Dear all, thank you very much for joining Nidec's conference call. I am Yoichi Orikasa, General Manager, Kyoto Branch of Mitsubishi UFJ Morgan Stanley Securities. 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 home page right now. Please note this call is being recorded and the conference materials will be posted on the company's home page for the coming weeks 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. Akinobu Samura, Senior Vice President and Chief Financial Officer, and Mr. Masahiro Nagayasu, General Manager, Investor Relations. First, Mr. Samura will make a presentation. After his presentation, we will move on to a Q&A session, and Mr. Samura and Mr. Nagayasu will answer your questions. Mr. Akinobu Samura now presents Nidec's Q2 fiscal year 2022 results, future outlook, and management strategy. Mr. Akinobu Samura, please go ahead. Okay. Good day everyone, and welcome to today's conference call. My name is Akinobu Samura, Chief Financial Officer of Nidec. I'll be your main speaker today and answer your questions with the help of Mr. Hiroki Narinouchi as an interpreter. Joining us also is Mr. Masahiro Nagayasu, General Manager of Nidec's IR team. For the forward-looking statements, please see slide 2 of our presentation materials, for details. Now I'm going to review the key figures. Please see slide three for our first half results. As summarized on slide 4, the net sales stood at a record high of JPY 1,130.8 billion, 24.2% higher year-on-year. The operating profit increased 8.1% year-on-year to JPY 96.4 billion, marking a record high. The profit before income taxes and profit attributable to owners of the parent increased 35.9% year-on-year to JPY 118.4 billion. 30.1% year-on-year to JPY 86.6 billion respectively. Both stood at record highs. The quarterly net sales, operating profit before income taxes and profit attributable to owners of the parent recorded all-time highs. On slides five and six, you have step charts showing the net sales and operating profit year-on-year and quarter-on-quarter respectively, by product groups with exchange rate effect eliminations and the structural reform expenses. As you see the upper chart of slide six, the quarterly sales of small precision motors and appliance, commercial, and industrial, or ACI, declined due to the reduced demand in home appliances. However, overall sales increased due to the remaining segments increased sales and weaker yen. The overall operating profit on the lower chart increased, and the decline in small precision motors was more than covered by all of the remaining segments increased operating profits. Please see slide 12. We are estimating that the global ratio of NEV or a new energy vehicle, which is including EVs and PHEVs, is going to reach 20% in 2025 and 37% in 2030. Regarding the NEV ratio in China and Europe, which are the two advanced NEV regions. China is expected to hit 37% in 2025 and 55% in 2030. While Europe to reach 32% in 2025 and 81% in 2030. Please see slide 13. The cumulative number of EVs using our E-Axles exceeded 547,000 units since the beginning of the sales in May 2019. Each month in the September quarter exceeded the previous high, and the total sales in the latest quarter increased 188% year-on-year. Please see slide 14. As you see, on the left-hand side, we have classified EV OEM customers into three types, namely Type A, who manufacture motors in-house. Type B, who sit between Type A and C, and Type C, who outsource motors. We have been prioritizing Type B and C customers over Type A. We estimated it would take more time to shift to outsourcing. However, we are beginning to see the sign that Type A customers in Europe could shift earlier than expected, as we have been contacted by a major European OEM for possible outsourcing. The background of this is considered to be number one, a fierce price competition for EVs with Chinese OEMs who are exporting their EVs increasingly. Number two, e-axles manufactured in-house by European OEMs are relatively costly. We are going to capture this opportunity and aiming to win orders of traction motors. Please see slide 15. We created Nidec PSA e-Motors, a joint venture with Stellantis, back in May 2018, as our strategic core in the European e-axle businesses. They started the first mass production just last month. As you see on the right-hand side, they are expecting to produce more than 1 million units of E-Axles in 2025, and more than 3 million in 2030. Please see slide 16. A conversion to E-Axle Gen.2 has started from 100 kW and 30% of conversion is expected to happen in the December quarter. We are aiming to complete the whole conversion in the March quarter of financial year 2023. As originally planned, we are aiming to realize a profit in financial year 2023 on a single fiscal year basis, and recoup cumulative losses in financial year 2025. In R&D, we have already started to tackle the fourth generation of E-Axles. The same is magnet-free, and this has been adopted by Green Innovation Fund project of NEDO, namely New Energy and Industrial Technology Development Organization, a national research and development agency in Japan. Please see slide 17. As you see on the left-hand side, the total production capacity of the seven factories and other areas is going to be seven million units in financial year 2025. We are going to prepare almost double the capacity of the 4 million orders in the turning point of year of financial year 2025. Please see slide 18. As higher raw material prices and lockdowns in China pressurized our profitability, our overall results are recovering after the profitability bottomed out in the March quarter of financial year 2021. Please see slide 19. Paradigm shift from ICE, or internal combustion engine, vehicles, to EVs is rapidly accelerating in two-wheeled and small cars as well. We are focusing on the two largest markets of India and China in both electric two-wheeled vehicles and small EVs. We are planning mass production in financial year 2022 for 11 projects, including 6 related to electric two-wheeled vehicles and 5 related to small EVs. We have added in four motors for electric motorcycles in India. With regards to production, we have converted the former HDD factory in the province of Zhejiang, China, to that of micromobility, and we are planning to double the floor area of our Indian factory. Please see slide 20. In the small precision motor segment, we are implementing business portfolio transformation amid the HDD motor market structural change. Please see slide 21. In ACI, we are executing structural reform in overseas businesses and looking to enter a new Phase of growth. While gaining market share outside Europe that is shaken by the conflict, we are going to accelerate top line growth through three new strategies in the fields of generators, battery energy storage system, battery charger for EVs, et cetera. For the air conditioner market, we are going to expand the businesses globally, mainly for industrial use. Assuming a higher raw material cost continues for the time being, like in the auto business, we are going to accelerate the improvement of profit structure, passing that on to selling price and reducing the manufacturing cost. Please see slide 22. Nidec signed a joint venture agreement with Saft Batteries S.A., French semi-solid lithium-ion battery manufacturer. Nidec's battery energy storage solution, or BESS, provide services to the grid that enable accelerated adoption of renewable power generation, which contributes to the realization of a carbon zero society. Meanwhile, Saft has innovative semi-solid lithium-ion battery manufacturing technology in terms of quality and the manufacturing process. It's planning to manufacture eco-friendly semi-solid lithium-ion batteries using 100% renewable energy through a dedicated power purchase agreement with Statkraft, which is Europe's largest renewable energy producer based on 100% hydroelectric power. Our partnership with Saft will ensure stable procurement of competitive and clean semi-solid lithium-ion batteries for Nidec's BESS solutions. This will help reduce CO2 emissions significantly throughout the entire process, from the battery manufacturing process to the use of our BESS solution by our customers. Through this strategic alliance, Nidec will provide innovative storage battery and power management technologies to the world, thereby contributing to the promotion of renewable energy and the realization of a decarbonized society. Please slide 23. Nidec's innovative battery energy storage solutions are used in prominent projects worldwide. ACI is also entering solution business such as EV charging stations and circular economy-related products. Please see slide 24. Despite headwinds posed by demand, a slowdown in Europe, and a raw material price hike, we are going to continue efforts to achieve operating profit ratio of 25%. Fifteen percent. Please see slide 25. In other product groups, the operating profit ratio since financial year 2021 is keeping high level of over 15%. Please see slide 26. Nidec Sankyo, Nidec Read, and Nidec Shimpo are the three major group companies in the machinery segment, and they are going to contribute to Vision 2025 target as growth drivers with high profitability by expanding such respective businesses as industrial robots, a printed circuit board inspection system, a surface inspection system, automated optical inspection equipment, inspection system for parts of traction motors, machine tools, press machines, and reducers. Please see slide 27. Nidec established Sustainability Committee, which makes a decision on sustainability within the board of directors. We will find the challenges to be the ideal company, a company growing for the next 100 years and beyond, and promote our sustainable management in a longer term and broader perspective through the committee's activities. Lastly, on behalf of the entire management team, we would like to thank our 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 questions. Thank you very much, Mr. Samura. Now, we'd like to turn to the Q&A session. Mr. Samura and Mr. Nagayasu will be pleased to answer your questions. Today's question and answer 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. We will now open for questions from the participants. Okay. \ Our first question today is from James Sherborne of Arete Research. James, please go ahead. Thank you. Sorry. This is Tom, James' colleague. James is unavailable. Can I ask about the machinery sales which are very strong? I know that you have a contribution from OKK, the acquisition contribution of about JPY 16 billion. Even excluding this, sales are very strong, again, well, both in Q1 and also again in Q2. Could you comment on this? Then also how sort of sustainable this trend is, please? Thank you. When it comes to machinery, the machine tool businesses are making very good contributions on a year-on-year basis. The sales have been JPY 25 billion. When it comes to this figure that you have mentioned, JPY 16 billion, this comes from not OKK, but from the Nidec Machine Tool Corporation, which it was carved out from Mitsubishi Heavy Industries. This group company's operating profit ratio is more than 12%. When it comes to Nidec OKK Corporation, it used to be in a deficit. It is now making a profitable business, but it's still within a process of recovery at this moment. We can expect a lot more contributions from our machine tool businesses in quarter three. When it comes to our machine tool businesses, we are planning to have additional acquisition of other companies or businesses. Therefore, we would like to raise these new businesses to be our cash cows. Okay, understood. Okay. For the JPY 16 billion from Nidec Machine Tool, I understand that. In terms of like organic non-M&A contributions to the growth in sales this year, are you able to guide me on that? When it comes to these machine tool businesses, which are Nidec Machine Tool Corporation and Nidec OKK Corporation, they are currently under the post-merger integration process under the direct supervision of Mr. Nagamori, the chairman of the Nidec group. They are trying to improve or strengthen their sales capabilities by trying to obtain as many sales inquiries as possible. After that, they are trying to reduce the cost and thus trying to make their businesses as profitable as possible. That's how these two companies are doing business within the area of machine tool business. Other than these two businesses, not just these two, but the rest of the machinery segment, how is that performing? When it comes to the areas outside the machine tool business, we have one of our growth companies called Nidec-Read Corporation. They are making and selling the semiconductor inspecting machines, and they are doing extremely profitable businesses. The profitable ratio is very high when it comes to this Nidec-Read Corporation. Other detailed information can be found on slide 26. Other than Nidec-Read Corporation, we have Nidec-Shimpo Corporation, which makes press machines as well as reducers. When it comes to reducers in particular, they are going to be installed in the robotic equipment, et cetera. We can expect the significant growth in the business. Understood. Okay. Sorry. My last question is just if you look at the outlook, you said that you're positive for Q3, but if we look into next year, obviously many people are expecting a downturn in general CapEx. I think semiconductor market and machinery market, people are pricing in quite a negative assumption. I was wondering what is your view and for your businesses if exposed to these areas, what's your view into next year about the environment? Currently the market is hitting a plateau, I believe. I believe some people or we could expect some harsh conditions going forward. When it comes to machine tool, for example, we are thinking about entering into a market we have never entered before. When it comes to Nidec Machine Tool gear businesses, we could expect to enter into China's local market, which is not something we have done business before. When it comes to China, we are building factories, and the production is about to start at our factories in China. Therefore, by entering into China's local market, we could expect to enlarge or expand our scale of business. If I may add one more thing, when it comes to machine tool business, we are trying to cover as many models as possible. Depending on these models, there are some ups and downs in market. The good conditions and bad conditions occur at a different timing, based depending on these models. By being able to handle all the possible models, we would like to mitigate such fluctuations of business. Okay. Understood. Thank you very much. Tom, thank you very much for your questions. Next question is from John Hall of Duncan Partners. John, please go ahead. Hi. Hello. Hi. Can you hear me properly on this line? Yes, we can hear you. Perfect. Thank you very much for making time in your evening to talk to your investors. I just want to first ask about the exchange rates. Obviously the exchange rate has been very favorable to us, I think. Can you just talk about the positives and the negatives with this very weak yen exchange rates? Also why do we still assume a far different exchange rate to what is very likely from this point on? If the exchange rate sensitivity still holds to our profit. Thank you. As far as Nidec is concerned, our policy is to produce our products locally and consume these products locally as well. Therefore, compared with other companies, we are not so prone to the current exchange rate situation. We are doing business on a very global basis, and our currencies, the currencies that we handle, vary from one after another. This is a very currency exchange rate situation is very complex as far as Nidec is concerned. In the overall situation, we're not really being seriously affected by the current depreciation of the yen. Currently the US dollar is being truly appreciated against the Japanese yen. We are generating sales more than our cost. Therefore, in that regard, we are enjoying the merits of the current depreciation of the yen. We do not necessarily think this is the very normal situation. I believe this current depreciation of the yen is rather very abnormal and extraordinary. Therefore, going forward, we believe that there may be some flashback or we may have some returning effect of this current depreciation of the yen. Pushback of the depreciation of the yen. I see. Thank you. Can I ask about our E-Axle business in China that we talk about on the slide? Overnight, there was some news that Tesla is going to be cutting their prices in China, presumably because demand has been somewhat challenging. Do you think that this will affect the markets? do we have a view if the EV market in China might be slowing because of perhaps higher penetration, and does that affect us? Thank you. My opinion about the Chinese market, EV market in China is that as far as China as well as the European market are concerned, they are not really slowing down. It's rather, the demands are growing in both of these two markets and raw materials prices were increasing more and more. It has been very difficult for us to pass on the price increase to our product selling prices. Currently, the situation is more quantity oriented, and this situation is gradually intensifying. Therefore, rather than slowing down, we believe that the opposite case is happening when it comes to the Chinese and European EV markets. Right. What is your forecast for the EV market growth the next couple of years? I assume we forecast will grow faster than the market with new OEM customers. Is that correct? When it comes to the growth of the EV market, we as a company have been long saying that the year 2025 will be the critical turning point of this EV business. Many people used to say that the critical turning point will be so farther away. It's not never going to be 2025. It's so farther away. This critical point 2025 is now becoming a reality. Therefore, I believe demand for the EVs will going to increase even more than it is now. Thank you. Maybe my last question is about our second generation E-Axle. I understand we are already producing the E-Axle second generation that has a lower cost. Can you talk to us on how much lower cost and how much of that cost reduction we have to pass on to our customer? Thank you. When it comes to this traction motor, generation two traction motor system, it is gen two is about 30%-35% cheaper cost-wise, in comparison with the first generation. That's our target. When it comes to gen two, our content is about 20% less than its predecessor, and the cost once again is 30%-35% less than its predecessor. Performance is about the same, therefore, by using gen two, our customers will be able to enjoy a lot of benefit, merits with the gen two product. Therefore, basically, we are now going to reduce the price of a gen two product in comparison with its predecessor. Gen.2 is going to make a significant contribution, we believe, to our traction motor business. If you take a look at slide 16, you can see the timing of the transition from Gen.1 to Gen.2. When it comes to Q3, we are expecting 30% of the entire Gen.1 traction motor to be replaced by Gen.2. The overall comprehensive replacement to Gen.2, we expect to happen in the fiscal year of 2023. Thus, our traction motor business's profitability will increase significantly. However, since our Gen.2 products use entirely new technologies, not everything is going so smoothly. What we are doing is try to solve problems one after another as we move forward. That's the current situation we are in. How much price cuts do we have to pass on to our customer? We are not going to pass on any amount of money over to our customers, and we will avoid as much as possible to reflect the cost reduction, amount of cost reduction over to our customers. That's what we like to avoid as much as possible. Sorry, could you say you would pass on some of the cost savings to our customer, or we will not pass any cost savings to our customer? It will be all on a case-by-case basis. We have to take into consideration, for example, our relationship with our customers. We have not been able to reflect entire price surge of raw materials onto our customers. Therefore, we need to go case by case in order to decide whether to pass on the price increase over to our customer or not, et cetera. Thank you very much. Thank you, John. The next question from Ramsey Neelam of State Street. Ramsey, please go ahead. Yeah, thank you. Can you hear me fine? Can you hear me now? Yes. Yes, we can hear you. Thank you. First, my question is on E-Axle. I think, can you provide any sort of shipments planned for financial year 2022? I think it was 65,000, if I'm not wrong. Can you Can you comment on that? Sir, can you please speak up a little bit? Yeah. Can you please provide guidance of E-Axle shipments for financial year 2022? This is Nagai. To give you figures on our financial presentation that we held this afternoon, Japan time today. Our production estimate forecast for this fiscal year is going to be 550,000 units. Our production plan for the next fiscal year, which is the fiscal year 2023, will be 1,000,000 units. Is it 550 units? Is it downgraded from your previous estimate? What was what from the previous estimate did you say? Yeah. For the current financial year, you said the estimate is 550,000 units. Does it downgrade from your previous estimate? When it comes to this fiscal year's production forecast, it was initially 600,000 units. Due to some factors such as the lockdown in Shanghai, China, the actual number was down by 50,000 units and now it's down to 550,000 units. When it comes to production forecast for fiscal year 2023, our forecast as of April was 1,000,000 units, but it is now up by 200,000 units to 1,200,000 units. Okay, thank you. On slide number 14 going forward. You mentioned that in Europe, the in-house E-Axle manufacturing cost is relatively high. Can you give us some understanding in how significant the cost difference between Nidec and European in-house manufacturers and like how Nidec can able to capture the market? Can you repeat that question, please? I'm sorry. On slide number 14, we mentioned that in Europe, E-Axle in-house manufacturing cost is relatively high. Can you give us some understanding in how significant the cost difference is and how Nidec is able to capture the market? When it comes to this difference in the production cost, it's not something we can say. This is based on various voices of people concerned in the market. Therefore, when it comes to quantity as well as technology, such current situation is coming to a reality a little faster than we had expected. That's the situation that I can say based on various parties in the market. Okay. Thank you. This is Masahiro Nagayasu speaking. One thing that I like to say based on the slide we have just alluded to is this, one fact that the Chinese EVs produced in China are exported to Europe, and they, these EVs run in European countries. There are hardly any cases where European-made EVs are exported to China. Almost all the European brand EVs vehicles running in China are, well, made in China. Therefore, the costs are expensive when it comes to EVs in Europe, and these are all associated with the component cost and many other different related costs. Yeah, I understand. Thank you. Thank you very much. Ramsey, thank you very much for your question. We have a few more minutes to take your questions, and I would like to welcome any questions. Otherwise, we'd like to conclude the conference call. Okay, now there seems to be no further question, and we would like to conclude the conference call. I'd like to appreciate for your active participation. Should you have any further questions, please do not hesitate to contact Nidec Corporation or your representative at Mitsubishi UFJ Morgan Stanley Securities. Thank you very much for joining the conference call. Now, you may disconnect.