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Edited Transcript of 6594.T earnings conference call or presentation 30-Apr-20 1:00pm GMT

Full Year 2020 Nidec Corp Earnings Call

Ukyoku May 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Nidec Corp earnings conference call or presentation Thursday, April 30, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Akira Sato

Nidec Corporation - First Senior VP, CPO & Director

* Masahiro Nagayasu

Nidec Corporation - General Manager of IR Department

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Conference Call Participants

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* Brad Snyder

Egerton Capital (UK) LLP - Partner and Investment Analyst

* Hiroshi Kamide

Robocap LLP - Equity Research Analyst

* James Pulsford;Alma Capital Investment Management;Fund Manager

* Trevor Wild

Ruffer LLP - Research Analyst

* Wendy Agnew

State Street Global Advisors, Inc. - Portfolio Manager and Senior Equity Analyst

* Yoichi Orikasa

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. - Executive Officer, GM of Kyoto Branch, Deputy Supervisory Executive of Kyoto Corporate Clients Div.

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Presentation

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Operator [1]

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Good day, everyone, and welcome to today's Nidec's Conference Call hosted by Mitsubishi UFJ Morgan Stanley Securities. Today's call is being recorded. At this time, I'd like to pass this conference to Mr. Orikasa at Mitsubishi UFJ Morgan Stanley Securities for the opening remarks. Mr. Orikasa, please go ahead, sir.

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Yoichi Orikasa, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. - Executive Officer, GM of Kyoto Branch, Deputy Supervisory Executive of Kyoto Corporate Clients Div. [2]

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Thank you, Holly. Ladies and gentlemen, good morning, good afternoon and good evening. Thank you very much for joining Nidec's Q4 conference call. My name is Yoichi Orikasa, General Manager of Kyoto Branch at Mitsubishi UFJ Morgan Stanley Securities. Before we start, please make sure all the materials are already in front of you. If not, please download the files on the company's homepage at this moment.

Now may I introduce Mr. Akira Sato, who is the First Senior Vice President and the Chief Performance Officer of the company. First Mr. Sato will make a presentation. After his presentation, we will move on to a Q&A session. Mr. Sato will now discuss the company's Q4 results, outlook and management strategy. Mr. Sato, please go ahead.

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [3]

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Thank you very much, Mr. Orikasa. Good day, ladies and gentlemen, and welcome to today's conference call. My name is Akira Sato, Chief Performance Officer of Nidec, and I'll be your main speaker for today. Joining me are Mr. Teruaki Urago and Mr. Masahiro Nagayasu of IR team.

For the forward-looking statements, please see Slide #2 of our presentation material for details. Now I will give you the key figures.

Our fiscal year 2019 results are illustrated on Slide #3 as summarized on Slide #4. The net sales has increased by 4% year-on-year to record high of JPY 1.535 trillion. The operating profit has decreased by 15% year-on-year to JPY 110.3 billion, mainly due to the additional R&D cost and start-up costs of traction motors, which are in high demand and to the additional acquisition-related expenses. The net profit has decreased by 45% year-on-year to JPY 60.1 billion, mainly due to the loss incurred through the sale of Secop's, which is compressor business for refrigerators.

On Slide #5 and 6, we have pictures showing the net sales and operating profit year-on-year and quarter-on-quarter, respectively, by product groups with exchange rate effect, eliminations and structural reform expenses.

As you see on Slide #6, the net sales and operating profit of small precision motors, automotive, appliance, commercial and industrial or ACI and the machinery declined quarter-on-quarter, mainly due to the spreading of COVID-19.

Slide #7, you see Slide #7. The operating cash flow in fiscal year 2019 remained quite strong despite the reduced operating profit. And the next Slide #8 shows we are maintaining our capital expenditure and R&D spendings that are necessary to support long-term growth, even in the middle of the current situation. Please turn to Slide #9, which is showing fiscal year 2020 forecast.

In light of the global impact of COVID-19 and uncertainties that lie ahead, we forecast net sales of JPY 1.5 trillion, the operating profit of JPY 125 billion and operating profit margin of 8.3%.

Please see Slide #12. Our new top management is up and running. We are returning from group management to top-down management and Mr. Shigenobu Nagamori, Chairman and CEO, will be in charge of Small Precision Motors group companies and M&A strategy, while Mr. Jun Seki, new President and COO, will be in charge of Automotive and ACI. The new top management that focuses on growth, first and foremost, is already starting full-fledged groundworks for net sales of JPY 10 trillion in FY 2030 and sticks to winning overwhelming #1 market share through top-down sales activities. Furthermore, we will strengthen human resource development through fundamental reform of our personnel evaluation system and by ensuring human resources education that enhances emotional quotient or EQ.

Please see Slide #13. With the spreading of COVID-19, we have enacted emergency measures in the first quarter of fiscal year 2020. The current status of our production varies depending on each region and each country. And countries like China and Japan have almost nearly recovered, whereas Europe and Americas are in a little over just a 60% recovery due to governmental restrictions. And the sales situation there is also depending on product groups and regions. And partial delays is spotted in some businesses due to slowdown of economic activities caused by governmental restrictions.

As to the R&D situation, our domestic and overseas research centers are implementing comprehensive infection preventive measures and are aggressively introducing teleworking as well.

In light of all of these, we are implementing emergency measures like comprehensive cost reductions based on cash is king, which ensure that we can stay profitable even when the top line gets halved. More concretely, as shown on Slide #16, we have active WPR4, which is to refortify the WPR program. As you see on the right-hand side of this slide, the WPR program means by taking unprecedented slowdown caused by COVID-19, the large opportunity to enhance structural reform. We will implement drastic measures to reform our profit structure of Nidec group.

This structural reform is aimed to retain positive operating profit even when the sales are cut half of the recent peak level and is aimed to retain the recent peak level of profit operating margin when the sales are to recover to 75%. When the sales are to recover to 100%, the operating margin is supposed to double [along the] recent peak.

Slide #17 is illustrating the example of the overseas businesses of ACI, which is conducting aggressive review of their cost structure. As you see on the right-hand slide from the top, we firstly aim to reduce the outsourcing costs through fundamental review of supply chain and accelerating vertical integration of parts made in-house and enhancing global procurement program.

Secondly, we aim to reduce the labor cost by enhancing competitive advantage by integrating vertical parts manufacturing functions, eliminating low-profit manufacturing lines and reinforcing lean production.

Thirdly, we aim to reduce the fixed cost by continuing to integrate and streamline production sites and slimming down indirect costs, such as headquarters function costs. Please see Slide #18.

In order to capture the rapidly increasing demand for traction motors, we are preparing for a 10 million unit production in FY 2030 by solidifying production R&D. For this 10 million unit project, as you see the bottom of this slide, we will firstly accelerate modularization and achieve low cost, high efficiency and further miniaturization. Secondly, we will choose the optimum production locations by looking 3 to 5 years ahead. Thirdly, we will proactively promote in-house production to control quality and reduce material cost. Lastly, we will reduce equipment costs by collaborating within group and developing local suppliers. Please see Slide #19.

Here are Nidec's solutions for the common problems of humankind, which have been exposed by COVID-19. These are 5G & thermal solutions, decarbonization, manpower saving, digital data explosion and power saving. These new 5 big waves will be our growth drivers for now and going forward.

Please see Slide #20, which is showing ESG topics, respectively. Firstly, on environment, we have launched our climate change initiative called SMART2030, where we aim to reduce our operational greenhouse gas by 30% by fiscal year 2030, compared to the level of fiscal year 2017.

On society area, in order to achieve productive development based on gender equality and work-life balance, we have established Diversity and Inclusion Promotion Office, which has evolved from the previous diversity promotion office. On corporate governance, we are shifting to a company with Audit and the Supervisory Committee and reinforcing the Board's oversight capability.

After this transition, it is planned that 5 out of our 9 Board members will become external, of which 2 are female members. Lastly, on behalf of the entire management team, I would like to thank our customers, partners, suppliers for their support on [improvement] as well as our shareholders.

At this time, we would like to open up the call for questions. Thank you very much for your attention.

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Yoichi Orikasa, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. - Executive Officer, GM of Kyoto Branch, Deputy Supervisory Executive of Kyoto Corporate Clients Div. [4]

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Thank you very much, Mr. Sato. Now we would like to move on to the Q&A session. Mr. Sato is pleased to take questions from the call participants.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from James Pulsford from Alma Capital.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [2]

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Could you, first of all, make some comments on restructuring costs. First of all, could you tell me what restructuring costs you booked in the fourth quarter and also for the full year for last year? And then perhaps more interestingly, can you talk about what restructuring costs you expect to, or what scale of restructuring costs do you expect to book in the current year and beyond, bearing in mind you're carrying out this very aggressive cost-cutting program?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [3]

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I will let you know the restructuring cost of the March quarter, which is about JPY 7.9 billion. And out of that, maybe JPY 4.1 billion for small precision motor and ACI at JPY 2.3 billion, and remaining JPY 1.3 billion or JPY 1.4 billion is for optical one. So mainly due to the some restructuring or integration of the number of factories in the ACI area, particularly in Europe, we are now impair -- recognizing the impairment cost of the building and land to be closed. And in the small precision motor, that's some kind of old inventory that were written off, and optical one, that same one, the written-off of the old inventory in order to improve our profit structure.

And fiscal year '19, the annual base, our restructuring cost is JPY 15.8 billion in fiscal year '19. And previous fiscal year, fiscal year 2018, that was JPY 38.1 billion. So that restructuring cost has been down by JPY 22.4 billion. That's the number we have in terms of our restructuring costs.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [4]

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And the outlook for the current year, when you're carrying out this major cost-cutting program, that's going to involve booking a number of costs, I would imagine.

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [5]

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Yes. Currently, it's going to be JPY 13 billion of restructuring costs in fiscal year 2020.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [6]

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JPY 13 billion?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [7]

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In our profit, 13, 1-3, billion yen.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [8]

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Can I ask just a follow-up, please? In the current year, when you look at your profit forecast, which is the modest recovery, is it possible to give an indication how much of that is due to your -- what cost-cutting impact you're expecting? And also, if you look at things on a divisional level, where are you seeing the profit recovery come from? Can you give an indication of where that's coming from this year?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [9]

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Of course, we have conducted a lot of the cost-reduction activities, particularly in automotive, because we are seeing some kind of a reduction of the top line in the automotive area, and that's why we're intensely reducing the cost in automotive area. And how, maybe the something is to do is accelerating the production in-house. That's kind of the first one. And the second one is kind of joint procurement. It's biggest one because economy itself -- macro economy is starting to be very soft, which means the oil price or price of the copper or price of the aluminum has been down a lot. So that it's a big opportunity for us to reduce our material costs. So that, together with the kind of joint procurement program, maybe we will reduce our marketing cost.

And another one is automation of the production line. It's another actions to reduce the labor cost. As you know, in any emerging country, the labor costs have been increasing. And also the lack for the working [wage] population, it's a big issue for us. And that's why we are now accelerating some automation of the production line, even in emerging countries.

And third one is a reduction of fixed costs by integration of the factory and also integration of the overhead, it's kind of big item to be tackled in our Nidec's in 2020. That's a very big opportunity for us to improve our cost competitiveness.

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Operator [10]

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We will now take our next question from [Atsushi Onaka] from MUFG.

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Unidentified Analyst, [11]

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So please, let me share the -- your view on the market environment of the automotive and industrial machinery sector in each area, like in Europe, in U.S. and Asia, please.

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [12]

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Maybe let me explain to you first the machinery area. It's kind of, various things are going on. First of all, some kind of robotics or reduction gears, that's not good as we expected. That's kind of a, still slow moving. But on the other hand, we have increased the kind of top line or sales of the stamping machine for cap, especially in the United States because in order to avoid kind of -- or decrease the classic usage that can demand. Demand for can is increasing. And that's why we are now getting a lot of order for press machine for can pressing.

And another one is a sound -- inspection machine for 5G is increasing. So that is included in the machinery [schedule]. And fiscal year '19, as you already know, that's a fair number in the machinery JPY 149.7 billion, compared to the JPY 164 billion fiscal year 2018. But out of that, the [how we do the work] has been reduced, but that's inspection machine having increased around JPY 2 billion and the stamping machine has been increased around JPY 40 billion -- sorry, JPY 4 billion. So maybe the -- in the machinery segment, maybe it's a business that is -- varies depend on the output. That's -- so we cannot say the kind of average of the industry. So maybe we expect the -- some increase in machinery area for fiscal year 2020 compared to fiscal year '19.

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Unidentified Analyst, [13]

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And yes, automotive. Yes.

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Masahiro Nagayasu, Nidec Corporation - General Manager of IR Department [14]

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So for the automotive, we are seeing, especially the June quarter could be a very hard time. And we expect ourselves will be a down half, 50% down year-on-year compared with the June quarter last year. So -- but maybe after June quarter, we expect the full year factories will be -- open up, then gradually, the demand for our automotive parts will be coming back. So as a total, we are looking at the global auto sales might be down somewhere like 7% to 10% per year for 2020. But after 2020, we see the auto sales will be back to a positive in 2021. Is that fine?

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Unidentified Analyst, [15]

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Yes.

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Operator [16]

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We will now take our next question from Theo Wild from Ruffer.

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Trevor Wild, Ruffer LLP - Research Analyst [17]

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My question is on the kind of phasing of the cost-cutting measures that you're putting in place for the year coming. I guess I want to get a sense of how much of this is sort of reactive to the current situation and how much of it is just an acceleration of the kind of planned improvements in efficiencies that you had, that would have come in the next couple of years?

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Unidentified Company Representative, [18]

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(foreign language)

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [19]

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Yes. Thank you for your question. And of course, are we accelerating our cost-cutting activities after coronavirus coming and usually around 5% to 10% cost-cutting every year has been implemented. And on top of that, around [3% to 5%] cost-cutting is added in order to improve our cost competitiveness. And then we are now accelerating some countermeasures like acceleration of the production [in-house] and also joint procurement by taking some opportunities of slow macroeconomy and fixed cost reduction. It's accelerated more and more than before. So it's -- time to market is very important for us. So it's a good trigger or driver, I mean, the coronavirus issue is becoming a kind of trigger to accelerate that cost-cutting activities in the Nidec group. Is that fine?

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Trevor Wild, Ruffer LLP - Research Analyst [20]

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Okay. So can I just ask a quick follow-up on that, please? Just looking at Slide 17, where you set out the cost reform structure. I mean you've labeled the small portion as variable cost. Can -- it reads as if most of these improvements are the ones that will enable operational gearing when the recovery happens. Can you just clarify how much of this cost-cutting you expect will be reversed when the recovery comes, i.e., how much is actually truly variable cost that we can expect to come back when sales return?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [21]

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Yes, this is showing the -- some overseas operations of the ACI, and as you can see, the operating profit margin will be up to around 10% in fiscal year 2020, the target. And original -- or fiscal year '19 it was around 3% to 4%. So out of that improvement by 7% or 6%, and that's outsourcing cost might be improved by 2% and labor cost 1% and variable cost is, the other variable cost is something like 1%.

And outsourcing cost reduction is the kind of biggest factor and a small [particle] integration of parts made in-house and also global joint procurement program.

So 22% means, currently it's -- ACIs, the sales number. It's around the JPY 484 billion. So that around JPY 10 billion, direct cost reduction for the outsourcing cost in this case. Is that fine?

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Trevor Wild, Ruffer LLP - Research Analyst [22]

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Yes. Great.

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Yoichi Orikasa, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. - Executive Officer, GM of Kyoto Branch, Deputy Supervisory Executive of Kyoto Corporate Clients Div. [23]

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Theo, do you have any following questions?

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Trevor Wild, Ruffer LLP - Research Analyst [24]

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No.

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Operator [25]

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(Operator Instructions) We now have a follow-up question from James Pulsford from Alma Capital.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [26]

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Great. Could you please comment on the profitability in Q4 of your small precision motors and how that breaks down between the HDD motors and the other element? And comment on the sort of sharp fall in profits once you exclude the restructuring costs of JPY 4.1 billion.

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [27]

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As we see hard disk drive this quarter would have a very high margin, which is something like 27.5%. Then the other DC motor fan is clearly lowered their op margin, especially the other area where the group companies are performing is now the profitability is coming down. And also, we do have a lower margin on the vibration and haptic motor, where we see a huge decline of the revenue of the haptic. But overall, hard disk drive is the only one which is higher sales with the higher margin. But all the other is down, is that the situation for the small precision motor in March quarter 2020. Is that fine?

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James Pulsford;Alma Capital Investment Management;Fund Manager, [28]

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Right. I guess you're -- so apart from the HDD motors, and even if you exclude the restructuring charge, it's -- the business is loss-making. Does that just reflect the level of sales, it's natural to be loss-making at that level because utilization is very low?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [29]

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Okay. So as we say, the onetime recurring charge, for this small precision motor, let me see here, is something like a total -- total is JPY 4 billion -- JPY 4.1 billion, yes. So it's so big. Okay? So hard disk drive is very, so-called a profitable. Then DC motor fan, at this point, even after the adjustment, is negative, okay? And the haptic and vibration is also a negative even after the adjustment of onetime cost, okay?

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James Pulsford;Alma Capital Investment Management;Fund Manager, [30]

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Right. Okay. So these are areas that you're going to be focusing on in your cost-cutting and restructuring efforts going forward, I guess, yes?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [31]

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Yes, especially, this area is clearly halted by COVID-19 and the hard disk drive was almost -- it's affected, but not as much as the other part of the small precision motor and the electric component, okay?

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James Pulsford;Alma Capital Investment Management;Fund Manager, [32]

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Okay. As a follow-up, if you don't mind, I know you don't like to give too much detail, but any -- if you can give me any figures for the fourth quarter for the disk drive volumes, ASP to whatever level of detail you're comfortable with, that would be very kind.

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [33]

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So this time, the volume of our shipments of our hard disk drive single motor was something like a 55.7 million units, which was down from 61.8 million unit shipment in December quarter. So clearly, the units is down, but the revenue was up, mainly because of the ASP was up. So ASP was up almost 12% from December quarter to the March quarter. Thereby, even the volume declined, which is something like 9%. So 9% down on the units, 4% up on the ASP, thereby that's going to be [querying] the revenue up.

Then the key to ASP up is entire enterprise nearline 2.5%, 3.5%, entire ASP up for each form factor. And the share of the nearline itself is coming down a little bit, but thanks to the each form factors have a higher ASP, then that's going to improve the ASP, right at 12%. So that's the most important point, and that's also going to enhance the profitability of this -- precision motor business in the March quarter.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [34]

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Okay. Why did that happen? Or how were you able to make that happen? Because up until now, my understanding is, although we've seen changes in ASP, they've been driven by mix, whereas this is a different pattern. Is this something that you, unilaterally looking at the situation, did in terms of putting up prices?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [35]

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Okay. Number one, the HDD unit, hard disk drive business is now down to the point that we have to change the so-called the business that we have. So we have been doing that business from 1979, right, that's almost 40 years. Over 40 years, we have been doing this HDD [so the more] business. Our unit is, as you understand now, the peak was 2010. Then last year, for example, only the unit was 318 million, from 651 million in 2010. So we decided that we have to change the name of the game because the energy is down. Then if we will keep the ASP, then the revenues is down. So we negotiate with our customers. Then also, there is some demand and supply situation, then we could raise the ASP for a solid customer of the ASP [for motors]. That is the basis of why we do have a very huge jump of the ASP from December to the March quarter.

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James Pulsford;Alma Capital Investment Management;Fund Manager, [36]

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Okay. Great. And sorry, last question. Can you -- are you willing to make any comment about the outlook in the new year for demand in this area?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [37]

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Well, as you understand that the nearline, which we said the last time, is very strong. And now it's still strong. So that's going to be tied to the slope of the data center demand, which may get some tailwinds by the current COVID-19 change of the lifestyle in the major countries because people now stay at home, then they are ready to work at home and they study with the phone, then the data center data is going up. So clearly, we understand that in the long run, for this year and next, the data center demand for the data storage are supposed to be very strong in the coming years. Is that fine?

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James Pulsford;Alma Capital Investment Management;Fund Manager, [38]

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Good. That's fine.

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Operator [39]

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We will now take our next question from Hiroshi Kamide from RoboCap.

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Hiroshi Kamide, Robocap LLP - Equity Research Analyst [40]

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A bit more on the small precision motors business. You mentioned that haptic motors not so great in the March quarter. Are you seeing a bit of recovery here? I guess it's related primarily to smartphone demand. How do you see that going forward this year, please?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [41]

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Okay. Number one, haptic. So clearly, as you see, the smartphone business is very, very competitive. So the smartphone makers are competing each other very fiercely. So thereby a component such as the haptic motor we make is also competitive because the smartphone makers are going to keep the cost down. So as you understand, the competition is very fierce, then those are so-called price basis. So anybody who cannot offer the reasonable price or a better price, you can get the -- you cannot get any deal. That's a very, very difficult situation.

So for the March quarter, maybe we had somewhat a wrong number for our quotes, thereby we didn't have so much of the business for this haptic business in the March quarter, that's number one. And the overall market is not so great. As you see, the COVID-19, especially in China, the February, March and the Europe and the U.S.A. from March to April. So overall, the production has not really the full operation in China or any other country. So that's also harmed the -- ourselves on the haptic sales in March quarter.

Then June quarter is completely different because the situation is different, and the product we supply will be different. So thereby, we do have a new game to play. So it's not really something that this quarter going to continue next. And next quarter will continue to next, it's not that. So every quarter or every year, we have to create a new game. Then within that game, sometimes you win and sometimes you lose. So at this point, what we can say is the March quarter 2020, where we lost even before the quarter start, then the quarter itself was not so great. So those are the 2 reasons that we cannot show you a very good number for the haptic. And the reality is the haptic number was [queried] down from the previous quarter. That's what happened.

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Hiroshi Kamide, Robocap LLP - Equity Research Analyst [42]

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So you expect things to basically recover from here, would that be correct?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [43]

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Yes. For example, the December quarter, we reported a JPY 13.1 billion sales, then the March quarter is only JPY 3.7 billion. So clearly, we are going to recover, but not as high as JPY 13 billion per quarter, maybe somewhat more lower in the June quarter and September. Then as I mentioned, every quarter, we are going to play the new game. So the outcome is not yet known, okay?

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Operator [44]

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(Operator Instructions) We will now take our next question from Brad Snyder from Egerton.

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Brad Snyder, Egerton Capital (UK) LLP - Partner and Investment Analyst [45]

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Yes. Just a follow-up question on haptics. Then I had an auto question, please. The haptic sales that you were just referring to, it sounded like maybe you walked away from some deals based on price. But I was just wondering how much of the sales impact there was due to the market or due to losing share to competitors?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [46]

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Sure. 80% market only 20%. If you cannot get share, even the market is good, you cannot sell your product, very simple.

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Brad Snyder, Egerton Capital (UK) LLP - Partner and Investment Analyst [47]

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Okay. Well, I guess, what is your response to that as you play the new game in June and September, will you kept a lower price meaningfully to win back the lost share?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [48]

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Okay. So our customer, usually 2 supplier for 1 product, okay? So always the 2 suppliers are going to be competing each other to a one model, right? Whatever the model numbers are. So sometimes, we're going to be making 2 models, 3 models. But always, we do have competitors. Then each quarter, then we will have debt. If you can get the -- if you can make a good number and good price, you can get. But not 100%, maybe 90%, 80%. So if you are making a very part number, only 10%. That's what the game -- that's what the rule of the game is. Do you understand?

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Brad Snyder, Egerton Capital (UK) LLP - Partner and Investment Analyst [49]

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Yes.

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [50]

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So it's not something that you can sit on the same game forever and winning all the time or even getting some money for your product anytime. But you have to compete very fiercely, then you have to win the share to get the business up, okay?

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Brad Snyder, Egerton Capital (UK) LLP - Partner and Investment Analyst [51]

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Okay. And I had a question on the auto business. I think in past slides, put some numbers in around the traction motor backlog and order book. So I didn't see any today. Is that something you can update us on?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [52]

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Yes, for traction motor, the order backlog of our EV, e-axle and the traction motor and the motor format have total, so all the traction motors, okay? Then in January, we measured 10 million from today to 2025 total. Then pretty much, today is April, and then we say 10 million became 16 million. That [would be it].

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Operator [53]

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We now move to our last question, from Wendy Agnew from SSGA.

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Wendy Agnew, State Street Global Advisors, Inc. - Portfolio Manager and Senior Equity Analyst [54]

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I was hoping that you could comment a little bit more on -- in both your acquisitions of Omron Auto and Embraco, you mentioned that sales have increased nicely from these acquisitions. And I know you had very strong goals to improve profitability, were you able to achieve any of that given the hit from COVID?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [55]

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For Embraco, it's contributing to our top line [for us] around JPY 92 billion in fiscal year 2019. And of the operating profit, that's contributing -- contribution is down JPY 4.6 billion -- it's Embraco. And Omron for [call it] mobility needed mobility now, JPY 44 billion of top line in fiscal 2019. And operating profit contribution is JPY 2.5 billion in fiscal year 2019. That's after the number of the contribution by 2 acquired companies in fiscal year 2019.

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Wendy Agnew, State Street Global Advisors, Inc. - Portfolio Manager and Senior Equity Analyst [56]

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Can you talk about any -- obviously, the margins have not been able to expand, and I'm sure a lot of that is because of the macroeconomic situation, but what are you forecasting for this year for fiscal year '20?

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Akira Sato, Nidec Corporation - First Senior VP, CPO & Director [57]

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Yes. Actually, first of all, the Embraco, the March quarter, its operating profit margin is around 3%. In this fiscal year 2020, it's going to be up to around 6%. It's in our plan. And mobility, the Omron, it is -- March quarter, it was around 7.4%, and it's going to be up to around 10% in fiscal year 2020, mainly due to our joint procurement. That's kind of biggest contribution to -- including [their] profitability. Is that fine?

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Operator [58]

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Mr. Orikasa, there are no further questions today. So at this time, I'd like to turn the conference back over to you for any additional or closing remarks.

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Yoichi Orikasa, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. - Executive Officer, GM of Kyoto Branch, Deputy Supervisory Executive of Kyoto Corporate Clients Div. [59]

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Sure. Thank you very much. We'd like to conclude today's conference call. Thank you very much for your active participation. Should you have any further questions you may come up with later, please do not hesitate to contact either Nidec Corporation or your sales representative at MUFJ Securities. Thank you very much again for participation today.

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Operator [60]

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Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.