NTN Corporation
Consolidated Financial Results for the First Half of FY2023
November 2, 2023

Event Summary[Company Name]NTN Corporation[Company ID]

6472-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Consolidated Financial Results for the First Half of FY2023[Fiscal Period]

FY2023 Q2[Date]

November 2, 2023

[Number of Pages]

36[Time]

15:30 – 16:51(Total: 81 minutes, Presentation: 32 minutes, Q&A: 49 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

5Eiichi Ukai
Hideaki Miyazawa

Masaaki Yamamoto
Etsu Harima
Tatsuo Nagao[Analyst Names]*

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Yuichiro Isayama
Tomohiko Sano

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Director, Representative Executive Officer,
President, Executive Officer, CEO
Director, Representative Executive Officer,
Executive Officer, Corporate General
Manager, Automotive Business HQ
Director, Executive Officer, CFO
Executive Officer, Aftermarket Business HQ.,
Industrial Business HQ.
Corporate Strategy Division, Public Relations& IR
Mitsubishi UFJ Morgan Stanley
Goldman Sachs
JPMorgan Securities

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Hirosuke Tai

Daiwa Securities*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or
whose questions were read by moderator/company representatives.

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Presentation
Nagao: Now that the time has arrived, we will begin the IR presentation of NTN Corporation’s financial resultsfor Q2 of the fiscal year ending March 31, 2024. Thank you very much for taking time out of your busy schedule
today to participate in our financial results IR presentation.
To begin, I would like to introduce the attendees. Ukai, Director, Representative Executive Officer, President,
Executive Officer, CEO.
Ukai: This is Ukai. Thank you for your cooperation.
Nagao: Yamamoto, Director, Executive Officer, CFO.
Yamamoto: I am Yamamoto. Thank you for your cooperation.
Nagao: Miyazawa, Director, Representative Executive Officer, Executive Officer, Corporate General Manager,
Automotive Business HQ.
Miyazawa: My name is Miyazawa. Thank you for your cooperation.
Nagao: Harima, Executive Officer, Aftermarket Business HQ., Industrial Business HQ.
Harima: My name is Harima. Best regards.
Nagao: Nagao and Kouge of the Corporate Strategy Division will be your moderators for today. Thank you foryour cooperation.
Today's briefing will follow the briefing materials distributed to your registered email address. The documents
are also available on our website, if you do not have them.
Today, President Ukai will first explain the key points of the financial results, followed by CFO Yamamoto's
explanation of the financial results for Q2 of the fiscal year ending March 31, 2024 and the outlook for the full
year. After the explanation, there will be a Q&A session and the meeting is scheduled to end at 5:00 PM.
Now then, President Ukai, please go ahead.

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Ukai: My name is Ukai from NTN. Thank you very much for taking time out of your busy schedule today toattend our earnings presentation. We would also like to take this opportunity to thank our shareholders andanalysts for their continued support.
CFO Yamamoto will explain the details of the financial results and the analysis of profit increase/decrease indetail later. I will explain the main points of the financial results.
See page three. In H1 of the year, both sales and income increased from the previous year and from theannouncement, with the exception of net income.
Net sales totaled JPY409.6 billion. The progress in resolving the shortage of semiconductors, together withimproved selling prices in response to soaring raw material and energy prices and the impact of foreignexchange due to a weaker yen, resulted in a JPY37.9 billion increase in sales from the previous fiscal year anda JPY5.6 billion increase from the announced figures.
Operating income was JPY6.8 billion. While affected by a decrease in the volume of goods shipped forindustrial machinery, the increase was JPY2.9 billion more than the previous year and JPY0.3 billion more than
the announced figure, due to factors such as progress in improving selling prices, reductions in fixed costs thatexceeded plans—including lower ocean freight costs and productivity improvements—and the impact offoreign exchange rates.
Ordinary income was JPY4.9 billion, and net income attributable to owners of the parent was JPY4.1 billion.

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4Inventories totaled JPY256.1 billion, a JPY16.7 billion increase from the end of the previous fiscal year, but thiswas due to foreign exchange effects and a slight decrease in physical inventory.
Free cash flow was positive JPY24.2 billion, mainly due to continued curbing of capital investment.

See page four. I will explain the key points of the H1 results by business segment.
In the aftermarket, demand declined in Japan as the recovery from the pandemic ran its course, but sales
increased by JPY3.9 billion from the previous fiscal year and by JPY0.3 billion from the announced figure, partly
due to the promotion of selling price improvement and the effect of foreign exchange rates.
Operating income, on the other hand, decreased by JPY1.1 billion from the previous year and by JPY1.6 billion
from the previous announcement, owing to these factors: the loss incurred from the bankruptcy of ourdistributor in Q1; and an increase in fixed costs due to lower factory utilization rates resulting from decreased
demand for industrial machinery, despite the improvement in selling prices.
Sales for industrial machinery decreased by JPY4.3 billion from the previous year and increased by JPY0.3
billion from the announcement due to decreased demand from major industries excluding rolling stock, suchas construction machinery, agricultural machinery, and gearboxes.
Operating income decreased by JPY1.3 billion from the previous year and decreased by JPY0.6 billion from theannouncement due to the decrease in scale, although the increase in steel and energy prices wascompensated for by the improvement in selling prices.

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Sales to the automotive industry increased by JPY38.3 billion from the previous year and JPY5 billion from theannouncement, due to the progress in resolving the shortage of semiconductors, as well as the effect offoreign exchange rates. Operating income increased by JPY5.3 billion from the previous fiscal year and JPY2.5
billion from the announcement, due to the promotion of selling price improvement, reduction of fixed costs
by decreasing ocean freight rates, and productivity improvement.
As for H1 of the year, we were unable to make up the Q1 loss and are still in the red, but the Q2 results were
the first quarterly operating profit since Q4 of the fiscal year ended March 31, 2021.

See page five. While the global economy continues to pick up, the situation in Ukraine, as well as the effectsof rising energy prices and inflation, coupled with tightening global monetary conditions, remain uncertain.
Under these circumstances, and because of the current situation in the Middle East and the difficulty inforeseeing a recovery from the US auto strike, which has already ended, we maintain our full-year forecasts
announced on August 2, 2023: net sales of JPY825 billion, operating income of JPY30 billion, ordinary incomeof JPY23 billion, and net income attributable to owners of the parent of JPY11 billion.

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6See page six.
As explained earlier, in light of the current business environment, we have left the previous forecasts for eachbusiness segment unchanged.

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7See page seven. This page will discuss the challenges and countermeasures in the aftermarket and industrial
machinery business.
Demand from the aftermarket is expected to remain flat overall, with a continued decline in Japan, but anincrease in the Americas and Europe, especially in the high-margin automotive aftermarket.
On the other hand, demand for industrial machinery is weak.
Demand is expected to decrease for construction machinery and wind power generation, where inventory
adjustment continues mainly in the US, and for gearboxes for robots, due to the impact of reduced newinvestment in China. Demand in other industries is also expected to remain sluggish from the previous year,with the exception of rolling stock.
Under these demand conditions, we will implement the following measures to improve profits.
First, we will steadily implement our ongoing efforts to improve selling prices in line with inflation and otherfactors, as well as to raise prices and scale back unprofitable businesses.
Secondly, we will improve factory utilization rate, expand sales, and improve profits by redirecting production
capacity due to decreased demand for industrial machinery to shipments to the aftermarket and to expand
standing inventory. The Wakayama Works, our newest plant, has also begun operations and will contributeto strengthening our supply capacity for the aftermarket.

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We will also expand procurement in optimal locations by developing and selecting new suppliers without
sticking to traditional suppliers, and thoroughly control fixed costs in response to declining scale.

See page eight. As explained at the Q1 financial results meeting held in August this year, our primary mission
in the automotive business is to return to profitability in the current fiscal year, and as initiatives to achieve
this mission, we have raised the strengthening of price revision activities and the cost reduction throughprocurement reforms and improvement of MIX. I will explain the progress of each of these.
The first step is to strengthen price revision activities. Reflecting on last year's activities, negotiations are being
escalated at an early stage to promote a reliable shift of inflationary costs to selling prices, and at this point,some of the results are being achieved ahead of schedule. We will continue to secure reasonable prices alongwith profit improvement in unprofitable businesses.
Next is cost reduction through procurement reforms. From H2 of this fiscal year, we will adopt pre-process
products from Korean manufacturers in the US and expand centralized procurement negotiations for steel
materials to reduce costs.
As for the improvement of MIX, new orders in the target segment will contribute to improved profits,
including the start-up of CFJ, a high-efficiency fixed type constant velocity joint for which we had received anorder for mass production, in Europe in H2, and the full-scale mass production of CVJ in-house switchingproducts for a Japanese automobile manufacturer.

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As for other activities, in the US, where the impact of inflation, including labor costs, has been significant,productivity has improved as a result of better employee retention and improved technical proficiency.
By steadily implementing and delivering results from these initiatives, we will achieve profitability for the fullyear.

See page nine. I would like to explain the outlook for shareholder returns.
The Company's policy is to pay dividends in proportion to operating results while maintaining stable dividend
payments from a medium- to long-term perspective.
In addition, we have set a target of 4% DOE for stable dividends.
For the current fiscal year, we plan to pay an annual dividend of JPY10 per share, unchanged from the forecast
at the beginning of the year. We will steadily pursue earnings recovery toward our goal of 4% DOE, which is
our target for stable dividends.

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10See page 10. We will explain our approach to ESG management.
With the aim of steadily promoting the action plan to achieve the carbon neutral goal, the Group is working
to reduce CO2 emissions through activities such as energy visualization and energy conservation improvement,
energy conversion of heat treatment facilities, purchase of CO2-free electricity, and use of natural energy
generation.
In July, the Carbon Neutral Promotion Committee and regional subcommittees were established in each
district, creating a global promotion system.
In addition, as an approach to disaster prevention and mitigation to reduce the impact of natural disasters on
people's lives, we are developing the market for N3 N-CUBE, which contains a small wind power generator,
solar panels, and storage batteries in a container.
In addition to conventional charging of mobile devices, we have begun proposing new ways to use the stations
as charging stations for personal mobility vehicles such as electric bicycles and electric kickboards, which
provide mobility for sightseeing and in times of disaster.
We will hold a separate ESG presentation meeting in December, at which we will explain these ESG
management initiatives in detail.
That is all from me.

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Nagao: Thank you, President Ukai. Yamamoto, CFO, will then present the financial results for Q2 of the fiscal
year ending March 31, 2024 and the outlook for the full fiscal year. CFO Yamamoto, thank you for your time.

Yamamoto: My name is Yamamoto.
Now, please turn to page 13. Key indicators of consolidation.
As Ukai mentioned earlier, the H1 results show net sales of JPY409.6 billion, operating income of JPY6.8 billion,
ordinary income of JPY4.9 billion, and net income of JPY4.1 billion after posting an extraordinary loss of JPY0.4
billion.
Inventories totaled JPY256.1 billion, an increase from the previous year, but a decrease of JPY0.2 billion
excluding foreign exchange factors. Free cash flow was JPY24.2 billion, which is very favorable progress against
the full-year target of JPY29 billion.
Also, in the increase/decrease section, excluding foreign exchange, (2) minus (1), sales increased by JPY19.9
billion, but operating income decreased by JPY2.2 billion, and this information is explained on page 14.

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Please see page 14. This is an analysis of the change in operating income between H1 of the previous year andH1 of the current year.
First, on the right side are the factors that reduced profits. The scale of the project is listed here at JPY13.7
billion. On the other hand, the selling price level is plus JPY18 billion on the left side. I mentioned earlier thatthe increase in sales was JPY19.9 billion, so if we subtract the selling price level, sales based on physical volume
increased by only JPY1.9 billion.
On the other hand, in the previous fiscal year, we had increased inventories and built up production
considerably. Compared to the previous year, production has decreased significantly, and inventory valuation
has fallen. The deterioration in the composition of the industry, with a drop in sales of industrial machinery
aftermarket and an increase in automotive sales, is included in the minus JPY13.7 billion figure for scale andother items.
The variable cost was JPY9.6 billion, but the rise in cost was JPY14.7 billion, of which the energy cost has beencalming down, but compared to H1 of the previous year, the rise in cost was about JPY10.4 billion. This is thebreakdown of the variable cost of JPY9.6 billion.
In addition, expenses, in particular, increased by JPY2.1 billion due to a significant return of shipping costs,
personnel expenses increased by JPY1.1 billion, and foreign exchange effects increased by JPY5.1 billion,
resulting in a YoY increase of JPY2.9 billion.

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Next, page 15. This is the difference between the operating income of JPY6.5 billion announced in August for
H1 of the fiscal year and the actual results of JPY6.8 billion.
On the right side, the scale and other factors are negative JPY4.4 billion, but the volume of goods soldexcluding the selling price level decreased by less than JPY7 billion, so the scale and other factors are negative
here due to the impact of that and inventory valuation.
On the left side, the sales price level is up JPY1.8 billion, of which JPY1.5 billion accounts for automotive
business and JPY0.3 billion accounts for the aftermarket. In addition, the variable costs were a factor in an
increase in profit of 1.1 billion yen as cost reduction was higher than originally forecasted, resulting in a JPY1.2
billion increase due to cost reductions and a JPY0.1 billion decrease due to soaring costs.
Also, control of expenses and personnel costs has been effective, resulting in an increase in profit of JPY0.4
billion each.

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Please refer to page 16. This is the status of sales by region.
Since we have not changed the results for H1 and the forecast for the full year, we have not changed the sales
by region or the forecast.
The key point here is the increase/decrease excluding foreign exchange rates, (2) minus (1), but of the JPY19.9
billion, JPY18 billion is due to the price increase, so there is only a JPY1.9 billion increase in terms of physicalquantity. The breakdown of the volume by region is as follows: Japan added JPY1.9 billion in volume, theAmericas added JPY2.2 billion, Europe was almost flat, and Asia and other regions were minus JPY2.1 billion.
In Asia and others, the decline in the Chinese market has had a considerable impact.

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Next, please turn to page 17. This is the situation by business segment.
The upper row shows net sales and the lower row shows operating income. The key point here is that theexcluding exchange rate for the same period last year, (2) minus (1), as I mentioned earlier, this JPY19.9 billion
includes JPY18 billion in price increase, so I will exclude those figures.
Excluding price increases, the aftermarket will be minus JPY2.8 billion, industrial machinery minus JPY9.7
billion, and automobiles plus JPY14.4 billion.
Due in part to the impact of this reduction in scale, operating income in the bottom row shows a YoY decreaseof JPY1.1 billion in the aftermarket, a decrease of JPY1.3 billion in industrial machinery, and an increase of
JPY5.3 billion in automotive business, for a total increase of JPY2.9 billion, which is the breakdown by businesssegment.

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Please continue to page 18. As I mentioned, here are the quarterly changes by business segment.
The bar graph on the left shows net sales, the bar graph on the right shows operating income amount, andthe line graph shows operating margin.
Comparing Q1 and Q2, aftermarket profit decreased by JPY0.7 billion from JPY4.8 billion to JPY4.1 billion,
mainly due to a decrease in scale. In the industrial machinery business, the decrease from JPY0.9 billion to
JPY0.5 billion was also due largely to a reduction in the scale of operations.
Conversely, for automotive business, the figure was JPY4.7 billion, up from minus JPY4.1 billion to plus JPY0.6
billion. This is a price pass-on measure. In particular, in Japan, we will pass on a large portion of the costs toselling price in September, which will have an impact, and we have also reduced fixed costs, resulting in a
JPY4.7 billion increase in profit over the previous quarter.

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Please see page 19. This is the situation by company location.
The upper row is a bar graph of net sales, and the lower row is a bar graph of operating income amount anda line graph of operating margin.
First of all, in Japan, there was a JPY5.3 billion decrease in profit due to the impact of the scale of the businessfrom H2 of the previous fiscal year to H1 of the current fiscal year. As a result, the operating margin also
decreased from 5.1% to 2.3%.
In the Americas, although there was an improvement from the same period of the previous year, there was aslight decrease when comparing H2 of the previous fiscal year with H1 of the current fiscal year. However, inAugust and September, on a monthly basis, we achieved profitability.

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Please continue to page 20. The same graph is for Europe, Asia, and others.
In Europe, both the amount and rate of operating income deteriorated from H2 of the previous fiscal year.
Since Europe has a long summer vacation, fixed costs, etc. have been reduced, but there is inevitably adecrease in the volume of goods. On a monthly basis, Europe also returned to profitability in September.
Profitability of ASEAN has been very stable, and both the amount of profit and profit margin have improved
compared to H2 of the previous fiscal year.

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Please continue to page 21. Inventories.
September 2023 was JPY256.1 billion with a turnover of 3.2. As I mentioned earlier, the figure is up JPY16.7
billion from the end of March, but the foreign exchange impact is JPY16.9 billion, and the volume is down
JPY0.2 billion, almost unchanged.
The forecast and target figures for March 2024 remain unchanged, which is JPY230 billion. Due to the impactof foreign exchange rates, the actual inventory volume is JPY10.7 billion, and if this amount is reduced, thetotal inventory volume will reach JPY230 billion. In particular, we plan to reduce materials, parts, and work inprocess.

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20Moving on to page 22, this is the status of capital expenditures a nd depreciation.
This is the fourth bar from the right in the bar graph. This represents a capital investment of JPY10.5 billion
for H1 of the current fiscal year. The forecast for the full year is JPY28 billion, so we are almost on plan. Also,
depreciation was JPY20.7 billion in H1 and is projected to be JPY41 billion for the full year, so it is also roughly
on plan here.

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Please continue to page 23. This is the status of interest-bearing debt.
In September 2023, the amount of interest-bearing debt increased to JPY387.6 billion, partly due to theissuance of JPY22.1 billion of convertible bonds.
On the other hand, net interest-bearing debt was JPY243.4 billion, which is very close to the March 2024
target.
The net D/E ratio was 1, as shown in the line graph above, and then 0.8 after adjusting subordinated bonds.

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Next, page 24. This is the status of cash flows.
For the 1H of fiscal year ending March 31, 2024, operating cash flow is JPY36.3 billion, investing cash flow is
negative JPY12.2 billion, and free cash flow is JPY24.2 billion.
Compared to the forecast figures for the fiscal year ending March 31, 2024, which are shown on the far right,
we are making almost better progress than plan.

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Lastly, please turn to page 25. The following is a summary of the convertible bonds issued in September.
We must make investments for sustainable growth and build a strong financial structure. Particularly withregard to financial strength, our equity ratio was 26.8% at the end of this past September. On the other hand,
our competitors in the same industry, are about 20 points better than NTN. While strengthening our financial
position, we issued CBs to further invest in growth areas, to improve productivity, to invest in strategic
production restructuring, and to fund carbon-neutral society.
As noted in the summary section, the conversion price is very high, approximately 12% higher than the closing
price on September 6. Therefore, the issue is based on the concept of keeping the dilution portion as low as
possible.
That is all for my explanation.
Nagao: Thank you very much, CFO Yamamoto.

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Question & Answer
Nagao [M]: Okay, we will now move on to the question-and-answer session.
Now, Mr. Sasaki of Mitsubishi UFJ Morgan Stanley Securities, please state your question.
Sasaki [Q]: My name is Sasaki from Mitsubishi UFJ. Best regards. Please tell me three brief points.
The first is, what are your thoughts and feelings about the automotive business? As you explained, we arepleased that you were able to raise prices relative to your expectations and that you were able to turn a profit
in Q2 as a result of productivity improvements. What I would like to ask is how much of the JPY0.5 billion
surplus in Q2 was your company's ability, including transitory factors and others? On top of that, you originallysaid that you would do whatever it takes to achieve profitability in H2 of the year through the various projects
and other things mentioned on page eight.
Please tell us about your company's response to the turnaround in H2 of this fiscal year, or rather, howconfident or responsive you are in your efforts. Best regards.
Miyazawa [A]: My name is Miyazawa and I am in charge of the automotive business. I would like to provide
an answer to your current question. We have achieved this in Q2 and have returned to profitability, making a
profit of about JPY0.6 billion. As I explained earlier, one of the major results is that we were able to include
the advance payment of price revisions. In addition, our internal efforts to reduce fixed and variable costs areprogressing as planned, and these results were achieved.
Regarding H2 of the fiscal year, of course there will be a decrease in the volume of goods in China in H2 of the
fiscal year, and the UAW strike is on track to be settled to a certain degree. Although there is a risk that wewill not be able to see a scenario for recovery from the damage caused by these factors, we are beginning tosee a certain degree of prospect for price revisions. We believe that there is a certain degree of certainty that
the Company will return to profitability for the full year, including H2 of the fiscal year. This will be our
response.
Sasaki [Q]: What do you think? Although your company may not be able to give details, from your company's
point of view, compared to, say, three or six months ago, is it correct to think that there has been a sense of
improvement?
Miyazawa [A]: I, Miyazawa, will answer. One is price revision, but of course there are other parties involvedin price revision, and to be honest, there are variations by region and by customer.
In that sense, as Ukai mentioned earlier, we are now proceeding with the escalation of negotiations at an
early stage to reach a certain settlement. In the area of fixed costs and costs, in the case of North America,
we have been promoting products made in the US by increasing the local procurement rate in North America.
This is a big challenge, but we are trying to lower costs by promoting the supply of parts and materials fromoutside the US. We are already seeing a certain amount of execution in November or December in this area.
We believe that unless there are very unexpected circumstances, we will be able to make a positive transition
for sure. That is all.
Sasaki [Q]: I understand very well. Thank you very much.
Second question. I guess this is a question for CFO Yamamoto, but what are your thoughts on inventory? To
be honest, I think your company has had some challenges with inventory management in the past, at the risk
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of sounding a bit rude. On the other hand, looking at the current financial results, while customers areadjusting their inventories, especially in the industrial machinery and aftermarket business, your company has
been able to reduce its own inventories, and I think it is wonderful that free cash flow, as well as operating
income, have been solidly generated.
With respect to that, what is the background behind the firm's ability to manage inventory and generate free
cash flow compared to the past? On that basis, I would very much like to know Mr. Yamamoto's opinion on
how working capital and other aspects of inventory management should be considered for H2 of the year
ahead. Best regards.
Yamamoto [A]: This is Yamamoto and I will answer. As for the inventory in September, production reform
activities have been progressing quite well in Japan, and I think we have been able to control the situation
there. However, there is still some differencees by region. In Europe, we have been unable to absorb
fluctuations in customer demand, and the current situation is that materials and work in process havefluctuated considerably.
In H2 of the year, the scale will increase in Europe as well, and we will make firm reductions in materials andwork in process. On the other hand, we will have excess production capacity for industrial machinery, which
we intend to control by firmly expanding inventories for aftermarket. I hope this answers your question.
Sasaki [Q]: What exactly is happening in terms of the progress in production reform activities in Japan thatyou mentioned at the beginning? I know that reforming production there has been an issue in the past, so
could you please tell us what changes you would like to see?
Ukai [A]: Ukai will answer your question. In a nutshell, we are trying to strengthen cash flow management.
We are working to reduce inventories between process and work-in-process inventories in the entire value
chain, from purchases and material suppliers to the final customer.
First, we started with production, and now we are working on reducing the amount of materials in the supply
chain, including those in the pre-process and those in the distribution process. We have been working on thisfor two to three years now, and although it is still a work in progress, we are gradually beginning to see results.
We have been trying for many years to reduce work-in-process inventories while controlling inventories as awhole and, at the same time, firmly shifting our portfolio to the expansion of our aftermarket business, which
is our goal, but we have not been able to achieve this. We are further enhancing our inventory of finishedgoods, which is used for necessary aftermarket, and while we will control the total inventory, we areproceeding with a policy of reducing work in process, but maintaining the necessary finished goods. Does thatanswer your question?
Sasaki [Q]: I understand very well. Thank you very much.
Finally, on the third point, in light of what you have just said, I would very much like to ask President Ukai. As
Mr. Miyazawa mentioned earlier, the results for Q2 of this fiscal year show that while automotive businessdid fairly well, the external environment was difficult for aftermarket and industrial machinery, and the results
were a bit harsh. However, from what you have said, it seems to me that the results of individual management
reforms, such as thorough inventory control as you mentioned, the ability to raise prices ahead of schedule,
and productivity improvements in the US, can be seen in the financial results.
So, I would like to ask President Ukai, putting aside the external environment, from the perspective of NTN's
restructuring, from the top management's viewpoint, what kind of response do you see in terms of thecompany's structure and profit improvement? If you have any ideas on how to improve this in the future,please let us know. Best regards.
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Ukai [A]: Yes, I understand. First, aftermarket is experiencing a drop in sales in Japan. However, overseas sales
have not declined significantly. On the other hand, price increase activities are steadily progressing in termsof correcting prices to be fair to the market. It is not that the brand value of the aftermarket business is
declining; 70% of the aftermarket business is bearings used for industrial machinery aftermarket.
Demand for industrial machinery OEMs has dropped in each region, including Japan, the Americas, Europe,and China. The utilization rate of factories that make products for OEM industrial machinery has dropped.
This has increased manufacturing costs, so the balance of these costs has resulted in a slightly negative profit
margin. Conversely, we do not expect to see a recovery in industrial machinery OEMs until March and again
in H2 of this fiscal year.
As I mentioned earlier, I believe that this is a great opportunity for us to shift our portfolio to the aftermarket
business, which we have not been able to achieve smoothly so far, by allocating this excess production
capacity to expand the necessary inventory for the aftermarket business.
The next medium-term management plan will start in April next year. In the next mid-term plan, we will shift
our focus even more toward aftermarket business, and we are planning to make various changes, includingorganizational changes. We see this as a great opportunity for a period of preparation for this.
And the other is the automotive business. The shortage of semiconductors is gone, and the strike happenedin the Big Three will have various effects throughout November, but after December, the market is waiting
for cars, so the companies will start increasing production. How far we manufacturers will be able to keep up
with this is another question. We are firmly on track to increase production for automotive business in theremaining four months of the year. In addition, the cost structure and selling prices have become more
appropriate, so our profit structure is improving a little.
We would like to speed up this process even further, and by March of next year, we would like to move
forward with such enthusiasm that automotive business will conversely help industrial machinery. Although
H2 of the year will be difficult, we believe that we can use this period to create various strengths for ourbusiness plan for the next mid-term. That is all.
Sasaki [M]: I understand very well. Thank you very much.
Nagao [M]: Thank you very much, Mr. Sasaki. Mr. Isayama of Goldman Sachs Securities, please continue withyour question.
Isayama [Q]: This is Isayama from Goldman Sachs. Let me ask you three points as well.
First point, a simple question. I want to ask for an analysis of the increase/decrease in your H1 results on page
14. As is customary, could you please give us the figures broken down by business?
Nagao [M]: Okay, the secretariat will answer that one.
Kouge [A]: This is Kouge from the secretariat. I will give you a breakdown by business segment on page 14,
regarding the change in operating income compared to the same period last year.
The first is the aftermarket business. JPY1.1 billion minus compared to the previous year, of which scale effectis minus JPY3.8 billion, foreign exchange is plus JPY1.3 billion, selling price level is plus JPY3 billion, variable
cost is minus JPY1.5 billion, and fixed cost is minus JPY0.2 billion.
Next is the industrial machinery business. The breakdown is a negative JPY1.3 billion compared to the previous
year, of which the scale effect is minus JPY4.3 billion, foreign exchange is plus JPY1.2 billion, selling price level

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is plus JPY2.9 billion, variable cost is minus JPY1.7 billion, and fixed cost is plus JPY0.8 billion, of which
personnel cost is JPY0.4 billion.
Regarding the aftermarket business mentioned earlier, of the negative JPY0.2 billion, JPY0.1 billion is for
personnel expenses.
Continuing on, we have the automotive business. This is an increase of JPY5.3 billion over the previous year.
The breakdown is as follows: scale effect minus JPY5.6 billion, foreign exchange plus JPY2.6 billion, selling
price level plus JPY12.1 billion, variable cost minus JPY6.4 billion, and fixed cost plus JPY2.6 billion, of which
JPY0.8 billion is personnel cost. That is all.
Isayama [Q]: Thank you very much. I would like to confirm the figures, but the forecast for H2 of the year is
not written in the entirety and has not been disclosed by you, but as for the business, you have dropped theindustrial machinery and aftermarket to a certain extent. Since President Ukai mentioned earlier that the
automotive business will help them, is this where you are increasing the amount than before?
Ukai [A]: One reason is that we would like to replenish inventory for the aftermarket using production capacity
for industrial machinery and OEMs , while production for automotive business will probably continue to be atfull capacity. This production is global and is expected to continue through December and beyond. Therefore,
as Miyazawa mentioned earlier, in order to respond to these changes, we are making changes to each materialpurchase in the variable cost section, which will come into effect H2 of the fiscal year.
We will also start mass production of new products, and we will also start alternative production of constantvelocity joints for a domestic automobile manufacturer's in-house production. The mix will also change a little.
We believe that the volume will increase while the profit structure will also improve, and that automotive
business will be even more expected in H2 of the year than we have planned.
Isayama [Q]: Okay. Thank you very much.
Based on your current comments, here is the second question. I want to ask President Ukai on this as well.
The slide you have just released on the industrial machinery and aftermarket segments shows that orders for
H1 of the fiscal year were JPY1.4 billion, but the H2 plan of JPY4 billion for industrial machinery seems a little
too large target in the current situation where orders from customers, including construction machinery, aredecreasing. I think you can say that you were indeed strong last year with a little less than JPY13 billion when
you produced JPY14 billion on a half-year basis. However, I think it is quite a challenging figure, even in lightof what you said about wanting to increase the composition of aftermarket sales. Can you get closer to thisfigure by increasing the weight of aftermarket sales as you mentioned?
When I looked at the figures frankly, my impression was that the downward swing would be too severe to becovered by the automotive portion. Is the effect of increasing profits by increasing the aftermarket weightingthat large of an expectation? Sorry, I'm afraid I'm asking in a rather vague way.
Ukai [A]: Okay. Harima, who is in charge of industrial machinery and the aftermarket, is also present today,
so I would like to begin with his response as the executive officer in charge.
Harima [A]: My name is Harima. First of all, in the H2 forecast, we mentioned a little at the beginning about
the external environment, and I believe it is true that the Chinese market has been affected by the decline
and other factors more than we had imagined. In particular, we expect a large drop in reduction gears for
robots and machine tools. I think it is a natural question to ask how much can be covered in the aftermarket
sales.

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28However, we expect to increase inventories for the next fiscal year and beyond, and in the case of businesscategories such as machine tools, which are subject to extreme ups and downs, we would like to focus on
creating appropriate inventories so that we will have the right amount of inventory the next time we have toclimb a mountain, based on our past reflections. To the extent that this will contribute to profits in H2 of theyear, we will have to take measures in other areas for profits in H2 of the year.
We have been actively promoting the transfer of inflation costs to selling prices since about a year ago, butthere are still some areas where inflation costs have risen with some delay and we have to transfer this aswell. Then the other thing is that I don't think we can make profits in H2 of the year unless we raise the pricesof businesses that are unprofitable or accelerate downsizing. We have already done our utmost to reduce
fixed costs, including personnel costs, and expenses, and we hope to minimize the bleeding in these areas.
That is all.
Isayama [Q]: Thank you very much.
Finally, the third part. As for the industrial machinery aftermarket, I expect the results of the measures
mentioned by Mr. Harima, but as President Ukai mentioned, it is a part of how much will be covered by theautomotive business. I would like to talk about the part from now on after turning profitable. For your part,Mr. Miyazawa, you mentioned that the selling price is ahead of schedule, but what measures, other thanforeign exchange, do you have in mind to make the Company more profitable with respect to the current
published plan?
Rather than the quantity of goods, I am wondering if there is anything that can be expected to improve
profitability in H2 of the year, such as the possibility of positive effects in certain regions, further progress inselling price negotiations, or some other positive factor specific to your company other than foreign exchange
rates. What can we expect in terms of plan overachievement? Please tell us about your automotive business.
Miyazawa [A]: This is Miyazawa and I would like to give a few answers. One is in the area of selling prices, butthere is quite a bit left to accumulate for FY2022, not the current fiscal year. We are also negotiating
intensively with European manufacturers, in particular, on the remaining balance. Although not incorporated
in the plan, we are currently in the midst of strong negotiations with European manufacturers on selling prices,
including the remaining balance, although it is going through a difficult negotiation. One of the first things weare thinking is that if we can successfully reap the results of these efforts, we may be able to get more than
the selling price we are currently planning.
Secondly, as Ukai mentioned earlier, we have a new project coming up in H2 of the fiscal year, which we hadoriginally planned. This is a change in MIX, or rather, the start of mass production in H2 of the year for
relatively profitable items, although the profit margin is not that high for the automotive business as a whole.
We are factoring in a certain amount of that. We are now looking at that contribution in a very conservative
way, but one thing is that there is room for that.
We are also working on a plan to rationalize our internal fixed costs, especially our technical staff, of which
we have a considerable number. We believe that is also an upside factor.
And also, as I mentioned earlier, changes in the supply chain within the US. We have been receiving supplies
of inexpensive products from outside the US, whereas in the past, the supply was completed within the US.
In addition, production in the US is currently quite tight, so we are responding to this situation with support
production from Japan or China. Fortunately, the yen is very weak at the moment, so the more we send infrom Japan, the more it will have a positive effect. The idea is to achieve the planned profit while having
several plans in that area as well. That is all.

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Isayama [Q]: Thank you very much. I don't want to talk too much about how much each of these would be,
but if you put them all together, would it be in the low billions of yen, or would you say that you are taking amargin of at least JPY5 billion? You may not want to say too much because it may lead to a discussion later on
about what you could or could not do, but can you give us a hint?
Ukai [A]: Yes. For example, in the previous announcement, we had planned a minus JPY1.9 billion for Q2, but
this quarter we had the effect of foreign exchange and we also brought forward the price increase, so we
finally landed at JPY0.6 billion, which is about JPY2.5 billion more than planned. Is this a hint for you, Mr.
Isayama?
Isayama [M]: I understand very well. Thank you very much.
Nagao [M]: Thank you very much, Mr. Isayama. Please continue with your question, Mr. Sano of JP Morgan
Securities.
Sano [Q]: My name is Sano from JP Morgan. Thank you for your explanation. Three points from me as well,please.
First, I would like to ask you about the change in your view of this fiscal year, particularly with regard to theincrease or decrease in operating income and sales price. Compared to three months ago, other companies
in the industry have seen lower-than-expected inflation, and in some cases, the increase in selling prices has
been suppressed accordingly. After the past three months, we would like to know if there are any differencesfrom your previous plans in terms of the range of increase in selling prices for the full year, and if you could
explain the basics of your approach to selling prices for the next fiscal year, etc. This is the first point.
Miyazawa [A]: Regarding automotive business, I would like to give an explanation. For automotive business,
we are basically revising selling prices to include inflationary costs and unprofitable portions. For somecustomers who have ordered less than the contracted quantity, we are revising the selling price to include
the portion of the quantity that is less than the contracted quantity.
However, as you know, electricity costs in Japan are beginning to decline, so there have been cases where wehave not been able to receive the electricity and energy costs that we originally planned. In the area of
procurement, our own energy costs are also decreasing, so this will be offset, so we do not think that there
will be much effect on a net basis.
In addition, some customers are beginning to talk about cost reductions instead of accepting price hikes.
Basically, however, our stance is that we will first ask our customers to fully reflect inflationary prices including
those left from the past in their selling prices, and if we ourselves can come up with the funds for cost
reduction, we will return them within a reasonable range. What we are focusing on now, or concentrating on,
is to revise the selling price, including past overcharges. That is all for automotive business.
Harima [A]: Continuing from Harima, first of all, the aftermarket. The aftermarket has a significant portion ofits business based on a fixed price list. One reason for this is that the fixed price list has been revised since thelast fiscal year, and this has made a significant contribution.
Then, in the case of the aftermarket, there is a wide range of small, medium, and small-lot customers. We
have been raising prices and passing on costs to selling prices in detail. This is another example of what wehave been doing since the previous fiscal year and is showing results in this fiscal year. The aftermarket has
achieved much more than the price increase that was initially contemplated in the business plan for thecurrent fiscal year.

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There are also two items related to industrial machinery. One is the passing on of price increases for energy
and other inflationary costs. We have been negotiating with many of our customers to raise the prices of
unprofitable parts of our products, and we have been able to raise the prices with the understanding of manyof them. However, there are some customers who have entered a phase in which the external environmentis deteriorating and have not been able to cooperate. Here, we have been continuing price increasenegotiations in H2 of the year while appealing to our actual situation. This is one of the situations.
The other part is that we are being asked to pass on the cost of inflation from our suppliers. There has been aslight delay in the electricity and gas price increases. Naturally, we are willing to accept this part of the project
as well. The current situation is that we are asking our customers to raise prices while obtaining theirunderstanding in this area as well, although we are behind schedule. That is all.
Sano [Q]: Thank you very much. Incidentally, I usually see the new profit increase/decrease from H1 to H2
and then to the full year on page 16 or 17. I thought it was your company's way of disclosure to do this every
time, but am I correct in understanding that we don’t have this for this time?
Yamamoto [A]: My name is Yamamoto. Since we have not changed the forecast for the full year, H2 of the
fiscal year is a subtraction of H1 from the full-year forecast, so we have not indicated this figure.
Sano [Q]: Yes, I understand. Thank you very much.
Second, I would like to ask Mr. Miyazawa to tell us about the status of orders for automotive business, orrather, the accumulation of projects. In the Chinese market, where you struggled a bit in Q1, I would like toknow if you have seen any results from your efforts to expand sales to non-Japanese companies or to attack
the local market, which was a bit of a challenge in Q1. Please.
Miyazawa [A]: Miyazawa here would like to give an answer. Basically, we have already finished the businessyear through 2024, so I would like to talk a little bit about the area around the 2025 business year in terms of
the fiscal year. Roughly JPY18 billion to JPY20 billion for the driveshafts. And then on the axle bearings, I think
the number is around JPY13 billion to JPY15 billion. Please keep in mind that this includes the dedicated model
number for EVs.
In China, as you know, Japanese manufacturers are struggling very badly, and we are shifting our focus toChina, especially to EV manufacturers. As a whole, Japanese manufacturers account for more than 80% of thetotal, and local manufacturers account for about 15%, but we expect this to increase by three to five
percentage points. Does this answer your question?
Sano [Q]: Thanks for the details.
Lastly, I would like to ask President Ukai, I believe that the plan is more focused on H2 of the year. From what
you have told us so far, I think that you are both certain and responsive to achieving this goal. How are you
managing the budget and actual results, including the front line, and how are you spreading the message thatyou will steadily achieve the figures you have set forth? Including the recent Global Management Conference,
how are you fostering a sense of urgency among NTN's frontline and management in terms of achieving theplan?
Ukai [A]: This is Ukai. Last year, before the pandemic had been contained, I visited all domestic offices, plants,
and sales companies, as well as major overseas offices, sales companies, and plants. This is what is known as
a town hall meeting, where we try to have a direct dialog with our key employees. I explained to them thecurrent situation of the Company and the future direction of the Company, and asked for their direct
understanding of the situation, as well as receiving various questions. At the same time, I answered theirquestions. This is what I have been doing in the past year.
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From April of this year, all executive officers have been going directly to the regions of the divisions they arein charge of, that is, to the sales companies and plants in Japan, but also overseas, depending on the region.
In addition, all executive officers have been working on a global basis to promote direct dialog with employees
and to share the direction we should take.
We are still on-going now, and will be in Europe again this month, but that is what we are doing.
We held the Global Management Conference the other day for the first time in five years. We were not able
to do much of this, mainly because of the pandemic. The main management members from around the world
gathered in Japan and held a meeting there to discuss common issues and the direction that NTN should takeand move in for the next mid-term, and we set the agenda in advance. The participants were divided into
teams, and the results of the team activities were presented in front of everyone, followed by a question-andanswer session.
In the past, the meetings were rather presentation-oriented, with the head of each department giving apresentation and the participants listening to it, but this time we asked the participants to devise a new way
to include the opinions of various younger people. Those who came from overseas also left with a sense offulfillment of their own when they did things in a way that was completely different from the way they had
done them before. It is not enough to just be fulfilled, so I feel that this is a significant response to the situationthat we will continue to act on so that we can get the proper results from it.
As I mentioned earlier, we are very clearly implementing various measures to enhance NTN’s corporate value
for the next medium term. Naturally, we will have to make fine adjustments depending on the conditions of
the external environment, but I have the feeling that we are gradually gaining a sense of direction and theability for everyone to act in this direction. That is all.
Sano [M]: Yes, I understand. Thank you for your response. That is all.
Nagao [M]: Thank you for your question, Mr. Sano. Now, Mr. Tai of Daiwa Securities, please ask your question.
Tai [Q]: My name is Tai. One is about the figures on page 17. For aftermarket, your results for H1 of this fiscal
year show an increase in sales compared to H2, but I think the profit has decreased by about two-thirds. I
think there is an increase in revenue and a decrease in profit compared to H1 of the previous year. I havereceived various figures on this, so an analysis might help, but in the end, what is the biggest impact?
Yamamoto [A]: My name is Yamamoto. I did not explain it well earlier, but first of all, compared to the same
period of the previous year and H1 of the previous term, the aftermarket sales are shown as an increase of
JPY0.2 billion, excluding exchange rate effects. However, if you exclude the selling price level, the sales volume
decreased by JPY2.8 billion. In addition, sales of industrial machinery were minus JPY6.8 billion excluding
foreign exchange, but minus JPY9.7 billion if the price portion is excluded. In short, the largest impact of thedecrease in production scale was seen in H1 compared to H1 of the previous year. The impact of scale on H1of the year is still quite large compared to H2 of the previous year.
Tai [Q]: Okay. In that sense, it would still be tough without an increase in volume.
Yamamoto [A]: Yes, that's right. As mentioned in the previous explanation, the products made at theindustrial machinery plants go to the aftermarket sales, so even if we pass on the price, the cost structure will
deteriorate due to the decline in the scale of production.
Tai [Q]: Okay.

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32One more thing, as I asked you earlier at other companies, I would like to ask you how you see prices whenlooking at the next fiscal year and beyond. Perhaps we should separate automotive and industrial machinery
business, but for automotive business, for example, the increase in sales to China that Mr. Miyazawa
mentioned earlier is naturally a tough mix. In the first place, the degree to which each customer accepts priceincreases is probably getting smaller and smaller now. In particular, I am wondering how much you arethinking about this, especially as it relates to EVs in China.
On the other hand, as for industrial machinery, I think we are entering an era in which, although this may betrue at present, they cannot accept price increases when demand is so weak.
What I would like to ask you is that the tide is turning again a bit, as similar stories are coming out quite often
in conference calls at overseas competitors, where the financial results have already been released. I believethat the days of simply asking for a price increase are over, and that unless we add some value or change thesystem, we will not be able to respond by raising prices all the time. Since the results for the current fiscal
year are no longer important, can you tell us anything that would complement the results for the next fiscal
year and beyond? That is all.
Miyazawa [A]: Now I would like to talk about automotive business. The discussion of next year and beyond isa hypothetical one, but basically, we will continue to receive business from next year and beyond, so there
will be contract unit prices for those contracts. What we are doing now is to steadily pass on the cost of
inflation due to economic fluctuations to the selling price.
Especially in the US, since the UAW has approved a 25% wage increase over the next four years, our laborcosts in the US will naturally rise, as well as our labor costs for our parts. The idea is to ensure that suchinflationary costs are taken care of. On the other hand, if they do not accept our offer, or if the negotiations
are extremely severe, we will not be able to ensure a stable supply. That is how we negotiate and we would
like to continue that.
Also, I want to talk about the volume. Basically, our contract unit price is a contract to fulfill a price within acertain contract volume. In cases where this is not met, we are considering negotiating with the customers tohave them pay a certain amount of the cost.
And about the future. Of course, we must add value to our products. Even CVJ does not easily move out ofcommodity areas. Rather than simply competing on price, we will add to our selling price our ability to solve
problems, make proposals, and respond quickly, which we believe is superior to our competitors. By adding
value in this way, we are trying to be chosen by our customers.
In fact, there have been several cases where they themselves have selected an LCC manufacturer but havenot been able to successfully develop the product, so they have come back to us in the middle of thedevelopment process. We are planning to apply such an approach to bring back overall profits in automotive
business. That is all.
Ukai [A]: I would like to add a few words. What I am saying is that we should overhaul the design. NTN has
the number one or number two market share in the world for high-speed constant velocity joints and hubs,
but I wonder if we are not resting on their laurels. The design standards that have been used for many years
have not been reviewed in a timely manner to meet the demands of the external environment and to improve
the quality of procurable parts and materials.
In addition, Chinese manufacturers and other manufacturers from emerging countries are now able to offer
products of reasonable quality and technology at low prices. In response to this, to keep on offering only highspec products forever will, as Mr. Tai just said, reduce the strength of our products, which are the pillars of
our company, in the years to come and beyond.
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We have a variety of products that are easy to manufacture and simple to design, and we also have a variety
of products that customers really want, especially for high-spec EVs in the future, but they will also be very
expensive. We believe that we need to fundamentally review the design of our products to determine how
we can competitively match market prices at an appropriate cost. We are going to make sure that this part ofthe project is going to be a big theme , I think, for the next mid-term, although we have already started now.
On the other hand, in the case of industrial machinery, the machines manufactured by individual customers,such as construction machinery manufacturers, are not standardized like cars, so various specifications aredemanded individually. However, our customers are also in competition with emerging countries, and in order
to increase cost competitiveness through the supply chain, I think it is necessary for us to encourage them tosimplify their design standards and so on. We believe that it is by no means possible to do business as before
simply by maintaining relationships with traditional customers. In that sense, we will review this area carefully,
as appropriate, or at least with increased speed.
In terms of parts and materials, we are shifting our procurement from China to India. Again, quality has
improved very much and so has competitiveness. We are now in the process of making drastic improvements
and reforms in the areas of variable costs connected to design, and of course, fixed costs to increase
productivity. That is all.
Tai [M]: Thank you very much. It's okay. Thank you again.
Nagao [M]: Thank you very much, Mr. Tai.
This concludes the NTN Corporation’s IR presentation of financial results for Q2 of the fiscal year ending March
31, 2024.
Thank you very much for your participation today.
[END]______________
Document Notes
1.
2.
3.
4.

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Portions of the document where the audio is obscured by technical difficulty are marked with [TD].
Speaker speech is classified based on whether it [Q] asks a question to the Company, [A] provides ananswer from the Company, or [M] neither asks nor answers a question.
This document has been translated by SCRIPTS Asia.

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