Nidec(NJDCY) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales increased by 4.8% year-on-year to ¥566.1 billion [5] - Operating profit increased by 34.7% year-on-year to ¥60.2 billion, marking a record high on a quarterly basis [5] - Profit before income taxes increased by 51% year-on-year to ¥86.1 billion, also a record high [5] - Profit attributable to owners of the current increased by 55% year-on-year to ¥64 billion, marking a record high [5] Business Line Data and Key Metrics Changes - The appliance, commercial and industrial (ACI) segment marked a record high in quarterly operating profit [6] - The MOEN (Motion & Energy) segment is expected to contribute to increased sales and profit in fiscal year 2023 [8] - The Battery Energy Storage Solutions (BESS) business is expected to grow sharply due to the energy crisis [9] Market Data and Key Metrics Changes - The market for E-Axles is shifting from larger models to more compact models, impacting sales volumes [34] - The HDD motor market is shrinking significantly, with expected shipments down to approximately 126 million units in 2023 [51] Company Strategy and Development Direction - The company aims to become the number one automotive system company by anticipating strong electrification demand [15] - Nidec is focusing on expanding its market share in the automotive sector, particularly in electric power steering and electric brakes [16] - The company is targeting ¥500 billion in sales from Battery EV-related business by fiscal year 2025 [18] Management Comments on Operating Environment and Future Outlook - Management noted that the transition from Gen 1 to Gen 2 E-Axles faced challenges, impacting sales forecasts [33] - The company is optimistic about maintaining operating profit despite reduced volumes due to improvements in cost structure [46] - Management highlighted the importance of compact models in the E-Axle market and the competitive landscape [49] Other Important Information - Nidec has established a joint venture for aerospace electrification to develop electric propulsion systems [10] - The company has acquired Houma Armature Works to enhance service offerings in the oil and gas sector [13] Q&A Session Summary Question: About the E-Axle business volume cut - Management explained the significant decline in volume was due to issues transitioning from Gen 1 to Gen 2, market shifts in China, and a move towards smaller models [34][35][36] Question: Expected launch of Gen 3 E-Axles - Gen 3 products are planned for launch in June 2024, with an initial target of 955,000 units for the Chinese market [39] Question: Profit margin on E-Axle business - Management indicated that despite reduced volumes, improvements in cost structure would help maintain operating profit [46] Question: Pricing dynamics in the E-Axle market - The market is experiencing intense competition, with a focus on compact models rather than price [48] Question: HDD motor segment market share - Management clarified that Nidec is the sole supplier to Western Digital and Toshiba, and the market is shrinking rather than losing share [51] Question: Working capital status - Working capital has increased significantly, but improvements are expected as lead times for raw materials decrease [55]