Thank you very much for joining Nidec's conference call. I am Yoshikazu Shorikasa, General Manager, Head of Branch of Mitsubishi UFJ Morgan Stanley. As we kick off the conference, I'd like to ask you to make sure all the materials are ready in front of you. If not, please download the files on Nidec's homepage right now. Please note this call is being recorded and the conference materials will be posted on the company's homepage for the coming week for investors and analysts who are not able to join today's call. Now, I'd like to introduce today's attendees from Nidec Corporation. Mr. Jun Seki, Representative Director, President and COO. Hello, everyone. Mr. Hidetoshi Yokota, Senior Vice President and Chief Financial Officer. Hello, everyone. First, Mr. Yokota will make a presentation. After his presentation, we will move on to a Q&A session and Mr. Seki and Mr. Yokota will answer your questions. Mr. Yokota now presents Nidec's Q4 FY 2021 results, future outlook and management strategies. Mr. Yokota, please go ahead. Thank you, Shorikasa-san, for the introduction. Good day, everyone, and welcome to today's conference call. My name is Hidetoshi Yokota, Chief Financial Officer of Nidec. Today, Mr. Jun Seki, Representative Director, President and Chief Operating Officer of Nidec, and myself will be your main speakers and answer your questions. Joining us also is Mr. Masahiro Nagayasu, General Manager of Nidec's IR team. For forward-looking statement, please see slide two of our presentation material for details. Now, I am going to review the key figures. Please see slide three for the FY 2021 full year results. As shown on slide four, the 12-month net sales stood at a record high of JPY 1,918.2 billion, 18.5% higher year-on-year. The operating profit and profit before income tax increased 7.2% year-on-year to JPY 171.5 billion and 11.9% year-on-year to JPY 171.1 billion respectively, and both were record high. The profit attributable to owners of the parent stood at record high of JPY 136.9 billion, 12.2% higher year-on-year. On slides 5 and 6, you have step chart 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, the upper chart of slide 6, the sales of small precision motor declined sharply due to the lockdown measure implemented in China. However, the sales of automotive, appliance, commercial and industrial or ACI and machinery made an increase. Regarding the operating profit in the lower chart, Small Precision Motors declined due to reduced sales and Automotive went down due to structural reform expenses and R&D expenses of traction motor system. However, the other segment increased despite the adverse climate in the market. Please see slide 8. For the FY 2022 forecast, we are aiming for net sales of JPY 2.1 trillion, operating profit of JPY 210 billion and operating profit ratio 10%. Please see slide 12. We are aiming to become number one automotive hardware company by anticipating the strong electrification demand boosted by CASE, which means connected, autonomous, sharing and electric. In the EV traction motor related business, mass production of E-Axle by the joint venture with Stellantis is expected to start in the H2 of FY 2022 and orders increasing backed by the tailwind of a strengthened environmental regulation in Europe. In China, in addition to the two existing major customers, we are going to focus on the resources on the five customers, including the three new ones. In other motors and auto parts, as the market in FY 2022 is expected to recover gradually while the increased raw material price is expected to continue, we are accelerating to improve our profit structure by passing high raw material costs to our selling price and by reducing manufacturing costs. We are aiming to achieve JPY 1 trillion net sales organically and JPY 300 billion additional net sales through M&As in FY 2025 in the automotive segment. Please see slide 13. Nidec is ranked as number one third-party supplier in E-Axle in the Chinese battery EV market. As you see the right-hand slide of slide two, slide two, 2.91 million battery EVs were sold in China in calendar year 2021, of which 1.45 million were assumed to be installed with E-Axles. We estimated 840,000 E-Axles were manufactured in-house by OEMs, and 610,000 E-Axles were supplied by third-party suppliers. In this market, Nidec has 27% share, which is almost double compared to second largest suppliers. Please see slide 14. The cumulative number of vehicles using our E-Axle exceeded 335,000 units, and the number of EV models has reached 11. Despite the February decline due to Chinese New Year, March saw the highest shipment volume and FY 2021 sales increased 140% year-on-year. Please see slide 15. We are going to solidify the outlook for E-Axle business monetization for post-two turning points by introducing mass-produced Gen. 2 E-Axle in FY 2022. The first-generation E-Axle, Gen. 1, prioritized speedy entry to the market and expansion of the market share. However, Gen. 2 is designed to achieve higher performance and a further cost reduction of 30% lower than Generation 1. By introducing Generation 2 E-Axle in the H2 of FY 2022, we are going to aim to monetize earlier than originally planned. We have also started to develop Generation 3 already, whose development theme is to gain overwhelming competitiveness to win through the high growth period. Please see slide 16. Our OEM customers are classified into Type A, who manufacture a traction motor in-house, Type C, who outsource them, and Type B, who sit in the middle. Recently, we are seeing increasing order from Type A-, who are Type A customers, but they buy parts from traction motors from outside. At Nidec, E-Axle for Type A and C are looked after by Automotive Motor & Electronic Control Business Unit or AMEC. Type B customer served by Nidec PSA emotors or NPE and motors for small EVs under 30 kW, as well as the motors for electric motorcycle by newly created Small Platform Motor and Solution Business Unit. Please see slide 17. While rising raw material price squeezes this quarter for profitability, we are going to prepare for the demand recovery with passing on the increased material price onto the selling price and reducing costs in FY 2022. Please see slide 18. Paradigm shift from ICE or internal combustion engine vehicle to EVs is rapidly accelerating into two-wheel and a small car as well. We are focusing on two largest markets of India and China in both electric two-wheel vehicles and small EVs. We are planning mass production in FY 2022 for 11 projects, including 6 related to electric two-wheel vehicles and 5 related to small EVs. Please see slide 19. Nidec's Ultra Flow FDB or UFF, ultra-thin and ultra-small fan developed with the technology accumulated through hard disk drive motor production, is supporting the solid demand for PCs and its shipment is increasing. As you see on the right-hand side of the slide, the quarterly shipment volume exceeded 7 million units in quarter three. Please see slide 20. Nidec is launching ultra-small and ultra-thin product by applying our magnetic circuit design technology curated in the design of HDD motors. CA series linear vibration motor of the left-hand side has approximately 1/15-1/50 of power consumption compared to our conventional product, and its diameter is ultra-small, 3mm. With these motors installed in stylus pens, they recreate the tactile sense, making users feel as if they were actually writing on paper by replicating the way the pen tip vibrates when writing words. The volume of slider linear vibration motors on the right-hand side has been reduced by 40% compared to our conventional product, and the thickness is ultra-thin, 2mm. With these installed in smartphones and smartwatches, they function to control vibration to make users feel as if they were pressing the button and vibrate in synchronization with the video. Please see slide 21. In the small precision motor segment, we are implementing business portfolio transformation aimed at the HDD motor market structure change. In ACIM, we are executing structural reform in overseas business and looking to enter a new phase of growth. While gaining market share outside Europe, which is shaken by the conflict, we are going to accelerate top line growth through three new strategy focusing on the field and the logistics and the material handling, and to prepare for expansion into the field in India and other Asian air conditioning market. Assuming higher raw material cost continues for the time being, the same as in auto business, we will accelerate improvement of the profit structure through passing that onto selling price and reducing manufacturing costs. Please see slide 23. Nidec's innovative battery energy storage solution are used in prominent projects worldwide. ACIM is also entering a solution business such as EV charging station and circular economy-related products. Please see slide 24. While struggling temporarily due to demand decline in Europe and higher material costs in the H2 of FY 2021, ACI is continuing to aim for operating profit ratio of 15%. Please see slide 25. In other product groups, the operating profit ratio for FY 2021 is keeping high level of over 15%. Please see slide 26. The machinery segment has been successful in achieving high growth in expanding the improving product portfolio through the steady organic growth and M&A. Especially in the machine tool business of our subsidiary, Nidec-Shimpo, we are going to explore a global market with organic growth and M&A, duplicating a successful method in the press machine business. Please see slide 27. We have completed the purchase of stake in Nidec OKK Corporation via third party share allocation. We are aiming to become highly profitable and a comprehensive machine tool manufacturer by creating synergies with Nidec Machine Tool. Last but not least, on behalf of the entire management team, we would like to thank you, customers, partners, suppliers for their support and commitment as well as our shareholders. At this time, we would like to open up the call for any question. Orika-san, sorry, this is Seki speaking. This doesn't include it in this presentation package, but prior to today's financial announcement in Japan, it's 5 hours ago, Mr. Nagamori announced that he come back to CEO position. While myself, I was CEO by today's morning times, I moved back to COO. We still control this company by two top managements. You know, just Nagamori-san come back to CEO and I go to COO. I think probably many question is waiting, so I avoid to tell more detail. I wait for questions. Thank you very much, Mr. Seki and Mr. Yokota. Now, we would like to come to the Q&A session. Mr. Seki and Mr. Yokota will be pleased to take your questions. Today's Q&A session will be conducted electronically. If you would like to ask a question, please press the star key and one on your touchtone phone. Again, please press star and one if you would like to ask a question. If you would like to cancel your request, please press star and two. Again, if you would like to cancel your request, please press star and two. We'll now pause for one moment for questions from the participants. Again, if you would like to ask a question, please press star and one on your touchtone phone. Okay. Our first question today is from Ramsey El-Assal of State Street Global Advisors. Thanks for taking my question. Can you hear me fine? Yes. Yeah. I'm sorry. My first question is on the inflation pressure. How much of the price increase is required to completely offset the raw material cost inflation that you are anticipating in 2022? Also, how much is already passed on? Can you give us more color on the raw material inflation cost and the pricing? Okay. Maybe I will break it up by maybe quarter size for everyone to better understanding. Every quarter, similar level of inflation are being observed recently. Of course, a mix of materials change from time to time. Recently, especially after the Ukraine-Russia crisis, most of the commodity is stabilizing again. Recently, magnetic steel, resin, copper, aluminum, everything is going up, and the rare metals as well. I would say, per quarter, the growth impact of material inflation is roughly more than JPY 10 billion per quarter. We are offsetting those by increasing price or putting some engineering effort. Every quarter, normally, JPY 4 billion is left over. If we completely offset 100, no impact, but there is a time lag or sometimes negotiation with our customer is prolonged. That's why we can't offset everything in the same quarter. As we promised in the previous quarter three, we are a bit behind in the price reflection in quarter three, especially ACIM. This quarter four, ACIM was very aggressive to recover the price. Actually, ACIM is getting more than their impact in quarter four. In general, the quarterly impact growth is roughly 100-120, sorry, JPY 10 billion-JPY 12 billion. We offset maybe 60% of it or 70% of it, and JPY 4 billion are left over. That is the mechanism per quarter. In FY 2022, of course, nobody knows what's gonna happen in the material situation. If a similar thing happen, even we try to be very aggressive to squeeze this leftover, this impact is still how should I say? There's a time lag to be carried over to next quarter. Okay, thank you. My other question is on since you mentioned Russia to Ukraine conflict, there is also an impairment of JPY 1.6 billion in auto segments. Can you give us the demand side of the equation? How is the demand in Europe and in China because of the COVID-19? Can you give us the demand side, there is any changing trends in various segments? This is Jun Seki speaking. Regarding automotive sales, automotive divisions, we have a direct impact by this Ukraine for customers demands. Actually, we don't clearly know if market demand is dropping or just automotive OEM cannot produce. As a parts supplier, we are suffered by 15% less volume than original estimations. For China, so far, maybe less than 5%. It's just started, so it's depending on how long this lockdown continues. Let's say, if it's continue till the end of May, probably impact become at 15% to 20%. That we are estimating. We are not seeing actually slowdown from market itself, so it's a pure delivery problems. Okay, thank you. Demand in other segments like ACI and Small Precision Motors, how is the demand there? For ACIM side, for Ukraine, we have an impact from two divisions. One is general appliance. We have our customer in Russia. The other one is like energy control segment. Those are roughly impacted by like EUR 20 to 30 million sales, maybe around EUR 10 million profit impact. Instead, we are seeing better demand from North American side. I think we can mitigate this, but the impact is, as I said, in Europe. For China, we are still watching what is the real impact. So far, direct impact is happening for inventories because we can't ship, and also a very high logistic cost because many ports are stopped. Other than that, we are not seeing actual demand drop even from our customers. That we are seeing. Last question for me is on E-Axle, can you give us the latest reported financial year sales and operating loss, and also what you are building into your forecasting for the coming financial year? Thank you, Ramsey. So far, when we're talking about E-Axle, our sales is only happening in China. If you go to page 14, accumulated total sales is 335,000, and in FY 2021, our sales was about 250,000. This is of course a record high for us. Before answering your questions, let us advertise again. If we go to page 13, please look at the donut graph on the right-hand side. The green color is ours. In China, still there are a mix of like in-house motor and purchased motor. This is a market share for pure purchased motor from third parties. We have an outstandingly high market share already. We are receiving a lot of RFQ and then actual order takings, so we are expecting that this market share will expand. In 2022, from April to March, we are expecting about 600,000-700,000 units. Customers' demand is over 800,000, which we don't believe they can build. We set our business plan based on 650,000. Accumulated E-Axle, which page 14 said 330,000. But actually, we already sold over 60,000 for LCV side through the ACI. Result is already 400,000. If we sell 600,000-700,000 in this FY, we easily reach 1 million sales. You are not asking our total sales, but let me advertise it, yeah, because 1 million is so important for me. Then, if you go to page 15. Sorry, page 15. You know, upper chart showing our growth. Vertical axis is the sales amount, and the horizontal axis is year by year. Lower part is our introduction strategy of our E-Axles. Currently, we are building and selling Gen. 1. It will be transferred into Gen. 2 from middle of this year. In terms of Gen. 1, our objective of Gen. 1 is introduction to the market because no one believe us. Naturally, we had a very gorgeous specifications. We intentionally lowered our price to grow up faster. Generation one in short, it's not profitable at all. Each time I sell, we lose money. That level is getting better and better. So far, you know, I want to be very straight, our marginal profit is minus 10%. It used to be minus 60%. I think we can make this minus 10% to breakeven within this 8 months. Hopefully, I can do that by June. We don't lose any money after that. Okay? Our original commitment by this chart showing that, you know, we make a profitable business in 2023. You know, model by model, profitable model introduced much earlier. Because we have remaining older models, 2023 is a target to make it breakeven. Today, I said I'm aiming to pull ahead at least six months to be profitable. Okay. That is our forecast and then challenges. That was it. If I missed this, can you give me the operating loss number in the segment in last year, 2021, and also what is projected for 2022, if you can? Just moment. Yes. Okay. Let me be very frank, okay? Usually I don't announce this to outside. I lost over 200 oku-yen by this business. It's not only a loss from sales but also loss from R&D budget. Okay. Roughly, I lost probably 60 oku-yen from business, 144, like fixed costs related to R&D budget. Thank you. That's all. Okay. Again, time by time, loss per car getting smaller. But meanwhile, we are selling more. That's very difficult for the past. Yeah. I'm very confident we completely turn around by generation two, which already almost, let's say 94% completed for that development. Actually, JPY 20 billion of deficit is mentioned by Mr. Nagamori during the earnings call. What he said was, if we turn into breakeven, we will gain JPY 20 billion. If we can pile up another JPY 20 billion, that is gonna be JPY 40 billion increase from now. That's why we want to eliminate this JPY 20 billion, a lot, as soon as possible by accelerating the launch of Gen. 2. That's our strategy from now. Thank you. I will get back to you. Yes, thank you. Ramsey, thank you very much. Next question is from John Hall of Zinka Partners. John, please go ahead. Hello. Hi, good evening. Can you hear me? Yes. Yes, we can. We can hear you clearly. Excellent. I just wanted to follow up on the E-Axle questions. Did you say that in June quarter this year we will be gross profit breakeven from minus 10%? Did I hear that correctly? Yeah, yes. That exactly I said, but that is my challenge, okay? I cannot commit to you, because you know. I- I can commit you if market price doesn't move. You know, day by day, I'm seeing rare metal is going up, copper going up, and aluminum going up, so I have to offset all of those. Then plus I have to delete -10%. Let's say my confidence level is 85%. Yeah. Sooner or later. I see. I get to break even. I see. Can I also ask, you know, on your page 13, you show the donut market share, where clearly number one market share. Do you think that some of these other competitors, A, B, C, D, and others, are they also losing money? Do you expect them to exit the business in the coming one or two years? Let me reply two ways. First, officially we don't know. Mm-hmm Of course, we communicate very closely. Yeah. At least A is much bleeding than us. Mm-hmm. B may be similar to us. C, D, we don't know, but probably bleeding. I see. You know, we will have very good growth this year. You mentioned 650,000 units. How much of that is the models that you show on page 14? How much of the 650 are new models that will be launched, that will use our E-Axle traction motor system? Since we say traction motor E-Axles, those are all E-Axle which are motor, inverter, reducer, combined. Mm-hmm. Gen. 1, Gen. 2. I'm asking the mix of Gen. 1 and Gen. 2 out of 650,000 units, right? Okay. Okay. Sorry, what I meant was, you show on page 14 the OEM models that use- Right Our E-Axle system. Out of the 650, how much is from this list and how much is from additional OEM models that will use Uh- Our system this year? Yeah. We didn't observe that way, so may not be accurate. Mm-hmm. I think this group of 300 certified will grow to, let's say, 500,000. 150 are, like, additional models from other brand. Yes, makes sense. Thank you. I also wanted to ask to clarify on your page sixteen. At the moment, we are doing business with OEMs that are outsourcing the motors. What you're saying is, in the future, towards 2023, 2024, 2025, those that are making this traction motor in-house will start to outsource. Is that your thinking for the next few years? Therefore our addressable market will grow because there'll be more outsourcing? Yes. That's exactly what we are seeing. John, actually, we are working with type C and type B. Type B is typically they request us to have joint ventures. Guangzhou Automobile Group in China is one, and then we have a joint venture with Stellantis in France, and that will start production from this H1. Then they show no hesitation to ask next model. Yeah. Your question- Mm-hmm Type A and then, you know, we start receiving RFQ from them. Sometimes they request only motor assemblies, okay? Sometimes Mm-hmm They request us to deliver like a rotor assembly or a stator assembly, like a module of motors. Yeah. Time to time, you know, they are finding our quality, speed, cost is much better than their in-house. Since they are insisting, you know, the, those need to be in-house. While they are abandoning a very detailed assembly, they stick for final assembly. That we are seeing. Then that start from low-cost models. They insist they keep an enhanced motor for their high-end, and but this invention will continue towards 2030. I think, 2030, no one making a motor by themselves. Mm. Mm. Because finally. I see. Scale merit is everything for this cost. Yes, you don't think the OEMs think of this E-Axle traction motor system as strategic, that they have to, like people like Tesla or, you know, Ford or GM in the West, you know, when they make EV, they. You don't think they will want to keep it in-house. You think all of them, including the Chinese firms, will want to outsource. That's your expectation. Is that right? Yeah. I am 100% sure they want to keep in-house, at least next 5 years. Yeah. They will find their in-house cost is too high. Oh. But while the- Yes. Understand. Yes. Understand. Performance is same. Particularly, you know, this electrification only occurring high-end or very low-end, not for medium-end. When those electrification introducing to like a B segment car or C segment car, I think their electric powertrain, in-house electric powertrain is too expensive. We already- Yes. Tested 2 OEMs with ours, and roughly 60% to 120% high because of very high fixed cost. Yes. Because they don't have enough volumes. Yeah. Yes. One more question on traction motor. You know, you mentioned when we introduce second generation sometime in this FY and definitely by next FY, we will be able to make a profit because the product has lower cost, and also we can charge more. Is that right? Or it is more the cost lower, we will charge the same, and we will make a profit because of that? Thank you, John. It's lower cost than Gen. 1. Actually, we are going to provide some price discount to customer as well. We share this lower cost with customers. Not fully, of course. One thing I have to tell you is that, you know, currently for the Gen. 1, we are facing a very rapid material increase, particularly like rare metal for magnet materials. Let's say up until middle of last year, none of Chinese automaker listened what supplier said. They completely ignored to absorb price up. But since they need volumes, they know we need money to get the parts. Lately, automotive, brand by brand, they start listening, and actually they are paying additional costs for this material increase. This Gen. 1 price is increasing, so starting point for Gen. 2 is increasing too. It's pure incremental costs, and we're not going to compress because we need competitiveness anyway. Yes. Straight answer to your questions, it's we gained profit because of cost, but we don't occupy that cost. We also share that to customers. By the way Yes. This graph may not be so clear, but we introduce the first 2 models of this generation 2 in middle of this FY, like, September, October periods. Then we expand those to other models. Thank you. Maybe one last question on the financial model, the financial question. I know three months ago when we gave the previous quarter results, we reiterated guidance for operating profit at JPY 190 billion. That was about three months ago. Obviously we only reported JPY 171 billion. Is the main difference because of unexpected raw material cost increase, or there were some other things that are temporarily hurting us that we will get back this year? Yeah. Absolutely, you're right. We are short by JPY 18.5 billion against our guidance. Vast majority of the shortfall comes from small precision motor and automotive, maybe half and half. Yes, there is an impact of material cost high, but as I said, they are suffered by material cost. For example, ACI business, they are so aggressive to recover the material cost they suffered from previous quarter. Actually they are positive in the material. All portfolio of material cost taken and offset impact in quarter four, actually the impact is not much in the single quarter. The majority of the shortfall comes from a maybe unexpected volume drop in Small Precision Motors and lower than expected volume growth in the automotive and also some continuous investment in the traction motors. For example, the Small Precision Motors, as we mentioned during the call, there was a big impact from the China lockdown at the end of March because we have to close the factory for almost a week, and also our shipment supply chain completely froze due to this. We couldn't make many last-minute sales in March. That was very big. As I mentioned during the call, we estimated the impact of loss of sales of small precision motor is about JPY 6 billion for the China lockdown impact in the sales. Also, maybe Nagayasu will explain a little bit more in the market situation. Our HDD business, HDD spindle motor business is keep declining in quarter four. As you know, the HDD spindle motor business is the cash cow for us. The volume reduction by previous quarter, about 25%, is a significant hit in our small precision motor. On top of that, other small precision motor products, such as fan motors or servo motors or thermal solutions or those so on and so forth, are severely impacted by chip shortage by customer. This quarter four is a big disaster for us. This kind of a, you know, the combination hit our top line in small precision motor. In automotive, as I said, we are anticipating more sales recovery, especially in Europe, but that was not happening, actually lower than expected. Our traction motor business, we keep investing to, you know, accelerate some of the development. All of this impact comes to the shortfall of JPY 18.5 billion against the outlook that we announced in the H2, end of the H2. By the very last moment, we had Ukraine and Zero-COVID policy from China. Do we make that 18.5 billion back this year? Meaning whatever we were gonna get this year, we would get plus what we lost because those are mostly delay. Is that fair to say those are mostly delay as opposed to permanent loss? No. It's definitely not permanent loss. We can recover. As Yokota-san said that, we are strongly negotiating with customer. We don't make them, you know, afraid. No. We got very patiently asking help because, you know, we are losing lots of profit. Then, you know, as I explained, for the traction motor examples, Chinese OEM never listened this type of, you know, price increase because of materials. But they start acknowledge that this is, you know, extremely unique from before. So they are listening and accepting for price increase. Then timing was bit delayed. So we're expecting those are effective from Q1, mainly. And also for the traction motor side, we lost over JPY 200 million last year. As I said, time by time it's getting better. We are expecting a much less loss in this FY. Also, if war and China COVID continue through this year, probably it's disaster. You know, we're estimating those will finish by somewhere in this H1. Yeah. Right. It's a JPY 210 billion forecast incorporating some disruptions already? Mm-hmm. Yeah. I think it's really, you mean that those situations has been reflected in JPY 210 billion, right? Yes. Exactly, yes. Because it is continuing a little bit in April and maybe- Yeah. Maybe a bit of May. Yeah. I think it's really difficult question for us because as Mr. Seki explained several minutes ago, our direct business with Russia and Ukraine is quite limited. The indirect economic impact on the European market is quite significant in the automotive business and the ACI business. It's really hard to foresee how much risk to be reflected in JPY 210 billion of forecast or how much should be, you know, forget. What we can do is if this kind of risk realized during the operation day by day, we will find a solution to mitigate the risk or offset the risk. We have a big opportunity in other areas such as North America or Southeast Asia or even China. If European risk is realized to be bigger and deeper, we will take immediate action. That's what Mr. Nagamori said, agile action by Nidec Spirit. It's to answer your question, we don't have crystal ball to how should I say, foresee you know how you know long you know how long does it take to complete this kind of a crisis. It's we think the impact to be you know the current level or no deeper than current situation. That's what we believe. Thank you so much. We know you guys are working very hard. We appreciate it. It is an uncertain world. Thank you. Sorry, John. My CFO is very conservative. You know, usually we don't disclose this number without some margins. Our internal plan is much higher than this. Of course, we have some solution to go higher and then stretching out everywhere. You know, as Nidec, I think performance in 2021 is very miserable, although we made a new record by four years' time, but I expected much higher landings, as you said, at least like JPY 1,900 billion. Yeah. This year, as a pride of Nidec, we really have to make this happen. We have a margin in back of this. To be honest, straight answer to your questions, we embed some impact of Ukraine and China in Q1 a lot, in Q2 much less, and we are not embed any impact for Q3 and Q4. Intentionally, we are being optimistic for that point. If it's continued, we have to bring us other solutions as Yokota-san said. Okay. Thank you. I'll go back to the queue. Thank you very much. Seki-san. Okay, John. John, thank you very much. We have a few more minutes to take questions from participants. For the benefit of all participants, please let me repeat. If you would like to ask a question, please press star key and one on your touchtone phone. Again, please press star and one if you would like to ask a question. We will take additional questions from Ramsey. Please go ahead. Thank you again. When looking at the balance sheet, the inventory, it is almost increased 50% compared to last year. Is it that the accumulation of the raw materials or some of the products for the future manufacturing or can you explain the inventory in the balance sheet? Okay. This is Yokota speaking. Let me answer your question. We can break it up in three pieces for the inventory increase from previous quarter end to this FY end. Three pieces mean one first piece, first box is a proportional increase by our turnover. As you remember, our turnover increased from JPY 1.6 trillion to JPY 1.9 trillion. Naturally, our inventory increased by this. The second is exactly what you said. We call the strategic stock. Strategic stock means any, you know, the material shortage or material price hike or supply, how should I say, supply chain congestion. In order to prepare for this kind of situation, we pile up the inventory, how should I say, intentionally. That's what we say, a strategic stock. The third piece, this is what we should eliminate. We did not anticipate such increase or we should take more control over this situation, but actually inventory increased. I would say those parts is roughly one-third each, let's say one-third each. The last box I mentioned should be eliminated. That is also including the impact of a port lockdown or China lockdown or, I don't know, sudden customer request. Not expected, you know, the sudden cancel by the customer at the end of FY. This FY -end, we suffered this situation based on the China lockdown and also maybe other area as well. Some inefficiency in our value chain, supply chain control. We piling up stock in our, you know, production line or supplier base or maybe finished goods. I'll say out of total inventory increase, we will surely try to eliminate one-third, which is bad inventory we consider, and we will clean up as soon as possible, especially quarter one. How fast we can eliminate in quarter one is a key for our action. Ramsey, of course, while we see a settle down of China's zero-COVID from China, material hike, logistic congestions, we can eliminate other stock, which is strategic inventory, which usually we don't need. We need very special because of current situations. A somewhat relevant question. I'm hearing, I mean, we are reading something around the supply chain issues in the industry, especially in Europe. Are you facing some supply chain issues in procuring some of the raw materials from China or some other parts of the world? Hmm? Ramsey, you are asking the supply chain issue in Europe due to. Yeah. What kind of incident? The Ukraine launch crisis or other? In general, I mean, it may be shipping related or it may be related to Ukraine issue. No, it's difficult to tell you overall situations, but at least we are seeing a longer lead time from like Shanghai to Germany and with more costs. You know, what we're hearing is Koreans shipping lots of products to Europe from Korea. Usually they use the Russian railway. Now it's banned, okay, completely blocked. So all Korean baggage coming into sea freight. So sea freight is extremely congested because they're coming into the seaside. Okay? That makes sea freight days longer and more cost. Actually port by port its situation is different. But on average, we are seeing a 30% to 40% increase for the logistics, and maybe 10% to 15% longer lead times. You know, that's very big impact, but more impact is energy side. Yeah. I don't know, Ramsey, where you are living, but our colleague in Germany and Italy, and they said that energy costs becoming double to triples. So that's impacting heavier than logistics. Especially the gas price is crazy high in Europe right now due to the impact of current conflict. Thanks. Then last question is on China. Recently China is somewhat I mean, they're reducing the restrictions. I mean, they're allowing some economic activity, and they're allowing companies to reopen the industrial activity. Have you seen improvement in China's economic activity for Nidec in the recent weeks? Again, area by area it's different. Fortunately, we don't have actual manufacturing operation in Shanghai, which is the most severe lockdowns. Nearby Shanghai, it's 1.5-hour drive to the southwest, south-southwest, we have a Pinghu, which is the biggest of our operations. In Pinghu, we have a very strong collaboration with local government. At this moment, from time to time, we have like a short lockdown, but we're not experienced long lockdown, fortunately. We don't know tomorrow. And then, like, we have ACIM in Fuzhou or other area. We have a traction motor operation in Guangzhou. So far, all of those are operating. time to time, we have some parts delivery shortage because supplier side is locked down. We don't say no impact. We are receiving impact. For our operations, all are working, not completely locked down. Of course, you know, Shanghai area is different. We have a big sales office in Shanghai, and then all of them are staying in the apartment. They cannot go out from their rooms. They can work from rooms. Thank you. That's helpful. James Ramsey, thank you very much. We are running out of time. Next will be today's last question. That is from James Ramsey. Please go ahead. Thank you for giving me a chance to ask one last question. The other variable that's moving a lot is the yen, very quickly, you know, in the last 2 to 3 months. Can you talk about the impact of this very fast moving yen on our operation, if there's anything to call out? Exchange rate. Yeah. Actually, we have shared the impact or dollar and sensitivity in page 3, in the bottom. Overall, what I can say is, maybe you can imagine the big, you know, heavy industrial automotive type of company in Japan. Their profit currency and the cost currency is different. They are exporting a car from Japan, for example. Their cost currency is Japanese yen, and their revenue currency is the U.S. So their U.S. revenue is boosted because of a rapidly weakening yen. They get a lot of benefit. As you can see, our sensitivity in sales is big because we have a big revenue from U.S. dollar currency or euro currency. Our production policy is based on the local production, local sales. Our cost currency and the revenue currency is matching most of the cases. That's why our sensitivity in revenues are quite limited. Of course, we will translate the local currency into Japanese by using a currency exchange. Of course, we will get the benefit of a weakening yen by converting this. You can imagine that the impact on any exporting company from Japan is getting the benefit of a weakening yen, while we have quite a limited impact on profitability side because of cost currencies and revenue currencies matching. In most cases, not all but I see. It's a shame, you know. Many of the Japanese industries are enjoying this weak yen, but we can't because we are much healthier than them. Yes, this makes sense. As investors, we shouldn't worry about it. I mean, I can see you're saying JPY 1.1 billion of OP impact. Even the yen was 120, we are only gonna increase our profit by about JPY 11 billion. Yeah, it doesn't change it that much. That's right. I see. E-even- There's no. Even if it goes up to like 100 yen per dollar, you don't have to worry about us. Yes. Yeah. Yes. There's no hedging issues either, right? Because we've matched- No. Natural, yeah. Naturally. Our operations. Yeah. Right. Yeah. Perfect. I mean, we don't have such impact in operation side, and this situation is you know making Toyota you know keep smiling. That's what we can say. Yes. Overall, sounds like it is a very challenging time now. It's something maybe as challenging you've ever seen, but you feel reasonably good that you are managing well. Yeah. Is that a fair summary qualitatively? What I can say is, you know, the revenue currency, cost currency based on our production policy, local manufacturing, local sales, the impact is quite limited. A rapidly weakening yen will also affect Japanese economy and some cost to increase in Japan. That may have indirect impact on our side. You know, we are not quite risk-free from that situation, but what I can say is exposure is quite limited. Thank you. Thank you. 说话人 4. John, thank you very much. Now, we would like to conclude the conference call. Sorry, no. I expected someone ask me, but you know, because no one made a question. Let me share what Nagamori-san explained for the CEO replacement. You know, basically, he said that, you know, under current situations, you know, time by time, you know, unexpected disaster comings. If we look back last year, material prices keep increasing and Southeast Asia attacked by a pandemic, and then now we are seeing a war and severe lockdown in China. This is very much against to our business. Under these situations, he believes Nidec need a more rapid decision times, decision speed. Of course, you know, I thought I have a good speed, but reality is, he knows much better than Nidec from corner to corner. While I know many for a automotive side, some for ACIM, but not so much for group company or precision motor. Now he said that, you know, for limited time, like three years, he better to take back CEO to him, and he can make a rapid decision under these circumstances. In meanwhile, traction motor is so important for our futures. At this moment, while I'm doing CEO jobs, I don't have enough time to take care of them. While Nagamori-san takes this role, I can spend more time for traction motor to pull ahead this business profitabilities. He said the target is three years. Within the three years, if our share price going back, business is settles, I'm grown up, and then I make a result from traction motors, let's going back to original situations. At the very last, he clearly said that all analysts and media, he's 77 years old, don't think he's, you know, aging. He said he has full of energy. Of course, he can't do 24 hours, 7 days work, but he is good enough to run these companies. Message is, don't worry. Okay. Thank you very much, Mr. Jun Seki. I'd like to appreciate all of your participation. Should you have any further questions, please do not hesitate to contact Nidec Corporation through your sales force or your sales representative at Mitsubishi UFJ Morgan Stanley Securities. Thank you everyone for joining the conference call today, and now, you may disconnect. Thank you everyone. Thank you. Bye-bye. It's a good chance to purchase our share now.