Q&A of the Financial Results for FY2024/12 H1
Date: Thursday, August 8, 2024, 11:00-12:08
Question
No Category
Company-wide
What are the factors behind theexceed plan in operating profit in1
H1?

Company-wide
2

Company-wide

3

8

Company-wide

Please tell us about the risk of
impairment in the future.

CMP
Precision
Reduction Gears
CMP
Precision
Reduction Gears

What is the status of Precision
Progress is made as planned. Some customers are still under theReduction Gears's pass-through of negotiation, so we are currently working to realize them as soon ascost increases?
possible.
Monthly orders for May to June are We belive that orders were already bottoming out in Third Quarterdecreasing, but what is your view on of 2023, but the rate of increase is slower than expected, and wefuture demand?
believe that the timing of the full-fledged recovery was delayed fromwithin FY2024 to within FY2025. Demand for general industries in
China is on an improving trend, and the operating rate of ourChinese factory has risen compared to before, but demand forautomotive applications has been severe.
What is the cause of the difference We believe that this is due to the inventory of finished goods by
between the status of orders fromrobot manufacturers.
robot manufacturers and that ofNabtesco?
P12 says "Review of production
In terms of demand for construction machinery in China exclude
capacity in Hydraulic Equipment
export, monthly statistical analysis shows that the number of units
Chinese market." While there aresold continues to exceed the previous year's level, and demand forsigns of a recovery in demand forlarge models in our Hydraulic Equipment is increasing slightly.
construction machinery in China,
However, the strength of the recovery is still weak, and the company
what is the background to therecognizes that it is necessary to carefully assess future trends.
revision of production capacity inIn China, the number of construction machinery sold peaked atHydraulic Equipment business?
340,000 units in 2021, but considering the subsequent sluggish
demand, the Chinese market is expected to mature, and the market isexpected to be around 200,000 units in the future. As a result, theCompany is reviewing its production capacity based on the scale ofdemand at the level of 200,000 units in China (including exports).
Production capacity adjustment through personnel optimization at
its plants in China has been effective in improving profit margins.

CMP
Precision
Reduction Gears
CMP
HydraulicEquipment

9

There is no change in the Company's policy of pass through the cost
increase speedily as needed.
In FY2024, the increase in costs such as utility and raw material
costs has been settled down, and the cost increase in FY2023 has
also been reflected.
What is the probability of achieving Although there are external factors that are difficult to forecast, suchthe latest plan (Plan as of on July
as exchange rate trends, the company recognizes that its full-year
forecast incorporates factors that are currently conceivable. For31)?
example, the current H2 plan assumes an exchange rate of 145 yen
to the dollar, and does not differ significantly from recent
movements in exchange rates. This is a plan formulated after carefulconsideration of various factors, and I would like to achieve it.
Regarding the impact of foreignexchange rates, based on P24
foreign exchange sensitivity, theincrease in profits (1.4 billion yen)from P19's H1 operating income
analyses seems to be too large.
Could you explain the detail?

57

What is your policy for passing onprice increases in the future?

Company-wide

46Answer
Factors behind the higher operating income in the H1 were (1)higher profits from higher sales (2) the impact of foreign exchange
rates (3) curtailment of expenses centered on Precision Reduction
Gears in CMP and the price pass through of cost increases.

P19 exchange rate assumption is compared with the same period of
the previous year, and P24 exchange rate sensitivity is the difference
between the end of the previous year and the point of H1. Inaddition, foreign exchange gains in P19 include foreign exchange
valuation stations in Gilgen's platform door business (calculatedexchange differences with Australian dollar, British pound, andother currencies based on the Swiss franc) of around 0.4 billion yen,and foreign exchange gains from currencies other than the dollar andRMB, which are expressed as "minimal" in P24, are also added.
As there is goodwill for Deep Sea and Gilgen, there is a potential
risk of recording impairments depending on future performance. We
want to strengthen the governance of the acquired companies andmanage them properly to minimize impairment risk.

TRS

10TRS

11

Smart Motion
Control

12

Smart Motion
Control

13

We would like to confirm which
Marine Vessels Equipment is fabless factory, and there are few
businesses will drive TRS earnings tangible fixed assets. Therefore, sales and profits tend to increase.
growth. However, it is difficult toWe do not disclose operating profit on an individual business unit,
analyze this because the profitability but we would like to announce the future growth image of theof the various businesses in the sub- segment and other information in the medium-term management
plan that is scheduled to be announced in February 2025.
segments is not disclosed. For
example, because the profitability ofMarine Vessels Equipment can beimproved in a broad framework,
could you give an indication of theoutlook for future earnings growth?
Are there potential spin-outs of non- Business portfolio management needs to be managed from a longcore businesses from the perspective term perspective as we have conveyed, and we intend to pursueof business portfolio management? stable growth in multiple segments rather than relying on sales andprofit growth in specific segments. I would like to once again
explain the specific state of the business portfolio that we are aiming
for, as we are in the process of discussions in the formulation of thenext medium-term management plan.
Regarding "Smart Motion Control" We believe that synergies can be created by applying Precision
Reduction Gears technology in all of our businesses. We highlighted
in the financial results briefing
two example in hydraulic and packaging machines but TRS is alsomaterials P15, is it likely to berealized in TRS since customers in under development of electrification products.
For example, in China, the market for electric buses has been
TRS are already have the highly
established and products are shipped. We believe that newelectrified final products?
electrification technologies, such as electric trucks, will be needed
even in Japan at a timing that is not far away, and we would like topropose solutions.
Whether each of the cases described Dealing with electrification of construction machinery (Case 1) is ain the financial results briefing
new technology, and the market itself is just has been blooming.
materials P15 is a market in which Regarding automation solutions within food related factories (Casethere is already competition or in2), while the technologies themselves are not new, we are expanding
which the market itself is newly
proposals as solutions, such as automation of some processes using acreated?.
AGV equipped with a mechanum wheel incorporating Precision
Reduction Gears, and automation of back and forth processes
including Packaging Machines.
We will leverage Precision Reduction Gears's strengths to create newsynergies in existing areas in each segment.