Value Creation Story

Management Commitment
About Us

Fiscal year ended March 31, 2023:
Results and Issues

With the steady implementation of our Medium-term Management Plan “DRIVE NTN100” Phase 2, we are promoting
the transformation of our business structure and accelerating initiatives designed to strengthen our financial
framework and build a resilient corporate structure capable of responding to changes in the business environment.
We recognize that we still face many challenges, but we also see positive signs. For example, our aftermarket andindustrial machinery businesses are showing expansionary trends, and the Americas and Europe regions returned
to profitability in the fourth quarter of the fiscal year ended March 31, 2023. In this, the final year of “DRIVE NTN100”
Phase 2, we will focus even more intently on the key issues of the Medium-term Management Plan, and thereby
transform ourselves into a company capable of securing profits. I therefore wish to take this opportunity to bring our
stakeholders up to date on our current status and outlook.

13 NTN Report 2023

NTN Report 2023

SASB Index

Eiichi Ukai

For the fiscal year ending March 31, 2024, we areforecasting net sales of 810 billion yen and operating
income of 30 billion yen. The aftermarket and industrial
machinery businesses are expected to reach record
highs by continuing to pass on rising costs to sales
prices and revising prices in unprofitable businesses.
Meanwhile, in the automotive business, we will aim
to achieve year-on-year increases in sales and profit
and break free from operating losses as easing
semiconductor shortages lead to a recovery inautomobile production.
In comparison with the initial targets of the Mediumterm Management Plan ending in the fiscal year ending
March 31, 2024, we anticipate that net sales will expand
but operating income will fall off the target of 42 billion
yen or more by 12 billion yen. Likewise, although ouroperating margin is gradually rising, it will remain at 3.7%
for the fiscal year ending March 31, 2024, compared tothe target of 6% or more.
Thus, we will be unable to achieve the Medium-termManagement Plan’s initial targets. Nonetheless, I see it
as management’s responsibility to make achievement
happen early in the new Medium-term Management
Plan, which will start in the fiscal year ending March 31,
2025. We are making thorough preparations during thecurrent fiscal year and will proceed with a concertedGroup-wide effort under the new Medium-termManagement Plan.
Specifically, we reworked the organizational structureof our head office in April 2023. The key componentof this reorganization was the establishment of theGroup Management Headquarters and the SCM
Strategy Headquarters. In particular, the SCM Strategy
Headquarters has a framework that consistently
manages operations related to overall supply chain
management, from procurement to production, supply
and demand control (production control), logistics,
and other areas. By consolidating functions to achieve
efficiency and overall optimization, and by strengthening
the Group’s management functions, we will makesteady progress in business reformation aimed at
improving profits.

NTN Group Information

Director
Representative Executive Officer, President
CEO (Chief Executive Officer)

Outlook for fiscal year ending March
31, 2024 and the Next Medium-termManagement Plan

Sustainability Management

a company
capable of securing profits.

Value Creation Story

We will transform
our business structure
and thereby become

The NTN Group reported net sales of 774.0 billion
yen and operating income of 17.1 billion yen in thefiscal year ended March 31, 2023. With increases inincome and profit, we enjoyed solid improvementsin performance compared to the previous fiscal
year, which was heavily impacted by the COVID-19
pandemic. Moreover, our aftermarket and industrial
machinery businesses marked record-high net sales
and operating income. These businesses are benefittingfrom recovering demand and foreign exchange rates.
Even before I became president, I was in charge of bothbusinesses, and from the very beginning, we focusedon earning power. We strove to reduce costs as muchas possible within the company, and then engaged
in repeated negotiations with customers and revised
prices in unprofitable businesses. These efforts are now
bearing fruit.
However, overall operating income fell far short of ourannounced figure of 26 billion yen. Consequently, we
have not met the expectations of our investors and otherstakeholders, a fact that I take very seriously.
Our operating income was lower than expected forchanges in the external environment and other reasons.
Chief among them were adjustments in productionthat we made in anticipation of a slow recovery inautomotive market demand, higher-than-expectedenergy costs, additional price increases for various
materials as a result of those costs, and our acceptanceof suppliers’ demands for higher prices. While changes
in the external environment were also a factor, achallenge we must undertake is the revitalization of ourautomotive business, which accounts for more than
60% of our Group’s net sales but which has been in
the red for four fiscal years. A major point we must taketo heart is that we were unable to generate adequate
profits despite the fact that driveshafts and hub
bearings—mainstay products that account for about
80% of our automotive business—have a significant
impact on our business performance. We will endeavor
to secure profits from driveshafts and hub bearings bystrengthening our cost competitiveness and passing on
rising costs to sales prices.
To strengthen our cost competitiveness, we willcontinue making unrelenting efforts to reduce costs
through procurement reforms, production reforms,
and other initiatives. One of the measures we will takeis to promote new procurement of parts with costcompetitiveness or cost advantages in terms of tariffs
after quality evaluations. We will strive to reduce variable
costs by using parts with higher cost competitiveness,
which we will do after obtaining approval fromautomakers, our customers, to make process changes.
As for passing on rising costs to sales prices, somecustomers have had harsh words for us during pricenegotiations. Nonetheless, some other customers

tell us that they want to continue doing business with
NTN and urge us to notify them if we are struggling
with a problem. I therefore get the sense that they
appreciate the value of our company. We will use
this as a springboard for strengthening trust with ourcustomers. Negotiating with customers is never easy,
but we are determined to press forward with pricenegotiations, including for businesses that we have
not yet passed on higher costs to sales prices in fiscal
year ended March 31, 2023.

14

Value Creation Story Management Commitment
About Us

Promoting reform in production and allother operations

In 2015, NTN signed the United Nations Global
Compact. In line with this, we continue striving to realize
ten principles in four areas—human rights, labour,
environment, and anti-corruption—that we consider tobe universal values. Aspiring to tackle environmental
issues, we launched a Carbon Neutrality Promotion
Project in July of last year. Then, in April of this year,
executed a reorganization that involved establishing a
Carbon Neutrality Strategy Promotion Department in theGroup Management Headquarters to bring this project
into closer alignment with management. We will continue
to formulate and promote strategies to achieve carbon
neutrality under this new structure.
Human capital management has become a hot topic
in recent years. Based on our belief that “the company
is its people,” we recognize that strengthening ourhuman resource base is essential for sustainable growth
and are therefore striving to develop diverse humanresources, taking “prosperous human development” as
one of the ESG issues. In addition, we started holding
Executive Officer-led “town hall meetings” this year. I
have communicated face-to-face with employees inJapan and overseas on numerous occasions, and now
our Executive Officers are more proactively visiting theirrespective departments to listen to employees in theworkplace. In this way, we are finding out what troubles
all employees have. We are endeavoring to enhancecommunication by clearly identifying what we can do as

NTN’s purpose and push to higher
corporate value
SASB Index

15 NTN Report 2023

Enhancing sustainability by practicing
ESG management

a company and providing feedback.
In the area of corporate governance, NTN transitioned
from a Company with a Board of Company Auditors to
a Company with a Nominating Committee, etc., in June
2019. Under this structure, we are striving to enhance
our corporate value over the medium and long term.
The Board of Directors is now chaired by a female
Outside Director. In addition, the Nominating Committee,
Compensation Committee, and Audit Committee
are all chaired by Outside Directors. In this way, weare employing a structure designed to strengthen
governance and increase corporate value.

NTN Group Information

I believe brand value will be an important topic in our
pursuit of more profitable business going forward.
Especially in the aftermarket segment, it is attractive as abusiness since we have an ability to take the initiative inpricing. On the other hand, a brand power in the market
is a key factor in determining prices.
When I was posted to Singapore, I encounteredsomething that left a strong impression on me. When I
compared our price of a particular product with thoseof our competitors, I discovered that our product soldat a lower market price than theirs, even though they
were almost identical in performance and quality. The
only thing that can account for this difference in price isbrand value. Suppose a customer has a bearing breakand needs a new one right away, and a supplier has
the ability to deliver one quickly and also offer solutions
to the problem. There are many customers who arewilling to pay a higher price for that kind of ability. This
experience—this concept—is what led me to strongly
advocate the importance of “availability” to NTN
employees every day.
Our goal is to be the price leader in the aftermarket
segment. In such a business model, it is importantthat we have a large inventory of products on hand sothat we can deliver them as quickly as possible when

In our mainstay automotive business, we will focus on
adjusting amid the shift to electric vehicles (EVs). Many
people are concerned that the shift to EVs will reduce
the number of parts that must be supplied. But as I havesaid in the past, for NTN Group—whose main products
are driveshafts and hub bearings used in EV drive units—
the shift will be rather advantageous.
In addition to our existing products, we have alreadydeveloped a high-speed deep groove ball bearing that
achieves the highest rotation speed in the industry, making
it suitable for “e-Axle” drive systems for EVs and motors
and transmissions for hybrid electric vehicles (HEVs).
Moreover, because EVs have better acceleration andrequire higher vibration damping performance, we are also
developing electric modules and other components thatare adapted to the unique behavior of EVs. We will createhigh-added-value products through efforts like these.
Looking at scheduled mass production start-ups
over the next three years, we anticipate that the ratio of
products we make for HEVs and EVs, which have higher
added value than those for internal combustion engines(ICE), will increase. We are currently working on a variety
of projects, which I will share with you as soon as they
can be announced to the public.
In terms of sustainability, I believe an importantquestion for the coming age will be how to makeproducts that remain usable for long periods of time.
Moreover, even products that have long service lives
will eventually reach a point when they can no longer
be used as is. We will therefore need to detect productconditions quickly and perform maintenance to ensure
even longer service life. In other words, I believe“maintain” leads to “sustain.”
Traditionally, the NTN Group’s business has focused
mainly on manufacturing and marketing bearings andother forms of hardware. However, we are now steppingup efforts to attach sensors to hardware to collect dataaround them during operation and link it to monitoring
services through software. I believe this will translate into
new profit opportunities.
Specifically, we offer condition monitoring systems
for various types of equipment, such as bearings in windturbines and bearings in machine tool spindles (rotating
shafts). We have also commercialized a diagnostic reportbusiness for bearings using NTN Portable Vibroscope.

Sustainability Management

Increasing profitability by enhancing
brand value

Medium- to-long-term business outlook

We are also developing “Talking BearingTM” with built-in
sensor functions without any changes in bearing volume
or appearance. Fully exploring this concept will allow us
to provide high-added-value solutions our competitors
cannot match.
One possibility for the future is the application of big
data on operating conditions that is gathered throughsensors. This capability will allow us to notify customers
of predicted equipment malfunctions before they occur
and to offer new added-value services linked to planned
preventative maintenance.
Furthermore, if we can accurately predict the service
life of parts based on equipment operating hours andother factors using big data, we will be able to forecast
demand. What bearings will be needed? When will they
be needed? And how many will be needed? Being able
to read demand will allow us to also read inventory levels,
which will naturally lead to more precise planning of
inventories, production, and procurement. In other words,
we will be able to develop “pull”-type marketing strategies
by obtaining accurate information from the market. Thisbusiness model is the exact opposite of the “push”type model, in which production plans are prepared by
anticipating demand based on rule of thumb. This is thekind of digital transformation (DX)-led business structurereform that our Group aims to achieve.

Value Creation Story

Although production reform is something we havebeen working on for years, our efforts have tended
to remain at partial optimization. Consequently, someproduction facilities are seeing better productivity, but
production line takt time (production time per single
product) happened to stay unimproved. In contrast, theproduction reform we are currently undertaking aims
for optimization in all areas, including the reductionof work-in-process inventories from the standpoint ofcash flow management. Our goal is to change how weapproach Monozukuri and also to change the mindsetof the employees working on site. We are endeavoring
to execute fundamental reforms with the advice of acompany that has long tackled similar production issues
and achieved positive results.
In addition, we revamped our IT core system in anundertaking aimed at comprehensively grasping all
information pertaining to our domestic supply chain.
We now have the ability to analyze product costs, sales
prices, and profits in a timely manner.
We intend to move boldly in transforming ourbusiness portfolio through these changes to ourorganizational structure and IT core system. We alreadyhave a firm vision of what we want to achieve. I will sharethe details with you when we make a formal decision.

customers need them.
At the same time, if we are going to make it ourbusiness to propose solutions that promptly address
the various issues our customers face, then we musthave personnel with the experiences and skills to
execute those solutions—in other words, field engineers.
Strengthening capabilities in this area cannot be
accomplished overnight, but I believe we must work
toward this goal through education, training, andpractical activities.

While pushing forward with efforts to reform our businessstructure over the past year, I reflected upon NTN’s
mission and purpose as a citizen of the world. Specifically,
I thought about how, for over a century, we have been
supplying the world with products that minimize energy
consumption by reducing friction, and that this fact islinked to our contribution to the global environment andforms the foundation of our Group’s business.
Over the next 50 to 100 years, our mission withrespect to climate change and other global issues will
be to help solve those issues by providing products
and services while limiting the environmental footprintof our business wherever possible. I am confident thatthe accumulation of such activities will bear fruit andultimately enhance our Group’s corporate value.
Lastly, I know that our price book-value ratio (PBR)
is below 1.0 and must be improved. This is a matter weare discussing internally. We want to continue being acompany that produces things we can leave to future
generations with pride. With this in mind, we will move
forward, striving to become a company valued by society
and capable of increasing its economic value while
appropriately returning profits to all of its stakeholders,
including investors, shareholders, customers, employees,
business partners, and society at large. I respectfully
request your continued support for NTN in this endeavor.

NTN Report 2023

16

Value Creation Story

Value Creation Process
About Us
Value Creation Story

Our Group has identified materiality to address the SDGs in order to solve social issues, and is developing businessactivities based on its corporate philosophy throughout the value chain by leveraging the management capital it has
accumulated over its more than 100-year history and the uniqueness of NTN it has fostered.
By providing products and technical services, including bearings and driveshafts, and by creating environmental
and social value, we aim to realize a “NAMERAKA Society” where people can easily lead a secure and fulfilling life inharmony with nature. We will continue to promote ESG management to achieve sustainable growth and contribute tosolving social issues.

Contribution to solving social issues

NTN Business Model
P.19

Improve the reliability of
products and services

Promote diversity

Procurement activities
with an emphasis onenvironment and society

Thorough compliance

Promote safety
and healthStrengthen governanceValue Chain(Quality assurance, stable supply)

Respect forhuman rights

Corporate
Philosophy

Number of employees 23,027(consolidated)

Ratio of overseas employees 63%

Manufacturing capital
Production sites 70 sites in 14 countries
Ratio of overseas production 54%

Intellectual capital

Challenge /Collaboration /Commitment

NTN’s Strengths

No. 1 in Japan in
the number of windturbines monitored

Contribution to the
popularization ofwind turbines

New products utilizing
proprietary technologies(i-WRISTTM, microscopic
coating device,green energy products)

Contribution todisaster prevention/
mitigation, providing
safety and security
during disasters
Contribution tolabor-saving
progress and thedevelopment ofregenerative
medicinei
Original
Technologies

es

n
Mo

Social and relational capital
Customer satisfaction survey 113 ompanies
Excellent + good88%

Contribution to the
expansion of
next-generation
mobility

P.23

Number of patents held 6,192
R&D sites 9 sites in 4 countriesl

Human capital

NTN SPIRIT

Sa

Shareholders’ equity 220.7 billion yen
Interest-bearing debt 371.3 billion yen
Cash and cash equivalents 110.7 billion yen

Highly functional
products for EVs
and electrification

We shall contribute tointernational society throughcreating new technologies anddeveloping new products.

CapitalsFinancial capital

Driveshafts

Contribution to CO2
reduction byenvironmentcontributing
products:
1,474,000 tons/yearoz

Performance Target(Forecast for fiscal year
ending March 31, 2024)

Quality

Net sales

810 billion yen

Natural capital

Corporate Governance

Energy consumption 6,456 TJ/year
Water consumption 2,841,000 m3

P.69

Services

Operating income

30.0 billion yen (3.7%)

FCF

29.0 billion yen

Strengthening of capitals

17 NTN Report 2023

NTN Report 2023

18

SASB Index

Globalizationof the business

Pro
cu

&D

Response toenvironmental issues
Change indemographics

Hub bearings

P.25

ur

Provide safety
and comfort

Human resource
development

Make the world
NAMERAKANTN Group Information

Response to
the paradigm shift

Reduceenergy loss

Resource
recycling andpollution prevention

S to B-eco 52.6%

nt
me
re

P.21

New
Businesses

Aftermarket
Business

Realization of a NAMERAKA Society

Risks and
Opportunities
Surrounding NTN

Realize asustainable society
using natural energy

Foundation to support ESG management

OutcomeEnvironmentcontributing
products

Automotive
Businessuk

Respond toclimate change

Industrial
MachineryBusiness

R

Contribution to solvingsocial issues toward
the future we aim for

OutputP.33

Sustainability Management

Materiality

Business Activities

Value Creation Story

Materiality

Identification process

STEP 1

STEP 5

Relevance to our business

Target

FY2035

Reduce CO2 emissions in business activities (Scope1, 2)

FY2050

Reduce CO2 emissions in business activities (Scope3)

FY2022Development related to products and services that contribute to the stable operation of windturbines FY2022 Completion of development themes

Detail page

Scope1, 2
Reduction of 22.6% compared to the FY2018
Scope3Develop and promote action plans

P.53

Launch a one-stop service that provides everything from bearing supply
to abnormality detection and maintenance for wind turbines, etc.

Development of high speed deep groove ball bearings for
EVs and HEVs, etc.

Development related to low friction, miniaturization and weight reduction of products forautomobiles and industrial machinery FY2023 Completion of development themes)

FY2022 Completion of development themes

Raise awareness of independent power supply units and implement proposal activities fordisaster mitigation and disaster prevention

Provide safety and comfort

Development related to robot-related modules
)

P.52

P.50

Development of Rotary Actuator Type Hand, etc.
N3 N-CUBE was adopted by several municipalities(e.g., circulating flush eco-toilets, bus stop waiting areas, etc.)

FY2023 Completion of development themes

NTN Group Information

Development related to robot-related modules

FY2023 (Achieve carbon neutrality
Achieve carbon neutrality

Development related to low friction, miniaturization and weight reduction of products forautomobiles and industrial machinery FY2022 Completion of development themes

Reduce energy loss

FY2022

4

50% reduction (Compared to the FY2018)

Development related to products and services that contribute to the stable operation of windturbines FY2023 Completion of development themes)

FY2022SocialThe Board of Directors resolved 13 items ofmateriality.

Actual results of FY2022

Reduce CO2 emissions in business activities (Scope1, 2)

FY2023 (Identify materiality

High

FY2030

FY2023 (3Materiality proposals

Target FY

Realize a sustainable society using natural energy

Conduct a questionnaire survey targeting thepresidents of our overseas affiliated companies
and confirm that all overseas affiliated companies
agree with the materiality proposals.

STEP 4

Sustainability Management

Environment

2

Respond to climate change

High
Expectations from society

1

Related SDGs

Validity assessment in overseas
affiliated companies

Evaluate the 99 items extracted in STEP 1 on a three-point scale from theperspectives of “expectations from society” and “relevance to our business.”
Organize items with high evaluations as materiality proposals.

STEP 2

Collect suggestions and opinions from academics
and experts in the field of CSR/sustainability, as
well as Outside Directors regarding ideas aboutmateriality identification and ESG strategies thatshould be focused on.

STEP 3

Evaluation and analysis of materiality candidates

Contribution to solving social issues toward the future we aim for
Materiality

Dialog with academics and experts

Extract social issues with reference to the GRI Standard, which is aninternational framework in the field of sustainability.
Extract items that are candidates for materiality based on the direction of
structural changes that have a major impact on the economy/environment/
society and the company’s effort.

Value Creation Story

In March 2015, we signed the United Nations Global Compact, which is a global framework for theinternational community to realize sustainable growth, and we are aiming to achieve the SDGs.
In December 2020, we identified 13 items of materiality that the Group should prioritize to address
in response to the SDGs, and we are driving efforts to achieve the targets set for each materiality.
Our initiatives toward materiality are outlined in a roadmap for realizing a “NAMERAKA Society,” andprogress is regularly reviewed by the Sustainability Committee, which includes members from acrossthe organization, and reported to the Board of Directors as appropriate.
The identified materialities are also linked to the NTN corporate philosophy of “We shall contributeto international society through creating new technologies and developing new products.” By
promoting materiality initiatives, we aim to realize a “NAMERAKA Society” through the Group’s
sustainable growth and the creation of environmental and social value.

About Us

Extraction of materiality candidates

P.57

Raise awareness of independent power supply units and conduct sales activities for disastermitigation and local revitalization

Foundation to support ESG management
Materiality

Related SDGs

Target FY

TargetWater consumption intensity

5

Waste generation intensity

Resource recycling and pollution prevention

Recycling rate
FY2023 ()

164 kg/million yen (Japan) 279.4 kg/million yen (Overseas)

159.7kg/million yen (Japan) 251.0 kg/million yen (Overseas)

97.9% (Japan) 97.5% (Overseas)

Water consumption intensity
Recycling rate

4.36 m3/million yen (Japan) 2.83 m3/million yen (Overseas)

6

Improve the reliability of products and services(Quality assurance, stable supply)

96.0% or more (Global)

FY2023 (7

Procurement activities with an emphasis on environment and society

Social8)19 NTN Report 2023

“Excellent” + “Good”: 88%
Maintain 100% certification

Number of participants in specialized quality education courses

145

100 or more

P.60

Introduction completed at 7 production sites
On track to complete implementation during FY2023

Start of the information security emergency response system (NTN-CSIRT)

Continue

Conduct CSR questionnaires for suppliers continuously and maintain and improve
achievement level of results

Result Achievement 87%

FY2022

Continue operation of occupational safety and health management system
6 domestic manufacturing affiliates have acquired GSC certification

2 companies have acquired certification
4 companies that have not yet acquired the certificate arecontinuing their efforts to complete the achievement during FY2023

Maintain “White 500” certification for Health and Productivity Management Organization(Large enterprise category)

Accreditation maintained for three consecutive years

Achievement of the annual plan of the Risk Survey targeting manufacturing sites

Degree of achievement 100%

Promote safety and healthContinue

GovernanceMore than 90% of responses for “Excellent” and “Good”

Maintain 100% certification for quality management systems (ISO9001/IATF16949)*Applies to domestic and overseas consolidated manufacturing subsidiaries (excluding basesthat have not started mass production).
Progress in restructuring the domestic core systems
Production area Competed the introduction to all sites(For sales and logistics, financial accounting, human resources and salaries, and technology
areas, already introduced in FY2021)

FY2023

P.58

98.7% (Japan) 96.2% (Overseas)

3.98 m3/million yen (Global)

Maintain high level of customer satisfaction
Continue

100%

P.61

FY2022Analyze and evaluate the results of questionnaires of overseas affiliates

Analysis and evaluation completed

Continue

Survey on the situation of foreign workers working in Japan (Monitoring)

Started counting the number of foreign workers (monthly)

Number of participants in “NTN Next Leader Program”

59

9

Respect for human rights

10

Human resource development

11

Promote diversity

12

Thorough complianceContinue

Helpline recognition level in survey of compliance awareness 85% or more
*Raise the target to 90% or more in FY2023, and promote initiatives

88.4%

13

Strengthen governanceContinue

Enhance Corporate Governance

Enhance Corporate GovernanceContinue
FY2023
December 2024

SASB Index

FY2022

Environment

Detail page

Actual results of FY2022

4.30 m3/million yen (Japan) 3.14 m3/million yen (Overseas)

50

Holding of “NTN PROUD AWARD” as ESG Corporate Award
Ratio of female managers

First Global Congress to be held in June 2023

9% for NTN

Ratio of male childcare leave acquisition

4.4% for NTN
30%

Annual number of Compliance Committee meetings held

37.2%
2

P.66

P.67
P.63,88
P.65

2*Targets marked with “continue” in the target FY are targets we will aim to achieve each year, and ( ) are newly set targets.

P.77
P.71
NTN Report 2023

20

Value Creation Story

Risks, Opportunities and Measures
About UsNTN Group analyzes risks and opportunities for each business environment such as the global trend of carbon
neutrality, the accelerating electrification to achieve the carbon neutral goal, labor shortages and human rights
issues, and takes countermeasures in line with the materiality. In order to respond to drastic changes in the external
environment, we are implementing regular reviews on anticipated risks and opportunities.
NTN’s Business Environment

Risks for the Company

Opportunities for the Company

Main Measures

Reduced use of bearings due to electrification of internal combustion andhydraulic equipment

Demand for high performance products such as higher efficiency products
Increasing demand for high value-added products such as bearings withbuilt-in sensors

Strengthen development of products for electrification and high valueadded products
Provide next-generation mobility modules for industrial machinerySpread of AI
and IoT

Difficulty in securing digital talent, for which demand is increasing
Rationalization of distributor network
Securing of aftermarket demand using industrial IoT Platforms (PFs) (missed
demand opportunities outside PFs)

Advances in equipment-related manpower saving
Rising demand for bearings with sensors
Growing demand for analysis and analytical technologies

Provide service solutions through CMS technology, etc.
Develop service-oriented business that lead to product sales andtransform into new business formats
Strengthen CAE analysis technology
Develop “Talking BearingsTM” (= use of sensors for bearings)
Provide robot-related modules such as i-WRIST in response to laborsaving issues

Spread ofinfectious
diseases(COVID-19)

Decrease in scale of sales due toeconomic stagnation
Crisis of business continuity
Damage to employees’ healthand safety

Growing demand for manpower-saving technologies
Utilizing microscopic coating technologies for drug discovery

Reduction in CO2emissions

Rising procurement and energy costs
Decline in product needs due to thedeclining usage of general-purpose
machinery
Requirements for carbon neutrality inbusiness activities

Requests forenergysaving
machinery

Decrease in the number of parts where bearings are used due to changes in theenergy transmission type and structure of machines
Establishment of a new mechanical structure that does not require bearings

Increasing demand for energy-saving products
Responding to new needs

Reduction inenvironmental
impactDecrease in corporate image/ESG rating when environmental impact cannot be
reduced
Cost increase due to incurrence of costs by suppliers and limitation on suppliers
that can meet environmental standards

Development of new customers through compliance with advanced
environmental and customers’ standards
Increasing demand for high-quality, long operating life products

Response tonatural disasters

Shutdown due to a disaster
Spillage of oil, chemical substances, etc. caused by natural disasters
Disconnection of supply chain

Increasing demand for emergency power source
Expansion of partnerships

Formulation of BCPs and BCP drills at the NTN Group
Provide independent power supply utilizing renewable energy-based
power generation and storage technologies

Shutdown of business activities due tothe spread of infectious diseases within
the workplace
Disconnection of supply chain

Suspension of dealing with customers
and deterioration of corporate image
in the event of failure to respond to thedemands of society

Increasing demand for wind turbines, including offshore ones
Increasing demand for railways
Increasing demand for green energy products

Development of new fields
Introduction of smart factories in thecompany

Develop hydrogen-related products
Promote production reform andreorganization aimed at improving the
productivity
Strengthen the automotive aftermarket
business

Increase sales of large bearings and CMSs for wind turbines
Increase sales for rolling stock
Expand sales of green energy products
Promote development of environment-contributing products
Promote energy conservation in production facilities
Introduction of renewable energy

E-commerce based on the new IT coresystemRealization of smart factories including
Wakayama WorksStrengthen external collaboration

6

Promotion of environment-friendly
business activities
Pursuit of circular economy

Selection of business partners that can comply with green procurement
and CSR procurement standards
Reduce environmental impact in manufacturing processes (conserve water,increase the recycling rate, reduce the use of hazardous materials, etc.)

8

10

1

2

3

3
Develop and provide long operating life
products
Strict control of environmentallyhazardous substances contained in
products
Expand bearing refurbish business and
MRO businessChanges indemographics
Globalization of thebusiness

Impact of a human-dependent production system on stability of operations

Accelerating labor saving and automation of production lines

Growth of
emerging
countries

Entry of emerging manufacturers
Soaring procurement prices due to the entry of competitors
Shortage of limited materials and resources

Expansion of sales opportunities due to increasing demand
Increasing demand for new driveshafts due to transition to front-wheel drive(FF) vehicles
Increasing demand for high performance products that meet environmental
regulations

Stable supply of basic products
Global production supporting optimal supply

Issue of businesssuccession

Suppliers and sales distributor going out of businessStart of business with new suppliers

Support business continuity through dialog with suppliers
Develop new business partners

Trade friction
andtariffs

Sluggish global demand
Disconnection of supply chain caused
by dependence on one country (China
risk, etc.)

Expanding opportunities to supply products and services utilizing global
networks

Realize the best mix of global and local procurement throughprocurement reform

Prevention ofchild labor(human rights)

Stopping the supply of parts
Suspension of dealing with customers and deterioration of corporate image in theevent of failure to respond to human rights issues

Improvement of corporate image through active response to human rights
issuesPromote human rights due diligence
Globalization of compliance
Implement various training programs in compliance with laws andregulations in each region

Start business with new suppliers
Acquire new human resources

Response toconflict minerals

Deterioration of quality
Suspension of dealing with customers and deterioration of corporate image in theevent of failure to respond to conflict minerals issues

Improvement of corporate image through active response

Promote human rights due diligence
Implement CSR questionnaire surveys of suppliers

Respond to conflict minerals surveys
conducted by customers
Stable supply of adapted products

Rise of low-cost
products

Intensified price competition due
to aggressive sales by emerging
manufacturers

Growing demand for high performance, highly functional products due tolower quality of products on the market
Demonstrating competitive advantage through differentiation of products
and services

Expand product lineup and inventory
Develop markets for the aftermarket business
Promote development of service-oriented businesses
Active outsourcing of general-purpose products

Integrated sales strategy in aftermarket
and industrial machinery businesses
Differentiation by services

Promote production reform andreorganization
Promote the work style reform

5

6

7

2

4

8

4

6

8

10 11

Realize the best mix of global and local
procurement

6

Reorganize suppliers and shorten
supply chain

6

7

6
6

7

9

12

6

7

9

6
Materiality

21 NTN Report 2023

4

4Provide compact, lightweight and low-torque products
Product development utilizing original technologies

Provide robot-related modules such as i-WRISTTM in response to laborsaving issues
Realization of smart factories including Wakayama Works
Promote and maximize the diversity of employees

Loss of sales opportunities
Loss of brand value due to lower prices

42

Develop lighter-weight, higher efficiency
driveshafts and low friction hub bearings
Provide next-generation mobility module
Develop hydrogen-related products

Medium-to
long-term labor
shortage

Downward pressure on profits due tohigher tariff costs
Rapid exchange-rate fluctuations

3

3

Life science-related R&D centered on microscopic coating technology
Provide robot-related modules such as i-WRISTTM in response to laborsaving issues
Promote the work style reform

Increasing needs for improvement offuel efficiency (electricity consumption
efficiency)
Expansion of next-generation mobility(EVs, hydrogen-related)

2

SASB Index

Electrificationof industrial
machinery

Provide lighter-weight, higher efficiency driveshafts and low friction hub
bearings
Provide next-generation mobility modules for EVs
Concentrate production of high performance products for EVs(Wakayama Works)

NTN Group Information

Decrease in the total number of bearings used per unit
Demand for higher performance products such as lighter weight products
Reorganization of the automotive industry

Sustainability Management

Response toenvironmental issues

Spread ofnext-generation
mobility

Value Creation Story

Response to paradigm shift

Using driveshafts’ patented technologies
to propose products that are smaller
and lighter
Growing demand for high performance
products for EVs
A possibility of growth in demandfor parts replacement as car sharing
increases the operating rate of vehicles

Expansion of sales channels due to entry of new EV manufacturers
Expanding sales opportunities for driveshafts and hub bearings that support
not only gasoline-powered vehicles and HEVs but also axle/drivetrain of
EVs
Increase in ASP (average sales price) due to size-up of driveshafts
corresponding to the motor’s output characteristics

Materiality

P.19

NTN Report 2023

22

Value Creation Story

NTN’s Capital and Strengths
About Us

NTN is committed to investing the management capital it has accumulated over our 100+ year history to strengthen its
strengths in original technology, quality, and service for future growth. NTN also deploys these strengths in each of its
businesses to conduct business activities that meet the needs of the world.

Invested Capital

NTN’s Three Strengths

Future Direction

Deployment of Strengths in Each Business
Aftermarket business

Number of patents held:
6,192
Enhanced correspondence
education and training system
for technical personnel
development

Originaltechnologies

R&D expenditures:
18.7 billion yen

Responding to new CASE
market needs such as
autonomous driving and sharing
Development and advancementof AI algorithms to predictremaining useful life
Development of “Talking
BearingsTM,” which incorporatea sensor in the bearing thattransmits abnormalities

Human resource development for passing on know-how through the
Global QC Circle Convention, the NTN Technical Skills Competition,and the TQM Convention
Encouraging ESG activities by employees with the NTN PROUD
AWARD

Capital investment:
22.3 billion yen
Manufacturing process to maintainand improve quality
Customer satisfaction survey: 113
companies, Excellent + Good: 88%
The number of technical service
car visits for the fiscal year
ended March 31, 2023 was 235
Held 335 aftermarket Webinars

Production sites:
70 sites in 14 countries
In addition to global production,“FIRST”, a system for theimmediate delivery of popular
products, is in operation

Providing products and services to customers from approximately
200 locations in 34 countries around the world
Responding to market needs in each region through a four-pole
global R&D system

Problem-solving customer responsiveness
ServicesIntellectual
CapitalNo.1 aftermarket share in Japan with the largest distributor network
in Japan
Providing remote technical support services globally
Contribution to solving all kinds of customer issues by providing
detailed support (from products to solutions)Social and
Relationship Capital

P.35

Addressing climate change
Renewable energy is increasingly being deployed to achieve a carbonneutral and decarbonized society.
We are strong in large bearings for the main shafts of wind turbines, and
we also have the largest market share in Japan for condition monitoring
systems (CMS) for wind turbines. In addition, we also sell green energy
products that utilize our proprietary blade technology, which we expect togrow as the market expands.

Robotization
Stable supply of highperformance products
Expanding the sophisticationof quality control using IoT and
AI to the manufacturing sector,
including suppliers

Strengthening the developmentof human resources who can“think and act by themselves” toachieve workplace goals
Our corporate philosophy
is instilled in our employees
around the world

Global network

SG&A expenses:
108.8 billion yen
SG&A expenses that
support service with highlevels of satisfaction

Manufacturing
CapitalPersonnel and work quality

Industrial machinery business

Sales expansion in the
Middle East and Africa regions

Providing advanced preventive
maintenance services throughthe use of big data
Expanding remote technicalsupport services and online
technical workshops for endusers

At manufacturing sites, there is a growing demand for labor savings andfurther efficiency gains due to labor shortages.
We are contributing to manpower saving and automation through highvalue-added products such as sensor-integrated bearings and Multi Track
Magnetic Rings in addition to the i-WRIST TM wrist joint module based on
CVJ technology. With the increasing demand for robotization, we expect toexpand sales of related products.

Automotive business

SASB Index

QualityIn the aftermarket for all types of machinery, the need for maintenanceservices and solution businesses for entire facilities rather than just bearings
is expanding, driven by the spread of AI and IoT.
NTN has the No. 1 share of the domestic aftermarket with its leading
distributor networks and services, and has also expanded its overseas network.
In the future, we will expand our services by utilizing our sensing technology andother know-how and digital technologies to capture further demand.

NTN Group Information

Energy consumption: 6,456 TJ/year
Promotion of CO2 emissions reduction
and renewable energy introduction

23 NTN Report 2023

Sensing technology

High reliability proven by a long track record of supplying products
for applications that support human life, such as the Shinkansen
and aerospace, by developing a quality control system that won the
Deming Prize, the first of its kind in the Japanese machinery industry
Achieving the world’s top class share in axle/drivetrain productsthat support safe driving

Production sites:
70 sites in 14 countries•Eight representative teams fromaround the world participated in the
Global QC Circle Convention•69 teams from all over the world
entered NTN PROUD AWARD

Human
CapitalDifferentiation through evolutionof cultivated technologies,
including low friction andmultifunctional hub bearings
Development of products toachieve carbon neutrality, suchas hydrogen-related products

Product quality

Number of employees (consolidated):
23,027

Financial
Capital

We are strong in manufacturing technologies such as heat
treatment, precision machining, and precision measurement,
which are indispensable for bearing manufacturing, and we pursue
tribology technology through bearing R&D.
We develop and sell not only rolling bearings, but also sliding bearings,
electrical and mechanical parts, and unit/module products combining
them as composite material products, using a wide range of materials
such as resin, sintered metals, magnetic materials, etc., and advanced
technologies such as fluid dynamic pressure technology

Development and supply of products equipped with highresolution rotation sensors and double-row magnetic rings, which
are the extension of NTN Europe’s ASB® (Active Sensor Bearing)
technology, the world standard
Developed monitoring services for large wind turbines using
the Condition Monitoring System (CMS) and achieved the top
market share in Japan with more than 200 units installed throughextensive support

Ratio of R&D expenditures to
net sales: 2.4%
Invested in R&D forsustainable growth

Expansion of services through hardware + software

Sustainability Management

R&D sites:
9 sites in 4 countries
Global structure supporting
high technological capabilities

Value Creation Story

Tribology technology

P.33

P.37

Adaptation to EVs
As the automotive market demands environmental responsiveness,fuelefficiency and CO 2 emission regulations for automobiles are being tightenedin many countries, and the shift to EVs and electrification is accelerating at
the initiative of governments.
We boast the world top class share of the market for hub bearings, which
support tire rotation, and driveshafts, which transmit the rotation of engines
and motors to tires, and our strength lies in our high technological capabilities
and dominant market share in automotive axle/drivetrain products.
Driveshafts and hub bearings are
Composition of
our main products, accounting forautomotive sales
approximately 80% of our automotive
sales, and are essential not only for internal
combustion engine vehicles (ICEVs) but
Othersalso for electric vehicles such as HEVs andEVs, and demand is expected to continue
Driveshafts
growing. We will pursue further weight
About 45%
reduction, higher efficiency, and lower
Hub bearings
friction, and provide highly functional
About 35%
products to ensure our superiority inthe market.

NaturalCapitalNTN Report 2023

24

Value Creation Story

Materiality

Strengths and Materiality Initiatives along the Value ChainContribution to solving social issues
toward the future we aim for

1

Respond to climate change

2

Realize a sustainable society using
natural energy

3

Reduce energy loss

4

Provide safety and comfort

About Us

The Group is promoting initiatives in line with the materiality to respond to the SDGs by leveraging its strengths in
R&D, procurement, Monozukuri (manufacturing), sales, and each of these processes. In developing business activities
based on our corporate philosophy of “we shall contribute to the international society by creating new technologies
and developing new products,” we create value in the value chain, leading to sustainable growth.

Foundation to support ESG management

5

Resource recycling and pollution
prevention

8

Promote safety and health

12 Thorough compliance

6Improve the reliability of
products and services(Quality assurance, stable supply)

9

Respect for human rights

13 Strengthen governance7

Procurement activities with anemphasis on environment andsociety

10 Human resource development
11 Promote diversity
Value Creation Story

Connecting to new R&D themes
Sales

We are building a technological foundation forsustainable growth by enhancing the value of existingproducts through deep plowing and deepening our coretechnologies and developing products in new areas that
capture changes in the business environment.
In the automotive field, we are developing productsthat contribute to electrification, and have developed
a bearing that achieves a dmn value* of 2.2 million asa further high-speed response to “High Speed Deep
Groove Ball Bearings for EVs and HEVs,” which aredesigned for high-speed motor rotation due to thedownsizing of electric drive unit products.
In the industrial machinery field, the use of robots at
production sites is accelerating and work operations are
becoming more diverse. We have developed a “Multi
Track Magnetic Encoder Integrated Rolling Bearing” thatcan detect the rotation speed, direction, and absolute
angle of robot joints, enabling improved joint motion
accuracy and a reduction in the number of parts.
In the new area of business, we have developed a“Talking BearingTM” that incorporates a power generation
unit and wireless device into an existing rolling bearing
and wirelessly transmits information on temperature,vibration, and rotational speed to help realize advanced
condition monitoring of equipment.

In Japan, procurement from overseas suppliers is
progressing and global transactions are expanding.
In accordance with the Procurement Policy
established in response to each of the SDGs, we will
pursue international and open procurement by promoting
local procurement and procurement in optimal locations
from a global perspective, and aim for stable procurementthat responds immediately to market fluctuations,while emphasizing quality and price advantages anddelivery reliability. In addition, by complying with laws
regulations and ethical standards and conducting fairand equitable transactions, we will not only ensure thetrust of our customers and society, but also improve thecompetitiveness of our business partners and continue toachieve “sustainable growth” together with them.
We will contribute to the creation of a “sustainable
society and environment” by promoting “green
procurement,” in which we procure from suppliers thatcomply with environmental laws and regulations andare committed to environmental conservation, withconsideration given to reducing their environmental
impact. We will deepen mutual understanding with ourbusiness partners through business transactions andstrive for coexistence and co-prosperity based on trust.

As part of production reforms, we are promoting
streamlining to optimize the entire process, including
logistics, and are working to improve throughput by
reducing inventories and lead times. Manufacturing
sites are promoting DX to efficiently collect and analyze
information, visualize problems, and quickly make
improvements to increase productivity. We will also
promote low-carbon manufacturing to achieve carbon
neutrality, which will lead to increased corporate value,customer satisfaction, and profit generation.
In terms of quality, we are striving to ensure stable
quality throughout the “process” from the development
stage to the manufacturing process and delivery of
products to customers. Specifically, we are “buildingin quality” throughout the company by conducting
design reviews at each step, strengthening risk analysis
when changes occur, and conducting quality audits at
manufacturing sites. We promote the establishmentof a global quality assurance system by incorporating
remote audits, improving processes, and providing
quality guidance to local employees when starting up
production overseas.

In response to the rapid shift to EVs in the automotive
market and the growing need for electrification in theindustrial machinery market, we provide high valueadded module products in line with customers’ newproduct development, and service solutions for windturbines that utilize IoT technology to monitor thecondition with bearings. We are developing consultingbased sales activities. In addition, for existing models
currently in mass production, we are striving to takemeticulous measures to ensure stable supply on a
global basis amid the ever-changing global situation.
For the aftermarket, we not only sell products, but also
provide technical services such as demonstrations
and workshops on how to handle bearings to increasecustomer satisfaction. In the fiscal year ended March
31, 2023, we held more than 300 technical seminars inremote format in Japan and abroad as the COVID-19
pandemic continued.
As customers’ needs are drastically changing due tothe paradigm shift in the external environment, we will
strive to improve our NTN brand and further enhancecustomer satisfaction by contributing to the realizationof a sustainable society as characterized by carbon
neutrality, as well as by increasing the functionality andadded value of our products.

*dmn value: An index of bearing rotational performance; bearing pitch
circle diameter (mm) x rotational speed (min-1)

Results
produced

Number of patentpublications:

Research andtechnology-related
newspaper articles:

Ratio of local
procurement:

Number of business partners
conducting CSR
questionnaires for suppliers:

Ratio of overseas
production:

Acquisition rate of quality
management system forconsolidated subsidiaries:

440

15

70%

629

54%

100%

Efforts in accordance with materiality

8

Promote health management
Prevent occupational accidents

Create a safe andsecure workplace

3

Save energy for EVs and electrification
Increase efficiency of manufacturing
equipment

2

Contribute to the spread of wind turbines use withhardware and software
Contribute to the arrival of a hydrogen society

4

Contribute to automation and labor saving in the
manufacturing industry by providing robot-related
modules
Contribute to disaster prevention and mitigationby providing independent power supply

25 NTN Report 2023

101

Promote the work style reform
Create a workplace to enhance employee engagement

Reduce CO2 emissions from procured components
and materials
Scope3

Promote female advancement
Promote senior employee
advancement

111

Promote employmentof persons withdisabilities

Reducing CO2 emissions in manufacturing
Scope1

Scope2

Number oftechnical service
car visits:

235

12

Thorough compliance3

6

Build the Quality Assurance System
Create a foundation for stable supply
Utilize digital technologies for stable supply

5

Use sustainable resources
Manage and reduce environmentally hazardous
substances

1

7

Promote green procurement
Advance CSR procurement

6

Build the Quality Assurance System
Create a foundation for stable supply
Utilize digital technologies for stable supply

6

9

Respond to human rights risks in the
supply chain

9

Respond to human rights risks in employees

SASB Index

Monozukuri (Manufacturing)

NTN Group Information

Procurement

Sustainability Management

Strengths that create value

R&D

Number ofPercentage of
online technical customer satisfaction
seminars:(excellent/good):

335
13

88%

Strengthen governance

Expand the bearing refurbish business

Reduce CO2 emissions in logistics activities
Scope3

Build the Quality Assurance System
Create a foundation for stable supply
Utilize digital technologies for stable supply

NTN Report 2023

26

Value Creation Story

Review of Management Plan

“DRIVE NTN100” Phase 2

About Us

In 2018, when we celebrated our 100th anniversary, we launched the Medium-term Management Plan “DRIVE
NTN100” to drive forward transformation of the business structure for the new 100 years. For the three years from thefiscal year ended March 2022 to the fiscal year ending March 2024, we are working on various measures as initiatives
for the Medium-term Management Plan “DRIVE NTN100” Phase 2.

April 2011
April
to 2011
Marchto2013
March 2013

Revival
Revival2014 2014

NTN100
NTN100April 2013
April
to 2013
Marchto2015
March 2015

DRIVE
DRIVE
NTN100
NTN100April 2015
April
to 2015
Marchto2018
March 2018

From April
From
2018
April 2018

Net Sales*Net Sales*
OperatingOperating
Margin Margin

Phase 1Phase 1

800.0

701.9 701.9

744.7 744.7

717.0 717.0

683.6 683.6

639.0 639.0

400.0

600.0 543.5 543.5

539.6 539.6

652.0 652.0

3.8

0

0

2012

2012

2013

2013

Basic policy
Acceleration of globalization by“On local sites with local materials
by local personnel”

2014

2015

2015

Basic policy
Reform business structure to
generate profit

Expand business globally with a focus
on growth markets
Establish world’s No.1 businesssegments
Establish new business segments suchas EV systems
Expand sales for Industrial machinery,
Aftermarket & Distributor
Expand sales in growth market
Expand local production andprocurement

Review
The Great East Japan Earthquake
in March 2011 and Greece’s fiscal
collapse that came to light in 2010
led to the European financial crisis
following the further downgrade of
the Greek credit rating in July 2011.
In addition, the impact of the floodingin Thailand on the automotive
industry from the end of October
2011 led to a turnaround in businessperformance. As a result, we had nochoice but to change direction.

Emergency measures

2016

Centralization of management resources

Structural reform

2018

Foundation building for Our Vision
Implement main policies based on 3 Basic Policies tobecome a co-creative partner company for customers
ASE
A
n Ch
gio
ina N, etc.
Re Eu
Ame rope
Japa ricas
n
Produ

ct

age

Busin
strat essegyBusineMan

age

Philo ss founbusinsophy, dation
ess p policy,
roces
s

Man

age

Man

th

Grow

bility

ta
Profi

n

datio

Foun

Concentrate resources(personnel, materials and cash)
on priority areas

2019

2019

2020

2020

Strengthen management andfinancial foundation

2022

6

6

Operating margin

4

4

2

2

0

0

10% or more
Total asset turnover
1.0 or more
Foreign exchangesensitivity
50% reduction

2022

2023

2023

years ended/ending(Fiscal years ended/ending
March 31) March 31)
2024 (Fiscal
2024

Basic Strategy

Drive Forward Transformationof Business Structure for the
New 100 Years
DRIVE NTN Transformation
for New 100

Reform business structure from“volume” to “value” to generate
profitDigitalization(latest digital technology)

Resources(Management resources that NTN has developed)

Innovation (development of innovative technologies, products and services)
Variable cost reformation (procurement reformation)
Efficiency improvement(achievement of the world’s No.1 productivity and quality/improvement of asset efficiency)

Business Operating Policies

NTN’s Revitalization
Phase 2Phase 1

Phase 3

Crisis Response Period
Growth

1. Develop Businesses in New Areas
2. Expand Aftermarket BusinessProfitability

3. Structural Reform of the Driveshaft
Business
4. “Monozukuri” with Next-generation
Technology

Foundation

5. Strengthen the Management
Foundation
6. Strengthen the Financial
Foundation

Expansion of new product and new businessMainthemes

Review
We were able to achieve numericaltargets, exceeding the plan, but thebenefits from exchange-rates werealso substantial, and with regard to
the basic policy of “Reform businessstructure to generate profit,” issues
remained unaddressed. We also
recognized the need to create new
businesses in order to sustainably
grow into the next 100 years.

2018

Basic policy

Mid-term business structural reform

Toward future growth

2017

Basic policy

Short-term measure to generate profit

Centralization of resources to priority
fields2017-0.6
2021 2021

Net sales growth rate
GDP growth rate ineach region+ something extra

SASB Index

Priority measures
Priority measures

2016(Forecast)

1.1

1.2

2014

3.7

2.2

1.3

Business

200.0

3.7

8

Review
We took measures for transformation to cope with the majorchanges in the external environment, the strengthening ofbasic technologies and products, and the development of
new business areas. Through these initiatives, we recognizedthat the next challenge is to “drive forward transformation ofbusiness structure for the new 100 years.”(2021)

Improve profitability andinvestment efficiency of existingproducts and businesses

Ensure the health and safety of
employees

Improve profitability andinvestment efficiency of existingproducts and businesses

Materialize new businessby creating products andbusinesses

Secure cash and continue
business

Select new business and review
the allocation of management
resources

Establish management system
to facilitate reform of businessstructure

Prepare for future growth

Strengthen corporate governance(Rebuild management foundation)

Build newbusinesses andcore business area

CreateGrow
Harvest* “Loyalty,” which was previously included in “non-operating income,” has been changed to be included in “net sales” from the fiscal year ended March 31, 2021.
The period for retroactive adjustment is after the fiscal year ended March 31, 2017, which is subjected to audit by an audit firm.

27 NTN Report 2023

NTN Group Information

200.0

642.0 642.0

5.4

5.3

(%)

8

NTN in the fiscal year
ending March 31, 2028

562.8 562.8

5.2

(%)

(Forecast) (Forecast)Crisis Response
Crisis Response
Period Period

6.7

6.2

400.0

774.0 774.0

733.8 733.8

Phase 3Phase 3810.0 From AprilFrom
2024April 2024

Sustainability Management

600.0

Phase 2Phase 2
April 2021April
to March
2021 to2024
March 2024810.0

April 2018April
to March2018 to2021
March 2021

(Billion yen)(Billion yen)

800.0

Value Creation Story

GlobalGlobalAdvance
Advance2013 2013

NTN Report 2023

28

Value Creation Story“DRIVE NTN100” Phase 2

NTN’s Business Environment

Value Creation Story“DRIVE NTN100” Phase 2

Rebuild Business Portfolio and Product Portfolio
About Us

NTN’s Business Environment

Electrification ofindustrial machineryJapan

Spread of AI and IoTMarket shrink due to thedepopulation(decreasing birthrate and aging
population)
Promoting response to climatechangeMaterialization of Society 5.0

Save labor andreorganize production
Use external
resources
R&D of electrificationand new products

We categorize NTN’s main businesses into a “Creation sector,” “Growth sector,” and “Harvest sector” and concentrate
management resources on these sectors. As to business portfolio, we focus on expansion of aftermarket business.

Creation
sectorEstablish new areas for
future growth

Spread of infectious
diseases (COVID-19)

Industrial machinery business

Aftermarket businessLife sciences (drug discovery
and regenerative medicine)

Expand sales in the Middle East
and Africa

Products adapting toelectrification

Hydrogen energy market

Develop “Talking bearing” and“Thinking bearing”

eHUB, sHUB

From product sales business toservice-oriented business

Products adapting toelectrification

Wind turbines (ultra-large size
bearing)

Strengthen MRO

Electric module products

Bearing refurbish business

Existing products fitting EV

Machine tools (European market)

Failure detection

Low friction, higher efficiency

Secure saleable inventory

Focus on the vehicle segment
where NTN’s strengths can beutilized

Expand market for wrist joint
robotsAmericas

Requests for energysaving machinery

Focus on products
for EV
Expand aftermarket
business
Develop Middle East /Africa market

Secure stable profit

Construction machinery(electrification and highperformance products)
Agricultural machinery (sales
expansion of CVJ for industrial
machinery)Highly competitive products(BU, etc.)
Use of overseas production andexternal procurement

Optimize customers portfolio
Secure volume in growthmarkets

Aerospace
Reduce fixed cost and expand supply capacity by outsourcing manufacturing (breaking away from selfsufficiency) of standard products such as ball bearings

SASB Index

Changes indemographics

Trend of population declining
Economic policy for climatechange (European Green Deal)
Significant strengthening of
regulations for fuel efficiency and
CO2
Uncertainty due to Brexit

Medium- to longterm labor shortage

Business composition ratio

Growth of emerging
countries
Issue of businesssuccession
China

Globalization of thebusiness

29 NTN Report 2023

Improve profitability byenhancing cost competitivenessHarvestsectorEuropeWorld’s No.1 population(decreasing birthrate and aging
population over the long-term)
Economic policy for climatechange and next-generation
technology (Made in China 2025)
Social infrastructure investment
in inland areas
Significant strengthening of
regulations for fuel efficiency andCO2

Aftermarket business

Expand volume
Focus on products
for EV
Focus on windturbines and rollingstocksStrengthen CMS
business

Trade friction andtariffs

17%

Fiscal year ended
March 31, 2023

Industrial machinery
business

Automotive business

65%

18%

Aftermarket businessPrevention of childlabor (human rights)
Response to conflictminerals
Rise of low-cost
products

Rolling stock (Chinese market)

NTN Group Information

Reduction inenvironmental
impactResponse to natural
disasters

Expand businesses
Concentrate resources

Robot / gearbox

Sustainability Management

Response toenvironmental issues

Reduction in CO2emissions

Strengthen products
for large vehicles
Expand aftermarket
business
Promote local
procurement

GrowthsectorElectric brake

Condition Monitoring (CMS)
Green energy products

Moderate population andeconomic growth
Policy shift by the new president
Economic policy shift to respondto climate change
U.S. and China struggling forhegemony
Medium- to long-term decline incrude oil price

Automotive business
Value Creation Story

Response toparadigm shift

Spread of nextgeneration mobility

NTN’s Main Strategies

Asia

Increase of population and middleincome group
Social infrastructure investment
Progress of digitization in emerging
countries

Expand volume
Utilize LCC products
to strengthen costcompetitiveness
Expand aftermarket
business

Industrial machinery
business

40%

Fiscal year ending
March 31, 2031

Automotive business60%

NTN Report 2023

30

Value Creation Story“DRIVE NTN100” Phase 2

R&D (Research & Development)
About Us

“DRIVE NTN100” Phase 2

NTN’s Intellectual Property Strategy

With the goal of contributing to the realization of a carbon-neutral society, ourgroup is promoting research and development based on two pillars: the evolutionof our core products, such as rolling bearings, hub bearings, and driveshafts, andthe application of our accumulated technologies to new areas, or exploration.
We will accelerate our contribution to the international society by promoting thefollowing six areas set forth in the Mid-term Management Plan “DRIVE NTN100”
Phase 2, while strengthening external collaboration with the NTN Next Generation
Research Alliance Laboratory, Osaka University, which started its new structure in
April 2023.

Investing R&D resources

The Group’s intellectual property is a source of creating new value, andwe are promoting the appropriate protection and utilization of intellectual
property rights globally in line with our business and R&D strategies.
In addition to intellectual property rights that will help maintain andstrengthen the competitiveness of our core products, we will create
intellectual property that will ensure pioneer profits by utilizing the IP
landscape in new areas. In the field of energy supply including wind power
generation in GX*, our group has obtained many patents among bearing
manufacturers. Production technology and software are also important
technologies that we will protect and utilize through our open/closed
strategy to improve our competitive advantage.

Executive Officer CTO (Chief Technology Officer)

in six target areas
R&D Direction•Carbon neutrality (Reductionof environmental impact anddecarbonization)•Pursuit of safety, security,and comfort

Masaki Egami

Value Creation Story

NTN’s basic stance on R&D*GX: Green Transformation1

To achieve carbon neutrality, the electrification of automobiles and EVs is essential, and we aredeveloping module products that will contribute to the further enhancement of rolling bearing
functionality and performance, as well as to the electrification of automobiles.
We have developed and started providing samples of “Bearing with Insulating Coating” and“Creepless Bearing” to suppress electrical pitting of bearings and wear of aluminum housings,
which are increasingly required as electric drive units become smaller and higher voltages areapplied. In addition, we have developed a rolling bearing that achieves a dmn value* of 2.2
million as a further high-speed response to “High Speed Deep Groove Ball Bearings for EVs
and HEVs,” which support the miniaturization of motors.
We will continue to develop products that anticipate market needs and contribute to theshift to EVs, autonomous driving, and carbon neutrality by leveraging our core competencies
and incorporating next-generation technologies.
* dmn value: An index of bearing rotational performance; bearing pitch circle diameter (mm) x rotational speed (min-1)

31 NTN Report 2023

TRINITTETM cooperatively connectedwith a picking robot

i-WRISTTM IWS series

Bearing with Insulating
Coating

Applied areas in parallel axis
e-Axle (red circle)

Bus waiting area using“N3 N-CUBE”

Hydrogen-related

Hydrogen is attracting attention as a next-generation energy source, and technologicaldevelopment is being actively pursued globally in all aspects of its utilization, including
production, transport, storage, and use. We are developing the application of products usedin high-pressure hydrogen compressors for hydrogen stations, which are indispensable forthe widespread use of fuel cell vehicles (FCVs). Mechanical parts used in hydrogen-related
equipment are used in special environments such as hydrogen exposure and high pressure,requiring higher reliability and durability.
We have started sample production and delivery of Hydrogen Embrittlement ResistantBearings with longer service life achieved by special heat treatment technology to prevent
premature failure of rolling bearings caused by hydrogen. In addition, resin products developed
using our composite material technology have been adopted as sealing components forhydrogen environments, and we are working to further improve their performance throughindustry-academia collaboration.
We will continue to promote the development of technologies and products applicable to
FCVs and equipment for various infrastructure facilities necessary for the social implementationof hydrogen.

6

DLC Coating Spherical
Roller Bearing

SASB Index

Next-generation mobility module

The main shaft bearings are becoming larger in diameter in line with the increasing size of
power generation equipment, particularly for offshore wind turbines. We have developed
a market for Asymmetrical Spherical Roller Bearings with a DLC (diamond-like carbon)
coating on the roller surface for superior wear resistance, contributing to the stable
operation of wind turbines.
Meanwhile, we are developing the N3 N-CUBE, a mobile power supply using naturalenergy, for the market. For the purpose of disaster prevention and regional infrastructuredevelopment, the product is used in evacuation centers during disasters, emergency foodand medical supplies storage warehouses, waiting rooms at bus stops in locations where itis difficult to install grid power, flush toilets with freestanding treatment tanks, and workation
facilities. With increasing awareness of safety and security, it is expected to be applied to awide range of applications. We continue to contribute to the creation of a safe and securecommunity for local residents.

5

Robot-related module

We have launched the TRINITTETM, our unique feeder for picking robots that supplies parts
from a rotating disk and automatically resupplies parts even if they are missed, and it has been
well received. We have developed a compact and lightweight “Rotary Actuator Type Hand” forpicking robots to be used in combination with TRINITTETM. When attached to a SCARA robot,
picking can be performed from the side or diagonally. This product can significantly reduce
the number of parts missed, and it realizes stable and continuous picking of parts with an
inexpensive equipment configuration.
In the i-WRISTTM wrist joint module for robots, the maximum weight capacity has been
increased from 1 kg to 3 kg to accommodate a wider range of end-effectors than before, which
has been well received.
We will continue to propose module products for robots that contribute to the promotion ofefficiency and automation as a measure to reduce manpower at manufacturing sites.

3

Talking Bearing

TM

Renewable Eenergy-related

NTN Group Information

The need for predictive maintenance through equipment condition monitoring is increasingat manufacturing sites. While maintaining the standard size of a rolling bearing, we havedeveloped a “Talking BearingTM” that incorporates a sensor, power generation unit, and wirelessdevice to measure temperature, vibration, and rotational speed, and transmit the obtained
data wirelessly. Talking BearingsTM are products that do not require special equipment design
or wiring for installation and facilitate the introduction of equipment condition monitoring,
contributing to improved production efficiency and stabilized quality at production sites.
In addition, a bearing diagnostic application compatible with the industrial IoT platform“Edgecross” has been developed and a free trial version is now available. Industrial PCs andrelated equipment with the basic software installed are loaned free of charge for a certain periodof time to users who are considering building an IoT system to experience the usefulness of thisapplication.
In the future, we will work to expand our service business by integrating AI analysis
technology with bearing technology to further enhance the functionality of condition monitoring.

2

4

Service/solution

Sustainability Management

Six target areas to invest R&D resources

HydrogenEmbrittlement ResistantRadial Bearing

Hydrogen Embrittlement Thrust Bearing

Life Sscience-related

As one of the applications of our proprietary microscopic coating
applicator, which excels in the quantitative and fixed positional
application of high-viscosity liquids, we are developing cell chips
with human iPS-derived cells coated on a plate. Using this device,
it is possible to form three-dimensional cellular tissue, and it has
been shown that the response is more similar to that of the humanbody than conventional two-dimensional tissue. It is expected toreplace animal experiments using mice and other animals for safety
evaluation in the drug discovery process.
We will continue our manufacturing research for further
functionalization and mass production of 3D cell chips to contributeto improving efficiency and speeding up the development of nextgeneration drug discovery.

Microscopic coating
applicator

Development of threedimensional cell chipDevelopment of
test kit

NTN Report 2023

32

Value Creation Story“DRIVE NTN100” Phase 2

Business Strategies
About Us

“DRIVE NTN100” Phase 2 strategy
Initiatives to be focused on during the three-year period (From the fiscal year ended March 31, 2022 to the fiscal year ending March 31, 2024)

Aftermarket Business

By sharing sales strategies across different types of businesses,
concentrate resources on important industries
Strengthen organizational structure to improve supply capacity, service
response, and profitability
2020

Executive Officer

From products to services

Increasing the brand value
Strengthen
product-and-service
businessStrengthen
service response(In addition to sales of devices, analysis report business)
Strengthen technical support functions in overseas sales
companies (ASEAN and India regions)

Develop and expand
technical service throughthe use of remote support
camerasTechnical service units activities and technical seminars for distributors

Strengthen theability to supply

Strengthen
structure andorganization

Maintain available stock for aftermarket
Prioritize production capacity for aftermarket (use of new IT core system)
Expand use of overseas manufacturing sites and external procurement
Expand sales in growing industries through integrated response from OEM to aftermarket

Accelerate “Made by NTN” by actively utilizing
products manufactured overseas
Strengthen the network system with distributors
and expand e-commerce

Improve profitability by short-term concentration through task force activities for key market

Relocate automotive aftermarket’s headquartersfunctions to Europe

Strengthen sales structure in the Middle East and Africa (A sales company
established in UAE in January 2021)

Expand sales in potential markets such as China
through the use of resources in Europe

TOPICS

Initiatives to strengthen supply capacity
We are working to enhance our brand value to expand
our aftermarket business. One of these measures is tostrengthen supply capacity for the aftermarket. In order toensure a stable supply of popular products to our global
distributor network, which is one of NTN’s strengths, weare expanding our “FIRST” system for immediate deliveryof popular products for the aftermarket. FIRST is a systemthat keeps an inventory of popular products for aftermarket
and automatically supplies bearings to NTN Group sales
companies according to actual sales.
In terms of production, we are shifting to overseas
production of standard small radial ball bearings inorder to expand supply capacity. We promise to provide
global quality by “Made by NTN”, maintaining the same
quality as products manufactured in Japan even if they

are manufactured overseas. We are also expanding our
production facilities in Japan for medium-sized radial ballbearings to supply for the aftermarket in a timelier manner.
In addition to product supply, we are also working
to strengthen our aftermarket service. NTN Portable
Vibroscope is easily portable and can be used to diagnose
the condition of equipment and bearings periodically.
For the purpose of preventive maintenance of operating
facilities, we have started a business to provide customers
with a “diagnostic report service” in Japan by analyzing thedata measured by this device. We have received numerous
inquiries since we launched promotional activities for thisbusiness on the web in March 2023. We plan to expand
this business globally.

SASB Index

Operating income (right axis)

Use of NTN Portable Vibroscope

Further strengthen measures against counterfeit bearings

Business performance
Sales (left axis)

Commercialize the condition monitoring ofcustomers’ equipment by utilizing sensor
technology and IoT and grasp the demand forbearing aftermarket

Expand bearing refurbish business

NTN Group Information

Net sales for the fiscal year ended March 31, 2023 totaled 134.0 billion
yen as a result of year-on-year growth in all regions, including overseas
and Japan, due to a recovery in demand from the COVID-19 pandemic
and strengthened supply capacity, despite the impact of the situation in
Ukraine. Operating income was 22.3 billion yen, a record high for both net
sales and operating income, as a result of efforts to absorb cost increases
caused by external factors such as surging raw material and energy prices,which were passed on to selling prices.
For the fiscal year ending March 31, 2024, we are forecasting net salesof 133 billion yen, down 1 billion yen year on year, due to the still uncertain
situation in Ukraine and the risk of a global economic recession, but
excluding the impact of exchange rates, we are forecasting 103% year on
year volume growth. In the current fiscal year, we will continue to strengthen
our supply capacity for the aftermarket, as we did in the previous fiscal
year, and at the same time, we will continue to raise prices by revising theprice list and other means in order to pass on higher inflationary costs toselling prices, aiming to improve profit margins.

33 NTN Report 2023

Rebuild revenue basewell as expanding our production capacity at domestic
plants. In response to demand for replacement of
automotive-related bearings and constant-velocity joints,
we are implementing activities appropriate for each
locality, with a view to transferring our headquartersfunctions to Europe, a center place of our sales.
We are also promoting expansion from products toservices, in other words, innovation to businesses thatwill make profit by adding various services to bearings.
More specifically, we have started measurement ofoperating data of industrial machinery and facilities
using “Talking BearingTM ” with built-in sensors andgenerators, and analytical and diagnostic report services
for measurement data obtained by using NTN Portable
Vibroscope. In remote technical support services, wehave enabled engineers in Japan to provide advice onequipment for overseas users via monitors. Throughsteady implementation of a series of these initiatives, wewill establish a business model for providing even better
services, beyond simply selling bearings.
In our future aftermarket business, we will focus onproviding high added-value by not only enhancing the“availability” of inventories through the FIRST immediatedelivery system for general-purpose products but
also improving “solutions” through combination ofvarious services. In the aftermarket business, which isindispensable for higher productivity and stable operationof customer equipment, we are creating a system thatis not significantly affected by fluctuations in market
demand. With our eyes on capturing further global
demand, etc., we will strive to achieve an even higher
profit ratio.

Results for the fiscal year ended March 31, 2023
and forecast for the fiscal year ending March 31, 2024

2024-

Sustainability Management

In our aftermarket business results in the fiscal year
ended March 2023, both sales and operating income
marked a record high, with an operating margin of
16.6%. We understand these results as outcomes ofour continued price increase activities, including pricelist revision, to enable us to reflect higher prices of raw
materials, energies, etc. in selling prices, as we did in theprevious fiscal year. However, we are still behind global
competitors in terms of the market share in the global
market, and I think there is room for us to increase thesales profit ratio further.
With regard to standard catalog products, expansionof fast-moving items inventory and development ofa prompt delivery system will lead to a wider sales
opportunity. Therefore, we will increase the numberof sales companies accessible to FIRST, a system
for the immediate delivery of popular products, while
expanding inventories of popular products for theaftermarket. I think we can increase our sales further
by improving inventories of popular products anddeveloping an immediate delivery system for orders
from all over the world.
As for MRO (Maintenance, Repair and Overhaul)
projects, we put our focus on relatively large bearings
such as those for steel manufacturing and paper
manufacturing machines. In addition to standard
products, which are facing harsher price competition
under commoditization, we will strengthen sales
activities for high value-added bearings by leveraging
NTN’s strengths. We will also focus on responding to
new demands by enhancing our supply capacity for theaftermarket through production transfer to overseas, as

Etsu Harima

2021-2023

Value Creation Story

Aiming at both share expansion andprofit ratio improvement

Strengthen e-commerce
Promote business development in theservice-oriented business

Operating income margin

16.9%
12.8% 11.6% 9.7% 13.1% 16.6%(Billion yen)
45.0
134.0 133.0
118.8
112.2
109.4
100.0
30.0
91.5
22.5
22.3

(Billion yen)

150.0

50.0

0

15.2

12.7

14.7

15.0

8.9

2019 2020 2021 2022 2023 2024

NTN Portable Vibroscope0(Fiscal year ended/(Forecast) ending March 31)

NTN Report 2023

34

Value Creation Story“DRIVE NTN100” Phase 2“DRIVE NTN100” Phase 2 strategy

Business Strategies

Select target areas
Improve selling price and reduce or withdraw from unprofitable areas
Reduce costs by procuring materials and parts from optimal locations(actively utilize materials from China and India)

Industrial Machinery Business

2020

Executive Officer

Creation
sectorGrowthsectorHarvestsector

2.5%
123.4

100.0
50.0
0

-1.9%

0.3%

3.2%

Operating income margin

5.2% 5.7%

139.5 133.0
126.1

105.1 101.9
7.3

7.5

(Billion yen)

15.0
10.0
5.0

4.1

3.1
0.4

0

-2.0
2019 2020 2021 2022 2023 2024

Expand overseas business
Develop new applications andderivatives

Service /solution business (CMS)

Establish maintenance service for wind turbine
bearings and overseas expansion

Gain bearing demand by leveraging
CMS technology

GearboxDevelop RV gearbox bearing
Expand sales of elastic bearings for wave motion gears

Expand sales in China(Follow changes in the industry)

Wind turbine

Focus on capturing demand in China
Drive sales and profit increase

Improve profitability by capturing
aftermarket demand
Expand production capacity

Machine tools

Expand sales of machine tools in China and India
Utilize products manufactured in a plant in Germany to sellthem on the European market

Expand CMS needs due to spread of
IoT
Expand sales of bearings with sensors

Rolling stock

Promote drastic cost reduction measures including
local production in China

Capture demand for railway network
expansion and subway in China

Construction machinery

Utilize competitive materials and components
Adapt to electrification, shift to high function products

Agricultural machinery

Expand sales of high value-added products
Expand sales of CVJ for industrial machinery

Follow changes in social structure andinfrastructure
Make sure to capture demand forelectrification

Aerospace

Withdraw from or reduce unprofitable projects
Improve profitability by concentrating productionin NTN Europe

Earn profits in MRO market
Expand sales for space industry(Fiscal year ended/(Forecast) ending March 31)

Wrist joint module “i-WRISTTM”
IWS series improved portability

Development of “Multi Track Magnetic
Encoder Integrated Rolling Bearing”

A new grade “IWS-C01” with improved portability of the“IWS series” of i-WRISTTM wrist joint modules has beendeveloped. The maximum payload has been increased
from 1 kg to 3 kg, enabling a wider range of end-effectors
to be mounted and products to be handled than in thepast, and contributing to automation and streamlining ofvarious manufacturing processes as well as labor savings
at production sites.
Specifically, when controlling the posture of productswith i-WRISTTM in visual inspection applications, it ispossible to handle not only small and lightweight plastic
parts, but also most products that are heavy enough tobe handled by human hands, such as small aluminum
die-cast parts. In addition, when “i-WRISTTM” is controlled
by an end-effector attached to it, it can be equipped withlarge lighting and a high-performance camera, enabling
detection of finer scratches and dents. In addition to visualinspection, the system can also be utilized in processes
where the load on the end-effector fluctuates greatly, suchas deburring.
Through further performance improvement andapplication developmentof “i-WRISTTM”, NTN
will contribute toautomation, efficiency,and quality stabilization
at manufacturing sites.

As a product that supports the expansion anddiversification of robot demand, we have developed a “Multi
Track Magnetic Encoder Integrated Rolling Bearing” thathas excellent environmental resistance and is capable ofhigh-precision angle detection. A magnetic ring and sensor
are attached to the deep groove ball bearing that supports
the joint mechanism of the robot to provide detection ofrotational speed, direction, and absolute angle, contributing
to improved robot performance, smaller and lighter weight,
and reduced man-hours for assembly and set-up. In
addition, magnetic encoders have excellent environmental
resistance, enabling high detection accuracy even in
operating environments where dust and oil are present.
The developed product integrates a bearing and amagnetic encoder, eliminating the need for mounting
and setup work for the rotary encoder and coupling,
and facilitating robot
assembly. The bearing
dimensions and load
capacity are the same as
Magnetic
those of general bearings Deep groove Multi Tracksensor ICball bearing Magnetic Ring
and can be applied to
Encodera wide range of robot
types.
Deep grooveball bearing
NTN will propose thisEncoder
new product to robot
manufacturers, etc., andpromote the expansion
Multi Track Magnetic Encoderof the robot peripheral
Integrated Rolling Bearing
module field.

i-WRISTTM IWS series

NTN Report 2023

SASB Index

150.0

Operating income (right axis)

Robot-related business(i-WRISTTM)NTN Group Information

35 NTN Report 2023

Business performance
Sales (left axis)

VS FY2020

Gain large customers
Promote acquisition of overseas certified standard

TOPICS

Results for the fiscal year ended March 31, 2023
and forecast for the fiscal year ending March 31, 2024

(Billion yen)

2024Growth strategy to respond to market change

Sustainability Management

internal combustion engines to motors advances also inconstruction machinery and agricultural machinery. Thisis because many of motor manufacturers are alreadyour customers in the industrial machinery industry, so
we are promoting initiatives that will surely connect thiscompetitive advantage to outcomes.
With regard to industrial robots, the demand has
been growing for the purpose of labor-saving, and robot
arm reducers, one of its indispensable components, areindeed a collection of bearings. We will respond to new
demands by providing bearings necessary for realizing
high-accuracy movement.
As for wind power generation, a long design life of
20 years or more is required, and thus extra-large sized
bearings to be built into such equipment must ensure an
extremely high quality and reliability. In this regard, we
have strength of our competitive advantage recognizedin the big Chinese market. We will differentiate ourselves
and provide high added value by using CMSs (condition
monitoring systems) that realize timely replacement ofbearings through monitoring. We consider wind power
generation to be a promising market, partly because
Japan also seems to focus on offshore power generationin the future.
For rolling stock application, which requires highquality and reliability, China is likewise an important
market for us. In the Chinese market, domestic
production of main parts such as bearings has beenpromoted as a national policy, to which we need to
pay attention regarding its future development. We
will continue to focus on launching new products andservices in growing markets to further improve ouroperating margin.

In the fiscal year ended March 31, 2023, sales reached a record high of
139.5 billion yen on the back of increased sales for construction machinery
due to increased mining demand and for aircraft due to a recovery inpassenger demand. Although there were increases in proportional costs
such as steel and energy prices, record operating income of 7.3 billion yen
was achieved due to activities to pass on selling prices and the impact offoreign exchange rates.
In the fiscal year ending March 31, 2024, the demands of aircraft andgearbox are expected to remain strong. On the other hand, for wind power
generation, with the peak demand in 2020, the demand adjustment phase is
expected to continue in the current fiscal year.
Under these assumptions, we will work to further improve profit margins.
We will continue to pass on inflationary costs, raise prices and withdraw
from unprofitable businesses, and engage in cost reduction activities suchas procurement of low-cost parts, including those made in India, mainly forbearings for wind power generation and rolling stock.

2021-2023
Rebuild the revenue baseEtsu Harima

In the industrial machinery business, both of our sales
and operating income hit a record high in the fiscal
year ended March 31, 2023. The operating margin wasover 5%, partly due to our continuous cost reduction
activities, price increases in unprofitable businesses, andinfluence of exchange rates. However, we are far fromsatisfied with these figures, and have already recognizedissues for improvement in all fields of production, sales,
and technologies. By addressing these issues properly,
we think that the operating margin will improve further.
As specific measures, we will shift from the strategy
of pursuing the scale of sales through low-margin,
high-volume sales. In terms of bearings, we regard
ourselves to be reaching a point of transition fromoffering a comprehensive collection of products, like
department stores, to focusing on markets where we candemonstrate our value.
On the other hand, we are also required to respond tohigher costs, such as raw materials, fuels, and labor. We
need to take a two-way strategy of continuing activities
for productivity improvement and cost reduction whilereflecting higher costs in product prices. For unprofitablebusinesses, price increase and scale reduction are
required, together with strategies for fighting out infocused growth markets. As for general bearings, wewill concentrate on offering added value, by assuming
growth of competitors in China and India.
Markets we think we should focus on in the future
include construction machinery, agricultural machinery,
and industrial robots, for which growing demand are
expected, as well as infrastructure-related markets suchas wind power generation and rolling stock.
With the current trend of decarbonization, big
business opportunities will emerge if a shift from

Expand sales of Wrist Joint Module“i-WRISTTM”
Expand service / solution business (CMS)
Expand renewable energy-related products

Value Creation Story

Enhancing the profitability throughstrategic expansion

About Us

Initiatives to be focused on during the three-year period (From the fiscal year ended March 31, 2022 to the fiscal year ending March 31, 2024)

36

Value Creation Story“DRIVE NTN100” Phase 2

Business Strategies
About Us

“DRIVE NTN100” Phase 2 strategy
Initiatives to be focused on during the three-year period (From the fiscal year ended March 31, 2022 to the fiscal year ending March 31, 2024)

Automotive Business

Executive Officer

Hideaki Miyazawa

2021-2023

2024-

Promote earning improvement NOT relying on the merit of scale
Driveshafts (CVJ)

Axle / hub bearings

Bearings

New areas (Electrification)

Shift to large-sized SUV/PUP and EVs
Secure volume in growth markets

Carefully select capital investments that are directly linked todifferentiation and competitivenessDevote energy into enhancing cost-competitiveness with a focus on
variable cost
Develop differentiated products complying with regulations for EVs, fuelefficiency and CO2

Develop differentiated high valueadded products
Realign portfolio based on customers
and vehicle segments

Strengthen sales activities especially for high-performance applications
Focus on enhancing production capacity and cost competitivenessespecially in Japan and China
Promote use of external partners on production of standard typeproducts

Invest resources in high performance
bearings through the selection

Increase production of gearboxes for electric hydraulic brakes
Promote cost reduction (Shorten assembly CT / Promote production in
China / Use Chinese materials)
Develop new products for integrated electrical modules

600.0

1.8%
491.3

-0.8%
437.0

400.0
200.0

500.4
369.5 403.7(1) Started mass production of highly efficient fixed
type constant velocity joint “CFJ”
With stricter CO2 regulations and therapid shift to BEVs, we have begun
mass production of high-efficiency
fixed constant velocity joints (CFJs),
which contribute significantly to
reducing vehicle CO2 emissions andimproving electricity costs.

0.0% (Billion yen)
60.0
544.0

0

0

The “R Series” is the world’s smallest
and lightest rear CVJ product, with a
30% weight reduction and a 3 to 5%
reduction in outer ring outer diametercompared to conventional products.
Since the start of mass production in
2018, sales have steadily increased, and this year, the adoptionof BEVs for European premium brands is expanding.

40.0
20.0

8.7

0

-3.7
-12.4 -11.9 -12.4
2019 2020 2021 2022 2023 2024

Advantage Super high speed, ultralow friction
Expand sales of electric oil pumps
Commercialize eHUB/ sHUB
Commercialize electric brakes

No effects,
stable growth

Flat sales,
Toward highperformance
products

Increase volume
Grow together

We have been shifting our sales to BEVs and large SUVs, where we can take advantage of the technologicalsuperiority of our products, and our activities are beginning to bear fruit.

Operating income margin-3.4% -2.9% -2.5%

Advantage Super low friction

No effects,
stable growth(Fiscal year ended/(Forecast) ending March 31)(3) Started mass production of “3rd Generation
Tapered Roller Hub Bearings”
Mass production of the third generation tapered roller hub
bearing with integrated hub shaft and inner ring for front wheelsof commercial vehicles for Europe, which combines high rigidity
and light weight.

SASB Index(Billion yen)

Advantage Small, lightweight, highefficiency, low vibration

Estimated
effects of EV/
electrification

TOPICS

Business performance
Operating income (right axis)

Strategy for sustainable growth

Deepen production reforms (streamlining) under way in Japan
Horizontal expansion of production reforms to global manufacturing
bases
Concentrated investment in high-performance products and automation(2) Expand sales of compact and lightweight“R series” driveshafts for rear end

Sales (left axis)

sustainable growth

NTN Group Information

37 NTN Report 2023

Develop high performance and high value-added
products responding to the environment, EVs, andelectrification
Expand sales of electrification products
Order winning activities aimed at portfolio optimizationand concentrated investment in focus segments

2020

Results for the fiscal year ended March 31, 2023
and forecast for the fiscal year ending March 31, 2024
For the fiscal year ended March 31, 2023, net sales were 500.4 billion yen due
to a gradual recovery in automobile production and the impact of passing on
inflationary costs to selling prices, although semiconductor supply shortages
continue. However, in addition to soaring energy and procurement material
costs globally, sales in the China region fell more than 50% below expectations
due to the disruption caused by the zero-COVID-19 policy and the terminationof the passenger car purchase tax reduction program, resulting in a significant
decline in operating income of -12.4 billion yen.
Although the outlook for sales in the fiscal year ending March 31, 2024
remains uncertain, we expect sales to increase as the supply shortage ofsemiconductors gradually eases and automobile production is expected torecover as in the previous fiscal year. To improve profits, we will continue tothoroughly implement price revisions, including withdrawal from unprofitablebusinesses, as well as 100% price shifting of inflationary costs, including thosecarried over from the previous fiscal year. Furthermore, we will accelerate
procurement reforms and expand our procurement network, especially inemerging countries, while ensuring quality.

Promote variable cost reduction through procurement reformation
Reduce manufacturing fixed cost by reforming Monozukuri and improving
productivity
Reduce fixed cost by utilizing RPAs and improving the organizational
structure and systems
Thorough selling price management, reduction and withdrawal from
unprofitable areas (regions and products)

Sustainability Management

is expected to increase as the shift to all-wheel drive
continues. Despite increased battery weight due toelectrification, reasonable electric cost is required, so
reducing parts weight is essential. Also, unlike ICEs, EVs
increase output simultaneously and require each part tobe rigid against larger torque. This allows us to leverage
our technological strengths to meet the conflicting weight
reduction demands and improved durability.
In parts supply, price competition with Low Cost
Countries (LCCs), mainly from emerging countries, isintensifying. In this competitive environment, we willdevelop a differentiation strategy based on value, notprice. Our unique value proposition lies in our ability todeliver proposals that directly solve customer problems
with an amazing speed. The backbone of our problemsolving capabilities is the accumulation of technicalexpertise that we have gained over many years ofhandling global projects, a level of expertise that is
unrivaled by LCCs. We will develop our business at an
appropriate price by having our customers recognize theunique added value that we offer as value.
At the same time, by promoting procurement andproduction reforms within the company and working toshorten and appropriate the supply chain, we will strive
to reduce the retention time of semi-finished products,
quickly cash in merchandise, and reduce inventories.
In particular, we will accelerate the use of low-costmaterials and parts that we have not yet been able
to penetrate deeply. On the production side, we willfurther strengthen productivity improvement activities
to minimize total cost increases even as unit prices ofprocured goods and energy rise, thereby promoting a
different design and production philosophy from the past.
In order to promote a series of measures, negotiations
with customers are essential. As I did before the
COVID-19 pandemic, I will personally travel overseas
to meet with customers to deepen my understandingof this issue. Return to profitability at all costs throughcontinuously implementing a series of measures. I know
it is my responsibility.

Basic products

The automotive business has been in the red for four
consecutive fiscal years since 2019. Two main reasons
exist for this: the external environment and internal
responses. External factors, which had a great impact,
were the spread of the COVID-19 pandemic, subsequent
semiconductor shortages, and unprecedented cost
increases. First of all, due to the COVID-19 pandemic,
the production of automobiles itself shrank from 95
million units to 75 million units per year, and demand forour products disappeared as a result.
Just as the COVID-19 pandemic subsided andautomotive manufacturers were about to ramp up
production, they were hit with a semiconductor shortage.
The semiconductor shortage has become more of anissue as the shift from ICEs to EVs and electrification has
increased the number of semiconductors needed per
vehicle to about seven times the previous number.
In addition, the rising cost of steel and other materials,
as well as rising energy costs, have rapidly increased ourmanufacturing costs.
The failure to respond adequately to these changes inthe external environment was another major reason forthe deficit. In other words, we were unable to pass on
increased costs to customers during the period, and, on
the production side, we were unable to respond flexibly
to rapid changes in demand, which resulted in a build-up
of work in progress. Although we have been affected bymany external circumstances, we are still ashamed of thefact that we have been in the red for some time.
So how will NTN’s automotive business withstandthe revitalization in the future? The shortage ofsemiconductors is not yet over. However, automobile
production is recovering, reaching 85 million units. We
are determined to make a profit in the fiscal year ending
March 31, 2024, and we are determined to promote ourbusiness.
Fortunately, the trend toward EVs and electrification
is a positive factor for us. In EV and electrification,
demand for hub bearings and driveshafts, which accountfor about 80% of sales in the automotive business,

2 Optimize portfolio to support

Value Creation Story

Provide unique suggestions to quickly resolve customer issues
Aiming to be a leading manufacturer in the power/drive train system

1 Strengthen the profit structure(4) Started mass production of driveshafts andhub bearings for BEVs of Japanese automobile
manufacturers
Mass production of driveshafts and hub bearings for flagship
BEVs of several Japanese automakers has started in Japan andoverseas.

(5) Development of various solution bearings for
e-Axle· High-speed rotating bearing dmn value*2.2 million
achieved
Our high-speed deep groove ball bearings for e-Axle haveachieved a high-speed rotation dmn value* of 2.2 million under
oil lubrication.
*dmn value: An index of bearing rotational performance; bearing pitch circle
diameter (mm) x rotational speed (min-1)· CreepLess Bearing Development
For e-Axle, which is becoming smaller and lighter, we havedeveloped a creep-less bearing that uses the industry’s first
method to stop progressive wave type creep generated by outerring distortion.
· Development of bearings with insulating coatings
By applying an insulating coating to the outer ring outer
diameter and width surface of the bearing, we have developed abearing with an insulating coating that can withstand voltages of
100 V or more, thereby suppressing the occurrence of electricalcorrosion and making it suitable for 800 V batteries.

NTN Report 2023

38

Value Creation Story“DRIVE NTN100” Phase 2

To revitalize our company, we urgently need to improve our cash flow through overall optimization of production.
In production restructuring, we are concentrating management resources on products and processes in which we candemonstrate our strengths, and we are promoting the realization of streamlined production and increased throughput inproduction reform.

About Us

Control Increase of Fixed Costs /Improve Asset Turnover

Production reform
Realize streamlined
production and increase
throughput

Promote overall optimization (rationalizationof the entire SCM) instead of partial
optimization (rationalization by process)Led by a dedicated promotion organization
Horizontal expansion of lean production system
Develop human resources to promote reform

Results and progress in the fiscal year ended March 31, 2023

Concentrate management
resources in products/
processes where NTN canleverage its strength

Reorganize domestic
production bases ofradial bearings

Outsource production of standard type products to overseas
bearing manufacturer (Break away from “self-efficiency”)
For special products, implement reorganization of production
with a new Wakayama Works playing a central role

Basic policy on production reorganization
enhance profitability by optimizing the entire supply chain.
In the production reorganization, we will freeze
investment in capacity expansion in principle, curb
costs by utilizing management resources for withdrawn
and downsized products, and shift to investment innatural disaster risk and safety measures, as well as inmaintenance and renewal of facilities.

Strengthening tripartite activities
In order to accelerate the speed of production reform, whichis “management reform,” it is essential to have a tripartite
system of management, promoters, and practitioners.
A video message from the President is posted on thecompany website to communicate throughout the company
the roles played by each level and the president’s strong
desire for the activities.
The management level (general managers of eachproduction site, presidents of affiliated companies etc.), having
made progress in fostering a general mindset, is working tostrengthen specific “behavioral” management for reform.
For promoters and practitioners, we provide group training
sessions where they can interact with other promoters to

Issues and priority measures for the fiscal year ending March 31, 2024
This fiscal year is a key year toward the new medium-term
management plan, and we will promote reform activities
focused on numerical values and the harvesting of results inorder to improve the cash conversion cycle.
In Japan, we will create scenarios for KPI achievement at
each production site and strengthen follow-up on the “surface”
side in order to make reform activities at production sites more
self-reliant (rules, system development, and human resource
development).
We will also expand the aim from data analysis tomultiple targets that maximize effectiveness, and accelerate
the development of the entire supply chain activities fromprocurement to sales for popular products with long leadtimes across suppliers and production sites.

Wakayama Works to consolidate high-performance products

39 NTN Report 2023

obtain hints for solving problems and promoting activities,
strengthen ties with their peers, and build a relationship ofmutual learning.
We also hold study sessions for sales divisions to learn
the importance of collaboration
between production andsales. After the study session,
there were cases where
information was shared withthe manufacturing division froma different angle, leading toactivities to build the entire supply
Internal website: message fromchain across related divisions.
the President

SASB Index

the backdrop of the transition to a decarbonized society. We
have positioned high-performance products such as “highspeed rotation and low torque” and “low noise and low
vibration” as one of our priority products, and have started toconsolidate high-performance products to Wakayama Works,
Ball Bearing Plant of Iwata Works, and NTN Mie Corporation,
which is the main manufacturing base for medium-sized radial
bearings. We will differentiate ourselves from our competitors
by introducing the latest production technology to ensure ourcompetitive advantage in terms of technical responsivenessand price competitiveness.
The space and management resources created by thereorganization of radial bearing production will be used toestablish a highly efficient production system by consolidating
manufacturing bases for tapered roller bearings, needle roller
bearings, and precision bearings, and to enhance profitability
by redefining the product portfolio. In addition, we will
establish a foundation for future manufacturing systems bylocating bases in consideration of the risk of natural disasters
such as earthquakes and tsunamis.

NTN Group Information

Production reorganization plan and progress
In “DRIVE NTN100” Phase 2, we are promoting thereorganization of production of radial bearings, one of ourcore products. Competition in the market for standard radial
bearing products is expected to increase further due to therise of LCC products and increasing commoditization. In
October 2022, we began to expand production outsourcing(approx. 5 million pcs/month) to our affiliated company,
TUNG PEI INDUSTRIAL CO., LTD. Utilizing the production
capacity and high efficiency production of the company,
we will strengthen the supply capacity of products for theaftermarket and reduce investment in maintenance andrenewal of production facilities, thereby enhancing profitability.
The expansion of outsourcing to TUNG PEI INDUSTRIAL CO.,LTD. is planned to be completed by October 2024, and wewill continue to strengthen cooperation with this company as
one of our main manufacturing bases for radial bearings.
On the other hand, the market for high-performance
products with high-speed rotation, low vibration, andinsulation performance is expected to expand due to theongoing shift to electrification and EVs in automobiles against

Sustainability Management

The market environment surrounding NTN is rapidlychanging against the backdrop of the transition to a
decarbonized society, including the shift to electrificationand EVs in the automotive market and the expansion of
the renewable energy business in the industrial machinery
market. Based on the growth strategy of each businessheadquarters, we will reorganize the production system inJapan from the viewpoint of product axis and base axis toengaged in activities covering the entire supply chain fromour manufacturing sites to each other and from suppliers tosales. In ball bearing supply chain optimization activities, wehave launched initiatives to shorten lead times in cooperation
with suppliers.
In addition, we have also started activities in the global
supply chain, and for export semi-finished products at the
Iwata CVJ Plant, we are working to establish a system forback-sailing based on actual demand in North America,
leading to a reduction in work-in-process inventory at theplant in North America. In the case of bearings for rolling stockin China, the change of transportation routes and the use of
a new warehouse
have produced
significant results:
transportation
lead time -39%,transportation cost
-78%, and inventory
at local sales
companies -33%.
Ball bearing supply chain optimization activity kickoff

Value Creation Story

Reorganization of production

For about three years since the start of activities, we havepromoted activities mainly at domestic business sites,
expanding the number of locations to 24.
The model numbers and lines targeted at each location
have reduced lead times, and some locations have seen an
improvement in inventory turnover, a management indicator.
At the Large Bearing Plant of Kuwana Works, throughput
increased 12.5% and inventory turnover increased 5% (bothcompared to the previous year), and at the NTN Kamiina
Corp., inventory reductions due to process streamlining andassociated reductions in external warehouse costs resulted in
improved profits.
However, on a company-wide basis, the company
has not completely broken away from a structure that issusceptible to demand fluctuations and other external
environmental influences, and its indicators have beensluggish. Therefore, we have been accelerating “surface”
activities that fill the two axes of “expansion from model
numbers to others” and “development of activities thatconnect the entire supply chain.”In particular, during the last fiscal year, we have been fully

As for activities linking Japan and overseas, we will
accelerate PSI (production, sales, and inventory) visualization
targeting the reduction of overseas semi-finished productinventory, and develop a system that is resistant to demand
fluctuations. Particularly, for small-lot aftermarket products,
we will design and manage strategic inventories on a global
basis to reduce lost sales opportunities and achieve high profit
margins.
In anticipation of full-scale global reform activities startingin the next fiscal year, we have already started production
reform activities in each region, starting with China and
ASEAN countries. We will establish a promotion system foreach region, utilizing local consultants.

Delivering “speedy” “satisfaction” to customers through DX

NTN Report 2023

40

Value Creation Story“DRIVE NTN100” Phase 2

Reduce Variable Cost/Procurement Reformation

Promotion of DX (Digital Transformation)

In the Medium-term Management Plan, “DRIVE NTN100” Phase 2, the NTN Group’s basic strategy is to accelerate thetransformation of its business structure by integrating digital technology with the Company’s accumulated management
resources. Based on this basic strategy, we are promoting the sophistication of business management through therenewal of our IT core system. We support the formulation of global sales strategies by building a system that enables
an instant grasp of the profit and loss status of each region, business, and product type, and by visualizing the profit
and loss status. In addition, we are optimizing inventory holdings to respond immediately to demand fluctuations byvisualizing the supply chain, and in the manufacturing process, we are promoting a smart factory by introducing IoT
and AI, overall optimization, and streamlining. For customers, we are working to create and expand new businesses
by expanding the introduction of condition monitoring systems (CMS) that monitor operating conditions of the windturbines, etc., and by providing advance prediction of failures by combining AI.
“DRIVE NTN100” Phase 3“DRIVE NTN100” Phase 2 (Increase efficiency / accumulate data)

Realize the best mix of global and local procurement (optimal procurement)
Expand and accelerate unification of contract operations (centralized purchasing)
Strengthen management by category1

41 NTN Report 2023

CAE: Streamline development / trial production / analysis

and by improving the quality and quantity of information
shared globally, we are making the best decisions andselections.
In fiscal year ending March 31, 2024, we will globally
disseminate the strategies planned and drafted in Japan,
and by sharing information more frequently globally,
we aim to establish management by category and toachieve procurement that is not affected by the external
environment as much as possible.

Upgrade business administration
P.64
Promote
RPA useIntroduce communication tools in response to work stylereforms3

Promote smart factory

Optimize production by introducing IoT and AI into production process

4

CMS (Condition Monitoring System)

Monitor operating condition of wind turbines, rolling stocks, etc.

Shorten development time and increase efficiency bypromoting Digital Transformation of design work
Aiming to shift from numerical analysis to explain experimental
results to numerical analysis that can replace experiments, we
are working to incorporate advanced analytical techniques andto develop and improve analytical systems that incorporate
the know-how of dedicated engineers so that even ordinary
design engineers can perform the same level of analysis as
analytical engineers. In “DRIVE NTN100” Phase 2, the following
technological developments have improved convenience andshortened product design lead times.
Automation of analysis processes required for design
and introduction of optimal design technologies
Reduce calculation time by designing a system thatmakes effective use of computing resources and bymodeling appropriately
Visualization of input/output, creation of support
tools/templates for complicated input work
In addition, we are also working to analyze design informationand computational data using AI and visualization tools to create
new value that contributes to design.

Environmental business(to adapt to “carbon neutrality”), etc.

P.39
Reorganization of production

Launch of Wakayama Works
Realize streamlined production by “visualization” of process condition

Create new business

P.40
Production reform

P.52
Realize a sustainable society
using natural energy

SASB Index

Tung Pei Industrial Co., Ltd. can be facilitated. In thefiscal year ending March 31, 2024, we will use AI andother technologies to strengthen price data analysis for
products and parts that have been centrally purchased,
and aim for digital transformation of quotation operations.
Also in China and India, where local procurement is mainpurchasing means, we will visualize and standardize
procedures so that similar measures can be implemented
in these countries.

(3) Strengthen management by category
Mainly in Japan, we are planning and implementing
a procurement strategy that considers the latest
external environment by categorizing products andparts. In addition, as material prices and procurement
availability change significantly due to the influenceof the external environment, sharing information by
category with procurement personnel of each region
has become increasingly important. In the purchasing
division at our head office, we increase the number of
personnel engaged in procurement planning/strategy,

RPA: optimize routine operations, and go paperless forreports, utilizing IT core system

Predict breakdowns in advance by using AI(2) Expand and accelerate unification of contract operations (centralized purchasing)
Previously, the production control section of each site
was in charge of supplier selection and quotation, andin Japan, we have assigned these operations to thepurchasing departments at our head office. By the fiscal
year ended March 31, 2023, centralized purchasing of allaxle products and about 50% of ball bearings and CVJs
has also been completed. This centralized purchasing
has facilitated cross-organizational selection of suppliers
and the development of new suppliers, and in particular,
for ball bearings, smooth transfer of small products toBusiness reform with digital technology

Integrate accumulated data such as
sales / production / procurement /logistics/ finance / process / CMS

NTN Group Information

we have initiated our activities based on these countries
as global procurement bases. Most recently, we havesuccessfully exported bearing parts from India to Japan
and North America, and have also started exports fromSouth Korea to Japan and North America. In the fiscal
year ending March 31, 2024, we will strengthen ourcollaborative systems with local suppliers and expand“optimal procurement,” and at the same time, instead of
placing too much importance on a single base, we will
promote dual-sourcing and multi-sourcing to achieve
cost reductions and stable procurement.

2

Digital technology

In the past, we promoted activities based on the policies
of “local procurement in each region” and “China as
an export base for procurement,” however, due tothe soaring labor costs in Europe and the U.S. after
COVID-19 pandemic, weakening of the yen, and the
trading friction between China and the US, we believethat local procurement and China as an export base are
no longer our optimal solutions. Therefore, in “DRIVE
NTN100” Phase 2, in addition to Japan and China,
we added South Korea, which has long been a major
procurement source for European locations, and India,
whose drastic growth in the future can be expected, andP.60
Stabilize newcore system

Promote utilization of inventory within NTN Group

20.0 billion yen / 3rd year

(1) Realize the best mix of global and local procurement (optimal procurement)

Integrate data
Sustainability Management

Achievements of reform

New IT core system

Strengthen responsiveness to market changes by“visualization” of sales / production / procurement /logistics, and optimize inventory

Achievements of “DRIVE NTN100” and steady implementation of new measures

Value Creation Story“DRIVE NTN100” Phase 2“DRIVE NTN100” Phase 2

About Us

In the basic operations of “buying,” “producing,” and “selling" we will strengthen cost competitiveness in the process of“buying” materials and parts by reducing variable cost and procurement reform. In the second year of “DRIVE NTN100”
Phase 2, we achieved results that were largely in line with our targets through procurement reforms, even as costs
continued to rise more than expected.
In the fiscal year ending March 31, 2024, our focus will be placed on [1] Realize the best mix of global and local
procurement, [2] Expand and accelerate centralized purchasing and [3] Strengthen management by category, whose
global activities have been limited due to reasons such as the impact of COVID-19 pandemic, and we aim to ensure
successful achievement within this fiscal year by clarifying policies and strategies under the leadership of Japan.

Value Creation Story

DX human resource development
We offer AI and data literacy courses to promote
the use of data and digital technologies to solve
business issues and to transform organizations,with 782 participants taking courses in the fiscal
year ended March 31, 2023. By actively increasing
the number of participants in each age group andworkplace, we will expand the base of AI literacy,
data analysis, and other digital literacy applications
throughout the company. The program offers a varietyof learning opportunities depending on the level ofthe participants, and by offering an advanced course,
we aim to develop human resources who can makeadvanced use of data analysis and machine learning.
High end
Middle skill

Base skill

NTN Report 2023

42

Value Creation Story

CFO Message
About Us

Executive Officer, CFO (Chief Executive Officer)

Masaaki Yamamoto

billion yen increase in the Americas due to special factors
such as higher labor costs and disruptions in production.
In terms of expenses and other costs, there were special
factors such as a 7.5 billion yen increase in transportation
costs mainly due to soaring ocean freight rates and a
1.8 billion yen increase in depreciation costs associatedwith the full-scale operation of IT core systems in Japan.
Excluding these special factors, the increase in fixed
costs was 3.7 billion yen, less than 15% of the 26.8
billion yen increase in volume-based sales.

Value Creation Story

Toward establishing a business foundationfor enabling sustainable growth as a
global company

billion yen, including procurement reforms, in responseto the 37.0 billion yen in price hikes of various materials
including energy prices, resulting in a negative factor of
31.4 billion yen. Recently, compared to the 37.0 billion
yen of cost increases in the previous fiscal year, the paceof steel price increases in particular has calmed down,
but inflationary costs continue to rise.
In fixed costs, personnel costs increased by 10.7
billion yen, and expenses etc. rose by 8.3 billion yen,amounting to a negative factor of 19.0 billion yen. The
increase in personnel expenses was mainly due to a 6.0*All figures in billion yen

Positive factors(60.7)

An urgent task for achieving the NTN Revitalization Scenario is to realign our automotive business. We have set a target of eliminating
the operating loss in the fiscal year ending March 31, 2024, by thoroughly passing on inflationary costs to sales prices, reducing
variable costs through procurement reforms, and continuing to control fixed costs.

Scale effects+12.1

2022/3Full year
Operatingincome(Results)
6.9

Actual results for the fiscal year ended March 31, 2023

Increase invariable costs-31.4

Cost reduction +5.6
Cost increase -37.0

Increase inpersonnel
costs
-10.7

2023/3Full year
Operatingincome(Results)
17.1

Expenses etc.
(Depreciation,
Others)-8.3

NTN Group Information

Actual results for the fiscal year ended March 31, 2023, and forecast for the
fiscal year ending March 31, 2024

1

Negative factors(-50.4)
Exchange
rates
+14.6

Sales price
level
+33.9

Sustainability Management

Analysis of Operating Income (2022/3 Results vs 2023/3 Results)
Analysis of Operating Income (2022/3 Results vs 2023/3 Results)+10.3

Key points

43 NTN Report 2023

business. In contrast, the aftermarket business andindustrial machinery business each posted recordhigh operating income, achieving the operating margin
targets set in the Medium-term Management Plan
“DRIVE NTN100” Phase 2 one year ahead of schedule.
We have resumed dividend payments for the first timein three fiscal years, paying an annual dividend of 5 yen
per share.
2

Profit Analysis (year on year)

Breakdown of positive factors (60.7 billion yen)
The largest positive factor is the sales price level,
accounting for 33.9 billion yen. We worked to pass on
to our customers the higher steel prices as well as otherinflationary cost increases such as higher variable costs
and higher ocean freight rates. However, we did notmeet some of our targets, mainly for our automotive
customers. The scale effects of 12.1 billion yen arosefrom the impact of higher sales and production (9.9billion yen), inventory valuation, and other factors. Adding
the impact of exchange rates of 14.6 billion yen to thistotal, the positive factors amounted to 60.7 billion yen.
Breakdown of negative factors (50.4 billion yen)
In variable costs, we carried out cost reductions of 5.6

Forecast for the fiscal year ending March 31, 2024
1

SASB Index

For the fiscal year ended March 31, 2023, net sales were774.0 billion yen (up 20.6% year on year), operating
income was 17.1 billion yen (up 149.2%), ordinary
income was 12.0 billion yen (up 76.8%), and profit
attributable to owners of parent was 10.4 billion yen(up 41.2%). However, compared with the forecasts
announced in October 2022, operating income fell shortby 34.2%, ordinary income was 47.6% lower, and profit
attributable to owners of parent was 13.6% lower. The
shortfall in profits compared with our forecasts was
mainly due to production adjustments made in the
fourth quarter with a focus on cash flow in anticipationof a delay in the recovery of demand from automotive
customers; an additional rise in variable costs, including
accepting price increases from suppliers; and also to
insufficient progress on raising our sales prices. On theother hand, we controlled fixed costs amid fluctuating
sales and improved both free cash flow and our net D/E
ratio. By steadily carrying out various measures, we met
our announced targets in these areas.
In terms of profit/loss by business segment, theautomotive business suffered severe results, continuing
to post an operating loss for the fourth consecutive
fiscal year. This was mainly due to additional increases
in variable costs, failure to raise sales prices, andlockdowns that affected the high-margin Chinese

Key points

Continuing on from the previous fiscal year, the key
issues for the fiscal year ending March 31, 2024, will beto strongly drive the transfer of inflation costs to sales
prices, and to steadily reduce variable costs, including
procurement reforms and control fixed costs. Looking at
the year ahead by business segment, it will be essential
to maintain operating margins in the industrial machinery
business, where sales volume is down from the previous
year, and in the aftermarket business, where sales
volume is flat. We must also eliminate operating losses in
the automotive business, where we expect sales volume
to grow as the semiconductor shortage eases, by both
responding to increased production and implementing
the above key issues. In addition, as a medium- tolong-term initiative for enhancing the profitability of theautomotive business, we plan to carry out a realignmentof our organization and production, mainly in Europe
and the Americas. For the fiscal year ending March 31,
2024, after factoring in some losses from restructuring
and other factors, we project net sales of 810 billion yen,operating income of 30 billion yen, extraordinary lossesof 4 billion yen, and profit attributable to owners of parentof 11 billion yen. The Company plans to pay an annual
dividend of 10 yen per share.
ReturntoShareholders
Shareholders
Return toInterim dividends

Year-end dividends

15 yen* 15 yen

10 yen 7.5

7.5

10 yen

5

5

5 yen
5
2017/3

7.5

2018/3

7.5

2019/3

5 yen
2.5

5
2020/30 yen 0 yen

2.5

2021/32023/3*Including 100th anniversary commemorative dividends

2022/352024/3(Forecast)

NTN Report 2023

44

Value Creation Story CFO Message
About Us

2

Profit Analysis (year on year)32023/3Full year
Operatingincome(Results)
17.1

45 NTN Report 2023

Positive factors(31.7)

Sales price
level
+22.9

Scale effects+5.2

Expenses etc.
(Depreciation,
Others)+3.0

Negative factors(-18.8)Exchange
rates
+0.5

Increase invariable costs-14.8

Cost reduction +6.5
Cost increase -21.3
Increase inpersonnel
costs
-3.9

2024/3Full year
Operatingincome(Forecast)
30.0

FY2023/3
Results

FY2024/3
Forecast 2

2 - 1

562.8 billion

700.0 billion or more

774.0 billion

810.0 billion

110.0 billion

Operating income-3.1 billion

42.0 billion or more

17.1 billion

30.0 billion-12.0 billion

Operating margin-0.6%

6% or more

2.2%

3.7%

-2.3pt(Aftermarket)

9.7%

12.0%

16.6%

16.9%

+4.9pt(Industrial machinery)

0.3%

4.0%

5.2%

5.6%

+1.6pt(Automotive)

-3.4%

4.7%

-2.5%

0.0%

-4.7pt18.5 billion

27.0 billion or more

20.4 billion

29.0 billion

2.0 billion

3.2

4.1

3.2

3.7

-0.4

20.4%

20% or more

25.4%

25.8%

+5.8pt1.6

1.5 or less

1.2

1.1

-0.4

ROIC

-0.4%

5% or more

2.0%

3.6%

-1.4ptROE-7.1%

8% or more

5.0%

5.0%

-3.0ptFCF
Inventory turnover ratio
Equity to capital ratio
Net D/E ratio

Toward medium-to long-term growth
Our current Medium-term Management Plan ends in thefiscal year ending March 31, 2024, and the next threeyear medium-term management plan will start from April
2024. Ahead of this, we carried out an organizational
reform in April of this year with the aim of enhancing
the strategic functions of the head office division. In thehead office division, we will transform ourselves into anorganization that can contribute to the business activitiesof the entire group. We will do this by enhancing ourability to formulate the head office and business divisions
are in talks aimed at drawing up the next medium-term
management plan. The next medium-term management
plan will continue the measures set forth in the current
Medium-term Management Plan. These include lowering
the break-even point for sales (product/business portfolio
reform, procurement reform, fixed cost control) andexpanding cash flow (production and logistics reform).
While we will not be able to achieve our medium-term
management targets for ROIC of 5% and ROE of 8%, wewill work to achieve these at the earliest possible date.
In addition, we will steadily promote structural reforms

SASB Index*All figures in billion yen

Net sales

DRIVE NTN100
Phase2 1

NTN Group Information

Analysis of Operating Income (2023/3 Results vs 2024/3 Forecast)Analysis of Operating Income (2023/3 Results vs 2024/3 Forecast)

FY2021/3
Results

Sustainability Management

Breakdown of negative factors (18.8 billion yen)
In variable costs, we plan to carry out cost reductionsof 6.5 billion yen, including procurement reforms, in
response to 21.3 billion yen in price hikes of various
materials including energy prices, resulting in a negative
factor of 14.8 billion yen. Although the pace of steel
price increases in particular has eased compared to the37.0 billion yen of cost increases in the previous year,
inflationary costs continue to rise.
As for fixed costs, we expect personnel expenses tolead to a negative factor of 3.9 billion yen. Labor costs
are likely to increase mainly in Japan (1.4 billion yen) andEurope (1.6 billion yen) due to rising prices and otherfactors. In the Americas, however, where labor costs rosein the previous fiscal year due to soaring labor costs andproduction disruptions, we expect these cost increases
to ease. The increase in fixed costs, which includes a
3.9 billion yen increase in personnel expenses and a
1.9 billion yen increase in expenses and other items
excluding transportation costs, is set at 5.8 billion yen.
This is based on our existing standard of limiting theincrease to within 15% (6 billion yen) of the 40.1 billion
yen increase in sales volume.

The fiscal year ending March 31, 2024, will be
the final year our Medium-term Management Plan
“DRIVE NTN100” Phase 2, aimed at strengthening
our financial position. The business environment haschanged drastically since we formulated the Mediumterm Management Plan. This was mainly due to thesituation in Ukraine as well as the economic slowdown
in China stemming from lockdowns in response to there-emergence of COVID-19. Prices of raw materials,
energy, and other materials have soared. Prolonged
semiconductor supply shortages have slowed theresumption of automotive production.
Despite these difficult conditions, we expect tomeet the operating margin targets in the Medium-teamManagement Plan for the aftermarket business andfor the industrial machinery business. However, we will
not be able to achieve the operating margin target in
the Medium-term Management Plan for the automotive
business. This is due to the impact of soaring materials
prices which continue to bring costs that we will have topass on to sales prices.
Although we will not achieve our operating margin
targets for the entire company due to the automotive
business, whose sales volumes are large, we have beensteadily improving our financial position through steadyrecovery of our performance each fiscal year, as well as
the sale of idle assets, and robust financial management
within the Group. As a result, we expect to achieve theMedium-term Management Plan targets for free cash
flow, equity ratio, and net D/E ratio.
Although some of the goals set in the Medium-termManagement Plan, such as ROIC of 5% and ROE of 8%,
will be pushed back to the next fiscal year and beyond,we will continue our management to strive for corporate
value creation.

Comparison with Medium-term Management Plan target

Value Creation Story

Breakdown of positive factors (31.7 billion yen)
The largest positive factor, in keeping with the previous
year, is sales price levels, amounting to 22.9 billion yen.
Scale effects are expected to be limited to 5.2 billion
yen as a result of a conservative estimate of the impact
of inventory reductions and of a deteriorating productmix as a result of higher ratio of automotive business.
Although we expect an increase in expenses due to theincrease in scale effects, we anticipate total expenses
to decrease by 3.0 billion yen as marine transportation
costs, which rose sharply in the previous fiscal year,
begin to decline. This, together with a 0.5 billion yen
impact from exchange rates, is expected to result in
positive factors of 31.7 billion yen.

Comparison with Medium-termManagement Plan targets

such as realigning our production as we work to further
strengthen our financial position.
In addition, we plan to set and disclose targets for
non-financial indicators such as promoting carbon
neutrality and investing in human resources (humancapitalism). We aim to increase corporate value by
steadily improving our financial strength and non-financial
indicators, and to achieve a P/B ratio of greater than
1 by engaging with investors to gain the appreciationof the stock market. I would like to thank all of our
stakeholders for their continued support, guidance andencouragement.

+12.9

NTN Report 2023

46