May 17, 2018

NTN Corporation
2018/5/17

1

NTN Corporate Philosophy and Vision
NTN Corporate Philosophy“We shall contribute to international society through creating new technologies anddeveloping new products”

Corporate philosophy code of conduct"NTN Spirit"
Newly established for the Company's 100th
Anniversary
Deepen the understanding of corporate philosophy
and promote its implementation“NTN Spirit”
http://www.ntnglobal.com/en/corporate/idea/index.html

Our Vision(1) A company where its corporate philosophy is understood by all employees
around the world and where all employees think and act for themselves(2) A company with original new products and services, appreciated for its highquality and functions, and has a global presence(3) A company where everyone involved with NTN be able to be proud of the“NTN” brand2018/5/17

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Initiatives for Realizing Our Vision
Our Vision toward a New 100 Years

SustainablegrowthManagement basesthat support our businesses
•
•
•
•

ESG
Profit creation
Pursue high productivity and quality
Improve efficiency in asset management

Corporate Philosophy“We shall contribute to international society through creating newtechnologies and developing new products”
2018/5/17

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Initiatives for ESG
NTN is working on ESG issues through the implementation of its corporate philosophy,
contributing to the realization of a sustainable society Develop innovative technologies,
products, and services
 Reduce environmental burdens
 Prevent global warming

GovernanceSocialEnvironmental

 Social contribution activities
 Coexistence with local communities Work style reform

Contributing to therevitalization of local
communities
NTN hybrid street
light that does notemit CO2 Strengthen and enhance
corporate governance Risk management
 Promote compliance"NTN Rotating
Workshop"– Environmental
education to thenext generation

Improving working
environment – The second
intra-company child day
care center in NTN

CSR global
conference

BCP/BCM
committees

Responding to social issues

Adopted in the SRI indices

UN Global Compact –Ten principles in four areas: humanrights, labor, environment, and anticorruption
Sustainable Development Goals(SDGs) – Business activities inconsideration of SDGs

Promote the disclosure of ESG information

2018/5/17

NTN is a company selected in the ESG indices adopted by the GPIF

4

NTN in 10 Years
NTN in 10 years
Transform from a "Manufacturing Company" intoa "Company that Delivers Value to Customers
through Products and Services"
Numerical targets
Net sales: 1 trillion yen or more
Operating income to sales: 10% or more
Total assets turnover: 1.0 or more
Foreign exchange sensitivity:
To be halved from the current level

Changes in external environment
Automotive industry: A change that occurs only oncea century (CASE)
Overall industry:
IoT, robotization, and AI
Social issues:
Population increase, climatechange, resource depletion,
poverty, starvation, etc. (SDGs)

1 trillion yen
Industrial
machinery

Industrial
machinery
Aftermarket

Automotive

FY2017

2018/5/17

Aftermarket

Transform our businessstructure to achieve the10-year goals
Respond to new market
needs created by changes inexternal environment
Strengthen coretechnologies and products

New businesses(natural energy, etc.)
Robotization and IoT needs
Expand core businesses
Expand the scope ofservices
Respond to vehicle
electrification
Expand core businesses

Automotive

FY2027

5

Business Review and Accomplishments
Previous Medium-term Management Plan "NTN100" April 2015 through March 2018
Building a foundation for the next 100 years in accordance withthree basic policies: “Manage Growth,” “Manage Profitability,” and “Manage Foundation”

Transform
our businessstructure

Develop businesses in new areas(1) Commercialize EV-related products(actuator sales, licensing agreements)(1) Commercialize green energy products(start of sale)Strengthen core technologies and products(2) Expand the scope of aftermarket services(3) Improve the profitability of driveshafts(+4.5%)(4) Practical use of next-generation
technologies(EBW, etc.)

Management bases that support our businesses:(5) Step up the existing compliance structure (6) Reduce interest-bearing debts, etc.

2018/5/17

Build a foundation
for transformation
Drive forward thetransformation of
our businessstructure in thenext three years"DRIVE"

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Basic Policy for "DRIVE NTN100"
Basic Policy
Drive forward the transformation of business structure for the new 100 years
DRIVE NTN Transformation for New 100
Period: April 2018 through March 2021

Resources

Digitalization･Integrate latest technologies (Digitalization)
into the management resources that
Innovation
NTN has cultivated (Resources)･Develop innovative technologies, products,
Variable cost reformationand services (Innovation）･ Accelerate global procurement andEfficiency improvement
Accelerate centralized purchasing (Variable cost reformation）･Achieve the world's highest productivity and quality
and improved efficiency in asset management (Efficiency improvement)
2018（100 th anniversary）“NTN100”
April 2015 through March 2018
NTN Transformation
for Next 100"Building foundation
for Our Vision"

2018/5/17

New Medium-term Management Plan

“DRIVE NTN100”
April 2018 through March 2021
DRIVE NTN Transformation
for New 100

Realizing
Our Vision
Achievingtarget in 10 years“Drive forward the transformation ofbusiness structure for the new 100 years"

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3-Year Plan for "DRIVE NTN100"
Revival 2014

NTN100DRIVE NTN100

FY2014FY2017

FY2020②vs①

Plan

Results ②\701.9 billion\800.0 billion\744.4 billion\480.5 billion\530.0 billion\508.6 billion+9％\550.0 billion+13%\109 billion\120.0 billion\119.1 billion+12%\125.0 billion+11%

Aftermarket\112.4 billion\150.0 billion\116.7 billion+7％\125.0 billion+13%

Operating Income\43.9 billion\70.0 billion\39.6 billion-2%

Automotive\18.4 billion\32.0 billion\21.8 billion+32%\30.0 billion+62%

Industry Machinery\6.3 billion\9.0 billion\2.8 billion-48%\7.0 billion+368%

Aftermarket\19.2 billion\29.0 billion\15.0 billion-20%\20.0 billion+47%

Operating Margin

6.2%

8.8%

5.3%

Net Sales
Automotive
Industry Machineryexcl. Forex+9%-0.6ptPlan ③③vs②

Results ①\800.0 billion\57.0 billion

7.1%

excl. Forex

+12%

+68%

+2.4ptAutomotive

3.8%

6.0%

4.3%

+0.8pt5.5%+1.7ptIndustry Machinery

5.7%

7.5%

2.3%

-3.1pt5.6%+3.9ptAftermarket

17.1%

19.3%

12.9%

-4.3pt16.0%+3.6pt\23.4 billion\42.0 billion\20.4 billion-\30.0 billion-

USD=\109.8

USD=\110

USD=\110.9-

USD=\110-Euro=\138.7

Euro=\130Euro=\129.6-

Euro=\115-

Net Income
Exchange rates

2018/5/17

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Accelerating Initiatives in the Next 3 Years
Drive forward transformation: Strengthen core technologies and products, develop
businesses in new areas, strengthen management bases that support our businesses
and further improve efficiency in asset management
Natural energy, etc.

Developbusinesses
in new areas

Strengthen
coretechnologies
and products
Strengthen
management basesthat support ourbusinesses
2018/5/17

Automobile
business

Industrial
machinerybusiness
Aftermarket business

Utilize core technologies
and external technologies
Improve the profitability of coreproducts
Product development in responseto vehicle electrification

Expand core businesses
Develop robot and IoT-related businesses

Reinforcing sales and technicalservice network

Focus our efforts on improvements in
Variable cost reformation
profitability and asset management
Structural reform of man-hours and resources
efficiency in preparation for new
Enhanced SCM and concentrated investmentcompetitive environments
9Automotive Business (1):Market Trends and Goals
Target: As an indispensable presence for the automotive market, NTN will become acompany that offers products and services for vehicles all over the world
Market trends
Projections of net sales
1. Electrification and EVs, automated driving
Connected
Autonomous (automated driving)
Shared (from ownership to sharing)Electric (vehicle electrification)
2. Increasing global automobile production
Automobile production will increase by 1.8 times
by 2040 compared to that of today- Electric vehicles (EVs/FCVs): 67X- Engine-powered vehicles including hybrids: 1.4X
1.8X in 2040

and operating margin
Vehicleelectrification
businessCorebusiness

Production of EVs/FCVs

67X of today
170 million
units in
FY204094 million units
in FY2016

120 million
units in
FY2027

Source: IEA (International Energy Agency) / ETP

2018/5/17

Production of engine-powered
vehicles including HEVs

1.4X of today
Driven by population
increase(in Asia and Africa)

10Automotive Business (2): Strengthen Core
Products and Efforts for Business in New Areas
Improve the profitability of core businesses and integrate mechanical modules into
control systems taking advantage of core competenceStrengthen coretechnologies and products

Develop businesses
in new areas

Become the world's top
maker of drive-train systems(including EVs)

Respond toelectrification and EVs
Respond to 48V mild HVs
Vehicle stabilization
Expanding the scope ofelectric-powered devices

Low friction
Lightweight"eHUB"
Hub bearing with amotor-generator
function

Driveshafts
Hub bearings
World's No. 2 share
World's No. 1 share
Electric motors
and actuators
2018/5/17"sHUB"
Hub bearing with apower steering function

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Automotive Business (3): Topics
For the world’s first mass-production of an EV using in-wheel motors

In-wheel motor driving system“Concluded license contract with Chinese EV manufacturer"
NTN will provide technical support in the mass production of in-wheel
motors in China
Business partner: Changchun Fawsn Auto Tech Co., Ltd. (FSAT)
FSAT's plans:Starting the production of an EV using in-wheel
motors in 2019, and producing 300,000
units/year of the EV in 2023
NTN expects to receive technical licensing revenue ofapproximately 7.0 billion yen/year in 2023
2018/5/17

An EV that FSAT will
mass-produce

12Industrial Machinery Business (1):Market Trends and Target; Core Products
Target: NTN will become a company that customers in the industrial machinery
market rely on most for its exceptional technological competenceMarket trends•••

Strengthen coretechnologies and products

Widespread use of IoT and utilization of
AI in the industry
Increasing demand for robot-related
products
Preventive measures through monitoring

Further development of core technologies;
development of high-performance products

For gearboxes of robot
Compact, high rigidity

Projections of net sales andoperating income to sales

Market forecasts by industry

GrowthIndustry

New business
area

Core

Core businessarea

2018/5/17

For main spindles of machine tools
Proprietary air-cooling technology

FY2017vsFY2020

Robot and Gearbox↑↑↑

Wind Turbine↑↑↑

Aerospace↑↑↑↑

Rolling Stock↑

Construction Machinery→

Agricultural Machinery↑↑

Machine Tool↑↑

For main spindles of wind power
generators

Long-life, large and offshore
needs
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Industrial Machinery Business (2):Develop businesses in new areas
New business area:

Robot-related business (robotics)
Develop system products for collaborative robots
i-WRISTTM

Today

Early 2000

FutureParallel link high speed
angle control equipment
Constant velocity joint
with an operating
angle of 90deg

Greaseapplication

Appearance
Robot wrist module
inspection

AI-controlled robotic
hand system

Labor-saving applications using wrist joint modules

New business area:

Service, solutions business
From monitoring to AI WEB services

Bearing condition
monitoring system (CMS)

2018/5/17

Sensornize bearings

Develop latest algorithms

AI-based bearing residual life prediction

Research for the application of microscopic coating
technology in the medical field• Early illness detection (microscopic coating of reagents)• Drug development, regenerative medicine(iPS-derived 3D tissue layers)14

Aftermarket Business
Projections of net sales
and operating margins

Tasks• Enhance brand power through the expansion of MRO sales• Expand aftermarket parts lineup not to miss sales opportunities

Actions• Continue to improve technical services including maintenance• Establish a production system independent of OEM business, andmaintaining sufficient quantities of aftermarket parts in stock Utilize overseas production bases and globally available stocks
 Aftermarket parts production and efficient stock management
using a new core IT system
Global Utilize overseas production bases (Italy and Germany) and globally available stocks
Reinforce a system for MRO sales expansion led by technical groups
Japan Drastically change the existing sales organization (integrating domestic sales
channels, establishing NTN Sales Japan Corporation)
 Expand the existing sales and service network by drastically changing the sales
system and by introducing a core IT system

Proactive utilization ofoverseas production bases

TargetTransform our business from products to services,or from selling bearings to selling services
 Utilize bearing sensing technology for industrial machinery business
Aftermarket
bearings

Independent demand

2018/5/17

MRO

Check & Repair businessOverall bearing
maintenance service
Blanket contracts foraftermarket demand

15New Business: Green Energy Products Business
From BtoB to BtoC ... Build sales and service networks for green energy products
NTN Green Power Park
(Kuwana, Mie)

NTN Micro Hydro
Turbine
The world’s first flowthrough hydro power
generator. Launch thetype intended for electric
power selling. Promoting
the development of highpower type.

Utilized in a campaign toinvite Osaka Expo 2025 (NTN
is an official partner)

NTN Hybrid Street Light
The highest hybrid power generation performance in the world. Promote
the creation of demand for this product as a social stock that contributes to crime
prevention and disaster preparedness. Develop a community surveillance function
and a Wi-Fi-based communication function jointly with Osaka University, etc.
Install this product at disaster evacuation sites (500,000 locations in Japan).

Contribute to a low-carbon society; responding to theneeds to utilize natural energy in local communities
2018/5/17

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Strengthen Management Bases to Respondto Future Changes
Robust management bases needed to overcome changes in competitive environments
Changes in external
environment

New market needs

CASE
robotization, IoT, AI

Develop businesses
in new areas

Declining
population in Japan

New competitiveenvironment

Robust management foundation
Improve profitability
Business expansion without the need for additional
workforce
Improve efficiency in asset management

Focus points of "DRIVE NTN100" inbuilding robust management bases• Variable cost reformation• Structural reform of man-hours
and resources• Enhanced SCM andconcentrated investment
2018/5/17

NTN in 10 years
Operating profit to sales ratio:
10% or more
Total assets turnover: 1.0 or more
Foreign exchange sensitivity:
To be halved from the current level
17

Variable Cost Reformation
Build a procurement network that supports the expansion of global production
capacity and the utilization of external production capacity
Reduce external procurement cost
1. Accelerate global procurement•••

Promote procurement in the most appropriate
regions based primarily on local procurement
Pursue cost reduction effects
Minimize exchange and inventory risks

2. Accelerate centralized purchasing•

3rd year: 3 billion yen on top of conventional
cost reductions
10th year: 30 billion yen on top of conventional
cost reductions

Promote the control of the number of suppliers andthe centralization of procurement pricemanagement

3. Establish Procurement Headquarters(April 2018)•••

Goals for effects ofvariable cost reformation

Promote global procurement
Promote centralized purchasing
Quality, price, production capacity, and complianceassessment (QCD+CSR assessment)

2018/5/17

Reducing external
procurement cost
Globalprocurement
Centralized purchasing
Purchasing information
management
QCD assessment + CSR assessmentin Supply chain

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Structural Reform of Man-Hours and Resources
Use IoT, AI, and robots to take care of part of operations in the
manufacturing department
Introduce RPA to improve the quality of operations in backoffice departments
3-year goals for reductions
in personnel expense
1. Promote the introduction of smart factory designs• Optimize and automating manufacturing processes using IoT and AI• Use robots to take care of part of operations in the manufacturing
department• Reduce lead time to improve responsiveness to customer needs
Material input

NTN Wakayama Works
Mass production starts in June
2019

Utilize IoT, AI abd
robots

Inspection& shipment

Lead time for prototyping 1/2X
Lead time for production 1/3X

2. Use robots to take care of part of operations inindirect departments (introduction of RPA)
• Introduce RPA (Robotics Process Automation) in indirect departments• Use robots to take care of routine operations in technical andadministrative departments

Routine operations
Repetitive operations
Simple operations outside
the system

2018/5/17

Manufacturing department: ¥1 billion
Technical and administrative
departments: ¥500 million

Introduce RPA
To take careof operations

High-value-added operations
Shift workforce to more professional
work such as new productdevelopment

Unmanned routine
operations
Create extra labor hours
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Enhance SCM and Concentrated Investment
Renew the core IT system for enhanced SCM and concentrated investment
1. Enhance supply chain management
・Utilize the new core IT system
・Efficient inventory holdings and reducing lead timeInventory visualization and efficient inventory holdings
Promoting the utilization of globally available inventories

2. Concentrated investment
・Intensively investing management resources in processes inwhich our technical strengths can be demonstrated
Proactively utilizing outsourcing

Reorganize existing domestic production
with a central focus on Wakayama Works

Sales
expansion
Reducedman-hours

Renew
core IT system

Standardization

Reducedinventory

Cost
reduction

Enhance andoptimize SCM
Outsource forstandard products• Reorganize domestic radial ball bearing production
bases in Japan• Intensively invest in high-value-added products
such as for EVs. Utilize outsource for standard
products
Concentrate on high-value-added products
2018/5/17

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Key Management Indicators of "DRIVE NTN100"
DRIVE NTN100
FY2017
Results

FY2018Plan

Net Sales
Operating Income\744.4 billion\39.6 billion\750.0 billion\43.0 billion\800.0 billion\57.0 billion

Operating Margin
Net Income

5.3%

5.7%

7.1%

\20.4 billion\37.6 billion\21.0 billion\55.0 billion\30.0 billion\170.0 billion/3 years

Capital expenditure

FY2020Target(incl. intangible \20.0 billion）

FCF
Inventory turnover ratio
Net D/E ratio
Equity to capital ratio
ROE
NTN-ROI*Dividends
Exchange rates

USD\13.4 billion\0.0 billion\45.0 billion/3 years

4.1 times
0.9

4.0 times
1.0

4.5 times
1.0 or less

30.2%

29.5%

30％ or more

8.4%
5.7%

8.1%
5.9%

10.0％ or more
7.5％ or more

¥15.0
¥110.8¥15.0¥105\15.0 or more
¥110

Euro
¥129.6¥130*NTN-ROI = Net operating income after tax / (Inventories + tangible fixed assets)
2018/5/17¥115
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DRIVE
NTN
Transformation forNew100• This presentation material, our statements made during the presentation, and our comments made during the subsequent Q&A session include forward-looking
statements about our future performance and business strategies. These statements and comments are made based on the information currently available andat the discretion of our management.
• These statements and comments based on future forecasts do not guarantee our future performance. Please understand that actual results may differ from ourperformance forecasts depending on various factors such as changes in demand for our products, exchange rates, interest rates, and contingent liabilities.

2018/5/17

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Reference: Sales Forecasts in New Business Areas
Business development in four new business areas (since 2015)
Accelerate the business development through "DRIVE NTN100"
Resolve social challenges

Respond to electrification

Sales forecast of eachnew business(100 million
yen)

Licensing revenue fromin-wheel motors

EV(in-wheel)

EnergyNew demand forvehicleelectrification
EV (electricmotor)

Robot-related

Robotization・IoT

Service solutions

・ Concerning in-wheel motors in EV business, alicensing agreement was concluded with aChinese EV maker. NTN expects to receive
licensing revenue (profit).
・ New demand for electric motors and actuators
responding to vehicle electrification.

2018/5/17

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Reference: Results of Previous Medium-termManagement Plan "NTN100"
Revival 2014

NTN100

NTN100FY2014FY2017FY2017

Results

Plan

Results

Net Sales\701.9 billion\800.0 billion\744.4 billion

Operating Income\43.9 billion\70.0 billion\39.6 billion

Operating Margin

6.2%

8.8%

5.3%

\23.4 billion\42.0 billion\20.4 billion

Net Income
Reduction of interest-bearing debt
(excluding foreign exchange impact)

Inventory turnover ratio

3.8 times\60.0 billion reduction \27.8 billion reduction/3 years/3 years

4.5 times

4.1 times

Capital expenditure-\135.0 billion/3 years \109.3 billion /3 years

FCF-\67.0 billion/3 years\47.1 billion/3 years

Equity to capital ratio

28.6%

30.0% or more

30.2%

Net D/E ratio

1.11

1.0 or less

0.9

ＲＯＥ

10.5%

Over 14%

8.4%

Dividend payout ratio

13.7%

Average 30%

Average 49%

USD=\109.8

USD=\110

USD=\110.9

Euro=\138.7

Euro=\130Euro=\129.6

Exchange rates

2018/5/17

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