMEC's organic business unit that has been integrated into ASIM business unit. How about the Moen, which is more profitable than the other business of ASIM business unit? I believe our profit ratio seems to be down. Is this because of the restructuring cost? I believe when it comes to quota three and quota four performance, you have best business and alternative business. other businesses as well, how much contribution do you think these businesses can make? At the beginning of this year, when it comes to mine and ASM business units, we have this seasonal factors different from the past. Prior to that, we have had restructuring efforts and organizational changes so that we can start a very good pace from the beginning of this year, calendar year. And we are making results for that. When it comes to Q3, you have ACM has suffered some loss. we have this 10% decrease has been recorded when it comes to sales, and this area profitability is very high. That's one of the reasons for the loss. When it comes to Q4, We have positive seasonal factors, including HVAC, whose business is going to be more profitable. When it comes to structuring a reform, which has been repeating, which I have been repeating, when it comes to, especially in the area of CNI business, the effects of the restructuring will take effect from Q4 and thereafter. That's my prediction here.