Nidec Corp Adr

I would like to start the presentation on NIDEC Corporation's performance for the fiscal year that ended March 31st of 2025. The representatives of NIDEC Corporation are as follows. Mr. Mitsuya Kishida, President and Chief Executive Officer. Mr. Kinobu Samura, Senior Vice President and Chief Financial Officer. And I am Teruaki Urago, General Manager of the Investor Relations Department, and I will serve as the moderator of this presentation. First, we would like to have the presentation by Mr. Samura on the overview of this financial performance, followed by a presentation on the third year plan by Mr. Kishida. Then we will have a question and answer session. Please make sure to wait until then to ask your questions. We would like to end this presentation at 6.30 p.m. Japan time. Mr. Samura, please. This is Samura speaking. I would like to give you an overview of the financial performance of NIO Corporation first. Net sales, 2.6071 trillion yen, which is 11.1% up from the previous fiscal year. Operating profit was up 48.4% to 240.2 billion yen, which is another record high result. And the profit before income tax was up 17.3% to 236.5 billion yen. And the profit attributable to the owner of the parent was up 34.7% to 167.7 billion yen. Next, I'd like to give an overview by a product group. The first one is about small precision motors. The operation has been very stable, and the demand was for AI water cooling server. There was a period in between active periods, and compared with Q3, there was a decline in sales, but eventually the operating profit was up from the previous fiscal year. Next, automotive products. We have been able to have the increased sales and operating profit. Even traction motor business was OK in China. It was continuously OK in China. European joint venture, the profitability was good in a stable manner. When it comes to organic business, we have made structural changes in our organization. We have a temporary cost increase by 3 billion yen. We have been able to keep the profitability ratio from the last fiscal term. Next, appliance commercial and industrial products. We have a significant decline due to the seasonal decline, but we have been able to make a recovery from that as battery storage system and other energy-related businesses have been very successful. Due to all those circumstances, we have been able to have the increased sales and operating profit. We have this business-based consolidation, especially in Europe. And we have had the cost of 500 million yen because of the activity. And lastly, machinery. We have a cyclical downtime. It has been lasted for a long time. We have seen signs of recovery in this area. And starting from the first half of the last fiscal year, we have been doing some recovery activities. And we have started to see some profit. And there are some recovery in the various business in this area. And we have been able to have this increased sales and operating profit. And there are some detailed information over here on this slide on the pure business basis. And you can see the year-on-year changes, as you can see on this slide. And we have some impact from this current exchange rate. And you can see the probability increases and improvement. We have a structural reform in the EV and traction motor business. And we have a restructuring taking place in Europe, which has incurred 6 billion yen in the AMEC organic area. We have incurred several hundred billion yen of expenses. And by the product, you can see We have had some sale of real estate, but other than that, all the other product groups have enjoyed increased sales and operating profit. This slide is about quarter-on-quarter changes. You have seen the exchange rate was down by 1.9 billion yen. We have sales production. Small precision mortars was down by 5.6 billion yen. And please go over to this slide for cash flow situation. You can see on the annual basis, you can see the 137.2 billion yen. And this is about the second best record high result. As I will explain later, we have a ROIC situation being very stable, and we have accelerated our pace of balance sheet-based business management. When it comes to this slide, which is about the capital expenditure depreciation and R&D, we have been active in making investment in these areas. As you can see, And these are the three major highlights from this latest presentation. Lastly, I would like to give you an update on the 2025 fiscal year forecast. The world economy is very uncertain, but as far as we are concerned, we like to be anticipatory in making steps forward. Instead of depending on sales, we like to achieve a double-digit operating profit ratio. We like to achieve 2.6 trillion yen for net sales, and when it comes to operating profit, 260 billion yen exchange rate. 140 is the new amount we have set. And the dividends are expected to be 42.5 yen. That is all for the overview. Thank you very much. I will take it from here to explain our business strategy. Over the past year, under the new management, I have been working with the new members of the management. This is the second phase of the founding, in a way. And despite all the uncertainties and various changes, we will overcome all those changes to go forward. And this information that I'm about to tell you and explain to you is based on a determination for us to become the true global company. There are quite a few things we have never tried before, but we are going to try them going forward. As NIDIC, we are going to convert ourselves, so this is the name. Conversion 2027 is the name of our new mid-term strategy. And please take a look at this slide. This is our forecast for the next three fiscal years. There are quite a few uncertainties that we are going to face going forward. And we will make sure to find solutions. And we will make a company-wide effort to solve those problems and issues. Please take a look at operating profit. 10% is now a ratio, target ratio, and we will continue to improve the operating profit ratio as a profit-making organization. In order to support these growths, we have five major pillars of growth. And we will make a truly global structure to support our growth. These are the three major conversions that we are going to make happen. Year after year, we will make improvements, and we will be ROIC-focused. 7.2% was the target percentage last fiscal year. We will make it to the 12% in 2027 fiscal year. I'd like to give you an explanation as to what these conversions are comprised of. We have a sales of 2.6 trillion yen. We have a profit of 80 million yen. We are incurring the fixed cost of 50 billion yen. That's how we were back in the 2024 fiscal year. We will add three new elements over here. When it comes to variable cost, we will improve it. We will reduce it by 100 billion yen. It's not just about reducing material cost. We will discontinue unprofitable businesses as well as non-core businesses. We will review them one by one. We will withdraw from some businesses if and as necessary. We will utilize all of our technologies to make our products much more value-added. We will be equality-oriented as NIDIC. We will make sure to be focused on reducing variable costs. We will reduce fixed cost by 50 billion yen. In the past, we have gone through 74 M&As. We have many businesses and companies that joined the Nidec group since the foundation of this company. We will respect all of these companies and the history of M&As of our company. And now we are a company. that boosts the sales of 2.6 trillion yen. We will try to search for the chances for business consolidations. And we have a business basis of more than 280 around the world. We will seek for chances to improve the structures of these organizations. We will boldly launch various improvements in order to reduce the fixed cost by 50 billion yen. We are calling these activities WPRT. We will identify chances of cost reductions. T stands for something that you can imagine very easily. T stands for transformation, in my opinion, making sure that we will execute all the transformations that we need to implement. Plus, we have a strategy number three, strategic investment. We will invest in DX, digital transformation. We will transform our processes and systems. We will make a strategic investment in these areas. It's about 1% of the net sales. That's the amount we elect to spend in the form of investment. And we would like to continue to investment in very good business improvement systems. There are quite a few categories that we would like to expand in the United States, for example. We need to transform and convert our businesses in these areas in the United States and elsewhere. We elect to spend 1% of the net sales for these investments. And these are the three major activities as we go forward. When it comes to ROIC, as of today, this is where we are in terms of ROIC. You can see our performance in each of these categories. We will continue to improve the operating profit ratio as well as the return on invested capitals. We have each of these organizations to be committed in these areas. We have five major pillars of business. We like to make sure to go into these areas, green areas, on a group-wide basis. When it comes to 2024 fiscal year, especially internally, We were focused on improving our balance sheet. We wanted to improve inventory situation and we would like to make sure to improve our accounts receivables as well as accounts payables. We need to reduce fixed cost among many other areas. We will continue to reduce and improve these path to do receivables as well as inventory. We will make such effort on a group-wide basis.

So one of the key points of this transformation is to focus on areas where we have not been able to work on so much, which is in particular reorganization of production sites. As of today, we have 248 production sites within the group. If you look at this by group, there's 34% of less than 100. Midsize of 42% and above 500 is 24%. So 34% means that over 80 production sites are small size, less than 100 employees. This means that we will focus on cutting this down by half. In Europe and United States and Americas, ACIM has taken a leadership in consolidating the production sites, and this will be done on a company-wide basis. Meanwhile, the 24 percent, this is 60 production sites, Are they able to operate at the highest level of efficiency and productivity? We need to re-examine this once again. So if it's a plant in China with regards to automotive products, this would be sort of designated as one of the cutting edge plant. We will implement cutting edge AI and we will build a template for the highly efficient production and operational process. This has been implemented from last year. Also, with regards to these larger plants, in particular, further efficiency of the manufacturing indirect groups. will be carried out. So we will be reducing the size of the interact departments. And on the right hand side you will see number of entities within the group. We have this many entities within the group for all the various reasons in the past. You can see that over 61% of entities have 100 employees or fewer. And again, we will look at this by geography and also by business to seek for better efficiency. So the number of entities will also be improved. The number of the entities doesn't directly affect our P&L, but it's really about efficiency of our governance and of our management. Therefore, we need to be more efficient and we need to be more hands-on. especially in the micromanagement, which has been part of the culture of NIDIC. We need to really make an improvement in efficiencies in that as well. And we will start implementing this from April 1st. This is the merger of NIDIC Mobility and NIDIC ELISIS. And this will be one of the reference cases. So NIDIC, as we have been from before, we will continue to compete in manufacturing, at the very core of manufacturing. And we have business opportunities in upstreams and downstreams, and we will be more aggressive in exploring opportunities there. In order to do that, in front of the five business pillars, we have three technological pillars. One is things that rotate and that is thermal management and the other is power generation and control. So these are the new business domains that we have designated. And we will try to explore opportunities where we can commercialize in the upstream technological areas. This will include initiatives in areas that is expected to grow explosively, such as coupling, quick coupling. And also in terms of machine tools, we have softwares and we have control technologies as well. Also in downstream, We have large motor business. These are recurring businesses after sales, maintenance. These are the solution businesses, and I think this will be part of that as well. In particular, in machine tools, we want to offer a one-stop solution to provide entire service, end-to-end service. And through this, we can expand the small curve of our business And this is how we would roll out our business domains. So if you were to replace this into five business pillars, this is how it will look like in terms of the growth. And we will continue to pursue efficiency in each of these business pillars. And the segments that we use We will change the segment structure so that we will reflect this five business pillars. So this will be carried out in FY2026. So the growth opportunities is unlimited. As for the better life to the left, AC business, India, we have much potential for growth here. Sustainable infrastructure and energy, BESS, battery energy storage system, quick coupling, LCM and fans. These are the water cooling businesses as well as component business which is peripheral to that. and also emergency power outlets and system development. We're expecting a very large business development in the United States. And so the production efficiency and also mobility innovation, which has been worrisome for you, this mid-term plan, we will be able to see them re-contribute to corporate value. So this will be the schedule, the timeframe, which we will work on. So these five business pillars will be managed by these leaders and sub-leaders. We have designated each individual person, and the discussions are going on. And there will be focus areas. focus regions where they will focus on maximizing customer value. They will look at what is the theme, focus theme. So this has been defined in each of the pillars. So in each of the businesses, so for example, to the left in the better life, we have motor compressors. And we want to expand each of the categories, but we also want to expand in emerging markets like India. This includes consolidation of production sites as well. The second from the left, sustainable infrastructure and energy, first and foremost, will be best. We will maximize that business. in terms of base of AI society, that is, power business for data centers and servers, and component business, which will underpin this area. In terms of efficient manufacturing, in order to become a one-stop solution, we will maximize full lineup. And we will also build gearbox businesses for humanoid application for mobility innovation. We have made a very significant transformation in the past in China. We have deep water and faraway businesses that have begun. As for the component business, including traction business, Japanese customers will be at the core, so we will continue to expand that, but we will at the same time look into expanding our business in India as well. With regards to the joint venture in China, at this point in time, we will minimize our R&D spending and will realize optimal operations. After Q2 last year, it has become profitable and we will continue to make it profitable, but we will also focus on making it even more efficient in the operations. For NPE, the parent Stellantis, has a new management structure which will be established in July. That's what I have been informed. So along with that, we will discuss what we can do as parent companies, and we will explore every opportunity without excluding anything. So we have our production plan, inventory plans and investment plans. We will try to keep it at the minimum, but at the same time, make it as profitable as possible. So in each of these five pillars, we'll directly contribute to increasing in the corporate value. So we will provide you with a specific roadmap so that we can implement this directly. When you think about it, The center of our discussion on the operation has been very much more internally focused, but this five business pillars has external accountability. We will make commitments to outside stakeholders as well, and we will have These five pillars help us track our performance. So we will continue to advance the structure. And as a first step, in 2025, we have this new global structure which will be transformed. And so in FY25, 26, 27, the members who will carry out the transformation will be designated as executive officers. So we have redefined executive personnel, and we have now 16 executive officers, including two non-Japanese nationals. And so this structure began from April. And also, in the CXO structure, we have two additional CXOs. One is Chief Digital Officer. The individual, Mr. Onishi, has a long-time experience in digital business in Sony, and he has now been assigned as CDO to lead our transformation. Also, from Toyota Motors, We have Mr. Ninai as chief HR officer. He has also had wide experience, long experience in Toyota Motors HR. So with the two new members, we have 16 ex-officers. And also from April, we have established a fellow position. There, we have five officers assigned. We will, as a group, enhance our technical capabilities and expertise We also have chief quality officer, which is a global position. This is the management of the next generation management. In order to make it more visible, we have established this position. It's a senior general manager position. There are 10 senior general managers, including four, five foreign nationals. So these are the next executive officer candidates. We have Americans, Italians, French, Chinese and Brazilian. It's quite a diverse foreign national management. So this is the next generation candidates for officers. Again, this is to make it visual and transparent to external stakeholders. So we will have started FI 2025 with this new structure in place.

And as we try to reform our service based on ROIC, we like to maximize our cash flow. And we like to maximize to the level of 500 billion yen. And for our growth, we like to make investments in our research and development and many other different business activities that we do. And M&A, which is part of our main features, is going to be another subject of investment. And we will continue to control interest-bearing debt control if there is no M&As. and this will be a primary area of our activities going forward. We will make sure to make a return better than ever to our shareholders as well. When it comes to our purchase of our own shares, we would like to intensify our efforts in this area. When it comes to dividend, as I've said before, we will continue to increase 2.5 yen increase is going to be made this fiscal year. And going forward, we would like to continue to be in the same direction as we go forward. This 50% targeting is our total return ratio, which is going to be comprising a dividend as well as a share repurchase. That's another major area for our reform or conversion. As we look back our history as a company, M&A is a very primary element of our growth. Without looking at it, there will be no future growth for us. If you think about the future, we need to take a look at the history of our companies M and A. It is a very important lesson that we can learn as we try to grow our service. It was back in 1984 that we purchased an American company called Torrens And we purchased this company's motor business, controller business, and that's the first M&A we have launched in our history. We have a linear transfer automation, Inc., and related to companies is the latest examples of M&A that we launched last fiscal year. You know, 45 companies joined the Nilek Group in 2010 and thereafter. And these companies are making great contributions to our sales growth. And please take a look at the chart. You can see the history in and after fiscal year 2010. Since I have been appointed to serve as president of this company, I make sure to check the history of the M&A of our company's history. I have been spending a lot of time to study these M&As. There are three major points that I need to continue to utilize. with which I would like you to know my stance about M&A going forward. First, the major element is that back in 2010, we purchased a business of Amazon Electronics, Amazon Electric Co. This is the basis of today's Moen and ASM business units. We purchased the motors and control businesses of this company, Amazon Electric, of the United States. And we have purchased the Italian company, Ansaldo, the motor and control businesses of the company. There is one more important point. Back then, we have purchased a power generator, power conversion, power transmission technologies are the things we have purchased from Ansaldo. These areas are what we have expanded continuously since then. And the same thing can be said about Emerson. We have made another purchase from Emerson after 2010 fiscal year. And these are the very basis of today's best business Without the answer of the protests back in 2012 fiscal year, we wouldn't be in this business of best battery energy storage business. And this is a very major technological area, and we have three major technologies that we have purchased in this area. And we have repeatedly searched for new major opportunities in our business, and this is one of those examples of our hard work and dedication in business expansion. We have purchased Honda LSS, and we have purchased Omron Automotive Electronics in 2019. With the purchase of these two companies, We have been able to grow this business. We have been able to complete the integration of these two companies. In order to generate greater synergies than before, we have been able to promote these two companies into new stages through this integration. This was part of our group-wide effort. There has been hardly any cases like this one. But going forward, we will be active in these areas as well when it comes to business integration in our group. The third point is about the machinery area. Back in 1997, we purchased the Kyori Kogyo Corporation. We have purchased some American companies and some Spanish company and we have purchased Takisawa as well as linear transfer business of Canada. We wanted to always trying to become a total solution provider. These businesses are the basis of this movement for us to become a total solution provider. We will continue to make steps carefully, one by one, to become a total solution provider. In these areas, we will stay active as well. We are trying to generate synergies for a long time. Instead of individual companies trying to do things differently, we will make sure to unite our service to go into the same direction. For the next three fiscal years, we will respect this history. We will open the new chapter of our business's history in order to become a total solution provider. This is what I wanted to tell you as my primary message to all of you today. Going forward, we will try to establish bold steps going forward through M&A to become a truly global company. We would like to make more profit. We would like to make healthier growth going forward. In order to do that, as NIDIC, we will respect the people, technology, and dreams. We will cherish all of these elements as we go forward. Dreams are truly important for us. Dreams are our existence itself. People, technology, purpose are truly, truly important. And we have cherished all of these elements over the past year. I have a lot to learn still. We will continue to lead this new management system to go forward, making steps one by one. Under this new system, we are still in this second phase of foundation, so to speak. We will try to do things we have never tried before. We will be focused on those things so that we can make a healthier growth. All for dreams. Thank you very much for your attention. Thank you very much, Mr. Kishida. Now we would like to have a question and answer session. We will hand over the microphone to you, so please make sure to raise your hand if you have any questions. First, we would like to entertain questions from investor analysts followed by people from the mass media. Thank you. Thank you very much in advance. Thank you. Does any analyst have any questions? Person in the middle, please. Thank you. Thank you very much for explanation. This is Takayama from Goldman Sachs Corporation. I'd like to ask you a question regarding a mid-term business plan. I'd like to go over things one by one, if I may. As far as I know, this mid-term plan has already been implemented, and preparation was already done in February or March, I believe. And I believe the situation has been changing very drastically since then. I believe you are making steps in advance. You are anticipating those changes, I believe. Do you have any predictions about measures, how you can absorb the tariffs, et cetera? Can you come up with an explanation as to how you anticipated all those risks, how you could possibly absorb those risks? Your question is what you said is right. Over the past few months, every day, we have had heated arguments and discussions among our service. When it comes to tariffs, Our transactions are based on Incoterms. We have reviewed our Incoterms. We reviewed the way we do our transactions with our business partners. I don't have to explain this to you. Almost all the sales are based on FOB or other Incoterms. We didn't care about tariffs so much. We didn't have to care about tariffs so much. Sometimes a DDP, Delivered Duty Paid, is another Incoterm that we used. We have to pay for duties based on this Incoterm terms and conditions in some business cases. We have had an impact of about several tens of billions of yen because of this Incoterms that we have used. We have had some discussions with our business partners when it comes to Incoterms and other terms and conditions of our business. We have checked all of these different elements, and we have focused on the United States as well when it comes to the production sites. We needed to understand the capacity of our American production sites. We checked and studied how much capacity we can increase in what period of time span. This is an endless process when it comes to updating our information and our processes. We try to manage the entire situation. That's how we are now at this moment. On the other hand, in these discussions, there are quite a few issues, major issues that we have identified. One of them is magnet and other rare earth element materials. We have export restrictions from China when it comes to these rare earth materials, elements. We have used motors and magnets over the past 50-some years. We need to have a certain level of supplies of motors and magnets. We produce EPS as well as brake units. And we have been producing components for brake-related materials components. Rearest materials are truly important for these products. We need to have a certain level of supply. We have this USMCA, which is a treaty among the United States, Mexico, and Canada. And when it comes to these materials that are registered as part of the treaty are not going to be affected by the current tariffs. This is just one example of so many different ones. In order to cover these points, I'd have to continue to talk for the next hour or so. We are trying to manage those tariffs and many other different elements. That's how we are now. Thank you very much. And there are not so many companies that can provide us with so much detailed explanation. Thank you very much for the information in that regard. And my second question, once again, is about the mid-term business plan. A certain level of cost needs to be considered, taken into consideration. Do you regard this cost as recurring cost, or could it be a temporary cost?

Thank you. So the reform itself cannot be done overnight. And you can't. It's not about planning for two years and then realizing year three. It's not like that way. So we do have a plan. So we will try to reform as quickly as we can. Last year, when we were formulating our midterm plan, Our plan for transformation and restructuring were actually complete to a certain extent, but this is like our WPRT that I have mentioned earlier, but we decided that we will accelerate and execute quicker. And that process is actually endless. And there are a lot of things that the numbers are not showing, but we would like to deal with it as quickly as we can. And the last point, your variable and fixed cost in three years. So this year, sales isn't... growing as much, but you are trying to generate profits. So maybe you will need to reduce fixed costs first. Maybe in year two or year three, you're planning to increase by $150 billion in each year. So maybe you're more focused on variable costs. How are you going to see that ratio change over the fixed costs and variable costs? Sure, and from that perspective, our foreign exchange assumption has changed as well. So in our long history, we have externally declared that sales will not grow. Maybe in our long history, this is probably the first time, perhaps. But even if our sales doesn't grow, We want to improve our profit, reform our profit, and it's a show of our intention, our will. And what is that? So we will, first of all, prioritize reform in the fixed cost. That was the show of determination that we have already expressed last year. So we will start to implement and reap that fruit this year. In ASIM and MOEM, we have already started on restructuring. So we will do this more on a company-wide level in this fiscal year, in this midterm plan. So this is the basis for the $50 billion in fixed cost. And in terms of $100 billion in variable cost, this will probably see the effect realized more in 2027. In particular, the non-core unprofitable businesses, as you can read here, this... will need to first get the understanding of the customers before we can implement this plan. So we will probably take some time for exchanges with the customers and also implementation. But we do have this goal in place. Thank you. Next question, please. then to the gentleman to the very left. Akizuki from Nomura Securities. Thank you for the opportunity. I also have a question on midterm plan. In three years, the allocation to M&A, what's the cash flow level you have in mind? And the reason for this question is because you have shown us the chart earlier. I forgot which page it was. I think it was page 21. You have shown us a table. You have really leveraged on M&A. That has really been a big growth driver for you. So M&A and consolidation of production sites, how are they linked? So perhaps you can share that information with me as well. So if you could look at the next page on the cash allocation. So this is operating cash flow, and if you add R&D, and this is called cash flow before investment, and this is expected to be about $500 billion in the final year, and half of that will be CapEx and R&D, and the rest, about $250 billion, half of it will be allocated for investment for growth. So that's sort of the ideal state in the final year. So the three years is a buildup for that. So that would be the appropriate image. Having said that, as you have speculated, it's not really allocating 250 billion each year. We have to look at opportunities as well. And there's many things that we want to do. So we will manage this according to our cash position as well. What about a relationship between M&A and consolidation of production sites? What I was saying is that once they enter the group, We will focus on consolidating the production sites of the ones that have been in the group for at least five, 10 years. And even those that will become part of the group, I would assume there will be production sites that will generate synergies right away. So we will look at that cautiously. We will not carry out M&As with an assumption that we will consolidate all the production sites in the beginning. So that's not our assumption. I see. With regards to your thinking on the plan for this fiscal year, you have provided us with different conditions earlier, but I think what's most challenging is how will the customer demand change and inventory changes also Are you able to actually produce what would be the customer's demand? I think that's where it's very uncertain and very difficult to predict. What is your assumption for these things? Thank you for the question. The main point is demand by category, how sluggish will the demand will be, and what will be the impact of tariff and cost, impact on cost. One thing is the automotive industry, particularly in the United States, how will that change? We have incorporated that. That we do not believe that there will be much tariff impact in the Mexico areas. We have think we can probably exclude that factor from the fluctuations in the sales. The other is computer related components parts. Even from the HS code, there are components from computers that have been excluded from TeraRef. So the server demand, which continues to be very strong, whether it be China or the United States, the demand is still very strong. And we do not think there will be much things that would overshadow that. So we will continue to produce in those areas. Also, there are ups and downs in the demand of civil use, which is not really visible. With regards to that, there will be some decrease in the appliances. But with regards to the growth prospects for appliances, we have ACM India, AC Business for India, These are the regions that is different from the tariff issues right now. And we can see increasing demand in those regions. So we don't want to have unnecessary inventories there. So that's how we would operate in those areas. Would you like to add anything to supplement? I keep talking. So anything from my colleagues? No. Then one last question. In terms of power generation and best in battery, your projection, what is your projection for this year? In terms of power generation, I think demand supply is quite tight. That's what I'm expecting. That's what I'm assuming. Can you raise prices in order to improve profitability? I think it's a great opportunity to do that. So how do you see this? What's your outlook on this? In terms of power generation or even best, We have a lot of back orders, backlogs, and we have not been able to catch up on the production. So we have been trying to enhance production capacity in FY 2025. First off, we should be able to start operation, increase utilization, but even then we're not able to catch up to the demand. And of course, I think we're in an environment where we can take initiatives on pricing. So I believe that we can aggressively promote improvement in profitability. Thank you very much for asking that question. I should have mentioned that, and I forgot to in the earlier question, in terms of increasing demand, when you start thinking about it, it's endless. I mean, so what is it that will fill in the increasing demand? Well, we think it's power generation in its best. There is a steady, certain demand there. So we will need to meet that demand and increase profitability there. So that would be the determination of the management. In terms of the scale of the business, Moen is about 500 billion yen. Then Alternator is about 200 billion yen. Best related, we have 50 billion or so. So this is really, as you have said, strong demand. Customers are asking us to ship quickly, increase production capacity. How much can you make? How many units can you make today? Those are the questions we are getting. And next week, I am going to the plant. and confirm the production capacity increase, and I will be meeting the customer in June. We have great business opportunity here to increase revenue and profit. It's a very healthy business and we know that we should be growing this business, so we will do so. Thank you very much. Any other question? Naito from Citigroup Securities. Thank you very much for allowing me to ask this question. I also have a question on mid-term plan. So you have five business pillars and you have growth strategy in each of the pillars. That's on page 18. So you will expect to see the increase in sales in 300 billion yen in the final year. What areas of growth do you expect? In terms of mobility, you talked about regrowth. What items do you expect to see further growth? Can you be more detailed? So in terms of the probability of the growth of the five business pillars, it would be sustainable infrastructure and energy and base of AI society. I think these are the domains where we can see a big scale of growth. the better life and mobility, which is at the two ends. Even today, we do have a certain level of growth or business size to a certain extent. But in terms of growth rate, I think we can expect. But in terms of the rate of the growth, I think it would be sustainable infrastructure and AI where we can see a significant increase. We have great expectations for this.

Thank you very much. As my additional question, for example, in the AI-related area, water cooling, cooling businesses, under what circumstances you are doing a business and how much growth can you expect? Do you have any changes? Do you see any changes in the competition? How about farm orders? Do you have any intensifying competition with the Chinese local manufacturers? That's something that I've heard. This is in addition to the overall structural changes, but if you think about these competition, please, can you make a comment on those measures against your competitors? When it comes to the second point you have made, I forgot to mention that part. When it comes to automotive business, this is something that I've talked about in the previous financial presentation. We have a component of business that we like to improve in a traction motor component of business. It's not traction motor itself that we like to improve. We like to continue to be very close to our customers in that area. When it comes to other areas, peripheral components, including ECU and other system-related areas, this is an area that has been providing us with huge business opportunities. This is something that I've said before. OEM manufacturers are trying to be focused on investing in autonomous driving and other technologies. Systems and other businesses are the areas of our customers' expectations in us, in NIDIC. In other words, we like to be focused on those areas. LSS have been integrated for that purpose. When it comes to the third point about automotive business, it is about India. We have the new campus to be established in India for multiple business units. Our Indian customers are not just ev oriented we have a hybrid uh ice related customers are there in india we like to answer the requirements of these customers in india and one more thing you have touched upon which is ai and other areas the movements about the competitors emerging chinese suppliers When it comes to our manufacturing industry, in all areas, we are competing with our Chinese competitors. Just like it has been in the past, we will continue to have this rivalry taking place between us and them, Chinese rivals. And what we are doing is part of our actual capabilities in China. Traction motor business is one of the areas we have gone through a lot in the past few fiscal years. We have been able to acquire a very good supplier network in China. As a global supplier, there are quite a few. I believe Nidec is the only one company with such a wide range of business network in China as a supplier of this business. And other component businesses will be able to enjoy such a wide range of network going forward. And our first purchase as a company was the farm motor business of an American company. We have a supplier panel, which is in a very good shape. And we have a wonderful designing and research and development capabilities in China and elsewhere. There will continue to be emerging rivals, but we are going to be fully prepared as we go forward as we try to compete with these Chinese customers, competitors. Thank you very much. That is all from me. Thank you very much for your answers. The person over there in front of me, thank you. This is Sato of Morgan Stanley Securities. Thank you very much for the explanation. I'd like to check the numbers with you, if that's okay. There are three things that I want to check with you. First of all, in the mid-term plan, in the 2027 fiscal year, 2.9 trillion yen, 350 billion yen in operating profit. Is this only for organic growth? And that is correct. My second question is as follows. We need to back in 2024 fiscal year data Santa related sales and operating profit. What is your forecast for this fiscal year and what will be the expectations on the growth of this business in 2027? When it comes to 2024 fiscal year, one approximately 17.4 billion yen. We failed to achieve our expected target of 20 billion yen. When it comes to operating profit, even though it is profitable, I would like to refrain from giving you a specific number here. When it comes to 2025 fiscal year, we have a super micro related to business opportunities. That was the case back in 2024. But we are in a period between two active periods. We still have been able to expand our business opportunities. And the results will be very productive. to make fruits in this fiscal year, we probably will be able to make double the profitability this fiscal year maybe if everything goes well we will check the monetary situation very carefully we like to make the business over worth worth over 50 billion yen if that's possible if if everything goes well and my third question is as follows back in 2024 structural reform expenses nine billion yen is that the entire amount And when it comes to temporary profit, PSAE 10.1 billion yen was sold. I believe that's another area of expenses to have incurred, possibly. Can you give us a number? When it comes to consolidating PSE, do you have any impact on the sales and operating profit? Can you give me those numbers? Thank you. But first of all, when it comes to 2024 fiscal year, a structural reform took place. As I've said, a similar related European 6 billion yen approximately. When it comes to automotive business, It may not be categorized as structural reform, but when it comes to the final quarter, 3 billion yen was incurred. Back in Q3, a similar cost was generated based on similar activities we have launched. These 6 billion yen and 3 billion yen were incurred, as I've said a minute ago. When it comes to Copao Yamada, which was sold to another company, there are some minute numbers. These are not really part of our temporary expenses to have been incurred. About the PSAE consolidation, the 10.1 billion yen in quarter one, that is the correct number, yes. That is right. When it comes to PSAE, How much sales contribution do you expect? 24 fiscal year, that's what I meant. NPE, 65 billion yen was the sales, approximately. 4 billion yen was including this acquisition. 4 billion yen approximately. That's operating profit or NPE. About the water cooling business, I'd like to add one information about the water cooling business. When it comes to CDU and other system-related businesses, We started this business about the last fiscal year. We talked about the shipment of GPO units and other products. We have been in a struggle trying to see what was going to happen. But after a year, since then, Here's what I strongly feel. When I talked about a mid-term business plan, I've talked about a quick coupling, LCM, and other components as part of our business. We elect to state, appeal these possible future business opportunities. When it comes to CDU itself, something that's different from the previous models. We have already embarked on those other new business opportunities, and we can expect the range of our customers to be widened. We would like to continue to try to make healthy growth. We would like to even go beyond our budget target of 50 billion yen. That is all from me. Thank you. Any other questions, comments from security analysts, the person that is right in front of me? This is Goto of Mizuho Securities. Thank you very much for your explanation. I'd like to ask you two questions. Please go to slide 14. It's about ROIC-focused management. Can you give me an update on how you are going to manage each business unit, how you are going to try to increase the turnover ratio, improve the turnover ratio? What is your direction of these different businesses? In addition to that, you have talked about improving variable cost and fixed cost. And how are you going to improve your manufacturing capabilities? In this mid-term business plan, how are you going to make a big decision about the future directions that you're going to go in? When it comes to Reich, please take a look at this slide. You have seen a plot by a group. We like to go into more details so that we can check our businesses one by one. When it comes to successful businesses, their balance sheets are very good. Even if their profitability is not so high, ROIC is very good for these successful businesses. Some of these businesses are not really something that we are expecting so much as future success. In that case, we may think about the chances of shrinking the size of those businesses if we cannot see any great future potentials. We would like to make a very good portfolio, a better portfolio going forward. I'd like to add some information here. This is a very important point. We have been generating these businesses, and this shows how we are going to manage our businesses. We have talked about traction businesses and nothing else in the past sometimes. And sometimes we have to make a significant downturn because of our focus on the traction motor business. We need to understand why that happened. We need to make sure. We forgot to show you our entire picture as the Nideko Group. There are some highly profitable automotive businesses. Some are not. These businesses are organisms. It's very living creatures, in a way. And we need to come up with a very good management style of each of these set of product portfolio. We need to understand how each of these businesses is going to go forward. We need to go beyond the boundaries when it comes to this heroic focus to business management. When it comes to technological development, would you like to say something? That's something that I myself think is the primary area of our focus. When it comes to NIDEC, NIDEC is a company of technology. NIDEC is a company that respects people. That's the type of the ideal style that we like to convert our service to. For example, when it comes to tariffs, we sometimes have to think about relocating our production basis. When it comes to production site transfers, there are no products that we can easily transfer to the United States, for example, in order to avoid the tariffs. We have had discussions about the possible production relocation. Global development and the production technologies are what we need going forward. We need to have a baseline production technology for different types of products. This is not going to be a group . We have these five different categories so that we can change our production size freely based on these five different areas or pillars. In order to obtain a very good paradigm, production technology is truly important. That's one of the things.

The second technology is the designation of the three technological areas that I have mentioned before. So we were talking about what we move and what we rotate. And so these are all the motor technologies. It's all about what we think is that spin and move. It's a motor technology, but we have actually added to that. One is thermal management. Often they say that heat is the grave for energy, so we want to focus on thermal management before heating, the final heating. So that is where we are working on in terms of fan and water cooling. And we need to identify what we're missing in that technological areas, and we will try to fill in that gap. So that's the second technology. And the third technology domain is the power generation, power distribution, and power transformation. So this is a control. Changing the rotation of motor is actually control of voltage itself. we will reinforce the control technology of our circuits. Samara-san, I want to ask this question to you. So you're aiming for $60 billion. operating profit what is the factors for fluctuations there so it's 140 yen and you have that you know tailwind and you have a 20 billion yen in addition in R&D and depreciation so you know What are some of the factors for changes in profit here, operating profit? So I talked about 100 billion in variable and 50 billion in fixed cost. So this is the three years restructuring. The reductions in fixed cost will be done top heavy. We will try to carry this out in 2025, and we already started that endeavor. So I think this will have a big impact Also, in terms of variable cost, as we have said earlier, it's more has a nature, has a more heavy in the latter half. So in the initial year, you will not have much impact. But in terms of the transformation of portfolio, I think it will be very significant. But in terms of the product mix. we're planning to change it quite significantly. So in terms of sales in FY24, 25, basically, we're looking at flat at 2.6 trillion. But in terms of contents, you have more energy. We're planning to increase by about 10% or so. But we talked about fan and other items. But in precision motors, And also, we have other small motor areas. We have a plan where we will be shrinking it to a certain level. So we are planning to change the profit structure with the changes in product mix. So this is the sort of large framework for FY 2025. Thank you. So we are almost running out of time. So I would like to invite questions from the media. Thank you. Nita from Nikkei newspaper. I have a question about tariff. In peak, you're expecting impact of several tens of billions of yen at the peak time. But tariff policies are changing quite frequently. So maybe there was that potential at one time. What is your projection now? I think there are some more elements to that. So we have the elemental tariff policy changing. And when you actually analyze it carefully, it seems as though that change will disappear. And the other point is that we're not just producing and just shipping it. have suppliers who supply components to us. We have tier ones and OEMs, which we ship to, and we have the communications with all of them. So we're looking at maximum 30 billion and what would be the reduction plan based on that. So we have consulted based on that. With regards to tariff, the big factor was the changes in Mexico. USMCA is still alive. This is very helpful. Also, the computer components is excluded from HS code. It's excluded from the tariff. I think this played a critical role as well. My interpretation going forward from here is that the United States have seen that there's a direct impact on their consumption. Anything that has impact on the consumers, they're trying to avoid. That could be automobile, telecommunication equipment, IT equipment, infrastructure, and network. I think in America, they have to have infrastructure and networks. So based on this assumption, as for tariffs, anything to do with, for example, IT tariff, they wanted to exclude. So that is why they kept US MCS alive. So it was $30 billion, but you negotiated and you are going to overcome. Yes, we have reduced it by negotiation, yes. And related to that, you are also increasing production in the United States. What's the percentage of production in the United States? What's your investment plan in the United States? The production volume in the United States itself, up until this situation occurred, we were on a declining trend each year. I think that's a fact, to be honest with you. We're not in the OEM automobile OEM industry, so we want to meet the demands from the customers. So, for example, if there's a cost reduction request, then we would come up with a plan to reduce costs. And we have been doing this sort of countries around the United States. This isn't really tariff driven, but because there are categories where we have seen explosive demand growth in the United States, that is why we're increasing production in the United States. And I think it's really ultimately the demand from the U.S. data centers. So the alternative system. We will be supplying to the United States also including supply from countries outside the United States, but we will also produce in the United States so that we can meet their daily demand. Thank you. And the last question is on traction motor. In Q4, you have approached to near profitability. and the components business is growing because number of cars that are adopting this is increasing as well. So what is your projection for FI 2025? For FI 2025, China traction business in principle We will see increase in delivery to Japanese manufacturers, but we don't want to change quantity because we have changed our policy, so we will not pursue volume. In principle, we're assuming flat unchanged from 2024. Meanwhile, in Europe, in NPE, 2024, the production capacity was very low, but we have tried to scale it. So in Q4, the sales exceeded 20 billion yen. So for 2025, I think we will see one step higher level. And as you can see from the graph, I think it will be very close to 100 billion. Thank you very much. And you will be profitable on a full year basis. Is that correct? Yes, that would be correct. Then the gentleman at the back. My name is Yoshida. I'm a journalist from Merchant Market. There are two questions. One is in terms of variable cost reductions of $100 billion. You said you will review some profitable non-core business. Is this something that will be done during the midterm plan and will you be spinning off or selling off some of your businesses? And if that's part of your option, then what would be the criteria? Would it be area? Is it capital efficiency or is it whether it's profitable or not? We will basically work on it without any sacred cows. Anything we have not done in the past, we will do so. So we do have an option of selling it, divesting. We have some ideas in our mind, but we are not able to disclose at this point in time. We don't have anything that we have really decided that we can announce today. But in terms of the direction, Non-core business is something that you will always have to face with when you do a business for a long time. So we don't have to have any sacred areas where we will not untouch. Mr. Samura, I want to check some numbers in terms of cash flow allocation. You talked about M&A. In the memo, it says in 2027, 500 billion and half will be R&D and the rest will be in shareholder return and growth investments. So number two, M&A, this is just the ballpark figure by 250 billion. Is that correct? And also in terms of cash flow in midterm. in 2025 and 2026. So it will grow and depending on the deal, but for 2025, 2026, you're in this process of increasing cash flow. So that would be the maximum of the M&A framework. Well, for 2027, in terms of thinking, We're looking at 525 billion. I think that's by math. But of course, you have to look at opportunities. It depends on the deals. But if there's nothing, no opportunity, we will use it to pay down our interest in bearing debt. So it really depends on the deal between 25, 26 and 27. We will grow our cash flow on a linear basis and we will manage ROIC. That will be our tool to do that. So half of 500 billion is 250 and half of that is So half of the $500 billion is $250 billion. So that would be an investment for growth, right? So that's your estimate, right? $250 billion, yes. In terms of impact tariff, of course, there's a concern for global recession. This isn't just about tariff, right? Have you included recession in your outlook? So in terms of macro, how serious are you looking at recession? What is your view on this? Well, how much have we incorporated on that? We do not have a very clear-cut answer on this. But of course, we do foresee situations like that. We could be in a global Great Recession. What would we do then? And that's WPRT. How much do we expect in terms of decreasing sales? Even if we analyze it carefully, I don't think that calculation will be very meaningful. So why do we do this story, talk about cash? It's because when recession, what's most important is cash. And this is a common sense. I don't even need to say it. But rather than capex, we need to prioritize is cash. So we have we will operate it with first and foremost priority on cash management.

Now we would like to finish this conference, and we would like to finish this presentation of NIDA Corporation's latest financial performance. Thank you very much for your participation today. Thank you very much. Thank you.